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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 28, 1999
PENN NATIONAL GAMING, INC
(Exact name of Registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of incorporation or organization)
0-24206 23-2234473
(Commission File Number) (I.R.S. Employer Identification No.)
825 BERKSHIRE BLVD, SUITE 200, WYOMISSING, PA
19610 (Address of principal executive offices
including Zip code)
610-373-2400
(Registrant's telephone number including area code)
Not applicable
(Former name and former address, if changed since last report)
Item 5. Other Events
GENERAL
On January 28, 1999, pursuant to a First Amendment to an Asset Purchase
Agreement, by, between and among Greenwood New Jersey, Inc. ("Greenwood"),
International Thoroughbred Breeders, Inc., Garden State Race Track, Inc.,
Freehold Racing Association, Atlantic City Harness, Inc. and Circa 1850, Inc.,
the original parties to an Asset Purchase Agreement entered into as of July 2,
1998, and Penn National Gaming, Inc. ("Penn") (the "Agreement"), and pursuant to
which Penn entered into a joint venture ("Joint Venture"), Penn, along with its
Joint Venture partner, Greenwood agreed to purchase certain assets of the Garden
State Race Track and Freehold Raceway, both located in New Jersey (the
"Acquisition").
BASIC TERMS OF THE ACQUISITION
The purchase price for the Acquisition is approximately $46,000,000
(subject to reduction of up to approximately $1,000,000 based upon the
resolution of certain disputed items, for which amounts have been placed in
escrow). The purchase price will consist of $23,000,000 in cash and $23,000,000
pursuant to two deferred purchase price promissory notes in the amount of
$22,000,000 and $1,000,000, each. Penn is responsible for approximately 50% for
the purchase price. The parties to the Joint Venture are also contingently
liable to the sellers in an amount of an additional $10,000,000, if the Joint
Venture receives approvals for off-track betting or phone betting.
THE JOINT VENTURE
Greenwood and Penn entered into the Joint Venture on January 28, 1999,
whereby the parties to the Joint Venture will effectuate the Acquisition. The
Joint Venture is contingent upon, among other things, Penn obtaining approvals
necessary to effect the Joint Venture, which approvals include: (i) full and
complete New Jersey regulatory approval (including but not limited to approval
of the New Jersey Racing Commission), (ii) Hart Scott Rodino compliance; and
(iii) the written consent of a majority of the holders of its $80 Million Senior
Notes issued December 17, 1997 to any necessary modification to the Indenture
dated December 12, 1997 to permit Penn's investment in the Joint Venture (the
"Penn Approvals"). At the initial closing of the Acquisition on January 28,
1999, Penn loaned FR Park Racing, LP, a New Jersey limited partnership
("FRPRLP") $11,250,000, which is secured by certain assets. After obtaining
the above Approvals, Penn will invest an additional $11,750,000 into the Joint
Venture with a portion of this amount being treated as capital and the balance
as debt. Penn will have approximately 50% interest in the Joint Venture.
CERTAIN RELATED AGREEMENTS
The Joint Venture will enter into various agreements with respect to
the operation of the racing facilities.
ACCOUNTING TREATMENT
The acquisition of its interests in the Joint Venture will be
accounted for under the purchase method of accounting.
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Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit No. Description
2.1 First Amendment to Asset Purchase Agreement dated as
of January 28, 1999 by and among Greenwood New
Jersey, Inc., International Thoroughbred Breeders,
Inc., Garden State Race Track, Inc., Freehold Racing
Association, Atlantic City Harness Inc., Circa 1850,
Inc., and Penn national Gaming, Inc.
2.2 First Amendment to Joint Venture Agreement dated as
of January 28, 1999, by and between Greenwood New
Jersey, Inc., and Penn National Gaming, Inc. (^)
(^) Penn will upon request provide the Commission with copies of any schedule or
exhibits to this agreement.
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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
February 12, 1999 By:_/s/Robert S. Ippolito________________
Date Robert S. Ippolito, Chief Financial Officer
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Exhibit Index
Exhibit No. Description
2.1 First Amendment to Asset Purchase Agreement dated as
of January 28, 1999 by and among Greenwood New
Jersey, Inc., International Thoroughbred Breeders,
Inc., Garden State Race Track, Inc., Freehold Racing
Association, Atlantic City Harness Inc., Circa 1850,
Inc., and Penn national Gaming, Inc.
2.2 First Amendment to Joint Venture Agreement dated as
of January 28, 1999, by and between Greenwood New
Jersey, Inc., and Penn National Gaming, Inc. (^)
(^) Penn will upon request provide the Commission with copies of any schedule or
exhibits to this agreement.
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Exhibit No. 2.1
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement is made and entered
into as of the 28th day of January, 1999, by, between and among the parties to
an Asset Purchase Agreement entered into as of July 2, 1998 (the AAgreement@),
and Penn National Gaming, Inc. (APenn@). Defined terms in this First Amendment,
except as specifically defined herein, shall have the same meaning as in the
Agreement. Buyer, ITB, Sellers and Penn have executed a Fourth Extension
Agreement extending the Closing Date to January 28, 1999.
The parties have agreed to certain modifications to the terms of the
transactions.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree
as follows:
1. Adjustments to Purchase Price.
(1) Cash Portion of the Purchase Price. The Cash Portion of the Purchase Price
set forth in Subsection 6(a)(i) of the Agreement is hereby amended from
Thirty-Three Million Dollars ($33,000,000) to Twenty-Three Million Dollars
($23,000,000). In connection with this change, the amount of Buyer=s Senior
Financing referred to in Subsection 6(a)(vii) shall be the original principal
amount of Thirty-Three Million Dollars ($33,000,000).
