UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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): November 1, 2013

 


 

GAMING AND LEISURE PROPERTIES, INC.

 


 

Commission file number 001-36124

 

Incorporated Pursuant to the Laws of the Commonwealth of Pennsylvania

IRS Employer Identification No. 46-2116489

825 Berkshire Blvd., Suite 400
Wyomissing, PA 19610

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 1.01.             Entry into a Material Definitive Agreement.

 

As previously disclosed, on November 1, 2013, Penn National Gaming, Inc. (“Penn”) completed the spin-off (the “spin-off”) of its real property assets through the distribution to its shareholders of shares of common stock of Gaming and Leisure Properties, Inc. (“GLPI”).  In connection with the spin-off, GLPI entered into several definitive agreements with Penn that, among other things, set forth the terms and conditions of the spin-off and provide a framework for GLPI’s relationship with Penn after the spin-off, including the following agreements:

 

·      Separation and Distribution Agreement;

 

·      Master Lease;

 

·      Tax Matters Agreement;

 

·      Employee Matters Agreement; and

 

·      Transition Services Agreement.

 

A more comprehensive description of certain important terms of the definitive agreements referenced above can be found in the section entitled “Relationship Between GLPI and Penn After the Spin-Off” of GLPI’s prospectus (File No. 333-188608) filed with the SEC on October 10, 2013 pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended, which description is incorporated herein by reference. The description is qualified in its entirety by the agreements filed with this Current Report on Form 8-K as Exhibits 2.1, 10.1, 10.2, 10.3 and 10.4, each of which is incorporated herein by reference.

 

Item 9.01.             Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit
Number

 

Description

 

 

 

2.1

 

Separation and Distribution Agreement, dated as of November 1, 2013, between Gaming and Leisure Properties, Inc. and Penn National Gaming, Inc.

 

 

 

10.1

 

Master Lease, dated as of November 1, 2013, among GLP Capital, L.P. and Penn Tenant, LLC.

 

 

 

10.2

 

Tax Matters Agreement, dated as of November 1, 2013, among Penn National Gaming, Inc. and Gaming and Leisure Properties, Inc.

 

 

 

10.3

 

Transition Services Agreement, dated as of November 1, 2013, among Penn National Gaming, Inc. and Gaming and Leisure Properties, Inc.

 

 

 

10.4

 

Employee Matters Agreement, dated as of November 1, 2013, among Penn National Gaming, Inc. and Gaming and Leisure Properties, Inc.

 

* * *

 

2



 

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.

 

Dated: November 7, 2013

GAMING AND LEISURE PROPERTIES, INC.

 

 

 

 

By:

/s/ William J. Clifford

 

 

Name:

William J. Clifford

 

 

Title:

Chief Financial Officer

 

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Exhibit 2.1

 

SEPARATION AND DISTRIBUTION AGREEMENT

 

BY AND BETWEEN

 

PENN NATIONAL GAMING, INC.

 

AND

 

GAMING AND LEISURE PROPERTIES, INC.

 

Dated November 1, 2013

 



 

ARTICLE I DEFINITIONS

 

2

 

 

 

1.1

 

Certain Definitions

 

2

 

 

 

 

 

ARTICLE II THE REORGANIZATION

 

11

 

 

 

2.1

 

Transfer of Assets; Assumption of Liabilities

 

11

 

 

 

 

 

2.2

 

GLPI Assets

 

13

 

 

 

 

 

2.3

 

GLPI Liabilities

 

13

 

 

 

 

 

2.4

 

Transfer of Assets and Assumption of Liabilities from and after the Effective Time

 

14

 

 

 

 

 

2.5

 

Approvals and Notifications

 

15

 

 

 

 

 

2.6

 

Responsibility for GLPI Liabilities Retained by Penn

 

16

 

 

 

 

 

2.7

 

Disclaimer of Representations and Warranties

 

17

 

 

 

 

 

ARTICLE III THE DISTRIBUTION

 

17

 

 

 

3.1

 

Actions on or Prior to the Distribution Date

 

17

 

 

 

 

 

3.2

 

Conditions Precedent to Distribution

 

18

 

 

 

 

 

3.3

 

The Distribution

 

20

 

 

 

 

 

ARTICLE IV ACCESS TO INFORMATION

 

21

 

 

 

4.1

 

Agreement for Exchange of Information

 

21

 

 

 

 

 

4.2

 

Ownership of Information

 

21

 

 

 

 

 

4.3

 

Compensation for Providing Information

 

21

 

 

 

 

 

4.4

 

Record Retention

 

21

 

 

 

 

 

4.5

 

Liability

 

22

 

 

 

 

 

4.6

 

Other Agreements Providing for Exchange of Information

 

22

 

 

 

 

 

4.7

 

Production of Witnesses; Records; Cooperation

 

22

 

 

 

 

 

4.8

 

Privileged Matters

 

23

 

 

 

 

 

ARTICLE V RELEASE AND INDEMNIFICATION

 

24

 

 

 

 

 

5.1

 

Release of Pre-Distribution Claims

 

24

 

 

 

 

 

5.2

 

General Indemnification by GLPI

 

26

 

 

 

 

 

5.3

 

General Indemnification by Penn

 

26

 

 

 

 

 

5.4

 

Disclosure Indemnification

 

27

 

 

 

 

 

5.5

 

Contribution

 

27

 

 

 

 

 

5.6

 

Indemnification Obligations Net of Insurance Proceeds and Other Amounts

 

27

 

 

 

 

 

5.7

 

Procedures for Indemnification of Third Party Claims

 

28

 

i



 

5.8

 

Tax Procedures

 

29

 

 

 

 

 

5.9

 

Additional Matters

 

31

 

 

 

 

 

5.10

 

Remedies Cumulative; Limitations of Liability

 

32

 

 

 

 

 

5.11

 

Survival of Indemnities

 

32

 

 

 

 

 

ARTICLE VI OTHER AGREEMENTS

 

32

 

 

 

 

 

6.1

 

Further Assurances

 

32

 

 

 

 

 

6.2

 

Confidentiality

 

33

 

 

 

 

 

6.3

 

Insurance Matters

 

35

 

 

 

 

 

6.4

 

Allocation of Costs and Expenses

 

37

 

 

 

 

 

6.5

 

Litigation; Cooperation

 

37

 

 

 

 

 

6.6

 

Tax Matters

 

38

 

 

 

 

 

6.7

 

Employment Matters

 

38

 

 

 

 

 

6.8

 

Intellectual Property Matters

 

38

 

 

 

 

 

6.9

 

Compliance with Legal Requirements

 

41

 

 

 

 

 

ARTICLE VII DISPUTE RESOLUTION

 

42

 

 

 

 

 

7.1

 

General Provisions

 

42

 

 

 

 

 

7.2

 

Arbitration

 

42

 

 

 

 

 

ARTICLE VIII MISCELLANEOUS

 

44

 

 

 

 

 

8.1

 

Corporate Power

 

44

 

 

 

 

 

8.2

 

Governing Law; Jurisdiction

 

44

 

 

 

 

 

8.3

 

Survival of Covenants

 

44

 

 

 

 

 

8.4

 

Force Majeure

 

44

 

 

 

 

 

8.5

 

Notices

 

45

 

 

 

 

 

8.6

 

Termination

 

46

 

 

 

 

 

8.7

 

Severability

 

46

 

 

 

 

 

8.8

 

Entire Agreement

 

46

 

 

 

 

 

8.9

 

Assignment; No Third-Party Beneficiaries

 

46

 

 

 

 

 

8.10

 

Public Announcements

 

46

 

 

 

 

 

8.11

 

Specific Performance

 

47

 

 

 

 

 

8.12

 

Amendment

 

47

 

 

 

 

 

8.13

 

Rules of Construction

 

47

 

ii



 

8.14

 

Counterparts

 

47

 

EXHIBITS

 

A

 

Form of Transition Services Agreement

B

 

Form of Tax Matters Agreement

C

 

Form of Employee Matters Agreement

D

 

Form of Amended and Restated Articles of Incorporation

E

 

Form of Amended and Restated Bylaws

 

iii



 

SCHEDULES

 

Schedule 1.1(a)

 

GLPI Contracts

Schedule 2.1(a)

 

Plan of Reorganization

Schedule 2.2(a)(iv)

 

GLPI Assets

Schedule 2.2(b)

 

Penn Assets

Schedule 2.3(a)

 

GLPI Liabilities

Schedule 6.1(a)

 

Further Assurances

Schedule 6.4

 

Allocation of Certain Costs and Expenses

Schedule 6.5(a)

 

Assumed Actions

Schedule 6.5(b)

 

Transferred Actions

Schedule 6.8

 

Licensed Intellectual Property, Licensed Marks and TRS Properties

 

iv



 

SEPARATION AND DISTRIBUTION AGREEMENT

 

This SEPARATION AND DISTRIBUTION AGREEMENT, dated as of November 1, 2013 (this “Agreement”), is by and between Penn National Gaming, Inc., a Pennsylvania corporation (“Penn”), and Gaming and Leisure Properties, Inc., a Pennsylvania corporation (“GLPI”), and, solely for the purposes of Section 6.8, Article VII and Article VIII, Hollywood Casinos, LLC, a Delaware limited liability company (“Hollywood Casinos”).

 

W I T N E S S E T H:

 

WHEREAS, the board of directors of Penn has determined that it is in the best interests of Penn to create and distribute the stock of a new publicly traded company which shall operate the GLPI Business, and such distribution is motivated, in substantial part, by the purpose of facilitating strategic expansion opportunities for the property ownership and development business of Penn by providing GLPI with the ability to (i) pursue transactions with other gaming operators that would not pursue transactions with Penn as a current competitor, (ii) fund acquisitions with its equity on significantly more favorable terms than those that would be available to Penn, (iii) diversify into different businesses in which Penn, as a practical matter, could not diversify, such as hotels, entertainment facilities and office space, and (iv) pursue certain transactions that Penn otherwise would be disadvantaged by or precluded from pursuing due to regulatory constraints;

 

WHEREAS, GLPI has been incorporated solely for these purposes and has not engaged in activities except in preparation for its corporate reorganization and the distribution of its stock;

 

WHEREAS, the board of directors of Penn and the board of directors of GLPI have approved the transfer by Penn and its Subsidiaries of the GLPI Assets to GLPI and its Subsidiaries in actual or constructive exchange for (i) the assumption by GLPI and certain of its Subsidiaries of the GLPI Liabilities, (ii) the issuance by GLPI to Penn or its Subsidiaries of shares of the common stock, par value one one-hundredth of one dollar ($0.01) per share, of GLPI (the “GLPI Common Stock”), and (iii) the distribution by GLPI, directly or indirectly, to Penn of the GLPI Cash Payment, all as more fully described in this Agreement and the other Transaction Documents (together with certain related transactions, the “Reorganization”);

 

WHEREAS, the board of directors of Penn has further approved the distribution (the “Spin-Off”) of all of the issued and outstanding shares of GLPI Common Stock to the holders of the issued and outstanding common shares, par value one one-hundredth of one dollar ($0.01) per share, of Penn (the “Penn Common Shares”) and the holders of Series C Convertible Preferred Stock (“Series C”) as of the close of business on the Record Date;

 

WHEREAS, Peter M. Carlino and a related trust will receive additional shares of GLPI Common Stock in exchange for Penn Common Shares that he will transfer to Penn immediately prior to the Spin-Off (together with the Spin-Off, the “Distribution”);

 

WHEREAS, GLPI has filed with the SEC the Form S-11, which sets forth disclosure concerning GLPI and the Distribution;

 



 

WHEREAS, in connection with the Distribution, Penn and GLPI have entered into the Financing Arrangements;

 

WHEREAS, for U.S. federal income tax purposes, certain aspects of the Reorganization and the Distribution, together with certain related transactions, are intended to qualify for tax-free treatment under Sections 355 and 368(a)(1)(D) of the Code;

 

WHEREAS, Penn has received a private letter ruling from the IRS to the effect that, among other things, (i) certain aspects of the Reorganization and the Distribution, together with certain related transactions, qualify as a transaction (a) that is described in Sections 355 and 368(a)(1)(D) of the Code, (b) in which the GLPI Common Stock distributed is “qualified property” under Section 361(c) of the Code and (c) in which the holders of Penn Common Shares recognize no income or gain for U.S. federal income tax purposes under Section 355 of the Code and (ii) certain other steps of the Plan of Reorganization qualify as transactions that are described in Sections 355(a) and 368(a)(1)(D) of the Code (the “Private Letter Ruling”);

 

WHEREAS, this Agreement is intended to be, and is hereby adopted as, a “plan of reorganization” within the meaning of Treas. Reg. 1.368-2(g); and

 

WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Reorganization and the Distribution and to set forth certain other agreements that will, following the Distribution, govern certain matters relating to the Reorganization and the Distribution and the relationship of Penn, GLPI and their respective Subsidiaries.

 

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1          Certain Definitions.  For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1:

 

Action” means any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.

 

Affiliate” (including, with a correlative meaning, “affiliated”) means, when used with respect to a specified Person, a Person that directly or indirectly, through one (1) or more intermediaries, controls, is controlled by or is under common control with such specified Person.  For the purpose of this definition and the definitions of “GLPI Group” and “Penn Group,” “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person shall mean the possession, directly or

 

2



 

indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise.  It is expressly agreed that, from and after the Effective Time and for purposes of this Agreement and the other Transaction Documents, no member of the GLPI Group shall be deemed to be an Affiliate of any member of the Penn Group, and no member of the Penn Group shall be deemed to be an Affiliate of any member of the GLPI Group.

 

Agreement” has the meaning set forth in the Recitals.

 

Amended and Restated Articles of Incorporation” has the meaning set forth in Section 3.2(m).

 

Amended and Restated Bylaws” has the meaning set forth in Section 3.2(m).

 

Approvals or Notifications” means any consents, waivers, approvals, permits or authorizations to be obtained from, notices, registrations or reports to be submitted to, or other filings to be made with, any third Person, including any Governmental Authority.

 

Assets” means, with respect to any Person, the assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other third Persons or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of such Person, including the following:

 

(a)           all accounting and other books, records and files whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape, electronic or any other form and including all architectural, structural, service manuals, engineering and mechanical plans, electrical, soil, wetlands, environmental, and similar reports, studies and audits in a Person’s possession or control;

 

(b)           all office, hotel, casino, barge, showroom, restaurant, bar, convention, meeting and other furniture, furnishings, fittings, appliances, equipment, equipment manuals, slot machines, gaming tables and gaming paraphernalia (including parts or inventories thereof), passenger/delivery vehicles, computer hardware and IT hardware systems, reservations terminals, software, point of sale equipment, two-way security radios and base station, machinery, spare parts, apparatus, appliances, draperies, art work, carpeting, keys, building materials, telephones and other communications equipment, televisions, maintenance equipment, tools, signs and signage, office supplies, engineering, maintenance and cleaning supplies and other supplies of all kinds, stationery and printing, linens (sheets, towels, blankets, napkins), uniforms, silverware, glassware, chinaware, pots, pans and utensils, and food, beverage, alcoholic beverage inventories and all other articles of tangible personal property;

 

(c)           all interests in Real Property;

 

3



 

(d)           (i) all interests in any capital stock or other equity interests of any Subsidiary or any other Person, (ii) all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person, (iii) all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person and (iv) all other investments in securities of any Person;

 

(e)           all license agreements, leases of personal property, supplies, parts or services and other contracts, agreements or commitments;

 

(f)            all deposits, letters of credit and performance and surety bonds;

 

(g)           all written (including in electronic form) or oral technical information, data, specifications, research and development information, engineering drawings and specifications, operating and maintenance manuals, and materials and analyses prepared by consultants and other third Persons;

 

(h)           all Intellectual Property and Technology;

 

(i)            all Software;

 

(j)            all cost information, sales data, customer lists, markers, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product data and literature, artwork, design, formulations and specifications, bookings, contracts, reservations, advertising, marketing and promotional materials, telephone numbers, quality records and reports and other books, records, studies, surveys, reports, plans and documents;

 

(k)           all prepaid expenses, trade accounts and other accounts and notes receivable;

 

(l)            all rights under contracts or agreements, all claims or rights against any Person arising from the ownership of any Asset, all rights in connection with any bids or offers and all claims, choses in action or similar rights, whether accrued or contingent;

 

(m)          all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution;

 

(n)           all licenses, permits, approvals and authorizations which have been issued by any Governmental Authority;

 

(o)           all cash or cash equivalents, bank accounts, lock boxes and other deposit arrangements; and

 

(p)           all interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements.

 

Assumed Actions” has the meaning set forth in Section 6.5(a).

 

Code” means the Internal Revenue Code of 1986, as amended.

 

4



 

CPR” means the International Institute for Conflict Prevention & Resolution.

 

CPR Arbitration Rules” has the meaning set forth in Section 7.2(a).

 

Disclosure Documents” means any registration statement (including the
Form S-11) filed with the SEC by or on behalf of any party or any of its controlled Affiliates, and also includes any information statement, prospectus, offering memorandum, offering circular, periodic report or similar disclosure document, whether or not filed with the SEC or any other Governmental Authority, in each case which describes the Reorganization or the GLPI Group or primarily relates to the transactions contemplated hereby.

 

Dispute” has the meaning set forth in Section 7.1(a).

 

Distribution” has the meaning set forth in the Recitals.

 

Distribution Agent” means Continental Stock Transfer & Trust.

 

Distribution Date” means November 1, 2013, or such other time as determined by Penn in accordance with Section 3.3(b).

 

Effective Time” means the time at which the Distribution occurs on the Distribution Date, which shall be deemed to be 12:01 a.m., New York City Time, on the Distribution Date.

 

Employee Matters Agreement” means the Employee Matters Agreement in substantially the form attached hereto as Exhibit C, to be entered into by and between Penn and GLPI on or prior to the Distribution Date.

 

Environmental Law” means any Law relating to pollution, protection or restoration of or prevention of harm to the environment or natural resources, including the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials or the protection of or prevention of harm to human health and safety.

 

Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time that reference is made.

 

Financing Arrangements” has the meaning set forth in Section 3.2(j).

 

Force Majeure” means, with respect to a party, an event beyond the control of such party (or any Person acting on its behalf), which by its nature could not reasonably have been foreseen by such party (or such Person), or, if it could have reasonably been foreseen, was unavoidable, and includes acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities or other national or international calamity or one (1) or more acts of terrorism or failure of energy sources.  Notwithstanding the foregoing, the receipt by a party of an unsolicited takeover offer or other acquisition proposal, even if unforeseen or unavoidable, and such party’s response thereto shall not be deemed an event of Force Majeure.

 

5



 

Form S-11” means the registration statement on Form S-11 filed by GLPI with the SEC to effect the registration of GLPI Common Stock pursuant to the Securities Act in connection with the Distribution, as such registration statement may be amended or supplemented from time to time prior to the Effective Time.

 

GLPI” has the meaning set forth in the Recitals.

 

GLPI Assets” has the meaning set forth in Section 2.2(a).

 

GLPI Balance Sheet” has the meaning set forth in Section 3.1(c).

 

GLPI Business” means the business of owning or leasing the GLPI Real Property and owning and operating the GLPI Subsidiaries, provided, for the avoidance of doubt, that the GLPI Business shall not include the business of operating any casinos, racetracks or other facilities located at the GLPI Real Property other than the TRS Properties.

 

GLPI Cash Payment” has the meaning set forth in Section 3.2(j).

 

GLPI Common Stock” has the meaning set forth in the Recitals.

 

GLPI Confidential Information” has the meaning set forth in Section 6.2(a).

 

GLPI Contracts” means any contract, agreement, arrangement, commitment or understanding listed or described on Schedule 1.1(a) (or any applicable licenses, leases, addenda and similar arrangements thereunder as described on Schedule 1.1(a)) and any other contract, agreement, arrangement, commitment or understanding, whether or not in writing, that relates primarily to the GLPI Business.

 

GLPI Group” means GLPI, each Subsidiary of GLPI and each other Person that is controlled directly or indirectly by GLPI, in each case immediately after the Effective Time; provided, however, that no director, officer, employee, agent or other representative of any of the foregoing who is a natural person shall be deemed to be a member of the GLPI Group.

 

GLPI Indemnified Parties” has the meaning set forth in Section 5.3.

 

GLPI Liabilities” has the meaning set forth in Section 2.3(a).

 

GLPI Subsidiaries” means the entities intended to become Subsidiaries of GLPI in the Reorganization pursuant to the Plan of Reorganization.

 

Governmental Authority” means any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof.

 

Group” means the Penn Group or the GLPI Group, as the context requires.

 

6



 

Hazardous Materials” means any chemical, material, substance, waste, pollutant, emission, discharge, release or contaminant that could result in liability under, or that is prohibited, limited or regulated by or pursuant to, any Environmental Law, and any natural or artificial substance (whether solid, liquid or gas, noise, ion, vapor or electromagnetic) which could cause harm to human health or the environment, including petroleum, petroleum products and byproducts, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances.

 

Indemnified Party” has the meaning set forth in Section 5.6(a).

 

Indemnifying Party” has the meaning set forth in Section 5.6(a).

 

Indemnity Payment” has the meaning set forth in Section 5.6(a).

 

Information” means information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.

 

Insurance Proceeds” means those monies (i) received by an insured from an insurance carrier, (ii) paid by an insurance carrier on behalf of the insured or (iii) received (including by way of set off) from any third Person in the nature of insurance, contribution or indemnification in respect of any Liability; in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof.

 

Intellectual Property” means all of the following whether arising under the Laws of the United States or of any other foreign or multinational jurisdiction:  (i) patents, patent applications (including patents issued thereon) and statutory invention registrations, including reissues, divisions, continuations, continuations in part, substitutions, renewals, extensions and reexaminations of any of the foregoing, and all rights in any of the foregoing provided by international treaties or conventions, (ii) trademarks, service marks, trade names, service names, trade dress, logos and other source or business identifiers, including all goodwill associated with any of the foregoing, and any and all common law rights in and to any of the foregoing, registrations and applications for registration of any of the foregoing, all rights in and to any of the foregoing provided by international treaties or conventions, and all reissues, extensions and renewals of any of the foregoing, (iii) Internet domain names, (iv) copyrightable works, copyrights, moral rights, mask work rights, database rights and design rights, in each case, other than Software, whether or not registered, and all registrations and applications for registration of any of the foregoing, and all rights in and to any of the foregoing provided by international treaties or conventions, (v) confidential and proprietary information, including trade secrets,

 

7



 

invention disclosures, processes and know-how, in each case, other than Software, and (vi) intellectual property rights arising from or in respect of any Technology.

 

IP License” has the meaning set forth in Section 6.8(a).

 

IRS” means the United States Internal Revenue Service.

 

Law” means any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

 

Leased Property” has the meaning set forth in the Master Lease.

 

Liabilities” means any and all debts, guarantees, liabilities, costs, expenses, interest and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, reserved or unreserved, or determined or determinable, including those arising under any Law, claim (including any third Person product liability claim), demand, Action, whether asserted or unasserted, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any fines, damages or equitable relief that is imposed, in each case, including all costs and expenses relating thereto.

 

Licensed Intellectual Property” has the meaning set forth in Section 6.8(a).

 

Licensed Marks” means any rights under the trade marks and service marks listed on Schedule 6.8 and the goodwill represented thereby.

 

Master Lease” means the Master Lease Agreement to be entered into by Penn and GLPI prior to or as of the Effective Time.

 

NASDAQ” means the NASDAQ Stock Market.

 

Penn” has the meaning set forth in the Recitals.

 

Penn Assets” has the meaning set forth in Section 2.2(b).

 

Penn Business” means the businesses and operations conducted prior to the Effective Time by any member of the Penn Group that are not included in the GLPI Business.

 

Penn Common Shares” has the meaning set forth in the Recitals.

 

Penn Confidential Information” has the meaning set forth in Section 6.2(b).

 

Penn Group” means Penn, each Subsidiary of Penn and each other Person that is controlled directly or indirectly by Penn, in each case immediately after the Effective Time;

 

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provided, however, that no director, officer, employee, agent or other representative of any of the foregoing who is a natural person shall be deemed a member of the Penn Group.

 

Penn Indemnified Parties” has the meaning set forth in Section 5.2.

 

Penn Liabilities” has the meaning set forth in Section 2.3(b).

 

Person” means any individual, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, Governmental Authority or other entity.

 

Plan of Reorganization” has the meaning set forth in Section 2.1(a).

 

Private Letter Ruling” has the meaning set forth in the Recitals.

 

Prospectus” means the prospectus, which will be part of the Form S-11, to be sent to each holder of Penn common stock in connection with the Distribution.

 

Qualifying Income” has the meaning set forth in Section 5.8(a)

 

Real Property” means all interests in real property of whatever nature, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise, and including all buildings or barges located thereon, and all associated parking areas, fixtures and all other improvements located on thereon, and including all rights, benefits, privileges, tenements, hereditaments, covenants, conditions, restrictions, easements and other appurtenances on such a real property or otherwise appertaining to or benefitting the real property and/or the improvements situated thereon, including all mineral rights, development rights, air and water rights, subsurface rights, vested rights entitling, or prospective rights which may entitle the owner of the real property to related easements, land use rights, air rights, viewshed rights, density credits, water, sewer, electrical or other utility service, credits and/or rebates, strips and gores and any land lying in the bed of any street, road or alley, open or proposed, adjoining the real property, and all easements, rights of way and other appurtenances used or connected with the beneficial use or enjoyment of the real property.

 

Record Date” means October 16, 2013.

 

REIT” has the meaning set forth in Section 5.8(a).

 

Reorganization” has the meaning set forth in the Recitals.

 

Representatives” has the meaning set forth in Section 6.2(a).

 

Required Approvals” has the meaning set forth in Section 2.5(a).

 

SEC” means the United States Securities and Exchange Commission.

 

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Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time that reference is made.

 

Security Interest” means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any other nature.

 

Series C” has the meaning set forth in the Recitals.

 

Software” means any and all (i) computer programs, including any and all software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow charts and other work products used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons, and (iv) documentation, including user manuals and other training documentation, relating to any of the foregoing.

 

Special Damages” has the meaning set forth in Section 5.10.

 

Specified REIT Requirements” has the meaning set forth in Section 5.8(a)

 

Spin-Off” has the meaning set forth in the Recitals.

 

Subsidiary” means, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (i) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (A) the total combined voting power of all classes of voting securities of such Person, (B) the total combined equity interests or (C) the capital or profit interests, in the case of a partnership, or (ii) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

 

Tax” has the meaning set forth in the Tax Matters Agreement.

 

Tax Attributes” has the meaning set forth in the Tax Matters Agreement.

 

Tax Matters Agreement” means the Tax Matters Agreement, in substantially the form attached hereto as Exhibit B, to be entered into by and between Penn and GLPI on or prior to the Distribution Date.

 

Technology” means all technology, designs, formulae, algorithms, procedures, methods, discoveries, processes, techniques, ideas, know-how, research and development, technical data, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship in any media, confidential, proprietary or non-public information, and other similar materials, and all recordings, graphs, drawings, reports, analyses and other writings, and other

 

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tangible embodiments of the foregoing in any form whether or not listed herein, in each case, other than Software.

 

Term” has the meaning set forth in Section 6.8(a).

 

Third Party Claim” has the meaning set forth in Section 5.7(a).

 

TPA” has the meaning set forth in Section 6.3(b)(i).

 

Transaction Documents” means this Agreement, the Master Lease, the Transition Services Agreement, the Tax Matters Agreement, the Employee Matters Agreement and the Transfer Documents.

 

Transactions” means, collectively, (i) the Reorganization, (ii) the Distribution and (iii) all other transactions contemplated by this Agreement or any other Transaction Document.

 

Transfer Documents” means the documents executed by Penn, GLPI or their applicable Affiliates or Subsidiaries in connection with the transactions contemplated by Section 2.1(b) and Section 2.4(b).

 

Transferred Actions” has the meaning set forth in Section 6.5(b).

 

Transition Services Agreement” means the Transition Services Agreement in substantially the form attached hereto as Exhibit A, to be entered into by and between Penn and GLPI on or prior to the Distribution Date.

 

TRS Properties” means the properties set forth on Schedule 6.8.

 

ARTICLE II

 

THE REORGANIZATION

 

2.1                               Transfer of Assets; Assumption of Liabilities.

 

(a)                                 Prior to the Distribution, in accordance with the plan and structure set forth on Schedule 2.1(a) (such plan and structure being referred to herein as the “Plan of Reorganization”), which Plan of Reorganization Penn shall effectuate on or prior to the Distribution, and to the extent not previously effected pursuant to the steps of the Plan of Reorganization that have been completed prior to the date hereof:

 

(i)                                     Penn shall, and shall cause its applicable Subsidiaries to, assign, transfer, convey and deliver to GLPI or certain Persons designated by GLPI who are or will become members of the GLPI Group, and GLPI or such Persons shall accept from Penn and its applicable Subsidiaries, all of Penn’s and such Subsidiaries’ respective direct or indirect right, title and interest in and to all GLPI Assets;

 

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(ii)                                  subject to Section 2.5(c), GLPI and certain Persons designated by GLPI who are or will become members of the GLPI Group shall accept, assume and agree faithfully to perform, discharge and fulfill all the GLPI Liabilities in accordance with their respective terms.  GLPI and such Persons shall be responsible for all GLPI Liabilities, regardless of when or where such GLPI Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Distribution Date, regardless of where or against whom such GLPI Liabilities are asserted or determined (including any GLPI Liabilities arising out of claims made by Penn’s or GLPI’s respective directors, officers, employees, agents, Subsidiaries or Affiliates against any member of the Penn Group or the GLPI Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Penn Group or the GLPI Group, or any of their respective directors, officers, employees, agents, Subsidiaries or Affiliates; and

 

(iii)                               GLPI shall make the GLPI Cash Payment.

 

(b)                                 In furtherance of the assignment, transfer, conveyance and delivery of the GLPI Assets and the assumption of the GLPI Liabilities in accordance with Sections 2.1(a)(i) and 2.1(a)(ii), on the date that such GLPI Assets are assigned, transferred, conveyed or delivered or such GLPI Liabilities are assumed (i) Penn shall execute and deliver, and shall cause its Subsidiaries to execute and deliver, such bills of sale, quitclaim deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of Penn’s and its Subsidiaries’ (other than GLPI and its Subsidiaries) right, title and interest in and to the GLPI Assets to GLPI and its Subsidiaries, and (ii) GLPI shall execute and deliver, and shall cause its Subsidiaries to execute and deliver, such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the GLPI Liabilities by GLPI and its Subsidiaries.

 

(c)                                  If at any time or from time to time (whether prior to or after the Effective Time), any party hereto (or any member of such party’s respective Group), shall receive or otherwise possess any Asset or Liability (including any Intellectual Property or Technology) that is allocated to any other Person pursuant to this Agreement or any other Transaction Document, such party shall, as applicable, promptly transfer or accept, or cause to be transferred or accepted, such Asset or Liability, as the case may be, to the Person entitled to such Asset or responsible for such Liability, as the case may be.  Prior to any such transfer, the Person receiving, possessing or responsible for such Asset or Liability shall be deemed to be holding such Asset or Liability, as the case may be, in trust for any such other Person.

 

(d)                                 GLPI hereby waives compliance by each and every member of the Penn Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the GLPI Assets to any member of the GLPI Group.

 

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2.2                               GLPI Assets.

 

(a)                                 For purposes of this Agreement, “GLPI Assets” shall mean (without duplication):

 

(i)                                     all Leased Property;

 

(ii)                                  all issued and outstanding capital stock of, or other equity interests in, the GLPI Subsidiaries;

 

(iii)                               all GLPI Contracts;

 

(iv)                              the Assets listed or described on Schedule 2.2(a)(iv), the Assets reflected as assets of the GLPI Group on the GLPI Balance Sheet and all other Assets that are expressly provided by this Agreement or any other Transaction Document as Assets to be transferred to GLPI or any other member of the GLPI Group; and

 

(v)                                 any and all Assets owned or held immediately prior to the Effective Time by Penn or any of its Subsidiaries that are used primarily in the GLPI Business (the intention of this clause (v) is only to rectify any inadvertent omission of transfer or conveyance of any Assets that, had the parties given specific consideration to such Asset as of the date hereof, would have otherwise been classified as a GLPI Asset; no Asset shall be deemed to be a GLPI Asset solely as a result of this clause (v) if such Asset is within the category or type of Asset expressly covered by the terms of another Transaction Document unless the party claiming entitlement to such Asset can establish that the omission of the transfer or conveyance of such Asset was inadvertent, and no Asset shall be deemed a GLPI Asset solely as a result of this clause (v) unless a claim with respect thereto is made by GLPI on or prior to the second (2nd) anniversary of the Distribution Date).

