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Exhibit 10.2
TERMINATION
AND SETTLEMENT AGREEMENT
TERMINATION AND
SETTLEMENT AGREEMENT, dated as of July 3, 2008 (this “
Agreement
”), among
PENN NATIONAL GAMING, INC., a Pennsylvania corporation (the
“ Company
”), PNG
ACQUISITION COMPANY INC., a Delaware corporation (“
Parent
”), PNG
MERGER SUB INC., a Pennsylvania corporation, a wholly owned
Subsidiary of Parent and an entity intended by Parent to be
transitory for U.S. federal income tax purposes (“
Merger
Sub ”), PNG
HOLDINGS LLC, a Delaware limited liability company (“
PNG
Holdings ”), FIG PNG
HOLDINGS LLC (“ FIG PNG
”), FORTRESS
INVESTMENT FUND V (FUND A) L.P. (“ FIF V (A
)
”), FORTRESS
INVESTMENT FUND V (FUND D) L.P. (“ FIF V
(D) ”), FORTRESS
INVESTMENT FUND V (FUND E) L.P. (“ FIF V
(E) ”), FORTRESS
INVESTMENT FUND V (FUND B) L.P. (“ FIF V
(B) ”), FORTRESS
INVESTMENT FUND V (FUND C) L.P. (“ FIF V
(C) ”), FORTRESS
INVESTMENT FUND V (FUND F) L.P. (“ FIF V
(F) ” and,
together with FIG PNG, FIF V (A), FIF V (D), FIF V (E), FIF V (B)
and FIF V (C), “ Fortress
”), CB PNG
HOLDINGS LLC (“ CB PNG
”),
CENTERBRIDGE CAPITAL PARTNERS, L.P. (“ CB Capital
Partners ”),
CENTERBRIDGE CAPITAL PARTNERS STRATEGIC, L.P. (“
CB
Strategic ”),
CENTERBRIDGE CAPITAL PARTNERS SBS, L.P. (“
CB
SBS ” and,
together with CB PNG, CB Capital Partners and CB Strategic,
“ Centerbridge
”), DB
INVESTMENT PARTNERS, INC. (“ DBIP
”), WACHOVIA
INVESTMENT HOLDINGS, LLC (“ WIH
”), DEUTSCHE
BANK SECURITIES INC. (“ DBSI
”), DEUTSCHE
BANK AG NEW YORK BRANCH (“ DBNY
”), WACHOVIA
CAPITAL MARKETS, LLC (“ WCM
”), WACHOVIA
BANK, NATIONAL ASSOCIATION (“ Wachovia
Bank ”), and
WACHOVIA INVESTMENT HOLDINGS, LLC (“
Wachovia
Investment , and together with
DBSI, DBNY, WCM and Wachovia Bank, the “
Lenders
”). Parent,
Merger Sub, PNG Holdings, Fortress and Centerbridge are
collectively referred to herein as the “
Sponsor
Parties ”. The
Lenders, DBIP and WIH are collectively referred to herein as the
“ Lender
Parties ”.
WHEREAS, Parent,
Merger Sub and the Company entered into an Agreement and Plan of
Merger, dated as of June 15, 2007 (the “
Merger
Agreement ”), pursuant
to which Merger Sub was to be merged with and into the Company on
the terms and subject to the conditions set forth in the Merger
Agreement (the “ Merger
”);
WHEREAS,
immediately prior to the execution of the Merger Agreement, CB PNG
executed an equity commitment letter with each of DBIP and WIH
(together, the “ Bridge Commitment
Letters ”) whereby
DBIP and WIH collectively agreed, subject to the terms and
conditions therein, to purchase non-voting common equity interests
in CB PNG at an aggregate price of $100 million;
WHEREAS,
concurrently with the execution of the Merger Agreement, each of
Fortress and Centerbridge executed an equity commitment letter
(together, the “ Equity Commitment
Letters
”)
whereby Fortress and Centerbridge collectively agreed, subject to
the terms and conditions therein, to directly or indirectly
provide, or cause to be provided, to Parent under the Merger
Agreement, up to $3.061 billion of cash and to fund, up to a
certain amount, a pro rata portion of amounts payable by Parent
under the Merger Agreement;
WHEREAS,
concurrently with the execution of the Merger Agreement, Fortress
and Centerbridge executed an engagement letter with each of DBSI
and WCM (together, the “ Engagement
Letters ”) whereby
DBSI and WCM agreed, subject to the terms and conditions therein,
to provide certain financial advisory and investment banking
services with respect to the Merger;
WHEREAS,
concurrently with the execution of the Merger Agreement, Parent
executed an exclusivity agreement with the Lenders and WIH (the
“ Exclusivity
Letter ”);
WHEREAS,
concurrently with the execution of the Merger Agreement, Parent
executed a fee letter with the Lenders and WIH (the “
Fee
Letter ”);
WHEREAS,
concurrently with the execution of the Merger Agreement, Parent
executed a debt financing commitment letter (the “
Debt
Financing Commitment Letter ”) whereby
the Lenders collectively agreed, subject to the terms and
conditions set forth in the Debt Financing Commitment Letter, to
provide to Parent senior secured credit facilities in an aggregate
amount of up to $5.1 billion and a senior unsecured term loan in an
aggregate amount of up to $2.0 billion;
WHEREAS, under
Section 9.1(a) of the Merger Agreement, the Company, on one hand,
and Parent and Merger Sub, on the other hand, have agreed to
terminate the Merger Agreement and abandon the Merger;
WHEREAS, the Board
of Directors of the Company has approved the execution, delivery
and performance by the Company of this Agreement and the
transactions contemplated by this Agreement; and
WHEREAS, the board
of directors (or equivalent governing body) of each of the Sponsor
Parties has approved such Sponsor Party entering into this
Agreement and declared it advisable for such Sponsor Party to enter
into this Agreement.
