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	                                                                                                                    Exhibit 10.1

	
STOCK PURCHASE AGREEMENT

   

	by and among

   
	PENN NATIONAL GAMING, INC.

   
	and

   
	THE PURCHASERS NAMED IN EXHIBIT A 

   
	July 3, 2008

	  	  	  	  	  	  	EXHIBIT 10.1    
	  
	TABLE OF CONTENTS 
	  
	  	  	  	  	  	  	  	  	Page  
	  
	  
	1.  	  	Definitions  	  	  	  	1  
	  
	2.  	  	Authorization, Purchase and Sale of Stock  	  	  	  	3  
	  	  	2.1  	  	Authorization, Purchase and Sale  	  	  	  	3  
	  	  	2.2  	  	Purchase Price  	  	  	  	4  
	  	  	2.3  	  	Closing  	  	  	  	4  
	  
	3.  	  	Representations and Warranties of the Company  	  	  	  	4  
	  	  	3.1  	  	Corporate Existence and Power  	  	  	  	4  
	  	  	3.2  	  	Capitalization  	  	  	  	4  
	  	  	3.3  	  	Authorization  	  	  	  	5  
	  	  	3.4  	  	Valid Issuance  	  	  	  	6  
	  	  	3.5  	  	No Conflict  	  	  	  	6  
	  	  	3.6  	  	Anti-Takeover Provisions  	  	  	  	6  
	  
	4.  	  	Representations and Warranties of Each Purchaser  	  	  	  	6  
	  	  	4.1  	  	Organization  	  	  	  	6  
	  	  	4.2  	  	Authorization  	  	  	  	7  
	  	  	4.3  	  	No Conflict  	  	  	  	7  
	  	  	4.4  	  	Purchasers’ Financing  	  	  	  	7  
	  	  	4.5  	  	Purchase Entirely for Own Account  	  	  	  	7  
	  	  	4.6  	  	Investor Status  	  	  	  	7  
	  	  	4.7  	  	Securities Not Registered  	  	  	  	8  
	  	  	4.8  	  	Tax Matters  	  	  	  	8  
	  
	5.  	  	Covenants  	  	  	  	8  
	  	  	5.1  	  	Best Efforts  	  	  	  	8  
	  	  	5.2  	  	Pennsylvania Control Share Statute  	  	  	  	8  
	  	  	5.3  	  	Interim Actions  	  	  	  	8  
	  	  	5.4  	  	Tax Treatment  	  	  	  	8  
	  
	6.  	  	Conditions Precedent  	  	  	  	9  
	  	  	6.1  	  	Conditions to the Obligations of Each Party  	  	  	  	9  
	  	  	6.2  	  	Conditions to the Obligations of the Company  	  	  	  	9  
	  	  	6.3  	  	Conditions to the Obligations of the Purchasers  	  	  	  	10  
	  
	7.  	  	Termination  	  	  	  	10  
	  	  	7.1  	  	Conditions of Termination  	  	  	  	10  
	  	  	7.2  	  	Effect of Termination  	  	  	  	11  
	  	  	7.3  	  	Application of Deposit; Repayment of Balance  	  	  	  	11  
	  
	8.  	  	Miscellaneous Provisions  	  	  	  	11  
	9.		Public Statements or Releases				    12 
	ii

 

	8.2  	  	Interpretation  	  	11  
	8.3  	  	Notices  	  	12  
	8.4  	  	Severability  	  	13  
	8.5  	  	Governing Law  	  	13  
	8.6  	  	Waiver  	  	14  
	8.7  	  	Expenses  	  	14  
	8.8  	  	Successors and Assigns  	  	14  
	8.9  	  	Third Parties  	  	14  
	8.10  	  	Counterparts  	  	14  
	8.11  	  	Entire Agreement; Amendments  	  	14  
	8.12  	  	Survival  	  	15  
	8.13  	  	Representation by Counsel; Mutual Drafting  	  	15  

 

	Exhibits  	  	  
	Exhibit A  	  	Purchasers  
	Exhibit B  	  	Investor Rights Agreement  
	Exhibit C  	  	Certificate of Designations  
	Exhibit D  	  	Escrow Agreement  

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	STOCK PURCHASE AGREEMENT

          STOCK PURCHASE AGREEMENT, dated as of July 3, 2008 (this “Agreement”), by and among PENN NATIONAL GAMING, INC., a Pennsylvania corporation (the “Company”) and the PURCHASERS NAMED IN THE ATTACHED EXHIBIT A (each, a “Purchaser” and collectively, the “Purchasers”).

          WHEREAS, the Company intends to sell to the Purchasers, and the Purchasers intend to purchase from the Company, as an investment in the Company, shares of Series B Preferred Stock of the Company (the “Preferred Stock”), subject to the terms and conditions set forth herein.

          NOW THEREFORE, in consideration of the mutual agreements, representations, warranties and covenants in this Agreement contained, the parties agree as follows:

          1.      Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

          “Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person.

          “Board of Directors” means the Board of Directors of the Company.

          “Business Day” means any day other than the days on which banks in New York, New York are required or authorized to close.

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

           “Common Stock” means the common stock of the Company, par value $0.01 per share.

           “Company Options” means outstanding options to acquire shares of Common Stock from the Company granted to employees of the Company under the Company Stock Plans or otherwise. 

           “Company Restricted Shares” means each share of Common Stock granted subject to vesting or other lapse restrictions pursuant to the Company Stock Plans or any applicable restricted stock award agreements.

           “Gaming Approvals” means all licenses, permits, approvals, authorizations, registrations, findings of suitability, franchises, entitlements, waivers and exemptions issued by any Gaming Authority required to permit the parties to consummate the Transactions or necessary to permit Purchasers to own the Preferred Stock.

           “Gaming Authority” means any Governmental Authority with regulatory control or jurisdiction over casino, pari-mutuel, lottery or other gaming activities and operations.

           “Governmental Authority” means any nation or government or any agency, public or regulatory authority, instrumentality, department, commission, court, arbitrator, ministry, 

tribunal or board of any nation or any government or political subdivision thereof, in each case, whether national, federal, tribal, provincial, state, regional, local or municipal, or any self-regulatory organization. 

          “HSR Act” means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended.

          “Investor Rights Agreement” means the Investor Rights Agreement by and among the Company and the Purchasers substantially in the form attached hereto as Exhibit B.

          “Law” means applicable statutes, common law, rules, ordinances, regulations, codes, licensing requirements, orders, judgments, injunctions, writs, decrees, licenses, governmental guidelines or interpretations having the force of law, permits, rules and bylaws, in each case, of a Governmental Authority.

          “Material Adverse Effect” means a material adverse event, change, effect, development, condition or occurrence on or with respect to the business, operations or financial condition of the Company and its Subsidiaries, taken as a whole; provided, however, except (other than in clauses (A), (B), (C), (D), (H), (I) and (J) below) to the extent such changes have a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole, when compared to other companies operating in the same industries in which the Company or its Subsidiaries operate, that Material Adverse Effect shall not be deemed to include any event, change, effect, development, condition or occurrence to the extent resulting from any one or more of the following: (A) changes in general economic conditions, the securities or financial markets, the gaming industry generally or in any specific jurisdiction or regulatory, legislative or other political conditions or developments; (B) public disclosure of the Transaction Agreements or of the transactions contemplated by the Transaction Agreements (the “Transactions”); (C) any taking of any action specifically required by the Transaction Agreements; (D) changes in Law (other than a change in Law enacted by the State of Illinois, the State of Indiana, the State of West Virginia or the Commonwealth of Pennsylvania prohibiting all gaming activities which are currently permitted therein) or GAAP, or the interpretation thereof; (E) any outbreak or escalation of hostilities or war or any act of terrorism; (F) any weather-related or other force majeure event; (G) any outbreak of illness or other public health-related event; (H) any divestiture or disposition of any assets or operations of the Company or any of its Subsidiaries which, as of the date of this Agreement, the Company and its Subsidiaries have committed to make to satisfy any Gaming Authority; (I) changes in the share price or trading volume of the Common Stock or the failure of the Company to meet projections or forecasts (unless due to a circumstance which would separately constitute a Material Adverse Effect); or (J) any litigation alleging breach of fiduciary duty or other violation of applicable Law relating to the Merger Agreement, the Merger, the Transaction Agreements or the Transactions.

          “Merger Agreement” means the Agreement and Plan of Merger dated June 15, 2007, by and among the Company, Parent and Merger Sub.

          “Merger Sub” means PNG Merger Sub Inc., a Pennsylvania corporation and a wholly owned subsidiary of Parent.

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     “Other Statutes” means Subchapters 25H, 25I and 25J of the Pennsylvania Business Corporation Law of 1988, as amended.

     “Parent” means PNG Acquisition Company Inc., a Delaware corporation.

     “Pennsylvania Control Share Statute” means Subchapter 25G of the Pennsylvania Business Corporation Law of 1988, as amended.

     “Person” means any individual, corporation, company, limited liability company, partnership, association, trust, joint venture, group or any other entity or organization, including any government or political subdivision or any agency or instrumentality thereof.

     “Purchase Price” means $1,250,000,000, which constitutes the aggregate amount of all Deposits and Balance Payments to be paid to the Company under Section 2.2 hereof.

     “Rights” has the meaning set forth in the Rights Agreement.

     “Rights Agreement” means that certain rights agreement, dated as of March 17, 1999, entered into by and between the Company and Continental Stock Transfer & Trust Company.

     “Securities” shall mean the Preferred Stock and the Common Stock or other securities issuable in respect of the Preferred Stock, upon redemption or in connection with a Business Combination (as defined in the Certificate of Designations).

     “Securities Act” shall mean the Securities Act of 1933, as amended, and all of the rules and regulations promulgated thereunder.

     “Subsidiary” means, with respect to any Person, any other Person of which the first Person owns, directly or indirectly, securities or other ownership interests having voting power to elect a majority of the board of directors or other persons performing similar functions (or, if there are no such voting interests, more than 50% of the equity interests of the second Person).

     “Termination and Settlement Agreement” means the Termination and Settlement Agreement, dated as of the date of this Agreement, by and among the Company, Parent, Merger Sub and the other parties thereto.

