SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-24206
PENN NATIONAL GAMING, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C> <C>
Wyomissing Professional Center
825 Berkshire Blvd., Suite 200
PENNSYLVANIA 23-2234473 Wyomissing, Pennsylvania 19610
(State or other jurisdiction of (I.R.S. Employer (Address of principal executive offices) (Zip Code)
incorporation or organization) Identification No.)
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Registrant's telephone number, including area code 610-373-2400
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common stock par value .01 per share
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 ___
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
Aggregate market value of the voting common stock held by nonaffiliates of the
Registrant as of March 19, 1999 was approximately $106,073,740.
Number of Shares of Common Stock outstanding as of March 19, 1999 - 14,757,059
Documents Incorporated by Reference
Registrants Definitive Proxy Statement with respect to annual meeting of
Shareholders to be held on May 5, 1999.
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.
References to "Penn National Gaming" or the "Company" include
Penn National Gaming, Inc. and its subsidiaries.
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PART 1
ITEM 1 BUSINESS
GENERAL
The Company, which began operations in 1972, is a diversified gaming and
pari-mutuel wagering company that owns and operates two racetracks and ten
off-track wagering facilities ("OTWs") in Pennsylvania, and the Charles Town
Joint Venture which is an entertainment complex that includes a thoroughbred
racetrack and gaming machines in Charles Town, West Virginia (89% owned). The
Company's Pennsylvania racetracks include Penn National Race Course, located
outside Harrisburg, one of two thoroughbred racetracks in Pennsylvania, and
Pocono Downs, located outside Wilkes-Barre, one of two harness racetracks in
Pennsylvania. The Company intends to develop the one additional OTW that has
been allocated to it under Pennsylvania law, after which it would operate 11 of
the 23 OTWs currently authorized in Pennsylvania. Between 1994 and 1998, the
Company increased total wagers at a compound annual growth rate of 12.9% by
expanding its simulcast and OTW operations.
INDUSTRY OVERVIEW
Pari-mutuel wagering on thoroughbred or harness racing is pooled
wagering in which a pari-mutuel wagering system totals the amounts wagered and
adjusts the payouts to reflect the relative amounts bet on different horses and
various possible outcomes. The pooled wagers are (i) paid out to bettors as
winnings in accordance with the payoffs determined by the pari-mutuel wagering
system, (ii) paid to the applicable regulatory or taxing authorities and (iii)
distributed to the track's horsemen in the form of "purses" which encourage
owners and trainers to enter their horses in that track's live races. The
balance of the pooled wagers is retained by the wagering facility. Pari-mutuel
wagering is currently authorized in more than 40 states in the United States,
all provinces in Canada and approximately 100 other countries around the world.
Gaming and wagering companies, such as the Company, that focus on
pari-mutuel horse race wagering derive revenue through wagers placed at their
own tracks, at their OTWs and on their own races at the tracks and OTWs of
others. While some states, such as New York, operate off-track betting locations
that are independent of racetracks, in other states (such as Pennsylvania)
racetrack ownership and operation is a precondition to OTW ownership and
operation. Owning a racetrack in such a state, then, is akin to an "admission
ticket" to the OTW business. Over the past several years, attendance at live
racing has generally declined; however the decline in revenues from live racing
has been more than offset by an increase in telephone wagering, off-track
wagering in and gaming machine operations.
STRATEGY
The Company intends to be a leading operator in the pari-mutuel
wagering industry by capitalizing on its horse racing expertise and its numerous
wagering locations and when possible expand them to include gaming machines
("Gaming Wagering"). The Company plans to increase revenue significantly by
using the following strategies:
Focus on Gaming Machine Operations. The Company intends to seek
legislation to permit it to operate gaming machines at its racetracks where not
now permitted and to expand legislation in West Virginia. Legislation has been
passed in West Virginia, subject to the Governor's signature or veto, which
would allow coin out and reel slot machines at race tracks. If such legislation
is signed by the Governor, the Company intends to convert some or all of its
current machines to coin out and increase the maximum number of machines with
reel slot machines.
Open Additional OTWs. The Company operates ten of the 20 OTWs now open
in Pennsylvania and has the right to operate one of the three remaining OTWs
that have been authorized in Pennsylvania. The Company's OTWs are located in
Allentown, Carbondale, Chambersburg, Erie, Hazleton, Johnstown, Lancaster,
Reading, Williamsport and York, Pennsylvania. At OTWs, customers can place
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wagers on thoroughbred and harness races simulcast from the Company's racetracks
and on import simulcast races from other tracks around the country. Under the
Pennsylvania Racing Act, only licensed thoroughbred and harness racing
associations, such as the Company, can operate OTWs or accept customer wagers on
simulcast races at Pennsylvania racetracks. The Company plans (subject to the
receipt of remaining regulatory approvals, including site approvals) to open and
operate an additional OTW in Stroudsburg, Pennsylvania, and to seek legislation
in other jurisdictions to operate additional OTW's.
Expand Simulcasting Operations. Simulcasting involves the transmission
to, or the receipt of, the audio and/or video signals of a live racing event
through a satellite for re-transmission at a different wagering location. The
Company transmits simulcasts of Company races to other wagering locations
year-round and receives simulcasts of races from other locations for wagering by
its customers at the Company's facilities year-round. During the past five
years, the Company expanded its simulcasting operations and took advantage of
favorable changes in pari-mutuel wagering and simulcasting laws in various
states and the expanded use of simulcasting technology. Import simulcasting
generates revenue for the Company by maximizing the number of events available
to a patron for wagering at the Company's facilities by utilizing idle time
between races at Company racetracks and OTWs. When customers place wagers on
import simulcast races, of the amount not returned to bettors as winning wagers,
a portion is paid to the state in which the Company's wagering facility is
located, a portion is paid to the "purse" fund for the horse owners and trainers
at the Company's racetrack with which the wagering facility is associated, a
portion is paid as a simulcast fee to the originating track and the balance is
retained by the wagering facility and/or track. In order to promote wagering,
the Company has increased and expects to continue to increase full-card import
simulcasts from premier racetracks. The Company currently receives import
simulcasts from approximately 77 racetracks, including premier racetracks such
as Belmont Park, Churchill Downs, Gulfstream Park, Hollywood Park, Santa Anita
and Saratoga. The Company believes that "full-card" import simulcasting, in
which all of the races at a non-Company track are import simulcast to a Company
wagering facility, has improved the wagering opportunities for its customers and
thereby increased the amount wagered at Company facilities. Export simulcasting
generates revenue for the Company by increasing the consumer base for Company
races beyond Company racetracks and OTWs. The Company transmits export
simulcasts of Company races to approximately 126 locations and receives a flat
percentage of the amounts wagered on Company races at non-Company locations,
while incurring minimal additional expense. The Company intends to increase
export simulcasting of races from Company-owned tracks to out-of-state
racetracks, OTWs, casinos and other gaming facilities.
Capitalize on Other Gaming and Pari-Mutuel Wagering Opportunities. The
Company intends to continue identifying opportunities in the gaming and
pari-mutuel wagering industries which complement the Company's core operations
and leverage its pari-mutuel management and operating strengths. Management also
intends to explore other opportunities to capitalize upon changes in gaming
legislation, including legislation relating to gaming machines.
ACQUISITIONS
Pocono Downs Acquisition
On November 27, 1996, the Company acquired Pocono Downs for an
aggregate purchase price of $48.2 million plus approximately $730,000 in
acquisition-related fees and expenses. In addition, pursuant to the terms of the
purchase agreement, the Company will be required to pay the sellers of Pocono
Downs an additional $10.0 million if, within five years after the consummation
of the acquisition of Pocono Downs, Pennsylvania authorizes any additional form
of gaming in which the Company may participate. The $10.0 million payment is
payable in annual installments of $2.0 million a year for five years, beginning
on the date that the Company first offers such additional form of gaming. As of
March 19, 1999, no such additional form of gaming in Pennsylvania has been
adopted, therefore no such payment is due at this time.
Charles Town Acquisition
On January 15, 1997, the Charles Town Joint Venture acquired
substantially all of the assets of Charles Town Races for an aggregate net
purchase price of approximately $16.0 million plus approximately $2.2 million in
acquisition-related fees and expenses. Prior to its acquisition by the Charles
Town Joint Venture, Charles Town Races conducted live thoroughbred horse racing,
on-site pari-mutuel wagering on live races run at Charles Town Races and
wagering on import simulcast races. The Company has refurbished and reopened the
facility as the Charles Town Entertainment Complex, which features live racing,
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dining, simulcast wagering and, effective September 1997, gaming machines. The
cost of the refurbishment, exclusive of the cost of the gaming machines, was
approximately $27.8 million.
GAMING MACHINE OPERATIONS AT CHARLES TOWN ENTERTAINMENT COMPLEX
On November 5, 1996, Jefferson County, West Virginia approved a
referendum authorizing the installation and operation of gaming machines at the
Charles Town Entertainment Complex. As a result, the Company consummated the
Charles Town Acquisition on January 15, 1997. In April 1997, the Company
reopened the Charles Town Entertainment Complex, featuring live racing, dining
and simulcast wagering. In September 1997, the Company expanded wagering
opportunities by installing gaming machines at the Charles Town Entertainment
Complex. The gaming machines are dollar bill-fed video gaming machines that
replicate traditional spinning reel slot machines and also feature video card
games, such as blackjack and poker. Legislation has been passed in West
Virginia, subject to the Governor's signature or veto, which would allow coin
out and reel slot machines at racetracks. If such legislation is signed by the
Governor, the Company intends to convert some or all of its current machines to
coin out and increase the maximum number of machines with reel slot machines.
The West Virginia Video Lottery Act specifies a 20% maximum percentage of each
dollar wagered on gaming machines which can be retained by the Company. The
balance of each dollar wagered must be paid out to the public as winning wagers.
Of the portion retained by the Company, a portion is paid to taxing authorities
and other beneficiary organizations mandated by the State of West Virginia and a
portion is paid to the Charles Town Horsemen in the form of purses. The Company
has installed and is operating, as of March, 1999, 899 gaming machines at the
Charles Town Entertainment Complex. The Company has obtained all necessary
approvals for the installation and operation of a total of 1,000 gaming machines
at the Charles Town Entertainment Complex and will increase the number of gaming
machines if demand warrants and they are approved by the West Virginia Lottery
Commission.
RACING AND PARI-MUTUEL OPERATIONS
The Company's racing and pari-mutuel revenues have been derived from
(i) wagering on the Company's live races (a) at the Company's racetracks, (b) at
the Company's OTWs, (c) at other Pennsylvania racetracks and OTWs and (d)
through telephone wagering, as well as wagering at the Company's racetracks on
certain stakes races run at out-of-state racetracks (collectively, referred to
in the Company's financial statements as "pari-mutuel revenues from live
races"), (ii) wagering on full-card import simulcasts at the Company's
racetracks and OTWs and through telephone wagering (collectively, referred to in
the Company's financial statements as "pari-mutuel revenues from import
simulcasting") and (iii) fees from wagering on export simulcasting Company races
at out-of-state locations (referred to in the Company's financial statements as
"pari-mutuel revenues from export simulcasting"). The Company's other revenues
have been derived from admissions, program sales, food and beverage sales and
concessions and certain other ancillary activities.
Pari-Mutuel Revenues
Revenues from Company races consist of the total amount wagered, less the
amount paid as winning wagers. Of the amount not returned to bettors as winning
wagers, a portion is paid to the state in which the track is located, a portion
is distributed to the track's horsemen in the form of "purses" and the balance
is retained by the wagering facility. The Pennsylvania Racing Act specifies the
maximum percentages of each dollar wagered on horse races in Pennsylvania which
can be retained by the Company (prior to required payments to the horse owners
(the "Horsemen") in Pennsylvania and applicable taxing authorities). The
percentages vary, based on the type of wager; the average percentage which is
retained by the Company has approximated 20%. The balance of each dollar wagered
must be paid out to the public as winning wagers. With the exception of revenues
derived from wagers at the Company's racetracks and OTWs, the Company's revenues
on each race are determined pursuant to such maximum percentage and agreements
with the other racetracks and OTWs at which wagering is taking place. Amounts
payable to the Pennsylvania Horsemen are determined under agreements with the
Pennsylvania Horsemen ("Horsemen Agreements")and vary depending upon where the
wagering is conducted and the racetrack at which such races take place. The
Pennsylvania Horsemen receive their share of such wagering as race purses. The
Company retains a higher percentage of wagers made at its own facilities than of
wagers made at other locations. The West Virginia Racing Act provides for a
similar disposition of pari-mutuel wagers placed at the Charles Town
Entertainment Complex, with the average percentage of wagers retained by the
Company having been approximately 20% (prior to required payments to the Charles
Town Horsemen and to applicable West Virginia taxing authorities and other
mandated beneficiary organizations).
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Simulcasting
The Company has been transmitting simulcasts of its races to other wagering
locations and receiving simulcasts of races from other locations for wagering by
its customers at Company facilities year-round, for more than five years. When
customers place wagers on import simulcast races, the Company receives revenue
and incurs expense in substantially the same manner as it would if the race had
been run at one of the Company's own tracks: of the amount not returned to
bettors as winning wagers, a portion is paid to the state in which the Company
wagering facility is located, a portion is paid to the purse fund for the horse
owners or trainers (thoroughbred or harness) of the Company's racetrack with
which the wagering facility is associated, a portion is paid to the racetrack
from which the race is simulcast and the balance is retained by the Company. The
Company believes that full-card import simulcasting, in which all of the races
at a non-Company track are import simulcast to a Company wagering facility, has
improved the wagering opportunities for its customers and thereby increased the
amount wagered at Company facilities. When the Company export simulcasts Company
races for wagering at non-Company locations, it receives a fixed percentage of
the amounts wagered on that race from the location to which the simulcast is
exported, while incurring minimal additional expense. During the years ended
December 31, 1997 and 1998, respectively, the Company received import simulcasts
from approximately 75 and 77 racetracks, respectively, including premier
racetracks such as Belmont Park, Church Hill Downs, Gulfstream Park, Hollywood
Park, Santa Anita and Saratoga and transmitted export simulcasts of Company
races to 98 and 126 locations, respectively.
Pursuant to an agreement among the members of the Pennsylvania Racing
Association, the Company and the two other Pennsylvania racetracks provide
simulcasts of all their races to all of each other's facilities and set the
commissions payable on such races. In addition, the Company has short-term
agreements with various racetracks throughout the United States to import
simulcast from, and export simulcast to, their facilities; these agreements
include import simulcasts of major stakes races. The Company believes that
import simulcasting of out-of-state races, including full card import
simulcasting, is beneficial economically to the Company because it makes
available wagering on higher quality races and which tends to increase the size
of the average wager.
Telephone Wagering
In 1983, the Company pioneered Telebet, Pennsylvania's first telephone
account wagering system. A telebet customer opens an account by depositing funds
with the Company. Account holders can then place wagers by telephone on Company
races and import simulcast races to the extent of the funds on deposit in the
account; any winnings are posted to the account and are available for withdrawal
or future wagers. In December 1995, Pocono Downs instituted Dial-A-Bet, a
similar telephone account betting system.
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Operating Data of the Company
The following table summarizes certain key operating statistics for the
Company's pari-mutuel operations and their respective OTWs, including the pro
forma presentation of data assuming the acquisition of Pocono Downs occurred on
January 1, 1994:
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YEAR ENDED DECEMBER 31
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1994 1995 1996 1997 1998
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(DOLLARS IN THOUSANDS, EXCEPT AVERAGE DAILY PURSES)
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NUMBER OF LIVE RACING DAYS:
Penn National Race Course 219 204 206 212 206
Pocono Downs 143 135 134 134 135
Charles Town Races - - - 159 206
TOTAL ATTENDANCE: (4)
Penn National Race Course (1) 485,224 430,128 370,898 339,487 304,220
Pocono Downs (1) 253,521 242,870 377,830 370,090 263,591
Reading OTW 253,183 246,012 214,314 178,237 159,818
Chambersburg OTW 110,075 143,554 132,447 125,448 105,384
York OTW - 232,109 238,610 225,672 213,929
Lancaster OTW - - 92,641 158,003 142,027
Williamsport OTW - - - 81,797 66,378
Johnstown OTW - - - - 25,411
Erie OTW 129,074 116,367 113,169 94,429 99,726
Allentown OTW 275,118 272,491 271,706 252,909 258,237
Carbondale OTW - - - - 62,757
Hazleton OTW - - - - 60,706
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Total paid attendance (1) 1,506,195 1,683,531 1,811,615 1,762,184 1,826,072
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TOTAL WAGERING: (1) (2)
Penn National Race Course $ 91,898 $ 85,661 $ 75,708 $ 69,687 $ 70,155
Pocono Downs 51,980 57,784 53,190 47,217 38,867
Reading OTW 39,714 42,810 41,320 30,811 29,178
Chambersburg OTW 14,589 24,365 25,024 24,899 22,336
York OTW - 42,140 49,864 45,245 43,873
Lancaster OTW - - 13,079 29,292 29,131
Williamsport OTW - - - 9,684 10,461
Johnstown OTW - - - - 3,977
Erie OTW 26,404 29,379 27,200 21,767 20,737
Allentown OTW 52,676 56,440 56,216 58,681 56,719
Carbondale OTW - - - - 10,284
Hazleton OTW - - - - 9,926
Penn National Telebet 7,967 8,281 8,423 9,473 10,333
Pocono Downs Dial-A-Bet - 75 5,510 8,179 9,088
Export simulcasting:
Penn National Race Course 90,878 113,639 148,702 181,281 199,041
Pocono Downs 25,723 30,121 32,493 26,426 23,986
Charles Town Races - - - 40,195 65,552
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Total wagering $ 401,829 $ 490,695 $ 536,729 $ 602,836 $ 659,649
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YEAR ENDED DECEMBER 31
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1994 1995 1996 1997 1998
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(DOLLARS IN THOUSANDS, EXCEPT AVERAGE DAILY PURSES)
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AVERAGE DAILY PURSES:
Penn National Race Course $ 48,560 $ 57,897 $ 62,328 $ 60,623 $ 63,374
Pocono Downs 35,790 42,314 42,313 40,149 41,363
Charles Town Races - - - 25,805 50,985
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Total average daily purse $ 84,350 $ 100,211 $ 104,641 $ 126,577 $ 155,722
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GROSS MARGIN FROM WAGERING: (3)
Penn National Race Course $ 17,963 $ 24,915 $ 27,955 $ 28,669 $ 29,068
Pocono Downs 16,653 17,838 17,805 16,920 18,820
Charles Town Races - - - 3,099 5,878
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Total gross margin from wagering $ 34,616 $ 42,753 $ 45,760 $ 48,688 $ 53,766
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(1) Does not reflect attendance for wagering on simulcasts when live racing
is not conducted (i) for all periods presented, in the case of Penn
National Race Course (ii) for the years ended December 31, 1994-1995,
in the case of Pocono Downs.
(2) Wagering on certain stakes races is included in Wagering on the
Penn National Race Course races.
(3) Amounts equal total pari-mutuel revenues, less purses paid to the
Horsemen, taxes payable and simulcast commissions or host track fees
paid to other racetracks.
(4) Does not include attendance for Charles Town Races.
Live Racing
The following table summarizes the Company's live racing facilities:
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RACING FACILITY LOCATION DATE OPENED/STATUS OPERATIONS CONDUCTED
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Penn National Race Course Grantville, PA Constructed in 1972; Live thoroughbred racing;
operated by the Company simulcast wagering; dining;
since 1972 telephone account wagering
Pocono Downs Plains Township, PA Constructed in 1965; Live harness racing;
operated by the Company simulcast wagering; dining;
since November 1996 telephone account wagering
Charles Town Races Charles Town, WV Charles Town Races was Live thoroughbred racing;
at the Charles Town constructed in 1933; simulcast wagering;
Entertainment Complex acquired by Charles Town dining (this facility is adjacent
Joint Venture on January gaming machine operations)
15, 1997; refurbished in
1997 and reopened as the
Charles Town Entertainment
Complex
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The Penn National Race Course is located on approximately 225 acres
approximately 15 miles northeast of Harrisburg, 100 miles west of Philadelphia
and 200 miles east of Pittsburgh. There is a total population of approximately
1.4 million persons within a radius of approximately 35 miles around the Penn
National Race Course and approximately 2.2 million persons within a 50-mile
radius. The property includes a one mile all-weather thoroughbred racetrack and
a 7/8-mile turf track. The property also includes approximately 400 acres
surrounding the Penn National Race Course which are available for future
expansion or development.
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The Penn National Race Course's main building is the
grandstand/clubhouse, which is completely enclosed and heated and, at the
clubhouse level, fully air-conditioned. The building has a capacity of
approximately 15,000 persons with seating for approximately 9,000, including
1,400 clubhouse dining seats. Several other dining facilities and numerous food
and beverage stands are situated throughout the facility. Television sets for
viewing live racing and simulcasts are located throughout the facility. The
pari-mutuel wagering areas are divided between those available for on-track
wagering and those available for simulcast wagering.
The Penn National Race Course includes stables for approximately 1,250
horses, a blacksmith shop, veterinarians' quarters, jockeys' quarters, a paddock
building, living quarters for grooms, a cafeteria and recreational building in
the backstretch area and water and sewage treatment plants. Parking facilities
for approximately 6,500 vehicles adjoin the Penn National Race Course.
The Company has conducted live racing at Penn National Race Course since
1972, and has held at least 204 days of live racing at the facility in each of
the last five years. The Penn National Race Course is one of only two
thoroughbred racetracks in Pennsylvania. Post time at Penn National Race Course
is 7:30 p.m. on Wednesdays, Fridays and Saturdays, and 5:00 p.m. on Sundays and
holidays.
Pocono Downs is located on approximately 400 acres in Plains Township,
outside Wilkes-Barre, Pennsylvania. There is a total population of approximately
785,000 persons within a radius of approximately 35 miles around Pocono Downs
and approximately 1.5 million persons within a 50-mile radius. The property
includes a 5/8-mile all-weather, lighted harness track. Pocono Downs's main
buildings are the grandstand and the clubhouse. The clubhouse is completely
enclosed, heated and fully air-conditioned. The grandstand has enclosed, heated
and air-conditioned seating for approximately 500 persons and permanent open-air
stadium-style seating for approximately 2,500 persons. The clubhouse is a tiered
dining and wagering facility that seats approximately 1,000 persons. The
clubhouse dining area seats 500 persons. Television sets for viewing live racing
and simulcasts are located throughout the facility along with pari-mutuel
wagering areas.
A two-story 14,000 square foot building which houses the Pocono Downs
offices is located on the property. Pocono Downs also includes stables for
approximately 950 horses, five paddock stables, quarters for grooms, two
blacksmith shops and a cafeteria for the Harness Horsemen. Parking facilities
for approximately 5,000 vehicles adjoin the track.
The acquisition of Pocono Downs was consummated following the last day
of racing at Pocono Downs for the 1996 season. The Company resumed live racing
at Pocono Downs in April 1997. The Company conducted 134 and 135 days of live
harness racing at the facility during 1997 and 1998 racing seasons,
respectively. Post time at Pocono Downs is 7:15 p.m.
The Charles Town Entertainment Complex is located on a portion of a
250-acre parcel in Charles Town, West Virginia, which is approximately a
60-minute drive from Baltimore, Maryland and a 70-minute drive from Washington,
D.C. There is a total population of approximately 3.1 million persons within a
50-mile radius and approximately 9.0 million persons within a 100-mile radius of
the Charles Town Entertainment Complex. The property includes a 3/4-mile
thoroughbred racetrack. The Charles Town Entertainment Complex's main building
is the grandstand/clubhouse, which is completely enclosed and heated. The
clubhouse dining room has seating for 600. Additional food and beverage areas
are situated throughout the facility. The property surrounding the Charles Town
Entertainment Complex, including the site of the former Shenandoah Downs
Racetrack, is available for future expansion or development. In addition, the
Company has a right of first refusal for an additional 250 acres that are
adjacent to the Charles Town Entertainment Complex. The Charles Town
Entertainment Complex also includes stables, an indoor paddock, ample parking
and water and sewage treatment facilities.
The Charles Town Races reopened in April 1997. The Company conducted
159 and 206 days of thoroughbred racing at the facility during 1997 and 1998
racing seasons, respectively. Post time at the Charles Town Races is 7:15 p.m.
on Mondays, Fridays and Saturdays, 4:00 p.m. on Wednesdays and 1:00 p.m. on
Sundays. Although other regional racetracks offer nighttime thoroughbred racing,
Penn National Race Course and Charles Town Races are the only racetracks in the
Eastern time zone conducting year-round nighttime thoroughbred horse racing,
which the Company believes increases its opportunities to export simulcast its
races during periods in which other racetracks are not conducting live racing.
9
<PAGE>
OTWs
The Company's OTWs provide areas for viewing import simulcasts and
televised sporting events, placing pari-mutuel wagers and dining. The facilities
also provide convenient parking.
<TABLE>
<CAPTION>
FACILITY/LOCATION DATE OPENED/STATUS SIZE (SQ.FT.) COST (1) OWNED/LEASED
- - ----------------- ------------------ ------------- -------- ------------
<S> <C> <C> <C> <C>
Allentown, PA Opened 7/93 28,500 $ 5,207,000 Owned
Carbondale, PA Opened 3/98 13,000 $ 2,661,000 Owned
Chambersburg, PA Opened 4/94 12,500 $ 1,500,000 Leased
Erie, PA Opened 5/91 22,500 $ 3,575,000 Owned
Hazleton, PA Opened 3/98 13,000 $ 1,868,000 Leased
Johnstown, PA Opened 9/98 14,220 $ 1,300,000 Leased
Lancaster, PA Opened 7/96 24,000 $ 2,700,000 Leased
Reading, PA Opened 5/92 22,500 $ 2,100,000 Leased
Williamsport, PA Opened 2/97 14,000 $ 3,000,000 Owned
York, PA Opened 3/95 25,000 $ 2,200,000 Leased
Stroudsburg, PA License authorized; approval to 12,000 $ 2,000,000 Leased (2)
operate pending; site selected (estimated)
</TABLE>
(1) Consists of original construction costs, equipment and, for owned
properties, the cost of land and building.
(2) The Company is licensed to operate one additional OTW and has identified a
site to operate the OTW facility in Stroudsburg, Pennsylvania, subject to
receipt of all applicable approvals to operate this site.
The Company considers its properties adequate for its presently
anticipated purposes.
POTENTIAL TENNESSEE DEVELOPMENT PROJECT
In June 1997, the Company acquired twelve one-month options to purchase
approximately 100 acres of land in Memphis, Tennessee. Since such time, the
Company, through its subsidiary, Tennessee Downs, Inc. ("Tennessee Downs"), has
pursued the development of a harness track and simulcast facility which is
located in the northeastern section of Memphis (the "Tennessee Development
Project"). 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 OTW facility at this
site. 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 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 Commission. On May 1, 1998, 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) for racing days for the period ending
December 31, 2000; and (iii) 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 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 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. The Company intends to
10
<PAGE>
continue its efforts to develop and operate a harness track in Tennessee. Costs
incurred as of December 31, 1998 regarding the Tennessee license amount to
$489,000 and are presented in prepaid expenses and other current assets.
If the State of Tennessee reinstates the Tennessee Commission or
otherwise regulates racing, the Company plans to spend approximately $9.0
million in the next year to purchase the land subject to the option and build a
combined OTW and grandstand facility. The Company estimates that total
development costs, including subsequent track construction, will be
approximately $15.5 million. In addition, it will be permitted to pursue the
development of additional OTWs in Tennessee, provided it first obtains necessary
approvals, including a public referendum for each proposed OTW site and other
necessary zoning and land development approvals.
NEW JERSEY JOINT VENTURE
On January 28, 1999, pursuant to a First Amendment to an Asset Purchase
Agreement by, between and among Greenwood New Jersey, Inc. ("Greenwood"),
International Thoroughbred Breeders Inc., Garden State Race Track, Inc.,
Freehold Racing Association, Atlantic City Harness, Inc. and Circa 1850, Inc.,
the original parties to an Asset Purchase Agreement entered into as of July 2,
1998, and the Company (the "Agreement"), and pursuant to which the Company
entered into a joint venture ("Joint Venture"), the Company, along with its
Joint Venture partner, Greenwood, agreed to purchase certain assets of the
Garden State Race Track and Freehold Raceway, both located in New Jersey (the
"Acquisition").
The purchase price for the Acquisition is approximately $46 million
(subject to reduction of certain disputed items, for which amounts have been
placed in escrow). The purchase price consisted of $23 million in cash and $23
million pursuant to two deferred purchase price promissory notes in the amount
of $22 million and $1 million each. The Company is responsible for 50% of the
purchase price. The parties to the Joint Venture are also contingently liable to
the sellers in amounts not to exceed a total of $10 million, if the Joint
Venture receives various approvals for off-track wagering or phone betting.
The Joint Venture is contingent upon, among other things, the Company
obtaining approvals necessary to effect the Joint Venture, which approvals
include: (i) full and complete New Jersey regulatory approval (including but not
limited to approval of the New Jersey Racing Commission); (ii) Hart Scott Rodino
compliance; and (iii) the written consent of a majority of the holders of its
$80 million Senior Notes issued December 17, 1997 to any necessary modification
to the Indenture dated December 12, 1997 to permit the Company's investment in
the Joint Venture. At the initial closing of the Acquisition on January 28,
1999, The Company loaned FR Park Racing, LP, a New Jersey limited partnership,
$11,250,000 (at the Company's effective borrowing rate as specified in Note 3
under "Credit Facilities"), which is secured by certain assets. After obtaining
the above approvals, the Company will invest an additional $11,750,000 into the
Joint Venture with a portion of this amount treated as capital and the balance
as debt. The Company will have a 50% interest in the Joint Venture.
MARKETING AND ADVERTISING
The Company seeks to increase wagering by broadening its customer base and
increasing the wagering activity of its existing customers. To attract new
customers, the Company seeks to increase the racing knowledge of its customers
through its television programming, and by providing "user friendly" automated
wagering systems and comfortable surroundings. The Company also seeks to attract
new customers by offering various types of promotions including family fun days,
premium give-away programs, contests and handicapping seminars.
Charles Town Gaming Machine Marketing Programs
The Company's marketing efforts, which include print and radio advertising,
commenced in October 1997 and are focused on the Washington, D.C., Baltimore,
Maryland, Northern Virginia, Eastern West Virginia and Southern Pennsylvania
markets. At the Charles Town Entertainment Complex the Company established the
Silver Screen Video Slots Club, a manual player tracking system designed to
reward frequent and active customers. In 1999, the Company is installing a
computerized player tracking system at the Charles Town Entertainment Complex,
which will further focus the Company's marketing efforts. In 1998, the Company
11
<PAGE>
implemented a coupon program where customers who visit the Charles Town
Entertainment Complex can redeem the coupons for $5. From these coupons, the
Company has compiled a database of customers which will be integrated into the
new player tracking system.
Televised Racing Program
The Company's Racing Alive program is televised by satellite
transmission commencing approximately one hour before post time on each live
racing day at the Penn National Race Course. The program provides color
commentary on the races at the Penn National Race Course (including wagering
odds, past performance information and handicapper analysis), general education
on betting and handicapping, interviews with racing personalities and featured
races from other thoroughbred racetracks across the country. The Racing Alive
program is shown at the Penn National Race Course and on various cable
television systems in Pennsylvania and is transmitted to all OTWs that receive
the Penn National Race Course races. The Company has expanded Racing Alive and
created additional televised programming to cover racing at Pocono Downs and at
other harness racing venues throughout the United States. The Company's
satellite transmissions are encoded so that only authorized facilities can
receive the program.
Automated Wagering Systems
To make wagering more "user friendly" to the novice and more efficient
for the expert, the Company leases Autotote Corporation's automated wagering
equipment. These wagering systems enable the customer to choose a variety of
ways to place a bet through touch-screen interactive terminals and personalized
portable wagering terminals, provide current odds information and enable
customers to place bets and credit winning tickets to their accounts. Currently,
more than 35% of all wagers at Penn National are processed through these
self-service terminals and Telebet.
Modern Facilities
The Company provides a comfortable, upscale environment at each of its
OTWs, including a full bar, a range of restaurant services and an area devoted
to televised sporting events. The Company believes that its attractive
facilities appeal to its current customers and to new customers, including those
who have not previously visited a racetrack.
GTECH GAMING MACHINE SUPPLY AND SERVICE AGREEMENT
In June 1997, the Charles Town Joint Venture, which is operated as PNGI
Charles Town Gaming, LLC, an 89% subsidiary of the Company, entered into an
agreement (the "GTECH Agreement") with GTECH relating to the lease, installation
and service of a video lottery system ("VLS") at the Charles Town Entertainment
Complex. On November 18, 1998, the Company entered into an agreement to purchase
GTECH's assets and rights related to the provision of gaming technology at
Charles Town Races. Under the terms of the agreement, the Company assumed the
ownership and operation of the 799 gaming devices and the central monitoring
system for consideration of $12.9 million.
PURSES; AGREEMENTS WITH HORSEMEN
The agreements with the Horsemen at each of the Company's racetracks set
forth the purses. The continuation of these agreements is required to allow the
Company to conduct live racing and export and import simulcasting. (See "Racing
and Pari-Mutuel Operations")
The Penn National Race Course Thoroughbred Horsemen Agreement was entered
into in February 1996, and expired on February 15, 1999. Failing to reach an
agreement through negotiations, on February 16, 1999, the Pennsylvania
Thoroughbred Horsemen stopped racing at Penn National Race Course and withdrew
their permission for the Company to import simulcast races from other
racetracks. This resulted in the closure of Penn National Race Course and its
six OTW facilities at Reading, Chambersburg, York, Lancaster, Williamsport and
Johnstown. The Company continued its efforts to negotiate a new agreement with
the Pennsylvania Thoroughbred Horsemen and on March 23, 1999 the Company signed
a new Horsemen agreement with the Pennsylvania Thoroughbred Horsemen with an
initial term that expires on January 1, 2004. The Pennsylvania Harness Horsemen
Agreement was entered into in November 1994, became effective in January 1995
and expires in January 2000. The Company has an agreement with the Charles Town
Horsemen, which expires on December 31, 2000. See, Management's Discussion and
Analysis of Financial Condition and Results of Operations - "Liquidity and
Capital
12
<PAGE>
Resources". The West Virginia Video LotteryAct also requires that the operator
of the Charles Town Entertainment Complex be subject to a written agreement with
the pari-mutuel clerks in order to operate gaming machines, this agreement
expires on December 31, 2000.
COMPETITION
The Company faces significant competition for wagering dollars from
other racetracks and OTWs in Pennsylvania and neighboring states (some of which
also offer other forms of gaming), other gaming venues such as casinos and
state-sponsored lotteries, including the Pennsylvania Lottery and the West
Virginia Lottery. The Company may also face competition in the future from new
OTWs or from new racetracks. From time to time, Pennsylvania has considered
legislation to permit other forms of gaming. Although Pennsylvania has not
authorized any form of casino or other gaming, if additional gaming
opportunities become available in or near Pennsylvania, such gaming
opportunities could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company's live races compete for wagering dollars and simulcast
fees with live races and races simulcast from other racetracks both inside and
outside Pennsylvania (including several in New York, New Jersey, West Virginia,
Ohio, Maryland and Delaware). The Company's ability to compete successfully for
wagering dollars is dependent, in part, on the quality of its live horse races.
The quality of horse races at some racetracks that compete with the Company,
either by live races or simulcasts, is higher than the quality of Company races.
The Company believes that there has been some improvement over the last several
years in the quality of the horses racing at the Penn National Race Course, due
to higher purses being paid as a result of the Company's increased simulcasting
activities, however, there can be no assurance that the Company can continue
such improvement.
The Company's OTWs compete with the OTWs of other Pennsylvania
racetracks, and new OTWs may compete with the Company's existing or proposed
wagering facilities. Competition between OTWs increases as the distance between
them decreases. For example, the Company believes that its Allentown OTW, which
was acquired in the acquisition of Pocono Downs and which is approximately 50
miles from the Penn National Race Course and 35 miles from the Company's Reading
OTW, has drawn some patrons from the Penn National Race Course, the Reading OTW
and the Company's telephone wagering system; and, the Company's Lancaster OTW,
which is approximately 31 miles from the Penn National Race Course and 25 miles
from the Company's York OTW, has drawn some patrons from the Penn National Race
Course, the York OTW and the Company's telephone wagering system. Moreover, the
Company believes that a competitor's OTW in King of Prussia, Pennsylvania, which
is approximately 23 miles from the Reading OTW, has drawn some patrons from the
Reading OTW. Although only one competing OTW remains authorized by law for
future opening, the opening of a new OTW in close proximity to the Company's
existing or future OTWs could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's gaming machine operations face competition from other
gaming machine venues in West Virginia and in neighboring states (including
Dover Downs in Dover, Delaware, Delaware Park in northern Delaware, Harrington
Raceway in southern Delaware and the casinos in Atlantic City, New Jersey).
Venues in Delaware and New Jersey, in addition to video gaming machines,
currently offer mechanical slot machines that feature physical spinning reels,
pull-handles and the ability to both accept and pay out coins. Legislation has
been passed in West Virginia, subject to the Governor's signature or veto, which
would allow coin out and reel slot machines at race tracks. If such legislation
is signed by the Governor, the Company intends to convert some or all of its
current machines to coin out and increase the maximum number of machines with
reel slot machines. The failure to attract or retain gaming machine customers at
the Charles Town Entertainment Complex, whether arising from such competition or
from other factors, could have a material adverse effect upon the Company's
business, financial condition and results of operations.
EFFECT OF INCLEMENT WEATHER AND SEASONALITY
Because horse racing is conducted outdoors, variable weather
contributes to the seasonality of the Company's business. Weather conditions,
13
<PAGE>
particularly during the winter months, may cause races to be canceled or may
curtail attendance. Because a substantial portion of the Company's racetrack
expenses are fixed, the loss of scheduled racing days could have a material
adverse effect on the Company's business, financial condition and results of
operations.
For the year ended December 31, 1998, the Company canceled a total of
five racing days because of inclement weather. The severe winter weather in 1996
resulted in the closure of the Company's OTW facilities for two days in January
1996. Because of the Company's growing dependence upon OTW operations, severe
weather that causes the Company's OTWs to close could have an adverse effect
upon the Company's business, financial condition and results of operations.
Attendance and wagering at the Company's facilities have been favorably
affected by special racing events which stimulate interest in horse racing, such
as the Triple Crown races in May and June and the heavier racing schedule
throughout the country during the second and third quarter of the year. As a
result, the Company's revenues and net income have been greatest in the second
and third quarters of the year, and lowest in the first and fourth quarters of
the year.
REGULATION AND TAXATION
General
Company subsidiaries are authorized to conduct thoroughbred racing and
harness racing in Pennsylvania under the Pennsylvania Racing Act. Such
subsidiaries are also authorized, under the Pennsylvania Racing Act and the
Federal Horseracing Act, to conduct import simulcast wagering. The Charles Town
Joint Venture is subject to the provisions of the West Virginia Racing Act,
which governs the conduct of thoroughbred horse racing in West Virginia, and the
West Virginia Video Lottery Act, which governs the operation of gaming machines
in West Virginia. The Company's live racing, pari-mutuel wagering and gaming
machine operations are contingent upon the continued governmental approval of
such operations as forms of legalized gaming. All of the Company's current and
proposed operations are subject to extensive regulations and could be subjected
at any time to additional or more restrictive regulations, or banned entirely.
Pennsylvania Racing Regulations
The Company's horse racing operations at Penn National Race Course and
Pocono Downs are subject to extensive regulation under the Pennsylvania Racing
Act, which established the Pennsylvania State Horse Racing Commission and the
State Harness Racing Commission (together, the "Pennsylvania Racing
Commissions") which are responsible for, among other things, (i) granting
permission annually to maintain racing licenses and schedule race meets, (ii)
approving, after a public hearing, the opening of additional OTWs, (iii)
approving simulcasting activities, (iv) licensing all officers, directors,
racing officials and certain other employees of the Company and (v) approving
all contracts entered into by the Company affecting racing, pari-mutuel wagering
and OTW operations.
As in most states, the regulations and oversight applicable to the
Company's operations in Pennsylvania are intended primarily to safeguard the
legitimacy of the sport and its freedom from inappropriate or criminal
influences. The Pennsylvania Racing Commissions have broad authority to regulate
in the best interests of racing and may, to that end, disapprove the involvement
of certain personnel in the Company's operations, deny approval of certain
acquisitions following their consummation or withhold permission for a proposed
OTW site for a variety of reasons, including community opposition. For example,
the Pennsylvania State Thoroughbred Racing Commission withheld approval for the
Company's initial site for its Lancaster OTW, but the Company applied and was
ultimately approved for another site in Lancaster, which opened in July 1996.
The Pennsylvania legislature also has reserved the right to revoke the power of
the Pennsylvania Racing Commissions to approve additional OTWs and could, at any
time, terminate pari-mutuel wagering as a form of legalized gaming in
Pennsylvania or subject such wagering to additional restrictive regulation; such
termination would, and any further restrictions could, have a material adverse
effect upon the Company's business, financial condition and results of
operations.
The Company may not be able to obtain all necessary approvals for the
continued operation or expansion of its business. Even if all such approvals are
obtained, the regulatory process could delay implementation of the Company's
plans to open additional OTWs. The Company has had continued permission from the
Pennsylvania State Horse Racing Commission to conduct live racing at the Penn
National Race Course since it commenced operations in 1972, and has obtained
permission from the Pennsylvania State Harness Racing Commission to conduct live
racing at Pocono Downs. Currently, the Company has approval from the
14
<PAGE>
Pennsylvania Racing Commissions to operate the ten OTWs that are currently open
and the one additional OTW the Company proposes to open. A Commission may refuse
to grant permission to open additional OTWs or to continue to operate existing
facilities. The failure to obtain required regulatory approvals would have a
material adverse effect upon the Company's business, financial condition and
results of operations.
West Virginia Racing and Gaming Regulation
The Company's operations at the Charles Town Entertainment Complex are
subject to regulation by the West Virginia Racing Commission under the West
Virginia Racing Act, and by the West Virginia Lottery Commission under the West
Virginia Video Lottery Act. The powers and responsibilities of the West Virginia
Racing Commission under the West Virginia Racing Act are substantially similar
in scope and effect to those of the Pennsylvania Racing Commissions and extend
to the approval and/or oversight of all aspects of racing and pari-mutuel
wagering operations. The Charles Town Joint Venture has obtained from the West
Virginia Racing Commission a license to conduct racing and pari-mutuel wagering
at the Charles Town Entertainment Complex. Pursuant to the West Virginia Video
Lottery Act, the Company has obtained approval for the installation and
operation of a total of 1,000 gaming machines at the Charles Town Entertainment
Complex.
State and Federal Simulcast Regulation
The Federal Interstate Horseracing Act, the Pennsylvania Racing Act and
the West Virginia Racing Act require that the Company have a written agreement
with each applicable horsemen's organization in order to simulcast races. The
Company has entered into the Horsemen Agreements, and in accordance therewith
has agreed on the allocations of the Company's revenues from import simulcast
wagering to the purse funds for the Penn National Race Course, Charles Town
Races and Pocono Downs. Because the Company cannot conduct import simulcast
wagering in the absence of the Horsemen Agreements, the termination or
non-renewal of such Horsemen Agreements could have a material adverse effect on
the Company's business, financial condition and results of operations.
Taxation
The Company believes that the prospect of significant additional
revenue is one of the primary reasons that jurisdictions permit legalized
gaming. As a result, gaming companies are typically subject to significant taxes
and fees in addition to normal federal and state income taxes, and such taxes
and fees are subject to increase at any time. The Company pays substantial taxes
and fees with respect to its operations. From time to time, federal legislators
and officials have proposed changes in tax laws, or in the administration of
such laws, affecting the gaming industry. It is not possible to determine with
certainty the likelihood of changes in tax laws or in the administration of such
laws. Such changes, if adopted, could have a material adverse effect on the
Company's business, financial condition and results of operations.
Compliance with Other Laws
The Company and its OTWs are also subject to a variety of other rules
and regulations, including zoning, construction and land-use laws and
regulations in Pennsylvania and West Virginia governing the serving of alcoholic
beverages. Currently, Pennsylvania laws and regulations permit the construction
of off-track wagering facilities, but may affect the selection of a particular
OTW site because of parking, traffic flow and other similar considerations, any
of which may serve to delay the opening of future OTWs in Pennsylvania. By
contrast, West Virginia law does not permit the operation of OTWs. The Company
derives a significant portion of its other revenues from the sale of alcoholic
beverages to patrons of its facilities. Any interruption or termination of the
Company's existing ability to serve alcoholic beverages would have a material
adverse effect on the Company's business, financial condition and results of
operations.
15
<PAGE>
Restrictions on Share Ownership and Transfer
The Pennsylvania Racing Act requires that any shareholder proposing to
transfer beneficial ownership of 5% or more of the Company's shares file an
affidavit with the Company setting forth certain information about the proposed
transfer and transferee, a copy of which the Company is required to furnish to
the Pennsylvania Racing Commissions. The certificates representing the Company
shares owned by 5% beneficial shareholders are required to bear certain legends
prescribed by the Pennsylvania Racing Act. In addition, under the Pennsylvania
Racing Act, the Pennsylvania Racing Commissions have the authority to order a 5%
beneficial shareholder of the Company to dispose of his Common Stock of the
Company if it determines that continued ownership would be inconsistent with the
public interest, convenience or necessity or the best interest of racing
generally. The West Virginia Video Lottery Act provides that a transfer of more
than 5% of the voting stock of a corporation which controls the license may only
be to persons who have met the licensing requirements of the West Virginia Video
Lottery Act or which transfer has been pre-approved by the West Virginia Lottery
Commission. Any transfer that does not comply with this requirement voids the
license.
Potential Tennessee Development Regulatory Compliance.
If the Company successfully completes the development of its potential
Tennessee harness track and OTWs, the Company will likely face regulatory
requirements that are similar to the requirements affecting its existing
operations; however, given the absence of horse racing in Tennessee at this
time, the Company may face more burdensome regulatory approvals or compliance in
light of the absence of an established regulatory framework.
ITEM 2 PROPERTIES
See, ITEM 1-BUSINESS - "RACING AND PARI-MUTUEL OPERATIONS"
A solid waste landfill ("Landfill") is on a parcel of land adjacent to
the Company's Harness Track. The East Side Landfill Authority (the "Landfill
Authority"), which operated the Landfill from 1970 until 1982, disposed of
municipal waste on behalf of four municipalities. The Landfill is currently
subject to a closure order issued by the Pennsylvania Department of
Environmental Resources ("PADER") which the four municipalities are required to
implement pursuant to a 1986 Settlement Agreement among the former trustee in
bankruptcy for Pocono Downs, the Landfill Authority, the municipalities and
PADER (the "Settlement Agreement"). According to the Company's environmental
consulting firm, the Landfill closure is substantially complete. To date, the
municipalities obligated to implement the closure order pursuant to the
Settlement Agreement, have been fulfilling their obligations under the
Settlement Agreement or that the terms of the Settlement Agreement will not be
amended in the future. In addition, the Company may be liable for future claims
with respect to the Landfill under the Comprehensive Environmental Response,
Compensation and Liability Act and analogous state laws. The Company may incur
expenses in connection with the Landfill in the future, which expenses may not
be reimbursed by the municipalities. Any such expenses could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Other Property and Equipment
The Company currently leases 6,183 square feet of office space in an
office building in Wyomissing, Pennsylvania for the Company's executive offices.
The lease expires in April 2000 and provides for an annual minimum rental of
$71,100. The office building is owned by an affiliate of Peter M. Carlino, the
Chairman and Chief Executive Officer of the Company. The Company believes that
the lease terms are not less favorable than lease terms that could have been
obtained from an unaffiliated third party.
The Company currently leases an aircraft from a company owned by John
Jacquemin, a director of the Company. The lease expires in September, 2007 and
provides for monthly payments of $8,356. The Company believes that the lease
terms are not less favorable than lease terms that could have been obtained from
an unaffiliated third party.
16
<PAGE>
EMPLOYEES AND LABOR RELATIONS
At March 19, 1999, the Company had 1,654 permanent employees, of whom
837 were full-time and 817 part-time. Employees of the Company who work in the
admissions department and pari-mutuels department at the Penn National Race
Course, Pocono Downs and the OTWs are represented under collective bargaining
agreements between the Company and Sports Arena Employees' Union Local 137. The
agreements extend until October 3, 1999 for track employees and until May 27,
1999 for OTW employees. The pari-mutuel clerks at Pocono Downs voted to unionize
in June 1997. The Company has held negotiations with this union, but does not
have a contract to date. Failure to reach agreement with this union would not
result in the suspension or termination of the Company's license to operate live
racing at Pocono Downs or to conduct simulcast or OTW operations. The
pari-mutuel clerks and racing valets at Charles Town are represented under a
collective bargaining agreement with the West Virginia Division of Mutuel
Clerks, which expires on December 31, 2000. The Company believes that its
relations with its employees are satisfactory.
ITEM 3 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 the 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) sought declaratory relief that
certain contracts allegedly bind the Charles Town Joint Venture to retain Amtote
for wagering services 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 prescribed performance
under the Third Party Wagering Contract. On February 20, 1998, the temporary
restraining order was lifted by the court. The Company intends to pursue legal
remedies in order to terminate Amtote and proceed under the Third Party Wagering
Services Contract. The Company believes that this 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.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
17
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PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is quoted on The Nasdaq National Market
under the symbol "PENN". The following table sets forth for the periods
indicated the high and low sales prices per share of the Company's Common Stock
as reported on The Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
1996
<S> <C> <C>
First Quarter $ 6.000 $ 4.292
Second Quarter 14.500 5.875
Third Quarter 15.625 9.000
Fourth Quarter 21.375 13.750
1997
First Quarter $ 18.250 $ 14.000
Second Quarter 19.625 13.750
Third Quarter 20.125 14.625
Fourth Quarter 19.250 8.750
1998
First Quarter $ 13.125 $ 8.875
Second Quarter 12.000 6.813
Third Quarter 9.125 5.125
Fourth Quarter 10.313 5.500
</TABLE>
The closing sale price per share of Common Stock on The Nasdaq National
Market on March 19, 1999, was $7.188. As of March 19, 1999, there were 738
holders of record of Common Stock.
DIVIDEND POLICY
Since the Company's initial public offering of Common Stock in May
1994, the Company has not paid any cash dividends on its Common Stock. The
Company intends to retain all of its earnings to finance the development of the
Company's business, and thus, does not anticipate paying cash dividends on its
Common Stock for the foreseeable future. Payment of any cash dividends in the
future will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, future earnings, operations, capital
requirements, the general financial condition of the Company and general
business conditions. Moreover, the Company's existing credit facility (the
"Credit Facility") prohibits the Company from authorizing, declaring or paying
any dividends until the Company's commitments under the Credit Facility have
been terminated and all amounts outstanding thereunder have been repaid. In
addition, future bank financing may prohibit the payment of dividends under
certain conditions.
18
<PAGE>
ITEM 6 SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of the Company for
the years ended December 31, 1994, 1995, 1996 1997 and 1998, except for
Operating Data, are derived from financial statements that have been audited by
BDO Seidman, LLP independent certified public accountants, adjusted as described
in the notes below. The selected consolidated financial data should be read in
conjunction with the consolidated financial statements of the Company and Notes
thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the other financial information included herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------
1994 1995 1996 1997 (1) 1998
-------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenue
Pari-mutuel revenues
Live races $ 23,428 $ 21,376 $ 18,727 $ 27,653 $ 26,893
Import simulcasting 16,968 27,254 32,992 59,810 68,136
Export simulcasting 1,187 2,142 3,347 5,279 5,810
Gaming revenue - - - 5,712 37,396
Admissions, programs and other racing revenue 2,563 3,704 4,379 5,678 6,280
Concessions revenues 1,885 3,200 3,389 7,404 9,550
-------------------------------------------------------------
Total revenues 46,031 57,676 62,834 111,536 154,065
-------------------------------------------------------------
OPERATING EXPENSES
Purses, stakes, and trophies 10,674 12,091 12,874 22,335 29,141
Direct salaries, payroll taxes and employee benefits 6,707 7,699 8,669 16,200 19,134
Simulcast expenses 8,892 9,084 9,215 12,982 13,809
Pari-mutuel taxes 4,054 4,963 5,356 9,506 9,281
Lottery taxes and administration - - - 1,874 14,749
Other direct meeting expenses 6,093 7,576 8,536 18,087 24,029
Concessions expenses 1,175 2,125 2,349 5,605 7,929
Management fees paid to related entity 345 - - - -
Other operating expenses 2,968 5,002 4,942 8,735 10,787
Depreciation and amortization 699 881 1,433 4,040 5,748
Site development and restructuring changes - - - 2,437 -
-------------------------------------------------------------
Total operating expenses 41,607 49,421 53,374 101,801 134,607
-------------------------------------------------------------
Income from operations 4,424 8,255 9,460 9,735 19,458
-------------------------------------------------------------
Other income (expenses)
Interest income (expense), net (340) 198 (156) (3,656) (7,549)
Other 15 10 - (2) 113
-------------------------------------------------------------
Total other income (expenses) (325) 208 (156) (3,658) (7,436)
-------------------------------------------------------------
Income before income taxes and extraordinary item 4,099 8,463 9,304 6,077 12,022
Taxes on income 1,381 3,467 3,794 2,308 4,519
-------------------------------------------------------------
Income before extraordinary item 2,718 4,996 5,510 3,769 7,503
Extraordinary item - loss on early extinquishment of debt,
net of income taxes of $83 and $1,001 respectively 115 - - 1,482 -
-------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------
1994 1995 1996 1997 (1) 1998
-------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
=============================================================
<S> <C> <C> <C> <C> <C>
Net income $ 2,603 $ 4,996 $ 5,510 $ 2,287 $ 7,503
=============================================================
PER SHARE DATA:
Basic income per share before extraordinary item $ 0.39 $ 0.41 $ 0.25 $ 0.50
Basic net income per share $ 0.39 $ 0.41 $ 0.15 $ 0.50
Diluted income per share before extraordinary item $ 0.38 $ 0.40 $ 0.24 $ 0.49
Diluted net income per share $ 0.38 $ 0.40 $ 0.15 $ 0.49
WEIGHTED SHARES OUTSTANDING:
Basic 12,906 13,302 14,925 15,015
Diluted 13,017 13,822 15,458 15,374
SUPPLEMENTAL PRO FORMA NET INCOME:
Statement data (3)
Supplemental pro forma net income $ 2,724
Supplemental pro forma net income per share $ 0.22
Weighted average number of common shares outstanding (4) 12,663
=============
OPERATING DATA:
Pari-mutuel wagering $ 111,248 $ 102,145 $ 89,327 $ 128,090 $ 122,686
Import simulcasting 93,461 142,499 170,814 298,459 336,191
Export simulcasting 40,337 72,252 112,871 176,287 194,772
-------------------------------------------------------------
Total pari-mutuel wagering $ 245,046 316,896 373,012 602,836 653,649
=============================================================
Gross profit from wagering (2) $ 17,936 24,915 27,955 45,589 47,888
=============================================================
BALANCE SHEET DATA:
Cash and cash equivalents $ 5,502 $ 7,514 $ 5,634 $ 21,854 6,826
Working capital (deficiency) 2,074 4,134 (509) 15,226 1,911
Total assets 21,873 27,532 96,723 158,878 160,798
Total debt 516 390 47,517 80,336 78,256
Shareholders' equity 15,627 20,802 27,881 53,856 59,036
</TABLE>
(1) Reflects the November 27, 1996 acquisition of Pocono Downs and the
January 15, 1997 acquisition of a joint venture interest in
the Charles Town Entertainment Complex. See "Business-Acquisitions."
(2) Amounts equal total pari-mutuel revenues, less purses paid to Horsemen,
taxes payable to Pennsylvania and simulcast commissions or host track fees
paid to other racetracks. Figures for the years ended December 31, 1995
and 1996 do not include purses paid at Penn National Speedway.
(3) Supplemental pro forma amounts for the year ended December 31, 1994
reflect (i) the elimination of $345,000 in management fees paid to a
related entity, (ii) the inclusion of $133,000, in executive
compensations, (iii) the elimination of $413,000 of interest expenses on
Company debt which was repaid with the proceeds of the initial public
offering in 1994, (iv) the elimination of $198,000 of loss on early
extinguishment of debt, and (v) a provision for income taxes of $377,000
as if the S corporations and partnerships comprising part of the Company
prior to the Reorganization in 1994 had been taxed as C corporations.
There were no supplemental pro forma adjustments for any subsequent
periods.
(4) Based on 8,400,000 shares of Common Stock outstanding before the initial
public offering in May 1994, plus 4,500,000 shares sold by the Company in
the initial public offering.
20
<PAGE>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company's pari-mutuel revenues have been derived from (i) wagering
on the Company's live races (a) at the Company's racetracks, (b) at the
Company's OTWs, (c) at other Pennsylvania racetracks and OTWs and (d) through
telephone wagering, as well as wagering at the Company's racetracks on certain
stakes races run at out-of-state racetracks (collectively, referred to in the
Company's financial statements as "pari-mutuel revenues from live races"), (ii)
wagering on full-card import simulcasts at the Company's racetracks and OTWs and
through telephone wagering (collectively, referred to in the Company's financial
statements as "pari-mutuel revenues from import simulcasting") and (iii) fees
from wagering on export simulcasting Company races at out-of-state locations
(referred to in the Company's financial statements as "pari-mutuel revenues from
export simulcasting"). The Company's other revenues have been derived from
admissions, program sales and certain other ancillary activities, food and
beverage sales and concessions and, beginning in September 1997, gaming
machines.
