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EXHIBIT 1.2
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PENN NATIONAL GAMING, INC.
(a Pennsylvania corporation)
$175,000,000
8 7/8% Senior Subordinated Notes due 2010
PURCHASE AGREEMENT
Dated: February 21, 2002
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TABLE OF CONTENTS
PAGE
PURCHASE AGREEMENT.........................................................1
SECTION 1. Representations and Warranties................................3
(a) Representations and Warranties by the Company.....................3
(i) Compliance with Registration Requirements..................3
(ii) Incorporated Documents.....................................4
(iii) Independent Accountants....................................4
(iv) Financial Statements.......................................5
(v) No Material Adverse Change in Business.....................5
(vi) Good Standing of the Company...............................5
(vii) Good Standing of Subsidiaries..............................6
(viii) Capitalization.............................................6
(ix) Authorization of Agreement.................................6
(x) Authorization of the Indenture.............................6
(xi) Authorization of the Notes and Guarantees..................7
(xii) Description of the Securities and the Indenture............7
(xiii) Absence of Defaults and Conflicts..........................7
(xiv) Absence of Labor Dispute...................................8
(xv) Absence of Proceedings.....................................8
(xvi) Accuracy of Exhibits.......................................9
(xvii) Possession of Intellectual Property........................9
(xviii) Absence of Further Requirements............................9
(xix) Possession of Licenses and Permits.........................9
(xx) Title to Property.........................................10
(xxi) Compliance with Cuba Act..................................10
(xxii) Investment Company Act....................................10
(xxiii) Environmental Laws........................................10
(xxiv) Registration..............................................11
(b) Officer's Certificates...........................................11
SECTION 2. Sale and Delivery to the Underwriters; Closing...............11
(a) Securities.......................................................11
(b) Payment..........................................................12
(c) Denominations; Registration......................................12
SECTION 3. Covenants of the Issuers.....................................12
(a) Compliance with Securities Regulations and Commission
Requests.....................................................12
(b) Filing of Amendments.............................................13
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(c) Delivery of Registration Statements..............................13
(d) Delivery of Prospectus...........................................13
(e) Continued Compliance with Securities Laws........................13
(f) Blue Sky Qualifications..........................................14
(g) Rule 158.........................................................14
(h) Use of Proceeds..................................................14
(i) DTC 14
(j) Restriction on Sale of Securities................................14
(k) Reporting Requirements...........................................15
SECTION 4. Payment of Expenses..........................................15
(a) Expenses.........................................................15
(b) Termination of Agreement.........................................15
SECTION 5. Conditions of the Underwriters' Obligations..................15
(a) Effectiveness of Registration Statement..........................15
(b) Opinion of Counsel for the Company...............................16
(c) Opinion of Counsel for the Underwriters..........................16
(d) Officers' Certificate............................................16
(e) Accountant's Comfort Letter......................................17
(f) Bring-down Comfort Letter........................................17
(g) Maintenance of Rating............................................17
(h) Receipt of Waivers or Commitments................................18
(j) DTC..............................................................18
(k) Additional Documents.............................................18
(l) Termination of Agreement.........................................18
SECTION 6. Indemnification..............................................18
(a) Indemnification of the Underwriters..............................18
(b) Indemnification of the Company, its Directors and
Officers and the Selling Shareholder.........................19
(c) Actions against Parties; Notification............................20
(d) Settlement without Consent if Failure to Reimburse...............20
SECTION 7. Contribution.................................................21
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery...................................................22
SECTION 9. Termination of Agreement.....................................22
(a) Termination; General.............................................22
(b) Liabilities......................................................23
SECTION 10. Default by One or More of the Underwriters...................23
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SECTION 11. Default by the Issuers.......................................24
SECTION 12. Notices......................................................24
SECTION 13. Parties......................................................24
SECTION 14. GOVERNING LAW AND TIME.......................................24
SECTION 15. Effect of Headings...........................................25
SCHEDULES
Schedule A - List of Underwriters..............................Sch A-1
Schedule B - List of Subsidiaries..............................Sch B-1
Schedule C - Pricing Information...............................Sch C-1
Schedule D - Guarantors........................................Sch D-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel...................A-1
Exhibit B - Form of Opinion of Phelps Dunbar LLP:
Mississippi.......................................B-1
Exhibit C - Form of Opinion of Phelps Dunbar LLP: Louisiana.......C-1
Exhibit D - Form of Opinion of Bowles Rice McDavid Graffe &
Love PLLC: West Virginia.........................D-1
Exhibit E - Form of Opinion of Riker, Danzig, Scherer,
Hyland & Perretti LLP: New Jersey................E-1
Exhibit F - Form of Opinion of Blake, Cassels & Graydon LLP:
Canada............................................F-1
Exhibit G - Form of Opinion of Schnader Harrison Segal &
Lewis LLP: Pennslyvania...........................G-1
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PENN NATIONAL GAMING, INC.
(a Pennsylvania corporation)
$175,000,000
8 7/8% Senior Subordinated Notes due 2010
PURCHASE AGREEMENT
February 21, 2002
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CIBC WORLD MARKETS CORP.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Four World Financial Center
250 Vesey Street
New York, New York 10080
Ladies and Gentlemen:
Penn National Gaming, Inc., a Pennsylvania corporation (the
"COMPANY"), confirms its agreement with Bear, Stearns & Co. Inc. ("Bear
Stearns"), Merrill Lynch & Co., Merrill Lynch Pierce, Fenner & Smith
Incorporated ("MERRILL LYNCH") and CIBC World Markets Corp. ("CIBC")
(collectively, the "UNDERWRITERS," which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), with respect to the
issue and sale by the Company, and the purchase by the Underwriters, acting
severally and not jointly, of the respective principal amounts set forth in
SCHEDULE A hereto of $175,000,000 aggregate principal amount of the Company's 8
7/8% Senior Subordinated Notes due 2010 (the "NOTES" and, together with the
Guarantees (as defined below), the "SECURITIES"). The Securities are to be
issued pursuant to an indenture to be dated as of February 28, 2002 (the
"INDENTURE") among the Company, the Guarantors (as defined below) and State
Street Bank and Trust Company, as trustee (the "TRUSTEE"). The Company's
obligations under the Notes will be unconditionally guaranteed (the
"GUARANTEES") on a senior subordinated basis by the guarantors listed on
SCHEDULE D hereto (collectively, the "GUARANTORS" and, together with the
Company, the "ISSUERS"). The Securities will be issued in book-entry form to
Cede & Co. as nominee of The Depository Trust Company ("DTC") pursuant to a
letter agreement, to be dated as of the Closing Time (as defined in Section
2(b)), among the Issuers, the Trustee and DTC.
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The Issuers understand that the Underwriters propose to make a
public offering of the Securities as soon as the Underwriters deem advisable
after this Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission
(the "COMMISSION") a registration statement on Form S-3 (No. 333-63780) covering
the registration of the Securities under the Securities Act of 1933, as amended
(the "1933 ACT"), including a related prospectus, which has become effective.
The registration statement (including the exhibits thereto and schedules
thereto, if any) as amended at the time it became effective, or, if a
post-effective amendment has been filed with respect thereto, as amended by such
post-effective amendment at the time of its effectiveness (including in each
case the information (if any) deemed to be part of such registration statement
at the time of effectiveness pursuant to Rule 430A under the 1933 Act), is
hereinafter referred to as the "REGISTRATION STATEMENT." The term "EFFECTIVE
DATE" shall mean each date that the Registration Statement and any
post-effective amendment or amendments thereto became or become effective. The
term "BASE PROSPECTUS" shall mean the prospectus referred to in Section 1(a)(i)
hereof contained in the Registration Statement at the Effective Date.
