Exhibit 10.1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this “Agreement”) is made effective November 24,
2010 (the “Effective Date”), by and among RIVER DOWNS INVESTMENT COMPANY, a
California limited partnership (“Seller”), RIVER DOWNS JOCKEY CLUB,
INCORPORATED, an Ohio Corporation (“Jockey Club”), RIVER DOWNS TURF CLUB,
INCORPORATED, an Ohio corporation (“Turf Club,” and, collectively with Seller
and Jockey Club, the “Seller Parties” and each a “Seller Party”), OHIO VALLEY
CONCESSIONS, INC. an Ohio corporation (“Concessions”), PNK (OHIO), LLC, an Ohio
limited liability company (“Buyer”), and PINNACLE ENTERTAINMENT, INC., a
Delaware corporation (“Pinnacle” and collectively with Buyer, Seller Parties and
Concessions, the “Parties”).
Background Information
WHEREAS, Seller is the owner of all of the assets of a thoroughbred horserace
track known as River Downs (the “Track”) located at 6301 Kellogg Avenue,
Cincinnati, Ohio 45230;
WHEREAS, the Seller Parties and Concessions own the assets necessary to operate
the Track (the “Business”);
WHEREAS, the Track and Property (as defined below) are located in a flood plain
and the Business has been operating at a significant loss, and expects to
continue to operate at a significant loss during the term of this Agreement;
WHEREAS, as more particularly set forth in this Agreement, Buyer desires to
purchase from the Seller Parties and the Seller Parties desire to sell to Buyer
substantially all of the assets of the Seller Parties related to the operation
of the Track and the Business;
WHEREAS, as more particularly set forth in this Agreement, Jockey Club and Turf
Club each agree to contribute, simultaneous with the Closing (as hereinafter
defined), the Racing Licenses (as hereinafter defined) to one or more
newly-formed limited liability companies (the “LLCs”); and the membership
interests of such LLCs shall then be purchased by Buyer at the Closing;
WHEREAS, Seller Consent (as defined below) and Buyer Consent (as defined below)
have been obtained prior to the Effective Date; and
WHEREAS, the Parties are entering into this Agreement to set forth the terms and
conditions of such sale and purchase.

 

 

--------------------------------------------------------------------------------

 

Statement of Agreement
The Parties hereby acknowledge the accuracy of the foregoing Background
Information and, in consideration of the premises and of the mutual covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, agree as follows:
Section 1. Purchase Of Assets
Section 1.1 Assets. On the terms and subject to the conditions hereof, as of the
Effective Time, the Seller Parties and Concessions shall sell, assign, transfer,
convey, and deliver to Buyer, and Buyer shall purchase and acquire from the
Seller Parties and Concessions, all assets owned or leased (to the extent of
Seller’s leasehold interest) (other than the Excluded Assets (as hereinafter
defined )) by the Seller Parties and Concessions and used or held for use in the
operation of the Track and the Business (collectively, the “Assets”), including
without limitation the following:
(a) All prepaid expenses (collectively, the “Prepaids”), and all inventories of
food, beverages, souvenirs, and consumable supplies located at the Track
(collectively, the “Inventories”);
(b) All furniture, fixtures, equipment, vehicles, rolling stock and other
tangible personal property owned by the Seller Parties or Concessions located at
or used in the operation of the Track (the “Equipment”);
(c) All names, trade secrets, proprietary rights, trademarks, trade names,
service marks, logos, copyrights, and web domain URLs, and related applications,
filings, registrations, licenses, sublicenses or agreements, including (without
limitation) the name River Downs (subject to Seller’s right to retain use of its
name “River Downs Investment Company” for up to six months pursuant to
Section 4.5(c) below), all computer software and systems used by Seller in the
Business (to the extent owned by the Seller Parties), and all goodwill and other
intangibles, subject to the provisions of this Agreement, together with all
rights to sue, counterclaim, and to collect damages and payments for and recover
for any and all legal and equitable claims of past, present, and future
infringements, damages, or other unauthorized use thereof, and all income,
royalties, damages, and payments now or hereafter due or payable with respect to
the foregoing intangibles (collectively, the “Intangibles”);
(d) 100% of the membership interests of the LLCs to which Jockey Club and Turf
Club agree to contribute, simultaneous with the Closing, the Racing Licenses (as
defined below) and, to the extent transferable, Pari-Mutuel Tax Abatements (as
defined below) related to the respective Racing Licenses. “Racing Licenses”
shall mean, collectively, (i) the thoroughbred racing permit and quarterhorse
racing permit issued by the Ohio State Racing Commission (the “OSRC”) to Jockey
Club and (ii) the thoroughbred racing permit issued by the OSRC to Turf Club
(each individually, a “Racing License”). “Pari-Mutuel Tax Abatements” shall mean
the rights to the pari-mutuel tax abatements and/or reductions for which the
holders of the Racing Licenses are eligible after the date of Closing;

 

2

--------------------------------------------------------------------------------

 

(e) To the extent assignable and subject to obtaining the Requisite Consents (as
hereinafter defined), all franchises, licenses, permits, consents,
authorizations, approvals and certificates which are necessary for Buyer to
continue to operate the Business as currently conducted and to own or lease any
property or assets utilized by the Seller Parties or Concessions in respect of
the Business in compliance with applicable law (the “Permits”), including
without limitation the Seller Parties’ and Concessions’ rights with respect to
(i) the liquor permits issued to Concessions by the Ohio Department of Liquor
Control (the “Liquor License”), (ii) the Racing Licenses, (iii) the Pari-Mutuel
Tax Abatements, and (iv) pending applications for any of the foregoing;
(f) All real property and buildings located thereon and improvements thereto,
and properties used for parking lots comprising the Track’s physical facilities
as is more particularly described on Schedule A.7. (collectively, the
“Property”);
(g) All existing contracts, agreements, leases and legally binding contractual
rights of any kind, written or oral, relating to the operation of the Track or
Business, including but not limited to, the Horsemen’s Benevolent and Protective
Association contract, all contracts relating to off-track betting, closed
circuit television, cable television, broadcast and simulcast rights, and the
totalizer contracts, and those with annual payments greater than $10,000
annually (“Material Contracts”) listed on Schedule 1.1(g) (collectively, the
“Existing Contracts”), together with all contracts, agreements, leases and
legally binding contractual rights entered into or acquired by Seller Parties or
Concessions between the date hereof and the Closing Date (as hereinafter
defined) in the ordinary course of business, consistent with past practices of
Seller (“New Contracts”) and in accordance with this Agreement and; provided,
however, Buyer shall not be required to assume or agree to assume any New
Contracts with a term greater than one year and a value greater than $25,000
which cannot be canceled with ninety (90) days prior written notice)
(collectively, Existing Contracts (including the Material Contracts), together
with New Contracts, the “Contracts”);
(h) Subject to Section 1.2(g), 1.2(i) and Section 1.2(l) below, all claims,
deposits, prepayments, prepaid assets, refunds, causes of action, rights of
recovery, rights of setoff and rights of recoupment of the Seller Parties
relating to the Business or the Assets, including any such rights of any Seller
Party under any property, casualty, workers’ compensation or other insurance
policy (collectively, “Insurance Rights"); provided, however, that Seller
Parties and Concessions shall retain any and all insurance proceeds or other
payments or recoupments received by them from insurance companies with respect
to any funds in excess of any applicable deductible amounts expended by Seller
Parties or Concessions for repair, replacement, etc. of any Assets prior to the
Closing Date;
(i) Seller’s administrative rights, if any, in the River Downs Horsemen’s
Account (“Horsemen’s Account”);
(j) Seller’s administrative rights in the River Downs Fine Money Account (“Fine
Money Account”);

 

3

--------------------------------------------------------------------------------

 

(k) Seller’s administrative rights in the Mutuel Impound Account (“Impound
Account” and, together with the Horsemen’s Account and the Fine Money Account,
the “Bank Accounts”);
(l) To the extent relating to the Assets or any Assumed Obligation (as
hereinafter defined), all rights, claims, rebates, discounts and credits
(including all indemnities, warranties and similar rights), performance and
other bonds, security and other deposits, advance payments and prepaid rents in
favor of Seller relating to the operation of the Business or to any of the
Assumed Obligations, in each case, other than any Receivables (as hereinafter
defined);
(m) Any Seller Party’s rights, if any, and only to the extent assignable and
subject to obtaining the Requisite Consents, with respect to gaming operations
at the Track (the “Gaming Rights”);
(n) To the extent transferable under applicable law, (i) all books and records
of Seller relating to the Business (except to the extent related to the Excluded
Assets (as hereinafter defined) or to Liabilities (as hereinafter defined) of
Seller or the Business other than the Assumed Obligations), including without
limitation all architectural, structural, service manuals, engineering and
mechanical plans, electrical, soil, wetlands, environmental and similar reports,
studies and audits, and (ii) all plans and specifications for the Property;
(o) All records of any Seller Party that relate to employees who are hired by
Buyer, but only to the extent that such records may be transferred under
applicable law, including without limitation records pertaining to: (i) skill
and development training, (ii) seniority histories, (iii) salary and benefit
information (iv) Occupational, Safety and Health Administration reports ad
records, and (v) active medical restriction forms (it being agreed and
understood that with respect to the foregoing clause (v), such forms have been
made available to Buyer, but nothing herein shall be deemed to require that
Buyer accept any such forms);
(p) To the extent assignable and subject to obtaining all Requisite Consents,
all concession equipment and inventory owned by Concessions, excluding cash,
receivables and deposits;
(q) All manufacturers’ and other warranties applicable to the Assets or the
Business; and
(r) Any other tangible or intangible assets owned, leased or licensed by a
Seller Party (other than the Excluded Assets) which are located at the Property
or used in the Business.

 

4

--------------------------------------------------------------------------------

 

The Assets shall be conveyed to Buyer free and clear of all Liens and
Liabilities other than Assumed Obligations or Permitted Liens. As used herein,
the term “Liens” shall mean any mortgage, pledge, lien, security interest,
conditional or installment sale agreement, option, right of first refusal,
restriction, exaction, imposition, charge or other claims of third parties of
any kind or nature, and the term “Liabilities” shall mean any direct or indirect
liability, indebtedness, obligation, commitment, expense, claim, deficiency,
guaranty or endorsement of or by any person of any type, whether accrued,
absolute, contingent, matured, unmatured, liquidated, unliquidated, known or
unknown. “Permitted Liens” shall mean current taxes not yet due and payable and
assessments, easements, covenants, restrictions, reservations of record, legal
highways, zoning ordinances and defects in title, encroachments or other matters
that do not materially adversely affect the continued use of the Property or
Assets as currently used by the Seller Parties. Additionally, Buyer and Pinnacle
acknowledge and agree that the funds held in the Bank Accounts are held for the
benefit of others and shall not be included in the definition of Assets.
Section 1.2 Excluded Assets. Notwithstanding any other provisions of this
Agreement to the contrary, the Seller Parties’ right, title and interest in and
to each of the following items (the "Excluded Assets”) shall be excluded from
the Assets and shall remain the property of Seller:
(a) All of the Seller Parties’ and Concessions’ cash, cash equivalents,
investments, cash funds for uncashed tickets, and deposits (including without
limitation all cash in the Track vault, petty cash, and cash in all concessions
booths at the Track), including without limitation certificates of deposit,
commercial paper, treasury bills, marketable securities, asset or money market
accounts and all such similar accounts or investments;
(b) All of the Seller Parties’ and Concessions’ accounts receivable, notes
receivable, and tax receivables (collectively, the “Receivables”);
(c) all tangible and intangible personal property of the Seller Parties and
Concessions disposed of or consumed in the ordinary course of business
consistent with the past practices of the Seller Parties and Concessions between
the Effective Date and the Closing Date;
(d) all Contracts that have terminated or expired prior to the Closing Date in
the ordinary course of business consistent with the past practices of the Seller
Parties;
(e) that certain Concession Agreement and Lease by and between Seller and
Concessions dated January 1, 1990, as amended through the date hereof;
(f) Each of the Seller Parties’ and Concessions’ respective corporate seals,
minute books, charter documents, corporate stock record books and such other
books and records as pertain to the organization, existence or share
capitalization of a Seller Party or Concessions (collectively, “Seller Records”)
and duplicate copies of such records as are necessary to enable the Seller
Parties and Concessions to file their respective tax returns and reports as well
as any other original records or materials relating to a Seller Party or
Concessions generally and not involving or relating to the Assets or the
operation or operations of the Business;

 

5

--------------------------------------------------------------------------------

 

(g) contracts of insurance, and all insurance proceeds or claims thereunder
relating to property or equipment repaired, replaced or restored by Seller prior
to the Closing Date; further provided, that Seller Parties and Concessions shall
retain any and all insurance proceeds or other payments or recoupments received
by them from insurance companies with respect to any funds in excess of any
applicable deductible amounts expended by Seller Parties or Concessions for
repair, replacement, etc. of any Assets prior to the Closing Date;
(h) all pension, profit sharing or cash or deferred (Section 401(k)) plans and
trusts (except for the River Downs Investment Company 401(k) Plan (the “Seller
401(k) Plan”), if Buyer elects to assume such plan pursuant to Section 10.3(a)),
and the assets thereof and any other employee benefit plan or arrangement and
the assets thereof, if any, maintained by a Seller Party or Concessions;
(i) any and all claims made by the Seller Parties and Concessions with respect
to transactions prior to the Closing Date and the proceeds thereof, other than
those with respect to Insurance Rights as provided for in Section 1.1(h) above,
which Insurance Rights are being transferred hereunder to Buyer as provided for
in Section 1.1(h);
(j) the rights, interests or tangible or intangible assets of Seller listed on
Schedule 1.2(j);
(k) All of Seller’s corporate stock, including, without limitation, the shares
held by Seller of WellPoint, Inc., River Downs Management Company
(“Management”), Jockey Club and Turf Club;
(l) All deposits, including but not limited to those deposits listed on Schedule
1.2(l);
(m) The 2000 Cadillac STS used in connection with the Business;
(n) All rights and obligations of any Seller Party under any contract or
agreement by and between any Seller Party and RaceTech LLC;
(o) Quarterhorse accounting overpayment in the amount of $112,866.53
(“Quarterhorse Overpayment”); and
(p) Seller’s interest in “Bet Pad” (including Betpad, Ltd.) and “America Tab.”

 

6

--------------------------------------------------------------------------------

 

Section 2. Assumption of Liabilities.
(a) Assumption of Certain Liabilities. At the Closing, Buyer shall assume and
shall pay or otherwise satisfy or discharge in accordance with their terms all
Liabilities under the Permits or the Contracts accruing or arising on or after
the Effective Time (as defined below), and the Liabilities assumed by Buyer in
Section 8.4 hereof related to the non-compliance of the Property with CAFO
Regulations (as defined below) (collectively, the “Assumed Obligations”). At the
Closing, Seller and Buyer shall enter into an agreement effectuating Seller’s
assignment and Buyer’s assumption of the Assumed Obligations (the “Assignment
and Assumption Agreement”).
(b) Non-Assumption of All Other Liabilities. Except for the Assumed Obligations,
Buyer has not assumed, undertaken, agreed to perform or accepted any
responsibility for, and does not and will not, in any way, assume, undertake,
agree to perform or accept responsibility for, any Liabilities of Seller Parties
and Concessions of any kind, whether such Liabilities be absolute, known or
unknown, liquidated or unliquidated, contingent or otherwise pending or
threatened, incurred before the Effective Time (collectively, the “Seller
Retained Liabilities").
(c) Closing Adjustments.
(i) All income and expenses arising from the conduct of the Business and
operation of the Assets shall be prorated between Buyer and Seller as of the
Effective Time, including the thoroughbred horse purse but not the quarterhorse
purse (the “Net Proration Amount”), on the Closing Date in accordance with U.S.
generally accepted accounting principles (“GAAP”). Such prorations shall be
based upon the principles that Seller shall be entitled to all income earned and
shall be responsible for all liabilities and obligations accruing in connection
with the operation of the Business until the Closing Date, and Buyer shall be
entitled to such income earned and be responsible for such liabilities and
obligations accruing in connection with the operation of the Business
thereafter. Such prorations shall include, without limitation, all ad valorem
and other property taxes and assessments (the “Real Estate Taxes”) (but
excluding taxes arising by reason of the transfer of the Assets as contemplated
hereby, which shall be paid as set forth in Section 7(c) of this Agreement),
deposits, utility expenses, rents and similar prepaid and deferred items and all
other expenses attributable to the ownership and operation of the Business;
provided, however, and notwithstanding anything in this Agreement to the
contrary, the Real Estate Taxes shall be paid and allocated as follows: Buyer
and/or Pinnacle shall pay all Real Estate Taxes with bill due dates subsequent
to the Effective Date; provided that Seller shall credit Buyer and Pinnacle an
amount equal to one half of the Real Estate Taxes payable in January 2011
(“January Tax Bill”) and related to the first six (6) months of 2010 pursuant to
Section 3(d). Any amounts credited by Seller shall be based on the tax
information and rates in effect prior to Closing and there shall be no
post-Closing adjustments. Buyer and/or Pinnacle shall be responsible for the
payment of all Real Estate Taxes that become due and payable after the January
Tax Bill date. The Net Proration Amount shall be paid in accordance with Section
3(c) below.
(ii) Except as otherwise provided herein, the prorations and adjustments
contemplated by Section 2(c)(i), to the extent practicable, shall be made on the
Closing Date. As to those prorations and adjustments not capable of being
ascertained on the Closing Date, an adjustment and proration shall be made
within ninety (90) days after the Closing Date.

 

7

--------------------------------------------------------------------------------

 

(iii) Buyer and Seller shall determine whether the purse accounting, as of the
Effective Time, is underfunded (the amount of any such underfunding, the
“Underfunded Amount”) or overfunded (the amount of any such overfunding, the
“Overfunded Amount”), and the Underfunded Amount or Overfunded Amount, as the
case may be, shall be paid in accordance with Section 3(c) below.
(iv) In the event of any disputes between the parties as to such adjustments set
forth in Section 2(c), the amounts not in dispute shall nonetheless be paid at
the time provided in Section 2, the amounts in dispute shall be determined by an
independent certified public accountant mutually acceptable to the Parties, and
the fees and expenses of such accountant shall be paid one-half by Seller and
one-half by Buyer. Notwithstanding the foregoing, if the aggregate amount in
dispute is $10,000 or less, the disputed amount shall be shared equally by Buyer
and Seller.
Section 3. Purchase Price.
(a) The total purchase price for the Assets shall be Forty-Five Million Dollars
and 00/100 ($45,000,000.00) plus the assumption of the Assumed Obligations by
Buyer (the “Purchase Price”). The Purchase Price (less the Escrow Fund (as
defined below)) shall be made by bank wire transfer, by Buyer and/or Pinnacle,
to an account designated by Seller in immediately available funds; provided,
however, Seller may direct Buyer and/or Pinnacle to pay a specified amount of
the Purchase Price to Concessions (the “Ohio Valley Concessions Payment”). The
Ohio Valley Concessions Payment, which shall be in consideration for the Assets
owned by Concessions, shall be made by bank wire transfer to an account
designated by Seller.
(b) At the Closing, Buyer shall assume the Assumed Obligations by executing and
delivering to Seller the Assignment and Assumption Agreement.
(c) If the Net Proration Amount (including the Underfunded Amount) results in a
credit in favor of Seller, the Purchase Price shall be increased accordingly in
the amount of the Net Proration Amount. If the Net Proration Amount (including
the Overfunded Amount) results in a credit in favor of Buyer, the Purchase Price
shall be reduced accordingly in the amount of the Net Proration Amount.
(d) The Purchase Price shall be decreased by the amount credited to Buyer by
Seller for one half of the Real Estate Taxes for the January Tax Bill pursuant
to Section 2(c)(i).
(e) The Purchase Price shall be increased by an amount not to exceed Thirty
Thousand Dollars ($30,000) for Seller Parties’ and Concessions’ fees and
expenses with respect to the preparation, negotiation and delivery of the legal
opinions set forth Section 7(a) (xiv) and Section 7(a)(xv).