RESULTS OF OPERATIONS
The following table sets forth certain data from the Consolidated
Statements of Income of the Company as a percentage of total revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1996 1997 1998
-----------------------------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Revenue
Pari-mutuel revenues
Live races 29.8% 24.8% 17.5%
Import simulcasting 52.5 53.6 44.2
Export simulcasting 5.3 4.7 3.8
Gaming revenue - 5.1 24.3
Admissions, programs and other racing revenue 7.0 5.1 4.1
Concessions revenues 5.4 6.7 6.2
-----------------------------
Total revenues 100.0 100.0 100.0
-----------------------------
Operating expenses
Purses, stakes, and trophies 20.5 20.0 18.9
Direct salaries, payroll taxes and employee benefits 13.8 14.5 12.4
Simulcast expenses 14.7 11.7 9.0
Pari-mutuel taxes 8.5 8.5 6.0
Lottery taxes and administration - 1.7 9.6
Other direct meeting expenses 13.6 16.2 15.6
Concessions expenses 3.7 5.0 5.1
Other operating expenses 7.9 7.8 7.0
Depreciation and amortization 2.3 3.6 3.7
Site development and restructuring changes - 2.2 -
-----------------------------
Total operating expenses 84.9 91.3 87.4
-----------------------------
Income from operations 15.1 8.7 12.6
-----------------------------
Total other (expenses) (0.2) (3.3) (4.8)
-----------------------------
Income before income taxes and extraordinary item 14.9 5.4 7.8
=============================
Net income 8.8% 2.1% 4.9%
=============================
</TABLE>
21
<PAGE>
Year Ended December 31, 1998 compared to Year Ended December 31, 1997
Total revenue increased by approximately $42.5 million or 38.1% from $111.5
million in 1997 to $154.1 million in 1998. Charles Town Races, which was
purchased in January of 1997 and began racing operations on April 30, 1997 and
video lottery machine operations on September 10, 1997, accounted for $40.4
million of the increase. Revenues from video lottery machines increased by $31.7
million as a result of a full year of operations in 1998 compared to three and
one-half months of operations in 1997. Racing revenues increased by $6.2 million
due to a racing season of 206 live race days at the Charles Town Races in 1998
compared to 159 live races days in 1997 and the opening of the new
simulcast-racing center in January 1998. Concession revenues increased by $2.2
million due to the increased attendance and the opening of the new buffet dining
area during the year. At Penn National Race Course and its OTW facilities,
revenues increased at the track ($.3 million) due to an increase in on-track
wagering and export simulcast wagering and the purchase and opening of the
Johnstown OTW ($.9 million) on September 1, 1998. The increases were offset by a
decrease in revenues at Chambersburg OTW ($.6 million) due to the opening of the
Charles Town Facility, Reading OTW ($.3 million) and York OTW ($.3 million).
Revenues at Pocono Downs and its OTW facilities resulted in a net increase of
$2.1 million primarily due to the opening of new facilities in Hazleton ($2.2
million) and Carbondale ($2.4 million). This was offset by a decrease at the
Pocono Downs racetrack ($2.1 million) due to the proximity of the two new OTW
facilities and decreases at Allentown OTW ($.3 million) and Erie OTW ($.2
million).
Total operating expenses increased by approximately $32.8 million or 32.2%
from $101.8 million in 1997 to $134.6 million in 1998. Charles Town Races
accounted for $32.6 million of the increase due primarily to the video lottery
operations ($24.7 million), racing operations ($5.9 million) and concession
operations ($2.1 million). Penn National Race Course and its OTW facilities had
a net decrease in operating expenses of $.6 million due to an increase in
expenses at the new Johnstown OTW ($.8 million) offset by a decrease in
operating expenses at the racetrack and other OTW facilities ($1.4 million).
Pocono Downs and its OTW facilities had a net increase in operating expenses of
$.9 million due to the opening of Hazleton OTW ($1.9 million) and Carbondale OTW
($1.8 million). The increase was offset by a decrease in operating expenses at
the Pocono Downs racetrack ($1.8 million), Allentown OTW ($.6 million) and Erie
OTW ($.4 million). Corporate expenses increased by $.6 million due to the hiring
of additional staff for OTW facility management, human resource management and
the leasing of additional office space. Depreciation and amortization increased
by $1.7 million due primarily to depreciation associated with new facilities for
Charles Town Gaming (September 1997), Charles Town Simulcast Center (January
1998), Hazleton and Carbondale OTW facilities (March 1998) and Johnstown OTW
(September 1998). Site development and restructuring expenses were $2.4 million
in 1997.
Income from operations increased by approximately $9.7 million or 100.0 %
from $9.7 million in 1997 to $19.5 million in 1998 due to the factors described
above.
Other expenses increased by approximately $3.8 million or 105.6% from $3.6
million in 1997 to $7.4 million in 1998. Net interest expense increased by $3.9
million (primarily due to the 10.625% Senior Notes issued December 1997). Other
income in 1998 of $113,000 consisted of a gain on the sale of Casino Magic
Corporation stock of $148,000 offset by a write-off of deferred financing cost
on the repurchase of the Company's 10.625% Senior Notes.
Taxes on income increased by approximately $2.2 million from $2.3 million
in 1997 to $4.5 million in 1998, due to the increase in income for the year.
The extraordinary item in 1997 consisted of a loss on the early
extinquishment of debt in the amount of $1,482,000, net of income taxes. The
loss consists primarily of write-offs of deferred finance costs associated with
the retired bank notes and legal and bank fees relating to the early
extinquishment of the debt.
Net income increased by approximately $5.2 million from $2.3 million in
1997 to $7.5 million in 1998 due to the factors described above.
22
<PAGE>
Year Ended December 31, 1997 compared to Year Ended December 31, 1996
Total revenue increased by approximately $48.7 million, or 77.5%, from
$62.8 million in 1996 to $111.5 million in 1997. Pocono Downs, which was
acquired in the fourth quarter of 1996 under the purchase method, accounted for
$30.8 million of the increase. Charles Town Races, which was purchased in
January 1997, accounted for $16.5 million of the increase. The Company renovated
and refurbished the Charles Town Entertainment Complex following its acquisition
and commenced racing operations on April 30, 1997 and gaming machine operations,
with a soft opening, on September 10, 1997. The remaining revenue increase of
$1.4 million was primarily due to an increase of approximately $6.2 million
associated with the opening of the Penn National OTW facility in Williamsport in
February 1997, a full year of operations at the Lancaster OTW facility, and
increased export of the Penn National Race Course live signal. This increase was
offset by a decrease in revenues of approximately $4.2 million at the Company's
OTW facilities in Reading and York. Management believes that the decrease in
revenues at these facilities was primarily due to the opening of a competitor's
OTW facility and the opening of the Company's Lancaster OTW facility in July
1996. The Company also had a decrease in revenues of $.6 million due to the
closing of Penn National Speedway at the end of the 1996 season.
Total operating expenses increased by approximately $48.4 million, or
90.7%, from $53.4 million in 1996 to $101.8 million in 1997. Pocono Downs and
Charles Town Races, which the Company did not operate in the corresponding prior
period, accounted for $25.5 million and $17.5 million of this increase,
respectively. Operating expenses also increased by $5.4 million primarily due to
an increase of $4.4 million associated with the opening of the Company's new OTW
facility in Williamsport in February 1997, and a full year of operations at the
Lancaster OTW facility. This increase was offset by a decrease in operating
expenses of approximately $1.9 million at the Penn National Race Course facility
and at the Company's OTW facilities in Reading and York associated with lower
revenues at those facilities. The increase in corporate expenses of $1.4 million
was due to increased personnel, office space and other administrative expense
necessary to support the expansion of the Company. The Company also incurred
site development and restructuring charges in the amount of $2.4 million. The
site development charges ($1.7 million) consist of $800,000 related to the
Charles Town Races Facility and $935,000 related to the abandonment of certain
proposed operating in 1997. The restructuring charges primarily consist of
$350,000 in severance termination benefits and other charges at the Charles Town
Races facility, $300,000 for the restructuring of the Erie, Pennsylvania OTW
facility and $52,000 of property and equipment written-off in connection with
the discontinuation of Penn National Speedway, Inc. operations during 1997. The
Company also had a decrease in expenses of $.9 million due to the closing of
Penn National Speedway at the end of the 1996 season.
Income from operations increased by approximately $275,000, or 2.9%,
from $9.5 million in 1996 to $9.7 million in 1997 due to the factors described
above. The Company had other expenses of approximately $3.7 million in 1997
compared to $156,000 in 1996, primarily as a result of increased interest
expense. The increase in interest expense is due to the company incurring bank
debt for the purchase of Pocono Downs and Charles Town Races, renovations to the
Charles Town Facility and the issuance of 10.625% Senior Notes on December 12,
1997 to repay existing bank debt.
The extraordinary item consisted of a loss on the early extinquishment
of debt in the amount of $1,482,000, net of income taxes. The loss consists
primarily of write-offs of deferred financing costs associated with the retired
bank notes and legal and bank fees relating to the early extinquishment of the
debt.
Net income decreased by approximately $3.2 million or 58.5%, from $5.5
million in 1996 to $2.3 million in 1997 based on the factors described above.
Income taxes decreased by $1.5 million from $3.8 million in 1996 to $2.3 million
in 1997 as a result of the decrease in income for the year.
23
<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 issuance of equity securities.
Net cash provided from operating activities was $11.9 million for the
year ended December 31, 1998. This consisted of net income and non-cash expenses
($13.6 million), an increase in accounts receivable ($1.6 million) due from
other tracks, a decrease in accounts payable and accrued expenses due to the
completion of construction at Charles Town ($2.6 million), an increase in purses
due horsemen ($.9 million) a decrease in prepaid income taxes ($2.1 million) and
other changes in certain assets and liabilities ($.5 million).
Cash flows used in investing activities for the year ended December 31,
1998 ($22.3 million) consisted of renovation and refurbishment of the Charles
Town facility and racetrack ($1.1 million), completion of the Hazleton and
Carbondale OTW facilities ($3.2 million), the purchase of the Johnstown OTW
facility ($1.3 million), the purchase of the GTECH video lottery machines and
central monitoring system ($12.9 million) and $3.8 million in capital
expenditures at other facilities.
Net cash flows used in financing activities was approximately $4.6
million for the year ended December 31, 1998. The Company purchased 424,700
shares of the Company's common stock ($2.4 million) and $11.0 million of the
Company's 10.625% Senior Notes at 97.25% during the year. In November 1998, the
Company borrowed $9.0 million under its Credit Facility to buy the GTECH video
lottery machines and central monitoring system.
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. See ITEM 2 -"PROPERTIES".
In the first quarter of 1999, the Company anticipates a one time
material loss associated with the actions by the Pennsylvania Thoroughbred
Horsemen on February 16, 1999 that resulted in the closing of Penn National Race
Course and its six OTW facilities at Reading, Chambersburg, York, Lancaster,
Williamsport and Johnstown, from February 16, 1999 through March 24, 1999. At
this time the Company has insufficient information to reasonably quantify the
amount of the loss.
Also in 1999, the Company anticipates spending approximately $9.0
million on capital expenditures at its racetrack and OTW facilities. The Company
anticipates expending approximately $5.0 million at the Charles Town
Entertainment Complex for player tracking ($1.5 million), new video slot
machines ($.8 million), interior renovations ($.4 million), machinery and
equipment ($.7 million) and other projects including design and planning for a
new motel ($1.6 million). The Company also plans to spend approximately $578,000
at Pocono Downs, $645,000 at Penn National, $295,000 at the OTW facilities for
building improvements and equipment and $2.0 million on building improvements
and equipment for its new OTW facility in Stroudsburg, Pennsylvania. 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 the Tennessee 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 29, 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 from 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 will accrue interest, at the option of the Company, at
24
<PAGE>
either a base rate plus an applicable margin of up to 2.0% or a eurodollar rate
plus an applicable margin of up to 3.0%. The Credit Facility is secured by the
assets of the Company and contains certain financial ratios and maintenance
tests. On December 31, 1998, the Company was in compliance with all applicable
ratios.
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. The Company
intends to fund its portion of the Joint Venture with Greenwood New Jersey, Inc.
(up to $28.75 million) from cash on hand, available credit lines and other
financing. 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.
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 disruptions 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. Most 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
All of the Company's debt obligations at December 31, 1998 were fixed
rate obligations, and Management, therefore, does not believe that the Company
has any material market risk from its debt obligations.
25
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
<TABLE>
<S> <C> <C>
Page No.
Report of Independent Certified Public Accountants 27
Consolidated financial statements
Balance sheets 28-29
Statements of income 30-31
Statements of shareholders' equity 32
Statements of cash flows 33-34
Notes to consolidated financial statements 35-55
</TABLE>
26
<PAGE>
Report of Independent Certified Public Accountants
Penn National Gaming, Inc.
and Subsidiaries
Wyomissing, Pennsylvania
We have audited the accompanying consolidated balance sheets of Penn National
Gaming, Inc. and Subsidiaries as of December 31, 1997 and 1998, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Penn National
Gaming, Inc. and Subsidiaries at December 31, 1997 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles.
Philadelphia, Pennsylvania \s\BDO Seidman, LLP
February 26, 1999, except for --------------------
Note 11 which is as of March 23, 1999 BDO Seidman, LLP
27
<PAGE>
Penn National Gaming, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31, 1997 1998
---------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 21,854 $ 6,826
Accounts receivable 2,257 3,840
Prepaid expenses and other current assets 1,441 2,131
Deferred income taxes 469 458
Prepaid income taxes 3,003 859
---------------------------------
Total current assets 29,024 14,114
---------------------------------
Property, plant and equipment, at cost
Land and improvements 24,643 26,969
Building and improvements 56,298 66,918
Furniture, fixtures and equipment 13,847 29,772
Transportation equipment 490 527
Leasehold improvements 6,778 9,579
Leased equipment under capitalized lease 824 824
Construction in progress 11,288 1,847
---------------------------------
114,168 136,436
Less accumulated depreciation and amortization 11,007 15,684
---------------------------------
Net property, plant and equipment 103,161 120,752
---------------------------------
Other assets
Excess of cost over fair market value of net assets acquired (net of
accumulated amortization of $1,389 and $2,002,
respectively) 23,055 22,442
Deferred financing costs 3,014 2,403
Miscellaneous 624 1,087
---------------------------------
Total other assets 26,693 25,932
---------------------------------
$ 158,878 $ 160,798
---------------------------------
</TABLE>
See accompanying summary of significant accounting
policies and notes to consolidated financial statements.
28
<PAGE>
Penn National Gaming, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31, 1997 1998
---------------------------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt and
capital lease obligations $ 204 $ 168
Accounts payable 7,405 6,217
Purses due horsemen -- 887
Uncashed pari-mutuel tickets 1,504 1,597
Accrued expenses 2,427 1,063
Accrued interest 326 468
Accrued salaries and wages 813 752
Customer deposits 470 548
Taxes, other than income taxes 649 503
---------------------------------
Total current liabilities 13,798 12,203
---------------------------------
Long-term liabilities
Long-term debt and capital lease obligations,
net of current maturities 80,132 78,088
Deferred income taxes 11,092 11,471
---------------------------------
Total long-term liabilities 91,224 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 15,152,580 and 15,164,080, respectively 152 152
Treasury stock, 424,700 shares at cost -- (2,379)
Additional paid-in capital 37,969 38,025
Retained earnings 15,735 23,238
---------------------------------
Total shareholders' equity 53,856 59,036
---------------------------------
$ 158,878 $ 160,798
---------------------------------
</TABLE>
See accompanying summary of significant accounting
policies and notes to consolidated financial statements.
29
<PAGE>
Penn National Gaming, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31, 1996 1997 1998
--------------------------------------------
<S> <C> <C> <C>
Revenues
Pari-mutuel revenues
Live races $ 18,727 $ 27,653 $ 26,893
Import simulcasting 32,992 59,810 68,136
Export simulcasting 3,347 5,279 5,810
Gaming revenue -- 5,712 37,396
Admissions, programs and other racing revenues 4,379 5,678 6,280
Concessions revenues 3,389 7,404 9,550
--------------------------------------------
Total revenues 62,834 111,536 154,065
--------------------------------------------
Operating expenses
Purses, stakes and trophies 12,874 22,335 29,141
Direct salaries, payroll taxes and employee benefits 8,669 16,200 19,134
Simulcast expenses 9,215 12,982 13,809
Pari-mutuel taxes 5,356 9,506 9,281
Lottery taxes and administration -- 1,874 14,749
Other direct meet expenses 8,536 18,087 24,029
Concessions expenses 2,349 5,605 7,929
Other operating expenses 4,942 8,735 10,787
Depreciation and amortization 1,433 4,040 5,748
Site development and restructuring charges -- 2,437 --
--------------------------------------------
Total operating expenses 53,374 101,801 134,607
--------------------------------------------
Income from operations 9,460 9,735 19,458
--------------------------------------------
Other income (expenses)
Interest (expense) (506) (4,591) (8,374)
Interest income 350 935 825
Other -- (2) 113
--------------------------------------------
Total other (expenses) (156) (3,658) (7,436)
--------------------------------------------
</TABLE>
See accompanying summary of significant accounting
policies and notes to consolidated financial statements.
30
<PAGE>
Penn National Gaming, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31, 1996 1997 1998
--------------------------------------------
<S> <C> <C> <C>
Income before income taxes and extraordinary item $ 9,304 $ 6,077 $ 12,022
Taxes on income 3,794 2,308 4,519
--------------------------------------------
Income before extraordinary item 5,510 3,769 7,503
Extraordinary item
Loss on early extinguishment of debt,
net of income taxes of $1,001 -- 1,482 --
--------------------------------------------
Net income $ 5,510 $ 2,287 $ 7,503
--------------------------------------------
Per share data
Basic
Income per share before extraordinary item $ .41 $ .25 $ .50
Extraordinary item -- .10 --
--------------------------------------------
Net income per share $ .41 $ .15 $ .50
--------------------------------------------
Diluted
Income per share before extraordinary item $ .40 $ .24 $ .49
Extraordinary item -- .09 --
--------------------------------------------
Net income per share $ .40 $ .15 $ .49
--------------------------------------------
Weighted shares outstanding
Basic 13,302 14,925 15,015
Diluted 13,822 15,458 15,374
--------------------------------------------
</TABLE>
See accompanying summary of significant accounting
policies and notes to consolidated financial statements.
31
<PAGE>
Penn National Gaming, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(In thousands, except share data)
<TABLE>
<CAPTION>
Additional
Common Stock Treasury Paid-In Retained
Shares Amount Stock Capital Earnings Total
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 12,945,000 $ 43 $ -- $12,821 $ 7,938 $20,802
Issuance of common stock 410,290 4 -- 1,565 -- 1,569
Stock splits -- 87 -- (87) -- --
Net income for the year -- -- -- -- 5,510 5,510
---------------------------------------------------------------------------
Balance, December 31, 1996 13,355,290 134 -- 14,299 13,448 27,881
Issuance of common stock 1,725,000 17 -- 22,914 -- 22,931
Exercise of stock options and warrants 72,290 1 -- 154 -- 155
Tax benefit related to
stock options exercised -- -- -- 602 -- 602
Net income for the year -- -- -- -- 2,287 2,287
---------------------------------------------------------------------------
Balance, December 31, 1997 15,152,580 152 -- 37,969 15,735 53,856
Exercise of stock options and warrants 11,500 -- -- 56 -- 56
Acquisition of treasury stock -- -- (2,379) -- -- (2,379)
Net income for the year -- -- -- -- 7,503 7,503
---------------------------------------------------------------------------
Balance, December 31, 1998 15,164,080 $152 $(2,379) $ 38,025 $ 23,238 $59,036
---------------------------------------------------------------------------
</TABLE>
See accompanying summary of significant accounting
policies and notes to consolidated financial statements.
32
<PAGE>
Penn National Gaming, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31, 1996 1997 1998
--------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 5,510 $ 2,287 $ 7,503
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,433 4,040 5,748
Write-off of deferred financing costs -- -- 376
Extraordinary loss relating to early
extinguishment of debt, before income
tax benefit -- 2,483 --
Deferred income taxes (benefit) 228 (97) 390
Decrease (increase) in
Accounts receivable (1,870) 2,036 (1,583)
Prepaid expenses and other current assets 871 111 (690)
Prepaid income taxes -- (3,003) 2,144
Miscellaneous other assets (255) (258) (463)
Increase (decrease) in
Accounts payable 1,288 2,339 (1,188)
Purses due horsemen (248) (1,421) 887
Uncashed pari-mutuel tickets 632 168 93
Accrued expenses 726 1,155 (1,364)
Accrued interest 101 225 142
Accrued salaries and wages 265 306 (61)
Customer deposits 105 50 78
Taxes,other than income taxes 146 257 (146)
Income taxes (985) -- --
--------------------------------------------
Net cash provided by operating activities 7,947 10,678 11,866
--------------------------------------------
Cash flows from investing activities
Expenditures for property, plant and equipment (6,995) (29,196) (22,333)
Acquisition of business, net of cash acquired (47,320) (18,248) --
(Increase) in prepaid acquisition costs (1,514) (176) --
--------------------------------------------
Net cash (used in) investing activities (55,829) (47,620) (22,333)
--------------------------------------------
</TABLE>
33
<PAGE>
Penn National Gaming, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31, 1996 1997 1998
--------------------------------------------
<S> <C> <C> <C>
Cash flows from financing activities
Proceeds from sale of common stock $ 1,569 $ 23,086 $ 56
Acquisition of treasury stock -- -- (2,379)
Tax benefit related to stock options exercised -- 602 --
Proceeds from long-term debt 47,000 111,167 9,000
Principal payments on long-term debt
and capital lease obligations (123) (78,348) (11,080)
(Increase) in unamortized financing costs (2,444) (3,345) (158)
--------------------------------------------
Net cash provided (used) by financing activities 46,002 53,162 (4,561)
--------------------------------------------
Net (decrease) increase in cash and cash equivalents (1,880) 16,220 (15,028)
Cash and cash equivalents at beginning of period 7,514 5,634 21,854
--------------------------------------------
Cash and cash equivalents at end of period $ 5,634 $ 21,854 $ 6,826
--------------------------------------------
</TABLE>
See accompanying summary of significant accounting
policies and notes to consolidated financial statements.
34
<PAGE>
1. Summary of Basis of Presentation
Significant
Accounting The consolidated financial statements
Policies include the accounts of Penn National
Gaming, Inc. and its subsidiaries
(collectively the "Company"). All
significant intercompany accounts and
transactions have been eliminated in
consolidation. Certain prior years' amounts
have been reclassified to conform to the 1998
presentation.
Description of Business
The Company provides pari-mutuel wagering
opportunities on both live and simulcast
thoroughbred and harness horse races at two
racetracks and ten off-track wagering
facilities ("OTWs") located in Pennsylvania
and pari-mutuel wagering opportunities and
video gaming machines at Charles Town Races,
the Company's Charles Town, West Virginia
thoroughbred racetrack. In March 1998, the
Company opened OTW facilities in Hazleton and
Carbondale, Pennsylvania and acquired its
tenth OTW facility in Johnstown, Pennsylvania
from Ladbroke Racing Management-Pennsylvania
("Ladbroke") in September 1998. The Company's
sole operating segment is gaming activities.
At each of its three racetracks, the Company
conducts pari-mutuel wagering on thoroughbred
and harness races from the Company's
racetracks and simulcasts from other
racetracks. The Company also simulcasts its
Penn National Race Course and Pocono Downs
races for wagering at other racetracks and
OTWs, including all Pennsylvania racetracks
and OTWs and locations outside Pennsylvania.
Wagering on Penn National Race Course and
Pocono Downs races and races simulcast from
other racetracks also occurs through the
Company's Pennsylvania racetracks' telephone
account betting network.
Glossary of Terminology
The following is a listing of terminology
used throughout the financial statements:
The Company's racetracks - Penn
National Race Course near
Harrisburg, Pennsylvania, Pocono
Downs near Wilkes-Barre,
Pennsylvania and Charles Town Races
in Charles Town, West Virginia.
Gaming machines - Video lottery
terminal gaming machines.
OTW - Off-track wagering location.
Pari-mutuel wagering - All wagering
at the Company's racetracks, at the
Company's OTWs and all wagering on
the Company's races at other
racetracks and OTWs.
Telebet - Telephone account
wagering.
Totalisator services - Computer
services provided to the Company by
various totalisator companies for
processing pari-mutuel betting odds
and wagering proceeds.
35
<PAGE>
Pari-mutuel revenues:
Live races - The Company's
share of pari-mutuel wagering
on live races within
Pennsylvania and West Virginia
and certain stakes races from
racetracks outside of
Pennsylvania and West Virginia
after payment of the amount
returned as winning wagers.
Import simulcasting - The
Company's share of wagering at
the Company's racetracks, at
the Company's OTWs and by
Telebet on full cards of races
simulcast from other
racetracks.
Export simulcasting - The
Company's share of wagering at
out-of-state locations on live
races conducted by the
Company.
Gaming revenue - The Company's
share of net winnings from
gaming wins and losses.
A summary of pari-mutuel wagering for the
periods indicated is as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1997 1998
- - --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Pari-mutuel wagering on
the Company's live races $ 89,327 $ 128,090 $ 122,686
Pari-mutuel wagering on
simulcasting
Import simulcasting from
other racetracks 170,814 298,459 336,191
Export simulcasting to out
of Pennsylvania
wagering facilities 112,871 176,287 194,772
--------------------------------------------
Total pari-mutuel wagering $ 373,012 $ 602,836 $ 653,649
</TABLE>
Racing Meet
The racing seasons, under the management
of the Company, for the past three years
consisted of the following number of live
race days:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1997 1998
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Penn National Race Course 206 212 206
Pocono Downs -- 134 135
Charles Town Races -- 159 206
</TABLE>
Depreciation and Amortization
Depreciation of property, plant and equipment
and amortization of leasehold improvements
are computed by the straight-line method at
rates adequate to allocate the cost of
applicable assets over their estimated useful
36
<PAGE>
lives. Depreciation and amortization for the
years ended December 31, 1996, 1997 and 1998
amounted to $1,301,000, $3,193,000 and
$4,705,000, respectively.
The excess of cost over fair value of net
assets acquired is being amortized on the
straight-line method over a forty-year
period. Amortization expense for 1996, 1997
and 1998 amounted to $98,000, $578,000 and
$613,000, respectively. The Company evaluates
the recoverability of the goodwill quarterly,
or more frequently whenever events and
circumstances warrant revised estimates and
considers whether the goodwill should be
completely or partially written off or the
amortization period accelerated.
The Company reviews the carrying values of
its long-lived and identifiable intangible
assets for possible impairment whenever
events or changes in circumstances indicates
that the carrying amount of the assets may
not be recoverable based on undiscounted
estimated future operating cash flows. As of
December 31, 1998, the Company has determined
that no impairment has occurred.
Deferred financing costs are charged to
operations over the life of the underlying
indebtedness. Amortization of deferred
financing costs for 1996, 1997 and 1998
amounted to $34,000, $269,000 and $430,000,
respectively.
Income Taxes
The Company recognizes deferred tax
liabilities and assets for the expected
future tax consequences of events that have
been recognized in the Company's financial
statements or tax returns. Under this method,
deferred tax liabilities and assets are
determined based on the difference between
the financial statement carrying amounts and
tax bases of assets and liabilities using
enacted tax rates in effect in the years in
which the differences are expected to
reverse.
Customer Deposits
Customer deposits represent amounts held by
the Company for telephone wagering.
Cash and Cash Equivalents
The Company considers all cash balances and
highly liquid investments with original
maturities of three months or less to be cash
equivalents.
Net Income Per Common Share
Basic net income per share includes no
dilution and is calculated by dividing net
income by the weighted average number of
common shares outstanding for the period.
Dilutive net income per share reflects the
potential dilution of securities that could
share in the net income of the Company which
consist of stock options and warrants (using
the treasury stock method).
Deferred Financing Costs
Deferred financing costs which are incurred
by the Company in connection with debt are
charged to operations over the life of the
underlying indebtedness using the interest
method, adjusted to give effect to any early
repayments.
37
<PAGE>
Concentration of Credit Risk
Financial instruments which potentially
subject the Company to credit risk consist of
cash equivalents and accounts receivable.
The Company's policy is to limit the amount
of credit exposure to any one financial
institution and place investments with
financial institutions evaluated as being
creditworthy, or in short-term money market
and tax-free bond funds which are exposed to
minimal interest rate and credit risk. At
December 31, 1998, the Company had bank
deposits which exceeded federally insured
limits by approximately $3,298,000 and money
market and tax-free bond funds of
approximately $975,000. Concentration of
credit risk, with respect to accounts
receivable, is limited due to the Company's
credit evaluation process. The Company does
not require collateral from its customers.
The Company's receivables consist principally
of amounts due from other racetracks and
OTWs. Historically, the Company has not
incurred any significant credit-related
losses.
Fair Value of Financial Instruments
The following methods and assumptions are
used to estimate the fair value of each class
of financial instruments for which it is
practical to estimate.
Cash and Cash Equivalents: The
carrying amount approximates the fair
value due to the short maturity of the
cash equivalents.
Long-Term Debt and Capital Lease
Obligations: The fair value of the
Company's long-term debt and capital
lease obligations is estimated based on
the quoted market prices for the same
or similar issues or on the current
rates offered to the Company for debt
of the same remaining maturities. The
carrying amount approximates fair value
since the Company's interest rates
approximate current interest rates.
Use of Estimates
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities
and disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of
revenue and expenses at the reporting period.
Actual results could differ from those
estimates.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting
Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for
Derivative Instruments" ("SFAS 133"). SFAS
133 is effective for all fiscal quarters of
the fiscal years beginning after June 15,
1999 and establishes accounting and reporting
standards for derivative instruments and for
hedging activities. SFAS 133 requires that an
entity recognize all derivatives as either
assets or liabilities and measure those
instruments at fair market value. Presently,
the Company does not use derivative
instruments either in hedging activities or
as investments. Accordingly, the Company
believes that adoption of SFAS 133 will have
no impact on its financial position or
results of operations.
38
<PAGE>
The Company has no comprehensive income
items as required by Statement of
Financial Accounting Standards No. 130,
"Comprehensive Income".
2. Acquisitions Pocono Downs Acquisition
On November 27, 1996, the Company purchased
all of the capital stock of The Plains
Company and the limited partnership interests
in The Plains Company's affiliated entities
(together, "Pocono Downs") for an aggregate
purchase price of $48.2 million plus
acquisition-related fees and expenses of
$730,000. Pocono Downs conducts live harness
racing at the harness racetrack located
outside Wilkes-Barre, Pennsylvania, export
simulcasting of Pocono Downs races to
locations throughout the United States,
pari-mutuel wagering at Pocono Downs and at
OTWs in Allentown, Erie, Carbondale and
Hazleton, Pennsylvania on Pocono Downs races
and on import simulcast races from other
racetracks, and telephone account wagering on
live and import simulcast races.
The Pocono Downs acquisition was accounted
for using the purchase method of accounting.
Accordingly, a portion of the purchase price
was allocated to the net assets acquired
based on their estimated fair values. The
balance of the purchase price was recorded at
cost over net assets acquired as goodwill,
approximately $10.4 million, and is being
amortized over forty years on a straight-line
basis. The Company recorded an additional
increase to goodwill of approximately $9.7
million and a corresponding increase to a
deferred tax liability, representing the
difference between the financial and tax
bases of certain assets acquired. The results
of operations of Pocono Downs have been
included in the Company's consolidated
financial statements since the effective date
of the acquisition. The Company used its
credit facility (see Note 3) and cash of
Pocono Downs to fund the acquisition.
Pursuant to the terms of the Pocono Downs
purchase agreement, the Company will be
required to pay the sellers of Pocono Downs
an additional $10 million if, within five
years after the consummation of the Pocono
Downs acquisition, Pennsylvania authorizes
any additional form of gaming in which the
Company may participate. The $10 million
payment would be payable in annual
installments of $2 million for five years,
beginning on the date that the Company first
offers such additional form of gaming.
Charles Town Acquisition
On February 26, 1996, the Company entered
into a joint venture agreement (the "Charles
Town Joint Venture") with Bryant Development
Company and its affiliates ("Bryant"), the
holder of an option to purchase substantially
all of the assets of Charles Town Racing
Limited Partnership and Charles Town Races,
Inc. (together, "Charles Town") relating to
the Charles Town Race Track and Shenandoah
Downs (together, the "Charles Town
Entertainment Complex") in Jefferson County,
West Virginia. In connection with the Charles
Town Joint Venture agreement, Bryant assigned
the option to the Charles Town Joint Venture.
In November 1996, the Charles Town Joint
Venture and Charles Town entered into an
amended and restated option agreement. On
November 5, 1996, Jefferson County, West
Virginia approved a referendum permitting
installation of gaming machines at the
Charles Town Entertainment Complex. On
January 15, 1997, the Charles Town Joint
Venture acquired substantially all of the
assets of Charles Town for approximately
$16.0 million plus acquisition-related fees
and expenses of approximately $2.2 million.
Pursuant to the original operating agreement
governing the Charles Town Joint Venture, the
39
<PAGE>
Company held an 80% ownership interest in the
Charles Town Joint Venture and was obligated
to contribute 80% of the purchase price of
the Charles Town acquisition and 80% of the
cost of refurbishing the Charles Town
Entertainment Complex. In consideration of
the fact that the Company contributed 100% of
the purchase price of the Charles Town
acquisition and 100% of the cost of
refurbishing the Charles Town Entertainment
Complex, the Company amended its operating
agreement with Bryant to, among other things,
increase the Company's ownership interest in
the Charles Town Joint Venture to 89% and
decrease Bryant's interest to 11%. In
addition, the amendment provided that the
entire amount the Company has contributed to
the Charles Town Joint Venture for the
acquisition and refurbishment of the Charles
Town Entertainment Complex would be treated,
as between the parties, as a loan to the
Charles Town Joint Venture from the Company.
Accordingly, prior to the distribution of any
future profits pursuant to the Charles Town
Joint Venture, the Company must be repaid in
full all such contributions or loans, plus
accrued interest, which as of December 31,
1998 amounted to $52.0 million.
Bryant had acquired its option from Showboat
Operating Company ("Showboat"). Showboat has
retained an option (the "Showboat Option") to
operate any casino at the Charles Town
Entertainment Complex in return for a
management fee (to be negotiated at the time,
based on rates payable for similar
properties) and a right of first refusal to
purchase or lease the site of any casino at
the Charles Town Entertainment Complex
proposed to be leased or sold and to purchase
any interest proposed to be sold in any such
casino on the same terms offered by a third
party or otherwise negotiated with the
Charles Town Joint Venture. The rights
retained by Showboat under the Showboat
Option extend for a period of five years from
November 6, 1996, the date that the Charles
Town Joint Venture exercised its option to
purchase the Charles Town Races, and expires
thereafter unless legislation to permit
casino gaming at the Charles Town
Entertainment Complex has been adopted prior
to the end of the five-year period. If such
legislation has been adopted prior to such
time, then the rights of Showboat continue
for a reasonable time (not less than 24
months) to permit completion of negotiations.
While the express terms of the Showboat
Option do not specify which activities at the
Charles Town Entertainment Complex would
constitute operation of a casino, Showboat
has agreed that the installation and
operation of gaming devices linked to the
lottery (like the gaming machines the Company
has installed and will continue to install)
at the Charles Town Entertainment Complex's
racetrack would not trigger Showboat's right
to exercise the Showboat Option.
The Charles Town Joint Venture refurbished
and reopened the Charles Town Entertainment
Complex as an entertainment complex that
features live racing, dining, simulcast
wagering and, effective September 1997, the
operation of gaming machines. The cost of the
refurbishment was approximately $27.8 million
inclusive of $614,000 of capitalized interest
and exclusive of the costs of the gaming
machines.
The Charles Town acquisition was accounted
for using the purchase method of accounting.
Accordingly, a portion of the purchase price
was allocated to the net assets acquired
based on their estimated fair values. The
balance of the purchase price was recorded as
cost over net assets acquired as goodwill,
approximately $1.7 million, and is being
40
<PAGE>
amortized over forty years on a straight-line
basis. The Company used its credit facility
(see Note 3) and cash from operations to fund
the acquisition.
The results of operations of Charles Town
have been included in the Company's
consolidated financial statements since
January 15, 1997, the effective date of the
acquisition.
3. Long-Term Debt Long-term debt and capital lease obligations are as
and Capital Lease follows:
Obligations
<TABLE>
<CAPTION>
December 31, 1997 1998
--------------------------
(In thousands)
<S> <C> <C>
Long-term debt
$80 million Senior Notes,
due December 15, 2004 with interest at
10.625% per annum payable semi-annually on
June 15 and December 15, commencing
June 15, 1998. The notes are unsecured and
are unconditionally guaranteed by certain
subsidiaries of the Company $ 80,000 $ 69,000
Revolving credit facility payable to a bank
group (see additional information below
under Credit Facilities) -- 9,000
Other notes payable 279 246
Capital lease obligations 57 10
--------------------------
80,336 78,256
Less current maturities 204 168
--------------------------
$ 80,132 $ 78,088
--------------------------
</TABLE>
Credit Facilities
At December 31, 1998, the Company was
contingently obligated under letters of
credit with face amounts aggregating
$1,886,000. These amounts consisted of
$1,786,000 relating to the horsemens' account
balances and $100,000 for Pennsylvania
pari-mutuel taxes.
In November 1996, the Company entered into an
agreement with a bank group which provides an
aggregate of $75 million of credit
facilities, which included a $5 million
revolving credit facility (the "Credit
Facility"). Simultaneously with the closing
of the Credit Facility, the Company repaid
amounts outstanding under its old credit
facility and replaced it. The Credit Facility
consisted of two term loan facilities of $47
million and $23 million (together, the "Term
Loans") which were used for the Pocono Downs
and Charles Town acquisitions, respectively,
and which were used for a portion of the cost
of refurbishment of the Charles Town
Entertainment Complex, and a revolving credit
facility of $5 million (together, the
"Loans"). The Term Loans were repaid in
December 1997 with the proceeds of the
Company's debt offering. See "Debt Offering"
hereinafter. At such time, the Credit
Facility was amended and restated to provide
for a $12 million revolving credit facility,
41
<PAGE>
including a $3 million sublimit for standby
letters of credit, which matures in December
2002.
On January 28, 1999, the Company entered into
a second amendment and restatement of the
Credit Facility. The Credit Facility, as
amended, provides for a $20 million revolving
credit facility, including a $3 million
sublimit for standby letters of credit and a
$5 million term loan. Under the terms of the
Credit Facility, as amended, the Company
borrowed an additional $11.5 million, of
which $11.2 million of the proceeds was used
to finance its share of the New Jersey Joint
Venture (see Note 4). The revolving credit
facility is secured by substantially all of
the assets of the Company, except for the
assets of the Charles Town facility. The
revolving credit facility provides for
certain covenants, including those of a
financial nature.
At the Company's option, the revolving
facility may bear interest at the highest of:
(1) 1/2 of 1% in excess of the federal
reserve reported certificate of deposit rate,
(2) the rate that the bank group announces
from time to time as its prime lending rate
and (3) 1/2 of 1% in excess of the federal
funds rate plus an applicable margin of up to
2% or the revolving facility may also bear
interest at a rate tied to a eurodollar rate
plus an applicable margin of up to 3%. The
outstanding amount under this credit facility
as of December 31, 1998 was $9.0 million at
an interest rate of 7.8125%.
Mandatory repayments of the revolving
facility are required in an amount equal to a
percentage of the net cash proceeds from any
issuance or incurrence of equity or funded
debt by the Company, that percentage to be
dependent upon the then outstanding balance
of the revolving facility and the Company's
leverage ratio. Mandatory repayments of
varying percentages are also required in the
event of either asset sales in excess of
stipulated amounts or defined excess cash
flow.
Debt Offering
On December 12, 1997, the Company and certain
of its subsidiaries (as guarantors) entered
into a purchase agreement for the sale and
issuance of $80,000,000 aggregate principal
amount of its 10.625% Senior Notes due 2004
(the "Offering"). The net proceeds of the
Offering were used for repayment of existing
indebtedness, for capital expenditures and
for general corporate purposes. Interest on
the notes will accrue from their date of
original issuance (the "Issue Date") and will
be payable semi-annually, commencing in 1998.
The notes will be redeemable, in whole or in
part, at the option of the Company in 2001 or
thereafter at the redemption prices set forth
in the Offering, plus accrued and unpaid
interest to the date of redemption.
The notes are general unsecured senior
obligations of the Company and rank equally
in right of payment to any existing and
future unsubordinated indebtedness of the
Company and senior in right of payment with
all existing and future subordinated
indebtedness of the Company. The notes are
unconditionally guaranteed (the "Guarantees")
on a senior basis by certain of the Company's
existing subsidiaries (the "Subsidiary
Guarantors"). The Guarantees are general
unsecured obligations of the Subsidiary
Guarantors and rank equally in right of
payment to any unsubordinated indebtedness of
42
<PAGE>
the Subsidiary Guarantors and rank senior in
right of payment to all other subordinated
obligations of the Subsidiary Guarantors. The
notes are effectively subordinated in right
of payment to all secured indebtedness of the
Company, including indebtedness incurred
under the amended $20 million revolving
credit facility.
On September 3, 1998, the Company repurchased
$11 million of the 10.625% Senior Notes due
2004 at 97.25% of the principal amount
($10,697,500) plus accrued interest of
$253,229 in public market trading. In
conjunction with the repurchase of the notes,
the Company recorded a write-off of deferred
financing costs associated with this portion
of the long-term debt. The extinguishment of
these notes did not result in any material
net loss.
The following is a schedule of future minimum
lease payments under capitalized leases and
repayments of long-term debt as of December
31, 1998:
<TABLE>
<CAPTION>
Term
Loans
and
Capitalized Notes
December 31, Leases Payable Total
---------------------------------------
(In thousands)
<S> <C> <C> <C>
1999 $ 10 $ 158 $ 168
2000 -- 34 34
2001 -- 37 37
2002 -- 9,017 9,017
2003 -- -- --
Thereafter -- 69,000 69,000
---------------------------------------
Total minimum payments 10 78,246 78,256
Less interest discount amount -- -- --
---------------------------------------
Total present value of net
minimum lease payments and total
notes payable 10 78,246 78,256
Current maturities 10 158 168
---------------------------------------
Total noncurrent maturities $ -- $ 78,088 $ 78,088
---------------------------------------
</TABLE>
On February 18, 1997, the Company completed a
secondary public offering of 1,725,000 shares
of common stock and used $19 million of the
$23 million proceeds therefrom to reduce the
then outstanding Term Loan amounts (see Note
7).
4. Commitments Operating Agreements
and
Contingencies In November 1997, the Company signed a new
Totalisator services and equipment agreement
for all of its subsidiaries. The agreement is
for five years, expiring on March 31, 2003.
The new agreement provides for annual
payments based on a specified percentage of
the total amount wagered at the Company's
facilities with a minimum annual payment of
$1,475,000.
The Company is also liable under numerous
operating leases for automobiles, other
equipment and buildings, which expire through
2004. Total rental expense under these
agreements was $1,001,000, $807,000 and
$1,169,000 for the years ended December 31,
1996, 1997 and 1998, respectively.
43
<PAGE>
The future lease commitments relating to
noncancelable operating leases as of December
31, 1998 are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1999 $ 1,369
2000 1,370
2001 1,286
2002 1,052
2003 957
Thereafter 2,339
-------------
$ 8,373
-------------
</TABLE>
In June 1997, the Charles Town Joint Venture,
which is operated as PNGI Charles Town
Gaming, LLC, an 89% subsidiary of the
Company, entered into an agreement (the
"GTECH Agreement") with GTECH relating to the
lease, installation and service of a video
lottery system ("VLS") at the Charles Town
Entertainment Complex. The GTECH Agreement
included a minimum annual fee of $4.3 million
if more than 799 gaming machines were placed
in operation. Due to significant economic
benefits to the Company, on November 18, 1998
the Company entered into an agreement to
purchase GTECH's assets and rights related to
the provision of gaming technology at Charles
Town Races. Under the terms of the agreement,
the Company assumed the ownership and
operation of the 799 gaming machines and the
central monitoring system for consideration
of $12.9 million.
Employment and Consulting Agreements
The Company has employment agreements with
its Chairman and Chief Financial Officer at
annual base salaries of $225,000 and $95,000,
respectively. The agreements became effective
June 1, 1994 and, as amended, terminate on
June 30, 1999. Each agreement prohibits the
employee from competing with the Company
during its term and for one year thereafter,
and requires a death benefit payment by the
Company equal to 50% of the employee's annual
salary in effect at the time of death.
The Company signed a consulting agreement
with its former Chairman expiring in August
1999 at an annual payment of $125,000. On
July 1, 1998, the consulting agreement was
amended to increase the annual payment to
$135,000.
The Company has an employment agreement with
its President and Chief Operating Officer at
an annual base salary of $210,000. The
agreement was to terminate on June 12, 1998,
but has been extended until June 12, 1999.
The agreement prohibits the employee from
competing with the Company during its term
and for two years thereafter, and requires a
death benefit payment by the Company equal to
50% of the employee's annual salary in effect
at the time of his death.
The Company has two profit sharing plans
under the provisions of Section 401(k) of the
Internal Revenue Code, The Penn National
Gaming, Inc. Profit Sharing Plan (the Penn
National 401(k) Plan") and the Pocono Downs,
Inc. Profit Sharing Plan (the "Pocono Downs
401(k) Plan"), that cover all eligible
employees who are not members of a bargaining
unit. Both plans enable employees choosing to
participate to defer a portion of their
salary in a retirement fund to be
administered by the Company. The Company's
44
<PAGE>
contributions to the Penn National 401(k)
Plan are set at 50% of employees elective
salary deferrals which may be made up to a
maximum of 6% of employee compensation. The
Company has no obligation to contribute to
the Pocono Downs 401(k) plan. However, for
the years ended December 31, 1996, 1997, and
1998, the Company has made discretionary
contributions to the Pocono Downs 401(k) Plan
based upon a percentage of the employee
elective deferrals which may be made up to a
maximum of 15% of employee compensation. The
Company made contributions to these plans of
approximately $89,000, $145,000 and $172,000
for the years ended December 31, 1996, 1997,
and 1998, respectively. Charles Town has a
defined contribution plan covering
substantially all of its employees. Charles
Town makes monthly contributions equal to the
amount accrued for retirement expense, which
is calculated as .25% of the daily mutual
handle and .5% of the net video lottery
revenues. Total contributions for the years
ended December 31, 1997 and 1998 were
$114,000 and $185,000, respectively.
On December 31, 1998, the Company merged the
Pocono Downs, Inc. Profit Sharing Plan into
the Penn National Gaming, Inc. 401(k) Plan
and spun off the assets into the
non-bargaining unit employees in the Charles
Town Races Future Services Retirement Plan
and merged those assets into the Penn
National 401(k) Plan. The results of the
merger is that the Company operates the Penn
National 401(k) Plan for all non-bargaining
unit employees at all locations while the
Charles Town Races Future Services Retirement
Plan is for bargaining unit employees at the
Charles Town facility.
OTW and Operating Facilities
On July 7, 1998, the Company entered into an
agreement with Ladbroke to purchase their
Johnstown, Pennsylvania OTW facility. The
agreement provided for a purchase price of
$1,225,000 for the assignment of the facility
lease and the sale of assets and was subject
to numerous contingencies, including approval
by the Pennsylvania State Horse Racing
Commission. Approval for the sale and
transfer of the Johnstown OTW was received
from the Harness Racing Commission on August
14, 1998 and the Pennsylvania State Horse
Racing Commission on August 20, 1998. Under
the terms of the agreements, the Company
sub-leased the facility from Ladbroke and
operated the facility from September 1, 1998,
the effective date of the agreement, through
December 30, 1998, the closing date of the
agreement, for $12,500 per month, at which
time the Company assumed full rights and
ownership of the facility.
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. The
agreement is subject to numerous
contingencies, including approval by the
Harness Racing Commission. On November 6,
1998, the Company submitted its application
for such approval. If approved by the Harness
Racing Commission, the Company expects to
spend approximately $2 million to have the
facility constructed and operational by the
end of 1999.
The Company is subject to possible
liabilities arising from environmental
conditions at the landfill adjacent to Pocono
Downs Racetrack. Specifically, the Company
may incur expenses in connection with the
landfill in the future, which expenses may
not be reimbursed by the four municipalities
45
<PAGE>
which are parties to an existing settlement
agreement. The Company is unable to estimate
the amount, if any, that it may be required
to expend.
Potential Tennessee Development Project
In June 1997, the Company acquired twelve
one-month options to purchase approximately
100 acres of land in Memphis, Tennessee.
Since such time, the Company, through its
subsidiary, Tennessee Downs, Inc. ("Tennessee
Downs"), has pursued the development of a
harness track and simulcast facility, which
is located in the northeastern section of
Memphis (the "Tennessee Development
Project"). 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 OTW facility at this
site. 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
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 Commission. On May 1, 1998, 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) for racing days
for the period ending December 31, 2000; and
(iii) 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 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 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. The Company
intends to continue its efforts to develop
and operate a harness track in Tennessee.
Costs incurred as of December 31, 1998
regarding the Tennessee license amounted to
$489,000 and are presented in prepaid
expenses and other current assets.
New Jersey Joint Venture
On January 28, 1999, pursuant to a First
Amendment to an Asset Purchase Agreement by,
between and among Greenwood New Jersey, Inc.
("Greenwood"), International Thoroughbred
Breeders, Inc., Garden State Race Track,
Inc., Freehold Racing Association, Atlantic
City Harness, Inc. and Circa 1850, Inc., the
original parties to an Asset Purchase
Agreement entered into as of July 2, 1998,
and the Company (the "Agreement"), and
pursuant to which the Company entered into a
joint venture ("Joint Venture"), the Company,
along with its Joint Venture partner,
Greenwood, agreed to purchase certain assets
of the Garden State Race Track and Freehold
Raceway, both located in New Jersey (the
"Acquisition"). 46
<PAGE>
The purchase price for the Acquisition is
approximately $46 million (subject to
reduction of up to approximately $1 million
based upon the resolution of certain disputed
items, for which amounts have been placed in
escrow). The purchase price will consist of
$23 million in cash and $23 million pursuant
to two deferred purchase price promissory
notes in the amount of $22 million and $1
million each. The Company is responsible for
50% of the purchase price. The parties to the
Joint Venture are also contingently liable to
the sellers in amounts not to exceed a total
of $10 million, if the Joint Venture receives
various approvals for off-track wagering or
phone betting.
The Joint Venture is contingent upon, among
other things, the Company obtaining approvals
necessary to effect the Joint Venture, which
approvals include: (i) full and complete New
Jersey regulatory approval (including but not
limited to approval of the New Jersey Racing
Commission); (ii) Hart Scott Rodino
compliance; and (iii) the written consent of
a majority of the holders of its $80 million
Senior Notes issued December 17, 1997 to any
necessary modification to the Indenture dated
December 12, 1997 to permit the Company's
investment in the Joint Venture. At the
initial closing of the Acquisition on January
28, 1999, the Company loaned FR Park Racing,
LP, a New Jersey limited partnership,
$11,250,000 (at the Company's effective
borrowing rate as specified in Note 3 under
"Credit Facilities"), which is secured by
certain assets. After obtaining the above
approvals, the Company will invest an
additional $11,750,000 into the Joint Venture
with a portion of this amount being treated
as capital and the balance as debt. The
Company will have a 50% interest in the Joint
Venture.
5. Income Taxes
The provision for income taxes charged to operations was as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1997 1998
--------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Current tax expense
Federal $ 2,686 $ 2,006 $ 3,374
State 880 399 755
---------------------------------------
Total current 3,566 2,405 4,129
---------------------------------------
Deferred tax expense (benefit)
Federal 178 (56 ) 378
State 50 (41 ) 12
---------------------------------------
Total deferred 228 (97 ) 390
---------------------------------------
Total provision $ 3,794 $ 2,308 $ 4,519
---------------------------------------
</TABLE>
47
<PAGE>
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
December 31, 1997 1998
--------------------------
(in thousands)
<S> <C> <C>
Deferred tax assets
Reserve for debit balances of
horsemens' accounts, bad debts
restructuring charges and
litigation $ 469 $ 458
--------------------------
Deferred tax liabilities
Property, plant and equipment $ 11,092 $ 11,471
--------------------------
</TABLE>
The following is a reconciliation of the
statutory federal income tax rate to the
actual effective income tax rate for the
following periods:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1997 1998
-----------------------------------
<S> <C> <C> <C>
Percent of pretax income
Federal tax rate 34.0% 34.0% 34.0%
Increase in taxes resulting from
state and local income taxes,
net of federal tax benefit 6.6 3.9 4.2
Permanent difference relating to
amortization of goodwill .2 .9 .4
Other miscellaneous items -- (.8) (1.0)
-----------------------------------
40.8% 38.0% 37.6%
-----------------------------------
</TABLE>
6. Supplemental Cash paid during the year for interest was
Disclosures of $506,000, $4,346,000 and $8,192,000
Cash Flow in 1996, 1997 and 1998, respectively.
Information
Cash paid during the year for income taxes
was $2,490,000, $3,649,000 and $4,207,000 in
1996, 1997 and 1998, respectively.
Noncash investing and financing activities
were as follows:
During 1996, the Company purchased Pocono
Downs for an aggregate purchase price of
$47,320,000, net of cash acquired. In
conjunction with the acquisition, liabilities
were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired, primarily property,
plant and equipment $ 53,150,000
Cash paid for the capital stock and the limited
partnership interests 47,320,000
------------------
Liabilities assumed $ 5,830,000
------------------
</TABLE>
During 1996, the Company issued a $250,000
long-term note payable for the incurrence of
prepaid Charles Town Acquisition costs.
48
<PAGE>
7. Common
Stock On February 18, 1997, the Company
completed a secondary public offering of
1,725,000 shares of its common stock.
The net proceeds of $23 million were used to
reduce $19 million of the Term Loan amounts
outstanding under the Credit Facility with
the balance of the proceeds used to finance
a portion of the cost of the refurbishment
of the Charles Town Entertainment
Complex (see Note 2 for Acquisitions).
From August 21, 1998 to September 10, 1998,
the Company purchased 424,700 shares of its
common stock in public market trading. The
total cost of these transactions was
$2,378,465 or $5.60 per share average price.
In April 1994, the Company's Board of
Directors and shareholders adopted and
approved the Stock Option Plan (the "Plan").
On April 30, 1997, the shareholders and the
Board of Directors approved an increase in
the number of authorized shares underlying
stock options to be granted from 1,290,000 to
2,000,000 shares. Therefore, the Plan permits
the grant of options to purchase up to
2,000,000 shares of Common Stock, subject to
antidilution adjustments, at a price per
share no less than 100% of the fair market
value of the Common Stock on the date an
option is granted with respect to incentive
stock options only. The price would be no
less than 110% of fair market value in the
case of an incentive stock option granted to
any individual who owns more than 10% of the
total combined voting power of all classes of
outstanding stock. The Plan provides for the
granting of both incentive stock options
intended to qualify under Section 422 of the
Internal Revenue Code of 1986, and
nonqualified stock options which do not so
qualify. Unless the Plan is terminated
earlier by the Board of Directors, the Plan
will terminate in April 2004.
Stock options that expire between August 20,
2000 and August 6, 2008 have been granted to
officers and directors to purchase Common
Stock at prices ranging from $3.33 to $17.63
per share. All options and warrants were
granted at market prices at date of grant.
The following table contains information on
stock options issued under the Plan for the
three-year period ended December 31, 1998:
<TABLE>
<CAPTION>
Exercise
Option Price Range Average
Shares Per Share Price
------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at
January 1, 1996 810,000 $ 3.33 to 5.58 $ 3.82
Granted 280,000 5.63 to 17.63 12.99
Exercised (110,250) 3.33 3.33
------------
Outstanding at
December 31, 1996 979,750 3.33 to 17.63 9.10
Granted 100,000 11.50 to 16.63 15.59
Exercised (39,250) 3.33 to 5.63 4.01
------------
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Exercise
Option Price Range Average
Shares Per Share Price
------------------------------------------------
<S> <C> <C> <C>
Outstanding at
December 31, 1997 1,040,500 3.33 to 17.63 7.31
Granted 195,000 6.44 to 15.50 9.06
Exercised (11,500) 3.33 to 5.63 4.88
Canceled (39,500) 5.63 to 15.50 13.36
------------
Outstanding at
December 31, 1998 1,184,500 3.33 to 17.63 9.50
------------
</TABLE>
In addition, 300,000 common stock options
were issued to the Chairman outside the Plan
on October 23, 1996. These options were
issued at $17.63 per share and are
exercisable through October 23, 2006.
Exercisable at year-end:
<TABLE>
<CAPTION>
Exercise Weighted
Option Price Range Average
Shares Per Share Price
------------------------------------------------------
<S> <C> <C> <C>
1996 337,250 $ 3.33 to 17.63 $ 3.71
1997 653,833 3.33 to 17.63 7.08
1998 1,034,666 3.33 to 17.63 8.36
------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Options available for future grant: 1994 Plan
-------------
1998 654,500
-------------
</TABLE>
The following table summarizes information
about stock options outstanding at December
31, 1998:
<TABLE>
<CAPTION>
Ranges Total
-------------------------- ----------
<S> <C> <C> <C>
$3.33 $5.58 $3.33
Range of exercise prices to $5.50 to $17.63 to $17.63
--------------------------------------------
Outstanding options
Number outstanding at
December 31, 1998 637,250 847,250 1,484,500
Weighted average remaining
contractual life (years) 4.84 6.51 5.79
Weighted average exercise
price $ 3.84 $ 13.75 $ 9.50
Exercisable options
Number outstanding at
December 31, 1998 637,250 397,416 1,034,666
Weighted average exercise
price $ 3.84 $ 15.61 $ 8.36
</TABLE>
Warrants outstanding have been granted to the
underwriters of the Company's initial public
offering at a price of $4.00 per share which
expire on June 2, 1999.