(2) Deferred Purchase Price Notes. In lieu of Buyer=s delivery of the $12
Million Note as called for by Subsection 6(a)(ii), Buyer will deliver two
promissory notes with an aggregate original principal amount of $23 Million. The
notes shall be in the original principal amounts of $22 Million and $1 Million,
and in the form of Exhibits A and B attached hereto (the ADeferred Purchase
Price Notes@). The $22 Million Deferred Purchase Price Note has been made
payable to CSFB at ITB and Sellers direction and is on account of ITB and
Sellers obligations to CSFB. In consideration of Buyer=s issuance of this Note,
CSFB will credit ITB and Sellers in an amount agreed to among CSFB, ITB and
Sellers. The $22 Million Deferred Purchase Price Note shall be secured as
provided in the Deferred Purchase Price Mortgage in the form of Exhibit C
attached hereto.
(3) Escrow Agreement. The principal payment of the $1 Million Deferred Purchase
Price Note shall be directly deposited by Buyer into escrow and held in
accordance with the terms of an Escrow Agreement substantially in the form
attached as Exhibit D to this First Amendment to Asset Purchase Agreement.
(4) 10 Acre Parcel.
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(1) Acquisition of 10 Acre Parcel. Any additional purchase price for the 10 Acre
Parcel is eliminated, in consideration of the acceleration of the payment of the
Purchase Price as set forth above. The 10 Acre Parcel will be transferred to
Buyer within thirty (30) days after the payment of the $1 Million Deferred
Purchase Price Note and the obtaining of subdivision and other approvals
required for the conveyance of the 10 Acre Parcel , whichever is later. To
facilitate the obtaining of approvals, at the Closing GSRT will provide GRI=s
operating entity, GS Park Racing, LP (AGSPRLP@) with a Power of Attorney which
will permit GSPRLP to pursue the approvals in the name of GRST and GSPRLP;
provided, however, GSPRLP may not use the Power of Attorney in a manner which
will create any burden upon the real estate owned by GSRT which is not part of
the 10 Acre Parcel, without GSRT consent, which consent will not be unreasonably
withheld; and further provided, however, the provisions of a Memorandum of
Conveyance Obligation between GSPRLP and GSRT shall apply to the obtaining of
the approvals for the 10 Acre Parcel. A site plan of the 10 Acre Parcel is
attached as Exhibit E-1 hereto. In addition, the 10 Acre Parcel will benefit
from an easement to permit the use of the existing access to and from Route 70
to be available to the 10 Acre Parcel, and no separate access to Route 70 will
be provided for the 10 Acre Parcel. The terms of the easement are attached as
Exhibit E-2 hereto.
(2) GSRT Right of First Refusal. If within three (3) years of the Closing Date:
(A) the entity affiliated with Buyer which acquired the 10 Acre Parcel (AOwner@)
receives a bona fide offer to sell the 10 Acre Parcel and intends to accept such
offer (AOffer@); (B) an OTB Facility is not then operating on the 10 Acre
Parcel; and (C) GSRT owns the contiguous real estate; then Owner shall give GSRT
a right of first refusal to acquire the 10 Acre Parcel by the matching of the
price and terms of the Offer. To effect the foregoing, Owner shall give GSRT
written notice of the Offer, and GSRT will then have fourteen (14) days to match
the Offer (AOffering Period@). If GSRT shall not have executed and delivered to
Owner a Purchase agreement containing all the terms and conditions of the Offer,
including the providing of deposits, by the end of the Offering Period, this
right of first refusal shall terminate and be of no further force or effect.
GSRT=s purchase agreement shall not be required to contain provisions of the
Offer which deal with the purchase of assets or property other than the 10 Acre
Parcel and improvements thereon. GSRT=s acceptance must be accompanied by
either: (y) an ITB guarantee; or (z) such other security or financial
arrangements which demonstrate to Buyer=s reasonable satisfaction that GSRT has
the financial ability to consummate the acquisition. In the event GSRT does not
exercise its right of first refusal after being offered the opportunity to do
so, or if it defaults on its acquisition after exercising its right, the right
of first refusal will be eliminated and of no further force and effect. This
right of first refusal may not be assigned or transferred by GSRT except to ITB
or an affiliate of ITB, which may not further assign or transfer this right.
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2. Admission of Penn. Sellers and ITB agree to the admission of Penn to a 50%
ownership interest in the Joint Venture Entities and the participation of Penn
at the Initial and Subsequent Closings. At the Initial Closing, Penn will
provide its Contingent Guaranty of the $1 Million Deferred Purchase Price and
the Contingent Promissory Notes, which Contingent Guaranty will be effective
only upon Penn obtaining approvals necessary to effect the Joint Venture, which
approvals are as follows: (i) full and complete New Jersey regulatory approval
(including but not limited to approval of the Racing Commission), (ii) HSR
Compliance; and (iii) the written consent of a majority of the holders of its
$80 Million Senior Notes issued December 17, 1997 to any necessary modification
to the Indenture dated December 12, 1997 to permit Penn=s investment in the
Joint Venture (the APenn Approvals@). The form of the Penn Contingent Guaranty
is attached hereto as Exhibit F. Penn undertakes to use its best efforts to
obtain the Penn Approvals by March 1, 1999, or as soon thereafter as possible.
3. Shareholder Approval. ITB represents and warrants that it has obtained the
approval of the transaction contemplated by the Agreement as amended herein by
shareholders holding more than a majority of the shares of ITB, and that the
condition to Closing set forth in Section 13(d) calling for the approval of ITB
shareholders has been satisfied.