 

8

--------------------------------------------------------------------------------

 

(f) The Purchase Price (including Assumed Obligations) shall be allocated among
the Assets (in accordance with section 1060 of the Code and the regulations
thereunder) pursuant to an allocation schedule mutually agreed to by the Parties
(the “Allocation Schedule”), which Allocation Schedule shall be consistent with
the allocation summary attached hereto as Exhibit E (the “Allocation Summary”).
On or before December 23, 2010, Buyer shall prepare and deliver to Seller a
draft of the Allocation Schedule. In the event of any disputes between the
Parties as to such draft Allocation Schedule that the Parties are not able to
resolve, the amounts in dispute shall be determined by an independent certified
public accountant mutually acceptable to the Parties, and the fees and expenses
of such accountant shall be paid one-half by Seller and one-half by Buyer. Buyer
and Seller shall timely file Internal Revenue Service Form 8594 and any required
attachments thereto in accordance with the Allocation Schedule. Except to the
extent otherwise required pursuant to a “determination” within the meaning of
Section 1313(a) of the Internal Revenue Code of 1986, as amended (the “Code”),
neither Seller nor Buyer shall take a tax position that is inconsistent with the
allocation reflected in the Allocation Schedule.
(g) On the Closing Date, Buyer and/or Pinnacle shall deposit Five Hundred
Thousand Dollars ($500,000.00) of the Purchase Price (the “Escrow Fund”) into an
escrow account (the “Escrow Account”) established with U.S. Bank National
Association (the “Escrow Agent”) in accordance with the terms and subject to the
conditions of an Indemnification Escrow Agreement substantially in the form
attached hereto as Exhibit D and which is by and among Seller, Buyer, Pinnacle
and the Escrow Agent (the “Indemnification Escrow Agreement”). Subject to the
terms and conditions of the Indemnification Escrow Agreement, the Escrow Fund
shall be held in the Escrow Account for a period of six (6) months after the
Closing Date solely as the exclusive fund and remedy for the purpose of
satisfying the indemnification obligations, if any, which arise in such
six-month period under Section 12.2 of this Agreement. Buyer, Pinnacle and
Seller shall execute the Indemnification escrow Agreement on the Closing Date.
Section 4. Conditions to Closing & Closing.
Section 4.1 Conditions for Buyer. Notwithstanding any other provision of this
Agreement to the contrary, the obligation of Buyer to complete the closing of
the transactions contemplated by this Agreement (the “Transaction”) shall be
subject to the satisfaction or waiver by Buyer of the following conditions:
(a) All the terms, covenants and conditions of this Agreement to be complied
with or performed or satisfied by the Seller shall have been complied with or
performed or satisfied on or prior to the Closing Date.

 

9

--------------------------------------------------------------------------------

 

(b) The representations and warranties of the Seller (as applicable) set forth
in Exhibit A, shall be true and correct in all material respects on the date of
this Agreement and on the Closing Date (except to the extent such
representations and warranties specifically relate to an earlier date in which
case such representations and warranties shall be true and correct in all
material respects on such earlier date).
(c) No governmental authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the Transaction illegal or otherwise
restraining or prohibiting consummation of such Transaction.
(d) All approvals from the OSRC with respect to the transfers of the Racing
Licenses described in this Agreement (collectively, the “Requisite Consents”)
shall have been obtained in form and substance reasonably acceptable to Buyer.
(e) Seller shall have made or stand willing to make all the deliveries required
under Section 7(a).
(f) Buyer’s Member and Pinnacle’s Board of Directors shall have approved the
execution of and consummation of the transactions contemplated by this Agreement
prior to the Effective Date.
(g) Jockey Club and Turf Club shall, simultaneous with the Closing, have
contributed and transferred the Racing Licenses and to the extent transferable,
transferred the Pari-Mutuel Tax Abatements, to the LLCs in exchange for 100% of
the membership interests of the LLCs, as more fully described in Section 4.4(n)
below.
(h) Seller shall have obtained a waiver from Ronald Plattner (“Plattner”) of any
rights or claims Plattner may have against any Seller Party, Concessions, Buyer
or Pinnacle in connection with the joint venture of Seller and Plattner pursuant
to that certain letter agreement by and between Seller and Plattner dated
December 1, 2006, in form and substance satisfactory to Buyer.
(i) If the consent and approvals needed for the transfer of the Liquor License
are not obtained prior to Closing, Concessions shall have executed and delivered
to Buyer the management agreement in the form attached hereto as Exhibit 4.2
(the “Management Agreement”).
(j) Seller shall have completed and submitted to the OSRC an application for the
pari-mutuel tax abatements for which Seller is eligible as a result of flood
damage to the Property and/or Track from the 1997 Ohio River flood.

 

10

--------------------------------------------------------------------------------

 

(k) On or prior to the earlier of: (a) December 31, 2010, and (b) ten Business
Days after Buyer’s receipt of the Survey (as defined below) (the “Property
Contingency Period”):
(i) Buyer shall have approved the condition of title to the Property (including,
without limitation, approval of all covenants, easements, restrictions,
agreements and other matters of record relating to or which affect the
Property); provided, however, that Buyer may only disapprove the condition of
title to the Property if a defect (or defects) in title, individually or in the
aggregate, materially impair the current use of the Property or the ability of
Buyer to use the Property for Buyer’s intended use;
(ii) Buyer shall have received a certified ALTA survey (addressed to Buyer and
to Buyer’s title insurance company, if any) (the “Survey”), showing the acreage
and boundary lines of the Property and all improvements located thereon, the
location of any and all easements and encroachments affecting the Property, the
location of all curb cuts, public ways, streets, roads, driveways and utilities
serving the Property and any other matters specified by Buyer, and shall have
approved such Survey; provided, however, that Buyer may only disapprove a Survey
matter if such matter (or matters) individually or in the aggregate, materially
impair the current use of the Property or the ability of Buyer to use the
Property for Buyer’s intended use.
(l) Any matters approved by Buyer included in Paragraph 4.1(k) above shall not
have materially changed or been altered after the Property Contingency Period
and prior to Closing solely as a result of any act initiated by Seller with
respect to the Property that individually or in the aggregate, materially impair
the ability of Buyer to use the Property for Buyer’s intended use.
(m) Upon receipt of the Survey or any initial drafts, revisions or updates
thereof, Buyer shall promptly provide a copy of such Survey to Seller Parties.
(n) Buyer shall prepare new legal descriptions for those parcels included in the
Property for which such new legal descriptions are required for purposes of
Buyer’s title insurance policy.
Section 4.2 Conditions for Seller. Notwithstanding any other provision of this
Agreement to the contrary, the obligation of Seller to complete the closing of
the Transaction shall be subject to the satisfaction or waiver by Seller of the
following conditions:
(a) All the terms, covenants and conditions of this Agreement to be complied
with or performed or satisfied by the Buyer shall have been complied with or
performed or satisfied on or prior to the Closing Date.
(b) The representations and warranties of the Buyer set forth on Exhibit B,
shall be true and correct in all material respects on the date of this Agreement
and on the Closing Date (except to the extent such representations and
warranties specifically relate to an earlier date in which case such
representations and warranties shall be true and correct in all material
respects on such earlier date).

 

11

--------------------------------------------------------------------------------

 

(c) No governmental authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the Transaction illegal or otherwise
restraining or prohibiting consummation of such Transaction.
(d) The Requisite Consents shall have been obtained.
(e) Buyer shall have made or stand willing to make all the deliveries required
under Section 7(b) and shall have paid or stand willing to pay the Purchase
Price as provided in Section 3.
(f) Seller shall have obtained requisite partnership approval of the execution
of and consummation of the transactions contemplated by this Agreement prior to
the Effective Date and the board of directors and shareholders of Jockey Club,
Turf Club and Concessions shall have approved the execution of and consummation
of the transactions contemplated by this Agreement prior to the Effective Date
(collectively, “Seller Consent”).
(g) Seller Parties shall have received the Survey as provided in Section 4.1(m)
and Buyer shall have provided to Seller Parties new legal descriptions for those
parcels included in the Property for which such new legal descriptions are
required for purposes of Buyer’s title insurance policy.
Section 4.3 Requisite Consents and Closing
(a) Buyer, Pinnacle and Seller Parties shall cooperate with each other and shall
assist each other in their respective efforts to obtain the Requisite Consents.
The Seller Parties agree to use commercially reasonable efforts to obtain
consent and approval from the OSRC with respect to the transfers of the Racing
Licenses and, to the extent transferable, the Pari-Mutuel Tax Abatements from
each of Jockey Club and Turf Club to the LLCs simultaneous with the Closing. The
Seller Parties further agree to submit to the OSRC an application for consent
and approval with respect to such transfers of the Racing Licenses and, to the
extent transferable, the Pari-Mutuel Tax Abatements, within five (5) Business
Days after the Effective Date. Buyer and Pinnacle agree to use their
commercially reasonable efforts to obtain consent and approval from the OSRC
with respect the purchase by Buyer of the membership interests of the LLCs that
will hold the Racing Licenses subsequent to the transfer described above to the
LLCs. Buyer and Pinnacle further agree to submit to the OSRC an application for
consent and approval with respect to the transfer of the membership interests
and Racing Licenses within five (5) Business Days after the Effective Date;
provided that the Seller Parties provide, in a timely manner, such

 

12

--------------------------------------------------------------------------------

 

information and cooperation as may be required of any Seller Party in connection
with such application. Notwithstanding anything else in this Agreement to the
contrary, if the Requisite Consents have not been obtained prior to December 15,
2010, and all other Closing Conditions set forth in Sections 4.1 and 4.2 have
been satisfied or waived except for those which cannot be satisfied until
Closing, then the Closing shall be postponed until such time as the Requisite
Consents are obtained, up to the Drop Dead Date (as hereinafter defined). For
the avoidance of doubt, the Closing shall not be postponed solely due to a
failure to obtain the consent and approvals needed for the transfer of the
Liquor License; and, in the event that the consent and approvals needed for the
transfer of the Liquor License are not obtained prior to Closing, Buyer shall
operate the Business pursuant to the Management Agreement.
(b) If the Closing is postponed under Section 4.3(a) above, then Buyer and/or
Pinnacle shall pay to Seller the following: (i) $150,000 for each full month
that the Closing has been postponed (and a pro-rated amount for any partial
periods beginning January 1, 2011), and (ii) an amount sufficient to pay the
Real Estate Taxes that become due subsequent to the Effective Date and before
the Closing Date or termination of this Agreement (collectively, the
“Section 4.3(b) Payments”). Pinnacle and/or Buyer shall pay the Section 4.3(b)
Payments to Seller as follows: (x) those funds described in Section 4.3(b)(i)
for each applicable month shall be paid to Seller on the earlier of the second
Business Day after the day on which the monthly meeting of the OSRC is held
during each such month and the 25th day of each such month, and (y) those
payments required by Section 4.3(b)(ii) shall be paid to Seller ten (10) days
prior to the due date of the applicable Real Estate Taxes. All Section 4.3(b)
Payments advanced to Seller by Buyer and/or Pinnacle shall be non-refundable to
Buyer and/or Pinnacle.
Section 4.4 Obligations of Seller Parties and Concessions Prior to Closing.
Until this Agreement is terminated or expires as set forth herein and except as
expressly permitted by this Agreement and provided all Section 4.3(b) Payments
have been paid when due, or with the prior written consent of Buyer, which
consent shall not be unreasonably conditioned, withheld or delayed, the Seller
Parties agree to the following:
(a) Seller will conduct its business only in the ordinary course of business
consistent with current practices and not enter into any agreements or
commitments other than at substantially prevailing market prices and on
substantially prevailing market terms except for (i) any commitments or
agreements to repair, replace or maintain Assets pursuant to which Seller
Parties will received insurance proceeds to cover such costs above the
applicable insurance deductible, or (ii) any commitments or agreements which
respect to an Uninsured Loss (as defined below) for which Seller Parties have or
will received an Uninsured Loss Payment (as defined below) from Buyer and/or
Pinnacle;
(b) Seller will not enter into any agreement or commitments in an amount
exceeding $25,000 without the written consent of Buyer except for (i) any
commitments or agreements to repair, replace or maintain Assets pursuant to
which Seller Parties will received insurance proceeds to cover such costs above
the applicable insurance deductible, or (ii) any commitments or agreements which
respect to an Uninsured Loss (as defined below) for which Seller Parties have or
will received an Uninsured Loss Payment (as defined below) from Buyer and/or
Pinnacle.

 

13

--------------------------------------------------------------------------------

 

(c) Seller will, except as otherwise directed by Buyer in writing, and without
making any commitment on Buyer’s behalf, use commercially reasonable efforts to
preserve intact its current business organization, keep available the services
of its officers, employees, and agents and maintain its relations and good will
with suppliers, customers, landlords, creditors, employees, agents, and others
having business relationships with it;
(d) Seller will otherwise report to, and as reasonably requested by, Buyer
concerning the status of Seller’s business, operations, and finances;
(e) Seller will make no material changes in management personnel without prior
consent of Buyer;
(f) Seller will keep in full force and effect, without amendment, all material
rights relating to Seller’s business;
(g) Seller will take all actions necessary to prosecute any licenses for video
lottery terminals (“VLTs”) granted (or that may be granted) to any Seller Party
by the Ohio Lottery Commission; provided that, if a Seller Party is required to
make a payment to any government agency or otherwise in connection with such
licenses, Buyer agrees to advance funds to Seller for such purposes; including
but not limited to attorney fees, staff costs and expenses, and all other fees
and expenses associated with the prosecution of the VLTs (“VLT Funds”) on the
following terms and conditions: All VLT Funds advanced by Buyer and/or Pinnacle
shall be evidenced by one or more promissory notes that: (i) shall bear no
interest, (ii) shall have a maturity date no later than two years after the date
of the Closing, (iii) shall be canceled upon the completion of a Closing under
this Agreement with no reduction in Purchase Price, and (iv) shall become
immediately due and payable upon a Change in Control (as hereinafter defined),
other than a Change in Control resulting from the transactions contemplated by
this Agreement. “Change in Control” means the occurrence of any one or more of
the following without the prior consent of Buyer: the acquisition by any
individual, entity or group of beneficial ownership of more than 50% of the
equity of any Seller Party or Concessions; the consummation of a reorganization,
merger, consolidation or other business combination (any of the foregoing, a
“Business Combination”) of Seller with any other entity; or the consummation of
a sale or other disposition of all or substantially all of the assets of the
Seller Parties;

 

14

--------------------------------------------------------------------------------

 

(h) Seller will not, and will instruct Investors Commercial Capital, LLC, ABI
International, Inc., and any other broker or other person to whom the
transactions contemplated by this Agreement were submitted not to, directly or
indirectly, solicit, initiate, encourage, or entertain any inquiries or
proposals from, discuss or negotiate with, provide any nonpublic information to,
or consider the merits of any inquiries or proposals from any person (other than
Buyer) relating to any business combination transaction involving Seller,
including the sale Seller’s membership interests, the merger or consolidation of
Seller, or the sale of Seller’s business or any of the Assets (other than in the
Ordinary Course of Business). Seller shall notify Buyer of any such inquiry or
proposal within twenty-four (24) hours of receipt or awareness of the same by
Seller;
(i) Seller will timely pay in full all taxes and other material obligations on
the Assets when such taxes and other obligations are due and payable; provided,
however, Seller shall not be obligated to pay any taxes or other obligations
which it is validly disputing;
(j) Subject to the disclosures made herein, Seller will maintain the Assets in a
state of repair and condition that is consistent with its current practices;
further provided, that Seller Parties shall not be required to repair, replace
or maintain any Asset or Assets which are damaged or part of a casualty loss, or
otherwise rendered inoperable and such repair or replacement or maintenance is
not covered by Seller Parties’ insurance (“Uninsured Loss”), provided, however,
Seller Parties shall replace, repair or maintain such damaged Asset or Assets
if: (i) such replacement, repair or maintenance is necessary to maintain the
Permits, including without limitation the Racing Licenses or to hold live racing
at the Track, and (ii) Buyer and/or Pinnacle advance the funds to cover the
costs of such Uninsured Loss (“Uninsured Loss Payment”). All Uninsured Loss
Payments advanced by Buyer and/or Pinnacle shall be evidenced by one or more
promissory notes that: (i) shall bear no interest, (ii) shall have a maturity
date no later than two years after the date of the Closing, (iii) shall be
canceled upon the completion of a Closing under this Agreement with no reduction
in Purchase Price, and (iv) shall become immediately due and payable upon a
Change in Control (as hereinafter defined), other than a Change in Control
resulting from the transactions contemplated by this Agreement;
(k) Seller Parties and Concessions shall not be required to comply with any
Mandates (as defined below), except that if prior to or after the Effective
Date, Seller Parties or Concessions is required by any law, regulation,
ordinance, CAFO Regulations or the OSRC or any federal, state, county or local
agency or department to repair, replace or perform maintenance on any Asset, or
obtain a permit, license or otherwise take any action (collectively, a
“Mandate”) and (i) such replacement, repair, maintenance or action is necessary
to maintain the Permits, including without limitation the Racing Licenses, to
hold live racing at the Track, or to avoid additional fines, penalties or
injunctive or similar relief, and (ii) Buyer and/or Pinnacle advance the funds
to cover the costs of such Mandate (“Mandate Payment”), Seller shall repair,
replace, maintain or take such actions as are necessary to maintain the Permits,
including without limitation the Racing Licenses or to hold live racing at the
Track. All Mandate Payments advanced by Buyer and/or Pinnacle shall be evidenced
by one or more promissory notes that: (i) shall bear no interest, (ii) shall
have a maturity date no later than two years after the date of the Closing,
(iii) shall be canceled upon the completion of a Closing under this Agreement
with no reduction in Purchase Price, and (iv) shall become immediately due and
payable upon a Change in Control, other than a Change in Control resulting from
the transactions contemplated by this Agreement;

 

15

--------------------------------------------------------------------------------

 