50
<PAGE>
A summary of the warrant transactions follows:
<TABLE>
<CAPTION>
Exercise
Price Weighted
Warrant Range Average
Shares Per Share Price
---------------------------------------------
<S> <C> <C> <C>
Warrants outstanding at
January 1, 1996 495,000 $ 4.00 $ 4.00
Warrants exercised (300,000) 4.00 4.00
------------
Warrants outstanding at
December 31, 1996 195,000 4.00 4.00
Warrants exercised (43,000) 4.00 4.00
------------
Warrants outstanding at
December 31, 1997 152,000 4.00 4.00
Warrants exercised (3,000) 4.00 4.00
------------
Warrants outstanding
at December 31, 1998 149,000 4.00 4.00
------------
</TABLE>
During 1995, the Financial Accounting
Standards Board adopted Statement of
Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation"
("SFAS 123"), which has recognition
provisions that establish a fair value based
method of accounting for stock-based employee
compensation plans and established fair value
as the measurement basis for transactions in
which an entity acquires goods or services
from nonemployees in exchange for equity
instruments. SFAS 123 also has certain
disclosure provisions. Adoption of the
recognition provisions of SFAS 123 with
regard to these transactions with
nonemployees was required for all such
transactions entered into after December 15,
1994, and the Company adopted these
provisions as required. The recognition
provision with regard to the fair value based
method of accounting for stock-based employee
compensation plans is optional. Accounting
Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employers" ("APB 25"),
uses what is referred to as an intrinsic
value based method of accounting. The Company
has decided to continue to apply APB 25 for
its stock-based employee compensation
arrangements. Accordingly, no compensation
cost has been recognized. Had compensation
cost for the Company's employee stock option
plan been determined based on the fair value
at the grant date for awards under the plan
consistent with the method of SFAS 123, the
Company's net income and net income per share
would have been reduced to the pro forma
amounts indicated below:
51
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31, 1996 1997 1998
---------------------------------------------
<S> <C> <C> <C>
Net income
As reported $ 5,510,000 $ 2,287,000 $ 7,503,000
Pro forma 5,344,000 1,660,000 6,827,000
Basic net income
per share
As reported $ .41 $ .15 $ .50
Pro forma .40 .11 .45
Diluted net income
per share
As reported $ .40 $ .15 $ .49
Pro forma .39 .11 .44
</TABLE>
The fair value of each option and
warrant grant is estimated on the date
of grant using the Black-Scholes
option-pricing model with the following
weighted average assumptions used for
grants in 1996, 1997 and 1998: dividend
yield of 0%; expected volatility of
20%; risk-free interest rate of 6%; and
expected lives of five years. The
effects of applying SFAS 123 in this
pro forma disclosure are not indicative
of future amounts. SFAS 123 does not
apply to awards prior to 1995.
Additional awards in future years are
anticipated.
8. Shareholder On May 20, 1998, the Board of Directors
Rights Plan of the Company authorized and declared a
dividend distribution of one Preferred
Stock purchase right (the "Rights") for
each outstanding share of the Company's
common stock, par value $.01 per share (the
"Common Shares"), payable to shareholders of
record at the close of business on March 19,
1999. Each Right entitles the registered
holder to purchase from the Company one
one-hundredth of a share (a "Preferred Stock
Fraction"), or a combination of securities
and assets of equivalent value, at a purchase
price of $40.00 per Preferred Stock Fraction
(the "Purchase Price"), subject to
adjustment. The description and terms of the
Rights are set forth in a Rights Agreement
(the "Rights Agreement") dated March 2, 1999
between the Company and Continental Stock
Transfer and Trust Company as Rights Agent.
All terms not otherwise defined herein are
used as defined in the Rights Agreement.
The Rights will be exercisable only if a
person or group acquires 15% or more of the
Company's common stock (the "Stock
Acquisition Date"), announces a tender or
exchange offer that will result in such
person or group acquiring 20% or more of the
outstanding common stock or is a beneficial
owner of a substantial amount of Common
Shares (at least 10%) whose ownership may
have a material adverse impact ("Adverse
Person") on the business or prospects of the
Company. The Company will be entitled to
redeem the Rights at a price of $.01 per
Right (payable in cash or stock) at anytime
until 10 days following the Stock Acquisition
Date or the date on which a person has been
determined to be an Adverse Person. If the
Company is involved in certain transactions
after the Rights become exercisable, a Holder
of Rights (other than Rights owned by a
shareholder who has acquired 15% or more of
the Company's outstanding common stock or is
determined to be an Adverse Person, which
Rights become void) is entitled to buy a
number of the acquiring company's Common
Shares or the Company's common stock, as the
case may be, having a market value of twice
the exercise price of each Right. A potential
dilutive effect may exist upon the exercise
of the Rights. Until a Right is exercised,
52
<PAGE>
the holder will have no rights as a
stockholder of the Company, including,
without limitations, the right to vote as a
stockholder or to receive dividends. The
Rights are not exercisable until the
Distribution Date and will expire at the
close of business on March 18, 2009, unless
earlier redeemed or exchanged by the Company.
9. Loss From In 1997, the Company recorded an
Retirement extraordinary loss of $1,482,000 after taxes
of Debt for the early retirement of debt. The
extraordinary loss consists primarily of
write-offs of deferred finance costs
associated with the retired notes and legal
and bank fees relating to the early
extinguishment of the debt.
10. Site Development During 1997, the Company incurred site
and Restructuring development (1,735,000) and restructuring
Charges ($702,000) charges of $2,437,000. The site
development charges consist of $800,000
related to the Charles Town Races facility
and $935,000 related to the abandonment of
certain proposed operating sites during 1997.
The restructuring charges primarily consistof
$350,000 in severance termination benefits
and other charges at the Charles Town Races
facility; $300,000 for the restructuring of
the Erie, Pennsylvania OTW facility and
$52,000 of property and equipment written off
in connection with the discontinuation of
Penn National Speedway, Inc. operations
during 1997. These charges, net of income
taxes, decreased the 1997 net income and
diluted net income per share by $1,462,000
and $.09 per share, respectively.
11. Subsequent The Company's contract with the Penn
Event National Race Course Thoroughbred Horsemen
("Horsemen") expired on February 15, 1999.
On that date, the Horsemen stopped
live racing at Penn National Race Course and
withdrew their permission for the Company to
import simulcast races from other racetracks,
resulting in the closure of Penn National
Race Course and its six OTW facilities at
Reading, Chambersburg, York, Lancaster,
Williamsport and Johnstown. Effective March
23, 1999, the parties signed a new Horsemen
Agreement with an initial term which expires
on January 1, 2004.
53
<PAGE>
12. Subsidiary Summarized financial information for years ended December
31, 1998 and 1997 for Guarantors Penn National Gaming, Inc. ("Parent"),
the Subsidiary Guarantors and Subsidiary Nonguarantors is as follows:
<TABLE>
<CAPTION>
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Subsidiary
Parent Subsidiary Non- Elimin- Consoli-
Company Guarantors Guarantors ations dated
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
As of December 31, 1997
Consolidated Balance Sheet (In Thousands)
<S> <C> <C> <C> <C> <C>
Current assets $ 3,068 $ 21,842 $ 1,636 $ 2,478 $ 29,024
Net property, plant and 21,856 38,097 43,208 103,161
equipment
Other assets (2,575) 237,878 1,764 (210,374) 26,693
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Total $ 22,349 $ 297,817 $ 46,608 $ (207,896) $ 158,878
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Current liabilities $ 5,077 $ 3,403 $ 7,628 $ (2,310) $ 13,798
Long-term liabilities 1,117 155,388 41,913 (107,194) 91,224
Shareholders' equity
(deficiency) 16,155 139,026 (2,933) (98,392) 53,856
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Total $ 22,349 $ 297,817 $ 46,608 (207,896) $ 158,878
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1997
Consolidated Statement of Income (In Thousands)
<S> <C> <C> <C> <C> <C>
Total revenues $ 6,887 $ 90,320 $ 16,484 $ (2,155) $ 111,536
Total operating expenses
3,434 81,822 18,700 (2,155) 101,801
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Income from operations 3,453 8,498 (2,216) 9,735
Other income(expenses) (3,565) 1,612 (1,705) (3,658)
- - ----------------------------- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Income before income taxes
(112) 10,110 (3,921) 6,077
Taxes on income (38) 3,909 (1,563) 2,308
Extraordinary item (142) (768) (572) (1,482)
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Net income (loss) $ (216) $ 5,433 $ (2,930) $ $ 2,287
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows (In Thousands)
<S> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities $ 2,559 $ (169,422) $ 882 $ 176,659 $ 10,678
Net cash provided by
(used in) investing
activities (8,995) 68,529 40 (107,194) (47,620)
Net cash provided by
(used in) financing
activities 22,361 100,266 (69,465) 53,162
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Net increase (decrease)
in cash and cash
equivalents 15,925 (627) 922 16,220
Cash and cash
equivalents at
beginning of period 3,015 2,597 22 5,634
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Cash and cash
equivalents at end of
period $ 18,940 $ 1,970 $ 944 $ $ 21,854
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Subsidiary
Parent Subsidiary 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 13,576 62,598 44,578 120,752
equipment
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>
Year ended December 31, 1998
Consolidated Statement of Income (In Thousands)
<S> <C> <C> <C> <C> <C>
Total revenues $ 10,789 $ 89,142 $ 56,883 $ (2,749) $ 154,065
Total operating expenses
4,612 81,187 51,557 (2,749) 134,607
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Income from operations 6,177 7,955 5,326 19,458
Other income(expenses) (5,535) 2,842 (4,743) (7,436)
- - ----------------------------- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Income before income taxes 642 10,797 583 12,022
Taxes on income 100 4,186 233 4,519
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Net income $ 542 $ 6,611 $ 350 $ $ 7,503
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
</TABLE>
Consolidated Statement of Cash Flows (In Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities $ (2,072) $ (4,121) $ 1,267 $ 16,792 $ 11,866
Net cash provided by
(used in) investing
activities (13,387) 290 909 (10,145) (22,333)
Net cash provided by
(used in) financing
activities (1,480) 3,566 (6,647) (4,561)
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Net increase (decrease)
in cash and cash
equivalents (16,939) (265) 2,176 (15,028)
Cash and cash
equivalents at
beginning of period 18,940 1,970 944 21,854
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
Cash and cash
equivalents at end of
period $ 2,001 $ 1,705 $ 3,120 $ $ 6,826
- - ------------------------- --- ------------- -- ------------- -- ------------- --- ------------ --- --------------
</TABLE>
55
<PAGE>
ITEM 9 CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by
reference from the Company's definitive proxy statement with
respect to the Company's Annual Meeting of Shareholders to be
held on May 5, 1999. Such proxy statement shall be filed
pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, within 120 days after the
end of the fiscal year covered by this Annual Report on Form
10-K.
ITEM 11 EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by
reference from the Company's definitive proxy statement with
respect to the Company's Annual Meeting of Shareholders to be
held on May 5, 1999. Such proxy statement shall be filed
pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, within 120 days after the
end of the fiscal year covered by this Annual Report on Form
10-K.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by Item 12 is incorporated by
reference from the Company's definitive proxy statement with
respect to the Company's Annual Meeting of Shareholders to be
held on May 5, 1999. Such proxy statement shall be filed
pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, within 120 days after the
end of the fiscal year covered by this Annual Report on Form
10-K.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by
reference from the Company's definitive proxy statement with
respect to the Company's Annual Meeting of Shareholders to be
held on May 5, 1999. Such proxy statement shall be filed
pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, within 120 days after the
end of the fiscal year covered by this Annual Report on Form
10-K.
56
<PAGE>
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(A) (1) The Financial Statements included in the Index to Part II,
Item 8, are filed as part of this Report
(2) List of Exhibits
EXHIBIT
NOS. DESCRIPTION OF EXHIBIT
1. Purchase Agreement.
2.1 Agreement and Plan of Reorganization dated April 11, 1994 among the
Registrant, Carlino Family Partnership, Carlino Financial Corporation
and the shareholders and general partners of the entities now
comprising Penn national Gaming, Inc. (Incorporated by reference to the
Company's registration statement on Form S-1, File #33-77758, dated May
26, 1994.)
2.1.1 Amendment to Agreement and Plan of Reorganization dated April 26, 1994
among the registrant, Carlino Family Partnership, Carlino Financial
Corporation and the shareholders and general partners of the entities
now comprising Penn national Gaming, Inc. (Incorporated by reference to
the Company's registration statement on Form S-1, File #33-77758, dated
May 26, 1994.)
2.2 Agreement and Plan of Reorganization dated April 11, 1994 between the
Registrant and Thomas J. Gorman. (Incorporated by reference to the
Company's registration statement on Form S-1, File #33/77758, dated May
26, 1994.)
2.2.1 Amendment to Agreement and Plan of Reorganization dated April 26, 1994
between the Registrant and Thomas J. Gorman. (Incorporated by reference
to the Company's registration statement on Form S-1, File #33-77758,
dated May 26, 1994.)
2.3 Closing Agreement dated January 15, 1997 among Charles Town Races,
Inc., Charles Town Racing Limited Partnership, and PNGI Charles Town
Gaming Limited Liability Company. (Incorporated by reference to the
Company's registration statement on Form 8-K, File #0-24206, dated
January 30, 1997.)
2.4 Amended and Restated Operating Agreement dated as of December 31, 1996
among Penn National Gaming of West Virginia, Inc., Bryant Development
Company and PNGI Charles Town Gaming limited Liability Company.
(Incorporated by reference to the Company's registration statement on
Form 8-K, File #0-24206, dated January 30, 1997.)
2.5 Letter dated January 14, 1997 from Peter M. Carlino to James A. Reeder
(Incorporated by reference to the Company's registration statement on
Form 8-K, File #0-24206, dated January 30, 1997.)
2.6 First Amendment and Consent dated as of January 7, 1997 among the
Company, Bankers Trust Company as Agent, CoreStates Bank, N.A. as
Co-Agent, and certain banks party to the Credit Agreement dated as of
November 27, 1996 (Incorporated by reference to the Company's
registration statement on Form 8-K, File #0-24206, dated January 30,
1997.)
2.7 Amended and Restated Option Agreement dated as of February 17, 1995
among Charles Town Races, Inc., Charles Town Racing Limited
Partnership, and PNGI Charles Town Gaming limited Liability Company
(Incorporated by reference to Exhibit 2.1 of the Company's Form 8-K,
File #0-24206, dated January 30, 1997)
2.8 Transfer, Assignment and Assumption Agreement and Bill of Sale dated
January 15, 1997 among Charles Town Races, Inc., Charles Town Racing
Limited Partnership, and PNGI Charles Town Limited Liability Company
(Incorporated by reference to Exhibit 2.2 of the Company's Form 10-Q ,
File #0-24206, dated November 14, 1997.)
2.9 Second Amended and Restated Operating Agreement dated as of October 17,
1997, among Penn National Gaming of West Virginia, Inc., BDC Group and
PNGI Charles Town Gaming Limited Liability Company (Incorporated by
reference to the Company's Form 10-Q, File #0-24206, dated November 14,
1997.)
57
<PAGE>
2.10 Purchase Agreement dated September 13, 1996 between the Company and the
Estate of Joseph B. Banks for the purchase of Pocono Downs Race Track
and two related OTW facilities. (Incorporated by reference to the
Company's Form 10-Q , File #0-24206, dated November 13, 1996.)
3.1 Amended and Restated Articles of Incorporation of Registrant,filed with
the Pennsylvania Department of State on April 12, 1994. (Incorporated
by reference to the Company's registration statement on Form S-1,
File #33-77758, dated May 26, 1994.)
3.2 By-laws of Registrant (Incorporated by reference to the Company's
registration statement on Form S-1, File #33-77758, dated
May 26, 1994.)
4.1 Indenture. (Incorporated by reference to the Company's registration
statement on Form S-4, File #333-45337, dated January 30, 1998.)
4.2 Registration Rights Agreement dated as of December 17, 1997 among the
Company, certain subsidiaries, BT Alex. Brown Incorporated and
Jefferies & Company, Inc. (Incorporated by reference to the Company's
registration statement on Form S-4, File #333-45337, dated January 30,
1998.)
5 Opinion of Morgan, Lewis & Bockius regarding validity of Notes.
(Incorporated by reference to the Company's registration statement on
Form S-4, File #333-45337, dated January 30, 1998.)
9.1 Form of Trust Agreement of Peter D. Carlino, Peter M. Carlino,
Richard J. Carlino, David E. Carlino, Susan F. Harrington,
Anne de Lourdes Irwin, Robert M. Carlino, Stephen P. Carlino and
Rosina E. Carlino Gilbert. (Incorporated by reference to
the Company's registration statement on Form S-1, File #33-77758,
dated May 26, 1994.)
10.1 1994 Stock Option Plan. (Incorporated by reference to the Company's
registration statement on Form S-1, File #33-77758, dated May 26,
1994.)
10.2 Employment Agreement dated April 12, 1994 between the Registrant and
Peter M. Carlino. (Incorporated by reference to the Company's
registration statement on Form S-1, File #33-77758, dated May 26,
1994.)
10.3 Credit Agreement, dated as of November 27, 1996, among Penn National
Gaming, inc., various banks, CoreStates bank, N.A., as Co-Agent and
Bankers Trust Company, as Agent. (Incorporated by reference to Exhibit
10.1 of the Company's registration statement on Form 8-K, File
#0-24206, dated December 12, 1996.)
10.4 Employment Agreement dated April 12, 1994 between the Registrant and
Robert S. Ippolito. (Incorporated by reference to the Company's
registration statement on Form S-1, File #33-77758, dated May 26,
1994.)
10.8 Consolidation of PRA Agreement dated may 18, 1992 and PRA Amendment
dated February 9, 1993 among all members of the Pennsylvania Racing
Association. (Incorporated by reference to the Company's registration
statement on Form S-1, File #33-77758, dated may 26, 1994.)
10.11 Lease dated march 7, 1991 between Shelbourne Associated and PNRC
Limited Partnership. (Incorporated by reference to the Company's
registration statement on Form S-1, File #33-77758, dated May 26,
1994.)
10.13 Lease dated June 30, 1993 between John E. Kyner, Jr. and Sandra R.
Kyner, and PNRC Chambersburg, Inc. (Incorporated by reference to
the Company's registration statement on Form S-1, File #33-77758,
dated May 26, 1994.)
10.34 Warrant Agreement between the Registrant and Fahnestock & Co. Inc.
(Incorporated by reference to the Company's registration statement on
Form S-1, File #33-77758, dated May 26, 1994.)
10.38 Consulting Agreement dated August 29, 1994, between the Company and
Peter D. Carlino. (Incorporated by reference to the Company's Form
10-K, File #0-24206 dated March 23, 1995.)
10.39 Lese dated July 7, 1994, between North Mall Associates and the Company
for the York OTW. (Incorporated by reference to the Company's Form
10-K, File #0-24206 dated March 23, 1995.)
10.41.1 Lease dated March 31, 1995 between Wyomissing Professional Center III,
LP and the Company for the Wyomissing Corporate Office. (Incorporated
by reference to the Company's Form 10-K, File #0-24206 dated March 20,
1996.)
58
<PAGE>
10.42 Employment Agreement dated June 1, 1995 between the Company and William
J. Bork. (Incorporated by reference to the Company's Form 10-K, File
#0-24206 dated March 20, 1996.)
10.43 Lease dated July 17, 1995 between E. Lampeter Associates and
Pennsylvania National Turf Club, Inc. for the Lancaster OTW, as
amended. (Incorporated by reference to the Company's Form 10-K, File
#0-24206 dated March 20, 1996.)
10.44 Agreement dated September 1, 1995 between Mountainview Thoroughbred
racing Association and Pennsylvania national Turf Club, Inc. and Sports
Arena Employees' Union Local 137 (non-primary location.) (Incorporated
by reference to the Company's Form 10-K, File #0-24206 dated March 20,
1996.)
10.45 Agreement dated December 27, 1995 between Pennsylvania national Turf
Club, Inc. and Teleview Racing Patrols, Inc. (Incorporated by reference
to the Company's Form 10-K, File #0-24206 dated March 20, 1996.)
10.47 Agreement dated February 15, 1996 among Mountainview Thoroughbred
Racing Association, Pennsylvania national Turf Club, Inc. and
Pennsylvania Division, horsemen's Benevolent and Protection
Association, Inc. (Incorporated by reference to the Company's Form
10-K, File #0-24206 dated March 20, 1996.)
10.50 Formation Agreement dated February 26, 1996 between the Company and
Bryant Development Company. (Incorporated by reference to the Company's
Form 10-K, File #0-24206 dated March 20, 1996.)
10.51 Assignment of Agreement of Sale dated March 6, 1996 between the Company
and Montgomery Realty Growth Fund, Inc. (Incorporated by reference to
the Company's Form 10-Q, File #0-24206, dated May 14, 1996.)
10.56 Amended and Restated Option Agreement dated as of February 17, 1995
between the PNGI Charles Town Gaming Limited Liability Company (The
Joint Venture) and Charles Town Racing Limited Partnership and Charles
Town Races, Inc. (Incorporated by reference to the Company's Form 10-Q,
File #0-24206, dated November 13,1996.)
10.57 General Contractor Agreement dated December 23, 1996, between PNGI
Charles Town Gaming Limited Liability Company and Warfel Construction
Company. (Incorporated by reference to the Company's Form 10-K, File
#0-24206, dated March 27, 1997.)
10.58 Agreement dated March 19, 1997, between PNGI Charles Town Gaming
Limited Liability Company and the Charles Town HBPA, Inc. (Incorporated
by reference to the Company's Form 10-K, File #0-24206, dated March 27,
1997.)
10.59 Agreement dated March 21, 1997, between PNGI Charles Town Gaming
Limited Liability Company and The West Virginia Thoroughbred Breeders
Association. (Incorporated by reference to the Company's Form 10-K,
File #0-24206, dated March 27, 1997.)
10.60 Agreement between PNGI Charles Town Gaming Limited Liability Company
and The West Virginia Union of Mutuel Clerks, Local 533, Service
Employees International Union, AFL-CIO. (Incorporated by reference to
the Company's Form 10-K, File #0-24206, dated March 27, 1997.)
10.61 General Contractor Agreement dated March 26, 1997, between PNGI Charles
Town Gaming Limited Liability Company and Myers Building Systems, Inc.
(Incorporated by reference to the Company's Form 10-Q, File #0-24206,
dated May 15, 1997.)
10.62 Agreement dated June 25, 1997, between the PNGI Charles Town Gaming
Limited Liability Company and GTECH Corporation. (Incorporated by
reference to the Company's Form 10-Q, File #0-24206, dated August 12,
1997.)
10.63 Purchase Option dated June 20, 1997, between the Company and Roosevelt
Boyland Devisees. (Incorporated by reference to the Company's Form
10-Q, File #0-24206, dated August 12, 1997.)
10.64 Purchase Option dated June 20, 1997, between the Company and Joyce M.
Peck. (Incorporated by reference to the Company's Form
10-Q, File #0-24206, dated August 12, 1997.)
10.65 Purchase Option dated June 20, 1997, between the Company and Alan J.
Aste. (Incorporated by reference to the Company's Form
10-Q, File #0-24206, dated August 12, 1997.)
10.66 Fourth Amendment Waiver and Consent dated as of October 20, 1997, among
the Company, Bankers Trust, as Agent, CoreStates Bank, N.A. as Co-Agent
and certain banks party to the Credit Agreement dated as of November
17, 1996. (Incorporated by reference to the Company's Form 10-Q, File
#0-24206, dated November 14, 1997.)
59
<PAGE>
10.67 Agreement dated October 2, 1996 between Pennsylvania National Turf
Club, Inc., Mountainview Racing Association and Sports Arena Employees'
union Local No. 137 (Primary Location.) (Incorporated by reference to
the Company's Form 10-K, File #0-24206, dated March 27, 1998.)
10.68 Lease dated July 1, 1997 between Laurel Mall Associated and the Downs
Off-Track Wagering, Inc. (Incorporated by reference to the Company's
Form 10-K, File #0-24206, dated March 27, 1998.)
10.69 General Contractor Agreement dated August 15, 1997, between Pocono
Downs, Inc. and S.G. Mastriani Construction Management.
(Incorporated by reference to the Company's Form 10-K, File #0-24206,
dated March 27, 1998.)
10.70 General Contractor Agreement dated October 15, 1997, between Pocono
Downs, Inc. and S.G. Mastriani Construction Management.
(Incorporated by reference to the Company's Form 10-K, File #0-24206,
dated March 27, 1998.)
10.71 General Contractor Agreement dated November 12, 1997, between Pocono
Downs, Inc. and Warfel Construction Company. (Incorporated by reference
to the Company's Form 10-K, File #0-24206, dated March 27, 1998.)
10.72 Totalisator Agreement dated November 19, 1997, between Penn National
Gaming, Inc. and AutoTote Systems, Inc. (Incorporated by reference to
the Company's Form 10-K, File #0-24206, dated March 27, 1998.)
10.73 Amended and Restated Credit Facility dated as of December 17, 1997,
among the Company, certain lenders, Bankers Trust Company, as Agent,
and CoreStates Bank, N.A., as Co-Agent. (Incorporated by reference to
the Company's Form 10-K, File #0-24206, dated March 27, 1998.)
10.74 Waiver dated March 25, 1998, between the Company, certain lenders,
Bankers Trust Company as Agent, and CoreStates Bank, N.A., as Co-Agent.
(Incorporated by reference to the Company's Form 10-K, File #0-24206,
dated March 27, 1998.)
10.75 General Contractor Agreement dated April 24, 1998, between Penn
National Turf Club and Warfel Construction Company. (Incorporated by
reference to the Company's Form 10-Q, File #0-24206, dated March 31,
1998.)
10.76 First Amendment and Waiver dated May 15, 1998, among Penn National
Gaming, Inc., CoreStates Bank, N.A. and Bankers Trust Company.
(Incorporated by reference to the Company's Form 10-Q, File #0-24206,
dated March 31, 1998.)
10.77 Purchase Agreement dated July 7, 1998, between Ladbroke Racing
Management - Pennsylvania and Mountainview Thoroughbred Racing
Association. (Incorporated by reference to the Company's Form 10-Q,
File #0-24206, dated June 30, 1998.)
10.78 Lease Agreement between Penn National Gaming, Inc. and Eagle Valley
Realty dated July 14, 1998. (Incorporated by reference to the Company's
Form 10-Q, File #0-24206, dated September 30, 1998.)
10.79 Joint Venture Agreement dated October 30, 1998 between Penn National
Gaming, Inc. and Greenwood New Jersey, Inc. (Incorporated by reference
to the Company's Form 10-Q, File #0-24206, dated September 30, 1998.)
10.80 Amendment dated November 2, 1998 to Joint Venture Agreement between
Penn National Gaming, Inc. and Greenwood New Jersey, Inc. (Incorporated
by reference to the Company's Form 10-Q, File #0-24206, dated September
30, 1998.)
10.81 Rights Agreement dated as of March 2, 1999 between Penn National
Gaming, Inc., and Continental Stock Transfer and Trust Company.
(Incorporated by reference to the Company's Form 8-K, File #0-24206,
dated March 2, 1999.)
10.82 First Amendment to Asset Purchase Agreement dated as of January 28,
1999 by and among Greenwood New Jersey, Inc., International
Thoroughbred Breeders, Inc., Garden State Race Track, Inc., Freehold
Racing Association, Atlantic City Harness Inc., Circa 1850, Inc., and
Penn National Gaming, Inc. (Incorporated by reference to the Company's
Form 8-K, File #0-24206, dated January 28, 1999.)
10.83 First Amendment to Joint Venture Agreement dated as of January 28,
1999, by and between Greenwood New Jersey, Inc. and Penn National
Gaming, Inc. (Incorporated by reference to the Company's Form 8-K, File
#0-24206, dated January 28, 1999.)
10.84 Purchase Agreement dated November 17, 1998 between the Company and
GTECH Corporation.
60
<PAGE>
10.85 Assignment and Assumption of Lease Agreement dated December 31, 1998
between Mountainview Thoroughbred Racing Association and
Ladbroke Racing Management-Pennsylvania.
10.86 Subordination, Non-Disturbance and Attornment Agreement dated
December 31, 1998 between Mountainview Thoroughbred Racing
Association and CRIIMI MAE Services Limited Partnership.
10.87 Second Amended and Restated Credit Agreement dated as of
January 28, 1999 between the Company and various banks, First Union
National Bank, as Agent.
10.88 Live Racing Agreement dated March 23, 1999 between Pennsylvania
National Turf Club, Inc. and Mountainview Thoroughbred Racing
Association and Pennsylvania Horsemen's Benevolent and Protection
Association, Inc.
21 Subsidiaries of the Registrant.
23.1 Consent of BDO Seidman, LLP. (Incorporated by reference to the
Company's registration statement on Form S-3, file #333-18861, dated
February 11, 1997.)
23.2 Consent of Robert Rossi & Co. (Incorporated by reference to the
Company's registration statement on Form S-3, File #333-18861, dated
February 11, 1997.)
23.3 Consent of Leonard J. Miller & Associates, Chartered. (Incorporated by
reference to the Company's registration statement on Form S-3, File
#333-18861, dated February 11, 1997.)
23.4 Consent of Morgan, Lewis & Bockius LLP (included in its opinion filed
as Exhibit 5.1 hereto). (Incorporated by reference to the Company's
registration statement of Form S-3, File #333-18861, dated February 11,
1997.)
23.6 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5)
(Incorporated by reference to the Company's Form S-4, File
#333-45337, dated January 30, 1997.)
24.1 Powers of Attorney. (Incorporated by reference to the Company's
registration statement on Form S-3, File #333-18861, dated
February 11, 1997.)
27.1 Financial Data Schedule.
99 Press Release of Penn National Gaming, Inc., issued January 20, 1995.
(Incorporated by reference to the Company's Form 8-K, File #0-24206,
dated January 21, 1997.)
(B) Reports on Form 8-K
None
61
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PENN NATIONAL GAMING, INC.
By \s\Peter M. Carlino
-----------------------
Peter M. Carlino,
Chairman of the Board
Dated: March 30 , 1999
Pursuant to the requirements of the Securities Act of 1934 this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Chief Executive Officer and
Director (Principal Executive
\s\ Peter M. Carlino Officer) March 30, 1999
- - -----------------------------------------------------
Peter M. Carlino
Chief Operating Officer and
Director (Principal Operating
\s\ William J. Bork Officer) March 30, 1999
- - -----------------------------------------------------
William J. Bork
Chief Financial Officer
\s\ Robert S. Ippolito (Principal Financial Officer) March 30, 1999
- - -----------------------------------------------------
Robert S. Ippolito
\s\ Harold Cramer Director March 30, 1999
- - -----------------------------------------------------
Harold Cramer
\s\ David A. Handler Director March 30, 1999
- - -----------------------------------------------------
David A. Handler
\s\ Robert P. Levy Director March 30, 1999
- - -----------------------------------------------------
Robert P. Levy
\s\ John M. Jacquemin Director March 30, 1999
- - -----------------------------------------------------
John M. Jacquemin
</TABLE>
62
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Nos. Description of Exhibits Page No.
<S> <C> <C>
10.84 Purchase Agreement dated November 17, 1998 between the
Company and GTECH Corporation. 64-69
10.85 Assignment and Assumption of Lease Agreement dated
December 31, 1998 between Mountainview Thoroughbred
Racing Association and Ladbroke Racing Management-Pennsylvania. 70-75
10.86 Subordination, Non-Disturbance and Attornment Agreement dated
December 31, 1998 between Mountainview Thoroughbred Racing
Association and CRIIMI MAE Services Limited Partnership. 76-85
10.87 Second Amended and Restated Credit Agreement dated as
of January 28, 1999 between the Company and various
banks, First Union National Bank, as Agent. 86-225
10.88 Live Racing Agreement dated March 23, 1999 between Pennsylvania
National Turf Club, Inc., Mountainview Thoroughbred Racing
Association and Pennsylvania Horsemen's Benevolent and Protection
Association, Inc. 226-239
21 Subsidiaries of the Registrant 240
27.1 Financial Data Statement 241
</TABLE>
63
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT entered into on November 17, 1998 is by
and among GTECH CORPORATION ('GTECH'), a Delaware corporation with its corporate
headquarters at 55 Technology Way, West Greenwich, Rhode Island 02817, PENN
NATIONAL GAMING, INC., a Pennsylvania corporation with a place of business at
825 Berkshire Boulevard, Wyomissing, Pennsylvania 19610 ("PENN") and PNGI
CHARLES TOWN GAMING, LLC ("PNGI"), a West Virginia limited liability company
with a place of business at 825 Berkshire Boulevard, Wyomissing, Pennsylvania
19610 ("PNGI,).
WITNESSETH:
WHEREAS, PNGI, a subsidiary of PENN, and GTECH are each party to that
certain Agreement dated as of June 25, 1997 (the "June 1997 Agreement") pursuant
to which GTECH provides a video lottery system that is operated at the Charles
Town Racetrack in Charles Town, West Virginia;
WHEREAS, PENN wishes to purchase, and GTECH wishes to sell the video
lottery system upon the terms and conditions set forth herein and PENN and PNGI,
on the one hand, and GTECH, on the other hand (collectively, the "Parties"),
wish to provide for an orderly resolution of their business relationship,
including the termination of the June 1997 Agreement, upon terms set forth
herein; and
WHEREAS, the Parties have agreed that nothing herein shall affect any
agreement, or understanding between AmTote International, Inc. and any of the
Parties
hereto.
NOW THEREFORE, in consideration of the foregoing and the material promises
and covenants contained herein, the Parties hereto, intending to be legally
bound, agree as follows:
I - Definitions. Terms used but not defined herein shall have the respective
meanings set forth in the June 1997 Agreement.
2.Purchase and Sale. Subject only to the receipt by GTECH of the payment
described in paragraph 4 hereof, effective on the date hereof:
2.1 GTECH hereby transfers, sells and assigns to PENN GTECH's entire right,
title and interest in and to the VLS System (other than Software)
installed at Charles Town Race Track on the date hereof and described
more particularly in Exhibit A hereof (the "Transferred Property");
2.2 PENN hereby purchases the Transferred Property and accepts delivery of the
Transferred Property "as is where is"; and
2.3 title to the Transferred Property hereby passes from GTECH to PENN.
3. The Software.
3.1 PNGI and PENN acknowledge that the Software installed at Charles Town
Race Track on the date hereof and described more particularly on Exhibit
B hereof (the "Transferred Software") is comprised exclusively of
software developed by IGT.
64
<PAGE>
3.2 GTECH hereby transfers, sells and assigns to PENN GTECH's entire right,
title and interest in and to the Transferred Software for use by PENN in
connection with the operation of the VLS System at the Charles Town Race
Track.
3.3 As between GTECH and PENN, PENN hereby accepts the Transferred Software
"as is where is" and acknowledges and agrees that GTECH shall have no
continuing obligations of support or maintenance with respect to the
Transferred Software.
3.4 PENN hereby covenants and agrees with GTECH that simultaneously with the
execution of this Agreement, PENN and IGT shall enter into the software
license agreement set forth on Exhibit B (the "Software License") and
that thereafter PENN shall use the Transferred Software strictly in
accordance with the terms of the Software License.
4.Compensation. In consideration of the transfer, sale and assignment by GTECH
to PENN of the Transferred Property, as provided in paragraph 2 hereof, and
the transfer, sale and assignment by GTECH to PENN of the Transferred
Software, as provided in paragraph 3 hereof, PENN shall simultaneously with
the execution of this Agreement pay to GTECH by wire transfer to the bank
account identified on Exhibit C hereof, cash proceeds in United States Dollars
in an amount equal to $12,999,999.00.
5. GTECH Warranties., Limitations.
5.1 GTECH has good and merchantable title, free and clear of all third party
claims, to the Transferred Property. 5.2 GTECH has all requisite power and
authority to transfer, sell and assign to PENN the Transferred Software
pursuant to paragraph 3 hereof.
5.3 THE TRANSFERRED PROPERTY AND THE TRANSFERRED SOFTWARE SOLD "AS IS WHERE,
IS" WITHOUT BY GTECH OF ANY KIND, EXPRESS OR IMPLIED. GTECH EXPRESSLY
DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
6. Additional Representations and Warranties. Each Party represents and
warrants to the others:
6.1 It is duly organized, validly existing and in good standing under the laws
of its state of incorporation or organization, and has all requisite power
and authority to conduct its businesses and to own its properties, and is
duly qualified and in good standing in all jurisdictions where such
qualification is required in order to perform its respective obligations
under this Agreement.
6.2 The execution, delivery and performance of its respective obligations under
this Agreement has been duly authorized by all necessary action and does
not and will not violate any provision of law or of its articles of
incorporation, bylaws and/or organization, or result in a breach of or
constitute a default under any agreement, indenture or instrument to which
it is a party.
6.3 This Agreement and its terms constitute valid legally binding and
enforceable obligations enforceable in accordance with its terms.
6.4 No governmental or other authorization, approval or filing is required for
the performance by it of its obligations hereunder and the transaction
contemplated herein.
65
<PAGE>
7.Settlement of October and November Invoices. PNGI agrees to pay to GTECH
amounts due under the June 1997 Agreement with respect to services performed
from October 16, 1998 through November 17, 1998 not later than 10 days after
receipt of each invoice from GTECH, prepared in a manner consistent with the
manner in which invoices issued heretofore have been prepared, respecting
services performed for such period or portion thereof. For purposes of
calculating amounts due hereunder for services performed during the month of
November 1998, applicable expenses for the entire calendar month of November
shall, where practicable, be prorated on a daily basis for the period November
1 - 17, 1998.
8. Mutual Release.
8.1 Effective on the date hereof, and except to the extent provided in
paragraph 7 hereof with respect to amounts due to GTECH for services
performed through the date hereof, the June 1997 Agreement is hereby
terminated, null and void and of no further force or effect. Without
limiting the foregoing, GTECH shall hereafter have no continuing obligation
to provide, and PENN no continuing obligation to use, any GTECH Services
whatsoever.
8.2 In consideration of the foregoing, PENN and PNGI, on behalf of themselves
and each of their present and former directors, officers, employees,
agents, subsidiaries, shareholders, successors and assigns (each, a
"Releasing Party"), each hereby release and forever discharge GTECH, its
present and former directors, officers, employees, agents, subsidiaries,
shareholders, successors and assigns from any and all liabilities, causes
of action, debts, claims and demands both in law and in equity, known or
unknown, fixed or contingent, which any Releasing Party may have or claim
to have, in its own right or as assignee, from the beginning of time
through the date hereof, including, without limitation, any claim based
upon or in any way related to the June 1997 Agreement, the goods or
services fumished under the June 1997 Agreement or the termination of the
June 1997 Agreement, and PENN and PNGI each hereby covenants not to file a
lawsuit or charge or commence any arbitration or other proceeding to assert
any such claim.
8.3 In consideration of the foregoing, GTECH, on behalf of itself and each of
its present and former directors, officers, employees, agents,
subsidiaries, shareholders, successors and assigns (each, a "Releasing
Party"), hereby releases and forever discharges PENN and PNGI, each of
their respective present and former directors, officers, employees, agents,
subsidiaries, shareholders, successors and assigns from any and all
liabilities, causes of action, debts, claims and demands both in law and in
equity, known or unknown, fixed or contingent, which any Releasing Party
may have or claim to have, in its own right or as assignee, from the
beginning of time through the date hereof (other than amounts due pursuant
to paragraph 7 hereof), including, without limitation (other than as
provided in such paragraph 7), any claim based upon or in any way related
to the June 1997 Agreement, the goods or services furnished under the June
1997 Agreement or the termination of the June 1997 Agreement, and GTECH
hereby covenants not to file a lawsuit or charge or commence any
arbitration or other proceeding to assert any such claim.
9. Confidentiality. Notwithstanding the termination of the June 1997
Agreement, paragraph 18 thereof is hereby incorporated by reference in this
Agreement as if set forth herein in its entirety.
10. Binding Nature of Agreement.
10.1 This Agreement shall be binding upon and inure to the benefit of the
Parties and to their respective permitted successors, assigns, heirs,
executors and administrators.
66
<PAGE>
10.2 If any one or more of the provisions contained in this Agreement shall for
any reason be held to be excessively broad as to duration, scope, activity
or subject, it shall be construed as compatible with the applicable law as
it shall then appear. Each Party acknowledges that the duration and other
restrictions set forth therein, are reasonable to protect the other
Parties' business interests.
11. Governing Law.
11.1 The validity, interpretation and enforcement of this Agreement shall be
governed by the laws of the State of West Virginia, without resort to its
rules regarding conflicts of laws.
12. Notices-, Press Releases.
12.1 All notices and other communications required or permitted to be given
under this Agreement to a Party shall be in writing and (a) personally
delivered, (b) mailed by registered or certified mail, postage prepaid,
return receipt requested, or (c) sent by prepaid overnight courier service
(e.g. Federal Express, Airborne, DHL), in any case to the address of the
relevant Party set forth on the first page of this Agreement, or at such
other addresses such Party may, by written notice, designate as its address
for purposes of notice, hereunder. In addition, notices and communications
to GTECH shall be sent to the attention of the President, and notices and
communications to PENN or to PNGI shall be sent to the attention of their
respective Chief Operating Officers.
12.2 If mailed by registered or certified mail, notices shall be deemed to be
given five (5) days after being sent; if sent by personal delivery, notice
shall be deemed to be given when delivered; and if sent by prepaid
overnight courier service, notice shall be deemed to be given one (1)
business day following deposit with the courier.
12.3 PENN, PNGI and GTECH agree jointly to the respective press releases set
forth as Exhibit D hereto respecting this Agreement and the termination of
the June 1997 Agreement. PENN, PNGI and GTECH each agree not to issue any
other press or other releases, or otherwise make any disclosure to any
third party concerning this Agreement or performance under or termination
of the June 1997 Agreement except with the prior written approval of the
other Parties hereto, it being expressly understood and agreed in such
connection that no Party shall disparage or speak negatively of the other
Parties to any third party.
13. Headings.
13.1 Section headings of this Agreement are for convenience only and shall
neither form a part nor affect the interpretation hereof.
14. Counterparts.
14.1. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute but one instrument. This Agreement shall become effective
when such counterparts have been executed and delivered by the Parties
to each other.
14.2. This Agreement may be executed and delivered by facsimile transmission
and any such facsimile copy shall have the same force and effect as if
an original had been executed and delivered.
15. Scope of Agreement-, Amendments.
15.1 This Agreement constitutes the entire agreement and understanding of the
Parties with respect to its subject matter, and supersedes all prior
agreements and understandings of the Parties, written and oral, related
thereto.
67
<PAGE>
15.2 This Agreement may not be amended, supplemented or modified except by a
written agreement signed by the Parties.
68
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENN NATIONAL GAMING, INC. ATTEST
BY: \s\Petter M. Carlino
- - ------------------------
Title: Chairman \s\Susan Montgomery
-------------------
PNGI CHARLES TOWN GAMING, LLC ATTEST
By:\s\William J. Bork
- - ---------------------
Title: \s\ Vice President \s\Joe Lashinger
-------------------
GTECH CORPORATION ATTEST
By:Steven Nowick
- - --------------------
Title: Chief Operating Officer \s\Brendan Radigan
--------------------
ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (this "Assignment") is made as
of the 31st day of December, 1998 by and between LADBROKE RACING
MANAGEMENT-PENNSYLVANIA, a general partnership organized under the laws of the
Commonwealth of Pennsylvania, having an address of P.O. Box 499, Racetrack Road,
Meadow Lands, Pennsylvania 15347 ("Assignor"), and MOUNTAINVIEW THOROUGHBRED
RACING ASSOCIATION, a Pennsylvania corporation, having an address of 825
Berkshire Boulevard, Suite 200, Wyomissing, Pennsylvania 19610 ("Assignee").
Recitals
A. Assignor is the holder of the Tenant's interest under a Lease dated as of
October 4, 1991 (the "Lease") by and between Assignor and UNIVERSITY PARK
ASSOCIATES, a Pennsylvania general partnership ("Landlord"), with respect to
certain Premises located in Richland Township, Cambria County, Pennsylvania,
more particularly described in the Lease (the "Premises"). B. Assignor desires
to assign its rights and delegate its obligations under the Lease to Assignee
and Assignee desires to assume such rights and obligations thereunder.
Agreement
In consideration of the foregoing, the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Assignor and Assignee, intending to, be legally bound
hereby, agree as follows:
Assignment. Assignor hereby transfers, conveys, assigns and sets over to
Assignee all of Assignor's right, title and interest in, to and under the Lease,
together with all of fixtures and improvements erected on the Premises and the
appurtenances thereto (collectively, the "Improvements") and represents and
warrants to Assignee that (a) Assignor's execution and delivery of this
Agreement have been duly authorized, (b) the persons executing this Assignment
on behalf of Assignor are fully authorized to execute it, (c) there are no
uncured defaults under the Lease, (d) Assignor has paid all rents and performed
all duties of Tenant under the Lease accruing through the date hereof, (e) the
Lease is in full force and effect, and there are no amendments, oral or written,
to the Lease, and (f) Assignor has not waived or relinquished any option or
right granted to Assignor by the terms of the Lease.
Acceptance and Assumption. Assignee expressly accepts the assignment to it of
Assignor's right, title and interest in and to the Lease and the Improvements
and assumes and agrees to be bound by the Lease and to keep, perform and fulfill
each and all of the obligations required to be kept, performed and fulfilled by
Assignor as tenant under the Lease accruing or arising on or after the date
hereof, and to make all payments accruing or due on or after the date hereof due
to Landlord or third parties under the Lease as and when the same are due and
payable. Assignee hereby represents and warrants to Assignor that (a) Assignee's
execution and delivery of this Assignment have been duly authorized, and (b) the
persons executing this Assignment on behalf of Assignee are fully authorized to
execute it. Indemnification of Assignor. Assignee hereby agrees to indemnify and
save Assignor harmless from any and all claims, demands, actions, causes of
action, suits, proceedings, damages, liabilities and costs and expenses of every
nature whatsoever, including, without limitation, reasonable attorneys' fees and
disbursements, arising out of or relating to any breach of Assignee's covenants
and agreements contained herein or relating to the Lease or the Premises arising
out of events or transactions occurring on or after the date hereof.
70
<PAGE>
Indemnification of Assignee. Assignor hereby agrees to indemnify and save
Assignee harmless from any and all claims, demands, actions, causes of action,
suits, proceedings, damages, liabilities and costs and expenses of every nature
whatsoever including, without limitation, reasonable attorneys' fees and
disbursements, arising out of or relating to any breach of Assignor's covenants
and agreements contained herein or relating to the Lease or the Premises arising
out of events or transactions occurring before the date hereof.
Further Assurances. Promptly upon request from time to time of the other party,
each party shall do, execute, acknowledge and deliver, or cause to be done,
executed, acknowledged or delivered, to or at the direction of such party, all
further acts, transfers, assignments, powers and other documents and instruments
as may be s reasonably requested to give effect to the transactions contemplated
hereby.
Successors and Assigns. This Assignment shall bind the parties and their
respective successors and assigns.
(Signatures appear on the following page)
71
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assignment of the date and
year first set forth above.
ASSIGNOR:
LADBROKE RACING MANAGEMENT-PENNSYLVANIA
By: Washington Trotting Association, Inc.,
a General Partner
By: /s/Michael E. Jeannot
-----------------------
Title: Vice President
By: Mountain Laurel Racing, Inc., a General Partner
By: /s/Michael E. Jeannot
---------------------
Title: Vice President
ASSIGNEE:
MOUNTAINVIEW THOROUGHBRED RACING ASSOCIATION
By: /s/Peter M. Carlino
-------------------
Peter M. Carlino, Chairman and CEO
72
<PAGE>
LANDLORD'S RELEASE
The undersigned hereby releases Ladbroke Racing Management-Pennsylvania from all
liability under the Lease from and after the effective date hereof.
LANDLORD:
UNIVERSITY PARK ASSOCIATES
By: /s/Stephen B. Zauers
General Partner
73
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF Washington )
On this the _28__ day of _December__, 1998, before me, a Notary Public, the
undersigned officer, personally appeared ___Michael E. Jeannot___, the __Vice
President____ of Washington Trotting Association, Inc., a General Partner of
Ladbroke Racing Management-Pennsylvania, and acknowledged that [s]he as such
officer, being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the partnership by [him]
[her]self as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
___\s\Deborah Howells__________________
Notary Public
My commission expires:
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF )
On this the __28__ day of ___December_, 1998, before me, a Notary Public, the
undersigned officer, personally appeared _____Michael Jeannot ___________, the
_Vice President_______ of Mountain Laurel Racing, Inc., a General Partner of
Ladbroke Racing Management-Pennsylvania, and acknowledged that [s]he as such
officer, being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the partnership by
[him][her]self as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
\s\Deborah Howwell
-------------------------------------
Notary Public
My commission expires:
74
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF )
On this the _29_ day of _December____________, 1998, before me, a Notary Public,
the undersigned officer, personally appeared Peter M. Carlino, the Chairman and
CEO of MOUNTAINVIEW THOROUGHBRED RACING ASSOCIATION and acknowledged that he as
such officer, being authorized to do so, executed the foregoing instrument for
the purposes therein contained by signing the name of the corporation by himself
as such officer. IN WITNESS WHEREOF, I hereunto set my hand and official seal.
\s\ Susan Montgomery
---------------------------------------
Notary Public
My commission expires:
75
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
This SUBORDINATION, NON-DISTURBANCE AND AT'TORNMENT AGREEMENT (this "Agreement")
is entered into as of December 31, 1998 (the "Effective Date"), between CRIIMI
MAE Services Limited Partnership, a Maryland Limited Partnership ("Mortgagee"),
and Mountainview Thoroughbred Racing Association, a Pennsylvania corporation
("Tenant").
A. University Park Associates ("Landlord"), owns the real property located at
University Park Shopping Center (such real property, including all buildings.
improvements, structures and fixtures located thereon, shall be hereinafter
referred to as the "Landlord's Premises"), as more particularly described on
Exhibit A attached hereto.
B. Mortgagee is the holder of a loan (the "Loan") to Landlord, which Loan is
secured, in part, by that certain Mortgage, Assignment of Rents and Security
Agreement dated February 21, 1998, in favor of Mortgagee (as amended, increased,
renewed, extended, spread, consolidated, severed, restated or otherwise changed
from time to time, the "Mortgage").
C. Pursuant to that certain Johnstown OTB Lease, dated as of October ___, 1991,
(the "Lease") Landlord demised to Ladbroke Racing Management - Pennsylvania a
portion of Landlord's Premises as described in the Lease (the "Tenant's
Premises"). D. Pursuant to that certain Assignment and Assumption of Lease
Agreement, dated as of December 31, 1998, Ladbroke Racing Management -
Pennsylvania assigned its rights and delegated its obligations under the Lease
to Tenant, and Tenant assumed such rights and obligations thereunder. E. Tenant
and Mortgagee desire to agree upon the relative priorities of their interests in
Landlord's Premises and their rights and obligations if certain events occur.
NOW, THEREFORE, for good and sufficient consideration, Tenant and Mortgagee
agree:
DEFINITIONS
The following terms shall have the following meanings for purposes of this
Agreement.
76
<PAGE>
Construction-Related Obligation. A "Construction-Related Obligation" means any
obligation of Landlord under Section 14(a) and (b) of the Lease to make, pay for
or reimburse Tenant for any alterations, demolitions or other improvements or
work at Landlord's Premises, including Tenant's Premises. "Construction-Related
Obligations" shall not include: (a) reconstruction or repair following fire,
casualty or condemnation to the extent of insurance proceeds or condemnation
awards actually received by Lender or (b) day-to-day maintenance and repairs.
Foreclosure Event. A "Foreclosure Event" means: (a) foreclosure under the
Mortgage; (b) any other exercise by Mortgagee of rights and remedies (whether
under the Mortgage or under applicable law, including bankruptcy law) as holder
of the Loan and/or the Mortgage, as a result of which Successor Landlord becomes
owner of Landlord's Premises; or (c) delivery by Landlord to Mortgagee (or its
designee or nominee) of a deed or other conveyance of Landlord's interest in
Landlord's Premises in lieu of any of the foregoing.
Former Landlord. A "Former Landlord" means Landlord and any other party that was
landlord under the Lease at any time before the occurrence of any attornment
under this Agreement.
Offset Right. An "Offset Right" means any right or alleged right of Tenant to
any offset, defense claim, counterclaim, reduction, deductions or abatement
against Tenant's payment of Rent or performance of Tenant's other obligations
under the Lease, arising (whether under the Lease or other applicable law) from
Landlord's breach or default under the Lease.
Rent. The "Rent" means any fixed rent, base rent or additional rent under the
Lease.
Successor Landlord. A "Successor Landlord" means any party that becomes owner of
Landlord's Premises as the result of a Foreclosure Event.
Termination Right. A 'Termination Right" means any right of Tenant to cancel or
terminate the Lease or to claim a partial or total eviction, arising (whether
under the Lease or under applicable law) from Landlord's breach or default under
the Lease.
SUBORDINATION.
The Lease shall be, and shall at all times remain, subject and subordinate
to the Mortgage, the lien imposed by the Mortgages and all advances made under
the Mortgage.
NON-DISTURBANCE, RECOGNITION AAD ATTORNMENT
No Exercise of Mortgage Remedies Against Tenant. So long as the Tenant is not in
default of the Lease, as defined at Section 21 thereof, Mortgagee shall not name
or join Tenant as a defendant in any exercise of Mortgagee's rights and remedies
arising upon a default under the Mortgage, unless applicable law requires Tenant
to be made a party thereto as a condition to proceeding against Landlord or
prosecuting such rights and remedies. In the latter case, Mortgagee may join
Tenant as a defendant in such action only for such purpose and not to terminate
the Lease or otherwise adversely affect Tenant's rights under the Lease or this
Agreement in such action.
77
<PAGE>
Non-Disturbance and Attornment. If Tenant is not in default of the Lease, as
defined at Section 21 thereof, when Successor Landlord takes title to the
Landlord's Premises: (a) Successor Landlord shall not terminate or disturb
Tenant's possession of Tenant's Premises under the Lease, except in accordance
with the terms of the Lease and this Agreement; (b) Successor Landlord shall be
bound to Tenant under all of the terms and conditions of the Lease (except as
provided in this Agreement);
(c) Tenant shall-recognize and attorn to Successor Landlord as Tenant's direct
landlord under the Lease as modified by this Agreement; and (d) the Lease shall
continue in full force and effect as a direct lease in accordance with its terms
(except as provided in this Agreement) between
Successor Landlord and Tenant.
Further Documentation. The provisions of this Article shall be effective and
self-operative without any need for Successor Landlord or Tenant to execute any
further documents. Tenant and Successor Landlord shall, however, confirm the
provisions of this Article in writing upon written request by either of them.
PROTECTION OF SUCCESSOR LANDLORD.
Notwithstanding anything to the contrary in the Lease or the Mortgage,
Successor Landlord shall not be liable for or bound by any of the following
matters:
Claims Against Former Landlord. Any Offset Right that Tenant may have against
any Former Landlord relating to any event or occurrence before the date of
attornment, including any claim for damages of any kind whatsoever as the
result of any breach by Former Landlord that occurred before the date of
attornment. Prepayments. Any payment of Rent that Tenant may have made to
Former Landlord more than thirty (30) days before the date such Rent was
first due and payable under the Lease.
Payment; Security Deposit. Any obligation: (a) to pay Tenant any sum(s) that any
Former Landlord owed to Tenant or (b) with respect to any security
deposited with Former Landlord, unless such security was actually delivered
to Mortgagee.
Modification, Amendment or Waiver. Any modification or amendment of Sections 2,
5, 6 or 7 of the Lease, or any waiver of any terms of Sections 2, 5, 6 or 7
of the Lease, made without Mortgagee's prior written consent.
Surrender,Etc. Any consensual or negotiated surrender, cancellations or
termination of the Lease, in whole or in part, agreed upon between Landlord
and Tenant, unless effected unilaterally by Tenant pursuant to the express
terms of the Lease.
Construction-Related Obligations. Any Construction-Related Obligation of Former
Landlord.
Casualty; Condemnation. Any obligation of Former Landlord to restore the
Landlord's Premises, including the Tenant's Premises, except to the extent
of insurance proceeds or condemnation awards actually received by Mortgagee
after the deduction of all costs and expenses incurred in obtaining such
proceeds or awards, and subject to the terms of the Mortgage with respect
to the disposition of such proceeds or awards.
EXCLUSION OF SUCCESSOR LANDLORD.
Notwithstanding anything to the contrary in this Agreement or the
Lease, upon any attornment pursuant to this Agreement, the Lease shall be deemed
to have been automatically amended to provide that Successor Landlord's
obligations and liability under the Lease shall never extend beyond Successor
Landlord's (or its successors' or assigns') interest, if any, in Landlord's
Premises from time to time, Successor Landlord's interest in the Lease and the
proceeds from any sale or other disposition of Landlord's Premises by Successor
Landlord (collectively, "Successor Landlord's Interest"). Tenant shall look
exclusively to Successor Landlord's Interest (or that of its successors and
assigns) for payment or discharge of any obligations of Successor Landlord under
the Lease as modified by this Agreement.
78
<PAGE>
MORTGAGEE'S RIGHT TO CURE.
Notice to Mortgagee. Notwithstanding anything to the contrary in the Lease, the
sole exception being Section 19 of the Lease, before exercising any
Termination Right or Offset Right, Tenant shall provide Mortgagee with
notice of the breach or default by Landlord giving rise to same (the
"Default Notice") and, thereafter, the opportunity to cure such breach or
default as provided for below.
Mortgagee's Cure Period. After Mortgagee receives a Default Notice, Mortgagee
shall have a period of thirty (30) days beyond any cure period provided to
Landlord under the Lease in which to cure the breach or default by
Landlord. Mortgagee shall have no obligation to cure any breach or default
by Landlord, except to the extent that Mortgagee agrees or undertakes
otherwise in writing.
Extended Cure Period. In addition, as to any breach or default by Landlord the
cure of which requires possession and control of Landlord's Premises,
Mortgagee's cure period shall contlnu6 for such additional time as
Mortgagee may reasonably require to either (a) obtain possession and
control of Landlord's Premises and thereafter cure the breach or default
with reasonable diligence and continuity or (b) obtain the appointment of a
receiver and give such receiver a reasonable period of time in which to
cure the default.
