EXHIBIT 1
Penn National Gaming, Inc.
$80,000,000
10 5/8% Senior Notes due 2004g
PURCHASE AGREEMENT
December 12, 1997
BT ALEX. BROWN INCORPORATED
JEFFERIES & COMPANY, INC.
c/o BT Alex. Brown Incorporated
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Penn National Gaming, Inc., a Pennsylvania corporation (the
"Company"), and the subsidiary guarantors listed on Schedule A hereto (the
"Subsidiary Guarantors"), each hereby confirms its agreement with you (the
"Initial Purchasers"), as set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchasers
$80,000,000 aggregate principal amount of its 10 5/8% Senior Notes due 2004
(with the Guarantees defined below, the "Notes"). The Notes will be guaranteed
(the "Guarantees") by the Subsidiary Guarantors on a senior basis. The Notes are
to be issued under an indenture (the "Indenture") to be dated as of December 17,
1997 by and between the Company, the Subsidiary Guarantors and State Street Bank
and Trust Company, as Trustee (the "Trustee").
It is contemplated, but not required, that concurrently with
the issuance of the Notes, the Company and its subsidiaries will enter into a
senior secured credit agreement (together with all documents executed in
connection therewith, the "New Credit Agreement") dated December 17, 1997, among
the Company, the Subsidiary Guarantors, the lenders party thereto in their
capacities as lenders thereunder and Bankers Trust Company, as agent, in the
form of a revolving credit facility in the amount of $12.0 million, for working
capital, letters
of credit and other general corporate purposes, to replace the $61.0 million
existing credit facility (the "Existing Credit Agreement" and together with the
New Credit Agreement, the "Credit Agreement").
The Notes will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Act"), in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has
prepared a preliminary offering memorandum dated November 24, 1997 (the
"Preliminary Memorandum") and a final offering memorandum dated December 12,
1997 (the "Final Memorandum"; the Preliminary Memorandum and the Final
Memorandum each herein being referred to as a "Memorandum") each setting forth
or including a description of the terms of the Notes, the terms of the offering
of the Notes, a description of the Company and any material developments
relating to the Company occurring after the date of the most recent historical
financial statements included therein.
The Company understands that the Initial Purchasers propose to
make an offering of the Notes only on the terms and in the manner set forth in
the Final Memorandum and Section 8 hereof as soon as the Initial Purchasers deem
advisable after this Agreement has been executed and delivered, to qualified
institutional buyers ("Qualified Institutional Buyers" or "QIBs") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("Rule
144A"), in transactions under Rule 144A, and outside the United States to
certain persons in reliance on Regulation S under the Act.
The Initial Purchasers and their direct and indirect
transferees of the Notes will be entitled to the benefits of the Registration
Rights Agreement, substantially in the form attached hereto as Schedule A (the
"Registration Rights Agreement"), to be dated the Closing Date (as defined in
Section 3 below), pursuant to which the Company and the Subsidiary Guarantors
have agreed, among other things, to file a registration statement (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") registering the Notes or the Exchange Notes (as defined in the
Registration Rights Agreement) under the Act.
2. Representations and Warranties. The Company and the
Subsidiary Guarantors, jointly and severally, represent and warrant to and agree
with the Initial Purchasers that:
(a) Neither the Preliminary Memorandum as of the date
thereof nor the Final Memorandum nor any amendment or supplement thereto as of
the date thereof and at all times subsequent thereto up to the Closing Date
contained or contains any untrue state-
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ment of a material fact or omitted or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this Section 2(a) do not apply to statements or omissions made in
reliance upon and in conformity with information relating to the Initial
Purchasers furnished to the Company in writing by the Initial Purchasers
expressly for use in the Preliminary Memorandum, the Final Memorandum or any
amendment or supplement thereto specified in Section 12 hereof.
(b) As of the Closing Date, the Company will have the
authorized, issued and outstanding capitalization set forth in the Final
Memorandum; all of the subsidiaries of the Company, including the Subsidiary
Guarantors and PNGI Charles Town Gaming LLC, an 89% owned joint venture, are
listed in Schedule B attached hereto (each, a "Subsidiary" and collectively, the
"Subsidiaries"); all of the outstanding shares of capital stock of the Company
and the Subsidiaries have been, and as of the Closing Date will be, duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights; except as contemplated
by the Credit Agreement all of the outstanding shares of capital stock of the
Company and the Subsidiaries will be free and clear of all liens, encumbrances,
equities and claims or restrictions on transferability (other than those imposed
by the Act and the securities or "Blue Sky" laws of certain jurisdictions) or
voting; except as issued pursuant to the Company's stock option plans and except
for the warrants described in the notes to the Consolidated Financial Statements
included in the Final Memorandum, there are no (i) options, warrants or other
rights to purchase from the Company or the Subsidiaries, (ii) agreements or
other obligations of the Company or the Subsidiaries to issue or (iii) other
rights to convert any obligation into, or exchange any securities for, shares of
capital stock of or ownership interests in the Company or any of the
Subsidiaries outstanding. Except for the Subsidiaries or as disclosed in the
Final Memorandum, the Company does not own, directly or indirectly, any shares
of capital stock or any other equity or long-term debt securities or have any
equity interest in any firm, partnership, joint venture or other entity.
(c) Each of the Company and the Subsidiaries has been duly
incorporated or duly formed (as applicable), is validly existing and is in good
standing as a corporation or as a limited liability company, as the case may be,
under the laws of its respective jurisdiction of incorporation or organization,
with all requisite corporate power and authority to own its properties and
conduct its business as now conducted and as described in the Final Memorandum;
each of the Company and the Subsidiaries is duly qualified to do business as a
foreign corporation or as a limited liability company, as the case may be, in
good standing in all other jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the business, condition
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(financial or otherwise), prospects or results of operations of the Company and
the Subsidiaries, taken as a whole (any such event, a "Material Adverse
Effect").
(d) Each of the Company and the Subsidiary Guarantors has
all requisite corporate power and authority to execute, deliver and perform each
of its obligations under the Notes, the Exchange Notes and the Private Exchange
Notes (as defined in the Registration Rights Agreement). The Notes, the Exchange
Notes and the Private Exchange Notes have each been duly and validly authorized
by the Company and the Subsidiary Guarantors and, when executed by the Company
and authenticated by the Trustee in accordance with the provisions of the
Indenture and, in the case of the Notes, when delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, will have
been duly executed, issued and delivered and will constitute valid and legally
binding obligations of the Company and the Subsidiary Guarantors, entitled to
the benefits of the Indenture and enforceable against the Company and the
Subsidiary Guarantors in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(e) The Guarantees to be endorsed on the Notes by each
Subsidiary Guarantor have been duly authorized by such Subsidiary Guarantor and,
on the Closing Date, will have been duly executed and delivered by each such
Subsidiary Guarantor. When the Notes have been issued, executed and
authenticated in accordance with the Indenture and delivered to and paid for by
the Initial Purchasers in accordance with the terms of this Agreement, the
Guarantee of each Subsidiary Guarantor endorsed thereon will be entitled to the
benefits of the Indenture and will be the valid and binding obligation of such
Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in
accordance with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally, and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought.
(f) Each of the Company and the Subsidiary Guarantors has
all requisite corporate power and authority to execute, deliver and perform its
obligations under the Indenture. The Indenture meets the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the "TIA"). The
Indenture has been duly and validly authorized by the Company and the Subsidiary
Guarantors and, when executed and delivered by the Company and the Subsidiary
Guarantors (assuming the due authorization, execution and delivery by the
Trustee), will constitute a valid and legally binding agreement of the Company
and the Subsidiary Guarantors, enforceable against the Company and the
Subsidiary Guarantors in accordance with its terms, except that the enforcement
thereof may be subject to
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(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought.
(g) Each of the Company and the Subsidiary Guarantors has
all requisite corporate power and authority to execute, deliver and perform its
obligations under the Registration Rights Agreement. The Registration Rights
Agreement has been duly and validly authorized by the Company and the Subsidiary
Guarantors and, when executed and delivered by the Company and the Subsidiary
Guarantors, will constitute a valid and legally binding agreement of the Company
and the Subsidiary Guarantors enforceable against the Company and the Subsidiary
Guarantors in accordance with its terms, except that (i) the enforcement thereof
may be subject to (A) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (B) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (ii) any rights to
indemnity or contribution thereunder may be limited by federal and state
securities laws and public policy considerations.
(h) Each of the Company and the Subsidiary Guarantors has
all requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. This Agreement and the transactions contemplated hereby have been duly
and validly authorized, executed and delivered by the Company and the Subsidiary
Guarantors.