(l) Seller will take no actions which directly or indirectly adversely impact
the validity or enforceability of this Agreement;
(m) The Seller Parties and Concessions shall (i) maintain all Permits required
for the continued operation of the Track on the Property and (ii) continue the
operation of the Track in the ordinary course of business consistent with
current practices and in a manner that allows Jockey Club and Turf Club to
maintain the Racing Licenses;
(n) The Seller Parties shall have duly organized the LLCs prior to Closing by
filing organizational documents reasonably acceptable in form and substance to
Buyer and the Seller Parties with the Secretary of State of the State of Ohio.
Each of Jockey Club and Turf Club shall have contributed the Racing Licenses
held by it and the related Pari-Mutuel Tax Abatements to the LLCs simultaneous
with the Closing, in exchange for all of the membership interests of the LLCs.
The Seller Parties agree to sell all of the membership interests of each of the
LLCs to Buyer at Closing, and to take only the actions described in this
Agreement with regard to the LLCs;
(o) Seller shall cause Buyer and Pinnacle, at Buyer’s expense, if any, to be
named as additional insureds on its property insurance policies for the Property
from the Effective Date until the Closing; provided, that the insurance company
is agreeable to such addition; and further provided that, in the event that this
Agreement terminates prior to Closing pursuant to Sections 9.1 or 9.2, Seller
shall have the right, without the consent of Buyer or Pinnacle, to have Buyer
and Pinnacle removed immediately, without notice, as additional insureds on its
property insurance policies and Buyer and Pinnacle agree, at their expense, to
take all actions necessary to be removed as additional insureds upon a
termination of the Agreement;
(p) Concessions will, within five (5) Business Days after the Effective Date,
submit written notice to the Ohio Lottery Commission of its intent to sell its
business to Buyer; and agrees to cooperate with Buyer in connection with the
application by Buyer to the Ohio Lottery Commission for an Ohio Lottery Retailer
License;
(q) Notwithstanding the provisions of Section 4.4(k) above, Seller Parties shall
use their commercially reasonable efforts to have completed the following
compliance corrections of which the Seller Parties were provided written notice
by the OSRC prior to the Effective Date that are required by the OSRC to be
completed after the close of the 2010 live racing season: paint all living
quarters in Dorm A and Dorm B, paint all stable area rest rooms, repair roofs on
all barns to be used in 2011 racing season, level all shed rows in the open
barns, install windows in Dorm B and eradicate bed bugs in Dorms A and B
(collectively, the “Racing Commission Corrections”);

 

16

--------------------------------------------------------------------------------

 

(r) Seller Parties shall use their commercially reasonable efforts to have
completed items set forth in a violation letter received from the Hamilton
County Department of Health by Seller prior to the Effective Date related to the
sewer plants, including but not limited to obtaining any required permits
related thereto (collectively, the “Health Department Corrections” and, together
with the Racing Commission Corrections, the “Site Corrections”).
Section 4.5 Obligations of Seller Post-Closing.
(a) After the Closing Date, Seller shall promptly reimburse Buyer for all
uncashed pari-mutuel tickets which were procured from the Track prior to Closing
(“Uncashed Tickets”) which Buyer pays out after the Closing upon presentment to
Buyer for payout by the legal holder of the Uncashed Ticket. Buyer shall provide
Seller with satisfactory supporting documentation of such payout upon request
for reimbursement of Uncashed Tickets from Seller. Seller shall establish a
reserve account to fund such Uncashed Tickets in an amount not to exceed $25,000
(the “Uncashed Ticket Fund”). No more than once a month, Buyer shall provide to
Seller a detailed accounting of Uncashed Tickets (“Account Detail") which it
pays out and Seller shall reimburse Buyer for such amount within thirty
(30) days of the receipt of the request for payment. Any unresolved disputes
which respect to the Account Detail shall be decided by a mutually acceptable
certified public accountant whose fees shall be paid one-half by Buyer and
one-half by Seller. Seller shall be entitled to the release the balance of the
Uncashed Ticket Fund on the first anniversary of the Closing Date.
(b) Seller agrees to the covenants regarding tax matters set forth in Exhibit C
hereto.
(c) Seller agrees to file with the California Secretary of State, within six
months after the Closing, appropriate documentation to change the name of
Management and Seller to entity names which do not include the phrase “River
Downs” or something similar thereto.
(d) Should the OSRC require a third party review of the financial statements of
one or more of the Seller Parties to after Closing, each of the Seller Parties
agrees to provide such information and assistance as may be necessary for Buyer
to have such review conducted at Buyer’s own expense.

 

17

--------------------------------------------------------------------------------

 

Section 4.6 Obligations, Covenants and Acknowledgements of Buyer Prior to
Closing and Post-Closing.
(a) Buyer will cooperate with all reasonable requests to take action which will
facilitate the Closing of the Transaction, including, without limitation, such
assistance as may be required in connection with the transfer of the Permits,
Liquor License and obtaining the Requisite Consents.
(b) Buyer acknowledges and agrees that the Track and Property is located in a
flood plain and the Business has been operating at a significant loss, and
expects to continue to operate at a significant loss during the term of this
Agreement.
(c) Uncashed Tickets. Buyer shall promptly pay any Uncashed Ticket presented to
Buyer for payment by the legal holder of such Uncashed Ticket after the Closing.
Buyer shall provide Seller with satisfactory supporting documentation of such
payouts upon Buyer’s request for reimbursement of Uncashed Tickets from Seller.
(d) Quarterhorse Accounting Overpayment. Buyer shall reimburse Seller for the
Quarterhorse Overpayment as follows: within ten (10) days of the receipt by
Buyer of funds allocated to quarterhorse purses, Buyer shall remit such funds to
Seller up to the amount of the Quarterhorse Overpayment.
(e) Retention of and Access to Records. After the Closing Date, Buyer shall
retain, at no expense to Seller Parties or Concessions, for a period of seven
years those records and that confidential information of Seller Parties and
Concessions delivered to Buyer and/or Pinnacle, including without limitation any
accounting records of any Seller Party or Concessions delivered to Buyer. Buyer
also shall provide the Seller Parties and Concessions and their representatives
reasonable access thereto, during normal business hours and on at least three
days’ prior written notice, to enable them to prepare financial statements or
tax returns or deal with tax audits. After the Closing Date, Seller shall
provide Buyer and its Representatives reasonable access to records that are
Excluded Assets to the extent such records are related to Assets, Assumed
Obligations or the payment of taxes, during normal business hours and on at
least three days’ prior written notice, for any reasonable business purpose
specified by Buyer in such notice. Buyer shall allow Seller Parties and
Concessions to maintain their Seller Records in the location in which the Seller
Records are currently kept for a period of six (6) months after the Closing at
no expense to Seller Parties or Concessions.
(f) Tax Matters Covenants. Buyer agrees to the covenants regarding tax matters
set forth in Exhibit C hereto.
(g) Should the OSRC require a third-party review of the financial statements of
one or more of the Seller Parties after Closing, Buyer agrees to have such
review conducted at Buyer’s own expense to satisfy the requirements imposed by
the OSRC; provided that each of the Seller Parties provides such information and
assistance as may be necessary to complete such review.

 

18

--------------------------------------------------------------------------------

 

(h) Buyer and Pinnacle covenant and agree that from and after the Effective Date
provided there is a Closing, Buyer and Pinnacle shall assume all obligations to
perform any actions necessary to complete the Site Corrections which were not
completed by Seller Parties prior to Closing and indemnify Seller Parties and
Concessions for any and all claims, losses, expenses, costs, fees, damages
and/or reasonable attorney fees (collectively, the “Damages”), including but not
limited to Damages related to fines, penalties or third party (including
governmental and quasi-governmental agency) claims, incurred by Seller Parties
or Concessions as a result of the Site Corrections not being completed, provided
such obligation shall not include any Damages, including but not limited to
Damages related to fines, penalties or third party (including governmental or
quasi-governmental agency) claims made or assessed against the Seller Parties
with respect to the Site Corrections not being completed prior to Closing, and
any limitation or exclusion set forth in Section 12 shall not apply to Buyer’s
and Pinnacle’s indemnification obligations under this Section.
(i) To the extent permitted by any law, rule or regulation, Buyer agrees to
cooperate with Seller Parties and Concession with respect to initiating
voluntary payroll deductions for any Transferred Employees, which such
applicable Transferred Employee agrees to, with respect to any amounts owed by
the Transferred Employees to the Seller Parties or Concessions.
(j) Buyer agrees to obtain all necessary surety bonds and/or provide guaranties
of performance as required by the OSRC or any other governmental authority with
respect to the Racing Licenses and use commercially reasonable efforts to assist
Seller Parties in having their current surety bond(s) and/or guaranties of
performance released as of the Closing.
Section 5. Closing. Subject to Section 9.1(c) and satisfaction or waiver of the
conditions of closing set forth in Sections 4.1 and 4.2, the closing of the
Transaction (the "Closing”) shall take place on the later of (a) December 15,
2010, and (b) five (5) Business Days, after the date that the conditions to
Closing set forth in Sections 4.1 and 4.2 have been satisfied or waived (other
than those conditions that by their nature are to be satisfied at Closing, but
subject to the satisfaction or waiver of those conditions at such time) or such
other date as otherwise mutually agreed upon by Buyer and Seller (the “Closing
Date”). At the option of Seller, the Closing shall (i) be by electronic exchange
of the documents and funds transfer or (ii) take place in the offices of Graydon
Head & Ritchey LLP, Cincinnati, Ohio. If the Closing Date does not fall on a
Business Day then the Closing Date shall be on the next Business Day. The time
and date as of which the Transaction shall be deemed effective (the “Effective
Time”) shall be 12:01 a.m. Ohio time on the Closing Date. “Business Day” shall
mean any day other than a Saturday, Sunday or other days on which commercial
banks in Ohio are authorized or obligated to close under applicable laws.

 

19

--------------------------------------------------------------------------------

 

Section 6. Investigations; Condemnation; Damage; Possession.
(a) Investigations. Following the date hereof, Buyer and Buyer’s agents and
contractors will have the right (upon reasonable notice to Seller) to conduct
all tests, inspections, title searches, investigations, surveys and other items
(“Investigations”), deemed necessary by Buyer, in its sole discretion, for
Buyer’s potential ownership and use of the Business and Assets. Seller shall
give Buyer and Buyer’s agents and contractors the right to come onto the
Property to do all such Investigations (upon reasonable notice to Seller). All
Investigations completed by Buyer or Buyer’s agents or contractors shall be
completed in a manner so as to not unreasonably interfere with Seller’s
ownership of the Assets or the existing use and possession. During the course of
the Investigations, Buyer shall have the right to inspect and review (A) all
studies, reports or other information (environmental or otherwise) within
Seller’s possession or control pertaining to the Assets, (B) the insurance
policies owned or maintained by Seller insuring or relating to the Assets or the
Business, (C) the Intangibles, (D) the Contracts, and (E) such additional
financial, operating, and such other relevant data and information as Buyer may
reasonably request; and Seller shall furnish Buyer with copies of the
documentation with respect to same. Seller shall cooperate and assist, to the
extent reasonably requested by Buyer, with all such Investigations. In addition,
Buyer shall have the right to have the Property inspected by Buyer’s agents and
contractors, at Buyer’s and Pinnacle’s sole cost and expense, for purposes of
determining the physical condition and legal characteristics of the Property.
Buyer and Pinnacle shall defend, hold harmless and indemnify Seller Parties and
Concessions, from and against all claims, liabilities, costs, fines and expenses
(including without limitation reasonable attorney fees and other litigation
expenses) and damages arising from or related to the conduct by Buyer or its
agents in the performance of the Investigations and any limitation or exclusion
set forth in Section 12 shall not apply to Buyer’s and Pinnacle’s
indemnification obligations under this Section.
(b) Notice of Condemnation and Eminent Domain. Seller shall promptly notify
Buyer in writing if Seller receives a notice of condemnation and/or exercise of
eminent domain in respect of all or any part of the Assets. Unless such exercise
of eminent domain materially impairs Buyer’s ability to use the Assets,
including the Property, for Buyer’s intended use, Buyer and Pinnacle shall
continue to be bound by this Agreement, except that any and all compensation
awarded for expropriation (including without limitation all rights to loss of
business, goodwill, fixtures, moving and other expenses) and all right and claim
of Seller to any such proceeds and compensation not paid by the Closing Date
shall be assigned to Buyer and retained by Buyer as its sole property and sole
remedy.
(c) Damage Before Closing. Seller shall insure the Assets until the Closing as
it currently insures the Assets (and use commercially reasonable efforts to
renew any policies of insurance which may expire prior to the applicable Closing
Date). If loss or damage to the Assets occurs from any cause (“Casualty”),
whether or not insured, then Seller shall promptly deliver a written notice to
Buyer specifying the nature and extent of the loss or damage and estimating the
cost of and time to complete repair and restoration, and whether the same is
covered by insurance (the “Notice of Loss”). Buyer and Pinnacle shall continue
to be bound by this Agreement except that any and all compensation awarded for
the loss or cost of repair covered by insurance and all right and claim of
Seller to any such proceeds and compensation not paid by the Closing Date shall
be assigned to Buyer and retained by Buyer as its sole property and sole remedy.
(d) Possession. If the Closing occurs, Buyer shall be entitled to exclusive
possession of the Assets as of the Closing.

 

20

--------------------------------------------------------------------------------

 

Section 7. Closing Deliveries.
(a) Seller’s Delivery Obligations. At the Closing, Seller Parties and
Concessions shall deliver to or for the benefit of Buyer the following (such
documents shall either be prepared by Buyer or shall be in a form approved by
Buyer prior to the Closing):
(i) One or more recordable limited warranty deeds for the Property, executed by
Seller;
(ii) A bill of sale for the Inventories and the Equipment, executed by Seller
Parties and Concessions (the “Bill of Sale”);
(iii) An assignment and assumption agreement for the assignment of Seller
Parties’ and Concessions’ Contracts to Buyer (the “Assignment and Assumption
Agreement”), executed by Seller;
(iv) An assignment (or assignments) of the intangibles, executed by Seller (the
“General Assignments”);
(v) The Indemnification Escrow Agreement executed by Seller;
(vi) A certificate of each of the Seller Parties and Concessions signed on
behalf of each by such Party’s chief executive officer or chief financial
officer certifying that the closing conditions set forth in Sections 4.1(a) and
(b) applicable to such Party have been satisfied and that the Party has complied
with all other covenants and obligations of the Party under this Agreement
applicable between the Effective Date and Closing Date in all material respects;
(vii) A copy of the Seller Consent, certified by officers or managers of each of
the Seller Parties and Concessions, as applicable;
(viii) A certificate of non-foreign status under Section 1445 of the Code with
respect to the Property;
(ix) Such other assignment or conveyance documents as may be requested by Buyer,
including such documents as required to transfer the assets of Concessions to
Buyer;

 

21

--------------------------------------------------------------------------------

 

(x) Such resolutions and other documents as may be reasonably requested by Buyer
to establish the authority of Seller Parties and Concessions to enter into the
Transaction;
(xi) Such other documents as shall be reasonably required to consummate the
purchase and sale of the Property, including, without limitation, the
certificates of title for the portions of the Property that are registered land;
(xii) All keys, security cards, security codes, remote devices, and all other
items required for access to all parts of the Track;
(xiii) Copies of the Requisite Consents obtained by Seller Parties and
Concessions on or prior to the Closing Date;
(xiv) A legal opinion of Graydon Head & Ritchey LLP, dated as of the Closing
Date, in the form of Exhibit F; and
(xv) A legal opinion of Sidley Austin LLP, dated as of the Closing Date, in the
form of Exhibit G.
(b) Buyer’s Delivery Obligations. At the Closing, Buyer shall deliver to Seller
the following:
(i) Payment of the Purchase Price as required in Section 3;
(ii) A certificate of each of Pinnacle and Buyer signed on behalf of each Party
by its chief executive officer or chief financial officer certifying that the
closing conditions set forth in Sections 4.2(a) and (b) applicable to such Party
have been satisfied and that such Party has complied with all other covenants
and obligations of the Party under this Agreement applicable between the
Effective Date and Closing Date in all material respects;
(iii) The Assignment and Assumption Agreement, executed by Buyer;
(iv) The General Assignments, executed by Buyer;
(v) The Indemnification Escrow Agreement, executed by Pinnacle and Buyer;
(vi) A copy of Buyer’s Consent certified by an officer of Buyer; and
(vii) Such other documents as shall be reasonably required to consummate the
purchase and sale of the Property.

 

22

--------------------------------------------------------------------------------

 

(c) Transfer Taxes. The costs of all transfer taxes, recording fees and
conveyance fees and expenses incurred in connection with the conveyance of the
Property shall be borne half by Seller and half by Buyer; provided that if the
total costs of all such taxes, fees and expenses exceeds $30,000, then the
portion of such costs borne by Seller shall be $15,000 and the remaining portion
of such costs shall be borne by Buyer.
Section 8. Representations and Warranties.
Section 8.1 Representations and Warranties of Seller. Seller hereby represents
and warrants to Buyer that all of the statements contained in Exhibit A attached
to this Agreement are true and correct in all material respects on the date of
this Agreement and on the Closing Date (except to the extent such
representations and warranties specifically relate to an earlier date in which
case such representations and warranties shall be true and correct in all
material respects on such earlier date).
Section 8.2 Representations and Warranties of Buyer and Pinnacle. Buyer and
Pinnacle hereby represent and warrant to Seller that all of the statements
contained in Exhibit B attached to this Agreement are true and correct in all
material respects on the date of this Agreement and on the Closing Date (except
to the extent such representations and warranties specifically relate to an
earlier date in which case such representations and warranties shall be true and
correct in all material respects on such earlier date).
Section 8.3 As Is/Where Is Sale. Buyer and Pinnacle acknowledge and agree that
Buyer is purchasing the Assets based solely upon Buyer’s inspection and
investigation of the Assets and all documents related thereto, or Buyer’s
opportunity to do so. Buyer acknowledges and agrees that Buyer and Buyer’s
agents and representatives have been given full access to inspect and evaluate
the Assets prior to the date hereof. IT IS UNDERSTOOD AND AGREED THAT SELLER IS
NOT MAKING AND SHALL NOT AT ANY TIME BE DEEMED TO HAVE MADE ANY WARRANTIES OR
REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO
THE PHYSICAL CONDITION, VALUE OR FUTURE USE OR RELIABILITY OF ANY OF THE ASSETS,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO
CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. BUYER
ACKNOWLEDGES AND AGREES THAT, UPON CLOSING, SELLER SHALL SELL AND CONVEY TO
BUYER AND BUYER SHALL ACCEPT SUCH ASSETS “AS IS, WHERE IS, WITH ALL FAULTS.”
Buyer and Pinnacle have not relied and will not rely on, and Seller is not
liable for or bound by, any express, implied or statutory warranties,
guaranties, statements, representations or information of any kind pertaining to
such Assets or relating thereto made or furnished by Seller, other than the
representations and warranties expressly set forth on Exhibit A hereto. Without
limiting the generality of the foregoing, Buyer and Pinnacle acknowledge and
agree that (i) Seller has advised Buyer and Pinnacle that the Property is
located in a flood plain, (ii) the Business has been operating at a loss, and
(iii) no representation or warranty has been made or will be made concerning the
profitability of the Business or the value or condition of the Assets at
Closing, and Buyer and Pinnacle are hereby waiving any claim against Seller
Parties or Concessions based on any adverse change in the profitability of the
Business or value of the Assets.

