Exhibit 10.2

 

MANAGEMENT AGREEMENT

 

THIS AGREEMENT is made this 5th day of May 2003, by and among Scioto Downs,
Inc., a corporation incorporated under the laws of the State of Ohio (“Owner”)
and MTR Gaming Group, Inc., a corporation incorporated under the laws of the
State of Delaware (“Manager”).

 

RECITALS

 

A.  Owner is licensed by the Ohio Racing Commission, and conducts a harness
horse racing business (the “Racing Business”) and owns a harness horse racing
facility in Franklin County, Ohio near the City of Columbus, consisting of,
among other things, a racing oval, exercise tracks, grandstand/clubhouse
buildings, pari-mutuel betting equipment, barns, grounds, food service
facilities, and other facilities and improvements (the “Facility”).

 

B.  Owner also conducts a business of simulcasting races from and to other
tracks and OTB facilities at the Facility (The “Simulcast Business”), as
authorized by Ohio law, and operates a food service business (the “Food Service
Business”) serving meals, snacks and beverages to its customers.

 

C.  Pursuant to a Merger Agreement entered into as of December 23, 2002, as
amended (the “Merger Agreement”), the Manager has contracted to acquire all of
the issued shares of the Owner (the “Acquisition”).

 

D.  Contemporaneously with the execution of the Merger Agreement, the Manager
advanced to the Owner the sum of One Million Dollars ($1,000,000.00) [the
“Improvement Amount”] which was intended to provide the Owner with sufficient
funds for the payment of accrued indebtedness, general operating expenses, and
capital expenditures prior to the consummation of the Acquisition.

 

E.  Owner has continued to experience operating losses and negative cash flow
and, as a result, requires additional funds prior to the consummation of the
Acquisition for the payment of general operating expenses and capital
expenditures.

 

F.  Manager has agreed to extend additional amounts to the Owner, in an
aggregate principal amount not to exceed One Million Dollars ($1,000,000.00)
[the “Loan”], pursuant to the terms and conditions set forth herein.

 

G.  In consideration for the Loan, and on account of Manager’s extensive
experience in the racing, simulcasting, gaming and food service businesses,
Owner desires to retain the Manager, and the Manager desires to be retained by
the Owner, pursuant to the terms and conditions set forth herein, to manage the
Racing Business, Simulcast Business, Food Service Business, any future gaming
business (the “Gaming Business”), and all other businesses presently conducted
or which may be conducted in the future on or with respect to the Facility
(collectively, the “Managed Businesses”).

 

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AGREEMENT

 

NOW THEREFORE in consideration of the covenants and agreements set forth in this
Agreement, the parties agree that:

 

ARTICLE I

DEFINITIONS

 

1.01                           Definitions.  All capitalized terms, unless
defined to the contrary herein, shall have the meaning set forth in Schedule A
attached hereto and made a part hereof.

 

1.02                           Recitals.  Manager and Owner each represents and
warrants to the other that the Recitals to this Agreement, insofar as they
relate to it, are true and correct.

 

1.03                           Interpretation.  In this Agreement, save and
except as otherwise expressly provided:

 

(a)                                  all words and personal pronouns relating
thereto shall be read and construed as the number and gender of the party or
parties requires and the verb shall be read and construed as agreeing with the
required word and pronoun;

 

(b)                                 the division of this Agreement into Articles
and  Sections and the use of headings is for convenience of reference only and
shall not modify or affect the interpretation or construction of this Agreement
or any of its provisions;

 

(c)                                  when calculating the period of time within
which or following which any act is to be done or step taken pursuant to this
Agreement, the date which is the reference day in calculating such period shall
be excluded.  If the last day of such period is not a business day, the period
in question shall end on the next business day;

 

(d)                                 all references to Article and section
numbers refer to Articles and sections of this Agreement, and all references to
Schedules refer to the Schedules attached hereto; and

 

(e)                                  the words “herein,” “hereof,” “hereunder,”
“hereinafter”  and “hereto” and words of similar import refer to this Agreement
as a whole and not to any particular Article or  section hereof.

 

ARTICLE II

GENERAL REPRESENTATIONS, WARRANTIES AND

COVENANTS OF THE PARTIES

 

2.01                           General Representations, Warranties and Covenants
of Owner.  Owner represents, warrants and covenants to Manager that:

 

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(a)                                  Owner has, and throughout the Term will
maintain, good and marketable title to the Facility, free and clear of any
liens, charges and encumbrances of any nature or kind, save and except for
liens, charges and encumbrances which: (i) exist as of the date hereof, (ii) are
incurred in the ordinary course of business, (iii) are contemplated by the
Merger Agreement or (iv) arise in connection with any matters which could not
have a material adverse effect on the operation of the Managed Businesses by
Manager and such other matters as may be approved by Manager in writing.

