1 FRIDAY, JULY 29, 2005

2 CHAIRMAN BARTCH: Please call the roll.

3 MS. ANGIE FRANKS: Chairman Bartch.

4 CHAIRMAN BARTCH: Here.

5 MS. FRANKS: Commissioner Hinrichs.

6 COMMISSIONER SUTTER-HINRICHS: Present.

7 MS. FRANKS: Commissioner Biele.

8 COMMISSIONER BIELE: Present.

9 MS. FRANKS: Commissioner Jones.

10 Commissioner Shull.

11 COMMISSIONER SHULL: Present.

12 MR. KEVIN MULLALLY: Mr. Chairman,

13 Commissioners, good morning. Before we begin the

14 first item of business, I think the staff and the

15 Commission would like to welcome Noel Shull to the

16 Commission. This is his first meeting.

17 He's an executive vice-president with

18 United Missouri Bank in Kansas City and from the

19 Liberty area, and should bring a very needed and

20 valued financial perspective to the matters before

21 the Commission.

22 CHAIRMAN BARTCH: Yes, thank you very

23 much. Thank you for being here. A banker certainly

24 will be very welcomed with what we're doing, so I

25 thank you, glad to have you, and we'll go about

2

1 business.

2 I would remind everybody that we've got

3 these microphones and you have to get close in order

4 to make them work.

5 MR. MULLALLY: Mr. Chairman, the first

6 item on the agenda is the consideration of the March

7 30, 2005, minutes under Tab A.

8 COMMISSIONER SUTTER-HINRICHS: I move to

9 approve the March 30 minutes.

10 COMMISSIONER BIELE: Second.

11 CHAIRMAN BARTCH: Any further discussion?

12 If not, please call the roll.

13 MS. FRANKS: Chairman Bartch.

14 CHAIRMAN BARTCH: Approved.

15 MS. FRANKS: Commissioner Hinrichs.

16 COMMISSIONER SUTTER-HINRICHS: Approved.

17 MS. FRANKS: Commissioner Biele.

18 COMMISSIONER BIELE: Approved.

19 MS. FRANKS: Commissioner Shull.

20 COMMISSIONER SHULL: Approved.

21 MS. FRANKS: By your vote, you've adopted

22 the minutes of the March 30, 2005 meeting.

23 MR. MULLALLY: Mr. Chairman, I might also

24 note that Commissioner Jones' absence today is due

25 to him taking his son to college, so I think we can

3

1 all understand the necessity of that.

2 The next item on the agenda is the

3 consideration of suitability of licensure of a Class

4 A licensee. This involves the Penn National

5 acquisition of Argosy Gaming. The presentation will

6 proceed as follows:

7 First, we will hear from the applicant,

8 Penn National Gaming. Then we will hear -- included

9 in that presentation, we will hear from the City of

10 Riverside. I believe Mayor Burch is here. Then we

11 will hear the investigative summary from Sergeant

12 Jeff Smith.

13 We will then have the opportunity for

14 anyone from the public to offer any testimony with

15 regards to this transaction. And, finally, we'll

16 have the staff recommendation.

17 So unless you have further questions,

18 I'll ask Jim Deutsch, the attorney representing Penn

19 National to come forward and introduce the

20 applicant.

21 MR. JIM DEUTSCH: Good morning, Commissioners.

22 My name is Jim Deutsch from Blitz, Bardgett & Deutsch

23 of St. Louis and Jefferson City, and we are here

24 today to present to you the company Penn National

25 Gaming Incorporated.

4

1 I have with me a long list of dignitaries

2 so I'm not going to try to introduce them all.

3 Instead I would like to just simply thank the

4 Commission for all of the cooperation we've had and

5 all the help that we've had in getting to this

6 point, and to introduce to you the chairman of the

7 board and chief executive officer of Penn National

8 Gaming Inc., Peter Carlino.

9 MR. PETER CARLINO: I take it this is voice

10 activated?

11 CHAIRMAN BARTCH: Yes, it is.

12 MR. CARLINO: Good morning, Chairman and

13 members of the Commission and staff. I am Peter

14 Carlino, Chairman and Chief Executive Officer of

15 Penn National Gaming. We brought, I think, half of

16 our corporate staff here this morning and let me

17 walk down the line of dark suits and tell you who

18 these folks are.