(i) No consent, approval, authorization or order of any
court, governmental agency or body or third party, including without limitation,
the Pennsylvania State Horse Racing Commission (the "Horse Racing Commission"),
the Pennsylvania State Harness Racing Commission (the "Harness Commission"), the
West Virginia State Racing Commission (the "West Virginia Racing Commission")
and the West Virginia Lottery Commission (the "Lottery Commission")
(collectively, the "Gaming Authorities"), is required for the performance of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except such as have been obtained and such as
may be required under state securities or "Blue Sky" laws in connection with the
purchase and resale of the Notes by the Initial Purchasers. None of the Company
or the Subsidiaries is (i) in violation of its certificate of incorporation or
bylaws (or similar organizational document), (ii) in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to it or any of
its respective properties or assets, except for any such breach or violation
that would not, individually or in the aggregate, have a Material Adverse
Effect, or (iii) in breach of or default under (nor has any event occurred that,
with notice or passage of time or both, would constitute a default under) or in
violation of any of the terms or provisions of any indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise agreement, permit,
certificate, contract or other agreement or instrument to which it is a party or
to which it or its
5
respective properties or assets is subject (collectively, "Contracts"), except
for any such breach, default, violation or event that would not, individually or
in the aggregate, have a Material Adverse Effect.
(j) The execution, delivery and performance by the Company
and the Subsidiary Guarantors of this Agreement, the Indenture, the Registration
Rights Agreement and the Credit Agreement and the consummation by each of the
Company and the Subsidiary Guarantors of the transactions contemplated hereby
and thereby (including, without limitation, the issuance and sale of the Notes
to the Initial Purchasers) and the fulfillment of the terms hereof and thereof
will not conflict with or constitute or result in a breach of or a default under
(or an event that with notice or passage of time or both would constitute a
default under) or violation of any of (i) the terms or provisions of any
Contract, except for any such conflict, breach, violation, default or event that
would not, individually or in the aggregate, have a Material Adverse Effect,
(ii) the certificate of incorporation or bylaws (or similar organizational
document) of the Company or any of the Subsidiaries or (iii) (assuming
compliance with all applicable state securities or "Blue Sky" laws and assuming
the accuracy of the representations and warranties of the Initial Purchasers in
Section 8 hereof) any statute, judgment, decree, order, rule or regulation
applicable to the Company or any of the Subsidiaries or any of their respective
properties or assets, except for any such conflict, breach or violation that
would not, individually or in the aggregate, have a Material Adverse Effect.
(k) The audited consolidated financial statements of the
Company included in the Final Memorandum, taken as a whole, present fairly in
all material respects the financial position, results of operations and changes
in shareholders' equity and cash flows of the Company at the dates and for the
periods to which they relate and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except as
otherwise stated therein. The summary and selected financial and statistical
data in the Final Memorandum, taken as a whole, present fairly, in all material
respects, the information shown therein and have been prepared and compiled on a
basis consistent with the audited financial statements included therein, except
as otherwise stated therein. BDO Seidman, LLP (the "Independent Accountant") is
an independent public accounting firm within the meaning of the Act and the
rules and regulations promulgated thereunder.
(l) There is not pending or, to the best knowledge of the
Company and the Subsidiary Guarantors, threatened any action, suit, proceeding,
inquiry or investigation to which the Company or any of the Subsidiaries is a
party, or to which the property or assets of the Company or any of the
Subsidiaries are subject, before or brought by any court, arbitrator or
governmental agency or body that, if determined adversely to the Company or the
Subsidiaries, would, individually or in the aggregate, have a Material Adverse
Effect or that seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or
6
sale of the Notes to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum.
(m) Each of the Company and the Subsidiaries owns or
possesses adequate licenses or other rights to use all patents, trademarks,
service marks, trade names, copyrights and know-how necessary to conduct the
businesses now or proposed to be operated, as described in the Final Memorandum,
and, except as described in the Final Memorandum, none of the Company or the
Subsidiaries has received any notice of infringement of or conflict with (or
knows of any such infringement of or conflict with) asserted rights of others
with respect to any patents, trademarks, service marks, trade names, copyrights
or know-how that, if such assertion of infringement or conflict were sustained,
would, individually or in the aggregate, have a Material Adverse Effect.
(n) Each of the Company and the Subsidiaries possesses all
licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities (including, without
limitation, all permits, licenses, certificates and franchises necessary to
conduct thoroughbred racing, harness racing, wagering on live and simulcast
racing and telephone account wagering activities, to operate off-track wagering
facilities and video gaming machines and to broadcast live racing), all
self-regulatory organizations and all courts and other tribunals, presently
required or necessary to own or lease, as the case may be, and to operate its
respective properties and to carry on its respective businesses as now or
proposed to be conducted as set forth in the Final Memorandum ("Permits"),
except where the failure to obtain such Permits would not, individually or in
the aggregate, have a Material Adverse Effect; each of the Company and the
Subsidiaries has fulfilled and performed all of its obligations with respect to
such Permits and no event has occurred that allows, or after notice or lapse of
time would allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such Permit; and none of
the Company or the Subsidiaries has received any notice of any proceeding
relating to revocation or modification of any such Permit, except as described
in the Final Memorandum and except where such revocation or modification would
not, individually or in the aggregate, have a Material Adverse Effect.
(o) Since the date of the most recent financial statements
appearing in the Final Memorandum, except as described therein, (i) none of the
Company or the Subsidiaries has incurred any liabilities or obligations, direct
or contingent, or entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of business, which
liabilities, obligations, transactions or contracts would, individually or in
the aggregate, be material to the business, condition (financial or otherwise),
prospects or results of operations of the Company and its Subsidiaries, taken as
a whole (a "Material Change"), (ii) none of the Company or the Subsidiaries has
purchased any of its outstanding capital
7
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock and (iii) there shall not have been any change in the
capital stock or long-term indebtedness of the Company or the Subsidiaries that
would, individually or in the aggregate, be a Material Change.
(p) Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns, except
where the failure to so file such returns would not, individually or in the
aggregate, have a Material Adverse Effect, and has paid all taxes shown as due
thereon; and other than tax deficiencies that the Company or any Subsidiary is
contesting in good faith and for which the Company or such Subsidiary has
provided adequate reserves, there is no tax deficiency that has been asserted
against the Company or any of the Subsidiaries that would have, individually or
in the aggregate, a Material Adverse Effect.
(q) The statistical and market-related data included in
the Final Memorandum are based on or derived from sources that the Company
believe to be reliable and accurate in all material respects.
(r) None of the Company, the Subsidiaries or any agent
acting on their behalf has taken or will take any action that might cause this
Agreement or the sale of the Notes to violate Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System, in each case as in effect, or
as the same may hereafter be in effect, on the Closing Date.
(s) Each of the Company and the Subsidiaries has good and
marketable title to all real property and good title to all personal property
described in the Final Memorandum as being owned by it and a valid leasehold
interest in the real and personal property described in the Final Memorandum as
being leased by it free and clear of all liens, charges, encumbrances or
restrictions, except as described in the Final Memorandum or to the extent the
failure to have such title or the existence of such liens, charges, encumbrances
or restrictions would not, individually or in the aggregate, have a Material
Adverse Effect. All material leases, contracts and agreements to which any of
the Company or the Subsidiaries is a party or by which any of them is bound are
valid and enforceable against the Company or such Subsidiary, are, to the
Company's knowledge, valid and enforceable against the other party or parties
thereto and are in full force and effect with only such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect.
(t) There are no legal or governmental proceedings
involving or affecting the Company or the Subsidiaries or any of their
respective properties or assets that would be required to be described in a
prospectus pursuant to the Act that are not described in the Final Memorandum,
nor are there any material contracts or other documents that would be
8
required to be described in a prospectus pursuant to the Act that are not
described in the Final Memorandum.
(u) The Company has no reason to believe that any of the
Gaming Authorities is considering modifying, suspending, revoking or not
granting renewal of any of the Permits, and, to its knowledge, neither the
Gaming Authorities nor any other governmental agency is investigating the
Company or any of the Subsidiaries or related parties or any director or
executive officer of the Company or any of the Subsidiaries, other than ordinary
course administrative reviews. Except as disclosed in the Final Memorandum, to
the best knowledge of the Company, no change in any laws or regulations is
pending which could reasonably be expected to be adopted and if adopted, could
reasonably be expected to have, individually or in the aggregate with all such
changes, a Material Adverse Effect.