 

23

--------------------------------------------------------------------------------

 

Section 8.4 Concentrated Animal Feeding Operations. Buyer and Pinnacle
acknowledge that Seller has informed Buyer and Pinnacle that the Property may
not currently be in compliance with applicable federal and state laws and
regulations relating to concentrated animal feeding operations (the “CAFO
Regulations”). Buyer and Pinnacle shall have no right to postpone or delay the
Closing, or terminate this Agreement, as a result of the Property not being in
compliance with CAFO Regulations at Closing. Buyer and Pinnacle covenant and
agree that from and after the Effective Date, provided there is a Closing, Buyer
and Pinnacle shall assume all obligations to bring the Property into compliance
with CAFO Regulations and indemnify Seller Parties and Concessions for any
Damages, including but not limited to Damages related to fines, penalties or
third party (including governmental and quasi-governmental agency) claims,
incurred by Seller Parties or Concessions as a result of the Property not being
in compliance with CAFO Regulations, provided such obligation shall not include
any Damages, including but not limited to Damages related to fines, penalties or
third party (including governmental and quasi-governmental agency) claims made
or assessed against the Seller Parties with respect to the Property not being in
compliance with CAFO Regulations prior to the Closing, and any limitation or
exclusion set forth in Section 12 shall not apply to Buyer’s and Pinnacle’s
indemnification obligations under this Section. Except as provided in
Section 4.4(k), the Parties agree that the Seller Parties shall have no
obligation under this Agreement to commence remediation with respect to CAFO
Regulations prior to the Closing.
Section 9. Default and Termination.
Section 9.1 Termination. This Agreement may be terminated prior to Closing by
Buyer and Pinnacle, on the one hand, or Seller, on the other hand, if the party
seeking to terminate is not in material default or breach of this Agreement,
upon written notice to the other party upon the occurrence of any of the
following:
(a) if Buyer and/or Pinnacle on the one hand or Seller on the other hand is in
material breach of this Agreement and such breach has been neither cured within
twenty (20) Business Days after written notice of such breach nor waived by the
party giving such termination notice;
(b) if a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action, in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and nonappealable;
(c) if the OSRC has not given its affirmative written consent to the
Transaction, including transfer of the Racing License, by March 31, 2011 (the
“Drop Dead Date”); or
(d) This Agreement may be terminated by written consent of Buyer, Pinnacle,
Concessions and Seller Parties.

 

24

--------------------------------------------------------------------------------

 

If any party believes the other party to be in breach or default of this
Agreement, the non-defaulting party shall, prior to exercising its right to
terminate under Section 9.1(a), provide the defaulting party with notice
specifying in reasonable detail the nature of such breach or default. Except for
a failure to pay the Purchase Price, the defaulting party shall have twenty
(20) Business Days from receipt of such notice to cure such default; provided,
that if the breach or default is due to no fault of the defaulting party and is
not capable of cure within such 20-Business Day period, the cure period shall be
extended as long as the defaulting party is diligently and in good faith
attempting to effectuate a cure.
Section 9.2 Buyer or Seller Termination.
(a) Buyer shall be able to terminate this Agreement by providing written notice
to Seller Parties and Concessions pursuant to (i) Section 6(b) if an exercise of
eminent domain materially impairs Buyer’s ability to use the Assets, including
the Property, for Buyer’s intended use, or (ii) Section 4.1(k), if, during the
Property Contingency Period, the Survey is not received by Buyer or Buyer
disapproves the condition of title to the Property or a survey matter with
respect to the Property (each as set forth in Section 4.1(k); or
(b) Seller Parties and Concessions shall be able to terminate this Agreement by
providing written notice to Buyer and Pinnacle if the Survey is not received by
Seller Parties and Buyer during the Property Contingency Period.
Section 9.3 Effect of Termination. In the event of termination of this Agreement
pursuant to Sections 9.1 or 9.2, this Agreement (other than Section 4.3(b)
relating to the Section 4.3(b) Payments, Section 4.4(g) relating to the VLT
Funds, Section 4.4(j), Section 4.4(k), Section 11 (Confidentiality) and
Section 21 (Expenses), which shall remain in full force and effect) shall
forthwith become null and void, and no party hereto (nor any of their respective
affiliates, directors, officers or employees) shall have any liability or
further obligation, except as provided in this Section 9 and Section 12;
provided, nothing in this Section shall relieve any party from liability for any
breach of this Agreement. If Seller terminates this Agreement pursuant to
9.1(a), Seller shall be entitled to pursue any other right or remedy available
under this Agreement, applicable law or otherwise, and Seller shall be entitled
to recover reasonable attorneys fees and court costs. If Buyer terminates this
Agreement pursuant to 9.1(a), Buyer shall be entitled to pursue any other right
or remedy available under this Agreement, applicable law or otherwise, and Buyer
shall be entitled to recover reasonable attorneys fees and court costs.

 

25

--------------------------------------------------------------------------------

 

Section 10. Employee Transition Matters.
Section 10.1 Employees.
(a) Notwithstanding any provision of this Agreement or any existing
confidentiality agreement to the contrary, from and after the date of this
Agreement, Buyer, shall have the right to discuss the terms of employment with
the employees, officers, agents and consultants of Seller Parties and
Concessions (collectively, the “Employer Parties”), and to offer to hire, and
effective as of the Effective Time, to hire and employ any or all of the
Employer Parties’ employees and officers, in Buyer’s sole discretion. Buyer will
prepare and provide to Seller at least five (5) days prior to the Closing Date a
list of all of the Employer Parties’ employees and officers that Buyer, in its
discretion, elects to hire and employ effective as of the Effective Time (each
such employee and officer that accepts Buyer’s offer individually referred to
herein as a “Transferred Employee” and all such employees and officers
collectively referred to herein as the “Transferred Employees”). Effective as of
the Effective Time, the Employer Parties shall terminate the employment of and
unconditionally release each Transferred Employee from any and all contractual
restrictions or other obligations related to his or her employment with the
Employer Parties, including, without limitation, any employment agreements and
any non-competition and non-solicitation covenants or agreements relating to the
Business, whether contained therein or otherwise, without penalty to the
Transferred Employees. Buyer shall not be required to, and shall not, assume any
employment contracts or other agreements or obligations of the Employer Parties
with any Transferred Employee regarding or related to his or her employment with
the Employer Parties, including, without limitation, any change of control
payments. The terms and conditions of employment to be offered to the
Transferred Employees shall be established in Buyer’s discretion.
(b) If the Buyer is a successor employer of Seller for purposes of the Agreement
between Seller and I.A.T.S.E. Local B 754 (the “Union”) dated April 16, 2010,
Buyer agrees that upon demand from the Union, Buyer shall negotiate with the
Union regarding the wages, hours and other terms and conditions of employment of
employees represented by the Union.
Section 10.2 Retained Employees; Termination Costs. Any employees or officers of
the Employer Parties, as of the date of this Agreement, that are not Transferred
Employees will be referred to herein as “Retained Employees.” The Employer
Parties shall be responsible for all liabilities (i) relating to Retained
Employees, whether terminated before or after the closing; and (ii) relating to
Transferred Employees, accrued or payable with respect to any pre-Closing period
or arising as a result of the Closing.
Section 10.3 Employee Benefits and Welfare Plans.
(a) Buyer may elect to, but shall not be required to, assume the Seller 401(k)
Plan as of Closing and at Buyer’s sole cost. If Buyer elects to assume the
Seller 401(k) Plan, Buyer shall provide written notice of such election to
Seller prior to Closing.
(b) Except as set forth in Section 10.3(a) above, Buyer shall not assume any
liabilities and obligations of the Employer Parties relating to their employees
or employee benefits. Without limiting the foregoing, the Employer Parties shall
retain, and Buyer shall not assume, obligations and liabilities with respect to
(i) any plans or arrangements maintained, sponsored, contributed to, or required
to be contributed to by the Employer Parties relating to Transferred Employees,
Retained Employees, or any other present, former or retired employees of the
Employer Parties, including, without limitation, liabilities and obligations for
any retiree benefits and (ii) except as provided in this Section 10, any
employee-related liabilities arising at or before, or by reason of, the Closing,
or otherwise in respect of any period at or before the Closing.

 

26

--------------------------------------------------------------------------------

 

(c) The Employer Parties will retain liability for all workers’ compensation
liabilities of the Transferred Employees due to or based upon events occurring
on or before the Closing Date, whether or not filed on or before the Closing
Date. Buyer shall be liable for all workers’ compensation liabilities of the
Transferred Employees due to or based upon events occurring after the Closing
Date.
Section 11. Confidentiality.
(a) Any Party (a “Receiving Party”) that receives any confidential or
proprietary information or data relevant to another Party (the “Disclosing
Party”) or such Disclosing Party’s business, whether of a technical or
commercial nature, shall not: (i) disclose to any person, association, firm,
corporation or other entity (other than the other Parties and their respective
representatives, attorneys, accountants, and agents or those designated in
writing by the Disclosing Party or any regulatory body that regulates activity
of any Party or its parent, including the OSRC) in any manner, directly or
indirectly, or (ii) use, or permit or assist, by acquiescence or otherwise, any
person, association, firm, corporation or other entity (other than the other
Parties and their respective representatives, attorneys, accountants, and agents
or those designated in writing by the Disclosing Party or any regulatory body
that regulates activity of any Party or its parent, including the OSRC) to use,
in any manner, directly or indirectly, any such information or data, excepting
only (A) disclosure or use of such data or information as is at the time
generally known or available to the public and which did not become so known or
available through any breach of any provision of this section by a Party, (B)
disclosures of information on a confidential basis to directors, employees or
professional advisors of a Party who need to know such information and
confidential use of such information by employees or professional advisors of a
Party who need to use such information, in each use only to the extent necessary
for the benefit of such Party, (C) disclosures of information to the extent
required by applicable law (including, without limitation, the rules and
regulations of the Securities and Exchange Commission, any state securities
commission or any gaming or racing laws) or any listing agreement with, or the
rules and regulations of, the New York Stock Exchange and (D) disclosure by
Buyer to any person, association, firm, corporation or other entity (and its
respective representatives, attorneys, accountants, and agents or any regulatory
body that regulates activity of any Party or its parent, including the OSRC)
considering whether to enter into a business relationship with Buyer with
respect to the Assets, Business or this Transaction, provided such person,
association, firm, corporation or other entity (and its respective
representatives, attorneys, accountants, and agents) agree to be bound by the
restrictions contained in this Section 11 and written notice is provided to
Seller.

 

27

--------------------------------------------------------------------------------

 

(b) If a Receiving Party becomes compelled in any proceeding or is requested by
a governmental body having regulatory jurisdiction over the Transaction to make
any disclosure that is prohibited or otherwise constrained by this Section 11,
that Receiving Party shall, to the extent not prohibited by any governmental
body, provide the Disclosing Party with prompt notice of such compulsion or
request so that it may seek an appropriate protective order or other appropriate
remedy or waive compliance with the provisions of this Section 11. In the
absence of a protective order or other remedy, the Receiving Party so compelled
or requested may make such the disclosures as, based upon advice of the
Receiving Party’s counsel, the Receiving Party is legally compelled to make or
that have been requested by such governmental body; provided, however, that such
Receiving Party shall use reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded by any person to whom such disclosures
are made. The provisions of this Section 11 do not apply to any proceedings
between the parties to this Agreement.
(c) Each Receiving Party acknowledges and agrees that the Disclosing Party’s
remedies at law would be inadequate for any violation or any attempted violation
of the Receiving Party’s obligations under this section. In the event of any
violation or attempted violation of this section by a Receiving Party, the
Disclosing Party shall be entitled to a temporary restraining order, temporary
and permanent injunctions, and other equitable relief, without the necessity of
posting any bond or proving any actual damage, in addition to all other rights
and remedies which may be available to such Party from time to time.
(d) The confidentiality obligation under Sections 11(a), (b) and (c) shall not
apply to filings or disclosures to be made by the Seller, Buyer or Pinnacle with
or any other filing or disclosures required by or from the U.S. Securities and
Exchange Commission, the New York Stock Exchange, Inc., the OSRC, Louisiana
Gaming Control Board, the Indiana Gaming Commission, the Missouri Gaming
Commission, the Nevada Gaming Commission, the Nevada State Gaming Control Board,
the City of Reno, Nevada gaming authorities, the New Jersey Casino Control
Commission, or any other state securities commission or gaming authority or
liquor authority or regulatory agency or any governmental body.

 

28

--------------------------------------------------------------------------------

 

Section 12. Indemnification.
Section 12.1 Survival. The representations, warranties, covenants and
obligations of each Party shall survive the Closing to the extent provided in
this Section 12.1. All representations, warranties, covenants and agreements and
related sections of the disclosure schedules shall survive the Closing for a
period of six (6) months after the Closing Date; provided that the Specified
Representations and Covenants (as hereinafter defined) shall survive and
continue until the expiration of the applicable statute of limitations. For
purposes of this Agreement, the representations and warranties set forth in
Sections A.2, A.3, A.4, B.1 and B.2 and the related sections of the disclosure
schedule, as applicable, shall be known as the “Specified Representations”; and
the covenants and agreements and the related sections of the disclosure
schedule, as applicable, set forth in Sections 4.5, 4.4(g), 4.4(j), 4.4(k),
10.3(c) and 11, and the Seller Retained Liabilities shall be known as the
“Seller Specified Covenants”; and the covenants and agreements and the related
sections of the disclosure schedule, as applicable, set forth in Section 4.6(c)
— (g), Section 6(a), Section 8.4, Section 10.1(b), Section 10.3(a), if
applicable, Section 11, the Assumed Obligations set forth in Section 2(a),
payment of the Purchase Price and any Liabilities related to Buyer’s ownership
and operation and conduct of the Business and Assets on and after the Closing
Date shall be known as the “Buyer Specified Covenants.” The Specified
Representations, Buyer Specified Covenants and Seller Specified Covenants
together, shall be known as the “Specified Representations and Covenants".
Notwithstanding anything to the contrary herein, if a claim notice relating to
any representation, warranty, covenant or agreement set forth in any of said
Sections is given to the Party required to provide indemnification pursuant to
this Section 12 on or prior to the six-month anniversary of the Closing Date, if
applicable, then, notwithstanding anything to the contrary contained in this
Section 12.1, such representation, warranty, covenant or agreement shall not so
expire, but rather shall remain in full force and effect until such time as each
and every claim that is based directly or indirectly upon, or that relates
directly or indirectly to, any breach or alleged breach of such representation,
warranty, covenant or agreement has been fully and finally resolved, either by
means of a written settlement agreement executed by the parties hereto, or by
means of a final, non-appealable judgment issued by a court of competent
jurisdiction.
Section 12.2 Seller Indemnification. Seller shall indemnify, defend and hold
harmless Buyer and its affiliates and their respective representatives from and
against any and all losses, liabilities, damages, demands, claims, suits,
actions, judgments or causes of action, assessments, costs and expenses,
including without limitation interest, penalties, reasonable attorneys’ fees,
any and all expenses incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation, asserted against,
resulting to, imposed upon, or incurred or suffered by Buyer, directly or
indirectly, as a result of or arising from (i) any material inaccuracy in or
material breach of any of the representations or warranties expressly made by
the Seller Parties or Concessions in this Agreement, (ii) any failure to perform
or comply with any covenants or agreements expressly made by the Seller Parties
and Concessions in this Agreement, or (iii) the Seller Retained Liabilities. In
the preceding sentence, the term “material” or “materially” shall mean any
inaccuracy in or breach of any of the representations or warranties expressly
made by the Seller Parties or Concessions in this Agreement or any failure by
any Seller Party to perform or comply with any covenants or agreements expressly
made by the Seller Parties and Concessions in this Agreement (other than with
respect to the Seller Specified Covenants) with which Buyer or Pinnacle makes a
written indemnification claim under Section 12(i) or (ii) in good faith in an
amount equal to or exceeding $3,000.00. In the event that such a material
inaccuracy in or material breach of a representation or warranty expressly made
by a Seller Party or Concessions in this Agreement occurs or a Seller Party
fails to materially perform or comply with any covenants or agreement in this
Agreement, the full amount of the indemnification claim made by Buyer or
Pinnacle in connection therewith shall be included in the calculation of the
aggregate amount of losses for which Buyer or Pinnacle is entitled to be
indemnified under this Agreement pursuant to Section 12.4(ii).

 

29

--------------------------------------------------------------------------------

 

Section 12.3 Buyer and Pinnacle Indemnification. Buyer and Pinnacle shall
indemnify, defend and hold harmless Seller Parties and Concessions and their
respective affiliates (collectively, the “Seller Indemnified Parties”) and their
respective representatives from and against any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments or causes of action,
assessments, costs and expenses, including without limitation interest,
penalties, reasonable attorneys’ fees, any and all expenses incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation, asserted against, resulting to, imposed upon, or
incurred or suffered by the Seller Indemnified Parties, directly or indirectly,
as a result of or arising from (i) any material inaccuracy in or material breach
of any of the representations or warranties expressly made by Buyer or Pinnacle
in this Agreement, (ii) any failure to materially perform or comply with any
covenants or agreements expressly made by Buyer or Pinnacle in this Agreement,
(iii) the Assumed Obligations, (iv) the ownership and operation and conduct of
the Business and Assets on and after the Closing Date, (v) payment of the
Purchase Price, Section 4.3(b) Payments or payments pursuant to Section 4.6, or
(vi) in accordance with Section 6 or Section 8.4.
Section 12.4 Limitations. Seller shall have no obligation to Buyer or Pinnacle
for any matter described in Section 12.2, except upon compliance by Buyer or
Pinnacle with the provisions of this Section 12. Seller shall not be required to
indemnify Buyer or Pinnacle under Section 12.2 unless (i) written notice of a
claim under this Section 12 was received by Seller within the pertinent survival
period specified in Section 12.1, and (ii) with respect to claims under
Sections 12.2(i) — (ii) (excluding Seller Specified Covenants), unless and until
the aggregate amount of losses for which the party is entitled to be indemnified
under this Agreement exceeds $250,000, after which Buyer and/or Pinnacle shall
be entitled to recover amounts over such $250,000 but limited as hereinafter set
forth. Seller shall not have any liability to Buyer and/or Pinnacle under any
circumstances for special, consequential, punitive or exemplary damages. In no
event shall the Seller’s total liability to Buyer and/or Pinnacle under this
Agreement with respect to indemnification claims under Sections 12.2(i) — (ii)
(other than breaches of representations and warranties constituting fraud, and
those with respect to the Specified Seller Covenants) exceed $500,000.
Section 12.5 Sole Remedy. After the Closing, the right to indemnification under
this Section 12 shall be the exclusive remedy of any party in connection with
any breach or default (other than breaches or defaults constituting fraud) by
another party under this Agreement; provided that nothing in this Section 12.5
shall limit a Party’s right to seek equitable relief in connection with the
non-performance of any agreement or covenant with respect to the Specified
Seller Covenants or Specified Buyer Covenants.
Section 13. Notices. All notices and deliveries to be given or made in
connection herewith shall be deemed completed and sufficient if mailed, by
certified mail, return receipt requested or delivered by personal delivery or
nationally recognized overnight courier service, effective upon: (i) receipt or
refusal to accept delivery with respect to personal delivery, (ii) the first
Business Day after deposit with an overnight courier service, provided that such
notices and deliveries shall be made to the respective parties for whom the same
is intended if forwarded to the parties at their addresses set forth below or to
such other address or addresses as the parties may notify each other in
accordance with this Section 13.