19 First in line is Robert Ippolito, our

20 treasurer/secretary of the company. Bill Clifford,

21 our chief financial officer. Kevin DeSanctis, our

22 president and chief operating officer. Jordan

23 Savitch, our general counsel. Len DeAngelo,

24 executive vice-president of the company. And James

25 Butler from Argosy, who I guess came to keep an eye

5

1 on us, make sure we behave through the presentation.

2 Just a brief history. My staff gave me

3 pages of notes with all kinds of facts and figures

4 and details which I'm sort of disinclined to walk

5 through, so I'll give you the briefest possible

6 summary and then be available for questions, as many

7 as you might like.

8 Penn National started as a family

9 business back in 1972 as a thoroughbred racing

10 company in Harrisburg, Pennsylvania, and that

11 primary business is still there. I was president in

12 1972 when it was founded and chairman by 1974, and

13 have been with the company for all of the years in

14 between.

15 We went public in 1994 with Jetset single

16 race track, and from that point, of course, the end

17 process as a public company of acquiring additional

18 racetracks, developing facilities first in

19 Pennsylvania, New Jersey, and West Virginia, and

20 have grown, as you certainly have seen, to become

21 now one of the largest gaming companies in America.

22 Post this Argosy merger, we will be the

23 third largest gaming company in the United States,

24 and I guess that means the world. We've left some

25 packets of information that have some stories and

6

1 background that I think might be helpful, tells the

2 story even better than I could about who we are, how

3 we've gotten to be where we are today. But we're

4 grateful to get to this moment.

5 We're particularly excited about the

6 Argosy merger because Argosy brings together two

7 very strong companies. It's a company that is very,

8 very well-managed, has been from the beginning, has

9 extraordinary properties. But properties, too, that

10 are quite similar to our own. We're not in Atlantic

11 City, we're not in Nevada. We are in middle America

12 and that's the business that we so far have chosen

13 to know and understand.

14 Here in Missouri the Riverside property

15 is spectacular. It's our good fortune, as I just

16 discussed with Mayor Burch a few moments ago, to

17 inherit some fine work that Argosy has done to

18 take that property to the next level, and as you

19 know, that's still underway, so that's a great bit

20 of news for us.

21 Our operating style, it would matter to

22 you to know that we're largely decentralized. My

23 sense is, and I know that our staff believes that all

24 wisdom does not reside in Pennsylvania. All markets

25 are local. We have a great management team there.

7

1 If you look at our history, we make virtually no

2 changes in properties except maybe changes for the

3 better in capital spent and things of that sort.

4 But our goal is to be a support for the team that is

5 in place so that you'll find no tremors in the force

6 at all as we would arrive here in Missouri. Just

7 try to do it better and the best we can.

8 Now, Kevin went out to meet with

9 the mayor just, I guess, a couple of weeks back and

10 talked about our commitment to the community,

11 something that we take very, very seriously. And I

12 could walk through some of the things that would

13 matter to you in terms of affirmative action,

14 minority hiring, procurement and so forth, all

15 things that we take very, very seriously as a gaming

16 company.

17 So I think in some ways to make the

18 point that I'd like to leave with you today, that

19 Penn National is completely and utterly focused on

20 being not just one of the bigger but certainly the

21 best gaming company in America. That is an absolute

22 commitment.

23 So as we would hope to enter your state

24 and to complete this merger with Argosy, I think

25 that's something you can count on. So any

8

1 questions, I'd be happy to answer.

2 COMMISSIONER SUTTER-HINRICHS: One quick

3 question and this is my band wagon. I don't see any

4 women and I have not read about any women and I

5 don't see any minorities and that's something I feel

6 very strongly about and I would have liked to have

7 seen women in executive positions and minorities in

8 executive positions in your company.

9 MR. CARLINO: We don't have many. There

10 are some of the properties -- actually our minority

11 hiring in total is about 55 percent -- or excuse me,

12 about 40 percent company-wide, but at the corporate

13 level, not too many. We have, I guess, a single

14 female attorney, senior counsel with us, but that's

15 about it.