4. Fairness Opinion. ITB has selected the firm of Janney Montgomery Scott
(AJMS@) to provide the fairness opinion referred to in Section 13(c) of the
Agreement, and JMS has issued its affirmative opinion in draft form. ITB will
cause JMS to issue its final opinion three (3) business days following execution
of this First Amendment. The selection of JMS is acceptable to Buyer.
5. Fiduciary Out. The fiduciary out contained in Subsection 22(b) of the
Agreement shall be of no further force and effect upon the execution of this
First Amendment.
6. Lease Rental Payment. The License Agreement set forth as Exhibit D to the
Lease Agreement for GSP is hereby eliminated, and GSRT shall not have any right
to operate a flea market at GSP. In consideration of this change, the annual
rent shall be increased from $100,000 to $300,000.
7. Further Lease Revisions; Waiver of Right of First Refusal; Covenant. The
Declaration of Restrictive Covenants set forth as Exhibit C to the Lease
Agreement (ACovenant@) is modified to delete the exceptions to the permanent
nature of the Covenant by the elimination of subparagraphs (1)(b)(i) and (ii),
and subparagraph (1)(c); and to delete the Right of First Refusal set forth in
subparagraphs 2(b) and (c).
8. Condition Precedent to $5 Million Contingent Promissory Note; Transfer of
Assets Subject to Contingent Notes. The $5 Million Contingent Promissory Note in
the form of Exhibit 6(a)(iii)(A) to the Asset Purchase Agreement shall be
amended to provide that the right to operate an OTB Facility described in the
Note as a Condition Precedent need not be at GSP, and the Condition Precedent
will be satisfied if any OTB Facility can be operated by Buyer in Camden County,
New Jersey, or elsewhere as a matter of right directly resulting from its
holding or having previously held rights to conduct live racing at GSP,
including if such rights are maintained by conducting live racing elsewhere than
at the Garden State Park Facility on account of licenses to conduct live racing
at the Garden State Park Facility, and all licenses, consents, approvals and
permits for such OTB Facility are received within three (3) years of Closing.
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9. Purse Accounts. Within the Thoroughbred Purse Agreement, there exists an
obligation of Sellers in the amount of $45,000 per annum payable in years 1999
and 2000 that relates to a purse under calculation in 1996. In addition, the
purse accounts at both GSP and Raceway appear to be underfunded. A good faith
estimate of the amount of any under funding as determined by Sellers and
approved by Buyer will be credited to Buyer at the Closing. As on thereafter as
a final reconciliation of the purse accounts up to the Effective Date can be
determined, but not later than 45 days after Closing, any required adjustment
will be made in accordance with Subparagraph 4(c) of the Agreement.
10. Liquor License at GSP. In order to continue operations at GSP in the event
the present food and beverage service contract is terminated, GSP will require a
liquor license. In accordance with Subparagraph 4(a) of the Asset Purchase
Agreement, and consistent with the lease arrangement, Buyer is only responsible
for payments and costs during its operations of GSP. Therefore, in the event
Buyer is required to acquire a liquor license in its name, or the name of its
nominee, for the benefit of Buyer=s operations at GSP and/or the OTB Facility at
GSP, and Buyer elects to have Seller participate in the acquisition of the
liquor license, then Buyer will pay the lesser of $100,000 or the purchase price
toward the acquisition of a liquor license for GSP and/or the OTB Facility at
GSP, and GSRT will contribute the balance of the costs, if any. Furthermore, if
GSRT has participated in the acquisition of the liquor license, and if within
three (3) years of the Closing Date, Buyer no longer has a use for the license
at GSP and/or the OTB Facility at GSP, GSRT will have the option to acquire the
liquor license from Buyer at such time, by reimbursing Buyer the amount Buyer
contributed to the acquisition of the liquor license. Seller is presently
pursuing the obtaining of a liquor license for GSPRLP. The terms of this
Paragraph will apply to this liquor license. Buyer=s obligation to pay $100,000
towards the acquisition of a liquor license is effective only upon Buyer=s
obtaining free and clear title to the liquor license in its or its designee=s
name. Notwithstanding the foregoing, the liquor license will be subject to a
Management Agreement giving Service America Corporation the ability to perform
its duties under a Concession Agreement dated November 4, 1983, as amended, and
a Phoenix Room Agreement dated November 4, 1983, as amended.
11. Buyer Conditions - CCC. In connection with Subsection 12(b) of the
Agreement, Buyer waives as a condition the obtaining of any approval from the
New Jersey Casino Control Commission for the simulcast of its races from GSP and
Raceway, provided, however, such waiver shall not limit the requirement of
obtaining other regulatory approvals as set forth in Subsection 12(b).
12. Raceway Property. At the Closing, Sellers will assign to Buyer any and all
third party leases as to which any Seller is a lessor, which leases are set
forth in Exhibit J hereto. All real property will be conveyed to Buyer at the
Closing.
13. Allocation of Purchase Price. The allocation of the Purchase Price required
by Subsection 6(b), is attached hereto as Exhibit K.
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14. Use of Names. The parties agree as follows:
(1) GSRT may retain the use of the name Garden State Race Track, Inc. as its
corporate name. Buyer shall have the right to use the name AGarden State Race
Track@ so long as it conducts racing or wagering operations at the GSP Facility.
(2) Buyer shall have the exclusive rights to use of the name AGarden State
Park@, subject only to GSRT reserving the right to the name AGarden State Park@
to be used for any residential, commercial or retail real estate use on the land
owned by it which constitutes GSRT=s presently owned real property and only with
Buyer=s prior written approval, which approval shall not be unreasonably
withheld.
