SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-24206
Penn National Gaming, Inc.
(Exact Name of Registrant
as Specified in its Charter)
Pennsylvania 23-2234473
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Penn National Gaming, Inc.
825 Berkshire Blvd.
Wyomissing, PA 19610
(Address of Principal Executive Offices)
610-373-2400
(Registrant's Telephone Number, Including Area Code:)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
(1)
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Title Outstanding as of August 12, 1997
Common stock par value .01 per share 15,126,070
---------------------
This Report contains forward-looking statements that inherently involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those discussed in this Quarterly Report on Form 10-Q and
those discussed in the Company's Annual Report on Form 10-K. References to "Penn
National Gaming" or the "Company" include Penn National Gaming, Inc. and its
subsidiaries.
(2)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
INDEX
PART I-FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - 4-5
June 30, 1997 (unaudited) and December 31, 1996
Consolidated Statements of Income - 6
Six Months Ended June 30, 1997 and 1996 (unaudited)
Consolidated Statements of Income - 7
Three Months Ended June 30, 1997 and 1996 (unaudited)
Consolidated Statement of Shareholders' Equity - 8
Six Months Ended June 30, 1997 (unaudited)
Consolidated Statement of Cash Flow - 9-10
Six Months Ended June 30, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements 11-14
Item 2. Management's Discussion and Analysis of Financial 15-18
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8 - K 19
- -------------------------------------------
(3)
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
PENN NATIONAL GAMING, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, 1997 December 31, 1996
(Unaudited)
Assets
Current Assets
Cash $ 4,827 $ 5,634
Accounts receivable 3,137 4,293
Prepaid expenses and other current assets 3,838 1,552
Deferred income taxes 58 90
--------- -------
Total current assets 11,860 11,569
-------- ------
Property, plant and equipment, at cost
Land and improvements 18,120 15,728
Buildings and improvements 46,941 30,484
Furniture, fixtures and equipment 12,430 8,937
Transportation equipment 477 366
Leasehold improvements 6,703 6,680
Leased equipment under capitalized lease 824 1,626
Construction in progress 12,702 2,926
-------- -------
98,197 66,747
Less accumulated depreciation and amortization 9,313 8,029
------- -------
Net property and equipment 88,884 58,718
--------- -------
Other assets
Excess of cost over fair market value of assets
acquired (Net of accumulated amortization of
$1,111 and $811, respectively) 23,525 21,885
Prepaid acquisition costs - 1,764
Deferred financing costs 1,860 2,416
Miscellaneous 874 371
-------- ------
Total other assets 26,259 26,436
--------- -------
$ 127,003 $ 96,723
======== =======
See accompanying notes to consolidated financial statements
(4)
PENN NATIONAL GAMING, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, 1997
(Unaudited) December 31, 1996
Liabilities and Shareholders'
Equity
Current Liabilities
Current maturities of long-
term debt and Capital lease
obligations $ 3,259 $ 1,563
Accounts payable 9,546 5,066
Purses due horseman 1,879 1,421
Uncashed pari-mutuel tickets 749 1,336
Accrued expenses 1,963 1,880
Customer deposits 681 420
Taxes, other than income taxes 349 392
Income Taxes 1,178 -
------- -------
Total current liabilities 19,604 12,078
------- -------
Long-term liabilities
Long-term debt and capital
lease obligations, Net of
current maturities 41,622 45,954
Deferred income taxes 10,926 10,810
------- -------
Total long-term liabilities 52,548 56,764
------- -------
Commitments and contingencies
Shareholders' equity
Preferred stock, $.01 par value,
1,000,000 shares authorized:
none issued - -
Common stock, $.01 par value,
20,000,000 shares authorized:
15,125.970 and 13,355,290
issued and outstanding 151 134
Additional paid in capital 38,009 14,299
Retained earnings 16,763 13,448
Treasury Stock, 4,320 shares at cost (72) -
------- -------
Total Shareholders' equity 54,851 27,881
------- -------
$127,003 $96,723
======== =======
See accompanying notes to consolidated financial statements
(5)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Six Months Ended
June 30,
1997 1996
Revenues
Pari-mutuel revenues
Live races $11,397 $ 9,672
Import simulcasting 31,338 15,509
Export simulcasting 3,395 1,776
Admissions, programs and other racing revenues 2,824 2,048
Concession revenues 3,450 1,601
------- -------
Total revenues 52,404 30,606
------- -------
Operating expenses
Purses, stakes and trophies 10,318 6,448
Direct salaries, payroll taxes and
employee benefits 7,420 3,967
Simulcast expenses 5,881 4,680
Pari-mutuel taxes 4,419 2,630
Other direct meeting expenses 8,499 4,478
Off-track wagering concessions expenses 2,640 1,045
Other operating expenses 5,435 2,485
------- -------
Total operating expenses 44,612 25,733
------ -------
Income from operations 7,792 4,873
------- -------
Other income (expenses)
Interest (expense) (1,675) (38)
Interest income 158 153
Other (4) -
------- -------
Total other income (expenses) (1,521) 115
------- -------
Income before income taxes 6,271 4,988
Taxes on income 2,573 2,024
------- -------
Income before extraordinary item 3,698 2,964
------- -------
Extraordinary item
Loss on early extinguishment
of debt, net of income taxes of $264 383 -
------- -------
Net income $ 3,315 $ 2,964
======= =======
Earnings per share before extraordinary item $ 0.24 $ 0.22
------- -------
Earnings per share $ 0.22 $ 0.22
------- -------
Weighted average common shares outstanding 15,319 13,596
======= =======
See accompanying notes to consolidated financial statements
(6)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30,
1997 1996
Revenues
Pari-mutuel revenues
Live races $ 7,028 $ 5,191
Import simulcasting 16,541 7,915
Export simulcasting 2,272 926
Admissions, programs and other racing revenues 1,566 1,171
Concession revenues 2,177 840
------- -------
Total revenues 29,584 16,043
------- -------
Operating expenses
Purses, stakes and trophies 6,116 3,522
Direct salaries, payroll taxes and
employee benefits 4,174 2,058
Simulcast expenses 3,045 2,391
Pari-mutuel expenses 2,462 1,363
Other direct meeting expenses 5,121 2,252
Off-track wagering concessions expenses 1,674 536
Other operating expenses 2,876 1,087
------- -------
Total operating expenses 25,468 13,209
------- -------
Income from operations 4,116 2,834
------- -------
Other income (expenses)
Interest (expenses) (775) (24)
Interest income 72 85
Other (4) -
------- ------
Total other income (expenses) (707) 61
------- -------
Income before income taxes 3,409 2,895
Taxes on income 1,395 1,170
------- -------
Net income $ 2,014 $ 1,725
======= =======
Earnings per share $ 0.13 $ 0.12
------- -------
Weighted average common shares outstanding 15,717 13,876
======= =======
See accompanying notes to consolidated financial statements
(7)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)
Common Stock Treasury Stock
Additional
Paid-In
Shares Amounts Shares Amounts Capital Earnings Total
Balance, at
January 1,1997 13,355,290 $ 134 - $ - $ 14,299 $ 13,448 $ 27,881
Issuance of common stock 1,770,680 17 23,137 23,154
Purchase of Treasury Stock
at cost 4,320 (72) (72)
Tax benefit related to stock
options exercised 573 573
Net income for the six
months ended
June 30, 1997 3,315 3,315
Balance, at
June 30, 1997 15,125,970 $ 151 4,320 $ (72) $ 38,009 $ 16,763 $ 54,851
========== ======= ===== ====== ======== ======== ========
See accompanying notes to consolidated financial statements
(8)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities
Net income $ 3,315 $ 2,964
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,660 592
Extraordinary item, loss on early extinguishment
of debt, before income tax benefit 647 -
Deferred income taxes 148 102
Decrease (Increase) in
Accounts receivable 1,156 (1,174)
Prepaid expenses and other current assets (2,286) (704)
Miscellaneous other assets (503) (252)
Increase (decrease) in
Accounts payable 4,480 1,126
Purses due horsemen 458 128
Uncashed pari-mutuel tickets (587) (286)
Accrued expenses 83 8
Customer deposits 261 210
Taxes other than income taxes (43) (54)
Income Taxes 1,178 (265)
-------- -------
Net cash provided by operating activities 9,967 2,395
-------- -------
Cash flows from investing activities
Expenditures for property and equipment (15,450) (2,044)
Acquisition of business,
(Primarily property and equipment) (16,000) -
Increase in prepaid acquisitions cost (176) -
--------- -------
Net cash (used in) investing activities (31,626) (2,044)
--------- -------
(9)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
(Continued)
Six Months Ended
June 30,
1997 1996
Cash flows from financing activities
Proceeds of sale common stock 23,082 1,486
Tax benefit related to stock options exercised 573 -
Proceeds of long term debt 16,500 -
Principal payments on long-term debt and (19,136) (41)
capital lease obligations
Increase in unamortized financing cost (167) -
-------- --------
Net cash provided by financing activities 20,852 1,445
-------- -------
Net increase (decrease) in cash (807) 1,796
Cash, at beginning of period 5,634 7,514
------- -------
Cash, at end of period $ 4,827 $ 9,310
======== ========
See accompanying notes to consolidated financial statements
(10)
PENN NATIONAL GAMING , INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Financial Statement Presentation
The accompanying consolidated financial statements are unaudited
and include the accounts of Penn National Gaming, Inc., ("Penn") and its wholly
and majority owned subsidiaries, (collectively, the "Company"). All significant
intercompany transactions and balances have been eliminated.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) have been made which are necessary to present fairly
the financial position of the Company as of June 30, 1997 and the results of its
operations for the six month periods ended June 30, 1997 and 1996. The results
of operations experienced for the six month period ending June 30, 1997 are not
necessarily indicative of the results to be experienced for the fiscal year
ending December 31, 1997.
The financial statements and related notes have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. The
accompanying notes should therefore be read in conjunction with the Company's
December 31, 1996 annual financial statements.