 

Notwithstanding the foregoing, the GLPI Assets shall not in any event include any Assets governed by the Tax Matters Agreement.

 

(b)                                 For the purposes of this Agreement, “Penn Assets” shall mean (without duplication), (i) any and all Assets of the Penn Group as of the Effective Time that are not expressly contemplated by this Agreement or any other Transaction Document to be GLPI Assets and (ii) those Assets listed or described on Schedule 2.2(b).

 

Notwithstanding the foregoing, the Penn Assets shall not in any event include any Assets governed by the Tax Matters Agreement.

 

2.3                               GLPI Liabilities.

 

(a)                                 For the purposes of this Agreement, “GLPI Liabilities” shall mean (without duplication):

 

(i)                                     except as limited by any Transaction Document, including Section 32.4 of the Master Lease, all Liabilities to the extent relating to, arising out of or resulting from any GLPI Assets, whether arising before, at or after the Effective Time;

 

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(ii)                                  all Liabilities provided by this Agreement or any other Transaction Document to be assumed by GLPI;

 

(iii)                               all Liabilities reflected as liabilities or obligations of GLPI or its Subsidiaries in the GLPI Balance Sheet; and

 

(iv)                              those Liabilities set forth on Schedule 2.3(a);

 

provided, however, that GLPI Liabilities shall not include any Liabilities for Taxes that are governed by the Tax Matters Agreement.

 

(b)                                 For the purposes of this Agreement, “Penn Liabilities” shall mean (without duplication) any and all Liabilities of Penn, GLPI and their respective Subsidiaries as of the Effective Time that are not expressly contemplated by this Agreement or any other Transaction Document to be GLPI Liabilities; provided, however, that Penn Liabilities shall not include any Liabilities for Taxes that are governed by the Tax Matters Agreement

 

2.4                               Transfer of Assets and Assumption of Liabilities from and after the Effective Time.

 

(a)                                 To the extent any Penn Asset is transferred or assigned to, or any Penn Liability is assumed by, a member of the GLPI Group at the Effective Time or is owned or held by a member of the GLPI Group after the Effective Time, and to the extent any GLPI Asset has not been transferred or assigned to, or any GLPI Liability has not been assumed by, a member of the GLPI Group at the Effective Time or is owned or held by a member of the Penn Group after the Effective Time, from and after the Effective Time:

 

(i)                                     GLPI or Penn, as applicable, shall, and shall cause its applicable Subsidiaries to, promptly assign, transfer, convey and deliver to the other party or certain of its Subsidiaries designated by such party, and GLPI or Penn, or such Subsidiaries, as applicable, shall accept from Penn or GLPI and such applicable Subsidiaries, all of Penn’s or GLPI’s or such Subsidiaries’ respective right, title and interest in and to such Penn or GLPI Assets; and

 

(ii)                                  Penn or GLPI, as applicable, or certain Subsidiaries of Penn or GLPI designated by such party, shall promptly accept, assume and agree faithfully to perform, discharge and fulfill all such Liabilities of Penn or GLPI in accordance with their respective terms.

 

(b)                                 In furtherance of the assignment, transfer, conveyance and delivery of Assets and the assumption of Liabilities set forth in this Section 2.4, and without any additional consideration therefor:  (A) the applicable party shall execute and deliver, and shall cause its Subsidiaries to execute and deliver, such bills of sale, quitclaim deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of such party’s and its Subsidiaries’ right, title and interest in and to the applicable Assets to the other party and its Subsidiaries, and (B) the applicable party shall execute and deliver such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the applicable Liabilities by such party.

 

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2.5                               Approvals and Notifications.

 

(a)                                 To the extent that the transfer or assignment of any Asset, the assumption of any Liability, the Reorganization or the Distribution requires any Approvals or Notifications (the “Required Approvals”), the parties will use their commercially reasonable efforts to obtain or make such Approvals or Notifications as soon as reasonably practicable; provided, however, that, except to the extent expressly provided in any of the other Transaction Documents, neither Penn nor GLPI shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.

 

(b)                                 If and to the extent that the valid, complete and perfected transfer or assignment of any Assets or assumption of any Liabilities would be a violation of applicable Law or require any Approvals or Notifications in connection with the Reorganization, or the Distribution, that has not been obtained or made by the Effective Time then, unless the parties hereto mutually shall otherwise determine, the transfer or assignment of such Assets or the assumption of such Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approvals or Notifications have been obtained or made; provided, however, that if such legal impediments are not removed, or such Approvals or Notifications are not obtained or made, in each case by the second (2nd) anniversary of the Distribution Date, then, unless the parties hereto mutually shall otherwise determine, all Assets and Liabilities that are held by any member of the Penn Group or the GLPI Group, as the case may be, will be retained by such party indefinitely, and the parties shall execute mutually acceptable documentation to such effect in accordance with applicable Law.

 

(c)                                  If any transfer or assignment of any GLPI Asset or any assumption of any GLPI Liabilities intended to be transferred, assigned or assumed hereunder, as the case may be, is not consummated on or prior to the Distribution Date, whether as a result of the provisions of Section 2.5(b) or for any other reason, then, insofar as reasonably possible, the member of the Penn Group retaining such GLPI Asset or such GLPI Liability, as the case may be, shall thereafter hold such GLPI Asset or GLPI Liability, as the case may be, for the use and benefit of the member of the GLPI Group entitled thereto (at the expense of the member of the GLPI Group entitled thereto) until such GLPI Asset or GLPI Liability is transferred to a member of the GLPI Group or until such GLPI Asset or GLPI Liability is retained by the member of the Penn Group pursuant to Section 2.5(b), whichever is sooner.  In addition, for such period, the member of the Penn Group retaining such GLPI Asset or such GLPI Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such GLPI Asset or GLPI Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the member of the GLPI Group to whom such GLPI Asset is to be transferred or assigned, or which will assume such GLPI Liability, as the case may be, in order to place such member of the GLPI Group in a substantially similar position as if such GLPI Asset or GLPI Liability had been transferred, assigned or assumed as contemplated hereby and so that all the benefits and burdens relating to such GLPI Asset or GLPI Liability, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such GLPI Asset or GLPI Liability, as the case may be, is to inure from and after the Effective Time to the GLPI Group.

 

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(d)                                 If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any GLPI Asset or the deferral of assumption of any GLPI Liability pursuant to Section 2.5(b), are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any GLPI Asset or the assumption of any GLPI Liability have been removed, the transfer or assignment of the applicable GLPI Asset or the assumption of the applicable GLPI Liability, as the case may be, shall be effected in accordance with the terms of this Agreement and/or the applicable Transaction Document.

 

(e)                                  Any member of the Penn Group retaining a GLPI Asset or GLPI Liability due to the deferral of the transfer or assignment of such GLPI Asset or the deferral of the assumption of such GLPI Liability, as the case may be, shall not be obligated, in connection with the foregoing and unless the parties have executed documentation providing for such asset or liability to be retained by such party pursuant to Section 2.5(b), to expend any money unless the necessary funds are advanced (or otherwise made available) by GLPI or the member of the GLPI Group entitled to the GLPI Asset or GLPI Liability, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by GLPI or the member of the GLPI Group entitled to such GLPI Asset or GLPI Liability.

 

(f)                                   To the extent any GLPI Asset intended to be subject to the Master Lease is retained by a member of the Penn Group, the rent payable under the Master Lease and the other obligations of the tenant under the Master Lease with respect to such GLPI Asset shall not be impacted by the retention of such GLPI Asset by a member of the Penn Group (and such rent and other obligations shall be determined as if such GLPI Asset had been transferred or assigned to GLPI or a member of the GLPI Group); provided that if such GLPI Asset is not transferred or assigned to GLPI or a member of the GLPI Group by the second (2nd) anniversary of the Distribution Date, then, unless the parties mutually shall otherwise determine, the rent payable under the Master Lease and the other obligations of the tenant under the Master Lease with respect to such GLPI Asset shall be modified by mutual agreement of the parties acting in good faith to reflect the exclusion of such GLPI Asset from the Master Lease (and the landlord under the Master Lease shall have no obligations with respect to any such GLPI Asset unless and until such GLPI Asset is transferred and assigned to GLPI or a member of the GLPI Group).

 

2.6                               Responsibility for GLPI Liabilities Retained by Penn.  If Penn or GLPI is unable to obtain, or to cause to be obtained, any consent, substitution, approval, amendment or release required to transfer a GLPI Liability to a member or members of the GLPI Group, then until the second (2nd) anniversary of the Effective Time, the applicable member of the Penn Group shall continue to be bound by such agreement, lease, license or other obligation or Liability and, unless not permitted by the terms thereof or by Law, GLPI shall, as agent or subcontractor for such member of the Penn Group, as the case may be, pay, perform and discharge fully all the obligations or other Liabilities of such member of the Penn Group that constitute GLPI Liabilities, as the case may be, thereunder from and after the Effective Time.  GLPI shall indemnify each Penn Indemnified Party, and hold each of them harmless, against any Liabilities arising in connection therewith; provided, that pursuant hereto GLPI shall have no obligation to indemnify any Penn Indemnified Party that has engaged in any knowing and intentional violation of Law, breach of contract, tort, fraud or misrepresentation in connection therewith.  Penn shall cause each member of the Penn Group without further consideration, to pay and remit, or cause to be paid or remitted, to GLPI, promptly all money, rights and other consideration received by it

 

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or any member of the Penn Group in respect of such performance (unless any such consideration is an Penn Asset).  If and when any such consent, substitution, approval, amendment or release shall be obtained or the obligations under such agreement, lease, license or other obligations or Liabilities shall otherwise become assignable or able to be novated, Penn shall promptly assign, or cause to be assigned, all its obligations and other Liabilities thereunder or any obligations of any member of the Penn Group to GLPI without payment of further consideration and GLPI shall, without the payment of any further consideration, assume such obligations in accordance with the terms of this Agreement and/or the applicable Transaction Document.

 

2.7                               Disclaimer of Representations and Warranties.  EACH OF PENN (ON BEHALF OF ITSELF AND EACH MEMBER OF THE PENN GROUP) AND GLPI (ON BEHALF OF ITSELF AND EACH MEMBER OF THE GLPI GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY OTHER TRANSACTION DOCUMENT, NO PARTY TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, OR OTHERWISE, IS REPRESENTING OR WARRANTING TO ANY OTHER PARTY HERETO OR THERETO IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY ACTION OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF.  EXCEPT AS MAY EXPRESSLY BE SET FORTH IN THIS AGREEMENT OR IN ANY TRANSACTION DOCUMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

ARTICLE III

 

THE DISTRIBUTION

 

3.1                               Actions on or Prior to the Distribution Date.  Prior to the Distribution, the following shall occur:

 

(a)                                 Prospectus; Listing.  Penn shall make the Prospectus available to the holders of Penn common stock as of the Record Date.  GLPI shall prepare, file with the SEC and

 

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use commercially reasonable efforts to cause to become effective the Form S-11 and amendments thereto and the Form S-8 and amendments thereto required to effect the transactions contemplated by this Agreement or any of the Transaction Documents. Penn and GLPI shall take all such actions as may be necessary or appropriate under the securities or “blue sky” Laws of states or other political subdivisions of the United States and shall use commercially reasonable efforts to comply with all applicable foreign securities Laws in connection with the transactions contemplated by this Agreement and the other Transaction Documents.  GLPI shall prepare, file and pursue an application to permit listing of the GLPI Common Stock on NASDAQ.

 

(b)                                 The Distribution Agent.  Penn shall enter into a distribution agent agreement with the Distribution Agent or otherwise provide instructions to the Distribution Agent regarding the Distribution.

 

(c)                                  GLPI Balance Sheet.  Penn shall prepare a pro forma combined balance sheet of GLPI and its Subsidiaries as of the Effective Time, or the latest time prior to the Effective Time that is reasonably practicable (the “GLPI Balance Sheet”).

 

(d)                                 Efforts.  The parties agree to use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable to satisfy or cause to be satisfied each of the conditions set forth in Section 3.2.

 

3.2                               Conditions Precedent to Distribution.  In no event shall the Distribution occur unless each of the following conditions shall have been satisfied (or waived by Penn, in whole or in part, in its sole discretion):

 

(a)                                 each of the other Transaction Documents shall have been duly executed and delivered by the parties thereto;

 

(b)                                 the Reorganization shall have been completed in accordance with the Plan of Reorganization;

 

(c)                                  (i) the Private Letter Ruling shall not have been revoked or modified in any material respect, (ii) Penn shall have received (A) an opinion of Wachtell, Lipton, Rosen & Katz substantially to the effect that, with respect to certain requirements for tax-free treatment under Section 355 of the Code on which the IRS will not rule, such requirements will be satisfied, (B) an opinion of KPMG LLP substantially to the effect that, with respect to certain requirements for tax-free treatment under Section 355 of the Code on which the IRS will not rule, such requirements will be satisfied, and (iii) GLPI shall have received (A) an opinion of Wachtell, Lipton, Rosen & Katz, to the effect that the manner in which GLPI is organized and its proposed method of operation will enable it to qualify to be taxed as a real estate investment trust under Sections 856 through 859 of the Code following the Distribution, and (B) an opinion of KPMG LLP, to the effect that the manner in which GLPI is organized and its proposed method of operation will enable it to qualify to be taxed as a real estate investment trust under Sections 856 through 859 of the Code following the Distribution;

 

(d)                                 the Form S-11 filed with the SEC shall have been declared effective by the SEC, no stop order suspending the effectiveness of the Form S-11 shall be in effect, no

 

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proceedings for such purpose shall be pending before or threatened by the SEC, and the Prospectus shall have been mailed to holders of Penn Common Shares as of the Record Date;

 

(e)                                  prior to the Distribution Date, such Registration Statements on Form S-8 as are necessary and appropriate to register the equity awards of GLPI contemplated by the Form S-11 to be available for granting to directors and employees of GLPI and Penn shall have been filed with the SEC;

 

(f)                                   all actions and filings necessary or appropriate under applicable federal, state or foreign securities or “blue sky” Laws and the rules and regulations thereunder shall have been taken and, where applicable, become effective or been accepted;

 

(g)                                  the GLPI Common Stock to be delivered in the Distribution shall have been accepted for listing on NASDAQ, subject to compliance with applicable listing requirements;

 

(h)                                 no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Distribution or any of the transactions related thereto, including the Reorganization, shall be threatened, pending or in effect;

 

(i)                                     any material consents and governmental authorizations to complete the Distribution, including all Required Approvals, shall have been obtained and be in full force and effect;

 

(j)                                    (i) GLPI shall have entered into the financing transactions described in the Form S-11 and contemplated to occur on or prior to the Distribution Date, and Penn shall have entered into the financing transactions to be entered into in connection with the Plan of Reorganization (the “Financing Arrangements”) and the respective financings thereunder shall have been consummated, (ii) GLPI shall have transferred to the applicable member of the Penn Group, no later than immediately prior to the Distribution, as contemplated by the Plan of Reorganization, the proceeds of GLPI debt issued to one or more banks (in an amount approximately equal to $2.1 billion dollars) in exchange for Penn’s transfer of the GLPI Assets to GLPI pursuant to this Agreement (the “GLPI Cash Payment”) and (iii) the Financing Arrangements shall be in full force and effect immediately prior to the Distribution;

 

(k)                                 on or prior to the Distribution, the persons specified in the Prospectus shall have been duly elected as members of GLPI’s board of directors;

 

(l)                                     Penn and the other parties to Penn’s agreements with Peter M. Carlino, FIF V PFD LLC and Centerbridge Capital Partners, L.P. and certain of their respective affiliates, in each case as described in the Form S-11, shall have fulfilled all of their respective obligations under such agreements that are contemplated by such agreements to be fulfilled prior to the Distribution, and each such agreement shall be in full force and effect immediately prior to the Distribution;

 

(m)                             (i) Penn and GLPI shall each have taken all necessary action that may be required to provide for the adoption by GLPI of the Amended and Restated Articles of

 

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Incorporation of GLPI in substantially the form attached hereto as Exhibit D (the “Amended and Restated Articles of Incorporation”), and the Amended and Restated Bylaws of GLPI in substantially the form attached hereto as Exhibit E (the “Amended and Restated Bylaws”) and (ii) GLPI shall have filed the Amended and Restated Articles of Incorporation of GLPI with the Secretary of State of the Commonwealth of Pennsylvania;

 

(n)                                 at or prior to the Effective Time, Penn and GLPI shall have taken all actions as may be necessary to approve the stock-based employee benefit plans of GLPI in order to satisfy the applicable rules and regulations of NASDAQ; and

 

(o)                                 no other condition shall fail to be satisfied and no event or development shall have occurred or exist that, in the judgment of the board of directors of Penn, in its sole discretion, makes it inadvisable to effect the Reorganization, the Distribution or the other transactions contemplated hereby or in connection herewith.

 

Notwithstanding Section 3.1(c) or any other provision hereof, each of the foregoing conditions is for the sole benefit of Penn and shall not give rise to or create any duty on the part of Penn or its board of directors to waive or not to waive any such condition or to effect the Reorganization and the Distribution, or in any way limit Penn’s rights of termination set forth in this Agreement.  Any determination made by Penn prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 3.2 shall be conclusive and binding on the parties.

 

3.3                               The Distribution.

 

(a)                                 Subject to the terms and conditions set forth in this Agreement, including Section 3.3(b), (i) on or prior to the Distribution Date, Penn shall deliver to the Distribution Agent for the benefit of holders of record of Penn Common Shares and Series C on the Record Date book-entry transfer authorizations for such number of the issued and outstanding shares of GLPI Common Stock necessary to effect the Distribution, (ii) the Distribution shall be effective at the Effective Time and (iii) Penn shall instruct the Distribution Agent to distribute, on or as soon as practicable after the Effective Time, (A) to each holder of record of Penn Common Shares as of the Record Date, by means of a pro rata distribution, one (1) share of GLPI Common Stock for every one (1) Penn Common Share so held and (B) to each holder of record of Series C as of the Record Date, by means of a pro rata distribution, one (1) share of GLPI Common Stock for every 1/1,000th (one one-thousandth) of a share of Series C.  Following the Distribution Date, GLPI agrees to provide all book-entry transfer authorizations for shares of GLPI Common Stock that Penn or the Distribution Agent shall require in order to effect the Distribution.

 

(b)                                 NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, PENN SHALL, IN ITS SOLE AND ABSOLUTE DISCRETION, DETERMINE THE DISTRIBUTION DATE AND ALL TERMS OF THE DISTRIBUTION, INCLUDING THE FORM, STRUCTURE AND TERMS OF ANY TRANSACTIONS AND/OR OFFERINGS TO EFFECT THE DISTRIBUTION AND THE TIMING OF AND CONDITIONS TO THE CONSUMMATION THEREOF.  IN ADDITION, PENN MAY AT ANY TIME AND FROM TIME TO TIME UNTIL THE COMPLETION OF

 

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THE DISTRIBUTION DECIDE TO ABANDON THE DISTRIBUTION OR MODIFY OR CHANGE THE TERMS OF THE DISTRIBUTION, INCLUDING BY ACCELERATING OR DELAYING THE TIMING OF THE CONSUMMATION OF ALL OR PART OF THE DISTRIBUTION.

 

(c)                                  The Parties agree that this Agreement constitutes a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g).

 

ARTICLE IV

 

ACCESS TO INFORMATION

 

4.1                               Agreement for Exchange of Information.  After the Effective Time (or such earlier time as the parties may agree) and until the seventh (7th) anniversary of the date of this Agreement, each of Penn and GLPI, on behalf of its respective Group, agrees to provide, or cause to be provided, to the other Group, as soon as reasonably practicable after written request therefor, any Information in the possession or under the control of such respective Group which the requesting party reasonably needs; provided, however, that in the event that any party determines that any such provision of Information could be commercially detrimental, violate any Law or agreement, or waive any attorney-client privilege, the parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.

 

4.2                               Ownership of Information.  Any Information owned by one Group that is provided to a requesting party pursuant to Section 4.1 shall be deemed to remain the property of the providing party, except where such Information is an Asset of the requesting party pursuant to the provisions of this Agreement or any other Transaction Document.  Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any Information requested or provided pursuant to Section 4.1.

 

4.3                               Compensation for Providing Information.  The party requesting Information agrees to reimburse the other party for the reasonable out-of-pocket costs and expenses, if any of creating, gathering and copying such Information to the extent that such costs are incurred in connection with such other party’s provision of Information in response to the requesting party.

 

4.4                               Record Retention.

 

(a)                                 To facilitate the possible exchange of Information pursuant to this Article IV and other provisions of this Agreement after the Effective Time, the parties agree to use their commercially reasonable efforts to retain all Information in their respective possession or control in accordance with the policies or ordinary course practices of Penn in effect on the Distribution Date (including any Information that is subject to a “Litigation Hold” issued by either party prior to the Distribution Date) or such other policies or practices as may be reasonably adopted by the appropriate party after the Effective Time.

 

(b)                                 Except in accordance with its, or its applicable Subsidiaries’, policies and ordinary course practices, no party will destroy, or permit any of its Subsidiaries to destroy, any Information that would, in accordance with such policies or ordinary course practices, be

 

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archived or otherwise filed in a centralized filing system by such party or its applicable Subsidiaries; in furtherance of the foregoing, no party will destroy, or permit any of its Subsidiaries to destroy, any Information required to be retained by applicable Law.

 

(c)                                  In the event of either party’s or any of its Subsidiaries’ inadvertent failure to comply with its applicable document retention policies as required under this Section 4.4, such party shall be liable to the other party solely for the amount of any monetary fines or penalties imposed or levied against such other party by a Governmental Authority (which fines or penalties shall not include any Liabilities asserted in connection with the claims underlying the applicable Action, other than fines or penalties resulting from any claim of spoliation) as a result of such other party’s inability to produce Information caused by such inadvertent failure and, notwithstanding Sections 5.2 and 5.3, shall not be liable to such other party for any other Liabilities.

 

4.5                               Liability.  No party shall have any liability to any other party in the event that any Information exchanged or provided pursuant to this Agreement which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate in the absence of willful misconduct by the party providing such Information.

 

4.6                               Other Agreements Providing for Exchange of Information.

 

(a)                                 The rights and obligations granted under this Article IV are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention or confidential treatment of Information set forth in any other Transaction Document, including Section 23.1(c) of the Master Lease.

 

(b)                                 Any party that receives, pursuant to a request for Information in accordance with this Article IV, Information that is not relevant to its request shall (i) either destroy such Information or return it to the providing party and (ii) deliver to the providing party a certificate certifying that such Information was destroyed or returned, as the case may be, which certificate shall be signed by an officer of the requesting party holding the title of vice president or above.

 

(c)                                  When any Information provided by one Group to the other (other than Information provided pursuant to Section 4.4) is no longer needed for the purposes contemplated by this Agreement or any other Transaction Document or is no longer required to be retained by applicable Law, the receiving party will promptly after request of the other party either return to the other party all Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the other party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon).

 

4.7                               Production of Witnesses; Records; Cooperation.

 

(a)                                 After the Effective Time, except in the case of an adversarial Action by one party against another party, each party hereto shall use its commercially reasonable efforts to make available to each other party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has

 

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the ability to make available, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting party may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder.  The requesting party shall bear all reasonable out-of-pocket costs and expenses in connection therewith.

 

(b)                                 If an Indemnifying Party chooses to defend or to seek to compromise or settle any Third Party Claim, the Indemnified Party shall use commercially reasonable efforts to make available to such Indemnifying Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such persons (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, or the prosecution, evaluation or pursuit thereof, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be.  The Indemnifying Party shall bear all reasonable out-of-pocket costs and expenses in connection therewith.

 

(c)                                  For the avoidance of doubt, the provisions of this Section 4.7 are in furtherance of the provisions of Section 4.1 and shall not be deemed to in any way limit or otherwise modify the parties’ rights and obligations under Section 4.1.

 

4.8                               Privileged Matters.

 

(a)                                 The parties recognize that legal and other professional services that have been and will be provided prior to the Effective Time have been and will be rendered for the collective benefit of each of the members of the Penn Group and the GLPI Group, and that each of the members of the Penn Group and the GLPI Group should be deemed to be the client with respect to such services for the purposes of asserting all privileges which may be asserted under applicable Law in connection therewith.

 

(b)                                 The parties agree as follows:

 

(i)                                     Penn shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with any privileged Information that relates solely to the Penn Business and not to the GLPI Business, whether or not the privileged Information is in the possession or under the control of any member of the Penn Group or any member of the GLPI Group. Penn shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with any privileged Information that relates solely to any Penn Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the privileged Information is in the possession or under the control of any member of the Penn Group or any member of the GLPI Group; and

 

(ii)                                  GLPI shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with any privileged Information that relates solely to the

 

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GLPI Business and not to the Penn Business, whether or not the privileged Information is in the possession or under the control of any member of the GLPI Group or any member of the Penn Group. GLPI shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with any privileged Information that relates solely to any GLPI Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the privileged Information is in the possession or under the control of any member of the GLPI Group or any member of the Penn Group.

 

(c)                                  Subject to the restrictions set forth in this Section 4.8, the parties agree that they shall have a shared privilege, each with equal right to assert or waive any such shared privilege, with respect to all privileges not allocated pursuant to Section 4.8(b) and all privileges relating to any Actions or other matters that involve both the Penn Group and the GLPI Group and in respect of which both parties have Liabilities under this Agreement, and that no such shared privilege or immunity may be waived by either party without the consent of the other party.

 

(d)                                 In the event of any Actions between Penn and GLPI, or any members of their respective Groups, either party may waive a privilege in which the other party or member of such other party’s Group has a shared privilege, without obtaining consent pursuant to Section 4.8(c); provided, that such waiver of a shared privilege shall be effective only as to the use of Information with respect to the Action between the parties and/or the applicable members of their respective Groups, and shall not operate as a waiver of the shared privilege with respect to any third Person.

 

(e)                                  If any dispute arises between Penn and GLPI, or any members of their respective Groups, regarding whether a privilege should be waived to protect or advance the interests of either the Penn Group or the GLPI Group, each party agrees that it shall (i) negotiate with the other party in good faith, (ii) endeavor to minimize any prejudice to the rights of the other party and (iii) not unreasonably withhold, condition or delay consent to any request for waiver by the other party.  Further, each party specifically agrees that it will not withhold its consent to the waiver of a privilege for any purpose except to protect its own legitimate interests.

 

(f)                                   In furtherance of the parties’ agreement under this Section 4.8, Penn and GLPI shall, and shall cause applicable members of their respective Group to, maintain their respective separate and joint privileges, including by executing joint defense and common interest agreements where necessary or useful for this purpose.

 

ARTICLE V

 

RELEASE AND INDEMNIFICATION

 

5.1                               Release of Pre-Distribution Claims.

 

(a)                                 Except as provided in (i) Section 5.1(c) and (ii) any Transaction Document, effective as of the Effective Time, GLPI does hereby, for itself and each other member of the GLPI Group, their respective Affiliates, successors and assigns, and all Persons who at any time prior to the Effective Time have been directors, officers, agents or employees of

 

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any member of the GLPI Group (in each case, in their respective capacities as such), release and forever discharge Penn and the other members of the Penn Group, their respective Affiliates, successors and assigns, and all Persons who at any time prior to the Effective Time have been shareholders, directors, officers, agents or employees of any member of the Penn Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Effective Time, including in connection with the transactions and all other activities to implement the Reorganization, the Distribution and any of the other transactions contemplated hereunder and under the other Transaction Documents.

 

(b)                                 Except as provided in (i) Section 5.1(c) and (ii) any Transaction Document, effective as of the Effective Time, Penn does hereby, for itself and each other member of the Penn Group, their respective Affiliates, successors and assigns, and all Persons who at any time prior to the Effective Time have been shareholders, directors, officers, agents or employees of any member of the Penn Group (in each case, in their respective capacities as such), release and forever discharge GLPI, the other members of the GLPI Group, their respective Affiliates, successors and assigns, and all Persons who at any time prior to the Effective Time have been directors, officers, agents or employees of any member of the GLPI Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Effective Time, including in connection with the transactions and all other activities to implement the Reorganization, the Distribution and any of the other transactions contemplated hereunder and under the other Transaction Documents.

 

(c)                                  Nothing contained in Section 5.1(a) or Section 5.1(b) shall impair any right of any Person to enforce this Agreement or any other Transaction Document, in each case in accordance with its terms.  In addition, nothing contained in Section 5.1(a) or Section 5.1(b) shall release any member of a Group from:

 

(i)                                     any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement or any other Transaction Document; or

 

(ii)                                  any Liability that the parties may have with respect to indemnification or contribution pursuant to this Agreement or any of the other Transaction Documents.

 

Further, nothing contained in Section 5.1(a) shall release Penn from indemnifying any director, officer or employee of GLPI who was or is a director, officer or

 

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employee of Penn or any of its Affiliates, to the extent such director, officer or employee is or becomes a named defendant in any Action with respect to which he or she was or is entitled to such indemnification pursuant to then existing obligations, it being understood that if the underlying obligation giving rise to such Action is a GLPI Liability, GLPI shall indemnify Penn for such Liability (including Penn’s costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this Article V.

 

(d)                                 GLPI shall not make, and shall not permit any member of the GLPI Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Penn or any member of the Penn Group, or any other Person released pursuant to Section 5.1(a), with respect to any Liabilities released pursuant to Section 5.1(a).  Penn shall not, and shall not permit any member of the Penn Group, to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification against GLPI or any member of the GLPI Group, or any other Person released pursuant to Section 5.1(b), with respect to any Liabilities released pursuant to Section 5.1(b).

 

(e)                                  It is the intent of each of Penn and GLPI, by virtue of the provisions of this Section 5.1, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Effective Time, between or among GLPI or any member of the GLPI Group and their respective directors, officers, agents or employees, on the one hand, and Penn or any member of the Penn Group and their respective directors, officers, agents or employees, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Distribution Date), except as expressly set forth in Section 5.1(c).

 

5.2                               General Indemnification by GLPI.  Except as provided in Section 5.6, GLPI shall, and shall cause the other members of the GLPI Group to, indemnify, defend and hold harmless each member of the Penn Group and each of their respective directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Penn Indemnified Parties”), from and against (i) any and all Liabilities of the Penn Indemnified Parties relating to, arising out of or resulting from any GLPI Liability and (ii) except as provided in Section 5.1, any and all Liabilities of the Penn Indemnified Parties relating to, arising out of or resulting from GLPI’s breach of this Agreement or any other Transaction Document other than the Master Lease.

 

5.3                               General Indemnification by Penn.  Except as provided in Section 5.6, Penn shall indemnify, defend and hold harmless each member of the GLPI Group and each of their respective directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “GLPI Indemnified Parties”), from and against (i) any and all Liabilities of the GLPI Indemnified Parties relating to, arising out of or resulting from any Penn Liability and (ii) except as provided in Section 5.1, any and all Liabilities of the GLPI Indemnified Parties relating to, arising out of or resulting from Penn’s breach of this Agreement or any other Transaction Document other than the Master Lease.

 

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5.4                               Disclosure Indemnification.  GLPI agrees to indemnify and hold harmless the Penn Indemnified Parties and each Person, if any, who controls any member of the Penn Group within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all Liabilities arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Form S-11 or any amendment thereof or any other Disclosure Document, or arising out of or based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

 

5.5                               Contribution.  If the indemnification provided for in this Article V is unavailable to, or insufficient to hold harmless, an indemnified party under Section 5.4 hereof in respect of any Liabilities referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such Liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the actions which resulted in Liabilities as well as any other relevant equitable considerations.  The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  For the purposes of this Section 5.5, the information relating to Penn after the Effective Time set forth in the Form S-11 shall be the only “information supplied by” Penn and all other information shall be deemed “information supplied by” GLPI.