"PRELIMINARY PROSPECTUS" means the preliminary prospectus supplement to the Base
Prospectus used prior to the filing of the Prospectus; the term "Prospectus"
means the prospectus supplement to the Base Prospectus first filed with the
Commission pursuant to Rule 424(b) under the Securities Act, together with the
Base Prospectus. Any registration statement filed pursuant to Rule 462(b) under
the 1933 Act is herein referred to as the "Rule 462(b) Registration Statement,"
and after such filing the term "REGISTRATION STATEMENT" shall include the Rule
462(b) Registration Statement.
Any reference in this Agreement to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, as of the effective date of the Registration Statement or
the date of such Preliminary Prospectus or the Prospectus, as the case may be
(it being understood that the several specific references in this Agreement to
documents incorporated by reference in the Registration Statement or the
Prospectus are for clarifying purposes only and are not meant to limit the
inclusiveness of any other definition herein). For purposes of this Agreement,
all references to the Registration Statement, any Preliminary Prospectus, or the
Prospectus or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR"). All references in this
Agreement to financial statements and schedules and other information which is
"contained," "included" or "stated" in the Registration Statement, any
Preliminary Prospectus or the Prospectus (or other references of like import)
shall be deemed to mean and include all such financial statements and schedules
and other information which is incorporated by reference in the Registration
Statement, any Preliminary Prospectus or the Prospectus, as the case may be.
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SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE ISSUERS. The Issuers
represent and warrant to each Underwriter as of the date hereof and agrees with
each Underwriter, as follows:
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Company meets
the requirements for use of Form S-3 under the 1933 Act and has filed with
the Commission the Registration Statement on such Form, including a Base
Prospectus, for registration under the 1933 Act of the offering and sale
of the Securities, one or more amendments to such Registration Statement
may have been so filed, and the Company may have used a Preliminary
Prospectus. Such Registration Statement, as so amended, has become
effective. Although the Base Prospectus may not include all the
information with respect to the Securities and the offering thereof
required by the 1933 Act and the rules and regulations of the Commission
thereunder (the "1933 ACT REGULATIONS") to be included in the Prospectus,
the Base prospectus includes all such information required by the 1933 Act
and the 1933 Act Regulations to be included therein as of the Effective
Date. After the execution of this Agreement, the Company will file with
the Commission pursuant to Rules 415 and 424(b)(2) or (5) a final
supplement to the Base Prospectus included in such Registration Statement
relating to the Securities and the offering thereof, with such information
as is required or permitted by the 1933 Act and as has been provided to
and approved by the Underwriters prior to the date hereof or, to the
extent not completed at the date hereof, containing only such specific
additional information and other changes (beyond that contained in the
Base Prospectus and any Preliminary Prospectus) as the Company has advised
you, prior to the date hereof, will be included or made therein. The
Company may also file a Rule 462(b) Registration Statement with the
Commission for the purpose or registering certain additional Securities,
which registration shall be effective upon filing with the Commission.
The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus. When any Preliminary Prospectus was
filed with the Commission, it (x) complied as to form in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations and (y) did not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. When the Registration Statement or any
amendment thereto was or is declared effective, it (I) complied as to form
or will comply in all material respects with the requirements of the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934 ACT"), the
1933 Act Regulations and the rules and regulations of the Commission under
the 1934 Act (the "1934 ACT REGULATIONS") and (II) did not or
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will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. When the Prospectus or any amendment or
supplement to the Prospectus is filed with the Commission pursuant to Rule
424(b) (or, if the Prospectus or such amendment or supplement is not
required to be so filed, when the Registration Statement or the amendment
thereto containing the Prospectus or such amendment or supplement to the
Prospectus was or is declared effective) and at the Closing Time, the
Prospectus, as amended or supplemented at any such time, (A) complied as
to form or will comply in all material respects with the requirements of,
the 1933 Act, the 1934 Act, the 1933 Act Regulations and the 1934 Act
Regulations and (B) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading. The foregoing provisions of this paragraph
do not apply to statements or omissions made in any Preliminary
Prospectus, the Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Issuers by any
Underwriter specifically for use therein.
If the Company has elected to rely on Rule 462(b) and the Rule
462(b) Registration Statement is not effective, (x) the Company will file
a Rule 462(b) Registration Statement in compliance with, and that is
effective upon filing pursuant to, Rule 462(b) and (y) the Company will
give irrevocable instructions for transmission of the applicable filing
fee in connection with the filing of the Rule 462(b) Registration
Statement, in compliance with Rule 111 under the 1933 Act, or the
Commission has received payment of such filing fee.
The Company has not distributed and, prior to the later of (x) the
Closing Time and (y) the completion of the distribution of the Securities,
will not distribute any offering material in connection with the offering
of the Securities pursuant to this Agreement other than the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto.
(ii) INCORPORATED DOCUMENTS. Each document, if any, filed or to be
filed pursuant to the 1934 Act and incorporated by reference in either the
Preliminary Prospectus or the Prospectus (or any amendment or supplement
thereto) complied or will comply when so filed in all material respects
with the 1934 Act and the 1934 Act Regulations.
(iii) INDEPENDENT ACCOUNTANTS. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
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(iv) FINANCIAL STATEMENTS. The financial statements of the Company
included in the Registration Statement and the Prospectus, together with
the related schedules and notes, present fairly the financial position of
the Company and its consolidated subsidiaries at the dates indicated and
the statement of operations, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules included in the
Registration Statement present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data and
the summary financial information included in the Prospectus present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in the
Registration Statement. The pro forma financial statements and the related
notes thereto included in the Registration Statement and the Prospectus,
if any, present fairly the information shown therein, have been prepared
in accordance with the Commission's rules and guidelines with respect to
pro forma financial statements and have been properly compiled on the
bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to
give effect to the transactions and circumstances referred to therein.
(v) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business (a "MATERIAL ADVERSE EFFECT"), (B) there
have been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered
as one enterprise, and (C) there has been no dividend or distribution of
any kind declared, paid or made by the Company on any class of its capital
stock.
(vi) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Pennsylvania and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform its
obligations under this Agreement; and the Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.
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(vii) GOOD STANDING OF SUBSIDIARIES. Each "SIGNIFICANT SUBSIDIARY" of
the Company (as such term is defined in Rule 1-02 of Regulation S-X) (each
a "SUBSIDIARY" and, collectively, the "SUBSIDIARIES") has been duly
organized and is validly existing as a corporation, partnership or limited
liability company, as the case may be, in good standing under the laws of
the jurisdiction of its incorporation or organization, as the case may be,
has the power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation, partnership or limited liability
company, as the case may be, to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding equity interests
of each such Subsidiary have been duly authorized and validly issued, are
fully paid and non-assessable and are owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding equity
interests of any Subsidiary was issued in violation of the preemptive or
similar rights of any securityholder of such Subsidiary. The only
Subsidiaries of the Company are the subsidiaries listed on Schedule B of
this Agreement.
(viii) CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to
this Agreement, pursuant to reservations, agreements or employee benefit
plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus). The
shares of issued and outstanding capital stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable;
none of the outstanding shares of capital stock of the Company was issued
in violation of the preemptive or other similar rights of any
securityholder of the Company.
(ix) AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by the Issuers.
(x) AUTHORIZATION OF THE INDENTURE. The Indenture has been duly
authorized by each of the Issuers and, when executed and delivered by each
of the Issuers and the Trustee, will constitute valid and binding
agreements of the Issuers, enforceable against the Issuers in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless
of whether enforcement is considered in a pro-
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ceeding in equity or at law). At the Closing Time, the Indenture will be
qualified under the United States Trust Indenture Act of 1939, as amended
(the "1939 ACT"), and the rules and regulations of the Commission
applicable to an indenture that is qualified thereunder.
(xi) AUTHORIZATION OF THE NOTES AND GUARANTEES. (A) The Notes have
been duly authorized and, at the Closing Time, will have been duly
executed by the Company and, when authenticated, issued and delivered in
the manner provided for in the Indenture and delivered against payment of
the purchase price therefor as provided in this Agreement, will constitute
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers) reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law), and will be in the form contemplated by, and entitled to the
benefits of, the Indenture;
(B) The Guarantees have been duly and validly authorized by the
Guarantors and, when the Notes are issued, authenticated and delivered by
the Company against payment by the Underwriters in accordance with the
terms of this Agreement and the Indenture, will be legal, valid and
binding obligations of the Guarantors, enforceable against each of them in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law), and will be in the form contemplated by, and entitled to the
benefits of, the Indenture.