     “Transaction Agreements” shall mean this Agreement, the Investor Rights Agreement, the Termination and Settlement Agreement and the Escrow Agreement.

     2. Authorization, Purchase and Sale of Stock.

     2.1 Authorization, Purchase and Sale. The Company has authorized the sale and issuance to the Purchasers of the 12,500 shares of Preferred Stock. Subject to and upon the terms and conditions set forth in this Agreement, at the Closing, the Company shall issue and sell to each Purchaser, and each Purchaser, severally, shall purchase from the Company the number of shares of Preferred Stock set forth opposite the name of such Purchaser under the heading “Shares of Preferred Stock to be Purchased” on Exhibit A (the “Investment”). The terms, limitations and relative rights and preferences of the Preferred Stock are set forth in a Statement

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with Respect to Shares of Series B Preferred Stock of the Company in the form set forth as Exhibit C hereto, subject to such ministerial changes thereto as the counsel to the Company and the Purchasers agree to be necessary or desirable (the “Certificate of Designations”), which will be filed by the Company on or before the Closing Date with the Department of State of the Commonwealth of Pennsylvania.

      2.2      Purchase Price.

          (a) Prior to 12:00 noon EDT on the first Business Day after the date hereof, each Purchaser shall deliver by wire transfer of immediately available United States funds to the Company the nonrefundable cash amount set forth opposite the name of such Purchaser on Exhibit A hereto under the heading “Signing Date Payment” (collectively, the “Deposit”); provided, however, that if the Company has not executed and delivered to the other parties thereto the Termination and Settlement Agreement on the date hereof, the Company shall refund the full amount of the Deposit to each Purchaser in the amount set forth opposite the name of such Purchaser on Exhibit A by 3:00 p.m. on the second Business Day immediately following the date hereof.

          (b) Prior to 10:00 a.m. EDT on July 21, 2008 (the “Balance Payment Date”), each Purchaser shall deposit with First American Title Insurance Company (the “Escrow Agent”) pursuant to an escrow agreement dated as of the date hereof in substantially the form attached hereto as Exhibit D (the “Escrow Agreement”) the cash amount set forth opposite the name of such Purchaser on Exhibit A hereto under the heading “Balance Payment” (each, a “Balance Payment”).

      2.3      Closing. The closing of the purchase and sale of the Preferred Stock (the “Closing”) shall take place (i) at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019 or (ii) at such other place and at such date and time as the Company and the Purchasers may agree (the actual date of the Closing, the “Closing Date”), as soon as reasonably practicable but, in any event, no later than the third (3rd) Business Day after the day on which the last condition set forth in Section 6 is satisfied or waived (other than those conditions that by their nature cannot be satisfied until the Closing Date, but subject to the satisfaction or waiver of such conditions). At the Closing, the Company shall deliver to each Purchaser certificates representing the shares of Preferred Stock purchased by such Purchaser and the Escrow Agent shall release the Balance Payment to the Company pursuant to the terms of the Escrow Agreement.

     3.      Representations and Warranties of the Company. The Company hereby represents and warrants to each of the Purchasers as follows:

     3.1    Corporate Existence and Power. Each of the Company and its Subsidiaries is duly organized, validly existing and in good standing under the laws of its jurisdiction, except where the failure to be in good standing has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

     3.2    Capitalization.

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     (a)      As of May 31, 2008, the authorized capital stock of the Company consists of: 

     (i)      200,000,000 shares of Common Stock, of which 86,940,520 shares were issued and outstanding (including 380,000 outstanding Company Restricted Shares);

     (ii)      1,000,000 shares of preferred stock, par value $.01 per share, none of which were issued and outstanding; and

     (iii)      outstanding Company Options to purchase an aggregate of 7,173,405 shares of Common Stock, with a weighted average exercise price of $27.68 per share.

     All outstanding shares of Common Stock are duly authorized, validly issued, fully paid and non-assessable, and are not subject to and were not issued in violation of any preemptive or similar right, purchase option, call or right of first refusal or similar right, other than as provided for in the Transaction Agreements. As of May 31, 2008, 1,698,800 shares of Common Stock were held in the treasury of the Company.

              (b)      Except as set forth in Section 3.2(a) and except for 3,224,475 shares of Common Stock reserved for issuance pursuant to the Company Stock Plans and except for the Rights, as of the date of this Agreement, there have not been reserved for issuance, and there are no outstanding: (i) shares of capital stock or other voting securities of the Company; (ii) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or voting securities of the Company; (iii) Company Options or other rights or options to acquire from the Company, or obligations of the Company to issue, any shares of capital stock, voting securities or securities convertible into or exchangeable for shares of capital stock or voting securities of the Company; or (iv) equity equivalent interests in the ownership or earnings of the Company or other similar rights in respect of the Company (the securities described in clauses (i) through (iv) are collectively referred to as the “Company Securities”). There are no outstanding obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any Company Securities. There are no preemptive rights of any kind which obligate the Company or any of its Subsidiaries to issue or deliver any Company Securities. There are no shareholder agreements, voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party or by which it is bound relating to the voting or registration of any shares of capital stock of the Company or preemptive rights with respect thereto.

    3.3      Authorization. The Company has all requisite corporate power to enter into the Transaction Agreements and to carry out and perform its obligations under the terms of the Transaction Agreements. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization of the Preferred Stock, and the filing of the Certificate of Designations, the authorization, execution, delivery and performance of the Transaction Agreements and the consummation of the Transactions has been taken. Except for any stockholder approval that may be required to approve the issuance of Common Stock in redemption of or exchange for the Preferred Stock pursuant to the rules of Nasdaq (or, if the Common Stock is not listed or quoted on Nasdaq, the principal national or regional exchange or market on which the Common Stock is then listed or quoted), the execution, delivery and 

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performance of the Transaction Agreements by the Company and the consummation of the Transactions do not require any approval of the Company’s stockholders. Assuming this Agreement constitutes the legal and binding agreement of the Purchasers, this Agreement constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or fraudulent conveyance and similar laws relating to or affecting creditors generally or by general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 

        3.4       Valid Issuance. The Preferred Stock being purchased by the Purchasers pursuant to this Agreement will, upon issuance pursuant to the terms of this Agreement and upon payment therefor, be duly authorized, validly issued, fully paid and non-assessable. Subject to the accuracy of the representations made by the Purchasers in Section 4, the Preferred Stock will be issued to the Purchasers in compliance with applicable exemptions from the registration and prospectus delivery requirements of the Securities Act.

         3.5       No Conflict. No material consent, approval, order or authorization of any third party that is not a Governmental Authority is required for the execution, delivery and performance of this Agreement by the Company. The execution, delivery and performance of the Transaction Agreements by the Company and the consummation of the other transactions contemplated hereby will not (i) conflict with or result in any violation of any provision of the articles of incorporation or by-laws of the Company or (ii) conflict with or violate any applicable Law, other than, in the case of (ii) above, as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

         3.6       Anti-Takeover Provisions. No “fair price,” “merger moratorium,” “control share acquisition,” or other anti-takeover or similar statute or regulation applies or purports to apply to this Agreement, the Transactions, or the issuance to the Purchasers of shares of Common Stock upon any redemption of Preferred Stock (the “Common Stock Issuance”), except for (i) those which have been made not applicable to this Agreement or the Transactions by valid action of the Board of Directors prior to the execution and delivery hereof, (ii) those which do not restrict or prohibit this Agreement or the Transactions or the Certificate of Designations, and (iii) with respect to the Common Stock Issuance, the Pennsylvania Control Share Statute and the Other Statutes. Prior to the execution and delivery hereof, the Board of Directors took all action necessary to ensure that the Purchasers and their respective Affiliates and Associates, each as defined in the Rights Agreement, are excepted from the definitions of Acquiring Person and Adverse Person in the Rights Agreement only to the extent each is a Beneficial Owner (as defined in the Rights Agreement) as a result of the approval, execution and delivery of this Agreement or consummation of the Transactions.

         4.        Representations and Warranties of Each Purchaser. Each Purchaser, severally for itself and not jointly with the other Purchasers, represents and warrants to the Company as follows:

        4.1      Organization. Such Purchaser is a legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite 

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power and authority to consummate the transactions contemplated by this Agreement and the other Transaction Agreements to which it will be a party and to perform each of its obligations hereunder and thereunder.

     4.2      Authorization. All corporate, member or partnership action on the part of such Purchaser or its stockholders, members or partners necessary for the authorization, execution, delivery and performance of this Agreement and the other Transaction Agreements to which it will be a party and the consummation of the Transactions has been taken. Assuming this Agreement constitutes the legal and binding agreement of the Company, this Agreement constitutes a legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or fraudulent conveyance and similar laws relating to or affecting creditors generally or by general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 

     4.3      No Conflict. No material consent, approval, order or authorization of any third party is required for the execution, delivery and performance of this Agreement by such Purchaser. The execution, delivery and performance of the Transaction Agreements by such Purchaser and the consummation of the other transactions contemplated hereby will not (i) conflict with or result in any violation of any provision of the certificate of incorporation or bylaws or other equivalent organizational documents of such Purchaser or (ii) conflict with or violate any applicable Law, other than, in the case of (ii) above, as would not, individually or in the aggregate, be reasonably expected to materially delay or hinder the ability of such Purchaser to perform its obligations under the Transaction Agreements.

     4.4      Purchasers’ Financing. On the date of this Agreement, such Purchaser has and, at the Balance Payment Date will have, all funds necessary to make the payments to the Company on such dates as contemplated hereby, and no internal or other approval is required for such Purchaser to fulfill such payment obligations hereunder, other than customary capital call provisions of such Purchaser pursuant to which each limited partner of such Purchaser has irrevocably committed to fund such limited partner’s capital contribution promptly after the call or demand by the general partner of such Purchaser.

     4.5      Purchase Entirely for Own Account. Such Purchaser is acquiring the Preferred Stock for its own account and not with a view to, or for sale in connection with, any distribution of the Preferred Stock in violation of the Securities Act. Such Purchaser has no present agreement, undertaking, arrangement, obligation or commitment providing for the disposition of the Preferred Stock.