 

5.6                               Indemnification Obligations Net of Insurance Proceeds and Other Amounts.

 

(a)                                 Any Liability subject to indemnification or contribution pursuant to this Article V will be net of Insurance Proceeds that actually reduce the amount of the Liability or Loss, as applicable.  Accordingly, the amount which any party (an “Indemnifying Party”) is required to pay to any Person entitled to indemnification under this Article V (an “Indemnified Party”) will be reduced by any Insurance Proceeds theretofore actually recovered by or on behalf of the Indemnified Party in respect of the related Liability, as applicable.  If an Indemnified Party receives a payment (an “Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds, then the Indemnified Party will pay to the Indemnifying Party an amount equal to such Insurance Proceeds but not exceeding the amount of the Indemnity Payment paid by the Indemnifying Party in respect of such Liability.

 

(b)                                 An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto.  The Indemnified Party shall use its commercially reasonable efforts to seek to collect or recover any third-party Insurance Proceeds (other than Insurance Proceeds under an arrangement where future premiums are adjusted to reflect prior claims in excess of prior premiums) to which the Indemnified Party is entitled in connection with any Liability for which the Indemnified Party seeks indemnification pursuant to this Article V; provided, that the Indemnified Party’s inability to collect or recover any such Insurance Proceeds shall not limit the Indemnifying Party’s obligations hereunder.

 

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(c)                                  Any indemnity payment under this Article V shall be increased to take into account any inclusion in income of the Indemnified Party arising from the receipt of such indemnity payment and shall be decreased to take into account any reduction in income of the Indemnified Party arising from such indemnified Liability or Loss, as applicable.  For purposes hereof, any inclusion or reduction shall be determined (i) using the highest marginal rates applicable to the Indemnified Party in effect at the time of the determination and (ii) assuming that the Indemnified Party will be liable for Taxes at such rate and has no Tax Attributes (as such term is defined in the Tax Matters Agreement) at the time of the determination.

 

5.7                               Procedures for Indemnification of Third Party Claims.

 

(a)                                 If an Indemnified Party receives written notice that a Person (including any Governmental Authority) that is not a member of the Penn Group or the GLPI Group has asserted any claim or commenced any Action (collectively, a “Third Party Claim”) that may implicate an Indemnifying Party’s obligation to indemnify pursuant to Sections 5.2, 5.3 or 5.4, or any other Section of this Agreement or any other Transaction Document, the Indemnified Party shall provide the Indemnifying Party written notice thereof as promptly as practicable (and no later than twenty (20) days or sooner, if the nature of the Third Party Claim so requires) after becoming aware of the Third Party Claim.  Such notice shall describe the Third Party Claim in reasonable detail and include copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim.  Notwithstanding the foregoing, the failure of an Indemnified Party to provide notice in accordance with this Section 5.7(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party is actually prejudiced by the Indemnified Party’s failure to provide notice in accordance with this Section 5.7(a).

 

(b)                                 Subject to this Section 5.7(b) and Section 5.7(c), an Indemnifying Party may elect to control the defense of (and seek to settle or compromise), at its own expense and with its own counsel, any Third Party Claim.  Within thirty (30) days after the receipt of notice from an Indemnified Party in accordance with Section 5.7(a) (or sooner, if the nature of the Third Party Claim so requires), the Indemnifying Party shall notify the Indemnified Party whether the Indemnifying Party will assume responsibility for defending the Third Party Claim and shall specify any reservations or exceptions to its defense.  After receiving notice of an Indemnifying Party’s election to assume the defense of a Third Party Claim, whether with or without any reservations or exceptions with respect to such defense, an Indemnified Party shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the Indemnified Party shall be responsible for the fees and expenses of its counsel and, in any event, shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnifying Party’s expense, all witnesses, information and materials in such Indemnified Party’s possession or under such Indemnified Party’s control relating thereto as are reasonably required by the Indemnifying Party.  If an Indemnifying Party has elected to assume the defense of a Third Party Claim, whether with or without any reservations or exceptions with respect to such defense, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third Party Claim and shall not be entitled to seek any indemnification or reimbursement from the Indemnified Party for any such fees or expenses incurred during the course of its

 

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defense of such Third Party Claim, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense.

 

(c)                                  Notwithstanding Section 5.7(b), if any Indemnified Party shall in good faith determine that there is an actual conflict of interest (whether legal, business or otherwise) if counsel for the Indemnifying Party represented both the Indemnified Party and Indemnifying Party, then the Indemnified Party shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, and the Indemnifying Party shall bear the reasonable fees and expenses of one (1) separate counsel for all Indemnified Parties.

 

(d)                                 If an Indemnifying Party elects not to assume responsibility for defending a Third Party Claim, or fails to notify an Indemnified Party of its election within thirty (30) days after the receipt of notice from an Indemnified Party as provided in Section 5.7(b), the Indemnified Party may defend the Third Party Claim at the cost and expense of the Indemnifying Party.  If the Indemnified Party is conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party, at the Indemnifying Party’s expense, all witnesses, information and materials in such Indemnifying Party’s possession or under such Indemnifying Party’s control relating thereto as are reasonably required by the Indemnified Party.

 

(e)                                  Without the prior written consent of any Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed, no Indemnified Party may settle or compromise, or seek to settle or compromise, any Third Party Claim; provided, however, in the event that the Indemnifying Party elects not to assume responsibility for defending a Third Party Claim or fails to notify the Indemnified Party of its election within thirty (30) days after the receipt of notice from the Indemnified Party as provided in Section 5.7(b), the Indemnified Party shall have the right to settle or compromise such Third Party Claim in its sole discretion.  Without the prior written consent of any Indemnified Party, which consent shall not be unreasonably withheld, conditioned or delayed, no Indemnifying Party shall consent to the entry of any judgment or enter into any settlement of any pending or threatened Third Party Claim for which the Indemnified Party is seeking or may seek indemnity pursuant to this Section 5.7 unless such judgment or settlement is solely for monetary damages, does not impose any expense or obligation on the Indemnified Party, does not involve any finding or determination of wrongdoing or violation of law by the Indemnified Party and provides for a full, unconditional and irrevocable release of that Indemnified Party from all liability in connection with the Third Party Claim.

 

5.8                               Tax Procedures.

 

(a)                                 With respect to any period in which GLPI has made or will make an election to be taxed as a real estate investment trust within the meaning of Section 856 of the Code (a “REIT”), notwithstanding any other provisions in this Agreement, any payments to be made by Penn to any member of the GLPI Group pursuant to Section 5.3 or 5.6 for any calendar year shall not exceed the sum of (i) the amount that it is determined will not be gross income of GLPI for purposes of the requirements of Sections 856(c)(2) and (3) of the Code for any period in which GLPI has made any election to be taxed as a REIT, with such determination to be set

 

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forth in an opinion of outside tax counsel selected by GLPI, which opinion shall be reasonably satisfactory to GLPI plus (ii) such additional amount that is estimated can be paid to GLPI in such taxable year without causing GLPI to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code, determined (x) as if the payment of such amount did not constitute income described in Sections 856(c)(2)(A) through (I) and 856(c)(3)(A) through (I) of the Code (“Qualifying Income”) and (y) by taking into account any other payments to GLPI during such taxable year that do not constitute Qualifying Income, which determination shall be (A) made by independent tax accountants to GLPI, and (B) submitted to and approved by GLPI’s outside tax counsel, and (iii) in the event that GLPI receives a ruling from the IRS to the effect that GLPI’s receipt of the additional amount otherwise to be paid under this Agreement either would constitute Qualifying Income or would be excluded from gross income of GLPI for purposes of Sections 856(c)(2) and (3) of the Code (the “Specified REIT Requirements”), the aggregate payments otherwise required to be made pursuant to Section 5.3 or 5.6 (determined without regard to this Section 5.8(a)) less the amount otherwise previously paid under clauses (i) and (ii) above.

 

(b)                                 Penn shall place the full amount of any payments otherwise to be made by Penn pursuant to Section 5.3 or 5.6 in a mutually agreed escrow account upon mutually acceptable terms (which shall provide that (i) the amount in the escrow account shall be treated as the property of Penn, unless it is released from such escrow account to any GLPI Indemnified Party, (ii) all income earned upon the amount in the escrow account shall be treated as the property of Penn and reported, as and to the extent required by applicable Law, by the escrow agent to the IRS, or any other taxing authority, on IRS Form 1099 or 1042S (or other appropriate form) as income earned by Penn whether or not said income has been distributed during such taxable year and (iii) any portion thereof shall not be released to any GLPI Indemnified Party unless and until Penn receives any of the following:  (A) a letter from GLPI’s independent tax accountants indicating the amount that it is estimated can be paid at that time to the GLPI Indemnified Parties without causing GLPI to fail to meet the Specified REIT Requirements for the taxable year in which the payment would be made, which determination shall be made by such independent tax accountants or (B) an opinion of outside tax counsel selected by GLPI, such opinion to be reasonably satisfactory to GLPI, to the effect that, based upon a change in applicable Law after the date on which payment was first deferred hereunder, receipt of the additional amount otherwise to be paid pursuant to Section 5.3 or 5.6 either would be excluded from gross income of GLPI for purposes of the Specified REIT Requirements or would constitute Qualifying Income, in either of which events Penn shall pay to the applicable GLPI Indemnified Parties the lesser of the unpaid amounts due pursuant to Section 5.3 or 5.6 (determined without regard to this Section 5.8) or the maximum amount stated in the letter referred to in clause (iii)(A) above.

 

(c)                                  Any amount held in escrow pursuant to Section 5.8(b) for five years shall be released from such escrow to be used as determined by Penn in its sole and absolute discretion.

 

(d)                                 GLPI shall bear all costs and expenses with respect to the escrow.

 

(e)                                  Penn shall cooperate in good faith to amend this Section 5.8 at the reasonable request of GLPI in order to (i) maximize the portion of such payment that may be

 

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distributed to GLPI hereunder without causing GLPI to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code, (ii) improve GLPI’s chances of securing a favorable ruling described in this Section 5.8, or (iii) assist GLPI in obtaining a favorable opinion from its outside tax counsel or determination from its tax accountants as described in this Section 5.8.  GLPI shall reimburse Penn for all reasonable costs and expenses of such cooperation.

 

5.9                               Additional Matters.

 

(a)                                 Indemnification or contribution payments in respect of any Liabilities for which an Indemnified Party is entitled to indemnification or contribution under this Article V shall be paid by the Indemnifying Party to the Indemnified Party as such Liabilities are incurred upon demand by the Indemnified Party, including reasonably satisfactory documentation setting forth the basis for the amount of such indemnification or contribution payment, including documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such Liabilities.  The indemnity and contribution agreements contained in this Article V shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnified Party, (ii) the knowledge by the Indemnified Party of Liabilities for which it might be entitled to indemnification or contribution hereunder and (iii) any termination of this Agreement.

 

(b)                                 Any claim for indemnification under this Agreement which does not result from a Third Party Claim shall be asserted by written notice given by the Indemnified Party to the applicable Indemnifying Party.  Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto.  If such Indemnifying Party does not respond within such thirty (30)-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment.  If such Indemnifying Party does not respond within such thirty (30)-day period or rejects such claim in whole or in part, such Indemnified Party shall be free to pursue such remedies as may be available to such party as contemplated by this Agreement and the other Transaction Documents without prejudice to its continuing rights to pursue indemnification or contribution hereunder.

 

(c)                                  If payment is made by or on behalf of any Indemnifying Party to any Indemnified Party in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnified Party as to any events or circumstances in respect of which such Indemnified Party may have any right, defense or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other Person.  Such Indemnified Party shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

 

(d)                                 In an Action in which the Indemnifying Party is not a named defendant, if either the Indemnified Party or Indemnifying Party shall so request, the parties shall endeavor to substitute the Indemnifying Party for the named defendant if they conclude that substitution is desirable and practical.  If such substitution or addition cannot be achieved for any reason or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action as set forth in this section, and the Indemnifying Party shall fully indemnify the named defendant against all costs of defending the Action (including court costs, sanctions imposed by a court,

 

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attorneys’ fees, experts fees and all other external expenses), the costs of any judgment or settlement, and the cost of any interest or penalties relating to any judgment or settlement.

 

(e)                                  For all Tax purposes other than for purposes of Section 355(g) of the Code, Penn and GLPI agree to treat (i) any payment required by this Agreement (other than payments with respect to interest accruing after the Effective Time) as either a contribution by Penn to GLPI or a distribution by GLPI to Penn, as the case may be, occurring immediately prior to the Effective Time or as a payment of an assumed or retained Liability, and (ii) any payment of interest as taxable or deductible, as the case may be, to the party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case except as otherwise required by applicable Law.

 

5.10                        Remedies Cumulative; Limitations of Liability.  The rights provided in this Article V shall be cumulative and, subject to the provisions of Article VII, shall not preclude assertion by any Indemnified Party of any other rights or the seeking of any and all other remedies against any Indemnifying Party.  Notwithstanding the foregoing, neither GLPI or its Affiliates, on the one hand, nor Penn or its Affiliates, on the other hand, shall be liable to the other for any special, indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages (collectively, “Special Damages”) of the other arising in connection with the Transactions (provided, that any such liability with respect to a Third Party Claim shall be considered direct damages).

 

5.11                        Survival of Indemnities.  The rights and obligations of each of Penn and GLPI and their respective Indemnified Parties under this Article V shall survive the sale or other transfer by any party of any Assets or businesses or the assignment by it of any Liabilities.

 

ARTICLE VI

 

OTHER AGREEMENTS

 

6.1                               Further Assurances.

 

(a)                                 In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto will cooperate with each other and use (and will cause their respective Subsidiaries and Affiliates to use) commercially reasonable efforts, prior to, on and after the Distribution Date, to take, or to cause to be taken, all actions, including the actions listed on Schedule 6.1(a), and to do, or to cause to be done, all things reasonably necessary on its part under applicable Law or contractual obligations to consummate and make effective the transactions contemplated by this Agreement and the other Transaction Documents.

 

(b)                                 Without limiting the foregoing, prior to, on and after the Distribution Date, each party hereto shall cooperate with the other parties, and without any further consideration, but at the expense of the requesting party from and after the Effective Time, to execute and deliver, or use its commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to obtain or make any Approvals or Notifications from or with any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument, and to take all such

 

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other actions as such party may reasonably be requested to take by any other party hereto from time to time, consistent with the terms of this Agreement and the other Transaction Documents, in order to effectuate the provisions and purposes of this Agreement and the other Transaction Documents and the transfers of the GLPI Assets and the assignment and assumption of the GLPI Liabilities and the other transactions contemplated hereby and thereby.  Without limiting the foregoing, each party will, at the reasonable request, cost and expense of any other party, take such other actions as may be reasonably necessary to vest in such other party good and marketable title to the Assets allocated to such party under this Agreement or any of the other Transaction Documents, free and clear of any Security Interest except as contemplated by any of the Financing Arrangements or any Transaction Document.

 

(c)                                  At or prior to the Effective Time, Penn and GLPI in their respective capacities as direct and indirect shareholders of their respective Subsidiaries, shall each ratify any actions that are reasonably necessary or desirable to be taken by GLPI or any other Subsidiary of Penn or GLPI, as the case may be, to effectuate the transactions contemplated by this Agreement.

 

6.2                               Confidentiality.

 

(a)                                 From and after the Effective Time, subject to Section 6.2(c) and except as contemplated by or otherwise provided in this Agreement or any other Transaction Document, Penn shall not, and shall cause its Affiliates and officers, directors, employees, and other agents and representatives, including attorneys, agents, customers, suppliers, contractors, consultants and other representatives of any Person providing financing (collectively, “Representatives”), not to, directly or indirectly, disclose, reveal, divulge or communicate to any Person other than Representatives of such party or of its Affiliates who reasonably need to know such information in providing services to any member of the Penn Group, any GLPI Confidential Information.  If any disclosures are made to any member of the Penn Group in connection with any services provided to a member of the GLPI Group under this Agreement or any other Transaction Document, then the GLPI Confidential Information so disclosed shall be used only as required in connection with the receipt of such services.  Penn shall use the same degree of care to prevent and restrain the unauthorized use or disclosure of the GLPI Confidential Information by any of its Representatives as it currently uses for its own confidential information of a like nature, but in no event less than a reasonable standard of care.  For purposes of this Section 6.2(a), any Information, material or documents relating to the GLPI Business currently or formerly conducted, or proposed to be conducted, by any member of the GLPI Group furnished to, or in possession of, Penn, irrespective of the form of communication, and all notes, analyses, compilations, forecasts, data, translations, studies, memoranda or other documents prepared by Penn or its officers, directors and Affiliates, that contain or otherwise reflect such information, material or documents is hereinafter referred to as “GLPI Confidential Information.”  GLPI Confidential Information does not include, and there shall be no obligation hereunder with respect to, information that (i) is or becomes generally available to the public, other than as a result of a disclosure by Penn not otherwise permissible hereunder, (ii) Penn can demonstrate was or became available to Penn from a source other than GLPI or its Affiliates or (iii) is developed independently by Penn without reference to the GLPI Confidential Information; provided, however, that, in the case of clause (ii), the source of such information was not known by Penn to be bound by a confidentiality agreement with, or other contractual, legal or fiduciary

 

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obligation of confidentiality to, GLPI or any member of the GLPI Group with respect to such information.

 

(b)                                 From and after the Effective Time, subject to Section 6.2(c) and except as contemplated by this Agreement or any other Transaction Document, GLPI shall not, and shall cause its Affiliates and their respective Representatives, not to, directly or indirectly, disclose, reveal, divulge or communicate to any Person other than Representatives of such party or of its Affiliates who reasonably need to know such information in providing services to GLPI or any member of the GLPI Group, any Penn Confidential Information.  If any disclosures are made to any member of the GLPI Group in connection with any services provided to a member of the GLPI Group under this Agreement or any other Transaction Document, then the Penn Confidential Information so disclosed shall be used only as required in connection with the receipt of such services.  The GLPI Group shall use the same degree of care to prevent and restrain the unauthorized use or disclosure of the Penn Confidential Information by any of their Representatives as they use for their own confidential information of a like nature, but in no event less than a reasonable standard of care.  For purposes of this Section 6.2(b), any Information, material or documents relating to the businesses currently or formerly conducted, or proposed to be conducted, by Penn or any of its Affiliates (other than any member of the GLPI Group) furnished to, or in possession of, any member of the GLPI Group, irrespective of the form of communication, and all notes, analyses, compilations, forecasts, data, translations, studies, memoranda or other documents prepared by GLPI, any member of the GLPI Group or their respective officers, directors and Affiliates, that contain or otherwise reflect such information, material or documents is hereinafter referred to as “Penn Confidential Information.”  Penn Confidential Information does not include, and there shall be no obligation hereunder with respect to, information that (i) is or becomes generally available to the public, other than as a result of a disclosure by any member of the GLPI Group not otherwise permissible hereunder, (ii) GLPI can demonstrate was or became available to GLPI from a source other than Penn and its respective Affiliates or (iii) is developed independently by such member of the GLPI Group without reference to the Penn Confidential Information; provided, however, that, in the case of clause (ii), the source of such information was not known by GLPI to be bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, Penn or its Affiliates with respect to such information.

 

(c)                                  If Penn or its Affiliates, on the one hand, or GLPI or its Affiliates, on the other hand, are requested or required (by oral question, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) by any Governmental Authority or pursuant to applicable Law to disclose or provide any GLPI Confidential Information or Penn Confidential Information (other than with respect to any such information furnished pursuant to the provisions of Article IV of this Agreement), as applicable, the Person receiving such request or demand shall use commercially reasonable efforts to provide the other party with written notice of such request or demand as promptly as practicable under the circumstances so that such other party shall have an opportunity to seek an appropriate protective order.  The party receiving such request or demand agrees to take, and cause its representatives to take, at the requesting party’s expense, all other reasonable steps necessary to obtain confidential treatment by the recipient.  Subject to the foregoing, the party that received such request or demand may thereafter disclose or provide any GLPI Confidential Information or

 

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Penn Confidential Information, as the case may be, to the extent required by such Law (as so advised by counsel) or by lawful process or such Governmental Authority.

 

(d)                                 Each of Penn and GLPI acknowledges that it and the other members of its Group may have in their possession confidential or proprietary information of third Persons that was received under confidentiality or non-disclosure agreements with such third Person prior to the Distribution Date.  Penn and GLPI each agrees that it will hold, and will cause the other members of its Group and their respective Representatives to hold, in strict confidence the confidential and proprietary information of third Persons to which it or any other member of its respective Group has access, in accordance with the terms of any agreements entered into prior to the Distribution Date between or among one (1) or more members of the applicable party’s Group and such third Persons to the extent disclosed to such party.

 

6.3                               Insurance Matters.

 

(a)                                 GLPI acknowledges and agrees, on its own behalf and on behalf of each of the GLPI Subsidiaries, that, from and after the Effective Time, neither GLPI nor any of the GLPI Subsidiaries shall have any rights to or under any of Penn’s or the Penn Subsidiaries’ insurance policies, other than any insurance policies acquired prior to the Effective Time directly by and in the name of a member of GLPI or any of the GLPI Subsidiaries or as expressly provided in this Section 6.3 or in the Employee Matters Agreement.

 

(b)                                 Notwithstanding Section 6.3(a), from the Effective Time through December 31, 2013, the TRS Properties shall continue to be covered by Penn’s or a Penn Subsidiary’s existing property insurance policies, it being understood that GLPI shall promptly reimburse Penn or such Penn Subsidiary for any premiums or other costs associated with such coverage.  In addition,  from and after the Effective Time, with respect to any Liability incurred by GLPI or any of the GLPI Subsidiaries prior to the Effective Time (or, solely with respect to any property insurance policies relating to the TRS Properties, prior to December 31, 2013), Penn shall provide GLPI with access to, and GLPI may make claims under insurance policies purchased by Penn if and to the extent that the terms of such policies provide such coverage to GLPI or the GLPI Subsidiaries, and subject to the terms and conditions of such insurance policies, including any limits on coverage or scope, any deductibles or self-insured retentions and other fees and expenses, and subject to the following additional conditions:

 

(i)                                     GLPI shall report claims under such policies directly to the applicable insurance company or its Third-Party Administrator (“TPA”) as applicable, as promptly as practicable, and shall provide a copy of all such claim reports to the Corporate Risk Management Department of Penn, and if Penn disagrees with any matter covered in such claims reports, Penn may notify the applicable insurance company, and shall provide a copy of such communication to GLPI;

 

(ii)                                  GLPI shall exclusively bear and be responsible for (and Penn shall have no obligation to repay or reimburse GLPI or any of the GLPI Subsidiaries for) and pay the applicable insurers or TPA as required under the applicable insurance policies and TPA agreements for any and all costs as a result of having access to, or making claims under, any insurance provided pursuant to this Section 6.3(b), including any deductibles and self-insured

 

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retentions associated with such claims, retrospective, retroactive or prospective premium adjustments associated with the applicable insurance policies, catastrophic coverage charges, overhead, claim handling and administrative costs, Taxes, surcharges, state assessments, reinsurance costs, other related costs and claim payments, relating to all open, closed, re-opened claims covered by the applicable policies, whether such claims are made by GLPI, its employees or third Parties, and GLPI shall indemnify, hold harmless and reimburse Penn and the Penn Subsidiaries for any deductibles and self-insured retentions incurred by Penn or the Penn Subsidiaries to the extent resulting from any access to, any claims made by GLPI or any of the GLPI Subsidiaries under, any insurance provided pursuant to this Section 6.3(b), including any indemnity payments, settlements, judgments, legal fees and allocated claims expenses and claim handling fees, whether such claims are made by GLPI, any GLPI Subsidiary, their respective employees or third Parties;

 

(iii)                               GLPI shall exclusively bear (and Penn shall have no obligation to repay or reimburse GLPI or any of the GLPI Subsidiaries for) and shall be liable for all uninsured, uncovered, unavailable or uncollectible amounts of all such claims made by GLPI or any of the GLPI Subsidiaries under the policies as provided for in this Section 6.3(b); and

 

(iv)                              Neither GLPI nor any GLPI Subsidiary, in connection with making a claim under any insurance policy of Penn or any Penn Subsidiary pursuant to this Section 6.3(b), shall take any action that would be reasonably likely to: (A) have an adverse impact on the then-current relationship between Penn or any Penn Subsidiary, on the one hand, and the applicable insurance company, on the other hand or (B) otherwise compromise, jeopardize or interfere with the rights of Penn or any Penn Subsidiary under the applicable insurance policy.

 

At all times, the Parties shall, and shall cause their respective Subsidiaries to, cooperate with reasonable requests for information by the other Party or the insurance companies regarding any such insurance policy claim.

 

(c)                                  Any payments, costs and adjustments required pursuant to Section 6.3(b) shall be billed by Penn, on behalf of itself and the Penn Subsidiaries, to GLPI on a monthly basis and GLPI, on behalf of itself and the GLPI Subsidiaries, shall pay such payments, costs and adjustments to Penn within sixty (60) days from receipt of invoice.  If Penn incurs costs to enforce GLPI’s obligations under this Section 6.3, GLPI agrees to indemnify Penn for such enforcement costs, including reasonable attorneys’ fees.

 

(d)                                 At the Effective Time, GLPI shall have in effect all insurance programs required to comply with GLPI’s statutory and contractual obligations and such other insurance policies as reasonably necessary or customary for companies operating a business similar to the GLPI Business.  Such insurance programs include general liability, commercial auto liability, workers’ compensation, employers liability, product liability, employment practices liability, employee dishonesty/crime, directors’ and officers’ liability and fiduciary liability.  GLPI shall obtain a property insurance program on or prior to December 31, 2013, and, notwithstanding Section 6.3(a), between the Effective Date and December 31, 2013, the property insurance of Penn shall provide coverage (determined in the sole discretion of Penn) for GLPI and the GLPI Subsidiaries.

 

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(e)                                  Neither Penn nor any of the Penn Subsidiaries shall have any obligation to secure extended reporting for any claims under any of Penn’s or the Penn Subsidiaries’ claims-made or occurrence-reported liability policies for any acts or omissions by GLPI or any GLPI Subsidiary incurred prior to the Effective Time.

 

(f)                                   This Agreement shall not be considered as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of either Penn or any Penn Subsidiary in respect of any of the Penn insurance policies and programs or any other contract or policy of insurance.

 

6.4                               Allocation of Costs and Expenses.  Penn and GLPI shall be responsible for the costs and expenses set forth on Schedule 6.4 according the allocation provided therein.

 

6.5                               Litigation; Cooperation.

 

(a)                                 As of the Effective Time, GLPI shall assume and thereafter, except as provided in Article V, be responsible for the administration of all Liabilities that may result from the Assumed Actions and all fees and costs relating to the defense of the Assumed Actions, including attorneys’ fees and costs incurred after the Effective Time.  “Assumed Actions” means those Actions (in which any member of the Penn Group or any Affiliate of a member of the Penn Group is a defendant or the party against whom the claim or investigation is directed) primarily relating to the GLPI Business, including the Actions listed on Schedule 6.5(a).

 

(b)                                 Penn shall transfer the Transferred Actions to GLPI, and GLPI shall receive and have the benefit of all of the proceeds of such Transferred Actions.  “Transferred Actions” means those Actions (in which any member of the Penn Group or any Affiliate of a member of the Penn Group is a plaintiff or claimant) primarily relating to the GLPI Business, including the Actions listed on Schedule 6.5(b).

 

(c)                                  (i)                                     Penn agrees that at all times from and after the Effective Time if a Third Party Claim relating primarily to the Penn Business is commenced naming both Penn and GLPI as defendants thereto, then Penn shall use its commercially reasonable efforts to cause GLPI to be removed from such Third Party Claim; provided, that, if Penn is unable to cause GLPI to be removed from such Third Party Claim, Penn and GLPI shall cooperate and consult to the extent necessary or advisable with respect to such Third Party Claim.

 

(ii)                                  GLPI agrees that at all times from and after the Effective Time if a Third Party Claim relating primarily to the GLPI Business is commenced naming both Penn and GLPI as defendants thereto, then GLPI shall use its commercially reasonable efforts to cause Penn to be removed from such Third Party Claim; provided, that, if GLPI is unable to cause Penn to be removed from such Third Party Claim, Penn and GLPI shall cooperate and consult to the extent necessary or advisable with respect to such Third Party Claim.

 

(iii)                               Penn and GLPI agree that at all times from and after the Effective Time if a Third Party Claim which does not relate primarily to the GLPI Business or the Penn Business is commenced naming both Penn (or any member of the Penn Group) and GLPI (or any member of the GLPI Group) as defendants thereto, then Penn and GLPI shall cooperate fully with each other, maintain a joint defense (in a manner that would preserve for both parties

 

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and their respective Affiliates any attorney-client privilege, joint defense or other privilege with respect thereto) and consult each other to the extent necessary or advisable with respect to such Third Party Claim.

 

6.6                               Tax Matters.  Penn and GLPI shall enter into the Tax Matters Agreement on or prior to the Distribution Date.  To the extent that any representations, warranties, covenants or agreements between the parties with respect to Taxes or other Tax matters are set forth in the Tax Matters Agreement, such Taxes and other Tax matters shall be governed exclusively by the Tax Matters Agreement and not by this Agreement.

 

6.7                               Employment Matters.  Penn and GLPI shall enter into the Employee Matters Agreement on or prior to the Distribution Date.  To the extent that any representations, warranties, covenants or agreements between the parties with respect to employment matters are set forth in the Employee Matters Agreement, such employment matters shall be governed exclusively by the Employee Matters Agreement and not by this Agreement.

 

6.8                               Intellectual Property Matters.

 

(a)                                 Hollywood Casinos hereby grants to GLPI a perpetual, non-exclusive license to use the Intellectual Property that is set forth on Schedule 6.8 (the “Licensed Intellectual Property”) solely in connection with the ownership, management, development, operation of and promotion of the TRS Properties, including the offering or sale by GLPI of products bearing the Licensed Marks (the “IP License”).  For a period of two years commencing on the date of this Agreement (the “Term”), the IP License shall be royalty-free.  The royalty to be paid for the continued use of the IP License after the Term shall reflect the fair market value thereof, determined pursuant to good faith negotiations between the parties prior to the end of Term or, if the parties have not reached such agreement by the end of Term, pursuant to the arbitration procedures set forth in Section 7.2 with any decision being applied retroactive to the first day following the end of Term.

 

(b)                                 GLPI shall have the right to sublicense the Licensed Intellectual Property to any member of the GLPI Group (solely for so long as such entity remains a member of the GLPI Group), provided, however, that any sublicense granted hereunder shall contain provisions whereby the sublicensee agrees to assume, observe and perform all of the obligations of GLPI and be bound by all of the restrictions under this Agreement applicable to the use of the Licensed Intellectual Property.

 

(c)

 

(i)                                     GLPI recognizes and acknowledges the exclusive right, title and interest of Hollywood Casinos in and to the ownership of the Licensed Intellectual Property, including the Licensed Marks.  GLPI agrees to assign and hereby assigns any and all rights in the Licensed Intellectual Property (including any and all rights in the Licensed Marks) it might acquire during or after the Term to Hollywood Casinos and agrees to execute and undertake during or after the Term and after termination of the IP License all documents and all actions reasonably necessary to effect the clarification or perfection of ownership of all Licensed Intellectual Property in and to Hollywood Casinos, and to allow Hollywood Casinos to apply for

 

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registrations of the Licensed Intellectual Property and to maintain any registrations issued thereon.

 

(ii)                                  All rights in and to the Licensed Intellectual Property not specifically granted to GLPI herein are expressly reserved by Hollywood Casinos. GLPI neither has nor under any circumstances shall be deemed to have any ownership, right, title or interest in or to any Licensed Intellectual Property.

 

(iii)                               All goodwill associated with or identified by the Licensed Intellectual Property shall inure directly and exclusively to the benefit of, and is the sole property of Hollywood Casinos and all use (whether authorized or unauthorized) of any other indicia of source, mark, logo or slogan by GLPI in the course of promoting or marketing the Licensed Intellectual Property shall likewise inure directly and exclusively to the benefit and shall be the sole property of Hollywood Casinos.

 

(iv)                              During the Term and thereafter, GLPI shall not:  (A) challenge the validity of Hollywood Casinos’s ownership of, or right to license, the Licensed Intellectual Property or any registration, or application for registration thereof; (B) represent in any manner that it has any title or right to the ownership, registration or use of the Licensed Intellectual Property except as set forth in this Agreement; (C) challenge the right of Hollywood Casinos to grant the licenses granted herein; or (D) interfere in any manner with nor attempt to prohibit the use or registration by Hollywood Casinos of any Licensed Intellectual Property.