(3) It is specifically further agreed that Sellers may not use the names Garden
State Park or Garden State Race Track in connection with any wagering or gaming
operations, horse racing, simulcasting, off-track betting, wagering activities
and gambling and gaming of any sort whether on the GSP property or elsewhere
within the State of New Jersey.
15. Environmental Matters.
(1) Unresolved Matters. The parties acknowledge that those matters referred to
in Exhibit I remain unresolved and are likely to remain unresolved as of
Closing. Each Seller and ITB agrees to undertake its best efforts to resolve
such matters at their expense to attain full compliance with all applicable
laws, including all Environmental Laws, as defined in the Agreement in Section
10(i)(D), as promptly as possible after the Closing. Each Seller and ITB agrees
and acknowledges that:
(1) Continuing Obligations. The matters set forth on Exhibit I are matters which
each Seller and ITB has jointly and severally agreed to indemnify Buyer for any
costs, expenses, fines, or damages incurred by Buyer relating thereto under
Section 17(a) of the Agreement, Section 12, of the Lease or otherwise;
(2) Preservation of Rights. The provisions of this paragraph, this First
Amendment to Agreement, or the Closing contemplated under the Agreement, is not
intended to, and shall not waive any of Buyer=s rights with respect to the
matters listed on Exhibit I, or any other environmental matter, or change or
modify Seller=s respective responsibilities and obligations in any way with
respect thereto, and all such rights and obligations shall remain in full force
and effect and shall survive the Closing.
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(2) GSP Lease. On December 4, 1998 the New Jersey Department of Environmental
Protection (ANJDEP@) issued to GSRT a New Jersey Pollutant Discharge Elimination
System discharge to surface water permit (APermit@). Subject to the provisions
of this Subsection 15(b), GSRT agrees to comply in all respects with the terms
and conditions of the Permit. The Permit=s effective date is January 1, 1999.
The Permit requires that a Stormwater Pollution Preventative Plan (ASPPP@) be
developed by June 30, 1999 and implemented by June 30, 2000. GSRT has authorized
Buyer to assist it in negotiations with NJDEP regarding the timetable for an
SPPP, and the elements of an SPPP. Buyer=s assignee, GSPRLP, which will be the
Tenant of GSRT and will operate GSP in accordance with the terms of the Permit,
to the extent consistent with normal racing track standards which do not require
extra material expense or inconvenience to GSPRLP, but has no obligation for
extraordinary expense or structural changes at GSP to comply with the Permit.
Buyer recognizes that the potential short term lease of GSP does not justify
GSRT making major construction expenditures at GSP to implement an SPPP.
Accordingly, to the extent implementation of an SPPP would require expenditures
by GSRT in the aggregate over the term of the GSP Lease exceeding $100,000, GSRT
shall have the option, by written notice to tenant at least 90 days prior to
when construction must commence, to decline to undertake such construction. If
GSRT declines to undertake such construction, or at anytime the Permit is not in
effect, GSPRLP may, but shall not be obligated to undertake the construction, or
at its option, upon 30 days written notice to GSRT, terminate the lease for GSP.
(3) Cooperation. From the date hereof, and continuing so long as the GSP Lease
is in effect, GSRT and the tenant shall fully cooperate with one another in
connection with environmental matters, including a free exchange of information
as to such matters; and, furthermore, ITB, the Sellers and Buyer shall fully
cooperate with one another in connection with remediation efforts at Raceway.
16. Employment Matters.
(1) Assumption of Contracts. At the Closing, Buyer will expressly assume, or
cause to be assumed, only the following collective bargaining contracts:
Agreements between Freehold Racing Association and Laborer=s
Local 472 (AAdmissions and Security Departments@ and AMaintenance Department@):
and Agreement between Freehold Racing Association and Teamsters Local 469.
(2) Contract Assumption Indemnity. In addition to the indemnity provisions of
Section 17(b) of the Agreement, Buyer shall indemnify, hold harmless and defend
each Seller and ITB from and against any loss incurred or suffered by any Seller
or ITB, directly or indirectly, by reason of any and all obligations, duties,
liabilities and claims, except those relating to any failure to engage in
effects bargaining, arising out of Seller=s failure to require Buyer to assume,
or cause to be assumed, pursuant to Section 4(c) of the Agreement, any
collective bargaining agreement set forth below. This indemnification is subject
to the provisions of Subsection (c), (d) and (e) of Section 17 of the Agreement.
The following collective bargaining agreements are the agreements to which the
foregoing indemnity applies:
(1) Freehold Racing Association and Sports Arena Employees= Union,
Local 137;
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(2) Freehold Racing Association (by the Building Contractors Association
of New Jersey) and Monmouth County Carpenters= Local No. 2250;
(3) Garden State Park and Carpenters District Council of South Jersey;
(4) Garden State Park and International Laborers= Association of North
America Local Union No. 222;
(5) Garden State Park and International Brotherhood of Electrical Workers
Local Union No. 351;
(6) Garden State Park and Brotherhood of Painters and Allied Trades of
America, Camden Local Union No. 1171;
(7) Garden State Park and United Association of Journeymen and Apprentices
of the Plumbing and Pipefitting Industry, Local Union No. 322;
(8) Garden State Park and Construction and General Laborers= Union
Local 172.
(9) Freehold Racing Association and International Union of Operating Engineers
Locals 68, 68A and 68B.