RENT PAYMENT NOTICES.
From and after Tenant's receipt of written notice from Mortgagee (a "Rent
Payment Notice"), Tenant shall pay all Rent to Mortgagee or as Mortgagee shall
direct in writing, until such time as Mortgagee directs otherwise in writing-
Tenant shall comply with any Rent Payment Notice, notwithstanding any contrary
instruction, direction or assertion from Landlord. Mortgagee's delivery to
Tenant of a Rent Payment Notice, or Tenant's compliance therewith, shall not be
deemed to: (a) cause Mortgagee to succeed to or to assume any obligations or
responsibilities as Landlord under the Lease, all of which shall continue to be
per-formed and discharged solely by Landlord unless and until any attornment has
occurred pursuant to this Agreement; or (b) relieve Landlord of any obligations
under the Lease.
79
<PAGE>
CONFIRMATION OF FACTS.
Tenant represents to Mortgagee and to any Successor Landlord, in each case
as of the Effective Date:
Effectiveness of Lease. The Lease is in full force and effect, has not been
modified and constitutes the entire agreement between Landlord and Tenant
relating to Tenant's Premises. Tenant has no interest in Landlord's
Premises except pursuant to the Lease. No unfulfilled conditions exist to
Tenant's obligations under the Lease.
Rent.Tenant has not paid any Rent that is first due and payable under the Lease
after the Effective Date.
No Landlord Default. To the best of Tenant's knowledge, no breach or default
by Landlord exists and no event has occurred that, with the giving of
notice, the passage of time or both, would constitute such a breach or
default.
No Tenant Default. Tenant is not in default under the Lease and has not
received any uncured notice of any default by Tenant under the Lease.
No Termination . Tenant has not commenced any action nor sent or received any
notice to terminate the Lease. Tenant has no presently exercisable
Termination Right(s) or Offset Right(s).
Commencement Date. The "Commencement Date" of the Lease was ________________,
199_.
Acceptance. Tenant has accepted possession of Tenant's Premises and Landlord has
performed all Construction-Related Obligations related to Tenant's initial
occupancy of Tenant's Premises and Tenant has accepted such performance by
Landlord.
No Transfer. Tenant has not transferred, encumbered, mortgaged, assigned,
conveyed or otherwise disposed of the Lease or any interest therein.
Due Authorization. Tenant has full authority to enter into this Agreement,
which has been duly authorized by all necessary actions.
MISCELLANEOUS.
Notices. All notices or other communications required or permitted under this
Agreement shall be in writing and given by certified mail (return receipt
requested) or by nationally recognized overnight courier service that
regularly maintains records of items and shall be delivered to Mortgagee or
Tenant (applicable) at the addresses set forth below. Notices shall be
effective upon receipt.
If to Tenant: Mountainview Thoroughbred Racing Association
Wyomissing Professional Center
825 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
Attn: William J. Bork, President
With a copy to: Mesirov Gelman Jaffe Cramer & Jamieson, LLP
1735 Market Street
38th Floor
Philadelphia, PA 19103
Attn: Robert P. Krauss, Esquire
80
<PAGE>
If to Mortgagee: Norwest Bank Minnesota, National Association,
as indenture trustee for the CRIIMI MAE CMBS
Corp., Commercial Mortgage Loan Trust
Certificates, Series 1998-1
11000 Broken Land Parkway
Columbia, MD 21044-3562
Attn: Corporate Trust Services, CRIIMI MAE 1998-1
With a copy to: CRIIMI MAE Services Limited Partnership,
as special servicer for the CRIIMI MAE CMBS
Corp., Commercial
Mortgage Loan Trust Certificates, Series 1998-1
11200 Rockville Pike
Rockville, MD 20852
Attn: David B. Iannarone, Esquire
Successors and Assigns. This Agreement shall bind and benefit the parties, their
successors and assigns, any Successor Landlord and its successors and
assigns. If Mortgagee assigns the Mortgage, upon delivery to Tenant of
written notice thereof all liability of the assignor shall terminate.
Entire Agreement. This Agreement constitutes the entire agreement between
Mortgagee and Tenant regarding the subordination of the Lease to the
Mortgage and the rights and obligations of Tenant and Mortgagee as to the
subject matter of this Agreement.
Interaction with Lease. If this Agreement conflicts with the Lease, then this
Agreement shall govern as between the parties and any Successor Landlord,
including upon an), attornment pursuant to this Agreement.
Mortgagee's Rights and Obligations. Except as expressly provided for in this
Agreement, Mortgagee shall have no obligations to Tenant with respect to
the Lease. If an attornment occurs pursuant to this Agreement, all rights
and obligations of Mortgagee under this Agreement shall terminate, without
thereby affecting in any way the rights and obligations of Successor
Landlord provided for in this Agreement.
Interpretation; Governing Law. The interpretation, validity and enforcement of
this Agreement shall be governed by and construed under the internal laws
of the state where the Landlord's Premises is located excluding its
principles of conflict of laws.
Amendments. This Agreement may be amended, discharged or terminated, or any of
its provisions waived, only by a written instrument executed by the party
to be charged.
Execution. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall
constitute one and the-same instrument.
Mortgagee's Authority. Mortgagee represents that Mortgagee has full authority to
enter into this Agreement, and Mortgagee's entry into this Agreement has
been duly authorized by all necessary actions.
81
<PAGE>
[intentionally left blank]
82
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by Mortgagee
and Tenant as of the Effective Date.
MORTGAGEE TENANT
CRIIMI MAE Services Limited Partnership, as
special servicer for the CRIIMI MAE CMBS Mountainview Thoroughbred Racing
Corp., Commercial Mortgage Loan Trust Association
certificates Series 1998-1
By: CRIIMI MAE Services, Inc., its general partner By:\s\William J. Bork__
Name:__\s\Kathryn C. Parks_________ Name: William J. Bork
Title:___Vice President______________ Title: Vice President
83
<PAGE>
Landlord consents and agrees to the terms of the foregoing Agreement, which
was entered into at Landlord's request. The foregoing Agreement shall not alter,
waive or diminish any of Landlord's obligations under the Mortgage or the Lease.
The above Agreement discharges any obligations of Mortgagee under the Mortgage
and related loan documents to enter into a non-disturbance agreement with
Tenant.
Landlord irrevocably directs Tenant to comply with any Rent Payment Notice,
notwithstanding any contrary direction, instructions, or assertion by Landlord.
Tenant shall be entitled to rely on any Rent Payment Notice. Tenant shall be
under no duty to controvert or challenge any Rent Payment Notice. Tenant's
compliance with a Rent Payment Notice shall not be deemed to violate the Lease.
LANDLORD
---------------------------------
By:______________________________
Name:____________________________
Title:_____________________________
Dated: _______________, 19__
84
<PAGE>
Each of the undersigned, a guarantor of Tenant's obligations under the
Lease (a "Guarantor"), consents to Tenant's execution, delivery and performance
of the foregoing Agreement. From and after any attornment pursuant to the
foregoing Agreement, that certain Guaranty dated _____________, 199_ (the
"Guaranty") executed by Guarantor in favor of shall automatically benefit and be
enforceable by Successor Landlord with respect to Tenant's obligations under the
Lease as affected by the foregoing Agreement. Successor Landlord's rights under
the Guaranty shall not be subject to any defense, offset, claim, counterclaim,
reduction or abatement of any kind resulting from any act, omission or waiver by
any Former Landlord for which Successor Landlord would, -pursuant to the
foregoing Agreement, not be liable or answerable after an attornment. Guarantor
confirms that the Guaranty is in full force and effect and Guarantor currently
has no offset, defense (other than any arising from actual payment or
performance by Tenant, which payment or performance would bind a Successor
Landlord under the foregoing Agreement), claim, counterclaim, reduction.
deduction or abatement against Guarantor's obligations under the Guaranty.
GUARANTOR
---------------------------------
By:______________________________
Name:____________________________
Title:_____________________________
Dated: _______________, 19__
85
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
among
PENN NATIONAL GAMING, INC.,
VARIOUS BANKS,
and
FIRST UNION NATIONAL BANK,
as AGENT
----------------------------------
Dated January 28, 1999
----------------------------------
86
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1. Amount and Terms of Credit..........................................................1
1.01. The Commitments........................................................1
1.02. Minimum Amount of Each Borrowing.......................................2
1.03. Notice of Borrowing....................................................2
1.04. Disbursement of Funds..................................................2
1.05. Notes..................................................................3
1.06. Conversions............................................................4
1.07. Percentages............................................................4
1.08. Interest...............................................................5
1.09. Interest Periods.......................................................5
1.10. Increased Costs, Illegality, etc.......................................6
1.11. Compensation...........................................................8
1.12. Change of Lending Office...............................................9
1.13. Replacement of Banks...................................................9
Section 2. Letters of Credit..................................................................10
2.01. Letters of Credit.....................................................10
2.02. Maximum Letter of Credit Outstandings; Final
Maturities...........................................................11
2.03. Letter of Credit Requests; Minimum Stated Amount......................11
2.04. Letter of Credit Participations.......................................12
2.05. Agreement to Repay Letter of Credit Drawings..........................13
2.06. Increased Costs.......................................................14
Section 3. Commitment Commission; Fees; Reductions of Commitment..............................15
3.01. Fees..................................................................15
3.02. Voluntary Termination of Unutilized Commitments.......................16
3.03. Certain Mandatory Prepayments.........................................16
Section 4. Prepayments; Payments; Taxes.......................................................18
4.01. Voluntary Prepayments.................................................18
4.02. Additional Mandatory Repayments.......................................19
4.03. Method and Place of Payment...........................................19
4.04. Net Payments..........................................................19
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>>
Section 5. Conditions Precedent...............................................................21
5.01. Execution of the Agreement............................................21
5.02. Notes.................................................................22
5.03. Officer=s Certificate.................................................22
5.04. Opinions of Counsel...................................................22
5.05. Corporate Documents; Proceedings; etc.................................22
5.06. Shareholders=Agreements; Tax Sharing Agreements;
Existing Indebtedness Agreements.....................................23
5.07. The Transaction.......................................................23
5.08. Original Credit Agreement, etc........................................24
5.09. Adverse Change, etc...................................................24
5.10. Litigation............................................................25
5.11. Contribution and Indemnification Agreement............................25
5.12. Mortgage Amendments...................................................25
5.13. Projections; Balance Sheet; Financial Review..........................26
5.14. Subsidiaries Guaranty. ...............................................26
5.15. Amended and Restated Security Agreement...............................26
5.16. Pledge Agreement......................................................26
5.17. Assignment of Notes...................................................26
5.18. Solvency Certificate; Insurance Certificates..........................26
5.19. Searches. ...........................................................27
5.20. Notice of Account Designation.........................................27
5.21. No Default; Representations and Warranties............................27
5.22. Notice of Borrowing; Letter of Credit Request.........................27
Section 6. Representations, Warranties and Agreements.........................................27
6.01. Corporate and Other Status............................................28
6.02. Corporate and Other Power and Authority...............................28
6.03. No Violation..........................................................28
6.04. Approvals.............................................................29
6.05. Financial Statements; Financial Condition;
Undisclosed Liabilities; Projections; etc............................29
6.06. Litigation............................................................30
6.07. True and Complete Disclosure..........................................30
6.08. Use of Proceeds; Margin Regulations...................................30
6.09. Tax Returns and Payments..............................................31
6.10. Compliance with ERISA.................................................31
6.11. The Security Documents................................................32
6.12. Representations and Warranties in the Documents.......................33
6.13. Properties............................................................33
6.14. Capitalization........................................................33
</TABLE>
88
<PAGE>
<TABLE>
<S> <C>
6.15. Subsidiaries; Investments.............................................34
6.16. Compliance with Statutes, etc.........................................34
6.17. Investment Company Act................................................34
6.18. Public Utility Holding Company Act....................................34
6.19. Environmental Matters.................................................34
6.20. Labor Relations.......................................................35
6.21. Patents, Licenses, Franchises and Formulas............................35
6.22. Licenses..............................................................36
6.23. Indebtedness..........................................................36
6.24. The Senior Notes......................................................36
6.25. Year 2000 Compliance..................................................37
6.26. Material Contracts....................................................37
6.27. Management Agreements.................................................37
6.28. Transaction Documents.................................................37
6.29. Inactive Subsidiaries.................................................37
</TABLE>
<TABLE>
<S> <C> <C>
Section 7. Affirmative Covenants..............................................................38
7.01. Information Covenants.................................................38
7.02. Books, Records and Inspections; Annual Meeting with Banks 41
7.03. Maintenance of Property; Insurance....................................41
7.04. Corporate Existence; Corporate Franchises.............................42
7.05. Compliance with Statutes, etc.........................................42
7.06. Compliance with Environmental Laws....................................43
7.07. ERISA.................................................................43
7.08. End of Fiscal Years; Fiscal Quarters..................................44
7.09. Performance of Obligations; Conduct of Business.......................44
7.10. Payment of Taxes......................................................45
7.11. Additional Security; Further Assurances...............................45
7.12. New Jersey Licenses...................................................46
7.13. Year 2000 Compliance..................................................46
7.14. Successor Agent.......................................................46
7.15. Transactions Among Affiliates.........................................46
7.16. Other Information.....................................................46
Section 8. Negative Covenants.................................................................46
8.01. Liens.................................................................47
8.02. Consolidation, Merger, Purchase or Sale of Assets, etc................49
8.03. Restricted Payments...................................................50
8.04. Indebtedness..........................................................51
8.05. Advances, Investments and Loans.......................................52
8.06. Transactions with Affiliates..........................................53
8.07. Leases................................................................54
8.08. Capital Expenditures..................................................54
</TABLE>
89
<PAGE>
<TABLE>
<S> <C> <C>
8.09. Minimum Consolidated Net Worth........................................55
8.10. Consolidated Cash Interest Coverage Ratio.............................55
8.11. Maximum Leverage Ratio................................................55
8.12. Limitation on Modifications of Certificate of Incorporation,
By-Laws and Certain Other Agreements; etc............................55
8.13. Limitation on Certain Restrictions on Subsidiaries....................56
8.14. Limitation on Issuance of Capital Stock...............................56
8.15. Business..............................................................56
8.16. Guaranties............................................................57
8.17. Limitation on Creation of Subsidiaries................................57
8.18. New Jersey Joint Venture..............................................57
Section 9. Events of Default..................................................................58
9.01. Payments..............................................................58
9.02. Representations, etc..................................................58
9.03. Covenants.............................................................58
9.04. Default Under Other Agreements........................................58
9.05. Bankruptcy, etc.......................................................58
9.06. ERISA.................................................................59
9.07. Security Documents....................................................59
9.08. Subsidiaries Guaranty.................................................60
9.09. Judgments.............................................................60
9.10. Change of Control.....................................................60
9.11. Governmental Authorities; Licenses....................................60
9.12. Applications..........................................................60
9.13. Legality..............................................................61
Section 10. Definitions and Accounting Terms..................................................61
10.01. Defined Terms........................................................61
Section 11. The Agent.........................................................................82
11.01. Appointment..........................................................82
11.02. Nature of Duties.....................................................83
11.03. Lack of Reliance on the Agent........................................83
11.04. Certain Rights of the Agent...........................................83
11.05. Reliance.............................................................84
11.06. Indemnification......................................................84
11.07. The Agent in its Individual Capacity.................................84
11.08. Holders..............................................................84
11.09. Resignation by the Agent.............................................84
</TABLE>
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<TABLE>
<S> <C> <C>
Section 12. Miscellaneous.....................................................................85
12.01. Payment of Expenses, etc.............................................85
12.02. Right of Setoff......................................................86
12.03. Notices..............................................................86
12.04. Benefit of Agreement; Assignments; Participations....................87
12.05. No Waiver; Remedies Cumulative.......................................88
12.06. Payments Pro Rata....................................................89
12.07. Calculations; Computations; Accounting Terms.........................89
12.08. GOVERNING LAW; SUBMISSION TO
JURISDICTION; VENUE; WAIVER OF JURY
TRIAL................................................................90
12.09. Arbitration..........................................................91
12.10. Counterparts.........................................................91
12.11. Effectiveness........................................................91
12.12. Headings Descriptive.................................................92
12.13. Amendment or Waiver; etc.............................................92
12.14. Survival.............................................................93
12.15. Domicile of Loans....................................................93
12.16. Register.............................................................93
12.17. Confidentiality......................................................94
</TABLE>
91
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SCHEDULE I -- Commitments
- - ---------- -- -----------
SCHEDULE II -- List of Banks
- - ----------- -- -------------
SCHEDULE III -- Existing Letters of Credit
- - ------------ -- --------------------------
SCHEDULE IV -- Real Property
- - ----------- -- -------------
SCHEDULE V -- Subsidiaries
- - ---------- -- ------------
SCHEDULE VI -- Existing Indebtedness
- - ----------- -- ---------------------
SCHEDULE VII -- Insurance
- - ------------ -- ---------
SCHEDULE VIII -- Existing Liens
- - ------------- -- --------------
SCHEDULE IX -- Existing Investments
- - ----------- -- --------------------
SCHEDULE X -- Management Agreements
- - ---------- -- ---------------------
SCHEDULE XI -- Environmental Matters
- - ----------- -- ---------------------
SCHEDULE XII -- Labor Relations
- - ------------ -- ---------------
SCHEDULE XIII -- Mortgaged Properties For Which Phase I Has Been Delivered
- - ------------- -- ---------------------------------------------------------
EXHIBIT A -- Form of Notice of Borrowing
- - --------- -- ---------------------------
EXHIBIT B-1 -- Form of Amended and Restated Revolving Note
- - ----------- -- -------------------------------------------
EXHIBIT B-2 -- Form of Term Note
- - ----------- -- -----------------
EXHIBIT C -- Form of Letter of Credit Request
- - --------- -- --------------------------------
EXHIBIT D -- Calculation of Funding Losses
- - --------- -- -----------------------------
EXHIBIT E -- Form of Section 4.04(b)(ii) Certificate
- - --------- -- ---------------------------------------
EXHIBIT F-1 -- Form of Opinion of West Virginia counsel to the Credit Parties
- - ----------- -- --------------------------------------------------------------
EXHIBIT F-2 -- Form of Opinion of Mesirov, Gelman, Jaffe, Cramer & Jamieson, counsel to the Credit Parties
- - ----------- -- -------------------------------------------------------------------------------------------
EXHIBIT G -- Form of Section 5.05 Officers= Certificate
- - --------- -- ------------------------------------------
EXHIBIT H -- Form of Acknowledgment Letter
- - --------- -- -----------------------------
EXHIBIT I -- Form of Contribution and Indemnification Agreement
- - --------- -- --------------------------------------------------
EXHIBIT J -- Form of Solvency Certificate
- - --------- -- ----------------------------
EXHIBIT K -- Form of Assignment and Assumption Agreement
- - --------- -- -------------------------------------------
EXHIBIT L -- Form of Intercompany Note
- - --------- -- -------------------------
EXHIBIT M -- Applicable Margins
- - --------- -- ------------------
EXHIBIT N -- Form of Officer=s Certificate - Covenant Compliance
- - --------- -- ---------------------------------------------------
</TABLE>
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THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this
ACredit Agreement@) is made this 28th day of January, 1999 among PENN NATIONAL
GAMING, INC., a Pennsylvania corporation (the ABorrower@), the Banks party
hereto from time to time, and FIRST UNION NATIONAL BANK, a national banking
association and successor by merger to CoreStates Bank, N.A., as Agent (all
capitalized terms used herein and defined in Section 10 are used herein as
therein defined).
W I T N E S S E T H :
WHEREAS, the Borrower, the Original Banks, CoreStates Bank,
N.A., as Co-Agent, and Bankers Trust Company, as Agent, are parties to an
Amended and Restated Credit Agreement, dated as of December 17, 1997 (as amended
and modified to, but not including, the Restatement Effective Date, the
AOriginal Credit Agreement@); and
WHEREAS, the Borrower has requested that the Original Credit
Agreement be amended and restated in its entirety, and the Banks and the Agent
hereunder are willing to amend and restate the same, upon the terms and
conditions set forth herein;
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree that the Original Credit Agreement shall be and is hereby
amended and restated in its entirety on and after the Restatement Effective Date
as follows:
Amount and Terms of Credit.
21 The Commitments. Subject to and upon the terms and conditions set forth
herein, each Bank severally agrees to make the following loans to Borrower:
22 Revolving Loan(s). At any time and from time to time after the
Restatement Effective Date and prior to the Final Maturity Date, a
revolving loan or revolving loans (each a ARevolving Loan@ and
collectively, the ARevolving Loans@) to the Borrower, which Revolving
Loans (i) shall, at the option of the Borrower, be incurred and
maintained as, and/or converted into, Base Rate Loans or Eurodollar
Loans, provided that, except as otherwise specifically provided in
Section 1.10(b), all Revolving Loans comprising the same Borrowing
shall at all times be of the same Type, (ii) may be repaid and
reborrowed in accordance with the provisions hereof, (iii) shall not
exceed for any Bank at any time outstanding that aggregate principal
amount which, when added to the product of such Bank=s Percentage and
the aggregate amount of all Letters of Credit Outstanding (exclusive of
Unpaid Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time, equals the Commitment of such Bank at
such time and (iv) shall not exceed for all Banks at any time
outstanding that aggregate principal amount which, when added to the
amount of all Letters of Credit Outstanding (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) at
such time, equals the Total Commitment at such time; and
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<PAGE>
23 Term Loan. On the Restatement Effective Date, a term loan (the ATerm
Loan@) to Borrower in the original principal amount of Five Million
Dollars ($5,000,000) from First Union, in its individual capacity.
24 Minimum Amount of Each Borrowing. The aggregate principal amount of
each Borrowing of Revolving Loans shall not be less than the Minimum
Borrowing Amount applicable thereto. More than one Borrowing may occur
on the same date, but at no time shall there be outstanding more than
five Borrowings of Eurodollar Loans.
25 Notice of Borrowing. (a) Whenever the Borrower desires to incur (x)
Eurodollar Loans hereunder, the Borrower shall give the Agent at the
Notice Office at least three Business Days= prior notice of each
Eurodollar Loan to be incurred hereunder and (y) Base Rate Loans
hereunder, the Borrower shall give the Agent at the Notice Office
notice thereof no later than the date on which each Base Rate Loan is
to be incurred hereunder, provided that (in each case) any such notice
shall be deemed to have been given on a certain day only if given
before 11:00 a.m. (Philadelphia time) on such day. Each such notice
(each a ANotice of Borrowing@), except as otherwise expressly provided
in Section 1.10, shall be irrevocable and shall be given by the
Borrower in writing, or by telephone promptly confirmed in writing on
the same day, in the form of Exhibit A, appropriately completed to
specify the aggregate principal amount of the Revolving Loans to be
incurred pursuant to such Borrowing, the date of such Borrowing (which
shall be a Business Day), and whether the Revolving Loans being
incurred pursuant to such Borrowing are to be initially maintained as
Base Rate Loans or, to the extent permitted hereunder, Eurodollar Loans
and, if Eurodollar Loans, the initial Interest Period to be applicable
thereto. The Agent shall promptly give each Bank notice of such
proposed Borrowing, of such Bank=s proportionate share thereof (if any)
and of the other matters required by the immediately preceding sentence
to be specified in the Notice of Borrowing.
26 Without in any way limiting the obligation of the Borrower to confirm
in writing any telephonic notice of any Borrowing or prepayment of
Loans, the Agent may act without liability upon the basis of telephonic
notice of such Borrowing or prepayment, believed by the Agent in good
faith to be from the Chairman of the Board, the President, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer or the
Controller of the Borrower, or from any other authorized officer of the
Borrower designated in writing by the Borrower to the Agent as being
authorized to give such notices, prior to receipt of written
confirmation. In each such case, the Borrower hereby waives the right
to dispute the Agent=s record of the terms of such telephonic notice of
such Borrowing or prepayment of Loans, absent manifest error.
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27 Disbursement of Funds. No later than 12:00 noon (Philadelphia time) (or
2:00 p.m. (Philadelphia time) in the case of Base Rate Loans made on
same day notice) on the date specified in each Notice of Borrowing,
each Bank will make available its Percentage of each such Borrowing
requested to be made on such date. All such amounts will be made
available in Dollars and in immediately available funds at the Payment
Office, and the Agent will make available to the Borrower at the
Payment Office the aggregate of the amounts so made available by the
Banks. Unless the Agent shall have been notified by any Bank prior to
the date of Borrowing that such Bank does not intend to make available
to the Agent such Bank=s portion of any Borrowing to be made on such
date, the Agent may assume that such Bank has made such amount
available to the Agent on such date of Borrowing and the Agent may (but
shall not be obligated to), in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Agent by such Bank, the
Agent shall be entitled to recover such corresponding amount on demand
from such Bank. If such Bank does not pay such corresponding amount
forthwith upon the Agent=s demand therefor, the Agent shall promptly
notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent. The Agent shall also be entitled to
recover on demand from such Bank or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the
date such corresponding amount was made available by the Agent to the
Borrower until the date such corresponding amount is recovered by the
Agent, at a rate per annum equal to (i) if recovered from such Bank, at
the overnight Federal Funds Rate and (ii) if recovered from the
Borrower, the rate of interest applicable to the respective Borrowing,
as determined pursuant to Section 1.08. Nothing in this Section 1.04
shall be deemed to relieve any Bank from its obligation to make Loans
hereunder or to prejudice any rights which the Borrower may have
against any Bank as a result of any failure by such Bank to make Loans
hereunder.
28 Notes.
29 Amended and Restated Revolving Notes. The Borrower=s obligation to pay
the principal of, and interest on, the Revolving Loans made by each
Bank shall be evidenced by an amended and restated promissory note duly
executed and delivered by the Borrower substantially in the form of
Exhibit B-1, with blanks appropriately completed in conformity herewith
(each a ARevolving Note@ and collectively, the ARevolving Notes@). The
Revolving Note issued to each Bank that has a Commitment or outstanding
Revolving Loans shall (i) be executed by the Borrower, (ii) be payable
to such Bank or its registered assigns and be dated the Restatement
Effective Date (or, if issued after the Restatement Effective Date, be
dated the date of the issuance thereof), (iii) be in a stated principal
amount equal to the Commitment of such Bank (or, if issued after the
termination thereof, be in a stated principal amount equal to the
outstanding Revolving Loans of such Bank at such time) and be payable
in the outstanding principal amount of the Revolving Loans evidenced
thereby, (iv) mature on the Final Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 1.08 in respect of the
Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to voluntary prepayment as provided in Section
4.01, and mandatory repayment as provided in Section 4.02, and (vii) be
entitled to the benefits of this Agreement and the other Credit
Documents.
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30 Amendment and Restatement. This Agreement amends and restates, replaces
and supersedes the Original Credit Agreement; provided, however, that
the execution and delivery of this Agreement shall not in any
circumstance be deemed to have terminated, extinguished, or discharged
the Borrower=s Indebtedness under the Original Credit Agreement, all of
which Indebtedness and the guaranties and security therefor shall
continue under and be governed by this Agreement and the other Credit
Documents. This Agreement IS NOT A NOVATION.
31 Term Note. The Borrower=s obligation to pay the principal of, and
interest on, the Term Loan made by First Union shall be evidenced by a
promissory note duly executed and delivered by the Borrower to First
Union substantially in the form of Exhibit B-2, with blanks
appropriately completed in conformity herewith (the ATerm Note@). The
Term Note shall (i) be executed by the Borrower, (ii) be payable to
First Union or its registered assigns and be dated the Restatement
Effective Date (or, if issued after the Restatement Effective Date, be
dated the date of the issuance thereof), (iii) be in an original
principal amount of $5,000,000, (iv) mature on the Term Loan Maturity
Date, (v) bear interest as provided in such Term Note, (vi) be subject
to voluntary prepayment as provided in Section 4.01(b), and (vii) be
entitled to the benefits of this Agreement and the other Credit
Documents to the extent set forth therein.
32 Each Bank will note on its internal records the amount of each Loan
made by it and each payment in respect of each Loan and will prior to
any transfer of any of its Notes, endorse on the reverse side thereof
the outstanding principal amount of the Loans evidenced thereby.
Failure to make any such notation or any error in such notation shall
not affect the Borrower=s obligations in respect of such Loans.
33 Conversions. The Borrower shall have the option to convert, on any
Business Day, all or a portion equal to at least the Minimum Borrowing
Amount of the outstanding principal amount of Loans made pursuant to
one or more Borrowings of one or more Types of Loans into a Borrowing
of another Type of Loan, provided that, (i) except as otherwise
provided in Section 1.10(b), Eurodollar Loans may be converted into
Base Rate Loans only on the last day of an Interest Period applicable
to the Loans being converted and no such partial conversion of
Eurodollar Loans shall reduce the outstanding principal amount of such
Eurodollar Loans made pursuant to a single Borrowing to less than the
Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may
be converted into Eurodollar Loans only if no Default or Event of
Default is in existence on the date of the conversion and (iii) no
conversion pursuant to this Section 1.06 shall result in a greater
number of Borrowings of Eurodollar Loans than is permitted under
Section 1.02. Each such conversion shall be effected by the Borrower by
giving the Agent at the Notice Office prior to 11:00 a.m. (Philadelphia
time) at least three Business Days= prior notice (each a ANotice of
Conversion@) specifying the Loans to be so converted, the Borrowing or
Borrowings pursuant to which such Loans were made and, if to be
converted into Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Agent shall give each Bank prompt notice of any
such proposed conversion affecting any of its Loans. Upon any such
conversion the proceeds thereof will be deemed to be applied directly
on the day of such conversion to prepay the outstanding principal
amount of the Loans being converted.
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34 Percentages. All Borrowings under this Agreement shall be incurred from
the Banks based on their Percentages. It is understood that no Bank
shall be responsible for any default by any other Bank of its
obligation to make Revolving Loans hereunder and that each Bank shall
be obligated to make the Revolving Loans provided to be made by it
hereunder, regardless of the failure of any other Bank to make its
Revolving Loans hereunder.
35 Interest. (a) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Base Rate Loan from the date of
Borrowing thereof until the earlier of (i) the maturity thereof
(whether by acceleration or otherwise) and (ii) the conversion of such
Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06 or 1.09,
as applicable, at a rate per annum which shall be equal to the sum of
the Applicable Margin plus the Base Rate in effect from time to time.
36 The Borrower agrees to pay interest in respect of the unpaid principal
amount of each Eurodollar Loan from the date of Borrowing thereof until
the earlier of (i) the maturity thereof (whether by acceleration or
otherwise) and (ii) the conversion of such Eurodollar Loan to a Base
Rate Loan pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a
rate per annum which shall, during each Interest Period applicable
thereto, be equal to the sum of the Applicable Margin plus the
Eurodollar Rate for such Interest Period.
37 Overdue principal and, to the extent permitted by law, overdue interest
in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to the
rate which is 2% per annum in excess of the rate then borne by such
Loans, in each case, with such interest to be payable on demand.
38 Accrued (and theretofore unpaid) interest shall be payable (i) in
respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on the last day
of each Interest Period applicable thereto and, in the case of an
Interest Period in excess of three months, on each date occurring at
three month intervals after the first day of such Interest Period and
(iii) in respect of each Revolving Loan, on any repayment or prepayment
(on the amount repaid or prepaid), at maturity (whether by acceleration
or otherwise) and, after such maturity, on demand.
39 Upon each Interest Determination Date, the Agent shall determine the
Eurodollar Rate for each Interest Period applicable to Eurodollar Loans
and shall promptly notify the Borrower and the Banks thereof. Each such
determination shall, absent manifest error, be final and conclusive and
binding on all parties hereto.
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40 Interest Periods. At the time the Borrower gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or
conversion into, any Eurodollar Loan (in the case of the initial
Interest Period applicable thereto) or on the third Business Day prior
to the expiration of an Interest Period applicable to such Eurodollar
Loan (in the case of any subsequent Interest Period), the Borrower
shall have the right to elect, by giving the Agent notice thereof, the
interest period (each an AInterest Period@) applicable to such
Eurodollar Loan, which Interest Period shall, at the option of the
Borrower, be a one, two, three or six-month period, provided that:
41 all Eurodollar Loans comprising a Borrowing shall at all times have the
same Interest Period;
42 the initial Interest Period for any Eurodollar Loan shall commence on
the date of Borrowing of such Eurodollar Loan (including the date of
any conversion thereto from a Base Rate Loan) and each Interest Period
occurring thereafter in respect of such Eurodollar Loan shall commence
on the day on which the next preceding Interest Period applicable
thereto expires;
43 if any Interest Period for a Eurodollar Loan begins on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
44 if any Interest Period for a Eurodollar Loan would otherwise expire on
a day which is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day; provided, however, that if any
Interest Period for a Eurodollar Loan would otherwise expire on a day
which is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
45 no Interest Period may be selected at any time when a Default or an Event
of Default is then in existence; and
46 no Interest Period in respect of any Borrowing of any Eurodollar Loan shall
be selected which extends beyond the Final Maturity Date.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such Eurodollar Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.
47 Increased Costs, Illegality, etc. (a) In the event that any Bank shall
have determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto but, with
respect to clause (i) below, may be made only by the Agent):
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48 on any Interest Determination Date that, by reason of any changes
arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in
the definition of Eurodollar Rate; or
49 at any time, that such Bank shall incur increased costs or reductions
in the amounts received or receivable hereunder with respect to any
Eurodollar Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation,
order, guideline or request (whether or not having the force of law) or
in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, order,
guideline or request, such as, for example, but not limited to: (A) a
change in the basis of taxation of payment to any Bank of the principal
of or interest on the Revolving Notes or any other amounts payable
hereunder (except for changes in the rate of tax on, or determined by
reference to, the net income or profits of such Bank pursuant to the
laws of the jurisdiction in which it is organized or in which its
principal office or applicable lending office is located or any
subdivision thereof or therein) or (B) a change in official reserve
requirements, but, in all events, excluding reserves required under
Regulation D to the extent included in the computation of the
Eurodollar Rate and/or (y) other circumstances since the date of this
Agreement affecting the interbank Eurodollar market; or
50 at any time, that the making or continuance of any Eurodollar Loan has
been made (x) unlawful by any law or governmental rule, regulation or
order, (y) impossible by compliance by any Bank in good faith with any
governmental request (whether or not having force of law) or (z)
impracticable as a result of a contingency occurring after the date of
this Agreement which materially and adversely affects the interbank
Eurodollar market;
then, and in any such event, such Bank (or the Agent, in the case of clause (i)
above) shall promptly give notice (by telephone promptly confirmed in writing)
to the Borrower and, except in the case of clause (i) above, to the Agent of
such determination (which notice the Agent shall promptly transmit to each of
the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar
Loans shall no longer be available until such time as the Agent notifies the
Borrower and the Banks that the circumstances giving rise to such notice by the
Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given
by the Borrower with respect to Eurodollar Loans which have not yet been
incurred (including by way of conversion) shall be deemed rescinded by the
Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such
Bank, upon such Bank=s written request therefor, such additional amounts (in the
form of an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Bank, showing in reasonable detail the basis for the
calculation thereof, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding on all the parties hereto)
and (z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.10(b) as promptly as possible and, in any event,
within the time period required by law.
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51 At any time that any Eurodollar Loan is affected by the circumstances
described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the
case of a Eurodollar Loan affected by the circumstances described in
Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan
is then being made initially or pursuant to a conversion, by giving the
Agent telephonic notice (confirmed in writing) on the same date that
the Borrower was notified by the affected Bank or the Agent pursuant to
Section 1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is
then outstanding, upon at least three Business Days= written notice to
the Agent, require the affected Bank to convert such Eurodollar Loan
into a Base Rate Loan, provided that, if more than one Bank is affected
at any time, then all affected Banks must be treated the same pursuant
to this Section 1.10(b).
52 If any Bank determines that after the date of this Agreement the
introduction of or any change in any applicable law or governmental
rule, regulation, order, guideline, directive or request (whether or
not having the force of law) concerning capital adequacy, or any change
in interpretation or administration thereof by any governmental
authority, central bank or comparable agency, will have the effect of
increasing the amount of capital required or expected to be maintained
by such Bank or any corporation controlling such Bank based on the
existence of such Bank=s Commitment hereunder or its obligations
hereunder, then the Borrower shall pay to such Bank, upon its written
demand therefor, such additional amounts as shall be required to
compensate such Bank or such other corporation for the increased cost
to such Bank or such other corporation or the reduction in the rate of
return to such Bank or such other corporation as a result of such
increase of capital. In determining such additional amounts, each Bank
will act reasonably and in good faith and will use averaging and
attribution methods which are reasonable, provided that such Bank=s
determination of compensation owing under this Section 1.10(c) shall,
absent manifest error, be final and conclusive and binding on all the
parties hereto. Each Bank, upon determining that any additional amounts
will be payable pursuant to this Section 1.10(c), will give prompt
written notice thereof to the Borrower, which notice shall show in
reasonable detail the basis for calculation of such additional amounts.
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53 Compensation. The Borrower shall compensate each Bank, upon its written
request (which request shall set forth in reasonable detail the basis
for requesting such compensation), for all reasonable losses, expenses
and liabilities (including, without limitation, any loss, expense or
liability incurred by reason of the liquidation or reemployment of
deposits or other funds required by such Bank to fund its Eurodollar
Loans but excluding loss of anticipated profits which such Bank may
sustain: (i) if for any reason (other than a default by such Bank or
the Agent) a Borrowing of, or conversion from or into, Eurodollar Loans
does not occur on a date specified therefor in a Notice of Borrowing or
Notice of Conversion (whether or not withdrawn by the Borrower or
deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment
(including any repayment made pursuant to Section 4.01, 4.02 or as a
result of an acceleration of the Loans pursuant to Section 9) or
conversion of any of its Eurodollar Loans occurs on a date which is not
the last day of an Interest Period with respect thereto; (iii) if any
prepayment of any of its Eurodollar Loans is not made on any date
specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of (x) any other default by the Borrower to repay its Loans
when required by the terms of this Agreement or the Note held by such
Bank or (y) any election made pursuant to Section 1.10(b).
54 Change of Lending Office. Each Bank agrees that on the occurrence of
any event giving rise to the operation of Section 1.10(a)(ii) or (iii),
Section 1.10(c), Section 2.06 or Section 4.04 with respect to such
Bank, it will, if requested by the Borrower, use reasonable efforts
(subject to overall policy considerations of such Bank) to designate
another lending office for any Loans or Letters of Credit affected by
such event, provided that such designation is made on such terms that
such Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of
the event giving rise to the operation of such Section. Nothing in this
Section 1.12 shall affect or postpone any of the obligations of the
Borrower or the right of any Bank provided in Sections 1.10, 2.06 and
4.04.
55 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank or
otherwise defaults in its obligations to make Revolving Loans or fund
Unpaid Drawings, (y) upon the occurrence of an event giving rise to the
operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section
2.06 or Section 4.04 with respect to any Bank which results in such
Bank charging to the Borrower increased costs in excess of those being
generally charged by the other Banks or (z) in the case of a refusal by
a Bank to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by
the Required Banks as (and to the extent) provided in Section 12.12(b),
the Borrower shall have the right, if no Default or Event of Default
then exists (or, in the case of preceding clause (z), no Default or
Event of Default will exist immediately after giving effect to such
replacement), to replace such Bank (the AReplaced Bank@) with one or
more other Eligible Transferees, none of whom shall constitute a
Defaulting Bank at the time of such replacement (collectively, the
AReplacement Bank@) and each of whom shall be required to be reasonably
acceptable to the Agent, provided that (i) at the time of any
replacement pursuant to this Section 1.13, the Replacement Bank shall
enter into one or more Assignment and Assumption Agreements pursuant to
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Section 12.04(b) (and with all fees payable pursuant to said Section
12.04(b) to be paid by the Replacement Bank) pursuant to which the
Replacement Bank shall acquire the entire Commitment and all
outstanding Loans of, and, in each case, participations in Letters of
Credit by, the Replaced Bank and, in connection therewith, shall pay to
(x) the Replaced Bank in respect thereof an amount equal to the sum of
(I) an amount equal to the principal of, and all accrued interest on,
all outstanding Loans of the Replaced Bank, (II) an amount equal to all
Unpaid Drawings that have been funded by (and not reimbursed to) such
Replaced Bank, together with all then unpaid interest with respect
thereto at such time and (III) an amount equal to all accrued, but
theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section
3.01 and (y) each Issuing Bank an amount equal to such Replaced Bank=s
Percentage of any Unpaid Drawing (which at such time remains an Unpaid
Drawing) to the extent such amount was not theretofore funded by such
Replaced Bank to such Issuing Bank and (ii) all obligations of the
Borrower due and owing to the Replaced Bank at such time (other than
those specifically described in clause (i) above in respect of which
the assignment purchase price has been, or is concurrently being, paid)
shall be paid in full to such Replaced Bank concurrently with such
replacement. Upon the execution of the respective Assignment and
Assumption Agreement, the payment of amounts referred to in clauses (i)
and (ii) above and, if so requested by the Replacement Bank, delivery
to the Replacement Bank of the appropriate Notes executed by the
Borrower, the Replacement Bank shall become a Bank hereunder and the
Replaced Bank shall cease to constitute a Bank hereunder, except with
respect to indemnification provisions under this Agreement (including,
without limitation, Sections 1.10, 1.11, 2.06, 4.04, 11.06 and 12.01),
which shall survive as to such Replaced Bank. It is understood and
agreed that replacements pursuant to this Section 1.13 shall be
effected by means of assignments which otherwise meet the applicable
requirements of Section 12.04(b).
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Letters of Credit.
56 Letters of Credit. (a) Subject to and upon the terms and conditions set
forth herein, the Borrower may request that the Issuing Bank issue, at
any time and from time to time on and after the Restatement Effective
Date and prior to the Final Maturity Date, for the account of the
Borrower and for the benefit of any holder (or any trustee, agent or
other similar representative for any such holders) of L/C Supportable
Obligations of the Borrower or any of its Subsidiaries, an irrevocable
standby letter of credit, in a form customarily used by the Issuing
Bank or in the other form as has been approved by the Issuing Bank
(each such standby letter of credit, a ALetter of Credit@) in support
of such L/C Supportable Obligations. It is hereby acknowledged and
agreed that each of the letters of credit described in Schedule III
(the AExisting Letters of Credit@) which were issued by Bankers Trust
as the Issuing Bank under the Original Credit Agreement for the account
of the Borrower prior to the Restatement Effective Date and which
remain outstanding on the Restatement Effective Date shall, after
completion of a Letter of Credit Request (as defined in Section 2.03)
be substituted with a Letter of Credit from Agent as the Issuing Bank
and shall constitute a ALetter of Credit@ for all purposes of this
Agreement and shall be deemed issued for purposes of Sections 2.04(a),
3.01(b) and 3.01(c) on the Restatement Effective Date. All Letters of
Credit shall be denominated in Dollars and shall be issued on a sight
basis only.
57 Subject to and upon the terms and conditions set forth herein, the
Issuing Bank hereby agrees that it will, at any time and from time to
time on and after the Restatement Effective Date and prior to the Final
Maturity Date, following its receipt of the respective Letter of Credit
Request, issue for the account of the Borrower, one or more Letters of
Credit in support of such L/C Supportable Obligations of the Borrower
or any of its Subsidiaries as are permitted to remain outstanding
without giving rise to a Default or an Event of Default, provided that
the Issuing Bank shall be under no obligation to issue any Letter of
Credit of the types described above if at the time of such issuance:
58 any order, judgment or decree of any governmental authority (including
any Commission) or arbitrator shall purport by its terms to enjoin or
restrain the Issuing Bank from issuing the Letter of Credit or any
requirement of law applicable to the Issuing Bank or any request or
directive (whether or not having the force of law) from any
governmental authority (including any Commission) with jurisdiction
over the Issuing Bank shall prohibit, or request that the Issuing Bank
refrain from, the issuance of letters of credit generally or the Letter
of Credit in particular or shall impose upon the Issuing Bank with
respect to the Letter of Credit any restriction or reserve or capital
requirement (for which the Issuing Bank is not otherwise compensated)
not in effect on the date hereof, or any unreimbursed loss, cost or
expense which was not applicable or in effect with respect to the
Issuing Bank as of the date hereof and which the Issuing Bank
reasonably and in good faith deems material to it; or
59 the Issuing Bank shall have received notice from the Required Banks
prior to the issuance of such Letter of Credit of the type described in
the second sentence of Section 2.03(b).
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60 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)
$3,000,000 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.
61 Letter of Credit Requests; Minimum Stated Amount. (a) Whenever the
Borrower desires that a Letter of Credit be issued for its account, the
Borrower shall give the Agent and the Issuing Bank at least five
Business Days= (or such shorter period as is acceptable to the Issuing
Bank) written notice thereof. Each notice shall be in the form of
Exhibit C (each a ALetter of Credit Request@). The Agent shall promptly
transmit copies of each Letter of Credit Request to each Bank.
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62 The making of each Letter of Credit Request shall be deemed to be a
representation and warranty by the Borrower that such Letter of Credit
may be issued in accordance with, and will not violate the requirements
of, Section 2.02. Unless the Issuing Bank has received notice from the
Required Banks before it issues a Letter of Credit that one or more of
the conditions specified in Section 5 are not then satisfied, or that
the issuance of such Letter of Credit would violate Section 2.02, then
the Issuing Bank shall, subject to the terms and conditions of this
Agreement, issue the requested Letter of Credit for the account of the
Borrower in accordance with the Issuing Bank=s usual and customary
practices. Upon its issuance of or amendment or modification to any
Letter of Credit, the Issuing Bank shall promptly notify the Borrower,
each Participant and the Agent of such issuance, amendment or
modification and such notification shall be accompanied by a copy of
the issued Letter of Credit or amendment or modification.
Notwithstanding anything to the contrary contained in this Agreement,
in the event that a Bank Default exists, the Issuing Bank shall not be
required to issue any Letter of Credit unless the Issuing Bank has
entered into an arrangement satisfactory to it and the Borrower to
eliminate the Issuing Bank=s risk with respect the participation in
Letters of Credit by the Defaulting Bank or Banks, including by cash
collateralizing such Defaulting Bank=s or Banks= Percentage of the
Letter of Credit Outstanding.
63 The initial Stated Amount of each Letter of Credit shall not be less than
$50,000 or such lesser amount as is acceptable to the Issuing Bank.
64 Letter of Credit Participations. (a) Immediately upon the issuance by
the Issuing Bank of any Letter of Credit, the Issuing Bank shall be
deemed to have sold and transferred to each Bank, other than the
Issuing Bank (each such Bank, in its capacity under this Section 2.04,
a AParticipant@), and each such Participant shall be deemed irrevocably
and unconditionally to have purchased and received from the Issuing
Bank, without recourse or warranty, an undivided interest and
participation, to the extent of such Participant=s Percentage, in such
Letter of Credit, each drawing or payment made thereunder and the
obligations of the Borrower under this Agreement with respect thereto,
and any security therefor or guaranty pertaining thereto. Upon any
change in the Commitments or Percentages of the Banks pursuant to
Section 1.13 or 12.04, it is hereby agreed that, with respect to all
outstanding Letters of Credit and Unpaid Drawings, there shall be an
automatic adjustment to the participations pursuant to this Section
2.04 to reflect the new Percentages of the assignor and assignee Bank,
as the case may be.
65 In determining whether to pay under any Letter of Credit, the Issuing
Bank shall not have an obligation relative to the other Banks other
than to confirm that any documents required to be delivered under such
Letter of Credit appear to have been delivered and that they appear to
substantially comply on their face with the requirements of such Letter
of Credit. Any action taken or omitted to be taken by the Issuing Bank
under or in connection with any Letter of Credit if taken or omitted in
the absence of gross negligence or willful misconduct, shall not create
for the Issuing Bank any resulting liability to the Borrower, any other
Credit Party, any Bank or any other Person.
66 In the event that the Issuing Bank makes any payment under any Letter
of Credit and the Borrower shall not have reimbursed such amount in
full to the Issuing Bank pursuant to Section 2.05(a), the Issuing Bank
shall promptly notify the Agent, which shall promptly notify each
Participant of such failure, and each Participant shall promptly and
unconditionally pay to the Issuing Bank the amount of such
Participant=s Percentage of such unreimbursed payment in Dollars and in
same day funds. If the Agent so notifies, prior to 11:00 a.m.
(Philadelphia time) on any Business Day, any Participant required to
fund a payment under a Letter of Credit, such Participant shall make
available to the Issuing Bank in Dollars such Participant=s Percentage
of the amount of such payment on such Business Day in same day funds.
If and to the extent such Participant shall not have so made its
Percentage of the amount of such payment available to the Issuing Bank,
such Participant agrees to pay to the Issuing Bank, forthwith on demand
such amount, together with interest thereon, for each day from such
date until the date such amount is paid to the Issuing Bank at the
overnight Federal Funds Rate for the first three days and at the
interest rate applicable Base Rate Loans for each day thereafter. The
failure of any Participant to make available to the Issuing Bank its
Percentage of any payment under any Letter of Credit shall not relieve
any other Participant of its obligation hereunder to make available to
the Issuing Bank its Percentage of any Letter of Credit on the date
required, as specified above, but no Participant shall be responsible
for the failure of any other Participant to make available to the
Issuing Bank such other Participant=s Percentage of any such payment.
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67 Whenever the Issuing Bank receives a payment of a reimbursement
obligation as to which it has received any payments from the
Participants pursuant to clause (c) above, the Issuing Bank shall pay
to each Participant which has paid its Percentage thereof, in Dollars
and in same day funds, an amount equal to such Participant=s share
(based upon the proportionate aggregate amount originally funded by
such Participant to the aggregate amount funded by all Participants) of
the principal amount of such reimbursement obligation and interest
thereon accruing after the purchase of the respective participations.
68 Upon the request of any Participant, the Issuing Bank shall furnish to
such Participant copies of any Letter of Credit issued by it and such
other documentation as may reasonably be requested by such Participant.
69 The obligations of the Participants to make payments to the Issuing
Bank with respect to Letters of Credit issued by it shall be
irrevocable and not subject to any qualification or exception
whatsoever and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:
70 any lack of validity or enforceability of this Agreement or any of the
other Credit Documents;
71 the existence of any claim, setoff, defense or other right which the
Borrower or any of its Subsidiaries may have at any time against a
beneficiary named in a Letter of Credit, any transferee of any Letter
of Credit (or any Person for whom any such transferee may be acting),
the Agent, any Participant, or any other Person, whether in connection
with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transaction between the Borrower or any Subsidiary of the
Borrower and the beneficiary named in any such Letter of Credit);
72 any draft, certificate or any other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect;
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73 the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Credit Documents; or
74 the occurrence of any Default or Event of Default.
75 Agreement to Repay Letter of Credit Drawings. (a) The Borrower hereby
agrees to reimburse the Issuing Bank, by making payment to the Agent in
immediately available funds at the Payment Office, for any payment or
disbursement made by the Issuing Bank under any Letter of Credit issued
by it (each such amount, so paid until reimbursed, an AUnpaid
Drawing@), not later than two Business Days following receipt by the
Borrower of notice of such payment or disbursement (provided that no
such notice shall be required to be given if a Default or an Event of
Default under Section 9.05 shall have occurred and be continuing, in
which case the Unpaid Drawing shall be due and payable immediately
without presentment, demand, protest or notice of any kind (all of
which are hereby waived by the Borrower)), with interest on the amount
so paid or disbursed by the Issuing Bank, to the extent not reimbursed
prior to 12:00 Noon (Philadelphia time) on the date of such payment or
disbursement, from and including the date paid or disbursed to but
excluding the date the Issuing Bank was reimbursed by the Borrower
therefor at a rate per annum which shall be the Base Rate in effect
from time to time plus the Applicable Margin for Base Rate Loans;
provided, however, to the extent such amounts are not reimbursed prior
to 12:00 Noon (Philadelphia time) on the third Business Day following
the receipt by the Borrower of notice of such payment or disbursement
or following the occurrence of a Default or an Event of Default under
Section 9.05, interest shall thereafter accrue on the amounts so paid
or disbursed by such Issuing Bank (and until reimbursed by the
Borrower) at a rate per annum which shall be the Base Rate in effect
from time to time plus the Applicable Margin for Base Rate Loans plus
2%, in each such case, with interest to be payable on demand. The
Issuing Bank shall give the Borrower prompt written notice of each
Drawing under any Letter of Credit, provided that the failure to give
any such notice shall in no way affect, impair or diminish the
Borrower=s obligations hereunder.
76 The obligations of the Borrower under this Section 2.05 to reimburse
the Issuing Bank with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against any
Bank (including in its capacity as issuer of the Letter of Credit or as
Participant), including, without limitation, any defense based upon the
failure of any drawing under a Letter of Credit (each a ADrawing@) to
conform to the terms of the Letter of Credit or any nonapplication or
misapplication by the beneficiary of the proceeds of such Drawing;
provided, however, that the Borrower shall not be obligated to
reimburse the Issuing Bank for any wrongful payment made by the Issuing
Bank under a Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of the
Issuing Bank.
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77 Increased Costs. If at any time after the date of this Agreement, the
introduction of or any change in any applicable law, rule, regulation,
order, guideline or request or in the interpretation or administration
thereof by any governmental authority (including any Commission)
charged with the interpretation or administration thereof, or
compliance by the Issuing Bank or any Participant with any request or
directive by any such authority (whether or not having the force of
law), shall either (i) impose, modify or make applicable any reserve,
deposit, capital adequacy or similar requirement against letters of
credit issued by the Issuing Bank or participated in by any
Participant, or (ii) impose on the Issuing Bank or any Participant any
other conditions relating, directly or indirectly, to this Agreement;
and the result of any of the foregoing is to increase the cost to the
Issuing Bank or any Participant of issuing, maintaining or
participating in any Letter of Credit, or reduce the amount of any sum
received or receivable by the Issuing Bank or any Participant hereunder
or reduce the rate of return on its capital with respect to Letters of
Credit (except for changes in the rate of tax on, or determined by
reference to, the net income or profits of the Issuing Bank or such
Participant pursuant to the laws of the jurisdiction in which it is
organized or in which its principal office or applicable lending office
is located or any subdivision thereof or therein), then, upon the
delivery of the certificate referred to below to the Borrower by the
Issuing Bank or any Participant (a copy of which certificate shall be
sent by the Issuing Bank or such Participant to the Agent), the
Borrower shall pay to the Issuing Bank or such Participant such
additional amount or amounts as will compensate such Bank for such
increased cost or reduction in the amount receivable or reduction on
the rate of return on its capital. The Issuing Bank or any Participant,
upon determining that any additional amounts will be payable pursuant
to this Section 2.06, will give prompt written notice thereof to the
Borrower, which notice shall include a certificate submitted to the
Borrower by the Issuing Bank or such Participant (a copy of which
certificate shall be sent by the Issuing Bank or such Participant to
the Agent), setting forth in reasonable detail the basis for the
calculation of such additional amount or amounts necessary to
compensate the Issuing Bank or such Participant. The certificate
required to be delivered pursuant to his Section 2.06 shall, absent
manifest error, be final and conclusive and binding on the Borrower.
Commitment Commission; Fees; Reductions of Commitment.
78 Fees. (a) The Borrower agrees to pay to the Agent for distribution to
each Non-Defaulting Bank a commitment commission (the ACommitment
Commission@) for the period from and including the Restatement
Effective Date to but excluding the Final Maturity Date (or such
earlier date as the Total Commitment shall have been terminated),
computed at a rate for each day equal to the appropriate percentage set
forth under the column titled ACommitment Fee@ on Exhibit M hereto, of
the daily average Unutilized Commitment of such Non-Defaulting Bank.
Accrued Commitment Commission shall be due and payable quarterly in
arrears on each Quarterly Payment Date and on the Final Maturity Date
or such earlier date upon which the Total Commitment is terminated.
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79 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 ALetter 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 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.
80 The Borrower agrees to pay to the Issuing Bank, for its own account, a
facing fee in respect of each Letter of Credit issued by it (the
AFacing Fee@), for the period from and including the date of issuance
of such Letter of Credit to and including the date of the termination
of such Letter of Credit, computed at a rate equal to 1/8 of 1% per
annum of the daily Stated Amount of such Letter of Credit. Accrued
Facing Fees shall be due and payable quarterly in arrears on each
Quarterly Payment Date and upon the first day after the termination of
the Total Commitment upon which no Letters of Credit remain
outstanding.
81 The Borrower agrees to pay to the Issuing Bank, upon each payment
under, issuance of, or amendment to, any Letter of Credit, such amount
as shall at the time of such event be the administrative charge and the
reasonable expenses which the Issuing Bank is generally imposing in
connection with such occurrence with respect to letters of credit.
82 The Borrower agrees to pay to the Agent, for its own account, such other
fees as have been agreed to in writing by the Borrower and the Agent.
83 Voluntary Termination of Unutilized Commitments. (a) Upon at least
three Business Days= prior written notice to the Agent at the Notice
Office (which notice the Agent shall promptly transmit to each of the
Banks), the Borrower shall have the right, at any time or from time to
time, without premium or penalty, (i) to terminate the Total Unutilized
Commitment, in whole or in part, pursuant to this Section 3.02(a), in
an integral multiple of $1,000,000, in the case of partial reductions
to the Total Unutilized Commitment, provided that each such reduction
shall apply proportionately to permanently reduce the Commitment of
each Bank.
84 In the event of a refusal by a Bank to consent to certain proposed
changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as (and to the
extent) provided in Section 12.12(b), the Borrower may, subject to its
compliance with the requirements of Section 12.12(b), upon five
Business Days= prior written notice to the Agent at the Notice Office
(which notice the Agent shall promptly transmit to each of the Banks)
terminate the entire Commitment of such Bank, so long as all Loans,
together with accrued and unpaid interest, Fees and all other amounts,
owing to such Bank are repaid concurrently with the effectiveness of
such termination pursuant to Section 4.01(b) (at which time Schedule I
shall be deemed modified to reflect such changed amounts), and at such
time, such Bank shall no longer constitute a ABank@ for purposes of
this Agreement, except with respect to indemnifications under this
Agreement (including, without limitation, Sections 1.10, 1.11, 2.06,
4.04, 11.06 and 12.01), which shall survive as to such repaid Bank.