 

30

--------------------------------------------------------------------------------

 

  (a)  
If to a Seller Party or Concessions, to:

River Downs Investment Company, a California Limited Partnership
6301 Kellogg Road
Cincinnati, OH 45230
Attention: Jack Hanessian
and:
Jack Hanessian
680 Birney Lane
Cincinnati, OH 45230
with a copy to:
Graydon Head and Ritchey LLP
511 Walnut St.
1900 Fifth Third Center
Cincinnati, OH 45202
Attention: John J. Kropp

  (b)  
If to Buyer or Pinnacle, to:

Pinnacle Entertainment, Inc.
8918 Spanish Ridge Ave.
Las Vegas, NV 89148
Attention: General Counsel
with a copy to:
Taft Stettinius & Hollister LLP
200 Public Square
Suite 3500
Cleveland, OH 44114
Attention: Irv Berliner
Section 14. Non-Waiver. No failure by any Party to insist upon strict compliance
with any term or provision of this Agreement, to exercise any option, to enforce
any right, or to seek any remedy upon any default of any other Party shall
affect, or constitute a waiver of, any other Party’s right to insist upon such
strict compliance, exercise that option, enforce that right, or seek that remedy
with respect to that default or any prior, contemporaneous, or subsequent
default. No custom or practice of the Parties at variance with any provision of
this Agreement shall affect or constitute a waiver of, any Party’s right to
demand strict compliance with all provisions of this Agreement.

 

31

--------------------------------------------------------------------------------

 

Section 15. Genders and Numbers; Headings. Where permitted by the context, each
pronoun used in this Agreement includes the same pronoun in other genders and
numbers, and each noun used in this Agreement includes the same noun in other
numbers. The headings of the various sections of this Agreement are not part of
the context of this Agreement, are merely labels to assist in locating such
sections, and shall be ignored in construing this Agreement.
Section 16. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same Agreement. Any signature page
that is faxed or transmitted electronically shall be effective as an original
signature page. Any signature page to any counterpart may be detached from such
counterpart without impairing the legal effect of the signatures thereon and
thereafter attached to another counterpart identical thereto except having
attached to it additional signature pages.
Section 17. Entire Agreement. This Agreement (including all exhibits, schedules,
and other documents referred to in this Agreement, all of which are hereby
incorporated by reference) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the Parties
with respect to the subject matter of this Agreement. Buyer, Pinnacle, Seller
Parties and Concessions acknowledge and agree that neither Buyer or Pinnacle,
nor Seller Parties or Concessions have made any representation or warranty
except as expressly set forth in this Agreement or the other agreements,
exhibits and schedules referenced in the immediately preceding sentence. Any
matter that is disclosed in a Schedule hereto in such a way as to make its
relevance to the information called for by another Schedule readily apparent
shall be deemed to have been included in such other Schedule, notwithstanding
the omission of an appropriate cross-reference. No amendment, waiver of
compliance with any provision or condition hereof, or consent pursuant to this
Agreement shall be effective unless evidenced by an instrument in writing signed
by the party against whom enforcement of any waiver, amendment, change,
extension or discharge is sought. No failure or delay on the part of Buyer,
Pinnacle, Seller Parties or Concessions in exercising any right or power under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power.
Section 18. Assignment; Successors. Neither Buyer nor Pinnacle may assign its
rights under this Agreement to any entity or person without Seller’s written
consent, which consent may be withheld by Seller for any reason or no reason.
Seller Parties and Concessions may assign their rights under this Agreement
(without releasing Seller Parties or Concessions from their obligations under
this Agreement) at any time after the Closing Date, to any entity or person
without Buyer’s or Pinnacle’s consent. Subject to the forgoing, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by and against
the Parties and their respective heirs, personal representatives, successors,
and assigns.

 

32

--------------------------------------------------------------------------------

 

Section 19. No Third Party Beneficiaries. Nothing contained in this Agreement,
expressed or implied, is intended or shall be construed to confer upon or give
to any person, firm, corporation or legal entity, other than the Parties, any
rights, remedies or other benefits under or by reason of this Agreement.
Section 20. Remedies. Except as otherwise provided in this Agreement, all rights
and remedies of each Party under this Agreement shall be cumulative and in
addition to all other rights and remedies which may be available to that Party
from time to time, whether under any other agreement, at law, or in equity.
Seller Parties, Concessions and Buyer acknowledge and agree that Buyer would be
irreparably damaged if any of the provisions of this Agreement are not performed
in accordance with their specific terms and that any breach of this Agreement by
Seller Parties or Concessions could not be adequately compensated in all cases
by monetary damages alone. Accordingly, subject to and limited by Section 12.5,
in addition to any other right or remedy to which Buyer may be entitled, at law
or in equity, it shall be entitled, after all notices have been given and cure
periods expired as set forth in this Agreement, to enforce any provision of this
Agreement by a decree of specific performance and to temporary, preliminary, and
permanent injunctive relief to prevent breaches or threatened breaches of any of
the provisions of this Agreement.
Section 21. Expenses. Except as otherwise provided in this Agreement, each of
the Parties will bear its respective legal, accounting, and other costs and
expenses associated with the transactions contemplated by this Agreement
(including without limitation the costs of any brokers and financial advisors).
Section 22. Announcements. No Party shall disclose any information relating to
this transaction except for such disclosures as may be required by applicable
law or to such professional advisors as may be necessary or appropriate in order
to complete the transactions contemplated by this Agreement without the prior
written consent of Buyer, in the case of the Seller Parties or Concessions, and
Seller, in the case of Buyer or Pinnacle.
Section 23. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio without regard to
principles of conflicts of law. Each of the parties hereto irrevocably consents
to the exclusive jurisdiction and venue of the courts located in Hamilton
County, Ohio and any state appellate court therefrom within the State of Ohio.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy or the
application of this Agreement to any person or circumstance is invalid or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated by this Agreement is not affected in any manner materially adverse
to any party. To such end, the provisions of this Agreement are agreed to be
severable. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement be consummated as originally
contemplated to the fullest extent possible.

 

33

--------------------------------------------------------------------------------

 

Section 24. Amendment. This Agreement may be amended by the Parties at any time
by execution of an instrument in writing signed by both Parties.
Section 25. Construction. Each Party acknowledges that it and its counsel have
reviewed and revised this Agreement and that the normal rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments or
schedules thereto.
Section 26. Further Assurances. Each Party shall execute, acknowledge or verify,
and deliver any and all documents which may from time to time be reasonably
requested by Buyer, Seller Parties or Concessions, as applicable, to carry out
the purpose and intent of this Agreement.
Section 27. Interpretation. For all purposes of this Agreement, except as
otherwise expressly provided:
(a) defined terms shall have the meanings assigned to them in this Agreement and
include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the meanings assigned
under “GAAP”, as in effect on the date hereof, unless otherwise stated;
(c) all references in this Agreement to designated “Sections” and other
subdivisions are to the designated Articles, Sections and other subdivisions of
the body of this Agreement;
(d) all references in this Agreement to designated Exhibits or Schedules are to
the designated Exhibit or Schedule to this Agreement, unless otherwise
indicated;
(e) the words “herein,” “hereof,” “hereby,” “hereunder” and “hereto” and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(f) the words “include,” “including” and other words of similar import mean
“include, without limitation” or “including, without limitation,” regardless of
whether any reference to “without limitation” or words of similar import is
made;
(g) the phrase “made available” in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available;

 

34

--------------------------------------------------------------------------------

 

(h) any table of contents, table of definitions and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement;
(i) nothing contained herein shall create a joint venture or partnership between
Buyer and Seller, or an agency principal relationship; and
(j) this Agreement shall not be recorded, but at Buyer’s election with Seller’s
consent, a memorandum of this Agreement shall be recorded against the Property.
If this Agreement is terminated prior to the Closing, then the parties shall
release the memorandum of record.
[Remainder of page intentionally left blank. Signature page follows.]

 

35

--------------------------------------------------------------------------------

 

Each of the undersigned confirms that it has read fully and understands this
Agreement and the schedules and exhibits attached hereto.

              PNK (OHIO), LLC, AN OHIO LIMITED LIABILITY COMPANY   RIVER DOWNS
INVESTMENT COMPANY, A CALIFORNIA LIMITED PARTNERSHIP
 
           
By
/s/ John A. Godfrey   By /s/ Edward J. Hanessian
 
        Print Name   John A. Godfrey   Print Name   Edward J. Hanessian
 
           
Title
Vice President and Secretary   Title President and General Partner
 
       
 
            PINNACLE ENTERTAINMENT, INC., A DELAWARE CORPORATION   RIVER DOWNS
JOCKEY CLUB, INCORPORATED, AN OHIO CORPORATION
 
           
By
/s/ John A. Godfrey   By /s/ Edward J. Hanessian
 
        Print Name   John A. Godfrey   Print Name   Edward J. Hanessian
 
           
Title
Executive Vice President, General Counsel and Secretary   Title President
 
       
 
            RIVER DOWNS TURF CLUB, INCORPORATED, AN OHIO CORPORATION   OHIO
VALLEY CONCESSIONS, INC., AN OHIO CORPORATION
 
           
By
/s/ Edward J. Hanessian   By /s/ Martin J. Stringer
 
        Print Name   Edward J. Hanessian   Print Name   Martin J. Stringer
 
           
Title
President   Title President
 
       

 

 

--------------------------------------------------------------------------------

 

JOINDER
The undersigned, in his capacity as Trustee, hereby joins in the execution of
this Agreement for the purpose of subjecting his interests in the Assets to the
terms of this Agreement and for the purpose of agreeing to convey the real
property known as Hamilton County Auditor’s Parcel Number 500-0460-0033 with an
address of 6480 Kellogg Avenue (the “Trustee Parcel”) in accordance with the
terms and conditions set forth in this Agreement (and execute and deliver, to
the extent applicable to the Trustee Parcel, the documents referenced in Section
7(a) of this Agreement.

                  /s/ Edward J. Hanessian       Edward J. Hanessian, Trustee   
       

 

--------------------------------------------------------------------------------

 

Exhibit A
Representations and Warranties of Seller
§A.1. Organization and Standing. Seller (a) is a limited partnership duly
organized, validly existing, and in full force and effect under the laws of the
State of California with full power and authority to own, lease, use and operate
the Assets and to conduct the Business as and where now owned, leased, used,
operated and conducted, (b) is duly qualified to do business in Ohio and is not
doing business in any other jurisdiction in which failure to qualify would have
an material adverse effect on the Assets, (c) has not received any written
notice or assertion within the last twelve (12) months from any governmental
official in any jurisdiction to the effect that it is required to be qualified
or authorized to do business in any such jurisdiction which would have a
material adverse effect on the Assets, and (d) is not in material default in the
performance, observation or fulfillment of any provision of its articles of
organization, operating agreement, or other organizational documents, each as
amended to date. Each person executing this Agreement on behalf of Seller
represents and warrants that such person is duly authorized to act on behalf of
Seller in executing this Agreement.
§A.2. Power and Authority; Capacity; Binding Obligation. Each of the Seller
Parties and Concessions has all requisite power and authority to enter into this
Agreement and to perform its obligations under this Agreement. This Agreement
and the transactions contemplated by this Agreement have been duly and validly
authorized by all necessary action on the part of each of the Seller Parties and
Concessions, and their respective members or shareholders, as applicable. This
Agreement has been duly executed and delivered by each of the Seller Parties and
Concessions and constitutes the legal, valid and binding obligation of each of
the Seller Parties and Concessions, enforceable against each of the Seller
Parties and Concessions in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereinafter in effect affecting creditors’ rights generally
and general principles of equity.
§A.3. Consents and Approvals. Except as set forth on Schedule A.3, neither the
execution and delivery of this Agreement by the Seller Parties and Concessions
nor the consummation by the Seller Parties and Concessions of the transactions
to be consummated by it as contemplated by this Agreement require or will
require any action, consent, or approval of, or review by, or registration with,
any third party, court or governmental body or other agency instrumentality or
authority.
§A.4. Title to Assets. Except for Permitted Liens and as set forth on
Schedule A.4, each of the Seller Parties and Concessions has good, clear and
valid title in and to the Assets (excluding the Property) being transferred to
Buyer, free and clear of all Liens or encumbrances other than covenants,
conditions and restrictions which do not materially adversely affect the
operation of the Business. With respect to the Property, except for Permitted
Liens and as set forth on Schedule A.4, the Property shall be free from
encumbrances.

 

1

--------------------------------------------------------------------------------

 

§A.5. Contracts. Seller has delivered to Buyer true and accurate copies of all
Material Contracts of which Seller has a copy, a description of any written
Material Contract of which Seller does not have a copy, and a description of any
oral Material Contract. To Seller’s knowledge, no party to any Material Contract
is in actual, alleged, or potential violation or breach of, or default under,
any Material Contract. Except as set forth in Schedule 1.1(g), to Seller’s
knowledge, the descriptions of oral Material Contracts and written Material
Contracts of which Seller does not have a copy include all material terms. To
Seller’s knowledge, except for the Material Contracts or as set forth in
Schedule A.5 or Schedule 1.1(g), or expired Contracts which Seller has provided
a description of to Buyer, no other Contract or commitment is necessary to
conduct the Business as it is currently conducted.
§A.6. Legal Proceedings, etc. Except as set forth on Schedule A.6, there are no
actions, claims, proceedings, suits, orders or investigations pending, and
Seller has not received notice of any actions, claims, proceedings, suits,
orders or investigations threatened, (i) against or relating any Seller Party,
the Business or any of the Assets by or before any federal, state, local or
foreign court or governmental body, agency, or authority, at law or in equity,
or (ii) for the purpose of enjoining or preventing the consummation of the sale
and purchase of the Assets or any other transactions contemplated by this
Agreement or otherwise challenging the validity or propriety of the transactions
contemplated by this Agreement.
§A.7. Real Property. Schedule A.7 contains a complete list of the numbers
currently assigned by the Hamilton County Auditor to the parcels of real
property that, together with all buildings located thereon and improvements
thereto, constitute the Property.
§A.8. Brokers, Finders. Except for Investors Commercial Capital, LLC and ABI
International, Inc., the transactions contemplated by this Agreement were not
submitted to Seller by any broker or other person entitled to a commission,
finder’s fee or like payment thereon and were not, with the consent of Seller,
submitted to Buyer by any broker or other person, and none of the actions of
Seller has given rise to any claim by any person for a commission, finder’s fee
or like payment against any of the Parties.
§A.9. Sufficiency of Assets. As of the date of this Agreement, the Assets
(excluding the Excluded Assets) constitute all of the material tangible and
intangible assets currently used in the operation of the Track and the Business.
§A.10. Permits. Seller Parties and/or Concessions, hold all Permits. As of the
date hereof, each Permit is valid, subsisting and in good standing and neither
Seller nor Concessions is in material default or breach of any Permit and no
proceeding is pending or, to the knowledge of Edward J. Hanessian, threatened to
revoke or limit any Permit.
§A.11. Seller Financial Information. Seller has provided to Buyer true and
correct copies of Seller Parties’ financial statements (consisting of a balance
sheet, income statement and statement of cash flows) and for the past five
calendar years (2004-2009) ((collectively, the “Financial Information”). To the
Seller’s knowledge, all such Financial Information is true and complete in all
material respects and fairly presents the assets, liabilities, financial
condition and results of operations of each Seller Party, as applicable, at such
dates and for such periods.

 

2

--------------------------------------------------------------------------------

 

§A.12. Jockey Club, Turf Club and Concessions. Each of Jockey Club, Turf Club
and Concessions (a) is a corporation duly incorporated, validly existing, and in
good standing under the laws of the State of Ohio with full power and authority
to own, lease, use and operate its assets and to conduct its business as and
where now owned, leased, used, operated and conducted, (b) is not doing business
in any other jurisdiction in which failure to qualify would have an material
adverse effect on the Assets, (c) has not received any written notice or
assertion within the last twelve (12) months from any governmental official in
any jurisdiction to the effect that it is required to be qualified or authorized
to do business in any such jurisdiction which would have a material adverse
effect on the Assets, and (d) is not in material default in the performance,
observation or fulfillment of any provision of its articles of incorporation,
code of regulations, or other organizational documents, each as amended to date.
Seller is the sole owner of all of the capital stock of each of Jockey Club and
Turf Club. Jockey Club and Turf Club hold the Racing Licenses which are valid,
subsisting and in good standing and neither Jockey Club nor Turf Club are in
material default or material breach of such Racing License and no proceeding is
pending or, to the knowledge of the Seller Parties, threatened to revoke or
limit the Racing License. Jockey Club and Turf Club own the Racing Licenses free
and clear of all Liens or encumbrances.
§A.13. Disclosure. No representation or warranty or other statement made by
Seller in this Agreement, the related disclosure schedules, any supplement to
the disclosure schedules, or otherwise in connection with the transactions
contemplated by this Agreement contains any untrue statement or omits to state a
material fact necessary to make any of them, in light of the circumstances in
which it was made, not misleading in any material respect.

 

3

--------------------------------------------------------------------------------

 

Exhibit B
Representations and Warranties of Buyer
§B.1. Organization and Standing. Buyer (a) is a limited liability company duly
organized, validly existing, and in full force and effect under the laws of the
State of Ohio with full power and authority to own, lease, use and operate the
Assets and to conduct the Business as and where now owned, leased, used,
operated and conducted, (b) is duly qualified to do business in Ohio and is not
doing business in any other jurisdiction in which failure to qualify would have
an material adverse effect on the Assets, (c) has not received any written
notice or assertion within the last twelve (12) months from any governmental
official in any jurisdiction to the effect that it is required to be qualified
or authorized to do business in any such jurisdiction which would have a
material adverse effect on the Assets, and (d) is not in material default in the
performance, observation or fulfillment of any provision of its articles of
organization, operating agreement, or other organizational documents, each as
amended to date. Pinnacle (a) is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of Delaware, (b) has
not received any written notice or assertion within the last twelve (12) months
from any governmental official in any jurisdiction to the effect that it is
required to be qualified or authorized to do business in any such jurisdiction
which would have a material adverse effect on the Assets, and (c) is not in
material default in the performance, observation or fulfillment of any provision
of its certificate of incorporation, by-laws or other organizational documents,
each as amended to date.
§B.2. Power and Authority; Capacity; Binding Obligation. Each of Buyer and
Pinnacle has all requisite power and authority to enter into this Agreement and
to perform its obligations under this Agreement. This Agreement and the
transactions contemplated by this Agreement have been duly and validly
authorized by all necessary action on the part of each of Buyer and its member
and Pinnacle and its directors. This Agreement has been duly executed and
delivered by each of Buyer and Pinnacle and constitutes the legal, valid and
binding obligation of each of Buyer and Pinnacle, enforceable against each of
Buyer and Pinnacle in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereinafter in effect affecting creditors’ rights generally and general
principles of equity.
§B.3. Legal Proceedings, etc. There are no actions, claims, proceedings, suits,
orders or investigations pending, and neither Buyer nor Pinnacle has received
notice of any actions, claims, proceedings, suits, orders or investigations
threatened, (i) against or relating to Buyer or Pinnacle by or before any
federal, state, local or foreign court or governmental body, agency, or
authority, at law or in equity that would have a material adverse effect on
Buyer’s or Pinnacle’s ability to consummate the deal, or (ii) for the purpose of
enjoining or preventing the consummation of the sale and purchase of the Assets
or any other transactions contemplated by this Agreement or otherwise
challenging the validity or propriety of the transactions contemplated by this
Agreement.