 

(b)                                 Subject to the performance, satisfaction and
compliance by Manager of and with all of its obligations under this Agreement
and as and when required, Manager may peaceably and quietly possess, manage and
operate the Managed Businesses during the Term, free from interruption or
disturbance.

 

2.02                           Representations, Warranties and Covenants of
Manager.  Manager represents, warrants and covenants to Owner that Manager has
the requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder.

 

ARTICLE III

MANAGER’S AND OWNER’S RESPONSIBILITIES

 

3.01                           Manager’s Appointment.  Owner engages Manager as
the exclusive manager of the Managed Businesses during the Term with, except as
provided herein, exclusive responsibility and full control and discretion in
connection with the furnishing, equipping, servicing, implementation, operation,
management, supervision and direction of the Managed Businesses in accordance
with the terms and conditions of this Agreement.  Provided, however, that
Manager may permit the Owner’s current personnel or Owner to perform and carry
out all or any part of Manager’s responsibilities and duties set forth herein.

 

3.02                           Manager’s Responsibilities.  From and after the
date hereof, Manager shall, throughout the Term, in a professional, efficient
and expeditious manner, and in consultation with either Owner’s current
management or Board of Directors, as applicable, do all things and take all
necessary action in connection with the implementation, servicing, operating,
management, supervision and direction of the Managed Businesses in accordance
with those standards of other harness horse racing tracks having the same or
similar size, character and reputation.  Without limiting the generality of the
foregoing and the other provisions of this Agreement, Manager is authorized and
directed, as agent of Owner, subject to and in accordance with the terms and
conditions of this Agreement and the Budgets, as in effect from time to time,
to:

 

(a)                                  hire, pay, supervise, relocate and
discharge personnel of the Managed Business. All such personnel shall be
employed by Owner and that all expenses relating to the employment of such
personnel approved by Owner shall be borne by Owner (as an Operating Expense),
and such personnel shall be employees of Owner.  Owner shall have the right to
conduct investigative procedures which are customary in the gaming industry in
respect of all personnel of the Managed Businesses prior to the hiring thereof
in a timely manner; provided that (a) in deciding whether or not to hire any
such personnel, Manager shall give regard to the results of such

 

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investigative procedures and to the  Owner’s customary employment standards, and
(b) all of the decisions relating to the employment of such personnel, including
(without limitation) the transfer and dismissal of such personnel shall be made
by Manager, it being understood by Manager that in deciding whether or not to
dismiss any such personnel, Manager shall give regard to the  Owner’s customary
employment standards.  In selecting employees, the Manager shall consult with
Owner, and shall, to the maximum extent possible consistent with good business
practices, give precedence in hiring (1) to existing employees of Owner and (2)
to persons residing within Franklin County, Ohio.

 

(b)                                 if requested, assist Owner in negotiations
with any labor union or other bargaining unit lawfully entitled to represent
personnel or any of them engaged in the operation of the Managed Businesses;
provided that any agreement or other accord of the Managed Businesses with any
such labor union or other bargaining unit shall be subject to the prior approval
of Owner;

 

(c)                                  prepare, in consultation with Owner and
taking into account Owner’s comments and concerns, the Operating Plan and
Budgets (as such terms are defined herein);

 

(d)                                 Advise Owner in installing video/security
monitoring equipment.

 

(e)                                  with the approval of Owner, hire, engage or
appoint the  consultants and other advisors of the Managed Businesses, it being
agreed by Owner that all such advisors shall be hired, engaged and appointed at
the cost and expense of the Managed Businesses, as the case may be, and shall be
advisors of Owner; and it being further understood that Manager shall have no
say or involvement with respect to advisors or attorneys handling the
Acquisition on behalf of Owner.

 

(f)                                    establish the cash management and banking
arrangements for the Managed Businesses;

 

(g)                                 establish the policy of the Managed
Businesses regarding association with any credit card and automatic teller
machine (“ATM”) systems;

 

(h)                                 establish, maintain, and supervise
procedures for handling cash (currency and coins) generating by any future
Gaming Business, including procedures:  (1) related to the cash reserves
required on-premises to pay customer wins to be funded by Owner, (2) removing
cash from the any gaming stations, (3) for securing cash on-premises overnight
or for longer periods, (4) for transporting cash and depositing cash into the
Bank Accounts, and (5) relating to any other aspect of handling cash prior to
its deposit into the Bank Accounts.