     4.6      Investor Status. Such Purchaser certifies and represents to the Company that such Purchaser is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act. Such Purchaser’s financial condition is such that it is able to bear the risk of holding the Preferred Stock for an indefinite period of time and the risk of loss of its entire investment. Such Purchaser has been afforded the opportunity to ask questions of and receive answers from the management of the Company concerning this investment and has sufficient 

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knowledge and experience in investing in companies similar to the Company so as to be able to evaluate the risks and merits of its investment in the Company.

     4.7      Securities Not Registered. Such Purchaser understands that the Preferred Stock has not been registered under the Securities Act, by reason of their issuance by the Company in a transaction exempt from the registration requirements of the Securities Act, and that the Preferred Stock must continue to be held by such Purchaser unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration. Such Purchaser understands that the exemptions from registration afforded by Rule 144 (the provisions of which are known to it) promulgated under the Securities Act depend on the satisfaction of various conditions, and that, if applicable, Rule 144 may afford the basis for sales only in limited amounts.

     4.8      Tax Matters. Such Purchaser is a United States person within the meaning of Section 7701(a)(30) of the Code.

     5.        Covenants.

     5.1      Best Efforts. Subject to the terms and conditions of this Agreement, each party will use its best efforts to take, or cause to be taken, all appropriate actions, to file, or cause to be filed, all documents and to do, or cause to be done, all things necessary, proper or advisable to consummate the Transactions, including preparing and filing as promptly as reasonably practicable all documentation to effect all necessary filings, consents, waivers, approvals, authorizations, Permits or orders from all Governmental Authorities (including Gaming Authorities) or other Persons and holding a vote of the Company’s stockholders to approve the Common Stock Issuance; provided, however, that in no event shall the Company or any of its Subsidiaries be required to pay any fee, penalty or other consideration to obtain any consent, approval or waiver required for the consummation of the Transactions under any contract.

     5.2      Pennsylvania Control Share Statute. The Company and the Board of Directors shall, subject to directors’ fiduciary duties under applicable law, grant such approvals and take such actions as are reasonably necessary to eliminate or minimize the effects of the Pennsylvania Control Share Statute with respect to the Preferred Stock, this Agreement and the Transactions, and shall hold a vote of the Company’s stockholders to approve the same pursuant to Section 2564 of the Pennsylvania Control Share Statute if requested by a Purchaser whose shares may be deemed to be Control Shares (as such term is defined in the Pennsylvania Control Share Statute).

     5.3      Interim Actions. If during the period between the date hereof and the earlier of the Closing Date and the date this Agreement is terminated, the Company takes any action that, had the Preferred Stock been outstanding at such time, (i) would have resulted in a distribution or payment to the holders of the Preferred Stock, (ii) would, or together with other like events could, have resulted in any adjustments to the terms of the Preferred Stock, including the Ceiling Price or the Floor Price (as defined in the Certificate of Designations), or (iii) would have required the prior approval of or consent by the holders of the Preferred Stock, then the taking of any such action by the Company shall require the approval of each of the Purchasers.

     5.4      Tax Treatment.

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                   (a)       Each Purchaser shall deliver to the Company an IRS Form W-9 in connection with its acquisition of the Preferred Stock hereunder and at any other time reasonably requested by the Company.

                   (b)      The Company shall not treat the Preferred Stock (based on its terms) as “preferred stock” as defined in Treasury Regulation Section 1.305 -5(a), provided that (i) it receives an opinion of nationally recognized tax counsel or an accounting firm on which it may rely, in form and substance reasonably satisfactory to the Company, at the time that such treatment is relevant to the Company based on then applicable law, to the effect that it is at least more likely than not that the Preferred Stock is not "preferred stock" as defined in Treasury Regulation Section 1.305 -5(a) and (ii) this Section 5.4 shall not limit the Company's rights under Section 10(c) of the Certificate of Designations.

     6.       Conditions Precedent.

     6.1     Conditions to the Obligations of Each Party. The obligations of the Company, and each Purchaser to consummate the sale of the Preferred Stock to the Purchasers at the Closing are subject to the satisfaction or waiver of the following conditions:

                   (a)      Any and all Gaming Approvals, and any approvals required under the HSR Act, if any, required to be obtained prior to the Closing to consummate the Investment shall have been obtained.

                   (b)      No temporary restraining order, preliminary or permanent injunction or other judgment or order issued by any court or agency of competent jurisdiction (each, a “Restraint”) shall be in effect which prohibits, restrains or renders illegal the consummation of the Investment (provided, that prior to asserting this condition, the party asserting this condition shall have used its best efforts (in the manner contemplated by Section 5.1) to prevent the entry of any such Restraint and to appeal as promptly as practicable any judgment that may be entered).

                  (c)       The Investor Rights Agreement shall be in full force and effect.

                  (d)       The Termination and Settlement Agreement shall be in full force and effect.

   6.2       Conditions to the Obligations of the Company. The obligation of the Company to consummate the sale of the Preferred Stock to the Purchasers at the Closing is subject to the satisfaction or waiver of the following further conditions:

                  (a)       The representations and warranties contained herein of the Purchasers shall be true and correct on the date of this Agreement and as of the Closing Date with the same force and effect as though made on and as of the Closing Date, except where the failure to be so true and correct would not, individually or in the aggregate, as of the date hereof and as of the Closing Date has not had, and would not be reasonably likely to have an effect on the Purchasers that will, or would reasonably be expected to, materially delay or hinder the ability of the Purchasers to perform their obligations under the Transaction Agreements; provided, however, 

9

that such representations and warranties made as of a specific date need only be true and correct (subject to the qualifications set forth above) as of such date only.

     (b) The Company shall have received the full amount of the Deposit and the Escrow Agent shall have received the full amount of the Balance Payment, each in accordance with the terms of this Agreement.

     (c) The Purchasers shall have performed in all material respects all obligations, and complied in all material respects with the agreements and covenants, required to be performed by or complied with by them hereunder at or prior to the Closing.

    6.3 Conditions to the Obligations of the Purchasers. The obligation of the Purchasers to consummate the sale of the Preferred Stock to the Purchasers at the Closing is subject to the satisfaction or waiver of the following further conditions:

     (a) The representations and warranties of the Company (i) set forth in Section 3.4 shall be true and correct on the date of this Agreement and as of the Closing Date with the same force and effect as though made on and as of the Closing Date and (ii) set forth in Article III, other than in Section 3.4, shall be true and correct on the date of this Agreement and as of the Closing Date with the same force and effect as though made on and as of the Closing Date (without giving effect to qualifications as to materiality or Material Adverse Effect contained therein), except where the failure to be so true and correct would not, individually or in the aggregate, have a Material Adverse Effect; provided, however, that such representations and warranties made as of a specific date need only be true and correct (subject to the qualifications set forth above) as of such date only.

     (b) The Certificate of Designations shall have been filed by the Company with the Department of State of the Commonwealth of Pennsylvania, and satisfactory evidence of such filing shall have been delivered to the Purchasers.

     (c) The Company shall have performed in all material respects all obligations, and complied in all material respects with the agreements and covenants, required to be performed by or complied with by it hereunder at or prior to the Closing. 

     7. Termination.

     7.1 Conditions of Termination. Notwithstanding anything to the contrary contained in this Agreement, this Agreement may be terminated at any time before the Closing:

     (a) by mutual consent of the Company and the Purchasers;

     (b) by either the Company, on the one hand, or the Purchasers, on the other hand, if:

     (i) the Closing shall not have occurred on or prior to 5:00 p.m., New York time, on December 31, 2008 and the party or parties seeking to terminate this Agreement pursuant to this Section 7.1(b)(i) shall not have breached in any material respect its or their obligations under this Agreement; or

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     (ii) any Restraint having the effect set forth in Section 6.1(b) shall be in effect and shall have become final and nonappealable; or

     (c) by the Company, if the Purchasers shall have failed to deliver (i) the Deposit before 5:00 p.m. EDT on the first Business Day after the date hereof, or (ii) the Balance Payment to the Escrow Agent, in accordance with the terms and conditions set forth herein, on or prior to the Balance Payment Date.

 7.2     Effect of Termination. In the event of any termination pursuant to Section 7.1, this Agreement shall become null and void and have no effect, with no liability on the part of the Company or the Purchasers, or their directors, officers, agents or stockholders, with respect to this Agreement, other than in respect of willful breach or except as set forth in Section 7.3.

 7.3    Application of Deposit; Repayment of Balance. If this Agreement is terminated, then (a) an amount equal to each Purchasers’ respective Balance Payment (together with interest thereon, if any) shall be released from escrow by the Escrow Agent to each such Purchaser (or, if an amount less than the full Balance Payment has been deposited with the Escrow Agent by any Purchaser, the Escrow Agent shall release to such Purchaser an amount equal to the portion of the Balance Payment (together with interest thereon, if any), if any received by the Escrow Agent from such Purchaser) pursuant to the terms of the Escrow Agreement, and (b) other than as may be required by Section 2.2(a), the Company shall retain the Deposit. Each of the Company and the Purchasers acknowledges that the agreements contained in this Section 7.3 are an integral part of the Transactions and that, without these agreements, the Company would not enter into this Agreement.

 8.      Miscellaneous Provisions.

 8.1    Public Statements or Releases. Promptly following the execution and delivery of this Agreement, the Company and the Purchasers shall issue a mutual acceptable joint press release announcing the execution of this Agreement. Neither the Company nor any Purchaser shall make any public announcement with respect to the existence or terms of this Agreement or the Transactions without the prior approval of the other parties, which shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, nothing in this Section 8.1 shall prevent any party from making any public announcement it considers necessary in order to satisfy its obligations under applicable law or under the rules of any national securities exchange or any Gaming Authority.

 8.2    Interpretation. Section and subsection references are to this Agreement unless otherwise specified. The headings in this Agreement are included for convenience of reference only and will not limit or otherwise affect the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” The phrase “the date of this Agreement,” and terms of similar import, unless the context otherwise requires, will be deemed to refer to the date set forth in the first paragraph of this Agreement. The meanings given to terms defined in this Agreement will be equally applicable to both the singular and plural forms of such terms. All matters to be agreed to by any party must be agreed to in writing by such party unless otherwise indicated in this Agreement. References to agreements, policies, 

11

standards, guidelines or instruments, or to statutes or regulations, are to such agreements, policies, standards, guidelines or instruments, or statutes or regulations, as amended or supplemented from time to time (or to successors thereto).