 

1

--------------------------------------------------------------------------------

 

§B.4. Brokers, Finders. Except for Investors Commercial Capital, LLC and ABI
International, Inc., the transactions contemplated by this Agreement were not
submitted to Seller by any broker or other person entitled to a commission,
finder’s fee or like payment thereon and were not, with the consent of Seller,
submitted to Buyer by any broker or other person, and none of the actions of
Buyer has given rise to any claim by any person for a commission, finder’s fee
or like payment against any of the Parties.
§B.5. Governmental Authorization. The execution, delivery and performance by
Buyer and Pinnacle of this Agreement and the consummation of the transactions
contemplated hereby and thereby require no action by or in respect of, or filing
with or notification to, any governmental authority other than those set forth
on Schedule B.5.
§B.6. Qualifications. Buyer and Pinnacle are legally, financially and otherwise
qualified to be the assignee and/or holder of all Permits and Racing License,
acquire, own and operate the Assets and Business in compliance with all
applicable laws, rules, regulations and policies applicable thereto. There are
no facts known to Buyer or Pinnacle that would, under existing law and the
existing rules, regulations, policies and procedures of the applicable to the
Assets and operation of the Business, disqualify Buyer as an assignee and/or
holder of the Permits and Racing License or as the owner and operator of the
Assets and Business.
§B.7. Financing. Buyer and Pinnacle have and during the time period from the
Effective Date through the date the Purchase Price is paid, Buyer and Pinnacle
will have, sufficient cash and cash equivalents available to perform its
obligations hereunder, including but not limited to payment of the Purchase
Price. Buyer and Pinnacle have provided to Seller true and complete copies of
documentation supporting Buyer’s ability to perform its obligations set forth in
the preceding sentence. There are no conditions to the funding of the financing
which Buyer or Pinnacle shall use to fulfill its obligations hereunder, and no
person or entity has any right to (i) impose any condition precedent to such
funding or (ii) reduce the amounts of the financing available to Buyer or
Pinnacle. Buyer’s and Pinnacle’s funding commitments are in full force and
effect, in all material respects, and there has been no default, action or
omission to act that would permit the termination or cancellation of Buyer’s or
Pinnacle’s financing or funding.
§B.8. Condition of Property and Business. Each of Buyer and Pinnacle represents
and warrants that it is fully aware of the fact that the Track and Property is
located in a flood plain and that the Business has been operating at a
significant loss, and expects to continue to operate at a significant loss
during the term of this Agreement. Each of Buyer and Pinnacle further represents
and warrants that it is fully aware of the fact that the Property may not be in
compliance with CAFO Regulations.
§B.9. Purchase for Own Account. Buyer represents and warrants that it is
acquiring the Stock for its own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, and Buyer has no
present intention of selling, granting any participation in, or otherwise
distributing the same.

 

2

--------------------------------------------------------------------------------

 

Exhibit C
covenants regarding tax matters
§C.1. Buyer and the Seller Parties shall cooperate fully, as and to the extent
reasonably requested by each other party, in connection with the preparation and
filing of any Tax Return (as hereinafter defined), statement, report or form,
any audit, litigation or other proceeding with respect to Taxes of or relating
to the Business. Such cooperation shall include the retention and (upon the
other party’s request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Buyer and
the Seller Parties agree (i) to retain all books and records with respect to tax
matters pertinent to the Business relating to any Pre-Closing Tax Period (as
hereinafter defined) for a period of seven (7) years at no expense to Seller
Parties, and to abide by all record retention agreements entered into with any
Taxing Authority (as hereinafter defined), and (ii) that the Seller Parties
shall give the Buyer reasonable written notice prior to destroying or discarding
any such books and records and, if the Buyer so requests, allow the Buyer to
take possession of such books and records.
§C.2. The Seller Parties shall prepare and file, or cause to be prepared and
filed, at their expense, all Tax Returns with respect to any Pre-Closing Tax
Period ending on or prior to the Closing Date, and the Seller Parties shall
timely pay all taxes shown as due on such Tax Returns. All such Tax Returns will
be filed when due in accordance with all applicable laws and consistent with the
past practices of the Business. Buyer shall prepare and file, or cause to be
prepared and filed, at its expense, all other Tax Returns with respect to the
Business and shall timely pay all taxes shown as due on such Tax Returns when
due in accordance with all applicable laws. All taxes relating to the Business
which shall have accrued and become payable prior to the Closing Date shall be
paid by the Seller.

 

1

--------------------------------------------------------------------------------

 

§C.3. For purposes of this Exhibit C, the following terms shall have the
following meanings:

  (a)  
“Pre-Closing Tax Period” means any tax period ending on or before the Closing
Date; and, with respect to a Straddle Tax Period, the portion of such Tax period
ending on the Closing Date.
    (b)  
“Tax Authority” means any governmental authority responsible for the imposition
of any tax.
    (c)  
“Tax Return” means a return, statement, report, election, declaration,
disclosure, schedule or form (including estimated tax or information return and
report) filed or required to be filed with any governmental authority
responsible for the imposition of any tax.
    (d)  
“Straddle Tax Period” means any taxable period beginning on or before, and
ending after, the Closing Date.

 

2

--------------------------------------------------------------------------------

 

Exhibit D
INDEMNIFICATION ESCROW AGREEMENT
THIS INDEMNIFICATION ESCROW AGREEMENT (this “Agreement”) is made and entered
into as of November  _____, 2010, by and among RIVER DOWNS INVESTMENT COMPANY, a
California limited partnership ("Seller”), and PNK (OHIO), LLC, an Ohio limited
liability company ("Sub”), and PINNACLE ENTERTAINMENT, INC., a Delaware
corporation (“Pinnacle” and together with Sub, the “Buyer”), and U.S. BANK,
NATIONAL ASSOCIATION, a national banking association (“Escrow Agent”).
WITNESSETH:
WHEREAS, Seller, River Downs Jockey Club, Incorporated, an Ohio corporation
(“Jockey Club”), River Downs Turf Club, Incorporated, an Ohio corporation (“Turf
Club”), and Ohio Valley Concessions, Inc., an Ohio corporation (“Concessions”)
and Buyer, are parties to a certain Asset Purchase Agreement, dated as of
November  _____, 2010, as may be amended from time to time (the “Purchase
Agreement”), pursuant to which Seller, Jockey Club, Turf Club and Concessions
will assign or otherwise convey to Sub substantially all of the assets used or
useful in connection with the ownership and operation Seller’s, Jockey Club’s,
Turf Club’s and Concession’s business (the “Acquired Assets”), subject to the
terms and conditions of the Purchase Agreement, and the closing of the
transactions contemplated by the Purchase Agreement are occurring simultaneously
with the execution hereof;
WHEREAS, pursuant to the Purchase Agreement, Buyer has agreed to deposit into
escrow the aggregate amount of Five Hundred Thousand Dollars ($500,000.00) (the
“Escrow Deposit”) for the purpose of satisfying indemnification claims by Buyer
against Seller and/or Concessions pursuant to Section 12.2 of the Purchase
Agreement (“Buyer Indemnification Claims”); and
WHEREAS, Seller and Buyer desire Escrow Agent to serve as Escrow Agent for the
Escrow Deposit, and Escrow Agent is willing to do so, all upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained in the Purchase Agreement and this Agreement, the parties hereto agree
as follows:
1. Deposit of Funds. Pursuant to Section 3(g) of the Purchase Agreement,
simultaneously with the execution hereof Buyer hereby deposits with Escrow Agent
the Escrow Deposit by wire transfer of funds, subject to the terms and
conditions herein contained.
2. Receipt Acknowledged. By execution of this Agreement, Escrow Agent hereby
acknowledges receipt of the Escrow Deposit. Escrow Agent shall, at the written
direction of Seller, promptly invest and reinvest the Escrow Deposit in
                     or any money market account or fund investing solely in
obligations of the United States or agencies, thereof, provided that no such
investment shall have a maturity of more than thirty (30) days from the date of
such investment unless specifically agreed to by Buyer and Seller, in the name
of “River Downs - Pinnacle Indemnification Escrow Deposit.” Seller shall provide
its federal identification number to Escrow Agent and authorizes Escrow Agent to
file appropriate reports of interest earned on the Escrow Deposit to the
Internal Revenue Service.

 

 

--------------------------------------------------------------------------------

 

The parties recognize and agree that the Escrow Agent will not provide
supervision, recommendations or advice relating to either the investment of
moneys held in the Escrow Deposit or the purchase, sale, retention or other
disposition of any permitted investment. Interest and other earnings on
permitted investments shall be added to the Escrow Deposit. Any loss or expense
incurred as a result of an investment will be borne by the Escrow Deposit.
The Escrow Agent is hereby authorized to execute purchases and sales of
permitted investments through the facilities of its own trading or capital
markets operations or those of any affiliated entity. The Escrow Agent shall
send statements to each of the parties hereto on a monthly basis reflecting
activity in the Escrow Deposit for the preceding month. Although the Seller and
the Buyer each recognizes that it may obtain a broker confirmation or written
statement containing comparable information at no additional cost, the Seller
and the Buyer hereby agree that confirmations of permitted investments are not
required to be issued by the Escrow Agent for each month in which a monthly
statement is rendered. No statement need be rendered for the Escrow Deposit if
no activity occurred for such month.
3. Disposition of the Escrow Deposit. Escrow Agent shall hold and dispose of the
Escrow Deposit, as follows:
(a) In accordance with the joint written instructions of Seller and Buyer.
(b) After the date that is at least six (6) months following the date hereof, in
accordance with the written instructions of Seller delivered to Escrow Agent
when accompanied by a certificate executed by an officer of Seller certifying
the amount of the Escrow Deposit subject to Buyer Indemnification Claims, Escrow
Agent shall pay to Seller the amount of the Escrow Deposit not subject to Buyer
Indemnification Claims along with the interest accrued on such amount; provided,
however, that prior to release of any portion of the Escrow Deposit in
accordance with such written instructions, Escrow Agent shall send to Buyer a
copy of Seller’s written instructions and Escrow Agent shall not release the
Escrow Deposit to Seller if Escrow Agent receives, within fifteen (15) days
after it has delivered a copy of Seller’s instructions to Buyer, written notice
from Buyer objecting to release of the Escrow Deposit to Seller (“Buyer’s
Rebuttal Notice”).
(c) In accordance with written instructions of Buyer delivered to Escrow Agent,
when accompanied by a certificate executed by officers of each Buyer certifying
the amount of the Escrow Deposit subject to Buyer Indemnification Claims, Escrow
Agent shall pay to Buyer the amount of the Escrow Deposit subject to Buyer
Indemnification Claims; provided, however, that prior to the release of any
portion of the Escrow Deposit in accordance with such written instructions,
Escrow Agent shall send to Seller a copy of Buyer’s written instructions and
Escrow Agent shall not release the Escrow Deposit to Buyer if Escrow Agent
receives, within fifteen (15) days after it has delivered a copy of Buyer’s
instructions to Seller, written notice from Seller objecting to release of the
Escrow Deposit to Buyer (“Seller’s Rebuttal Notice”).

 

2

--------------------------------------------------------------------------------

 

(d) After timely receipt by Escrow Agent of Buyer’s Rebuttal Notice or Seller’s
Rebuttal Notice, Escrow Agent shall not deliver the Escrow Deposit until such
time as Escrow Agent receives: (i) a written agreement signed by Seller and
Buyer providing instructions as to the disposition of the Escrow Deposit, or
(ii) a certified copy of an order or judgment from a court of competent
jurisdiction which has become final (meaning that the order or judgment is no
longer subject to appeal to or review by a court of competent jurisdiction) with
respect to the disposition of the Escrow Deposit, at which time Escrow Agent
shall deliver the Escrow Deposit (along with interest accrued thereon) in
accordance with said agreement, order or judgment. Notwithstanding the
foregoing, after receipt by Escrow Agent of Buyer’s Rebuttal Notice or Seller’s
Rebuttal Notice, Escrow Agent may: (i) deposit the Escrow Deposit (along with
interest accrued thereon) with any court which has properly assumed jurisdiction
of any dispute hereunder, or (ii) commence an action in interpleader in any
court of competent jurisdiction located in Cincinnati, Ohio and deposit the
Escrow Deposit (along with interest accrued thereon) with such court.
4. General Provisions.
(a) This Agreement shall become effective as of the date hereof and shall
continue in force until the final delivery of the Escrow Deposit and interest
earned thereon by Escrow Agent pursuant to the terms of this Agreement. This
Agreement shall then terminate and the Escrow Agent shall be discharged of all
responsibility hereunder.
(b) All notices, demands or other communications required or permitted by this
Agreement shall be in writing and shall be: (a) delivered personally, (b) sent
overnight delivery, charges prepaid, by a nationally recognized overnight
delivery service, or (c) by facsimile transmission, to all of the following
persons at the specified addresses or facsimile transmission phone number (or at
such other address or facsimile transmission phone number as any party may
designate in writing to the other parties):

          If to Seller:   River Downs Investment Company
6301 Kellogg Road
Cincinnati, OH 45230
Attention: Jack Hanessian
 
        with a copy to:    
 
       
 
      Graydon Head & Ritchey LLP
511 Walnut St.
1900 Fifth Third Center
Cincinnati, OH 45202
Attention: John J. Kropp
 
        If to Buyer to:   Pinnacle Entertainment, Inc.
8918 Spanish Ridge Ave.
Las Vegas, NV 89148
Attention: General Counsel

 

3

--------------------------------------------------------------------------------

 

          with a copy to:    
 
       
 
      Taft Stettinius & Hollister LLP
200 Public Square
Suite 3500
Cleveland, OH 44114
Attention: Irv Berliner
 
        If to Escrow Agent:    
 
       
 
      U.S. Bank, National Association
Attn: Corporate Trust Department
425 Walnut Street
Cincinnati, Ohio 45202
Fax: (513) 632-5511

A copy of any notice of communication given by any party to any other party
hereto shall be given at the same time to every party to this Agreement. Each
notice, demand or other communication which shall be delivered or sent in the
manner described above shall be deemed effective for all purposes at such time
it is actually delivered to the addressee (with the delivery receipt or the
affidavit of messenger or facsimile confirmation sheet being deemed conclusive
but not exclusive evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
(c) In no event shall the Escrow Agent be liable for any act or failure to act
under the provisions of this Agreement, except where its acts are the result of
its own negligence or willful misconduct. The Escrow Agent shall have no duties
except those which are expressly set forth herein, and it shall not be bound by
any notice of a claim, or demand with respect thereto, or any waiver,
modification, amendment, termination or rescission of this Agreement, unless in
writing received by it and signed by Buyer and Seller. No right, duty or
obligations of the Escrow Agent hereunder shall be changed or modified without
the Escrow Agent’s prior written consent.
(d) The Escrow Agent shall be protected in acting upon any written notice,
request, waiver, consent, receipt or other paper or document furnished to it in
connection herewith, not only as to its due execution and the validity and
effectiveness of its provisions, but also as to the truth and acceptability of
any information therein contained, which it reasonably believes to be genuine
and what it purports to be.
(e) The Escrow Agent may consult with counsel of its own choosing in connection
with this Agreement. Buyer, on the one hand, and Seller, on the other hand,
jointly and severally, shall indemnify and hold harmless the Escrow Agent for
any liability, loss, claim or damage incurred by the Escrow Agent in connection
with this Escrow Agreement, including any claims by third parties, unless such
liability, loss, claim or damage is a result of Escrow Agent’s own gross
negligence or willful misconduct. This indemnification shall survive termination
of this Agreement and the resignation or removal of the Escrow Agent.

 

4

--------------------------------------------------------------------------------

 

(f) The Escrow Agent may resign at any time by giving a minimum of thirty
(30) days prior written notice of resignation to both Buyer and Seller, such
resignation to be effective on the date specified in such notice. Any assets
held by the Escrow Agent under the terms of this Agreement as of the effective
date of the resignation shall be delivered to a successor Escrow Agent
designated in writing by both Buyer and Seller. If the other parties hereto have
failed to appoint a successor prior to the expiration of thirty (30) days
following receipt of the notice of resignation or removal, the Escrow Agent may
petition any court of competent jurisdiction for the appointment of a successor
escrow agent or for other appropriate relief, and any such resulting appointment
shall be binding upon all of the parties hereto.
(g) Escrow Agent is not a party to, and is not bound by, any agreement other
than as expressly set forth herein. In the event that any of the terms and
provisions of any other agreement (excluding any amendment to this Agreement)
between any of the parties hereto, conflict or are inconsistent with any of the
provisions of this Agreement, the terms and provisions of this Agreement shall
govern and control in all respects.
(h) Except as provided in Section 4(i), Seller, on the one hand, and Buyer, on
the other hand, shall each pay one-half of Escrow Agent’s fees and necessary out
of pocket expenses it incurs for acting as Escrow Agent hereunder subsequent to
the date of this Agreement in administering this Agreement, including without
limitation legal fees, wire charges, postage, long distance calls and express
mail, which fees and expenses shall be in accordance with its customary fee
schedule. Buyer and Seller agree that Escrow Agent may withdraw the escrow fees
and expenses from any interest accrued on the Escrow Fund but not from the
principal on a quarterly basis from time to time; provided, however, that Escrow
Agent notify both Buyer and Seller in writing on no less than a quarterly basis
of the amount of such escrow fees and expenses imposed during the prior period.
(i) In the event that Buyer or Seller files a lawsuit or institutes arbitration
or other formal legal action against the other (including any counterclaim to a
lawsuit filed by the other party) to enforce its right to the Escrow Deposit and
any interest earned thereon under this Agreement, the prevailing party shall be
reimbursed by the other party (either Seller or Buyer, as the case may be) and
the non-prevailing party shall reimburse the Escrow Agent for all expenses
incurred therewith, including reasonable attorneys’ fees.
(j) The Escrow Agent shall be under no obligation to invest the deposited funds
or the income generated thereby until it has received a Form W-9 or W-8, as
applicable, from the Buyer and the Seller, regardless of whether such party is
exempt from reporting or withholding requirements under the Internal Revenue
Code of 1986, as amended.
(k) IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR
ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER,
OTHER THAN DAMAGES WHICH RESULT FROM THE ESCROW AGENT’S FAILURE TO ACT IN
ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS AGREEMENT, OR (ii) SPECIAL OR
CONSEQUENTIAL DAMAGES, EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.