(3) WARN Compliance. ITB and Sellers represent and warrant that the aggregate
number of employees permanently laid-off or terminated, whether for reasons
related to the transaction or otherwise, in the ninety (90) days immediately
preceding Closing (including employees who earlier had been temporarily laid off
but whose period of layoff reached, within such ninety (90) day period, six
months in length without such employee having been recalled) is 54. ITB and
Sellers further represent and warrant that the aggregate number of employees
temporarily laid-off, whether for reasons related to the transaction or
otherwise, in the ninety (90) days immediately preceding Closing is 44. A
schedule listing such employees and the dates of and reasons for the separation
of each is attached hereto as Exhibit AJ@. In reliance on these representations,
Buyer waives Sellers= compliance with WARN prior to Closing. Buyer represents
and warrants that it intends to hire, within thirty (30) days of Closing,
individuals employed by Sellers at Garden State Park and Freehold Raceway
sufficient in number to avoid, as a result of Closing, a Aplant closing@ or
Amass layoff@ under WARN. Buyer agrees to indemnify, hold harmless and defend
Sellers and ITB from and against any loss incurred or suffered by any Seller or
ITB, directly or indirectly, by reason of any and all obligations, duties,
liabilities and claims under WARN as a consequence of Buyer=s failure to hire
individuals employed by Sellers at Garden State Park and Freehold Raceway
sufficient in number to avoid, as a result of Closing, a Aplant closing@ or
Amass layoff@ under WARN.
17. Closing Date. The Closing Date set forth in Sections 9 and 22(e) of the
Agreement is hereby amended to Thursday, January 28, 1999.
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18. Release of Claims. Effective upon the Closing of the transaction,
automatically and without the necessity of further action by Buyer, Buyer shall
be deemed to have waived any claims it has alleged against ITB and Sellers for
conduct between the date of the Agreement and the Closing, as relates to fair
dealing, cooperation, and prompt and diligent pursuit in obtaining approvals
required for the consummation of the transaction.
19. Chiller Lease. GECC has failed to confirm in writing that Buyer=s sole
obligation to GECC is to make scheduled monthly payments and routine maintenance
of the Chiller Lease during the term of the Lease of GSP. In the event GECC
accelerates the obligation of GSRT or takes any other collection actions under
the GECC Chiller Lease, except due to Buyer=s failure to make scheduled monthly
payments or perform routine maintenance, GSRT shall be responsible for all
payments or obligations under the GECC Chiller Lease, except scheduled monthly
payments.
20. Agent for Contingent Notes. In accordance with Subsection 6(a)(vii), the
Contingent Promissory Notes and related Mortgage are to be payable to an agent
for the benefit of ITB and the Sellers. ITB and Sellers need additional time to
arrange for such an agent. Buyer is not waiving this requirement by closing
without an agent in place. Accordingly, ITB and Sellers agree that any payments
required to be made under the Contingent Promissory Notes prior to an agent, as
described in Subsection 6(a)(vii) being in place and the Contingent Promissory
Notes have been assigned to such agent, shall be made to Buyer=s counsel, Fox,
Rothschild, O=Brien & Frankel, LLP, to be held in escrow until an agent is in
place, and then shall be paid to ITB, or as ITB shall direct. Furthermore, the
Mortgage delivered at Closing shall be held by Buyer=s counsel and released for
recording only after such agent is in place and can be identified on such
Mortgage.
21. Time of the Essence. Time is of the essence in connection with the
obligations of the parties under the Asset Purchase Agreement, as amended.
22. Ratification. In all other respects, the Asset Purchase Agreement is hereby
ratified and affirmed; and the rights and obligations of the parties thereunder
preserved. By the execution of this First Amendment, no party is waiving any
rights or claims under the Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Asset Purchase Agreement on the date first above written.
GREENWOOD NEW JERSEY, INC.
By: /s/ Harold G. Handel_____
Harold G. Handel, President
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By: /s/ Nunzio DeSantis______
GARDEN STATE RACE TRACK, INC.
By: /s/ Nunzio DeSantis______
FREEHOLD RACING ASSOCIATION
By: /s/ Nunzio DeSantis______
ATLANTIC CITY HARNESS, INC.
By: /s/ Nunzio DeSantis______
CIRCA 1850, INC.
By:/s/ Nunzio DeSantis______
PENN NATIONAL GAMING, INC.,
By: /s/ William J. Bork________
William J. Bork, President
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LIST OF EXHIBITS TO
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
1. $22 Million Deferred Purchase Price Promissory Note*
2. $1 Million Deferred Purchase Price Promissory Note
3. Mortgage and Security Agreement related to Deferred Purchase Price
Notes*
4. Escrow Agreement
E-1. 10 Acre Parcel
E-2. Easement relating to the 10 Acre Parcel
F. Penn Contingent Guaranty
G. Raceway Leases
H. Allocation of Purchase Price
I. Environmental Matters
J. Employees Laid-Off or Terminated Since April 1, 1998
*Exhibits A and C are omitted. The form of these documents will be negotiated
among ITB, Sellers, Buyer and CSFB.
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Exhibit No. 2.2
FIRST AMENDMENT TO JOINT VENTURE AGREEMENT
RELATING TO NEW JERSEY ASSETS
This First Amendment to Joint Venture Agreement is made and entered
into as of the 28th day of January, 1999, by and between Greenwood New Jersey,
Inc. (AGreenwood@) and Penn National Gaming, Inc. (APenn@), the parties to a
Joint Venture Agreement dated October 30, 1998, as previously modified by a
letter from Penn to Greenwood dated November 2, 1998 (the AJV Agreement@).
Certain defined terms used herein are based on the definitions of the Asset
Purchase Agreement of July 2, 1998.