   8.3       Notices. All notices, requests and other communications to any party hereunder shall be in writing, by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), or by facsimile, and shall be given:

(a)   if to the Company, to:

Penn National Gaming, Inc.

825 Berkshire Boulevard, Suite 200 

Wyomissing, Pennsylvania 19610 

Attention:    Peter M. Carlino 

Fax:            (610) 376-2842

with a copy to (which shall not constitute notice):

Wachtell, Lipton, Rosen & Katz 

51 West 52nd Street New York, 

New York 10019-6150 

Attention:   Daniel A. Neff 

                  David C. Karp 

Fax:          (212) 403-2000

(b) if to any Purchaser, to the address set forth in Exhibit A for such Purchaser with a copy to (which shall not constitute notice):

Willkie Farr & Gallagher LLP 

787 Seventh Avenue New York, 

New York 10019 

Attention:  Thomas M. Cerabino 

                Adam M. Turteltaub 

Fax:         (212) 728-8111

and

Cahill Gordon & Reindel LLP 

80 Pine Street 

New York, New York 10005 

Attention: Jonathan A. Schaffzin 

Fax: (212) 269-5420

or such other address or facsimile number as such party may hereafter specify by notice to the other parties hereto. Each such notice, request or other communication shall be effective (i) if

12

given by facsimile, when such facsimile is transmitted to the facsimile number specified above and electronic confirmation of transmission is received or (ii) if given by any other means, when delivered at the address specified in this Section 8.3.

 8.4      Severability. If any part or provision of this Agreement is held unenforceable or in conflict with the applicable laws or regulations of any jurisdiction, the invalid or unenforceable part or provisions shall be replaced with a provision which accomplishes, to the extent possible, the original business purpose of such part or provision in a valid and enforceable manner, and the remainder of this Agreement shall remain binding upon the parties.

8.5       Governing Law.

     (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof.

     (b) For the purposes of any suit, action or other proceeding between any of the parties hereto arising out of this Agreement or any transaction contemplated hereby, each party irrevocably submits to the jurisdiction of the United States District Court for the Eastern District of Pennsylvania, and, in the event there is no subject matter jurisdiction over this dispute in Federal court, then to the jurisdiction of the Court of Common Pleas of Berks County. Each party agrees to commence any suit, action or proceeding between any of the parties hereto arising out of this Agreement or any transaction contemplated hereby in the United States District Court for the Eastern District of Pennsylvania, and, in the event such suit, action or other proceeding may not be brought in Federal court, then each party agrees to commence such suit, action or proceeding in the Court of Common Pleas of Berks County. Each party irrevocably and unconditionally waives any objection to the laying of venue of any suit, action or proceeding between any of the parties hereto arising out of this Agreement or any transaction contemplated hereby in (i) the United States District Court for the Eastern District of Pennsylvania, and in (ii) the Court of Common Pleas of Berks County. Each party hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any of the aforementioned courts that any such suit, action or proceeding has been brought in an inconvenient forum. Each party further irrevocably consents to the service of process out of any of the aforementioned courts in any such suit, action or other proceeding by the mailing of copies thereof by registered mail to such party at its address set forth in this Agreement, such service of process to be effective upon acknowledgment of receipt of such registered mail; provided that nothing in this Section 8.5 shall affect the right of any party to serve legal process in any other manner permitted by law. The consent to jurisdiction set forth in this Section 8.5 shall not constitute a general consent to service of process in the Commonwealth of Pennsylvania and shall have no effect for any purpose except as provided in this Section 8.5. The parties agree that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

      (c) EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION 

 

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DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.5.

     8.6      Waiver. No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or be construed as, a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement.

     8.7      Expenses. Each of the Company and the Purchasers shall be responsible for their own expenses incurred in connection with the Investment and the other transactions contemplated by the Transaction Agreements; provided, however, that (i) the Purchasers shall be liable for and shall pay any regulatory fees incurred in order to obtain any filings, consents, waivers, approvals authorizations, permits or other orders from any Gaming Authority necessary in connection this Agreement or, except for the Bank Parties, the Merger Agreement, and shall be responsible for the costs of any approvals under the HSR Act.

     8.8      Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto (and any purported assignment without such consent shall be void and without effect), provided, however, that a Purchaser may assign any of its rights, interests and obligations hereunder to an Affiliate, provided that no Purchaser may assign any of its rights, interests and obligations hereunder to an Affiliate if such assignment would, or would reasonably be expected to, materially delay or hinder the ability of any the Purchasers to perform their obligations under Sections 2.2 and 7.3 hereto, and provided further that no such assignment shall relieve such Purchaser from any of its agreements and obligations hereunder.

     8.9      Third Parties. This Agreement does not create any rights, claims or benefits inuring to any Person that is not a party nor create or establish any third party beneficiary to this Agreement or any other Transaction Agreement.

     8.10      Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

     8.11      Entire Agreement; Amendments. This Agreement, the Investment Rights Agreement and the Confidentiality Agreement, constitute the entire agreement between the parties respecting the subject matter of this Agreement and supersede all prior agreements, negotiations, understandings, representations and statements respecting the subject matter of this 

14

Agreement, whether written or oral. No modification, alteration, waiver or change in any of the terms of this Agreement shall be valid or binding upon the parties unless made in writing and duly executed by the parties.

     8.12 Survival. The representations and warranties contained in this Agreement shall terminate upon the first to occur of the Closing or the termination of this Agreement.

     8.13 Representation by Counsel; Mutual Drafting. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and have participated jointly in the negotiation and drafting of this Agreement and hereby waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

*         *         *         *

15

	                   IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and  year first above written. 
	

	PENN NATIONAL GAMING, INC. 
	 
	 
	By: 	 	/s/    Peter M. Carlino   
	Name:          Mr. Peter M. Carlino 
	Title:             Chairman and Chief Executive Officer 

	FIF V PFD LLC 	 	 
	 
	 
	By:      /s/      Randal Nardone  
	Name:          Randal Nardone   
	Title:             Vice President   

	CENTERBRIDGE CAPITAL PARTNERS, L.P. 
	
	
	By: Centerbridge Associates, L.P., 
	       its general partner
	
	By: Centerbridge Associates, G.P., 
	       its general partner
	 
	By:     /s/      Steven Price  
	Name:         Steven Price
	Title:            Senior Managing Director

	DB INVESTMENT PARTNERS, INC. 
	 
	 
	By:      /s/      Joseph J. Rice   
	Name:          Joseph J. Rice 
	Title:             Director 

	By:      /s/      Michael T. Iben  
	Name:          Michael T. Iben 
	Title:             Director 

	WACHOVIA INVESTMENT HOLDINGS, LLC 
	 
	 
	By:      /s/      Eric J. Lloyd  
	Name:          Eric J. Lloyd 
	Title:             Managing Director 

	  	  	  	  	  	  	                           EXHIBIT A  
	  
	PURCHASERS 
	

	  
	Purchaser Name and  	  	Shares of Preferred  	  	Signing Date Payment  	  	Balance Payment  
	Address  	  	Stock to be  	  	  	  	  
	  	  	Purchased  	  	  	  	  
	

		

		

		

	FIF V PFD LLC  	  	9,750  	  	$370,500,000  	  	$604,500,000  
	

		

		

		

	CENTERBRIDGE  	  	2,300  	  	$87,400,000  	  	$142,600,000  
	CAPITAL  	  	  	  	  	  	  
	PARTNERS, L.P.  	  	  	  	  	  	  
	

		

		

		

	DB INVESTMENT  	  	225  	  	$8,550,000  	  	$13,950,000  
	PARTNERS, INC.  	  	  	  	  	  	  
	

		

		

		

	WACHOVIA  	  	225  	  	$8,550,000  	  	$13,950,000  
	INVESTMENT  	  	  	  	  	  	  
	HOLDINGS, LLC  	  	  	  	  	  	  
	

		

		

		

	                                     TOTAL:  	  	                                     12,500  	  	               $475,000,000.00  	  	               $775,000,000.00  
	

		

		

		

	EXHIBIT B

INVESTOR RIGHTS AGREEMENT

	EXHIBIT C

CERTIFICATE OF DESIGNATIONS

	EXHIBIT D

	ESCROW AGREEMENTsettlementagreement.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

                                                                                                                                                                                                         Exhibit 10.2

TERMINATION AND SETTLEMENT AGREEMENT

     TERMINATION AND SETTLEMENT AGREEMENT, dated as of July 3, 2008 (this “Agreement”), among PENN NATIONAL GAMING, INC., a Pennsylvania corporation (the “Company”), PNG ACQUISITION COMPANY INC., a Delaware corporation (“Parent”), PNG MERGER SUB INC., a Pennsylvania corporation, a wholly owned Subsidiary of Parent and an entity intended by Parent to be transitory for U.S. federal income tax purposes (“Merger Sub”), PNG HOLDINGS LLC, a Delaware limited liability company (“PNG Holdings”), FIG PNG HOLDINGS LLC (“FIG PNG”), FORTRESS INVESTMENT FUND V (FUND A) L.P. (“FIF V (A)”), FORTRESS INVESTMENT FUND V (FUND D) L.P. (“FIF V (D)”), FORTRESS INVESTMENT FUND V (FUND E) L.P. (“FIF V (E)”), FORTRESS INVESTMENT FUND V (FUND B) L.P. (“FIF V (B)”), FORTRESS INVESTMENT FUND V (FUND C) L.P. (“FIF V (C)”), FORTRESS INVESTMENT FUND V (FUND F) L.P. (“FIF V (F)” and, together with FIG PNG, FIF V (A), FIF V (D), FIF V (E), FIF V (B) and FIF V (C), “Fortress”), CB PNG HOLDINGS LLC (“CB PNG”), CENTERBRIDGE CAPITAL PARTNERS, L.P. (“CB Capital Partners”), CENTERBRIDGE CAPITAL PARTNERS STRATEGIC, L.P. (“CB Strategic”), CENTERBRIDGE CAPITAL PARTNERS SBS, L.P. (“CB SBS” and, together with CB PNG, CB Capital Partners and CB Strategic, “Centerbridge”), DB INVESTMENT PARTNERS, INC. (“DBIP”), WACHOVIA INVESTMENT HOLDINGS, LLC (“WIH”), DEUTSCHE BANK SECURITIES INC. (“DBSI”), DEUTSCHE BANK AG NEW YORK BRANCH (“DBNY”), WACHOVIA CAPITAL MARKETS, LLC (“WCM”), WACHOVIA BANK, NATIONAL ASSOCIATION (“Wachovia Bank”), and WACHOVIA INVESTMENT HOLDINGS, LLC (“Wachovia Investment, and together with DBSI, DBNY, WCM and Wachovia Bank, the “Lenders”). Parent, Merger Sub, PNG Holdings, Fortress and Centerbridge are collectively referred to herein as the “Sponsor Parties”. The Lenders, DBIP and WIH are collectively referred to herein as the “Lender Parties”.