 

(i)                                     serve as Owner’s exclusive construction
liaison in the design and construction of additions and improvements to the
Facility involving the Managed Businesses any of which must be approved by
Owner.

 

(j)                                     cause all such other things to be done
in and about the Managed Businesses as shall be necessary to comply with
Applicable Laws respecting the operation and management of

 

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the Managed Businesses, the non-compliance with which would materially and
adversely affect the Managed Businesses; provided, however, that either Owner or
Manager shall, in consultation with the other, have the right to contest by
legal proceedings the validity of any Applicable Law to the extent and in the
manner provided or permitted by Applicable Law until final determination of any
such proceeding.  Notwithstanding the foregoing, nothing in this Section 3.02(j)
shall require Manager to undertake any of Owner’s required filings.

 

3.03                           Limitation on Powers of Manager.  Notwithstanding
the provisions of section 3.02, Manager shall not take any of the following
actions without the prior written approval of Owner:

 

(a)                                  commence any legal action or proceeding
with respect to any contract, lease or concession agreement which Owner has the
right under this Agreement to approve;

 

(b)                                 execute or otherwise enter into any
contract, agreement or undertaking to borrow money on behalf of Owner;

 

(c)                                  make, execute or deliver on behalf of Owner
any assignment for the benefit of creditors, or any guarantee, indemnity, bond
or surety bond;

 

(d)                                 settle any legal action or proceeding
concerning the Managed Businesses.

 

(e)                                  take any action that may materially and
adversely affect any of the assets of Owner.

 

3.04                           Owner’s Responsibilities.  Owner shall file all
reports with respect to the Managed Businesses that are required to be filed by
a racing or gaming licensee or which are otherwise required to be filed by the
Owner.  Owner shall keep all such filings current.  Owner shall provide Manager
with a copy of all such filings.

 

3.05                           Dealings with Third Persons.  Owner agrees to
enter into such contracts with third party providers for maintenance, cleaning,
and other ancillary products and services related to the Managed Businesses as
are contemplated by the Budgets which have been approved by Owner, it being
acknowledged that the Manager does not have authority to execute contracts for
the account of Owner.  Owner hereby acknowledges and agrees that, in fulfillment
of its obligations hereunder, Manager may, subject to the terms and conditions
of this Agreement, communicate directly with any Person engaged to provide
products and services to the Facility.

 

3.06                           Operating Plan.  The Manager shall, in
consultations with Owner, present an initial written operating plan, setting
forth in detail the Manager’s recommendations as to the manner in which the
Managed Businesses are to be conducted, including a description of the job
titles and job functions of all employees of the Managed Businesses, procedures
for security, procedures for collecting, securing, transporting and depositing
revenues from the Managed Businesses, marketing and advertising plans, and all
other tasks necessary to conduct the Managed Businesses in an efficient a manner
as possible.  Within ten (10) days after presenting the initial operating plan,
the Manager shall meet with Owner’s Representatives (as defined

 

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herein) and shall discuss the various comments and suggestions made by the
Owner’s Representatives, and to respond to their questions. Within ten (10) days
thereafter, the Manager shall present a final written operating plan (the
“Operating Plan”), which takes into account the comments and concerns expressed
by the Owner’s representatives as agreed to by the Manager.  Upon the Operating
Plan being approved by both Manager and Owner, the parties shall take all steps
necessary to implement such Operating Plan pursuant to the terms and conditions
of this Agreement.

 

3.07                           Manager’s Time Commitment.  In fulfilling its
duties under this Agreement, Manager shall devote such time and effort as
Manager, in its reasonable discretion, deems necessary in order to perform its
duties under this Agreement.   Manager shall not be required to spend more than
three (3) business days at the Facility every other week (i.e., an average of
1.5 business days per week).  If the Manager is repeatedly required to spend
more than such time in order to fulfill its duties, the parties shall negotiate
to increase the Manager Fees.  If the parties are unable to reach an agreement
on an increase in the Manager Fees, the dispute shall be resolved in accordance
with Section 11.07.

 

3.07                           Budget.  Every calendar year, the Manager and
Owner shall jointly prepare a proposed annual operating budget for the Managed
Businesses  (the “Budget”).  The Budget shall set forth detailed information on
all projected revenues and all Operating Expenses to be incurred by the Managed
Businesses.  The Budget shall include a description of the number and
classification of all employees of such businesses, salaries or other
compensation for such employees, costs of legally mandated insurances and fringe
benefits attributable thereto (e.g., FICA, FUTA, disability, workers
compensation) and the costs of any fringe benefits being provided by the
employer on a voluntary basis or per collective bargaining agreement.  All
employees of the Managed Businesses, except the senior executive supervisory
personnel employed by the Manager, shall be employees of Owner.