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85 Certain Mandatory Prepayments. (a) The Total Commitment (and the
Commitment of each Bank) shall terminate in its entirety on the earlier
of (i) the date on which a Change of Control occurs; (ii) the Final
Maturity Date; and (iii) the date on which the Agent terminates the
Total Commitment pursuant to the last paragraph of Section 9 hereof.
86 In addition to any other mandatory prepayments pursuant to this Section
3.03, on each date on or after the Restatement Effective Date upon
which the Borrower or any Credit Party receives any cash proceeds from
any incurrence by the Borrower or any Credit Party of Indebtedness for
borrowed money (other than Indebtedness for borrowed money permitted to
be incurred pursuant to Section 8.04 (Indebtedness) as such Section is
in effect on the Restatement Effective Date), the Borrower shall prepay
the Loans on such date by an amount equal to 100% of the Net Debt
Proceeds of the respective incurrence of Indebtedness, such prepayment
to be applied pursuant to the terms of Section 3.03(e) hereof.
87 In addition to any other mandatory prepayments pursuant to this Section
3.03, on each date on or after the Restatement Effective Date upon
which the Borrower or any Credit Party receives cash proceeds from any
Asset Sale, the Borrower shall prepay the Loans on such date by an
amount equal to 100% of the Net Sale Proceeds of such Asset Sale, such
prepayment to be applied pursuant to the terms of Section 3.03(e)
hereof; provided that no prepayment shall be required pursuant to this
Section 3.03(c) so long as no Default or Event of Default then exists
and the Borrower delivers a certificate to the Agent on or prior to
such date stating that such Net Sale Proceeds shall be used to purchase
replacement assets within 270 days following the date of such Asset
Sale (which certificate shall set forth the estimates of the proceeds
to be so expended), and provided further, that if all or any portion of
such Net Sale Proceeds not giving rise to a mandatory prepayment are
not so reinvested in replacement assets within such 270 day period,
such remaining portion shall give rise to a mandatory prepayment on the
last day of such period as set forth above in this Section 3.03(c).
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88 In addition to any other mandatory prepayments pursuant to this Section
3.03, within 10 days following each date on or after the Restatement
Effective Date upon which the Borrower or any Credit Party receives any
cash proceeds from any Recovery Event, the Borrower shall prepay the
Loans on such 10th day by an amount equal to 100% of the Net Insurance
Proceeds of such Recovery Event, such prepayment to be applied pursuant
to the terms of Section 3.03(e) hereof, provided that so long as no
Default or Event of Default then exists and such proceeds do not exceed
$10,000,000, no mandatory prepayment shall be required pursuant to this
Section 3.03(d) to the extent that the Borrower has delivered a
certificate to the Agent on or prior to such date stating that such
proceeds shall be used to replace or restore any properties or assets
in respect of which such proceeds were paid within 270 days following
the date of the receipt of such proceeds (which certificate shall set
forth the estimates of the proceeds to be so expended), and provided
further, that (i) if the amount of such proceeds exceeds $10,000,000,
then the Borrower shall make a mandatory prepayment equal to the entire
amount and not just the portion in excess of $10,000,000 and (ii) if
all or any portion of such proceeds not giving rise to a mandatory
prepayment pursuant to the preceding proviso are not so used within 270
days after the date of the receipt of such proceeds, such remaining
portion shall give rise to a mandatory prepayment on the last day of
such period as set forth above in this Section 3.03(d).
89 In the absence of a Default or an Event of Default, Borrower shall
allocate each mandatory prepayment pursuant to this Section 3.03
between the following options: (i) to prepay amounts outstanding under
the Term Loan, including principal, interest on such payment to the
date of prepayment, any associated funding losses as calculated
pursuant to Exhibit D attached hereto and other fees, and (ii) to
prepay amounts outstanding under the Revolving Loans, including
principal, interest on such payment to the date of prepayment, any
associated funding losses as calculated pursuant to Exhibit D attached
hereto and other fees, such prepayment to be shared among the Banks
pursuant to each Bank=s Percentage. During the continuance of a Default
or an Event of Default, such allocation shall be applied pro rata
between the Revolving Loans and the Term Loan. Prepayments of the
Revolving Loan shall not reduce the Total Commitment and may be
reborrowed in accordance with the terms hereof.
Prepayments; Payments; Taxes.
90 Voluntary Prepayments. (a) The Borrower shall have the right to prepay
the Loans, without premium or penalty, in whole or in part at any time
and from time to time (and, in the absence of a Default or Event of
Default, Borrower may determine the allocation of such payments between
the Term Loan and the Revolving Loans) on the following terms and
conditions: (i) the Borrower shall give the Agent prior to 12:00 noon
(Philadelphia time) at the Notice Office (x) at least one Business
Day=s prior written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay Base Rate Loans and (y) at least three
Business Days= prior written notice (or telephonic notice promptly
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confirmed in writing) of its intent to prepay Eurodollar Loans, the
amount of such prepayment and the Types of Loans to be prepaid and, in
the case of Eurodollar Loans, the specific Borrowing or Borrowings
pursuant to which made, which notice the Agent shall promptly transmit
to each of the Banks; (ii) each prepayment shall be in an aggregate
principal amount of at least $500,000 and, if greater, in an integral
multiple of $100,000, provided that if any partial prepayment of
Eurodollar Loans made pursuant to any Borrowing shall reduce the
outstanding principal amount of Eurodollar Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount
applicable thereto, then such Borrowing may not be continued as a
Borrowing of Eurodollar Loans, and any election of an Interest Period
with respect thereto given by the Borrower shall have no force or
effect; (iii) prepayments of Eurodollar Loans made pursuant to this
Section 4.01(a) other than on the last day of an Interest Period
applicable thereto shall be accompanied by payment of associated
funding losses as calculated pursuant to Exhibit D hereto; (iv)
prepayments of Revolving Loans shall not reduce the Total Commitment
and may be reborrowed in accordance with the terms hereof; and (v) each
prepayment in respect of any Loans made pursuant to a Borrowing shall
be applied pro rata among such Loans, provided that, at the Borrower=s
election, such prepayment shall not be applied to any Loan of a
Defaulting Bank.
(b) In the event of a refusal by a Bank to consent to certain proposed
changes, waivers, discharges or terminations with respect to this Agreement
which have been approved by the Required Banks as (and to the extent) provided
in Section 12.12(b), the Borrower may, upon five Business Days= prior written
notice to the Agent at the Notice Office (which notice the Agent shall promptly
transmit to each of the Banks) repay all Loans, together with accrued and unpaid
interest, Fees, and other amounts owing to such Bank in accordance with, and
subject to the requirements of, said Section 12.12(b) so long as (A) the entire
Commitment of such Bank is terminated concurrently with such repayment pursuant
to Section 3.02(b) (at which time Schedule I shall be deemed modified to reflect
the changed Commitments) and (B) the consents, if any, required by Section
12.12(b) in connection with the repayment pursuant to this clause (b) have been
obtained.
91 Additional Mandatory Repayments. (a) On any day on which the sum of the
aggregate outstanding principal amount of the Loans plus the Letter of
Credit Outstandings exceeds the Total Commitment as then in effect, the
Borrower shall prepay on such day the principal of Loans in an amount
equal to such excess. If, after giving effect to the prepayment of all
outstanding Loans, the aggregate amount of the Letter of Credit
Outstandings exceeds the Total Commitment as then in effect, the
Borrower shall pay to the Agent at the Payment Office on such day an
amount of cash or Cash Equivalents equal to the amount of such excess
(up to a maximum amount equal to the Letter of Credit Outstandings at
such time), such cash or Cash Equivalents to be held as security for
all obligations of the Borrower to the Issuing Banks and the Banks
hereunder in a cash collateral account to be established by the Agent.
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92 With respect to each repayment of Loans required by this Section 4.02,
the Borrower may designate the Types of Loans which are to be repaid
and, in the case of Eurodollar Loans, the specific Borrowing or
Borrowings pursuant to which made, provided that: (i) repayments of
Eurodollar Loans pursuant to this Section 4.02 may only be made on the
last day of an Interest Period applicable thereto unless (a) all
Eurodollar Loans with Interest Periods ending on such date of required
repayment and all Base Rate Loans have been paid in full or (b) such
repayment is accompanied by payment of funding losses calculated
pursuant to Exhibit D hereto; (ii) if any repayment of Eurodollar Loans
made pursuant to a single Borrowing shall reduce the outstanding
Eurodollar Loans made pursuant to such Borrowing to an amount less than
the Minimum Borrowing Amount applicable thereto, such Borrowing shall
be converted at the end of the then current Interest Period into a
Borrowing of Base Rate Loans; and (iii) each repayment of any Loans
made pursuant to a Borrowing shall be applied pro rata among such
Loans. In the absence of a designation by the Borrower as described in
the preceding sentence, the Agent shall, subject to the above, make
such designation in its sole discretion.
93 Notwithstanding anything to the contrary contained in this Agreement or
in any other Credit Document, all then outstanding Loans shall be
repaid in full on the earlier of (i) the date on which a Change of
Control occurs; (ii) the Final Maturity Date or Term Loan Maturity
Date, as applicable; and (iii) the date on which the Agent terminates
the Commitment pursuant to the last paragraph of Section 9 hereof.
94 Method and Place of Payment. Except as otherwise specifically provided
herein, all payments under this Agreement or under any Note shall be
made to the Agent for the account of the Bank or Banks entitled thereto
not later than 12:00 noon (Philadelphia time) on the date when due and
shall be made in Dollars in immediately available funds at the Payment
Office. Whenever any payment to be made hereunder or under any Note
shall be stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest shall be payable at the
applicable rate during such extension.
95 Net Payments. (a) All payments made by the Borrower hereunder or under
any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made
free and clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority
thereof or therein with respect to such payments (but excluding, except
as provided in the second succeeding sentence, any tax imposed on or
measured by the net income or profits of a Bank pursuant to the laws of
the jurisdiction in which it is organized or the jurisdiction in which
the principal office or applicable lending office of such Bank is
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located or any subdivision thereof or therein) and all interest,
penalties or similar liabilities with respect to such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges (all
such non-excluded taxes, levies, imposts, duties, fees, assessments or
other charges being referred to collectively as ATaxes@). If any Taxes
are so levied or imposed, the Borrower agrees to pay the full amount of
such Taxes, and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement or under any
Note, after withholding or deduction for or on account of any Taxes,
will not be less than the amount provided for herein or in such Note.
If any amounts are payable in respect of Taxes pursuant to the
preceding sentence, the Borrower agrees to reimburse each Bank, upon
the written request of such Bank, for taxes imposed on or measured by
the net income or profits of such Bank pursuant to the laws of the
jurisdiction in which such Bank is organized or in which the principal
office or applicable lending office of such Bank is located or under
the laws of any political subdivision or taxing authority of any such
jurisdiction in which such Bank is organized or in which the principal
office or applicable lending office of such Bank is located and for any
withholding of taxes as such Bank shall determine are payable by, or
withheld from, such Bank, in respect of such amounts so paid to or on
behalf of such Bank pursuant to the preceding sentence and in respect
of any amounts paid to or on behalf of such Bank pursuant to this
sentence. The Borrower will furnish to the Agent within 45 days after
the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the
Borrower. The Borrower agrees to indemnify and hold harmless each Bank,
and reimburse such Bank upon its written request, for the amount of any
Taxes so levied or imposed and paid by such Bank.
96 Each Bank that is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes agrees to deliver to the Borrower and the Agent on or prior to
the Restatement Effective Date, or in the case of a Bank that is an
assignee or transferee of an interest under this Agreement pursuant to
Section 1.13 or 12.04 (unless the respective Bank was already a Bank
hereunder immediately prior to such assignment or transfer), on the
date of such assignment or transfer to such Bank, (i) two accurate and
complete original signed copies of Internal Revenue Service Form 4224
or 1001 (or successor forms) certifying to such Bank=s entitlement to a
complete exemption from United States withholding tax with respect to
payments to be made under this Agreement and under any Note, or (ii) if
the Bank is not a Abank@ within the meaning of Section 881(c)(3)(A) of
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the Code and cannot deliver either Internal Revenue Service Form 1001
or 4224 (or successor forms) pursuant to clause (i) above, (x) a
certificate substantially in the form of Exhibit E (any such
certificate, a ASection 4.04(b)(ii) Certificate@) and (y) two accurate
and complete original signed copies of Internal Revenue Service Form
W-8 (or successor form) certifying to such Bank=s entitlement to a
complete exemption from United States withholding tax with respect to
payments of interest to be made under this Agreement and under any
Note. In addition, each Bank agrees that from time to time after the
Restatement Effective Date, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate
in any material respect, such Bank will deliver to the Borrower and the
Agent two new accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001 (or successor form), or Form W-8 (or
successor form) and a Section 4.04(b)(ii) Certificate, as the case may
be, and such other forms as may be required in order to confirm or
establish the entitlement of such Bank to a continued exemption from or
reduction in United States withholding tax with respect to payments
under this Agreement and any Note, or such Bank shall immediately
notify the Borrower and the Agent of its inability to deliver any such
Form or Certificate, in which case such Bank shall not be required to
deliver any such Form or Certificate pursuant to this Section 4.04(b).
Notwithstanding anything to the contrary contained in Section 4.04(a),
but subject to Section 12.04(b) and the immediately succeeding
sentence, (x) the Borrower shall be entitled, to the extent it is
required to do so by law, to deduct or withhold income or similar taxes
imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, Fees or other amounts
payable hereunder for the account of any Bank which is not a United
States person (as such term is defined in Section 7701(a)(30) of the
Code) for U.S. Federal income tax purposes to the extent that such Bank
has not provided to the Borrower U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding
and (y) the Borrower shall not be obligated pursuant to Section 4.04(a)
hereof to gross-up payments to be made to a Bank in respect of income
or similar taxes imposed by the United States if (I) such Bank has not
provided to the Borrower the Internal Revenue Service Forms required to
be provided to the Borrower pursuant to this Section 4.04(b) or (II) in
the case of a payment, other than interest, to a Bank described in
clause (ii) above, to the extent that such Forms do not establish a
complete exemption from withholding of such taxes. Notwithstanding
anything to the contrary contained in the preceding sentence or
elsewhere in this Section 4.04 and except as set forth in Section
12.04(b), the Borrower agrees to pay any additional amounts and to
indemnify each Bank in the manner set forth in Section 4.04(a) (without
regard to the identity of the jurisdiction requiring the deduction or
withholding) in respect of any Taxes deducted or withheld by it as
described in the immediately preceding sentence as a result of any
changes after the Restatement Effective Date in any applicable law,
treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of
such Taxes.
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Conditions Precedent. The occurrence of the Restatement Effective Date and the
obligation of each Bank to make Loans on and after the Restatement
Effective Date, and the obligation of the Issuing Bank to issue Letters
of Credit on and after the Restatement Effective Date, are subject at
the time of any such Credit Event to the satisfaction of any the
following conditions (to the extent applicable to such Credit Event):
97 Execution of the Agreement. On or prior to the Restatement Effective Date,
this Agreement shall have been executed and delivered in accordance with
Section 12.11.
98 Notes. On or prior to the Restatement Effective Date, there shall have
been delivered (i) to the Agent for the account of each of the Banks
the appropriate Revolving Note and (ii) to First Union, the Term Note,
executed by the Borrower, in the amounts, maturities and as otherwise
provided herein.
99 Officer=s Certificate. On the Restatement Effective Date, the Agent
shall have received a certificate, dated the Restatement Effective Date
and signed on behalf of the Borrower by the Chairman of the Board, the
President or any Vice President of the Borrower, stating that all of
the conditions in Sections 5.08, 5.09, 5.10 and 5.13 have been
satisfied on such date.
100 Opinions of Counsel. On the Restatement Effective Date, the Agent shall
have received from (i) Bowles, Rice McDavid, Graff & Love, PLLC, West
Virginia counsel to the Credit Parties, an opinion addressed to the
Agent and each of the Banks and dated the Restatement Effective Date,
covering the matters set forth in Exhibit F-1 and such other matters
incident to the transactions contemplated herein as the Agent may
reasonably request and (ii) Mesirov Gelman Jaffe Cramer & Jamieson, LLP
counsel to the Credit Parties, an opinion addressed to the Agent and
the Banks, dated the Restatement Effective Date, covering the matters
set forth in Exhibit F-2 and such other matters incident to the
transactions contemplated herein as the Agent may reasonably request.
101 Corporate Documents; Proceedings; etc. (a) On the Restatement Effective
Date, the Agent shall have received a certificate from each Credit
Party, dated the Restatement Effective Date, signed by the Chairman of
the Board, the President or any Vice President of such Credit Party,
and attested to by the Secretary or any Assistant Secretary of such
Credit Party, in the form of Exhibit G with appropriate insertions,
together with copies of the certificate of incorporation (or equivalent
organizational document) and by-laws of such Credit Party and the
resolutions of such Credit Party referred to in such certificate, and
the foregoing resolutions shall be in form and substance reasonably
acceptable to the Agent.
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102 All corporate and legal proceedings and all instruments and agreements
in connection with the transactions contemplated by this Agreement and
the other Documents shall be satisfactory in form and substance to the
Agent and the Required Banks, and the Agent shall have received all
information and copies of all documents and papers, including records
of corporate proceedings, governmental approvals, good standing
certificates and bring-down telegrams or facsimiles, if any, which the
Agent reasonably may have requested in connection therewith, such
documents and papers where appropriate to be certified by proper
corporate or governmental authorities.
103 On the Restatement Effective Date, the corporate, ownership and capital
structure (including, without limitation, the terms of any capital
stock, options, warrants or other securities issued by the Borrower or
any of its Subsidiaries) of the Borrower and its Subsidiaries shall be
in form and substance reasonably satisfactory to the Agent and the
Required Banks.
104 Shareholders= Agreements; Tax Sharing Agreements; Existing Indebtedness
Agreements. On or prior to the Restatement Effective Date, there shall
have been delivered to (or there shall have been made available for
review by) the Agent true and correct copies of the following
documents:
105 all agreements entered into by the Borrower or any of its Subsidiaries
governing the terms and relative rights of its capital stock and any
agreements entered into by shareholders relating to any such entity
with respect to its capital stock, including, without limitation, the
Charles Town Joint Venture Agreement (collectively, the AShareholders=
Agreements@);
106 all tax sharing, tax allocation and other similar agreements entered
into by the Borrower or any of its Subsidiaries (collectively, the ATax
Sharing Agreements@); and
107 all agreements evidencing or relating to Indebtedness of the Borrower
or any of its Subsidiaries which is to remain outstanding after the
Restatement Effective Date, including without limitation the Senior
Note Documents (collectively, the AExisting Indebtedness Agreements@);
all of which Shareholders= Agreements, Tax Sharing Agreements and Existing
Indebtedness Agreements shall be in form and substance satisfactory to the Agent
and the Required Banks and shall be in full force and effect on the Restatement
Effective Date.
108 The Transaction. (a) On or prior to the Restatement Effective Date,
there shall have been delivered to the Agent true and correct copies of
the following documents (the ATransaction Documents@) evidencing the
joint venture between Borrower and Greenwood New Jersey, Inc. (the
ATransaction@), in form and substance satisfactory to the Agent:
109 the Asset Purchase Agreement dated July 2, 1998 by and among Garden State
Race Track, Inc., Freehold Raceway Association, Atlantic City Harness,
Inc., Circa 1850, Inc. and International Thoroughbred Breeders, Inc. (the
ANew Jersey Asset Purchase Agreement@);
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110 First Amendment to Asset Purchase Agreement dated of even date herewith by
and among the parties to the New Jersey Asset Purchase Agreement and
Borrower;
111 Lease Agreement between Garden State Race Track Inc. and GSPRLP dated of
even date herewith;
112 Joint Venture Agreement Relating to New Jersey Assets dated October 30,
1998 by and between Greenwood New Jersey, Inc. and Borrower (the AJV
Agreement@);
113 First Amendment to Joint Venture Agreement Relating to New Jersey
Assets dated of even date herewith between Greenwood New Jersey, Inc.
and Borrower (collectively with the JV Agreement, the ANew Jersey Joint
Venture Agreement@);
114 the New Jersey Shareholders= Agreement; and
115 any other document in connection with the Transaction requested by the
Agent.
(b) On or prior to the Restatement Effective Date, Borrower shall assign the
promissory note from FRPRLP to Borrower in the original principal amount of
$11,250,000 to Agent on behalf of Banks, pursuant to the terms of the
Pledge Agreement.
116 Original Credit Agreement, etc. (a) On the Restatement Effective Date
(i) all loans under the Original Credit Agreement shall have been
repaid in cash in full, (ii) there shall have been paid in cash in full
all accrued but unpaid interest on the loans outstanding under the
Original Credit Agreement and (iii) there shall have been paid in cash
in full all accrued but unpaid fees (including, without limitation,
commitment fees, letter of credit fees and facing fees) and other
amounts, costs and expenses (including, without limitation, breakage
costs, if any, with respect to Eurodollar rate loans) owing under the
Original Credit Agreement, in each case regardless of whether or not
any of the foregoing amounts would otherwise be due and payable at such
time pursuant to the terms of the Original Credit Agreement.
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(b) On the Restatement Effective Date, (i) all Interest Rate Protection
Agreements entered into by the Borrower prior to the Restatement Effective Date
shall have been terminated and (ii) all amounts, costs and expenses owing by the
Borrower pursuant to such Interest Rate Protection Agreements as a result of the
termination thereof shall have been paid in full.
(c) On the Restatement Effective Date, the Agent, the Continuing Banks and
the Non-Continuing Banks shall have executed and delivered an acknowledgment
letter in the form of Exhibit H.
117 Adverse Change, etc. (a) Since September 30, 1998, nothing shall have
occurred (and neither the Agent nor any Bank shall have become aware of
any facts or conditions not previously known) which the Agent or the
Required Banks shall determine (a) has had, or could reasonably be
expected to have, a material adverse effect on the rights or remedies
of the Banks or the Agent, or on the ability of any Credit Party to
perform its obligations to them hereunder or under any other Credit
Document or (b) has had, or could reasonably be expected to have, a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the
Borrower or any of its Subsidiaries.
118 All necessary governmental (domestic and foreign) and third party
approvals and/or consents (including, without limitation, any approvals
and/or consents of any Commission necessary, or in the reasonable
opinion of the Agent desirable, to operate the businesses of the
Borrower or any of its Subsidiaries permitted under Section 8.15) in
connection with this Agreement, the Transaction and the Documents and
otherwise referred to herein or therein shall have been obtained and
remain in effect, and all applicable waiting periods with respect
thereto shall have expired without any action being taken by any
competent authority which restrains, prevents or imposes materially
adverse conditions upon, this Agreement, the Transaction or the
Documents or otherwise referred to herein or therein. Additionally,
there shall not exist any judgment, order, injunction or other
restraint issued or filed or a hearing seeking injunctive relief or
other restraint pending or notified prohibiting or imposing materially
adverse conditions upon this Agreement, the Transaction or the
Documents or otherwise required to herein or therein.
119 Except for licenses in connection with the Transaction, the Borrower
and each of its Subsidiaries shall have all licenses, including,
without limitation, gaming, racing and alcohol licenses, necessary for
the operation of its businesses.
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120 Litigation. On the Restatement Effective Date, there shall be no
actions, suits or proceedings pending or threatened (i) with respect to
the Transaction, this Agreement or any other Document or (ii) which the
Agent or the Required Banks shall determine could reasonably be
expected to have a material adverse effect on (a) the Transaction or on
the business, operations, property, assets, condition (financial or
otherwise) or the prospects of the Borrower or any Credit Party, (b)
the rights or remedies of the Banks or the Agent hereunder or under any
other Credit Document or (c) the ability of any Credit Party to perform
its respective obligations to the Banks or the Agent hereunder or under
any other Credit Document.
121 Contribution and Indemnification Agreement. On the Restatement
Effective Date, each Credit Party shall have duly authorized, executed
and delivered a contribution and indemnification agreement in the form
of Exhibit I (the AContribution and Indemnification Agreement@).
122 Mortgage Amendments. On the Restatement Effective Date, the Agent shall
have received (i) fully executed counterparts of amendments (the
AMortgage Amendments@), in form and substance satisfactory to the
Agent, to each of the Existing Mortgages, and (ii) fully executed
counterparts of any additional mortgages that may be requested by Agent
(AAdditional Mortgages@) in form and substance satisfactory to Agent,
together with evidence that counterparts of each of the Mortgage
Amendments and Additional Mortgage have been delivered to the title
company insuring the Lien on each of the Mortgaged Properties for
recording in all places to the extent necessary or desirable, in the
judgment of the Agent, effectively to maintain a valid and enforceable
first priority mortgage lien on the Existing Mortgaged Properties, and
create a valid and enforceable first priority mortgage lien on any and
all properties referenced in the Additional Mortgages, (the AAdditional
Mortgaged Properties@) in favor of the Agent for the benefit of the
Secured Creditors, and the Agent shall have received either
endorsements to the existing Mortgage Policies or new Mortgage
Policies, in either case assuring the Agent that each Existing Mortgage
is a valid and enforceable first priority mortgage lien on the
respective Mortgaged Properties, free and clear of all defects and
encumbrances except Permitted Encumbrances.
123 Projections; Balance Sheet; Financial Review. On or prior to the
Restatement Effective Date, the Agent shall have received copies of
historical financial statements, the financial statements and the
Projections referred to in Sections 6.05(a) and (d), and the foregoing
financial statements and Projections shall be in form and substance
satisfactory to the Agent and the Required Banks.
124 Subsidiaries Guaranty. The Subsidiaries Guaranty, duly executed by
each Subsidiary Guarantor.
125 Amended and Restated Security Agreement. The Security Agreement, in
form and substance acceptable to Agent, together with any amendments
to financing statements and any other related documents reasonably
required by the Agent.
126 Pledge Agreement. The Pledge Agreement, duly executed by Borrower and each
Subsidiary.
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127 Assignment of Notes. The assignment to Agent, for the ratable benefit
of Banks, of all existing promissory notes in favor of Borrower or any
Credit Party: (i) by Bankers Trust Company, of all such notes
previously assigned to it by Borrower or any Credit Party in its
capacity as agent under the Original Credit Agreement, and (ii) all
such notes not previously assigned by Borrower or a Credit Party to
Agent or Bankers Trust Company.
128 Solvency Certificate; Insurance Certificates. On the Restatement
Effective Date, the Borrower shall have delivered to the Agent:
129 a certificate in the form of Exhibit J executed by the Chief Financial
Officer of the Borrower; and
130 certificates of insurance complying with the requirements of Section
7.03 for the business and properties of the Borrower and each Credit
Party, in form and substance satisfactory to the Agent and the Required
Banks and naming the Agent as an additional insured and as loss payee,
and stating that such insurance shall not be canceled without at least
30 days prior written notice by the insurer to the Agent (or such
shorter period of time as a particular insurance company generally
provides).
131 Searches. On or prior to the Restatement Effective Date, Agent shall
have received tax, Uniform Commercial Code and judgment searches
against each Credit Party in those offices and jurisdictions as the
Bank shall reasonably request.
132 Notice of Account Designation. On the Restatement Effective Date, the
Borrower shall have delivered to Agent a duly executed notice of
account designation, in form and substance acceptable to Agent.
133 No Default; Representations and Warranties. At the time of each Credit
Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein and in the other Credit Documents shall be true and
correct in all material respects with the same effect as though such
representations and warranties had been made on the date of such Credit
Event (it being understood and agreed that any representation or
warranty which by its terms is made as of a specified date shall be
required to be true and correct in all material respects only as of
such specified date).
134 Notice of Borrowing; Letter of Credit Request. (a) Prior to the making
of each Loan, the Agent shall have received a Notice of Borrowing
meeting the requirements of Section 1.03(a).
135 Prior to the issuance of each Letter of Credit, the Agent and the
Issuing Bank shall have received a Letter of Credit Request meeting the
requirements of Section 2.03.
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136 Other Documents. Prior to the Restatement Effective Date and/or each
Credit Event, Agent shall receive from Borrower and its Subsidiaries
such additional documents as Agent may reasonably require.
The occurrence of the Restatement Effective Date and the
acceptance of the proceeds of each Loan and the making of each Letter of Credit
Request shall constitute a representation and warranty by the Borrower to the
Agent and each of the Banks that all the applicable conditions specified in this
Section 5 exist as of the date of each such Credit Event. All of the Notes,
certificates, legal opinions and other documents and papers referred to in this
Section 5, unless otherwise specified, shall be delivered to the Agent at the
Notice Office for the account of each of the Banks and, except for the Notes, in
sufficient counterparts or copies for each of the Banks and shall be in form and
substance satisfactory to the Agent and the Required Banks.
Representations, Warranties and Agreements. In order to induce the Banks to
enter into this Agreement and to make the Loans, and issue (or
participate in) the Letters of Credit as provided herein, the Borrower
makes the following representations, warranties and agreements, in each
case after giving effect to the Transaction, all of which shall survive
the execution and delivery of this Agreement and the Notes and the
making of the Loans and issuance of the Letters of Credit, with the
occurrence of the Restatement Effective Date and each other Credit
Event on or after the Restatement Effective Date being deemed to
constitute a representation and warranty that the matters specified in
this Section 6 are true and correct on and as of the Restatement
Effective Date and on the date of each such other Credit Event (it
being understood and agreed that any representation or warranty which
by its terms is made as of a specified date shall be required to be
true and correct only as of such specified date).
137 Corporate and Other Status. Each Credit Party and each of their
Subsidiaries (i) is a duly organized and validly existing corporation,
limited liability company or partnership, as the case may be, in good
standing under the laws of the jurisdiction of its organization, (ii)
has the corporate, limited liability company or partnership power and
authority, as the case may be, to own its property and assets and to
transact the business in which it is engaged and presently proposes to
engage and (iii) is duly qualified and is authorized to do business and
is in good standing in each jurisdiction where the ownership, leasing
or operation of its property or the conduct of its business requires
such qualifications except for failures to be so qualified which,
individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the business, operations, property,
assets, liabilities, condition (financial or otherwise) or prospects of
the Borrower and its Subsidiaries taken as a whole.
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138 Corporate and Other Power and Authority. Each Credit Party has the
corporate, limited liability company or partnership power and
authority, as the case may be, to execute, deliver and perform the
terms and provisions of each of the Documents to which it is party and
has taken all necessary corporate, limited liability company or
partnership action, as the case may be, to authorize the execution,
delivery and performance by it of each of such Documents. Each Credit
Party has duly executed and delivered each of the Documents to which it
is party, and each of such Documents constitutes its legal, valid and
binding obligation enforceable in accordance with its terms, except to
the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors= rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
139 No Violation. Neither the execution, delivery or performance by any
Credit Party of the Documents to which it is a party, nor compliance by
it with the terms and provisions thereof, (i) will contravene any
provision of any law, statute, rule or regulation or any order, writ,
injunction or decree of any court or governmental instrumentality,
including without limitation any Commission, (ii) will conflict with or
result in any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation
or imposition of (or the obligation to create or impose) any Lien
(except pursuant to the Security Documents) upon any of the property or
assets of the Borrower or any of its Subsidiaries pursuant to the terms
of any indenture, mortgage, deed of trust, credit agreement or loan
agreement, or any other material agreement, contract or instrument,
including without limitation any license or authority issued or
provided by any Commission, to which the Borrower or any of its
Subsidiaries is a party or by which it or any of its property or assets
is bound or to which it may be subject or (iii) will violate any
provision of the certificate of incorporation, by-laws, limited
liability company agreement or partnership agreement (or equivalent
organizational documents) of the Borrower or any of its Subsidiaries.
140 Approvals. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except for
those that have otherwise been obtained or made on or prior to the
Restatement Effective Date and which remain in full force and effect on
the Restatement Effective Date), or exemption by, any governmental or
public body or authority, including without limitation any Commission,
or any subdivision thereof, is required to authorize, or is required in
connection with, (i) the execution, delivery and performance of any
Document or (ii) the legality, validity, binding effect or
enforceability of any such Document.
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141 Financial Statements; Financial Condition; Undisclosed Liabilities;
Projections; etc. (a) The consolidated balance sheet of the Borrower
and its Subsidiaries at December 31, 1997 and September 30, 1998 and
the related consolidated statements of income, cash flows and
shareholders= equity of the Borrower and its Subsidiaries for the
fiscal year and nine-month period ended on such dates, as the case may
be, copies of which have been furnished to the Banks prior to the
Restatement Effective Date, present fairly the financial position of
the Borrower and its Subsidiaries at the date of such balance sheets
and the results of the operations of the Borrower and its Subsidiaries
for the periods covered thereby. The consolidated balance sheet of the
Borrower and its Subsidiaries as of September 30, 1998, a copy of which
has been furnished to the Banks prior to the Restatement Effective
Date, presents fairly the financial position of the Borrower and its
Subsidiaries as of such date and after giving effect to the
Transaction. All of the foregoing financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied, subject to normal year-end audit adjustments in
the case of the nine-month and other interim financial statements
referred to above. Since December 31, 1997, there has been no material
adverse change in the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole.
142 On and as of the Restatement Effective Date and after giving effect to
the Transaction and to all Indebtedness (including the Loans and the
Senior Notes) incurred or assumed or being incurred or assumed and
Liens created by the Credit Parties in connection therewith, (a) the
sum of the assets, at a fair valuation, of each of the Borrower on a
stand-alone basis and of the Borrower and its Subsidiaries taken as a
whole will exceed its debts; (b) each of the Borrower on a stand-alone
basis and the Borrower and its Subsidiaries taken as a whole has not
incurred and does not intend to incur, and does not believe that they
will incur, debts beyond their ability to pay such debts as such debts
mature; and (c) each of the Borrower on a stand alone basis and the
Borrower and its Subsidiaries taken as a whole will have sufficient
capital with which to conduct its business. For purposes of this
Section 6.05(b), Adebt@ means any liability on a claim, and Aclaim@
means (i) right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or
unsecured or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured. The
amount of contingent liabilities at any time shall be computed as the
amount that, in the light of all the facts and circumstances existing
at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
143 Except as fully disclosed in the financial statements delivered
pursuant to Section 6.05(a), there were as of the Restatement Effective
Date no liabilities or obligations with respect to the Borrower or any
of its Subsidiaries of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether or not due) which, either
individually or in aggregate, could reasonably be expected to be
material to the Borrower and its Subsidiaries taken as a whole. As of
the Restatement Effective Date, the Borrower does not know of any basis
for the assertion against it or any of its Subsidiaries of any
liability or obligation of any nature whatsoever that is not fully
disclosed in the financial statements delivered pursuant to Section
6.05(a) which, either individually or in the aggregate, could
reasonably be expected to be material to the Borrower and its
Subsidiaries taken as a whole.
144 On and as of the Restatement Effective Date, the Projections delivered
to the Agent and the Banks prior to the Restatement Effective Date have
been prepared in good faith and are based on reasonable assumptions,
and there are no statements or conclusions in the Projections which are
based upon or include information known to the Borrower to be
misleading in any material respect or which fail to take into account
material information known to the Borrower regarding the matters
reported therein. On the Restatement Effective Date, the Borrower
believes that the Projections are reasonable and attainable.
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145 Litigation. There are no actions, suits or proceedings pending or, to
the best knowledge of the Borrower, threatened (i) with respect to any
Document, (ii) with respect to any material Indebtedness of the
Borrower or any of its Subsidiaries or (iii) that are reasonably likely
to materially and adversely affect the business, operations, property,
assets, liabilities, condition (financial or otherwise) or prospects of
the Borrower and its Subsidiaries taken as a whole.
146 True and Complete Disclosure. All factual information (taken as a
whole) furnished by any Credit Party in writing to the Agent or any
Bank (including, without limitation, all information contained in the
Documents) for purposes of or in connection with this Agreement, the
other Credit Documents or any transaction contemplated herein or
therein is, and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of any Credit Party in writing to
the Agent or any Bank will be, true and accurate in all material
respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any fact necessary to make such
information (taken as a whole) not misleading in any material respect
at such time in light of the circumstances under which such information
was provided.
147 Use of Proceeds; Margin Regulations. (a) All proceeds of the Loans
shall be used for: (i) at closing, the financing of a loan by Borrower
to FR Park Racing L.P. (which shall not exceed $11,250,000) pursuant to
the terms of Transaction and which loan may be converted to a 50%
equity interest in Pennwood and 49.95% limited partnership interest in
each of FRPRLP, GSPRLP, FR Park Services and GS Park Services upon the
Transaction Conversion; (ii) the refinancing of certain existing
Indebtedness of Borrower (including under the Original Credit
Agreement) and (iii) the working capital and general corporate purposes
of the Borrower and its Subsidiaries. Letters of Credit shall be used
for L/C Supportable Obligations.
148 No part of any Credit Event (or the proceeds thereof) will be used to
purchase or carry any Margin Stock or to extend credit for the purpose
of purchasing or carrying any Margin Stock. Neither the making of any
Loan nor the use of the proceeds thereof nor the occurrence of any
other Credit Event will violate or be inconsistent with the provisions
of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
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149 Tax Returns and Payments. Each of the Borrower and each of its
Subsidiaries has filed all federal and state income tax returns and all
other material tax returns, domestic and foreign, required to be filed
by it and has paid all taxes and assessments payable by it which have
become due, except for those contested in good faith and adequately
disclosed and fully provided for on the financial statements of the
Borrower and its Subsidiaries in accordance with generally accepted
accounting principles. The Borrower and each of its Subsidiaries have
at all times paid, or have provided adequate reserves (in the good
faith judgment of the management of the Borrower) for the payment of,
all federal, state, local and foreign income taxes applicable for all
prior fiscal years and for the current fiscal year to date. There is no
material action, suit, proceeding, investigation, audit, or claim now
pending or, to the knowledge of the Borrower threatened, by any
authority, including without limitation any Commission, regarding any
taxes relating to the Borrower or any of its Subsidiaries. As of the
Restatement Effective Date, neither the Borrower nor any of its
Subsidiaries has entered into an agreement or waiver or been requested
to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of the
Borrower or any of its Subsidiaries, or is aware of any circumstances
that would cause the taxable years or other taxable periods of the
Borrower or any of its Subsidiaries not to be subject to the normally
applicable statute of limitations.
150 Compliance with ERISA. Each Plan (and each related trust, insurance
contract or fund) is in substantial compliance with its terms and with
all applicable laws, including, without limitation, ERISA and the Code;
each Plan (and each related trust, if any) which is intended to be
qualified under Section 401(a) of the Code has received a determination
letter from the Internal Revenue Service to the effect that it meets
the requirements of Sections 401(a) and 501(a) of the Code; no
Reportable Event has occurred; no Plan which is a multiemployer plan
(as defined in Section 4001(a)(3) of ERISA) is insolvent or in
reorganization; no Plan has an Unfunded Current Liability; no Plan
which is subject to Section 412 of the Code or Section 302 of ERISA has
an accumulated funding deficiency, within the meaning of such sections
of the Code or ERISA, or has applied for or received a waiver of an
accumulated funding deficiency or an extension of any amortization
period, within the meaning of Section 412 of the Code or Section 303 or
304 of ERISA; all contributions required to be made with respect to a
Plan have been timely made; neither the Borrower nor any Subsidiary of
the Borrower nor any ERISA Affiliate has incurred any material
liability (including any indirect, contingent or secondary liability)
to or on account of a Plan pursuant to Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
401(a)(29), 4971 or 4975 of the Code or expects to incur any such
material liability under any of the foregoing sections with respect to
any Plan; no condition exists which presents a material risk to the
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Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of
incurring a material liability to or on account of a Plan pursuant to
the foregoing provisions of ERISA and the Code; no proceedings have
been instituted to terminate or appoint a trustee to administer any
Plan which is subject to Title IV of ERISA; no action, suit,
proceeding, hearing, audit or investigation with respect to the
administration, operation or the investment of assets of any Plan
(other than routine claims for benefits) is pending, expected or
threatened; using actuarial assumptions and computation methods
consistent with Part 1 of subtitle E of Title IV of ERISA, the
aggregate liabilities of the Borrower and its Subsidiaries and its
ERISA Affiliates to all Plans which are multiemployer plans (as defined
in Section 4001(a)(3) of ERISA) in the event of a complete withdrawal
therefrom, as of the close of the most recent fiscal year of each such
Plan ended prior to the date of the most recent Credit Event, would not
exceed $500,000; each group health plan (as defined in Section 607(1)
of ERISA or Section 4980B(g)(2) of the Code) which covers or has
covered employees or former employees of the Borrower, any Subsidiary
of the Borrower or any ERISA Affiliate has at all times been operated
in compliance with the provisions of Part 6 of subtitle B of Title I of
ERISA and Section 4980B of the Code; no lien imposed under the Code or
ERISA on the assets of the Borrower or any Subsidiary of the Borrower
or any ERISA Affiliate exists or is likely to arise on account of any
Plan; and the Borrower and its Subsidiaries may cease contributions to
or terminate any employee benefit plan maintained by any of them
without incurring any material liability.
151 The Security Documents. (a) The provisions of the Security Agreement
continue to create and are effective to create in West Virginia and
from all Subsidiary Guarantors formed after the date of the Original
Credit Agreement: (i) in favor of the Agent for the benefit of the
Secured Creditors a legal, valid and enforceable security interest in
all right, title and interest of the Credit Parties party thereto in
the Security Agreement Collateral described therein, to secure
Borrower=s Indebtedness solely under the Revolving Loans and (ii) in
favor of First Union, a legal, valid and enforceable security interest
in all right, title and interest of Borrower in the Security Agreement
Term Loan Collateral described therein, to secure Borrower=s
Indebtedness solely under the Term Loan. The Agent, for the benefit of
the Secured Creditors, has a fully perfected first lien on, and
security interest in, all right, title and interest in all of the
Security Agreement Collateral as described therein, subject to no other
Liens other than Permitted Liens, and First Union has a fully perfected
first lien on, and security interest in, all right, title and interest
in all of the Security Agreement Term Loan Collateral as described
therein, subject to no other liens other than Permitted Liens. The
recordation of the Assignment of Security Interest in U.S. Patents and
Trademarks in the form attached to the Security Agreement in the United
States Patent and Trademark Office, together with filings on Form UCC-1
made pursuant to the Security Agreement, created, as of November 27,
1996 and continue to create, as may be perfected by such filing and
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recordation respectively, a perfected security interest granted to the
Agent in the United States trademarks and patents covered by the
Security Agreement, and the recordation of the Assignment of Security
Interest in U.S. Copyrights in the form attached to the Security
Agreement with the United States Copyright Office, together with
filings on Form UCC-1 made pursuant to the Security Agreement, created,
as of November 27, 1996 and continue to create, as may be perfected by
such filing and recordation respectively, a perfected security interest
granted to the Agent in the United States copyrights covered by the
Security Agreement.
152 The security interests created as of November 27, 1996 in favor of the
Agent, as Pledgee, for the benefit of the Secured Creditors, under the
Pledge Agreement, constitute and continue to create first priority
perfected security interests in the Pledged Securities described in the
Pledge Agreement, subject to no security interests of any other Person.
No filings or recordings are required in order to perfect (or maintain
the perfection or priority of) the security interests created in the
Pledged Securities under the Pledge Agreement, other than in connection
with the pledge of the ownership interests of PNGI Charles Town Gaming
LLC.
153 The Mortgages (as amended by the Mortgage Amendments in the case of the
Existing Mortgages) created as of November 27, 1996 and continue to
create, and the Additional Mortgages create, for the obligations
purported to be secured thereby, a valid and enforceable perfected
security interest in and mortgage lien on all of the Mortgaged
Properties in favor of the Agent (or such other trustee as may be
required or desired under local law) for the benefit of the Secured
Creditors, superior to and prior to the rights of all third persons
(except that the security interest and mortgage lien created in the
Mortgaged Properties may be subject to the Permitted Encumbrances
related thereto) and subject to no other Liens (other than Liens
permitted under Section 8.01). Schedule IV contains a true and complete
list of each parcel of Real Property owned or leased by the Borrower
and the Credit Parties on the Restatement Effective Date, and the type
of interest therein held by the Borrower or such Credit Party. The
Borrower and each Credit Party have good and marketable title to all
fee-owned Real Property and valid leasehold title to all Leaseholds, in
each case free and clear of all Liens except those described in the
first sentence of this subsection (c).
154 Representations and Warranties in the Documents. All representations
and warranties set forth in the other Documents were true and correct
in all material respects at the time as of which such representations
and warranties were (or are) made (or deemed made).
155 Properties. The Borrower and each of its Subsidiaries have good and
marketable title to all material properties and assets owned by them,
including all property and assets reflected in the balance sheets
referred to in Section 6.05(a) (except as sold or otherwise disposed of
since the date of such balance sheet in the ordinary course of business
or a permitted by the terms of this Agreement), free and clear of all
Liens, other than Permitted Liens.
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156 Capitalization. On the Restatement Effective Date, the authorized
capital stock of the Borrower shall consist of (i) 20,000,000 shares of
common stock, $.01 par value per share and (ii) 1,000,000 shares of
preferred stock, $.01 par value per value, of which no shares of such
preferred stock are issued or outstanding. All outstanding shares of
capital stock of the Borrower have been duly and validly issued, are
fully paid and nonassessable. The Borrower does not have outstanding
any securities convertible into or exchangeable for its capital stock
or outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreement providing for the
issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, its capital stock, except for
options or warrants to purchase shares of its common stock.
157 Subsidiaries; Investments. As of the Restatement Effective Date,
neither the Borrower, nor any Subsidiary, has any Subsidiaries other
than those Subsidiaries listed on Schedule V. Schedule V correctly sets
forth, as of the Restatement Effective Date, the percentage ownership
(direct or indirect) of the Borrower in each class of capital stock or
other equity of each of its Subsidiaries and also identifies the direct
owner thereof. Neither Borrower nor any Subsidiary has investments in
or loans to any other individuals or business entities, except for: (i)
those permitted by Section 8.05, (ii) set forth on Schedule IX or (iii)
those to the New Jersey Joint Venture Entities and related entities.
158 Compliance with Statutes, etc. Each of the Borrower and each of its
Subsidiaries is in compliance with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of
its business and the ownership of its property (including applicable
statutes, regulations, orders and restrictions relating to
environmental standards and controls and the Commissions), except such
noncompliances as could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.
159 Investment Company Act. Neither the Borrower nor any of its
Subsidiaries is an Ainvestment company@ or a company Acontrolled@ by an
Ainvestment company,@ within the meaning of the Investment Company Act
of 1940, as amended.
160 Public Utility Holding Company Act. Neither the Borrower nor any of its
Subsidiaries is a Aholding company,@ or a Asubsidiary company@ of a
Aholding company,@ or an Aaffiliate@ of a Aholding company@ or of a
Asubsidiary company@ of a Aholding company@ within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
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161 Environmental Matters. (a) The Borrower and each of its Subsidiaries
have complied with, and on the date of each Credit Event are in
compliance with, all applicable Environmental Laws and the requirements
of any permits issued under such Environmental Laws. Other than as
disclosed on Schedule XI, there are no pending or threatened
Environmental Claims against the Borrower or any of its Subsidiaries
(including any such claim arising out of the ownership or operation by
the Borrower or any of its Subsidiaries of any Real Property no longer
owned or operated by the Borrower or any of its Subsidiaries) or any
Real Property owned or operated by the Borrower or any of its
Subsidiaries. There are no facts, circumstances, conditions or
occurrences with respect to any Real Property owned or operated by the
Borrower or any of its Subsidiaries (including any Real Property
formerly owned or operated by the Borrower or any of its Subsidiaries
but no longer owned or operated by the Borrower or any of its
Subsidiaries) or any property adjoining or adjacent to any such Real
Property that could be expected (i) to form the basis of an
Environmental Claim against the Borrower or any of its Subsidiaries or
any Real Property owned or operated by the Borrower or any of its
Subsidiaries or (ii) to cause any Real Property owned or operated by
the Borrower or any of its Subsidiaries to be subject to any
restrictions on the ownership, occupancy or transferability of such
Real Property by the Borrower or any of its Subsidiaries under any
applicable Environmental Law.
162 Hazardous Materials have not at any time been generated, used, treated
or stored on, or transported to or from, any Real Property owned or
operated by the Borrower or any of its Subsidiaries where such
generation, use, treatment or storage has violated or could be expected
to violate any Environmental Law. Hazardous Materials have not at any
time been Released on or from any Real Property owned or operated by
the Borrower or any of its Subsidiaries where such Release has violated
or could be expected to violate any applicable Environmental Law.
163 Notwithstanding anything to the contrary in this Section 6.19, the
representations made in this Section 6.19 shall not be untrue unless
the aggregate effect of all violations, claims, restrictions, failures
and noncompliances of the types described above could reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
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164 Labor Relations. Other than as disclosed on Schedule XII, neither the
Borrower nor any of its Subsidiaries is engaged in any unfair labor
practice that could reasonably be expected to have a material adverse
effect on the Borrower or on the Borrower and its Subsidiaries taken as
a whole. Other than as disclosed on Schedule XII, there is (i) no
unfair labor practice complaint pending against the Borrower or any of
its Subsidiaries or threatened against any of them before the National
Labor Relations Board, and no grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is so
pending against the Borrower or any of its Subsidiaries or threatened
against any of them, (ii) no strike, labor dispute, slowdown or
stoppage pending against the Borrower or any of its Subsidiaries or
threatened against the Borrower or any of its Subsidiaries and (iii) no
union representation question exists with respect to the employees of
the Borrower or any of its Subsidiaries, except (with respect to any
matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as could not reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
165 Patents, Licenses, Franchises and Formulas. Each of the Borrower and
each of its Subsidiaries owns all the patents, trademarks, permits,
service marks, trade names, copyrights, licenses (including, but not
limited to, gaming and alcohol licenses), franchises, proprietary
information (including but not limited to rights in computer programs
and databases) and formulas, or rights with respect to the foregoing,
and has obtained assignments of all leases and other rights of whatever
nature, necessary for the present conduct of its business, without any
known conflict with the rights of others which, or the failure to
obtain which, as the case may be, could reasonably be expected to
result in a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
166 Licenses. (a) The Penn National Licenses and the Pocono Downs Licenses
are in full force and effect, have not been subject to any suspension
at any time within the last five years and there are no grounds to
suspend or revoke any of such Licenses, nor has any notice been
received with respect to such Licenses at any time within the last five
years from the Pennsylvania Horse Racing Commission or the Pennsylvania
Harness Racing Commission that the Pennsylvania Horse Racing Commission
or the Pennsylvania Harness Racing Commission believes there are
grounds for suspending or revoking any of such Licenses or indicating
that any inquiry is or may be conducted with respect to any such
suspension or revocation or the fitness of any shareholder of the
Borrower or any of its Subsidiaries to hold any capital stock therein.
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167 The Charles Town Licenses are in full force and effect, have not been
subject to any suspension at any time and there are no grounds to
suspend or revoke any of such Licenses, nor has any notice been
received with respect to such Licenses from the West Virginia Racing
Commission or the West Virginia Lottery Commission that the West
Virginia Racing Commission or the West Virginia Lottery Commission
believes there are grounds for suspending or revoking any of such
Licenses or indicating that any inquiry is or may be conducted with
respect to any such suspension or revocation or the fitness of any
shareholder of the Borrower or any of its Subsidiaries to hold any
capital stock or other equity interest therein.
168 Other than licenses reasonably expected to be obtained in connection
with the Transaction, all other licenses or grants of authority from
any other Commission or governmental authority that are required for
the conduct of Borrower=s or any Subsidiary=s business are in full
force and effect, have not been subject to any suspension at any time
and there are no grounds to suspend or revoke any such licenses or
grants of authority.
169 Indebtedness. Schedule VI sets forth a true and complete list of all
Indebtedness (including Contingent Obligations) of the Borrower and its
Subsidiaries as of the Restatement Effective Date and which is to
remain outstanding after giving effect to the Transaction (excluding
the Senior Notes, the Loans, and the Letters of Credit, the AExisting
Indebtedness@), in each case showing the aggregate principal amount
thereof and the name of the respective borrower and any Credit Party or
any of its Subsidiaries which directly or indirectly guarantees such
debt.
170 The Senior Notes. The Senior Notes are unsecured obligations of the
Borrower. There exists no default or event of default under the Senior
Notes Documents. There does not exist any judgment, order or injunction
prohibiting or imposing material adverse conditions upon the
performance by the Borrower or any of its Subsidiaries of their
obligations under the Senior Note Documents.
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171 Year 2000 Compliance. Borrower and its Subsidiaries are conducting a
comprehensive review and assessment of their computer systems and
applications, micro-processor based goods and equipment owned or used
by them in their business and all products currently sold by them, and
are making inquiry of their material suppliers, vendors and customers,
with respect to functionality before, during and after the year 2000
(the AYear 2000 Problem@). Borrower and its Subsidiaries are preparing
a plan to ensure that all such systems, goods, equipment and products
owned or used by them and material to the conduct of their business
will be Year 2000 Compliant in a timely manner, will provide a copy of
such plan to Agent no later than May 31, 1999. Borrower and its
Subsidiaries reasonably believe, based on the foregoing review,
assessment and inquiry, that the Year 2000 Problem will not result in a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of
Borrower and its Subsidiaries taken as a whole.
172 Material Contracts. Neither Borrower nor any of its Subsidiaries is a
party to or in any manner obligated under any contracts material to its
respective business under which there exists a material default.
173 Management Agreements. Except as set forth on Schedule X hereto,
neither Borrower nor any of its Subsidiaries is a party to any
management or consulting agreement for the provision of services to
such entity, including without limitation agreements between and among
Affiliates.
174 Transaction Documents.
(a) Validity. Borrower has the power and authority under laws of Borrower=s
state of incorporation and under its articles of incorporation and by-laws to
enter into and perform the Transaction Documents; and all actions (corporate or
otherwise) necessary or appropriate for Borrower=s execution and performance of
the Transaction Documents and all actions required thereunder have been taken,
and, upon their execution, the Transaction Documents will constitute the valid
and binding obligation of Borrower, enforceable in accordance with their
respective terms.
(b) No Violations. The making and performance of the Transaction Documents
and all actions required thereunder will not violate any provision of any law or
regulation, federal, state or local, including without limitation all state
corporate laws and judicial precedents of Borrower=s state of incorporation and
Commission regulations, and will not violate any provisions of the articles of
incorporation and by-laws of Borrower, or constitute a default under any
agreement by which Borrower or its property may be bound.
175 Inactive Subsidiaries. There does not exist, by virtue of statute,
common law, contract or otherwise, any liability of, or any activity or
condition relating to, any Inactive Subsidiary, including, without
limitation, with respect to any environmental condition, taxes,
employee benefit plan, program or statutory obligation, tort claim or
contract dispute, which may survive the liquidation of any such
Inactive Subsidiary (whether by operation of law, express assumption or
otherwise), except for those liabilities which (a) are reserved for or
otherwise reflected in the financial statements of the Borrower and its
consolidated Subsidiaries or (b) do not in the aggregate as to all
Inactive Subsidiaries exceed $50,000.
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Affirmative Covenants. The Borrower hereby covenants and agrees that on and
after the Restatement Effective Date and until the Total Commitment,
and all Letters of Credit have terminated and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other Obligations
incurred hereunder and thereunder, are paid in full:
176 Information Covenants. The Borrower will furnish to each Bank:
177 Monthly Reports. Within 35 days after the end of each fiscal month of
the Borrower, the consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal month and
the related consolidated and consolidating statements of income and
retained earnings and statement of cash flows for such fiscal month and
for the elapsed portion of the fiscal year ended with the last day of
such fiscal month, in each case setting forth comparative figures for
the corresponding fiscal month in the prior fiscal year and comparable
budgeted figures for such fiscal month.
178 Quarterly Financial Statements. Within 50 days after the close of the
first three quarterly accounting periods in each fiscal year of the
Borrower, (i) the consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at the end of such quarterly
accounting period and the related consolidated and consolidating
statements of income and retained earnings and statement of cash flows
for such quarterly accounting period and for the elapsed portion of the
fiscal year ended with the last day of such quarterly accounting
period, in each case setting forth comparative figures for the related
periods in the prior fiscal year, all of which shall be certified by
the Chief Financial Officer of the Borrower, subject to normal year-end
audit adjustments and (ii) management=s discussion and analysis of the
important operational and financial developments during the quarterly
and year-to-date periods.
179 Annual Financial Statements. Within 95 days after the close of each
fiscal year of the Borrower, (i) the consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as at the end of
such fiscal year and the related consolidated and consolidating
statements of income and retained earnings and of cash flows for such
fiscal year setting forth comparative figures for the preceding fiscal
year and certified (x) in the case of the consolidated financial
statements, by BDO Seidman, LLP or such other independent certified
public accountants of recognized national standing reasonably
acceptable to the Agent, together with a report of such accounting firm
stating that in the course of its regular audit of the financial
statements of the Borrower and its Subsidiaries, which audit was
conducted in accordance with generally accepted auditing standards,
such accounting firm obtained no knowledge of any Default or an Event
of Default which has occurred and is continuing or, if in the opinion
of such accounting firm such a Default or Event of Default has occurred
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and is continuing, a statement as to the nature thereof and (y) in the
case of the consolidating financial statements, by the Chief Financial
Officer of the Borrower and (ii) management=s discussion and analysis
of the important operational and financial developments during the
respective fiscal year.
180 Management Letters. Promptly after the Borrower=s or any of its
Subsidiaries= receipt thereof, a copy of any Amanagement letter@
received from its certified public accountants and management=s
response thereto.
181 Budgets and Projections. No later than thirty days following the first
day of each fiscal year of the Borrower, a budget in form satisfactory
to the Agent (including budgeted statements of income and sources and
uses of cash and balance sheets) prepared by the Borrower for each of
the months of such fiscal year prepared in detail.