2. Wagering Information (in thousands):
Three months ended June 30,
1997 1996
---- ----
Penn National Pocono Downs Charles Town Total Penn National
Pari-mutuel wagering in-state on
company live races $ 25,084 $ 9,243 $ 4,640 $ 38,967 $ 24,798
------- ------ --------- -------- --------
Pari-mutuel wagering on simulcasting:
Import simulcasting from
other racetracks 42,603 30,258 6,645 79,506 40,620
Export simulcasting to out of Pennsylvania
wagering facilities 38,930 8,827 - 47,757 31,450
------- ------- ---------- -------- --------
81,533 39,085 6,645 127,263 72,070
------- ------- --------- -------- --------
Total pari-mutuel wagering $106,617 $48,328 $ 11,285 $166,230 $ 96,868
======== ======= ========= ======== ========
(11)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. Wagering Information (in thousands)
Three months ended June 30,
1997 1996
---- ----
Penn National Pocono Downs Charles Town Total Penn National
Pari-mutuel wagering in-state
on company live races $ 47,574 $ 9,243 $ 4,640 $ 61,457 $ 46,105
------- ------ --------- -------- --------
Pari-mutuel wagering on simulcasting:
Import simulcasting from
other racetracks 85,843 59,510 6,645 151,998 81,451
Export simulcasting to out of Pennsylvania
wagering facilities 76,361 8,827 - 85,188 59,788
-------- ------- ---------- -------- --------
162,204 68,337 6,645 237,186 141,239
-------- ------- --------- -------- --------
Total pari-mutuel wagering $209,778 $77,580 $ 11,285 $298,643 $187,344
======== ======= ========= ======== ========
3. Commitments
At June 30, 1997, the Company was contingently obligated under
letters of credit with face amounts aggregating $1,803,700. The $1,803,700
consisted of $1,703,700 relating to the horsemen's account balances and $100,000
for Pennsylvania pari-mutuel taxes.
On June 20, 1997, the Company acquired options to purchase
approximately 100 acres of land in Memphis, Tennessee for an aggregate purchase
price of $2.7 million. The Company paid $11,000 to acquire the options and has
the right to extend the options from month to month until June 20, 1998 upon the
payment of $11,000 per month. The Company is preparing an application to the
Tennessee State Racing Commission for the proposed development of a harness race
track and off-track wagering facility at the site.
On June 25, 1997, the Company entered into a five-year technology
agreement with GTECH Corporation for the installation and operation of the VLT
system at the Charles Town facility. The agreement provides for annual payments
equal to the facility's net win multiplied by a percentage which decreases as
the net win per day per machine at the facility increases.
(12)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. Supplemental Disclosures of Cash Flow Information
Cash paid during the six months ended June 30, 1997 and 1996 for
interest was $2,051,000 and $30,000, respectively.
Cash paid during the six months ended June 30, 1997 and 1996 for
income taxes was $629,000 and $1,616,000, respectively.
For the six months ended June 30, 1997, the Company reclassified
approximately $1.9 million of prepaid acquisition costs to excess of cost over
fair market value of net assets acquired.
5. Common Stock
In February 1997, the Company completed a secondary public
offering of 1,725,000 shares of its common stock. The net proceeds of $23
million were used to repay $19 million of term loans outstanding under the $75
million credit facility and to finance a portion of the cost of the
refurbishment of the Charles Town Races facility. In connection with such debt
repayment, the Company incurred an extraordinary loss of $383,000 after taxes,
consisting primarily of the write-off of deferred finance costs.
6. Acquisitions
On January 15, 1997, an 89% - owned Company subsidiary acquired
substantially all of the assets of Charles Town Races for approximately $16
million plus acquisition-related fees and expenses of approximately $1.9
million.
On March 26, 1997, the Company entered into an agreement to
purchase property for its proposed Carbondale, Pennsylvania OTW facility. The
agreement provides for a purchase price of $200,000 and is subject to numerous
contingencies, including approval by the Pennsylvania State Harness Racing
Commission. On June 5, 1997, the Company's application was approved by the
Racing Commission, the Company expects to have the facility constructed and
operational in the fourth quarter of 1997.
(13)
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. Subsequent Items
On July 8, 1997, the Company entered into a lease agreement for
the Hazleton OTW facility. The lease is for 13,000 square feet at the Laurel
Mall in Hazleton, Pennsylvania. The initial term of the lease is for ten years
with two additional five-year renewal options available. The agreement is
subject to numerous contingencies, including approval by the Pennsylvania State
Harness Racing Commission. On July 10, 1997, the Company submitted its
application for such approval. If approved by the Racing Commission, the Company
expects to have the facility constructed and operational in the fourth quarter
of 1997.
(14)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three months ended June 30, 1997 compared to three months ended June 30, 1996
Total revenue increased by approximately $13.5 million or 84.4%
from $16.1 million to $29.6 million for the three months ended June 30, 1997 as
compared to the three months ended June 30, 1996. Pocono Downs, which was
acquired in the fourth quarter of 1996, accounted for $10.1 million of the
increase. Charles Town Races, which was purchased in January of 1997 and began
racing operations on April 30, 1997, accounted for $2.9 million of the increase.
In addition, revenues at Penn National Race Course and its OTW facilities
increased by $547,000. This increase was primarily due to the receipt of $2.5
million in revenues at the Company's new OTW facilities in Lancaster and
Williamsport, offset by a decrease of $2.0 million at the thoroughbred track in
Grantville and the other OTW facilities. Management believes that the decrease
in revenues at the Penn National OTW facilities was primarily due to the opening
of a competitor's OTW facility and the opening of the Company's Lancaster OTW
facility.
Total operating expenses increased by approximately $12.3 million
or 93.2% from $13.2 million to $25.5 million for the three months ended June 30,
1997 as compared to the three months ended June 30, 1996. Pocono Downs and
Charles Town Races accounted for $8.3 million and $3.0 million of this increase,
respectively. Penn National Race Course and its OTW facility operations
accounted for $1.0 million of the total operating expense increase. This
increase was primarily due to $1.9 million in operating expenses for the
Company's new OTW facilities in Lancaster and Williamsport offset by a decrease
in purses, pari-mutuel taxes, simulcast expenses, and direct salaries, payroll
taxes, and employees benefits at the thoroughbred track in Grantville and the
other OTW facilities due to decreased revenues.
Income from operations increased by approximately $1.3 million or
45.2% from $2.8 million to $4.1 million due to the factors described above.
Other expenses for the three months ended June 30, 1997 consisted of
approximately $775,000 in interest expense (primarily due to the financing of
the Pocono Downs acquisition) compared to $24,000 in interest expense for the
three months ended June 30, 1996.
Income tax expense increased from $1.2 million to $1.4 million due
to the increase in income for the period.
Net income increased by approximately $300,000 or 16.7% from $1.7
million to $2.0 million for the three months ended June 30, 1997 compared to the
three months ended June 30, 1996 based on the factors described above.
(15)
Six months ended June 30, 1997 compared to six months ended June 30, 1996
Total revenue increased by approximately $21.8 million or 71.2%
from $30.6 million to $52.4 million for the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996. Pocono Downs, which was acquired
in the fourth quarter of 1996, accounted for $17.3 million of the increase.
Charles Town Races, which was purchased in January of 1997 and began racing
operations on April 30, 1997, accounted for $2.9 million of the increase. In
addition, revenues at Penn National Race Course and its OTW facilties increased
by $1.6 million. This increase was primarily due to the receipt of $4.7 million
in revenues at the Company's new OTW facilities in Lancaster and Williamsport,
offset by a decrease of $3.1 million at the thoroughbred track in Grantville and
the other OTW facilities. Management believes that the decrease at the Penn
National OTW facilities was primarily due to the opening of a competitor's OTW
facility and the opening of the Company's Lancaster OTW facility.
Total operating expenses increased by approximately $18.9 million
or 73.4% from $25.7 million to $44.6 million for the six months ended June 30,
1997 as compared to the six months ended June 30, 1996. Pocono Downs and Charles
Town Races accounted for $13.8 million and $3.0 million of this increase
respectively. Penn National Race Course and its OTW facility operations
accounted for $2.1 million of the total operating expense increase. This
increase was primarily due to $3.4 million in operating expenses for the
Company's new OTW facilities in Lancaster and Williamsport offset by a decrease
in purses, pari-mutuel taxes, simulcast expenses, and direct salaries, payroll
taxes, and employees benefits at the thoroughbred track in Grantville and the
other OTW facilities due to decreased revenues.
Income from operations increased by approximately $2.9 million or
59.9% from $4.9 million to $7.8 million due to the factors described above.
Other expenses for the six months ended June 30, 1997 consisted of approximately
$1.7 million in interest expense (primarily due to the financing of the Pocono
Downs acquisition) compared to $38,000 in interest expense for the six months
ended June 30, 1996.
Income tax expense increased from $2.0 million to $2.6 million due
to the increase in income for the period.
The extraordinary item consisted of a loss on the early
extinguishment of debt in the amount of $383,000 net of income taxes. This
resulted from the Company's receiving approximately $23 million as proceeds from
the February 1997 equity offering and using approximately $19 million to reduce
long-term debt.
(16)
Net income increased by approximately $351,000 or 11.8% from $3.0
million to $3.3 million for the six months ended June 30, 1997 compared to the
six months ended June 30, 1996 based on the factors described above.
Liquidity and Capital Resources
Historically, the Company's primary sources of liquidity and
capital resources have been cash flow from operations and borrowings from banks.
During the six months ended June 30, 1997, the Company's cash position decreased
by approximately $800,000 due primarily to the renovation project at Charles
Town Races.
Net cash provided from operating activities totaled approximately
$10.0 million for the six months ended June 30, 1997. Net income and non-cash
expenses provided $5.6 million and $1.3 million came from the repayment of the
Charles Town Races loan receivable in January 1997. The balance of $3.1 million
was generated by other changes in working capital.
Cash flows used in investing activities totaled approximately
$31.6 million. Acquisition costs for the purchase of Charles Town Races totaled
$16.0 million and construction in progress and equipment for the Charles Town
facility totaled approximately $13.0 million. Capital expenditures for the
completion of the Williamsport OTW facility was $700,000. The balance of $1.9
million represents other necessary ongoing capital expenditures.
Cash flows from financing activities totaled approximately $20.9
million of which was generated from the secondary equity offering in February
1997 and the exercise of options that resulted in the issuance of 1,756 shares
of common stock. The Company also received $16.5 million in proceeds from
long-term debt to use as payment for the Charles Town acquisition on January 15,
1997. The Company used $19.0 million of the proceeds from the offering to repay
a portion of its bank debt. The remaining amount of the proceeds of
approximately $4.0 million was used for the refurbishment of the Charles Town
facility.
During the balance of 1997, the Company anticipates capital
expenditures of approximately $4.0 million, exclusive of the cost of
refurbishing the Charles Town Facility (described below), to construct two
additional OTW facilities and approximately $500,000 for other capital
expenditures and improvements to existing facilities for Penn National Race
Course and Pocono Downs. Under the Company Credit Facility, the Company is
permitted to make capital expenditures (not including the refurbishment of the
Charles Town Facility or the cost of gaming machines to be installed there) of
$12.0 million in 1997, $4.0 million in 1998 and $2.0 million in 1999 and in each
year thereafter. The Company anticipates expending approximately $18.5 million
on the refurbishment of the Charles Town Facility (excluding the cost of gaming
machines), of
(17)
which $13.0 million had already been expended through June 30, 1997. On July 15,
1997, the Company borrowed an additional $3.5 million under the Company Credit
Facility for Charles Town refurbishment costs.