16 I guess the difficulty is simply finding

17 people that have the experience. For us, as we've

18 grown rapidly, many of the folks that we've hired

19 come through these acquisitions so that -- we just

20 put our first woman on the board just last year.

21 Again, very tough.

22 I think their general view is that as we

23 look to fill positions, we look doubly hard to find

24 people to fit those categories. We generally do.

25 But we haven't made a lot of changes in management.

9

1 As we come to Argosy, for example, you'll see very

2 few changes.

3 It is a commitment that's not enough. I

4 would agree.

5 COMMISSIONER SUTTER-HINRICHS: Well, I'd

6 like to see you make an effort to do that. I just

7 think it's shameful that there is one female name on

8 here and the excuse is always "they don't have the

9 experience." Well, they don't have experience

10 because they haven't been given the experience.

11 MR. CARLINO: Oh, I understand what

12 you're saying.

13 COMMISSIONER SUTTER-HINRICHS:

14 Opportunity is yours, not theirs, to do something

15 about it.

16 MR. CARLINO: Any other questions? Thank

17 you very much.

18 MR. DEUTSCH: Commissioners, we do have

19 the mayor here from the City of Riverside. I would

20 like to ask her to come forward and to say a few

21 words to the Commission about what I think is

22 reflected in the letter you have in your materials,

23 but she was kind enough to come here, so Mayor

24 Burch.

25 MAYOR BETTY BURCH: Good morning. Thank you for

10

1 allowing me to be here with you folks this morning.

2 I'm Betty Burch, and I am the mayor for the City of

3 Riverside. I've got a little voice problem this

4 morning. It will get better. Is that better?

5 I've been with the City of Riverside for

6 thirty years and I'm very proud of this city and I'm

7 very proud of the Argosy Gaming Company. The

8 results of the gaming that has been given to the

9 city has been used for infrastructure in our city.

10 We are building a new city today.

11 It's been ten years and Argosy has been

12 with us that long and now we're going to go with

13 Penn Gaming Company, which I think is going to be a

14 good merge for both of them. Their hotel is under

15 construction as I speak and I want you to know that

16 the changes in the City of Riverside are almost

17 astronomical. We are building roads, streets, we've

18 given free trash service, all those things to our

19 residents there just to show the people in the city

20 that we are using our money wisely.

21 So with that said, I want to tell you

22 that I welcome Penn to the City of Riverside and

23 hopefully we'll have a very good relationship just

24 like the one I've had with the Argosy Casino.

25 Do you have any questions?

11

1 CHAIRMAN BARTCH: I don't have any

2 questions, but I take this opportunity to

3 congratulate you because Riverside has done exactly

4 what is an example to the rest of the State of

5 Missouri and industry. You're doing the exact type

6 of things that you should be doing and we

7 congratulate you for that.

8 MAYOR BURCH: Well, thank you very much.

9 MR. MULLALLY: Mr. Chairman, while we

10 have the mayor here, I would echo those thoughts.

11 Not only have they done a wonderful job, but I think

12 Riverside is an excellent example of the use of

13 patience.

14 These things don't happen overnight and

15 a lot of cities get caught up in the trap of wanting

16 to produce instant results and oftentimes throw up

17 symbolic things that are of some value to the

18 community but are more amenities rather than

19 fundamental infrastructure improvements. You know,

20 new community centers with, you know, pools with

21 brass doors and, you know, big statues out front

22 and fountains may look pretty and may make the

23 residents happy, but as far as long-term economic

24 development, I'm not sure how effective those are.

25 Those are the nice amenities that you do after

12

1 you've had some success.

2 Riverside has stuck to the nuts and

3 bolts. They've built their levee, they built the

4 infrastructure, they put the necessary sewer and

5 water improvements in that can attract large scale

6 industrial businesses to their area, and the last

7 estimate that I read was they expect over a billion

8 dollars of capital investment in that industrial

9 park over the next decade.

10 That is real economic development and

11 it's taken them ten years to do it and we have

12 probably another ten years to fully realize the

13 potential, but in the end the payoff is going to be

14 very big and it's really a tribute to Mayor Burch

15 and the leaders there to be able to stay the course.

16 The next step of the process would be to

17 hear from the investigative team, which would be led

18 by Sergeant Jeff Smith of the Missouri State Highway