NOW, THEREFORE, in
consideration of the foregoing premises and the respective
representations, warranties, covenants and agreements contained in
this Agreement, and intending to be legally bound, the parties
hereby agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.1. Definitions
. Unless
otherwise specifically defined in this Agreement, each capitalized
term used but not defined in this Agreement shall have the meaning
assigned to such term in the Merger Agreement.
ARTICLE
II
SETTLEMENT
Section
2.1. Settlement
.
2
(a)
Simultaneously with the execution and delivery of this Agreement
and in consideration of the agreements made by the Company and the
Sponsor Parties under this Agreement, FIF V PFD LLC, a Delaware
limited liability company, CB Capital Partners, DBIP and WIH
(collectively, the “ Purchasers
”)
and the Company, each shall execute and deliver to each other that
certain Purchase Agreement, dated of even date herewith (the
“ Purchase
Agreement
”), pursuant
to which on the terms and subject to the conditions set forth
therein, the Purchasers shall purchase, and the Company shall sell,
12,500 shares of Series B Preferred Stock of the Company for an
aggregate purchase price of $1.25 billion.
(b)
Prior to 12:00 noon EDT on the business day after the date hereof
and in consideration of the agreements made herein, (A) the Lenders
shall (i) pay Two Hundred Twenty-Five Million Dollars
($225,000,000.00) to Merger Sub (the “ Lenders
Payment ”) and (ii)
reimburse the PNG Holdings for Forty-Five Million Dollars
($45,000,000.00) of fees and expenses incurred by the Sponsor
Parties in connection with the transactions contemplated by the
Merger Agreement and (B) Merger Sub shall pay, or cause to be paid,
Two Hundred Twenty-Five Million Dollars ($225,000,000.00) to the
Company (the “ Settlement
Payment ”). Each of
Wachovia Bank and DBNY shall severally be responsible for fifty
percent (50%) of each of the payments set forth in clause (A)
above. The parties hereto intend to treat the payments pursuant to
this Article 2 as made for damage to capital and not for lost
profit. Merger Sub hereby directs Lenders to wire the Lenders
Payment directly to the Company by wire transfer of immediately
available United States funds, and, upon the Company’s
receipt of the full amount of the Lenders Payment, Merger Sub shall
have fully satisfied its obligation to pay the Settlement
Payment. The Settlement
Payment shall not be repayable or refundable under any
circumstances, including the termination or expiration of this
Agreement or the Purchase Agreement.
ARTICLE
III
TERMINATION
Section
3.1. Termination of
Merger Agreement . Effective upon
the receipt by the Company of the full amount of both the Deposit
(as defined in the Purchase Agreement) and the Settlement Payment,
pursuant to Section 9.1(a) of the Merger Agreement, without further
action of any party hereto, the Merger Agreement is hereby
terminated in its entirety, is null and void, and is of no further
force and effect, including, without limitation, those provisions
of the Merger Agreement which by their terms would otherwise
survive termination of the Merger Agreement, and there shall be no
liability or obligation on the part of any Released Person (as
defined below), except that the Confidentiality Agreement, dated
April 23, 2007, between the Company and Fortress Investment Group
LLC and the Confidentiality Agreement, dated April 23, 2007,
between the Company and Centerbridge Associates, L.P. (the
“ Confidentiality
Agreements ”) will
survive the termination of the Merger Agreement and the execution
and delivery of this Agreement by each of the parties. The
termination of the Merger Agreement, once effective, is
irrevocable.
Section
3.2. Termination of
Bridge Commitment Letters and Equity Commitment
Letters
.