182 Officer=s Certificates. At the time of the delivery of the financial
statements provided for in Sections 7.01(b) and (c), a certificate of
the Chief Financial Officer of the Borrower in the form of Exhibit N to
the effect that, to the best of such officer=s knowledge, no Default or
Event of Default has occurred and is continuing or, if any Default or
Event of Default has occurred and is continuing, specifying the nature
and extent thereof, which certificate shall (x) set forth in reasonable
detail the calculations required to establish whether the Borrower and
its Subsidiaries were in compliance with the provisions of Sections
3.03(d), 3.03(e), 8.04, 8.05 and 8.07 through 8.11, inclusive, at the
end of such fiscal quarter or year, as the case may be.
183 Notice of Default, Litigation or Non-Compliance. Promptly upon, and in
any event within three Business Days after, an officer of any Credit
Party obtains knowledge thereof, notice of (i) the occurrence of any
event which constitutes a Default or an Event of Default; (ii) any
litigation or governmental investigation or proceeding (including
without limitation any Commission investigation or proceeding) pending
(x) against the Borrower or any of its Subsidiaries which could
reasonably be expected to materially and adversely affect the business,
operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a
whole, (y) with respect to any material Indebtedness of the Borrower or
any of its Subsidiaries or (z) with respect to the Transaction or any
Document; and (iii) any actual or alleged failure of Borrower or any
Subsidiary to fail to comply with or perform, breach, violate or suffer
a default under any local, state or federal law or regulation, or under
the terms of any franchise, license or grant of authority, or the
occurrence or existence of any facts or circumstances which, with the
passage of time, the giving of notice or otherwise could create such a
breach, violation or default or could occasion the termination of any
franchise, license or grant of authority.
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184 Other Reports and Filings. Promptly after the filing or delivery
thereof, copies of all financial information, proxy materials and
reports, if any, which the Borrower or any of its Subsidiaries shall
publicly file with the Securities and Exchange Commission or any
successor thereto (the ASEC@) or deliver to holders of its Indebtedness
pursuant to the terms of the documentation governing such Indebtedness
(or any trustee, agent or other representative therefor).
185 Management Personnel. Notice in writing within 30 days after any
change of Borrower=s senior management personnel.
186 Environmental Matters. Promptly after an officer of any Credit Party
obtains knowledge thereof, notice of one or more of the following
environmental matters, unless such environmental matters could not,
individually or when aggregated with all other such environmental
matters, be reasonably expected to materially and adversely affect the
business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole:
187 any pending or threatened Environmental Claim against the Borrower or
any of its Subsidiaries or any Real Property owned or operated by the
Borrower or any of its Subsidiaries;
188 any condition or occurrence on or arising from any Real Property owned
or operated by the Borrower or any of its Subsidiaries that (a) results
in noncompliance by the Borrower or any of its Subsidiaries with any
applicable Environmental Law or (b) could be expected to form the basis
of an Environmental Claim against the Borrower or any of its
Subsidiaries or any such Real Property;
189 any condition or occurrence on any Real Property owned or operated by
the Borrower or any of its Subsidiaries that could be expected to cause
such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability by the Borrower or any of its
Subsidiaries of such Real Property under any Environmental Law; and
190 the taking of any removal or remedial action in response to the actual
or alleged presence of any Hazardous Material on any Real Property
owned or operated by the Borrower or any of its Subsidiaries as
required by any Environmental Law or any governmental or other
administrative agency; provided, that in any event the Borrower shall
deliver to each Bank all notices received by the Borrower or any of its
Subsidiaries from any government or governmental agency under, or
pursuant to, CERCLA which identify the Borrower or any of its
Subsidiaries as potentially responsible parties for remediation costs
or which otherwise notify the Borrower or any of its Subsidiaries of
potential liability under CERCLA.
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All such notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence or removal or remedial action and the
Borrower=s or such Subsidiary=s response thereto.
191 Regulatory Matters. Promptly after (i) the Borrower or any of its
Subsidiaries receives any correspondence or other written communication
from any Commission (other than correspondence relating to routine
operating matters of the Borrower or any of its Subsidiaries in the
ordinary course of business) or (ii) the Borrower or any of its
Subsidiaries delivers any correspondence or other written communication
to any Commission (other than correspondence relating to routine
operating matters of the Borrower or any of its Subsidiaries), the
Borrower shall deliver copies of any such correspondence or other
written communication to each of the Banks.
192 Other Information. From time to time, such other information or
documents (financial or otherwise) with respect to the Borrower or any
of its Subsidiaries as the Agent or any Bank may reasonably request.
193 Books, Records and Inspections; Annual Meeting with Banks. (a) The
Borrower will, and will cause each of its Subsidiaries to, keep proper
books of record and accounts in which full, true and correct entries in
conformity with generally accepted accounting principles and all
requirements of law shall be made of all dealings and transactions in
relation to its business and activities. The Borrower will, and will
cause each of its Subsidiaries to, permit officers and designated
representatives of the Agent or any Bank to visit and inspect, under
guidance of officers of the Borrower or such Subsidiary, any of the
properties of the Borrower or such Subsidiary, and to examine the books
of account of the Borrower or such Subsidiary and discuss the affairs,
finances and accounts of the Borrower or such Subsidiary with, and be
advised as to the same by, its and their officers and independent
accountants, all at such reasonable times and intervals and to such
reasonable extent as the Agent or such Bank may reasonably request.
194 At a date to be mutually agreed upon between the Agent and the Borrower
occurring on or prior to the 120th day after the close of each fiscal
year of the Borrower, the Borrower will hold a meeting with all of the
Banks at which meeting shall be reviewed the financial results of the
previous fiscal year and the financial condition of the Borrower and
its Subsidiaries and the budgets presented for the current fiscal year
of the Borrower.
195 Maintenance of Property; Insurance. (a) Schedule VII sets forth a true
and complete listing of all insurance maintained by the Borrower and
its Subsidiaries as of the Restatement Effective Date. The Borrower
will, and will cause each of its Subsidiaries to, (i) keep all property
necessary to the business of the Borrower and its Subsidiaries in
reasonably good working order and condition, ordinary wear and tear
excepted, (ii) maintain insurance (including hazard and business
interruption coverage) on all such property in at least such amounts
and against at least such risks as is consistent and in accordance with
industry practice for companies similarly situated owning similar
properties in the same general areas in which the Borrower or any of
its Subsidiaries operates, and (iii) furnish to the Agent or any Bank,
upon written request, full information as to the insurance carried. At
any time that insurance at levels described on Schedule VII is not
being maintained by the Borrower or any Subsidiary of the Borrower, the
Borrower will, or will cause one of its Subsidiaries to, promptly
notify the Agent in writing and, if thereafter notified by the Agent or
the Required Banks to do so, the Borrower or any such Subsidiary, as
the case may be, shall obtain such insurance at such levels and
coverage which are at least as great as to the extent such insurance is
reasonably available.
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196 The Borrower will, and will cause each of the other Credit Parties to,
at all times keep its property insured in favor of the Agent, and all
policies (including Mortgage Policies) or certificates (or certified
copies thereof) with respect to such insurance (and any other insurance
maintained by the Borrower and/or such other Credit Parties) (i) shall
be endorsed to the Agent=s satisfaction for the benefit of the Agent
(including, without limitation, by naming the Agent as loss payee
and/or additional insured), (ii) shall state that such insurance
policies shall not be canceled without at least 30 days= prior written
notice thereof by the respective insurer to the Agent (or such shorter
period of time as a particular insurance company policy generally
provides), (iii) shall provide that the respective insurers irrevocably
waive any and all rights of subrogation with respect to the Agent and
the Secured Creditors, (iv) shall contain the standard non-contributing
mortgage clause endorsement in favor of the Agent with respect to
hazard liability insurance, (v) shall, except in the case of public
liability insurance, provide that any losses shall be payable
notwithstanding (A) any act or neglect of the Borrower or any such
other Credit Party, (B) the occupation or use of the properties for
purposes more hazardous than those permitted by the terms of the
respective policy if such coverage is obtainable at commercially
reasonable rates and is of the kind from time to time customarily
insured against by Persons owning or using similar property and in such
amounts as are customary, (C) any foreclosure or other proceeding
relating to the insured properties or (D) any change in the title to or
ownership or possession of the insured properties and (vi) shall be
deposited with the Agent.
197 If the Borrower or any of its Subsidiaries shall fail to insure its
property in accordance with this Section 7.03, or if the Borrower or
any of its Subsidiaries shall fail to so endorse and deposit all
policies or certificates with respect thereto, the Agent shall have the
right (but shall be under no obligation) to procure such insurance and
the Borrower agrees to reimburse the Agent for all costs and expenses
of procuring such insurance.
198 Corporate Existence; Corporate Franchises. (a) The Borrower will, and
will cause each of its Subsidiaries to, preserve and maintain its
existence as a corporation, limited partnership or limited liability
corporation, as applicable, and its good standing in all states in
which it conducts business.
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(b) The Borrower will, and will cause each of its Subsidiaries to, do or
cause to be done, all things necessary to preserve and keep in full
force and effect its existence and its material rights, franchises,
licenses, permits, grants of authority and patents; provided, however,
that nothing in this Section 7.04 shall prevent (i) sales of assets
and other transactions by the Borrower or any of its Subsidiaries in
accordance with Section 8.02 or (ii) the withdrawal by the Borrower or
any of its Subsidiaries of its qualification as a foreign corporation
in any jurisdiction where such withdrawal could not reasonably be
expected to have a material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as
a whole.
199 Compliance with Statutes, etc. The Borrower will, and will cause each
of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by,
all governmental bodies, domestic or foreign, including any Commission,
in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls), except
such noncompliances as could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.
200 Compliance with Environmental Laws. (a) The Borrower will comply, and
will cause each of its Subsidiaries to comply, in all material respects
with all Environmental Laws applicable to the ownership or use of its
Real Property now or hereafter owned or operated by the Borrower or any
of its Subsidiaries, will promptly pay or cause to be paid all costs
and expenses incurred in connection with such compliance, and will keep
or cause to be kept all such Real Property free and clear of any Liens
imposed pursuant to such Environmental Laws. Neither the Borrower nor
any of its Subsidiaries will generate, use, treat, store, release or
dispose of, or permit the generation, use, treatment, storage, release
or disposal of Hazardous Materials on any Real Property now or
hereafter owned or operated by the Borrower or any of its Subsidiaries,
or transport or permit the transportation of Hazardous Materials to or
from any such Real Property, except for Hazardous Materials generated,
used, treated, stored, released or disposed of at any such Real
Properties in compliance in all material respects with all applicable
Environmental Laws and reasonably required in connection with the
operation, use and maintenance of the business or operations of the
Borrower or any of its Subsidiaries.
201 Borrower shall deliver to Agent on or before June 30, 1999 a copy of a
Phase I environmental report with respect to each Mortgaged Property
(other than the Mortgaged Properties described on Schedule XIII) and
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= satisfaction.
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202 ERISA. As soon as possible and, in any event, within ten (10) days
after the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate knows or has reason to know of the occurrence of any of the
following, the Borrower will deliver to each of the Banks a certificate
of the Chief Financial Officer of the Borrower setting forth the full
details as to such occurrence and the action, if any, that the
Borrower, such Subsidiary or such ERISA Affiliate is required or
proposes to take, together with any notices required or proposed to be
given to or filed with or by the Borrower, the Subsidiary, the ERISA
Affiliate, the PBGC, a Plan participant or the Plan administrator with
respect thereto: that a Reportable Event has occurred; that an
accumulated funding deficiency, within the meaning of Section 412 of
the Code or Section 302 of ERISA, has been incurred or an application
may be or has been made for a waiver or modification of the minimum
funding standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code or
Section 303 or 304 of ERISA with respect to a Plan; that any
contribution required to be made with respect to a Plan or Foreign
Pension Plan has not been timely made; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title
IV of ERISA; that a Plan has an Unfunded Current Liability; that
proceedings may be or have been instituted to terminate or appoint a
trustee to administer a Plan which is subject to Title IV of ERISA;
that a proceeding has been instituted pursuant to Section 515 of ERISA
to collect a delinquent contribution to a Plan; that the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate will or may incur any
liability (including any indirect, contingent, or secondary liability)
to or on account of the termination of or withdrawal from a Plan under
Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with
respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the
Code or Section 409 or 502(i) or 502(l) of ERISA or with respect to a
group health plan (as defined in Section 607(1) of ERISA or Section
4980B(g)(2) of the Code) under Section 4980B of the Code; or that the
Borrower or any Subsidiary of the Borrower may incur any material
liability pursuant to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) that provides benefits to retired employees or
other former employees (other than as required by Section 601 of ERISA)
or any Plan or any Foreign Pension Plan. The Borrower will deliver to
each of the Banks a complete copy of the annual report (on Internal
Revenue Service Form 5500-series) of each Plan (including, to the
extent required, the related financial and actuarial statements and
opinions and other supporting statements, certifications, schedules and
information) required to be filed with the Internal Revenue Service. In
addition to any certificates or notices delivered to the Banks pursuant
to the first sentence hereof, copies of annual reports and any material
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notices received by the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate with respect to any Plan shall be delivered to the
Banks no later than ten (10) days after the date such report has been
filed with the Internal Revenue Service or such notice has been
received by the Borrower, the Subsidiary or the ERISA Affiliate, as
applicable.
203 End of Fiscal Years; Fiscal Quarters. The Borrower will cause (i) each
of its, and each Credit Party=s, fiscal years to end on December 31,
and (ii) each of its, and each of Credit Party=s, fiscal quarters to
end on March 31, June 30, September 30 and December 31, provided that
with respect to any Subsidiary Guarantor acquired after the Restatement
Effective Date in accordance with (and to the extent permitted by) this
Agreement which has a different fiscal year end or fiscal quarter end
from those set forth above, the Borrower shall change such Subsidiary
Guarantor=s fiscal year end and/or fiscal quarter end to the dates set
forth above within 60 days after the date of such acquisition. The
Borrower will maintain and will cause each of its Subsidiaries to
maintain its accounting method currently in effect.
204 Performance of Obligations; Conduct of Business. The Borrower will, and
will cause each Credit Party to, perform all of its obligations under
the terms of each mortgage, indenture, security agreement, loan
agreement or credit agreement and each other material agreement,
contract or instrument by which it is bound, except such
non-performances as could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower and Credit Party
taken as a whole. The Borrower will, and will cause each Credit Party
to, continue to conduct its business in such a manner as could not,
individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the
Borrower and the Credit Parties taken as a whole.
205 Payment of Taxes. The Borrower will pay and discharge, and will cause
each Credit Party to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims for sums that
have become due and payable which, if unpaid, might become a Lien not
otherwise permitted under Section 8.01(i); provided, that neither the
Borrower nor any Credit Party shall be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves
with respect thereto in accordance with generally accepted accounting
principles.
206 Additional Security; Further Assurances. (a) The Borrower will, and
will cause each of the Subsidiary Guarantors to, grant to the Agent
security interests and mortgages in such assets and properties of the
Borrower and such Subsidiary Guarantors as are not covered by the
original Security Documents, as amended and restated pursuant to the
terms of this Agreement, and as may be requested from time to time by
the Agent or the Required Banks, together with the execution of any
reasonably requested financing statements (collectively, the
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Additional Security Documents@). All such security interests and
mortgages shall be granted pursuant to documentation reasonably
satisfactory in form and substance to the Agent and shall constitute
valid and enforceable perfected security interests and mortgages
superior to and prior to the rights of all third Persons and subject to
no other Liens except for Permitted Liens. The Additional Security
Documents or instruments related thereto shall have been duly recorded
or filed in such manner and in such places as are required by law to
establish, perfect, preserve and protect the Liens in favor of the
Agent required to be granted pursuant to the Additional Security
Documents and all taxes, fees and other charges payable in connection
therewith shall have been paid in full.
207 The Borrower will, and will cause each of the Subsidiary Guarantors to,
at the expense of the Borrower, make, execute, endorse, acknowledge,
file and/or deliver to the Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates,
real property surveys, reports and other assurances or instruments and
take such further steps relating to the collateral covered by any of
the Security Documents as the Agent may reasonably require.
Furthermore, the Borrower will cause to be delivered to the Agent such
opinions of counsel, title insurance and other related documents as may
be reasonably requested by the Agent to assure itself that this Section
7.11 has been complied with.
208 The Borrower agrees that each action required above by this Section
7.11 shall be completed as soon as possible, but in no event later than
90 days after such action is either requested to be taken by the Agent
or the Required Banks or required to be taken by the Borrower and the
Subsidiary Guarantors pursuant to the terms of this Section 7.11;
provided that in no event will the Borrower be required to take any
action, other than using its best efforts, to obtain consents from
third parties with respect to its compliance with this Section 7.11.
209 New Jersey Licenses. Borrower shall use its best efforts to obtain, on
or before September 30, 1999, all Licenses required in connection with
the Transaction from the necessary regulatory authorities in the State
of New Jersey.
210 Year 2000 Compliance. The Borrower and its Subsidiaries shall take all
action necessary to assure that Borrower=s and its Subsidiaries=
computer systems and applications, micro-processor based goods and
equipment owned or used by them in their business, and all products
sold by them will be Year 2000 Compliant in a timely manner; and use
reasonable best efforts to assure the Year 2000 Compliance of their
material vendors and suppliers or to assure that failures to be Year
2000 Compliant by such vendors and suppliers will not have a material
adverse effect on the business or operations of Borrower and its
Subsidiaries. Borrower shall provide to Agent by May 31, 1999 its plan
for Year 2000 Compliance referenced in Section 6.25, together with any
later material updates or revisions, and notice of any material
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increase in the estimated costs to Borrower and its Subsidiaries of
achieving Year 2000 Compliance in accordance with such plan; and, at
the request of Agent, Borrower and its Subsidiaries shall provide Agent
assurances acceptable to Agent regarding the Year 2000 Compliance
and/or contingency plans related thereto, of Borrower and its
Subsidiaries and their material vendors and suppliers.
211 Successor Agent. In the event of the appointment of any successor Agent
pursuant to the terms of this Agreement, Borrower and the Credit
Parties shall execute and deliver any documents reasonably requested by
Banks to effectuate and confirm the transfer to such successor Agent of
all rights, powers, duties, obligations and property vested in its
predecessor Agent hereunder.
212 Transactions Among Affiliates. The Borrower and the Credit Parties
shall cause all transactions between and among Affiliates to be on an
arms-length basis and on such terms and conditions as are customary in
the applicable industry between and among unrelated entities.
213 Other Information. The Borrower shall and shall cause its subsidiaries
to provide Banks with any other documents and information, financial or
otherwise, reasonably requested by Banks from time to time.
Negative Covenants. The Borrower hereby covenants and agrees that on and after
the Restatement Effective Date and until the Total Commitment, the Term
Loan and all Letters of Credit have terminated and the Loans, Term
Loan, Revolving Notes, Term Notes and Unpaid Drawings, together with
interest, Fees and all other Obligations incurred hereunder and
thereunder, are paid in full:
214 Liens. The Borrower will not, and will not permit any Credit Party to,
create, incur, assume or suffer to exist any Lien upon or with respect
to any property or assets (real or personal, tangible or intangible) of
the Borrower or any Credit Party whether now owned or hereafter
acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such
property or assets (including sales of accounts receivable with
recourse to the Borrower or any Credit Party), or assign any right to
receive income or permit the filing of any financing statement under
the UCC or any other similar notice of Lien under any similar recording
or notice statute; provided that the provisions of this Section 8.01
shall not prevent the creation, incurrence, assumption or existence of
the following (Liens described below are herein referred to as
APermitted Liens@):
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215 inchoate Liens for taxes, assessments or governmental charges or levies
not yet due or Liens for taxes, assessments or governmental charges or
levies being contested in good faith and by appropriate proceedings for
which adequate reserves have been established in accordance with
generally accepted accounting principles;
216 Liens in respect of property or assets of the Borrower or any Credit
Party imposed by law, which were incurred in the ordinary course of
business and do not secure Indebtedness for borrowed money, such as
carriers=, warehousemen=s, materialmen=s and mechanics= liens and other
similar Liens arising in the ordinary course of business, and (x) which
do not in the aggregate materially detract from the value of the
Borrower=s or such Credit Party=s property or assets or materially
impair the use thereof in the operation of the business of the Borrower
or such Credit Party=s or (y) which are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or assets subject to
any such Lien;
217 Liens in existence on the Restatement Effective Date which are listed,
and the property subject thereto described, in Schedule VIII, but only
to the respective date, if any, set forth in such Schedule VIII for the
removal, replacement and termination of any such Liens, plus renewals,
replacements and extensions of such Liens to the extent set forth on
Schedule VIII, provided that (x) the aggregate principal amount of the
Indebtedness, if any, secured by such Liens does not increase from that
amount outstanding at the time of any such renewal, replacement or
extension and (y) any such renewal, replacement or extension does not
encumber any additional assets or properties of the Borrower or any
Credit Party;
218 Permitted Encumbrances;
219 Liens created pursuant to the Security Documents;
220 leases or subleases granted to other Persons not materially
interfering with the conduct of the business of the Borrower or any
Credit Party;
221 Liens upon assets of the Borrower or any Credit Party subject to
Capitalized Lease Obligations to the extent such Capitalized Lease
Obligations are permitted by Section 8.04(iv), provided that (x) such
Liens only serve to secure the payment of Indebtedness arising under
such Capitalized Lease Obligation and (y) the Lien encumbering the
asset giving rise to the Capitalized Lease Obligation does not encumber
any other asset of the Borrower or any Credit Party;
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222 Liens placed upon equipment or machinery used in the ordinary course of
business of the Borrower or any Credit Party at the time of the
acquisition thereof by the Borrower or any such Credit Party or within
90 days thereafter to secure Indebtedness incurred to pay all or a
portion of the purchase price thereof or to secure Indebtedness
incurred solely for the purpose of financing the acquisition of any
such equipment or machinery or extensions, renewals or replacements of
any of the foregoing for the same or a lesser amount, provided that (x)
the aggregate outstanding principal amount of all Indebtedness secured
by Liens permitted by this clause (viii); shall not at any time exceed
$250,000 and (y) in all events, the Lien encumbering the equipment or
machinery so acquired does not encumber any other asset of the Borrower
or such Credit Party; provided further that Liens may be placed upon
the Charles Town Video Lottery Terminals only pursuant to clause (xiv)
below.
223 easements, rights-of-way, restrictions, encroachments and other similar
charges or encumbrances, and minor title deficiencies, in each case not
securing Indebtedness and not materially interfering with the conduct
of the business of the Borrower or any Credit Party;
224 Liens arising from precautionary UCC financing statement filings
regarding operating leases permitted under Section 8.07;
225 Liens arising out of the existence of judgments or awards in respect of
which the Borrower or any Credit Party shall in good faith be
prosecuting an appeal or proceedings for review in respect of which
there shall have been secured a subsisting stay of execution pending
such appeal or proceedings, provided that the aggregate amount of any
cash and the fair market value of any property subject to such Liens do
not exceed $500,000 at any time outstanding;
226 statutory and common law landlords= liens under leases to which the
Borrower or any Credit Party is a party;
227 Liens (other than Liens imposed under ERISA) incurred in the ordinary
course of business in connection with workers compensation claims,
unemployment insurance and social security benefits and Liens securing
the performance of bids, tenders, leases and contracts in the ordinary
course of business, statutory obligations, surety bonds, performance
bonds and other obligations of a like nature incurred in the ordinary
course of business (exclusive of obligations in respect of the payment
for borrowed money), provided that the aggregate outstanding amount of
obligations secured by Liens permitted by this clause (xiv) (and the
value of all cash and property encumbered by Liens permitted pursuant
to this clause (xiv)) shall not at any time exceed $500,000;
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228 after payment in full in cash to First Union of all amounts outstanding
under the Term Loan, Liens placed upon the Charles Town Video Lottery
Terminals to secure Indebtedness for the purpose of continuing the
financing of the acquisition of such Terminals, or extensions, renewals
or replacements of such Terminals for the same or a lesser amount,
provided that (x) the aggregate outstanding principal amount of all
Indebtedness secured by Liens permitted by this clause (xiv) shall not
at any time exceed $5,000,000 and (y) in all events, the Lien
encumbering the equipment or machinery so acquired does not encumber
any other asset of the Borrower or any Subsidiary; and
229 Liens which may secure Indebtedness of Tennessee Downs, Inc. to the
extent such Indebtedness is permitted by Section 8.04(vii)(B) hereof.
In connection with the granting of Liens of the type described in clauses (vii),
(viii) and (ix) of this Section 8.01 by the Borrower or any Credit Party, the
Agent shall be authorized to take any actions deemed appropriate by it in
connection therewith (including, without limitation, by executing appropriate
lien releases or lien subordination agreements in favor of the holder or holders
of such Liens, in each case solely with respect to the item or items of
equipment or other assets subject to such Liens.
230 Consolidation, Merger, Purchase or Sale of Assets, etc. The Borrower
will not, and will not permit any Credit Party to, wind up, liquidate
or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of all or
any part of its property or assets, or enter into any sale-leaseback
transactions, or purchase or otherwise acquire (in one or a series of
related transactions) any part of the property or assets (other than
purchases or other acquisitions of inventory, materials and equipment
in the ordinary course of business) of any Person (or agree to do any
of the foregoing at any future time), except that:
231 Capital Expenditures by the Borrower and the Credit Parties shall be
permitted to the extent not in violation of Section 8.08;
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232 each of the Borrower and the Credit Parties may sell assets (other than
the capital stock of any Subsidiary Guarantor, the equity interest in
the Charles Town Joint Venture, any Mortgaged Property or the Charles
Town Race Track), so long as (x) no Default or Event of Default then
exists or would result therefrom, (y) each such sale is in an
arm=s-length transaction and the Borrower or the respective Credit
Party receives at least fair market value (as determined in good faith
by the Borrower or such Credit Party, as the case may be), (iii) at
least 85% of the total consideration received by the Borrower or such
Credit Party is cash and is paid at the time of the closing of such
sale, (iv) the Total Commitment is reduced in an amount equal to the
Net Sale Proceeds therefrom as (and to the extent) required by Section
3.03(c) and (v) the aggregate amount of the proceeds received from all
assets sold pursuant to this clause (ii) shall not exceed $3,000,000 in
any fiscal year of the Borrower;
233 Investments may be made to the extent permitted by Section 8.05
(Advances, Investments and Loans);
234 each of the Borrower and the Credit Parties may lease (as lessee) real
or personal property (so long as any such lease does not create a
Capitalized Lease Obligation except to the extent permitted by Section
8.04(iv) (Indebtedness; Capitalized Lease Obligations));
235 each of the Borrower and the Credit Parties may make sales of
inventory in the ordinary course of business;
236 each of the Borrower and the Credit Parties may sell obsolete or
worn-out equipment or materials in the ordinary course of business;
237 each of the Borrower and the Credit Parties may grant leases or
subleases to other Persons not materially interfering with the conduct
of the business of the Borrower or any of the Credit Parties;
238 each of the Borrower and the Credit Parties may, in the ordinary course
of business, license, as licensor or licensee, patents, trademarks,
copyrights and know-how to and/or from third Persons and to and/or from
one another so long as any such license by the Borrower or any other
Credit Party in its capacity as licensor is permitted to be assigned
pursuant to the Security Agreement (to the extent that the security
interest in such patents, trademarks, copyrights and know-how is
granted thereunder) and does not otherwise prohibit the granting of a
Lien by the Borrower or any other Credit Party pursuant to the Security
Agreement in the intellectual property covered by such license; and
239 so long as no Default or Event of Default then exists, any Wholly-Owned
Subsidiary of the Borrower may merge with and into any other
Wholly-Owned Subsidiary of the Borrower, so long as in the case of any
merger involving a Subsidiary Guarantor, the Subsidiary Guarantor shall
be the surviving corporation of such merger.
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To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale of any Collateral, or any Collateral is sold as permitted by
this Section 8.02 (other than to the Borrower or a Subsidiary thereof), such
Collateral shall be sold free and clear of the Liens created by the Security
Documents, and the Agent shall be authorized to take any actions deemed
appropriate in order to effect the foregoing.
240 Restricted Payments. The Borrower will not, and will not permit any
Credit Party to, make any Restricted Payments, except that:
241 (A) any Credit Party may pay cash Dividends to the Borrower or any
Wholly-Owned Subsidiary of the Borrower; (B) long as no Default or
Event of Default then exists or would result therefrom, any
non-Wholly-Owned Subsidiary of the Borrower may pay cash Dividends to
its shareholders or partners generally so long as the Borrower or the
Credit Party which owns the equity interest or interests in the Credit
Party paying such Dividends receives at least its proportionate share
thereof (based upon its relative holdings of equity interests in the
Credit Party paying such Dividends and taking into account the relative
preferences, if any, of the various classes of equity interests in such
Credit Party, including the preferences in favor of the Borrower in
respect of Dividends paid by the Charles Town Joint Venture); and (C)
so long as there shall exist no Default or Event of Default (both
before and after giving effect to the payment thereof), the Borrower
may repurchase outstanding shares of its common stock (or options to
purchase such common stock) following the death, disability or
termination of employment of employees of the Borrower or any Credit
Party; provided that the aggregate amount of Dividends and other
Restricted Payments paid by the Borrower pursuant to clauses (i) (A-C)
hereof shall not exceed $250,000 in the aggregate for the fiscal year
ending December 31, 1999 and for each fiscal year thereafter shall not
exceed the amount approved by Required Banks for such fiscal year.
242 so long as there is no Default or Event of Default hereunder and no
Default or Event of Default would be caused thereby, the Borrower may
pay regularly scheduled interest and principal on the Senior Notes.
243 Indebtedness. The Borrower will not, and will not permit any Credit
Party to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
244 Indebtedness incurred pursuant to this Agreement and the other Credit
Documents;
245 Existing Indebtedness outstanding on the Restatement Effective Date and
listed on Schedule VI, without giving effect to any subsequent
extension, renewal or refinancing thereof except to the extent set
forth on Schedule VI, provided that the aggregate principal amount of
the Indebtedness to be extended, renewed or refinanced does not
increase from that amount outstanding at the time of any such
extension, renewal or refinancing;
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246 Indebtedness under Interest Rate Protection Agreements entered into
with respect to other Indebtedness permitted under this Section 8.04 so
long as all of the terms and conditions of such Interest Rate
Protection Agreements are satisfactory to the Agent;
247 Indebtedness subject to Liens permitted under Section 8.01(viii)
(purchase money security interests);
248 intercompany Indebtedness among the Borrower and the Credit Parties to
the extent permitted by Section 8.05(vii) (intercompany loans evidenced
by pledged Intercompany Notes) and (ix) (Charles Town Joint Venture
Indebtedness);
249 Indebtedness of the Borrower and the Subsidiary Guarantors under the
Senior Note Documents in an aggregate principal amount not to exceed
$150,000,000 (as reduced by any repayments of principal thereof); and
250 (A) additional unsecured Indebtedness of the Borrower and the Credit
Parties, which Indebtedness shall not mature until after the Final
Maturity Date and (B) so long as there is no Default or Event of
Default and no Default or Event would be caused thereby, additional
Indebtedness of Tennessee Downs, Inc., which Indebtedness may be
secured and which Indebtedness shall not mature until after the Final
Maturity Date; provided that the Indebtedness described in clauses
(vii) (A) and (B) hereof shall not exceed, in the aggregate,
$16,000,000 in aggregate principal amount at any time outstanding.
Notwithstanding anything to the contrary contained in this
Section 8.04 or in Section 8.01 (Liens), until such time as the Charles Town
Joint Venture is a Wholly-Owned Subsidiary of the Borrower, Penn National Gaming
of West Virginia, Inc. shall not permit the Charles Town Joint Venture to incur
any Indebtedness other than existing Indebtedness of the Charles Town Joint
Venture which is also listed on Schedule VI and intercompany loans evidenced by
pledged Intercompany Notes (but no refinancings thereof).
251 Advances, Investments and Loans. The Borrower will not, and will not
permit any Credit Party to, directly or indirectly, lend money or
credit or make advances to any Person, or purchase or acquire any
stock, obligations or securities of, or any other interest in, or make
any capital contribution to, any other Person, or purchase or own a
futures contract or otherwise become liable for the purchase or sale of
currency or other commodities at a future date in the nature of a
futures contract, or hold any cash or Cash Equivalents (each of the
foregoing an AInvestment@ and, collectively, AInvestments@), except
that the following shall be permitted:
252 the Borrower and each Credit Party may acquire and hold accounts
receivables owing to any of them, if created or acquired in the
ordinary course of business and payable or dischargeable in accordance
with customary trade terms of the Borrower or such Credit Party;
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253 the Borrower and each Credit Party may acquire and hold cash and Cash
Equivalents;
254 the Borrower and each Credit Party may hold the Investments held by
them on the Restatement Effective Date and described on Schedule IX
(excluding any Investments previously made in the Charles Town Joint
Venture), provided that any additional Investments made with respect
thereto shall be permitted only if independently justified under the
other provisions of this Section 8.05;
255 the Borrower and each Credit Party may receive non-cash consideration
in connection with any asset sale permitted by Section 8.02(ii) but
only to the extent set forth in Section 8.02(ii);
256 the Borrower and each Credit Party may make loans and advances in the
ordinary course of business to their respective employees so long as
the aggregate principal amount thereof at any time outstanding
(determined without regard to any write-downs or write-offs of such
loans and advances) shall not exceed $100,000;
257 the Borrower may enter into Interest Protection Agreements to the extent
permitted by Section 8.04(iii);
258 the Borrower and the Subsidiary Guarantors may make intercompany loans
and advances between or among one another (collectively, AIntercompany
Loans@), so long as each Intercompany Loan shall be evidenced by an
Intercompany Note that is pledged to the Agent pursuant to the Pledge
Agreement;
259 the Borrower and the Credit Parties may make cash capital
contributions to Subsidiaries of the Borrower which are Subsidiary
Guarantors; and
260 the Borrower and the Credit Parties may make Investments in the Charles
Town Joint Venture in an aggregate amount not to exceed $47,566,007
plus accrued interest.
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261 (a) Prior to the date of the Transaction Conversion, the Borrower or a
wholly-owned Subsidiary may make a loan to FRPRLP not exceeding
$11,250,000 pursuant to the terms of the Transaction, which loan shall
be evidenced by a note that is pledged to the Agent pursuant to the
Pledge Agreement; (b) on the date of the Transaction Conversion, the
Borrower or a wholly-owned Subsidiary may invest an amount not in
excess of an additional $11,750,000 in the New Jersey Joint Venture
Entities; and (c) 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,
Borrower may (i) make payments of up to $8,750,000 to effect the Put
(as defined in the New Jersey Joint Venture Agreement) obligation
required of the Borrower pursuant to Paragraph 5 of the New Jersey
Joint Venture Agreement and (ii) may make payments required to be made
under the Contingent Guaranty (as defined in the New Jersey Joint
Venture Agreement) entered into pursuant to the New Jersey Joint
Venture Agreement; provided, however, that neither the Borrower nor any
Credit Party shall permit the Transaction Documents to include any
provision which requires Borrower or any Credit Party to, nor shall
Borrower or any Credit Party, loan, advance, guaranty or invest in any
New Jersey Joint Venture Entity; provided, further, however, that
Borrower or a wholly-owned Subsidiary may: (i) loan or invest up to
$23,000,000 in the New Jersey Joint Venture; (ii) subject to Section
8.05(x), expend up to $8,750,000 in connection with the exercise of the
Put; (iii) subject to Section 8.05(x), 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 (iii) expend up to
$1,250,000 on transaction expenses related to the New Jersey Joint
Venture.
262 Transactions with Affiliates. The Borrower will not, and will not
permit any Credit Party to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of
business, with any Affiliate of the Borrower or any Credit Party, other
than in the ordinary course of business and on terms and conditions
substantially as favorable to the Borrower or such Credit Party as
would reasonably be obtained by the Borrower or such Credit Party at
that time in a comparable arm=s-length transaction with a Person other
than an Affiliate, except that the following in any event shall be
permitted:
263 Dividends may be paid to the extent provided in Section 8.03 (Dividends;
Subordinated Debt);
264 loans may be made and other transactions may be entered into by the
Borrower and each Credit Party to the extent permitted by Sections 8.02
(Consolidation, Merger, Purchase or Sale of Assets, etc.), 8.04
(Indebtedness) and 8.05 (Advances, Investments and Loans);
265 customary fees may be paid to non-officer directors of the Borrower and the
Credit Parties; and
266 Credit Parties may pay management fees to the Borrower.
267 Leases. The Borrower will not permit the aggregate payments (including,
without limitation, any property taxes paid as additional rent or lease
payments) made by the Borrower and each Credit Party on a consolidated
basis under any agreement to rent or lease any real or personal
property (or any extension or renewal thereof) (excluding Capitalized
Lease Obligations) to exceed: (x) for the fiscal year of Borrower
ending December 31, 1999, $1,400,000 and (y) for any fiscal year of the
Borrower ending after December 31, 1999, the amount approved by
Required Banks for such fiscal year in excess of $1,400,000.
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268 Capital Expenditures. (a) The Borrower will not, and will not permit
any Credit Party to, make any Capital Expenditures, except that (x)
during the fiscal year of the Borrower ending December 31, 1999, the
Borrower and the Credit Parties may make Capital Expenditures so long
as the aggregate amount of all such Capital Expenditures does not
exceed in such fiscal year of the Borrower $9,000,000 and (y) during
any fiscal year of the Borrower ending after December 31, 1999 the
Borrower and each Credit Party may make Capital Expenditures that do
not exceed the amount approved by Required Banks for such fiscal year.
269 In addition to the foregoing, the Borrower and each Credit Party may
make Capital Expenditures with the amount of Net Insurance Proceeds
received by the Borrower or any Credit Party from any Recovery Event so
long as such Net Insurance Proceeds are used to replace or restore any
properties or assets in respect of which such Net Insurance Proceeds
were paid within 270 days following the date of receipt of such Net
Insurance Proceeds from such Recovery Event to the extent such Net
Insurance Proceeds do not give rise to a reduction in the Total
Commitment pursuant to Section 3.03(e).
270 From and after such time as Tennessee Downs obtains all necessary
licenses, permits and approvals to conduct harness racing in the State
of Tennessee, Tennessee Downs may make up to $16,000,000 of Capital
Expenditures to purchase and/or develop a harness race track and
related facilities in the State of Tennessee.
271 Minimum Consolidated Net Worth. The Borrower will not permit Consolidated
Net Worth at any time to be less than the Minimum Consolidated Net
Worth at such time.
272 Consolidated Cash Interest Coverage Ratio. The Borrower will not permit
the Consolidated Cash Interest Coverage Ratio of the Borrower and its
consolidated Subsidiaries at any time during a period set forth below
for any Test Period ending on the last day set forth below to be less
than the ratio set forth opposite such period below:
Period Ratio
Restatement Effective Date through
September 30, 1999 2.50:1.00
October 1, 1999
and thereafter 3.00:1.00
273 Maximum Leverage Ratio. The Borrower will not permit the Leverage Ratio
of the Borrower and its consolidated Subsidiaries at any time during a
period set forth below to be greater than the ratio set forth opposite
such period below:
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Period Ratio
Restatement Effective Date through and including
December 31, 1999 4.00:1.00
January 1, 2000 through and including
December 31, 2000 3.50:1.00
January 1, 2001 and thereafter 3.00:1.00
274 Limitation on Modifications of Certificate of Incorporation, By-Laws
and Certain Other Agreements; etc. The Borrower will not, and will not
permit any Credit Party to, (i) amend, modify or change its certificate
of incorporation (including, without limitation, by the filing or
modification of any certificate of designation) or by-laws (or the
equivalent organizational documents) or any agreement entered into by
it with respect to its capital stock (including any Shareholders=
Agreement), or enter into any new agreement with respect to its capital
stock, other than any such amendment, modification, change or other
action contemplated by this clause (i) which could not reasonably be
expected to be adverse to the interests of the Banks in any material
respect, or (ii) amend, modify or change the Charles Town Joint Venture
Agreement, other than any such amendment, modification or change which
could not reasonably be expected to be adverse to the interests of the
Banks in any material respect (it being understood and agreed, however,
that in any event the Borrower or a Wholly-Owned Subsidiary thereof
shall at all times be the managing member of the Charles Town Joint
Venture and shall own at least 89% of the equity interest therein),
(iii) amend, modify or change the Transaction Documents other than any
such amendment, modification or change which could not reasonably be
expected to be adverse to the interests of the Banks in any material
respect, or (iv) amend, modify or change any provision of any Tax
Sharing Agreement or enter into any new tax sharing agreement, tax
allocation agreement or similar agreements, other than any such
amendment, modification, change or other action contemplated by this
clause (iv) which could not reasonably be expected to adversely effect
the interests of the Banks in any material respect.
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275 Limitation on Certain Restrictions on Subsidiaries. Subject to Section
8.16, the Borrower will not, and will not permit any Credit Party to,
directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
such Subsidiary to (a) pay dividends or make any other distributions on
its capital stock or any other interest or participation in its profits
owned by the Borrower or any Credit Party, or pay any Indebtedness owed
to the Borrower or any Credit Party, (b) make loans or advances to the
Borrower or any Subsidiary of the Borrower or (c) transfer any of its
properties or assets to the Borrower or any Credit Party, except for
such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) this Agreement and the other Credit Documents,
(iii) customary provisions restricting subletting or assignment of any
lease governing a leasehold interest of the Borrower or any Credit
Party, (iv) customary provisions restricting assignment of any
licensing agreement entered into by the Borrower or any Credit Party in
the ordinary course of business and (v) restrictions on the transfer of
any asset subject to a Lien permitted by this Agreement.
276 Limitation on Issuance of Capital Stock. (a) The Borrower will not, and
will not permit any Credit Party to, issue (i) any preferred stock
(subject to Section 8.14(b) or (ii) any redeemable common stock (other
than, in the absence of a Default or Event of Default and if such
issuance will not cause a Default or Event of Default, common stock
that is redeemable after the Final Maturity Date or at the sole option
of the Borrower).
277 The Borrower will not permit any Subsidiary Guarantor to issue any
capital stock (other than, in the absence of a Default or Event of
Default and if such issuance will not cause a Default or Event of
Default, preferred stock that is redeemable after the Final Maturity
Date and including by way of sales of treasury stock) or any options or
warrants to purchase, or securities convertible into, capital stock,
except (i) for transfers and replacements of then outstanding shares of
capital stock, (ii) for stock splits, stock dividends and issuances
which do not decrease the percentage ownership of the Borrower or any
Credit Party in any class of the capital stock of such Credit Party,
(iii) to qualify directors to the extent required by applicable law or
(iv) for issuances by newly created or acquired Subsidiaries in
accordance with the terms of this Agreement.
278 Business. The Borrower will not, and will not permit any Credit Party
to, engage (directly or indirectly) in any business other than the
businesses in which the Borrower and Credit Parties are engaged on the
Restatement Effective Date and reasonable extensions thereof, it being
understood and agreed that, except as provided below, in no event shall
the Borrower or any Credit Party engage in any business or enter into
any agreement which requires the Borrower or any Credit Party to make
any payments under Section 4 of the Plains Company Acquisition
Agreement; provided, however, the Borrower and the Credit Parties may
operate slot machines at the Penn National Race Track, the Pocono Downs
Race Track and at any Non-Primary Location operated by the Borrower and
the Credit Parties and may make the required payments pursuant to
Section 4 of the Plains Company Acquisition Agreement in connection
therewith.
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279 Guaranties. The Borrower will not and will not permit any Credit Party
to guarantee or assume to agree to become liable in any way, either
directly or indirectly, for any additional Indebtedness or liabilities
of others except to endorse checks or drafts in the ordinary course of
business; provided, however, that with the written approval of Required
Banks, the Borrower or a Credit Party may guarantee Indebtedness of a
New Jersey Joint Venture Entity (in addition to the Contingent Guaranty
referred to in Paragraph 8.05 hereof) on terms and conditions
satisfactory to Required Banks.
280 Limitation on Creation of Subsidiaries. Notwithstanding anything to the
contrary contained in this Agreement, the Borrower will not, and will
not permit any Credit Party to, establish, create or acquire after the
Restatement Effective Date any Subsidiary, provided that the Borrower
and its Wholly-Owned Subsidiaries shall be permitted to establish or
create Wholly-Owned Subsidiaries so long as (i) the capital stock of
such new Wholly-Owned Subsidiary is pledged pursuant to, and to the
extent required by, the Pledge Agreement and the certificates
representing such stock, together with stock powers duly executed in
blank, are delivered to the Agent for the benefit of the Secured
Creditors, (ii) the partnership interests or limited liability company
interests, as the case may be, of such new Wholly-Owned Subsidiary (to
the extent that same is a partnership or a limited liability company,
as the case may be) are pledged and assigned pursuant to, and to the
extent required by, the Pledge Agreement, (iii) such new Wholly-Owned
Subsidiary executes a counterpart of the Subsidiaries Guaranty, the
Pledge Agreement and the Security Agreement, and (iv) such new
Wholly-Owned Subsidiary, to the extent requested by the Agent or the
Required Banks, takes all actions required pursuant to Section 7.11. In
addition, (x) each new Wholly-Owned Subsidiary shall execute and
deliver, or cause to be executed and delivered, all other relevant
documentation of the type described in Section 5 as such new
Wholly-Owned Subsidiary would have had to deliver if such new
Wholly-Owned Subsidiary were a Credit Party on the Restatement
Effective Date (including without limitation a joinder to: this
Agreement, the Notes, the Subsidiaries Guaranty and the Security
Documents) and (y) at such time as the Charles Town Joint Venture
becomes a Wholly-Owned Subsidiary of the Borrower, or at such time as
the Charles Town Joint Venture Agreement permits the Charles Town Joint
Venture to become a Subsidiary Guarantor hereunder (or the Charles Town
Minority Owners otherwise consent thereto), the Borrower shall cause
the Charles Town Joint Venture (A) to execute a counterpart of the
Subsidiaries Guaranty, the Pledge Agreement and the Security Agreement,
(B) to the extent requested by the Agent or the Required Banks, to take
all actions required pursuant to Section 7.11 and (C) to deliver all of
the relevant documentation described in preceding clause (x) of this
sentence.
Events of Default. Upon the occurrence of any of the following specified events
(each an AEvent of Default@):
281 Payments. The Borrower shall (i) default in the payment when due of any
principal of any Loan or any Note (ii) default, and such default shall
continue unremedied for three or more Business Days, in the payment
when due of any interest on any Loan or Note, any Unpaid Drawing or any
Fees or any other amounts owing hereunder or thereunder; or
282 Representations, etc. Any representation, warranty or statement made
(or deemed made) by any Credit Party herein or in any other Credit
Document or in any certificate delivered to the Agent or any Bank
pursuant hereto or thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made; or
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283 Covenants. Any Credit Party shall (i) default in the due performance or
observance by it of any term, covenant or agreement contained in
Section 7.01(g)(i) or 7.08 or Section 8 or (ii) default in the due
performance or observance by it of any other term, covenant or
agreement contained in this Agreement or any other Credit Document
(other than those set forth in Sections 9.01 and 9.02) and such default
shall continue unremedied for a period of 30 days after written notice
thereof to the defaulting party by the Agent or the Required Banks; or
284 Default Under Other Agreements. (i) The Borrower or any of its
Subsidiaries shall (x) default in any payment of any Indebtedness
(other than the Notes) beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness was created
or (y) default in the observance or performance of any agreement or
condition relating to any Indebtedness (other than the Notes) or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause (determined without
regard to whether any notice is required), any such Indebtedness to
become due prior to its stated maturity; (ii) any Indebtedness (other
than the Notes) of the Borrower or any Credit Party shall be declared
to be (or shall become) due and payable, or required to be prepaid
other than by a regularly scheduled required prepayment, prior to the
stated maturity thereof, provided that it shall not be a Default or an
Event of Default under this Section 9.04 unless the aggregate principal
amount of all Indebtedness as described in preceding clauses (i) and
(ii) is at least $500,000; or (iii) the Borrower or any Credit Party
shall default in the performance of its obligations under any material
contract (other than contracts for Indebtedness); or
285 Bankruptcy, etc. The Borrower or any of its Subsidiaries shall commence
a voluntary case concerning itself under Title 11 of the United States
Code entitled ABankruptcy,@ as now or hereafter in effect, or any
successor thereto (the ABankruptcy Code@); or an involuntary case is
commenced against the Borrower or any of its Subsidiaries, and the
petition is not controverted within 10 days, or is not dismissed within
60 days, after commencement of the case; or a custodian (as defined in
the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Borrower or any of its
Subsidiaries, or the Borrower or any of its Subsidiaries commences any
other proceeding under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect
relating to the Borrower or any of its Subsidiaries, or there is
commenced against the Borrower or any of its Subsidiaries any such
proceeding which remains undismissed for a period of 60 days, or the
Borrower or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case
or proceeding is entered; or the Borrower or any of its Subsidiaries
suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed
for a period of 60 days; or the Borrower or any of its Subsidiaries
makes a general assignment for the benefit of creditors; or any
corporate action is taken by the Borrower or any of its Subsidiaries
for the purpose of effecting any of the foregoing; or
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286 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard
required for any plan year or part thereof under Section 412 of the
Code or Section 302 of ERISA or a waiver of such standard or extension
of any amortization period is sought or granted under Section 412 of
the Code or Section 303 or 304 of ERISA, a Reportable Event shall have
occurred, any Plan which is subject to Title IV of ERISA shall have had
or is likely to have a trustee appointed to administer such Plan, any
Plan which is subject to Title IV of ERISA is, shall have been or is
likely to be terminated or to be the subject of termination proceedings
under ERISA, any Plan shall have an Unfunded Current Liability, a
contribution required to be made with respect to a Plan or a Foreign
Pension Plan has not been timely made, the Borrower or any Subsidiary
of the Borrower or any ERISA Affiliate has incurred or is likely to
incur any liability to or on account of a Plan under Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of
a group health plan (as defined in Section 607(1) of ERISA or Section
4980B(g)(2) of the Code) under Section 4980B of the Code, or the
Borrower or any Subsidiary of the Borrower has incurred or is likely to
incur liabilities pursuant to one or more employee welfare benefit
plans (as defined in Section 3(1) of ERISA) that provide benefits to
retired employees or other former employees (other than as required by
Section 601 of ERISA) or Plans; (b) there shall result from any such
event or events the imposition of a lien, the granting of a security
interest, or a liability or a material risk of incurring a liability;
and (c) such lien, security interest or liability, individually, and/or
in the aggregate, in the opinion of the Required Banks, has had, or
could reasonably be expected to have, a material adverse effect on the
business, operations, property, assets, liabilities, condition
(financial or otherwise) o prospects of the Borrower and its
Subsidiaries taken as a whole; or
287 Security Documents. At any time after the execution and delivery
thereof, any of the Security Documents, as amended, shall cease to be
in full force and effect, or shall cease to give the Agent for the
benefit of the Secured Creditors the Liens, rights, powers and
privileges purported to be created thereby (including, without
limitation, a perfected security interest in, and Lien on, all of the
Collateral, in favor of the Agent, superior to and prior to the rights
of all third Persons (except Permitted Liens), and subject to no other
Liens (except Permitted Liens); or
288 Subsidiaries Guaranty. At any time after the execution and delivery
thereof, the Subsidiaries Guaranty or any provision thereof shall cease
to be in full force or effect as to any Subsidiary Guarantor, or any
Subsidiary Guarantor or any Person acting by or on behalf of such
Subsidiary Guarantor shall deny or disaffirm such Subsidiary
Guarantor=s obligations under the Subsidiaries Guaranty or any
Subsidiary Guarantor shall default in the due performance or observance
of any term, covenant or agreement on its part to be performed or
observed pursuant to the Subsidiaries Guaranty; or
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289 Judgments. One or more judgments or decrees shall be entered against
the Borrower or any Subsidiary of the Borrower involving in the
aggregate for the Borrower and its Subsidiaries a liability (not paid
or fully covered by a reputable and solvent insurance company) and such
judgments and decrees either shall be final and non-appealable or shall
not be vacated, discharged or stayed or bonded pending appeal for any
period of 30 consecutive days, and the aggregate amount of all such
judgments exceeds $500,000; or
290 Change of Control. A Change of Control shall occur; or
291 Governmental Authorities; Licenses. If custody or control of any
substantial part of the property of Borrower or any Credit Party shall
be assumed by any governmental agency, including without limitation any
Commission, or any court of competent jurisdiction at the instance of
any governmental agency, including without limitation any Commission;
the termination, suspension or revocation of any License, or the
existence of any circumstance, event, matter or condition which under
any Act would permit any Commission to terminate, revoke or suspend any
such License, or any Commission shall require the Borrower or any
Credit Party to divest any License or its equity interest in any
Subsidiary owning or holding any License; or if any governmental
regulatory authority or judicial body, including without limitation any
Commission, shall make any other final non-appealable determination,
the effect of which would be to affect materially and adversely the
operations of Borrower or any Credit Party as now conducted; or
292 Applications. If in any year the Borrower does not, or does not cause
one Credit Party to, submit all appropriate applications to the
Pennsylvania Horse Racing Commission and the Pennsylvania Harness
Racing Commission to conduct live horse racing at the Penn National
Race Track and the Pocono Downs Race Track, or to conduct full card
simulcasting at any such Track, in each case in the immediately
following calendar year; or if in any year the Borrower does not, or
does not cause one Credit Party to, submit all appropriate applications
to the West Virginia Racing Commission to conduct live horse racing at
the Charles Town Race Track in the immediately following calendar year;
or if in any year the Borrower does not, or does not cause one Credit
Party to, submit all appropriate applications to the West Virginia
Lottery Commission for a license to operate at least 1000 video lottery
terminals in the immediately following fiscal year of the license (or
such higher number of video lottery terminals as the Borrower or such
Subsidiary may have previously been granted a license to operate);
293 Legality. At any time the conduct of live thoroughbred racing, live
harness racing or full card simulcasting in Pennsylvania cannot legally
be conducted at the Pocono Downs Race Track or the Penn National Race
Track or off-track wagering cannot legally be conducted at the
Non-Primary Locations operated by the holders of the Penn National
Licenses or the Plains Company Licenses, in each case under applicable
Pennsylvania or federal law; or the conduct of live horse racing,
televised racing or operation of video lottery terminals in West
Virginia cannot legally be conducted at the Charles Town Race Track
under applicable West Virginia or federal law;
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then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent may, and upon the written request of the
Required Banks shall, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent, any Bank or the
holder of any Note to enforce its claims against any Credit Party (provided,
that, if an Event of Default specified in Section 9.05 shall occur with respect
to the Borrower, the result which would occur upon the giving of written notice
by the Agent as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Commitment terminated, whereupon the Commitment of each Bank shall forthwith
terminate immediately and any Commitment Commission shall forthwith become due
and payable without any other notice of any kind; (ii) declare the principal of
and any accrued interest in respect of all Loans and Notes, and all Obligations
owing hereunder and thereunder to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each Credit Party; (iii) terminate any
Letter of Credit which may be terminated in accordance with its terms; (iv)
direct the Borrower to pay (and the Borrower agrees that upon receipt of such
notice, or upon the occurrence of an Event of Default specified in Section 9.05
with respect to the Borrower, it will pay) to the Agent at the Payment Office
such additional amount of cash or Cash Equivalents, to be held as security by
the Agent, as is equal to the aggregate Stated Amount of all Letters of Credit
issued for the account of the Borrower and then outstanding; (v) enforce, as
Agent, all of the Liens and security interests created pursuant to the Security
Documents and (vi) apply any cash collateral held by the Borrower pursuant to
Section 4.02(a) to the repayment of the Obligations.
Definitions and Accounting Terms.
294 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
AAct@ shall mean (i) the Pennsylvania Horse Race Industry
Reform Act, as amended, (ii) the West Virginia Racetrack Video Lottery Act, as
amended, or (iii) the West Virginia Code " 19-23-1 et. seq., as amended, as
applicable and including, in each case, any successor thereto.
AAdditional Mortgages@ shall have the meaning provided in
Section 5.12.
AAdditional Security Documents@ shall have the meaning
provided in Section 7.11.
AAffiliate@ shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power (i)
to vote 5% or more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.
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AAgent@ shall mean First Union National Bank, successor by
merger to CoreStates Bank, N.A., in its capacity as Agent for the Banks
hereunder, and shall include any successor to the Agent appointed pursuant to
Section 11.09.
AAgreement@ shall mean this Credit Agreement, as modified,
supplemented, amended, restated (including any amendment and restatement
hereof), extended, renewed, refinanced or replaced from time to time.
AApplicable Margin@ shall mean a percentage per annum equal to
(i) in the case of Base Rate Loans, the applicable percentage set forth in the
column titled AApplicable Base Rate Margin@ on Exhibit M hereto, and (ii) in the
case of Eurodollar Loans, the applicable percentage set forth in the column
titled AApplicable Eurodollar Margin@ on Exhibit M hereto. The initial
Applicable Margin shall be determined on the Restatement Effective Date by
reference to the Leverage Ratio of Borrower and its consolidated Subsidiaries as
reported on the officer=s certificate in the form of Exhibit N delivered by
Borrower to Agent on the Restatement Effective Date; provided, however, that the
calculations on such certificate are preliminary calculations, and if final
calculations at a later date shall result in an increase of the Applicable
Margin, the Applicable Margin shall be readjusted retroactively to the
Restatement Effective Date. Adjustments, if any, in the Applicable Margin shall
be made by the Agent on the tenth (10th) Business Day after receipt by the Agent
of the quarterly financial statements of Borrower and its consolidated
Subsidiaries required by Section 7.01(b) and the accompanying officer=s
certificate required by Section 7.01(f), setting forth the Leverage Ratio of
Borrower and its consolidated Subsidiaries as of the most recent fiscal quarter
end. In the event the Borrower fails to deliver such financial statements and
certificate within the time required by Sections 7.01(b) and 7.01(f), the
Applicable Margin shall be at Level I until the delivery of such financial
statements and certificate; provided, further, however, that the Applicable
Margin shall readjust retroactively to the date such financial statements and
certificate were required to be delivered by Section 7.01(f) if the Applicable
Margin shall increase based on such financial statements and certificate and
shall readjust on the day after delivery of such delinquent financial statements
or certificate if the Applicable Margin shall decrease or remain the same based
on the ratio set forth in such certificate.