(xii) DESCRIPTION OF THE SECURITIES AND THE INDENTURE. The Securities
and the Indenture will conform in all material respects to the respective
statements relating thereto contained in the Prospectus.
(xiii) ABSENCE OF DEFAULTS AND CONFLICTS. None of the Issuers nor any
of their subsidiaries is in violation of its charter, by-laws or limited
liability company agreement, as the case may be, or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which any Issuer or any of their subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Issuers or any of
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their subsidiaries is subject (collectively, "Agreements and Instruments")
except for such defaults that would not result in a Material Adverse
Effect; and the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated in this Agreement and in
the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use of Proceeds") and
compliance by the Issuers with their obligations under this Agreement has
been duly authorized by all necessary corporate action and do not and will
not, whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default or Repayment
Event (as defined below) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the any
Issuer or any of their subsidiaries pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions of
the charter, by-laws or limited liability company agreement, as the case
may be, of any Issuer or their subsidiaries or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court having jurisdiction over
any Issuer or any of their subsidiaries or any of their assets, properties
or operations. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such holder's behalf) the right
to require the repurchase, redemption or repayment of all or a portion of
such indebtedness by any Issuer or any of their subsidiaries.
(xiv) ABSENCE OF LABOR DISPUTE. No labor dispute with the employees
of the Company or any of its subsidiaries exists or, to the knowledge of
the Issuers, is imminent, and the Issuers are not aware of any existing or
imminent labor disturbance by the employees of any of its or any
subsidiary's principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to result in a Material
Adverse Effect.
(xv) ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body now pending, or, to the knowledge of the Issuers,
threatened, against or affecting the Company or any subsidiary, which is
required to be disclosed in the Registration Statement (other than as
disclosed therein), or which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement or the
performance by the Issuers of their obligations hereunder or thereunder;
the aggregate of all pending legal or governmental proceedings to which
the Company or any subsidiary is a party or of which any of their
re-
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spective property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation incidental
to the business, would not reasonably be expected to result in a Material
Adverse Effect.
(xvi) ACCURACY OF EXHIBITS. There are no contracts or documents which
are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
(xvii) POSSESSION OF INTELLECTUAL PROPERTY. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, domain names, trade names or other intellectual
property (collectively, "INTELLECTUAL PROPERTY") necessary to carry on the
business now operated by them, and neither the Company nor any of its
subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to
any Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of its subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would reasonably be expected to result in a Material Adverse
Effect.
(xviii) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Issuers of their
obligations hereunder, in connection with the offering, issuance or sale
of the Securities under this Agreement or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933 Act
Regulations and state securities or blue sky laws.
(xix) POSSESSION OF LICENSES AND PERMITS. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "GOVERNMENTAL LICENSES") issued by the
appropriate federal, state or local regulatory agencies or bodies
necessary to conduct the business now operated by them and the Company and
its subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to possess or
comply would not, singly or in the aggregate, have a Material Adverse
Effect; all of the Governmental Licenses possessed by the Company and its
Subsidiaries are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the fail-
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ure of such Governmental Licenses to be in full force and effect would not
have a Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xx) TITLE TO PROPERTY. The Company and its subsidiaries have good
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Prospectus or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company or any of
its subsidiaries; and all of the leases and subleases material to the
business of the Company and its subsidiaries, considered as one
enterprise, and under which the Company or any of its subsidiaries holds
properties described in the Prospectus, are in full force and effect, and
neither the Company nor any subsidiary has any notice of any material
claim of any sort that has been asserted by anyone adverse to the rights
of the Company or any subsidiary under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or
such subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease.
(xxi) COMPLIANCE WITH CUBA ACT. The Company has complied with, and is
and will be in compliance with, the provisions of that certain Florida act
relating to disclosure of doing business with Cuba, codified as Section
517.075 of the Florida statutes, and the rules and regulations thereunder
(collectively, the "CUBA ACT") or is exempt therefrom.
(xxii) INVESTMENT COMPANY ACT. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 ACT").
(xxiii) ENVIRONMENTAL LAWS. Except as described in the Registration
Statement and except as would not, singly or in the aggregate, reasonably
be expected to result in a Material Adverse Effect, (A) neither the
Company nor any of its subsidiaries is in violation of any federal, state
or local statute, law, rule, regulation, ordinance, code, published policy
or rule of common law or any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent, decree
or judgment, relating to pollution or protection of human health, the
environment (in-
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cluding, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without limitation,
laws and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials
(collectively, "ENVIRONMENTAL LAWS"), (B) the Company and its subsidiaries
have all permits, authorizations and approvals required under any
applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or, to the Issuers' knowledge,
threatened administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or any of its subsidiaries and (D) to the Issuers' knowledge,
there are no events or circumstances that might reasonably be expected to
form the basis of an order for clean-up or remediation, or an action, suit
or proceeding by any private party or governmental body or agency, against
or affecting the Company or any of its subsidiaries relating to Hazardous
Materials or any Environmental Laws.
(xxiv) REGISTRATION. There are no persons with registration rights or
other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act, except as disclosed in the Registration Statement.
(b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of
the Company or any of its subsidiaries delivered to the Underwriters or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO THE UNDERWRITERS;
CLOSING.
(a) SECURITIES. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Issuers agree to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Issuers, at
the price set forth in SCHEDULE B, the number of Securities set forth in
SCHEDULE A opposite the name of such Underwriter, plus any additional number of
Securities which such Underwriter may become obligated to purchase pursuant to
the provisions of Section 10 hereof.
(b) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the offices of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York 10005 or at such other place as
shall be agreed upon by Bear Stearns
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and the Company, at 9:00 A.M. (Eastern time) on the fifth business day after the
date hereof (unless postponed in accordance with the provisions of Section 10),
or such other time not later than ten business days after such date as shall be
agreed upon by Bear Stearns and the Company (such time and date of payment and
delivery being herein called the "CLOSING TIME").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Underwriters for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. Bear Stearns, individually and not
as representative of the Underwriters, may (but shall not be obligated to) make
payment of the purchase price for the Securities to be purchased by any
Underwriter whose funds have not been received by the Closing Time, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(c) DENOMINATIONS; REGISTRATION. Certificates for the Securities
shall be in such denominations and registered in such names as the Underwriters
may request in writing at least one full business day before the Closing Time.
The certificates for the Securities will be made available for examination and
packaging by the Underwriters in The City of New York not later than 10:00 A.M.
(Eastern time) on the business day prior to the Closing Time.
SECTION 3. COVENANTS OF THE ISSUERS. The Issuers covenant with each
Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS.
The Issuers, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify Bear Stearns immediately, and
confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect the
filings necessary pursuant to Rule 424(b) and will take such steps as it deems
necessary to ascertain promptly whether the form of prospectus transmitted for
filing under Rule 424(b) was received for filing by the Commission and, in the
event that it was not, it will promptly file such prospectus. The Issuers will
make every reasonable effort to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest possible
moment.
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(b) FILING OF AMENDMENTS. The Issuers will give Bear Stearns notice
of its intention to file or prepare any amendment to the Registration Statement
(including any filing under Rule 462(b)) or any amendment, supplement or
revision to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, will furnish Bear Stearns with
copies of any such documents a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file or use any such document to
which Bear Stearns or counsel for the Underwriters shall reasonably object.
(c) DELIVERY OF REGISTRATION STATEMENTS. The Issuers have furnished
or will deliver to the Underwriters and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Underwriters, without charge, conformed
copies of the Registration Statement as originally filed and of each amendment
thereto (without exhibits) for each of the Underwriters. The copies of the
Registration Statement and each amendment thereto furnished to the Underwriters
will be identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T.