The parties desire to further amend their Joint Venture Agreement, and
agree as follows:
1. Term of the Joint Venture. It is the intention of the parties that neither be
free to deal independently in connection with the acquisition of the New Jersey
Assets, unless for any reason, one of the parties is unable to proceed due to
circumstances outside its control, for example, the inability to obtain
regulatory approval. The parties therefore agree that neither will act alone in
connection with the acquisition of the assets until July 1, 1999, unless one of
the joint venture parties is unable to proceed due to circumstances outside its
control and abandons its efforts to seek the required approvals.
2. Best Efforts. Each party to the Joint Venture will use its best efforts to
obtain or meet all consents, approvals or requirements necessary to effect the
Joint Venture, and to allow the parties to jointly acquire the New Jersey
Assets. For purposes of this First Amendment, for Greenwood the approval
required shall be only full and complete New Jersey regulatory approval
(including but not limited to approval of the Racing Commission); and for Penn,
only (i) full and complete New Jersey regulatory approval (including but not
limited to approval of the Racing Commission), (ii) HSR Compliance; and (iii)
the written consent of a majority of the holders of its $80 Million Senior Notes
issued December 17, 1997 to any necessary modification to the Indenture dated
December 12, 1997 to permit Penn=s investment in the Joint Venture (the APenn
Approvals@).
3. Structure of the Transaction.
(1) Operating Entities. Greenwood intends to assign its rights to acquire the
Assets related to Raceway to FR Park Racing, LP, a New Jersey limited
partnership (AFRPRLP@); and the Assets related to GSP, including the leasehold
interest, to GS Park Racing, LP, a New Jersey limited partnership (AGSPRLP@).
Greenwood Limited Partner, Inc., a Delaware corporation (AGLP@) will hold the
entire limited partnership interest of 99.9% in each of FRPRLP and GSPRLP; and
Pennwood Racing, Inc., a Delaware corporation (APennwood@), will hold the entire
general partnership interest of .1% in each of FRPRLP and GSPRLP.
(2) Service Companies. Employees of Raceway will be employed by FR Park
Services, LP, a New Jersey limited partnership (AFR Park Services@); and
employees of GSP will be employed by GS Park Services, L.P., a New Jersey
limited partnership (AGS Park Services@). Benstone Partners, a Pennsylvania
general partnership (ABenstone@) is owned indirectly 100% by Greenwood Racing,
Inc. (AGRI@). Benstone will hold the entire limited partnership interest of
99.9% in each of FR Park Services and GS Park Services; and Pennwood will hold
the entire general partnership interest of .1% of each. Pennwood is owned 100%
by GRI.
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(1)
(3) Documentation. Prior to the execution of this First Amendment, the documents
relating to the formation, organization and governance of the limited
partnerships referred to in Paragraph 3(a) and 3(b) above have been agreed to by
Penn and GRI. FRPRLP, GSPRLP, FR Park Services, and GS Park Services are
referred to herein as the Joint Venture Entities.
4. Participation by Penn at Initial and Subsequent Closings.
(1) Initial Closing. The Closing Date of the Asset Purchase Agreement with ITB,
et al, is presently scheduled for January 1999 (the AInitial Closing@), prior to
Penn=s obtaining the Penn Approvals.
(2) Penn Loan. At the Initial Closing, Penn will loan to FRPRLP Eleven Million
Two Hundred and Fifty Thousand Dollars ($11,250,000), and GRI, or affiliate of
GRI will loan to FRPRLP Eleven Million Seven Hundred Fifty Thousand Dollars
($11,750,000). These loans will be subordinated to the Deferred Purchase Price
Notes issued to the Sellers. The loan from Penn will be evidenced by a
$11,250,000 Promissory Note (the APenn Note@) from FRPRLP to Penn, guaranteed by
GRI. The loan from GRI, or an affiliate of GRI, will be a demand loan, subject
to the provisions of Subparagraph 4(f) below, and will be evidenced by a
$11,750,000 Promissory Note in the form of the Penn Note. The Penn Note will
have an initial maturity of April 30, 2000, and will bear interest at PNG=s cost
of borrowing. Interest will be payable quarterly. The Penn Note will be secured
by a Mortgage and Security Agreement subordinated to FRPRLP obligations to CSFB
contained in a $22 Million Note to be delivered at the Initial Closing, and
subject to CSFB=s lien in an amount not to exceed $22 Million. The maturity of
the Penn Note shall be extended in the event that as of the original maturity
date Penn has not obtained approval to participate in the Put obligation
referred to below in Paragraph 5 and the Put obligation to CSFB remains
applicable to GRI. At such time, the Penn Note shall be converted to the Put
Loan (as defined in Paragraph 5), and shall have the maturity of the Put Loan.
At its original maturity date, if the maturity date has been extended pursuant
to this Paragraph 4(b), the principal amount of the Penn Note shall be reduced
to Eight Million Seven Hundred and Fifty Thousand Dollars ($8,750,000) by the
payment by FRPRLP of any principal amount in excess of this amount.