AAsset Sale@ shall mean any sale, transfer or other
disposition by the Borrower or any Credit Party to any Person (including
by-way-of redemption by such Person) other than to the Borrower or a
Wholly-Owned Subsidiary of the Borrower of any asset (including, without
limitation, any capital stock or other securities of, or equity interests in,
another Person) other than sales of assets pursuant to Sections 8.02 (v), (vi),
(vii) and (viii).
AAssignment and Assumption Agreement@ shall mean an Assignment
and Assumption Agreement substantially in the form of Exhibit K (appropriately
completed).
ABank@ shall mean each financial institution listed on
Schedule I, as well as any Person which becomes a ABank@ hereunder pursuant to
Section 1.13 or 12.04(b).
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ABank Default@ shall mean (i) the refusal (which has not been
retracted) or the failure of a Bank to make available its portion of any
Borrowing or to fund its portion of any unreimbursed payment under Section
2.04(c) or (ii) a Bank having notified in writing the Borrower and/or the Agent
that such Bank does not intend to comply with its obligations under Section 1.01
or 2, in the case of either clause (i) or (ii) as a result of any takeover or
control (including, without limitation, as a result of the occurrence of any
event of the type described in Section 9.05 with respect to such Bank) of such
Bank by any Commission or agency.
ABankruptcy Code@ shall have the meaning provided in Section
9.05.
ABase Rate@ shall mean, at any time, the higher of (i) the
Prime Lending Rate and (ii) 2 of 1% in excess of the Federal Funds Rate.
ABase Rate Loan@ shall mean each Loan designated or deemed
designated as such by the Borrower at the time of the incurrence thereof or
conversion thereto.
ABorrower@ shall have the meaning provided in the first
paragraph of this Agreement.
ABorrowing@ shall mean the borrowing of one Type of Revolving
Loan on a given date (or resulting from a conversion or conversions on such
date) having in the case of Eurodollar Loans the same Interest Period, provided
that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered
part of the related Borrowing of Eurodollar Loans.
ABusiness Day@ shall mean (i) for all purposes other than as
covered by clause (ii) below, any day other than a Saturday, Sunday or legal
holiday on which banks in Charlotte, North Carolina and New York, New York, are
open for the conduct of their commercial banking business and (ii) with respect
to all notices and determinations in connection with, and payments of principal
and interest on, any Eurodollar Loan, any day that is a Business Day described
in clause (i) above and that is also a day for trading by and between banks in
Dollar deposits in the London interbank market.
ACapital Expenditures@ shall mean, with respect to any Person,
all expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles and, without duplication, the amount of
Capitalized Lease Obligations incurred by such Person.
ACapitalized Lease Obligations@ shall mean, with respect to
any Person, all rental obligations of such Person which, under generally
accepted accounting principles, are or will be required to be capitalized on the
books of such Person, in each case taken at the amount thereof accounted for as
indebtedness in accordance with such principles.
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ACash Equivalents@ shall mean, as to any Person, (i)
securities issued or directly and fully guaranteed or insured by the United
States or any agency or instrumentality thereof (provided that the full faith
and credit of the United States is pledged in support thereof) having maturities
of not more than six months from the date of acquisition, (ii) Dollar
denominated time deposits and certificates of deposit of any commercial bank
having, or which is the principal banking subsidiary of a bank holding company
having, a long-term unsecured debt rating of at least AA@ or the equivalent
thereof from Standard & Poor=s Ratings Services or AA2@ or the equivalent
thereof from Moody=s Investors Service, Inc. with maturities of not more than
six months from the date of acquisition by such Person, (iii) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv) commercial paper issued by
any Person incorporated in the United States rated at least A-1 or the
equivalent thereof by Standard & Poor=s Ratings Services or at least P-1 or the
equivalent thereof by Moody=s Investors Service, Inc. and in each case maturing
not more than six months after the date of acquisition by such Person and (v)
investments in money market funds substantially all of whose assets are
comprised of securities of the types described in clauses (i) through (iv)
above.
ACERCLA@ shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C. ' 9601 et seq.
AChambersburg Property@ shall mean the real property of
Borrower located in Chambersburg, Pennsylvania upon which the collateral agent
under the Original Credit Agreement held a mortgage.
AChange of Control@ shall mean (i) any Person or Agroup@
(within the meaning of Rules 13d-3 or 13d-5 under the Securities Exchange Act
(as in effect on the Restatement Effective Date)), other than the Permitted
Holders, shall (A) have acquired beneficial ownership of 25% or more on a fully
diluted basis of the voting and/or economic interest in the Borrower=s capital
stock or (B) have obtained the power (whether or not exercised) to elect a
majority of the Borrowers= directors, (ii) the Board of Directors of the
Borrower shall cease to consist of a majority of Continuing Directors, (iii) the
Permitted Holders shall cease to collectively own at least 25% on a fully
diluted basis of the voting and/or economic interest in the Borrower=s capital
stock or (iv) a Achange of control@ or similar event shall occur under, and as
defined in, the Senior Note Documents.
ACharles Town Joint Venture@ shall mean PNGI Charles Town
Gaming Limited Liability Company, a West Virginia limited liability company.
ACharles Town Joint Venture Agreement@ shall mean the Second
Amended and Restated Operating Agreement of the Charles Town Joint Venture dated
October 17, 1997.
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ACharles Town Licenses@ shall mean the licenses to conduct
horse racing issued to the Borrower or one Credit Party by the West Virginia
Racing Commission and to conduct video lottery issued to the Borrower or one
Credit Party by the West Virginia Lottery Commission.
ACharles Town Minority Owners@ shall mean the four individuals
and one entity which hold, collectively, an 11% equity interest in the Charles
Town Joint Venture as of the Restatement Effective Date.
ACharles Town Races@ shall mean Charles Town Races, Inc., a
West Virginia corporation.
ACharles Town Race Track@ shall mean Charles Town Race Track
located in Jefferson County, West Virginia.
ACharles Town Video Lottery Terminals@ shall mean the video
lottery terminals used at the Charles Town Race Track acquired by Borrower
through the purchase of the Gtech Contract in November, 1998 and from time to
time after the date hereof, other video lottery terminals used at the Charles
Town Race Track located in Jefferson County, West Virginia.
ACode@ shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
ACollateral@ shall mean all property (whether real or
personal) with respect to which any security interests have been granted (or
purported to be granted) pursuant to any Security Document, including, without
limitation, all Pledge Agreement Collateral, all Security Agreement Collateral,
the Mortgaged Properties and all cash and Cash Equivalents delivered as
collateral pursuant to Section 4.02(a) or 9.
ACommission@ shall mean each of the Pennsylvania Horse Racing
Commission, the Pennsylvania Harness Racing Commission, the West Virginia Racing
Commission and the West Virginia Lottery Commission.
ACommitment@ shall mean, for each Bank, the amount set forth
opposite such Bank=s name in Schedule I directly below the column entitled
ARevolving Loans Commitment,@ as same may be (x) reduced from time to time
pursuant to Sections 3.02, 3.03 and/or 9 or (y) adjusted from time to time as a
result of assignments to or from such Bank pursuant to Section 1.13 or 12.04(b).
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ACommitment Commission@ shall have the meaning provided in
Section 3.01(a), and shall be determined pursuant to the applicable percentage
set forth under the column titled ACommitment Fee@ on Exhibit M hereto. The
initial Commitment Commission shall be determined on the Restatement Effective
Date by reference to the Leverage Ratio of Borrower and its consolidated
Subsidiaries as reported on the officer=s certificate in the form of Exhibit N
delivered by Borrower to Agent on the Restatement Effective Date; provided,
however, that the calculations on such certificate are preliminary calculations,
and if final calculations at a later date shall result in an increase of the
Commitment Commission, the Commitment Commission shall be readjusted
retroactively to the Restatement Effective Date. Adjustments, if any, in the
Commitment Commission shall be made by the Agent on the tenth (10th) Business
Day after receipt by the Agent of quarterly financial statements of the Borrower
and its consolidated Subsidiaries required by Section 7.01(b) and the
accompanying officer=s certificate required by Section 7.01(f) setting forth the
Leverage Ratio of Borrower and its consolidated Subsidiaries as of the most
recent fiscal quarter end. In the event the Borrower fails to deliver such
financial statements and certificate within the time required by Sections
7.01(b) and 7.01(f), the Commitment Commission shall be at Level I until the
delivery of such financial statements and certificate; provided, further,
however, that the Commitment Commission shall readjust retroactively to the date
such financial statements and certificates were required to be delivered by
Sections 7.01(b) and 7.01(f) and shall readjust on the day after delivery of
such delinquent financial statements or certificate if the Commitment Commission
shall decrease or remain the same based on the ratio set forth in such
certificate.
AConsolidated Cash Interest Coverage Ratio@ shall mean, for
any period, the ratio of Consolidated EBITDA to Consolidated Cash Interest
Expense for such period.
AConsolidated Cash Interest Expense@ shall mean, for any
period, Consolidated Interest Expense for such period including net costs under
any Interest Rate Protection Agreements, provided that there shall be excluded
any non-cash interest expense for such period (other than any interest that has
been capitalized) to the extent that same would otherwise have been included
therein.
AConsolidated EBIT@ shall mean, for any period, Consolidated
Net Income before Consolidated Interest Expense and provision for taxes for such
period and without giving effect (x) to any cash extraordinary gains or losses
not to exceed $1,000,000 in the most recent twelve month period and (y) to any
gains or losses from sales of assets other than from sales of inventory sold in
the ordinary course of business.
AConsolidated EBITDA@ shall mean, for any period, Consolidated
EBIT for such period, adjusted by (x) adding thereto the amount of all
amortization of intangibles and depreciation that were deducted in arriving at
Consolidated EBIT for such period, and (y) subtracting therefrom the amount of
any payments made by the Borrower or any Credit Party pursuant to Section 4 of
the Plains Company Acquisition Agreement for such period (but only to the extent
that such payments have not already reduced Consolidated Net Income for such
period), it being understood and agreed, however, that for purposes of this
clause (y), such payment will be treated as being paid in four equal consecutive
quarterly installments, with the first such installment being treated as being
paid in the fiscal quarter of the Borrower in which such payment is made.
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AConsolidated Indebtedness@ shall mean, at any time, the
principal amount of all Indebtedness of the Borrower and its Subsidiaries at
such time (other than (x) Indebtedness in respect of Letters of Credit and (y)
Indebtedness under Interest Rate Protection Agreements except to the extent of a
payment default thereunder.
AConsolidated Interest Expense@ shall mean, for any period,
the total consolidated interest expense of the Borrower and its Subsidiaries for
such period (calculated without regard to any limitations on the payment
thereof) plus, without duplication, that portion of Capitalized Lease
Obligations of the Borrower and its Subsidiaries representing the interest
factor for such period; provided that the amortization of deferred financing
costs with respect to this Agreement or the Indebtedness incurred hereunder
shall be excluded from Consolidated Interest Expense to the extent same would
otherwise have been included therein.
AConsolidated Net Income@ shall mean, for any Person and
period, the net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis (after any deduction for minority
interests), provided that (i) in determining Consolidated Net Income of the
Borrower, the net income of any other Person which is not a Subsidiary of the
Borrower or is accounted for by the Borrower by the equity method of accounting
shall be included only to the extent of the payment of dividends or
distributions by such other Person to the Borrower or a Subsidiary thereof
during such period and (ii) the net income (or loss) of any other Person
acquired by such specified Person or a Subsidiary of such Person in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded.
AConsolidated Net Worth@ shall mean, on any date of
determination thereof, the consolidated net worth of the Borrower and its
Subsidiaries determined as of such date of determination.
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AContingent Obligation@ shall mean, as to any Person, any
obligation of such Person as a result of such Person being a general partner of
the other Person, unless the underlying obligation is expressly made
non-recourse as to such general partner, and any obligation of such Person
guaranteeing or intended to guarantee any Indebtedness, leases, dividends or
other obligations (Aprimary obligations@) of any other Person (the Aprimary
obligor@) in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (x) for the purchase
or payment of any such primary obligation or (y) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the holder of such
primary obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include (i) endorsements of instruments for
deposit or collection in the ordinary course of business and (ii) until such
time as the conditions to effectiveness of the Borrower=s obligations under the
Contingent Guaranty referred to in Section 8.05 have been satisfied, the
Contingent Guaranty. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.
AContinuing Bank@ shall mean each Original Bank with a Commitment under this
Agreement on the Restatement Effective Date.
AContinuing Directors@ shall mean the directors of the
Borrower on the Restatement Effective Date and each other director, if such
other director=s nomination for election to the Board of Directors of the
Borrower is recommended by a majority of the then Continuing Directors or is
recommended by a committee of the Board of Directors a majority of which is
composed of the then Continuing Directors.
AContribution and Indemnification Agreement@ shall have the
meaning provided in Section 5.11.
ACredit Documents@ shall mean this Agreement, each Note, the
Subsidiaries Guaranty and each Security Document.
ACredit Event@ shall mean (i) the occurrence of the
Restatement Effective Date and (ii) the making of any Loan or the issuance of
any Letter of Credit, it being understood that any conversion of a Loan pursuant
to Section 1.06 shall not constitute a Credit Event.
ACredit Party@ shall mean the Borrower and each Subsidiary
Guarantor.
ADefault@ shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
ADefaulting Bank@ shall mean any Bank with respect to which a
Bank Default is in effect.
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ADividend@ shall mean, with respect to any Person, that such
Person has declared or paid a dividend or returned any equity capital to its
stockholders, partners or members or authorized or made any other distribution,
payment or delivery of property (other than common stock of such Person) or cash
to its stockholders, partners or members as such, or redeemed, retired,
purchased or otherwise acquired, directly or indirectly, for a consideration any
shares of any class of its capital stock or any partnership or membership
interests outstanding on or after the Restatement Effective Date (or any options
or warrants issued by such Person with respect to its capital stock), or set
aside any funds for any of the foregoing purposes, or shall have permitted any
Credit Party to purchase or otherwise acquire for a consideration any shares of
any class of the capital stock or any partnership or membership interests of
such Person outstanding on or after the Restatement Effective Date (or any
options or warrants issued by such Person with respect to its capital stock).
Without limiting the foregoing, ADividends@ with respect to any Person shall
also include all payments made or required to be made by such Person with
respect to any stock appreciation rights, plans, equity incentive or achievement
plans or any similar plans or setting aside of any funds for the foregoing
purposes.
ADocuments@ shall mean the Credit Documents and the
Transaction Documents.
ADollars@ and the sign A$@ shall each mean freely transferable
lawful money of the United States.
ADrawing@ shall have the meaning provided in Section 2.05(b).
AEligible Transferee@ shall mean and include a commercial
bank, financial institution or other Aaccredited investor@ (as defined in
Regulation D of the Securities Act).
AEnvironmental Claims@ shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law or any permit issued,
or any approval given, under any such Environmental Law (hereafter, AClaims@),
including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief in connection
with alleged injury or threat of injury to health, safety or the environment due
to the presence of Hazardous Materials.
AEnvironmental Law@ shall mean any Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guideline, written policy
and rule of common law now or hereafter in effect and in each case as amended,
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, employee health and safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33
U.S.C. ' 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. ' 2601 et
seq.; the Clean Air Act, 42 U.S.C. ' 7401 et seq.; the Safe Drinking Water Act,
42 U.S.C. ' 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ' 2701 et
seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42
U.S.C. ' 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. '
1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C. ' 651 et
seq.; and any state and local or foreign counterparts or equivalents, in each
case as amended from time to time.
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AERISA@ shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
AERISA Affiliate@ shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the
Borrower would be deemed to be a Asingle employer@ (i) within the meaning of
Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the Borrower
or a Subsidiary of the Borrower being or having been a general partner of such
person.
AEurodollar Loan@ shall mean each Loan designated as such by
the Borrower at the time of the incurrence thereof or conversion thereto.
AEurodollar Rate@ shall mean a rate per annum (rounded
upwards, if necessary, to the next higher 1/100th of 1%) determined by the Agent
pursuant to the following formulas
LIBOR
rate = 1.00 - Eurodollar Reserve Percentage.
AEurodollar Reserve Percentage@ means, for any day, the
percentage (expressed as a decimal and rounded upwards, if necessary, to the
next higher 1/100th of 1%) which is in effect for such day as prescribed by the
Federal Reserve Board (or any successor) for determining the maximum reserve
requirement (including without limitation any basic, supplemental or emergency
reserves) in respect of eurocurrency liabilities or any similar category of
liabilities for a member bank of the Federal Reserve System in New York City.
AEurodollar Spread@ shall mean a percentage per annum equal to
2 of the Applicable Margin as in effect from time to time for Eurodollar Loans,
provided that in no event shall the Eurodollar Spread be less than 1%.
AEvent of Default@ shall have the meaning provided in Section
9.
AExisting Indebtedness@ shall have the meaning provided in
Section 6.23.
AExisting Indebtedness Agreements@ shall have the meaning
provided in Section 5.06.
AExisting Letters of Credit@ shall have the meaning provided
in Section 2.01.
AExisting Mortgages@ shall mean all Mortgages granted by the
Credit Parties pursuant to the Original Credit Agreement and which have not been
released prior to the Restatement Effective Date.
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AFacing Fee@ shall have the meaning provided in Section
3.01(c).
AFederal Funds Rate@ shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
AFees@ shall mean all amounts payable pursuant to or referred
to in Section 3.01.
AFinal Maturity Date@ shall mean the date four years after the
Restatement Effective Date.
AFirst Union@ or AAgent@ shall mean First Union National Bank,
successor by merger to CoreStates Bank, N.A., in its individual capacity, and
any successor corporation thereto by merger, consolidation or otherwise.
AFR Park Services@ shall mean FR Park Services, LP, a New
Jersey limited partnership.
AFRPRLP@ shall mean FR Park Racing, LP, a New Jersey limited
partnership.
AGS Park Services@ shall mean GS Park Services, L.P., a New
Jersey limited partnership.
AGSPRLP@ shall mean GS Park Racing, LP, a New Jersey limited
partnership.
AGTECH Contract@ shall mean that certain agreement relating to
the lease, installation and service of the Charles Town Video Lottery Terminals,
dated as of June 25, 1997, between the Charles Town Joint Venture and GTECH
Corporation.
AHazardous Materials@ shall mean (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of Ahazardous substances,@ Ahazardous waste,@ Ahazardous materials,@
Aextremely hazardous substances,@ Arestricted hazardous waste,@ Atoxic
substances,@ Atoxic pollutants,@ Acontaminants,@ or Apollutants,@ or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, the Release of which is prohibited, limited or
regulated by any governmental authority.
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AInactive Subsidiaries@ shall mean The Plains Company, Audio Video Concepts,
Inc., Lehigh Off-Track Wagering, L.P. and Peach Street Limited Partnership.
AIndebtedness@ shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, interest, fees and
charges) of such Person for borrowed money or for the deferred purchase price of
property or services, (ii) the maximum amount available to be drawn under all
letters of credit issued for the account of such Person and all unpaid drawings
in respect of such letters of credit, (iii) all Indebtedness of the types
described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition
secured by any Lien on any property owned by such Person, whether or not such
Indebtedness has been assumed by such Person (provided, that, if the Person has
not assumed or otherwise become liable in respect of such Indebtedness, such
Indebtedness shall be deemed to be in an amount equal to the fair market value
of the property to which such Lien relates as determined in good faith by such
Person), (iv) the aggregate amount required to be capitalized under leases under
which such Person is the lessee, (v) all obligations of such person to pay a
specified purchase price for goods or services, whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent
Obligations of such Person and (vii) all obligations under any Interest Rate
Protection Agreement, any Other Hedging Agreement or under any similar type of
agreement. Notwithstanding the foregoing, Indebtedness shall not include (i)
trade payables and accrued expenses incurred by any Person in accordance with
customary practices and in the ordinary course of business of such Person and
(ii) the Borrower=s obligations with respect to the Put obligation referred to
in Section 8.05 hereof.
AIntercompany Loan@ shall have the meaning provided in Section
8.05(vii).
AIntercompany Note@ shall mean a promissory note, in the form
of Exhibit K, evidencing Intercompany Loans.
AInterest Determination Date@ shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
AInterest Period@ shall have the meaning provided in Section
1.09.
AInterest Rate Protection Agreement@ shall mean any interest
rate swap agreement, interest rate cap agreement, interest collar agreement,
interest rate hedging agreement or other similar agreement or arrangement.
AInvestments@ shall have the meaning provided in Section 8.05.
AIssuing Bank@ shall mean First Union National Bank.
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AL/C Supportable Obligations@ shall mean (i) obligations of
the Borrower and its Subsidiaries incurred in the ordinary course of business to
horsemen for racing purposes, (ii) obligations of the Borrower and its
Subsidiaries for pari-mutual taxes and (iii) such other obligations of the
Borrower as are reasonably acceptable to the Issuing Bank and otherwise
permitted to exist pursuant to the terms of this Agreement.
ALeaseholds@ of any Person shall mean all the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
ALetter of Credit@ shall have the meaning provided in Section
2.01(a).
ALetter of Credit Fee@ shall have the meaning provided in
Section 3.01(b).
ALetter of Credit Outstanding@ shall mean, at any time, the
sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and
(ii) the amount of all Unpaid Drawings.
ALetter of Credit Request@ shall have the meaning provided in
Section 2.03(a).
ALeverage Ratio@ shall mean, at any time, the ratio of (i)
Consolidated Indebtedness at such time to (ii) Consolidated EBITDA for the Test
Period then most recently ended (in each case taken as one accounting period),
provided that for purposes of determining the Applicable Margin, the Interest
Reduction Discount and the Applicable Commitment Commission Percentage as of any
Test Date, the term AConsolidated Indebtedness@ as used in the foregoing clause
(i) of this definition shall be the sum of (I) Consolidated Indebtedness (other
than Revolving Outstanding) on such Test Date plus (II) the average Revolving
Outstanding for the quarterly period ending on such Test Date.
ALIBOR@ shall mean the rate of interest per annum determined
on the basis of the rate for deposits in Dollars in minimum amounts of at least
$5,000,000 for a period equal to the applicable Interest Period which appears on
the Telerate Page 3750 at approximately 11:00 a.m. (London time) two (2)
Business Days prior to the first day of the applicable Interest Period (rounded
upward, if necessary, to the nearest one-sixteenth of one percent (1/16%)). If,
for any reason, such rate does not appear on Telerate Page 3750, then ALIBOR@
shall be determined by the Agent to be the arithmetic average (rounded upward,
if necessary, to the nearest one-sixteenth of one percent (1/16%)) of the rate
per annum at which deposits in Dollars would be offered by first class banks in
the London interbank market to the Agent approximately 11:00 a.m. (London time)
two (2) Business Days prior to the first day of the applicable Interest Period
for a period equal to such Interest Period and in an amount substantially equal
to the amount of the applicable Eurodollar Loan.
ALicenses@ shall mean each of the Penn National Licenses, the
Plains Company Licenses and the Charles Town Licenses, and any other license
required for Borrower=s or any Subsidiary=s operations by any Commission, as the
case may be.
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ALien@ shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing or similar statement or notice filed under
the UCC or any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
ALoan@ shall mean, collectively, the Revolving Loan(s) and the
Term Loan.
AMargin Stock@ shall have the meaning provided in Regulation
U.
AMinimum Borrowing Amount@ shall mean $500,000 and $100,000
increments in excess thereof.
AMinimum Consolidated Net Worth@ shall mean, at any time, the
sum of (i) $53,856,000 plus (ii) 50% of Consolidated Net Income of the Borrower,
if positive, for each fiscal quarter of the Borrower ended prior to the date of
determination plus (iii) 75% of the Net Equity Proceeds received by the Borrower
after the Restatement Effective Date, it being understood that any increase to
the Minimum Consolidated Net Worth shall be effective as of the last day of each
fiscal quarter of the Borrower.
AMortgage@ shall mean each mortgage, deed to secure debt or
deed of trust pursuant to which any Credit Party shall have granted to the Agent
a mortgage lien on such Credit Party=s Mortgaged Property, and shall include all
Mortgage Amendments and Additional Mortgages.
AMortgage Amendments@ shall have the meaning provided in
Section 5.12.
AMortgage Policies@ shall mean the mortgage title insurance
policies issued in respect of each of the Mortgaged Properties.
AMortgaged Properties@ shall mean all Real Property of the
Credit Parties listed on Schedule IV and designated as Existing Mortgaged
Properties therein and all Additional Mortgaged Properties.
ANet Debt Proceeds@ shall mean, with respect to any incurrence
of Indebtedness for borrowed money, the cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith)
received by the respective Person from the respective incurrence of such
Indebtedness for borrowed money.
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ANet Equity Proceeds@ shall mean, with respect to each
issuance or sale of any equity by any Person or any capital contribution to such
Person, the cash proceeds (net of underwriting discounts and commissions and
other reasonable costs associated therewith) received by such Person from the
respective sale of issuance of its equity or from the respective capital
contribution.
ANet Insurance Proceeds@ shall mean, with respect to any
Recovery Event, the cash proceeds (net of reasonable costs and taxes incurred in
connection with such Recovery Event) received by the respective Person in
connection with the respective Recovery Event.
ANet Sale Proceeds@ shall mean, for any Asset Sale, the gross
cash proceeds (including any cash received by way of deferred payment pursuant
to a promissory note, receivable or otherwise, but only as and when received)
received from such sale of assets, net of the reasonable costs of such sale
(including fees and commissions, payments of unassumed liabilities relating to
the assets sold and required payments of any Indebtedness (other than
Indebtedness secured pursuant to the Security Documents) which is secured by the
respective assets which were sold), and the incremental taxes paid or payable as
a result of such Asset Sale.
ANew Jersey Joint Venture Agreement@ shall have the meaning
provided in Section 5.07.
ANew Jersey Joint Venture Entities@ shall mean, collectively,
FRPRLP, GSPRLP, Pennwood, FR Park Services and GS Park Services.
ANew Jersey Shareholders= Agreement@ shall mean the
Shareholders= Agreement dated of even date herewith, by, between and among those
entities listed on Exhibit A attached thereto entered into in connection with
the Transaction.
ANon-Continuing Bank@ shall mean each Original Bank which does
not have a commitment under this Agreement on the Restatement Effective Date.
ANon-Defaulting Bank@ shall mean and include each Bank other
than a Defaulting Bank.
ANon-Primary Location@ shall have the meaning provided in the Act referred
to in clause (i) of the definition of AAct@.
ANote@ or ANotes@ shall mean, collectively, the Revolving
Notes(s) and the Term Note(s).
ANotice of Borrowing@ shall have the meaning provided in
Section 1.03(a).
ANotice of Conversion@ shall have the meaning provided in
Section 1.06.
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ANotice Office@ shall mean the office of the Agent located at
600 Penn Street, P.O. Box 1102 - PA 6464, Reading, PA 19603 Attn: Lynn B.
Eagleson, Vice President, Facsimile No.: (610) 655-1027, or such other office as
the Agent may hereafter designate in writing as such to the other parties
hereto.
AObligations@ shall mean all amounts owing to the Agent, the
Issuing Bank or any Bank pursuant to the terms of this Agreement or any other
Credit Document.
AOriginal Bank@ shall mean each Person which was a Bank under,
and as defined in, the Original Credit Agreement immediately prior to the
Restatement Effective Date.
AOriginal Credit Agreement@ shall have the meaning provided in
the first AWhereas@ clause of this Agreement.
AOther Hedging Agreement@ shall mean any foreign exchange
contracts, currency swap agreements, commodity agreements or other similar
agreements or arrangements designed to protect against the fluctuations in
currency values.
AParticipant@ shall have the meaning provided in Section
2.04(a).
APayment Office@ shall mean the office of the Agent located at
1345 Chestnut Street, Philadelphia, PA 19107, or such other office as the Agent
may hereafter designate in writing as such to the other parties hereto.
APBGC@ shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
APenn National Licenses@ shall mean the licenses to conduct
thoroughbred racing issued to the Borrower or one Credit Party by the
Pennsylvania Horse Racing Commission.
APenn National Race Track@ shall mean Penn National Race Track
located in Dauphin County, Pennsylvania.
APennsylvania Harness Racing Commission@ shall mean the
Pennsylvania State Harness Racing Commission (and any successor thereto).
APennsylvania Horse Racing Commission@ shall mean the
Pennsylvania State Horse Racing Commission (and any successor thereto).
APennwood@ shall mean Pennwood Racing, Inc., a Delaware
corporation and the general partner of FRPRLP and GSPRLP.
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APercentage@ of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Commitment of such
Bank at such time and the denominator of which is the Total Commitment at such
time, provided that if the Percentage of any Bank is to be determined after the
Total Commitment has been terminated, then the Percentages of the Banks shall be
determined immediately prior (and without giving effect) to such termination.
APermitted Encumbrance@ shall mean, with respect to any
Mortgaged Property, such exceptions to title as are set forth in the title
insurance policy or title commitment delivered with respect thereto, all of
which exceptions must be reasonably acceptable to the Agent in their reasonable
discretion.
APermitted Holders@ shall mean Peter D. Carlino, his progeny
and his or their spouses and any trusts over which any such Person has sole
control (voting or otherwise) and which name as beneficiaries only such Person
or such Person=s spouse or children.
APermitted Liens@ shall have the meaning provided in Section
8.01.
APerson@ shall mean any individual, partnership, joint
venture, firm, corporation, association, limited liability company, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
APlains Company Acquisition Agreement@ shall mean the Purchase
Agreement dated as of September 13, 1996, by and between the Estate of Joseph B.
Banks and the Borrower.
APlan@ shall mean any pension plan as defined in Section 3(2)
of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower or a Subsidiary of the Borrower or an
ERISA Affiliate, and each such plan for the five year period immediately
following the latest date on which the Borrower, or a Subsidiary of the Borrower
or an ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan.
APledge Agreement@ shall mean the Amended and Restated Pledge
Agreement, required pursuant to Section 5.16, made by the Borrower and each
Subsidiary Guarantor in favor of the Agent, as Pledgee, as such agreement may be
modified, amended or supplemented from time to time.
APledge Agreement Collateral@ shall mean all ACollateral@ as
defined in the Pledge Agreement.
APledgee@ shall have the meaning provided in the Pledge
Agreement.
APledged Securities@ shall mean all APledged Securities@ as
defined in the Pledge Agreement.
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APocono Downs Licenses@ shall mean the licenses to conduct
harness racing and off track facilities issued to the Borrower or one Credit
Party by the Pennsylvania Harness Racing Commission.
APocono Downs Race Track@ shall mean Pocono Downs Race Track
located in Luzerne County, Pennsylvania.
APrime Lending Rate@ shall mean the rate which Agent announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Agent may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.
AProjections@ shall mean the projections which were prepared
by the Borrower for the four-year period after the Restatement Effective Date
ending in December, 2002, and delivered to the Banks on or about January 6,
1999.
AQuarterly Payment Date@ shall mean each March 31, June 30,
September 30 and December 31 occurring after the Restatement Effective Date.
ARCRA@ shall mean the Resource Conservation and Recovery Act,
as the same may be amended from time to time, 42 U.S.C. ' 6901 et seq.
AReal Property@ of any Person shall mean all the right, title
and interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
ARecovery Event@ shall mean the receipt by the Borrower or any
Credit Party of any cash insurance proceeds or condemnation awards payable (i)
by reason of theft, loss, physical destruction, damage, taking or any other
similar event with respect to any property or assets of the Borrower or any
Credit Party and (ii) under any policy of insurance required to be maintained
under Section 7.03.
ARegister@ shall have the meaning provided in Section 12.15.
ARegulation D@ shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
ARegulation G@ shall mean Regulation G of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
ARegulation T@ shall mean Regulation T of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
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ARegulation U@ shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
ARegulation X@ shall mean Regulation X of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
ARelease@ shall mean the disposing, discharging, injecting,
spilling, pumping, leaking, leaching, dumping, emitting, escaping, emptying,
pouring or migrating, into or upon any land or water or air, or otherwise
entering into the environment.
AReplaced Bank@ shall have the meaning provided in Section
1.13.
AReplacement Bank@ shall have the meaning provided in Section
1.13.
AReportable Event@ shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA
other than those events as to which the 30-day notice period is waived under
subsection .13, .14, .16, .18, .19 or .20 of PBGC Regulation Section 4043.
ARestatement Effective Date@ shall have the meaning provided
in Section 12.10.
ARestricted Payments@ shall mean Dividends and payments on
Subordinated Debt.
ARequired Banks@ shall mean Non-Defaulting Banks the sum of
whose outstanding Commitments (or after the termination thereof, outstanding
Loans and Percentage of Letter of Credit Outstanding) represent an amount
greater than 66b% of the Total Commitment less the Commitments of all Defaulting
Banks (or after the termination thereof, the sum of the then total outstanding
Loans of Non-Defaulting Banks and the aggregate Percentages of all
Non-Defaulting Banks of the total outstanding Letter of Credit Outstanding at
such time).
ARevolving Loan(s)@ shall have the meaning provided in Section
1.01(a).
ARevolving Note(s)@ shall have the meaning provided in Section
1.05(a).
ARevolving Outstanding@ shall mean, at any time, the sum of
(I) the aggregate principal amount of Loans then outstanding plus (II) the
aggregate amount of Letter of Credit Outstanding at such time.
ASEC@ shall have the meaning provided in Section 7.01(h).
ASection 4.04(b)(ii) Certificate@ shall have the meaning
provided in Section 4.04(b)(ii).
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ASecured Creditors@ shall have the meaning assigned that term
in the respective Security Documents.
ASecurities Act@ shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
ASecurities Exchange Act@ shall mean the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.
ASecurity Agreement@ shall mean the Amended Restated Security
Agreement, required pursuant to Section 5.15, dated of even date herewith, made
by the Borrowers and each Subsidiary Guarantor in favor of the Agent, as such
agreement may be modified, amended or supplemented from time to time.
ASecurity Agreement Collateral@ shall mean all ACollateral@ as
defined in the Security Agreement.
ASecurity Agreement Term Loan Collateral@ shall mean all ATerm
Loan Collateral@ as defined in the Security Agreement.
ASecurity Document@ shall mean and include each of the
Security Agreement, the Pledge Agreement and each Mortgage and, after the
execution and delivery thereof, each Additional Security Document.
ASenior Note Indenture@ shall mean the Indenture dated as of
December 17, 1997 among the Borrower, the Subsidiary Guarantors and State Street
Bank and Trust Company, as Trustee.
ASenior Notes@ shall mean the Borrower=s 10-5/8% Senior Note
due 2004.
AShareholders= Agreements@ shall have the meaning provided in
Section 5.06.
AStated Amount@ of each Letter of Credit shall, at any time,
mean the maximum amount available to be drawn thereunder (in each case
determined without regard to whether any conditions to drawing could then be
met).
ASubordinated Debt@ shall mean indebtedness of Borrower or any
Subsidiary subordinated to the Loans with subordination provisions in form and
substance satisfactory to Banks including without limitation any payment and
repurchase of the Senior Notes.
ASubsidiaries Guaranty@ shall mean the Amended and Restated
Subsidiaries Guaranty, required pursuant to Section 5.14, made by each of the
Subsidiary Guarantors, as such guaranty may be modified, amended or supplemented
from time to time.
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ASubsidiary@ shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
ASubsidiary Guarantor@ shall mean each direct and indirect
Subsidiary of the Borrower (other than the Charles Town Joint Venture so long as
the Charles Town Joint Venture is a non-Wholly-Owned Subsidiary of the
Borrower).
ATax Sharing Agreements@ shall have the meaning provided in
Section 5.06.
ATaxes@ shall have the meaning provided in Section 4.04(a).
ATennessee Downs@ shall mean Tennessee Downs, Inc., a
Tennessee corporation.
ATerm Loan@ shall have the meaning provided in Section
1.01(b).
ATerm Loan Maturity Date@ shall mean the earlier of December
31, 1999 or the date on which Banks may accelerate the loan pursuant to the last
paragraph of Section 9 hereof.
ATest Period@ shall mean the four consecutive fiscal quarters
of the Borrower then last ended (in each case taken as one accounting period).
ATotal Commitment@ shall mean, at any time, the sum of the
Commitments of the Banks.
ATotal Unutilized Commitment@ shall mean, at any time, an
amount equal to the remainder of (x) the Total Commitment then in effect less
(y) the sum of the aggregate principal amount of Loans then outstanding plus the
then aggregate amount of Letter of Credit Outstanding.
ATransaction@ shall have the meaning provided in Section 5.07.
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ATransaction Conversion@ means the issuance to Borrower or a
wholly-owned Subsidiary of a 50% or more equity interest in Pennwood and a
49.95% or more limited partnership interest in each of FRPRLP, GSPRLP, FR Park
Services and GS Park Services upon the following: (i) the issuance of
appropriate New Jersey licenses to Borrower pursuant to the terms of Section
2.12 and (ii) an additional investment in the New Jersey Joint Venture Entities
by Borrower or a wholly-owned Subsidiary of an amount not in excess of
$11,750,000; or such other transaction structure as may be presented by the
Borrower and approved by Required Banks, which approval shall not be
unreasonably withheld.
ATransaction Documents@ shall have the meaning provided in
Section 5.07.
AType@ shall mean the type of Loan determined with regard to
the interest option applicable thereto, i.e., whether a Base Rate Loan or a
Eurodollar Loan.
AUCC@ shall mean the Uniform Commercial Code as from time to
time in effect in the relevant jurisdiction.
AUnfunded Current Liability@ of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year exceeds the
fair market value of the assets allocable thereto, each determined in accordance
with Statement of Financial Accounting Standards No. 87, based upon the
actuarial assumptions used by the Plan=s actuary in the most recent annual
valuation of the Plan.
AUnited States@ and AU.S.@ shall each mean the United States
of America.
AUnpaid Drawing@ shall have the meaning provided for in
Section 2.05(a).
AUnutilized Commitment@ shall mean, with respect to any Bank
at any time, such Bank=s Commitment at such time less the sum of (i) the
aggregate outstanding principal amount of Revolving Loans made by such Bank and
(ii) such Bank=s Percentage of the Letters of Credit Outstanding.
AWest Virginia Lottery Commission@ shall mean the West
Virginia Lottery Commission (and any successor thereto).
AWest Virginia Racing Commission@ shall mean the West Virginia
Racing Commission (and any successor thereto).
AWholly-Owned Subsidiary@ shall mean, as to any Person, (i)
any corporation 100% of whose capital stock (other than director=s qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint venture
or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest at such time.
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AYear 2000 Compliant@ shall mean, as to any computer system or
application or micro-processor dependent good or equipment, that it is designed
and intended to be used prior to, during and after the calendar year 2000 AD and
that it will operate as designed and intended during each such time period
without error relating to date data or date information, specifically including
any error relating to, or the product of, date data or date information that
represents or references different centuries or more than one century.
The Agent.
295 Appointment. The Banks hereby irrevocably designate First Union as
Agent to act as specified herein and in the other Credit Documents.
Each Bank hereby irrevocably authorizes, and each holder of any Note,
by the acceptance of such Note, shall be deemed irrevocably to
authorize, the Agent to take such action on their behalf under the
provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the Agent by
the terms hereof and thereof and such other powers as are reasonably
incidental thereto. The Agent may perform any of its respective duties
hereunder by or through its respective officers, directors, agents,
employees or affiliates.
296 Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and
in the other Credit Documents. Neither the Agent, nor any of its
respective officers, directors, agents, employees or affiliates shall
be liable for any action taken or omitted by them hereunder or under
any other Credit Document or in connection herewith or therewith,
unless caused by its or their gross negligence or willful misconduct.
The duties of the Agent shall be mechanical and administrative in
nature; the Agent shall not have by reason of this Agreement or any
other Credit Document a fiduciary relationship in respect of any Bank
or the holder of any Note; and nothing in this Agreement or any other
Credit Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of
this Agreement or any other Credit Document except as expressly set
forth herein or therein.
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297 Lack of Reliance on the Agent. Independently and without reliance upon
the Agent, each Bank and the holder of each Note, to the extent it
deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the
Borrower and its Subsidiaries in connection with the making and the
continuance of the Loans and the taking or not taking of any action in
connection herewith and (ii) its own appraisal of the creditworthiness
of the Borrower and its Subsidiaries and, except as expressly provided
in this Agreement, the Agent shall not have any duty or responsibility,
either initially or on a continuing basis, to provide any Bank or the
holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the
Loans or at any time or times thereafter. The Agent shall not be
responsible to any Bank or the holder of any Note for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith
or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of
this Agreement or any other Credit Document or the financial condition
of the Borrower or any Credit Party or be required to make any inquiry
concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Credit
Document, or the financial condition of the Borrower or any Credit
Party or the existence or possible existence of any Default or Event of
Default.
298 Certain Rights of the Agent. If the Agent shall request instructions
from the Required Banks with respect to any act or action (including
failure to act) in connection with this Agreement or any other Credit
Document, the Agent shall be entitled to refrain from such act or
taking such action unless and until the Agent shall have received
instructions from the Required Banks; and the Agent shall not incur
liability to any Person by reason of so refraining. Without limiting
the foregoing, no Bank or the holder of any Note shall have any right
of action whatsoever against the Agent as a result of the Agent acting
or refraining from acting hereunder or under any other Credit Document
in accordance with the instructions of the Required Banks.
299 Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message,
cablegram, radiogram, order or other document or telephone message
signed, sent or made by any Person that the Agent believed to be the
proper Person, and, with respect to all legal matters pertaining to
this Agreement and any other Credit Document and its duties hereunder
and thereunder, upon advice of counsel selected by the Agent.
300 Indemnification. To the extent the Agent is not reimbursed and
indemnified by the Borrower or any Credit Party, the Banks will
reimburse and indemnify the Agent in proportion to their respective
Apercentage@ as used in determining the Required Banks, for and against
any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, costs, expenses or disbursements of
whatsoever kind or nature which may be imposed on, asserted against or
incurred by the Agent in performing its respective duties hereunder or
under any other Credit Document, in any way relating to or arising out
of this Agreement or any other Credit Document; provided that no Bank
shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements resulting from the Agent=s gross negligence or willful
misconduct.
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301 The Agent in its Individual Capacity. With respect to its obligation to
make Loans or issue or participate in Letters of Credit under this
Agreement, the Agent shall have the rights and powers specified herein
for a ABank@ and may exercise the same rights and powers as though it
were not performing the duties specified herein; and the term ABanks,@
ARequired Banks,@ Aholders of Notes@ or any similar terms shall, unless
the context clearly otherwise indicates, include the Agent in its
respective individual capacity. The Agent and its affiliates may accept
deposits from, lend money to, and generally engage in any kind of
banking, investment banking, trust or other business with, or provide
debt financing, equity capital or other services (including financial
advisory services) to, any Credit Party or any Affiliate of any Credit
Party (or any Person engaged in a similar business with any Credit
Party or any Affiliate thereof) as if they were not performing the
duties specified herein, and may accept fees and other consideration
from any Credit Party or any Affiliate of any Credit Party for services
in connection with this Agreement and otherwise without having to
account for the same to the Banks.
302 Holders. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes hereof unless and until a written notice
of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Agent. Any request, authority or consent
of any Person who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and
binding on any subsequent holder, transferee, assignee or endorsee, as
the case may be, of such Note or of any note or notes issued in
exchange therefor.
303 Resignation by the Agent. (a) The Agent may resign from the performance
of all its functions and duties hereunder and/or under the other Credit
Documents at any time by giving 15 Business Days= prior written notice
to the Banks. Such resignation shall take effect upon the appointment
of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
304 Upon any such notice of resignation by the Agent, the Required Banks
shall appoint a successor Agent hereunder or thereunder who shall be a
commercial bank or trust company reasonably acceptable to the Borrower.
305 If a successor Agent shall not have been so appointed within such 15
Business Day period, the Agent with the consent of the Borrower (which
consent shall not be unreasonably withheld or delayed), shall then
appoint a successor Agent who shall serve as Agent hereunder or
thereunder until such time, if any, as the Required Banks appoint a
successor Agent as provided above.
306 If no successor Agent has been appointed pursuant to clause (b) or (c)
above by the 20th Business Day after the date such notice of
resignation was given by the Agent, the Agent=s resignation shall
become effective and the Required Banks shall thereafter perform all
the duties of the Agent hereunder and/or under any other Credit
Document until such time, if any, as the Required Banks appoint a
successor Agent as provided above.
Miscellaneous.
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307 Payment of Expenses, etc. The Borrower shall: (i) whether or not the
transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agent (including, without
limitation, the reasonable fees and disbursements of Pepper Hamilton
LLP and of the Agent=s local racing and other counsel and consultants)
in connection with the preparation, execution and delivery of this
Agreement and the other Credit Documents and the documents and
instruments referred to herein and therein and any amendment, waiver or
consent relating hereto or thereto, of the Agent in connection with
their syndication efforts with respect to this Agreement and of the
Agent and, after the occurrence of an Event of Default, each of the
Banks in connection with the enforcement of this Agreement and the
other Credit Documents and the documents and instruments referred to
herein and therein (including, without limitation, the reasonable fees
and disbursements of counsel for the Agent and, after the occurrence of
an Event of Default, for each of the Banks); (ii) pay and hold each of
the Banks harmless from and against any and all present and future
stamp, excise and other similar documentary taxes with respect to the
foregoing matters and save each of the Banks harmless from and against
any and all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to such Bank) to pay
such taxes; and (iii) indemnify the Agent and each Bank, and each of
their respective officers, directors, employees, representatives and
agents from and hold each of them harmless against any and all
liabilities, obligations (including removal or remedial actions),
losses, damages, penalties, claims, actions, judgments, suits, costs,
expenses and disbursements (including reasonable attorneys= and
consultants= fees and disbursements) incurred by, imposed on or
assessed against any of them as a result of, or arising out of, or in
any way related to, or by reason of, (a) any investigation, litigation
or other proceeding (whether or not the Agent or any Bank is a party
thereto and whether or not such investigation, litigation or other
proceeding is brought by or on behalf of any Credit Party) related to
the entering into and/or performance of this Agreement or any other
Credit Document or the use of any Letter of Credit or the proceeds of
any Loans or the Term Loan hereunder or the consummation of any
Transaction or any other transactions contemplated herein or in any
other Credit Document or the exercise of any of their rights or
remedies provided herein or in the other Credit Documents, or (b) the
actual or alleged presence of Hazardous Materials in the air, surface
water or groundwater or on the surface or subsurface of any Real
Property owned or at any time operated by the Borrower or any Credit
Party, the generation, storage, transportation, handling or disposal of
Hazardous Materials at any location, whether or not owned or operated
by the Borrower or any Credit Party, the non-compliance of any Real
Property with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any
Real Property, or any Environmental Claim asserted against the
Borrower, any Credit Party or any Real Property owned or at any time
operated by the Borrower or any Credit Party, including, in each case,
without limitation, the reasonable fees and disbursements of counsel
and other consultants incurred in connection with any such
investigation, litigation or other proceeding (but excluding any
losses, liabilities, claims, damages or expenses to the extent incurred
by reason of the gross negligence or willful misconduct of the Person
to be indemnified). To the extent that the undertaking to indemnify,
pay or hold harmless the Agent or any Bank set forth in the preceding
sentence may be unenforceable because it is violative of any law or
public policy, the Borrower shall make the maximum contribution to the
payment and satisfaction of each of the indemnified liabilities which
is permissible under applicable law.
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308 Right of Setoff. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Bank is
hereby authorized (to the extent not prohibited by applicable law) at
any time or from time to time, without presentment, demand, protest or
other notice of any kind to the Borrower or to any other Person, any
such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any
other Indebtedness at any time held or owing by such Bank (including,
without limitation, by branches and agencies of such Bank wherever
located) to or for the credit or the account of any Credit Party
against and on account of the Obligations and liabilities of the Credit
Parties to such Bank under this Agreement or under any of the other
Credit Documents, including, without limitation, all interests in
Obligations purchased by such Bank pursuant to Section 12.06(b), and
all other claims of any nature or description arising out of or
connected with this Agreement or any other Credit Document,
irrespective of whether or not such Bank shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any
of them, shall be contingent or unmatured.
309 Notices. Except as otherwise expressly provided herein, all notices and
other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered: if to
any Credit Party, at the address specified opposite its signature below
or in the other relevant Credit Documents; if to any Bank, at its
address specified on Schedule II; and if to the Agent, at the Notice
Office; or, as to any Credit Party, or the Agent, at such other address
as shall be designated by such party in a written notice to the other
parties hereto and, as to each Bank, at such other address as shall be
designated by such Bank in a written notice to the Borrower and the
Agent. All such notices and communications shall, when mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight
courier, be effective when deposited in the mails, delivered to the
telegraph company, cable company or overnight courier, as the case may
be, or sent by telex or telecopier, except that notices and
communications to the Agent shall not be effective until received by
the Agent.
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310 Benefit of Agreement; Assignments; Participations. (a) This Agreement
shall be binding upon and inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto; provided,
however, the Borrower may not assign or transfer any of its rights,
obligations or interest hereunder without the prior written consent of
the Banks and, provided further, that, although any Bank may transfer,
assign or grant participations in its rights hereunder in a minimum
amount of $5,000,000, such Bank shall remain a ABank@ for all purposes
hereunder (and may not transfer or assign all or any portion of its
Commitment hereunder except as provided in Sections 1.13 and 12.04(b))
and the transferee, assignee or participant, as the case may be, shall
not constitute a ABank@ hereunder and, provided further, that no Bank
shall transfer or grant any participation under which the participant
shall have rights to approve any amendment to or waiver of this
Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend the final scheduled maturity of
any Loan, Note or Letter of Credit (unless such Letter of Credit is not
extended beyond the Final Maturity Date) in which such participant is
participating, or reduce the rate or extend the time of payment of
interest or Fees thereon (except in connection with a waiver of
applicability of any post-default increase in interest rates) or reduce
the principal amount thereof, or increase the amount of the
participant=s participation over the amount thereof then in effect (it
being understood that a waiver of any Default or Event of Default or of
a mandatory reduction in the Total Commitment, shall not constitute a
change in the terms of such participation, and that an increase in
Commitment or any Loan shall be permitted without the consent of any
participant if the participant=s participation is not increased as a
result thereof), (ii) consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement or
(iii) release all or substantially all of the Collateral under all of
the Security Documents (except as expressly provided in the Credit
Documents). In the case of any such participation, the participant
shall not have any rights under this Agreement or any of the other
Credit Documents (the participant=s rights against such Bank in respect
of such participation to be those set forth in the agreement executed
by such Bank in favor of the participant relating thereto) and all
amounts payable by the Borrower hereunder shall be determined as if
such Bank had not sold such participation.
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311 Notwithstanding the foregoing, any Bank (or any Bank together with one
or more other Banks) may (x) assign all or a portion of its Commitment
or the Term Loan and related outstanding Obligations hereunder to its
parent company and/or any affiliate of such Bank which is at least 50%
owned by such Bank or its parent company or to one or more Banks or (y)
assign all, or if less than all, a portion equal to at least $5,000,000
in the aggregate for the assigning Bank or assigning Banks, of such
Commitments or the Term Loan hereunder to one or more Eligible
Transferees, each of which assignees shall become a party to this
Agreement as a Bank by execution of an Assignment and Assumption
Agreement, provided that, (i) at such time Schedule I shall be deemed
modified to reflect the Commitments of such new Bank and of the
existing Banks, (ii) upon the surrender of the old notes by the
assigning Bank (or, upon such assigning Bank=s indemnifying the
Borrower for any lost Note pursuant to a customary indemnification
agreement) new Notes will be issued, at the Borrower=s expense, to such
new Bank and to the assigning Bank upon the request of such new Bank or
assigning Bank, such new Notes to be in conformity with the
requirements of Section 1.05 (with appropriate modifications) to the
extent needed to reflect the revised Commitments, (iii) the consent of
the Agent and Borrower shall be required in connection with any
assignment to an Eligible Transferee pursuant to clause (y) above,
which consents shall not be unreasonably withheld or delayed; provided,
however, that Borrower=s consent shall not be required if a Default or
Event of Default has occurred and is continuing, (iv) the Agent shall
receive at the time of each such assignment, from the assigning or
assignee Bank, the payment of a non-refundable assignment fee of $3,500
and (v) no such transfer or assignment will be effective until recorded
by the Agent on the Register pursuant to Section 12.15. To the extent
of any assignment pursuant to this Section 12.04(b), the assigning Bank
shall be relieved of its obligations hereunder with respect to its
assigned Commitment. At the time of each assignment pursuant to this
Section 12.04(b) to a Person which is not already a Bank hereunder and
which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for Federal income tax purposes, the
respective assignee Bank shall, to the extent legally entitled to do
so, provide to the Borrower the appropriate Internal Revenue Service
Forms (and, if applicable, a Section 4.04(b)(ii) Certificate) described
in Section 4.04(b). To the extent that an assignment of all or any
portion of a Bank=s Commitment pursuant to Section 1.13 or this Section
12.04(b) would, at the time of such assignment, result in increased
costs under Section 1.10, 2.06 or 4.04 from those being charged by the
respective assigning Bank prior to such assignment, then the Borrower
shall not be obligated to pay such increased costs (although the
Borrower, in accordance with and pursuant to the other provisions of
this Agreement, shall be obligated to pay any other increased costs of
the type described above resulting from changes after the date of the
respective assignment).
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312 Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans or Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank.
313 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Agent or any Bank in exercising any right, power or privilege hereunder
or under any other Credit Document and no course of dealing between the
Borrower or any other Credit Party and the Agent or any Bank shall
operate as a waiver thereof; nor shall any single or partial exercise
of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The
rights, powers and remedies herein or in any other Credit Document
expressly provided are cumulative and not exclusive of any rights,
powers or remedies which the Agent or any Bank would otherwise have. No
notice to or demand on any Credit Party in any case shall entitle any
Credit Party to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent
or any Bank to any other or further action in any circumstances without
notice or demand.
314 Payments Pro Rata. (a) Except as otherwise provided in this Agreement,
the Agent agrees that promptly after its receipt of each payment from
or on behalf of the Borrower in respect of any Obligations hereunder,
it shall distribute such payment to the Banks (other than any Bank that
has consented in writing to waive its pro rata share of any such
payment) pro rata based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.
315 Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker=s lien, by
counterclaim or cross action, by the enforcement of any right under the
Credit Documents, or otherwise), which is applicable to the payment of
the principal of, or interest on, the Loans, Unpaid Drawings,
Commitment Commission or Letter of Credit Fees, of a sum which with
respect to the related sum or sums received by other Banks is in a
greater proportion than the total of such Obligation then owed and due
to such Bank bears to the total of such Obligation then owed and due to
all of the Banks immediately prior to such receipt, then such Bank
receiving such excess payment shall purchase for cash without recourse
or warranty from the other Banks an interest in the Obligations of the
respective Credit Party to such Banks in such amount as shall result in
a proportional participation by all the Banks in such amount; provided
that if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without
interest.
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316 Notwithstanding anything to the contrary contained herein, the
provisions of the preceding Sections 12.06(a) and (b) shall be subject
to the express provisions of this Agreement which require, or permit,
differing payments to be made to Non-Defaulting Banks as opposed to
Defaulting Banks.
317 Calculations; Computations; Accounting Terms. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be made
and prepared in accordance with generally accepted accounting
principles in the United States consistently applied throughout the
periods involved (except as set forth in the notes thereto or as
otherwise disclosed in writing by the Borrower to the Banks); provided
that, except as otherwise specifically provided herein, all
computations of Commitment Commission and Applicable Margin, and all
computations and all definitions used in determining compliance with
Sections 8.08 through 8.11, inclusive, shall utilize accounting
principles and policies in conformity with those used to prepare the
historical financial statements of the Borrower delivered to the Banks
referred to in Section 6.05(a).
318 All computations of interest, Commitment Commission and other Fees
hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first day but excluding the last
day; except that in the case of Letter of Credit Fees, the last day
shall be included) occurring in the period for which such interest,
Loan Commitment Commission or Fees are payable.
319 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS
OTHERWISE PROVIDED IN THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT
REFERENCE TO CHOICE OF LAW PROVISIONS. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA OR OF THE
UNITED STATES FOR THE EASTERN DISTRICT OF PENNSYLVANIA, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT,
THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY
CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER THE
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BORROWER, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENTS
BROUGHT IN ANY OF THE AFOREMENTIONED COURTS, THAT SUCH COURTS LACK
PERSONAL JURISDICTION OVER THE BORROWER. THE BORROWER FURTHER
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
THE BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE
BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF
PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM
IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER
CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR
INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, ANY
BANK OR THE HOLDER OF ANY REVOLVING NOTE TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION.
320 THE BORROWER 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 OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED
TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, 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.
321 EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
322 Arbitration. Upon demand of any party hereto, whether made before or
after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this
Agreement or the other Credit Documents (ADisputes@) shall be resolved
by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort
claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from
Credit Documents executed in the future, or claims arising out of or
connected with the transaction reflected by this Agreement.
Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the AArbitration Rules@) of the
American Arbitration Association (the AAAA@) and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city where the Payment Office is
located. The expedited procedures set forth in Rule 53 et seq. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted or if such person is not available to serve, the
single arbitrator may be a licensed attorney. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to any
Interest Rate Protection Agreement or Other Hedging Agreement.
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323 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto
shall be lodged with the Borrower and the Agent.