The Company currently estimates that the net proceeds of the
equity offering, together with the cash generated from operations and borrowings
under its Credit Facility, will be sufficient to finance its current operations
and planned capital expenditure requirements. There can be no assurance,
however, that the Company will not be required to seek capital, in addition to
that available from the foregoing sources. The Company may, from time to time,
seek additional funding through public or private financing, including equity
financing. There can be no assurance that adequate funding will be available as
needed or, if available, on terms acceptable to the Company. If additional funds
are raised by issuing equity securities, existing shareholders may experience
dilution.
(18)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.62. Agreement dated June 25, 1997, between PNGI Charles Town
Gaming Limited Liability Company and GTECH Corporation.
10.63. Purchase Option dated June 20, 1997 between the Company and
Alan J. Aste.
10.64. Purchase Option dated June 20, 1997 between the Company and
Joyce M. Peck.
10.65. Purchase Option dated June 20 1997 between the Company and
Roosevelt Boyland Devisees.
(b) Reports on Form 8-K
None
(19)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PENN NATIONAL GAMING, INC.
By:/s/ Robert S. Ippolito
Date August 12, 1997 Robert S. Ippolito
Chief Financial Officer
Secretary/Treasurer
(20)
EXHIBIT INDEX
Exhibit Nos. Description of Exhibits Page No.
10.62 Agreement dated June 25, 1997, betweenPNGI 22
Charles Town Gaming Limited Liability Company
and GTECH Corporation.
10.63 Purchase Option dated June 20 1997 between the 42
Company and Roosevelt Boyland Devisees.
10.64 Purchase Option dated June 20, 1997 between the 46
Company and Joyce M. Peck.
10.65 Purchase Option dated June 20, 1997 between the 51
Company and Alan J. Aste.
(21)
AGREEMENT
THIS AGREEMENT dated as of this 25th day of June, 1997, is by and between
GTECH CORPORATION ("GTECH"), a Delaware corporation with its corporate
headquarters at 55 Technology Way, West Greenwich, Rhode Island 02817, and PNGI
Charles Town Gaming, LLC, ("PNGI"), a West Virginia Limited Liability Company
with a place of business at 825 Berkshire Boulevard, Wyomissing, Pennsylvania
19610 ("PNGI").
W I T N E S S E T H:
WHEREAS, PNGI desires to acquire a video lottery system to be operated at
the Charles Town Racetrack in Charles Town, West Virginia; and
WHEREAS, GTECH is experienced in the design and operation of video
lottery systems and desires to provide such a system to PNGI; and
WHEREAS, GTECH and PNGI desire to set forth in writing the terms of their
agreements with respect to such a system.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants contained herein, the parties hereto, intending to be legally
bound, agree:
1. Definitions.
1.1 "Aggregate Amortization" means, as of any given day, the sum
of Amortization for all items of equipment comprising the VLS System through
that day.
1.2 "Aggregate Equipment Value" means, as of any given day, the
sum of the Equipment Values for all items of equipment comprising the VLS System
as of that day.
1.3 "Amortization" means, with respect to an item of equipment
comprising the VLS System as of any given date, the aggregate sum of all
principal payments that would have been paid from the date that item of
equipment was placed in service through that given date, on the theoretical
assumption that the Equipment Value of such item of equipment had been financed
over sixty consecutive monthly level payments, the first of which is due one
month after the date such item of equipment is placed in service (x) at a five
percent per annum borrowing rate of interest if that item of equipment was
placed in service during months one through twenty-four, or (y) an eight percent
per annum borrowing rate of interest if that item of equipment was placed in
service at any time after the twenty-fourth month following the Start-Up Date.
1.4 "Central Site" shall mean the site(s) where the VLS System
and its component parts shall be located which shall be specified by PNGI,
subject to the requirements of the West Virginia Lottery Commission, and the
approval of GTECH, which approval shall not be unreasonably withheld or delayed.
1.5 "Central Computer System Hardware" means the hardware having
the specifications set forth in Attachment A.
1.6 "Communications Network Equipment" means the equipment
having the specifications
(22)
set forth in Attachment B.
1.7 "Confidential Information" shall have the meaning given that
term in subsection 18.2.
1.8 "Equipment Value" means, with respect to an item of equipment
comprising the VLS System, its value calculated as follows:
A. If such item of equipment was placed in service
during months one through twelve following the Start-Up Date, the actual cost
of that equipment to GTECH;
B. If such item of equipment was placed in service
during months thirteen through twenty-four following the Start-Up Date, the
actual cost of that equipment to GTECH, plus a twenty percent mark up; and
C. If such item of equipment was placed in service
during months twenty-five through sixty following the Start-Up Date, the actual
cost of that equipment to GTECH, plus a twenty percent mark up plus one percent
for each month, or portion thereof, after the twenty-fourth month through
the date it was placed in service.
1.9 "GTECH Services" means the following tasks and
responsibilities, all of which shall conform to reasonable standards prevailing
in the industry:
A. Acquiring, installing and making operational the
technical infrastructure of the VLS System;
B. Acquiring, installing and making operational the
Communications Network for the VLS System;
C. Acquiring, installing and making operational the
Video Lottery Terminals and other third party Software and licenses from
vendors designated by PNGI and agreed to by GTECH which consent shall not
be unreasonably withheld or delayed;
D. Installing and making operational the VLS System.
E. Providing or causing to be provided the Maintenance
Services for the VLS System following installation;
F. Providing or causing to be provided the Marketing
Services;
G. Expanding the VLS System to include additional Video
Lottery Terminals ("VLT's") within thirty (30) days following receipt of such
additional VLT's and GLI approved software provided that approval by the
West Virginia Lottery Commission and any other required governmental
approvals shall have been obtained; and
H. Providing post-installation supplemental programming
and modifications to the Software as may be necessary to fine tune the VLS
System and provide properly formatted accounting data, player tracking data
and all reports and reporting requirements of the West Virginia Lottery
Commission.
(23)
1.10 "Maintenance Services" means the maintenance services for
the VLS System described on Attachment F.
1.11 "Marketing Services" means the provision of three
ambassadors, each for a period of twenty-four hours for each week during the
term of this Agreement who shall provide customer assistance and orientation
subject to the management, direction and control of PNGI.
1.12 "Net Terminal Income" or "Net Win" means the total of all
cash inserted into or game credits played on all Video Lottery Terminals and
Slot Machines, if any, minus the total value of all prizes paid in cash, by game
credits or otherwise.
1.13 "Net Unamortized Residual Value" means, as of any given day,
Aggregate Equipment Value less Aggregate Amortization as of that day.
1.14 "Player Tracking System" means the software and hardware
that will enable PNGI to operate and maintain a customer data base.
1.15 "Progressive Jackpots" means jackpots offered by a Video
Lottery Terminal and/or Slot Machine which, along with other Video Lottery
Terminals and/or Slot Machines, is linked to a central computer system under an
arrangement in which each Video Lottery Terminal and/or Slot Machine so linked
contributes a percentage of play to such jackpots.
1.16 "Slot Machine" means any gaming device that pays winners in
coin or token rather than issuing credit receipts or scrip.
1.17 "Software" means the GTECH and third party software having
the specifications set forth in Attachment C, and all documentation and licenses
related thereto, and all additional software and related documentation that
GTECH may provide to PNGI during the term of this Agreement for use in
connection with the VLS System.
1.18 "Start-Up Date" means the first date that operations on the
VLS System commence and Net Win is generated.
1.19 "Validation and Management Terminals" means the hardware
having the specifications set forth on Attachment D.
1.20 "Video Lottery Terminals" means the electronic computerized
video game machines having the specifications set forth on Attachment E.
1.21 "VLS System" means, collectively, the Central Computer
System Hardware, the technical infrastructure of the VLS System, the
Communications Network Equipment, the Video Lottery Terminals, Slot Machines
(subject to paragraphs 3.8, 3.9, and 3.10 below), the Validation and Management
Terminals, the Software and the Player Tracking System that comply with the
specifications and requirements set forth in the Attachments to this Agreement
including but not limited to Attachment H.
2. Management Control.
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2.1 PNGI shall have management control over all aspects of the
VLS System including but not limited to the VLS Central System provider, VAT
vendors (subject to GTECH's consent which shall not be unreasonably withheld or
delayed), VAT servicing, floor layout and design; provided, however, that GTECH
shall have access to, and control over, such aspects of the VLS System
(including without limitation the Central Computer System Hardware and Software
and the Validation and Management Terminals) as may be necessary or appropriate
to permit it to perform its obligations under this Agreement.
3. Scope of Work to be Performed.
3.1 The VLS System shall be delivered and installed so as to
comply with all the specifications set forth on Attachments A through E hereof.
3.2 GTECH shall cause the installation of the VLS System to be
complete and the VLS System to be operational as soon as possible but in no
event later than five days after delivery of Video Lottery Terminals to the
Charles Town Race Track, receipt of approval from the West Virginia Lottery
Commission and GLI, and the completion of West Virginia Lottery Commission and
GLI on-site acceptance testing of the VLS System; provided, however, that GTECH
shall not be responsible for delays attributable to or caused by PNGI or other
third parties beyond GTECH's control including without limitation third party
Video Lottery Terminal vendor delivery schedules.
3.3 GTECH and PNGI shall obtain and/or make all required
governmental filings and/or registrations required by the State of west
Virginia, the West Virginia Lottery Commission and any third parties in
connection with the performance of their respective obligations hereunder. The
parties shall use their respective best efforts to effect such applications,
filing and registrations and otherwise to provide for the issuance and continued
effectiveness of all such licenses, permits, consents and approvals during the
term of this Agreement.
3.4 GTECH shall perform for PNGI the GTECH Services in conformity
with all required governmental licenses, permits, consents and approvals.
3.5 In connection with GTECH providing the GTECH Services, PNGI
shall perform or shall cause to be performed the following tasks and
responsibilities, which shall conform to the reasonable standards prevailing in
the industry:
A. Providing and preparing the Central Site (inclusive
of an in-floor duct system, air conditioning and handling, security, and
surveillance);
B. Providing adequate electrical supplies to the Central
Site (but GTECH shall be responsible for the acquisition, maintenance and
installation of uninterruptible power supplies to all System computers);
C. Determining the vendors of the Video Lottery
Terminals (subject to GTECH'S consent which shall not be unreasonably withheld
or delayed);
D. Determining the quantities, distribution and
placement of the Video Lottery Terminals;
E. Providing storage rooms (not less than 1,000 square
feet in aggregate) for parts and consumables as well as for depot repair;
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F. Installing cables provided by GTECH; and
G. Operation of the VLS System (other than those
obligations to be perform by GTECH under this Agreement).