 

3.08                           Payment of Operating Expenses.  On a regular
periodic basis (at least monthly), Manager shall remit payment on account of
Operating Expenses of the Managed Businesses to vendors, and/or others providing
goods or services to the Managed Businesses.  All vendor payments shall be made
on a timely basis so as to avoid the accrual of interest, late charges or other
surcharges.

 

3.09                           Cleaning and Maintenance.  “Food Service Areas”
means any and all places, areas, booths, stands, carts, counters, kitchens, food
preparation areas, dining rooms, or other facilities, designated by Owner or
Manager as places where Food Service products may be prepared and/or sold. 
Manager shall clean and keep Food Service Areas as well as public areas within
ten (10) feet of the Food Service Areas free of debris during all times that the
Facility is in operation.  The Manager shall keep neat and clean and in a
sanitary condition all food processing, production and storage areas used during
the term of this Agreement.  Manager shall be responsible for cleaning all Food
Service Areas at least daily (and more frequently if required to maintain a
first class food service operation), and shall deposit all rubbish in Owner
designated dumpsters.  All laws, ordinances and regulations of governmental
bodies which apply to the operation of the Food Service Business shall be
complied with by the Manager.

 

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3.10                           Rubbish Removal.  Manager shall be responsible to
place all garbage and other refuse from the Food Service Business in dumpsters,
and shall arrange for the removal and transportation of garbage and other refuse
with a responsible waste hauler.  Manager shall comply with all federal, state
and local laws relating to recycling of any portion of the refuse stream.

 

3.11                           Equipment.  Owner hereby grants to Manager the
right to use all of the furniture, fixtures and equipment currently located at
the Food Service Areas within the Facility. Purchase of any capital equipment,
whether required for expansion or replacement, shall be handled by the Manager
within the constraints of the annual Food Service Business budget, unless
otherwise approved in advance by Owner.  To the extent possible, the Manager
shall utilize the existing kitchen, food preparation and beverage areas now in
existence.

 

3.12                           Insurance.  Manager shall arrange for and obtain
insurance coverage in the amount set forth in the Operating Plan and Budget. 
All of such insurance shall list both the Manager and Owner as named insureds. 
Upon request of Owner, Manager shall provide Owner with written evidence that
such insurance coverage has been obtained and is in full force and effect.
Premiums for such insurance shall be an Operating Expense.

 

3.13                           Tip reporting.  Manager shall keep track of and
provide Owner with written information concerning tips received by employees of
the Food Service Business, such information to be provided in a format that will
allow Owner to comply with its governmental reporting requirements as to such
tip income.  Owner shall file all required reports to the federal and Ohio State
government concerning such tips, on such forms as may be required from time to
time.

 

ARTICLE IV

OPERATIONS WITH BUDGETS; EMERGENCY EXPENDITURES

 

4.01                           Operations within Budgets.  Manager shall operate
the Managed Businesses within the constraints imposed by the Operating Plan and
Budget. Any variations from the budgeted costs, which exceed the budgeted amount
by more than Five Thousand Dollars ($5,000.00) must be approved by the Owner. 
If the parties fail to agree on such a variance, the Manager may nevertheless
incur obligations to expend such funds, but the parties shall refer the dispute
to binding arbitration conducted pursuant to Section 11.07 hereof.  If the
arbitrator determines that all or part of the additional costs were
appropriately incurred, then such costs (or part) shall be determined to be
Operating Expenses.  If the arbitrator determines that all or any part of the
additional costs were not appropriately incurred, then such costs (or part)
shall be borne by the Manager, and shall be deducted from the Manager Fees. 
Notwithstanding anything in this Section 4.01 to the contrary, the following
charges may be incurred without requiring Owner’s consent to amendment of the
budget: (i) charges imposed by the Ohio Racing Commission (if any), or (ii)
labor costs above the amount budgeted, to the extent necessitated by changes in
law relating to minimum wages or otherwise imposing increased costs for
mandatory fringe benefits.  Notwithstanding anything to the contrary set forth
above, Manager shall use reasonable efforts to provide Owner with an Operating
Plan and Budget within two (2) weeks of execution of this Agreement.