(v) Except as would not, individually or in the aggregate,
have a Material Adverse Effect (i) each of the Company and the Subsidiaries is
in compliance with and not subject to liability under applicable Environmental
Laws, (ii) each of the Company and the Subsidiaries has made all filings and
provided all notices required under any applicable Environmental Law, has and is
in compliance with all Permits required under any applicable Environmental Laws
and each of them is in full force and effect, (iii) there is no civil, criminal
or administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter or request for information
pending or, to the knowledge of the Company or any of the Subsidiaries,
threatened against the Company or any of the Subsidiaries under any
Environmental Law, (iv) no lien, charge, encumbrance or restriction has been
recorded under any Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the Company or the
Subsidiaries, (v) none of the Company or the Subsidiaries has received notice
that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or any comparable state law, (vi) (A) no property or
facility of the Company or the Subsidiaries is listed or proposed for listing on
the National Priorities List under CERCLA OR (B) to the knowledge of the Company
and the Subsidiary Guarantors is listed in the Comprehensive Environmental
Response, Compensation, Liability Information System List promulgated pursuant
to CERCLA or any comparable list maintained by any state or local governmental
authority.
For purposes of this Agreement, "Environmental Laws" means
the common law and all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated, approved
or entered thereunder, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
hazardous materials, into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata),
(ii) the manufacture, proc-
9
essing, distribution, use, generation, treatment, storage, disposal, transport
or handling of hazardous materials and (iii) underground and above ground
storage tanks, and related piping, and emissions, discharges, releases or
threatened releases therefrom.
(w) Except as described in the Final Memorandum, there is
no strike, labor dispute, slowdown or work stoppage with the employees of the
Company or the Subsidiaries that is pending or, to the knowledge of the Company
or the Subsidiaries, threatened.
(x) Each of the Company and the Subsidiaries carries
insurance in such amounts and covering such risks as in its reasonable
determination are adequate for the conduct of its business and the value of its
properties.
(y) None of the Company or the Subsidiaries has any
liability for any prohibited transaction or funding deficiency or any complete
or partial withdrawal liability with respect to any pension, profit sharing or
other plan that is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or any of the Subsidiaries
makes or ever has made a contribution and in which any employee of the Company
or the Subsidiaries is or has ever been a participant. With respect to such
plans, the Company and the Subsidiaries are in compliance in all material
respects with all applicable provisions of ERISA.
(z) Each of the Company and the Subsidiaries (i) makes and
keeps accurate books and records and (ii) maintains internal accounting controls
that provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) trans-actions are recorded as
necessary to permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted only in
accordance with management's authorization and (D) the reported accountability
for its assets is compared with existing assets at reasonable intervals.
(aa) None of the Company or the Subsidiaries will be an
"investment company" or "promoter" or "principal underwriter" for an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
(bb) The Notes, the Guarantees, the Exchange Notes, the
Indenture, the Credit Agreement and the Registration Rights Agreement will
conform in all material respects to the descriptions thereof in the Final
Memorandum.
(cc) No holder of securities of the Company or any
Subsidiary will be entitled to have such securities registered under the
registration statements required to be
10
filed by the Company pursuant to the Registration Rights Agreement other than as
expressly permitted thereby.
(dd) Immediately after the consummation of the
transactions contemplated by this Agreement, the fair value and present fair
saleable value of the assets of each of the Subsidiary Guarantors (each on a
consolidated basis) will exceed the sum of its stated liabilities and identified
contingent liabilities; none of the Company or the Subsidiary Guarantors (each
on a consolidated basis) is, nor will any of the Company or the Subsidiary
Guarantors (each on a consolidated basis) be, after giving effect to the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby, (i) left with unreasonably small capital
with which to carry on its business as it is proposed to be conducted, (ii)
unable to pay its debts (contingent or otherwise) as they mature or (iii)
otherwise insolvent.
(ee) None of the Company, the Subsidiaries or any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under the Act)
has directly, or through any agent, (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any "security" (as defined in the
Act) that is or could be integrated with the sale of the Notes in a manner that
would require the registration under the Act of the Notes or (ii) engaged in any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the Notes or in
any manner involving a public offering within the meaning of Section 4(2) of the
Act. Assuming the accuracy of the representations and warranties of the Initial
Purchasers in Section 8 hereof, it is not necessary in connection with the
offer, sale and delivery of the Notes to the Initial Purchasers in the manner
contemplated by this Agreement to register any of the Notes under the Act or to
qualify the Indenture under the TIA.
(ff) No securities of the Company or any Subsidiary are of
the same class (within the meaning of Rule 144A under the Act) as the Notes and
listed on a national securities exchange registered under Section 6 of the
Exchange Act, or quoted in a U.S. automated inter-dealer quotation system.
(gg) None of the Company or the Subsidiaries has taken,
nor will any of them take, directly or indirectly, any action designed to, or
that might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Notes.
Any certificate signed by any officer of the Company or
the Subsidiaries and delivered to the Initial Purchasers or to counsel for the
Initial Purchasers shall be deemed a joint and several representation and
warranty by the Company and each of the Subsidiaries to the Initial Purchasers
as to the matters covered thereby.
11
3. Purchase, Sale and Delivery of the Notes. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchasers and the Initial Purchasers, acting
severally and not jointly, agree to purchase the Notes, in the respective
amounts set forth on Schedule I hereto, from the Company at 97.0% of their
principal amount. One or more certificates in definitive form for the Notes that
the Initial Purchasers have agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names as the
Initial Purchasers request upon notice to the Company at least 36 hours prior to
the Closing Date, shall be delivered by or on behalf of the Company to the
Initial Purchasers, against payment by or on behalf of the Initial Purchasers of
the purchase price therefor by wire transfer (same day funds), to such account
or accounts as the Company shall specify prior to the Closing Date, or by such
means as the parties hereto shall agree prior to the Closing Date. Such delivery
of and payment for the Notes shall be made at the offices of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York at 9:00 A.M., New York time, on
December 17, 1997, or at such other place, time or date as the Initial
Purchasers, on the one hand, and the Company, on the other hand, may agree upon,
such time and date of delivery against payment being herein referred to as the
"Closing Date." The Company will make such certificate or certificates for the
Notes available for checking and packaging by the Initial Purchasers at the
offices of BT Alex. Brown Incorporated in New York, New York, or at such other
place as BT Alex. Brown Incorporated may designate, at least 24 hours prior to
the Closing Date.
4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Notes at the price and upon the terms set
forth in the Final Memorandum, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchasers is advisable.
5. Covenants of the Company and the Subsidiary Guarantors.
Each of the Company and the Subsidiary Guarantors, jointly and severally,
covenants and agrees with the Initial Purchasers that:
(a) The Company and the Subsidiary Guarantors will not
amend or supplement the Final Memorandum or any amendment or
supplement thereto of which the Initial Purchasers shall not
previously have been advised and furnished a copy for a
reasonable period of time prior to the proposed amendment or
supplement and as to which the Initial Purchasers shall not
have given its consent. The Company and the Subsidiary
Guarantors will promptly, upon the reasonable request of the
Initial Purchasers or counsel for the Initial Purchasers, make
any amendments or supplements to the Final Memorandum that may
12
be necessary or advisable in connection with the resale of the
Notes by the Initial Purchasers.
(b) The Company and the Subsidiary Guarantors will
cooperate with the Initial Purchasers in arranging for the
qualification of the Notes for offering and sale under the
securities or "Blue Sky" laws of such jurisdictions as the
Initial Purchasers may designate and will continue such
qualifications in effect for as long as may be necessary to
complete the resale of the Notes; provided, however, that in
connection therewith, the Company shall not be required to
qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction or subject
itself to taxation in excess of a nominal dollar amount in any
such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the
distribution by the Initial Purchasers of the Notes or the
Private Exchange Notes, any event occurs or information
becomes known as a result of which the Final Memorandum as
then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or
if for any other reason it is necessary at any time to amend
or supplement the Final Memorandum to comply with applicable
law, the Company and the Subsidiary Guarantors will promptly
notify the Initial Purchasers thereof and will prepare, at the
expense of the Company and the Subsidiary Guarantors, an
amendment or supplement to the Final Memorandum that corrects
such statement or omission or effects such compliance.
(d) The Company and the Subsidiary Guarantors will, without
charge, provide to the Initial Purchasers and to counsel for
the Initial Purchasers as many copies of the Final Memorandum
or any amendment or supplement thereto as the Initial
Purchasers may reasonably request.
(e) The Company will apply the net proceeds from the sale
of the Notes as set forth under "Use of Proceeds" in the Final
Memorandum.
(f) For so long as the Notes remain outstanding, the
Company and the Subsidiary Guarantors will furnish to the
Initial Purchasers copies of all reports and other
communications (financial or otherwise) furnished by the
Company to the Trustee or the holders of the Notes and, as
soon as available, copies of any reports or financial
statements furnished to or filed by the Com-
13
pany with the Commission or any national securities exchange
on which any class of securities of the Company may be listed.
(g) None of the Company, the Subsidiaries or any of their
Affiliates will sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any "security" (as
defined in the Act) that could be integrated with the sale of
the Notes in a manner that would require the registration
under the Act of the Notes.