3.6 GTECH shall have the right to determine which of its staff
shall be assigned to perform the GTECH Services under this Agreement and to
replace or reassign such personnel during the term of this Agreement; provided,
however, that PNGI may request the reassignment or replacement of GTECH staff
performing GTECH Services in its reasonable discretion, and GTECH shall promptly
replace or reassign such individuals. GTECH shall consult with PNGI with respect
to the placement, replacement or reassignment of all GTECH employees at the
Charles Town site.
3.7 GTECH and PNGI each shall only assign employees to perform
services or work under this Agreement who are experienced and qualified for
their respective positions and to perform their respective tasks.
3.8 GTECH warrants that the VLS System, when installed and
operational, will be compatible with the future installation of Slot
Machines, and will have the capacity to provide Progressive Jackpots and
Player Tracking during the Term; provided, however, the timing and cost
of any proposed installation of Progressive Jackpots and Player Tracking
are not included in the GTECH Services but will be provided by GTECH for such
additional compensation which shall be negotiated in good faith by the
parties.
3.9 In the event Slot Machines are approved by the West Virginia
Legislature and if PNGI so elects, GTECH shall purchase and, not later than five
days after delivery of the Slot Machines to the Charles Town Race Track, install
Slot Machines for PNGI at Charles Town; provided, however, PNGI shall provide
not less than ninety days prior written notice of its decision to install Slot
Machines and will pay for all hardware and software acquisition costs. GTECH
shall be responsible for all installation costs and all costs associated with
the integration of the Slot Machines into the VLS System except for third party
vendor services and parts as to which GTECH's liability shall be limited in
amount to the sum of $100,000 00.
3.10 The obligation on the part of GTECH to provide the GTECH
Services and to install and make operational Slot Machines, Progressive Jackpots
and/or Player Tracking is subject to the issuance and continued effectiveness of
all required governmental and other licenses and approvals, other than licenses
and/or approvals related to the failure or inability of GTECH to be licensed as
a vendor or which are unavailable or revoked as a result of any matter, reason
or thing within GTECH's control.
3.11 PNGI agrees that GTECH shall be the exclusive provider of
the VLS System including, without limitation, the Video Lottery Terminals and
Slot Machines, if any, at the Charles Town Race Track during the Term. PNGI
represents and warrants to GTECH that, apart from this Agreement, neither it nor
any of its affiliates has entered into any agreement with any third party for
the provision of video lottery systems (or any component thereof) or services at
Charles Town Race Track, other than the purchase order which it placed with
Video Lottery Technologies, Inc. on May 15, 1997 for the purchase of 152 Video
Lottery Terminals (the '"Purchase Order it) as to which a down payment of
$277,218.00 has been advanced by PNGI (a copy of which has been previously
supplied to GTECH). Promptly after execution of this Agreement, PNGI shall
assign to GTECH, or shall cause to be assigned to GTECH, the Purchase Order
whereupon GTECH shall assume all obligations with respect thereto and shall
refund to PNGI the deposit made by PNGI.
4. Change in Scope.
(26)
4.1 If PNGI should desire a change in GTECH's obligations under
this Agreement or in the specifications for the VLS System, PNGI shall submit to
GTECH a written proposal specifying the desired changes. GTECH and PNGI shall
exercise good faith efforts to reach a mutually acceptable agreement in writing
on any and all changes or enhancements to such obligations and/or
specifications, as well as the terms and conditions (including as to
compensation and timing) respecting any such changes, in the manner provided
below.
4.2 GTECH shall submit to PNGI a written response to each change
request within fifteen (15) business days following receipt of the request.
GTECH's written response shall include a statement of the availability of
GTECH's personnel and resources, as well as any impact the proposed changes will
have (if any) on the delivery dates, the anticipated Start-Up Date, the GTECH
Services, the warranty provisions of this Agreement or the compensation to be
paid GTECH under this Agreement.
4.3 Changes to the scope of the GTECH Services or in the
specifications for the VLS System shall be evidenced by a written "Modification
Agreement". A Modification Agreement shall be signed by authorized
representatives of GTECH and PNGI, whereupon GTECH shall commence performance in
accordance with this Agreement as modified. GTECH shall not be obligated to
perform any additional services or modify the specifications for the VLS System
prior to its approval of a Modification Agreement.
4.4 GTECH shall not unreasonably withhold or delay its consent to
any change requested by PNGI or refuse to enter into a Modification Agreement;
provided, however, that GTECH shall be entitled to received reasonable
compensation (to be determined through good faith negotiations between the
parties) for any material expansion of GTECH's obligations, cost or expense as a
result of any requested change or any Modification Agreement. Should GTECH be
unwilling to approve a change or to sign a Modification Agreement as written,
GTECH will so notify PNGI within fifteen (15) business days of GTECH's receipt
of PNGI's written proposal and shall set forth with specificity it reasons for
refusing to do so.
4.5 For purposes of this Agreement, each Modification Agreement
duly authorized in writing by GTECH and PNGI shall be deemed incorporated into
and made part of this Agreement. Each such Modification Agreement shall
constitute a formal change to this Agreement.
4.6 No change to this Agreement and/or the GTECH Services shall
be effective unless and until a Modification Agreement has been executed and
delivered by the parties.
4.7 A "change" in GTECH's obligations under this Agreement shall
be any change which is, individually or in the aggregate, a material addition to
the specifications of the VLS System as set forth in the Attachments to this
Agreement and which effects a material increase to its cost, exposure or
obligations of providing the GTECH Services.
5. Compensation.
5.1 As compensation for the VLS System and the GTECH Services,
PNGI shall pay GTECH the compensation specified in Attachment G to this
Agreement.
5.2 GTECH shall submit to PNGI on a bi-weekly basis (based on
PNGI's accounting period) invoices for the charges set forth in subsection 5.1.
PNGI shall pay GTECH the amounts invoiced within ten (10) business days after
receipt of such invoice.
(27)
6. Term Of Agreement.
6.1 Subject to the provisions of paragraph 6.3 below, the term of
this Agreement shall begin on the date first above written, and shall continue
through and including that date which is five (5) years after the first date on
which there are at least 400 Video Lottery Terminals installed, operational and
generating Net Win on the VLS System (the "Term"); provided, however, any delay
in the commencement of the Term occasioned by events or matters within GTECH's
control shall on a day-for-day basis reduce the length of the Term; and provided
further, that the Term shall be extended on a day-for-day basis for each day
during the Term that the VLS System is substantially non-operational for reasons
beyond the control of GTECH.
6.2 At the end of the Term, PNGI shall purchase from GTECH the
VLS System for a cash purchase price equal to the Net Unamortized Residual
Value. If there is no Net Unamortized Residual Value, title to the VLS System
shall pass to PNGI upon termination of this Agreement.
6.3 GTECH shall upon transfer of title of the VLS System assign
or grant, or cause to be assigned or granted, a continuing non-exclusive,
non-assignable, non-sublicensable license to PNGI for all Software required for
PNGI to use the Video Lottery Terminals and/or the Slot Machines, except for the
central system software, which assignment or license shall remain in effect for
so long as PNGI operates or otherwise uses the Video Lottery Terminals and the
Slot Machines. GTECH shall have no continuing obligation of Software maintenance
or support by virtue of this license.
6.4 For all video lottery equipment placed in service by PNGI
prior to the seventh month following the Start-Up Date, all such Video Lottery
Terminals and equipment shall be deemed to have been acquired as of the Start-Up
Date for purposes of calculating Net Unamortized Residual Value.
6.5 For all video lottery equipment placed in service by PNGI
after the sixth month following the Start-Up Date, all such Video Lottery
Terminals and equipment shall be deemed to have been acquired as of the date
they are placed in service for purposes of calculating Net Unamortized Residual
Value.
7. Termination.
7.1 PNGI shall have the right to terminate this Agreement by
giving written notice to GTECH in the event of any of the following shall occur:
A. GTECH voluntarily: (1) liquidates (except as a part
of a merger transaction in which a successor corporation has a greater net worth
and solvency), (2) enters into receivership, or (3) files a petition under any
chapter of the U.S. Bankruptcy Code;
B. GTECH is the subject of an involuntarily bankruptcy
petition and fails to have such petition dismissed, vacated, voided or otherwis
removed within sixty (60) days after its filing;
C. GTECH fails to install and make substantially
operational the VLS System as soon as possible and in accordance with sections
3.2 and 3.3, time being of the essence, unless the failure to do so is caused
or accounted for by reasons or matters beyond GTECH's control;
D. Any representation or warranty made by GTECH in this
Agreement was materially incorrect when made or GTECH commits a material breach
of any provision of this Agreement and fails to
(28)
cure such misrepresentation or breach within thirty (30) days following the
giving of written notice to GTECH by PNGI specifying such breach;
E. The west Virginia Lottery Commission orders PNGI to
terminate this Agreement;
F. GTECH fails to obtain or loses for any reason any
license or permit required or which qualifies it to conduct its business and
perform its obligations under this Agreement;
G. GTECH or any of its senior management is convicted
of a felony in connection with the performance of any of its obligations under
this Agreement or otherwise in connection with the performance of any of
its obligations under this Agreement.
H. For purposes of paragraphs C. and D. above, the
parties agree that reasons or matters beyond GTECH'S control include but are
not limited to (1) the failure of any governing body to issue any necessary
license to PNGI, (2) the failure of Video Lottery Terminal manufacturers to
deliver timely Video Lottery Terminals (so long as GTECH has exercised its
best efforts to expedite their delivery), (3) construction delays at Charles
Town, and/or (4) the failure of any governing body to issue any necessary
license or approval required for the use of any of the Video Lottery Terminals
to be delivered pursuant to this Agreement;
7.2 GTECH may terminate this Agreement by giving written notice
to PNGI in the event of any of the following shall occur:
A. PNGI voluntarily: (1) liquidates (except as a part
of a merger transaction in which a successor corporate has a greater net worth
and solvency), (2) enters into receivership, or (3) files a petitionunder
any chapter of the U.S. Bankruptcy Code;
B. PNGI is the subject of an involuntarily bankruptcy
petition and fails to have such petition, dismissed, vacated, voided or
otherwise removed within sixty (60) days after its filing;
C. Any representation or warranty made by PNGI in this
Agreement was materially incorrect when made or PNGI commits a material breach
of any provision of this Agreement and fails to cure such misrepresentation
or breach within thirty (30) days following the giving of written notice to
PNGI by GTECH specifying such breach;
D. PNGI fails to make any payment to GTECH within thirty
(30) days of the date when such payment is due under this Agreement.
