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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report(Date of earliest event reported): June 12, 1996
Penn National Gaming, Inc.
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Pennsylvania 23-2234473
Penn National Gaming, Inc.
825 Berkshire Blvd.
Wyomissing, PA 19610
610-373-2400
Item 5. Other Events
General
Effective June 4, 1996, PNGI Charles Town Gaming Limited Liability
Company ("Gaming") entered into a Cooperation Agreement between and among
Gaming, Charles Town Racing Limited Partnership ("Partnership") and Charles Town
Races, Inc. ("Races", and together with Partnership, "Charles Town"). The
Cooperation Agreement was originally dated April 30, 1996, and was delivered and
became effective on June 4, 1996. Penn National Gaming of West Virginia, Inc.,
an indirect wholly-owned subsidiary of Penn National Gaming, Inc. is the
Managing Member and has an 80% membership interest in Gaming. Races is a
wholly-owned subsidiary of Partnership.
Gaming also entered into a Loan and Security Agreement with Races (the
"Loan Agreement"), evidenced by a Promissory Note in the original principal
amount of $1,250,000 (the "Note"), a Security Agreement with Partnership (the
"Security Agreement"), a Stock Pledge Agreement with Partnership (the "Pledge
Agreement"), and a Limited Recourse Guaranty Agreement with Partnership (the
"Guaranty Agreement" and together with the Loan Agreement, the Security
Agreement and the Pledge Agreement, the "Loan Documents"), all of which were
dated May 8, 1996, and were delivered and became effective June 4, 1996.
Races' obligations under the Loan Agreement and Partnership's
obligations under the Guaranty Agreement are further secured by a Credit Line
Deed of Trust (the "Mortgage") relating to Partnership's fee ownership interest
in approximately 250 acres of land at which Races operates a thoroughbred racing
track (the "Property"), and by Races' leasehold interest in the Property. One
Valley Bank, Inc., Charles Town's primary lender, has a prior mortgage on the
Property.
The Cooperation Agreement
The Cooperation Agreement provides for a payment by Gaming of $250,000,
to extend from March 31, 1996 to December 31, 1996, the option held by Gaming to
acquire from Charles Town, for a purchase price of $18,000,000 (the "Purchase
Price"), the Property and the other assets related to the operation of the
thoroughbred racing and simulcast wagering activities conducted by Races at the
Property (the "Option"). The Cooperation Agreement also amends the Option, to
reduce the Purchase Price for amounts borrowed by Races under the Loan
Agreement.
The Cooperation Agreement, among other things, also provides that
Gaming shall, at its own cost, use its best efforts to cause a referendum to
permit video lottery games in Jefferson County, West Virginia (the "Referendum")
to be placed on the ballot for the election voting to be held on November 5,
1996, and to be passed in such voting, and provides for Gaming to assume certain
liabilities of Charles Town upon the closing of the purchase transaction
contemplated by the Option (if it is exercised).
The Loan Documents
The Loan Agreement provides for Gaming to provide Races with a line of
credit in the maximum amount of $1,250,000 (the "Loan"), with interest accruing
on the outstanding balance at the Wall Street Journal listed Prime Rate plus 1
1/2%. All amounts borrowed or accrued under the Loan are due November 6, 1996 if
the Referendum does not pass, December 31, 1996 if the Referendum passes, or
upon the closing of the purchase transaction contemplated by the Option (if it
is exercised). Under the Loan Agreement, Races grants to Gaming a security
interest in and lien on all assets of Races. One Valley Bank, Inc. has a prior
security interest in such assets. The Loan is evidenced by the Note.
Pursuant to the Guaranty Agreement, Partnership guarantees the
obligations of Races under the Loan Agreement (the "Limited Guaranty"). As
security for the Guaranty, Partnership entered into the Security Agreement,
pursuant to which it granted Gaming a lien on and security interest in all of
the assets of Partnership. One Valley Bank, Inc. has a prior security interest
in such assets. As further security for the Guaranty, Partnership entered into
the Stock Pledge Agreement, pursuant to which Partnership pledged all of the
stock of Races to Gaming. Partnership and Races further secured their respective
obligations under the various Loan Documents by granting to Gaming the Mortgage.
Partnership's Guaranty is limited in recourse to its assets, the Races Stock and
the Mortgage, and is not recourse to the partners of Partnership.
Item 7. Financial Statements and Exhibits
Exhibit 5.1 Cooperation agreement dated April 30, 1996 between the Company and
Charles Town Races, Inc. and Charles Town Racing Limited Partnership
Exhibit 5.2 Loan and Security agreement dated May 8, 1996 between the Company
and Charles Town Races, Inc.
Exhibit 5.3 Security agreement dated May 8, 1996 between the Company and Charles
Town Racing Limited Partnership.
Exhibit 5.4 Stock Pledge agreement dated May 8, 1996 between the Company and
Charles Town Racing Limited Partnership.
Exhibit 5.5 Limited Recourse Guaranty agreement dated May 8, 1996 between the
Company and Charles Town Racing Limited Partnership.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Penn National Gaming, Inc.
By:_____________________________________________________
Robert S. Ippolito Secrectary
Date: June 12, 1996
COOPERATION AGREEMENT
This Cooperation Agreement (this "Agreement") is dated this 30th day
of April, 1996, by and among Charles Town Races, Inc., a West Virginia
corporation (the "Corporation"), Charles Town Racing Limited Partnership, a West
Virginia limited partnership (the "Partnership"), and PNGI Charles Town Gaming
Limited Liability Company, a West Virginia limited liability company ("PNGI").
BACKGROUND
The Partnership owns that certain parcel of land including Charles
Town Race Track and Shenandoah Downs and approximately 250 acres thereat (the
"Premises"), and a right of first refusal with respect to an additional
approximately 250 acres of land adjoining or adjacent to the Premises (the
"Additional Property").
The Partnership leases the Premises to the Corporation and the
Corporation conducts thoroughbred racing and simulcast wagering and related
activities at the Premises (the "Business").
On or about February 17, 1995, the Corporation and the Partnership
(which are sometimes hereinafter collectively referred to as the "Optionors")
granted to a third party an option (the "Option") to acquire: the Premises, the
right of first refusal to purchase the Additional Property, and all of the other
assets, rights and privileges of the Optionors in connection with the operation
of the Business. The Option was subsequently assigned to Bryant Development
Company ("BDC"), and BDC has assigned the Option to PNGI. PNGI is the registered
holder of the Option.
The Business has not been operating at a profit, a referendum to
permit video lottery games to be operated at the Premises was previously
defeated, and the Business is in danger of failing. Optionors desire that PNGI
extend credit to the Corporation, and incur certain costs relating to a new
video lottery games referendum.
PNGI has substantial experience and expertise in operating and
managing thoroughbred racing and simulcast wagering activities and the
facilities at which such activities are conducted.
PNGI has agreed to establish a line of credit in the amount of up to
$1,250,000 for working capital for the Corporation pursuant to a certain Loan
and Security Agreement of even date herewith (the "Line of Credit"). PNGI has
further
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agreed to assist the Corporation in supporting, and to incur costs related to, a
new referendum to permit video lottery games to be operated at the Premises.
The Corporation, the Partnership and PNGI desire to amend certain
provisions of the Option and to make certain other arrangements regarding their
relationships, all as set forth in and subject to the terms and provisions of
this Agreement.
NOW, THEREFORE, in consideration of the above premises, and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Extension of the Option. Optionors acknowledge and agree that (a)
PNGI is the registered holder of the Option; and (b) that PNGI has on or before
the date hereof made a payment to Optionors aggregating $250,000, to extend the
Option from March 31, 1996 until December 31, 1996 (the "Extension Date").
2. Amendments to the Option. Optionors agree that
the Option shall be and hereby is amended as follows:
(a) the purchase price set forth in Section 1 of the
Option shall be reduced as follows:
(i) by $1.60 for each $1 which Corporation borrows under the
Line of Credit (it being understood that only the receipt of funds by
Corporation upon its request under the Line of Credit, and not the mere
execution of the Line of Credit, will reduce the purchase price, and it being
further understood that the reduction in the purchase price shall not in any
manner affect Corporation's obligation to repay all such indebtedness); and
(ii) by $1 for each $1 of the net amount of the purchase price
(i.e. gross amount less a 10% real estate commission and other reasonable and
customary closing costs) for that certain parcel of land constituting a portion
of the Premises and currently under an Agreement of Sale between Corporation and
Sheetz, Inc., but only if such sale is consummated prior to the closing of the
sale transaction contemplated by the Option (the "Closing").
(b) if the November 5, 1996 referendum fails (or if the question of
permitting video lottery games in Jefferson County, West Virginia is not placed
on the ballot for the referendum), the Option shall remain outstanding and
exercisable at any time during which the Line of Credit is outstanding, whether
by extension, default or otherwise, notwithstanding anything to the contrary
contained or implied in this Agreement or the Option or in any other agreement
between or among the parties hereto;
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(c) Corporation (and not PNGI) shall be and remain liable for the
full repayment of the $750,000 loan made by AmTote International, Inc. to
Corporation as provided in paragraph 7 of that certain "Agreement" dated October
20, 1994 between Corporation and AmTote International, Inc., and Corporation
shall
repay such loan upon the Closing.;
(d) that upon the Closing, PNGI shall assume that certain
indebtedness of Corporation to One Valley Bank, Inc. in the original principal
amount of $350,000 and which has an approximate current outstanding principal
balance of $167,000, incurred by Optionors for capital improvements to the
Premises, and which indebtedness is secured by a Credit Line Deed of Trust made
by Optionors dated November 28, 1990 and recorded in the office of the Clerk of
the County Commission of Jefferson County, West Virginia in deed book 671 at
page 545. It is understood that this loan is being repaid through refunds from a
portion of the handle of the Business, as provided by West Virginia Law, and
Optionors agree to continue making such repayments until the Closing, after
which time PNGI shall assume responsibility for repayment of such indebtedness
(whether or not the refunds from a portion of the handle are sufficient to fully
repay the indebtedness);
(e) Optionors acknowledge and agree that Optionors shall be liable
for all (and PNGI shall not be liable for any) costs incurred by any party in
connection with the settlement of that certain litigation between the Optionors
and WVA 340 Limited Partnership, Civil Action No. 95-C-121 in the circuit court
of Jefferson County, West Virginia, relating to the use of certain pipes for
storm water run-off, as previously disclosed to PNGI;
(f) PNGI agrees that if the November 5, 1996 referendum fails (or if
the question of permitting video lottery games in Jefferson County, West
Virginia is not placed on the ballot for the referendum), PNGI shall release its
collateral granted to secure repayment of the Line of Credit and waive or
release its rights under the Option with respect to such collateral as necessary
to permit sales of such collateral to bona fide purchasers, where the proceeds
of such sale are paid to One Valley Bank, Inc.
3. Referendum; Costs of Referendum.
(a) The parties acknowledge that to permit video lottery games
to be operated at the Premises, a referendum on the question of permitting video
lottery games in Jefferson County, West Virginia (the "Referendum") must be
placed on the ballot in
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connection with the general election voting to be held in Jefferson County on
November 5, 1996, and approved by such voters in connection with such election
voting.
(b) PNGI hereby agrees to use its best efforts to cause the
Referendum to be included on the ballot in connection with the November 5, 1996
election voting, and to use its best efforts to support the Referendum and to
cause the Referendum to be approved by the voters of Jefferson County in such
voting. All costs associated with the foregoing shall be borne by PNGI (the
"Referendum Costs").
4. Video Lottery Legislation. The parties agree that from the date
hereof until June 30, 1997, each shall cooperate with each other and with the
other participants in the West Virginia thoroughbred racing and simulcast
wagering industry to cause Chapter 29, Article 22 of the West Virginia Code
(relating to video lottery gaming) to be extended for a period of not less than
five years, it being understood that Optionors shall not be required to incur
any costs in connection with the foregoing, and it being further understood that
this provision shall not in any manner be deemed to extend the Option until June
30, 1997 or any other time, or otherwise affect the Option or the Line of
Credit.
5. Limited Partnership Agreement. The Partnership
and the Corporation hereby represent and warrant to PNGI that the
copy of the limited partnership agreement of the Partnership
previously delivered to PNGI (the "Partnership Agreement") is
true, correct and complete.
6. Partnership Actions. The Partnership shall not take any action or
fail to take any action the result of which may be to impede the Corporation
from performing all of the Corporation's obligations under this Agreement;
provided however, the foregoing shall not in any manner obligate any partner of
the Partnership individually, it being the intent of the parties hereto that all
obligations of the Partnership be subject only to Partnership assets and not the
assets of the individual partners of the Partnership.
7. Representations and Warranties. (a) Optionors represent and
warrant to PNGI that each Optionor is properly organized and in good standing in
the State of West Virginia, and that each has the full corporate or partnership
(as applicable) authority to enter into and perform its respective obligations
under this Agreement and the transactions contemplated hereby. (b) PNGI
represents and warrants to each Optionor that PNGI is properly organized and in
good standing in the State of West Virginia, and has the full authority to enter
into and perform this Agreement and the transactions contemplated hereby.
DS1-303442
8. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement
shall not confer any rights or remedies upon any person other
than the parties hereto and their respective successors and
permitted assigns.
(b) Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes any prior understandings,
agreements, or representations by or among such parties, written or oral, that
may have related in any way to the subject matter hereof, but shall only amend
the Option in the manner set forth in Section 2 hereof.
(c) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other parties hereto, except that PNGI may assign its rights
hereunder to an affiliate of PNGI.
(d) Counterparts.This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The paragraph and section headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement or give full notice thereof.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then three
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, or (and then one day after) it is sent by overnight
courier, and addressed to the intended recipient as set forth below:
If to Partnership or Corporation:
D. Keith Wagner, President
Charles Town Races, Inc.
Charles Town Racetrack
U.S. Route 340
Charles Town, West Virginia 25414
DS1-303442
Copy to:
Michael B. Keller, Esq.