 

(v)                                 GLPI acknowledges that certain of the Licensed Intellectual Property may have been and may potentially be misappropriated by third Persons. Hollywood Casinos provides neither any guarantee nor assurance that Hollywood Casinos will be able to cause cessation of such misappropriation nor any assurance that such third Persons may fail in an ability to claim superiority of rights with respect to the subject Licensed Intellectual Property.

 

(vi)                              Nothing contained in this Agreement shall be construed to confer upon GLPI any right or license to have any of the Licensed Intellectual Property registered in the name of GLPI, any member of the GLPI Group or any third Person or to vest in GLPI, any member of the GLPI Group or any third Person any right, title or interest in and to the Licensed Intellectual Property.  GLPI shall not, directly or indirectly, register or cause to be registered in any country or governmental subdivision any trademark, trade name, service mark, trade dress, Internet domain name, other universal resource locator, patent, mask work or copyright consisting of, embodied in, relating to, arising out of or similar to any of the Licensed Intellectual Property. GLPI shall not knowingly damage, do any act or fail to do any act, which could be reasonably anticipated to damage, dilute, or materially modify any of the Licensed Intellectual Property or knowingly permit a third Person to do so.

 

(vii)                           GLPI shall immediately notify Hollywood Casinos in writing of any infringement, misappropriation, dilution or other claim of right, title, or interest (or any suspected activity with respect to any of the foregoing) with respect to any of the Licensed Intellectual Property of which GLPI knows or otherwise becomes aware.

 

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(viii)                        (A) GLPI shall use the Licensed Marks without any accompanying words or symbols of any nature (save as required by the provisions hereof) unless first approved in writing by Hollywood Casinos or Penn and GLPI shall not modify the Licensed Marks or conjoin the Licensed Marks with any other name, service mark, trade name or trademark whatsoever, unless otherwise approved by Hollywood Casinos or Penn, in Hollywood Casinos’s and Penn’s reasonable discretion, in writing; and (B) GLPI agrees to include on all uses of the Licensed Intellectual Property all notices and legends reasonably requested by Hollywood Casinos.

 

(ix)                              GLPI shall neither file any application for registration or other recognition of any name incorporating or embodying in any manner the Licensed Marks, or variant thereof, as a fictitious business name nor use the Licensed Marks, or any variant thereof, as part of its formal entity name (including any corporate, partnership, limited-liability company, limited-liability partnership, limited partnership or any other formal entity name) or permit any member of the GLPI Group or any third Person to do so, unless Hollywood Casinos or Penn grants such use of the Licensed Marks, in its reasonable discretion.

 

(d)

 

(i)                                     GLPI agrees to use the Licensed Intellectual Property in good faith and in a dignified manner, in a manner consistent with Penn and Hollywood Casinos’s high standards of, and reputation for quality, in a manner consistent with the standards of quality of the TRS Properties immediately prior to the Effective Time, and in accordance with generally accepted trademark practice wherever the Licensed Marks are used. GLPI agrees to use commercially reasonable efforts to protect the Licensed Intellectual Property and the goodwill associated therewith.

 

(ii)                                  GLPI covenants that the nature and quality of the products and services provided at the TRS Properties and all promotional, advertising or other material relating to the any such products and services, and all representations of the Licensed Intellectual Property, shall be of good quality comparable to the quality of similar goods and services presently sold or provided by the TRS Properties immediately prior to the Effective Date and shall conform to any applicable brand rules of Penn or Hollywood Casinos in effect as of the Effective Time. With respect to any additional services or products that may be provided by the TRS Properties, GLPI agrees that the nature and quality of such products and services shall be equal to and commensurate with that of existing products and services offered by the TRS Properties immediately prior to the Effective Time.

 

(iii)                               GLPI covenants that no promotional, advertising or other material that utilizes any of the Licensed Intellectual Property (including the “Hollywood” name or logo) shall display such Licensed Intellectual Property without also prominently indicating the full name of the applicable property (i.e., “Hollywood Casino Baton Rouge” or “Hollywood Casino Perryville”).

 

(iv)                              In furtherance of the provisions of Section 8.9, GLPI covenants that it shall not assign or otherwise transfer any interest in the Licensed Intellectual Property to any third party without Hollywood Casinos’s prior written consent.  For purposes of this

 

40



 

paragraph, it shall be deemed a transfer if any person other than GLPI acquires at least 25% of the voting control of GLPI, or of any GLPI Subsidiary that directly or indirectly owns one or more TRS Properties.  Hollywood Casinos agrees that, in the event of a change of control or sale of all or substantially all of the assets of GLPI or of any GLPI Subsidiary that directly or indirectly owns one or more of the TRS Properties, for no additional consideration Hollywood Casinos will grant a license to use the Licensed Intellectual Property for a term of one year from the date of such change in control or transfer on the same terms as are applicable to GLPI pursuant to this Section 6.8 to such GLPI Subsidiary or the acquiror, as applicable, at such Person’s election.

 

(v)                                 Solely for the purposes of ensuring compliance with this Section 6.8, Hollywood Casinos’s and Penn’s duly authorized representatives shall have the right to inspect the quality of the products and services provided at the TRS Properties, and GLPI shall permit, subject to applicable Law, such representatives of Hollywood Casinos and Penn to have reasonable access to all areas of the TRS Properties for such inspection purposes during regular business hours and on reasonable notice and in a manner that will cause minimal disruption to GLPI’s business.

 

(e)                                  Penn agrees to take such actions as may be necessary to cause Hollywood Casinos to comply with this Section 6.8.

 

6.9                               Compliance with Legal Requirements(a).  After the Effective Time, GLPI covenants and agrees that it will comply in all material respects with all legal requirements and regulations applicable to it that have been enacted by a Governmental Authority as a condition to or otherwise in connection with the Distribution.

 

 

41



 

ARTICLE VII

 

DISPUTE RESOLUTION

 

7.1                               General Provisions.

 

(a)                                 Any dispute, controversy or claim arising out of or relating to this Agreement or the other Transaction Documents (other than the Master Lease), or the validity, interpretation, breach or termination thereof (a “Dispute”), shall be resolved in accordance with the procedures set forth in this Article VII, which shall be the sole and exclusive procedures for the resolution of any such Dispute unless otherwise specified in the applicable Transaction Document or in this Article VII below.

 

(b)                                 Commencing with a request contemplated by Section 7.2 set forth below, all communications between the parties or their representatives in connection with the attempted resolution of any Dispute shall be deemed to have been delivered in furtherance of a Dispute settlement and shall be exempt from discovery and production, and shall not be admissible into evidence for any reason (whether as an admission or otherwise), in any arbitral or other proceeding for the resolution of any Dispute.

 

(c)                                  THE PARTIES EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO (I) SPECIAL DAMAGES, AS DEFINED HEREIN (PROVIDED, THAT LIABILITY FOR ANY SUCH SPECIAL DAMAGES, AS DEFINED HEREIN, WITH RESPECT TO ANY THIRD PARTY CLAIM SHALL BE CONSIDERED DIRECT DAMAGES) AND (II) TRIAL BY JURY.

 

(d)                                 The specific procedures set forth in this Article VII below, including the time limits referenced therein, may be modified by agreement of both of the parties in writing.

 

(e)                                  All applicable statutes of limitations and defenses based upon the passage of time shall be tolled while the procedures specified in this Article VII are pending.  The parties will take any necessary or appropriate action required to effectuate such tolling.

 

7.2                               Arbitration.

 

(a)                                 In the event of any Dispute, either party may (i) pursuant to its rights under Section 8.11, submit a request for interim injunctive relief to the arbitral tribunal appointed pursuant to Section 7.2(b) (provided, that, if the tribunal shall not have been constituted, either party may seek interim relief either before a special arbitrator, as provided for in Rule 14 of the CPR Arbitration Rules, or before any court of competent jurisdiction) if, in the reasonable opinion of such party, such interim injunctive relief is necessary to preserve its rights pending resolution of the Dispute, and (ii) submit such Dispute to be finally resolved by binding arbitration, in each case, pursuant to the CPR Rules for Non-Administered Arbitration as then in effect (the “CPR Arbitration Rules”).

 

(b)                                 The neutral organization for purposes of the CPR Arbitration Rules will be the CPR.  The arbitral tribunal will be composed of one arbitrator to be mutually agreed by the parties or, if the parties are unable to agree on an arbitrator, the arbitrator will be appointed by

 

42



 

CPR from a list of eight (8) proposed neutrals submitted by the CPR each of whom shall have at least ten (10) years’ experience in arbitrating commercial disputes.  Each party may strike no more than three (3) neutrals from the list submitted by CPR.

 

(c)                                  Arbitration will take place in Wyomissing, Pennsylvania.  Along with the arbitrator appointed, the parties will agree to a mutually convenient date and time to conduct the arbitration, but in no event will the hearing(s) be scheduled less than six (6) months from submission of the Dispute to arbitration unless the parties agree otherwise in writing; provided, that, if injunctive or other interim relief contemplated by Section 7.2(d) below is requested, the hearing(s) will be expedited in accordance with any order entered by the court, tribunal or special arbitrator adjudicating that request.

 

(d)                                 The arbitral tribunal will have the right to award, on an interim basis, or include in the final award, any relief which it deems proper in the circumstances, including money damages (with interest on unpaid amounts from the due date), injunctive relief (including specific performance) and attorneys’ fees and costs; provided, that the arbitral tribunal will not award any relief not specifically requested by the parties and, in any event, will not award Special Damages.  Upon constitution of the arbitral tribunal following any grant of interim relief by a special arbitrator or court pursuant to Sections 7.2(a) and 8.11, the tribunal may affirm or disaffirm that relief, and the parties will seek modification or rescission of the order entered by the special arbitrator or court as necessary to accord with the tribunal’s decision.

 

(e)                                  The parties agree to be bound by the provisions of Rule 13 of the Federal Rules of Civil Procedure with respect to compulsory counterclaims (as the same may be amended from time to time); provided, that any such compulsory counterclaim shall be filed within thirty (30) days of the filing of the original claim.

 

(f)                                   So long as either party has a timely claim to assert, the agreement to arbitrate Disputes set forth in this Section 7.2 will continue in full force and effect subsequent to, and notwithstanding the completion, expiration or termination of, this Agreement.

 

(g)                                  A party obtaining an order of interim injunctive relief may enter judgment upon such award in any court of competent jurisdiction.  The final award in an arbitration pursuant to this Article VII shall be conclusive and binding upon the parties, and a party obtaining a final award may enter judgment upon such award in any court of competent jurisdiction.

 

(h)                                 It is the intent of the parties that the agreement to arbitrate Disputes set forth in this Section 7.2 shall be interpreted and applied broadly such that all reasonable doubts as to arbitrability of a Dispute shall be decided in favor of arbitration.

 

(i)                                     If a Dispute includes both arbitrable and nonarbitrable claims, counterclaims or defenses, the parties shall arbitrate all such arbitrable claims, counterclaims or defenses and shall concurrently litigate, subject to and in accordance with Section 8.2, all such nonarbitrable claims, counterclaims or defenses.

 

(j)                                    The parties agree that any Dispute submitted to arbitration shall be governed by, and construed and interpreted in accordance with, Section 8.2 and, except as

 

43



 

otherwise provided in this Article VII or mutually agreed to in writing by the parties, the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq., shall govern any arbitration between the parties pursuant to this Section 7.2.

 

(k)                                 Each party shall bear (i) its own fees, costs and expenses and shall bear an equal share of the expenses of the arbitration, including the fees, costs and expenses of the arbitrator; provided, in the case of any Disputes relating to the parties’ rights and obligations with respect to indemnification under Article V, the substantially prevailing party shall be entitled to reimbursement by the other party of its reasonable out-of-pocket fees and expenses (including attorneys’ fees) incurred in connection with the arbitration.

 

ARTICLE VIII

 

MISCELLANEOUS

 

8.1                               Corporate Power.  Penn represents on behalf of itself and on behalf of other members of the Penn Group, and GLPI represents on behalf of itself and on behalf of other members of the GLPI Group, as follows:

 

(a)                                 each such Person has the requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform each of this Agreement and each other Transaction Document to which it is a party and to consummate the transactions contemplated hereby and thereby; and

 

(b)                                 this Agreement and each Transaction Document to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

 

8.2                               Governing Law; Jurisdiction.  This Agreement and, unless expressly provided therein, each other Transaction Document, shall be governed by and construed and interpreted in accordance with the Laws of the Commonwealth of Pennsylvania irrespective of the choice of Laws principles of the Commonwealth of Pennsylvania.  In addition, with respect to this Agreement (other than arbitrable Disputes governed by Section 7.2) and, unless expressly provided therein, each other Transaction Document, Penn and GLPI agree that any legal action or proceeding shall be brought or determined exclusively in a state or federal court located within the County of Berks in the Commonwealth of Pennsylvania.

 

8.3                               Survival of Covenants.  Except as expressly set forth in any other Transaction Document, the covenants and other agreements contained in this Agreement and each other Transaction Document, and liability for the breach of any obligations contained herein or therein, shall survive each of the Reorganization and the Distribution and shall remain in full force and effect.

 

8.4                               Force Majeure.  No party hereto (or any Person acting on its behalf) shall have any liability or responsibility for failure to fulfill any obligation (other than a payment obligation) under this Agreement or, unless otherwise expressly provided therein, any other Transaction Document, so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure.

 

44



 

A party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (i) notify the other parties of the nature and extent of any such Force Majeure condition and (ii) use due diligence to remove any such causes and resume performance under this Agreement as soon as feasible.

 

8.5                               Notices.  All notices, requests, claims, demands and other communications under this Agreement and, to the extent applicable and unless otherwise provided therein, under each of the other Transaction Documents shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8.5):

 

If to Penn or a member of the Penn Group, to:

 

Penn National Gaming, Inc.
825 Berkshire Boulevard, Suite 200

Wyomissing, Pennsylvania 19610
Attention:
                                         Chief Executive Officer
Facsimile:
                                         (610) 373-4966

 

with a copy to:

 

Ballard Spahr LLP

1735 Market Street, 51st Floor

Philadelphia, Pennsylvania 19103

Attention:                                         Justin P. Klein, Esq.
Facsimile:                                         (215) 864-9166

 

if to GLPI:

 

Gaming and Leisure Properties, Inc.

825 Berkshire Boulevard, Suite 400

Wyomissing, Pennsylvania 19610

Attention:                                         Chief Executive Officer

Facsimile:                                         (610) 401-2901

 

45



 

with a copy to:

 

Pepper Hamilton LLP

300 Two Logan Square

Eighteenth and Arch Streets

Philadelphia, Pennsylvania 19103

Attention:                                         Barry M. Abelson, Esq.
Facsimile:
                                         (215) 981-4750

 

8.6                               Termination.  Notwithstanding any provision to the contrary, this Agreement may be terminated and the Distribution abandoned at any time prior to the Effective Time by and in the sole discretion of Penn without the prior approval of any Person, including GLPI.  In the event of such termination, this Agreement shall become void and no party, or any of its officers and directors shall have any liability to any Person by reason of this Agreement.  After the Effective Time, this Agreement may not be terminated except by an agreement in writing signed by each of the parties to this Agreement.

 

8.7                               Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall remain in full force and effect.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties to this Agreement shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible.

 

8.8                               Entire Agreement.  Except as otherwise expressly provided in this Agreement, this Agreement (including the Schedules and Exhibits hereto) constitutes the entire agreement of the parties hereto with respect to the subject matter of this Agreement and supersedes all prior agreements and undertakings, both written and oral, between or on behalf of the parties hereto with respect to the subject matter of this Agreement.

 

8.9                               Assignment; No Third-Party Beneficiaries.  This Agreement shall not be assigned by either party without the prior written consent of the other party hereto.  Except as provided in Article V with respect to Indemnified Parties, this Agreement is for the sole benefit of the parties to this Agreement and members of their respective Group and their permitted successors and assigns and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

8.10                        Public Announcements.  From and after the Effective Time, Penn and GLPI agree that they shall make no public statement that would be inconsistent with any of the representations or assumptions underlying the Private Letter Ruling or that would otherwise in any manner compromise or undermine the tax treatment of any of the Transactions without the prior written consent of the other, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system.

 

46



 

8.11                        Specific Performance.  Subject to the provisions of Article VII, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any other Transaction Document, the party or parties who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) of its rights under this Agreement or such Transaction Document, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.  The parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived.  Any requirements for the securing or posting of any bond with such remedy are waived by each of the parties to this Agreement.

 

8.12                        Amendment.  No provision of this Agreement may be amended or modified except by a written instrument signed by all the parties to this Agreement.  No waiver by any party of any provision of this Agreement shall be effective unless explicitly set forth in writing and executed by the party so waiving.  The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach.

 

8.13                        Rules of Construction.  Interpretation of this Agreement shall be governed by the following rules of construction:  (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) references to the terms Article, Section, paragraph, clause, Exhibit and Schedule are references to the Articles, Sections, paragraphs, clauses, Exhibits and Schedules of this Agreement unless otherwise specified, (iii) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement, including the Schedules and Exhibits hereto, (iv) references to “$” shall mean U.S. dollars, (v) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified, (vi) the word “or” shall not be exclusive, (vii) references to “written” or “in writing” include in electronic form, (viii) unless the context requires otherwise, references to “party” shall mean Penn or GLPI, as appropriate, and references to “parties” shall mean Penn and GLPI (except that with reference to Section 6.8, Article VII and Article VIII, “parties” shall mean Penn, GLPI and, to the extent applicable in the context, Hollywood Casinos, and to the extent applicable, “party” shall mean Penn or GLPI or Hollywood Casinos, as applicable), (ix) provisions shall apply, when appropriate, to successive events and transactions, (x) the table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement, (xi) Penn and GLPI have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or burdening either party by virtue of the authorship of any of the provisions in this Agreement or any interim drafts of this Agreement, and (xii) a reference to any Person includes such Person’s successors and permitted assigns.

 

8.14                        Counterparts.  This Agreement may be executed in one (1) or more counterparts, and by the different parties to each such agreement in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this

 

47



 

Agreement by facsimile or portable document format (PDF) shall be as effective as delivery of a manually executed counterpart of any such Agreement.

 

[The remainder of this page is intentionally left blank.]

 

48



 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first written above by their respective duly authorized officers.

 

 

 

PENN NATIONAL GAMING, INC.

 

 

 

 

 

 

By:

/s/ Robert S. Ippolito

 

 

Name: Robert S. Ippolito

 

 

Title: VP, Secretary & Treasurer

 

 

 

 

 

 

 

GAMING AND LEISURE PROPERTIES, INC.

 

 

 

 

 

 

By:

/s/ William J. Clifford

 

 

Name: William J. Clifford

 

 

Title: Chief Financial Officer

 

 

 

 

 

 

 

HOLLYWOOD CASINOS, LLC, solely for the purposes of Section 6.8, Article VII and Article VIII of this Agreement

 

 

 

 

 

 

 

By: CRC Holdings, Inc., its sole member

 

 

 

 

 

 

 

 

By:

/s/ Robert S. Ippolito

 

 

 

Name: Robert S. Ippolito

 

 

 

Title: Secretary & Treasurer

 

[Signature Page to Separation and Distribution Agreement]

 


Exhibit 10.1

 

EXECUTION VERSION

 

MASTER LEASE

 



 

TABLE OF CONTENTS
TO
MASTER LEASE

 

 

 

Page

 

 

 

ARTICLE I

 

 

 

1.1

Leased Property

1

1.2

Single, Indivisible Lease

2

1.3

Term

2

1.4

Renewal Terms

2

 

 

 

ARTICLE II

 

 

 

2.1

Definitions

3

 

 

 

ARTICLE III

 

 

 

3.1

Rent

22

3.2

Late Payment of Rent

23

3.3

Method of Payment of Rent

23

3.4

Net Lease

23

 

 

 

ARTICLE IV

 

 

 

4.1

Impositions

24

4.2

Utilities

25

4.3

Impound Account

25

 

 

 

ARTICLE V

 

 

 

5.1

No Termination, Abatement, etc.

26

 

 

 

ARTICLE VI

 

 

 

6.1

Ownership of the Leased Property

27

6.2

Tenant’s Property

28

6.3

Guarantors; Tenant’s Property

28

 

 

 

ARTICLE VII

 

 

7.1

Condition of the Leased Property

29

7.2

Use of the Leased Property

29

7.3

Development Facilities

30

7.4

Competing Business

30

 

i



 

ARTICLE VIII

 

 

 

8.1

Representations and Warranties

32

8.2

Compliance with Legal and Insurance Requirements, etc.

32

8.5

Zoning and Uses

33

8.6

Compliance with Ground Lease

34

 

 

 

ARTICLE IX

 

 

 

9.1

Maintenance and Repair

34

9.2

Encroachments, Restrictions, Mineral Leases, etc.

36

 

 

 

ARTICLE X

 

 

10.1

Construction of Capital Improvements to the Leased Property

37

10.2

Construction Requirements for All Capital Improvements

38

10.3

Landlord’s Right of First Offer to Fund

39

 

 

 

ARTICLE XI

 

 

11.1

Liens

41

 

 

 

ARTICLE XII

12.1

Permitted Contests

43

 

 

 

ARTICLE XIII

 

 

 

13.1

General Insurance Requirements

44

13.2

Maximum Foreseeable Loss

46

13.3

Additional Insurance

46

13.4

Waiver of Subrogation

46

13.5

Policy Requirements

46

13.6

Increase in Limits

47

13.7

Blanket Policy

47

13.8

No Separate Insurance

47

 

 

 

ARTICLE XIV

 

 

14.1

Property Insurance Proceeds

48

14.2

Tenant’s Obligations Following Casualty

48

14.3

No Abatement of Rent

49

14.4

Waiver

49

14.5

Insurance Proceeds Paid to Facility Mortgagee

49

14.6

Termination of Master Lease; Abatement of Rent

50

 

ii



 

ARTICLE XV

 

 

15.1

Condemnation

52

15.2

Award Distribution

52

15.3

Temporary Taking

52

15.4

Condemnation Awards Paid to Facility Mortgagee

52

15.5

Termination of Master Lease; Abatement of Rent

53

 

 

 

ARTICLE XVI

 

 

16.1

Events of Default

53

16.2

Certain Remedies

56

16.3

Damages

57

16.4

Receiver

58

16.5

Waiver

58

16.6

Application of Funds

58

 

 

 

ARTICLE XVII

 

 

17.1

Permitted Leasehold Mortgagees

58

17.2

Landlord’s Right to Cure Tenant’s Default

66

17.3

Landlord’s Right to Cure Debt Agreement

66

 

 

 

ARTICLE XVIII

 

 

18.1

Sale of the Leased Property

67

 

 

 

ARTICLE XIX

 

 

19.1

Holding Over

67

 

 

 

ARTICLE XX

 

 

20.1

Risk of Loss

68

 

 

 

ARTICLE XXI

 

 

21.1

General Indemnification

68

 

 

 

ARTICLE XXII

 

 

22.1

Subletting and Assignment

68

22.2

Permitted Assignments

69

22.3

Permitted Sublease Agreements

71

22.4

Required Assignment and Subletting Provisions

72

22.5

Costs

73

22.6

No Release of Tenant’s Obligations; Exception

73

 

iii



 

ARTICLE XXIII

 

 

 

23.1

Officer’s Certificates and Financial Statements

73

23.2

Public Offering Information

76

23.3

Financial Covenants

77

23.4

Landlord Obligations

77

 

 

 

ARTICLE XXIV

 

 

 

24.1

Landlord’s Right to Inspect

78

 

 

 

ARTICLE XXV

 

 

 

25.1

No Waiver

78

 

 

 

ARTICLE XXVI

 

 

 

26.1

Remedies Cumulative

78

 

 

 

ARTICLE XXVII

 

 

 

27.1

Acceptance of Surrender

78

 

 

 

ARTICLE XXVIII

 

 

 

28.1

No Merger

78

 

 

 

ARTICLE XXIX

 

 

 

29.1

Conveyance by Landlord

79

 

 

 

ARTICLE XXX

 

 

 

30.1

Quiet Enjoyment

79

 

 

 

ARTICLE XXXI

 

 

 

31.1

Landlord’s Financing

79

31.2

Attornment

80

31.3

Compliance with Facility Mortgage Documents

81

 

 

 

ARTICLE XXXII

 

 

 

32.1

Hazardous Substances

82

32.2

Notices

83

32.3

Remediation

83

32.4

Indemnity

83

32.5

Environmental Inspections

84

 

iv



 

ARTICLE XXXIII

 

 

 

33.1

Memorandum of Lease

85

33.2

Reserved

85

33.3

Tenant Financing

85

33.4

Iowa Casino

85

 

 

 

ARTICLE XXXIV

 

 

 

34.1

Expert Valuation Process

85

 

 

 

ARTICLE XXXV

 

 

 

35.1

Notices

87

 

 

 

ARTICLE XXXVI

 

 

 

36.1

Transfer of Tenant’s Property and Operational Control of the Facilities

88

36.2

Determination of Successor Lessee and Gaming Assets FMV

89

36.3

Operation Transfer

91

 

 

 

ARTICLE XXXVII

 

 

 

37.1

Attorneys’ Fees

91

 

 

 

ARTICLE XXXVIII

 

 

 

38.1

Brokers

92

 

 

 

ARTICLE XXXIX

 

 

 

39.1

Anti-Terrorism Representations

92

 

 

 

ARTICLE XL

 

 

 

40.1

GLP REIT Protection

92

 

 

 

ARTICLE XLI

 

 

 

41.1

Survival

94

41.2

Severability

94

41.3

Non-Recourse

94

41.4

Successors and Assigns

94

41.5

Governing Law

94

41.6

Waiver of Trial by Jury

94

41.7

Entire Agreement

95

41.8

Headings

95

41.9

Counterparts

95

41.10

Interpretation

95

 

v



 

41.11

Time of Essence

95

41.12

Further Assurances

95

41.13

Gaming Regulations

96

41.14

Certain Provisions of Nevada Law

96

 

vi



 

EXHIBITS AND SCHEDULES

 

EXHIBIT A — LIST OF FACILITIES

 

EXHIBIT B — LEGAL DESCRIPTIONS

 

EXHIBIT C — TERMS OF DEVELOPMENT FACILITIES

 

EXHIBIT D — GAMING LICENSES

 

EXHIBIT E — FORM OF GUARANTY

 

EXHIBIT F-1 — FORM OF NONDISTURBANCE AND ATTORNMENT AGREEMENT

 

EXHIBIT F-2 — FORM OF SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT

 

 

SCHEDULE 1A — DISCLOSURE ITEMS

 

SCHEDULE 1.1 — EXCLUSIONS FROM LEASED PROPERTY

 

SCHEDULE 6.3 — GUARANTORS UINDER THE MASTER LEASE

 

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MASTER LEASE

 

This MASTER LEASE (the “Master Lease”) is entered into as of November 1, 2013, by and among GLP Capital, L.P. (together with its permitted successors and assigns, “Landlord”), and Penn Tenant, LLC (together with its permitted successors and assigns, “Tenant”).

 

RECITALS

 

A.                                    Capitalized terms used in this Master Lease and not otherwise defined herein are defined in Article II hereof.

 

B.                                    Pursuant to that certain Separation and Distribution Agreement, dated as of November 1, 2013 (the “Distribution Agreement”), between Penn National Gaming, Inc., the sole member of the Tenant (“Tenant’s Parent”), and Gaming and Leisure Properties, Inc. (“GLP”), the general partner of Landlord, Landlord desires to lease the Leased Property to Tenant and Tenant desires to lease the Leased Property from Landlord upon the terms set forth in this Master Lease.

 

C.                                    A list of the Seventeen (17) facilities covered by this Master Lease as of the date hereof is attached hereto as Exhibit A (each a “Facility,” and collectively, the “Facilities”).

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

ARTICLE I

 

1.1                               Leased Property.  Upon and subject to the terms and conditions hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord all of Landlord’s rights and interest in and to the following with respect to each of the Facilities other than the Development Facilities (collectively, the “Leased Property”):

 

(a)                                 the real property or properties described in Exhibit B attached hereto (collectively, the “Land”);

 

(b)                                 all buildings, structures, Fixtures (as hereinafter defined) and other improvements of every kind now or hereafter located on the Land or connected thereto including, but not limited to, alleyways and connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site and off-site to the extent Landlord has obtained any interest in the same), parking areas and roadways appurtenant to such buildings and structures of each such Facility (collectively, the “Leased Improvements”);

 

(c)                                  all easements, rights and appurtenances relating to the Land and the Leased Improvements; and

 

(d)                                 all equipment, machinery, fixtures, and other items of property, including all components thereof, that (i) are now or hereafter located in, on or used in connection with and

 



 

permanently affixed to or otherwise incorporated into the Leased Improvements and (ii) qualify as Long-Lived Assets, together with all replacements, modifications, alterations and additions thereto (collectively, the “Fixtures”);

 

in each case, with respect to clauses (b) and (d) above, to the extent constituting “real property” as that term is defined in Treasury Regulation §1.856-3(d).

 

The Leased Property is leased subject to all covenants, conditions, restrictions, easements and other matters affecting the Leased Property as of the Commencement Date and such subsequent covenants, conditions, restrictions, easements and other matters as may be agreed to by Landlord or Tenant in accordance with the terms of this Master Lease, whether or not of record, including any matters which would be disclosed by an inspection or accurate survey of the Leased Property.  Notwithstanding the foregoing, Leased Property shall exclude those items referenced on Schedule 1.1.

 

1.2                               Single, Indivisible Lease.  This Master Lease constitutes one indivisible lease of the Leased Property and not separate leases governed by similar terms.  The Leased Property constitutes one economic unit, and the Rent and all other provisions have been negotiated and agreed to based on a demise of all of the Leased Property to Tenant as a single, composite, inseparable transaction and would have been substantially different had separate leases or a divisible lease been intended.  Except as expressly provided in this Master Lease for specific, isolated purposes (and then only to the extent expressly otherwise stated), all provisions of this Master Lease apply equally and uniformly to all of the Leased Property as one unit.  An Event of Default with respect to any portion of the Leased Property is an Event of Default as to all of the Leased Property.  The parties intend that the provisions of this Master Lease shall at all times be construed, interpreted and applied so as to carry out their mutual objective to create an indivisible lease of all of the Leased Property and, in particular but without limitation, that, for purposes of any assumption, rejection or assignment of this Master Lease under 11 U.S.C. Section 365, or any successor or replacement thereof or any analogous state law, this is one indivisible and non-severable lease and executory contract dealing with one legal and economic unit and that this Master Lease must be assumed, rejected or assigned as a whole with respect to all (and only as to all) of the Leased Property.  The parties may amend this Master Lease from time to time to include one or more additional Facilities as part of the Leased Property and such future addition to the Leased Property shall not in any way change the indivisible and nonseverable nature of this Master Lease and all of the foregoing provisions shall continue to apply in full force.

 

1.3                               Term.  The “Term” of this Master Lease is the Initial Term plus all Renewal Terms, to the extent exercised.  The initial term of this Master Lease (the “Initial Term”) shall commence on November 1, 2013 (the “Commencement Date”) and end on the last day of the calendar month in which the fifteenth (15th) anniversary of the Commencement Date occurs, subject to renewal as set forth in Section 1.4 below.

 

1.4                               Renewal Terms.  The term of this Master Lease may be extended for four (4) separate “Renewal Terms” of five (5) years each if:  (a) at least twelve (12), but not more than eighteen (18) months prior to the end of the then current Term, Tenant delivers to Landlord a “Renewal Notice” that it desires to exercise its right to extend this Master Lease for one (1) Renewal Term; and (b) no Event of Default shall have occurred and be continuing on the date

 

2



 

Landlord receives the Renewal Notice (the “Exercise Date”) or on the last day of the then current Term.  During any such Renewal Term, except as otherwise specifically provided for herein, all of the terms and conditions of this Master Lease shall remain in full force and effect.