Effective upon the receipt by the Company of the full amount of
both the Deposit and the Settlement Payment, without further action
of any party hereto, the parties hereby agree that the Bridge
Commitment Letters and Equity Commitment Letters are hereby
terminated in their
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entirety, are null
and void, and are of no further force and effect, including,
without limitation, any provisions of the Bridge Commitment Letters
or the Equity Commitment Letters which by their terms would
otherwise survive termination of the Bridge Commitment Letters or
the Equity Commitment Letters, as the case may be.
Section
3.3. Termination of Fee
Letter and Debt Financing Commitment Letter . Effective upon
the receipt by the Company of the full amount of both the Deposit
and the Settlement Payment, without further action of any party
hereto, the parties hereby agree that the Fee Letter and Debt
Financing Commitment Letter are hereby terminated in their
entirety, are null and void, and are no further force and effect,
including, without limitation, any provisions of the Fee Letter or
the Debt Commitment Letter relating to indemnity, contribution,
payment of expenses or otherwise, which by their terms would
otherwise survive termination of the Fee Letter or the Debt
Commitment Letter.
Section
3.4. Termination of
Engagement Letters and Exclusivity Letter . Effective upon
the receipt by the Company of the full amount of both the Deposit
and the Settlement Payment, without further action of any party
hereto, the parties hereby agree that the Engagement Letters and
the Exclusivity Letter are hereby terminated in their entirety, are
null and void and are of no further force and effect, including,
without limitation, any provisions of the Engagement Letter or the
Exclusivity Letter which by their terms would otherwise survive
termination of the Engagement Letters or the Exclusivity Letter, as
the case may be.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES
Section
4.1. Representations and
Warranties of the Company . The Company
hereby represents and warrants that this Agreement has been duly
authorized, executed and delivered by the Company and, assuming
this Agreement constitutes the valid and binding agreement of the
Sponsor Parties and the Lender Parties, is the valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms.
Section
4.2. Representations and
Warranties of the Sponsor Parties . Each of the
Sponsor Parties hereby represents and warrants that this Agreement
has been duly authorized, executed and delivered by such Sponsor
Party and, assuming this Agreement constitutes the valid and
binding agreement of the Company and the Lender Parties, this
Agreement is the valid and binding obligation of such Sponsor
Party, enforceable against such Sponsor Party in accordance with
its terms.
Section
4.3. Representations and
Warranties of the Lender Parties . Each of the
Lender Parties hereby represents and warrants that this Agreement
has been duly authorized, executed and delivered by such Lender
Party and, assuming this Agreement constitutes the valid and
binding agreement of the Company and the Sponsor Parties, this
Agreement is the valid and binding obligation of such Lender Party,
enforceable against such Lender Party in accordance with its
terms.
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ARTICLE
V
RELEASES AND
COVENANT NOT TO SUE
Section
5.1. Company
Release . Effective
as of the receipt by the Company of the full amount of both the
Deposit and the Settlement Payment, the Company, for itself and, to
the maximum extent permitted by law, on behalf of its former,
current or future officers, directors, agents, representatives,
managing directors, partners, managers, principals, members,
parents, subsidiaries, Affiliates, employees, predecessor entities,
heirs, executors, administrators, successors and assigns of any
said person or entity, security holders of any said person or
entity, and any other person claiming (now or in the future)
through or on behalf of any of said entities (“
Company Releasing
Parties ”), hereby
unequivocally, fully and irrevocably releases and discharges (x)
the Sponsor Parties, their parents, subsidiaries and Affiliates and
their respective former, current or future officers, directors,
managing directors, partners, managers, principals, members,
parents, subsidiaries, Affiliates, employees and attorneys and
other advisors and agents (including, without limitation, debt and
equity financing sources), predecessor entities, heirs, executors,
administrators, successors and assigns of any said person or entity
(collectively, “ Sponsor Released
Persons ”) and (y)
the Lender Parties, their parents, subsidiaries and Affiliates and
their respective former, current or future officers, directors,
managing directors, partners, managers, principals, members,
parents, subsidiaries, Affiliates, employees and attorneys and
other advisors and agents (including, without limitation, debt and
equity financing sources), predecessor entities, heirs, executors,
administrators, successors and assigns of any said person or entity
(collectively, “ Lender Released
Persons ”), from any
and all past, present, direct, indirect and/or derivative
liabilities, claims, rights, actions, causes of action, counts,
obligations, sums of money due, attorneys’ fees, suits,
debts, covenants, agreements, promises, demands, damages and
charges of whatever kind or nature, known or unknown, in law or in
equity, asserted or that could have been asserted, under federal or
state statute, or common law or the laws of any other relevant
jurisdiction, arising from or out of, based upon, in connection
with or otherwise relating in any way to the Merger Agreement, the
Bridge Commitment Letters, the Equity Commitment Letters, the Debt
Financing Commitment Letter, the Engagement Letters, the
Exclusivity Letter, the Fee Letter, and including, without
limitation, any acts, omissions, disclosure or communications
related to the Merger Agreement, the Bridge Commitment Letters or
the Equity Commitment Letters, the Fee Letter, the Debt Financing
Commitment Letter, the Exclusivity Letter, and the Engagement
Letters or the transactions or payments contemplated thereby (the
“ Company Released
Claims ”);
provided
that,
for the avoidance of doubt, nothing contained in this Agreement
shall be deemed to release any party hereto from its obligations
under this Agreement, the Confidentiality Agreements, the Purchase
Agreement, the Investor Rights Agreement, dated as of the date
hereof, executed pursuant to the Purchase Agreement (the
“ Investor Rights
Agreement ”) or any
agreement among any of the parties hereto entered into subsequent
to the execution this Agreement, or the transactions contemplated
hereby or thereby; and provided
,
further
, that
nothing contained herein shall be deemed to release any of the
Sponsor Parties from its obligations under the Merger Agreement or
the Purchase Agreement to pay any regulatory fees incurred by the
parties thereto in connection with the Merger Agreement or the
Purchase Agreement. For purposes of this Agreement, “
Affiliate
”
shall mean, with respect to any person, any other person directly
or indirectly controlling, controlled by or under direct or
indirect common control with such person.