Bowles Rice McDavid Graff & Love
105 West Burke Street
Post Officer Drawer 1419
Martinsburg, West Virginia 25401-1419
If to PNGI:
c/o Penn National Gaming, Inc.
Wyomissing Professional Center
825 Berkshire Boulevard, Suite 203
Wyomissing, PA 19610
attention: Peter M. Carlino, Chairman
Copies to:
Robert P. Krauss, Esq.
Mesirov Gelman Jaffe & Cramer
1735 Market Street
Philadelphia, PA 19103-7598
James A. Reeder
Patton Boggs, LLP
2550 M Street, N.W.
Washington, D.C. 20037
Any party hereto may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any party hereto may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties hereto
notice in the manner herein set forth.
(g) Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws (and not
the law of conflicts) of the State of West Virginia.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
party sought to be bound thereby. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant
DS1-303442
hereunder or affect in any way any rights arising by virtue of
any prior or subsequent such occurrence.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
on the date first written above.
CHARLES TOWN RACES, INC.
BY: /s/D. Keith Wagner
D. Keith Wagner, President
CHARLES TOWN RACING
LIMITED PARTNERSHIP
By: D.K.W. Inc., general partner
and attorney-in-fact for all
general partners of the Partnership
BY: /s/D. Keith Wagner
D. Keith Wagner, President
PNGI CHARLES TOWN GAMING LIMITED
LIABILITY COMPANY, by Penn National
Gaming of West Virginia, Inc., its
Managing Member
BY: /s/ William Bork 6/4/96
William Bork, President
DS1-303442
LOAN AND SECURITY AGREEMENT
BETWEEN
CHARLES TOWN RACES, INC.
AND
PNGI CHARLES TOWN GAMING
LIMITED LIABILITY COMPANY
DATED MAY 8, 1996
DS1-303749
1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Loan Agreement") is made and
effective as of the day of May, 1996, between Charles Town Races, Inc., a West
Virginia corporation ("Borrower"), and PNGI Charles Town Gaming Limited
Liability Company, a West Virginia limited liability company ("Lender").
BACKGROUND
Borrower is engaged in the business of conducting thoroughbred
racing and simulcast wagering and related activities at the Premises (the
"Business"). Borrower is a wholly-owned subsidiary of the Partnership.
Lender has agreed to make available to Borrower a working capital
line of credit of up to $1,250,000 (i.e., the "Line"), upon and subject to the
terms and provisions hereof. Borrower has secured its obligations hereunder by
granting to Lender a security interest in and lien on All Assets of Borrower,
and granting to Lender the Mortgage.
To induce Lender to enter into this Loan and Security Agreement and
to make Advances to Borrower under the Line, the Partnership has agreed to
guaranty Borrower's obligations hereunder pursuant to the Guaranty, and to
secure the Partnership's obligations under the Guaranty pursuant to the Security
Agreement, the Pledge, and the Mortgage, all of even date herewith.
Borrower, Lender and Partnership have also agreed to enter into
certain other agreements and make certain other arrangements, relating among
other things to an option of Lender to acquire the Premises and the Business, as
set forth in a separate agreement also of even date herewith (the "Cooperation
Agreement").
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
the parties hereto, intending to be legally bound hereby, agree as follows:
SECTION 1. DEFINITIONS, CERTAIN RULES OF CONSTRUCTION
1.1 Defined Terms. Each initially capitalized term used herein shall have
the meaning set forth below in this Paragraph 1.1 or as otherwise set forth
herein for the purposes hereof and for each of the Loan Documents:
"Advance" means any extension of credit by Lender to
Borrower under the Line.
"Affiliate" means and refers to, as applied to any Person, any other
Person directly or indirectly controlling, or through one or more Persons
controlled by, controlling or under common control with that Person. "Control"
(including with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise.
"All Assets" means all assets, rights, interests, properties, and
privileges of a Person including, but not limited to, leasehold interests, real
property, accounts, accounts and notes receivable, inventory, furniture,
fixtures, chattel paper, letters of credit, instruments, documents, supplies,
machinery, equipment, customer lists, licenses, general intangibles, money,
securities, contract rights and rights under other agreements and any other
tangible or intangible personal property of such Person. All Assets of Borrower
shall not include, however, any Licenses issued to Borrower by the West Virginia
Racing Commission if the hypothecation of such licenses is prohibited by such
Commission or would void such License.
"Bankruptcy Code" means Title 11 of the United States Code as now or
hereafter in effect, or any successor statute.
"Business Day" means any day other than a Saturday, Sunday or day on
which banking institutions in West Virginia are authorized by law or regulation
to close.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time.
"Closing" and "Closing Date" mean the date on which this Loan
Agreement is fully executed.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor code or statute.
"Collateral" means the collateral of Borrower as defined in Section
3 of this Loan Agreement.
"Designated Officer" means Peter M. Carlino, Chairman of PNGI/West
Virginia, or any other person designated in writing by such Designated Officer
as Lender's representative for the purpose of receiving notice under this Loan
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Financing Statements" means any and all financing statements,
amendments or continuation statements required or appropriate to perfect and
keep perfected any security interest created hereby or under any Loan Document
pursuant to the Uniform Commercial Code as adopted in any state having
jurisdiction over the Collateral.
"Fiscal Year" means the fiscal year of Borrower, which ends on
December 31 of each year.
"Funding Date" means the Business Day on which an
Advance is funded.
"GAAP" means generally accepted accounting principles as set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board as in effect on the
date hereof or in such other statements by such other Person as may be approved
by a significant segment of the accounting profession, which are applicable to
the circumstances as of the date of determination and which are applied on a
consistent basis.
"Guaranty" means that certain Limited Recourse Guaranty Agreement
dated the date of this Loan Agreement between Lender and Partnership.
"Indebtedness" means all amounts due from Borrower to Lender
pursuant to Paragraph 1.4, Section 2 and Paragraph 3.1.4 hereof or otherwise
arising out of or in connection with this Loan Agreement, or any other Loan
Document, and all other indebtedness of Borrower to Lender whether now existing
or hereafter incurred.
"Interest Expense" means all payments by Borrower with respect to
interest on the Indebtedness or any other obligation of Borrower on which
interest is paid.
"Lender's Costs" means all reasonable costs and expenses of any kind
(including attorney's and other professionals' fees) paid or incurred by Lender
in connection with the preservation, enforcement, defense and protection of
Lender's rights, remedies, obligations and liabilities in any manner concerning
this Loan Agreement, the Collateral or any other Loan Document, any transaction
contemplated herein or any existing or future related agreements.
"Lien" means any interest in property securing an obligation owed
to, or a claim, right or interest of, any Person, whether created by agreement,
statute, common law or judicial or governmental authority, action or proceeding,
including, but not limited to, any security interest, lien, encumbrance,
mortgage, assignment, pledge, conditional sale, lease, consignment or bailment.
"Line" means the aggregate credit facility under which Borrower may
request Advances, subject to the provisions of this Loan Agreement, up to the
Maximum Available Credit.
"Loan Agreement" means this Loan and Security Agreement, and any
schedules, exhibits, riders, extensions, supplements, amendments and
modifications to or restatements of this Loan and Security Agreement.
"Loan Documents" means this Loan Agreement, the Note, the Guaranty,
the Security Agreement, the Pledge, the Mortgage, and any other instrument or
document executed in connection herewith or therewith, or which evidences or
secures any extension of credit to Borrower.
"Materially Adverse Change or Effect" means, the loss by any obligor
of any right, privilege, license or agreement necessary for or the occurrence of
any other event which would make impractical, the continued operation of the
Business substantially as currently conducted, the loss of which is material and
adverse, as determined by Lender in its reasonable discretion.
"Maximum Available Credit" means One Million Two Hundred and Fifty
Thousand ($1,250,000) Dollars of principal outstanding at any time. Capitalized
interest shall not be considered as principal for purposes of determining the
Maximum Available Credit.
"Mortgage" means that certain Mortgage dated the date of this Loan
Agreement granted by the Partnership and Borrower to Lender with respect to the
Partnership's fee interest in the Premises and with respect to Borrower's
leasehold interest in the Premises.
"Note" means the promissory note of Borrower in favor of Lender to
evidence Borrower's repayment obligations under this Loan Agreement with respect
to the Line.
"Obligors" means Borrower and Partnership.
"Obligations" means the Indebtedness and all covenants and
agreements of Borrower contained herein or entered into in connection herewith.
"Partnership" means Charles Town Racing Limited
Partnership, a West Virginia limited partnership of which
Borrower is a wholly-owned subsidiary.
"Permitted Liens" means the items set forth on Schedule B - Section
2 of that certain Commitment for Title Insurance of Lawyers Title Insurance
Company dated effective March 22, 1996.
"Person" means an individual, corporation, partnership, joint
venture, trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Pledge" means that certain Pledge Agreement dated the date of this
Loan Agreement between Lender and Partnership.
"PNGI/West Virginia" means Penn National Gaming of West
Virginia, Inc., a West Virginia corporation, and the Managing
Member of Lender.
"Premises" means the approximately 250 acre property on which the
Charles Town Racetrack and Shenandoah Downs are located and on which the
Business is conducted, and which is owned by Partnership and leased to Borrower.
"Prime Rate" means the prime rate of interest set forth in the Money
Rates section of the New York edition of the Wall Street Journal, rounded up to
the nearest one-eight, or if not published, then the prime rate of interest of
One Valley Bank, Inc.
"Restricted Payment" means any distribution or payment to any
shareholder or Affiliate of Borrower and any redemption of any securities issued
by Borrower, but not including arms-length transactions between Borrower and an
Affiliate or any distributions to shareholders for the purpose of paying taxes
on the income of Borrower.
"Security Agreement" means that certain Security Agreement dated the
date of this Loan Agreement between Lender and Partnership.
"Termination Date" means, (a) if the Referendum (as defined in the
Cooperation Agreement) passes (i) December 31, 1996 if Lender has not exercised
the Option (as defined in the Cooperation Agreement) or (ii) the closing date
with respect to the purchase and sale transaction contemplated by the Option if
Lender has exercised the Option, or, (b) November 6, 1996 if the Referendum does
not pass, or (c) as Borrower and Lender may mutually determine in writing, from
time to time.
"Unmatured Event of Default" means and refers to any event, act or
occurrence which with the passage of time or giving of notice or both would
become an Event of Default.
1.2 Accounting Reports and Principles. The character or amount of any
asset, liability, account or reserve and of any item of income or expense to be
determined, and any consolidation or other accounting computation to be made,
and the construction of any definition containing a financial term, including
but not limited to capitalized terms not otherwise defined herein, pursuant to
this Loan Agreement or any other Loan Document, shall be construed, determined
or made, as the case may be, in accordance with GAAP, consistently applied,
unless such principles are inconsistent with any express provision of this Loan
Agreement.
1.3 Business Day. Whenever any payment or other obligation hereunder,
whether under the Note or under another Loan Document, is due on a day other
than a Business Day, such shall be paid or performed on the Business Day next
following the prescribed due date, except as otherwise specifically provided for
herein to the contrary, and such extension of time shall be included in the
computation of interest and charges. Any reference made herein or in any other
Loan Document to an hour of day shall refer to the then prevailing time in
Charles Town, West Virginia, unless specifically provided herein to the
contrary.
1.4 Lender's Costs. Borrower shall, upon the request of Lender, pay Lender
the amount of all unpaid Lender's Costs within thirty days after such notice.
Until paid, all past due and owing interest payments, fees and all past due
Lender's Costs shall be deemed to be part of the principal balance of the Line,
shall bear interest at the rate applicable to a then outstanding Advance, and
shall be secured by the Collateral.
SECTION 2. COMMERCIAL LINE OF CREDIT
2.1 Commercial Line of Credit Facility Established. Provided that no Event
of Default or Unmatured Event of Default has occurred and is continuing, and
subject to the terms and conditions set forth herein, commencing on the Closing
Date and expiring on the Termination Date, Lender shall, upon Lender's approval
of Borrower's Funding Request from time to time, extend one or more Advances,
the aggregate of which outstanding at any time shall not exceed the Maximum
Available Credit, to Borrower for Borrower's working capital needs.
2.2 Line Interest Rate. Advances shall bear interest on the unpaid
principal balance outstanding at any time from the Funding Date of each such
advance to maturity (or repayment) at the floating interest rate of one and
one-half percent (1.5%) per annum in excess of the Prime Rate (the "Line
Interest Rate"). The Line Interest Rate shall be changed automatically on and as
of the effective date of each change in the Prime Rate. Interest shall be
calculated on the basis of a 360-day year, but charged for the actual number of
days elapsed.
2.3 Funding Requests.
2.3.1 Form of Funding Requests. Borrower may request one or more
Advances by submitting to Lender a completed and executed Funding Request
("Funding Request") in the form attached hereto as Schedule 2.3 no later than
11:00 A.M. five (5) days prior to the proposed Funding Date. Each Funding
Request shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount of the proposed Advance, (iii) a detailed description of
Borrower's proposed use of the Advance, and (iv) such other matters as Lender
may request. The minimum amount of any such Advance shall be $10,000 with the
amount of all such Advances to be in integral multiples of $10,000. Subject to
the provisions of Section 2 hereof and Lender's approval of the Funding Request,
Lender shall extend the Advance requested on the proposed Funding Date in
accordance with such Borrower's Funding Requests.
2.3.2 Approval of Funding Requests. Lender agrees that it shall
approve the Advance set forth in a Funding Request if the Advance requested
thereby is to be used to pay necessary and reasonable operating expenses of the
Business. Lender shall not be required to, but in its sole and absolute
discretion may, advance funds to be used by Borrower to pay taxes (whether or
not delinquent) or to pay indebtedness or obligations guaranteed by any Obligor
(or shareholder or partner of any Obligor) or as to which any Obligor (or
shareholder or partner of any Obligor) has provided the creditor with security,
and each Funding Request shall state whether the requested Advance will be used
in whole or in part for any such purposes. No third party is intended to be a
beneficiary of this provision (or of any other provision of this Loan
Agreement).