(h) The Company and the Subsidiary Guarantors will not, and
will not permit any of the Subsidiaries to, engage in any form
of general solicitation or general advertising (as those terms
are used in Regulation D under the Act) in connection with the
offering of the Notes or in any manner involving a public
offering within the meaning of Section 4(2) of the Act.
(i) For so long as any of the Notes remain outstanding, the
Company and the Subsidiary Guarantors will make available,
upon request, to any seller of such Notes the information
specified in Rule 144A(d)(4) under the Act, unless the Company
is then subject to Section 13 or 15(d) of the Exchange Act.
(j) The Company will use their best efforts to (i) permit
the Notes to be designated PORTAL securities in accordance
with the rules and regulations adopted by the NASD relating to
trading in the Private Offerings, Resales and Trading through
Automated Linkages market (the "Portal Market") and (ii)
permit the Notes to be eligible for clearance and settlement
through The Depository Trust Company.
6. Expenses. The Company and the Subsidiary Guarantors,
jointly and severally, agree to pay all of their costs and expenses incident to
the performance of their obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 11 hereof, including all costs and expenses incident to (i)
the printing, word processing or other production of documents with respect to
the transactions contemplated hereby, including any costs of printing the
Preliminary Memorandum and the Final Memorandum and any amendment or supplement
thereto and any "Blue Sky" memoranda, (ii) all arrangements relating to the
delivery to the Initial Purchasers of copies of the foregoing documents, (iii)
the fees and disbursements of counsel, accountants and any other experts or
advisors retained by the Company, (iv) preparation (including printing),
issuance and delivery to the Initial Purchasers of the Notes, (v) the
qualification of the Notes under state securities and "Blue Sky" laws, including
filing fees and fees and disbursements of counsel for the Initial Purchasers
relating thereto,
14
(vi) expenses in connection with any meetings with prospective investors in the
Notes, (vii) fees and expenses of the Trustee including fees and expenses of
counsel, (viii) all expenses and listing fees incurred in connection with the
application for quotation of the Notes on the Portal Market and (ix) any fees
charged by investment rating agencies for the rating of the Notes. In addition,
if the sale of the Notes provided for herein is not consummated because any
condition to the obligations of the Initial Purchasers set forth in Section 7
(other than subsection (b)) hereof is not satisfied, because this Agreement is
terminated or because of any failure, refusal or inability on the part of the
Company or any Subsidiary Guarantor to perform all obligations and satisfy all
conditions on their part to be performed or satisfied hereunder (other than
solely by reason of a default by the Initial Purchasers of their obligations
hereunder after all conditions hereunder have been satisfied in accordance
herewith), the Company and the Subsidiary Guarantors, jointly and severally,
agree to promptly reimburse the Initial Purchasers upon demand for all
out-of-pocket expenses (including fees, disbursements and charges of Cahill
Gordon & Reindel, counsel for the Initial Purchasers) that shall have been
incurred by the Initial Purchasers in connection with the proposed purchase and
sale of the Notes.
7. Conditions of the Initial Purchasers' Obligations. The
obligation of the Initial Purchasers to purchase and pay for the Notes shall, in
their sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have
received the opinion, dated as of the Closing Date and
addressed to the Initial Purchasers, from Morgan, Lewis &
Bockius LLP, counsel for the Company and the Subsidiary
Guarantors, in form and substance satisfactory to counsel for
the Initial Purchasers, to the effect that:
(i) The Company and each of the Subsidiaries is
validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or formation and
has all requisite corporate power and authority to own,
lease and operate its properties and to conduct its
business as described in the Final Memorandum. Neither the
Company nor any Subsidiary is registered or qualified to do
business in any jurisdiction other than its jurisdiction of
organization, the Company and the Subsidiaries having
informed such counsel that the nature of the properties and
the conduct of the business of each such entity do not
require registration or qualification to do business in any
jurisdiction other than each such entity's jurisdiction of
organization.
(ii) The Company has authorized, under its articles of
incorporation, (a) one million shares of preferred stock,
$.01 par value per
15
share and (b) 20 million shares of common stock, $.01 par
value per share; all of the outstanding shares of capital
stock of the Company and the Subsidiaries have been duly
authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any
preemptive or similar rights; to the knowledge of such
counsel, except as set forth in the Final Memorandum and
the Credit Agreement, all of the outstanding shares of
capital stock of the Subsidiaries are owned, directly or
indirectly, by the Company, free and clear of all perfected
security interests and, free and clear of all other liens,
encumbrances, equities and claims or restrictions on
transferability (other than those imposed by the Act and
the securities or "Blue Sky" laws of certain
jurisdictions).
(iii) To the knowledge of such counsel, except as set
forth in the Final Memorandum and except as issued pursuant
to the Company's stock option plans and the warrants
described in the Notes to Consolidated Financial Statements
included in the Final Memorandum, (A) no options, warrants
or other rights to purchase from the Company or the
Subsidiaries shares of capital stock or ownership interests
in the Company or the Subsidiaries are outstanding, (B) no
agreements or other obligations of the Company or the
Subsidiaries to issue, or other rights to cause the Company
or the Subsidiaries to convert, any obligation into, or
exchange any securities for, shares of capital stock or
ownership interests in the Company or the Subsidiaries are
outstanding and (C) no holder of securities of the Company
or the Subsidiaries is entitled to have such securities
registered under a registration statement filed by the
Company pursuant to the Registration Rights Agreement.
(iv) The Company and the Subsidiary Guarantors has all
requisite corporate power and authority to execute, deliver
and perform its obligations under the Indenture, the Notes,
the Exchange Notes and the Private Exchange Notes; the
Indenture is in sufficient form for qualification under the
TIA; the Indenture has been duly and validly authorized by
the Company and the Subsidiary Guarantors and, when duly
executed and delivered by the Company and the Subsidiary
Guarantors (assuming the due authorization, execution and
delivery thereof by the Trustee), will constitute the valid
and legally binding agreement of the Company and the
Subsidiary Guarantors, enforceable against the Company and
the Subsidiary Guarantors in accordance with its terms,
except that the enforcement thereof may be subject to (A)
bankruptcy,
16
insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors'
rights generally and (B) general principles of equity and
the discretion of the court before which any proceeding
therefor may be brought.
(v) The Notes are in the form contemplated by the
Indenture. The Notes have each been duly and validly
authorized by the Company and when duly executed and
delivered by the Company and paid for by the Initial
Purchasers in accordance with the terms of this Agreement
(assuming the due authorization, execution and delivery of
the Indenture by the Trustee and due authentication and
delivery of the Notes by the Trustee in accordance with the
Indenture), will constitute the valid and legally binding
obligations of the Company, entitled to the benefits of the
Indenture, and enforceable against the Company in
accordance with their terms, except that the enforcement
thereof may be subject to (A) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally
and (B) general principles of equity and the discretion of
the court before which any proceeding therefor may be
brought.
(vi) The Exchange Notes and the Private Exchange Notes
have been duly and validly authorized by the Company, and
when the Exchange Notes and the Private Exchange Notes have
been duly executed and delivered by the Company in
accordance with the terms of the Registration Rights
Agreement and the Indenture (assuming the due
authorization, execution and delivery of the Indenture by
the Trustee and due authentication and delivery of the
Exchange Notes and the Private Exchange Notes by the
Trustee in accordance with the Indenture), will constitute
the valid and legally binding obligations of the Company,
entitled to the benefits of the Indenture, and enforceable
against the Company in accordance with their terms, except
that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought.
(vii) The Company and the Subsidiary Guarantors have
all requisite corporate power and authority to execute,
deliver and perform their respective obligations under the
Registration Rights Agreement; the Registration Rights
Agreement has been duly and validly author-
17
ized by the Company and the Subsidiary Guarantors and, when
duly executed and delivered by the Company and the
Subsidiary Guarantors (assuming due authorization,
execution and delivery thereof by the Initial Purchasers),
will constitute the valid and legally binding agreement of
the Company and the Subsidiary Guarantors, enforceable
against the Company and the Subsidiary Guarantors in
accordance with its terms, except that (A) the enforcement
thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be
brought and (B) any rights to indemnity or contribution
thereunder may be limited by federal and state securities
laws and public policy considerations.
(viii) The Company and the Subsidiary Guarantors have
all requisite corporate power and authority to execute,
deliver and perform their respective obligations under this
Agreement and to consummate the transactions contemplated
hereby; this Agreement and the consummation by the Company
and the Subsidiary Guarantors of the transactions
contemplated hereby have been duly and validly authorized
by the Company and the Subsidiary Guarantors. This
Agreement has been duly executed and delivered by the
Company and the Subsidiary Guarantors.
(ix) The Indenture, the Notes, the Guarantees, the
Exchange Notes, the Registration Rights Agreement and the
Credit Agreement conform in all material respects to the
descriptions thereof contained in the Final Memorandum.