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Section
5.2. Sponsor Party
Releases . Effective
as of the receipt by the Company of the full amount of both the
Deposit and the Settlement Payment, the Sponsor Parties, for
themselves and, to the maximum extent permitted by law, on behalf
of their former, current or future respective officers, directors,
agents, representatives, managing directors, partners, managers,
principals, members, parents, subsidiaries, Affiliates, employees,
predecessor entities, heirs, executors, administrators, successors
and assigns of any said person or entity, security holders of any
said person or entity and any other person claiming (now or in the
future) through or on behalf of any of said entities
(“ Sponsor Releasing
Parties ”), hereby
unequivocally, fully and irrevocably release and discharge (x) the
Company, its subsidiaries and Affiliates and their respective
former, current or future officers, directors, managing directors,
partners, managers, principals, members, parents, subsidiaries,
Affiliates, employees and attorneys and other advisors and agents
(including, without limitation, financial and legal advisors),
predecessor entities, heirs, executors, administrators, successors
and assigns of any said person or entity (collectively,
“ Company Released
Persons ” and
together with the Sponsor Released Persons and the Lender Released
Persons, the “ Released
Persons ”), (y) the
Lender Released Persons and (z) each of the other Sponsor Released
Persons, from any and all past, present, direct, indirect and/or
derivative liabilities, claims, rights, actions, causes of action,
counts, obligations, sums of money due, attorneys’ fees,
suits, debts, covenants, agreements, promises, demands, damages and
charges of whatever kind or nature, known or unknown, in law or in
equity, asserted or that could have been asserted, under federal or
state statute, or common law or the laws of any other relevant
jurisdiction, arising from or out of, based upon, in connection
with or otherwise relating in any way to the Merger Agreement, the
Bridge Commitment Letters or the Equity Commitment Letters, the Fee
Letter, the Debt Financing Commitment Letter, the Exclusivity
Letter, and the Engagement Letters or the transactions or payments
contemplated thereby, including, without limitation, any claim
relating to the termination of the Merger Agreement (including,
without limitation, any claim for payment of the Termination Fee or
the payment or reimbursement of any Parent Expenses or any other
expenses of Parent or Merger Sub in connection with the Merger),
and including, without limitation, any acts, omissions, disclosure
or communications related to the Merger Agreement, the Bridge
Commitment Letters or the Equity Commitment Letters, the Fee
Letter, the Debt Financing Commitment Letter, the Exclusivity
Letter, and the Engagement Letters or the transactions or payments
contemplated thereby (the “ Sponsor Party
Released Claims ”);
provided
that,
for the avoidance of doubt, nothing contained in this Agreement
shall be deemed to release any party hereto from its obligations
under this Agreement, the Confidentiality Agreements, the Purchase
Agreement, the Investor Rights Agreement or any agreement among any
of the parties hereto entered into subsequent to the execution of
this Agreement, or the transactions contemplated hereby or
thereby.
Section
5.3. Parent and PNG
Holdings Release . Effective
as of the receipt by the Company of the full amount of both the
Deposit and the Settlement Payment, for itself and, to the maximum
extent permitted by law, on behalf of its former, current or future
officers, directors, employees, agents, representatives, parents,
Subsidiaries, Affiliates and any predecessor entities, heirs,
executors, administrators, successors and assigns of any said
person or entity, and any other person claiming (now or in the
future) for Parent or PNG Holdings, as applicable, through or on
behalf of Parent or PNG Holdings, as applicable, hereby
unequivocally, fully and irrevocably release and discharge, the
Sponsor R
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