2.4 Maximum Available Credit. The aggregate amount of principal which
Borrower may have outstanding under the Line at any time shall not exceed the
Maximum Available Credit. Borrower agrees to immediately repay, without notice
or demand, any principal balance of the Line in excess of the Maximum Available
Credit.
2.5 Principal and Interest Payments.
2.5.1 Payment Terms. Until the Indebtedness is due, on the
Termination Date or earlier as provided herein or in the Note, interest shall
accrue on the principal balance outstanding under the Line from time to time.
Anything to the contrary herein notwithstanding, all unpaid principal of the
Line and all interest accrued thereon shall be paid in full by Borrower not
later than the Termination Date (or earlier as provided herein or in the Note).
Prior to the Termination Date, accrued interest shall be calculated monthly and
capitalized, and constitute additional outstanding principal, provided however,
such capitalized interest shall not be considered as principal for purposes of
determining the Maximum Available Credit.
2.5.2 Late Charges. Borrower shall pay Lender a late charge of five
percent (5%) of any payment of principal or interest which is more than fifteen
(15) days overdue, provided however, late charges shall apply only as to
payments of principal or interest due on or after November 6, 1996, and then
only if the Referendum does not pass.
2.6 Default Rate of Interest. Any principal payments on the Line not paid
when due and, to the extent permitted by applicable law, any interest payment on
the Line not paid when due, and any other amount due to Lender under this Loan
Agreement or any other Loan Document not paid when due, in any case whether at
stated maturity, by notice of prepayment, by acceleration or otherwise, shall
thereafter bear interest payable upon demand at a rate which is three percent
(3%) per annum in excess of the applicable Line Interest Rate, provided however,
the default rate of interest shall apply only as to payments of principal or
interest due on or after November 6, 1996, and then only if the Referendum does
not pass.
2.7 Renewal. Lender may, in its sole discretion, renew the Line for such
periods as shall be agreed upon by Borrower and Lender. Neither Lender nor
Borrower is obligated to renew the Line.
2.8 Prepayment. Borrower may prepay the Indebtedness, in
whole at any time or in part from time to time, without penalty.
2.9 Release of Collateral.
2.9.1 Upon Repayment and Termination. Upon the repayment in full of
all Obligations hereunder (or if Borrower has not at any time borrowed any funds
hereunder), Borrower may terminate the Line by providing notice thereof to
Lender. Upon such termination, Lender shall take (at Borrower's cost) any and
all actions reasonably requested by Borrower which may be required to release
the Collateral. In addition, Lender agrees that if the Referendum fails (or if
the question of permitting video lottery games in Jefferson County, West
Virginia is not placed on the ballot for the Referendum), Lender shall release
the Collateral with respect to such Collateral as necessary to permit sales (up
to the amount currently owed to One Valley Bank, Inc.) of such Collateral to
bona fide purchasers, where the proceeds of such sales are paid to One Valley
Bank, Inc. or to Lender.
2.9.2 Upon Liquidation. If, during the term of this Loan Agreement,
Borrower shall propose to liquidate any portion of the Collateral, and provided
that all of the proceeds of such liquidation are used towards repayment of the
existing indebtedness of Borrower to One Valley Bank, Inc., Lender shall release
such portion of the Collateral to be so liquidated, with the cash proceeds
thereof to be repaid to One Valley Bank Inc. Lender shall also release any such
portion of the Collateral to be so liquidated, if the cash proceeds thereof are
to be repaid to Lender.
SECTION 3. SECURITY
3.1 Collateral Generally.
3.1.1 Security Interest in All Assets. As security for the prompt
payment, performance and discharge of all of the Indebtedness and the
Obligations, Borrower hereby grants to Lender a security interest in and lien on
All Assets of Borrower now owned or hereafter acquired, whether or not earned by
performance, all books and records pertaining thereto (including without
limitation all manual and computer records, runs, printouts, disks, software and
other computer-prepared information of every kind), including all policies of
insurance thereon and all insurance proceeds in connection therewith, together
with all cash and non-cash proceeds and products thereof, and a mortgage on
Borrower's leasehold interest in the Premises (pursuant to the Mortgage) (the
foregoing, collectively the "Collateral").
3.1.2 Financing Statements and Other Documents. Borrower agrees to
execute and deliver to Lender any and all Financing Statements and other
documents and instruments reasonably requested by Lender to perfect or keep
perfected any security interest created under this Loan Agreement or under any
Loan Document under the Uniform Commercial Code as adopted in any state having
jurisdiction over the Collateral, and any such additional security agreements,
financing statements, continuation statements or termination statements and
other security instruments creating a lien upon All Assets of Borrower as Lender
may reasonably require in connection with the security interests created by this
Loan Agreement. Borrower hereby appoints Lender as Borrower's attorney-in-fact
to execute and file in Borrower's name all documents and instruments which
Lender may deem necessary or appropriate to perfect and continue perfected the
security interest in the Collateral created by this Loan Agreement including the
Borrower Mortgage.
3.1.3 Mortgage. Borrower agrees to execute and convey and deliver to
Lender a mortgage on Borrower's leasehold interest in the Premises (i.e., the
Mortgage). The Mortgage shall be a continuing lien on Borrower's leasehold
interest in the Premises, free and clear of all prior liens except for Permitted
Liens and title exceptions approved in writing by Lender, and shall be insured
at Borrower's expense by Lawyer's Title Insurance Company or another title
insurance company satisfactory to Lender.
3.1.4 Maintenance of Collateral. If Borrower fails to do so, Lender
may, at its option, pay and discharge taxes, liens, security interests and other
encumbrances pertaining to the Collateral (except Permitted Liens), and may pay
for the maintenance and preservation of the Collateral to prevent a material
deterioration from its present condition and for insurance thereon in order to
keep the Collateral in salable condition. Borrower agrees to reimburse Lender,
within three Business Days after notice thereof from Lender to Borrower, for any
payment so made.
3.2 Security Agreement. Borrower and Lender hereby acknowledge and agree
that the provisions of this Loan Agreement are intended to constitute a security
agreement under the Uniform Commercial Code as enacted in each jurisdiction in
which Collateral is located.
SECTION 4. CONDITIONS PRECEDENT
The performance by Lender of its obligations hereunder are subject to the
following conditions precedent:
4.1 Initial Advance. Borrower shall deliver or cause to be delivered to
Lender (except as otherwise indicated herein), in form and substance
satisfactory to Lender and its counsel, in addition to this Loan Agreement, the
following documents and instruments and the following conditions shall have been
satisfied:
4.1.1 The Note and the Mortgage, duly executed by
Borrower;
4.1.2 The Guaranty, the Security Agreement, the
Pledge, and the Mortgage each duly executed by Partnership;
4.1.3 The execution and delivery by Borrower and
Partnership of the Cooperation Agreement;
4.1.4 Receipt of a Certified Written Lien Search from the Secretary
of State of the State of West Virginia, the cost of which is borne by Borrower,
evidencing that the UCC-1 Financing Statements executed and delivered in
accordance with this Loan Agreement will evidence a security interest in and
lien on the Collateral superior in right of preference to all other encumbrances
of any nature other than Permitted Liens in favor of One Valley Bank, Inc.;
4.1.5 Such Financing Statements and other evidence
of Lender's security interest in the Collateral as may be
reasonably requested by Lender;
4.1.6 The opinion of Borrower's and the Partnership's counsel in
form and substance satisfactory to Lender, related to the authority of Obligors
to enter into and perform the Loan Documents, the valid, binding and enforceable
nature of the Loan Documents as to Obligors, the non- contravention of the Loan
Documents with other agreements of the Obligors, and the receipt of all
necessary consents and approvals by Obligors in connection with the execution,
delivery and performance of the Loan Documents;
4.1.7 A corporate and partnership status search of Borrower and
Partnership performed by a company designated by Lender, evidencing that
Borrower and Partnership are each in good standing in their state of
incorporation or partnership and qualified to do business in each jurisdiction
in which such qualification is required;
4.1.8 Incumbency Certificate of the officers of
Borrower authorized to execute and deliver the Loan Documents to
which Borrower is a party;
4.1.9 Such landlord's or other waivers as Lender
shall reasonably require; and
4.1.10Such additional documents or instruments as may be required by
this Loan Agreement or as Lender may reasonably require.
4.2 All Advances After the Closing Date. On each Funding Date after the
Closing Date: (a) Lender shall have timely received a Funding Request as
required by Section 2.3 hereof; (b) the representations and warranties set forth
in Section 5 hereof shall be true and correct on and as of such date, with the
same effect as though made on and as of such date, except to the extent such
representations and warranties specifically and exclusively relate to an earlier
date; (c) no Event of Default or Unmatured Event of Default shall have occurred
and be continuing hereunder or under any other Loan Document; (d) no Material
Adverse Change shall have occurred after the date hereof; and (e) Borrower and
the Partnership shall be in compliance with all of the terms and conditions
hereof, of the Note, and of all other Loan Documents to which it is a party, in
each case on and as of the date of the performance of such obligations by
Lender. Each Advance shall be deemed to constitute a representation and warranty
by Borrower on the respective Funding Dates as to the matters specified in this
Section 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
5.1 Representations and Warranties. Borrower hereby
represents and warrants to Lender as follows:
5.1.1 Good Standing. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of West
Virginia; Borrower has the power and authority to own and operate its properties
and to carry on its business where and as conducted and as contemplated;
Borrower is duly qualified as a foreign corporation to do business in, and is in
good standing in, every jurisdiction where the nature of Borrower's business
requires such qualification.
5.1.2 Power and Authority. The making, execution, delivery, issuance
and performance by Borrower of this Loan Agreement, the Note and the other Loan
Documents to which it is a party, have been duly authorized by all necessary
corporate action and will not violate any provision of law or regulation or of
the Articles of Incorporation or Bylaws of Borrower; and will not violate any
agreement, trust or other indenture or instrument to which Borrower is a party
or by which Borrower or any of its property is bound.
5.1.3 Priority of Liens; Location and Condition of Collateral. With
the exception of Permitted Liens, Borrower owns the Collateral free and clear of
all liens, encumbrances, security interests or other rights of third parties,
excepting only the rights and interests granted Lender herein and in the Loan
Documents, and upon perfection of Lender's security interest in the Collateral,
Lender will have a security interest in and lien on the Collateral superior in
right of preference to all other liens other than those Permitted Liens in favor
of One Valley Bank, Inc. Borrower's principal executive office and any name
other than its corporate name under which it does business is set forth on
Schedule 5.1.3 hereto.
5.1.4 Financial Condition. The Financial Statements of Borrower set
forth on Schedule 5.1.4 hereto are true, complete and correct in all material
respects, have been prepared in accordance with GAAP, consistently applied, and
present fairly the financial condition of Borrower as of said dates and the
results of Borrower's operations for the periods then ended. Borrower has filed
all federal, state and local tax returns required to be filed by it with any
taxing authority.
5.1.5 No Litigation, Employee Relations. Except as set forth on
Schedule 5.1.5 attached hereto, there are no suits or proceedings pending, or,
to the knowledge of Borrower, threatened against or affecting Borrower or any of
its assets, and Borrower is not in default in the performance of any agreement
to which Borrower is a party or by which Borrower is bound, or with respect to
any order, writ, injunction, or any decree of any court, or any federal, state,
municipal or other government agency or instrumentality, domestic or foreign,
which could have a Material Adverse Effect on Borrower. Except as set forth on
Schedule 5.1.5 attached hereto, Borrower has not violated any material provision
of any union contracts or any law, rule or regulation pertaining to its
employees.
5.1.6 Compliance. Borrower has all authorizations, consents,
approvals, licenses, and exceptions from, and has made all registrations and
filings with, and all reports to, all Federal, state and local governmental
bodies and agencies (collectively referred to as "Governmental Approvals")
necessary for the conduct of Borrower and the Business, and the conduct of
Borrower's business is not and has not been in violation of any such
Governmental Approvals or any applicable federal, state or local law, rule or
regulation, including ERISA, the failure of which to obtain or to comply with
would, in any such case, have a Material Adverse Effect on Borrower. Borrower
does not require any Governmental Approvals to enter into, or perform under,
this Loan Agreement, the Note or any other Loan Document, except approvals which
have been obtained by Borrower and evidence of which has been delivered to
Lender. There are no actions or investigations pending or threatened against or
affecting Borrower before any governmental authority, or which could result in a
Material Adverse Change in Borrower's business, prospects or the ability of
Borrower to conduct its business in a manner consistent with past operations and
financial results.
5.1.7 Taxes. Borrower has paid all taxes, governmental charges and
assessments levied against Borrower or any of its assets for the periods ending
December 31, 1994 and all local, state and federal withholding taxes due and
payable through the date of this Loan Agreement.
5.1.8 Environmental. Borrower has in the conduct of its business,
and the ownership and use of all real property, complied, in all material
respects, with all federal, state and local, laws, rules, regulations, judicial
decisions and decrees pertaining to the use, storage, transportation or disposal
of hazardous waste or toxic materials, including but not limited to CERCLA.
5.1.9 Certain Licenses. Borrower and if required by applicable law
each of its officers, directors and shareholders, has each and every license,
permit or approval of any regulatory or other government entity necessary or
desirable to conduct the Business as it is currently conducted or as
contemplated to be conducted (the "Licenses"). Neither Borrower nor any such
officer, director or shareholder has received notice of any restriction or
limitations on any of such licenses, or any warnings in connection with such
Licenses, and to Borrower's knowledge no such notices, warnings, restrictions or
limitations have been threatened or are pending. Borrower and each of its
officers, directors and shareholders, is in full compliance with all
requirements of each such License.
5.1.10Other Contractual Obligations. The execution, delivery and
performance by Borrower of its obligations under the Loan Documents does not
violate any other contractual obligations of Borrower.