E. The West Virginia Lottery Commission orders GTECH to
terminate this Agreement;
F. PNGI fails to obtain or loses for any reason any
license or permit required for or which qualifies it to conduct its business
and perform its obligations under this Agreement; or
G. PNGI or any of its senior management is convicted of
a felony in connection with the performance of any of its obligations under this
Agreement or otherwise in connection with the performance of it obligations
under this Agreement.
(29)
7.3 In the event of termination of this Agreement pursuant to
Section 7.1 or 7.2 neither party shall have any further obligation to the other
except that each party shall remain obligated for liabilities owed to the other
which have accrued and are due and owing as of the date of termination and:
A. In the case of a termination of this Agreement
arising out of or otherwise constituting a material misrepresentation and/or
breach of this Agreement by PNGI:
(1) PNGI shall purchase from GTECH, within thirty
(30) days of termination, the vies System on an AS-IS, WHERE-AS basis, at a
price equal to the Net Unamortized Residual Value; and
(2) PNGI shall pay to GTECH:
(a) For a termination which occurs during
the first year of the Term, the sum of $8,500,000.00;
(b) For a termination which occurs during
the second year of the Term, the sum of $6,600,000.00;
(c) For a termination which occurs during
the third year of the Term, the sum of $5,000,000.00;
(d) For a termination which occurs during
the fourth year of the Term, the sum of $3,700,000.00; or
(e) For a termination which occurs during
the fifth year of the Term, the sum of $2,500,000.00;
B. In the case of any uncured material misrepresentation
and/or breach of this Agreement by GTECH that has occurred and is continuing
thirty (30) days after the giving of written notice to GTECH of that breach:
(1) PNGI may terminate this Agreement by giving
written notice thereof to GTECH;
(2) PNGI may purchase from GTECH, within thirty
(30) days of termination, on an AS-IS, WHERE-AS basis, at a price equal
to the Net Unamortized Residual Value, the VLS System.
C. In the event this Agreement is terminated by either
party for any reason then, subject only to PNGI paying the Net Unamortized
Residual Value, PNGI shall have, and GTECH hereby grants to PNGI, a continuing
royalty free license to use all Software and other components of the VLS
System at the Charles Town Race Track to the extent necessary to permit
PNGI to continue to use the VLS System in substantially the same manner
as prior to termination which license shall continue, as to the Video
Lottery Terminals, for so long as PNGI uses the Video Lottery Terminals,
and, as to the rest of the VLS System, until PNGI has a reasonable
opportunity, not to exceed six months, to obtain alternative software and/or
components; provided, however, GTECH shall have no further obligation to
service or support the Software.
(30)
D. The rights and remedies set forth in this paragraph
7.3 shall be the exclusive remedies of the parties in the event of a termination
of this Agreement by either party.
8. Insurance.
8.1 Throughout the Term of this Agreement (including any
extensions thereof) GTECH and PNGI shall maintain in effect their respective
standard insurance coverages.
8.2 Upon request, each party shall provide the other with
evidence that any one or all of the insurance coverage required under this
Section are in place.
8.3 All insurance coverage required under this Section shall be
issued by companies qualified to do business in the State of West Virginia and
shall otherwise comply with the requirements of the West Virginia Code and the
rules and regulations of the West Virginia Lottery Commission.
9. Title to System.
9.1 Except as otherwise provided in this Agreement, (A) title to
the VLS System, including component hardware, equipment and Software shall not
pass to PNGI but shall remain in GTECH, and (B) PNGI does not obtain under this
Agreement any license or other interest in the VLS System or any part thereof.
10. Industrial and Intellectual Property Rights.
10.1 All industrial and intellectual property rights, including
but not limited to rights in and to patent, copyright, mask work rights,
trademark, and trade secret rights, related to the equipment, hardware, and/or
software directly or indirectly provided by GTECH under or in connection with
this Agreement at any time during the Term (including extensions thereof),
belong and shall continue to belong exclusively to GTECH.
10.2 PNGI shall immediately notify GTECH if PNGI ever becomes
aware of any impairment or infringement, or imminent threat of impairment or
infringement, of GTECH's rights. PNGI shall not take any steps against any
alleged infringer unless and until requested to do so in writing by GTECH;
provided, however, that if GTECH fails to take action as to any infringement
that has or is likely to have a material adverse effect on PNGI's capacity to
use the VLS System as contemplated by this Agreement, may, after the giving of
at least fourteen (14) days prior written notice to GTECH, take reasonable
action to stop or abate the infringement at GTECH's expense and GTECH will
cooperate in any such action. PNGI shall, at GTECH's expense, join with GTECH in
taking such steps as GTECH may reasonably request to protect GTECH's rights.
10.3 This Section 10 shall survive the termination or expiration
of this Agreement without time limitation.
11. License of Software and Related Documentation.
11.1 GTECH hereby grants to PNGI in connection with the VLS
System a non-exclusive, non-transferable, non-sublicensable license to use the
VLS System at the Charles Town Race Track throughout the Term of, and as
otherwise provided in, this Agreement. To the extent the Software is comprised
of Software provided by GTECH, PNGI shall have the right to use only the object
code (i.e., machine readable) form of such software and only on hardware and
Video Lottery Terminals provided or approved by GTECH as interfacing with the
VLS System.
(31)
GTECH shall not unreasonably refuse or delay any requested approval of hardware
or Video Lottery Terminals.
11.2 Except as otherwise provided in this Agreement:
A. The license of the Software for the central system
shall terminate upon the expiration or earlier termination of this Agreement
except that, in the event of termination of this Agreement pursuant to Section
7 hereof, the license of the Software shall continue so as to permit
continued use of the Software and the VLS System as contemplated by that
Section;
B. PNGI may at its option elect to continue this license
after the termination of this Agreement subject to the payment to GTECH of a
royalty of two percent of Net Win, which shall be payable monthly.
11.3 PNGI acknowledges and agrees that:
A. The Software is Confidential Information;
B. The Software is a valuable and unique asset of GTECH,
and GTECH owns all right, title and interest thereto, including all intellectual
property rights therein;
C. PNGI shall not reproduce in any medium any part of
the Software; and
D. Promptly upon the termination of the license, PNGI
shall return all materials constituting or containing any part of the
Software to GTECH, except for materials reasonably necessary or
appropriate for the exercise of continuing rights under section 7.3, which
materials shall be returned when such rights terminate.
12. Warranties.
12.1 GTECH hereby warrants and represents to PNGI that:
A. The VLS System and the GTECH Services will comply in all
respects with reasonable standards prevailing in the industry; and
B. The VLS System and the GTECH Services will be
provided in accordance, and at all times shall comply, with all Federal, state
and local laws, ordinances, rules and regulations as they apply to the VLS
System and GTECH's employees and contractors in the performance of the GTECH
Services.
12.2 GTECH shall use its best efforts to cause the manufacturers
of any third party components of the VLS System to extend to the VLS System
warranties that are at least as favorable as such manufacturer's standard
warranties.
12.3 PNGI's sole remedy for GTECH's breach of any warranty
contained in this Section 12 shall be for GTECH to remedy the breach promptly at
its own expense; provided however, if GTECH can not within a reasonable time
under the circumstances (not to exceed thirty (30) days) after written notice by
PNGI remedy the breach, and the breach is material, then PNGI may thereupon
terminate this Agreement. The foregoing limitation shall not apply to breaches
by GTECH that constitute intentional misconduct or gross negligence.
12.4 THE WARRANTIES SET FORTH IN THIS AGREEMENT ARE MADE TO AND
(32)
FOR THE BENEFIT OF PNGI AND ITS AFFILIATES ONLY. EXCEPT AS OTHERWISE PROVIDED IN
THIS AGREEMENT, GTECH MAKES NO OTHER WARRANTY OF ANY KIND WHATEVER, EXPRESS OR
IMPLIED.
13. Limitation of Liability.
13.1 EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL,
PUNITIVE, OR INDIRECT DAMAGES INCLUDING, BUT NOT LIMITED TO, LOSS OF ANTICIPATED
PROFITS, LOSS OF USE OR UTILIZATION OR CAPABILITIES RESULTING FROM THE PARTY'S
PERFORMANCE OR NON PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT;
PROVIDED, HOWEVER, NOTHING HEREIN SHALL LIMIT ANY PARTY'S OBLIGATION TO
INDEMNIFY THE OTHER AS PROVIDED IN SECTIONS 14 AND 15 OF THIS AGREEMENT.
13.2 THE LIMIT OF GTECH'S LIABILITY (WHETHER IN CONTRACT, TORT,
NEGLIGENCE, OR OTHERWISE) TO PNGI CONCERNING PERFORMANCE OR NON-PERFORMANCE BY
GTECH, OR IN ANY MANNER RELATED TO THIS AGREEMENT, FOR ANY AND ALL CLAIMS SHALL
NOT IN THE AGGREGATE EXCEED THE AMOUNTS PAID BY PNGI TO GTECH UNDER THIS
AGREEMENT.
13.3 The limitations on liability contained in this Section 13
shall not apply to damage claims arising out of a party's intentional misconduct
or gross negligence.
14. Indemnity Against Infringing Use.
14.1 GTECH warrants to PNGI that the Software provided by GTECH
does not and shall not infringe any U.S. patent, U.S. copyright, or other
proprietary right of any third party.
14.2 GTECH shall defend, at its expense, any action brought
against PNGI to the extent that it is based on a claim that the Software
provided by GTECH infringes any third party's U.S. patent, U.S. copyright or
other proprietary right, provided that GTECH is given prompt notice of such
action and is given information, reasonable assistance and sole authority to
defend or settle the action. GTECH shall pay all costs and damages, including
legal fees (provided that if the action is unsuccessful and legal fees are
awarded against the plaintiff, GTECH shall be entitled to receive such legal
fees) finally awarded against PNGI arising from any such complaint. However,
GTECH is not authorized to agree to any settlement, compromise or the like which
would require PNGI to make any payment or to stop using the Software provided by
GTECH, without PNGI's prior written notice stating its approval.
14.3 In the event that PNGI is enjoined from using any material
portion of the VLS System because of an infringement, GTECH shall, at its own
expense, either:
A. Procure for PNGI the right to continue using the
Software provided by GTECH and the right to continue enjoyment of the rights
and licenses granted in this Agreement; or
B. Replace or modify the Software provided by GTECH so
that it becomes non-infringing but equivalent in function and performance; or
C. Only if the alternatives set forth in subsections A.
& B. of this Section 14.2 are not reasonably feasible, refund to PNGI all
amounts paid by PNGI to GTECH under this Agreement with interest at the
(33)
rate of 8% per annum, in which event this Agreement shall become null and void
and of no further force or effect.