 

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4.02                           Emergency Expenditures.  Notwithstanding Section
4.01, whenever, by reason of circumstances beyond the control of Manager,
emergency or special circumstances warrant expenditures which are in the opinion
of Manager required to be made for the lawful or safe operation and management
of the Managed Businesses, Manager shall be entitled to make such expenditures. 
Manager shall use its reasonable efforts to give Owner advance notice of any
expenditures required to be made by Manager and to obtain the approval of Owner
prior to making any such expenditures.  Whenever the giving of such advance
notice or the obtaining of such approval is, however, impracticable, in
Manager’s opinion, by virtue of the nature of the emergency or special
circumstances giving rise to any expenditures required to be made by Manager
pursuant this section 4.02, Manager shall be entitled to make such expenditures
without having to give such advance notice or having to obtain such approval;
provided, however, that Manager shall give Owner notice as soon as practicable
after such expenditures are made of the nature of the emergency or special
circumstances giving rise to such expenditures, the action taken by Manager to
deal with the emergency or special circumstances giving rise to such
expenditures and the amount of such expenditures.

 

ARTICLE V

FUNDING, BANKING, ETC. - $1 MILLION LOAN

 

5.1                                 The Bank Accounts.  All revenues from the
Managed Businesses shall be deposited in one or more bank accounts established
by the Manager for the benefit of the Owner (the “Bank Accounts”).  Provide,
however, that Manager reserves to itself the right, in lieu of opening new Bank
Accounts, to deposit the proceeds of the Loan into the operating account of
Owner so long as Manager is added as a signatory to such account(s).

 

5.2                                 $1 Million Loan Facility.

 

A.                                   The Manager agrees to lend to Owner, upon
the terms and conditions set forth in this Agreement, and in a Promissory Note,
Loan Agreement and Mortgage of even date herewith, such amounts as may be
advanced from time to time in a maximum principal amount not to exceed One
Million Dollar ($1,000,000.00) [the “Loan”].  Within three (3) business days
after satisfaction of the conditions to funding), the Manager shall deposit the
amount advanced into the Bank Accounts and such amounts shall thereafter be
disbursed by the Manager pursuant to Section 7.03 hereof.  A true and correct
schedule of amounts currently due and owing by Owner for operating expenses
which shall be paid with the Loan proceeds is attached hereto as Schedule 5.2
and made a part hereof.

 

B.                                     Owner warrants and represents that the
making of the Loan does not violate any provision of any promissory note,
mortgage, security agreement, trust indenture, other loan document between Owner
as borrower and any other lender (other than National City Bank from whom the
parties will obtain a Non-Disturbance Agreement), or (to the best of Owner’s
knowledge) any other agreement to which Owner is a party.

 

C.                                     The conditions set forth in Section 5 of
the Loan Agreement must be fulfilled or waived before the Manager is obligated
to advance any funds under the Loan.

 

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5.3                                 Repayment Terms; Collateral For Repayment of
Loan

 

A.                                   The One Million Dollars ($1,000,000.00) in
funds (or so much thereof as may be actually advanced) shall constitute a loan
made by the Manager to Owner, shall be evidenced by the Promissory Note, and
shall be secured by the Mortgage.  At all times that any balance of the Loan is
outstanding, amounts advance and remaining outstanding shall accrue interest at
the Interest Rate (as herein defined).  Unless earlier accelerated, the entire
balance of principal and all interest shall become due and payable on December
31, 2003 (the “Maturity Date”).   For purposes of this Agreement, the term
“Interest Rate” shall mean the rate equal to the rate of interest that would by
paid by the Payee pursuant to the Third Amended and Restated Credit Agreement
dated March 28, 2003 by and between Payee and its subsidiaries as the Borrowers,
Wells Fargo Bank, National Association as the Agent Bank, Swingline Lender and
L/C Issuer, and the Lenders referenced therein (the “Wells Fargo Credit
Agreement”).

 

B.                                     The obligation of Owner to repay the Loan
shall be secured by a second mortgage (subordinate to the National City Bank
Loan), dated as of the date hereof, on the approximately 173 acres of real
property comprising the Facility (the “Mortgage”).

 

ARTICLE VI

TERM

 

6.01                           Basic Term.  The Manager is appointed for a term
commencing on the later of (a) the date hereof and (b) the date on which this
Agreement is approved by the Ohio Racing Commission (if required) [the
“Commencement Date”], and continuing until Five (5) years from the Commencement
Date, subject to earlier termination as provided below or as provided in Article
XI (the “Term”).