(x) To the knowledge of such counsel, no legal or
governmental proceedings are pending or threatened to which
any of the Company or the Subsidiaries is a party or to
which the property or assets of the Company or the
Subsidiaries are subject that, if determined adversely to
the Company or the Subsidiaries, would result, individually
or in the aggregate, in a Material Adverse Effect, or that
seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Notes to be
sold hereunder or except as described in the Final
Memorandum the consummation of the other transactions
described in the Final Memorandum under the caption "Use of
Proceeds."
18
(xi) None of the Company or the Subsidiaries is (i) in
violation of its certificate of incorporation or bylaws (or
similar organizational document), (ii) to the knowledge of
such counsel, in breach or violation of any statute,
judgment, decree, order, rule or regulation applicable to
it or its respective properties or assets, except for any
such breach or violation that would not, individually or in
the aggregate, have a Material Adverse Effect, or (iii) to
the knowledge of such counsel in breach or default under or
in violation of any of the terms or provisions of any
Contract known to such counsel, except for any such breach,
default, violation or event that would not, individually or
in the aggregate, have a Material Adverse Effect.
(xii) The execution and delivery of this Agreement,
the Indenture, the Registration Rights Agreement and the
Credit Agreement and the consummation of the transactions
contemplated hereby and thereby (including, without
limitation, the issuance and sale of the Notes to the
Initial Purchasers) will not conflict with or constitute or
result in a breach or a default under (or an event that
with notice or passage of time or both would constitute a
default under) or violation of any of (i) the terms or
provisions of any contract described in the Final
Memorandum known to such counsel, except for any such
conflict, breach, violation, default or event that would
not, individually or in the aggregate, have a Material
Adverse Effect, (ii) the certificate of incorporation or
bylaws (or similar organizational document) of the Company
or any of the Subsidiaries or (iii) (assuming compliance
with all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and warranties
of the Initial Purchasers in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation known to such
counsel to be applicable to the Company or the Subsidiaries
or any of their respective properties or assets, except for
any such conflict, breach or violation that would not,
individually or in the aggregate, have a Material Adverse
Effect.
(xiii) To the knowledge of such counsel, no consent,
approval, authorization or order of any governmental
authority is required for the issuance and sale by the
Company of the Notes to the Initial Purchasers or the other
transactions contemplated hereby, except such as may be
required under Blue Sky laws or such as may be required
under the gaming, racing, wagering and/or lottery laws of
Pennsylvania or West
19
Virginia, as to which such counsel need express no opinion,
and those that have previously been obtained.
(xiv) None of the Company or the Subsidiaries is, or
immediately after the sale of the Notes to be sold
hereunder and the application of the proceeds from such
sale (as described in the Final Memorandum under the
caption "Use of Proceeds") will be, an "investment company"
as such term is defined in the Investment Company Act of
1940, as amended.
(xv) No registration under the Act of the Notes is
required in connection with the sale of the Notes to the
Initial Purchasers as contemplated by this Agreement and
the Final Memorandum or in connection with the initial
resale of the Notes by the Initial Purchasers in accordance
with Section 8 of this Agreement, and prior to the
commencement of the Exchange Offer (as defined in the
Registration Rights Agreement) or the effectiveness of the
Shelf Registration Statement (as defined in the
Registration Rights Agreement), the Indenture is not
required to be qualified under the TIA, in each case
assuming (i) that the purchasers who buy such Notes in the
initial resale thereof are qualified institutional buyers
as defined in Rule 144A promulgated under the Act ("QIBs")
or are purchasing the Notes in offshore transactions in
reliance on Regulation S, (ii) the accuracy of the Initial
Purchasers' representations in Section 8 and those of the
Company, the Subsidiaries and their respective Affiliates
contained in this Agreement regarding the absence of a
general solicitation in connection with the sale of such
Notes to the Initial Purchasers and the initial resale
thereof and (iii) the due performance by the Initial
Purchasers of the agreements set forth in Section 8 hereof.
(xvi) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance,
execution or delivery of the Notes will violate Regulation
G, T, U or X of the Board of Governors of the Federal
Reserve System.
(xvii) The Credit Agreement has been duly authorized,
executed and delivered by the Company and the guarantors
thereunder.
In rendering such opinion, such counsel may
(A) rely as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company
and public officials and (B) state that they express no
opinion
20
with respect to the laws of any jurisdiction other than the
laws of the Commonwealth of Pennsylvania, the State of New
York, the General Corporation Law of the State of Delaware and
the federal laws of the United States.
At the time the foregoing opinion is
delivered, Morgan, Lewis & Bockius LLP shall additionally
state that it has participated in conferences with officers
and other representatives of the Company and the Subsidiary
Guarantors, representatives of the independent public
accountants for the Company, representatives of the Initial
Purchasers and counsel for the Initial Purchasers, at which
conferences the contents of the Final Memorandum and related
matters were discussed, and, although it has not independently
verified and is not passing upon and assumes no responsibility
for the accuracy, completeness or fairness of the statements
contained in the Final Memorandum (except to the extent
specified in subsection 7(a)(ix)), no facts have come to its
attention that lead it to believe that the Final Memorandum
excluding Gaming, on the date thereof or at the Closing Date,
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 contained therein, in the
light of the circumstances under which they were made, not
misleading (it being understood that such firm need express no
opinion with respect to the financial statements and related
notes thereto and the other financial, statistical and
accounting data included in the Final Memorandum). The opinion
of Morgan, Lewis & Bockius LLP described in this Section shall
be rendered to the Initial Purchasers at the request of the
Company and shall so state therein.
References to the Final Memorandum in this subsection
(a) shall include any amendment or supplement thereto prepared
in accordance with the provisions of this Agreement at the
Closing Date.
(b) On the Closing Date, the Initial Purchasers shall
have received the opinion, in form and substance satisfactory
to the Initial Purchasers, dated as of the Closing Date and
addressed to the Initial Purchasers, of Cahill Gordon &
Reindel, counsel for the Initial Purchasers, with respect to
certain legal matters relating to this Agreement and such
other related matters as the Initial Purchasers may reasonably
require. In rendering such opinion, Cahill Gordon & Reindel
shall have received and may rely upon such certificates and
other documents and information as it may reasonably request
to pass upon such matters.