     WHEREAS, Parent, Merger Sub and the Company entered into an Agreement and Plan of Merger, dated as of June 15, 2007 (the “Merger Agreement”), pursuant to which Merger Sub was to be merged with and into the Company on the terms and subject to the conditions set forth in the Merger Agreement (the “Merger”);

     WHEREAS, immediately prior to the execution of the Merger Agreement, CB PNG executed an equity commitment letter with each of DBIP and WIH (together, the “Bridge Commitment Letters”) whereby DBIP and WIH collectively agreed, subject to the terms and conditions therein, to purchase non-voting common equity interests in CB PNG at an aggregate price of $100 million;

     WHEREAS, concurrently with the execution of the Merger Agreement, each of Fortress and Centerbridge executed an equity commitment letter (together, the “Equity Commitment Letters”) whereby Fortress and Centerbridge collectively agreed, subject to the terms and conditions therein, to directly or indirectly provide, or cause to be provided, to Parent under the Merger Agreement, up to $3.061 billion of cash and to fund, up to a certain amount, a pro rata portion of amounts payable by Parent under the Merger Agreement;

     WHEREAS, concurrently with the execution of the Merger Agreement, Fortress and Centerbridge executed an engagement letter with each of DBSI and WCM (together, the “Engagement Letters”) whereby DBSI and WCM agreed, subject to the terms and conditions therein, to provide certain financial advisory and investment banking services with respect to the Merger;

     WHEREAS, concurrently with the execution of the Merger Agreement, Parent executed an exclusivity agreement with the Lenders and WIH (the “Exclusivity Letter”);

     WHEREAS, concurrently with the execution of the Merger Agreement, Parent executed a fee letter with the Lenders and WIH (the “Fee Letter”);

     WHEREAS, concurrently with the execution of the Merger Agreement, Parent executed a debt financing commitment letter (the “Debt Financing Commitment Letter”) whereby the Lenders collectively agreed, subject to the terms and conditions set forth in the Debt Financing Commitment Letter, to provide to Parent senior secured credit facilities in an aggregate amount of up to $5.1 billion and a senior unsecured term loan in an aggregate amount of up to $2.0 billion;

     WHEREAS, under Section 9.1(a) of the Merger Agreement, the Company, on one hand, and Parent and Merger Sub, on the other hand, have agreed to terminate the Merger Agreement and abandon the Merger; 

     WHEREAS, the Board of Directors of the Company has approved the execution, delivery and performance by the Company of this Agreement and the transactions contemplated by this Agreement; and

     WHEREAS, the board of directors (or equivalent governing body) of each of the Sponsor Parties has approved such Sponsor Party entering into this Agreement and declared it advisable for such Sponsor Party to enter into this Agreement.

     NOW, THEREFORE, in consideration of the foregoing premises and the respective representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.1.   Definitions. Unless otherwise specifically defined in this Agreement, each capitalized term used but not defined in this Agreement shall have the meaning assigned to such term in the Merger Agreement.

ARTICLE II

SETTLEMENT

     Section 2.1.   Settlement.

2

     (a)    Simultaneously with the execution and delivery of this Agreement and in consideration of the agreements made by the Company and the Sponsor Parties under this Agreement, FIF V PFD LLC, a Delaware limited liability company, CB Capital Partners, DBIP and WIH (collectively, the “Purchasers”) and the Company, each shall execute and deliver to each other that certain Purchase Agreement, dated of even date herewith (the “Purchase Agreement”), pursuant to which on the terms and subject to the conditions set forth therein, the Purchasers shall purchase, and the Company shall sell, 12,500 shares of Series B Preferred Stock of the Company for an aggregate purchase price of $1.25 billion.

     (b)    Prior to 12:00 noon EDT on the business day after the date hereof and in consideration of the agreements made herein, (A) the Lenders shall (i) pay Two Hundred Twenty-Five Million Dollars ($225,000,000.00) to Merger Sub (the “Lenders Payment”) and (ii) reimburse the PNG Holdings for Forty-Five Million Dollars ($45,000,000.00) of fees and expenses incurred by the Sponsor Parties in connection with the transactions contemplated by the Merger Agreement and (B) Merger Sub shall pay, or cause to be paid, Two Hundred Twenty-Five Million Dollars ($225,000,000.00) to the Company (the “Settlement Payment”). Each of Wachovia Bank and DBNY shall severally be responsible for fifty percent (50%) of each of the payments set forth in clause (A) above. The parties hereto intend to treat the payments pursuant to this Article 2 as made for damage to capital and not for lost profit. Merger Sub hereby directs Lenders to wire the Lenders Payment directly to the Company by wire transfer of immediately available United States funds, and, upon the Company’s receipt of the full amount of the Lenders Payment, Merger Sub shall have fully satisfied its obligation to pay the Settlement Payment. The Settlement Payment shall not be repayable or refundable under any circumstances, including the termination or expiration of this Agreement or the Purchase Agreement. 

ARTICLE III

TERMINATION

     Section 3.1.   Termination of Merger Agreement. Effective upon the receipt by the Company of the full amount of both the Deposit (as defined in the Purchase Agreement) and the Settlement Payment, pursuant to Section 9.1(a) of the Merger Agreement, without further action of any party hereto, the Merger Agreement is hereby terminated in its entirety, is null and void, and is of no further force and effect, including, without limitation, those provisions of the Merger Agreement which by their terms would otherwise survive termination of the Merger Agreement, and there shall be no liability or obligation on the part of any Released Person (as defined below), except that the Confidentiality Agreement, dated April 23, 2007, between the Company and Fortress Investment Group LLC and the Confidentiality Agreement, dated April 23, 2007, between the Company and Centerbridge Associates, L.P. (the “Confidentiality Agreements”) will survive the termination of the Merger Agreement and the execution and delivery of this Agreement by each of the parties. The termination of the Merger Agreement, once effective, is irrevocable.

     Section 3.2.   Termination of Bridge Commitment Letters and Equity Commitment Letters. Effective upon the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, without further action of any party hereto, the parties hereby agree that the Bridge Commitment Letters and Equity Commitment Letters are hereby terminated in their 

3

entirety, are null and void, and are of no further force and effect, including, without limitation, any provisions of the Bridge Commitment Letters or the Equity Commitment Letters which by their terms would otherwise survive termination of the Bridge Commitment Letters or the Equity Commitment Letters, as the case may be.

     Section 3.3.   Termination of Fee Letter and Debt Financing Commitment Letter. Effective upon the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, without further action of any party hereto, the parties hereby agree that the Fee Letter and Debt Financing Commitment Letter are hereby terminated in their entirety, are null and void, and are no further force and effect, including, without limitation, any provisions of the Fee Letter or the Debt Commitment Letter relating to indemnity, contribution, payment of expenses or otherwise, which by their terms would otherwise survive termination of the Fee Letter or the Debt Commitment Letter.

     Section 3.4.   Termination of Engagement Letters and Exclusivity Letter. Effective upon the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, without further action of any party hereto, the parties hereby agree that the Engagement Letters and the Exclusivity Letter are hereby terminated in their entirety, are null and void and are of no further force and effect, including, without limitation, any provisions of the Engagement Letter or the Exclusivity Letter which by their terms would otherwise survive termination of the Engagement Letters or the Exclusivity Letter, as the case may be. 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     Section 4.1.   Representations and Warranties of the Company. The Company hereby represents and warrants that this Agreement has been duly authorized, executed and delivered by the Company and, assuming this Agreement constitutes the valid and binding agreement of the Sponsor Parties and the Lender Parties, is the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

     Section 4.2.   Representations and Warranties of the Sponsor Parties. Each of the Sponsor Parties hereby represents and warrants that this Agreement has been duly authorized, executed and delivered by such Sponsor Party and, assuming this Agreement constitutes the valid and binding agreement of the Company and the Lender Parties, this Agreement is the valid and binding obligation of such Sponsor Party, enforceable against such Sponsor Party in accordance with its terms.

     Section 4.3.   Representations and Warranties of the Lender Parties. Each of the Lender Parties hereby represents and warrants that this Agreement has been duly authorized, executed and delivered by such Lender Party and, assuming this Agreement constitutes the valid and binding agreement of the Company and the Sponsor Parties, this Agreement is the valid and binding obligation of such Lender Party, enforceable against such Lender Party in accordance with its terms.