 

Tenant may exercise such options to renew with respect to all (and no fewer than all) of the Facilities which are subject to this Master Lease as of the Exercise Date; provided, however, that the exercise of each Renewal Term shall be applicable with respect to each Barge-Based Facility only if an Expert has confirmed prior to the applicable Exercise Date (but no more than 180 days prior thereto) that exercising such Renewal Term with respect to such Barge-Based Facility would not cause the aggregate Term to exceed eighty percent (80%) of the useful life of such Barge-Based Facility as measured from the Commencement Date or the estimated residual fair market value of such Barge-Based Facility at the end of the applicable Renewal Term to be less than 20% of the fair market value of such Barge-Based Facility as of the Commencement Date without regard to inflation or deflation.  If exercising any Renewal Term would cause the aggregate Term to exceed eighty percent (80%) of any Barge-Based Facility’s estimated useful life, then (i) the remainder of the Leased Property (other than any Barge-Based Facility for which the aggregate Term would exceed eighty percent (80%) of such Barge-Based Facility’s estimated useful life or the estimated residual fair market value of such Barge-Based Facility at the end of the applicable Renewal Term to be less than 20% of the fair market value of such Barge-Based Facility as of the Commencement Date without regard to inflation or deflation) shall continue to be demised hereunder for the entire applicable Renewal Term, and (ii) each such Barge-Based Facility shall be included in such Renewal Term only for the period of time that is within (and does not exceed) eighty percent (80%) of the estimated useful life of such Barge-Based Facility and the estimated residual fair market value of such Barge-Based Facility at the end of the applicable Renewal Term shall be not less than 20% of the fair market value of such Barge-Based Facility as of the Commencement Date without regard to inflation or deflation and shall thereafter not be a part of the Leased Property hereunder and the Base Rent due hereunder shall thereafter be reduced to account for the period of time each such Barge-Based Facility is not part of the Leased Property by an amount determined in accordance with the formula set forth in Section 14.6 hereof and such Barge-Based Facility and the Tenant’s Property related thereto shall be sold at fair market value, with Landlord entitled to the value of the Leased Property relating to such Barge-Based Facility and Tenant entitled to the value of the Tenant’s Property relating to such Barge-Based Facility.

 

ARTICLE II

 

2.1                               Definitions.  For all purposes of this Master Lease, except as otherwise expressly provided or unless the context otherwise requires, (i) the terms defined in this Article II have the meanings assigned to them in this Article and include the plural as well as the singular; all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (ii) all references in this Master Lease to designated “Articles,” “Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions of this Master Lease; (iii) the word “including” shall have the same meaning as the phrase “including, without limitation,” and other similar phrases; (iv) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Master Lease as a whole and not to any particular Article, Section or other subdivision; and (v) for the calculation of any financial ratios or tests referenced in this Master Lease (including the Adjusted Revenue to Rent Ratio and

 

3



 

the Indebtedness to EBITDA Ratio), this Master Lease, regardless of its treatment under GAAP, shall be deemed to be an operating lease and the Rent payable hereunder shall be treated as an operating expense and shall not constitute Indebtedness or interest expense.

 

AAA:  As defined in Section 34.1(b).

 

Accounts:  All accounts, including deposit accounts and any Facility Mortgage Reserve Account (to the extent actually funded by Tenant), all rents, profits, income, revenues or rights to payment or reimbursement derived from the use of any space within the Leased Property and/or from goods sold or leased or services rendered from the Leased Property (including, without limitation, from goods sold or leased or services rendered from the Leased Property by any subtenant) and all accounts receivable, in each case whether or not evidenced by a contract, document, instrument or chattel paper and whether or not earned by performance, including without limitation, the right to payment of management fees and all proceeds of the foregoing.

 

Additional Charges:  All Impositions and all other amounts, liabilities and obligations which Tenant assumes or agrees to pay under this Master Lease and, in the event of any failure on the part of Tenant to pay any of those items, except where such failure is due to the acts or omissions of Landlord, every fine, penalty, interest and cost which may be added for non-payment or late payment of such items.

 

Adjusted Revenue:  For any Test Period, Net Revenue (i) minus expenses other than Specified Expenses and (ii) plus Specified Proceeds, if any; provided, however, that for purposes of calculating Adjusted Revenue, Net Revenue shall not include Gaming Revenues, Retail Sales or Promotional Allowances of any subtenants of Tenant or any deemed payments under subleases of this Master Lease, licenses or other access rights from Tenant to its operating subsidiaries.  Adjusted Revenue shall be calculated on a pro forma basis to give effect to any increase or decrease in Rent as a result of the addition or removal of Leased Property to this Master Lease since the beginning of any Test Period of Tenant as if each such increase or decrease had been effected on the first day of such Test Period.

 

Adjusted Revenue to Rent Ratio:  As at any date of determination, the ratio for any period of Adjusted Revenue to Rent.  For purposes of calculating the Adjusted Revenue to Rent Ratio, Adjusted Revenue shall be calculated on a pro forma basis (and shall be calculated to give effect to (x) pro forma adjustments reasonably contemplated by Tenant and (y) such other pro forma adjustments consistent with Regulation S-X under the Securities Act) to give effect to any material acquisitions and material asset sales consummated by the Tenant or any Guarantor during any Test Period of Tenant as if each such material acquisition had been effected on the first day of such Test Period and as if each such material asset sale had been consummated on the day prior to the first day of such Test Period.  In addition, (i) Adjusted Revenue and Rent shall be calculated on a pro forma basis to give effect to any increase or decrease in Rent as a result of the addition or removal of Leased Property to this Master Lease during any Test Period as if such increase or decrease had been effected on the first day of such Test Period and (ii) in the event Rent is to be increased in connection with the addition or inclusion of a Long-Lived Asset that is projected to increase Adjusted Revenue, such Rent increase shall not be taken into account in

 

4



 

calculating the Adjusted Revenue to Rent Ratio until the first fiscal quarter following the completion of the installation or construction of such Long-Lived Assets.

 

Affected Facility:  As defined in Section 7.4(a).

 

Affiliate:  When used with respect to any corporation, limited liability company, or partnership, the term “Affiliate” shall mean any person which, directly or indirectly, controls or is controlled by or is under common control with such corporation, limited liability company or partnership.  For the purposes of this definition, “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, through the ownership of voting securities, partnership interests or other equity interests.

 

Appointing Authority:  As defined in Section 34.1(b).

 

Award:  All compensation, sums or anything of value awarded, paid or received on a total or partial Taking.

 

Barge-Based Facility:  Each Facility identified in Exhibit A, as amended from time to time, as a “Barge-Based Facility.”

 

Base Rent:  The sum of (i) the Building Base Rent, and (ii) the Land Base Rent.

 

Building Base Rent:

 

(A)                               During the Initial Term, an annual amount equal to two hundred forty million, four hundred sixty-three thousand, seven hundred seven Dollars ($240,463,707); provided, however, that commencing with the second (2nd) Lease Year and continuing each Lease Year thereafter during the Initial Term, the Building Base Rent shall increase to an annual amount equal to the sum of (i) the Building Base Rent for the immediately preceding Lease Year, and (ii) the Escalation.

 

(B)                               The Building Base Rent for the first year of each Renewal Term shall be an annual amount equal to the sum of (i) the Building Base Rent for the immediately preceding Lease Year, and (ii) the Escalation.  Commencing with the second (2nd) Lease Year of any Renewal Term and continuing each Lease Year thereafter during such Renewal Term, the Building Base Rent shall increase to an annual amount equal to the sum of (i) the Building Base Rent for the immediately preceding Lease Year, and (ii) the Escalation.

 

(C)                               As applicable during the Term, Building Base Rent shall be increased pursuant to Section 10.3(c) in respect of Capital Improvements funded by Landlord (which increases shall, in each case, be subject to the Escalations provided in the foregoing clauses (A) and (B)).

 

(D)                               As applicable during the Term, Building Base Rent shall be increased on any Development Facility Commencement Date in respect of the applicable Development

 

5



 

Facility (which increases shall, in each case, be subject to the Escalations provided in the foregoing clauses (A) and (B)) as contemplated in Exhibit C.

 

Building Base Rent shall be subject to further adjustment as and to the extent provided in Section 14.6.

 

Business Day:  Each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which national banks in the City of New York, New York are authorized, or obligated, by law or executive order, to close.

 

Capital Improvements:  With respect to any Facility, any improvements or alterations or modifications of the Leased Improvements, including without limitation capital improvements and structural alterations, modifications or improvements, or one or more additional structures annexed to any portion of any of the Leased Improvements of such Facility, or the expansion of existing improvements, which are constructed on any parcel or portion of the Land of such Facility, during the Term, including construction of a new wing or new story, all of which shall constitute a portion of the Leased Improvements and Leased Property hereunder in accordance with Section 10.3.

 

Cash:  Cash and cash equivalents and all instruments evidencing the same or any right thereto and all proceeds thereof.

 

Casualty Event:  Any loss of title or any loss of or damage to or destruction of, or any condemnation or other taking (including by any governmental authority) of, any asset for which Tenant or any of its Subsidiaries (directly or through Tenant’s Parent) receives cash insurance proceeds or proceeds of a condemnation award or other similar compensation (excluding proceeds of business interruption insurance).  “Casualty Event” shall include, but not be limited to, any taking of all or any part of any real property of Tenant or any of its Subsidiaries or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any applicable law, or by reason of the temporary requisition of the use or occupancy of all or any part of any real property of Tenant or any of its Subsidiaries or any part thereof by any governmental authority, civil or military.

 

Change in Control:  (i) Any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended from time to time, and any successor statute), (a) shall have acquired direct or indirect beneficial ownership or control of thirty-five percent (35%) or more on a fully diluted basis of the direct or indirect voting power in the Equity Interests of Tenant’s Parent entitled to vote in an election of directors of Tenant’s Parent, or (b) shall have caused the election of a majority of the members of the board of directors or equivalent body of Tenant’s Parent, which such members have not been nominated by a majority of the members of the board of directors or equivalent body of Tenant’s Parent as such were constituted immediately prior to such election, (ii) except as permitted or required hereunder, the direct or indirect sale by Tenant or Tenant’s Parent of all or substantially all of Tenant’s assets, whether held directly or through Subsidiaries, relating to the Facilities in one transaction or in a series of related transactions (excluding sales to Tenant or its Subsidiaries), or (iii) (a) Tenant ceasing to be a wholly-owned Subsidiary (directly or indirectly) of Tenant’s Parent or (b) Tenant’s Parent ceasing to control one hundred percent

 

6



 

(100%) of the voting power in the Equity Interests of Tenant or (iv) Tenant’s Parent consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, Tenant’s Parent, in any such event pursuant to a transaction in which any of the outstanding Equity Interests of Tenant’s Parent ordinarily entitled to vote in an election of directors of Tenant’s Parent or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Equity Interests of Tenant’s Parent ordinarily entitled to vote in an election of directors of Tenant’s Parent outstanding immediately prior to such transaction constitute or are converted into or exchanged into or exchanged for a majority (determined by voting power in an election of directors) of the outstanding Equity Interests ordinarily entitled to vote in an election of directors of such surviving or transferee Person (immediately after giving effect to such transaction).

 

Code:  The Internal Revenue Code of 1986 and, to the extent applicable, the Treasury Regulations promulgated thereunder, each as amended from time to time.

 

Commencement Date:  As defined in Section 1.3.

 

Competing Facility:  As defined in Section 7.4(e).

 

Competing Facility Floor:  As defined in Section 7.4(e).

 

Condemnation:  The exercise of any governmental power, whether by legal proceedings or otherwise, by a Condemnor or a voluntary sale or transfer by Landlord to any Condemnor, either under threat of condemnation or while legal proceedings for condemnation are pending.

 

Condemnor:  Any public or quasi-public authority, or private corporation or individual, having the power of Condemnation.

 

Consolidated Interest Expense:  For any period, interest expense of Tenant and its Subsidiaries that are Guarantors for such period as determined on a consolidated basis for Tenant and its Subsidiaries that are Guarantors in accordance with GAAP.

 

CPI:  The United States Department of Labor, Bureau of Labor Statistics Revised Consumer Price Index for All Urban Consumers (1982-84=100), U.S. City Average, All Items, or, if that index is not available at the time in question, the index designated by such Department as the successor to such index, and if there is no index so designated, an index for an area in the United States that most closely corresponds to the entire United States, published by such Department, or if none, by any other instrumentality of the United States.

 

CPI Increase:  The product of (i) the CPI published for the beginning of each Lease Year, divided by (ii) the CPI published for the beginning of the first Lease Year.  If the product is less than one, the CPI Increase shall be equal to one.

 

CPR Institute:  As defined in Section 34.1(b).

 

CT Facilities:  The Hollywood Casino located in Columbus, Ohio and the Hollywood Casino located in Toledo, Ohio.

 

7



 

CT Land Base Rent: An annual amount equal to forty-two million, eight hundred fifty-seven thousand, three hundred seventy-nine Dollars ($42,857,379).  CT Land Base Rent shall be subject to further adjustment as and to the extent provided in Section 14.6.

 

Date of Taking:  The date the Condemnor has the right to possession of the property being condemned.

 

Debt Agreement:  If designated by Tenant to Landlord in writing to be included in the definition of “Debt Agreement,” one or more (A) debt facilities or commercial paper facilities, providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to lenders or to special purpose entities formed to borrow from lenders against such receivables) or letters of credit, (B) debt securities, indentures or other forms of debt financing (including convertible or exchangeable debt instruments or bank guarantees or bankers’ acceptances), or (C) instruments or agreements evidencing any other indebtedness, in each case, with the same or different borrowers or issuers and, in each case, (i) entered into from time to time by Tenant and/or its Affiliates, (ii) as amended, supplemented, modified, extended, restructured, renewed, refinanced, restated, replaced or refunded in whole or in part from time to time, (iii) which may be secured by assets of Tenant and its Subsidiaries, including, but not limited to, their Cash, Accounts, Tenant’s Property, real property and leasehold estates in real property (including this Master Lease), and (iv) which shall provide Landlord, in accordance with Section 17.3 hereof, the right to receive copies of notices of Specified Debt Agreement Defaults thereunder and opportunity to cure any breaches or defaults by Tenant thereunder within the cure period, if any, that exists under such Debt Agreement.

 

Development Facility Commencement Date:  As defined in Section 7.3.

 

Development Facilities:  The Facilities which are identified in Exhibit A, as amended from time to time, as “Development Facilities.”

 

“Dollars” and “$” shall mean the lawful money of the United States.

 

Discretionary Transferee:  A transferee that meets all of the following requirements:  (a) such transferee has (1) at least five (5) years of experience (directly or through one or more of its Subsidiaries) operating or managing casinos with revenues in the immediately preceding fiscal year of at least seven hundred fifty million Dollars ($750 million) (or retains a manager with such qualifications, which manager shall not be replaced other than in accordance with Article XXII hereof) that is not in the business, and that does not have an Affiliate in the business, of leasing properties to gaming operators, or (2) agreement(s) in place in a form reasonably satisfactory to Landlord to retain for a period of eighteen (18) months (or more) after the effective time of the transfer at least (i) eighty percent (80%) of Tenant and its Subsidiaries’ personnel employed at the Facilities who have employment contracts as of the date of the relevant agreement to transfer and (ii) eighty percent (80%) of Tenant’s and Tenant’s Parent’s ten most highly compensated corporate employees as of the date of the relevant agreement to transfer based on total compensation determined in accordance with Item 402 of Regulation S-K of the Securities and Exchange Act of 1934, as amended; (b) such transferee (directly or through one or more of its Subsidiaries) is licensed or certified by each gaming authority with jurisdiction over any portion of the Leased Property as of the date of any proposed assignment or transfer to

 

8



 

such entity (or will be so licensed upon its assumption of the Master Lease); (c) such transferee is Solvent, and, other than in the case of a Permitted Leasehold Mortgagee Foreclosing Party, if such transferee has a Parent Company, the Parent Company of such transferee is Solvent, and (d) (i) other than in the case of a Permitted Leasehold Mortgagee Foreclosing Party, (x) the Parent Company of such transferee or, if such transferee does not have a Parent Company, such transferee, has sufficient assets so that, after giving effect to its assumption of Tenant’s obligations hereunder or the applicable assignment (including pursuant to a Change in Control under Section 22.2(iii)(x) or Section 22.2(iii)(y), its Indebtedness to EBITDA Ratio on a consolidated basis in accordance with GAAP is less than 8:1 on a pro forma basis based on projected earnings and after giving effect to the proposed transaction or (y) an entity that has an investment grade credit rating from a nationally recognized rating agency with respect to such entity’s long term, unsecured debt has provided a Guaranty, or (ii) in the case of a Permitted Leasehold Mortgagee Foreclosing Party, (x) Tenant has an Indebtedness to EBITDA Ratio of less than 8:1 on a pro forma basis based on projected earnings and after giving effect to the proposed transaction or (y) an entity that has an investment grade credit rating from a nationally recognized rating agency with respect to such entity’s long term, unsecured debt has provided a Guaranty.

 

Distribution Agreement:  As defined in Recital B.

 

Distribution Agreement Ancillary Documents:  The Transition Services Agreement, the Tax Sharing Agreement, the Intellectual Property Agreement and the Employee Matters Agreement, each dated as of the date of the Distribution Agreement and entered into between Affiliates of Tenant and GLP.

 

EBITDA:  For any Test Period, the consolidated net income or loss of the Parent Company of a Discretionary Transferee (or, in the case of (x) a Permitted Leasehold Mortgagee Foreclosing Party, such Permitted Leasehold Mortgagee Foreclosing Party or (y) a Discretionary Transferee that does not have a Parent Company, such Discretionary Transferee) on a consolidated basis for such period, determined in accordance with GAAP, adjusted by excluding (1) income tax expense, (2) consolidated interest expense (net of interest income), (3) depreciation and amortization expense, (4) any income, gains or losses attributable to the early extinguishment or conversion of indebtedness or cancellation of indebtedness, (5) gains or losses on discontinued operations and asset sales, disposals or abandonments, (6) impairment charges or asset write-offs including, without limitation, those related to goodwill or intangible assets, long-lived assets, and investments in debt and equity securities, in each case, in accordance with GAAP, (7) any non-cash items of expense (other than to the extent such non-cash items of expense require or result in an accrual or reserve for future cash expenses), (8) extraordinary gains or losses and (9) unusual or non-recurring gains or items of income or loss.

 

Encumbrance:  Any mortgage, deed of trust, lien, encumbrance or other matter affecting title to any of the Leased Property, or any portion thereof or interest therein.

 

End of Term Gaming Asset Transfer Notice:  As defined in Section 36.1.

 

Environmental Costs:  As defined in Section 32.4.

 

9



 

Environmental Laws:  Any and all federal, state, municipal and local laws, statutes, ordinances, rules, regulations, guidances, policies, orders, decrees or judgments, whether statutory or common law, as amended from time to time, now or hereafter in effect, or promulgated, pertaining to the environment, public health and safety and industrial hygiene, including the use, generation, manufacture, production, storage, release, discharge, disposal, handling, treatment, removal, decontamination, cleanup, transportation or regulation of any Hazardous Substance, including the Industrial Site Recovery Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Comprehensive Environmental Response Compensation and Liability Act, the Resource Conservation and Recovery Act, the Federal Insecticide, Fungicide, Rodenticide Act, the Safe Drinking Water Act and the Occupational Safety and Health Act.

 

Equity Interests:  With respect to any person, any and all shares, interests, participations or other equivalents, including membership interests (however designated, whether voting or non-voting), of equity of such person, including, if such person is a partnership, partnership interests (whether general or limited) and any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership.

 

Equity Rights:  With respect to any person, any then outstanding subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including any stockholders’ or voting trust agreements) for the issuance, sale, registration or voting of any additional Equity Interests of any class, or partnership or other ownership interests of any type in, such person; provided, however, that a debt instrument convertible into or exchangeable or exercisable for any Equity Interests shall not be deemed an Equity Right.

 

Escalated Building Base Rent:  For any Lease Year (other than the first Lease Year), an amount equal to 102% of the Building Base Rent as of the end of the immediately preceding Lease Year.

 

Escalation:  For any Lease Year (other than the first Lease Year), the lesser of (a) an amount equal to the excess of (i) the Escalated Building Base Rent for such Lease Year over (ii) the Building Base Rent for the immediately preceding Lease Year, and (b) an amount (but not less than zero) that adding such amount to the Rent for the immediately preceding Lease Year will have yielded an Adjusted Revenue to Rent Ratio for such preceding Lease Year of 1.8:1.

 

Event of Default:  As defined in Article XVI.

 

Exercise Date:  As defined in Section 1.4.

 

Expert:  An independent third party professional, with expertise in respect of a matter at issue, appointed by the agreement of Landlord and Tenant or otherwise in accordance with Article XXXIV hereof.

 

Facilit(y)(ies):  As defined in Recital C.

 

Facility Mortgage:  As defined in Section 13.1.

 

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Facility Mortgage Documents:  With respect to each Facility Mortgage and Facility Mortgagee, the applicable Facility Mortgage, loan agreement, debt agreement, credit agreement or indenture, lease, note, collateral assignment instruments, guarantees, indemnity agreements and other documents or instruments evidencing, securing or otherwise relating to the loan made, credit extended, or lease or other financing vehicle entered into pursuant thereto.

 

Facility Mortgage Reserve Account:  As defined in Section 31.3(b).

 

Facility Mortgagee:  As defined in Section 13.1.

 

Financial Statements:  (i) For a Fiscal Year, consolidated statements of Tenant’s Parent and its consolidated subsidiaries (as defined by GAAP) of income, stockholders’ equity and comprehensive income and cash flows for such period and for the period from the beginning of the Fiscal Year to the end of such period and the related consolidated balance sheet as at the end of such period, together with the notes thereto, all in reasonable detail and setting forth in comparative form the corresponding figures for the corresponding period in the preceding Fiscal Year and prepared in accordance with GAAP and audited by a “big four” or other nationally recognized accounting firm, and (ii) for a fiscal quarter, consolidated statements of Tenant’s Parent’s income, stockholders’ equity and comprehensive income and cash flows for such period and for the period from the beginning of the Fiscal Year to the end of such period and the related consolidated balance sheet as at the end of such period, together with the notes thereto, all in reasonable detail and setting forth in comparative form the corresponding figures for the corresponding period in the preceding Fiscal Year and prepared in accordance with GAAP.

 

Fiscal Year:  The annual period commencing January 1 and terminating December 31 of each year.

 

Fixtures:  As defined in Section 1.1(d).

 

Foreclosure Assignment:  As defined in Section 22.2(iii).

 

Foreclosure COC:  As defined in Section 22.2(iii).

 

Foreclosure Purchaser:  As defined in Section 31.1.

 

GAAP:  Generally accepted accounting principles consistently applied in the preparation of financial statements, as in effect from time to time (except with respect to any financial ratio defined or described herein or the components thereof, for which purposes GAAP shall refer to such principles as in effect as of the date hereof).

 

Gaming Assets FMV:  As defined in Section 36.1.

 

Gaming Facility:  A facility at which there are operations of slot machines, table games or pari-mutuel wagering.

 

Gaming License:  Any license, permit, approval, finding of suitability or other authorization issued by a state regulatory agency to operate, carry on or conduct any gambling game, gaming device, slot machine, race book or sports pool on the Leased Property, or required

 

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by any Gaming Regulation, including each of the licenses, permits or other authorizations set forth on Exhibit D, as amended from time to time, and those related to any Facilities that are added to this Master Lease after the date hereof.

 

Gaming Regulation(s): Any and all laws, statutes, ordinances, rules, regulations, policies, orders, codes, decrees or judgments, and Gaming License conditions or restrictions, as amended from time to time, now or hereafter in effect or promulgated, pertaining to the operation, control, maintenance or Capital Improvement of a Gaming Facility or the conduct of a person or entity holding a Gaming License, including, without limitation, any requirements imposed by a regulatory agency, commission, board or other governmental body pursuant to the jurisdiction and authority granted to it under applicable law.

 

Gaming Revenues:  As defined in the definition of Net Revenue.

 

GLP:  As defined in the recitals.

 

Greenfield Floor:  As defined in Section 7.4(a).

 

Greenfield Project:  As defined in Section 7.4(a).

 

Ground Leased Property:  The real property leased pursuant to the Ground Leases.

 

Ground Leases:  Those certain leases with respect to real property that is a portion of the Leased Property, pursuant to which Landlord is a tenant and which leases have either been approved by Tenant or are in existence as of the date hereof and listed on Schedule 1A hereto.

 

Ground Lessor:  As defined in Section 8.6(a).

 

Guarantor:  Any entity that guaranties the payment or collection of all or any portion of the amounts payable by Tenant, or the performance by Tenant of all or any of its obligations, under this Master Lease, including any replacement guarantor consented to by Landlord in connection with the assignment of the Master Lease or a sublease of Leased Property pursuant to Article XXII.

 

Guaranty:  That certain Guaranty of Master Lease dated as of the date hereof, a form of which is attached as Exhibit E hereto, as the same may be amended, supplemented or replaced from time to time, by and between Tenant’s Parent, Landlord and certain Subsidiaries of Tenant from time to time party thereto, and any other guaranty in form and substance reasonably satisfactory to the Landlord executed by a Guarantor in favor of Landlord (as the same may be amended, supplemented or replaced from time to time) pursuant to which such Guarantor agrees to guaranty all of the obligations of Tenant hereunder.

 

Handling:  As defined in Section 32.4.

 

Hazardous Substances:  Collectively, any petroleum, petroleum product or by product or any substance, material or waste regulated or listed pursuant to any Environmental Law.

 

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Immaterial Subsidiary Guarantor:  Any Subsidiary of Tenant having assets with an aggregate fair market value of less than twenty-five million Dollars ($25.0 million) as of the most recent date on which Financial Statements have been delivered to Landlord pursuant to Section 23.1(b); provided, however, that in no event shall the aggregate fair market value of the assets of all Immaterial Subsidiary Guarantors exceed fifty million Dollars ($50.0 million) as of the most recent date on which Financial Statements have been delivered to Landlord pursuant to Section 23.1(b).

 

Impartial Appraiser:  As defined in Section 13.2.

 

Impositions:  Collectively, all taxes, including capital stock, franchise, margin and other state taxes of Landlord, ad valorem, sales, use, single business, gross receipts, transaction privilege, rent or similar taxes; assessments including assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not to be completed within the Term; ground rents (pursuant to the Ground Leases); water, sewer and other utility levies and charges; excise tax levies; fees including license, permit, inspection, authorization and similar fees; and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Leased Property and/or the Rent and Additional Charges and all interest and penalties thereon attributable to any failure in payment by Tenant (other than failures arising from the acts or omissions of Landlord) which at any time prior to, during or in respect of the Term hereof may be assessed or imposed on or in respect of or be a lien upon (i) Landlord or Landlord’s interest in the Leased Property, (ii) the Leased Property or any part thereof or any rent therefrom or any estate, right, title or interest therein, or (iii) any occupancy, operation, use or possession of, or sales from or activity conducted on or in connection with the Leased Property or the leasing or use of the Leased Property or any part thereof; provided, however, that nothing contained in this Master Lease shall be construed to require Tenant to pay (a) any tax based on net income (whether denominated as a franchise or capital stock or other tax) imposed on Landlord or any other Person, (b) any transfer, or net revenue tax of Landlord or any other Person except Tenant and its successors, (c) any tax imposed with respect to the sale, exchange or other disposition by Landlord of any Leased Property or the proceeds thereof, or (d) any principal or interest on any indebtedness on or secured by the Leased Property owed to a Facility Mortgagee for which Landlord or its Subsidiaries or GLP is the obligor; provided, further, Impositions shall include any tax, assessment, tax levy or charge set forth in clause (a) or (b) that is levied, assessed or imposed in lieu of, or as a substitute for, any Imposition.

 

Indebtedness:  Of any Person, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under capital leases which have been or should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (c) all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business), (d) all indebtedness secured by a lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person, (e) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn) and banker’s acceptances issued for the account of such Person, (f) all obligations under any agreement with respect to any swap, forward, future or derivative transaction or option or similar arrangement involving, or settled by

 

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reference to, one or more rates, currencies, commodities, equity or debt instruments or securities or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or combination of transactions, (g) all guarantees by such Person of any of the foregoing and (h) all indebtedness of the nature described in the foregoing clauses (a)-(g) of any partnership of which such Person is a general partner.

 

Indebtedness to EBITDA Ratio:  As at any date of determination, the ratio of (a) Indebtedness of the applicable (x) Discretionary Transferee or Parent Company of the Discretionary Transferee or (y) in the case of a Permitted Leasehold Mortgagee Foreclosing Party, the Permitted Leasehold Mortgagee Foreclosing Party (such Discretionary Transferee, Parent Company or Permitted Leasehold Mortgagee Foreclosing Party, as applicable the “Relevant Party”) on a consolidated basis, as of such date (excluding (i) Indebtedness of the type referenced in clauses (e) or (f) of the definition of Indebtedness or Indebtedness referred to in clauses (d) or (g) of the definition of Indebtedness to the extent relating to Indebtedness of the type referenced in clauses (e) or (f) of the definition of Indebtedness, to (b) EBITDA for the Test Period most recently ended prior to such date for which financial statements are available.  For purposes of calculating the Indebtedness to EBITDA Ratio, EBITDA shall be calculated on a pro forma basis (and shall be calculated, except for pro forma adjustments reasonably contemplated by the potential transferee which may be included in such calculations, otherwise in accordance with Regulation S-X under the Securities Act) to give effect to any material acquisitions and material asset sales consummated by the Relevant Party and its Subsidiaries since the beginning of any Test Period of the Relevant Party as if each such material acquisition had been effected on the first day of such Test Period and as if each such material asset sale had been consummated on the day prior to the first day of such period.  In addition, for the avoidance of doubt, (i) if the Relevant Party or any Subsidiary of the Relevant Party has incurred any Indebtedness or repaid, repurchased, acquired, defeased or otherwise discharged any Indebtedness since the end of the most recent Test Period for which financial statements are available, Indebtedness shall be calculated (for purposes of this definition) after giving effect on a pro forma basis to such incurrence, repayment, repurchase, acquisition, defeasance or discharge and the applications of any proceeds thereof as if it had occurred prior to the first day of such Test Period and (ii) the Indebtedness to EBITDA Ratio shall give pro forma effect to the transactions whereby the applicable Discretionary Transferee becomes party to the Master Lease or the Change in Control transactions permitted under Sections 22.2(iii) and shall include the Indebtedness and EBITDA of Tenant and its Subsidiaries for the relevant period.

 

Initial Term:  As defined in Section 1.3.

 

Insurance Requirements:  The terms of any insurance policy required by this Master Lease and all requirements of the issuer of any such policy and of any insurance board, association, organization or company necessary for the maintenance of any such policy.

 

Investment Fund: A bona fide private equity fund or bona fide investment vehicle arranged by and managed by or controlled by, or under common control with, a private equity fund (excluding any private equity fund investment vehicle the primary assets of which are Tenant and its Subsidiaries and/or this Master Lease and assets related thereto) that is engaged in making, purchasing, funding or otherwise or investing in a diversified portfolio of businesses and

 

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companies and is organized primarily for the purpose of making equity investments in companies.

 

Iowa Casino:  The Facility known as the Argosy Sioux City Casino.

 

Land:  As defined in Section 1.1(a).

 

Land Base Rent:  The sum of the CT Land Base Rent and the Other Land Base Rent.

 

Landlord:  As defined in the preamble.

 

Landlord Representatives: As defined in Section 23.4.

 

Landlord Tax Returns:  As defined in Section 4.1(b).

 

Lease Year:  The first Lease Year for each Facility shall be the period commencing on the Commencement Date and ending on the last day of the calendar month in which the first (1st) anniversary of the Commencement Date occurs, and each subsequent Lease Year for each Facility shall be each period of twelve (12) full calendar months after the last day of the prior Lease Year.

 

Leased Improvements:  As defined in Section 1.1(b).

 

Leased Property:  As defined in Section 1.1.

 

Leased Property Rent Adjustment Event:  As defined in Section 14.6.

 

Leasehold Estate:  As defined in Section 17.1(a).

 

Legal Requirements:  All federal, state, county, municipal and other governmental statutes, laws, rules, policies, guidance, codes, orders, regulations, ordinances, permits, licenses, covenants, conditions, restrictions, judgments, decrees and injunctions (including common law, Gaming Regulations and Environmental Laws) affecting either the Leased Property, Tenant’s Property and all Capital Improvements or the construction, use or alteration thereof, whether now or hereafter enacted and in force, including any which may (i) require repairs, modifications or alterations in or to the Leased Property and Tenant’s Property, (ii) in any way adversely affect the use and enjoyment thereof, or (iii) regulate the transport, handling, use, storage or disposal or require the cleanup or other treatment of any Hazardous Substance.