(3) Subsequent Closing. Upon the obtaining of the Penn Approvals, and at the
time required by the Asset Purchase Agreement, as amended (the ASubsequent
Closing@), Penn will invest in the Joint Venture Entities an aggregate of an
additional Eleven Million Seven Hundred Fifty Thousand Dollars ($11,750,000),
adjusted to represent 50% of the payment then due the Sellers, plus 50% of all
other payments to Seller, less the principal amount of the loan made at the
Initial Closing (the ASubsequent Closing@). Penn shall not be able to use or
convert the Penn Note to equity or Joint Venture Entity debt until it has
obtained Noteholder approval for the Put obligation, the Put obligation has been
extinguished, or Penn has loaned GRI or its affiliate which purchased the GSP
real estate 50% of the Purchase Price, whichever is the earliest. At the
Subsequent Closing, Penn will acquire 50% of the equity of Pennwood, and 49.95%
of the limited partnership interests of each of the Joint Venture Entities. Penn
will be allocated profit or loss in the Joint Venture Entities on a pro rata
basis reflecting the portion of the year it owned its interests in the Joint
Venture Entities. Attached hereto as Exhibit A is a schedule showing the present
intention of the parties as to the equity and debt structure of the Joint
Venture Entities. Changes to Exhibit A shall require the approval of both Penn
and Greenwood.
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(4) Termination of Joint Venture. In the event and at such time as Penn
determines that it will not be able to obtain one or more of the Penn Approvals,
and abandons its efforts to obtain such approval(s), or December 31, 1999,
whichever is earlier (the ATermination Date@), the initial maturity date of the
Penn Note will be changed to the earlier of (i) eighteen (18) months from the
Termination Date; or (ii) five (5) business days after the successful closing of
a financing transaction specifically intended to repay Penn, which financing is
in an amount at least as great as the Penn debt. Such maturity date is subject
to extension in the event the Put obligation continues and the Penn Loan has
been converted to the Put Loan; provided, that, FRPRLP shall have reduced the
amount of the Put Loan by payment of any principal amount in excess of
$8,750,000.
(5) Escrow and Conduct Pending Subsequent Closing. At the Initial Closing GRI,
FRPRLP, GSPRLP, FR Park Services, GS Park Services, Pennwood and Penn will enter
into an Escrow Agreement providing that the documents necessary to issue
interests or shares constituting ownership of one-half interest in the Joint
Venture Entities and Pennwood will be placed in Escrow to be distributed at the
Subsequent Closing or such other time as determined by the Escrow Agreement.
From the Initial Closing until the earlier of (i) the Subsequent Closing, or
(ii) the Termination Date, GRI will not permit a change in the governing
documents, capitalization or ownership of any Joint Venture Entity or Pennwood,
without the prior approval of Penn, which approval will not be unreasonably
withheld.
(f) Greenwood Failure to Participate in the Subsequent
Closing. In the event that Penn has obtained the Penn Approvals, but Greenwood
breaches it obligations to participate in the Subsequent Closing, Penn may
proceed with the Subsequent Closing and may make all necessary payments to
Sellers at the Subsequent Closing. Provided that Penn makes all necessary
payments at the Subsequent Closing such that the Subsequent Closing is
consummated, and Greenwood fails to participate at the Subsequent Closing, then
(i) the maturity of the GRI loan to FRPRLP made at the Initial Closing will
convert from a demand loan to a loan with a fixed maturity date eighteen (18)
months from the Subsequent Closing; and (ii) GRI and its affiliates shall
execute and deliver to Penn all such documents, shares, or interests necessary
to transfer the full and complete ownership of the Joint Venture Entities to
Penn, and the Joint Venture shall be immediately terminated; provided, however,
that GRI=s loan to FRPRLP shall remain in accordance with its terms and Penn
shall reimburse GRI for one-half of its reasonable costs incurred in connection
with the Initial Closing.
(g) Penn Failure to Participate in the Subsequent Closing. In
the event that Penn has obtained the Penn Approvals but breaches its obligation
to participate in the Subsequent Closing, Greenwood may proceed with the
Subsequent Closing and may make all necessary payments to Seller at the
Subsequent Closing. Provided that Greenwood makes all necessary payments at the
Subsequent Closing such that the Subsequent Closing is consummated, the Joint
Venture shall be immediately terminated; provided, however, that Penn=s loan to
FRPRLP shall remain in accordance with its terms.
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5. Penn Responsibility in Connection with CSFB Put.
(a) Put. At the Closing, arrangements are to be entered into
between GRI, or another related entity of GRI (which may include a Joint Venture
Entity) and CSFB, whereby GRI, or a designee of GRI may be the purchaser of the
GSP real estate. In the event the Penn Approvals are not obtained, or Penn
otherwise does not acquire an interest in the Joint Venture Entities, Penn will
nevertheless join in the purchase of the GSP real estate to the extent of a
fifty percent participation, including providing 50% of all deposits and other
required payments, and the assumption of 50% of any debt incurred in connection
with the purchase of the real estate. The obligations of the GRI and Penn to
Sellers and CSFB shall be several and not joint. The parties will form a limited
liability company for such purchase, unless a different form of ownership is
agreed to by the parties at a later date. To the extent GS Park Racing, LP
continues operating at GSP, the lease governing its use will be amended to
reflect rental and other terms, as the parties shall agree.