324 Effectiveness. This Agreement shall become effective on the date (the
ARestatement Effective Date@) on which (i) the Borrower, the Agent and
each Continuing Bank shall have signed a counterpart hereof (whether
the same or different counterparts) and shall have delivered the same
to the Agent at the Notice Office, or, in the case of the Continuing
Banks, shall have given to the Agent telephonic (confirmed in writing),
written, telex or telecopy notice (actually received) at such office
that the same has been signed and mailed to it and (ii) the conditions
contained in Section 5 are met to the satisfaction of the Agent and the
Required Banks (determined immediately after the occurrence of the
Restatement Effective Date). Unless the Agent has received actual
notice from any Bank that the conditions contained in Section 5 have
not been met to its satisfaction, upon the satisfaction of the
condition described in clause (i) of the immediately preceding sentence
and upon the Agent=s good faith determination that the conditions
described in clause (ii) of the immediately preceding sentence have
been met, then the Restatement Effective Date shall have been deemed to
have occurred, regardless of any subsequent determination that one or
more of the conditions thereto had not been met (although the
occurrence of the Restatement Effective Date shall not release the
Borrower from any liability for failure to satisfy one or more of the
applicable conditions contained in Section 5). The Agent will give the
Borrower and each Bank prompt written notice of the occurrence of the
Restatement Effective Date.
325 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any
provision of this Agreement.
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326 Amendment or Waiver; etc. (a) Neither this Agreement nor any other
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the respective Credit Parties party
thereto and the Required Banks, provided that no such change, waiver,
discharge or termination shall, without the consent of each Bank (other
than a Defaulting Bank), (i) extend the final scheduled maturity of any
Loan or Note or extend the stated expiration date of any Letter of
Credit beyond the Final Maturity Date, or reduce the rate or extend the
time of payment of interest or Fees thereon, or reduce the principal
amount thereof (except to the extent repaid in cash) (it being
understood that any amendment or modification to the financial
definitions in this Agreement or to Section 12.07(a) shall not
constitute a reduction in the rate of interest or any Fees for purposes
of this clause (i)), (ii) release all or substantially all of the
Collateral (except as expressly provided in the Credit Documents) under
all the Security Documents, (iii) amend, modify or waive any provision
of this Section 12.12, (iv) reduce the percentage specified in the
definition of Required Banks (it being understood that, with the
consent of the Required Banks, additional extensions of credit pursuant
to this Agreement may be included in the determination of the Required
Banks on substantially the same basis as the Commitments are included
on the Restatement Effective Date) or (v) consent to the assignment or
transfer by the Borrower of any of its rights and obligations under
this Agreement; provided further, that no such change, waiver,
discharge or termination shall (w) increase the Commitment of any Bank
over the amount thereof then in effect without the consent of such Bank
(it being understood that waivers or modifications of conditions
precedent, covenants, Defaults or Events of Default or of a mandatory
reduction in the Total Commitment shall not constitute an increase of
the Commitment of any Bank, and that an increase in the available
portion of the Commitment of any Bank shall not constitute an increase
of the Commitment of such Bank), (x) without the consent of the Issuing
Bank, amend, modify or waive any provision of Section 2 or alter its
rights or obligations with respect to Letters of Credit, (y) without
the consent of the Agent, amend, modify or waive any provision of
Section 11 or any other provision as same relates to the rights or
obligations of the Agent or (z) without the consent of the Agent,
amend, modify or waive any provision relating to the rights or
obligations of the Agent.
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327 If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated
by clauses (i) through (v), inclusive, of the first proviso to Section
12.12(a), the consent of the Required Banks is obtained but the consent
of one or more of such other Banks whose consent is required is not
obtained, then the Borrower shall have the right, so long as all
non-consenting Banks whose individual consent is required are treated
as described in either clauses (A) or (B) below, to either (A) replace
each such non-consenting Bank or Banks with one or more Replacement
Banks pursuant to Section 1.13 so long as at the time of such
replacement, each such Replacement Bank consents to the proposed
change, waiver, discharge or termination or (B) terminate such
non-consenting Bank=s Commitment of such Bank in accordance with
Sections 3.02(b) and/or 4.01(b), provided that, unless the Commitment
that is terminated pursuant to preceding clause (B) is immediately
replaced in full at such time through the addition of new Banks or the
increase of the Commitments of existing Banks (who in each case must
specifically consent thereto), then in the case of any action pursuant
to preceding clause (B) the Required Banks (determined after giving
effect to the proposed action) shall specifically consent thereto,
provided further, that in any event the Borrower shall not have the
right to replace a Bank, terminate its Commitment as a result of the
exercise of such Bank=s rights (and the withholding of any required
consent by such Bank) pursuant to the second proviso to Section
12.12(a)).
328 Survival. All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 2.06, 4.04, 11.06 and 12.01 shall
survive the execution, delivery and termination of this Agreement and
the Notes and the making and repayment of the Obligations.
329 Domicile of Loans. Each Bank may transfer and carry its Loans at, to or
for the account of any office, Subsidiary or Affiliate of such Bank.
Notwithstanding anything to the contrary contained herein, to the
extent that a transfer of Loans pursuant to this Section 12.14 would,
at the time of such transfer, result in increased costs under Section
1.10, 1.11, 2.06 or 4.04 from those being charged by the respective
Bank prior to such transfer, then the Borrower shall not be obligated
to pay such increased costs (although the Borrower shall be obligated
to pay any other increased costs of the type described above resulting
from changes after the date of the respective transfer).
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330 Register. The Borrower hereby designates the Agent to serve as the
Borrower=s agent, solely for purposes of this Section 12.15, to
maintain a register (the ARegister@) on which it will record the
Commitments from time to time of each of the Banks, the Loans made by
each of the Banks and each repayment in respect of the principal amount
of the Loans of each Bank. Failure to make any such recordation, or any
error in such recordation shall not affect the Borrower=s obligations
in respect of such Loans. With respect to any Bank, the transfer of the
Commitment of such Bank and the rights to the principal of, and
interest on, any Loan made pursuant to such Commitment shall not be
effective until such transfer is recorded on the Register maintained by
the Agent with respect to ownership of such Commitment and Loans and
prior to such recordation all amounts owing to the transferor with
respect to such Commitment and Loans shall remain owing to the
transferor. The registration of assignment or transfer of all or part
of any Commitments and Loans shall be recorded by the Agent on the
Register only upon the acceptance by the Agent of a properly executed
and delivered Assignment and Assumption Agreement pursuant to Section
12.04(b). Coincident with the delivery of such an Assignment and
Assumption Agreement to the Agent for acceptance and registration of
assignment or transfer of all or part of a Loan, or as soon thereafter
as practicable, the assigning or transferor Bank shall surrender the
Note evidencing such Loan, and thereupon one or more new Notes in the
same aggregate principal amount shall be issued to the assigning or
transferor Bank and/or the new Bank. The Borrower agrees to indemnify
the Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted
against or incurred by the Agent in performing its duties under this
Section 12.15.
331 Confidentiality. (a) Subject to the provisions of clause (b) of this
Section 12.16, each Bank agrees that it will use its reasonable efforts
not to disclose without the prior consent of the Borrower (other than
to its employees, auditors, advisors or counsel or to another Bank if
the Bank or such Bank=s holding or parent company in its sole
discretion determines that any such party should have access to such
information, provided such Persons shall be subject to the provisions
of this Section 12.16 to the same extent as such Bank) any information
with respect to the Borrower or any Credit Party which is now or in the
future furnished pursuant to this Agreement or any other Credit
Document and which is designated by the Borrower to the Banks in
writing as confidential, provided that any Bank may disclose any such
information (a) as has become generally available to the public other
than by virtue of a breach of this Section 12.16(a) by the respective
Bank, (b) as may be required or reasonably appropriate in any report,
statement or testimony submitted to any municipal, state or Federal
regulatory body having or claiming to have jurisdiction over such Bank
or to the Federal Reserve Board or the Federal Deposit Insurance
Corporation or similar organizations (whether in the United States or
elsewhere) or their successors, (c) as may be required or reasonably
appropriate in respect to any summons or subpoena or in connection with
any litigation, (d) in order to comply with any law, order, regulation
or ruling applicable to such Bank, (e) to the Agent and (f) to any
prospective or actual transferee or participant in connection with any
contemplated transfer or participation of any of the Notes or
Commitments, or any interest therein by such Bank, provided that such
prospective transferee agrees to be bound by the confidentiality
provisions contained in this Section 12.16.
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332 The Borrower hereby acknowledges and agrees that each Bank may share
with any of its affiliates any information related to the Borrower or
any Credit Party (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Borrower and its
Subsidiaries, provided such Persons shall be subject to the provisions
of this
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Section 12.16 to the same extent as such Bank).
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address: PENN NATIONAL GAMING, INC.
Wyomissing Professional Center
825 Berkshire Boulevard, Suite 203
Wyomissing, Pennsylvania 19610
Attention: Chief Financial Officer By \s\Robert S. Ippolito
Telephone: (610) 376-2400 Name: Robert S. Ippolito
Facsimile: (610) 376-2842 Title:Chief Financial Officer
FIRST UNION NATIONAL BANK,
successor by merger to
CoreStates Bank, N.A.,
Individually and as Agent
By \s\Lynn B. Eagleson
Name:Lynn B. Eagleson
Title:Vice President
SUMMIT BANK
By \s\Mary R. Balciar
Name:Mary R. Balciar
Title:Vice President
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SCHEDULE I
REVOLVING LOANS COMMITMENT
Bank Commitment
First Union National Bank $10,000,000
Summit Bank $10,000,000
TOTAL: $20,000,000
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SCHEDULE II
BANK ADDRESSES
Bank Address
First Union National Bank 600 Penn Street
Reading, Pennsylvania 19603
Attn: Lynn B. Eagleson
Tel: 610-655-2950
Fax: 610-655-1027
Summit Bank 201 Granite Run Drive
Suite 280
Lancaster, PA 17601
Attn: Mary Balciar
Tel: (717) 581-0300
Fax: (717) 581-5394
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SCHEDULE III
EXISTING LETTERS OF CREDIT
Beneficiary Issuer Amount Expiration
Date
The State Horseracing Bankers Trust $100,000 12/31/99
Commission
The Horsemen=s Benevolent Bankers Trust $1,776,000 12/31/99
Protective Association
199
<PAGE>
EXHIBIT A
FORM OF NOTICE OF BORROWING
[Date]
First Union National Bank,
as Agent for the Banks party
to the Credit Agreement
referred to below
Attention: ___________________
Ladies and Gentlemen:
The undersigned, Penn National Gaming, Inc. (the ABorrower@),
refers to the Second Amended and Restated Credit Agreement, dated January 28,
1999 (as amended from time to time, the ACredit Agreement,@ the terms defined
therein being used herein as therein defined), among the Borrower, the lenders
from time to time party thereto (the ABanks@) and you, as Agent for such Banks,
and hereby gives you notice, irrevocably, pursuant to Section 1.03(a) of the
Credit Agreement, that the undersigned hereby requests a Borrowing under the
Credit Agreement, and in that connection sets forth below the information
relating to such Borrowing (the AProposed Borrowing@) as required by Section
1.03(a) of the Credit Agreement:
The Business Day of the Proposed Borrowing is ___________.
The aggregate principal amount of the Proposed
Borrowing is $____________.
The Proposed Borrowing shall consist of
[$______________ of Eurodollar Loans] and
[$__________ of Base Rate Loans].
[The initial Interest Period for the Eurodollar Loans
shall be ______ months.]
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on
the date of the Proposed Borrowing:
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(A) the representations and warranties contained in
the Credit Agreement and in the other Credit Documents are and
will be true and correct in all material respects, both before
and after giving effect to the Proposed Borrowing and to the
application of the proceeds thereof, as though made on such
date, unless stated to relate to a specific earlier date, in
which case such representations and warranties shall be true
and correct in all material respects as of such earlier date;
and
(B) no Default or Event of Default has occurred and
is continuing, or would result from such Proposed Borrowing or
from the application of the proceeds thereof.
Very truly yours,
PENN NATIONAL GAMING, INC.
By: ____________________________
Name:
Title:
201
<PAGE>
EXHIBIT B-1
FORM OF AMENDED AND RESTATED
REVOLVING NOTE
$___________ Philadelphia, Pennsylvania
January __, 1999
FOR VALUE RECEIVED, PENN NATIONAL GAMING, INC. (the
ABorrower@), a Pennsylvania corporation, hereby promises to pay to ___________
or its registered assigns (the ABank@), in lawful money of the United States of
America in immediately available funds, at the office of First Union National
Bank (the AAgent) located at _______________________________________ on the
Final Maturity Date (as defined in the Agreement referred to below) the
principal sum of _____________________ DOLLARS ($_________) or, if less, the
unpaid principal amount of all Revolving Loans (as defined in the Agreement)
made by the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at the rate and at the times provided in Section 1.08 of the Agreement.
This Amended and Restated Note (this ANote@) is one of the
Revolving Notes referred to in the Second Amended and Restated Credit Agreement,
dated January __, 1999, among the Borrower, the lenders from time to time party
thereto (including the Bank), and the Agent (as amended, modified or
supplemented from time to time, the AAgreement@) and is entitled to the benefits
thereof and of the other Credit Documents (as defined in the Agreement). This
Note is secured by the Security Documents (as defined in the Agreement) and is
entitled to the benefits of the Subsidiaries Guaranty (as defined in the
Agreement). This Note is subject to voluntary and mandatory prepayment or
repayment prior to the Final Maturity Date, in whole or in part, as provided in
the Agreement.
In case a Default or Event of Default (as defined in the
Agreement) shall occur and be continuing, the principal of and accrued interest
on this Note may become or be declared to be due and payable in the manner and
with the effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
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This Note amends and restates the Note dated December 17, 1997
by Borrower in favor of Bank (the APrior Note@); provided, however, that the
execution and delivery of this Note shall not in any circumstance be deemed to
have terminated, extinguished or discharged Borrower=s indebtedness under such
Prior Note, all of which indebtedness and the collateral security therefor shall
continue under and be governed by this Note, the Agreement, and the Security
Documents (as defined in the Agreement). This Note is an amendment and
restatement of the Prior Note and is NOT A NOVATION. Nothing herein is intended
to modify or in any way affect the priority of the liens and security interests
which secure this Note in favor of Bank.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA.
PENN NATIONAL GAMING, INC.
By:______________________________
Name:
Title:
203
<PAGE>
EXHIBIT B-2
FORM OF TERM NOTE
$5,000,000 Philadelphia, Pennsylvania
January __, 1999
FOR VALUE RECEIVED, PENN NATIONAL GAMING, INC. (the
ABorrower@), a Pennsylvania corporation, hereby promises to pay to FIRST UNION
NATIONAL BANK or its registered assigns (the ABank@), in lawful money of the
United States of America in immediately available funds, at the office of First
Union National Bank (the AAgent@) located at 1345 Chestnut Street, Philadelphia,
PA 19107 on the Term Loan Maturity Date (as defined in the Agreement referred to
below) the principal sum of FIVE MILLION DOLLARS ($5,000,000) or, if less, the
unpaid principal amount of all the Term Loans (as defined in the Agreement) made
by the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at the rate and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Term Notes referred to in the Second
Amended and Restated Credit Agreement, dated of even date herewith, among the
Borrower, the lenders from time to time party thereto (including the Bank), and
the Agent (as amended, modified or supplemented from time to time, the
AAgreement@) and is entitled to the benefits thereof and of the other Credit
Documents (as defined in the Agreement). This Note is secured by the Security
Documents (as defined in the Agreement) and is entitled to the benefits of the
Subsidiaries Guaranty (as defined in the Agreement). This Note is subject to
voluntary and mandatory prepayment or repayment prior to the Term Loan Maturity
Date, in whole or in part, as provided in the Agreement.
In case a Default or an Event of Default (as defined in the
Agreement) shall occur and be continuing, the principal of and accrued interest
on this Note may become or be declared to be due and payable in the manner and
with the effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
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THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA.
PENN NATIONAL GAMING, INC.
By:_______________________________
Name:
Title:
205
<PAGE>
EXHIBIT D
CALCULATION OF FUNDING LOSSES
If a Borrower is liable to a Bank for funding costs pursuant
to Paragraph 3.3(e), 4.01 or 4.02(b) of the Credit Agreement, then on the
repayment or prepayment date, such Borrower shall pay such Bank an amount, not
less than zero, as calculated by Agent in accordance with the following formula:
(Eurodollar Rate, applicable to the Borrowing being repaid or prepaid minus
one and one-fourth percent (1 1/4%) per annum) - (the Applicable Eurodollar Rate
minus the Applicable Margin)
X
(the principal amount of the Borrowing not funded or being repaid or prepaid)
X
(the number of days in the Interest Period selected for any
Borrowing not funded or the number of days to but excluding the last day in the
Interest Period for any Borrowing being repaid or prepaid) divided by 365
The AApplicable Eurodollar Rate@ shall mean the Eurodollar
Rate as defined in the Credit Agreement, determined at or about 11:00 a.m.
London time on the first Business Day in London following the date of repayment
or prepayment for deposits of United States Dollars in amount or amounts
substantially equal in the aggregate to the amount being repaid or prepaid and
with a maturity or maturities substantially equal to the period or periods of
time between the date of repayment or prepayment and the date or dates such
amount would otherwise have matured and become repayable under the Credit
Agreement.
206
<PAGE>
Exhibit E
FORM OF SECTION 4.04(b)(ii) CERTIFICATE
Reference is hereby made to the Second Amended and Restated
Credit Agreement, dated as of January 28, 1999 among Penn National Gaming, Inc.,
a Pennsylvania corporation, the Banks party thereto from time to time, and First
Union National Bank, a national banking association and successor by merger to
CoreStates Bank, N.A., as Agent (the ACredit Agreement@). Pursuant to the
provisions of Section 4.04(b)(ii) of the Credit Agreement, the undersigned
hereby certifies that it is not a Abank@ as such term is used in Section
881(c)(3)(A) of the Internal Revenue Code of 1986, as amended.
[BANK]
Date: _________________ By: _________________________________
Name:
Title:
207
<PAGE>
EXHIBIT H
FORM OF ACKNOWLEDGMENT LETTER
January __, 1999
First Union National Bank, as Agent
under the Credit Agreement
referred to below
Reference is hereby make to the Credit Agreement, dated as of
November 27, 1996, and amended and restated as of December 17, 1997, among Penn
National Gaming, Inc., the lenders party thereto on the date hereof (the
ABanks@), CoreStates Bank, N.A., as Co-Agent, and Bankers Trust Company, as
Agent (as amended, modified or supplemented through, but not including, the date
hereof, the AExisting Credit Agreement@).
The Borrower intends to consummate a transaction whereby the
Existing Credit Agreement shall be amended and restated (the Existing Credit
Agreement, as so amended and restated, is hereinafter referred to as the ASecond
Amended and Restated Credit Agreement@) and in connection with such amendment
and restatement: (i) certain of the Banks shall no longer continue to be Banks
under the Second Amended and Restated Credit Agreement; (ii) First Union
National Bank, successor by merger to CoreStates Bank, N.A. shall replace
Bankers Trust Company as the Agent under the Second Amended and Restated Credit
Agreement and (iii) Summit Bank shall become a Bank under the Second Amended and
Restated Credit Agreement.
This acknowledgment letter is to confirm that upon the
effectiveness of the Second Amended and Restated Credit Agreement (which
includes the payment of all Loans, interest, fees and other amounts due and
owing under the Existing Credit Agreement and the termination of all Letters of
Credit issued under such Existing Credit Agreement), (i) the Banks party to the
Existing Credit Agreement and listed under the heading ACONTINUING BANKS@ on the
signature page below shall continue to constitute Banks under, and as defined
in, the Second Amended and Restated Credit Agreement and (ii) the Banks party to
the Existing Credit Agreement listed under the heading ANON-CONTINUING BANKS@ on
the signature page below shall cease to constitute Banks under, and as defined
in, the Amended and Restated Credit Agreement, although any indemnification
provisions under the Existing Credit Agreement and the other Credit Documents
referred to therein which by their terms survive shall continue to be effective
as to all Banks.
208
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this acknowledgment letter as of the
date first above written.
CONTINUING BANKS
FIRST UNION NATIONAL BANK,
successor by merger to
CoreStates Bank, N.A.
By:
Name:
Title:
NON-CONTINUING BANKS
BANKERS TRUST COMPANY
By
Name:
Title:
Acknowledged and Agreed:
SUMMIT BANK
By
Name:
Title:
PENN NATIONAL GAMING, INC.
By
Name:
Title:
209
<PAGE>
EXHIBIT J
FORM OF SOLVENCY CERTIFICATE
I, the undersigned, the Chief Financial Officer of Penn National Gaming,
Inc. (the ABorrower@), do hereby certify in such capacity and on behalf of the
Borrower that:
This Certificate is furnished to the Agent and each of the
Banks pursuant to Section 5.19 of the Second Amended
and Restated Credit Agreement, dated January __,
1999, among the Borrower, the Banks party thereto
from time to time, and First Union National Bank, (as
Agent as may be amended, modified or supplemented
from time to time, the ACredit Agreement@). Unless
otherwise defined herein, capitalized terms used in
this Certificate shall have the meanings set forth in
the Credit Agreement.
For purposes of this Certificate, the terms below shall have
the following definitions:
AFair Value@
The amount at which the assets, in their
entirety, of the Borrower and its
Subsidiaries (on a consolidated basis) would
change hands between a willing buyer and a
willing seller, within a commercially
reasonable period of time, each having
reasonable knowledge of the relevant facts,
with neither being under any compulsion to
act.
APresent Fair Salable Value@
The amount that could be obtained by an
independent willing seller from an
independent willing buyer if the assets of
the Borrower and its Subsidiaries (on a
consolidated basis) are sold with reasonable
promptness under normal selling conditions
in a current market.
AStated Liabilities@
The recorded liabilities (including
contingent liabilities) that would be
recorded in accordance with generally
accepted accounting principles (AGAAP@) of
the Borrower and its Subsidiaries (on a
consolidated basis) at December 31, 1997,
determined in accordance with GAAP
consistently applied, together with the net
change in long-term debt (including current
maturities) between December 31, 1997 and
the date hereof.
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Identified Contingent Liabilities
The maximum estimated amount of liabilities
reasonably likely to result from pending
litigation, asserted claims and assessments,
guaranties, uninsured risks and other
contingent liabilities of each of the
Borrower and its Subsidiaries (on a
consolidated basis) after giving effect to
the Transaction (exclusive of such
contingent liabilities to the extent
reflected in Stated Liabilities).
Will be able to pay its Stated Liabilities and Identified Contingent
Liabilities, as they mature@
Each of the Borrower and its Subsidiaries
(on a consolidated basis) will have
sufficient assets and cash flow to pay their
respective Stated Liabilities and Identified
Contingent Liabilities as those liabilities
mature or otherwise become payable.
Does not have Unreasonably Small Capital@
Each of the Borrower and its Subsidiaries
(on a consolidated basis), after
consummation of the Transaction and all
Indebtedness (including the Loans and the
Senior Notes) being incurred or assumed and
Liens created by the Borrower and its
Subsidiaries in connection therewith, is a
going concern and has sufficient capital to
ensure that it will continue to be a going
concern for such period and to remain a
going concern.
For purposes of this Certificate, I, or other officers of
the Borrower under my direction and supervision, have
performed the following procedures as of and for the
periods set forth below.
I have reviewed the financial statements referred to
in Section 6.05(a) of the Credit Agreement.
I have made inquiries of certain officials of
the Borrower and its Subsidiaries, who have
responsibility for financial and accounting
matters regarding (i) the existence and
amount of Identified Contingent Liabilities
associated with the business of the Borrower
and its Subsidiaries and (ii) whether the
unaudited consolidated financial statements
referred to in paragraph (a) above are in
conformity with GAAP applied on a basis
substantially consistent with that of the
audited financial statements as at December
31, 1997.
211
<PAGE>
I have knowledge of and have reviewed to my
satisfaction the Credit Documents and the
other Documents, and the respective
Schedules and Exhibits thereto.
With respect to Identified Contingent Liabilities, I:
inquiredof certain officials of the
Borrower and its Subsidiaries, who
have responsibility for legal,
financial and accounting matters, as
to the existence and estimated
liability with respect to all
contingent liabilities known to
them;
confirmed with officers of the Borrower and
its Subsidiaries, that, to the best
of such officers= knowledge, (i) all
appropriate items were included in
Stated Liabilities or the listing of
Identified Contingent Liabilities
and that (ii) the amounts relating
thereto were the maximum estimated
amount of liabilities reasonably
likely to result therefrom as of the
date hereof; and
I have examined the Projections which have
been delivered to the Banks and considered
the effect thereon of any changes since the
date of the preparation thereof on the
results projected therein. After such
review, I hereby certify that in my opinion
the Projections are reasonable and the
Projections support the conclusions
contained in paragraph 4 below.
I have made inquiries of certain officers of
the Borrower and its Subsidiaries who have
responsibility for financial reporting and
accounting matters regarding whether they
were aware of any events or conditions that,
as of the date hereof, would cause the
Borrower and its Subsidiaries (on a
consolidated basis), after giving effect to
the Transaction, to (i) have assets with a
Fair Value or Present Fair Salable Value
that are less than the sum of Stated
Liabilities and Identified Contingent
Liabilities; (ii) have Unreasonably Small
Capital; or (iii) not be able to pay its
Stated Liabilities and Identified Contingent
Liabilities as they mature or otherwise
become payable.
212
<PAGE>
Based on and subject to the foregoing, I hereby certify on
behalf of the Borrower that, after giving effect to
the Transaction, it is my informed opinion that (i)
the Fair Value and Present Fair Salable Value of the
assets of the Borrower and its Subsidiaries (on a
consolidated basis) exceed its Stated Liabilities and
Identified Contingent Liabilities; (ii) the Borrower
and its Subsidiaries (on a consolidated basis) do not
have Unreasonably Small Capital; and (iii) the
Borrower and its Subsidiaries (on a consolidated
basis) will be able to pay their Stated Liabilities
and Identified Contingent Liabilities, as they mature
or otherwise become payable.
IN WITNESS WHEREOF, I have hereto set my hand this ___ day of
January, 1999.
PENN NATIONAL GAMING, INC.
By: ________________________________
Name:
Title:
213
<PAGE>
EXHIBIT K
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
DATE: _________________
Reference is made to the Credit Agreement described in Item 2
of Annex I annexed hereto (as such Credit Agreement may hereafter be amended,
modified or supplemented from time to time, the "Credit Agreement"). Unless
defined in Annex I attached hereto, terms defined in the Credit Agreement are
used herein as therein defined. _______________ (the AAssignor@) and
________________________ (the AAssignee@), intending to be legally bound, hereby
agree as follows:
The Assignor hereby sells and assigns to the Assignee
without recourse and without representation or
warranty (other than as expressly provided herein),
and the Assignee hereby purchases and assumes from
the Assignor, that interest in and to all of the
Assignor=s rights and obligations under the Credit
Agreement as of the date hereof which represents the
percentage interest specified in Item 4 of Annex I
(the AAssigned Share@) of all of the outstanding
rights and obligations under the Credit Agreement
including, without limitation, all rights and
obligations with respect to the Assigned Share of the
Total Commitment and all outstanding Loans and
Letters of Credit.
The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is
free and clear of any adverse claims; (ii) makes no
representation or warranty and assumes no
responsibility with respect to any statements,
warranties or representations made in or in
connection with the Credit Agreement or the other
Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or the other Credit
Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no
responsibility with respect to the financial
condition of the Borrower or any of its Subsidiaries
or the performance or observance by the Borrower or
any of its Subsidiaries of any of their respective
obligations under the Credit Agreement or the other
Credit Documents or any other instrument or document
furnished pursuant thereto.
214
<PAGE>
The Assignee (i) confirms that it has received a copy of
the Credit Agreement and the other Credit Documents,
together with copies of the financial statements
referred to therein and such other documents and
information it has deemed appropriate to make its own
credit analysis and decision to enter into this
Assignment and Assumption Agreement; (ii) agrees that
it will, independently and without reliance upon the
Agent, the Assignor or any other Bank and based on
such documents and information as it shall deem
appropriate at the time, continue to make its own
credit decisions in taking or not taking action under
the Credit Agreement; (iii) appoints and authorizes
the Agent to take such action as agent on its behalf
and to exercise such powers under the Credit
Agreement and the other Credit Documents as are
delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental
thereto; [and] (iv) agrees that it will perform in
accordance with their terms all of the obligations
which by the terms of the Credit Agreement are
required to be performed by it as a Bank[; and (v)
attaches the forms and/or Certificate set forth in
the penultimate sentence of Section 12.04(b) of the
Credit Agreement.]1
Followingthe execution of this Assignment and Assumption
Agreement by the Assignor and the Assignee, an
executed original hereof (together with all
attachments) will be delivered to the Agent. The
effective date of this Assignment and Assumption
Agreement shall be the date of: (i) execution hereof
by the Assignor and the Assignee, to the extent
required by the Credit Agreement; (ii) the receipt of
the consent of the Agent; (iii) receipt by the Agent
of the assignment fee referred to in Section 12.04(b)
of the Credit Agreement; and (iv) the recordation by
the Agent of the assignment effected hereby in the
Register, unless otherwise specified in Item 5 of
Annex I (the ASettlement Date@).
Upon the delivery of a fully executed original hereof to
the Agent, as of the Settlement Date: (i) the
Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and
Assumption Agreement, have the rights and obligations
of a Bank thereunder and under the other Credit
Documents and (ii) the Assignor shall, to the extent
provided in this Assignment and Assumption Agreement,
relinquish its rights and be released from its
obligations under the Credit Agreement and the other
Credit Documents.
215
<PAGE>
It is agreed that upon the effectiveness hereof, the
Assignee shall be entitled to: (x) all interest in
the Assigned Share of the Loans at the rates
specified in Item 6 of Annex 1, (y) all Commitment
Commission on the Assigned Share of the Total
Commitment at the rate specified in Item 7 of Annex I
and (z) all Letter of Credit Fees on the Assignee=s
participation in all Letters of Credit at the rate
specified in Item 8 of Annex 1, which, in each case,
accrue on and after the Settlement Date (such
interest, Commitment Commission and Letter of Credit
Fees to be paid by the Agent directly to the
Assignee). It is further agreed that all payments of
principal made on the Assigned Share of the Loans
which occur on and after the Settlement Date will be
paid directly by the Agent to the Assignee. Upon the
Settlement Date, the Assignee shall pay to the
Assignor an amount specified by the Assignor in
writing which represents the Assigned Share of the
principal amount of the Loans made by the Assignor
pursuant to the Credit Agreement which are
outstanding on the Settlement Date, net of any
closing costs, and which are being assigned
hereunder. The Assignor and the Assignee shall make
all appropriate adjustments in payments under the
Credit Agreement for periods prior to the Settlement
Date directly between themselves.
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
216
<PAGE>
COMMONWEALTH OF PENNSYLVANIA.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written, such execution
also being made on Annex I hereto.
[NAME OF ASSIGNOR],
as Assignor
By: ______________________________
Name:
Title:
[NAME OF ASSIGNEE],
as Assignee
By: ______________________________
Name:
Title:
[Acknowledged and Agreed:
FIRST UNION NATIONAL BANK, as Agent
By: _______________________________
Name:
Title:
PENN NATIONAL GAMING, INC.
By: _______________________________
Name:
Title:
217
<PAGE>
ANNEX I FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
1. The Borrower: Penn National Gaming, Inc.
2. Name and Date of Credit Agreement:
Second Amended and Restated Credit Agreement dated January 28, 1999
among Penn National Gaming, Inc., the lenders from time to time party
thereto, and First Union National Bank, as Agent.
3. Date of Assignment Agreement:
4. Amounts (as of date of item #3 above):
Term Loan (solely from
Commitment (Revolving Loans) First Union)
a. Aggregate Amount for aa. Aggregate Amount $______
all Banks $__________
b. Assigned Share __________% bb. Assigned Share _____%
c. Amount of Assigned cc. Amount of Assigned
Share $__________ Share $______
5. Settlement Date: ___________
6. Rate of Interest As set forth in Section 1.08 of the Credit Agreement
to the Assignee: (unless otherwise agreed to by the Assignor and the
Assignee)3
7. Commitment As set forth in Section 3.01(a) of the Credit
218
<PAGE>
Commission Agreement (unless otherwise agreed to by the Assignor and
to the Assignee: the Assignee)
8. Letter of Credit Fee As set forth in Section 3.01(b) of the Credit
Agreement to the Assignee: (unless otherwise agreed to by the Assignor
and the Assignee)
9. Notice: ASSIGNOR:
==========================
==========================
Attention:
Telephone No.:
Facsimile No.:
Reference:
ASSIGNEE:
==========================
==========================
Attention:
Telephone No.:
Facsimile No.:
Reference:
219
<PAGE>
Payment Instructions: ASSIGNOR:
==========================
==========================
ABA Account:
Account No.:
Reference:
Attention:
ASSIGNEE:
==========================
==========================
ABA Account:
Account No.:
Reference:
Attention:
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By: _______________________ By: ______________________
Name: Name:
Title: Title:
220
<PAGE>
EXHIBIT L
FORM OF INTERCOMPANY NOTE
[Date]
FOR VALUE RECEIVED, [NAME OF PAYOR] (the APayor@), hereby
promises to pay on demand to the order of ______________ or its assigns (the
APayee@), in lawful money of the United States of America in immediately
available funds, at such location in the United States of America as the Payee
shall from time to time designate, the unpaid principal amount of all loans and
advances made by the Payee to the Payor.
The Payor promises also to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at such rate per annum as shall be agreed upon from time to time by the
Payor and Payee.
Upon the commencement of any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar proceeding of any jurisdiction relating to the Payor, the
unpaid principal amount hereof shall become immediately due and payable without
presentment, demand, protest or notice of any kind in connection with this Note.
[This Note, and all of the Payor=s obligations hereunder,
shall be subordinate and junior to all Senior Indebtedness (as defined in
Section 1.07 of Annex A hereto) on the terms and conditions set forth in Annex A
hereto, which Annex A is incorporated herein by reference and made a part hereof
as if set forth herein in its entirety.]
This Note evidences certain permitted intercompany
Indebtedness referred to in the Second Amended and Restated Credit Agreement,
dated January 28, 1999, among Penn National Gaming, Inc., the lenders party
thereto from time to time, First Union National Bank, as Agent (as may be
amended, modified or supplemented from time to time, the ACredit Agreement@),
and is subject to the terms thereof, and shall be pledged by the Payee pursuant
to the Pledge Agreement (as defined in the Credit Agreement). The Payor hereby
acknowledges and agrees that the Agent pursuant to and as defined in the Pledge
Agreement, as in effect from time to time, may exercise all rights provided
herein with respect to this Note. Terms used herein and not defined shall have
the respective meanings set forth in the Credit Agreement.
The Payee is hereby authorized to record all loans and
advances made by it to the Payor (all of which shall be evidenced by this Note),
and all repayments or prepayments thereof, in its books and records, such books
and records constituting prima facie evidence of the accuracy of the information
contained therein.
221
<PAGE>
All payments under this Note shall be made without offset,
counterclaim or deduction of any kind.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA.
[NAME OF PAYOR]
By: _________________________
Name:
Title:
[NAME OF PAYEE]
By: ______________________
Name:
Title:
Pay to the order of
- - --------------------------
222
<PAGE>
EXHIBIT M
Applicable Margins
Leverage Applicable Applicable Base Commitment
Level Ratio Eurodollar Margin Rate Margin Fee
Level I > 3.00 2.75% 1.75% .500%
Level II > 2.50 > 3.00x 2.50% 1.50% .500%
--
Level III > 2.00 > 2.50x 2.00% 1.00% .375%
--
Level IV > 1.50 > 2.00x 1.75% 0.75% .375%
--
Level V > 1.50x 1.50% 0.50% .375%
223
<PAGE>
EXHIBIT N
FORM OF OFFICER=S CERTIFICATE - COVENANT COMPLIANCE
[PENN NATIONAL GAMING, INC. LETTERHEAD]
CERTIFICATE OF OFFICER
OF
PENN NATIONAL GAMING, INC.
This Certificate is delivered by Penn National Gaming, Inc., a
Pennsylvania corporation (the ACompany@), pursuant to Section 7.01(f) of the
Second Amended and Restated Credit Agreement dated January 28, 1999 (the
AAgreement@), among the Company, various banks and First Union National Bank, as
Agent. Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Agreement.
The undersigned, a duly elected and authorized officer of the
Company, as such hereby certifies to the Lenders that accompanying this
certificate as Exhibit A hereto is a true and correct copy of Form _____ of the
Company as filed with the SEC on
- - ----------------.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate on the ____ day of ________________, ____.
PENN NATIONAL GAMING, INC.
By: __________________________
Name:
Title:
224
<PAGE>
Penn National Gaming, Inc.
First Union Financial Loan Covenants
As of _______________
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------- ---------------------- -------------------------
Per Bank Per Company
- - ------------------------------------------------------------------- ---------------------- -------------------------
- - ------------------------------------------------------------------- ---------------------- -------------------------
<S> <C> <C>
Section 8.05(ix)
Cash equity contributions to Charles Town Joint Venture, not to $47,566.007 + $__________
exceed accrued interest
- - ------------------------------------------------------------------- ---------------------- -------------------------
- - ------------------------------------------------------------------- ---------------------- -------------------------
Section 8.07
Operating Leases may not exceed $[1,400,000] $___________
[or $______, as
approved by
Required Banks
for the current
fiscal
year]
- - ------------------------------------------------------------------- ---------------------- -------------------------
- - ------------------------------------------------------------------- ---------------------- -------------------------
Section 8.08
Capital expenditures $[9,000,000] $___________
[or $______, as
approved by
Required Banks
for the current
fiscal
year]
[if applicable, Capital Expenditures by Tennessee Downs] [$16,000,000] [$___________]
- - ------------------------------------------------------------------- ---------------------- -------------------------
- - ------------------------------------------------------------------- ---------------------- -------------------------
Section 8.09
Minimum consolidated net worth may not be less than [$53,856,000 $___________
+ 50%
of
Consolidated
Net Income +
75% of Net
Equity Proceeds]
- - ------------------------------------------------------------------- ---------------------- -------------------------
- - ------------------------------------------------------------------- ---------------------- -------------------------
Section 8.10
Consolidated Cash interest coverage ratio not to be less than [2.50 to ___________
1]
- - ------------------------------------------------------------------- ---------------------- -------------------------
- - ------------------------------------------------------------------- ---------------------- -------------------------
Section 8.11
Maximum leverage ratio not greater than [4.00 to ___________
1]
- - ------------------------------------------------------------------- ---------------------- -------------------------
- - ------------------------------------------------------------------- ---------------------- -------------------------
</TABLE>
225
LIVE RACING AGREEMENT
THIS LIVE RACING AGREEMENT (the "Agreement") is effective as of March
23, 1999 by and among PENNSYLVANIA NATIONAL TURF CLUB, INC. (PNTC) and
MOUNTAINVIEW THOROUGHBRED RACING ASSOCIATION (MTRA) (hereinafter collectively
referred to as the "Associations") and PENNSYLVANIA HORSEMEN'S BENEVOLENT AND
PROTECTIVE ASSOCIATION, INC. ("PA HBPA").
WITNESSETH
WHEREAS, the Associations operate and conduct thoroughbred horse race
meetings with pari-mutuel wagering at the track facility located in Grantville,
Pennsylvania, known as Penn National Race Course ("Penn National"); and
WHEREAS, the PA HBPA represents the horsemen, during the Term of this
Agreement, who own, train and/or race horses at Penn National; and
WHEREAS, the February 15, 1996 Agreement between the Associations and the
PA HBPA has expired by its terms; and
WHEREAS, the Associations and the PA HBPA have agreed to enter into the
following Agreement with regards to the conduct of thoroughbred horse racing at
Penn National.
NOW, THEREFORE, for and in consideration of the foregoing recitals and
the mutual undertakings contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby mutually
acknowledged, the parties hereto intending to be legally bound, hereby agree as
follows:
1. Purses
(a) The Associations agree to allocate and pay horsemen purses
equal to the following percentages of the Associations'
receipts, fees and revenues described below:
March 23, 1999 to March 22, 2000: 32 %
March 23, 2000 to March 22, 2001: 32-2/3%
March 23, 2001 to expiration: 33-1/3%
226
<PAGE>
of:
(i) Net Commissions from the pari-mutuel handle,
including the Telephone Account Betting
handle, and the Associations' and horsemen's
share of the breakage received from the
pari-mutuel handle on Penn National live
races.
(ii) Net Commissions from the gross handle on
Penn National's live races being simulcast
to the Associations' off-track betting
sites, including horsemen's share of
breakage.
(iii) Total Commissions from the handle for send
intertrack wagering of Penn National's live
races, including track handle, Telephone
Account Betting handle and off-track betting
handle.
(iv) Total out-of-state host fee when the
Associations' are sending a full card of
interstate simulcasting wagering ("ISW") on
Penn National's live races.
(v) Net Commissions from the handle for receive
intertrack wagering of Pocono Downs, Meadows
and Philadelphia Park live races, including
track handle, Telephone Account Betting
handle, off-track betting handle and
horsemen's share of breakage.
(vi) Net Commissions from the handle for
on-track, off-track and Telephone Account
Betting, including horsemen's share of
breakage, when the Associations are
receiving a full card of ISW, regardless of
in-state host association.
(vii) The Associations' net revenues from all
other gaming activities, provided, however,
227
<PAGE>
that revenue from video gaming devices and
other similar non-pari-mutuel revenues
during the Term of this Agreement shall be
allocated in the same manner as set forth in
the Amendments to Senate Bill No.
692 (Printer's No. 714) dated June 9, 1997.
(viii) Host fees received from intrastate and
interstate tracks or the NTRA on account of
telephone or electronic wagering by persons
in geographic proximity.
Two percent (2%) of purses shall be paid monthly to PA HBPA,
which may be increased by mutual consent of the parties.
For purposes of this Article, Net Commissions are defined as
the gross handle at the racetrack, telephone account betting, non-primary
betting locations (OTB's), less the amounts returned to the betting public, less
the amounts paid to the Commonwealth of Pennsylvania as required by statute,
less host fees paid to intrastate and interstate tracks or host fees paid to the
NTRA for races received or for telephone or electronic wagering received from
persons in geographic proximity.
(b) Waiver of overpayment through February 15, 1999 The Associations agree
to credit the overpayment in the amount of $299,550.26.
(c) The Associations will use commercially reasonable best efforts to
maximize each existing component of the "gross handle" described in
Section 1(a)(i) through (viii) above, as well as any additional source
of gross handle that becomes available during the term of this
Agreement.
228
<PAGE>
2. Simulcasting Consents
(a) The PA HBPA grants its consent and approval to the
Associations as provided for under Sections 216, 216a and
234 of the Race Horse Industry Reform Act and the
provisions of the Interstate Horse Racing Act of 1978, so
that the Associations may act as "host licensees" for the
purpose of transmitting and receiving intrastate,
international and interstate simulcast races, said consent
and approval to be effective for any agreement that
existed prior to February 15, 1999 or a successor
agreement. As to any new racetracks the Associations shall
present any proposed new simulcast agreement to PA HBPA
for its review and approval, which shall not be
unreasonably withheld. Such approval to be given or denied
within two (2) days of presentation to PA HBPA.
3. Compatibility of Purses
(a) It is the intent of Associations and PA HBPA to promote
competitive horse racing at Penn National to (i) avoid any
underpayment or overpayment of purses (except seasonal
adjustments) and (ii) assure the payment, as far as
practical and feasible, of consistent purses throughout
the contract year.
(b) Associations shall notify PA HBPA of the racing dates
applied for to the SHRC for the next following calendar
year by promptly sending to the PA HBPA a copy of their
application filed with the SHRC. The actual pari-mutuel
handles from the current year for the comparable dates
will be used as a guide in projecting the approximate
handle for the ensuing year. The purse formula as
described under paragraph 1 of this agreement will be
applied to establish an average purse per day for a
beginning guideline.
(c) Should a purse overpayment or underpayment develop in
excess of $150,000, then the parties agree to
automatically adjust purses down or up, in the next
published condition book, by 5%. This triggering mechanism
may be waived by mutual consent of the PA HBPA and
Associations.
229
<PAGE>
(d) If, in the opinion of the Penn National Racing
Secretary, the agreed adjustment in the condition book
does not alleviate the overpaid purse condition, the
Associations have the right, and are required, to make
immediate purse cuts in accordance with formulas mutually
agreeable, to eliminate the purse overpayment. The
Associations, without prejudice, shall have the right to
not exercise this right, should they so desire.
(e) If, in the opinion of the PA HBPA Condition Book
Committee, the agreed adjustment in the condition book
does not alleviate the underpaid purse condition, the PA
HBPA shall have the right to require the Associations to
make and the Associations shall make immediate purse
increases in accordance with formulas mutually agreeable,
to eliminate the purse underpayment. The PA HBPA, without
prejudice shall have the right not to exercise this right,
should it so desire.
4. Horsemen's Bookkeeper Account
(a) Section 235 of the Race Horse Industry Reform Act shall
govern the operation of the Horsemen's Bookkeeper Account.
5. Inactive Accounts In Horsemen's Bookkeeper Account
(a) Associations will furnish annually to PA HBPA a list of
all accounts in the Horsemen's Bookkeeper Account which
have been inactive for a period of four years, giving the
names of such accounts, the amount thereof and the last
known addresses. This list will be rendered annually as of
June 15, 1999 and prior to each June 15 during the Term
hereof.
(b) PA HBPA will advertise the four-year-old inactive
accounts in a Horsemen's publication of general
circulation. All unclaimed inactive accounts one year
after they are advertised shall be paid to the PA HBPA's
Benevolent Fund. PA HBPA agrees to hold Associations
harmless and to indemnify them as to any claim, liability,
cost or expense (including reasonable attorney's fees) as
a result of the payment of inactive accounts to the PA
HBPA's Benevolent Fund.
230
<PAGE>
6. PA HBPA Fire And Hazard Insurance
Associations agree to pay to HBPA National office, on
or before May 15 of each year during the term hereof,
their proportionate share of the total annual premium
as determined annually by the National HBPA for a
national policy of fire and other hazards insurance
covering horses and tack belongings to PA HBPA
members stabled at Penn National or at locations as
covered by said HBPA policy. It is understood,
however, that the limits and types of coverage will
not be increased without the prior agreement of
Associations.
7. Track Committees
(a) Equine Safety Committee
The Associations and the PA HBPA agree to establish
an Equine Safety Committee. The membership will
consist of representatives from all constituent
groups that affect live racing at Penn National. The
committee will meet at least once a month, if not
more frequently, to discuss the variety of issues
that affect all aspects of equine safety at Penn
National.
(b) Condition Book Committee
The PA HBPA may appoint a committee of not more than
five individuals which will be known as the
"Condition Book Committee". The Condition Book
Committee shall be entitled to meet with the
Associations and/or the Racing Secretary and/or
General Manager in order to establish guidelines for
preparing the condition book and for filling and
carding races and other matters of concern to the
horsemen, including the mix of races and purse levels
for particular condition books.
(c) PA HBPA Management Committee
During the term of this Agreement, Associations and
the PA HBPA shall organize and maintain a joint
committee to be known as the "PA HBPA/Management
Committee." This Committee shall be composed of three
representatives from the PA HBPA and three
231
<PAGE>
representatives from Associations (including the
General Manager). This Committee shall meet regularly
at the request of any member of said Committee. The
Committee shall discuss such things as barn area
issues, track conditions, racing program, track
kitchen, other matters which relate to attendance,
pari-mutuel handle, the quality of racing and any
other issue not specifically addressed in this
Agreement which will assist the Pennsylvania
thoroughbred horse racing industry to be progressive
and competitive. The Committee shall determine how to
resolve any of the foregoing issues and it may
recommend any impasse to arbitration in accordance
with Section 8.(b) of this Agreement.
8. PA HBPA Covenant
(a) PA HBPA covenants that so long as Associations comply with
the provisions of this Agreement, PA HBPA will not
institute or instigate, promote, encourage, condone, or
engage in any boycott, close down, slow down, stoppage of,
or interference with any race meet or race meets of
Associations at Penn National. PA HBPA will use its best
efforts to ensure that its members comply with this
paragraph.
(b) In the event that there is a disagreement between the
parties as to whether any party has complied with the
terms or conditions in this Agreement, then the
Associations shall choose an Arbitrator and the PA HBPA
shall choose an Arbitrator. The two Arbitrators shall
choose a third Arbitrator, and the Board of Arbitrators
shall decide the issues involved and each party agrees to
be bound by the decision of the arbitration panel. No
action shall be taken by PA HBPA prohibited by paragraph
8(a) unless and until the Arbitrators have determined that
Associations are not in compliance with the terms hereof.
9. Associations' Covenants
(a) The Associations will not, by means of agreement or
otherwise, seek to establish or impose upon the horsemen a
monopoly concerning horseshoers, feedmen, tack suppliers
or any other suppliers or servicemen customarily used by
horsemen. Notwithstanding the foregoing, the Associations
232
<PAGE>
reserve the right to impose reasonable nondiscriminatory
requirements for security, safety and environmental
reasons on the Associations' premises and to limit access
to only those vendors, suppliers and servicemen who are
properly licensed by the State Horse Racing Commission and
conditioned upon their compliance with reasonable rules
and regulations promulgated by the Associations.
(b) The Associations will not, in making their stall
allocations, discriminate against any horsemen because of
the horseman's participation in lawful PA HBPA activities.
Allocations of stalls shall, subject only to the above
limitations, remain the prerogative of the Associations.
10. Recognition of PA HBPA
Associations recognize PA HBPA during the Term of this
agreement as the exclusive representative of the horse
owners and trainers racing at Penn National, the majority
of whom are members of the PA HBPA and, during the term of
this Agreement, for purposes of negotiating a successor
live racing agreement. During the term of the Agreement,
Associations agree that they will not negotiate with any
other group purporting to represent horsemen at Penn
National and Associations further agree that they will not
revoke the foregoing recognitions, and will not supplant,
attempt to supplant or encourage the supplanting of the PA
HBPA as the exclusive representative of horsemen at Penn
National.
11. Term Of Agreement
This Agreement will continue for a term commencing March 23,
1999 and ending January 1, 2004. This Agreement shall continue
for a further Term of two years without change unless any
party shall, at least ninety days prior to January 1, 2004, or
each successive two-year Term thereafter, give notice to the
other of their intention that this Agreement shall not be
automatically renewed pursuant to the provisions of this
paragraph. In the event notice of intent not to renew is given
by either party, the parties agree that weekly negotiation
sessions shall be held commencing no later than 75 days prior
to the expiration of the term or successive term and the
233
<PAGE>
parties mutually agree to bargain in good faith, without
waiving rights or prerogatives of either party. In the event
that a successor agreement is not reached on or before 30 days
prior to the expiration of the term or successor term, the
parties agree to utilize the services of the Pennsylvania
Bureau of Mediation for non-binding negotiation. If a
successor Live Racing Agreement is not signed by the
expiration of the term of successor term or any extensions
thereof, Associations agree that the horsemen shall have 30
days thereafter within which to remove their horses from the
backstretch area at Penn National and that the facilities
listed in paragraph 16 shall be available during that 30 day
period of time. This additional 30 day period of time shall
not be construed as evidence of the Associations' recognition
of the PA HBPA as the exclusive representative of the horsemen
subsequent to the expiration of the term or successive term of
this Agreement.
234
<PAGE>
12. Notices
All notices or other communication pursuant hereto by any party
shall be sent b certified mail, return receipt requested to:
PNTC: Pennsylvania National Turf Club, Inc.
P.O. Box 100
Grantville, Pa. 17128
Attn: General Manager
MTRA: Mountainview Thoroughbred Racing Association
P.O. Box 32
Grantville, Pa. 17128
Attn: General Manager
PA HBPA: Pennsylvania Division, Horsemen's Benevolent and Protective
Association, Inc.
P.O. Box 88
Grantville, Pa. 17028
Attn: President
13. Prior Agreements and Claims
(a) The entering into of this agreement represents a
cancellation of all prior agreements between the parties
with respect to the subject matters herein.
(b) The parties acknowledge that neither has any claims or
demands on the other for any matter prior to February 16,
1999. The Associations and PA HBPA agree that the relief
available under the Order of Court entered into in Dauphin
County by Judge Kleinfelter (attached) shall be moot upon
the execution of this Agreement. Parties agree to join in
a notice to settle, discontinue and end these matters.
(c) Mutual Releases
The parties hereby mutually agree to release each other
from all outstanding claims arising out of the 1996 Live
Racing Agreement. PA HBPA shall notify National HBPA and
all other supporting horsemen's groups nationally of the
settlement of all issues and ask for the cooperation with
restoring the prior existing relations that existed prior
to February 15, 1999 upon the execution of this Agreement.
235
<PAGE>
14. Stakes Schedule
PA HBPA and Associations agree to grandfather, for
the term of the agreement, all Non-Pa Bred Stakes
Race monies of $250,000.00. Existing stakes monies
may be increased upon mutual agreement of PA HBPA and
Associations. It is understood by both of the
Associations and the PA HBPA that the overnight
purses will be the first priority in purse increases
followed by stakes races. The initial increases in
stakes monies must be preceded by at least a six
month period of average daily purses earned being
above the following benchmark levels: Average purses
earned daily Allocated for Stakes
$60,000 Up to 4%
$65,000 + up Up to 6%
Average purses will be calculated by dividing all
purse monies live, ITW, ISW and OTW by total number
of live Penn National race days.
15. Application For Racing Days In Penn National Live Program
Associations agree to apply for the maximum number of
racing days during each calendar year as can be raced for
the maximum benefit of Associations and consistent with
their leases with the owner of Penn National. The
determination of the number of racing days shall be
decided exclusively by the Associations, but in no event
shall it be less than 199 days without the approval of the
Board of HBPA.
236
<PAGE>
16. Availability of Facilities
The racing strip, barns, dormitories, track kitchen,
tack rooms and all other facilities of Penn National
useful for training purposes, shall be made available
to Horsemen approved by Associations, without charge.
Associations agree that these facilities shall be
available for at least twenty-one days prior to the
opening date of each thoroughbred race meet or
reopening after a shutdown. Associations shall also
make water and electricity available without charge,
and shall, at their own expense, keep the track
properly harrowed and watered daily and available
during reasonable hours for training purposes, all
subject to weather conditions. Associations shall
continue to provide PA HBPA offices and restroom
facilities on a year round basis. Heating, cooling
and electric services are to be provided. PA HBPA
shall be responsible for cleaning and interior
maintenance of its facilities. Structural maintenance
of roofs, wall, floor and restrooms shall be the
responsibility of Associations.
17. Approval By SHRC
This Agreement shall be subject to approval
by the Pennsylvania State Horse Racing Commission.
18. Binding Effect
This Agreement shall be binding upon and inure to the
benefit of the parties hereto or their respective
successors and approved assigns. Each party will supply
all parties with a certified copy of a Resolution
approving this Agreement.
237
<PAGE>
19. Mutual Cooperation
The Associations and PA HBPA agree that there will be
opportunities where there will be a need for cooperation
between the parties because of the mutual benefit to
racing. The parties agree to support each others positions
where there is a mutual benefit.
20. Telebet Account Recovery
Associations agree to use their best efforts to retrieve
the telephone accounts that have been transferred from
Penn National to Pocono. Associations shall provide a list
of those telebet accounts which were transferred to Pocono
and shall return those accounts, except those whose
account holders refuse consent, to Penn National and
provide proof to the PA HBPA.
21. Entire Agreement
This Agreement contains the entire agreement and
understanding of the parties hereto with respect to
the subject matter interest and supersedes all prior
or contemporaneous agreements with respect to such
subject matters; and may not be modified or amended
except in writing signed by all parties hereto.
Notwithstanding the aforementioned, the Stall
Agreements shall remain in full force and effect.
This Agreement further incorporates, and supersedes
the York and Lancaster OTW Agreements.
22. Headings
The paragraph headings of this Agreement are for
convenience of reference only and do not form a part of
the terms or conditions of this Agreement or give full
notice thereof.
238
<PAGE>
23. Mutual Consents of Non-Discrimination
Neither party will discriminate against any
individual or group for any activities that took place
during the period between February 15, 1999 and the date
herein
.
IN WITNESS WHEREOF, the Associations and PA HBPA have executed this
Live Racing Agreement this 23rd day of March, 1999.
ASSOCIATIONS:
Attest: PENNSYLVANIA NATIONAL TURF CLUB
INC.
By:\s\Philip T. O'Hara_
Name: Philip T. O'Hara
Witness Title: Vice President
Attest: MOUNTAINVIEW THOROUGHBRED
RACING ASSOCIATION
By: \s\Philip T. O'Hara
Name: Philip T. O'Hara
Witness Title: Vice President
Attest: PENNSYLVANIA HORSEMEN'S
BENEVOLENT AND PROTECTIVE
ASSOCIATION, INC.
By:\s\Joseph H. Santanna
Name: Joseph H. Santanna
Witness Title: President
239
Subsidiaries
The Plains Company
Mountainview Thoroughbred Racing Association
Pennsylvania National Turf Club, Inc.
Penn National Speedway, Inc.
Penn National holding Company
Penn national Gaming of West Virginia, Inc.
Penn National GSFR, Inc.
Sterling Aviation, Inc.
Northeast Concessions, Inc.
The Downs Racing, Inc.
PNGI Pocono, Inc.
Tennessee Downs, Inc.
Backside, Inc.
Audio Video Concepts
Mill Creek Land, Inc.
Wilkes Barre Downs, Inc.
Grantville Racing, Inc.
PNGI Charles Town Food and Beverage, LLC
240
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 6,826
<SECURITIES> 0
<RECEIVABLES> 3,840
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,114
<PP&E> 136,436
<DEPRECIATION> 15,684
<TOTAL-ASSETS> 160,798
<CURRENT-LIABILITIES> 12,203
<BONDS> 69,000
0
0
<COMMON> 152
<OTHER-SE> 58,884
<TOTAL-LIABILITY-AND-EQUITY> 160,798
<SALES> 154,065
<TOTAL-REVENUES> 154,065
<CGS> 123,820
<TOTAL-COSTS> 123,820
<OTHER-EXPENSES> 10,787
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,374
<INCOME-PRETAX> 12,022
<INCOME-TAX> 4,519
<INCOME-CONTINUING> 7,503
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,503
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.49
</TABLE>