 

Liquor Authority:  As defined in Section 41.13(a).

 

Liquor Laws:  As defined in Section 41.13(a).

 

Long-Lived Assets: (i) With respect to property owned by Tenant’s Parent as of the date hereof, all property capitalized in accordance with GAAP with an expected life of not less than fifteen (15) years as initially reflected on the books and records of Tenant’s Parent at or about the time of acquisition thereof or (ii) with respect to those assets purchased, replaced or

 

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otherwise maintained by Tenant after the date hereof, such asset capitalized in accordance with GAAP with an expected life of not less than fifteen (15) years as of or about the time of the acquisition thereof, as classified by Tenant in accordance with GAAP.

 

Master Lease:  As defined in the preamble.

 

Material Indebtedness:  At any time, Indebtedness of any one or more of the Tenant (and its Subsidiaries) and any Guarantor in an aggregate principal amount exceeding ten percent (10%) of Adjusted Revenue of Tenant and the Guarantors that are Subsidiaries of Tenant on a consolidated basis over the most recent Test Period for which financial statements are available. As of the date hereof, until financial statements are available for the initial Test Period, such amount shall be forty million Dollars ($40,000,000).

 

Maximum Foreseeable Loss:  As defined in Section 13.2.

 

Net Revenue:  The sum of, without duplication, (i) the amount received by Tenant (and its Subsidiaries and its subtenants) from patrons at any Facility for gaming, less refunds and free promotional play provided to the customers and invitees of Tenant (and its Subsidiaries and subtenants) pursuant to a rewards, marketing, and/or frequent users program, and less amounts returned to patrons through winnings at any Facility (the amounts in this clause (i), “Gaming Revenues”); and (ii) the gross receipts of Tenant (and its Subsidiaries and subtenants) for all goods and merchandise sold, the charges for all services performed, or any other revenues generated by Tenant (and its Subsidiaries and subtenants) in, at, or from the Leased Property for cash, credit, or otherwise (without reserve or deduction for uncollected amounts), but excluding any Gaming Revenues (the amounts in this clause (ii), “Retail Sales”); less (iii) the retail value of accommodations, food and beverage, and other services furnished without charge to guests of Tenant (and its Subsidiaries and subtenants) at any Facility (the amounts in this clause (iii), “Promotional Allowance”).  For the avoidance of doubt, gaming taxes and casino operating expenses (such as salaries, income taxes, employment taxes, supplies, equipment, cost of goods and inventory, rent, office overhead, marketing and advertising and other general administrative costs) will not be deducted in arriving at Net Revenue.  Net Revenue will be calculated on an accrual basis for these purposes, as required under GAAP.  For the absence of doubt, if Gaming Revenues, Retail Sales or Promotional Allowances of a Subsidiary or subtenant, as applicable, are taken into account for purposes of calculating Net Revenue, any rent received by Tenant from such Subsidiary or subtenant, as applicable, pursuant to any sublease with such Subsidiary or subtenant, as applicable, shall not also be taken into account for purposes of calculating Net Revenues.  Notwithstanding the foregoing, with respect to any Specified Sublease, Net Revenue shall not include Gaming Revenues or Retail Sales from the subtenants under such subleases and shall include the rent received by Tenant or its subsidiaries thereunder.

 

New Lease:  As defined in Section 17.1(f).

 

Notice:  A notice given in accordance with Article XXXV.

 

Notice of Termination.  As defined in Section 17.1(f).

 

NRS:  As defined in Section 41.14.

 

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OFAC:  As defined in Section 39.1.

 

Officer’s Certificate:  A certificate of Tenant or Landlord, as the case may be, signed by an officer of such party authorized to so sign by resolution of its board of directors or by its sole member or by the terms of its by-laws or operating agreement, as applicable.

 

Other Land Base Rent: An annual amount equal to forty-six million, seven hundred forty thousand, four hundred eighty-four Dollars ($46,740,484); provided that as applicable during the Term, Land Base Rent shall be increased on any Development Facility Commencement Date in respect of the applicable Development Facility, as contemplated in Exhibit C.  Other Land Base Rent shall be subject to further adjustment as and to the extent provided in Section 14.6.

 

Overdue Rate:  On any date, a rate equal to five (5) percentage points above the Prime Rate, but in no event greater than the maximum rate then permitted under applicable law.

 

Parent Company means, with respect to any Discretionary Transferee, any Person (other than an Investment Fund) (x) as to which such Discretionary Transferee is a Subsidiary; and (y) which is not a Subsidiary of any other Person (other than an Investment Fund).

 

Payment Date:  Any due date for the payment of the installments of Rent or any other sums payable under this Master Lease.

 

Percentage Rent:  The sum of (1) for all Facilities other than the CT Facilities, an annual amount equal to forty-six million, seven hundred forty thousand, four hundred seventy Dollars ($46,740,470) per Lease Year; provided, however, that the Percentage Rent for all Facilities other than the CT Facilities shall be reset each Percentage Rent Reset Year to a fixed annual amount equal to the product of (i) four percent (4%) and (ii) the excess (if any) of (a) the average annual Net Revenues of all the Facilities other than the CT Facilities for the trailing five-year period (i.e., the first (1st) through fifth (5th) Lease Years, the sixth (6th)  through tenth (10th) Lease Years, the eleventh (11th) though fifteenth (15th) Lease Years, the sixteenth (16th) through twentieth (20th) Lease Years, the twenty-first through twenty-fifth Lease Years and the twenty-sixth (26t) through thirtieth (30th) Lease Years) over (b) one billion, one hundred sixty-eight million, five hundred eleven thousand, seven hundred fifty Dollars ($1,168,511,750), and (2) for the CT Facilities, a variable amount, determined monthly, equal to (i) twenty percent (20%) of the excess of actual Net Revenues of the month then ended for the CT Facilities over (ii) seventeen million, eight hundred fifty-seven thousand, two hundred forty-one Dollars ($17,857,241).  For purposes of clause (a) in the preceding sentence, (x) the “average annual Net Revenues” of any Development Facility added to the Leased Property hereunder during any such trailing five-year period shall be calculated taking into consideration only the portion of such trailing five-year period commencing on the relevant Development Facility Commencement Date and (y) in the case of any Leased Property Rent Adjustment Event other than with respect to a CT Facility, the “average annual Net Revenues” shall be calculated as if such Leased Property Rent Adjustment Event occurred on the first day of such trailing five-year period.  Percentage Rent shall be increased on any Development Facility Commencement Date in respect of the applicable Development Facility as contemplated in Exhibit C by increasing the amount referenced in clause (1) above and the amount referenced in clause (b) of the proviso in clause

 

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(1).  Percentage Rent shall be subject to further adjustment as and to the extent provided in Section 14.6.

 

Percentage Rent Reset Year:  The sixth (6th) Lease Year, the eleventh (11th) Lease Year, the sixteenth (16th) Lease Year, the twenty-first (21st) Lease Year, the twenty-sixth (26th) Lease Year and the thirty-first (31st) Lease Year.

 

Permitted Leasehold Mortgage:  A document creating or evidencing an encumbrance on Tenant’s leasehold interest (or a subtenant’s subleasehold interest) in the Leased Property, granted to or for the benefit of a Permitted Leasehold Mortgagee as security for the obligations under a Debt Agreement.

 

Permitted Leasehold Mortgagee:  The lender or agent or trustee or similar representative on behalf of one or more lenders or noteholders or other investors under a Debt Agreement, in each case as and to the extent such Person has the power to act on behalf of all lenders under such Debt Agreement pursuant to the terms thereof; provided such lender, agent or trustee or similar representative (but not necessarily the lenders, noteholders or other investors which it represents) is a banking institution in the business of generally acting as a lender, agent or trustee or similar representative (in each case, on behalf of a group of lenders) under debt agreements or instruments similar to the Debt Agreement.

 

Permitted Leasehold Mortgagee Designee:  An entity designated by a Permitted Leasehold Mortgagee and acting for the benefit of the Permitted Leasehold Mortgagee, or the lenders, noteholders or investors represented by the Permitted Leasehold Mortgagee.

 

Permitted Leasehold Mortgagee Foreclosing Party:  A Permitted Leasehold Mortgagee that forecloses on this Master Lease and assumes this Master Lease or a Subsidiary of a Permitted Leasehold Mortgagee that assumes this Master Lease in connection with a foreclosure on this Master Lease by a Permitted Leasehold Mortgagee.

 

Person or person:  Any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other form of entity.

 

Pre-Opening Expense:  With respect to any fiscal period, the amount of expenses (including Consolidated Interest Expense) incurred with respect to capital projects which are appropriately classified as “pre-opening expenses” on the applicable financial statements of Tenant’s Parent and its Subsidiaries for such period.

 

Primary Intended Use:  Gaming and/or pari-mutuel use consistent, with respect to each Facility, with its current use (as specified on Exhibit A attached hereto as it may be amended from time to time), or with prevailing gaming industry use at any time (including all ancillary uses consistent with gaming industry practice such as hotels, restaurants, bars, etc.).

 

Prime Rate:  On any date, a rate equal to the annual rate on such date publicly announced by JPMorgan Chase Bank, N.A. (provided that if JPMorgan Chase Bank, N.A. ceases to publish such rate, the Prime Rate shall be determined according to the Prime Rate of another nationally known money center bank reasonably selected by Landlord), to be its prime rate for

 

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ninety (90)-day unsecured loans to its corporate borrowers of the highest credit standing, but in no event greater than the maximum rate then permitted under applicable law.

 

Proceeding:  As defined in Section 23.1(b)(v).

 

Prohibited Persons:  As defined in Section 39.1.

 

Promotional Allowance:  As defined in the definition of Net Revenue.

 

Qualified Successor Tenant:  As defined in Section 36.2.

 

Renewal Notice:  As defined in Section 1.4(a).

 

Renewal Term:  A period for which the Term is renewed in accordance with Section 1.4.

 

Rent:  Collectively, the Base Rent and the Percentage Rent.

 

Representative:  With respect to the lenders or holders under a Debt Agreement, a Person designated as agent or trustee or a Person acting in a similar capacity or as representative for such lenders or holders.

 

Restricted Area:  The geographical area that at any time during the Term is within (A) a seven (7) mile radius of any Facility covered under this Master Lease at such time and located in the State of Nevada, or (B) a sixty (60) mile radius of any Facility covered under this Master Lease at such time and located outside the State of Nevada.

 

Restricted Payment:  Dividends (in cash, property or obligations) on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement, repurchase or other acquisition of, any Equity Interests or Equity Rights (other than outstanding securities convertible into Equity Interests) of Tenant, but excluding dividends, payments or distributions paid through the issuance of additional shares of Equity Interests and any redemption, retirement or exchange of any Equity Interest through, or with the proceeds of, the issuance of Equity Interests of Tenant.

 

Retail Sales:  As defined in the definition of Net Revenue.

 

SEC:  The United States Securities and Exchange Commission.

 

Securities Act:  The Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

 

Solvent:  With respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person, on a going-concern basis, is greater than the total amount of liabilities (including contingent liabilities) of such Person, (b) the present fair salable value of the assets of such Person, on a going-concern basis, is not less than the amount that will be required to pay the probable liability of such Person on its debts (including contingent liabilities) as they become absolute and matured, (c) such Person has not incurred, and does not

 

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intend to, and does not believe that it will, incur, debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital and (e) such Person is “solvent” within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances.  For purposes of this definition, the amount of any contingent liability shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Accounting Standards Codification No. 450).

 

Specified Debt Agreement Default: Any event or occurrence under a Debt Agreement or Material Indebtedness that enables or permits the lenders or holders (or Representatives of such lenders or holders) to accelerate the maturity of the Indebtedness outstanding under a Debt Agreement or Material Indebtedness.

 

Specified Expenses:  For any Test Period, (i) Rent incurred for the same Test Period, and (ii) the (1) income tax expense, (2) consolidated interest expense, (3) depreciation and amortization expense, (4) any nonrecurring, unusual, or extraordinary items of income, cost or expense, including but not limited to, (a) any gains or losses attributable to the early extinguishment or conversion of indebtedness, (b) gains or losses on discontinued operations and asset sales, disposals or abandonments, and (c) impairment charges or asset write-offs including, without limitation, those related to goodwill or intangible assets, long-lived assets, and investments in debt and equity securities, in each case, pursuant to GAAP, (5) any non-cash items of expense (other than to the extent such non-cash items of expense require an accrual or reserve for future cash expenses (provided that if such accrual or reserve is for contingent items, the outcome of which is subject to uncertainty, such non-cash items of expense may, at the election of the Tenant, be added to net income and deducted when and to the extent actually paid in cash)), (6) any Pre-Opening Expenses, (7) transaction costs for the spin-off of GLP, the entry into this Master Lease, the negotiation and consummation of the financing transactions in connection therewith and the other transactions contemplated in connection with the foregoing consummated on or before the date hereof, (8) non-cash valuation adjustments, (9) any expenses related to the repurchase of stock options, and (10) expenses related to the grant of stock options, restricted stock, or other equivalent or similar instruments; in the case of each of (1) through (10), of Tenant and the Subsidiaries of Tenant that are Guarantors on a consolidated basis for such period.

 

Specified Proceeds:  For any Test Period, to the extent not otherwise included in Net Revenue, the amount of insurance proceeds received during such period by Tenant or the Guarantors in respect of any Casualty Event; provided, however, that for purposes of this definition, (i) with respect to any Facility subject to such Casualty Event which had been in operation for at least one complete fiscal quarter the amount of insurance proceeds plus the Net Revenue (excluding such insurance proceeds), if any, attributable to the Facility subject to such Casualty Event for such period shall not exceed an amount equal to the Net Revenue attributable to such Facility for the Test Period ended immediately prior to the date of such Casualty Event (calculated on a pro forma annualized basis to the extent such Facility was not operational for the full previous Test Period) and (ii) with respect to any Facility subject to such Casualty Event

 

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which had not been in operation for at least one complete fiscal quarter, the amount of insurance proceeds plus the Net Revenue attributable to such Facility for such period shall not exceed the Net Revenue reasonably projected by Tenant to be derived from such Facility for such period.

 

Specified Sublease: Any lease in effect on the Commencement Date constituting part of the Leased Property with respect to which Tenant is a sublessor, substantially as in effect on the Commencement Date.

 

State:  With respect to each Facility, the state or commonwealth in which such Facility is located.

 

Subsidiary:  As to any Person, (i) any corporation more than fifty percent (50%) of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time of determination owned by such Person and/or one or more Subsidiaries of such Person, and (ii) any partnership, limited liability company, association, joint venture or other entity in which such person and/or one or more Subsidiaries of such person has more than a fifty percent (50%) equity interest at the time of determination.  Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Master Lease shall refer to a Subsidiary or Subsidiaries of Tenant.

 

Successor Tenant:  As defined in Section 36.1.

 

Successor Tenant Rent:  As defined in Section 36.2.

 

Taking:  As defined in Section 15.1(a).

 

Tenant:  As defined in the preamble.

 

Tenant Capital Improvement:  A Capital Improvement funded by Tenant, as compared to Landlord.

 

Tenant COC:  As defined in Section 22.2(iii).

 

Tenant Parent COC:  As defined in Section 22.2(iii).

 

Tenant Representatives:  As defined in Section 23.4.

 

Tenant’s Parent:  Penn National Gaming, Inc.

 

Tenant’s Property:  With respect to each Facility, all assets (other than the Leased Property and property owned by a third party) primarily related to or used in connection with the operation of the business conducted on or about the Leased Property, together with all replacements, modifications, additions, alterations and substitutes therefor.

 

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Term:  As defined in Section 1.3.

 

Termination Notice:  As defined in Section 17.1(d).

 

Test Period:  With respect to any Person, for any date of determination, the period of the four (4) most recently ended consecutive fiscal quarters of such Person.

 

Unavoidable Delay:  Delays due to strikes, lock-outs, inability to procure materials, power failure, acts of God, governmental restrictions, enemy action, civil commotion, fire, unavoidable casualty or other causes beyond the reasonable control of the party responsible for performing an obligation hereunder; provided that lack of funds shall not be deemed a cause beyond the reasonable control of a party.

 

Unsuitable for Its Primary Intended Use:  A state or condition of any Facility such that by reason of damage or destruction, or a partial taking by Condemnation, such Facility cannot, following restoration thereof (to the extent commercially practical), be operated on a commercially practicable basis for its Primary Intended Use, taking into account, among other relevant factors, the amount of square footage and the estimated revenue affected by such damage or destruction.

 

ARTICLE III

 

3.1                               Rent.  During the Term, Tenant will pay to Landlord the Rent and Additional Charges in lawful money of the United States of America and legal tender for the payment of public and private debts, in the manner provided in Section 3.3.  The Base Rent during any Lease Year is payable in advance in consecutive monthly installments on the fifth (5th) Business Day of each calendar month during that Lease Year and the Percentage Rent during any Lease Year for all the Facilities other than the CT Facilities is payable in advance in consecutive monthly installments on the fifth (5th) Business Day of each calendar month during that Lease Year; provided that during the first three (3) months of each Percentage Rent Reset Year the amount of the Percentage Rent payable monthly in advance shall remain the same as in the then preceding Lease Year, and provided, further, that Tenant shall make a payment to Landlord (or be entitled to set off against its Rent payment due) on the fifth (5th) Business Day of the fourth (4th) calendar month of such Lease Year in the amount necessary to “true-up” any Percentage Rent payments not yet (or overpayments having been) made for such three (3) month period.  The Percentage Rent for the CT Facilities is payable in advance on the fifth (5th) Business Day of each calendar month and such advance payment shall be calculated assuming Net Revenues for the CT Facilities for the applicable month will equal the monthly Net Revenues for the preceding month (and for the first month of the Lease, assuming the monthly Net Revenue will equal thirty-five million, seven hundred fourteen thousand, four hundred eighty-three Dollars ($35,714,483)); provided that Tenant shall also make a payment to Landlord (or be entitled to set off against a Rent payment due) in the amount, if any, necessary to “true-up” any Percentage Rent payments not yet (or overpayments having been) made for the prior month; provided, further, that Tenant shall be entitled to set off against a Rent payment due hereunder any rent payments made by Tenant’s Parent or one of its Subsidiaries to third-party lessors (and not previously set off)  under leases (or subleases) existing on the Commencement Date, which leases (or subleases) are related to any Facility subject to this Master Lease or

 

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provide access or other similar rights to such Facility, if such lease (or sublease) has not been transferred to Landlord either (i) solely because the requisite consents to transfer have not been obtained or (ii) because the rent payable under such lease is satisfied through the payment of local development taxes, fees or other amounts paid by Tenant (provided that, in each case, Tenant shall certify to Landlord in writing on a periodic basis as reasonably requested by Landlord the applicable lease (or sublease) and third-party lessor and include reasonable detail regarding the amounts paid thereunder).  Unless otherwise agreed by the parties, Rent and Additional Charges shall be prorated as to any partial months at the beginning and end of the Term.  The parties will agree on an allocation of the Base Rent on a declining basis for federal income tax purposes within the 115/85 safe harbor of Section 467 of the Code, assuming a projected schedule of Base Rent for this purpose.

 

3.2                               Late Payment of Rent.  Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent will cause Landlord to incur costs not contemplated hereunder, the exact amount of which is presently anticipated to be extremely difficult to ascertain.  Accordingly, if any installment of Rent other than Additional Charges payable to a Person other than Landlord shall not be paid within five (5) days after its due date, Tenant will pay Landlord on demand a late charge equal to the lesser of (a) five percent (5%) of the amount of such installment or (b) the maximum amount permitted by law.  The parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment by Tenant.  The parties further agree that such late charge is Rent and not interest and such assessment does not constitute a lender or borrower/creditor relationship between Landlord and Tenant.  Thereafter, if any installment of Rent other than Additional Charges payable to a Person other than Landlord shall not be paid within ten (10) days after its due date, the amount unpaid, including any late charges previously accrued, shall bear interest at the Overdue Rate from the due date of such installment to the date of payment thereof, and Tenant shall pay such interest to Landlord on demand.  The payment of such late charge or such interest shall not constitute waiver of, nor excuse or cure, any default under this Master Lease, nor prevent Landlord from exercising any other rights and remedies available to Landlord.

 

3.3                               Method of Payment of Rent.  Rent and Additional Charges to be paid to Landlord shall be paid by electronic funds transfer debit transactions through wire transfer of immediately available funds and shall be initiated by Tenant for settlement on or before the Payment Date; provided, however, if the Payment Date is not a Business Day, then settlement shall be made on the next succeeding day which is a Business Day.  Landlord shall provide Tenant with appropriate wire transfer information in a Notice from Landlord to Tenant.  If Landlord directs Tenant to pay any Rent to any party other than Landlord, Tenant shall send to Landlord, simultaneously with such payment, a copy of the transmittal letter or invoice and a check whereby such payment is made or such other evidence of payment as Landlord may reasonably require.

 

3.4                               Net Lease.  Landlord and Tenant acknowledge and agree that (i) this Master Lease is and is intended to be what is commonly referred to as a “net, net, net” or “triple net” lease, and (ii) the Rent shall be paid absolutely net to Landlord, so that this Master Lease shall yield to Landlord the full amount or benefit of the installments of Rent and Additional Charges throughout the Term with respect to each Facility, all as more fully set forth in Article IV and subject to any other provisions of this Master Lease which expressly provide for

 

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adjustment or abatement of Rent or other charges.  If Landlord commences any proceedings for non-payment of Rent, Tenant will not interpose any counterclaim or cross complaint or similar pleading of any nature or description in such proceedings unless Tenant would lose or waive such claim by the failure to assert it.  This shall not, however, be construed as a waiver of Tenant’s right to assert such claims in a separate action brought by Tenant.  The covenants to pay Rent and other amounts hereunder are independent covenants, and Tenant shall have no right to hold back, offset or fail to pay any such amounts for default by Landlord or for any other reason whatsoever, except as provided in Section 3.1.

 

ARTICLE IV

 

4.1                               Impositions.  (a)  Subject to Article XII relating to permitted contests, Tenant shall pay, or cause to be paid, all Impositions before any fine, penalty, interest or cost may be added for non-payment.  Tenant shall make such payments directly to the taxing authorities where feasible, and promptly furnish to Landlord copies of official receipts or other satisfactory proof evidencing such payments.  Tenant’s obligation to pay Impositions shall be absolutely fixed upon the date such Impositions become a lien upon the Leased Property or any part thereof subject to Article XII.  If any Imposition may, at the option of the taxpayer, lawfully be paid in installments, whether or not interest shall accrue on the unpaid balance of such Imposition, Tenant may pay the same, and any accrued interest on the unpaid balance of such Imposition, in installments as the same respectively become due and before any fine, penalty, premium, further interest or cost may be added thereto.

 

(b)                                 Landlord or GLP shall prepare and file all tax returns and reports as may be required by Legal Requirements with respect to Landlord’s net income, gross receipts, franchise taxes and taxes on its capital stock and any other returns required to be filed by or in the name of Landlord (the “Landlord Tax Returns”), and Tenant or Tenant’s Parent shall prepare and file all other tax returns and reports as may be required by Legal Requirements with respect to or relating to the Leased Property (including all Capital Improvements), and Tenant’s Property.

 

(c)                                  Any refund due from any taxing authority in respect of any Imposition paid by or on behalf of Tenant shall be paid over to or retained by Tenant.

 

(d)                                 Landlord and Tenant shall, upon request of the other, provide such data as is maintained by the party to whom the request is made with respect to the Leased Property as may be necessary to prepare any required returns and reports.  If any property covered by this Master Lease is classified as personal property for tax purposes, Tenant shall file all personal property tax returns in such jurisdictions where it must legally so file.  Landlord, to the extent it possesses the same, and Tenant, to the extent it possesses the same, shall provide the other party, upon request, with cost and depreciation records necessary for filing returns for any property so classified as personal property.  Where Landlord is legally required to file personal property tax returns, Tenant shall be provided with copies of assessment notices indicating a value in excess of the reported value in sufficient time for Tenant to file a protest.

 

(e)                                  Billings for reimbursement by Tenant to Landlord of personal property or real property taxes and any taxes due under the Landlord Tax Returns, if and to the extent Tenant

 

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is responsible for such taxes under the terms of this Section 4.1, shall be accompanied by copies of a bill therefor and payments thereof which identify the personal property or real property or other tax obligations of Landlord with respect to which such payments are made.

 

(f)                                   Impositions imposed or assessed in respect of the tax-fiscal period during which the Term terminates shall be adjusted and prorated between Landlord and Tenant, whether or not such Imposition is imposed or assessed before or after such termination, and Tenant’s obligation to pay its prorated share thereof in respect of a tax-fiscal period during the Term shall survive such termination.  Landlord will not voluntarily enter into agreements that will result in additional Impositions without Tenant’s consent, which shall not be unreasonably withheld (it being understood that it shall not be reasonable to withhold consent to customary additional Impositions that other property owners of properties similar to the Leased Property customarily consent to in the ordinary course of business); provided Tenant is given reasonable opportunity to participate in the process leading to such agreement.

 

4.2                               Utilities.  Tenant shall pay or cause to be paid all charges for electricity, power, gas, oil, water and other utilities used in the Leased Property (including all Capital Improvements).  Tenant shall also pay or reimburse Landlord for all costs and expenses of any kind whatsoever which at any time with respect to the Term hereof with respect to any Facility may be imposed against Landlord by reason of any of the covenants, conditions and/or restrictions affecting the Leased Property or any portion thereof, or with respect to easements, licenses or other rights over, across or with respect to any adjacent or other property which benefits the Leased Property or any Capital Improvement, including any and all costs and expenses associated with any utility, drainage and parking easements.  Landlord will not enter into agreements that will encumber the Leased Property without Tenant’s consent, which shall not be unreasonably withheld (it being understood that it shall not be reasonable to withhold consent to encumbrances that do not adversely affect the use or future development of the Facility as a Gaming Facility or increase Additional Charges payable under this Master Lease); provided Tenant is given reasonable opportunity to participate in the process leading to such agreement.  Tenant will not enter into agreements that will encumber the Leased Property after the expiration of the Term without Landlord’s consent, which shall not be unreasonably withheld (it being understood that it shall not be reasonable to withhold consent to encumbrances that do not adversely affect the value of the Leased Property or the Facility); provided Landlord is given reasonable opportunity to participate in the process leading to such agreement.

 

4.3                               Impound Account.  At Landlord’s option following the occurrence and during the continuation of an Event of Default or a default by Tenant of Section 23.3(b) hereof (to be exercised by thirty (30) days’ written notice to Tenant); and provided Tenant is not already being required to impound such payments in accordance with the requirements of Section 31.3(b) below, Tenant shall be required to deposit, at the time of any payment of Base Rent, an amount equal to one-twelfth of the sum of (i) Tenant’s estimated annual real and personal property taxes required pursuant to Section 4.1 hereof (as reasonably determined by Landlord), and (ii) Tenant’s estimated annual maintenance expenses and insurance premium costs pursuant to Articles IX and XIII hereof (as reasonably determined by Landlord).  Such amounts shall be applied to the payment of the obligations in respect of which said amounts were deposited in such order of priority as Landlord shall reasonably determine, on or before the respective dates on which the same or any of them would become delinquent.  The reasonable cost of

 

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administering such impound account shall be paid by Tenant.  Nothing in this Section 4.3 shall be deemed to affect any right or remedy of Landlord hereunder.

 

ARTICLE V

 

5.1                               No Termination, Abatement, etc.  Except as otherwise specifically provided in this Master Lease, Tenant shall remain bound by this Master Lease in accordance with its terms and shall not seek or be entitled to any abatement, deduction, deferment or reduction of Rent, or set-off against the Rent.  Except as may be otherwise specifically provided in this Master Lease, the respective obligations of Landlord and Tenant shall not be affected by reason of (i) any damage to or destruction of the Leased Property or any portion thereof from whatever cause or any Condemnation of the Leased Property, any Capital Improvement or any portion thereof; (ii) other than as a result of Landlord’s willful misconduct or gross negligence, the lawful or unlawful prohibition of, or restriction upon, Tenant’s use of the Leased Property, any Capital Improvement or any portion thereof, the interference with such use by any Person or by reason of eviction by paramount title; (iii) any claim that Tenant has or might have against Landlord by reason of any default or breach of any warranty by Landlord hereunder or under any other agreement between Landlord and Tenant or to which Landlord and Tenant are parties; (iv) any bankruptcy, insolvency, reorganization, consolidation, readjustment, liquidation, dissolution, winding up or other proceedings affecting Landlord or any assignee or transferee of Landlord; or (v) for any other cause, whether similar or dissimilar to any of the foregoing, other than a discharge of Tenant from any such obligations as a matter of law.  Tenant hereby specifically waives all rights arising from any occurrence whatsoever which may now or hereafter be conferred upon it by law (a) to modify, surrender or terminate this Master Lease or quit or surrender the Leased Property or any portion thereof, or (b) which may entitle Tenant to any abatement, reduction, suspension or deferment of the Rent or other sums payable by Tenant hereunder except in each case as may be otherwise specifically provided in this Master Lease.  Notwithstanding the foregoing, nothing in this Article V shall preclude Tenant from bringing a separate action against Landlord for any matter described in the foregoing clauses (ii), (iii) or (v) and Tenant is not waiving other rights and remedies not expressly waived herein.  The obligations of Landlord and Tenant hereunder shall be separate and independent covenants and agreements and the Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events unless the obligations to pay the same shall be terminated pursuant to the express provisions of this Master Lease or by termination of this Master Lease as to all or any portion of the Leased Property other than by reason of an Event of Default.  Tenant’s agreement that, except as may be otherwise specifically provided in this Master Lease, any eviction by paramount title as described in item (ii) above shall not affect Tenant’s obligations under this Master Lease, shall not in any way discharge or diminish any obligation of any insurer under any policy of title or other insurance and, to the extent the recovery thereof is not necessary to compensate Landlord for any damages incurred by any such eviction, Tenant shall be entitled to a credit for any sums recovered by Landlord under any such policy of title or other insurance up to the maximum amount paid by Tenant to Landlord under this Section 5.1, and Landlord, upon request by Tenant, shall assign Landlord’s rights under such policies to Tenant; provided that such assignment does not adversely affect Landlord’s rights under any such policy and provided further, that Tenant shall indemnify, defend, protect and save Landlord harmless from and against any liability, cost or expense of any kind that may be imposed upon Landlord in

 

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connection with any such assignment except to the extent such liability, cost or expense arises from the gross negligence or willful misconduct of Landlord.

 

ARTICLE VI

 

6.1                               Ownership of the Leased Property.  (a) Landlord and Tenant acknowledge and agree that they have executed and delivered this Master Lease with the understanding that (i) the Leased Property is the property of Landlord, (ii) Tenant has only the right to the possession and use of the Leased Property upon the terms and conditions of this Master Lease, (iii) this Master Lease is a “true lease,” is not a financing lease, capital lease, mortgage, equitable mortgage, deed of trust, trust agreement, security agreement or other financing or trust arrangement, and the economic realities of this Master Lease are those of a true lease, (iv) the business relationship created by this Master Lease and any related documents is and at all times shall remain that of landlord and tenant, (v) this Master Lease has been entered into by each party in reliance upon the mutual covenants, conditions and agreements contained herein, and (vi) none of the agreements contained herein is intended, nor shall the same be deemed or construed, to create a partnership between Landlord and Tenant, to make them joint venturers, to make Tenant an agent, legal representative, partner, subsidiary or employee of Landlord, or to make Landlord in any way responsible for the debts, obligations or losses of Tenant.

 

(b)                                 Each of the parties hereto covenants and agrees, subject to Section 6.1(c), not to (i) file any income tax return or other associated documents; (ii) file any other document with or submit any document to any governmental body or authority; (iii) enter into any written contractual arrangement with any Person; or (iv) release any financial statements of Tenant, in each case that takes a position other than that this Master Lease is a “true lease” with Landlord as owner of the Leased Property and Tenant as the tenant of the Leased Property, including (x) treating Landlord as the owner of such Leased Property eligible to claim depreciation deductions under Sections 167 or 168 of the Code with respect to such Leased Property, (y) Tenant reporting its Rent payments as rent expense under Section 162 of the Code, and (z) Landlord reporting the Rent payments as rental income under Section 61 of the Code.