(d) DELIVERY OF PROSPECTUS. The Issuers have delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Issuers hereby consent to the use
of such copies for purposes permitted by the 1933 Act. The Issuers will furnish
to each Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, such number of
copies of the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(e) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Issuers will
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is required by
the 1933 Act to be delivered in connection with sales of the Securities, any
event shall occur or condition shall exist as a result of which it is necessary,
in the opinion of counsel for the Underwriters or for the Company, to amend the
Registration Statement or amend or supplement the Prospectus in order that the
Prospectus will not include any untrue statements of a material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regula-
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tions, the Issuers will promptly prepare and file with the Commission, subject
to Section 3(b), such amendment or supplement as may be necessary to correct
such statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements, and the Issuers will furnish to the
Underwriters such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(f) BLUE SKY QUALIFICATIONS. The Issuers will use their reasonable
best efforts, in cooperation with the Underwriters, to qualify the Securities
for offering and sale under the applicable securities laws of such states and
other jurisdictions (domestic or foreign) as Bear Stearns may designate and to
maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; PROVIDED, HOWEVER, that the Issuers shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which
they are not so qualified or to subject themselves to taxation in respect of
doing business in any jurisdiction in which they are not otherwise so subject.
In each jurisdiction in which the Securities have been so qualified, the Issuers
will file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) RULE 158. The Issuers will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earning statement for the purposes of,
and to provide the benefits contemplated by, the last paragraph of Section 11(a)
of the 1933 Act.
(h) USE OF PROCEEDS. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds."
(i) DTC. The Company will assist the Underwriters in arranging for
the Securities to be eligible for clearance and settlement through The
Depository Trust Company ("DTC").
(j) RESTRICTION ON SALE OF SECURITIES. During a period of 90 days
from the date of the Prospectus, the Company will not, without the prior written
consent of Bear Stearns and Merrill Lynch, directly or indirectly, issue, sell,
offer or contract to sell, grant any option for the sale of, or otherwise
transfer or dispose of, any debt securities of the Company.
(k) REPORTING REQUIREMENTS. The Issuers, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods and rules and regulations of the Commission
thereunder.
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SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Company will pay all expenses incident to its
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any transfer
taxes and any stamp or other duties payable upon the sale and the issuance or
delivery of the Securities by the Company to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, and of the Prospectus and any amendment or supplement
thereto, (vii) the preparation, printing and delivery to the Underwriters of
copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and
expenses of any transfer agent or registrar for the Securities and (ix) the
filing fees incident to, the review by the NASD of the terms of the sale of the
Securities.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Underwriters in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The
obligations of the several Underwriters hereunder are subject to the accuracy of
the representations and warranties of the Issuers contained in Section 1 hereof
or in certificates of any officer of the Company or any subsidiary of the
Company delivered pursuant to the provisions hereof, to the performance by the
Issuers of their covenants and other obligations hereunder, and to the following
further conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT; FILING OF PROSPECTUS
SUPPLEMENT. The Registration Statement, including any Rule 462(b)
Registration Statement, has become effective and at the Closing Time no
stop order suspending the effectiveness of the Registration Statement
shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of
the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel for the Underwriters. The
Prospectus, as supplemented by the prospectus supplement relating to the
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offering of the Securities shall have been filed with the Commission in
accordance with Rule 424(b) under the 1933 Act within the applicable
time period prescribed for such filing by the regulations promulgated
under the 1933 Act and in accordance with Section 3(a) hereof.
(b) OPINION OF COUNSEL FOR THE COMPANY. At the Closing Time, the
Underwriters shall have received the favorable opinions, dated as of the
Closing Time, of (i) Morgan, Lewis & Bockius LLP, counsel for the Company,
(ii) Phelps Dunbar LLP, Mississippi local counsel for the Company, (iii)
Phelps Dunbar LLP, Louisiana local counsel for the Company, (iv) Bowles
Rice McDavid Graff & Love PLLC, West Virginia local counsel for the
Company, (v) Riker, Danzig, Scherer Hyland & Perretti LLP, New Jersey
local counsel for the Company, (vi) Blake, Cassels & Graydon LLP, Canadian
Counsel for the Company and (vii) Schnader Harrison Segal & Lewis LLP,
Pennsylvania Racing counsel for the Company, all in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to the
effect set forth in EXHIBITS A, B, C, D, E, F AND G, respectively, hereto
and to such further effect as counsel for the Underwriters may reasonably
request.
(c) OPINION OF COUNSEL FOR THE UNDERWRITERS. At the Closing Time,
the Underwriters shall have received the favorable opinion, dated as of
the Closing Time, of Cahill Gordon & Reindel, counsel for the
Underwriters, together with signed or reproduced copies of such letter for
each of the other Underwriters, in form and substance satisfactory to the
Underwriters. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the
State of New York and the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Underwriters. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and
its subsidiaries and certificates of public officials.
(d) OFFICERS' CERTIFICATE. At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and
the Underwriters shall have received a certificate of the Company, signed
by the Chief Executive Officer of the Company and by the chief financial
or chief accounting officer of the Company, dated as of the Closing Time,
to the effect that (i) there has been no such material adverse change,
(ii) the representations and warranties in Section 1(a) hereof that are
qualified by materiality are true and correct and all other
representations and warranties in Section 1(a) hereof are true and
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correct in all material respects with the same force and effect as
though expressly made at and as of the Closing Time, (iii) the Issuers
have complied in all material respects with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to the Closing Time, and (iv) to their knowledge no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or are contemplated by the Commission.
(e) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of
this Agreement, the Underwriters shall have received from BDO Seidman and
Arthur Andersen LLP, letters dated such date, in form and substance
satisfactory to the Underwriters, together with signed or reproduced
copies of such letters for each of the other Underwriters containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus.
(f) BRING-DOWN COMFORT LETTER. At the Closing Time, the Underwriters
shall have received from BDO Seidman, LLP a letter, dated as of the
Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (e) of this Section, except that
the specified date referred to shall be a date not more than five business
days prior to the Closing Time.
(g) MAINTENANCE OF RATING. At the Closing Time, the Securities shall
be rated at least B3 by Moody's Investor's Service Inc. and B- by Standard
& Poor's Ratings Group, a division of McGraw-Hill, Inc., and the Company
shall have delivered to the Underwriters a letter dated the Closing Time,
from each such rating agency, or other evidence satisfactory to the
Underwriters, confirming that the Securities have such ratings; and since
the date of this Agreement, there shall not have occurred a downgrading in
the rating assigned to the Securities or any of the Company's other
securities by any "nationally recognized statistical rating agency," as
that term is defined by the Commission for purposes of Rule 436(g)(2)
under the 1933 Act, and no such organization shall have publicly announced
that it has under surveillance or review its rating of the Securities or
any of the Company's other securities.
(h) RECEIPT OF WAIVERS OR COMMITMENTS. At or before the Closing
Time, the Company shall have received and provided to the Underwriters
copies thereof (i) all necessary waivers and/or amendments to the
Company's existing senior secured credit facility (the "Credit Facility")
to permit the issuance by the Company of the Notes or (ii) evidence of the
retirement of the Credit Facility and an executed credit agreement
providing for a $75.0 million revolving credit facility to the Company.
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(i) DTC. At the Closing Time, the Securities shall be eligible for
clearance and settlement through DTC.
(j) ADDITIONAL DOCUMENTS. At the Closing Time, counsel for the
Underwriters shall have been furnished with such documents and opinions as
they may reasonably require for the purpose of enabling them to pass upon
the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Issuers in connection with the issuance
and sale of the Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Underwriters and counsel for the
Underwriters.