5.2 Accuracy of Representations; No Default. The information set forth
herein and on each of the Schedules hereto, in the Note and the other Loan
Documents and each document delivered to Lender in connection herewith is
complete and accurate and contains full and true disclosure of pertinent
financial and other information as requested or required thereby. None of the
foregoing contains any untrue statement of a material fact or omits to state a
material fact necessary to make the information contained herein or therein not
misleading or incomplete. No Event of Default or Unmatured Event of Default
hereunder, under the Note or the other Loan Documents, has occurred.
SECTION 6. AFFIRMATIVE COVENANTS
6.1 Borrower's Covenants. As long as any portion of the Indebtedness
remains outstanding and unpaid or Lender has any ability to extend Advances
hereunder, Borrower covenants and agrees that, in the absence of prior written
consent of Lender, Borrower will:
6.1.1 Financial Statements and Other Reports. Furnish not later than
ninety days after the close of each Fiscal Year, and quarterly to the Lender
within twenty days after the close of each fiscal quarter, but in each case
immediately upon and subject to receipt from its accountants (or its internal
preparation if no outside accountants are providing such information), and only
to the extent available to or prepared by or for Borrower, a statement of income
and expenses together with a balance sheet and source and use of funds statement
and notes pertaining thereto, and any other information readily available to
Borrower and reasonably requested by the Lender. The annual financial statements
shall be reviewed or audited with respect to the year ended December 31, 1995 by
an accounting firm acceptable to Lender. Concurrently with such annual financial
statements, Borrower shall furnish to Lender a written statement by such
accountant, and with each quarterly financial statement a written statement
signed by the President of Borrower, stating that the signatory thereto has no
reason to believe that Borrower has committed or there exists an Event of
Default or Unmatured Event of Default hereunder or under any other Loan
Document. All financial statements shall set forth in reasonable detail the
results of operations and financial condition of Borrower certified as true and
correct by Borrower and the Partnership and shall be in a form satisfactory to
Lender. Borrower shall also furnish Lender, as soon as available, a signed copy
of Borrower's federal income tax return;
6.1.2 Additional Financial Data. With reasonable promptness furnish
to Lender information related to daily handle and other customary racing and
wagering reports produced by or for Borrower, and such additional information
and data concerning the business and financial condition of Borrower as may be
reasonably requested by Lender; upon reasonable prior notice afford Lender or
its agents reasonable access to the financial books and records, computer
records and properties of Borrower at all reasonable times and permit Lender or
its agents to make copies and abstracts of same and to remove such copies and
abstracts from Borrower's premises and permit Lender or its agents the right to
converse directly with the independent accounting firm then engaged by Borrower
to prepare its audited Financial Statements;
6.1.3 Taxes. Borrower shall pay timely when due all local, state and
federal withholding taxes and, if necessary to prevent a Material Adverse
Effect, cause the prompt payment and discharge of all taxes, governmental
charges and assessments levied and assessed or imposed upon Borrower or any of
its assets except as may be contested in good faith with adequate reserves
having been set aside therefor;
6.1.4 Existence; Compliance with Laws. Maintain the existence of
Borrower and all necessary foreign qualifications in good standing; continue to
comply with all applicable statutes, rules and regulations with respect to
Borrower or the conduct of Borrower's business, including but not limited to
ERISA and CERCLA; and maintain such necessary licenses and permits (including
the Licenses and Governmental Approval) required for the conduct of Borrower's
business and otherwise comply in all respects with any requirements or
conditions of such Licenses and Governmental Approvals, and any other licenses
and permits necessary or desirable to Borrower or the conduct of the Business;
6.1.5 Insurance. Maintain in full force and effect: (i) casualty and
other insurance on Borrower and its assets, in amounts usual and customary in
Borrower's business and to contain, as appropriate, Lender loss payee and breach
of warranty clauses and thirty day notice of cancellation or material change
endorsements in favor of Lender;
6.1.6 Litigation. Promptly defend all actions, proceedings or claims
which could have a Material Adverse Effect on Borrower or Borrower's business
(provided however, a claim the result of which would be a lien on the assets of
Borrower inferior in right of preference to Lender's lien on Borrower's assets,
and which otherwise would not cause a Material Adverse Effect, shall not be
deemed to have a Material Adverse Effect), and promptly notify Lender of the
institution of, or any change in, any such action, proceeding or claim, or any
claim if the
same is in excess of $50,000 for any single action, proceeding or claim and
$100,000 (other than claims covered by insurance in the ordinary course of
business and booked on Borrower's balance sheet) in the aggregate, or would have
a Material Adverse Effect if adversely determined;
6.1.7 Additional Security Documents. Provide Lender at any time or
from time to time on request with such mortgages, assignments, certificates of
title or Financing Statements and such additional instruments or documents as
Lender may, in Lender's sole discretion, deem necessary in order to perfect,
protect and maintain the security interest in the Collateral granted to Lender
pursuant to the terms hereof;
6.1.8 Notice of Events. Promptly give written notice to Lender of
the occurrence or imminent occurrence of any event which causes or would cause
any representation or warranty made in Section 5 hereof to be untrue in any
material respect at any time or which would cause Borrower to be in default
hereunder, under the Note or any other Loan Document for any other reason, or
the occurrence of an Event of Default or Unmatured Event of Default, or of any
material casualty to any of the Collateral or other property of Borrower; and
within ten (10) days thereafter, notify Lender in writing of the occurrence of
any default or event of default under any other obligation to repay borrowed
money;
6.1.9 Principal Executive Office. Promptly notify
Lender of a change in Borrower's Fiscal Year; and, notify Lender
at least sixty days prior to a change of Borrower's principal
executive office or in the location of any Collateral;
6.1.10Use of Advances. Use each Advance only for the specific
purposes and in the particular amounts set forth in the Funding Request as to
each such Advance, and to permit Lender or its representatives from time to time
as Lender may request with access to the properties, books, records, personnel
and agents or Borrower to audit and confirm such use of the Advances;
6.1.11Compliance with Laws, Agreements. Comply in all material
respects with (A) all laws, rules and regulations to which Borrower, its
property or the Business is subject, and (B) all material agreements (including,
but not limited to, collective bargaining agreements with all labor unions) to
which Borrower is or may become a party or by which Borrower, its property or
the Business may be bound, if the failure to be in compliance with such
agreements could have a Material Adverse Effect;
6.1.12Performance of Obligations. Perform, pay and discharge, as and
when due, all of Borrower's obligations (both monetary and non-monetary) (A)
under the Loan Documents; and (B) under any agreement that encumbers any part of
the Premises or the Collateral if (as to B) the failure to so do could result in
a Material Adverse Effect;
6.1.13Material Adverse Changes. Immediately notify Lender of: (i)
the occurrence or likely occurrence of any event which causes or could cause:
(A) any Material Adverse Effect; (B) any representation or warranty made by
Borrower hereunder to be untrue, incomplete or misleading in any material
respect; or (C) the occurrence of any other Event of Default or Unmatured Event
of Default hereunder; (ii) the institution of, or the issuance of any order,
judgment, decree or other process in, any litigation, investigation,
prosecution, proceeding or other action by any governmental authority or other
Person against Borrower or related to the Business and that does, or could, have
a Material Adverse Effect, or that relates in any manner to the Premises or any
License or Government Approval; (iii) any material casualty to any property of
Borrower, whether or not insured; and (iv) any change of Borrower's
shareholders, directors or officers;
6.1.14Business. Maintain the general character of
Borrower's business in which it is currently engaged;
6.2 Indemnification. Borrower hereby indemnifies and agrees to protect,
defend, and hold harmless Lender and Lender's directors, officers, employees,
agents, attorneys and shareholders from and against any and all losses, damages,
expenses or liabilities of any kind or nature and from any suits, claims, or
demands, including all reasonable counsel fees incurred in investigating,
evaluating or defending any such claim, suffered by any of them and caused by,
relating to, arising out of, resulting from, or in any way connected with this
Agreement, the Note, or the other Loan Documents and any transaction
contemplated herein or therein including, but not limited to, claims based upon
any act or failure to act by Lender in connection with this Loan Agreement, or
the other Loan Documents and any transaction contemplated herein or therein. If
Borrower shall have knowledge of any claim or liability hereby indemnified
against, it shall promptly give written notice thereof to Lender. THIS COVENANT
SHALL SURVIVE PAYMENT OF THE INDEBTEDNESS AND THE TERMINATION OR SATISFACTION OF
THIS LOAN AGREEMENT.
6.2.1 Lender shall promptly give Borrower written notice of all
suits or actions instituted against Lender with respect to which Borrower has
indemnified Lender, and Borrower shall timely proceed to defend any such suit or
action. Lender shall also have the right, at the expense of Borrower, to
participate in or, at Lender's election, assume the defense or prosecution of
such suit, action, or proceeding, and in the latter event Borrower may employ
counsel and participate therein. Lender shall have the right to adjust, settle,
or compromise any claim, suit, or judgment after notice to Borrower, unless
Borrower desires to litigate such claim, defend such suit, or appeal such
judgment and simultaneously therewith deposits with Lender additional collateral
security sufficient to pay any judgment rendered, with interest, costs, legal
fees and expenses. The right of Lender to indemnification under this Loan
Agreement shall extend to any money paid by Lender in settlement or compromise
of any such claims, suits, and judgments in good faith, after notice to
Borrower.
6.2.2 If any suit, action, or other proceeding is brought by Lender
against Borrower for breach of Borrower's covenant of indemnity herein
contained, separate suits may be brought as causes of action accrue, without
prejudice or bar to the bringing of subsequent suits on any other cause or
causes of action, whether theretofore or thereafter accruing.
DS1-303749
1
SECTION 7. NEGATIVE COVENANTS
As long as any portion of the Indebtedness shall remain outstanding and
unpaid, or Lender has any obligation or ability to make Advances to Borrower
hereunder, Borrower covenants and agrees that, in the absence of prior written
consent of Lender, which consent may be withheld in the sole discretion of
Lender, Borrower will not:
7.1 Debt, Liens and Encumbrances. Create, incur, assume or permit to exist
any mortgage, lien, pledge, charge, security interest or other encumbrance upon
any of the Collateral, or any of its other properties or assets, whether now
owned or hereafter acquired, except: (i) security interests with respect to
money borrowed from Lender; and (ii) Permitted Liens; and (iii) as otherwise
approved in writing by Lender, such approval not to be unreasonably withheld;
7.2 Transfer of Collateral. Except for Permitted Liens, sales of assets in
the ordinary course of business or for deterioration or obsolescence, sell,
enter into an agreement of sale for, convey, lease, assign, transfer, pledge,
grant a security interest, mortgage or lien in, or otherwise dispose of the
Collateral or its other assets;
7.3 Combination, Merger. Enter into proceedings in total or partial
liquidation; merge, combine or consolidate with or into any other Person, or,
acquire all or substantially all of the assets or securities of any other
Person; or take any action or omit to take any action the result or which could
have a Materially Adverse Effect;
7.4 Management. Change Borrower's corporate structure,
including but not limited to, a change in the principal
stockholders, or their respective interest in, Borrower or the
Directors or Executive Officers of Borrower;
7.5 Transactions with Affiliates. Enter into any transaction or
transactions with any Affiliate for less than full value or on terms or
conditions less favorable than could be obtained in an arm's length transaction
with a third party;
7.6 Environmental Matters. Use, generate, treat, transport, store, dispose
of, or otherwise introduce fuel or any other hazardous substances, pollutants,
contaminants, hazardous waste, residual waste or solid waste into or on any real
property owned, leased or occupied by Borrower, or cause, suffer, allow, or
permit anyone else to do so, in violation of any applicable statute, law,
ordinance rule or regulation;
7.7 Licenses and Government Approvals. Fail to maintain in full force and
effect or fail to be in compliance with (or permit its officers, directors or
shareholders to fail to maintain or fail to be in compliance with) all
requirements of Licenses and Governmental Approvals, or any other permit or
license necessary or desirable in connection with Borrower or the Business;
7.8 Ordinary Course. Alter or amend any material provision
of a terminate or permit termination of any agreement integral or
necessary to the Business, or in any manner conduct the Business
other than in the ordinary course;
7.9 Restricted Payments. Make any Restricted Payments; and
7.10 Non-Assignability of Loan Agreement. Assign this Loan
Agreement or any other Loan Document or any interest herein or
therein.