 

(c)                                  If Tenant should reasonably conclude that GAAP or the SEC require treatment different from that set forth in Section 6.1(b) for applicable non-tax purposes, then (x) Tenant shall promptly give prior Notice to Landlord, accompanied by a written statement that references the applicable pronouncement that controls such treatment and contains a brief description and/or analysis that sets forth in reasonable detail the basis upon which Tenant reached such conclusion, and (y) notwithstanding Section 6.1(b), Tenant may comply with such requirements.

 

(d)                                 The Rent is the fair market rent for the use of the Leased Property and was agreed to by Landlord and Tenant on that basis, and the execution and delivery of, and the performance by Tenant of its obligations under, this Master Lease does not constitute a transfer of all or any part of the Leased Property.

 

(e)                                  Tenant waives any claim or defense based upon the characterization of this Master Lease as anything other than a true lease and as a master lease of all of the Leased

 

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Property.  Tenant stipulates and agrees (1) not to challenge the validity, enforceability or characterization of the lease of the Leased Property as a true lease and/or as a single, unseverable instrument pertaining to the lease of all, but not less than all, of the Leased Property, and (2) not to assert or take or omit to take any action inconsistent with the agreements and understandings set forth in Section 3.4 or this Section 6.1.

 

6.2                               Tenant’s Property.  Tenant shall, during the entire Term, own (or lease) and maintain (or cause its Subsidiaries to own (or lease) and maintain) on the Leased Premises adequate and sufficient Tenant’s Property, and shall maintain (or cause its Subsidiaries to maintain) all of such Tenant’s Property in good order, condition and repair, in all cases as shall be necessary and appropriate in order to operate the Facilities for the Primary Intended Use in compliance with all applicable licensure and certification requirements and in compliance with all applicable Legal Requirements,  Insurance Requirements and Gaming Regulations.  If any of Tenant’s Property requires replacement in order to comply with the foregoing, Tenant shall replace (or cause a Subsidiary to replace) it with similar property of the same or better quality at Tenant’s (or such Subsidiary’s) sole cost and expense.  Subject to the foregoing, Tenant and its Subsidiaries may sell, transfer, convey or otherwise dispose of Tenant’s Property (other than Gaming Licenses and subject to Section 6.3) in their discretion in the ordinary course of its business and Landlord shall have no rights to such Tenant’s Property.  Tenant shall, upon Landlord’s request, from time to time but not more frequently than one time per Lease Year, provide Landlord with a list of the material Tenant’s Property located at each of the Facilities.  In the case of any such Tenant’s Property that is leased (rather than owned) by Tenant (or its Subsidiaries), Tenant shall use commercially reasonable efforts to ensure that the lease agreements pursuant to which Tenant (or its Subsidiaries) leases such Tenant’s Property are assignable to third parties in connection with any transfer by Tenant (or its Subsidiaries) to a replacement lessee or operator at the end of the Term.  Tenant shall remove all of Tenant’s Property from the Leased Premises at the end of the Term, except to the extent Tenant has transferred ownership of such Tenant’s Property to a Successor Tenant or Landlord.  Any Tenant’s Property left on the Leased Property at the end of the Term whose ownership was not transferred to a Successor Tenant shall be deemed abandoned by Tenant and shall become the property of Landlord.

 

6.3                               Guarantors; Tenant’s Property.  Each of Tenant’s Parent and each of Tenant’s Subsidiaries set forth on Schedule 6.3 shall be a Guarantor under this Agreement and shall execute and deliver to the Landlord the Guaranty attached hereto as Exhibit E.  In addition, if any material Gaming License or other license or other material asset necessary to operate any portion of the Leased Property is owned by a Subsidiary, Tenant shall within two (2) Business Days after the date such Subsidiary acquires such Gaming License, other license or other material asset, (a) notify the Landlord thereof and (b) cause such Subsidiary (if it is not already a Guarantor) to become a Guarantor by executing the Guaranty in form and substance reasonably satisfactory to Landlord; provided that this sentence shall not apply to Belle of Sioux City, L.P. and Iowa Gaming Company, LLC, and notwithstanding anything to the contrary contained herein, Belle of Sioux City, L.P. and Iowa Gaming Company, LLC shall not be required to become party to the Guaranty.

 

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ARTICLE VII

 

7.1                               Condition of the Leased Property.  Tenant acknowledges receipt and delivery of possession of the Leased Property and confirms that Tenant has examined and otherwise has knowledge of the condition of the Leased Property prior to the execution and delivery of this Master Lease and has found the same (except as included in the disclosures on Schedule 1A) to be in good order and repair and, to the best of Tenant’s knowledge, free from Hazardous Substances not in compliance with Legal Requirements and satisfactory for its purposes hereunder.  Regardless, however, of any examination or inspection made by Tenant and whether or not any patent or latent defect or condition was revealed or discovered thereby, Tenant is leasing the Leased Property “as is” in its present condition.  Tenant waives any claim or action against Landlord in respect of the condition of the Leased Property including any defects or adverse conditions not discovered or otherwise known by Tenant as of the Commencement Date.  LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE NATURE OR QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, OR THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, IT BEING AGREED THAT ALL SUCH RISKS, LATENT OR PATENT, ARE TO BE BORNE SOLELY BY TENANT INCLUDING ALL RESPONSIBILITY AND LIABILITY FOR ANY ENVIRONMENTAL REMEDIATION AND COMPLIANCE WITH ALL ENVIRONMENTAL LAWS.

 

7.2                               Use of the Leased Property.  (a)  Tenant shall use or cause to be used the Leased Property and the improvements thereon of each Facility for its Primary Intended Use.  Tenant shall not use the Leased Property or any portion thereof or any Capital Improvement thereto for any other use without the prior written consent of Landlord, which consent Landlord may withhold in its sole discretion.  Landlord acknowledges that operation of each Facility for its Primary Intended Use generally requires a Gaming License under applicable Gaming Regulations and that without such a license neither Landlord nor GLP may operate, control or participate in the conduct of the gaming and/or racing operations at the Facilities.

 

(b)                                 Tenant shall not commit or suffer to be committed any waste on the Leased Property (including any Capital Improvement thereto) or cause or permit any nuisance thereon or to, except as required by law, take or suffer any action or condition that will diminish the ability of the Leased Premises to be used as a Gaming Facility after the expiration or earlier termination of the Term.

 

(c)                                  Tenant shall neither suffer nor permit the Leased Property or any portion thereof to be used in such a manner as (i) might reasonably tend to impair Landlord’s title thereto or to any portion thereof or (ii) may make possible a claim of adverse use or possession, or an implied dedication of the Leased Property or any portion thereof.

 

(d)                                 Except in instances of casualty or condemnation, Tenant shall continuously operate each of the Facilities for the Primary Intended Use.  Tenant in its discretion shall be permitted to cease operations at a Facility or Facilities if such cessation would not reasonably be expected to have a material adverse effect on Tenant, the Facilities, or on the

 

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Leased Property, taken as a whole, provided that the following conditions are satisfied:  (i) no Event of Default has occurred and is continuing immediately prior to or immediately after the date that operations are ceased or as a result of such cessation; and (ii) the Percentage Rent due from each and every such Facility whose operations have ceased will thereafter be subject to a floor which will be calculated based on the Percentage Rent that would have been paid for such Facility if Percentage Rent were adjusted based on Net Revenues for the Fiscal Year immediately preceding the time that Tenant ceased operations at the Facility.

 

7.3                               Development Facilities.

 

Landlord and Tenant have agreed to the terms contemplated by Exhibit C with respect to the Development Facilities.  Unless otherwise contemplated by Exhibit C, the Land, the Leased Improvements and the Fixtures related to such Development Facility (and all easements, rights and appurtenances relating thereto) shall be added to the Leased Property demised under this Master Lease and the parties shall amend Exhibit A and Exhibit B to reflect such addition, in each case effective as of the date gaming operations commence at such Development Facility (a “Development Facility Commencement Date”), and, except as otherwise contemplated by Exhibit C, all the terms of this Master Lease shall thereafter apply to such Facility.

 

7.4                               Competing Business.

 

(a)                                 Tenant’s Obligations for Greenfields.  Tenant agrees that during the Term, other than with respect to the Development Facilities, neither Tenant nor any of its Affiliates shall build or otherwise participate in the development of a new Gaming Facility (including a facility that has been shut down for a period of more than twelve (12) months) (a “Greenfield Project”) within a Restricted Area of a Facility (the Facility in whose Restricted Area there is activity under this Section 7.4, an “Affected Facility”), unless Tenant shall first offer Landlord the opportunity to include the Greenfield Project as a Leased Property under this Master Lease on terms to be negotiated by the parties (which terms with respect to Landlord funding such development shall include the terms set forth in Section 10.3 hereof regarding Capital Improvements).  Within thirty (30) days of Landlord’s receipt of notice from Tenant providing the opportunity to fund and include as Leased Property under this Master Lease a Greenfield Project on terms to be negotiated by the parties, Landlord shall notify Tenant as to whether it intends to participate in such Greenfield Project and, if Landlord indicates such intent, the parties shall negotiate in good faith the terms and conditions upon which this would be effected, including the terms of any amendment to this Master Lease and any development or funding agreement, which Landlord might require.  Should Landlord notify Tenant that it does not intend to pursue such Greenfield Project (or should Landlord decline to notify Tenant of its affirmative response within such thirty (30) day period), or if the parties despite good faith efforts on both sides fail to reach agreement on the terms under which such opportunity would be jointly pursued under this Master Lease and such new Greenfield Project would become a portion of the Leased Property hereunder, in any event, within forty-five (45) days after Landlord’s notice to Tenant of Landlord’s intent to participate in such Greenfield Project, then the Percentage Rent due from each and every Affected Facility will thereafter (a) be subject to a floor which will be calculated based on the Percentage Rent that would have been paid for such Affected Facility if Percentage Rent were adjusted based on Net Revenues for the calendar year immediately prior to

 

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the year in which the Greenfield Project is first opened to the public (the “Greenfield Floor”), and (b) be subject to normal periodic adjustments; provided that annual Percentage Rent may not be reduced below the Greenfield Floor.  Notwithstanding anything to the contrary in this Section 7.4(a), Tenant and its Affiliates shall not be restricted under this Section 7.4(a) from (i) expanding any Facility under this Master Lease (subject to Tenant’s compliance with the terms of Section 10.3 and the other provisions of Article X), and (ii) subject to compliance with the provisions of Section 7.4(e) hereof, acquiring or operating any competing Gaming Facility that is in operation at the time of its acquisition or operation by Tenant or its Affiliates.

 

(b)                                 Landlord’s Obligations for Greenfields.  Landlord agrees that during the Term, neither Landlord nor any of its Affiliates shall, without the prior written consent of the Tenant (which consent may be withheld in Tenant’s sole discretion), build or otherwise participate in the development of a Greenfield Project within the Restricted Area.  Notwithstanding anything to the contrary in this Section 7.4(b), (i) Landlord and its Affiliates shall not be restricted under this Section 7(b) from acquiring, financing or providing refinancing for any facility that is in operation or has been in operation at any time during the twelve month period prior to the time in question (or with respect to furthering the development of the Development Facilities), and (ii) subject to the provisions of Section 7.4(d) hereof, Landlord and its Affiliates shall not be restricted under this Section 7.4(b) from expanding any Competing Facility existing at the time in question.

 

(c)                                  Tenant’s Rights Regarding Facility Expansions.  Tenant shall be permitted to construct Capital Improvements in accordance with the terms of Article X hereof.

 

(d)                                 Landlord’s Rights Regarding Facility Expansions.  Landlord shall be permitted to finance expansions of any Competing Facility within the Restricted Area that is already existing at any time in question, provided that the Percentage Rent attributable to any Affected Facilities (other than a CT Facility) shall thereafter be calculated monthly (and not based on the trailing five-year period as would have otherwise been the case for Facilities other than the CT Facilities).

 

(e)                                  Tenant’s Rights to Acquire or Operate Existing Facilities.  In the event Tenant or its Affiliate acquires or operates any existing competing Gaming Facility within the Restricted Area (a “Competing Facility”), the Percentage Rent due from any Affected Facility will thereafter (a) be subject to a floor which will be based on the Percentage Rent that would have been paid for such Affected Facility if Percentage Rent were adjusted based on Net Revenues for the calendar year immediately prior to the year in which the competing facility is acquired or first operated by Tenant or its Affiliate (the “Competing Facility Floor”), and (b) be subject to normal periodic adjustments; provided that annual Percentage Rent may not be reduced below the Competing Facility Floor.

 

(f)                                   Landlord’s Rights to Acquire or Finance Existing Facilities.  Landlord shall not be restricted under this Section 7.4 from acquiring or providing any kind of financing or refinancing to any Competing Facility within the Restricted Area that is already existing at any time in question.

 

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(g)                                  No Restrictions Outside of Restricted Area.  Each of Landlord and Tenant shall not be restricted from participating in opportunities, including, without limitation, developing, building, purchasing or operating Gaming Facilities, outside the Restricted Area at any time.

 

ARTICLE VIII

 

8.1                               Representations and Warranties.  Each party represents and warrants to the other that:  (i) this Master Lease and all other documents executed or to be executed by it in connection herewith have been duly authorized and shall be binding upon it; (ii) it is duly organized, validly existing and in good standing under the laws of the state of its formation and is duly authorized and qualified to perform this Master Lease within the State(s) where any portion of the Leased Property is located; and (iii) neither this Master Lease nor any other document executed or to be executed in connection herewith violates the terms of any other agreement of such party.

 

8.2                               Compliance with Legal and Insurance Requirements, etc.  Subject to Article XII regarding permitted contests, Tenant, at its expense, shall promptly (a) comply in all material respects with all Legal Requirements and Insurance Requirements regarding the use, operation, maintenance, repair and restoration of the Leased Property (including all Capital Improvements thereto) and Tenant’s Property whether or not compliance therewith may require structural changes in any of the Leased Improvements or interfere with the use and enjoyment of the Leased Property, and (b) procure, maintain and comply in all material respects with all Gaming Regulations and Gaming Licenses, and other authorizations required for the use of the Leased Property (including all Capital Improvements) and Tenant’s Property for the applicable Primary Intended Use and any other use of the Leased Property (including Capital Improvements then being made) and Tenant’s Property, and for the proper erection, installation, operation and maintenance of the Leased Property and Tenant’s Property.  In an emergency or in the event of a breach by Tenant of its obligations under this Section 8.2 which is not cured within any applicable cure period, Landlord may, but shall not be obligated to, enter upon the Leased Property and take such reasonable actions and incur such reasonable costs and expenses to effect such compliance as it deems advisable to protect its interest in the Leased Property, and Tenant shall reimburse Landlord for all such reasonable costs and expenses incurred by Landlord in connection with such actions.  Tenant covenants and agrees that the Leased Property and Tenant’s Property shall not be used for any unlawful purpose.  In the event that a regulatory agency, commission, board or other governmental body notifies Tenant that it is in jeopardy of losing a Gaming License material to the continued operation of a Facility (other than the Iowa Casino), and, assuming no Event of Default has occurred and is continuing, Tenant shall be given reasonable time to address the regulatory issue, after which period (but in all events prior to an actual revocation of such Gaming License) Tenant shall be required to sell the Gaming License and Tenant’s Property related to such Facility to a successor operator of such Facility determined by Landlord choosing one and Tenant choosing three (for a total of four) potential operators and Landlord indicating the reasonable, market terms under which it would agree to lease such Facility to such potential operators, which in Landlord’s reasonable discretion may contain reasonable variations in terms to the extent required to account for credit quality differences among the potential operators (e.g., Landlord may require different letter of credit terms and amounts, but may not set different rent terms).  Tenant will then be entitled to auction

 

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off Tenant’s Property relating to such Facility and Landlord will thereafter be entitled to lease the Facility to the potential successor that is the successful bidder.  In the event of a new lease from Landlord to the successor, the Leased Property relating to such Facility shall be severed from the Leased Property hereunder and thereafter Rent shall be reduced based on the formula set forth in Section 14.6 hereof.  Landlord shall comply with any Gaming Regulations or other regulatory requirements required of it as owner of the Facilities taking into account its Primary Intended Use (except to the extent Tenant fulfills or is required to fulfill any such requirements hereunder).  In the event that a regulatory agency, commission, board or other governmental body notifies Landlord that it is in jeopardy of failing to comply with any such Gaming Regulation or other regulatory requirements material to the continued operation of a Facility for its Primary Intended Use, Landlord shall be given reasonable time to address the regulatory issue, after which period (but in all events prior to an actual cessation of the use of the Facility for its Primary Intended Use as a result of the failure by Landlord to comply with such regulatory requirements) Landlord shall be required to sell the Leased Property relating to such Facility to the highest bidder (and Tenant shall be entitled to be one of the bidders) who would agree to lease such Facility to Tenant on terms substantially the same as the terms hereof (including rent calculated in the manner provided pursuant to Section 14.6 hereof, an identical amount of which, after the effective time of such sale, shall be credited against Rent hereunder); provided that if Tenant is the bidder it shall not be required to agree to lease the Facility, but if it is the winning bidder shall be entitled to a credit against the Rent hereunder calculated in the manner provided pursuant to Section 14.6.  In the event during the period in which Landlord conducts such auction such regulatory agency notifies Landlord and Tenant that Tenant may not pay any portion of the Rent to Landlord, Tenant shall be entitled to fund such amount into an escrow account, to be released to Landlord or the party legally entitled thereto at or upon resolution of such regulatory issues and otherwise on terms reasonably satisfactory to the parties.  Notwithstanding anything in the foregoing to the contrary, no transfer of Tenant’s Property used in the conduct of gaming (including the purported or attempted transfer of a Gaming License) or the operation of a Gaming Facility for its Primary Intended Use shall be effected or permitted without receipt of all necessary approvals and/or Gaming Licenses in accordance with applicable Gaming Regulations.

 

8.5                               Zoning and Uses.  Without the prior written consent of Landlord, which shall not be unreasonably withheld unless the action for which consent is sought could adversely affect the Primary Intended Use of a Facility (in which event Landlord may withhold its consent in its sole and absolute discretion), Tenant shall not (i) initiate or support any limiting change in the permitted uses of the Leased Property (or to the extent applicable, limiting zoning reclassification of the Leased Property); (ii) seek any variance under existing land use restrictions, laws, rules or regulations (or, to the extent applicable, zoning ordinances) applicable to the Leased Property or use or permit the use of the Leased Property; (iii) impose or permit or suffer the imposition of any restrictive covenants, easements or encumbrances (other than Permitted Leasehold Mortgages) upon the Leased Property in any manner that adversely affects in any material respect the value or utility of the Leased Property; (iv) execute or file any subdivision plat affecting the Leased Property, or institute, or permit the institution of, proceedings to alter any tax lot comprising the Leased Property; or (v) permit or suffer the Leased Property to be used by the public or any Person in such manner as might make possible a claim of adverse usage or possession or of any implied dedication or easement (provided that the proscription in this clause (v) is not intended to and shall not restrict Tenant in any way from

 

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complying with any obligation it may have under applicable Legal Requirements, including, without limitation, Gaming Regulations, to afford to the public access to the Leased Property).

 

8.6                               Compliance with Ground Lease.

 

(a)                                 This Master Lease, to the extent affecting and solely with respect to the Ground Leased Property, is and shall be subject and subordinate to all of the terms and conditions of the Ground Lease.  Tenant hereby acknowledges that Tenant has reviewed and agreed to all of the terms and conditions of the Ground Lease.  Tenant hereby agrees that Tenant shall not do, or fail to do, anything that would cause any violation of the Ground Lease.  Without limiting the foregoing, (i) to the extent Landlord is required to obtain the written consent of the lessor under the Ground Lease (the “Ground Lessor”) to alterations of or the subleasing of all or any portion of the Ground Leased Property pursuant to the Ground Lease, Tenant shall likewise obtain Ground Lessor’s written consent to alterations of or the subleasing of all or any portion of the Ground Leased Property, and (ii) Tenant shall carry and maintain general liability, automobile liability, property and casualty, worker’s compensation and employer’s liability insurance in amounts and with policy provisions, coverages and certificates as required of Landlord as tenant under the Ground Lease.

 

(b)                                 In the event of cancellation or termination of the Ground Lease for any reason whatsoever whether voluntary or involuntary (by operation of law or otherwise) prior to the expiration date of this Master Lease, including extensions and renewals granted thereunder, then, at Ground Lessor’s option, Tenant shall make full and complete attornment to Ground Lessor with respect to the obligations of Landlord to Ground Lessor in connection with the Ground Leased Property for the balance of the term of the Lease (notwithstanding that this Master Lease shall have expired with respect to the Ground Leased Property as a result of the cancellation or termination of the Ground Lease).  Tenant’s attornment shall be evidenced by a written agreement which shall provide that the Tenant is in direct privity of contract with Ground Lessor (i.e., that all obligations previously owed to Landlord under this Master Lease with respect to the Ground Lease or the Ground Leased Property shall be obligations owed to Ground Lessor for the balance of the term of this Master Lease, notwithstanding that this Master Lease shall have expired with respect to the Ground Leased Property as a result of the cancellation or termination of the Ground Lease) and which shall otherwise be in form and substance reasonably satisfactory to Ground Lessor.  Tenant shall execute and deliver such written attornment within thirty (30) days after request by Ground Lessor.  Unless and until such time as an attornment agreement is executed by Tenant pursuant to this Section 8.6(b), nothing contained in this Master Lease shall create, or be construed as creating, any privity of contract or privity of estate between Ground Lessor and Tenant.

 

(c)                                  Nothing contained in this Master Lease amends, or shall be construed to amend, any provision of the Ground Lease.

 

ARTICLE IX

 

9.1                               Maintenance and Repair.  (a)  Tenant, at its expense and without the prior consent of Landlord, shall maintain the Leased Property and Tenant’s Property, and every portion thereof, and all private roadways, sidewalks and curbs appurtenant to the Leased

 

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Property, and which are under Tenant’s control in good order and repair whether or not the need for such repairs occurs as a result of Tenant’s use, any prior use, the elements or the age of the Leased Property and Tenant’s Property, and, with reasonable promptness, make all reasonably necessary and appropriate repairs thereto of every kind and nature, including those necessary to ensure continuing compliance with all Legal Requirements, whether interior or exterior, structural or non-structural, ordinary or extraordinary, foreseen or unforeseen or arising by reason of a condition existing prior to the Commencement Date.  All repairs shall be at least equivalent in quality to the original work.  Tenant will not take or omit to take any action the taking or omission of which would reasonably be expected to materially impair the value or the usefulness of the Leased Property or any part thereof or any Capital Improvement thereto for its Primary Intended Use.

 

(b)                                 Landlord shall not under any circumstances be required to (i) build or rebuild any improvements on the Leased Property; (ii) make any repairs, replacements, alterations, restorations or renewals of any nature to the Leased Property, whether ordinary or extraordinary, structural or non-structural, foreseen or unforeseen, or to make any expenditure whatsoever with respect thereto; or (iii) maintain the Leased Property in any way.  Tenant hereby waives, to the extent permitted by law, the right to make repairs at the expense of Landlord pursuant to any law in effect at the time of the execution of this Master Lease or hereafter enacted.

 

(c)                                  Nothing contained in this Master Lease and no action or inaction by Landlord shall be construed as (i) constituting the consent or request of Landlord, expressed or implied, to any contractor, subcontractor, laborer, materialman or vendor to or for the performance of any labor or services or the furnishing of any materials or other property for the construction, alteration, addition, repair or demolition of or to the Leased Property or any part thereof or any Capital Improvement thereto; or (ii) giving Tenant any right, power or permission to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Landlord in respect thereof or to make any agreement that may create, or in any way be the basis for, any right, title, interest, lien, claim or other encumbrance upon the estate of Landlord in the Leased Property, or any portion thereof or upon the estate of Landlord in any Capital Improvement thereto.

 

(d)                                 Tenant shall, upon the expiration or earlier termination of the Term, vacate and surrender the Leased Property (including all Capital Improvements, subject to the provisions of Article X), in each case with respect to such Facility, to Landlord in the condition in which such Leased Property was originally received from Landlord and Capital Improvements were originally introduced to such Facility, except as repaired, rebuilt, restored, altered or added to as permitted or required by the provisions of this Master Lease and except for ordinary wear and tear.

 

(e)                                  Without limiting Tenant’s obligations to maintain the Leased Property and Tenant’s Property under this Master Lease, within thirty (30) days after the end of each calendar year (commencing with the calendar year ending December 31, 2014), Tenant shall provide Landlord with evidence satisfactory to Landlord in the reasonable exercise of Landlord’s discretion that Tenant has in such calendar year spent, with respect to the Leased Property and

 

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Tenant’s Property, an aggregate amount equal to at least 1% of its actual Net Revenue from the Facilities for such calendar year on installation or restoration and repair or other improvement of items, which installations, restorations and repairs and other improvements are capitalized in accordance with GAAP with an expected life of not less than three (3) years.  If Tenant fails to make at least the above amount of expenditures and fails within sixty (60) days after receipt of a written demand from Landlord to either (i) cure such deficiency or (ii) obtain Landlord’s written approval, in its reasonable discretion, of a repair and maintenance program satisfactory to cure such deficiency, then the same shall be deemed an Event of Default hereunder.

 

9.2                               Encroachments, Restrictions, Mineral Leases, etc.  If any of the Leased Improvements shall, at any time, encroach upon any property, street or right-of-way, or shall violate any restrictive covenant or other agreement affecting the Leased Property, or any part thereof or any Capital Improvement thereto, or shall impair the rights of others under any easement or right-of-way to which the Leased Property is subject, or the use of the Leased Property or any Capital Improvement thereto is impaired, limited or interfered with by reason of the exercise of the right of surface entry or any other provision of a lease or reservation of any oil, gas, water or other minerals, then promptly upon the request of Landlord or any Person affected by any such encroachment, violation or impairment, each of Tenant and Landlord, subject to their right to contest the existence of any such encroachment, violation or impairment, shall protect, indemnify, save harmless and defend the other party hereto from and against fifty percent (50%) of all losses, liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including reasonable attorneys’, consultants’ and experts’ fees and expenses) based on or arising by reason of any such encroachment, violation or impairment.  In the event of an adverse final determination with respect to any such encroachment, violation or impairment, either (a) each of Tenant and Landlord shall be entitled to obtain valid and effective waivers or settlements of all claims, liabilities and damages resulting from each such encroachment, violation or impairment, whether the same shall affect Landlord or Tenant or (b) Tenant at the shared cost and expense of Tenant and Landlord on a 50-50 basis shall make such changes in the Leased Improvements, and take such other actions, as Tenant in the good faith exercise of its judgment deems reasonably practicable, to remove such encroachment or to end such violation or impairment, including, if necessary, the alteration of any of the Leased Improvements, and in any event take all such actions as may be necessary in order to be able to continue the operation of the Leased Improvements for the Primary Intended Use substantially in the manner and to the extent the Leased Improvements were operated prior to the assertion of such encroachment, violation or impairment.  Tenant’s (and Landlord’s) obligations under this Section 9.2 shall be in addition to and shall in no way discharge or diminish any obligation of any insurer under any policy of title or other insurance and, to the extent the recovery thereof is not necessary to compensate Landlord and Tenant for any damages incurred by any such encroachment, violation or impairment, Tenant shall be entitled to fifty percent (50%) of any sums recovered by Landlord under any such policy of title or other insurance up to the maximum amount paid by Tenant under this Section 9.2 and Landlord, upon request by Tenant, shall assign Landlord’s rights under such policies to Tenant; provided such assignment does not adversely affect Landlord’s rights under any such policy.  Landlord agrees to use reasonable efforts to seek recovery under any policy of title or other insurance under which Landlord is an insured party for all losses, liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including reasonable attorneys’, consultants’ and experts’ fees and expenses) based on or arising by reason of any such encroachment, violation or impairment as set forth in this Section 9.2;

 

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provided, however, that in no event shall Landlord be obligated to institute any litigation, arbitration or other legal proceedings in connection therewith unless Landlord is reasonably satisfied that Tenant has the financial resources needed to fund such litigation and Tenant and Landlord have agreed upon the terms and conditions on which such funding will be made available by Tenant, including, but not limited to, the mutual approval of a litigation budget.

 

ARTICLE X

 

10.1                        Construction of Capital Improvements to the Leased Property.  Tenant shall, with respect to any Facility, have the right to make a Capital Improvement, including, without limitation, any Capital Improvement required by Section 8.2 or 9.1(a), without the consent of Landlord if the Capital Improvement (i) is of equal or better quality than the existing Leased Improvements it is improving, altering or modifying, (ii) does not consist of adding new structures or enlarging existing structures, and (iii) does not have an adverse effect on the structure of any existing Leased Improvements.  Tenant shall provide Landlord copies of the plans and specifications in respect of all Capital Improvements, which plans and specifications shall be prepared in a high-grade professional manner and shall adequately demonstrate compliance with clauses (i)-(iii) of the preceding sentence with respect to projects that do not require Landlord’s written consent and shall be in such form as Landlord may reasonably require for any other projects.  All other Capital Improvements shall be subject to Landlord’s review and approval, which approval shall not be unreasonably withheld.  For any Capital Improvement which does not require the approval of Landlord, Tenant shall, prior to commencing construction of such Capital Improvement, provide to Landlord a written description of such Capital Improvement and on an ongoing basis supply Landlord with related documentation and information as Landlord may reasonably request (including plans and specifications of any such Capital Improvements).  If Tenant desires to make a Capital Improvement for which Landlord’s approval is required, Tenant shall submit to Landlord in reasonable detail a general description of the proposal, the projected cost of construction and such plans and specifications, permits, licenses, contracts and other information concerning the proposal as Landlord may reasonably request.  Such description shall indicate the use or uses to which such Capital Improvement will be put and the impact, if any, on current and forecasted gross revenues and operating income attributable thereto.  It shall be reasonable for Landlord to condition its approval of any Capital Improvement upon any or all of the following terms and conditions:

 

(a)                                 Such construction shall be effected pursuant to detailed plans and specifications approved by Landlord, which approval shall not be unreasonably withheld;

 

(b)                                 Such construction shall be conducted under the supervision of a licensed architect or engineer selected by Tenant and approved by Landlord, which approval shall not be unreasonably withheld;

 

(c)                                  Landlord’s receipt, from the general contractor and, if reasonably requested by Landlord, a major subcontractor(s) of a performance and payment bond for the full value of such construction, which such bond shall name Landlord as an additional obligee and otherwise be in form and substance and issued by a Person reasonably satisfactory to Landlord;

 

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(d)                                 In the case of a Tenant Capital Improvement, such construction shall not be undertaken unless Tenant demonstrates to the reasonable satisfaction of Landlord the financial ability to complete the construction without adversely affecting its cash flow position or financial viability; and

 

(e)                                  No Capital Improvement will result in the Leased Property becoming a “limited use” property for purposes of United States federal income taxes.

 

10.2                        Construction Requirements for All Capital Improvements.  Whether or not Landlord’s review and approval is required, for all Capital Improvements:

 

(a)                                 Such construction shall not be commenced until Tenant shall have procured and paid for all municipal and other governmental permits and authorizations required to be obtained prior to such commencement, including those permits and authorizations required pursuant to any Gaming Regulations, and Landlord shall join in the application for such permits or authorizations whenever such action is necessary; provided, however, that (i) any such joinder shall be at no cost or expense to Landlord; and (ii) any plans required to be filed in connection with any such application which require the approval of Landlord as hereinabove provided shall have been so approved by Landlord;

 

(b)                                 Such construction shall not, and Tenant’s licensed architect or engineer shall certify to Landlord that such architect or engineer believes that such construction shall not, impair the structural strength of any component of the applicable Facility or overburden the electrical, water, plumbing, HVAC or other building systems of any such component in a manner that would violate applicable building codes or prudent industry practices;

 

(c)                                  Tenant’s licensed architect or engineer shall certify to Landlord that such architect or engineer believes that the detailed plans and specifications conform to, and comply with, in all material respects all applicable building, subdivision and zoning codes, laws, ordinances and regulations imposed by all governmental authorities having jurisdiction over the Leased Property of the applicable Facility;

 

(d)                                 During and following completion of such construction, the parking and other amenities which are located in the applicable Facility or on the Land of such Facility shall remain adequate for the operation of such Facility for its Primary Intended Use and in no event shall such parking be less than that which is required by law (including any variances with respect thereto); provided, however, with Landlord’s prior consent and at no additional expense to Landlord, (i) to the extent additional parking is not already a part of a Capital Improvement, Tenant may construct additional parking on the Land; or (ii) Tenant may acquire off-site parking to serve such Facility as long as such parking shall be reasonably proximate to, and dedicated to, or otherwise made available to serve, such Facility;

 

(e)                                  All work done in connection with such construction shall be done promptly and using materials and resulting in work that is at least as good product and condition as the remaining areas of the applicable Facility and in conformity with all Legal Requirements, including, without limitation, any applicable minority or women owned business requirements; and

 

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(f)                                   Promptly following the completion of such construction, Tenant shall deliver to Landlord “as built” drawings of such addition, certified as accurate by the licensed architect or engineer selected by Tenant to supervise such work, and copies of any new or revised certificates of occupancy.