(k) TERMINATION OF AGREEMENT. If any condition specified in this
Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement may be terminated by the Underwriters by notice
to the Company at any time at or prior to the Closing Time and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF THE UNDERWRITERS. Each of the Issuers,
jointly and severally, agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 430A Information
and the Rule 434 Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue state-
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ment or omission, or any such alleged untrue statement or omission;
PROVIDED that (subject to Section 6(d) below) any such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Bear Stearns), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Issuers by any
Underwriter expressly for use in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and PROVIDED, FURTHER, HOWEVER, that the Issuers shall not
be liable to any indemnified party with respect to any preliminary prospectus
(or supplement thereto) if the Prospectus corrected any such untrue statement or
omission, was delivered to such indemnified party and such indemnified party
failed to furnish a copy of the Prospectus at or prior to the written
confirmation of the sale of Securities to the applicable purchaser.
(b) INDEMNIFICATION OF THE ISSUERS AND THEIR DIRECTORS AND OFFICERS.
Each Underwriter severally agrees to indemnify and hold harmless the Issuers,
their directors, each of their officers who signed the Registration Statement,
and each person, if any, who controls each Issuer within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter expressly for use in the Registration Statement (or
any amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so
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notify an indemnifying party shall not relieve such indemnifying party from any
liability hereunder to the extent it is not materially prejudiced as a result
thereof and in any event shall not relieve it from any liability which it may
have otherwise than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 6(a) above, counsel for the indemnified
parties shall be selected by Merrill Lynch, and, in the case of parties
indemnified pursuant to Section 6(b) above, counsel for the indemnified parties
shall be selected by the Company. An indemnifying party may participate at its
own expense in the defense of any such action; PROVIDED, HOWEVER, that counsel
for the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel for the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 6 or Section 7 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement. Notwithstanding the immediately preceding sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel, an
indemnifying party shall not be liable for any settlement of the nature
contemplated by Section 6(a)(ii) effected without its consent if such
indemnifying party (i) reimburses the indemnified party in accordance with such
request to the extent it consider such request to be reasonable and (ii)
provides written notice to the indemnified party which fully explains the
indemnifying party's belief that any unpaid balance of such request is
unreasonable, in each case prior to the date of such settlement.
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SECTION 7. CONTRIBUTION. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers on the one hand and the Underwriters on the other hand from the offering
of the Securities pursuant to this Agreement or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuers on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions,
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.
The relative benefits received by the Issuers on the one hand and
the Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Issuers and the total underwriting discount received by the Underwriters, in
each case as set forth on the cover of the Prospectus, or, if Rule 434 is used,
the corresponding location on the Term Sheet, bear to the aggregate initial
public offering price of the Securities as set forth on such cover.
The relative fault of the Issuers on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Issuers or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Issuers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
<Page>
-22-
Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Issuers and each officer of the Issuer who signed the
Registration Statement, and each person, if any, who controls any Issuer within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the such Issuer. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Securities set forth opposite their respective names
in Schedule A hereto and not joint.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Issuers, and shall
survive delivery of the Securities to the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The Underwriters may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States, any outbreak or escalation
of hostilities, acts of terrorism or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Representatives, impracticable to
market the Securities or to enforce contracts for the sale of the Securities, or
(iii) if trading in any securities of the Company has been suspended or
materially limited by the Commission or the New York Stock Ex-
<Page>
-23-
change, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or a material disruption has occurred
in commercial banking or securities settlement or clearance services in the
United States or (iv) if a banking moratorium has been declared by either
Federal or New York authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section 9, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or
more of the Underwriters shall fail at the Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"DEFAULTED SECURITIES"), the Underwriters shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Underwriters shall not have completed
such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of Securities to be purchased on such date, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Underwriters or the Company shall have
the right to postpone the Closing Time, for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.
<Page>
-24-
SECTION 11. DEFAULT BY THE ISSUERS. If the Issuers shall fail at the
Closing Time to sell the number of Securities that they are obligated to sell
hereunder, then this agreement shall terminate without any liability on the part
of any non-defaulting party; PROVIDED, HOWEVER, that the provisions of Sections
1, 4, 6, 7 and 8 shall remain in full force and effect. No action taken pursuant
to this Section shall relieve the Issuers from liability, if any, in respect of
such default.
SECTION 12. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to Bear, Stearns & Co. Inc., at 245 Park Avenue,
New York, New York 10167, attention of High Yield Capital Markets and to Merrill
Lynch at North Tower, World Financial Center, New York, New York 10281-1201,
attention of Todd Bernick and notices to the Issuers shall be directed to it at
825 Berkshire Boulevard, Suite 200, Wyomissing, Pennsylvania 19610, facsimile
no. (610) 376-2842, attention of Joseph A. Lashinger, Jr., with a copy to
Morgan, Lewis & Bockius, LLP, 1701 Market Street, Philadelphia, Pennsylvania,
19103, facsimile no. (215) 963-5299, attention of Steven M. Goodman.
SECTION 13. PARTIES. This Agreement shall each inure to the benefit
of and be binding upon the Underwriters, the Issuers and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters and the Issuers and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. EFFECT OF HEADINGS. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
<Page>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuers a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Issuers in accordance with its terms.
Very truly yours,
PENN NATIONAL GAMING, INC.
By:______________________________
Name:
Title:
THE DOWNS RACING, INC.
By:_______________________________
Name: Joseph A. Lashinger, Jr.
Title: Secretary and Treasurer
WILKES BARRE DOWNS, INC.
By:________________________________
Name: Robert E. Abraham
Title: President, Secretary and Treasurer
ALL OTHER GUARANTORS, LISTED ON SCHEDULE D
HERETO
By:______________________________
Name: Robert S. Ippolito
Title: Secretary and Treasurer
<Page>
CONFIRMED AND ACCEPTED,
as of the date first above written:
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CIBC WORLD MARKETS CORP.
By: BEAR, STEARNS & CO. INC.
By:________________________________________
Name: Lawrence B. Aletto
Title: Senior Managing Director
<Page>
SCHEDULE A
<Table>
<Caption>
Aggregate
Principal Amount
Name of Underwriter of Securities
- ------------------- ----------------
Bear, Stearns & Co. Inc............................... $ 58,334,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................. $ 58,334,000
CIBC World Markets Corp............................... $ 58,332,000
------------
Total................................................. $175,000,000
</Table>
Schedule A-1
<Page>
SCHEDULE B
Subsidiaries of Penn National Gaming, Inc.:
<Table>
<Caption>
STATE OF
ORGANIZATION
NAME OR INCORPORATION
- ---- ----------------
Penn National Holding Company Delaware
CRC Holdings, Inc. Florida
Penn National Gaming of West Virginia, Inc. West Virginia
PNGI Pocono, Inc. Delaware
Penn National GSFR, Inc. Delaware
Louisiana Casino Cruises, Inc. Louisiana
BSL, Inc. Mississippi
BTN, Inc Mississippi
The Downs Racing, Inc. Pennsylvania
CHC Casinos Canada Limited Nova Scotia
Mountainview Thoroughbred Racing Association Pennsylvania
Pennsylvania National Turf Club, Inc. Pennsylvania
</Table>
Schedule B-1
<Page>
SCHEDULE C
PENN NATIONAL GAMING, INC.
$175,000,000
8 7/8% Senior Subordinated Notes due 2010
1. The initial public offering price of the Securities shall be
99.287% of the principal amount thereof, plus accrued interest, if any, from the
date of issuance.
2. The purchase price to be paid by the Underwriters for the
Securities shall be 97.75% of the principal amount.
Schedule C-1
<Page>
SCHEDULE D
GUARANTORS
BACKSIDE, INC.
BSL, INC.
BTN, INC.
CHC CASINOS CORP.
CRC HOLDINGS, INC.
THE DOWNS RACING, INC.
EBETUSA.COM, INC.
LOUISIANA CASINO CRUISES, INC.
MILL CREEK LAND, INC.
MOUNTAINVIEW THOROUGHBRED
RACING ASSOCIATION
NORTHEAST CONCESSIONS, INC.
PENN NATIONAL GAMING OF WEST
VIRGINIA, INC.
PENN NATIONAL GSFR, INC.