(b) Approval for Penn Participation in the Put; Put Loan. To
accelerate the date by which Penn receives approval of the holders of its Senior
Notes, Penn will commence its efforts to obtain such approval immediately
following the Initial Closing. To the extent Penn requires approval of the
holders of its Senior Notes referred to in Paragraph 2 above for this
participation, and has not obtained such approval by the time the acquisition of
the GSP real estate must occur, Penn will nevertheless loan to GRI 50% of the
purchase price on the terms of the Penn Note; provided, however, the loan in
connection with the GSP real estate will have a maturity date which will be the
earliest of (i) when GRI, or its affiliate, sells the GSP real estate; (ii) when
GRI, or its affiliate obtains a mortgage loan for the GSP real estate in an
amount equal to or greater than its purchase price under the Put; or (iii)
eighteen (18) months from the date the GSP real estate is acquired by GRI or its
affiliate, and then, in either case, until Penn=s undertaking in Paragraph 5(c)
below has been fulfilled (the APut Loan@). The following provisions shall also
apply to the Put Loan:
(y) Upside Participation. In the event the GSP real
estate is sold while the Put Loan is outstanding,
then Penn will be entitled to receive a payment equal
to thirty-three percent (33%) of the gain, if any,
measured by the difference between the net proceeds
to the seller and the purchase price (including costs
of acquisition) at acquisition, which amount will be
paid at the closing of the sale. In the event an
agreement of sale anticipated to produce a gain for
the seller is entered into while the Put Loan is
outstanding, but closing under the agreement is
scheduled for after the due date of the Put Loan,
Penn shall have the option of extending the maturity
of the Put Loan to the closing date. In the event
Penn does not extend the Put Loan, Penn will forego
its upside participation if closing occurs after the
Put Loan is repaid. In the event that an agreement of
sale is entered into within sixty (60) days of the
payoff of the Put Loan, based on an offer arising
after such payoff, Penn will be entitled to receive a
payment equal to thirty-three percent (33%) of the
gain, if any, measured by the difference between the
net proceeds to the seller and the purchase price
(including the costs of acquisition) at acquisition,
which amount will be paid at the closing of the sale.
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(z) Refinance or Sale. GRI will use its reasonable
efforts to refinance the GSP real estate, or sell it
on commercially reasonable terms designed to net the
owner more than its costs of acquisition, holding and
selling the property. GRI will keep Penn advised of
any offers received to refinance or sell the
property. Furthermore, in the event the owner of the
GSP real estate receives a bona fide cash offer to
sell the GSP real estate for a price in excess of
Twenty Million Dollars ($20,000,000) when the Put
Loan is outstanding, and rejects the offer, the Put
Loan shall be repaid within sixty (60) days of the
rejection of the offer. For purposes of this
subparagraph, a bona fide cash offer shall mean a
written offer which: (1) is from a financially
responsible person with demonstrated ability to fund
the purchase price; (2) is likely to close on a
timely basis; (3) has a closing date of not longer
than one hundred twenty (120) days from the date of
the offer; (4) has no material conditions to the
Buyer=s obligation to close other than the delivery
of title to the real estate in the same condition as
that which was acquired by GRI through the Put
option; (5) provides for a sale of the property Aas
is@ Awhere is@ with no representations or warranties
from the Seller; (6) is a sale subject to the
Covenant and the obligation to convey the 10 Acre
Parcel; (7) preserves the rights of GRI to conduct
any gaming or other activities relating thereto,
which it may have (such as the right to operate an
OTB at GSP or phone betting) other than live racing
at GSP; (8) does not contain material provisions
relating to matters other than the sale of the real
property, or material post closing obligation on GRI
or material obligations that may affect other
activities of GRI or its affiliates or require GRI or
its affiliates to take or refrain from taking action
other than the conveyance of the property to the
Buyer. For purposes of this subparagraph, a rejection
of an offer shall mean a rejection which terminates
negotiations of a bona fide cash offer meeting the
requirements above, and not one which is part of
ongoing negotiations, such as a counterproposal.
(c) Penn Failure to Participate in the Put Obligation. In the
event Penn fails to participate in the Put obligation to the extent of a 50%
participation, whether because it has not obtained the Penn Approvals, has not
obtained the approval of the holders of the Senior Notes, or any other reason,
Penn shall nevertheless remain liable to Greenwood, GRI, and their affiliates
for any loss it incurs as a result of the failure of GRI to purchase the GSP
property pursuant to the Put obligation. If Greenwood, GRI, or an affiliate
completes the purchase, Penn will also, at Greenwood=s request, indemnify and
hold Greenwood, GRI, and their affiliates harmless to the extent of 50% of all
costs, expenses, losses or claims incurred in purchasing, holding, selling or
realizing upon such property, including any loss suffered in a sale.
(d) Greenwood Failure to Participate in the Put Obligation. In
the event Greenwood fails to participate in the Put obligation to the extent of
a 50% participation, Penn shall have the option of exercising the Put on behalf
of itself and Greenwood, through a Joint Venture Entity or otherwise, at its
option. In the case of Greenwood=s failure to participate in the Put Obligation,
GRI shall nevertheless remain liable to Penn and its affiliates for any loss
Penn incurs as a result of the failure of Penn or a Joint Venture Entity to
purchase the GSP property pursuant to the Put obligation. GRI, directly or
through an affiliate, will also continue to have an obligation to participate to
the extent of a 50% interest, and will further have an obligation to indemnify
and hold Penn harmless to the extent of 50% of all costs, expenses, losses or
claims incurred in purchasing, holding, selling or realizing upon such property,
including any loss suffered in a sale.
6. Assignment. Neither party shall have the right to assign its interest in the
Joint Venture to any party not controlled by it or under common control of such
party, except as contemplated by the terms of this First Amendment.
In all other respects the Joint Venture Agreement is ratified and
affirmed.
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IN WITNESS WHEREOF, the parties have executed this First Amendment to
Joint Venture Agreement as of the first date above written.
GREENWOOD NEW JERSEY, INC.
By: /s/ Harold G.
Handel______________________
Harold G. Handel, President
PENN NATIONAL GAMING, INC.
By:_/s/ William J. Bork_____
William J. Bork, President
For purposes of agreement to the guaranty referred to in Paragraph 4(b) and the
undertakings of Paragraphs 5(b) and 5(d):
GREENWOOD RACING, INC.
By:/s/ Robert W. Green_______
Robert W. Green, President
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