(c) On the Closing Date, the Initial Purchasers shall
have received the favorable opinion, dated as of the Closing
Date and addressed to the Initial
21
Purchasers, in form and substance satisfactory to the Initial
Purchasers and counsel for the Initial Purchasers, of Mesirov
Gelman Jaffe Cramer & Jamieson, special counsel for the
Company to the effect that:
(i) Mountainview Thoroughbred Racing Association
("Mountainview") and Pennsylvania National Turf
Club ("PNTC") each holds a valid and existing
license (the "Thoroughbred Licenses") under the
Pennsylvania Industry Race Horse Reform Act (the
"Race Horse Act") to conduct thoroughbred horse
racing with pari-mutuel wagering in the manner
described in the Offering Memorandum; Pocono
Downs, Inc. holds a valid and existing license
(the "Harness License" and, together with the
Thoroughbred Licenses, the "Licenses") under the
Race Horse Act to conduct harness racing with
pari-mutuel wagering in the manner described in
the Offering Memorandum; the Horse Racing
Commission and the Harness Commission approved,
respectively, five and two non-primary locations
in the Commonwealth of Pennsylvania at which the
Company (or a Subsidiary thereof) is authorized
to conduct pari-mutuel wagering in the manner
described in the Offering Memorandum, and to
such counsel's knowledge the approvals are in
full force and effect; the direct and indirect
ownership by the Company, as currently owned, of
the capital stock of the entities holding the
Licenses does not violate the Race Horse Act or
other applicable Pennsylvania law; to such
counsel's knowledge, none of the gaming
authorities in Pennsylvania is considering
modifying, suspending, revoking or not granting
renewal of any of the Licenses, and, to such
counsel's knowledge, neither of such gaming
authorities nor any other governmental agency is
investigating the Company or any of its
Subsidiaries or related parties or any director
or executive officer of the Company or any of
its Subsidiaries other than in ordinary course
administrative reviews; to the knowledge of such
counsel, no change in any laws or regulations is
pending which could reasonably be expected to be
adopted and if adopted, could reasonably be
expected to materially limit the operations
currently conducted by the Company or which,
individually or in the aggregate with all such
changes, would have a Material Adverse Effect;
22
(ii) the Initial Purchasers are not required to be
licensed or approved by the Harness Commission
or the Horse Racing Commission as a result of
the execution of this Agreement or the
consummation of the transactions contemplated
hereby;
(iii) to the knowledge of such counsel, there are no
legal or governmental proceedings pending or
threatened against the Company or any of the
Subsidiaries or to which the Company or any of
the Subsidiaries, or any of their respective
properties, is subject;
(iv) The statements in the Offering Memorandum under
the headings, "Offering Memorandum Summary,"
"Risk Factors - Regulation and Taxation,"
"Business - Racing and Pari-Mutuel Operations,"
"Business - Purses; Agreements with Horsemen,"
and "Business - Regulation and Taxation" which
purport to summarize certain provisions of the
requirements under the Race Horse Act and any
other laws or regulations of the Commonwealth of
Pennsylvania, or certain agreements or legal
proceedings to which the Company or any of the
Subsidiaries is a party, fairly summarize in all
material respects the matters therein described;
and the conduct of the business of the Company
and the Subsidiaries is not subject to any
material racing, wagering or gaming law or
regulation that is not described in the Offering
Memorandum under "Business - Regulation and
Taxation";
(v) such counsel has no knowledge that on the date
hereof or on the Closing Date the Final
Memorandum contained an untrue statement of a
material fact regarding Pennsylvania gaming or
other laws or regulations or omitted to state
any material fact concerning such laws necessary
to make the statements therein not misleading or
in the light of the circumstances under which
they were made, not misleading;
(vi) no consent, approval, authorization or order of,
or registration or filing with, any court,
regulatory body, administrative agency or other
governmental body, agency or official under the
gaming, racing, wagering and/or lottery laws of
Pennsylvania is required for the issuance,
offer, sale or delivery of the Notes, the
execution, delivery or performance of this
Agreement by the Com-
23
pany and the Subsidiary Guarantors or the
consummation of the transactions contemplated
hereby; and
(vii) neither the issue and sale of the Notes nor the
consummation of any of the other transactions
contemplated hereby will result in a breach of
or constitute a default under (A) the
certificate of incorporation or by laws (or
similar organizational document) of the Company
of any of the Subsidiaries or (B) the terms or
provisions of any Contract known to such
counsel, except for any such conflict, breach,
violation, default or event that would not,
individually or in the aggregate, have a
Material Adverse Effect, to which the Company or
any of the Subsidiaries is a party or by which
any of them or any of their respective
properties is bound or (C) any judgment, order
or decree of any court, governmental, regulatory
or administrative body or agency or arbitrator
having jurisdiction over the Company or any
Subsidiary, which judgment, order or decree is
known to such counsel to be applicable to the
Company or any Subsidiary.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any
jurisdiction other than the laws of the Commonwealth of
Pennsylvania, the General Corporation Law of the State of
Delaware or the federal laws of the United States, to the
extent they deem proper and specified in such opinion, upon
the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to counsel
for the Initial Purchasers and (B) as to matters of fact,
to the extent they deem proper, on certificates of
responsible officers of the Company and public officials.
References to the Offering Memorandum in this paragraph (c)
include any supplements thereto at the Closing Date.
(d) On the Closing Date, the Initial Purchasers shall
have received the favorable opinion, dated as of the Closing Date and addressed
to the Initial Purchasers, in form and substance satisfactory to the Initial
Purchasers and counsel for the Initial Purchasers, of Hamb & Pollenbarger,
special counsel for the Company to the effect that:
(i) each of Penn National Gaming of West Virginia,
Inc. ("PNGWV") and PNGI Charles Town (together,
the "West Virginia Subsidiaries") is a
corporation duly organized, validly existing
and in good standing in the jurisdiction of its
incorporation, with full corporate power and
authority to own, lease and operate its
properties and to conduct its business as
described in
24
the Offering Memorandum, and is duly registered
and qualified to conduct its business and is in
good standing in each jurisdiction or place
where the nature of its properties or the
conduct of its business requires such
registration or qualification, except where the
failure so to register or qualify or be in good
standing does not have a Material Adverse
Effect; (ii) all the outstanding shares of
capital stock of each of the West Virginia
Subsidiaries have been duly authorized and
validly issued, fully paid and nonassessable,
and are wholly owned by the Company directly or
indirectly through one of the other
Subsidiaries, free and clear of any perfected
security interest and, to the knowledge of such
counsel, after due inquiry, free and clear of
any other lien, adverse claim, security
interest, equity or other encumbrance, except
in each case as described in the Offering
Memorandum; and there are no (A) existing
preemptive rights under any West Virginia
Subsidiary's articles of incorporation or code
of regulations, or other organizational
documents, or applicable law or (B) similar
rights that entitle or will entitle any person
to acquire any shares of any West Virginia
Subsidiary;
(iii) PNGI Charles Town holds a valid and existing
license (the "West Virginia License") under the
West Virginia Racing Act to conduct
thoroughbred horse racing with pari-mutuel
wagering in the manner described in the
Offering Memorandum; PNGI Charles Town also
holds a license (the "Lottery License") under
the West Virginia Racetrack Video Lottery Act
to operate video gaming machines in the manner
described in the Offering Memorandum; such
counsel has no reason to believe that any of
the gaming authorities in West Virginia is
considering modifying, suspending, revoking or
not granting renewal of the West Virginia
License or revoking the Lottery License to such
counsel's knowledge, neither of such gaming
authorities nor any other governmental agency
is investigating the Company or any of its
Subsidiaries or related parties or any director
or executive officer of the Company or any of
its Subsidiaries other than in the normal
course of determining whether or not to issue
the Lottery License; and, except as disclosed
in the Offering Memorandum, to the best
knowledge of such counsel, no change in
25
any laws or regulations is pending which could
reasonably be expected to be adopted and, if
adopted, could reasonably be expected to have,
individually or in the aggregate with all such
changes, a Material Adverse Effect;
(iv) PNGWV has all requisite corporate power and
authority to execute, deliver and perform its
obligations under this Agreement, the
Registration Rights Agreement, the Indenture
and the Guarantees;
(v) the Initial Purchasers are not required to be
licensed or approved by the West Virginia
Racing Commission or the Lottery Commission as
a result of the execution of this Agreement or
the consummation of the transactions
contemplated hereby;
(vi) to the knowledge of such counsel, there are no
legal or governmental proceedings pending or
threatened against the Company or any of the
West Virginia Subsidiaries or to which the
Company or any of the West Virginia
Subsidiaries, or any of their respective
properties, is subject, that are required to be
described in the Offering Memorandum but are
not described as required; there are no
statutes or regulations of the State of West
Virginia or agreements, contracts, indentures,
leases or other instruments to which any of the
West Virginia Subsidiaries is a party that are
required to be described in the Offering
Memorandum that are not described or filed as
required by the Act; the statements in the
Offering Memorandum under the headings,
"Offering Memorandum Summary," "Risk Factors -
Regulation and Taxation," "Business - Gaming
Machine Operating at Charles Town Entertainment
Complex," "Business - Charles Town Joint
Venture; Operating Terms," "Business - Racing
and Wagering Operations" and "Business -
Regulation and Taxation", insofar as such
statements purport to summarize certain
provisions of the requirements under the West
Virginia Racing Act, the West Virginia
Racetrack Video Lottery Act and any other laws
or regulation of the State of West Virginia, or
certain agreements or legal proceedings to
which the Company or any of the West Virginia
Subsidiaries is a party, fairly summarize the
matters therein described; and the conduct of
the business of the Company and the
Subsidiaries is not subject to any material
racing, wagering or gaming law or regulator of
the
26
State of West Virginia that is not described in
the Offering Memorandum under "Business
Regulation and Taxation";
(vii) no consent, approval, authorization or order
of, or registration or filing with, any court,
regulatory body, administrative agency or other
governmental body, agency or official of the
State of West Virginia under the gaming,
racing, wagering and/or lottery laws of the
State of West Virginia (including the West
Virginia Racing Act or the West Virginia
Racetrack Video Lottery Act) is required for
the issuance, offer, sale or delivery of the
Notes, the execution, delivery or performance
of this Agreement by the Company and Penn
National Gaming of West Virginia, Inc. or the
consummation of the transactions contemplated
hereby, except such approvals (specified in
such opinion) as have been obtained; and
(viii) none of this issuance, offer, sale or delivery
of the Notes, the execution, delivery or
performance of this Agreement by the Company or
the consummation of the other transactions
contemplated hereby (A) conflicts or will
conflict with or constitutes or will constitute
a breach of, or a default under, the articles
of incorporation or code of regulations, or
other organizational documents, of the West
Virginia Subsidiaries or (B) violates or will
violate any existing statute, law, regulation,
Permit or filing or judgment, injunction, order
or decree in each case (1) known to such
counsel, (2) applicable to the Company or any
of the West Virginia Subsidiaries or any of
their respective properties and (3) pertaining
to the conduct of racing, wagering, gaming or
video lottery operations in the State of West
Virginia or (C) will conflict with or
constitute or result in a breach or a default
under (or an event that with notice or passage
of time or both would constitute a default
under) or violation of any of the terms or
provisions of any Contract known to such
counsel, except for any such conflict, breach,
violation, default or event that would not,
individually or in the aggregate, have a
Material Adverse Effect.