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ARTICLE V

RELEASES AND COVENANT NOT TO SUE

     Section 5.1.   Company Release.  Effective as of the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, the Company, for itself and, to the maximum extent permitted by law, on behalf of its former, current or future officers, directors, agents, representatives, managing directors, partners, managers, principals, members, parents, subsidiaries, Affiliates, employees, predecessor entities, heirs, executors, administrators, successors and assigns of any said person or entity, security holders of any said person or entity, and any other person claiming (now or in the future) through or on behalf of any of said entities (“Company Releasing Parties”), hereby unequivocally, fully and irrevocably releases and discharges (x) the Sponsor Parties, their parents, subsidiaries and Affiliates and their respective former, current or future officers, directors, managing directors, partners, managers, principals, members, parents, subsidiaries, Affiliates, employees and attorneys and other advisors and agents (including, without limitation, debt and equity financing sources), predecessor entities, heirs, executors, administrators, successors and assigns of any said person or entity (collectively, “Sponsor Released Persons”) and (y) the Lender Parties, their parents, subsidiaries and Affiliates and their respective former, current or future officers, directors, managing directors, partners, managers, principals, members, parents, subsidiaries, Affiliates, employees and attorneys and other advisors and agents (including, without limitation, debt and equity financing sources), predecessor entities, heirs, executors, administrators, successors and assigns of any said person or entity (collectively, “Lender Released Persons”), from any and all past, present, direct, indirect and/or derivative liabilities, claims, rights, actions, causes of action, counts, obligations, sums of money due, attorneys’ fees, suits, debts, covenants, agreements, promises, demands, damages and charges of whatever kind or nature, known or unknown, in law or in equity, asserted or that could have been asserted, under federal or state statute, or common law or the laws of any other relevant jurisdiction, arising from or out of, based upon, in connection with or otherwise relating in any way to the Merger Agreement, the Bridge Commitment Letters, the Equity Commitment Letters, the Debt Financing Commitment Letter, the Engagement Letters, the Exclusivity Letter, the Fee Letter, and including, without limitation, any acts, omissions, disclosure or communications related to the Merger Agreement, the Bridge Commitment Letters or the Equity Commitment Letters, the Fee Letter, the Debt Financing Commitment Letter, the Exclusivity Letter, and the Engagement Letters or the transactions or payments contemplated thereby (the “Company Released Claims”); provided that, for the avoidance of doubt, nothing contained in this Agreement shall be deemed to release any party hereto from its obligations under this Agreement, the Confidentiality Agreements, the Purchase Agreement, the Investor Rights Agreement, dated as of the date hereof, executed pursuant to the Purchase Agreement (the “Investor Rights Agreement”) or any agreement among any of the parties hereto entered into subsequent to the execution this Agreement, or the transactions contemplated hereby or thereby; and provided, further, that nothing contained herein shall be deemed to release any of the Sponsor Parties from its obligations under the Merger Agreement or the Purchase Agreement to pay any regulatory fees incurred by the parties thereto in connection with the Merger Agreement or the Purchase Agreement. For purposes of this Agreement, “Affiliate” shall mean, with respect to any person, any other person directly or indirectly controlling, controlled by or under direct or indirect common control with such person.

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     Section 5.2.   Sponsor Party Releases.  Effective as of the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, the Sponsor Parties, for themselves and, to the maximum extent permitted by law, on behalf of their former, current or future respective officers, directors, agents, representatives, managing directors, partners, managers, principals, members, parents, subsidiaries, Affiliates, employees, predecessor entities, heirs, executors, administrators, successors and assigns of any said person or entity, security holders of any said person or entity and any other person claiming (now or in the future) through or on behalf of any of said entities (“Sponsor Releasing Parties”), hereby unequivocally, fully and irrevocably release and discharge (x) the Company, its subsidiaries and Affiliates and their respective former, current or future officers, directors, managing directors, partners, managers, principals, members, parents, subsidiaries, Affiliates, employees and attorneys and other advisors and agents (including, without limitation, financial and legal advisors), predecessor entities, heirs, executors, administrators, successors and assigns of any said person or entity (collectively, “Company Released Persons” and together with the Sponsor Released Persons and the Lender Released Persons, the “Released Persons”), (y) the Lender Released Persons and (z) each of the other Sponsor Released Persons, from any and all past, present, direct, indirect and/or derivative liabilities, claims, rights, actions, causes of action, counts, obligations, sums of money due, attorneys’ fees, suits, debts, covenants, agreements, promises, demands, damages and charges of whatever kind or nature, known or unknown, in law or in equity, asserted or that could have been asserted, under federal or state statute, or common law or the laws of any other relevant jurisdiction, arising from or out of, based upon, in connection with or otherwise relating in any way to the Merger Agreement, the Bridge Commitment Letters or the Equity Commitment Letters, the Fee Letter, the Debt Financing Commitment Letter, the Exclusivity Letter, and the Engagement Letters or the transactions or payments contemplated thereby, including, without limitation, any claim relating to the termination of the Merger Agreement (including, without limitation, any claim for payment of the Termination Fee or the payment or reimbursement of any Parent Expenses or any other expenses of Parent or Merger Sub in connection with the Merger), and including, without limitation, any acts, omissions, disclosure or communications related to the Merger Agreement, the Bridge Commitment Letters or the Equity Commitment Letters, the Fee Letter, the Debt Financing Commitment Letter, the Exclusivity Letter, and the Engagement Letters or the transactions or payments contemplated thereby (the “Sponsor Party Released Claims”); provided that, for the avoidance of doubt, nothing contained in this Agreement shall be deemed to release any party hereto from its obligations under this Agreement, the Confidentiality Agreements, the Purchase Agreement, the Investor Rights Agreement or any agreement among any of the parties hereto entered into subsequent to the execution of this Agreement, or the transactions contemplated hereby or thereby.

     Section 5.3.   Parent and PNG Holdings Release.  Effective as of the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, for itself and, to the maximum extent permitted by law, on behalf of its former, current or future officers, directors, employees, agents, representatives, parents, Subsidiaries, Affiliates and any predecessor entities, heirs, executors, administrators, successors and assigns of any said person or entity, and any other person claiming (now or in the future) for Parent or PNG Holdings, as applicable, through or on behalf of Parent or PNG Holdings, as applicable, hereby unequivocally, fully and irrevocably release and discharge, the Sponsor Released Persons from any and all past, present, direct, indirect and/or derivative liabilities, claims, actions, causes of

6

action, counts, obligations, sums of money due, attorneys’ fees, suits, debts, covenants, agreements, promises, demands, damages and charges of whatever kind or nature, known or unknown, in law or in equity, asserted or that could have been asserted, under federal or state statute, or common law or the laws of any other relevant jurisdiction arising out of, or relating to any of the Equity Commitment Letters or the transactions contemplated thereby, including, without limitation, any claim relating to the payment of the Reverse Termination Fee or any payments in respect of the Other Obligations (as defined in the Equity Commitment Letters) and including, without limitation, any breaches, non-performances, acts, omissions, disclosures or communications related to the Equity Commitment Letters or the transactions contemplated thereby (the “Parent/PNG Holdings Released Claims”); provided that, for the avoidance of doubt, nothing contained herein shall be deemed to release any party hereto from its obligations under this Agreement or the transactions contemplated hereby.

     Section 5.4.   Lender Party Releases.  Effective as of the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, the Lender Parties, for themselves and on behalf of their former, current or future respective officers, directors, employees, agents, managing directors, partners, managers, members, principals, parents, Subsidiaries, Affiliates, and any predecessor entities, heirs, executors, administrators, successors and assigns of any said person or entity, any “indemnified person” (as defined in the Debt Commitment Letter) and any other person claiming (now or in the future) for the Lender Parties through or on behalf of the Lender Parties, and, to the maximum extent permitted by law, security holders of any said person or entity (“Lender Releasing Parties”), hereby unequivocally, fully and irrevocably release and discharge, (x) the Company Released Persons and (y) the Sponsor Released Persons, from any and all past, present, direct, indirect and/or derivative liabilities, claims, rights, actions, counts, causes of action, obligations, sums of money due, attorneys’ fees, suits, debts, covenants, agreements, promises, demands, damages and charges of whatever kind or nature, known or unknown, in law or in equity, asserted or that could have been asserted, under federal or state statute, or common law or the laws of any other relevant jurisdiction, arising from or out of, based upon, in connection with or otherwise relating in any way to the Merger Agreement, the Bridge Commitment Letters, the Equity Commitment Letters, the Fee Letter, the Debt Financing Commitment Letter, the Exclusivity Letter, and the Engagement Letters or the transactions or payments contemplated thereby, (the “Lender Party Released Claims” and together with the Company Released Claims, the Parent/PNG Holdings Released Claims and the Sponsor Released Claims, the “Released Claims”); provided that, for the avoidance of doubt, nothing contained in this Section 5.4 shall be deemed to release (i) any party hereto from its obligations under this Agreement, the Purchase Agreement or the Investor Rights Agreement or the transactions contemplated hereby or thereby, (ii) any claim under that certain Indemnification and Guaranty Agreement, dated the date hereof, entered into by the Lenders, Parent and certain affiliates of Fortress and Centerbridge (the “I&G Agreement”) or (iii) any claim by any Lender Releasing Party solely in its capacity as a fiduciary for a beneficial owner of securities of the Company (other than any such beneficial owner that is a Sponsor Party (and each Sponsor Party hereby consents to the foregoing release by any such Lender Releasing Party)).

Section 5.5.   Scope of Release and Discharge.

     (a)    The parties, on behalf of the respective Releasing Parties, acknowledge and agree that they may be unaware of or may discover facts in addition to or different from 

7

those which they now know, anticipate or believe to be true related to or concerning the Released Claims. The parties know that such presently unknown or unappreciated facts could materially affect the claims or defenses of a party or parties. It is nonetheless the intent of the parties to give a full, complete and final release and discharge of the Released Claims. In furtherance of this intention, the releases herein given shall be and remain in effect as full and complete releases with regard to the Released Claims notwithstanding the discovery or existence of any such additional or different claim or fact. To that end, with respect to the Released Claims only, the parties expressly waive and relinquish any and all provisions, rights and benefits conferred by any law of the United States or of any state or territory of the United States or of any other relevant jurisdiction, or principle of common law, under which a general release does not extend to claims which the parties do not know or suspect to exist in their favor at the time of executing the release, which if known by the parties might have affected the parties’ settlement. With respect to the Released Claims only, the Parties expressly waive and relinquish, to the fullest extent permitted by law, the provisions, rights, and benefits of §1542 of the California Civil Code, or any New York or other state’s counterpart thereto, which provides:

     A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

     (b)    The parties acknowledge and agree that the inclusion of this Section 5.5 was separately bargained for and is a key element of this Agreement.