SECTION 8. DEFAULT
8.1 Events of Default. The occurrence of any one or more of the following
events, conditions or states of affairs, shall constitute an "Event of Default"
hereunder, under the Note and under each of the other Loan Documents, provided
however, that nothing contained in this Section 8 shall be deemed to enlarge or
extend any grace period provided for in the Note or any other Loan Document:
8.1.1 Failure by Borrower to pay the Indebtedness or any portion
thereof as the same becomes due, or if any Advance is not applied specifically
in the manner and in the amount(s) as stated in the relevant Funding Request;
8.1.2 Failure by Borrower to observe or perform any agreement,
condition, undertaking or covenant in: (i) this Loan Agreement or any other Loan
Document, or in any other agreement between Borrower and Lender; or (ii) any
other material agree ment, lease, mortgage, note or other obligation to which
Borrower is a party or by which Borrower or any of its assets is or may be
bound, where the failure to be in compliance could have a Material Adverse
Effect;
8.1.3 Any representation or warranty of the Borrower made, or deemed
made, in this Loan Agreement or any other Loan Document or any statement or
information in any report, certificate, financial statement or other instrument
furnished by Borrower in connection with making this Loan Agreement, the
establishment of the Line hereunder or in compliance with the provisions hereof
or any other Loan Document shall have been false or misleading in any material
respect when so made, deemed made or furnished;
8.1.4 Borrower shall file a voluntary petition or proceeding seeking
liquidation, reorganization or other relief with respect to itself under any
provision of the Bankruptcy Code or any state bankruptcy or insolvency statute,
or make an assignment or any other transfer of assets for the benefit of its
creditors, or apply for or consent to the appointment of a receiver for its
assets, or suffer the filing against its property of any attachment or
garnishment or take any action to authorize any of the foregoing; or an
involuntary case or other proceeding shall be commenced against Borrower seeking
liquidation, reorganization or other relief with respect to its debts under the
Bankruptcy Code or any other bankruptcy, insolvency or similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days (it being understood
that no delay period applies with respect to any default arising under this
Section by reason of the filing of a voluntary petition by Borrower under the
Bankruptcy Code or any state bankruptcy or insolvency statute or the making of
an assignment or other transfer of assets for the benefit of Borrower's
creditors or by reason of Borrower applying for or consenting to the appointment
of a receiver for Borrower's assets); or an order for relief shall be entered
against Borrower under any provision of the Bankruptcy Code or any state
bankruptcy or insolvency statute as now or hereafter in effect;
8.1.5 Borrower shall cease to conduct its Business
substantially as it is now conducted; or Borrower shall change
the nature of its Business;
8.1.6 Entry of a final judgment or judgments against Borrower by a
court of law in an amount exceeding $50,000 or an aggregate of $150,000
outstanding at any one time, enforcement of which judgment or judgments has not
been stayed or satisfied within thirty days after entry, except where the result
of such judgement does not cause a Material Adverse Effect (it being understood
that the creation of a lien inferior in right of preference to Lender's lien in
All Assets of Borrower and which does not otherwise cause a Material Adverse
Effect, shall not be deemed to cause a Material Adverse Effect);
8.1.7 Except for Permitted Liens or Liens in favor of Lender or
liens otherwise consented to in writing by Lender, imposition of any Lien or
series of Liens against Borrower or any of the Collateral whether by operation
of law or by consent which is not removed within thirty days, except where the
result of such lien does not cause a Material Adverse Effect (it being
understood that the creation of a lien inferior in right of preference to
Lender's lien in All Assets of Borrower and which does not otherwise cause a
Material Adverse Effect, shall not be deemed to cause a Material Adverse
Effect);
8.1.8 Loss or partial invalidity of Borrower's
corporate or Partnership's partnership existence; or
8.1.9 The occurrence of any breach of or default under this Loan
Agreement or the Guaranty, the Security Agreement, the Pledge, the Mortgage, or
any other Loan Document or any other instrument or document entered into in
connection with the foregoing.
8.2 Remedies on Default.
8.2.1 Upon the occurrence and continuation of any
Event of Default:
8.2.1.Lender may at its election forthwith declare all
Indebtedness to be immediately due and payable, without protest, demand or other
notice (which are hereby expressly waived by Borrower) and, in addition to the
rights specifically granted hereunder or now or hereafter existing in equity, at
law, by virtue of statute or otherwise (each of which rights may be exercised at
any time and from time to time), Lender may exercise the rights and remedies
available to Lender at law or in equity or under this Loan Agreement, the Note,
the Mortgages and any of the other Loan Documents or any other agreement by,
between or among Borrower and Lender in accordance with the respective
provisions thereof.
8.2.1.Lender shall have all the rights of a secured creditor
under the Uniform Commercial Code as enacted in West Virginia and any other
jurisdiction in which any Collateral is located, and as a Mortgagee under the
laws of West Virginia.
8.2.1.Borrower will pay, as part of the Indebtedness and
obligations hereby secured, Lender's administrative fees and all other amounts
(including but not limited to Lender's reasonable attorneys' and other
professional fees) paid by Lender: (i) for taxes, levies, and insurance on, or
maintenance of, such Collateral; and (ii) in taking possession of, disposing of,
or preserving such Collateral, with interest on all of same at the Line Interest
Rate plus 3% from and after demand for the payment thereof until paid.
8.2.2 Borrower hereby designates and appoints
Lender and its designees or agents as attorney-in-fact of Borrower upon the
occurrence and continuation of an Event of Default, irrevocably and with power
of substitution, with authority to sign Borrower's name on any Financing
Statements relating to the Collateral; to endorse the name of Borrower on any
notes, acceptances, checks, drafts, money orders or other evidences of payment
or proceeds of the Collateral that may come into Lender's possession, to sign
the name of Borrower on any invoices, documents, drafts against and notices to
account debtors of Borrower, assignments and request for verification of
accounts; to execute proofs of claim and loss; to execute any endorsements,
assignments or other instruments of conveyance or transfer; to adjust and
compromise any claims under insurance policies; to execute releases; and to do
all other acts and things necessary and advisable in the sole discretion of
Lender to carry out and enforce this Loan Agreement. All acts of said attorney
or designee are hereby ratified and approved and said attorney or designee shall
not be liable for any acts of commission or omission, nor for any error of
judgment or mistake of fact or law. This power of attorney being coupled with an
interest is irrevocable while any of the Indebtedness shall remain unpaid or
Lender has any obligations or ability to make Advances hereunder.
8.3 Application of Proceeds. Any cash proceeds of sale, lease or other
disposition of the Collateral upon an Event of Default shall be applied in the
following order:
8.3.1 To Lender's Costs;
8.3.2 To the payment of interest due pursuant to
the Loan Documents;
8.3.3 To the payment of principal due pursuant to
the Loan Documents;
8.3.4 Any surplus then remaining to Borrower or whomever may be
lawfully entitled thereto.
8.4 Set-Off Rights Upon Default. Upon and during the continuance of any
Event of Default, Lender, in addition to any remedies set forth above, shall
have the right at any time and from time to time without notice to Borrower (to
the extent permitted by law) (any such notice being expressly waived by
Borrower), to set off, to exercise any lender's lien or any right of attachment
or garnishment and apply any and all monies at any time held by Lender and other
indebtedness at any time owing by Lender to or for the account of Borrower
against any and all Indebtedness or other obligations of Borrower now or
hereafter existing under this Loan Agreement, the Note or any other Loan
Document, regardless of whether Lender shall have made any demand hereunder or
thereunder.
8.5 Singular or Multiple Exercise; Non-Waiver. The
remedies provided herein, in the Note and in the other Loan
Documents or otherwise available to Lender at law or in equity
and any warrants of attorney herein or therein contained, shall
be cumulative and concurrent, and may be pursued singly, successively or
together at the sole discretion of Lender, and may be exercised as often as
occasion therefor shall occur; and the failure to exercise any such right or
remedy shall in no event be construed as a waiver or release of the same.
SECTION 9. MISCELLANEOUS
9.1 Integration. This Loan Agreement, the Note and the other Loan
Documents shall be construed as one agreement, and in the event of any
inconsistency, the provisions of this Loan Agreement shall control over the
provisions of any other Loan Document. This Loan Agreement, the Note and the
other Loan Documents contain all the agreements of the parties hereto with
respect to the subject matter of each thereof and supersede all prior or
contemporaneous discussions and agreements with respect to such subject matter.
9.2 Modification. Modifications or amendments of or to the provisions of
this Loan Agreement, the Note or any other Loan Document to which Borrower is a
party shall be effective only if set forth in a written instrument signed by
Lender and Borrower.
9.3 Notices. Any notice or other communication by one party hereto to the
other shall be in writing and shall be deemed to have been validly given upon
receipt if by hand delivery, or by overnight delivery service or by telecopier,
or two days after mailing if mailed, first class mail, postage prepaid, return
receipt requested as follows:
If to Borrower:
D. Keith Wagner, President
Charles Town Races, Inc.
U.S. Route 340
Charles Town Racetrack
Charles Town, West Virginia 25414
Telecopier:304-725-6979
With a copy to:
Michael B. Keller, Esquire
Bowles Rice McDavid Graff & Love
105 West Burke Street
Martinsburg, West Virginia 25401
Telecopier: 304-267-3822
If to Lender:
Peter M. Carlino, Chairman
Penn National Gaming of West Virginia, Inc.
c/o Penn National Gaming, Inc.
Wyomissing Professional Center
825 Berkshire Boulevard, Suite 203
Wyomissing, PA 19610
Telecopier: 610-376-2842
With a copy to:
Robert P. Krauss, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street
Philadelphia, Pennsylvania 19103-7598
Telecopier: (215) 994-1111
9.4 Survival. The terms of this Loan Agreement and all agreements,
representations, warranties and covenants made by Borrower in any other Loan
Document shall survive the issuance and payment of the Note and shall continue
as long as any portion of the Indebtedness shall remain outstanding and unpaid
or Lender shall have any obligation or ability to make Advances hereunder;
provided, however, that the covenants set forth in Sections 6.2, 9.7 and 9.8
hereof shall survive the payment of the Indebtedness and the termination or
settlement of this Loan Agreement. Borrower hereby acknowledge that Lender has
relied upon the foregoing in making available the Line.
9.5 Closing. Closing hereunder shall occur on May , 1996 at the offices of
Borrower, or at such other time and place as the parties hereto may determine.
9.6 Successors and Assigns; Governing Law. This Loan Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto; provided, however, that Borrower shall not assign this
Loan Agreement, or any rights or duties arising hereunder, without the express
prior written consent of Lender (which consent may be withheld in the sole
discretion of Lender), and Lender may assign all or any part of its rights or
duties hereunder without the consent of Borrower. This Agreement shall be
construed and enforced in accordance with the internal laws of the State of West
Virginia for contracts made and to be performed in West Virginia.
DS1-303749
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9.7 CONSENT TO JURISDICTION AND VENUE. IN ANY LEGAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS LOAN
AGREEMENT OR THE RELATIONSHIP EVIDENCED HEREBY, EACH UNDERSIGNED PARTY HEREBY
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED IN JEFFERSON COUNTY, WEST VIRGINIA AND AGREES NOT TO RAISE ANY
OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR MAINTAINING OF THE VENUE OF
ANY SUCH PROCEEDING IN SUCH COUNTY. EACH PARTY HERETO AGREES THAT SERVICE OF
PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON HIM BY MAILING A COPY
THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH
HEREIN.
9.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN
ANY LEGAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO
THIS LOAN AGREEMENT OR THE RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LINE AVAILABLE TO BORROWER.
9.9 Public Announcement. Lender may, at its option, announce and publicize
the existence of this Loan Agreement and the extension of credit by Lender to
Borrower pursuant to the terms and conditions hereof, in such media as Lender
may, in its sole discretion, from time to time determine.
9.10 Relationship of Parties. The relationship of Lender and Borrower will
at all times be that of creditor and obligor. Nothing herein shall be deemed or
construed to confer upon the parties any other relationship including, but not
limited to, any relationship of a partnership or joint venture.
9.11 Participation and Information. Lender may in its sole discretion
enter into participation arrangements with respect to this Loan Agreement and
loans made hereunder and may provide all information in its possession relating
to Borrower or this Loan Agreement: (i) to any current or prospective
participating lender; (ii) to its Affiliates, employees, directors, agents,
attorneys, accountants and other professional advisors; (iii) upon the request
or demand of any governmental authority; (iv) in response to any order of court
or as may be otherwise be required pursuant to any requirement of applicable
law; (v) which has been publicly disclosed other than in breach of this Loan
Agreement; or (vi) in connection with the exercise of any remedy or other
enforcement of the rights of Lender hereunder or under any of the Loan
Documents.
9.12 No Third Party Beneficiary. This Loan Agreement shall not confer any
rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
IN WITNESS WHEREOF, Borrower and Lender have executed this Loan Agreement
under seal, intending to be legally bound hereby, as of the day and year first
above written.
Borrower:
CHARLES TOWN RACES, INC.
BY: /s/ D. Keith Wagner
D. Keith Wagner, President
Lender:
PNGI CHARLES TOWN GAMING LIMITED
LIABILITY COMPANY, by Penn National
Gaming of West Virginia, Inc., its
Managing Member
By: /s/ William Bork 6/4/96
William Bork, President
DS1-303749
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Schedule 2.3
Form of Funding Request
By
Charles Town Races, Inc.
_____________, 1996
Peter M. Carlino
PNGI Charles Town Gaming Limited Liability Company
c/o Penn National Gaming, Inc.
Wyomissing Professional Center
825 Berkshire Boulevard, Suite 203
Wyomissing, PA 19610
This Funding Request ("Request") is provided to PNGI Charles Town Gaming
Limited Liability Company ("Lender") to evidence the desire of the above
Borrower to borrow funds under the Loan and Security Agreement, dated as of May
, 1996 by and between Borrower and Lender (the "Loan Agreement"). All
capitalized terms not defined herein shall have the same meaning as provided in
the Loan Agreement unless the context clearly requires to the contrary.
Please transfer the amount of $___________ (the "Advance") to [account] on
(date) (the "Funding Date").
The Advance shall be used only for the specific purposes and in the
particular amounts as set forth on Exhibit A to this Funding Request.
The Borrower hereby certifies that no Event of Default or Unmatured Event
of Default under the Loan Agreement or any other Loan Document has occurred or
is continuing.
CHARLES TOWN RACES, INC.
By: __________________________
D. Keith Wagner, President
DS1-303749
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Schedule 5.1.3
Borrower's Principal Executive Offices and Trade Names
DS1-303749
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Schedule 5.1.4
Financial Statements
DS1-303749
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Schedule 5.1.5
Litigation
DS1-303749
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DS1-303749
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LIMITED RECOURSE GUARANTY AGREEMENT
THIS LIMITED RECOURSE GUARANTY AGREEMENT (this "Guaranty") is made this
8th day of May, 1996, by Charles Town Racing Limited Partnership, a West
Virginia limited partnership ("Guarantor"), to and for the benefit of PNGI
Charles Town Gaming Limited Liability Company, a West Virginia limited liability
company, its successors and assigns ("Lender").
B A C K G R O U N D
Lender is about to provide a line of credit to Charles Town Races,
Inc., a West Virginia corporation and wholly-owned subsidiary of Guarantor
("Borrower"), in the principal amount of up to One Million Two Hundred and Fifty
Thousand ($1,250,000) Dollars (the "Loan") pursuant to the provisions of that
certain Loan and Security Agreement between Borrower and Lender of even date
herewith (the "Loan Agreement"), and evidenced by Borrower's Note of even date
herewith (the "Note"). The obligations of Borrower under the Loan Documents is
secured by a lien on and security interest in All Assets of Borrower and the
Mortgage on Borrower's leasehold interest in the Premises (the foregoing,
collectively, the "Collateral").