PENN NATIONAL HOLDING COMPANY
PENN NATIONAL SPEEDWAY, INC.
PENNSYLVANIA NATIONAL TURF
CLUB, INC.
PNGI CHARLES TOWN FOOD &
BEVERAGE LIMITED LIABILITY
COMPANY
PNGI CHARLES TOWN GAMING
LIMITED LIABILITY COMPANY
PNGI POCONO, INC.
STERLING AVIATION INC.
TENNESSEE DOWNS, INC.
WILKES BARRE DOWNS, INC.
Schedule D-1
<Page>
EXHIBIT A
FORM OF OPINION OF COUNSEL FOR THE COMPANY
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) The Company is validly existing as a corporation in good
standing under the laws of the Commonwealth of Pennsylvania.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in the State of Mississippi.
(iv) The authorized capital stock of the Company is as set forth in
the Prospectus under the caption "Capitalization."
(v) The issuance of the Notes is not subject to the preemptive or,
to our knowledge, other similar rights of any securityholder of the Company.
(vi) Each of Backside, Inc., a Pennsylvania corporation, CHC Casinos
Corp., a Florida corporation, CRC Holdings, Inc., a Florida corporation, The
Downs Racing, Inc., a Pennsylvania corporation, eBetUSA.com, Inc., a Delaware
corporation, Mill Creek Land, Inc., a Pennsylvania corporation, Mountainview
Thoroughbred Racing Association, a Pennsylvania corporation, Northeast
Concessions, Inc, a Pennsylvania corporation, Penn National GSFR, Inc., a
Delaware corporation, Penn National Holding Company, a Delaware corporation,
Penn National Speedway, Inc., a Pennsylvania corporation, Pennsylvania National
Turf Club, Inc., a Pennsylvania corporation, PNGI Pocono, Inc., a Delaware
corporation, Sterling Aviation Inc., a Delaware corporation and Wilkes Barre
Downs, Inc., a Pennsylvania corporation, is validly existing as a corporation in
good standing under the laws of the jurisdiction of its organization, has the
power and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus; to the best of our knowledge, all of
the issued and outstanding equity interests of each Subsidiary are owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, except as
otherwise disclosed in the Registration Statement.
(vii) The Indenture has been duly authorized, executed and delivered
by the Company and the Guarantors and constitutes a valid and binding agreement
of the Company and the Guarantors, enforceable against the Company and the
Guarantors in accordance with its terms, except as such enforceability may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other similar laws relating to or affecting credi-
A-1
<Page>
tors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(viii) The Notes have been duly authorized, executed and delivered
by the Company and authenticated by the Trustee and constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture and
enforceable in accordance with their terms, except as such enforceability may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(ix) The Guarantees have been duly authorized, executed, and
delivered by each of the Guarantors and constitute valid and binding obligations
of each of the Guarantors enforceable in accordance with their terms, except as
such enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(x) The Purchase Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors.
(xi) The Registration Statement is effective under the 1933 Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); and, to the best of
our knowledge, no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto has been issued , and no proceedings for that
purpose are pending or threatened by the Commission.
(xii) The Registration Statement and each amendment thereto, any
Rule 462(b) Registration Statement and the Prospectus (in each case, including
the documents incorporated by reference therein but not including the financial
statements and other financial information contained therein, as to which such
counsel need express no opinion) comply as to form in all material respects with
the applicable requirements of the 1933 Act, the 1934 Act, the 1933 Act
Regulations and the 1934 Act Regulations.
(xiii) To the best of our knowledge and except as disclosed in the
Registration Statement, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Company or any subsidiary is
a party, or to which the property of the Company or any subsidiary is subject,
before or brought by any court or governmental agency or body which would
reasonably be expected to result in a Material Adverse Effect, or which would
reasonably be expected to materially and adversely affect the consummation of
the transactions contemplated in the Purchase Agreement or the performance by
the Company or the Guarantors of their respective obligations thereunder.
A-2
<Page>
(xiv) The descriptions of the Indenture, the Notes and the
Guarantees contained in the Prospectus conform in all material respects to the
respective underlying documents.
(xv) The information in the Prospectus under "Description of Capital
Stock -- Common Stock," and "Description of Capital Stock -- Preferred Stock"
and in the Registration Statement under Item 15, to the extent that it
constitutes matters of law, summaries of legal matters, the Company's articles
of incorporation and bylaws, legal proceedings or legal conclusions, fairly
summarize the matters described therein.
(xvi) To the best of our knowledge, there are no franchises,
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto.
(xvii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency (other than under the 1933 Act and the 1933 Act Regulations
and under the 1939 Act and the regulations thereunder, which have been obtained,
as may be required under the securities or blue sky laws of the various states,
as to which we need express no opinion, or under gaming and racing laws and
regulations, as to which we need express no opinion) is necessary or required in
connection with the due authorization, execution and delivery of the Purchase
Agreement or for the offering, issuance, sale or delivery of the Securities.
(xviii) The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the Purchase
Agreement (including the issuance and sale of the Securities) and compliance by
the Company and the Guarantors with their respective obligations under the
Purchase Agreement do not and will not, whether with or without the giving of
notice or lapse of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined in Section 1(a)(xiii) of the Purchase
Agreement) under or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or any other agreement or instrument, known to us, to
which the Company or any subsidiary is a party or by which it or any of them may
be bound, or to which any of the property or assets of the Company or any
subsidiary is subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances, if any, that would not have a Material Adverse Effect),
nor will such action result in any violation of the provisions of the charter or
by-laws of the Company or any Subsidiary identified in paragraph (vi) above, or
any applicable New York, Pennsylvania or federal law, statute, rule or
regulation (other than gaming and racing laws, statutes, rules or regulations,
as to which we express no opinion) or any judgment, order, writ or decree, known
to us, of any
A-3
<Page>
government, government instrumentality or court having jurisdiction over the
Company or any subsidiary or any of their respective properties, assets or
operations.
(xix) To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act.
(xx) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
We have participated in conferences with officers and other
representatives of the Company, the independent auditors of the Company, the
Underwriters and counsel to the Underwriters, at which conferences the contents
of the Registration Statement and the Prospectus and related matters were
discussed. Based on our participation in the above-referenced conferences and
our review of the Registration Statement and Prospectus, we advise you that
nothing has come to our attention that caused us to believe that at the time the
Registration Statement became effective under the Act (but after giving effect
to any modifications incorporated therein pursuant to Rule 430A under the Act),
the Registration Statement contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that as of its date and the date
hereof, the Prospectus contained or contains, as the case may be, an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that in each such case we express no belief or statement with respect to the
financial statements, related notes and schedules, the pro forma financial
information, or the other financial, numerical or statistical data found in or
derivable from the internal accounting, financial or other records of the
Company and its subsidiaries set forth or referred to in the Prospectus).
In rendering such opinion, such counsel may rely as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials and as
to Guarantors organized under the laws of jurisdictions other than Delaware,
Florida and Pennsylvania may assume that the Purchase Agreement, the Indenture
and the Guarantees have been duly authorized, executed and delivered pursuant to
adequate corporate or company power. Such opinion shall not state that it is to
be governed or qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
A-4
<Page>
EXHIBIT B
FORM OF OPINION OF PHELPS DUNBAR LLP: MISSISSIPPI
(i) BSL has been duly incorporated, and is validly existing as a
corporation in good standing under the laws of Mississippi, and has all
corporate power and authority necessary to own and operate the Casino
Magic - Bay St. Louis gaming establishment;
(ii) BTN has been duly incorporated, and is validly existing as a
corporation in good standing under the laws of Mississippi, and has all
corporate power and authority necessary to own and operate the Boomtown -
Biloxi gaming establishment;
(iii) The Relevant Portion of the Prospectus and the Relevant
Portions of the Prospectus Supplement, to the extent that such sections
deal with Mississippi regulatory matters, are accurate in all material
respects;
(iv) The Company possesses all Mississippi Commission licenses,
findings of suitability, registrations and approvals necessary to own,
lease and operate the Casino Magic- Bay St. Louis gaming establishment and
the Boomtown - Biloxi gaming establishment (the "Mississippi Gaming
Licenses");
(v) All such Mississippi Gaming Licenses are in full force and
effect;
(vi) To the best of our knowledge, the Company is in compliance with
the terms and conditions of all such Mississippi Gaming Licenses, except
where the failure to comply would not, singly or in the aggregate, have a
material adverse effect on the Company;
(vii) To the best of our knowledge, no event has occurred (including,
without limitation, the receipt of any notice from the Mississippi
Commission) that allows, or after notice or lapse of time, or both, would
allow revocation, modification, suspension or termination of any such
Mississippi Gaming License or would result in any other material
impairment of the rights of the holder of any such Mississippi Gaming
License that, singly or in the aggregate, would result in a material
adverse effect on the Company; and
(viii) To the best of our knowledge, the Mississippi Commission is not
considering limiting, suspending or revoking any such Mississippi Gaming
License and is not investigating the Company or any of the Subsidiaries,
other than ordinary administrative reviews.