 

6.02                           Termination in Certain Other Events.

 

A.                                   To the best of Owner’s knowledge, this
Agreement is enforceable against Owner, subject to the provisions of the
Bankruptcy Act as amended from time to time (to the extent applicable) and to
general principles of equity.  To the best of Owner’s knowledge, Owner is not
required to obtain any governmental permits, licenses or other authorization
other than from the Ohio Racing Commission (“Authorization”) in order to enter
into this Agreement with the Manager.  If, however, it is subsequently
determined by (1) final court order not subject to appeal, (2) non-final court
order which has not been stayed pending appeal, or (3) order or other directive
of the Ohio Racing Commission, that any such governmental Authorization is
required, and if the same cannot be obtained within any time constraints imposed
by the governmental agency having jurisdiction to issue such Authorization, then
Owner may terminate the Manager’s continuing services under this Agreement by
written notice to the Manager, which notice shall state the effective date of
such termination.  In such case, the Manager shall be paid all fees due with
respect to services rendered up to the effective date of termination.  Nothing
contained in the foregoing sentence shall be construed as abrogating or limiting
any collateral rights held by the Manager.

 

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B.                                     To the best of Owner’s knowledge, no
Authorization other than from the Ohio Racing Commission is required with
respect to the Manager Fees. If, however, it is subsequently determined by (1)
final court order not subject to appeal, (2) non-final court order which has not
been stayed pending appeal, or (3) order or other directive of the Ohio Racing
Commission, that the Manager Fees set forth herein are in violation of any
applicable law or regulation, or that any such governmental Authorization is
required in order for such Manager Fees to be paid to the Manager, then the
following provisions shall apply:

 

(1)                                  If the Manager Fees are not legally
permitted, then either party may terminate the further performance of management
services by the Manager under this Agreement by written notice to the other
party, such notice to state the effective date of termination.  In such event,
the Manager shall be paid reasonable compensation (which shall not be computed
with reference to revenues or EBITDA) for all services rendered.  Nothing
contained in the foregoing sentence shall be construed as abrogating or limiting
any collateral rights held by the Manager.  Any dispute as to the amount of the
Manager’s compensation shall be determined by arbitration pursuant to the
provisions of Section 11.07.  In the event of any conflict between the
provisions of this subsection 6.03(B) and any other provision of this Agreement,
the terms of this subsection 6.03(B) shall control.

 

(2)                                  If fee arrangements based on revenues and
EBITDA are generally permissible, but a governmental Authorization is required,
both parties agree to use all diligent efforts to obtain such Authorization, and
to supply any information that may be required in connection therewith.  If the
Authorization ultimately is denied, then either party may terminate the further
performance of management services by the Manager under this Agreement in
accordance with the procedures set forth in clause (1) of this Section 6.03(B),
and the provisions of such clause relating to interim compensation shall also
apply.  If neither party elects to terminate, the parties shall negotiate for a
fixed or non-percentage fee arrangement, and if they reach agreement as to such
new fee arrangement, the remaining provisions of this Agreement shall continue
in effect.   If the parties fail to reach agreement as to a fixed or
non-percentage fee within thirty (30) days after the Authorization is denied,
then either party may terminate the further performance of services by Manager
under this Agreement as provided in clause (1) of this Section 6.03(B).

 

(3)                                  If at any time during the process of
applying for such Authorization, Owner is ordered to discontinue the arrangement
with respect to Manager Fees, Owner shall be authorized to do so, and the
Manager shall have the right to either (i) terminate further performance of
services under this Agreements in accordance with the procedures of clause (1)
above, and the provisions thereof concerning interim compensation shall apply,
or (ii) give written notice to Owner that Manager elects to continue to perform
services on a fixed fee or other non-percentage arrangement mutually agreeable
to the parties.  If the parties are not able to agree on the Manager’s fees
within thirty (30) days of receipt of the Manager’s written election, then
either party may terminate further performance

 

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of management services by the Manager hereunder, using the procedures of clause
(1) above, and the interim compensation provisions of such clause shall apply.

 

C.                                     Notwithstanding anything to the contrary
contained in this Agreement, this Agreement shall terminate upon completion of
the merger between Manager and Owner as provided for under the Merger Agreement.

 

D.                                    Notwithstanding anything to the contrary
contained in this Agreement, this Agreement may be terminated: (i) by Owner in
the event Manager is in breach of the Merger Agreement beyond any applicable
cure and grace period; or (ii) by Owner in the event Manager terminates the
Merger Agreement due to any factor(s) other than the breach by Owner of its
obligations under the Merger Agreement.