In rendering such opinion, such counsel may rely (A)
as to matters involving the application of laws of any
jurisdiction other than the State of West Virginia or the
United States, to the extent they deem proper and specified in
such opinion, upon the opinion of other counsel of good
standing whom they
27
believe to be reliable and who are satisfactory to counsel for
the Underwriters and (B) as to matters of fact, to the extent
they deem proper, on certificates of responsible officers of
the Company and public officials. References to the Offering
Memorandum in this paragraph (d) include any supplements
thereto at the Closing Date.
(e) The Initial Purchasers shall have received from
the Independent Accountant a "comfort letter" dated the date
hereof and the Closing Date, in form and substance
satisfactory to counsel for the Initial Purchasers.
(f) The representations and warranties of the Company
and the Subsidiary Guarantors contained in this Agreement
shall be true and correct on and as of the date hereof and on
and as of the Closing Date as if made on and as of the Closing
Date; the statements of the Company's and each Subsidiary
Guarantor's officers made pursuant to any certificate
delivered in accordance with the provisions hereof shall be
true and correct on and as of the date made and on and as of
the Closing Date; the Company and each Subsidiary Guarantor
shall have performed all covenants and agreements and
satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date; and,
except as described in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial statements
in such Final Memorandum, there shall have been no event or
development that, individually or in the aggregate, has or
would be reasonably likely to have a Material Adverse Effect.
(g) The sale of the Notes hereunder shall not be
enjoined (temporarily or permanently) on the Closing Date.
(h) The Initial Purchasers shall have received a
certificate of the Company and the Subsidiary Guarantors,
dated the Closing Date, signed on behalf of the Company and
each Subsidiary Guarantor by its Chairman of the Board,
President or any Senior Vice President and the Chief Financial
Officer, to the effect that:
(i) The representations and warranties of the
Company and the Subsidiary Guarantors contained in
this Agreement are true and correct in all material
respects as of the date hereof and as of the Closing
Date, and the Company and the Subsidiary Guarantors
have performed all covenants and agreements and
satisfied all conditions on their re-
28
spective parts to be performed or satisfied hereunder
at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof
or since the date of the most recent financial
statements in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date
hereof), no event or events have occurred, no
information has become known nor does any condition
exist that, individually or in the aggregate, would
have a Material Adverse Effect; and
(iii) The sale of the Notes hereunder has not
been enjoined (temporarily or permanently).
(i) The Credit Agreement shall have been executed and
delivered by the parties thereto, shall be in full force and
effect and in form and substance satisfactory to the Initial
Purchasers.
(j) On the Closing Date, the Initial Purchasers shall
have received the Registration Rights Agreement executed by
the Company and the Subsidiary Guarantors and such agreement
shall be in full force and effect at all times from and after
the Closing Date.
On or before the Closing Date, the Initial Purchasers
and counsel for the Initial Purchasers shall have received such further
documents, opinions, certificates, letters and schedules or instruments relating
to the business, corporate, legal and financial affairs of the Company and the
Subsidiaries as they shall have heretofore reasonably requested from the
Company.
All such documents, opinions, certificates, letters,
schedules or instruments delivered pursuant to this Agreement will comply with
the provisions hereof only if they are reasonably satisfactory in all material
respects to the Initial Purchasers and counsel for the Initial Purchasers. The
Company shall furnish to the Initial Purchasers such conformed copies of such
documents, opinions, certificates, letters, schedules and instruments in such
quantities as the Initial Purchasers shall reasonably request.
8. Offering of Notes; Restrictions on Transfer. Each of the
Initial Purchasers represents and warrants that it is a QIB. Each of the Initial
Purchasers agrees that (i) it has not and will not solicit offers for, or offer
or sell, the Notes by any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act; and
(ii) it has and will solicit offers for the Notes only from, and will offer the
Notes only to, in the case
29
of offers inside the United States, persons whom the Initial Purchasers
reasonably believe to be QIBs or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to the Initial Purchasers that each such
account is a QIB to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A, and, in each case, in transactions under
Rule 144A; and (B) in the case of offers outside the United States, to persons
other than U.S. persons ("foreign purchasers," which term shall include dealers
or other professional fiduciaries in the United States acting on a discretionary
basis for foreign beneficial owners (other than an estate or trust)); provided,
however, that, in the case of this clause (B), in purchasing such Notes such
persons are deemed to have represented and agreed as provided under the caption
"Transfer Restrictions" contained in the Final Memorandum.
9. Indemnification and Contribution. (a) Each of the Company
and the Subsidiary Guarantors agrees to indemnify and hold harmless the Initial
Purchasers, and each person, if any, who controls any Initial Purchaser within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against
any losses, claims, damages or liabilities to which any Initial Purchaser or
such controlling person may become subject under the Act, the Exchange Act or
otherwise, insofar as any such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of
any material fact contained in any Memorandum or any amendment
or supplement thereto or any application or other document; or
(ii) the omission or alleged omission to state, in any
Memorandum or any amendment or supplement thereto, a material
fact required to be stated therein or necessary to make the
statements therein not misleading,
and will reimburse, as incurred, the Initial Purchasers and each such
controlling person for any legal or other expenses incurred by the Initial
Purchasers or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; provided, however, that the
Company and the Subsidiary Guarantors will not be liable (i) in any such case to
the extent that any such loss, claim, damage, or liability arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in any Memorandum or any amendment or supplement thereto
in reliance upon and in conformity with written information concerning the
Initial Purchasers furnished to the Company by the Initial Purchasers
specifically for use therein or (ii) with respect to the Preliminary Memorandum,
to the extent that any such loss, claim, damage or liability arises solely from
the fact that the Initial Purchasers sold Notes to a person to whom there was
not sent or given a copy of the Final Memorandum (as amended or supplemented) at
or prior to the written confirmation of such
30
sale if the Company shall have previously furnished copies thereof to the
Initial Purchasers in accordance with Section 5(d) hereof and the Final
Memorandum (as amended or supplemented) would have corrected any such untrue
statement or omission. This indemnity agreement will be in addition to any
liability that the Company and the Subsidiary Guarantors may otherwise have to
the indemnified parties. The Company and the Subsidiary Guarantors shall not be
liable under this Section 9 for any settlement of any claim or action effected
without its prior written consent, which shall not be unreasonably withheld.
(b) The Initial Purchasers agree to indemnify and hold
harmless the Company and the Subsidiary Guarantors, their directors, officers
and each person, if any, who controls the Company and the Subsidiary Guarantors
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
against any losses, claims, damages or liabilities to which the Company, the
Subsidiary Guarantors or any such director, officer or controlling person may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or supplement
thereto, or (ii) the omission or the alleged omission to state therein a
material fact required to be stated in any Memorandum or any amendment or
supplement thereto, or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information concerning such Initial
Purchaser, furnished to the Company by the Initial Purchasers specifically for
use therein; and subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses incurred by the
Company, the Subsidiary Guarantors or any such director, officer or controlling
person in connection with investigating or defending against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action in respect thereof. This indemnity agreement will be in addition to
any liability that the Initial Purchasers may otherwise have to the indemnified
parties. The Initial Purchasers shall not be liable under this Section 9 for any
settlement of any claim or action effected without their consent, which shall
not be unreasonably withheld. The Company shall not, without the prior written
consent of the Initial Purchasers, effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Initial Purchaser is or
could have been a party, or indemnity could have been sought hereunder by any
Initial Purchaser, unless such settlement (A) includes an unconditional written
release of the Initial Purchasers, in form and substance reasonably satisfactory
to the Initial Purchasers, from all liability on claims that are the subject
matter of such proceeding and (B) does not include any statement as to an
admission of fault, culpability or failure to act by or on behalf of any Initial
Purchaser.
31
(c) Promptly after receipt by an indemnified party under
this Section 9 of notice of the commencement of any action for which such
indemnified party is entitled to indemnification under this Section 9, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9, notify the indemnifying party of the
commencement thereof in writing; but the omission to so notify the indemnifying
party (i) will not relieve the indemnifying party from any liability under
paragraph (a) or (b) above unless and to the extent such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and (ii)
will not, in any event, relieve the indemnifying party from any obligations to
any indemnified party other than the indemnification obligation provided in
paragraphs (a) and (b) above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that if (i) the use of counsel chosen
by the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Initial Purchasers
in the case of paragraph (a) of this Section 9 or the Company in the case of
paragraph (b) of this Section 9, representing the indemnified parties under such
paragraph (a) or paragraph (b), as the case may be, who are parties to such
action or actions) or (ii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After
32
such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the prior
written consent of the indemnifying party (which consent shall not be
unreasonably withheld), unless such indemnified party waived in writing its
rights under this Section 9, in which case the indemnified party may effect such
a settlement without such consent.
