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/ ▇▇▇▇▇▇ ▇.
Handel______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
PENN NATIONAL GAMING, INC.
By:_/s/ ▇▇▇▇▇▇▇ ▇. 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/ ▇▇▇▇▇▇ ▇. Green_______
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
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