Lender is unwilling to make the Loan unless Guarantor guarantees
payment of the Note and performance by Borrower of each and every term,
covenant, condition and agreement contained therein and in the Loan Agreement
and any other Loan Document and under any and all other agreements executed by
Borrower to or for the benefit of Lender in connection with the Loan on the part
of Borrower to be kept, observed or performed. Guarantor desires to give such
guaranty (i.e. this Guaranty) in order to induce Lender to make the Loan.
The obligations of Guarantor under this Guaranty are secured by: a
lien on and security interest in All Assets of Guarantor pursuant to the
Security Agreement, by all of the issued and outstanding capital stock of
Borrower pursuant to the Pledge, and by a lien on and security interest in the
Premises pursuant to the Mortgage, all as set forth in such documents and
agreements (the foregoing, the "Guarantor Collateral"). The obligations of
Guarantor under this Guaranty are non-recourse as to the general partners of
Guarantor, and enforcement of Guarantor's obligations hereunder are limited
solely to the Guarantor Collateral or other assets of Guarantor.
Each initially-capitalized term used herein shall have the meaning
ascribed to it in the Loan Agreement unless the context clearly requires to the
contrary.
DS1-303930
1
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by Guarantor, and intending to be legally bound hereby,
Guarantor agrees as follows, for the benefit of Lender:
1. GUARANTY:
A. Guaranty - Guarantor unconditionally and absolutely guarantees
the due and punctual payment within applicable grace periods of the principal of
the Note, the interest thereon and any other monies due or which may become due
under the Loan Documents, and the due and punctual performance and observance by
Borrower of any other terms, covenants and conditions of the Loan Documents on
the part of Borrower to be kept, observed or performed whether according to the
present terms thereof, at any earlier or accelerated date or dates as provided
therein, or pursuant to any extension of time or to any change or changes in the
terms, covenants and conditions thereof now or at any time hereafter made or
granted. All liabilities and obligations hereinabove described and covered by
this Guaranty are hereinafter collectively referred to as the "Obligations".
B. Enforcement of Guaranty - Lender may, in its sole discretion,
exercise any right or remedy which Lender has under, or in connection with this
Guaranty or by law (such rights and remedies being cumulative and not
alternative or exclusive) without pursuing or exhausting any right or remedy
Lender has against Borrower or any other person or entity, or which Lender has
with respect to any Collateral for any or all of the Obligations of Borrower or
any other guaranty of any or all of the Obligations. Lender need not join
Borrower or any other person as a party in any action brought to enforce the
provisions hereof; and Lender may exercise any right or remedy which it has
under this Guaranty without regard to any actions or omissions of Borrower or
any other person. In the event of a default under or breach of any of the Loan
Documents, after expiration of any applicable grace period therein provided,
Lender shall be entitled to immediately enforce the obligations of Guarantor
hereunder.
C. Guaranty Absolute - The obligations of Guarantor hereunder shall
be absolute, primary and unconditional and shall continue in full force and
effect irrespective of the validity, legality or enforceability of any of the
Loan Documents pursuant to which any of the Obligations arise, or the existence,
value or condition of any collateral for any of the Obligations, or of any other
guaranty of the Obligations or any other circumstances which might otherwise
constitute a legal or equitable discharge of a surety or guarantor. This
Guaranty and the obligations of
DS1-303930
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Guarantor hereunder shall be irrevocable and shall not be discharged until (i)
the Obligations are fully paid and satisfied, and (ii) any obligation or ability
of Lender to make loans, advances or extensions of credit to Borrower under the
Line are terminated.
D. Guaranty Not Affected - Without limiting the generality of
Section C above, Guarantor hereby consents and agrees that, at any time, and
from time to time, without notice to Guarantor:
(i) the time, manner, place or terms of payment
of any of the Obligations may be extended or modified;
(ii) any Collateral, or any other guaranty, for
any of the Obligations may be exchanged, released, surrendered,
or otherwise disposed of;
(iii) any action may be taken under or in respect of any
agreements, notes or documents pursuant to which any of the Obligations arise,
in the exercise of any remedy, power or privilege therein contained or otherwise
with respect thereto, or such remedy, power or privilege may be waived, omitted,
or not enforced;
(iv) the time for Borrower's performance of or compliance with
any term, covenant or agreement on its part to be performed or observed under
any agreements, notes or documents pursuant to which any of the Obligations
arise may be extended, or such performance or compliance waived, or failure in
or departure from such performance or compliance consented to;
(v) any of the Loan Documents, or any term thereof may be
amended or modified in any respect (including, without limitation the interest
rate or date of maturity);
(vi) the liability of Borrower under the Loan
Documents or of Guarantor hereunder may be released, settled or
compromised; and
(vii) monies received from Borrower or others, or from
Collateral held for the Obligations, may be applied by Lender against other
indebtedness owed by Borrower to Lender, as Lender in its sole discretion
determines; all in such manner and upon such terms as Lender deems proper,
without notice to or further assents from Guarantor, and all without affecting
this Guaranty or the obligations of Guarantor hereunder, which shall continue in
full force and effect until the Obligations and all obligations of Guarantor
hereunder shall have been fully paid and performed.
DS1-303930
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E. Non-recourse - Notwithstanding any other provision of this
Guaranty, enforcement of Guarantor's obligations hereunder is limited solely to
the Guarantor Collateral and any other assets of Guarantor. Lender specifically
acknowledges and agrees that no partner of Guarantor, or his or its individually
owned assets, shall be liable for any of Guarantor's obligations hereunder, such
obligations being non-recourse as to Guarantor's general partners.
2. WAIVERS:
A. Notice of Acceptance - Guarantor hereby waives notice of
acceptance of this Guaranty, presentment and demand for payment, notice of
dishonor, protest and notice of protest or noncompliance with the terms and
provisions of the Loan Agreement, the Note, the Mortgage, and any other Loan
Document. No act or omission of any kind in the premises shall in any way affect
or impair this Guaranty.
B. Marshalling of Assets - Guarantor hereby waives any right or
claim of right to cause a marshalling of Borrower's assets or to cause Lender to
proceed against any of the security held by Lender before proceeding against
Guarantor or the Guarantor Collateral, or to proceed against Guarantor or the
Guarantor Collateral in any particular order, and Guarantor hereby waives any
requirement that Lender shall institute any action or proceedings at law or in
equity against Borrower, or anyone else, with respect to the Loan Agreement, the
Note, the Mortgage, or any other Loan Document or with respect to any other
security held by Lender, as a condition precedent to bringing an action against
Guarantor or the Guarantor Collateral upon this Guaranty.
C. Other Agreements by Guarantor - Guarantor agrees that there shall
be no requirement that Lender document its acceptance of this Guaranty, evidence
its reliance thereon, or that Lender take any action against any person or any
property prior to taking action against Guarantor or the Guarantor Collateral.
Guarantor further agrees that Lender's rights and remedies hereunder shall not
be impaired or subject to any stay, suspension or other delay as a result of
Borrower's or Guarantor's insolvency or as a result of any proceeding applicable
to Borrower or Guarantor or any property of Borrower or Guarantor under any
bankruptcy or insolvency law. Guarantor also agrees that payments and other
reductions on the Obligations may be applied to such of the Obligations and in
such order as Lender may elect.
D. Security Interest - As security for the
obligations of Guarantor hereunder, Guarantor has executed and
DS1-303930
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delivered that certain Pledge, that certain Security Agreement, and that certain
Mortgage, each in favor of Lender and of even date herewith, pursuant to which
Guarantor has pledged all of the issued and outstanding capital stock of
Borrower to Lender, has granted to Lender a security interest in and lien on All
Assets of Guarantor and a mortgage on the Premises, as provided in such
agreements (i.e. the Guarantor Collateral).
E. Subordination and Subrogation - In the event Borrower or any
subsequent owner of the Collateral are now or shall hereafter become indebted to
Guarantor, the amount of each sum and of such indebtedness shall at all times be
subordinate as to lien, time of payment, and in all other respects, to the
amounts owing to Lender under the Note or the other Loan Documents, and
Guarantor shall not be entitled to enforce or receive payment thereof until all
sums owing to Lender have been paid. Nothing herein contained is intended or
shall be construed to give to Guarantor any right of subrogation in or under the
Note or the other Loan Documents or any right to participate in any way therein,
or in the right, title or interest of Lender in the Premises, notwithstanding
any payments made by Guarantor under this Guaranty, all rights of subrogation
and participation being hereby expressly waived and released. If any amount
shall be paid to Guarantor on account of such subrogation, indemnification or
contribution at any time when all of the Obligations and all other expenses
guarantied pursuant hereto shall not have been paid and satisfied in full, such
amount shall be held in trust for the benefit of Lender, shall be segregated
from the other funds of Guarantor and shall forthwith be paid over to Lender to
be applied in whole or in part by Lender against the Obligations, whether
matured or unmatured, in such order as Lender shall determine in its sole
discretion. If Guarantor shall make payment to Lender of all or any portion of
the Obligations and all of the Obligations shall be paid in full, Guarantor's
right of subrogation shall be without recourse to and without any implied
warranties by Lender and shall remain fully subject and subordinate to Lender's
right to collect any other amounts which may thereafter become due to Lender by
Borrower in connection with the Obligations.
F. No Waiver; Delay - No delay on the part of Lender in exercising
any of its rights, powers or privileges or partial or single exercise thereof
under this Guaranty of the Loan Documents shall operate as a waiver of any such
privilege, powers or rights. No waiver of any of its rights hereunder and no
modification or amendment of this Guaranty, shall be deemed to be made by Lender
unless the same shall be in writing, duly signed on behalf of Lender by a duly
authorized officer, and each such waiver, if any, shall apply only with respect
to the specific instance involved, and shall in no way impair the rights of
DS1-303930
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Lender or the obligations of Guarantor to Lender in any other respect at any
other time.
3. REPRESENTATIONS AND WARRANTIES: Guarantor hereby
represents and warrants to Lender as follows:
A. All financial statements heretofore delivered by Guarantor to
Lender, if any, (i) are true, correct and complete in all material respects,
fairly represent Guarantor's financial condition as of the date thereof, and no
material adverse change has occurred in Guarantor's financial condition
reflected therein since the dates thereof, and (ii) no information has been
omitted which would make the information previously furnished in such reports
and financial statements misleading or incorrect in any material respect.
Guarantor shall promptly notify Lender in writing of the occurrence of any
Material Adverse Change in Guarantor's financial condition.
B. This Guaranty has been duly executed and delivered
and constitutes the valid and legally binding obligation of
Guarantor, enforceable in accordance with its terms.
C. The execution, delivery and the performance of and compliance
with this Guaranty on the part of Guarantor will not (with or without the giving
of notice or lapse of time, or both) result in any violation of, or be in
conflict with, or constitute a default under, the terms of any contract, note,
indenture or other agreement to which Guarantor is a party, or of any judgment,
decree, order, statute, rule or regulation to which Guarantor is subject; and
will not violate any provisions of Guarantor's Partnership Agreement or other
governing documents.
D. There are no outstanding judgments, actions, proceedings, claims
or investigations pending or threatened before any court or governmental body
which may materially and adversely affect the operations, business, properties,
or financial condition of Guarantor.
4. COVENANTS: Guarantor covenants and agrees as follows:
A. Guarantor shall, upon reasonable request of Lender and as soon as
reasonably possible, furnish, or cause to be furnished, to Lender such financial
and business information pertaining to Guarantor as Lender may reasonably
request.
B. Guarantor shall, upon reasonable notice by Lender, give Lender or
representative or agents of Lender access during normal business hours to and
permit such persons to examine, copy or make excerpts from any and all books,
records and documents in the possession or control of Guarantor relating to the
business
DS1-303930
6
affairs or financial condition of Guarantor or Borrower, and to
inspect any of the properties of Guarantor or Borrower.
C. Guarantor shall promptly notify Lender of any litigation actions,
proceedings, claims or investigations pending or threatened against it which may
materially and adversely affect the financial condition of Guarantor.
D. Guarantor shall observe, perform and comply with all of the
covenants, terms and conditions of this Guaranty until (i) the Obligations are
fully paid and satisfied, and (ii) any obligation or ability of Lender to make
loans, Advances, or extensions of credit to Borrower under the Line have
terminated.
E. Guarantor shall provide Lender with such information on the
business affairs and financial condition of Guarantor as Lender from time to
time may reasonably request, including, but not limited to, a true and correct
copy of Federal or State Partnership Tax Returns and hereby agrees to promptly
notify Lender of any change in the address of Guarantor or in the location of
any of its assets.
5. MISCELLANEOUS:
A. Integration - This Guaranty contains all the agreements of the
parties hereto with respect to the subject matter hereof and supersedes all
prior or contemporaneous discussions and agreements with respect to such subject
matter.
B. Amendments - No amendment of any provision of this Guaranty shall
be effective unless it is in writing and signed by Lender and Guarantor, and no
waiver of any provisions of this Guaranty, and no waiver or consent to any
departure by Guarantor therefrom, shall be effective unless it is in writing and
signed by Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
C. Expense of Enforcement - In the event this Guaranty is placed in
the hands of an attorney for enforcement, Guarantor will reimburse Lender for
all expenses incurred in connection therewith, including reasonable attorney's
fees.
D. Reinstatement - This Guaranty shall continue to be effective or
be reinstated, as the case may be, if at any time payment of any of the
Obligations, or any part thereof, is rescinded or must otherwise be returned by
Lender upon the insolvency or bankruptcy of Borrower, or otherwise, all as
though such payment had not been made.