B-1
<Page>
EXHIBIT C
FORM OF OPINION OF PHELPS DUNBAR LLP: LOUISIANA
(i) LCCI has been duly incorporated, and is validly existing as a
corporation in good standing under the laws of Louisiana;
(ii) The statements in the Relevant Portions of the Prospectus to
the extent such sections deal with Louisiana gaming regulatory matters are
accurate in all material respects;
(iii) LCCI possesses the license issued by the Louisiana Gaming
Control Board necessary to operate the Casino Rouge, Baton Rouge,
Louisiana conducting gaming activities as described in LSA-R.S. 27:65 et
seq. (the "Louisiana Gaming License");
(iv) The Louisiana Gaming License is in full force and effect;
(v) To the best of our knowledge, LCCI is in compliance with the
terms and conditions of the Louisiana Gaming License, except where the
failure to comply would not, singly or in the aggregate, have a material
adverse effect on LCCI or the Company;
(vi) To the best of our knowledge, no event has occurred (including,
without limitation, the receipt of any notice from any regulatory entity)
that allows, or after notice or lapse of time, or both, or would allow
revocation, modification, suspension or termination of the Louisiana
Gaming License or would result in any other material impairment of the
rights of the holder of the Louisiana Gaming License that, singly or in
the aggregate, would result in a material adverse effect on the Company or
LCCI; and
(vii) To the best of our knowledge, the Louisiana Gaming Control
Board is not considering limiting, suspending or revoking the Louisiana
Gaming License nor investigating the Company or LCCI, other than ordinary
routine administrative investigations and reviews which singly or in the
aggregate, would result in a material adverse effect on the Company or
LCCI or any ordinary review of the transactions contemplated in the
Prospectus.
C-1
<Page>
EXHIBIT D
FORM OF OPINION OF BOWLES RICE MCDAVID GRAFFE & LOVE PLLC:
WEST VIRGINIA
(i) Penn-WV has been duly incorporated and is validly existing as a
corporation in good standing under the laws of West Virginia, and has all
corporate power and authority necessary to own or hold its properties in
West Virginia and conduct the businesses in which it is engaged in West
Virginia;
(ii) Each of Charles Town and Charles Town Food & Beverage has been
duly formed and is validly existing as a limited liability company under
the laws of West Virginia, and has all limited liability company power and
authority necessary to own or hold its properties in West Virginia and
conduct the businesses in which it is engaged in West Virginia;
(iii) The statements in the Prospectus Supplement dated February 21,
2002 under the caption "Risk Factors", to the extent such section deals
with West Virginia regulatory matters, and insofar as such statements as a
whole constitute a summary of the legal matters, documents and proceedings
referred to therein, fairly present in all material respects such legal
matters, documents and proceedings;
(iv) Each of Charles Town and Charles Town Food & Beverage
possesses, has obtained and caused to be issued to it all West Virginia
Government Licenses and has made all required filings with West Virginia
regulatory bodies necessary to own, lease and operate its properties in
West Virginia and to conduct the businesses now operated in the State of
West Virginia and all such West Virginia Governmental Licenses are in full
force and effect;
(v) To the knowledge of such counsel, upon reasonable inquiry,
Charles Town and Charles Town Food & Beverage are in compliance with the
terms and conditions of all required West Virginia Governmental Licenses,
except where the failure to comply could not, singly or in the aggregate,
have a Material Adverse Effect on Charles Town or Charles Town Food &
Beverage;
(vi) To the knowledge of such counsel, upon reasonable inquiry, no
event has occurred (including, without limitation, the receipt of any
notice from any West Virginia regulatory body) which allows, or after
notice or lapse of time, or both, would allow revocation, modification,
suspension or termination of any West Virginia Governmental License or
would result in any other material impairment of the rights of the holder
of any such West Virginia Governmental License which, singly or in the
aggre-
D-1
<Page>
gate, would result in a Material Adverse Effect on Charles Town and
Charles Town Food & Beverage; and
(vii) To the knowledge of such counsel, upon reasonable inquiry, no
regulatory body is considering limiting, suspending or revoking any West
Virginia Government License or is investigating the Company or any of
Penn-WV, Charles Town and/or Charles Town Food & Beverage, other than
ordinary administrative reviews or any ordinary review of the transactions
contemplated hereby.
D-2
<Page>
EXHIBIT E
FORM OF OPINION OF RIKER, DANZIG, SCHERER, HYLAND & PERRETTI LLP:
NEW JERSEY
(i) Each of GS Park Services, L.P., FR Park Services, L.P., GS Park
Racing, L.P. and FR Park Racing, L.P. (the "Limited Partnerships") is a
limited partnership, and is in good standing as a limited partnership
under the laws of the State of New Jersey. The foregoing is based solely
on the certificates of the New Jersey Department of the Treasury, Division
of Commercial Recording annexed hereto as Schedule I and is as of the
dates set forth in such certificates.
(ii) On January 19, 1999, we filed a petition before the Racing
Commission for approval of the Company's acquisition of an interest in
Freehold Raceway and the lease of Garden State Park pursuant to the Joint
Venture Agreement dated October 30, 1998, (the "Joint Venture Agreement"),
as amended by the First Amendment to the Joint Venture Agreement dated
January 28, 1999, by, between and among the Company and Greenwood New
Jersey, Inc., a New Jersey corporation, and its assignees FR Park Racing,
L.P., GS Park Racing, L.P.; FR Park Services, L.P.; and GS Park Services,
L.P.; each a New Jersey limited partnership. By Order dated May 20, 1999,
the Racing Commission approved (the "Approval"): (a) the acquisition by
the Company of 50% of the shares of Pennwood Racing, Inc. ("Pennwood"),
the .1% general partner of permitholder GS Park Racing, L.P. (thoroughbred
and harness permits) and permitholder FR Park Racing, L.P. (two harness
permits); and the .1% general partner of GS Park Services, L.P. and FR
Park Services, L.P.; and (b) the Company's acquisition of a 49.95% limited
partnership in the Limited Partnerships.
(iii) The Approval obtained by the Company is subject to five (5)
conditions, one of which incorporates any and all previously imposed
conditions upon the Limited Partnerships, their affiliates or related
persons, which include eight (8) conditions of the previous Commission
Order dated December 17, 1998 and superseded by the Commission Order dated
March 19, 1999. The Racing Commission later removed certain conditions
imposed on the Limited Partnerships by order dated May 11, 2000. The
Orders of the Racing Commission are set forth on Schedule II and attached
hereto. Based solely upon confirmation by Michael Vukcevich of the Racing
Commission and no further investigation, the Approval is in full force and
effect and has not been adversely modified or amended by the Racing
Commission as of the date hereof nor has the Approval been appealed to the
New Jersey Appellate Division. Garden State Park was sold in 2001 and
racing operations ceased on May 29, 2001. In sole reliance upon
conversations with Michael Vukcevich, and to the best of our actual
knowledge, FR Park Racing, L.P. has not failed to make all of the
requisite filings and secure approv-
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als of the New Jersey regulatory entities necessary to maintain race track
operations at Freehold Raceway. In sole reliance upon conversations with
Michael Vukcevich, and to the best of our actual knowledge, GR Park
Racing, L.P. has not failed to make all of the requisite filings and
secure approvals of the New Jersey regulatory entities necessary to
maintain race track operations at Garden State Park prior to the cessation
of race track operations on May 29, 2001.