(d) In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 9 is unavailable to, or
insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Notes or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company and
the Subsidiary Guarantors on the one hand and any Initial Purchaser on the other
shall be deemed to be in the same proportion as the total proceeds from the
offering (before deducting expenses) received by the Company bear to the total
discounts and commissions received by such Initial Purchaser. The relative fault
of the parties shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company and the Subsidiary Guarantors on the one hand, or such Initial Purchaser
on the other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission or alleged
statement or omission, and any other equitable considerations appropriate in the
circumstances. The Company, the Subsidiary Guarantors and the Initial Purchasers
agree that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this paragraph (d). Notwithstanding any other
provision of this paragraph (d), no Initial Purchaser shall be obligated to make
contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by such Initial Purchaser under this
Agreement, less the aggregate amount of any damages that such Initial Purchaser
has otherwise been required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a material fact, and
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled
33
to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Initial Purchasers, and each director of the Company and the Subsidiary
Guarantors, each officer of the Company and the Subsidiary Guarantors and each
person, if any, who controls the Company and the Subsidiary Guarantors within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, shall
have the same rights to contribution as the Company and the Subsidiary
Guarantors.
10. Survival Clause. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Company and the Subsidiary Guarantors, their officers and the Initial Purchasers
set forth in this Agreement or made by or on behalf of them pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company and the Subsidiary Guarantors,
any of their officers or directors, the Initial Purchasers or any controlling
person referred to in Section 9 hereof and (ii) delivery of and payment for the
Notes. The respective agreements, covenants, indemnities and other statements
set forth in Sections 6, 9 and 15 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the
sole discretion of the Initial Purchasers by notice to the Company given prior
to the Closing Date in the event that the Company or any Subsidiary Guarantor
shall have failed, refused or been unable to perform all obligations and satisfy
all conditions on their part to be performed or satisfied hereunder at or prior
thereto or, if at or prior to the Closing Date:
(i) any of the Company or the Subsidiaries shall have
sustained any loss or interference with respect to its
businesses or properties from fire, flood, hurricane, accident
or other calamity, whether or not covered by insurance, or
from any strike, labor dispute, slow down or work stoppage or
any legal or governmental proceeding, which loss or
interference, in the sole judgment of the Initial Purchasers,
has had or has a Material Adverse Effect, or there shall have
been, in the sole judgment of the Initial Purchasers, any
event or development that, individually or in the aggregate,
has or could be reasonably likely to have a Material Adverse
Effect (including without limitation a change in control of
the Company or the Subsidiaries), except in each case as
described in the Final Memorandum (exclusive of any amendment
or supplement thereto);
(ii) trading in securities of the Company or in securities
generally on the New York Stock Exchange, American Stock
Exchange or the Nasdaq
34
National Market shall have been suspended or minimum or
maximum prices shall have been established on any such
exchange or market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation
of hostilities between the United States and any foreign
power, or (B) an outbreak or escalation of any other
insurrection or armed conflict involving the United States or
any other national or international calamity or emergency or
(C) any material change in the financial markets of the United
States which, in the case of (A),(B) or (C) above and in the
sole judgment of the Initial Purchasers, makes it
impracticable or inadvisable to proceed with the offering or
the delivery of the Notes as contemplated by the Final
Memorandum; or
(v) any securities of the Company shall have been
downgraded or placed on any "watch list" for possible
downgrading by any nationally recognized statistical rating
organization.
(b) Termination of this Agreement pursuant to this Section
11 shall be without liability of any party to any other party except as provided
in Section 10 hereof.
12. Information Supplied by the Initial Purchasers. The
statements set forth in the last paragraph on the front cover page, and the
second and third sentences of the third paragraph and paragraph seven under the
heading "Private Placement" in the Final Memorandum (to the extent such
statements relate to the Initial Purchasers) constitute the only information
furnished by the Initial Purchasers to the Company for the purposes of Sections
2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing
and, if sent to the Initial Purchasers, shall be mailed or delivered to BT Alex.
Brown Incorporated, 130 Liberty Street, New York, New York 10006, Attention:
Corporate Finance Department; if sent to the Company or any Subsidiary
Guarantors, shall be mailed or delivered to the Company at Penn National Gaming,
Inc., 825 Berkshire Boulevard, Suite 200, Wyomissing, PA 19610, Attention:
Chairman; with a copy to Morgan, Lewis & Bockius LLP, 2000 One Logan Square,
Philadelphia, PA 19103 Attention: Brian Lynch.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in
35
the mail, postage prepaid, if mailed; and one business day after being timely
delivered to a next-day courier.
14. Successors. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers, the Company, the Subsidiary
Guarantors and their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of this Agreement, or any provisions herein contained; this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnities of the Company and the
Subsidiary Guarantors contained in Section 9 of this Agreement shall also be for
the benefit of any person or persons who control the Initial Purchasers within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii)
the indemnities of the Initial Purchasers contained in Section 9 of this
Agreement shall also be for the benefit of the directors of the Company and the
Subsidiary Guarantors, their officers and any person or persons who control the
Company and the Subsidiary Guarantors within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act. No purchaser of Notes from the Initial
Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
36
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement by and among
the Company, the Subsidiary Guarantors and the Initial Purchasers.
Very truly yours,
PENN NATIONAL GAMING, INC.
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Chief Financial Officer
THE PLAINS COMPANY, as
Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Assistant Secretary
MOUNTAINVIEW THOROUGHBRED
RACING ASSOCIATION,
as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Chief Financial Officer
PENNSYLVANIA NATIONAL TURF
CLUB, INC., as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Treasurer
PENN NATIONAL SPEEDWAY, INC., as
Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Treasurer
37
PENN NATIONAL HOLDING COMPANY,
as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Treasurer
PENN NATIONAL GAMING OF WEST
VIRGINIA, INC., as Subsidiary
Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Treasurer
STERLING AVIATION INC., as
Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Treasurer
POCONO DOWNS, INC., as
Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Assistant Secretary
NORTHEAST CONCESSIONS, INC.,
as Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Assistant Secretary
38
THE DOWNS OFF-TRACK WAGERING, INC., as
Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Treasurer
THE DOWNS RACING, INC., as
Subsidiary Guarantor
By: \s\ Joseph A. Lashinger, Jr.
-------------------------------
Name: Joseph A. Lashinger, Jr.
Title: President and Treasurer
PENN NATIONAL GAMING OF INDIANA, INC., as
Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Treasurer
39
PNGI POCONO, INC., as
Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Treasurer
TENNESSEE DOWNS, INC., as
Subsidiary Guarantor
By: /s/ Robert S. Ippolito
-------------------------------
Name: Robert S. Ippolito
Title: Treasurer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
BT ALEX. BROWN INCORPORATED
JEFFERIES & COMPANY, INC.
By: BT ALEX. BROWN INCORPORATED
By: \s\ Robert Lipps
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Name: Robert Lipps
Title: Vice President
40
SCHEDULE A
Subsidiary Guarantors
The Plains Company
Mountainview Thoroughbred Racing Association
Pennsylvania National Turf Club, Inc.
Penn National Speedway, Inc.
Penn National Holding Company
Penn National Gaming of West Virginia, Inc.
Sterling Aviation Inc.
Pocono Downs, Inc.
Northeast Concessions, Inc.
The Downs Off-Track Wagering, Inc.
The Downs Racing, Inc.
Penn National Gaming of Indiana, Inc.
PNGI Pocono, Inc.
Tennessee Downs, Inc.
41
SCHEDULE B
Subsidiaries
Jurisdiction of Incorporation/
Name Formation
- ---- ---------
The Plains Company Pennsylvania
Mountainview Thoroughbred Racing
Association Pennsylvania
Pennsylvania National Turf
Club, Inc. Pennsylvania
Penn National Speedway, Inc. Pennsyvlania
Penn National Holding Company Delaware
Penn National Gaming of
West Virginia, Inc. West Virginia
Sterling Aviation Inc. Delaware
PNGI Charles Town Gaming LLC West Virginia
Pocono Downs, Inc. Pennsylvania
Northeast Concessions, Inc. Pennsylvania
The Downs Off-Track Wagering, Inc. Pennsylvania
The Downs Racing, Inc. Pennsylvania
Penn National Gaming of Indiana, Inc. Delaware
PNGI Pocono, Inc. Delaware
Tennessee Downs, Inc. Tennessee
Backside, Inc. Pennsylvania
Audio Video Concepts Pennsylvania
Mill Creek Land, Inc. Pennsylvania
42
SCHEDULE 1
Principal
Initial Purchaser Amount of Notes
- ----------------- ---------------
BT Alex. Brown Incorporated............................. $56,000,000
Jeffries & Company, Inc................................. 24,000,000
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Total................................... $80,000,000