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IEB Report for Penn National 9.18.13

IEB Report for Penn National 9.18.13

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Published by masslive
Penn National — unsuccessful in two previous bids to enter the Massachusetts gambling market — recently announced it had signed an option to purchase Plainridge and would honor the terms of the previous agreement.
Penn National — unsuccessful in two previous bids to enter the Massachusetts gambling market — recently announced it had signed an option to purchase Plainridge and would honor the terms of the previous agreement.

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Published by: masslive on Sep 18, 2013
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11/24/2013

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On December 15, 2008, former Illinois Governor Rod Blagojevich signed Public Act
No. 95-1008 requiring the four casinos noted above to continue paying the 3 percent tax
surcharge to subsidize Illinois horse racing interests. On January 8, 2009, the four casinos filed
suit in the District Court, asking it to declare the law unconstitutional. The 3 percent tax
surcharge being paid pursuant to Public Act No. 95-1008 was paid into a protest fund where it
accrued interest. The defendants filed a motion to dismiss, which was granted on August 17,
2009. The four casinos appealed the dismissal and filed motions to keep the funds in the protest

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fund while the appeal is being litigated. These motions were denied and the funds have been
released to the racetracks.

On June 12, 2009, the four casinos filed a lawsuit in Illinois Federal Court naming
Blagojevich, his campaign fund, racetrack owner John Johnston, and his two racetracks as
defendants alleging a civil conspiracy in violation of the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. §1962(c), (d) (“RICO”), based on an illegal scheme to secure the
enactment of the 3 percent tax surcharge legislation in exchange for the payment of money by
Johnston and entities controlled by him. The Four Casinos also sought to impose a constructive
trust over all funds paid under the tax surcharge, and therefore all of the Illinois racetracks were
named as parties to the lawsuit. The defendants in the RICO case filed motions to dismiss. On
December 7, 2009, the district court denied the motion to dismiss the RICO count, but it granted
the motion to dismiss the constructive trust count, stating that it did not have jurisdiction in this
case to impose the constructive trust. The four casinos appealed this dismissal to the Seventh
Circuit Court of Appeals, which affirmed the dismissal in an en banc opinion. The Illinois
racetracks are now free to use the monies that they received from the 3 percent surcharge.

7. Board of County Commissioners of the County of Cherokee, Kansas
v. Penn National

On September 11, 2008, the Board of County Commissioners of Cherokee County, KS,
filed suit in the District Court of Shawnee County, KS, against Penn National and Kansas Penn
Gaming LLC (“KPG”), a wholly owned subsidiary of Penn National created to pursue a
development project in Cherokee County, KS. The suit alleged that KPG breached its pre-
development agreement with the county when KPG withdrew its application to manage a lottery
gaming facility in Cherokee County. The suit sought in excess of $50 million in damages. In
connection with the suit, Cherokee County obtained an order attaching the $25 million privilege
fee paid to the Kansas Lottery Commission in conjunction with the gaming license application
for the Cherokee County zone. The defendants contested the validity and scope of the
attachment. The motions to dissolve and reduce the attachment were denied. Following
discovery, both parties filed dispositive motions which were argued on April 20, 2012. In
September 2012, the judge ruled in favor of the County on its motion for summary judgment on
the breach of contract claim. The Court denied Penn National’s motion to dismiss the lawsuit.

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At December 31, 2012, the Company accrued $6.4 million which was included in accrued
expenses within the consolidated balance sheet, based on settlement discussions that took place
in January 2013. In February 2013, the Company finalized the settlement with the County and
the $25 million privilege fee was returned to the Company, net of the amount previously
accrued.

8. Power Plant Entertainment Casino Resorts Indiana LLC et al v. Penn
National Gaming Inc. et al

On February 15, 2011, the Cordish companies filed a suit in Baltimore City Circuit Court
seeking $300 million in damages against Penn National and others including the owner of
Indiana Live for defamation and conspiracy related to advertisements and statements made
during the referendum campaign in Anne Arundel County, MD, in 2009. The case was
temporarily stayed due to the bankruptcy filing by the Indiana Live defendants. Recently, the
stay was lifted and the case is pending.

The defendants filed a motion to transfer venue to Anne Arundel County and Penn
National just learned that the motion was denied.

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