     Section 5.6.   Covenant Not to Sue.  Effective as of the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, each of the parties covenants, on behalf of itself and the Company Releasing Parties, in the case of the Company, the Sponsor Releasing Parties, in the case of the Sponsor Parties or the Lender Releasing Parties, in the case of the Lender Parties, not to bring any Released Claim before any court, arbitrator, or other tribunal in any jurisdiction, whether as a claim, a cross claim, or counterclaim. Any Released Person may plead this Agreement as a complete bar to any Released Claim brought in derogation of this covenant not to sue.

     Section 5.7.   Accord and Satisfaction.  Effective as of the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, this Agreement and the releases reflected in this Agreement shall be effective as a full, final and irrevocable accord and satisfaction and release of all of the Released Claims.

     Section 5.8.   Indemnification.

     (a)    Effective as of the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, the Company agrees to hold harmless and indemnify each Sponsor Party and such Sponsor Party’s Affiliates and any officer, director, partner, employee or agent of such Sponsor Party or such Sponsor Party’s Affiliates and any Person controlling such Sponsor Party or such Sponsor Party’s Affiliates (collectively, the “Sponsor Party Indemnified Persons”) from and against half of any and all losses, claims, judgments, damages, liabilities and expenses, including without limitation any payments made in settlement of any such claims (each a “Loss”

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and collectively, the “Losses”) whatsoever (including reasonable expenses incurred in preparing or defending against any litigation or proceeding, commenced or threatened, or any claims whatsoever whether or not resulting in any liability) imposed on or incurred by any Sponsor Party Indemnified Person, to the extent that such Loss results from any claim or cause of action brought by or on behalf of one or more former, present or future Company stockholders (including any direct or derivative claim) based upon the execution, delivery or performance of this Agreement, the Merger Agreement or the Transaction Agreements (as defined in the Purchase Agreement) or the termination of the Merger Agreement or the taking of any action, or failure to take any action, including with respect to any actual or omitted public disclosure, with respect to the Merger Agreement or the Merger. Any person indemnified initially hereunder shall remain so indemnified, regardless of any subsequent change in their position or status that qualified such person for indemnification initially. The Company shall be entitled to receive one half of any amounts recovered by any Sponsor Party Indemnified Person from third parties, including amounts recovered under insurance policies, with respect to Losses incurred in connection with any claim or cause of action which is subject to Section 5.8(a) or (b) (net of any costs of such recovery, including attorneys’ fees and other out-of pocket litigation and similar costs).

     (b)    Effective as of the receipt by the Company of the full amount of both the Deposit and the Settlement Payment, the Sponsor Parties, jointly and severally, agree to hold harmless and indemnify the Company and its Affiliates and any officer, director, partner, employee or agent of the Company or its Affiliates and any Person controlling the Company or its Affiliates (collectively, the “Company Indemnified Persons”) from and against half of any and all Losses whatsoever (including reasonable expenses incurred in preparing or defending against any litigation or proceeding, commenced or threatened, or any claims whatsoever whether or not resulting in any liability) imposed on or incurred by any Company Indemnified Person, to the extent that such Loss results from any claim or cause of action brought by or on behalf of one or more former, present or future Company stockholders (including any direct or derivative claim) based upon the execution, delivery or performance of this Agreement, the Merger Agreement or the Transaction Agreements or the termination of the Merger Agreement or the taking of any action, or failure to take any action, including with respect to any actual or omitted public disclosure, with respect to the Merger Agreement or the Merger. Any person indemnified initially hereunder shall remain so indemnified, regardless of any subsequent change in their position or status that qualified such person for indemnification initially. The Sponsor Parties shall be entitled to receive, pro rata according to the amounts paid as indemnification for the claim in question pursuant to this Section 5.8(b), one half of any amounts recovered by any Company Indemnified Person from third parties, including amounts recovered under insurance policies, with respect to Losses incurred in connection with any claim or cause of action which is subject to Section 5.8(a) or (b) (net of any costs of such recovery, including attorneys’ fees and other out-of pocket litigation and similar costs).

     (c)    If a Sponsor Party Indemnified Person or Company Indemnified Person intends to seek indemnification pursuant to this Section 5.8 with respect to any claim or cause of action described in Section 5.8(a) or Section 5.8(b), respectively, such Sponsor Party Indemnified Person or Company Indemnified Person shall promptly provide written notice to the party from whom indemnification is being sought (in accordance with Section 6.7 hereof) describing such claim or cause of action in reasonable detail and providing copies of all material 

9

written evidence thereof and the estimated amount of the Losses that have been or may be sustained by such Sponsor Party Indemnified Person or Company Indemnified Person, as applicable; provided that the failure to provide such notice or information shall not affect the obligations of the indemnifying party unless it is actually materially prejudiced thereby. The Company and the Sponsor Parties shall jointly control the defense of any such claim or cause of action which is subject to Section 5.8(a) or (b) and shall, and shall use reasonable best efforts to cause each of the Company Indemnified Parties and the Sponsor Indemnified Parties to, fully cooperate in any such defense; provided, however, that for the avoidance of doubt nothing herein shall require any party to assert, or refrain from asserting, any claim, defense or other position in litigation. Each of the Company and the Sponsor Parties shall be entitled to retain their own counsel in connection with any such defense. Neither the Company nor the Sponsor Parties shall agree to a settlement of, or the entry of any judgment arising from, any such claim or cause of action, without the prior written consent of the other party, such consent not to be unreasonably conditioned, withheld or delayed. Notwithstanding anything to the contrary contained in the letter agreement, dated May 22, 2008 (as modified and extended by the letter agreements dated May 27, 2008, May 30, 2008, June 3, 2008, June 4, 2008, June 6, 2008, June 9, 2008, June 10, 2008, June 20, 2008, June 23, 2008 and June 29, 2008 the “Letter Agreement”), by and between the Company on the one hand and the Acquiring Parties (as defined in the Letter Agreement) on the other hand, the Company and the Sponsor Parties shall be entitled to use any and all statements covered by such Letter Agreement in the defense of any claim.

ARTICLE VI

MISCELLANEOUS

     Section 6.1.   Publicity.  Immediately following the execution and delivery of this Agreement, the Company shall issue a press release announcing the execution of this Agreement, which press release shall be subject to the prior review and approval of the Sponsor Parties and the Lender Parties. Other than as a party may determine is necessary to respond to any legal or regulatory process or proceeding or to give appropriate testimony or file any necessary documents in any legal or regulatory proceeding or as may be required by law, each of the parties hereto will use its commercially reasonable efforts not to make any public statements (including in any filing with the SEC or any other regulatory or governmental agency, including any stock exchange, or except as may be required by law) that are inconsistent with, or otherwise contrary to, the jointly approved statements in the press release issued pursuant to this Section 6.1.

     Section 6.2.   Non-Disparagement.  Other than as a party may determine is necessary to respond to any legal or regulatory process or proceeding or to give appropriate testimony or file any necessary documents in any legal or regulatory proceeding or as may be required by law, each party to this Agreement shall use its commercially reasonable efforts not to make any public statements or any private statements that disparage, denigrate or malign the other parties or the Released Persons concerning the subject matter of this Agreement, the Merger Agreement, the Equity Commitment Letters the Debt Financing Commitment Letter, the Engagement Letters, the Bridge Equity Commitment Letters, the Exclusivity Letter, the Fee Letter or the business or practices of the other parties hereto. 

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     Section 6.3.   Admission.  This Agreement constitutes the settlement of disputed claims; it does not and shall not constitute an admission of liability by any of the parties.

     Section 6.4.   Counterparts; Effectiveness.  This Agreement may be executed in two or more counterparts (including by facsimile), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by telecopy or otherwise) to the other parties.

     Section 6.5.   Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof.

     Section 6.6.   Jurisdiction.

     (a)    For the purposes of any suit, action or other proceeding between any of the parties hereto arising out of this Agreement or any transaction contemplated hereby, each party irrevocably submits to the jurisdiction of the United States District Court for the Eastern District of Pennsylvania, and, in the event there is no subject matter jurisdiction over this dispute in Federal court, then to the jurisdiction of the Court of Common Pleas of Berks County. Each party agrees to commence any suit, action or proceeding between any of the parties hereto arising out of this Agreement or any transaction contemplated hereby in the United States District Court for the Eastern District of Pennsylvania, and, in the event such suit, action or other proceeding may not be brought in Federal court, then each party agrees to commence such suit, action or proceeding in the Court of Common Pleas of Berks County. Each party irrevocably and unconditionally waives any objection to the laying of venue of any suit, action or proceeding between any of the parties hereto arising out of this Agreement or any transaction contemplated hereby in (i) the United States District Court for the Eastern District of Pennsylvania, and in (ii) the Court of Common Pleas of Berks County. Each party hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any of the aforementioned courts that any such suit, action or proceeding has been brought in an inconvenient forum. Each party further irrevocably consents to the service of process out of any of the aforementioned courts in any such suit, action or other proceeding by the mailing of copies thereof by registered mail to such party at its address set forth in this Agreement, such service of process to be effective upon acknowledgment of receipt of such registered mail; provided that nothing in this Section 6.6 shall affect the right of any party to serve legal process in any other manner permitted by law. The consent to jurisdiction set forth in this Section 6.6 shall not constitute a general consent to service of process in the Commonwealth of Pennsylvania and shall have no effect for any purpose except as provided in this Section 6.6. The parties agree that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

     (b)    EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION 

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DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.6.