14.4 GTECH shall have no obligation under this Section 14 if
and to the extent that such claim arises from:
A. PNGI's modification, without GTECH's approval, of the
Software provided by GTECH;
B. PNGI's combination of the Software provided by GTECH
with products other than those supplied by GTECH (provided that the alleged
infringement would not have occurred without such combination); or
C. If the Software provided by GTECH is used for a
purpose other than that contemplated by this Agreement.
15. Indemnification.
15.1 GTECH shall indemnify and hold harmless PNGI, and its
affiliates, directors, officers, and employees from and against all losses,
liabilities, judgments, awards, settlements, damages and costs (including legal
fees and expenses) in connection with third party claims:
A. For personal injury (including death) or damage to
tangible personal property to the extent caused by the negligent or willful acts
or omissions of GTECH, its employees or agents;
B. Arising from any intentional breach by GTECH of its
obligations under this Agreement.
15.2 At the request of PNGI from time to time after any such
claims, GTECH shall, at its sole expense, defend with counsel reasonably
acceptable to PNGI, all claims, suits or proceedings arising out of the matters
set forth in paragraph 15.1 of this Agreement. GTECH shall be notified promptly
of any such claims, suits or proceedings in writing and, if requested to defend
such action, given full and complete authority, information and assistance for
the defense of same, provided, however, GTECH shall nave no authority to enter
into any settlement or compromise on behalf of PNGI without the prior written
consent of PNGI (which consent shall not be unreasonably withheld or delayed).
In all events, PNGI shall have the right to participate, at its own expense, in
the defense of any such proceedings with counsel of its own choosing.
15.3 PNGI shall indemnify and hold harmless GTECH, and its
affiliates, directors, officers and employees, from and against all losses,
liabilities, judgments, awards, settlements, damages and costs (including legal
fees and expenses) in connection with third party claims:
A. For personal injury (including death) or damage to
tangible personal property to the extent caused by the negligent or willful acts
or omissions of PNGI, its employees or agents;
B. Arising from any intentional breach by PNGI of its
obligations under this Agreement.
(34)
15.4 At the request of GTECH from time to time after any such
claims, PNGI shall, at its sole expense, defend with counsel reasonably
acceptable to GTECH all claims, suits or proceedings arising out of the matters
set forth in paragraph 15.3 of this Agreement. PNGI shall be notified promptly
of any such claims, suits or proceedings in writing and, if requested to defend
such action, given full and complete authority, information and assistance for
the defense of same, provided, however, PNGI shall have no authority to enter
into any settlement or compromise on behalf of GTECH without the prior written
consent of GTECH (which consent shall not be unreasonably withheld or delayed).
In all events, GTECH shall have the right to participate, at its own expense, in
the defense of any proceedings with counsel of its own choosing.
16. Cooperation of the Parties; Resolution of Disputes.
16.1 The parties hereto shall use their best efforts to resolve
by mutual agreement any disputes, controversies or differences which may arise
between or among them out of or in connection with this Agreement.
16.2 If any disputes, controversies or differences cannot be so
resolved by mutual agreement, the parties agree that, other than those claims
over which a regulatory agency has exclusive jurisdiction, all such unresolved
disputes, controversy, and claims shall be resolved by arbitration in accordance
with the Commercial Arbitration Rules ("CAR") of the American Arbitration
Association ("AAA"), and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof. The parties shall
attempt, by agreement, to nominate a sole arbitrator for confirmation by the
AAA. If the parties fail to agree and nominate a sole arbitrator within thirty
(30) days from the date when the claimant's Request for arbitration has been
communicated to the other party, then the sole arbitrator shall be appointed by
the AAA in accordance with the applicable rules governing such appointment.
16.3 The place of arbitration shall be Charles Town, West
Virginia. All expedited procedures prescribed by the CAR shall apply.
16.4 The findings and the award of the arbitrator shall be
reasonably detailed and shall set forth his findings of fact and conclusions of
law.
16.5 Any award of the arbitrator shall be final and binding on
the parties, and each party hereby waives to the fullest extent permitted by law
any right it may otherwise have under the laws of any jurisdiction to any form
of appeal.
16.6 With this arbitration agreement the parties do not intend to
deprive any court of its jurisdiction to issue a prearbitral injunction,
prearbitral attachment or other order in aid of arbitration proceedings and
enforcement of the award.
17. Independent Contractors.
17.1 The parties hereto acknowledge that they are and shall
continue to be independent contractors. Nothing contained herein shall be
construed so as to create the relationship of employer and employee,
partnership, or principal and agent between PNGI and GTECH. Neither party shall
have any authority to bind the other party as an agent or in any other capacity
for any purpose, nor shall either party directly or indirectly represent to any
person that it has such authority.
(35)
18. Confidentiality.
18.1 Each party acknowledges a duty of confidentiality owed to
the other party, and shall not, at any time, (directly or indirectly, in whole
or in part):
A. Use or duplicate any Confidential Information of the
other party (except as necessary to effect the purposes of this Agreement); or
B. Disclose any Confidential Information of the other
party to any entity not a party to this Agreement, in addition, neither
party shall disclose Confidential Information of the other to any of its
officers, directors, employees or representatives, unless their knowledge
of such Confidential Information is necessary to effect the purposes of this
Agreement.
18.2 As used herein, "Confidential Information" shall mean any
information and any copies or records thereof, in any medium, disclosed to or
otherwise obtained by a party from the other party in connection with GTECH's
installation, implementation, operation and/or maintenance of the VLS System for
PNGI, and which is descriptive of or pertaining to any aspect of the other
party's business, products, services, equipment, technologies, know-how,
personnel, finances, sales and/or marketing (including in the case of GTECH,
without limitation, Software and information contained in GTECH's Data Exchange
Specification (the "DXS's"). Notwithstanding the foregoing sentence, the
following shall not be 'Confidential Information:
A. Information that is or has been generally available
to the public or comes into the public domain otherwise than in circumstances
giving rise to a breach of the terms of this Agreement;
B. Information already known to the receiving party at
the time it is disclosed by the other party, as documented by records in
possession of the receiving party predating such disclosure;
C. Information subsequently received by the receiving
party in good faith from an entity (other than the disclosing party) having the
prior right to make such subsequent disclosure;
D. Information independently developed by the receiving
party without use of the Confidential Information;
E. Information approved by the disclosing party in
writing for unrestricted release or unrestricted disclosure by the other party.
18.3 Each party acknowledges that all Confidential Information is
a valuable and unique asset and trade secret of the other party and that it has
no right, title or interest therein (other than such rights as may be
specifically set forth in this Agreement).
18.4 Any copy of documents or other media made by a party
containing Confidential Information of the other (to the extent copies are
permitted) shall bear all copyright, trademark, patent and other proprietary
notices appearing on the original.
18.5 Upon the expiration or earlier termination of this
Agreement, each party shall promptly, and without need for notice or demand,
deliver to the other party all records and media containing or embodying the
other party's Confidential Information within the party's possession, custody or
control.
(36)
18.6 PNGI agrees that Confidential Information might be learned
through examination of the interior or disassembly of components of the VLS
System and, therefore, PNGI agrees that, without prior specific notice of
authorization from GTECH, PNGI shall neither permit the display of the interior
of any such components of the VLS System to others nor permit the transfer of
possession of any such components to others.
18.7 Notwithstanding anything in this Agreement to the contrary,
Confidential Information may be disclosed if, in the reasonable opinion of a
party's legal counsel, disclosure is required to be made by law or government
rule or regulation, or by court order; provided, however, that:
A. Prior to any such disclosure, the party shall provide
to the owner of the Confidential Information a written opinion of the
party's legal counsel supporting its conclusion that such disclosure is
necessary, and shall cooperate insofar as is commercially reasonable with the
party owning the Confidential Information regarding the manner of such
disclosure or with any action taken by the party owning the Confidential
Information (entirely the cost of such owning party) to challenge the validity
of such requirement; and
B. Such disclosure shall be made only to the extent
determined necessary in the written opinion of the party~s outside counsel,
or by the governmental body requiring disclosure (the latter determination to
have priority).
18.8 The provisions of this Section 18 shall continue in effect
after the expiration or termination of this Agreement, without time limitation.
19. Force Majeure.
19.1 GTECH shall not be liable for any delay in performing any
obligation hereunder resulting from the occurrence of a "Force Majeure Event",
and such delay shall not constitute a default hereunder.
19.2 A "Force Majeure Event" shall mean an event or circumstance
beyond the direct control of GTECH including, but not limited to, riots, effects
of War, civil commotion, political unrest, governmental acts, laws, order,
proclamations, and regulations, acts of God such as fires, floods, earthquakes
and lightning, labor disputes such as strikes and lockouts, the failure of
technology providers to meet delivery dates or otherwise perform in accordance
with the terms of their agreements with PNGI, construction delays at Charles
Town, the failure of GLI or any governing body to issue any required license or
approval to PNGI or necessary for the operation of Video Lottery Terminals at
Charles Town, and the failure of PNGI to perform in accordance with the terms of
this Agreement.
19.3 If, as a result of the occurrence of a Force Majeure Event,
GTECH is delayed in performing any obligation hereunder, GTECH shall as soon as
possible give PNGI written notice of such event and the estimated delay caused
as a result thereof.
20. Scope of Agreement; Amendments.
20.1 This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter, and supersedes
all prior agreements and understandings of the parties, written and oral,
related thereto.
20.2 This Agreement may not be amended, supplemented or modified
except by a written agreement signed by both parties.
(37)
21. Assignment.
21.1 This Agreement shall not be assigned, in whole or in part,
by either party without the prior written notice of consent by the other party.
Notwithstanding the foregoing, it is agreed that GTECH may assign its rights and
obligations under this Agreement to an affiliate of GTECH and may subcontract
its obligations hereunder in whole or in part, provided, however, that GTECH
shall in all such events remain liable for performance hereunder. Any attempted
assignment in violation of this Section 21 shall be null and void ab initio.
22. Binding Nature of Agreement: Severability.
22.1 This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective permitted successors, assigns,
heirs, executors and administrators. If any provision of this Agreement shall be
or become invalid, such invalidity shall not affect any of the remaining
provisions of this Agreement.
22.2 If any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
scope, activity or subject, it shall be construed by limiting or reducing it so
as to be enforceable to the extent compatible with the applicable law as it
shall then appear. Each party acknowledges that the duration and other
restrictions set forth therein are reasonable to protect the other party's
business interests.
23. Waivers.
23.1 No waiver of any provisions of this Agreement shall be
effective unless agreed to in writing by the party against whom such waiver is
sought to be enforced. Waiver of any default or breach hereunder shall not
constitute a waiver of any other default or breach whether similar or otherwise.