 

ARTICLE VII

REMUNERATION AND REIMBURSEMENT OF MANAGER

 

7.01                           (a)                                 During the
Term, the Owner shall pay to the Manager compensation for the management
services consisting of (a) three percent (3%) of the all revenues derived from
the Managed Businesses (the “Gross Revenue Fee”), and (b) eight percent (8%) of
the EBITDA derived from the Managed Businesses (the “EBITDA Fee” and, together
with the Gross Revenue Fee, the “ Manager Fees”).  Provided there is no default
by Owner hereunder, the Manager Fees shall accrue and not be payable until the
date which is twelve (12) months from the date of this Agreement.

 

(b)                                 Manager shall compute and disburse pursuant
to Section 7.03 (i) the Gross Revenue Fee within thirty (30) days of the end of
each full or partial calendar month and (ii) the EBITDA Fee within thirty (30)
days of the end of each full or partial calendar quarter. Except to the extent
delay in the computation or disbursement of Manager Fees is due to the fault of
Manager, delinquent Manager Fees shall bear interest at the Interest Rate.

 

7.02                           Reimbursement of Costs and Expenses.  Owner
shall, within twenty (20) days following the receipt of a reimbursement request
from Manager, promptly reimburse Manager for all costs and expenses reasonably
incurred by Manager in the performance of the services in accordance with this
Agreement.  Manager shall provide Owner with commercially reasonable
documentation supporting its request for reimbursement.  Reimbursable costs and
expenses include the cost of travel to and from the Facility.  Manager shall
have the authority, pursuant to Section 7.03, to reimburse itself for costs and
expenses out of the Bank Accounts.

 

7.03                           Payment of Available Cash.  Subject to Section
7.01, the following payments shall be made by Manager on behalf of Owner from
the Bank Accounts in the following order of priority:

 

(a)                                  to the payment of the Manager Fees and the
reimbursement to Manager of costs, expenses and any amounts advanced by Manager
under this Agreement, and, to the extent provided for by this Agreement, to the
payment of interest using the Interest Rate computed from the date such

 

11

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advances were made and the date delinquent costs, expenses, and Management Fees
were due;

 

(b)                                 to the payment of an amount necessary to
fully amortize the accrued and unpaid Manager Fees over a period of eighteen
(18) months)

 

(c)                                  to the payment of other Operating Expenses;

 

(d)                                 to fund adequate working capital and
reserves for the Managed Businesses;

 

(e)                                  to repay the Loan;

 

(f)                                    to pay for agreed upon capital
refurbishments in accordance with the Operating Plan and Budget; and

 

(g)                                 the balance to Owner.

 

The payments enumerated in this Section 7.03 shall be made by Manager (by way of
cash, direct debit to Bank Accounts, check, bank draft, wire transfer or other
means of payment selected by Manager) on behalf of Owner from time to time as
required for the operation of the Managed Businesses or as otherwise set forth
in this Agreement.

 

ARTICLE VIII

 

8.01                           Maintenance of Records.  Manager shall maintain
all accounting records and documents regarding the Managed Businesses throughout
the term of the Agreement in accordance with generally accepted accounting
principles, consistently applied, except to the extent specifically otherwise
provided by this Agreement.  Manager agrees to provide Owner with copies of any
financial and accounting records, upon request, at a reasonable photocopy cost
to Owner.  Manager will maintain the original entry copies of all such records,
together with any work papers and other documentation relating thereto, and make
them available for review, inspection, transcription and audit by Owner, upon
request.  Owner agrees to comply with any reasonable precautions and procedures
promulgated by Manager so that Owner’s right of access and inspection shall not
unreasonably interfere with Manager’s ability to conduct accounting operations.

 

8.02                           Audit.  The Owner may call for an audit of
Manager’s records relating to the payment of the Manager Fees at any time or
times, and such audit shall be conducted by an independent certified public
accounting firm selected by the Owner.  The costs of such audit shall be borne
by the Owner, unless the audit discloses any discrepancy which has resulted in
an overpayment of the Manager Fees in any Accounting Year by Fifty Thousand
Dollars ($50,000.00) or more, in which case the costs of the audit shall be
borne by Manager.  Any overpayment of the Manager Fees (whether or not in excess
of the above-stated threshold) shall be promptly paid to the Owner by Manager,
together with interest at  the Interest Rate calculated from the date of receipt
of the audit report to the date payment is made.  Notwithstanding the

 

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foregoing, if an adjustment in the Manager Fees results solely from a technical
adjustment to the accounts by virtue of the auditor’s decision that any election
between permissible alternative treatments of any item of account made by
Manager should be reversed, and if Manager disagrees with the auditor’s report,
then the issue shall be determined under section 11.07 hereof.  If it is
determined that the auditor is correct, then the additional fee due to the Owner
shall be promptly paid but Manager shall not be responsible for the costs of the
audit.