 

10.3                        Landlord’s Right of First Offer to Fund.  Tenant shall request that Landlord fund or finance the construction and acquisition of any Capital Improvement that includes Long-Lived Assets (along with reasonably related fees and expenses, such as title fees, costs of permits, legal fees and other similar transaction related costs) if the cost of such Capital Improvements constituting Long-Lived Assets is expected to be in excess of $2 million (subject to the CPI Increase), and Tenant shall provide to Landlord any information about such Capital Improvements which Landlord may reasonably request (including any specifics regarding the terms upon which Tenant will be seeking financing for such Capital Improvements).  Landlord may, but shall be under no obligation to, provide the funds necessary to meet the request.  Within thirty (30) days of receipt of a request to fund a proposed Capital Improvement pursuant to this Section 10.3, Landlord shall notify Tenant as to whether it will fund all or a portion of such proposed Capital Improvement and, if so, the terms and conditions upon which it would do so.  If Landlord agrees to fund such proposed Capital Improvement, Tenant shall have ten (10) Business Days to accept or reject Landlord’s funding proposal.  If Landlord declines to fund a proposed Capital Improvement (or declines to provide Tenant written notice within such thirty (30)-day period of the terms of its proposal to fund such Capital Improvements), Tenant shall be permitted to secure outside financing or utilize then existing available financing for such Capital Improvement for a six-month period, after which six-month period (if Tenant has not secured outside financing or determined to utilize then existing available financing) Tenant shall again be required to first seek funding from Landlord.  If Landlord agrees to fund all or a portion of a proposed Capital Improvement and Tenant rejects the terms thereof, Tenant shall be permitted to either use then existing available financing or seek outside financing for such Capital Improvement for a six-month period, in each case on terms that are economically more advantageous to Tenant than offered under Landlord’s funding proposal, and if Tenant elects to utilize economically more advantageous financing it shall provide Landlord evidence of the terms of such financing; provided that, in determining if financing is economically more advantageous (i) consideration may be given to, among other items, (x) pricing, amortization, and length of term of such financing; (y) the cost, availability and terms of any financing sufficient to fund such Capital Improvement and other expenditures (exclusive of the related fees and expense described above) material in relation to the cost of such Capital Improvement (if any) which are intended to be funded in connection with the construction and acquisition of such Capital Improvement and which are related to the use and operation of such Capital Improvement and (z), and other customary considerations and, (ii) in the event that Tenant uses Cash to fund such Capital Improvement Costs, such use of Cash shall be deemed to have financing terms equivalent to those of the then outstanding Indebtedness of the Tenant having the highest rate of interest which is then permitted to be repaid, factoring in any related call or prepayment premium (to the extent any such Indebtedness of the Tenant is then outstanding); and provided, further, that in no event shall Tenant be obligated to obtain financing from Landlord to the extent such financing from Landlord would violate or cause a default or breach under any Material Indebtedness of Tenant’s Parent or Tenant.  If Tenant constructs a Capital Improvement with its then existing available financing or outside financing obtained in accordance with this Section 10.3, (i) except as may otherwise be expressly provided in this

 

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Master Lease to the contrary, (A) during the Term, such Capital Improvements shall be deemed part of the Leased Property and the Facilities solely for the purpose of calculating Net Revenues and Percentage Rent hereunder and shall for all other purposes be Tenant’s Property and (B) following expiration or termination of the Term, shall be either, at the option of Landlord, purchased by Landlord for fair market value or, if not purchased by Landlord, Tenant shall be entitled to either remove such Tenant Capital Improvements, provided that the Leased Property is restored in a manner reasonably satisfactory to Landlord, or receive fair value for such Tenant Capital Improvements in accordance with Article XXXVI.  If Landlord agrees to fund a proposed Capital Improvement and Tenant accepts the terms thereof, such Capital Improvements shall be deemed part of the Leased Property and the Facilities for all purposes and Tenant shall provide Landlord with the following prior to any advance of funds:

 

(a)                                 any information, certificates, licenses, permits or documents reasonably requested by Landlord which are necessary and obtainable to confirm that Tenant will be able to use the Capital Improvement upon completion thereof in accordance with the Primary Intended Use, including all required federal, state or local government licenses and approvals;

 

(b)                                 an Officer’s Certificate and, if requested, a certificate from Tenant’s architect providing appropriate backup information, setting forth in reasonable detail the projected or actual costs related to such Capital Improvements;

 

(c)                                  an amendment to this Master Lease (and any development or funding agreement agreed to in accordance with this Section 10.3), in a form reasonably agreed to by Landlord and Tenant, which may include, among other things, an increase in the Rent in amounts as agreed upon by the parties hereto pursuant to the agreed funding proposal terms described above and other provisions as may be necessary or appropriate;

 

(d)                                 a deed conveying title to Landlord to any land acquired for the purpose of constructing the Capital Improvement free and clear of any liens or encumbrances except those approved by Landlord, and accompanied by an ALTA survey thereof satisfactory to Landlord;

 

(e)                                  for each advance, endorsements to any outstanding policy of title insurance covering the Leased Property or commitments therefor reasonably satisfactory in form and substance to Landlord (i) updating the same without any additional exception except those that do not materially affect the value of such land and do not interfere with the use of the Leased Property or as may be approved by Landlord, which approval shall not be unreasonably withheld, and (ii) increasing the coverage thereof by an amount equal to the cost of the Capital Improvement, except to the extent covered by the owner’s policy of title insurance referred to in subparagraph (f) below;

 

(f)                                   if appropriate, an owner’s policy of title insurance insuring the fair market value of fee simple title to any land and improvements conveyed to Landlord free and clear of all liens and encumbrances except those that do not materially affect the value of such land and do not interfere with the use of the Leased Property or are approved by Landlord, which approval shall not be unreasonably withheld, provided that if the requirement in this paragraph (f) is not satisfied (or waived by Landlord), Tenant shall be entitled to seek third party financing or use available financing in lieu of seeking such advance from Landlord;

 

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(g)                                  if requested by Landlord, an appraisal by a member of the Appraisal Institute of the Leased Property indicating that the fair market value of the Leased Property upon completion of the Capital Improvement will exceed the fair market value of the Leased Property immediately prior thereto by an amount not less than ninety-five percent (95%) of the cost of the Capital Improvement, provided that if the requirement in this paragraph (g) is not satisfied (or waived by Landlord), Tenant shall be entitled to seek third party financing or use available financing in lieu of seeking such advance from Landlord; and

 

(h)                                 such other billing statements, invoices, certificates, endorsements, opinions, site assessments, surveys, resolutions, ratifications, lien releases and waivers and other instruments and information reasonably required by Landlord.

 

ARTICLE XI

 

11.1                        Liens.  Subject to the provisions of Article XII relating to permitted contests, Tenant will not directly or indirectly create or allow to remain and will promptly discharge at its expense any lien, encumbrance, attachment, title retention agreement or claim upon the Leased Property or any Capital Improvement thereto or upon the Gaming Licenses (including indirectly through a pledge of shares in the direct or indirect entity owning an interest in the Gaming Licenses) or any attachment, levy, claim or encumbrance in respect of the Rent, excluding, however, (i) this Master Lease; (ii) the matters that existed as of the Commencement Date with respect to such Facility and disclosed on Schedule 1A; (iii) restrictions, liens and other encumbrances which are consented to in writing by Landlord (such consent not to be unreasonably withheld); (iv) liens for Impositions which Tenant is not required to pay hereunder; (v) subleases permitted by Article XXII; (vi) liens for Impositions not yet delinquent or being contested in accordance with Article XII, provided that Tenant has provided appropriate reserves as required under GAAP and any foreclosure or similar remedies with respect to such Impositions have not been instituted and no notice as to the institution or commencement thereof has been issued except to the extent such institution or commencement is stayed no later than the earlier of (x) ten (10) Business Days after such notice is issued or (y) five (5) Business Days prior to the institution or commencement thereof; (vii) liens of mechanics, laborers, materialmen, suppliers or vendors for sums either disputed or not yet due, provided that (1) the payment of such sums shall not be postponed under any related contract for more than sixty (60) days after the completion of the action giving rise to such lien unless being contested in accordance with Article XII and such reserve or other appropriate provisions as shall be required by law or GAAP shall have been made therefor and no foreclosure or similar remedies with respect to such liens has been instituted and no notice as to the institution or commencement thereof have been issued except to the extent such institution or commencement is stayed no later than the earlier of (x) ten (10) Business Days after such notice is issued or (y) five (5) Business Days prior to the institution or commencement thereof; or (2) any such liens are in the process of being contested as permitted by Article XII; (viii) any liens created by Landlord; (ix) liens related to equipment leases or equipment financing for Tenant’s Property which are used or useful in Tenant’s business on the Leased Property, provided that the payment of any sums due under such equipment leases or equipment financing shall either (1) be paid as and when due in accordance with the terms thereof, or (2) be in the process of being contested as permitted by Article XII and provided that a lien holder’s removal of any such Tenant’s Property from the Leased Property shall be made in accordance with the requirements set forth in this Section 11.1; (x) liens granted

 

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as security for the obligations of Tenant and its Affiliates under a Debt Agreement; provided, however, in no event shall the foregoing be deemed or construed to permit Tenant to encumber its leasehold interest (or a subtenant to encumber its subleasehold interest) in the Leased Property or its direct or indirect interest (or the interest of any of its Subsidiaries) in the Gaming Licenses (other than, in each case, to a Permitted Leasehold Mortgagee), without the prior written consent of Landlord, which consent may be granted or withheld in Landlord’s sole discretion; and provided, further, that Tenant shall be required to provide Landlord with fully executed copies of any and all Permitted Leasehold Mortgages and related principal Debt Agreements; and (xi) easements, rights-of-way, restrictions (including zoning restrictions), covenants, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies on or with respect to any Leased Property, in each case whether now or hereafter in existence, not individually or in the aggregate materially interfering with the conduct of the business on the Leased Property, taken as a whole.  For the avoidance of doubt, the parties acknowledge and agree that Tenant has not granted any liens in favor of Landlord as security for its obligations hereunder (except to the extent contemplated in the final paragraph of this Section 11.1) and nothing contained herein shall be deemed or construed to prohibit the issuance of a lien on the Equity Interests in Tenant (it being agreed that any foreclosure by a lien holder on such interests in Tenant shall be subject to the restriction on Change in Control set forth in Article XXII) or to prohibit Tenant from pledging its Accounts and other Tenant’s Property and other property of Tenant, including fixtures and equipment installed by Tenant at the Facilities, as collateral in connection with financings from equipment lenders (or to Permitted Leasehold Mortgagees); provided that Tenant shall in no event pledge to any Person that is not granted a Permitted Leasehold Mortgage hereunder any of the Gaming Licenses or other of Tenant’s Property to the extent that such Tenant’s Property cannot be removed from the Leased Property without damaging or impairing the Leased Property (other than in a de minimis manner).  For the further avoidance of doubt, by way of example, Tenant shall not grant to any lender (other than a Permitted Leasehold Mortgagee) a lien on, and any and all lien holders (including a Permitted Leasehold Mortgagee) shall not have the right to remove, carpeting, internal wiring, elevators, or escalators at the Leased Property, but lien holders may have the right to remove (and Tenant shall have the right to grant a lien on) slot machines and other gaming equipment even if the removal thereof from the Leased Premises could result in de minimis damage; provided any such damage is repaired by the lien holder or Tenant in accordance with the terms of this Master Lease.

 

Landlord and Tenant intend that this Master Lease be an indivisible true lease that affords the parties hereto the rights and remedies of landlord and tenant hereunder and does not represent a financing arrangement.  This Master Lease is not an attempt by Landlord or Tenant to evade the operation of any aspect of the law applicable to any of the Leased Property.  Except as otherwise required by applicable law or any accounting rules or regulations, Landlord and Tenant hereby acknowledge and agree that this Master Lease shall be treated as an operating lease for all purposes and not as a synthetic lease, financing lease or loan and that Landlord shall be entitled to all the benefits of ownership of the Leased Property, including depreciation for all federal, state and local tax purposes.

 

If, notwithstanding (a) the form and substance of this Master Lease and (b) the intent of the parties, and the language contained herein providing that this Master Lease shall at all times be construed, interpreted and applied to create an indivisible lease of all of the Leased

 

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Property, any court of competent jurisdiction finds that this Master Lease is a financing arrangement, this Master Lease shall be considered a secured financing agreement and Landlord’s title to the Leased Property shall constitute a perfected first priority lien in Landlord’s favor on the Leased Property to secure the payment and performance of all the obligations of Tenant hereunder (and to that end, Tenant hereby grants, assigns and transfers to the Landlord a security interest in all right, title or interest in or to any and all of the Leased Property, as security for the prompt and complete payment and performance when due of Tenant’s obligations hereunder).  Tenant authorizes Landlord, at the expense of Tenant, to make any filings or take other actions as Landlord reasonably determines are necessary or advisable in order to effect fully this Master Lease or to more fully perfect or renew the rights of the Landlord, and to subordinate to the Landlord the lien of any Permitted Leasehold Mortgagee, with respect to the Leased Property (it being understood that nothing herein shall affect the rights of a Permitted Leasehold Mortgagee under Article XVII hereof).  At any time and from time to time upon the request of the Landlord, and at the expense of the Tenant, Tenant shall promptly execute, acknowledge and deliver such further documents and do such other acts as the Landlord may reasonably request in order to effect fully this Master Lease or to more fully perfect or renew the rights of the Landlord with respect to the Leased Property.  Upon the exercise by the Landlord of any power, right, privilege or remedy pursuant to this Master Lease which requires any consent, approval, recording, qualification or authorization of any governmental authority, Tenant will execute and deliver, or will cause the execution and delivery of, all applications, certifications, instruments and other documents and papers that Landlord may be required to obtain from Tenant for such consent, approval, recording, qualification or authorization.

 

ARTICLE XII

 

12.1        Permitted Contests.  Tenant, upon prior written notice to Landlord, on its own or in Landlord’s name, at Tenant’s expense, may contest, by appropriate legal proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any licensure or certification decision (including pursuant to any Gaming Regulation), Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy, encumbrance, charge or claim; provided, however, that (i) in the case of an unpaid Imposition, lien, attachment, levy, encumbrance, charge or claim, the commencement and continuation of such proceedings shall suspend the collection thereof from Landlord and from the Leased Property or any Capital Improvement thereto; (ii) neither the Leased Property or any Capital Improvement thereto, the Rent therefrom nor any part or interest in either thereof would be in any danger of being sold, forfeited, attached or lost pending the outcome of such proceedings; (iii) in the case of a Legal Requirement, neither Landlord nor Tenant would be in any danger of civil or criminal liability for failure to comply therewith pending the outcome of such proceedings; (iv) if any such contest shall involve a sum of money or potential loss in excess of Two Hundred Thousand Dollars ($200,000), upon request of the Landlord, Tenant shall deliver to Landlord an opinion of counsel reasonably acceptable to Landlord to the effect set forth in clauses (i), (ii) and (iii) above, to the extent applicable; (v) in the case of a Legal Requirement, Imposition, lien, encumbrance or charge, Tenant shall give such reasonable security as may be required by Landlord to insure ultimate payment of the same and to prevent any sale or forfeiture of the Leased Property or any Capital Improvement thereto or the Rent by reason of such non-payment or noncompliance; (vi) in the case of an Insurance Requirement, the coverage required by Article XIII shall be maintained; (vii) Tenant shall keep Landlord reasonably informed as to the status of the

 

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proceedings; and (viii) if such contest be finally resolved against Landlord or Tenant, Tenant shall promptly pay the amount required to be paid, together with all interest and penalties accrued thereon, or comply with the applicable Legal Requirement or Insurance Requirement.  Landlord, at Tenant’s expense, shall execute and deliver to Tenant such authorizations and other documents as may reasonably be required in any such contest, and, if reasonably requested by Tenant or if Landlord so desires, Landlord shall join as a party therein.  The provisions of this Article XII shall not be construed to permit Tenant to contest the payment of Rent or any other amount (other than Impositions or Additional Charges which Tenant may from time to time be required to impound with Landlord) payable by Tenant to Landlord hereunder.  Tenant shall indemnify, defend, protect and save Landlord harmless from and against any liability, cost or expense of any kind that may be imposed upon Landlord in connection with any such contest and any loss resulting therefrom, except in any instance where Landlord opted to join and joined as a party in the proceeding despite Tenant’s having sent written notice to Landlord of Tenant’s preference that Landlord not join in such proceeding.

 

ARTICLE XIII

 

13.1        General Insurance Requirements.  During the Term, Tenant shall at all times keep the Leased Property, and all property located in or on the Leased Property, including Capital Improvements, the Fixtures and Tenant’s Property, insured with the kinds and amounts of insurance described below.  Each element of insurance described in this Article XIII shall be maintained with respect to the Leased Property of each Facility and Tenant’s Property and operations thereon.  Such insurance shall be written by companies permitted to conduct business in the applicable State.  All third party liability type policies must name Landlord as an “additional insured.”  All property policies shall name Landlord as “loss payee” for its interests in each Facility.  All business interruption policies shall name Landlord as “loss payee” with respect to Rent only.  Property losses shall be payable to Landlord and/or Tenant as provided in Article XIV.  In addition, the policies, as appropriate, shall name as an “additional insured” and/or “loss payee” each Permitted Leasehold Mortgagee and as an “additional insured” or “loss payee” the holder of any mortgage, deed of trust or other security agreement (“Facility Mortgagee”) securing any indebtedness or any other Encumbrance placed on the Leased Property in accordance with the provisions of Article XXXI (“Facility Mortgage”) by way of a standard form of mortgagee’s loss payable endorsement.  Except as otherwise set forth herein, any property insurance loss adjustment settlement shall require the written consent of Landlord, Tenant, and each Facility Mortgagee (to the extent required under the applicable Facility Mortgage Documents) unless the amount of the loss net of the applicable deductible is less than Five Million Dollars ($5,000,000) in which event no consent shall be required.  Evidence of insurance shall be deposited with Landlord and, if requested, with any Facility Mortgagee(s).  The insurance policies required to be carried by Tenant hereunder shall insure against all the following risks with respect to each Facility:

 

(a)           Loss or damage by fire, vandalism and malicious mischief, extended coverage perils commonly known as “All Risk,” and all physical loss perils normally included in such All Risk insurance, including, but not limited to, sprinkler leakage and windstorm in an amount not less than the insurable value on a Maximum Foreseeable Loss (as defined below in Section 13.2) basis and including a building ordinance coverage endorsement, provided that in the event the premium cost of any or all of earthquake, flood, windstorm (including named

 

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windstorm) or terrorism coverages are available only for a premium that is more than 2.5 times the average premium paid by Tenant (or prior operator of Facilities) over the preceding three years for the insurance policy contemplated by this Section 13.1(a), then Tenant shall be entitled and required to purchase the maximum insurance coverage it deems most efficient and prudent to purchase and Tenant shall not be required to spend additional funds to purchase additional coverages insuring against such risks; and provided, further, that some property coverages might be sub-limited in an amount less than the Maximum Foreseeable Loss as long as the sub-limits are commercially reasonable and prudent as deemed by Tenant;

 

(b)           Loss or damage by explosion of steam boilers, pressure vessels or similar apparatus, now or hereafter installed in each Facility, in such limits with respect to any one accident as may be reasonably requested by Landlord from time to time;

 

(c)           Flood (when any of the improvements comprising the Leased Property of a Facility is located in whole or in part within a designated 100-year flood plain area) in an amount not less than the probable maximum loss of a 500 year event and such other hazards and in such amounts as may be customary for comparable properties in the area;

 

(d)           Loss of rental value in an amount not less than twelve (12) months’ Rent payable hereunder or business interruption in an amount not less than twelve (12) months of income and normal operating expenses including 90-days ordinary payroll and Rent payable hereunder with an extended period of indemnity coverage of at least ninety (90) days necessitated by the occurrence of any of the hazards described in Sections 13.1(a), 13.1(b) or 13.1(c), provided that Tenant may self-insure specific Facilities for the insurance contemplated under this Section 13.1(d), provided that (i) such Facilities that Tenant chooses to self-insure are not expected to generate more than ten percent (10%) of Net Revenues anticipated to be generated from all the Facilities and (ii) Tenant deposits in any impound account created under Section 4.3 hereof an amount equal to the product of (1) the sum of (A) the insurance premiums paid by Tenant for such period under this Section 13.1(d) to insurance companies and (B) the amount deposited by Tenant in an impound account pursuant to this provision, and (2) the percentage of Net Revenues that are anticipated to be generated by the Facilities that are being self-insured by Tenant under this provision;

 

(e)           Claims for personal injury or property damage under a policy of comprehensive general public liability insurance with amounts not less than One Hundred Million Dollars ($100,000,000) each occurrence and One Hundred Million Dollars ($100,000,000) in the annual aggregate, provided that such requirements may be satisfied through the purchase of a primary general liability policy and excess liability policies;

 

(f)            During such time as Tenant is constructing any improvements, Tenant, at its sole cost and expense, shall carry, or cause to be carried (i) workers’ compensation insurance and employers’ liability insurance covering all persons employed in connection with the improvements in statutory limits, (ii) a completed operations endorsement to the commercial general liability insurance policy referred to above, (iii) builder’s risk insurance, completed value form (or its equivalent), covering all physical loss, in an amount and subject to policy conditions satisfactory to Landlord, and (iv) such other insurance, in such amounts, as Landlord deems

 

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reasonably necessary to protect Landlord’s interest in the Leased Property from any act or omission of Tenant’s contractors or subcontractors.

 

13.2        Maximum Foreseeable Loss.  The term “Maximum Foreseeable Loss” shall mean the largest monetary loss within one area that may be expected to result from a single fire with protection impaired, the control of the fire mainly dependent on physical barriers or  separations and a delayed manual firefighting by public and/or private fire brigades.  If Landlord reasonably believes that the Maximum Foreseeable Loss has increased at any time during the Term, it shall have the right (unless Tenant and Landlord agree otherwise) to have such Maximum Foreseeable Loss redetermined by an impartial national insurance company reasonably acceptable to both parties (the “Impartial Appraiser”), or, if the parties cannot agree on an Impartial Appraiser, then by an Expert appointed in accordance with Section 34.1 hereof.  The determination of the Impartial Appraiser (or the Expert, as the case may be) shall be final and binding on the parties hereto, and Tenant shall forthwith adjust the amount of the insurance carried pursuant to this Article XIII to the amount so determined by the Impartial Appraiser (or the Expert, as the case may be), subject to the approval of the Facility Mortgagee, as applicable.  Each party shall pay one-half (1/2) of the fee, if any, of the Impartial Appraiser.  If Landlord pays the Impartial Appraiser, fifty percent (50%) of such costs shall be Additional Charges hereunder and if Tenant pays such Impartial Appraiser, fifty percent (50%) of such costs shall be a credit against the next Rent payment hereunder.  If Tenant has undertaken any structural alterations or additions to the Leased Property having a cost or value in excess of Twenty Five Million Dollars ($25,000,000), Landlord may at Tenant’s expense have the Maximum Foreseeable Loss redetermined at any time after such improvements are made, regardless of when the Maximum Foreseeable Loss was last determined.

 

13.3        Additional Insurance.  In addition to the insurance described above, Tenant shall maintain such additional insurance upon notice from Landlord as may be reasonably required from time to time by any Facility Mortgagee and shall further at all times maintain adequate workers’ compensation coverage and any other coverage required by Legal Requirements for all Persons employed by Tenant on the Leased Property in accordance with Legal Requirements.

 

13.4        Waiver of Subrogation.  All insurance policies carried by either party covering the Leased Property or Tenant’s Property, including, without limitation, contents, fire and liability insurance, shall expressly waive any right of subrogation on the part of the insurer against the other party.  Each party, respectively, shall pay any additional costs or charges for obtaining such waiver.

 

13.5        Policy Requirements.  All of the policies of insurance referred to in this Article XIII shall be written in form reasonably satisfactory to Landlord and any Facility Mortgagee and issued by insurance companies with a minimum policyholder rating of “A-” and a financial rating of “VII” in the most recent version of Best’s Key Rating Guide, or a minimum rating of “BBB” from Standard & Poor’s or equivalent.  If Tenant obtains and maintains the general liability insurance described in Section 13.1(e) above on a “claims made” basis, Tenant shall provide continuous liability coverage for claims arising during the Term.  In the event such “claims made” basis policy is canceled or not renewed for any reason whatsoever (or converted to an “occurrence” basis policy), Tenant shall either obtain (a) “tail” insurance coverage

 

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converting the policies to “occurrence” basis policies providing coverage for a period of at least three (3) years beyond the expiration of the Term, or (b) an extended reporting period of at least three (3) years beyond the expiration of the Term.  Tenant shall pay all of the premiums therefor, and deliver certificates thereof to Landlord prior to their effective date (and with respect to any renewal policy, prior to the expiration of the existing policy), and in the event of the failure of Tenant either to effect such insurance in the names herein called for or to pay the premiums therefor, or to deliver such certificates thereof to Landlord, at the times required, Landlord shall be entitled, but shall have no obligation, to effect such insurance and pay the premiums therefor, in which event the cost thereof, together with interest thereon at the Overdue Rate, shall be repayable to Landlord upon demand therefor.  Tenant shall obtain, to the extent available on commercially reasonable terms, the agreement of each insurer, by endorsement on the policy or policies issued by it, or by independent instrument furnished to Landlord, that it will give to Landlord thirty (30) days’ (or ten (10) days’ in the case of non-payment of premium) written notice before the policy or policies in question shall be altered, allowed to expire or cancelled.  Notwithstanding any provision of this Article XIII to the contrary, Landlord acknowledges and agrees that the coverage required to be maintained by Tenant may be provided under one or more policies with various deductibles or self-insurance retentions by Tenant or its Affiliates, subject to Landlord’s approval not to be unreasonably withheld.  Upon written request by Landlord, Tenant shall provide Landlord copies of the property insurance policies when issued by the insurers providing such coverage.

 

13.6        Increase in Limits.  If, from time to time after the Commencement Date, Landlord determines in the exercise of its reasonable business judgment that the limits of the personal injury or property damage-public liability insurance then carried pursuant to Section 13.1(e) hereof are insufficient, Landlord may give Tenant Notice of acceptable limits for the insurance to be carried; provided that in no event will Tenant be required to carry insurance in an amount which exceeds the product of (i) the amounts set forth in Section 13.1(e) hereof and (ii) the CPI Increase; and subject to the foregoing limitation, within ninety (90) days after the receipt of such Notice, the insurance shall thereafter be carried with limits as prescribed by Landlord until further increase pursuant to the provisions of this Section 13.6.

 

13.7        Blanket Policy.  Notwithstanding anything to the contrary contained in this Article XIII, Tenant’s obligations to carry the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Tenant; provided that the requirements of this Article XIII (including satisfaction of the Facility Mortgagee’s requirements and the approval of the Facility Mortgagee) are otherwise satisfied, and provided further that Tenant maintains specific allocations acceptable to Landlord.

 

13.8        No Separate Insurance.  Tenant shall not, on Tenant’s own initiative or pursuant to the request or requirement of any third party, (i) take out separate insurance concurrent in form or contributing in the event of loss with that required in this Article XIII to be furnished by, or which may reasonably be required to be furnished by, Tenant or (ii) increase the amounts of any then existing insurance by securing an additional policy or additional policies, unless all parties having an insurable interest in the subject matter of the insurance, including in all cases Landlord and all Facility Mortgagees, are included therein as additional insureds and the loss is payable under such insurance in the same manner as losses are payable under this Master Lease.  Notwithstanding the foregoing, nothing herein shall prohibit Tenant from insuring

 

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against risks not required to be insured hereby, and as to such insurance, Landlord and any Facility Mortgagee need not be included therein as additional insureds, nor must the loss thereunder be payable in the same manner as losses are payable hereunder except to the extent required to avoid a default under the Facility Mortgage.

 

ARTICLE XIV

 

14.1        Property Insurance Proceeds.  All proceeds (except business interruption not allocated to rent expenses) payable by reason of any property loss or damage to the Leased Property, or any portion thereof, under any property policy of insurance required to be carried hereunder shall be paid to Facility Mortgagee or to an escrow account held by a third party depositary reasonably acceptable to Landlord and Tenant (pursuant to an escrow agreement acceptable to the parties and intended to implement the terms hereof) and made available to Tenant upon request for the reasonable costs of preservation, stabilization, emergency restoration, business interruption, reconstruction and repair, as the case may be, of any damage to or destruction of the Leased Property, or any portion thereof; provided, however, that the portion of such proceeds that are attributable to Tenant’s obligation to pay Rent shall be applied against Rents due by Tenant hereunder; and provided, further, that if the total amount of proceeds payable net of the applicable deductibles is One Hundred Fifty Thousand Dollars ($150,000) or less, and, if no Event of Default has occurred and is continuing, the proceeds shall be paid to Tenant and, subject to the limitations set forth in this Article XIV used for the repair of any damage to the Leased Property, it being understood and agreed that Tenant shall have no obligation to rebuild any Tenant Capital Improvement, provided that the Leased Property is rebuilt in a manner reasonably satisfactory to Landlord.  Any excess proceeds of insurance remaining after the completion of the restoration or reconstruction of the Leased Property to substantially the same condition as existed immediately before the damage or destruction and with materials and workmanship of like kind and quality and to Landlord’s reasonable satisfaction shall be provided to Tenant.  All salvage resulting from any risk covered by insurance for damage or loss to the Leased Property shall belong to Landlord.  Tenant shall have the right to prosecute and settle insurance claims, provided that Tenant shall consult with and involve Landlord in the process of adjusting any insurance claims under this Article XIV and any final settlement with the insurance company shall be subject to Landlord’s consent, such consent not to be unreasonably withheld.

 

14.2        Tenant’s Obligations Following Casualty.  (a)  If a Facility and/or any Tenant Capital Improvements to a Facility are damaged, whether or not from a risk covered by insurance carried by Tenant, except as otherwise provided herein, (i) Tenant shall restore such Leased Property (excluding any Tenant Capital Improvement, it being understood and agreed that Tenant shall not be required to repair any Tenant Capital Improvement, provided that the Leased Property is rebuilt in a manner reasonably satisfactory to Landlord), to substantially the same condition as existed immediately before such damage and (ii) such damage shall not terminate this Master Lease.

 

(b)           If Tenant restores the affected Leased Property and the cost of the repair or restoration exceeds the amount of proceeds received from the insurance required to be carried hereunder, Tenant shall provide Landlord with evidence reasonably acceptable to Landlord that

 

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Tenant has available to it any excess amounts needed to restore such Facility.  Such excess amounts necessary to restore such Facility shall be paid by Tenant.

 

(c)           If Tenant has not restored the affected Leased Property and gaming operations have not recommenced by the date that is the third anniversary of the date of any casualty, all remaining insurance proceeds shall be paid to and retained by Landlord free and clear of any claim by or through Tenant.

 

(d)           In the event neither Landlord nor Tenant is required or elects to repair and restore the Leased Property, all insurance proceeds, other than proceeds reasonably attributed to any Tenant Capital Improvements (and, subject to no Event of Default having occurred and being continuing, any business interruption proceeds in excess of Tenant’s Rent obligations hereunder), which proceeds shall be and remain the property of Tenant, shall be paid to and retained by Landlord free and clear of any claim by or through Tenant except as otherwise specifically provided below in this Article XIV.

 

14.3        No Abatement of Rent.  This Master Lease shall remain in full force and effect and Tenant’s obligation to pay th