24. Governing Law.
24.1 The validity, interpretation and enforcement of this
Agreement shall be governed by the laws of the State of West Virginia, without
resort to its rules regarding conflicts of laws.
25. Notices.
25.1 All notices and other communications required or permitted
to be given under this Agreement to a party shall be in writing and (a)
personally delivered, (b) mailed by registered or certified mail, postage
prepaid, return receipt requested, or (c) sent by prepaid overnight courier
service (e.g. Federal Express, Airborne, DHL), in any case to the address of the
relevant party set forth on the first page of this Agreement, or at such other
addresses such party may, by written notice, designate as its address for
purposes of notice, hereunder. In addition, notices and communications to GTECH
shall be sent to the attention of the President, and notices and communications
to PNGI shall be sent to the attention of its Chief Operating Officer.
25.2 If mailed by registered or certified mail, notices shall be
deemed to be given five (5) days after being sent; if sent by personal delivery,
notice shall be deemed to be given when delivered; and if sent by prepaid
overnight courier service, notice shall be deemed to be given one (1) business
day following deposit with the courier.
26. Headings.
26.1 Section headings of this Agreement are for convenience only
and shall neither form a part
(38)
nor affect the interpretation hereof.
27. Counterparts.
27.1 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one instrument. This Agreement shall become
effective when such counterparts have been executed and delivered by the parties
to each other.
27.2 This Agreement may be executed and delivered by facsimile
transmission and any such facsimile copy shall have the same force and effect as
if an original had been executed and delivered.
28. Compliance With Laws. Further Assurances.
28.1 Each party represents and warrants to the other that they
shall comply in all respects with the requirements of the West Virginia Code and
the rules and regulations of the West Virginia Lottery Commission in the
performance of their respective obligations under this Agreement.
28.2 Each party shall take such acts and do such things as may be
reasonably required to carry out the terms and conditions of this Agreement.
29. Additional Representations and Warranties.
29.1 Each party represents and warrants to the other:
A. It is duly organized, validly existing and in good
standing under the laws of its state of incorporation or organization, and
has all requisite power and authority to conduct its businesses and to
own its properties, and is duly qualified and in good standing in all
jurisdictions where such qualification is required in order to perform its
respective obligations under this Agreement.
B. The execution, delivery and performance of its
respective obligations under this Agreement has been duly authorized by all
necessary action and does not and will not violate any provision of law or of
its articles of incorporation, by-laws and/or organization, or result in a
breach of or constitute a default under any agreement, indenture or instrument
to which it is a party.
C. This Agreement and its terms constitute valid,
legally binding and enforceable obligations enforceable in accordance with its
terms.
D. No governmental or other authorization, approval or
filing is required for the performance by it of its obligations hereunder and
the transaction contemplated herein.
29.2 During the Term of this Agreement, PNGI shall:
A. Deliver to GTECH copies of all financial statements
and other financial information that it routinely files with the Securities &
Exchange Commission and/or the West Virginia Lottery Commission which are
generally available to the public; and
B. Maintain a Tangible Net Worth of not less than 105%
of the dollar amounts set
(39)
forth in paragraph 7.3 A.(2) during the time periods referred to therein;
provided, however, any funds disbursed for debt service to PNGI's ultimate
parent, at a time when PNGI's ultimate parent is unable to make such debt
service payments, shall not cause this covenant to be violated.
C. As used in paragraph B. above, Tangible Net Worth
means, as of any given day, the amount that would be properly reflected as
Shareholders' (Members') Equity on the balance sheet of PNGI if a balance
sheet were prepared for PNGI as of that day, less the amount of PNGI's
intangible assets (defined as rights or property granted by a government,
another entity or internally developed by PNGI that lack physical substance)
as of such day, assuming for such purpose that such balance sheet had been
prepared in accordance with generally accepted accounting principles
consistently applied.
D. On or before the end of each calendar quarter, PNGI
shall submit to GTECH the certification of its chief financial officer that
PNGI is or is not, as the case may be, in compliance with this paragraph 29.2.
E. At least once annually, PNGI shall cause its
certified public accountant to submit to GTECH a certification that PNGI is
or is not, as the case may be, in compliance with this paragraph 29.2.
30. Dismissal of Litigation.
30.1 Simultaneously with the execution with this Agreement,
the parties shall execute, and cause all other counsel of
(40)
record to sign, and file of record the Stipulation of Dismissal attached hereto
as Attachment I.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PNGI CHARLES TOWN GAMING, LLC ATTEST:
By:/S/ William J. Bork /S/ Robert S. Ippolito_
Title:Vice-President
GTECH CORPORATION ATTEST:
By/S/ Michael Chambrello /S/ Brandon J. Radje _
Title:Executive Vice-President
All attachments to Agreement have been intentionally omitted
(41)
OPTION TO PURCHASE REAL PROPERTY
1. In consideration of Two Thousand and no/100 Dollars ($2,000.00) paid
to Roosevelt Boyland DEVISEES, 3529 E. Rolling Woods Drive, Memphis, Tennessee,
38128, hereinafter referred to as "Seller", receipt of which is hereby
acknowledged, Seller hereby gives and grants to Penn National Gaming, Inc., 825
Berkshire Boulevard, Wyomissing, Pennsylvania, 19610, hereinafter referred to as
"Purchaser", and/or its assigns, the exclusive option to purchase the 18 acre
real property of Seller situated in the City of Memphis, County of Shelby, State
of Tennessee, and particularly described on Exhibit A which is attached hereto
and made a part hereof by reference.
2. Exercise of the option to purchase is at the sole discretion of
Purchaser.
3. The period of duration of the option is thirty (30) days from the
date hereof.
4. However, Purchaser is also granted additional options of up to three
hundred thirty (330) additional days. Said options will be granted upon receipt
of the sum of $2,000.00 per 30 day period. The first $2,000.00 must be tendered
to Seller before the expiration of the first thirty (30) day option, and each
additional $2,000.00 must be tendered to Seller before the expiration of each
succeeding thirty (30) day period. The sum of $22,000.00 shall be deposited with
an Escrow Agent in Memphis, Tennessee within fourteen (14) days of the date of
this Agreement. Said Escrow Agent shall be chosen by mutual agreement of the
parties, in writing. Said funds shall be placed in an interest bearing account.
5. Upon failure of Purchaser to exercise this option to purchase the
property, the aforementioned $2,000.00 and any additional option monies paid to
Seller shall be the sole property of Seller, and there shall be no further
liability of the parties under this agreement, one to the other.
6. In the event Purchaser exercises its option to purchase the
property, all option payments, mentioned herein, will be applied to the purchase
price.
7. The purchase price of the subject property is $15,000.00 per acre,
assuming 18 acres, subject to survey, of which all option money is a part. Said
sum shall be paid to Seller, in certified funds, at closing. Survey shall be at
the expense of the Seller (not to exceed $300.00 Dollars).
(42)
8. If the Purchaser elects to exercise its option granted herein, the
Purchaser shall notify the Seller, in writing, United States Mail, postage
prepaid and/or hand delivery, to Seller's address shown above prior to midnight
on the day the option or any extension thereon expires.
9. The closing of the purchase shall be within thirty (30) days of the
notice, by Purchaser to Seller, that Purchaser desires to exercise the option
granted herein.
10. At closing, Seller will deliver to Purchaser a good and valid
Warranty Deed on forms customarily used in Memphis, Shelby County, Tennessee,
wherein the Seller will warrant that there are no liens or encumbrances on said
property, except any subdivision or other restrictions of record, and any
property taxes levied by the City of Memphis or County of Shelby. Seller will
not grant any easements or other encumbrances on the property after the date of
this Agreement.
11. Any property taxes for years prior to the tax year of closing shall
be paid by Seller; the property taxes for the year of closing shall be prorated
between the Seller and the Purchaser, as of the date of closing. Any Greenbelt
taxes shall be paid by Seller. Any billboard leases will be assigned to
Purchaser. All tax liens, and liens of Deeds of Trust, will be removed, at the
sole expense of the Seller. Any labor and materialman liens will be removed, at
the sole expense of the Seller.
12. If Seller is unable to deliver the good and sufficient Warranty Deed,
as aforementioned, the option money paid herein shall be immediately returned to
Purchaser.
13. At Purchaser's option, Purchaser may proceed against Seller for
specific performance of this Option Contract, and if suit is necessary, Seller
agrees to pay all reasonable costs incurred by Purchaser, including a reasonable
attorney fee.
Executed in duplicate originals as of the 20th day of June, 1997.
SELLER
By:/s/ Dorothy Williams,INDIVIDUALLY and ATTORNEY IN FACT FOR DEVISEES ROOSEVELT
BOYLAND
PURCHASER
By: /s/ William J. Bork
PENN NATIONAL GAMING, INC.
Individual Acknowledgement
(43)
STATE OF TENNESSEE
COUNTY OF SHELBY
Personally appeared before me, a Notary Public in and for said State and
County, Dorothy Williams, Individually and as Attorney-in-Fact for Devisees of
Roosevelt Boyland, the within named bargainor, with whom I am personally
acquainted (or proved to me on the basis of satisfactory evidence), and who
acknowledged that she executed the within Instrument for the purposes therein
contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
By: /s/ R. A. Mayhall
Notary Public
My Commission Expires:
February 9, 1999
Corporate Acknowledgement
STATE OF PENNSYLVANIA
COUNTY OF BERKS
I hereby certify that on this day before me, an officer duly authorized
in the state aforesaid and in the county aforesaid to take acknowledgements,
personally appeared William J. Bork , to me known to be the person described in
and who executed the foregoing instrument as President of Penn National Gaming,
Inc., a corporation named therein, and acknowledged before me that he executed
the same as such officer, in the name of and for and on behalf of the said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal this 23rd day of June, 1997.
(44)
By: /s/ Susan M. Montgomery
Notary Public
My Commission Expires:
June 7, 1999
(45)
OPTION TO PURCHASE REAL PROPERTY
1. In consideration of Seven Thousand and no/100 Dollars ($7,000.00) paid
to Joyce M. Peck, c/o 1558 Texas Street, Memphis, Tennessee, 38106, hereinafter
referred to as "Seller", receipt of which is hereby acknowledged, Seller hereby
gives and grants to Penn National Gaming, Inc., with business offices at 825
Berkshire Boulevard, Wyomissing, PA 19610, hereinafter referred to as
"Purchaser", and its assigns, the exclusive option to purchase the 65 acre real
property of Seller situated in the City of Memphis, County of Shelby, State of
Tennessee, and particularly described on Exhibit A which is attached hereto and
made a part hereof by reference.