 

5

--------------------------------------------------------------------------------

 

(l) The Escrow Agent shall have the right to perform any of its duties hereunder
through agents, attorneys, custodians or nominees.
(m) Any banking association or corporation into which the Escrow Agent may be
merged, converted or with which the Escrow Agent may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Escrow Agent shall be a party, or any banking association or corporation to
which all or substantially all of the corporate trust business of the Escrow
Agent shall be transferred, shall succeed to all the Escrow Agent’s rights,
obligations and immunities hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
(n) No printed or other matter in any language (including, without limitation,
prospectuses, notices, reports and promotional material) that mentions the
Escrow Agent’s name or the rights, powers or duties of the Escrow Agent shall be
issued by the other parties hereto or on such parties’ behalf unless the Escrow
Agent shall first have given its specific written consent thereto.
(n) Capitalized terms used herein and not defined herein or otherwise
conventionally capitalized shall have the meanings ascribed thereto in the
Purchase Agreement.
(o) This Agreement shall be binding upon and inure to the benefit of the
parties, their successors and assigns.
(p) This Agreement sets forth the entire agreement between Seller, Buyer and
Escrow Agent and supersedes any and all prior and contemporaneous agreements and
understandings with respect to the escrow of funds to satisfy Buyer
Indemnification Claims.
(q) The construction and performance of this Agreement shall be governed by the
laws of the State of Ohio without giving effect to the choice of law provisions
thereof. Any action, suit or proceeding brought by any party to this Agreement
relating to or arising out of this Agreement or any other agreement, instrument,
certificate or other document delivered pursuant hereto (or the enforcement
hereof or thereof) must be brought and prosecuted as to all parties in, and each
of the parties hereby consents to service of process, personal jurisdiction and
venue in, the state and federal courts of general jurisdiction located in
Cincinnati, Ohio. This Agreement may be executed in one or more counterparts,
including faxed counterparts, each of which will be deemed an original and all
of which together will constitute one and the same instrument.
(r) All signatories to this Agreement warrant that they have full and complete
authority to enter into this Agreement and to sign this Agreement on behalf of
themselves and the entity on whose behalf they are signing.
[SIGNATURE PAGES FOLLOW]

 

6

--------------------------------------------------------------------------------

 

SIGNATURE PAGE TO INDEMNIFICATION ESCROW AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Indemnification Escrow
Agreement as of the date and year first written above.

            RIVER DOWNS INVESTMENT COMPANY
      By:           Name:           Title:      

 

7

--------------------------------------------------------------------------------

 

SIGNATURE PAGE TO INDEMNIFICATION ESCROW AGREEMENT

            PNK (OHIO), LLC
      By:           Name:           Title:           PINNACLE ENTERTAINMENT,
INC.
      By:           Name:           Title:      

 

8

--------------------------------------------------------------------------------

 

SIGNATURE PAGE TO INDEMNIFICATION ESCROW AGREEMENT

                  By:           Name:           Title:        

 

 

--------------------------------------------------------------------------------

 

Exhibit E
Allocation Summary
Concessions
Furniture, fixtures, equipment not to exceed $100,000
Leasehold improvements not to exceed $50,000
Goodwill, licenses, other intangibles $1,800,000, less above two items
RDIC
Furniture, fixtures, equipment not to exceed $500,000
Land and buildings and improvements not to exceed $9,000,000
Goodwill, licenses, other intangibles $43,200,000, less above two items
The “not to exceed” amounts will be finalized by Buyer (after discussions with
KPMG) and will be furnished to Seller Parties prior to Closing.

 

 

--------------------------------------------------------------------------------

 

Exhibit F
LEGAL OPINION — GRAYDON HEAD
[Proposed Ohio Opinion Letter]
November [__], 2010
Pinnacle Entertainment, Inc.
8918 Spanish Ridge Avenue
Las Vegas, NV 89148
PNK (Ohio), LLC
8918 Spanish Ridge Avenue
Las Vegas, NV 89148
Ladies and Gentlemen:
We have acted as Ohio counsel to River Downs Investment Company, a California
limited partnership (“Seller”), River Downs Jockey Club, Incorporated, an Ohio
corporation (“Jockey Club”), River Downs Turf Club, Incorporated, an Ohio
corporation (“Turf Club”), and Ohio Valley Concessions, Inc., an Ohio
corporation (“Concessions,” and collectively with Seller, Jockey Club and Turf
Club, the “Seller Parties”) (Jockey Club, Turf Club and Concessions are also
sometimes referred to collectively herein as the “Ohio Parties”) in connection
with the closing under the Asset Purchase Agreement dated as of November
[_____], 2010 (the “Agreement”) by and among the Seller Parties, Pinnacle
Entertainment Group, Inc. a Delaware corporation (“Pinnacle”) and PNK (Ohio),
LLC (“Buyer”). This letter is being provided pursuant to Section 7(a)(vx) of the
Agreement. Capitalized terms used in this letter that are defined in the
Agreement shall have the respective meanings set forth in the Agreement unless
otherwise defined herein or unless the context clearly requires otherwise.
1. DOCUMENTS REVIEWED
(a) Documents Reviewed—Transaction Documents. In connection with our opinions
provided in this letter, we have reviewed copies of the following documents and
instruments (collectively, the “Transaction Documents”):
(i) the Agreement;
(ii) the Bill of Sale from Seller Parties to Buyer dated as of
                    , 2010;
(iii) the Assignment and Assumption Agreement between Seller Parties and Buyer
dated as of                     , 2010;
(iv) the Escrow Indemnification Agreement to which Seller and Buyer are parties
dated as of                     , 2010; and
(v) the Management Agreement between Concessions and Buyer dated as of
                    , 2010.

 

 

--------------------------------------------------------------------------------

 

(b) Documents Reviewed—Other Documents Examined. In addition to the Transaction
Documents, we have also examined and relied upon copies of the following given
to us by the Seller Parties in connection with our opinions:
(1) Limited Partnership Agreement of River Downs Investment Company;
(2) Articles of Incorporation of River Downs Jockey Club, Incorporated;
(3) Ohio Secretary of State Good Standing Certificate for River Downs Jockey
Club, Incorporated, dated November 16, 2010;
(4) Code of Regulations or Bylaws for River Downs Jockey Club, Incorporated;
(5) Articles of Incorporation of River Downs Turf Club, Incorporated.;
(6) Ohio Secretary of State Good Standing Certificate for River Downs Turf Club,
Incorporated, dated November 16, 2010;
(7) Code of Regulations or Bylaws for River Downs Turf Club, Incorporated;
(8) Articles of Incorporation of Ohio Valley Concessions, Inc.;
(9) Ohio Secretary of State Good Standing Certificate for Ohio Valley
Concessions, Inc., dated November 16, 2010;
(10) Code of Regulations or Bylaws for Ohio Valley Concessions, Inc.;
(11) Certificate addressed to this law firm of Seller;
(12) Certificate addressed to this law firm of River Downs Jockey Club,
Incorporated;
(13) Certificate addressed to this law firm of River Downs Turf Club,
Incorporated; and
(14) Certificate addressed to this law firm of Ohio Valley Concessions, Inc.
In addition to our review of the Transaction Documents, we have made such other
examinations and inquiries that we have deemed necessary and/or appropriate as
the basis for the opinions herein after expressed.

 

2

--------------------------------------------------------------------------------

 

We understand that you are obtaining a separate opinion from California counsel
in regard to the Seller and certain California law issues and our opinion does
not address any such California law issues.
(The Certificates identified as items 11-14 above are sometimes referred to
herein as the “Certificates”) (the foregoing items 1-10 are sometimes referred
to herein as the “Governing Documents” and each a “Governing Document”).
2. ASSUMPTIONS
In our examination, we have assumed the genuineness of all signatures (other
than the Seller Parties), the legal capacity and competency of all natural
persons, the authenticity of all documents submitted to us as originals and the
conformity to authentic original documents of all documents submitted to us as
certified or photostatic copies.
In such review we have relied upon information in documents and certificates
issued by public officials and upon information provided by officers of the
Seller Parties and others, without investigation or analysis of any underlying
data supporting information contained in such documents or certificates,
including certificates of the Seller Parties, including the Certificates. We
have also relied on the representations and warranties of the Seller Parties in
the Transaction Documents, which reliance we believe is justifiable and we have
no knowledge to the contrary.
Whenever in this letter the phrase “to our knowledge” is used, it means the
conscious awareness of facts or other information by the lawyers in this firm
who have devoted substantive attention to negotiating this transaction or
preparing the Transaction Documents without independent investigation, which is
John J. Kropp, Esq., Karen J. Renz, Esq. and Gerald F. O’Connell, Jr., Esq.
We have also assumed that each party to this transaction (other than the Seller
Parties) has satisfied those legal requirements that are applicable to it to the
extent necessary to make the Transaction Documents enforceable against it.
We have also assumed that the Seller, River Downs Investment Company, is a
California limited partnership duly formed, validly existing in good standing
under the laws of the State of California, with full power and authority to
enter into the Transaction Documents and fulfill its obligations hereunder, and
that it has duly authorized, executed and delivered the Transaction Documents.
We have further assumed that all parties have acted and will act in good faith,
without fraud, duress, undue influence, or a lack of conscionability or fair
dealing. With respect to applicable law, we have assumed the constitutionality
of all relevant law and the general availability of all relevant decisions,
rules and regulations to lawyers practicing in the State of Ohio.

 

3

--------------------------------------------------------------------------------

 

We understand that with respect to title matters, you will be relying on a title
insurance commitment and UCC searches. We have not made or undertaken to make
any investigation of the state of title to any real or personal property or of
the filing or recordation of any deeds, releases, etc. that are intended to be
filed or recorded, and we express no opinion with respect to (i) the adequacy or
legal sufficiency of the description of, or the title to, any of the real
property or personal property described in any of the Transaction Documents,
(ii) whether those Transaction Documents intended to be recorded or filed have
in fact been duly recorded, filed, or indexed, or (iii) the priority, perfection
or subordination of any liens whatsoever. Our investigation has been limited to
a review of the Transaction Documents, and we have not conducted any
investigation of any property, and we offer no opinion as to the physical
condition of any property or as to whether any property or any operations
conducted therewith or thereon are in compliance with all applicable laws, rules
and regulations, including without limitation, building codes, zoning
ordinances, or environmental laws. As to (i) the adequacy and legal sufficiency
of the description of any property described in the Transaction Documents,
(ii) title to any property described in the Transaction Documents, (iii) the due
recordation, filing, and/or indexing of any Transaction Documents, and (v) each
and any other matter that is insured by the title insurance policy obtained by
purchaser, we understand that purchaser is relying upon such title insurance
policy, and all matters insured by such policy are hereby excepted and excluded
from the opinions expressed in this letter.
We express no opinion with respect to the effect of any law other than the law
of the State of Ohio and the Federal law of the United States.
3. OPINIONS
Based upon and subject to the foregoing and the other qualifications and
limitations stated in this opinion letter, we are of the opinion that:
(a) Based solely on the issuance of a good standing certificate by the Secretary
of State of Ohio, and our review of the Certificates and of the corporate minute
books provided to us by the Seller Parties for each of the Ohio Entities each of
Jockey Club, Turf Club and Concessions is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of Ohio.
(b) Based on our review of the corporate minute books provided to us by the
Seller Parties for each of the Ohio Entities, each of Jockey Club, Turf Club and
Concessions has the requisite corporate power and authority to execute and
deliver, and to perform its obligations under, each of the Transaction
Documents.
(c) Based on our review of the Certificates and of the corporate minute books
provided to us by the Seller Parties for each of the Ohio Entities, the
execution, delivery, and performance by each of Jockey Club, Turf Club and
Concessions of each of the Transaction Documents have been duly authorized by
all necessary action of each of Jockey Club, Turf Club and Concessions,
including, without limitation, authorization by each of their respective Boards
of Directors and Shareholders.
(d) Based on our review of the corporate minute books provided to us by the
Seller Parties for each of the Ohio Entities, each of Jockey Club and Turf Club
has the requisite corporate power and authority to contribute the racing
licenses held by each of Jockey Club and Turf Club, respectively, and the
related pari-mutuel tax abatements to one or more newly-formed limited liability
companies pursuant to the Purchase Agreement.

 

4

--------------------------------------------------------------------------------

 

(e) The contributions by each of Jockey Club and Turf Club of the racing
licenses held by each of Jockey Club and Turf Club, respectively, and the
related pari-mutuel tax abatements to one or more newly-formed limited liability
companies have been duly authorized by all necessary corporate action of each of
Jockey Club and Turf Club, including, without limitation, authorization by each
of their respective Boards of Directors and Shareholders.
(f) Each of the Transaction Documents has been duly executed and delivered by
Jockey Club, Turf Club and Concessions.
(g) Each of the Transaction Documents executed by one or more of Jockey Club,
Turf Club and Concessions, and, as to the Seller, assuming the due and valid
existence of Seller, and the authorization, and execution and delivery of the
Transaction Documents by the Seller, constitutes the legal, valid, and binding
obligation of each of the Seller Parties that is a party thereto, enforceable
against such Seller Party in accordance with its terms.
(h) None of the execution and delivery by any Ohio Entity of any of the
Transaction Documents, the consummation of the transactions contemplated by the
Transaction Documents, or the contributions by each of Jockey Club and Turf Club
of the racing licenses held by each of Jockey Club and Turf Club, respectively,
and the related pari-mutuel tax abatements to one or more newly-formed limited
liability companies violates (i) any provision of the Governing Documents
related to such party, (ii) to our knowledge, any order or judgment applicable
to such party, or (iii) the provisions of any Material Agreement (as defined in
the Certificates) to which such party is a party or any Material Agreement which
is otherwise binding on such party or its property.
* * * * * * * * * * * * *
4. QUALIFICATIONS
Our opinions expressed above are qualified with respect to the Transaction
Documents follows:
(a) The opinions expressed in paragraph (g) above are subject to the following
qualifications: (i) enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws or
general application affecting creditors’ rights generally, (ii) enforceability
may be limited by general equitable principles, including, without limitation,
the doctrines of good faith, fair dealing, reasonableness and materiality, and
the discretion of courts in applying the remedy of specific performance,
injunctions, or other equitable remedies (whether enforcement is considered in a
proceeding at law or in equity), and (iii) no opinion is expressed as to the
enforceability of (A) self-help provisions, (B) provisions which purport to
limit, or permit the alteration or termination of, the rights of third parties,
(C) provisions which purport to establish evidentiary standards, (D) provisions
related to waiver of rights, notices or defenses, notifications or remedies (or
the delay or omission of enforcement thereof), disclaimers of liability,
liability limitations with respect to third parties, release of legal or
equitable rights, discharges of defenses, or liquidated damages, (E) provisions
which purport to require payment or reimbursement of attorney’s fees, collection
fees, or litigation expenses of another party, (F) the right of a party to have
a receiver appointed for the premises, or (G) indemnification provisions.

 

5

--------------------------------------------------------------------------------

 

(b) Our opinion regarding enforceability of the Transaction Documents is further
subject to the qualifications that (i) we render no opinion as to the
enforceability of any provision of the Transaction Documents which constitutes a
penalty as opposed to reasonable compensatory damages, and (ii) certain other
rights, remedies, waivers, or other provisions of the Transaction Documents may
not be enforceable or specifically enforced but will not interfere with the
practical realization of the principal benefits of the Transaction Documents.
This letter deals only with the specific legal issues it explicitly addresses.
Accordingly, an express opinion concerning a particular legal issue does not
address any other matters. An express opinion includes an implied opinion only
if it is both essential to the legal conclusion reached by the express opinion
and, based upon prevailing norms and expectations among experienced lawyers in
the State, reasonable in the circumstances. Further we do not opine as to the
effect of federal or state securities, antitrust, labor, employee benefit,
intellectual property, environmental, tax, criminal or local law.
Only the addresses are entitled to rely upon or assert any legal rights based
upon this letter, and only for the purpose contemplated by the Transaction
Documents. The addresses may not rely on this letter or this firm for any legal
or other analysis beyond that set forth in this letter, such as the broader
guidance and counsel that we might provide to the Selling Parties.
This letter speaks only as of its date. We have no obligation to advise the
addresses (or any third party) of changes of law or fact that occur after the
date of this letter, regardless of whether the change my affect the legal
analysis, a legal conclusion or an information confirmation in this letter.
We are licensed to practice in the State of Ohio. The coverage of this letter is
limited to the laws of the state of Ohio and the federal laws of the United
States and we do not express an opinion as to the laws of any other
jurisdiction.

 

6

--------------------------------------------------------------------------------

 

This opinion letter is furnished only to Pinnacle and Buyer and is solely for
the benefit of Pinnacle and Buyer in connection with the transactions
contemplated by the Transaction Documents. This opinion is not to be used,
circulated, quoted, or otherwise relied upon by any other person or entity, or
for any other purpose.

            Very truly yours,

GRAYDON HEAD & RITCHEY LLP
      By:           Gerald F. O’Connell, Jr.        General Partner   

 

7

--------------------------------------------------------------------------------

 

Exhibit G
LEGAL OPINION — SIDLEY AUSTIN

             
(SIDLEY LOGO) [c09002c0900201.gif]
  SIDLEY AUSTIN llp
555 WEST FIFTH STREET
LOS ANGELES, CA 90013
(213) 896 6000
(213) 896 6600 FAX
  BEIJING
BRUSSELS
CHICAGO
DALLAS
FRANKFURT
GENEVA
HONG KONG
LONDON
LOS ANGELES

FOUNDED 1866   NEW YORK
PALO ALTO
SAN FRANCISCO
SHANGHAI
SINGAPORE
SYDNEY
TOKYO
WASHINGTON, D.C.

SIDLEY DRAFT 11/23/10
SUBJECT TO OPINION COMMITTEE REVIEW
[                    ]
Pinnacle Entertainment, Inc.
8918 Spanish Ridge Avenue
Las Vegas, NV 89148
PNK (Ohio), LLC
8918 Spanish Ridge Avenue
Las Vegas, NV 89148
Ladies and Gentlemen:
We have acted as special counsel to River Downs Investment Company, a California
limited partnership (“Seller”) in connection with the closing under that certain
Asset Purchase Agreement dated as of November [_____], 2010 (the “Agreement”) by
and among the Seller, River Downs Jockey Club, Incorporated, an Ohio corporation
(“Jockey Club”), River Downs Turf Club, Incorporated, an Ohio corporation (“Turf
Club”), and Ohio Valley Concessions, Inc., an Ohio corporation (“Concessions,”
and collectively with Seller, Jockey Club and Turf Club, the “Seller Parties”),
Pinnacle Entertainment Group, Inc. a Delaware corporation (“Pinnacle”) and PNK
(Ohio), LLC (“Buyer”). This letter is being provided pursuant to
Section 7(a)(xv) of the Agreement. Capitalized terms used in this letter that
are defined in the Agreement shall have the respective meanings set forth in the
Agreement unless otherwise defined herein or unless the context clearly requires
otherwise.
I. Documents
In connection with our opinions provided in this letter, we have reviewed copies
of the following documents and instruments (collectively, the “Transaction
Documents”):
(i) the Agreement;
(ii) the Bill of Sale from Seller Parties to Buyer dated as of
                    , 2010;
(iii) the Assignment and Assumption Agreement between Seller Parties and Buyer
dated as of                     , 2010;

 

 

--------------------------------------------------------------------------------

 

(SIDLEY LOGO) [c09002c0900202.gif]
                    
[                    ]
Page 2
(iv) the Escrow Indemnification Agreement to which Seller and Buyer are parties
dated as of                     , 2010; and
(v) the Management Agreement between Concessions and Buyer dated as of
                    , 2010.
[We also have reviewed all of the following documents:                      (the
“Enabling Documents”), as well as certain organizational documents of
                     (the “Organizational Documents”)].
II. Assumptions
For purposes of this opinion, we have made, with your consent, and without
further inquiry as to their accuracy or completeness, the following assumptions:
A. All signatures on all documents that we have reviewed or relied upon are
genuine, all natural persons executing relevant documents at the relevant times
had the legal capacity to do so, all documents submitted to us as originals are
authentic, all documents submitted to us as copies conform with the originals,
and, except only to the extent expressly opined upon herein, all persons acting
in a representative capacity had the authority to do so and are acting in
accordance with their fiduciary obligations.
B. Without limiting Section II.A. above, we have assumed that all partners of
Seller have taken whatever internal entity procedures as are necessary to
authorize them to execute, deliver and perform their obligations under any
agreements they are party to, and that the persons acting in a representative
capacity on behalf of such partners had the authority to do so and are acting in
accordance with their fiduciary obligations.
C. With respect to certain information material to our opinions, with your
consent and without further inquiry, we have relied on the factual
representations made by Seller in the Transaction Documents and in certificates
that Seller and its general partner have delivered to you and to us, and on
certificates received from the California Secretary of State and
[                                        ]. Further, with your consent, we have
assumed the accuracy of the information set forth in the afore-mentioned
documents, and we have undertaken no independent investigation or inquiry into
the truth, accuracy, completeness, or any other aspect of any matter referred to
in any of such documents, although to our knowledge none of such documents or
the information contained therein is false, inaccurate or incomplete.