(iv) The Approval obtained by the Company indicates that the Racing
Commission conducted an investigation into the qualifications of the
Company and its affiliates. The Racing Commission was advised on March 12,
1999 that upon completion of the proposed acquisition by the Company of an
interest in the four limited partnerships, the Company would transfer its
interest to its holding company, Penn National Holding, Inc., which would
own 50 percent of the interest in Pennwood. The Racing Commission was
advised that Penn National Holding, Inc. is a Delaware holding company
that is wholly owned by the Company. In addition, the Racing Commission
was advised that the Company would form a Delaware "C" corporation known
as Penn National GSFR, Inc. to maintain the 49.95 percent limited
partnership interest in FR Park Racing, L.P. and GS Park Racing, L.P. The
Racing Commission was advised that this new corporation would be wholly
owned by Penn National Holding, Inc. The Racing Commission was also
apprised that the Company's 49.95 percent interest in the service
companies, FR Park Services, L.P. and GS Park Services, L.P., would be
held by Pennsylvania National Turf Club, Inc., a Pennsylvania corporation
wholly owned by the Company. A copy of our March 12, 1999 letter to the
Racing Commission is set forth as Schedule III and attached hereto.
(v) On August 30, 1999, the Company filed an application as a
holding company affiliated with GS Park Racing, L.P. and FR Park Racing,
L.P. in connection with a non-gaming casino service industry license with
the New Jersey Casino Control Commission in order to conduct simulcasting
into the New Jersey casinos. That application is pending before the Casino
Control Commission. In the interim, Freehold Raceway and Garden State Park
were authorized to conduct simulcasting into the New Jersey casinos
pursuant to an order of the Casino Control Commission issued on December
16, 1998. The Order of the Casino Control Commission is set forth on
Schedule IV and attached hereto. Simulcasting at Garden State Park ceased
on May 29, 2001.
(vi) In sole reliance upon conversations with Michael Vukcevich, and
to the best of our actual knowledge, the Company is in compliance with the
terms and conditions of the Approval referred to in paragraph (ii) above,
except where the failure to comply would not, singly or in the aggregate,
have a material adverse effect on the Company.
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(vii) In sole reliance upon conversations with Michael Vukcevich, and
to the best of our actual knowledge, and, except as set forth in Paragraph
7 below, no event has occurred (including, without limitation, the receipt
of any notice from any regulatory entity) which allows, or after notice or
lapse of time, or both, would allow revocation, modification, suspension
or termination of the Approval referred to in paragraph (ii) above or
would result in any other material impairment of the rights of the holder
of the Approval referred to in paragraph (ii) above which, singly or in
the aggregate, would result in a material adverse effect on the Company.
(viii) Except as set forth herein, in sole reliance upon conversations
with Michael Vukcevich, and to the best of our actual knowledge, no
regulatory entity in the State of New Jersey is considering, as of the
date of this letter, limiting, suspending or revoking the Approval
referred to in paragraph (ii) above. We have been advised by the Racing
Commission that it recently has conducted an investigation of the
phone/internet wagering account practices of one of the Company's
affiliates, eBetUSA.com, Inc. ("eBet"). The investigators allege that eBet
does not act with due diligence in verifying all account information given
them by prospective customers. eBet has been fully cooperative and is in
the process of resolving this matter with the Racing Commission.
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EXHIBIT F
FORM OF OPINION OF BLAKE, CASSELS & GRAYDON LLP: CANADA
(i) No consents or approvals are required and no authorizations or
approvals of, and no filings with, any Canadian governmental or regulatory
authority or agency or other similar entity having jurisdiction are
necessary for the issuance and sale of the Notes by the Corporation; and
(ii) The issuance and sale of Notes by the Corporation will not
result in the revocation or suspension of CHC Casinos' registration with
the Alcohol and Gaming Commission of Ontario under the GAMING CONTROL ACT.
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EXHIBIT G
FORM OF OPINION OF SCHNADER HARRISON SEGAL & LEWIS LLP:
PENNSLYVANIA
(i) Mountainview Thoroughbred Racing Association and Pennsylvania
National Turf Club, Inc. each holds a valid and existing license under the
Act to conduct thoroughbred horse racing with pari-mutuel wagering at Penn
National Race Track (the "Penn National Licenses") and The Downs Racing,
Inc. holds a valid and existing license under the Act to conduct harness
racing with pari-mutuel wagering at Pocono Downs Race Track (the "Pocono
Downs License"). To our knowledge, neither of the Commissions is
considering modifying, suspending, revoking or not granting renewal of any
of the Penn National Licenses or the Pocono Downs License, and to our
knowledge, neither of the Commissions nor any other governmental agency is
investigating PNGI or any of the Subsidiaries or related parties or any
director or executive officer of PNGI or any of the Subsidiaries with
respect to their Pennsylvania Racing Activities, other than taking
ordinary course administrative actions; and to our knowledge, no change in
any Pennsylvania laws or regulations has been introduced and is pending
which if adopted, could reasonably be expected to materially limit the
Pennsylvania Racing Activities currently conducted by the Subsidiaries, or
which, individually or in the aggregate with all such changes, would have
a material adverse effect on PNGI and the Subsidiaries taken as a whole.
To our knowledge, the Subsidiaries are the only direct or indirect
subsidiaries of PNGI who conduct Racing Activities in or from the
Commonwealth of Pennsylvania and over whom the Commissions have regulatory
jurisdiction.
(ii) The Horse Racing Commission approved six non-primary locations
in the Commonwealth of Pennsylvania at which PNGI (or a Subsidiary
thereof) is authorized to conduct pari-mutuel wagering. The Harness
Commission approved five non-primary locations in the Commonwealth of
Pennsylvania at which The Downs Racing, Inc. (or a Subsidiary thereof) is
authorized to conduct pari-mutuel wagering. To our knowledge (i) such
approvals are in full force and effect, and (ii) no action has been taken
or threatened in writing by the Horse Racing Commission or the Harness
Commission to modify, revoke or suspend any of the Penn National Licenses
or the Pocono Downs License, or to disallow PNGI or a Subsidiary which is
a licensed corporation from continuing to operate their respective race
tracks and non-primary locations substantially in the manner as they have
been operated during the past two years (or during such shorter period as
they have actually been operated).
(iii) No order, consent, approval, license, authorization, or
validation of, or prefiling, recording, or registration with, or exemption
by, the Horse Racing Commission or the Harness Commission ("Commission
Action") is required pursuant to the
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Act or the Regulations to authorize, or is required in connection with the
execution, delivery, and performance of the Purchase Agreement Documents
by PNGI. The legality, validity and binding effect of the Purchase
Agreement Documents does not depend upon any further Commission Action.
The Commissions have requested that a copy of the Purchase Agreement be
filed with the Commissions after the Closing.
(iv) Neither the execution, delivery, nor performance by PNGI or any
of the Subsidiaries of any of the Purchase Agreement Documents to which it
is a party, nor compliance by it with the terms and provisions thereof
will contravene any provision of the Act, the Regulations or of any of the
Penn National Licenses or the Pocono Downs License. Ownership of the
capital stock of the entities holding the Penn National Licenses or the
Pocono Downs License does not violate Section 205 of the Act.
(v) The Underwriters are not required to be licensed or approved by
the Harness Commission or the Horse Racing Commission as a result of the
execution and performance of the Purchase Agreement.
(vi) To our knowledge, neither PNGI nor any of its Subsidiaries is
in material breach of the Act or the Regulations.
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