     Section 6.7.   Notices.  All notices, requests and other communications to any party hereunder shall be in writing, by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), or by facsimile, and shall be given:

	(a)  	  	if to any of the Sponsor Parties, to:  
	                          
	  	  	Fortress Investment Group LLC  
	  	  	1345 Avenue of the Americas, 46th Floor  
	  	  	New York, New York 10105  
	  	  	Attention: General Counsel  
	  	  	Fax: (212) 798-6070  
	                         
	with a copy to (which shall not constitute notice):  
	                           
	  	  	Willkie Farr & Gallagher LLP  
	  	  	787 Seventh Avenue  
	  	  	New York, New York 10019  
	  	  	Attention:  	  	Thomas M. Cerabino  
	                   Adam M. Turteltaub 
	  	  	Fax: (212) 728-8111  

	(b)  	  	if to the Company, to:  
	                     
	  	  	Penn National Gaming, Inc.  
	  	  	825 Berkshire Boulevard, Suite 200  
	  	  	Wyomissing, Pennsylvania 19610  
	  	  	Attention: Peter M. Carlino  
	  	  	Fax: (610) 376-2842  
	                         
	  	  	with a copy to (which shall not constitute notice):  
	  
	  	  	Wachtell, Lipton, Rosen & Katz  
	  	  	51 West 52nd Street  
	  	  	New York, New York 10019-6150  
	  	  	Attention: Daniel A. Neff  
	  	  	                David C. Karp  

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	  	  	Fax: (212) 403-2000  
	              
	(c)  	  	if to the Lender Parties, to:  
	                       
	  	  	Deutsche Bank Securities Inc.  
	  	  	60 Wall Street  
	  	  	New York, New York 10005  
	  	  	Attention: Jeffrey Welch  
	  	  	Fax: (212) 797-4561  
	                 
	  	  	Wachovia Capital Markets, LLC  
	  	  	One Wachovia Center  
	  	  	301 South College St.  
	  	  	Charlotte, North Carolina 28288  
	  	  	Attention: Barbara H. Wright  
	  	  	Fax: (704) 383-0649  
	                     
	  	  	with a copy to (which shall not constitute notice):  
	  
	  	  	Cahill Gordon & Reindel LLP  
	  	  	Eighty Pine Street  
	  	  	New York, New York 10005  
	  	  	Attention:  	  	Jonathan A. Schaffzin  
	  	  	  	  	                     Charles A. Gilman  
	  	  	Fax: (212) 269-5420  

or such other address or facsimile number as such party may hereafter specify by notice to the other parties hereto. Each such notice, request or other communication shall be effective (i) if given by facsimile, when such facsimile is transmitted to the facsimile number specified above and electronic confirmation of transmission is received or (ii) if given by any other means, when delivered at the address specified in this Section 6.7.

     Section 6.8.   Assignment; Binding Effect.  Neither this Agreement nor any of the rights, interests or obligations in this Agreement shall be assigned by any of the parties (whether by operation of Law or otherwise) without the prior written consent of the other parties. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and, subject to the preceding sentence, assigns.

     Section 6.9.   Severability.  Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only as broad as is enforceable.

     Section 6.10.   Entire Agreement; No Third-Party Beneficiaries.  This Agreement constitutes the entire agreement of the parties with respect to the subject matter of this 

13

Agreement, and supersedes all other prior (but not subsequent) agreements and understandings, both written and oral, between the parties, or any of them, with respect to the subject matter of this Agreement and thereof; provided, however, that the obligations of the parties set forth in the Confidentiality Agreements, the Purchase Agreement and the Investor Rights Agreement shall not be superseded and shall remain in full force and effect. Each party hereto acknowledges and agrees that each of the non-party Released Persons are express third party beneficiaries of the releases of such non-party Released Persons contained in Sections 5.1, 5.2, 5.3, 5.4 and 5.5 and covenants not to sue contained in Section 5.6 of this Agreement and indemnities set forth in Section 5.8 and are entitled to enforce rights under such sections to the same extent that such non-party Released Persons could enforce such rights if they were a party to this Agreement. Except as provided in the preceding sentence, there are no third party beneficiaries to this Agreement, and this Agreement is not otherwise intended to and shall not otherwise confer upon any Person other than the parties any rights or remedies in this Agreement.

     Section 6.11.   Headings.  Headings of the Articles and Sections of this Agreement are for convenience of the parties only and shall be given no substantive or interpretive effect whatsoever.

     Section 6.12.   Interpretation.  When a reference is made in this Agreement to an Article or Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The word “or” shall be deemed to mean “and/or.” The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. 

     Section 6.13.   Representation by Counsel; Mutual Drafting.  The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and have participated jointly in the negotiation and drafting of this Agreement and hereby waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

     Section 6.14.   Specific Performance.  It is understood and agreed by the parties that a breach of this Agreement would cause actual, immediate and irreparable injury for which there would be no adequate remedy at law and money damages would not be a sufficient remedy for any breach of this Agreement by any party, and each non-breaching party therefore shall be entitled, in addition to any other remedy available thereto under this Agreement, at law or in 

14

equity, to specific performance and injunctive or other equitable relief as a remedy of any such breach.

     Section 6.15.   Termination.  If the full amount of both the Deposit and the Settlement Payment shall not have been received by the Company before 5:00 p.m. EDT on the first (1st) business day after the date hereof, the Company may give written notice to the other parties hereto at any time thereafter of its intent to terminate this Agreement, in which event this Agreement shall terminate at 5:00 p.m. EDT on the first (1st) business day after the date of delivery of such notice of intent to all other parties hereto unless such payments are received by the Company prior to such time.

[Signature Pages Follow]

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     IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered as of the date first above written.

	                                PENN NATIONAL GAMING, INC. 
	 
	 
	                                By: /s/   Peter M. Carlino

	                                Name:  Peter M. Carlino
	                                Title:    Chairman and Chief Executive Officer

 

[Signature Page — Termination and Settlement Agreement]

	                                PNG ACQUISITION COMPANY INC. 
	 
	 
	                                By: /s/ Randal Nardone
	                                Name: Randal Nardone
	                                Title:   Vice President
	 
	                                PNG MERGER SUB INC. 
	 
	 
	                                By: /s/   Randal Nardone
	                                Name:  Randal Nardone
	                                Title:    Vice President 
	 
	                                PNG HOLDINGS LLC 
	 
	 
	                                By: /s/  Randal Nardone
	                                Name: Randal Nardone
	                                Title:   Manager

 

[Signature Page — Termination and Settlement Agreement]

	                                FIG PNG HOLDINGS LLC 
	 
	 
	                                By: /s/   Randal Nardone
	                                Name:   Randal Nardone
	                                Title:     Vice President
	 
	                                FORTRESS INVESTMENT FUND V (FUND A) 
	                                   L.P. 
	 
	 
	                                By: /s/   Randal Nardone 
	                                Name:   Randal Nardone
	                                Title:     Vice President
	 
	                                FORTRESS INVESTMENT FUND V (FUND D) 
	                                   L.P. 
	 
	 
	                                By: /s/   Randal Nardone
	                                Name:   Randal Nardone
	                                Title:     Vice President
	 
	                                FORTRESS INVESTMENT FUND V (FUND E) 
	                                   L.P. 
	 
	 
	                                By: /s/    Randal Nardone
	                                Name:   Randal Nardone
	                                Title:     Vice President
	 
	                                FORTRESS INVESTMENT FUND V (FUND B) 
	                                   L.P. 
	 
	 
	                                By: /s/     Randal Nardone 
	                                Name:    Randal Nardone
	                                Title:      Vice President
	 
	 
	                                FORTRESS INVESTMENT FUND V (FUND C) 
	                                   L.P. 

[Signature Page — Termination and Settlement Agreement]

	                                By: /s/   Randal Nardone
	                                Name:  Randal Nardone
	                                Title:     Vice President
	 
	 
	                                FORTRESS INVESTMENT FUND V (FUND F) 
	                                   L.P. 
	 
	 
	                                By: /s/   Randal Nardone 
	                                Name:  Randal Nardone 
	                                Title:     Vice President 

 

 

[Signature Page — Termination and Settlement Agreement]

	                                CB PNG HOLDINGS LLC 
	          
	            
	                                By: /s/   Steven Price
	                                Name:  Steven Price
	                                Title:     Senior Management Director
	             
	                                CENTERBRIDGE CAPITAL PARTNERS, L.P. 
	        
	            
	                                By: /s/   Steven Price
	                                Name:  Steven Price
	                                Title:     Senior Management Director
	         
	                                CENTERBRIDGE CAPITAL PARTNERS 
	                                   STRATEGIC, L.P. 
	           
	         
	                                By: /s/   Steven Price 
	                                Name:  Steven Price
	                                Title:     Senior Management Director
	         
	                                CENTERBRIDGE CAPITAL PARTNERS SBS, 
	                                   L.P. 
	         
	               
	                                By: /s/   Steven Price
	                                Name:  Stephen Price
	                                Title:     Senior Management Director

 

[Signature Page — Termination and Settlement Agreement]

	                                DB INVESTMENT PARTNERS, INC. 
	                                  
	                                             
	                                By: /s/   Micheal T. Iben
	                                Name:  Michael T. Iben
	                                Title:     Director
	                     
	                                By: /s/   Joseph J. Rice
	                                Name:  Joseph J. Rice
	                                Title:     Director
	                                                                
	                                DEUTSCHE BANK SECURITIES INC. 
	                                 
	                           
	                                By:  /s/   Arthur Goldfrank
	                                Name:   Arthur Goldfrank
	                                Title:     Managing Director
	                                     
	                                By: /s/   A. Drew Goldman
	
                                Name:  A. Drew Goldman

	                                Title:    Managing Director
	                    
	                                DEUTSCHE BANK AG NEW YORK BRANCH 
	                                   
	                                             
	                                By: /s/   David Mayhew
	                                Name:   David Mayhew
	                                Title:      Managing Director
	                                                       
	                                By: /s/   Stephen Cayer
	                                Name:  Stephen Cayer
	                                Title:     Director
	             

[Signature Page — Termination and Settlement Agreement]

	                                WACHOVIA INVESTMENT HOLDINGS, 
	                                   LLC 
	         
	       
	                                By: /s/   Eric J. Lloyd
	                                Name:  Eric J. Lloyd
	                                Title:     Managing Director
	          
	                                WACHOVIA CAPITAL MARKETS, LLC 
	         
	        
	                                By: /s/   Eric J. Lloyd 
	                                Name:  Eric J. Lloyd
	                                Title:     Managing Director
	 
	                                WACHOVIA BANK, NATIONAL 
	                                   ASSOCIATION 
	 
	 
	                                By: /s/   Eric J. Lloyd 
	                                Name:  Eric J. Lloyd
	                                Title:     Managing Director
	 

[Signature Page — Termination and Settlement Agreement]

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