2. Exercise of the option to purchase is at the sole
discretion of Purchaser.
3. The period of duration of the option is thirty (30)
days from the date hereof.
4. However, Purchaser is also granted additional options of up to three
hundred thirty (330) additional days. Said options will be granted upon receipt
of the sum of $7,000.00 per thirty (30) day period. The first $7,000.00 must be
tendered to Seller before the expiration of the first thirty (30) day option,
and each additional $7,000.00 must be tendered to Seller before the expiration
of each succeeding thirty (30) day period. Said sums shall be paid out of the
Escrow Account, below mentioned.
5. The sum of seventy-seven thousand dollars ($77,000.00) shall be
deposited with an Escrow Agent in Memphis, Tennessee on or before fourteen (14)
days from the date of this Agreement. Said Escrow Agent shall be chosen by
mutual agreement of the parties, in writing. Seller's consent to the designation
of an Escrow Agent may not be unreasonably withheld. Said seventy-seven thousand
dollars ($77,000.00) (hereinafter the Deposit Funds) may, at Purchaser's option,
be placed by Escrow Agent in an interest bearing account.
5. Upon failure of Purchaser to exercise this option to purchase the
property, the aforementioned $7,000.00 and any additional option monies paid to
Seller shall be the sole property of Seller, and there shall be no further
liability of the parties
(46)
under this agreement, one to the other.
6. In the event Purchaser exercises its option to
purchase the property, all option payments made to Seller shall be
applied to the purchase price.
7. Purchase price of the subject property is $30,000.00 per acre;
purchase shall be of the property, in its entirety, described on Exhibit A. All
sums due to Seller shall be paid in certified funds at closing. Property shall
be surveyed at expense of Seller; survey shall be furnished to Purchaser within
30 days of the date of this Agreement.
8. Purchaser's exercise of its option to purchase shall be written notice
to Seller by hand-delivery, U.S.Mail or Federal Express, which notice, to be
effective, must be actually received by Seller before midnight on the day
Purchaser's option or any extensions expires.
9. The final closing of the Purchase shall be within thirty (30) days of
Purchaser's exercise of its option, subject to any extensions the parties may
mutually agree upon, in writing.
10. At closing, Seller will deliver to Purchaser a good and valid
Warranty Deed on forms customarily used in Memphis, Shelby County, Tennessee,
wherein the Seller will warrant that there are no liens or encumbrances on said
property, except any subdivision or other restrictions of record, and any
property taxes levied by the City of Memphis or County of Shelby. Seller will
not grant any easements or other encumbrances on the property after the date of
this Agreement.
11. Any property taxes for years prior to the tax year of closing shall
be paid by Seller; the property taxes for the year of closing shall be prorated
between the Seller and the Purchaser, as of the date of closing. Any Greenbelt
taxes shall be paid by Seller. Any billboard leases will be assigned to
Purchaser. All tax liens, and liens of Deeds of Trust, will be removed, at the
sole expense of the Seller. Any labor and materialman liens will be removed, at
the sole expense of the Seller.
12. Seller, at Seller's expense, will fill the entire 65 acres to a
height one foot above the 100 year flood plain as established on FEMA maps as of
December, 1994. Said fill shall be an engineered fill and compacted to 90% of
Maximum Standard Proctor Density. If the property is not filled by the date of
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closing, then the sum of $15,000.00 (of the purchase price) per unfilled acre
will be held in escrow, with sums released to Seller as the fill is completed.
All fill must be completed within six (6) months after closing.
13. In the event either party must enforce its rights under the
Agreement, or otherwise seek redress from the other for damages suffered in
connection with this Agreement, the losing party shall pay to the prevailing
party all reasonable costs, attorney fees and suit expenses.
14. Tennessee law shall apply in any action brought arising out of this
Agreement, and all suits shall be prosecuted in the Chancery Court of Shelby
County, Tennessee.
Executed in duplicate originals as of the 20th day of June, 1997.
SELLER:
By: /s/ Joyce M. Peck
JOYCE M. PECK
PURCHASER:
By: /s/ William J. Bork
PENN NATIONAL GAMING, INC.
(48)
Individual Acknowledgement
STATE OF TENNESSEE
COUNTY OF SHELBY
On this the 18th day of June, 1997, before me, Ramona Allen, the
undersigned officer, personally appeared Joyce M. Peck, known to me to be the
person whose name is subscribed to the within instrument and acknowledged that
he executed the same for the purpose therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
By: /s/ Ramona Allen
Notary Public
My commission expires:
July 12, 1999
Corporate Acknowledgement
STATE OF PENNSYLVANIA
COUNTY OF BERKS
I hereby certify that on this day before me, an officer duly authorized
in the state aforesaid and in the county aforesaid to take acknowledgements,
personally appeared William J. Bork , to me known to be the person described in
and who executed the foregoing instrument as President of Penn National Gaming,
Inc., a corporation named therein, and acknowledged before me that he executed
the same as such officer, in the name of and for and on behalf of the said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal this 23rd day of June, 1997.
By: /s/ Susan M. Montgomery
(49)
Notary Public
My Commission Expires:
June 7, 1999
(50)
OPTION TO PURCHASE REAL PROPERTY
1. In consideration of Two Thousand and no/100 Dollars ($2,000.00) paid
to Alan J. Aste, 3999 Forrest, Memphis, Tennessee 38122, hereinafter referred to
as "Seller", receipt of which is hereby acknowledged, Seller hereby gives and
grants to Penn National Gaming, Inc., 825 Berkshire Boulevard, Wyomissing,
Pennsylvania, 19610, hereinafter referred to as "Purchaser", and/or its assigns,
the exclusive option to purchase the 18 acre real property of Seller situated in
the City of Memphis, County of Shelby, State of Tennessee, and particularly
described on Exhibit A which is attached hereto and made a part hereof by
reference.
2. Exercise of the option to purchase is at the sole
discretion of Purchaser.
3. The period of duration of the option is thirty (30)
days from the date hereof.
4. However, Purchaser is also granted additional options of up to three
hundred thirty (330) additional days. Said options will be granted upon receipt
of the sum of $2,000.00 per 30 day period. The first $2,000.00 must be tendered
to Seller before the expiration of the first thirty (30) day option, and each
additional $2,000.00 must be tendered to Seller before the expiration of each
succeeding thirty (30) day period. The sum of $22,000.00 shall be deposited with
an Escrow Agent in Memphis, Tennessee within fourteen (14) days of the date of
this Agreement. Said Escrow Agent shall be chosen by mutual agreement of the
parties, in writing. Said funds shall be placed in an interest bearing account.
5. Upon failure of Purchaser to exercise this option to purchase the
property, the aforementioned $2,000.00 and any additional option monies paid to
Seller shall be the sole property of Seller, and there shall be no further
liability of the parties under this agreement, one to the other.
6. In the event Purchaser exercises its option to
purchase the property, all option payments, mentioned herein, will
be applied to the purchase price.
7. The purchase price of the subject property is
(51)
$27,500.00 per acre, assuming 18 acres, subject to survey, of which all option
money is a part. Said sum shall be paid to Seller, in certified funds, at
closing. Survey shall be at the expense of the Seller.
8. If the Purchaser elects to exercise its option granted herein, the
Purchaser shall notify the Seller, in writing, United States Mail, postage
prepaid and/or hand delivery, to Seller's address shown above prior to midnight
on the day the option or any extension thereon expires.
9. The closing of the purchase shall be within thirty (30) days of the
notice, by Purchaser to Seller, that Purchaser desires to exercise the option
granted herein.
10. At closing, Seller will deliver to Purchaser a good and valid
Warranty Deed on forms customarily used in Memphis, Shelby County, Tennessee,
wherein the Seller will warrant that there are no liens or encumbrances on said
property, except any subdivision or other restrictions of record, and any
property taxes levied by the City of Memphis or County of Shelby. Seller will
not grant any easements or other encumbrances on the property after the date of
this Agreement.
11. Any property taxes for years prior to the tax year of closing shall
be paid by Seller; the property taxes for the year of closing shall be prorated
between the Seller and the Purchaser, as of the date of closing. Any Greenbelt
taxes shall be paid by Seller. Any billboard leases will be assigned to
Purchaser. All tax liens, and liens of Deeds of Trust, will be removed, at the
sole expense of the Seller. Any labor and materialman liens will be removed, at
the sole expense of the Seller.
12. If Seller is unable to deliver the good and sufficient Warranty Deed,
as aforementioned, the option money paid herein shall be immediately returned to
Purchaser.
13. If Seller desires to exchange this property to qualify
for Section 1031 treatment, by Internal Revenue Service, Purchaser
will attempt to cooperate, but this option is not contingent
thereon, and closing will not be delayed.
14. At Purchaser's option, Purchaser may proceed against Seller for
specific performance of this Option Contract, and if suit is necessary, Seller
agrees to pay all reasonable costs incurred by Purchaser, including a reasonable
attorney fee.
(52)
Executed in duplicate originals as of the 20th day of June, 1997.
SELLER
By: /s/ Alan J. Aste
ALAN J. ASTE
PURCHASER
By: /s/ William J. Bork
PENN NATIONAL GAMING, INC.
(53)
Individual Acknowledgement
STATE OF TENNESSEE
COUNTY OF SHELBY
Personally appeared before me, a Notary Public in and for said State and
County, Alan J. Aste, Individually and as Attorney- in-Fact for Devisees of
Roosevelt Boyland, the within named bargainor, with whom I am personally
acquainted (or proved to me on the basis of satisfactory evidence), and who
acknowledged that she executed the within Instrument for the purposes therein
contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
By: /s/ Dorothy A.
Kanlandingham
Notary Public
My Commission Expires:
August 22, 2000
Corporate Acknowledgement
STATE OF PENNSYLVANIA
COUNTY OF BERKS
I hereby certify that on this day before me, an officer duly authorized
in the state aforesaid and in the county aforesaid to take acknowledgements,
personally appeared William J. Bork , to me known to be the person described in
and who executed the foregoing instrument as President of Penn National Gaming,
Inc., a corporation named therein, and acknowledged before me that he executed
the same as such officer, in the name of and for and on behalf of the said
corporation.
(54)
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal this 23rd day of June, 1997.
By: /s/ Susan M. Montgomery
Notary Public
My Commission Expires:
June 7, 1999
5
1,000
6-mos
Dec-31-1997
Jan-01-1997
Jun-30-1997
4,827
0
3,137
0
0
11,860
98,197
9,313
127,003
19,604
0
0
0
151
54,700
127,003
52,404
52,404
39,177
39,177
5,435
0
1,675
6,271
2,573
3,698
0
383
0
3,315
.22
.22