DS1-303930
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E. Notices - Any notice provided or permitted to be given under this
Guaranty must be in writing, and will be effective, (a) if delivered by hand or
sent by overnight courier, the day it is delivered, (b) if sent by telecopy, on
the day the recipient's telephonic confirmation of receipt is received or (c) if
sent by certified or registered mail (return receipt requested), three business
days after mailing. Notice served in any other manner shall be deemed to have
been given only if and when actually received by the addressee. For purposes of
notices, the addresses of the parties shall be as follows:
Guarantor: Charles Town Racing Limited Partnership
Charles Town Racetrack
U.S. Route 340
Charles Town, West Virginia 25414
Telecopier: 304-725-6979
Copy to: Michael B. Keller, Esquire
Bowles Rice McDavid Graff & Love
105 West Burke Street
Martinsburg, West Virginia 25401
Telecopier: 304-267-3822
Lender: Peter M. Carlino, Chairman
c/o Penn National Gaming, Inc.
Wyomissing Professional Center
825 Berkshire Blvd., Suite 203
Wyomissing, PA 19610
Telecopier: (610) 376-2842
Copy to: Mesirov Gelman Jaffe Cramer &
Jamieson
1735 Market Street, 38th Floor
Philadelphia, PA 19103-7598
Attn: Robert P. Krauss, Esq.
Telecopier: 215-994-1111
F. Counterparts - This Guaranty may be executed in multiple
counterparts, and each counterpart hereof executed by any party shall be deemed
an original and shall as to such party constitute one and the same instrument
with all other counterparts hereof executed by such party, regardless of whether
the same or any other counterpart thereof is executed by any other Guarantor or
person intended to be or become a "Guarantor" hereunder.
G. Waiver of Jury Trial - Guarantor hereby waives, and Lender by its
acceptance hereof waives, trial by jury in any legal proceeding involving,
directly or indirectly, any matter (whether sounding in tort, contract or
otherwise) in any way arising out of
DS1-303930
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or related to this Guaranty or the Note guaranteed hereby. This
provision is a material inducement for Lender to make the Loan.
H. Severability - If any provision of this Guaranty shall contravene
or be held invalid under the laws of any jurisdiction, this Guaranty shall be
construed as if it did not contain such provision, and the rights, remedies,
warranties, representations, covenants and provisions hereof shall be construed
and enforced accordingly and in such manner to as nearly as possible reflect the
intent of the parties hereto as shall be lawful in such jurisdiction and shall
not in any manner affect such provision in any other jurisdiction, or any other
provisions of this Guaranty.
I. Governing Law - Guarantor and Lender elect that the internal laws
of the State of West Virginia shall govern the construction of this Guaranty and
the rights, remedies, warranties, representations, covenants, and provisions
hereof without regard to the principles of conflict of laws.
J. Interpretations - If this Guaranty is signed by more than one
person, each Guarantor shall be jointly and severally liable hereunder and this
Guaranty shall with respect to each Guarantor be interpreted as if each
Guarantor has delivered his or her sole and separate guaranty containing the
identical provisions contained in this Guaranty. Words importing the singular
number mean and include the plural number, and words of the masculine gender
mean and include words of the feminine or neuter gender, and vice versa.
K. Headings - Section headings in this Guaranty are
included for convenience of reference only and shall not constitute
a part hereof for any other purpose.
DS1-303930
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L. Transfer of Benefit - This Guaranty shall be binding upon
Guarantor, its successors, representatives and assigns, and shall inure to the
benefit of, and be enforceable by Lender, its successors and assigns.
Notwithstanding the foregoing, none of the rights or obligations of Guarantor
may be assigned or otherwise transferred without the prior written consent of
Lender which consent may be withheld in the sole discretion of Lender. Lender
may assign its rights hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set its hand and seal the
day and year first above written.
GUARANTOR
CHARLES TOWN RACING LIMITED
PARTNERSHIP
By: D.K.W., Inc., general partner and
attorney-in-fact for all general
partners of the Partnership
By: /s/ D. Keith Wagner
D. Keith Wagner, President
DS1-303930
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT made and entered into this 8th day of May, 1996,
by and between Charles Town Racing Limited Partnership, a West virginia limited
partnership ("Guarantor") and PNGI Charles Town Gaming Limited Liability
Company, a West Virginia limited liability company ("Secured Party").
BACKGROUND:
Secured Party is about to provide a line of credit to Charles Town
Races, Inc., a West Virginia corporation and wholly-owned subsidiary of
Guarantor ("Borrower"), in the principal amount of up to One Million Two Hundred
and Fifty Thousand ($1,250,000) Dollars (the "Loan") pursuant to the provisions
of that certain Loan and Security Agreement between Borrower and Secured Party
of even date herewith (the "Loan Agreement"), and evidenced by Borrower's
Promissory Note of even date herewith (the "Note"). The obligations of Borrower
under the Loan Documents is secured by a lien on and security interest in All
Assets of Borrower and the Mortgage on Borrower's leasehold interest in the
Premises (the foregoing, collectively, the "Collateral").
Secured Party is unwilling to make the Loan unless Guarantor
guarantees payment of the Note and performance by Borrower of each and every
term, covenant, condition and agreement contained therein and in the Loan
Agreement and any other Loan Document or under any and all other agreements
executed by Borrower to or for the benefit of Secured Party in connection with
the Loan on the part of Borrower to be kept, observed or performed.
Guarantor desires to give such guaranty in order to induce Secured
Party to make the Loan, and has therefore entered into a Guaranty of even date
herewith for the benefit of Lender. The obligations of Guarantor under such
Guaranty are secured by: a lien on and security interest in All Assets of
Guarantor pursuant to this Security Agreement, by all of the issued and
outstanding capital stock of Borrower pursuant to the Pledge Agreement, and by a
lien on and security interest in the Premises pursuant to the Mortgage, all as
set forth in such documents and agreements.
Each initially-capitalized term used herein shall have the meaning
ascribed to it in the Guaranty or the Loan Agreement unless the context clearly
requires to the contrary.
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by Guarantor, and intending to be legally bound hereby,
Guarantor agrees as follows, for the benefit of Secured Party:
Document No. 304109
1. Security Interest.
(a) As security for Guarantor's obligations under the Guaranty (the
"Guarantor Obligations"), including but not limited to for the payment,
performance and discharge of any and all of the obligations of Borrower under
the Note and any of the other Loan Documents, Guarantor does hereby grant to
Secured Party a lien on, and security interest in, All Assets of Guarantor,
including but not limited to, all of Guarantor's Accounts, Equipment, Inventory,
Machinery, Fixtures, General Intangibles, Documents, Instruments, books and
records (including but not limited to manual records, computer runs, printouts,
tapes, disks, software programs, source codes and other computer prepared
information and equipment of any kind) and any other tangible or intangible
personal property of Guarantor, whether now owned or hereafter acquired,
including all policies of insurance thereon and all insurance proceeds in
connection therewith, together with all cash and noncash proceeds and products
thereof (collectively, the "Guarantor Collateral"). This document is intended to
be a security agreement under the Uniform Commercial Code of the State of West
Virginia and any other state in which any such Guarantor Collateral is located
and all capitalized terms used in this Section 1.1(a) shall have the same
meaning as ascribed to such terms in the Uniform Commercial Code of the State of
West Virginia or such other state as applicable.
(b) Guarantor hereby assigns, conveys and delivers to Secured Party
all of Guarantor's rights and interests in and to that certain option agreement,
pursuant to which Guarantor has the right of first refusal with respect to
approximately 250 acres of property adjacent to or adjoining the Premises.
Guarantor hereby agrees to execute and deliver to Secured Party any and all
instruments of assignment to effectuate the foregoing.
(c) Guarantor hereby agrees to execute and deliver to Secured Party
any and all UCC-1 Financing Statements and other documents and instruments
requested by Secured Party to perfect or keep perfected any security interest
created under this Security Agreement or in any other document or agreement made
in connection with the Loan, and any such additional security agreements,
financing statements, continuation statements or termination statements and
other security interests creating a lien upon the Guarantor Collateral.
Guarantor hereby appoints Secured Party as Guarantor's attorney-in-fact to
execute and file in Guarantor's name all documents and instruments which Secured
Party may deem necessary or appropriate to perfect and continue perfecting the
security interest in the Guarantor Collateral.
2. Representations and Warranties. Guarantor hereby represents and
warrants the following for the benefit of Secured Party with full knowledge that
the Secured Party will rely thereon in accepting the Guarantor Collateral
granted by this Security Agreement:
Document No. 304109
(a) Guarantor is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of West Virginia, and
has the power and authority to own and operate its properties and to carry on
its business where and as conducted and contemplated, and is in good standing in
every jurisdiction where the nature of its business requires such qualification;
(b) The making, execution, issuance and performance by Guarantor of
this Security Agreement, as well as any other document or instrument required to
implement the objectives hereof, have each been duly authorized by all necessary
partnership action and will not violate the provisions of any law or regulation
or the Partnership Agreement or other governing documents or agreements of
Guarantor and will not violate any agreement, trust or other indenture or
instrument to which Guarantor is a party, or by which Guarantor or any of its
property is bound, so that this Security Agreement, and each and all of the
documents required to be executed in connection herewith or therewith, when
executed, issued and delivered by Guarantor, will be the valid and binding
obligations of Guarantor, enforceable in accordance with their respective terms;
(c) Except for the lien and security interest granted hereby from
Guarantor to Secured Party and the existing recorded liens and security
interests of One Valley Bank, Inc., the Guarantor Collateral will be owned by
Guarantor free and clear of all liens, encumbrances, security interests or
rights of third parties and upon perfection of Secured Party's security interest
in the Guarantor Collateral, Secured Party will have a security interest in the
Guarantor Collateral superior in right of preference to all other Liens other
than Liens in favor of One Valley Bank, Inc.
(d) Guarantor's principal place of business is located at Charles
Town Racetrack, U.S. Route 340, Charles Town, West Virginia 25414, and all
tangible portions of the Guarantor Collateral will be located at Guarantor's
principal place of business. So long as any portion of the Indebtedness remains
outstanding and unpaid, Guarantor shall not change its principal place of
business, nor the locations of the tangible portions of Guarantor Collateral
without giving Secured Party at least ten (10) days prior written notice of such
change of address.
3. Covenants. So long as any portion of the Indebtedness
shall remain outstanding and unpaid, or Guarantor shall have any
obligations under the Guaranty, Guarantor shall:
(a) Pay and discharge all debts in the ordinary course of business
and otherwise conduct the business of Guarantor in accordance with sound
business judgment consistent with custom and usage in its business;
Document No. 304109
(b) Not: (i) sell or dispose of any portion of the
Guarantor Collateral other than in the ordinary course of business
for full and fair consideration; nor (ii) permit any portion of the
Guarantor Collateral to become encumbered or levied upon;
(c) Maintain the partnership existence of Guarantor and all
necessary foreign qualifications in good standing; continue to comply with all
applicable statutes, rules and regulations with respect to the conduct of
Guarantor's business to the extent that same are material to the financial
condition of Guarantor or the conduct of Guarantor's business; and maintain such
licenses and permits required for the conduct of Guarantor's business or in
connection with the business or Borrower;
(d) Maintain such personal liability, fire, casualty and property
insurance from such insurers in such amounts as Secured Party shall direct,
insuring the Guarantor Collateral and the business of Guarantor and to deliver
to Secured Party a certificate of insurance evidencing the maintenance of such
insurance providing that Secured Party shall have no less than thirty (30) days
prior written notice of any amendment, modification or termination of such
coverage. To the extent said insurance insures tangible portions of the
Guarantor Collateral, Secured Party shall be named a "loss payee" with respect
to such coverage;
(e) Promptly defend all actions, proceedings or claims which could
have a material adverse effect on Guarantor or Guarantor's business or the
Guarantor Collateral (or on Borrower, Borrower's business or the Collateral) and
promptly notify Secured Party of the institution of, or change in, any such
action, pro ceeding or claim if the same is in excess of $100,000 for any single
action, proceeding or claim, or $250,000 in the aggregate; and
(f) Permit access by Secured Party and its representa tives to the
books and records and properties of Guarantor from time to time during regular
business hours.
4. Events of Default. The following shall constitute an
Event of Default hereunder:
(a) Any Event of Default under or breach by Borrower or Guarantor of
any representation, warranty, covenant or other term of, the Loan Agreement, the
Note, the Guaranty, the Pledge, the Mortgage, the Security Agreement, or any
other Loan Document, or any document, agreement or instrument entered into or
delivered in connection with any of the foregoing;
(b) The dissolution, liquidation or sale of all or
substantially all of the assets of the Guarantor or Borrower, or
the sale or encumbrance of any of the capital stock of Borrower; or
Document No. 304109
(c) The occurrence of any substantial deterioration of
the Premises from its current condition.
5. Remedies.
(a) Upon any Event of Default hereunder and at the option of the
Secured Party, the obligations of Guarantor secured by this Agreement shall
become immediately due and payable in full without notice or demand and the
Secured Party shall have all the rights, remedies and privileges with respect to
repossession, retention and sale of the Guarantor Collateral and disposition of
the proceeds thereof as are accorded by the applicable sections of the Uniform
Commercial Code respecting "Default". In addition, and not by way of limitation,
the Secured Party shall be entitled to enter upon the premises of Guarantor and
to take peaceful posses sion of any or all of the Guarantor Collateral located
therein as well as peaceful possession of all of the books and records of
Guarantor.
(b) Upon any Event of Default and upon demand: (i) Guarantor shall
assemble the Guarantor Collateral and make it available to the Secured Party at
the place and at the time designated in the demand and shall furnish the Secured
Party with a list of the names and addresses of all account debtors; and (ii)
Secured Party may forthwith notify any and all account debtors of Guarantor of
the existence of Secured Party's security interest in Guarantor's accounts and
instruct any and all such account debtors to make payments with respect thereto
to Secured Party or its designee. In the event that Secured Party forecloses on
any tangible portion of the Guarantor Collateral, Secured Party may do so at
public or private sale and in all such events Guarantor agrees that ten days
prior notice to Guarantor shall constitute adequate notice thereof.