 

 

--------------------------------------------------------------------------------

 

(SIDLEY LOGO) [c09002c0900202.gif]
                    
[                    ]
Page 3
III. Opinions
Based upon the foregoing and our review of such other documents and matters of
law as we deem relevant, and subject to the assumptions, limitations,
qualifications and exceptions herein contained, we are of the opinion that:
1. Seller is a duly formed limited partnership and is existing in good standing
under the laws of the State of California.
2. Seller has the limited partnership power and authority to execute and
deliver, and to perform its obligations under, each of the Transaction
Documents.
3. The execution, delivery, and performance by Seller of each of the Transaction
Documents have been duly authorized by all necessary limited partnership action
on the part of the partners of Seller.
4. Each of the Transaction Documents has been duly executed and delivered by
Seller.
IV. Limitations
In addition to the limitations and qualifications expressed elsewhere herein,
each of the opinions rendered herein is subject to the following limitations and
qualifications:
A. Any opinion or statement herein which is expressed to be “to our knowledge”
or is otherwise qualified by words of like import means that none of the lawyers
who have given substantive attention to the transaction in which the Transaction
Documents have been executed and delivered has any current conscious awareness
of any facts or information contrary to such opinion or statement. With respect
to such matters, such person, with your express permission and consent, has not
undertaken any other investigation or inquiry of other lawyers practicing law
with this firm, or any review of files maintained by this firm, or any inquiry
of officers or employees of Seller or any other Seller Party except as set forth
in the Enabling Documents. The reference to “conscious awareness” in this
Paragraph has the meaning given that phrase in the Third-Party Legal Opinion
Report, Including the Legal Opinion Accord, of the Section of Business Law,
American Bar Association, 47 Bus. Law. 167, 192 (1991).

 

 

--------------------------------------------------------------------------------

 

(SIDLEY LOGO) [c09002c0900202.gif]
                    
[                    ]
Page 4
B. Our opinion is limited solely to matters of law under United States federal
law, and the internal laws of the States of California, as those laws are in
effect as of the date hereof. We express no opinion as to the laws of any other
jurisdiction, including without limitation (i) those laws addressed in the
separate opinion from Graydon Head & Ritchey LLP delivered to you in connection
with the Agreement, and (ii) any ordinances, regulations or practices of any
county, city or other government agency or body within the State of California
or elsewhere.
C. We express no opinion as to any circumstances or events subsequent to the
issuance of this letter.
D. Our opinions expressed herein are subject to and may be limited by the
effects of bankruptcy, insolvency, reorganization, moratorium and other laws and
court decisions of general application (including, without limitation, laws
relating to fraudulent conveyances and preferences) and other legal or equitable
principles affecting the enforcement of creditors’ rights generally.
The opinions expressed herein are being delivered to you in connection with the
execution and delivery of the Transaction Documents. This opinion letter is not
intended to be employed in respect of any other transaction and is being
delivered on the understanding that neither this letter nor its contents may be
published, communicated or otherwise made available in whole or in part to any
person or entity without, in each instance, our specific prior written consent.
Notwithstanding the foregoing, copies of this letter may be furnished to
Pinnacle’s and Buyer’s successors and assigns and their counsel and advisors,
provided that no such successor, assign, or party shall have any greater rights
than Pinnacle and Buyer may have under this letter. The opinions expressed
herein speak as of the date hereof, and we assume no obligation to advise you of
any changes of law or fact that may occur after the date thereof,
notwithstanding that such changes may affect the legal analysis or conclusions
contained herein.
Sidley Austin LLP

 

 

--------------------------------------------------------------------------------

 

Exhibit 4.2
MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of this                      day of
                    , 2010 (the “Closing Date”), by and between OHIO VALLEY
CONCESSIONS INC., d/b/a River Downs Racetrack (“Licensee”), and PNK (OHIO) LLC
(“Applicant”). Reference is made herein to that certain Asset Purchase Agreement
dated as of November  _____, 2010 to which Applicant and Licensee are parties
(the “Purchase Agreement”), the terms and conditions of which are incorporated
herein by reference.
RECITALS:
WHEREAS, Licensee is selling to Applicant, and Applicant is purchasing from
Licensee, certain personal property used in the operation of the liquor business
operated by Licensee (the “Liquor Business”) at 6301 Kellogg Avenue, Anderson
Township, Hamilton County, Ohio 45230 (the “Premises”), according to the terms
set forth in the Purchase Agreement;
WHEREAS, Licensee is currently the holder of D-1, D-2, D-3 and D-6 Permit
No. 6522996, including certain concession stand permits Nos. 65229960003;
6522996000 and 65229960005 (collectively referred to as the “Permit”) issued by
the Ohio Department of Commerce, Division of Liquor Control (“ODLC”) for the
sale of alcoholic beverages on the Premises;
WHEREAS, Applicant has or will be filing an application for approval by ODLC for
transfer of Licensee’s Permit to Applicant (the “Transfer Application”); and
WHEREAS, the parties hereto desire to set forth their rights and obligations
with respect to the use of the Permit by Applicant, pending ODLC’s approval of
the Transfer Application.
NOW, THEREFORE, the parties hereby agree as follows:
1. APPOINTMENT. On the terms and subject to the conditions hereinafter set forth
Licensee hereby appoints Applicant to take charge of and operate all aspects of
the Liquor Business. Applicant hereby accepts such appointment.
2. TERM. The term of this Agreement shall commence on the Closing Date, and
shall remain in force until the date on which the Permit is transferred to
Applicant by the ODLC or on which the ODLC gives a final denial of such
transfer, unless terminated at an earlier date as provided herein.

 

 

--------------------------------------------------------------------------------

 

3. APPLICANT’S DUTIES. During the term of this Agreement, Applicant shall:
(a) keep accurate accounting records showing all funds received and expenditures
made or incurred in connection with the operation of the Liquor Business, and
make all tax and other governmental filings with respect thereto under
Licensee’s account numbers;
(b) keep such records and underlying receipts for at least three (3) years after
the period covered;
(c) conduct the Liquor Business in a legal and proper manner, abiding by all
laws, ordinances, rules, regulations, and directives of any governmental unit
having jurisdiction over the Liquor Business, including, without limitation, the
ODLC;
(d) maintain and pay premiums for comprehensive bodily injury, liquor liability
and property damage insurance in amounts sufficient to provide reasonable and
adequate protection of both Applicant and Licensee against liability which may
arise in connection with the Liquor Business, but in amounts no less than
currently maintained by Licensee;
(e) maintain and pay premiums for unemployment and worker’s compensation
insurance for all employees working in the Liquor Business; and
(f) timely pay all income and sales taxes, employees’ salaries, withholding
taxes, and all other expenses relating to the operation of the Liquor Business.
4. LICENSEE’S DUTIES. During the term of this Agreement, Licensee shall take any
and all steps at the direction of and reasonably required by Applicant to
facilitate the continued validity of the Permit, including, without limitation,
renewing the Permit if it expires during the term of this Agreement, and to
facilitate the transfer of the Permit to Applicant, including the voluntary
relinquishment of Licensee’s Permit at such time as the ODLC approves the
transfer and the provision of any documentation requested by the ODLC.
5. MANAGEMENT FEE. In consideration of the services to be rendered by Applicant
to Licensee hereunder, Applicant shall be entitled to retain all net income
produced from the Liquor Business upon continued satisfaction of Applicant’s
duties under Section 3.
6. COST OF TRANSFER APPLICATION. Applicant has paid and is responsible for the
filing fee for the Transfer Application.
7. DOCUMENT DELIVERY. Each party shall deliver within five (5) business days of
receipt of such information and documents to the other party all documents and
information that are received by each party with respect to the Permit.
8. EVIDENCE OF INSURANCE. During the term of this Agreement, Applicant shall
name Licensee as an additional insured on all policies of insurance which
Applicant obtains for its operation of the Liquor Business. Upon request
Applicant shall furnish to Licensee, on or before the Closing Date, a
certificate from the insurer with respect to such policies and copies of all
such policies.

 

2

--------------------------------------------------------------------------------

 

9. NO PARTNERSHIP OR JOINT VENTURE OR AGENCY. Applicant and Licensee are not
partners, joint venturers, or agents and nothing herein shall be so construed.
Applicant shall perform its duties hereunder solely as an independent contractor
of Licensee.
10. INDEMNIFICATION.
(a) Licensee hereby agrees to compensate, indemnify and save and hold Applicant
harmless from and against any claim, liability, loss, damage, cost, expense or
other deficiency, including but not limited to, reasonable attorneys’ fees and
other legal costs and expenses in any way arising out of, resulting from, or
relating to: 1) operation of the Liquor Business prior to the Closing (as
defined in the Purchase Agreement); 2) Licensee’s breach of any representation
or warranty made by Licensee herein; or 3) failure of Licensee to perform any of
its obligations as set forth herein.
(b) Applicant hereby agrees to compensate, indemnify, and save and hold Licensee
harmless from and against any claim, liability, loss, damage, cost, expense or
other deficiency, including but not limited to, reasonable attorneys’ fees and
other legal costs and expenses in any way arising out of, resulting from, or
relating to 1) Applicant’s breach of any representation or warranty made by
Applicant herein; 2) failure of Applicant to perform any of its obligations as
set forth herein; or 3) Applicant’s operation of the Liquor Business after the
Closing.
11. AMENDMENTS; BINDING EFFECT. This Agreement shall not be modified or
terminated except by an instrument in writing signed by both parties hereto or
their respective successors or assigns, and shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
12. COUNTERPARTS. This Agreement may be signed in one or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same instrument.

 

3

--------------------------------------------------------------------------------

 

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

            LICENSEE: OHIO VALLEY CONCESSIONS, INC.,
dba RIVER DOWNS RACETRACK
            By:           Name:                 APPLICANT: PNK (OHIO), LLC
            By:           Name:      

 

4

--------------------------------------------------------------------------------

 

ACKNOWLEDGMENT
The undersigned, being the current owner of the Premises, hereby acknowledges
and consents to the foregoing.
RIVER DOWNS INVESTMENT COMPANY
a California limited partnership

                   
By:
                      Print Name:        
 
     
 
   

 

5

--------------------------------------------------------------------------------

 

Schedule 1.1(g)
Material Contracts
Payment in 2010 thru 11/9/10
Vendors with written or oral contracts over $25,000

             
America TAB (Churchill Downs)
  Deposits to Internet Accounts   $ 63,394  
CBT, LLC
  Video Services   $ 510,225  
Daily Racing Form
  Racing Forms   $ 126,058  
Daily Racing Form
  Racing Programs   $ 81,597  
Daily Racing Form
  Live Programs   $ 36,173  
Duke Energy
  Gas & Electric Delivery   $ 213,944  
First Energy
  Electric Supplier   $ 104,765  
Greater Cinti Water Works
  Water   $ 118,385  
Hardy Trucking
  Manure Removal   $ 46,936  
HBPA
  Horsemen’s Fees & Insurance   $ 24,313  
Hudepohl Construction
  Kitchen Contractor   $ 33,879  
Incompass
  Program Data   $ 32,125  
Integrys Energy*
  Natural Gas   $ 24,003  
Roberts Communication
  Decoder Rental   $ 62,671  
Roberts Communication
  Uplink Video   $ 31,800  
Dinsmore & Fries
  Lobbying   $ 5,000/mo  
Tim Wykoff
  Turf and Landscape Maint   $ 69,770  
Xerox Corp
  Copier Rental   $ 21,645  

Vendors with written or oral contracts under $25,000

             
American Teletimer Corp
  Photo Finish   $ 13,000  
Auxier Gas
  Propane   $ 20,824  
John B. Battaglia
  Morning Line Services   $ 6,760  
Brink’s
  Armored Car   $ 1,763  
John Capurro, MD
  Track Physician   $ 10,400  
Race Track Chaplaincy
  Track Chaplain   $ 2,500  
CRC & Assoc
  C/H Kitchen Engineer   $ 4,355  
Equibase Company
  Program Royalties   $ 20,578  
Fire Extinguisher Services
  Extinguisher & Supression   $ 4,312  
Jones Fish Hatcheries
  Pond Maintenance   $ 3,362  
Kim Jordan
  Outrider Horse Maint   $ 2,820  
Kone Inc
  Elevator/Escalator Maint   $ 12,772  
T.L. Krieg Offset
  Print Condition Books   $ 14,970  
Cincinnati Light
  Casual Labor   $ 11,118  
Nurse Staffing of Cincinnati
  Contract Nurses   $ 7,686  
Pitney Bowes
  Postage Machine Contract   $ 1,926  
Plant Trolly
  Foilage Care Offices   $ 937  
Preferred Fire Protection
  Maint Sprinkler System   $ 2,478  
Rincon Vitova Insectaries
  Fly Control   $ 2,588  

 

 

--------------------------------------------------------------------------------

 

             
Roberts Communication
  Frame Relay   $ 13,000  
Rumpke
  Trash Removal Contract   $ 5,224  
Rumpke (Concessions)
  Trash Removal   $ 300/month  
Sport Tech
  Interface Fees   $ 12,322  
John Shipley
  Dead Horse Removal   $ 3,250  
Sprint PCS
  Cell Phone   $ 3,200  
Stanley Convergent Security
  Fire and Alarm Monitoring   $ 2,262  
Bill Sweeney
  Furnish Straw   $ 5,732  
TW Telecom
  Telephone & Internet   $ 21,023  
TRPB
  Tattooing Horses   $ 6,868  
Voice Tech
  Fax Services   $ 3,066  
NYRA
  Decoder Rental   $ 250/mo  
Woodbine Entertainment
  Decoder Rental   $ 1,050  
Paul Wykoff
  HVAC Maint   $ 6,611  
Xpedx
  Maintenance Supplies   $ 15,105  
Jack York
  Outrider Horse Maint   $ 3,000  
 
           
Coca-Cola
  Race Sponsorship/Supplier Agreement        

      *   With respect to this contract, Seller makes no representation that the
description of such contract provided to Buyer and Pinnacle includes all
material terms, but rather represents that such description accurately describes
the following terms: (i) the applicable rate, and (ii) that the contract is
cancelable.

 

 

--------------------------------------------------------------------------------

 

Schedule 1.2(j)
Excluded Assets

1.   Seller Parties’ MAS90 software and related data and records. To the extent
permitted by applicable license agreements, Buyer to allow Seller Parties the
opportunity to retrieve software and related data and records from Seller
Parties’ computer system post-Closing.

2.   Concessions’ Business Works software and related data and records. To the
extent permitted by applicable license agreements, Buyer to allow Concessions
the opportunity to retrieve software and related data and records from Seller
Parties’ and/or Concessions’ computer system post-Closing.

3.   2005 Ford Explorer owned by Concessions.

 

 

--------------------------------------------------------------------------------

 

Schedule 1.2(l)
Excluded Deposits

1.   Racing Commission Tax Deposit in the approximate amount of $8,100.   2.  
Workers’ Compensation Deposit for River Downs Investment Company in the
approximate amount of $1000.   3.   Ohio Valley Concessions, Inc. deposit with
the Lottery Commission.   4.   Ohio Valley Concessions, Inc. prepaid monthly
sales tax deposits.   5.   Ohio Valley Concessions, Inc. deposits for beer kegs
in stock.   6.   Workers’ Compensation Deposit for Ohio Valley Concessions, Inc.
in the approximate amount of $223.36.

 

 

--------------------------------------------------------------------------------

 

Schedule A.3.
Consents

1.   OSRC consent to the assignment and/or transfer of the Racing Licenses to
the LLCs and the subsequent purchase of the membership interests of the LLCs by
Buyer.   2.   Consent to the assignment and/or transfer of the liquor permits
issued to Concessions to Buyer from the Ohio Department of Liquor Control.   3.
  Any consent or approval required under the CAFO Regulations.   4.   Any
consent or approval required by the Ohio Lottery Commission with respect to
Buyer being an Ohio Lottery Retailer License;

 

 

--------------------------------------------------------------------------------

 

Schedule A.4.
Title to Assets

1.   All matters disclosed in the Commitment For Title Insurance issued by
Commonwealth Land Title Insurance Company with an Effective Date of October 19,
2010 at 6:59 a.m., Commitment No.: 10-001575/12287300   2.   “River Downs” is an
unregistered trade name.   3.   Domain name riverdowns.com registered with
Network Solutions, LLC.

 

 

--------------------------------------------------------------------------------

 

Schedule A.5.
Exceptions
None.

 

 

--------------------------------------------------------------------------------

 

Schedule A.6.
Legal Proceedings

1.   U.S. Equal Employment Opportunity Commission Notice of Charge of
Discrimination of Stephen B. Scardina dated February 1, 2010, as amended
February 26, 2010.

2.   Defendant in the following case: In re Cloverleaf Enterprises v. Maryland
Enterprises, Chapter 11 Bankruptcy case filed in Maryland Bankruptcy Court,
Greenbelt Division, Case No. 09-20056.

3.   Defendant in the following case: Horsemen’s Benevolent & Protective
Association — Ohio Division, Inc. v. Marc Dann, et al, filed in the United
States Court of Appeal for the Sixth Circuit, Court of Appeals Docket # 10-3511.

 

 

--------------------------------------------------------------------------------

 

Schedule A.7.
Description of property

      Hamilton County Auditor’s     Parcel Number   Property Address
 
   
500-0460-0033
  6480 Kellogg Avenue
500-0460-0017
  200 Kellogg Avenue
500-0460-0058
  205 Kellogg Avenue
500-0460-0048
  201 Kellogg Avenue
500-0460-0018
  6382 Kellogg Avenue
500-0460-0019
  6452 Kellogg Avenue
500-0460-0021
  6482 Kellogg Avenue
500-0460-0023
  6472 Kellogg Avenue
500-0460-0027
  6301 Kellogg Avenue
500-0460-0028
  6475 Kellogg Avenue
500-0460-0029
  6539 Kellogg Avenue
500-0460-0030
  Kellogg Road
500-0460-0031
  6446 Kellogg Avenue
500-0460-0034
  6444 Kellogg Avenue
500-0460-0043
  6432 Kellogg Avenue
500-0460-0047
  6448 Kellogg Avenue
500-0460-0053
  6456 Kellogg Avenue

 

 

--------------------------------------------------------------------------------

 

Schedule B.5.
Governmental Consents
Pinnacle will file a form 8-K with the U.S. Securities and Exchange Commission.