(c) Upon any Event of Default, the Secured Party's reasonable
attorneys' fees and the legal and other expenses incurred in connection with the
pursuing, searching for, receiving, taking, keeping, storing, advertising and
selling of the Guarantor Collateral, or any of it, shall be chargeable to
Guarantor and shall constitute a portion of the Guarantor Obligations and be
secured by the Guarantor Collateral.
(d) Subject to the terms of the Guaranty, Guarantor shall remain
liable for any deficiency resulting from a sale of the Guarantor Collateral and
shall pay any such deficiency forthwith on demand. Nothing herein shall be
constituted as requiring the Secured Party to enforce the within Security
Agreement or to impair the Secured Party's rights to collect the Indebtedness
without first foreclosing upon assets or enforcing the within Security
Agreement.
Document No. 304109
(e) If Guarantor defaults in the performance of any of the
provisions of this Agreement on its part to be performed, Secured Party may
perform same for Guarantor's account and any monies expended in so doing shall
be chargeable with interest (at 3% in excess of the Line Interest Rate) to
Guarantor and added to the Guarantor Obligations secured hereby.
6. Miscellaneous Provisions.
(a) This Security Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of West Virginia with respect to
contracts to be executed and performed in the State of West Virginia.
(b) This Security Agreement shall be binding upon the parties'
respective successors, administrators and assigns, provided, however, that
although Secured Party may assign its interest hereunder, Guarantor may not
assign any of its obligations hereunder.
(c) All notices required hereunder shall be given in writing and
shall be effective upon certified mailing of such notice, return receipt
requested, to the following addresses unless either party hereto shall have
given the other party hereto written notice of the change of such address in
accordance with the provision of this Section 6(c):
If to Secured Party:Peter M. Carlino, Chairman
c/o Penn National Gaming, Inc.
Wyomissing Professional Center
825 Berkshire Blvd., Suite 203
Wyomissing, PA 19610
Telecopier: 610-376-2842
If to Guarantor: Charles Town Racing Limited Partnership
Charles Town Race Track
U.S. Route 340
Charles Town, West Virginia 25414
Attention: D. Keith Wagner
Telecopier: 304-725-6979
Document No. 304109
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have executed this Agreement as of the day and year first written above.
CHARLES TOWN RACING LIMITED PARTNERSHIP
a West Virginia limited partnership
By: D.K.W., Inc., general partner and
attorney-in-fact for all general
partners
By: /s/ D. Keith Wagner
D. Keith Wagner, President
PNGI CHARLES TOWN GAMING LIMITED LIABILITY
COMPANY, by Penn National Gaming of West Virginia,
Inc., its Managing Member
By: /s/ William Bork 6/4/96
William Bork, President
Document No. 304109
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is made this 8th day
of May, 1996, by and between CHARLES TOWN RACING LIMITED PARTNERSHIP,a West
Virginia limited partnership ("Pledgor"), and PNGI CHARLES TOWN GAMING LIMITED
LIABILITY COMPANY, a West Virginia limited liability company ("Pledgee").
B A C K G R O U N D:
Pledgee is about to provide a line of credit to Charles Town Races,
Inc., a West Virginia corporation and wholly-owned subsidiary of Pledgor
("Borrower"), in the principal amount of up to One Million Two Hundred and Fifty
Thousand ($1,250,000) Dollars (the "Loan") pursuant to the provisions of that
certain Loan and Security Agreement between Borrower and Pledgee of even date
herewith (the "Loan Agreement"), and evidenced by Borrower's Promissory Note of
even date herewith (the "Note"). The obligations of Borrower under the Loan
Documents is secured by a lien on and security interest in All Assets of
Borrower and the Mortgage on Borrower's leasehold interest in the Premises (the
foregoing, collectively, the "Collateral").
Pledgee is unwilling to make the Loan unless Pledgor guarantees
payment of the Note and performance by Borrower of each and every term,
covenant, condition and agreement contained therein and in the Loan Agreement
and any other Loan Document and under any and all other agreements executed by
Borrower to or for the benefit of Pledgee in connection with the Loan on the
part of Borrower to be kept, observed or performed.
Pledgor desires to give such guaranty in order to induce Pledgee to
make the Loan, and has therefore entered into the Guaranty of even date
herewith. The obligations of Pledgor under the Guaranty are secured by: a lien
on and security interest in All Assets of Pledgor pursuant to the Security
Agreement, by all of the issued and outstanding capital stock of Borrower
pursuant to this Pledge Agreement, and by a lien on and security interest in the
Premises pursuant to the Mortgage, all as set forth in such documents and
agreements (the foregoing, the "Pledgor Collateral").
Each initially-capitalized term used herein shall have the meaning
ascribed to it in the Guaranty or in the Loan Agreement unless the context
clearly requires to the contrary.
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by
Document No. 304111
1
Pledgor, and intending to be legally bound hereby, Pledgor agrees as follows,
for the benefit of Pledgee:
1. Pledge. To secure the payment and performance, when due, of the
Obligations, Pledgor hereby pledges and assigns to Pledgee and grants Pledgee a
security interest in the stock, which stock is currently evidenced by
certificates, set forth on Schedule 1 attached hereto (which shares of stock of
Corporation are referred to as the "Pledged Shares" and which certificates are
referred to as the "Certificates"), together with all rights of Pledgor in and
to any dividends or other distributions made on or with respect to the Pledged
Shares, or in exchange therefore, whether as dividends in cash or property,
stock dividends, stock splits, as a result of any recapitalization,
reorganization, merger, exchange of shares, or otherwise. All cash dividends
paid with respect to the Pledged Shares shall be applied first to the payment of
the Note, and then to the payment of the balance of the Obligations, as
determined by Pledgee.
2. Delivery of Pledged Shares. Pledgor has delivered, and by these
presents does hereby deliver to Pledgee all of the Certificates, together with
stock powers for each Certificate duly executed in blank for transfer by the
registered owner of the Pledged Shares evidenced by each Certificate. Pledgee
shall retain such Certificates and stock powers in its possession in pledge
subject to the terms of this Agreement.
3. Additional Obligations. In addition to the Obligations, the
security interests and pledges created hereby shall secure reimbursement of
Pledgee for (i) all costs and expenses incurred in collection of all amounts due
to Pledgee; (ii) all future advances made by Pledgee for taxes, levies, or
maintenance of the Pledged Shares; (iii) all other expenses incurred by Pledgee
for the account of Pledgor; (iv) performance by Pledgor of the agreements set
forth in this Agreement or contemplated by this Agreement (including pursuant to
any of the other Loan Documents); and (v) interest on all of the foregoing at
the rate set forth in the Note.
4. Representations. The Pledgor warrants and represents; that it
owns the Pledged Shares; that there are no restrictions upon the transfer of the
Pledged Shares; that the Pledgor has the right to transfer the Pledged Shares to
Pledgee as provided for herein free of any liens, encumbrances or restrictions
and without obtaining the consent of any person, corporation, or other legal
entity; and that the Pledged Shares represent all of the issued and outstanding
capital stock of Borrower.
5. Capital Structure. In the event that during the term of this
Agreement any stock dividend, reclassification, readjustment, or other change is
declared or made in the capital structure of Borrower, Pledgor shall,
immediately after receipt thereof, deliver to Pledgee, all new, substituted or
additional shares, or other securities of any kind, issued by reason of any such
change, to be held by Pledgee under the terms of this Agreement and in the same
manner as the Pledged Shares originally pledged hereunder. Pledgee shall have
the right at any time, whether before or after an Event of Default, as defined
herein, to transfer the Pledged Shares to its name or to the name of its
nominee.
6. Pledgor's Covenants. Until the termination of
this Agreement and the pledge created hereby: Pledgor shall not,
and shall not permit Borrower, without the prior written consent
of Pledgee, to undertake any of the following:
(a) The sale, transfer, pledge, hypothecation or other
encumbrance or the execution of an agreement contemplating any of the foregoing
for all or any part of the Pledged Shares;
(b) The merger or consolidation or execution of an agreement
for the merger or consolidation of Borrower or Pledgor into or with any other
firm or corporation or the total or partial liquidation or dissolution of
Borrower or Pledgor or the adopting of a plan or agreement for the total or
partial liquidation or dissolution of Borrower or Pledgor;
(c) The issuance or agreement to issue any shares of capital
stock of Borrower or partnership interests of Pledgor or any options, warrants,
or rights to purchase or convertible into shares of capital stock of Borrower or
partnership interests of Pledgor;
(d) The filing by Borrower or Pledgor of a petition under any
federal or state law for the relief of debtors, the making of an assignment by
Borrower or Pledgor for the benefit of its creditors, or the appointment of a
receiver or trustee for Borrower or Pledgor;
(e) The declaration or payment of any dividends or other
distributions, whether in cash, property, or shares of capital stock of Borrower
or in any manner with respect to the Pledged Shares.
Document No. 304111
2
7. Further Assurances. Pledgor will, upon Pledgee's request, and in
confirmation of the security interest hereby created, execute and deliver to
Pledgee such further acts, deeds, transfers, assurances, financing and
continuation statements, and agreements, and take such other action, as Pledgee
may reasonably request.
8. Events of Default. The following shall constitute
an Event of Default hereunder:
(a) Any Event of Default under or breach by Borrower or
Guarantor of any representation, warranty, covenant or other term of, the Loan
Agreement, the Note, the Guaranty, this Pledge, the Mortgage, the Security
Agreement, or any other Loan Document, or any document or instrument entered
into or delivered in connection with any of the foregoing; or
(b) The dissolution, liquidation or sale of all or
substantially all of the assets of the Pledgor or Borrower, or the sale or
encumbrance of any of the capital stock of Borrower.
9. Remedies. In the event of an Event of Default,
Pledgee shall have and may exercise all of the rights and
remedies available to a secured party under the Uniform
Commercial Code as in effect in the State of West Virginia and
all other applicable laws.
If, in the enforcement of the foregoing rights and remedies,
Pledgee shall propose to dispose of all or any portion of the Pledged Shares,
Pledgor agrees that ten (10) days prior written notice, sent to Pledgor shall be
adequate and reasonable notice.
Pledgor acknowledges and agrees that Pledgee may be unable to
effect a public sale of the Pledged Shares, or any part thereof, by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, or
state securities laws and that private sales made at prices and other terms less
favorable than those which might be obtainable at public sales shall not for
that reason be deemed to have not been made in a commercially reasonable manner
and that Pledgee has no obligation to delay any such private sale to permit the
registration of any of the Pledged Shares under said Act or other laws.
10. Indemnification. Pledgor shall indemnify, defend and hold
harmless Pledgee and its officers, directors, members and agents from and
against any loss, liability, damage, or expense which Pledgee or any such party
may incur without willful default on its part arising out of or in connection
with this Agreement or the taking, holding, and/or disposing of the Pledged
Shares, including fees, costs and expenses of defending itself against any
claims of liability hereunder, provided however, the obligations of Pledgor
under the foregoing indemnification shall be limited to the assets of Pledgor.
11. Rights of Pledgor in Pledged Shares. For so long as there is no
Event of Default, Pledgor shall retain and may exercise all rights of or
incident to the ownership of the Pledged Shares, including voting rights, which
are not incon sistent with the terms of this Agreement; provided that Pledgor
shall not vote the Pledged Shares in any manner contrary to the terms or intent
hereof.
12. Termination. This Agreement and the security
interest and pledge created hereby shall terminate on the payment
and performance in full by Borrower of the Indebtedness and the
satisfaction in full by Pledgor of all the Obligations. Upon
termination, Pledgee shall deliver to Pledgor all the
Certificates, with all stock powers therefor.
13. Waivers. Pledgee shall at all times have the right to enforce
the provisions of this Agreement in strict accordance with the terms hereof,
notwithstanding any conduct or custom to the contrary. The failure of Pledgee at
any time to enforce its rights hereunder shall not be construed as having
created a custom contrary to the provisions of this Agreement, as having
modified in any manner the terms hereof, or as preventing Pledgee from
thereafter enforcing strict compliance. All rights and remedies of Pledgee are
cumulative and concurrent and the exercise of one right or remedy shall not be
deemed a waiver or release of any other right or remedy.
14. Miscellaneous.
(a) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Pledgor:Charles Town Racing Limited
Partnership
Charles Town Racetrack
U.S. Route 340
Charles Town, West Virginia 25414
Attention: D. Keith Wagner
Telecopier: 304-725-6979
If to PledgePeter M. Carlino, Chairman
c/o Penn National Gaming, Inc.
Wyomissing Professional Center
825 Berkshire Blvd., Suite 203
Wyomissing, PA 19610
Telecopier: 610-376-2842
Document No. 304111
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Any party hereto may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, tele copy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party hereto
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties hereto
notice in the manner herein set forth.
(b) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and may
not be changed, nor any rights or remedies waived, except in writing, signed by
the party sought to be bound by such change or waiver.
(c) Headings. The headings of sections and paragraphs of this
Agreement are for convenience of reference only, and in case of any conflict the
text of this Agreement, rather than such headings, shall control.
(d) Governing Law. This Agreement shall be
governed by and construed in accordance with the internal laws
(and not the law of conflicts) of the State of West Virginia.
(e) Counterparts. This Agreement may be executed in any number
of copies, and by the different parties hereto on the same or separate
counterparts, each of which shall be deemed to be an original instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement, under seal,
the day and year first above written.
CHARLES TOWN RACING LIMITED PARTNERSHIP
By: D.K.W., Inc., general partner and
attorney-in-fact for all general partners
of the Partnership
By: /s/ D. Keith Wagner (SEAL)
D. Keith Wagner, President
PNGI CHARLES TOWN GAMING LIMITED LIABILITIES COMPANY, by
Penn National Gaming of West Virginia, Inc., its
Managing Member
By: /s/ William Bork 6/4/96
William Bork, President
Document No. 304111
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Schedule 1
Name of Issuer
(Corporation") No. of Shares Certificate No.
Charles Town
Races, Inc. 2,000 1
Document No. 304111
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