 

ARTICLE IX

RELATIONSHIP OF MANAGER AND OWNER

 

9.01                           Manager to Act as Agent for Owner.  In the
performance of its duties as the manager of the Managed Businesses, Manager
shall act solely as the agent of Owner.  Nothing in this Agreement shall
constitute or be construed to be or create a partnership, joint venture or joint
employer relationship between Owner and Manager, and the relationship of Manager
to Owner shall be that of an independent contractor acting on Owner’s behalf.
Except with respect to its obligation to extend the Loan in accordance with the
terms and conditions with respect thereto, Manager shall not be required to
expend any of its own funds or otherwise incur any debts or liabilities to any
Person in the performance of its duties as the manager of the Managed
Businesses.  All debts and liabilities to third Persons required or permitted to
be incurred by Manager under this Agreement in the course of its furnishing,
equipping, servicing, marketing, operation and management of the Managed
Businesses shall be the debts and liabilities of Owner only and Manager shall
not be liable for any such obligations by reason of its furnishing, equipping,
servicing, marketing, operation and management of the Managed Businesses for
Owner. Manager may so inform third Persons with whom it deals on behalf of Owner
and may take any other reasonable steps to carry out the intent of this section
9.01.

 

9.02.                        Delegation of Authority by Manager.  Manager may
engage one or more Persons to assist Manager to perform services in connection
with the furnishing, equipping, servicing, marketing, operation and management
of the Managed Businesses and each Person engaged by Manager to perform such
services, including (without limitation) any of its Affiliates, any agent or
employee of Manager or any of its Affiliates or any agent or employee of Owner
hired by Manager or any of its Affiliates, shall be acting solely as agent of
Owner and not of Manager for such purposes.  Notwithstanding that Manager may
engage one or more Persons to perform the services contemplated by this section
9.02, Manager shall not be released from its responsibilities under this
Agreement or any liabilities which may result therefrom nor shall such
responsibilities or liabilities be diminished.

 

9.03                           Representatives of Parties.  Owner shall
designate one or more representatives (the “Owner Representatives”) and the
Manager shall designate one or more representatives (the “Manager
Representatives”, and together with the Owner Representatives, the
“Representatives”) who shall act as primary contact persons and who shall
administer the parties’ respective obligations under this Agreement.  The
Representatives shall meet regularly throughout the term of this Agreement (at
least monthly) and at such other times as may be requested by any
Representative.  If the Owner Representatives and Manager Representatives cannot
reach an agreement, the dispute shall be resolved in accordance with Section
11.07 hereof.

 

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ARTICLE X

ASSIGNMENT AND MORTGAGES

 

10.01                     Owner’s Right to Assign.   Subject to the terms and
conditions of the Merger Agreement, Owner shall have the right at any time to
sell, assign, transfer or otherwise dispose of all or any part of its Interest
to any Qualified Person on the condition that such Person first enter into an
agreement with Manager, in form and substance satisfactory to Manager, agreeing:

 

(a)                                  that this Agreement continue in full force
in effect after such sale, assignment, transfer or other disposition if it has
not been sooner terminated; and

 

(b)                                 to assume all of the contractual obligations
of Owner contained in the this Agreement.

 

10.02                     Manager’s Right to Assign.  Manager shall have the
right at any time to sell, assign, transfer or otherwise dispose of all or any
part of its Interest to any Qualified Person, on the condition that:

 

(a)                                  the Person to whom the Interest of Manager
is to be sold, assigned, transferred or otherwise disposed of has been approved
by Owner and shall first enter into an agreement with Owner, in form and
substance satisfactory to Owner, agreeing to assume all of the contractual
obligations of Manager contained in this Agreement; and

 

(b)                                 in the case of a sale, assignment, transfer
or other disposition to an Affiliate of Manager, no consent shall be required
provided Manager agrees to be jointly and severally liable with such Affiliate
to perform all of the contractual obligations of Manager contained in this
Agreement notwithstanding such sale, assignment, transfer or other disposition.

 

Upon a sale, assignment, transfer or other disposition to a Person other than an
Affiliate, Manager shall be released from all of its obligations under this
Agreement.

 

10.03                     Manager’s Right to Mortgage.  Manager shall have the
right at any time to mortgage, hypothecate or otherwise encumber all or any part
of its right to any payments to which it is entitled hereunder to a financial
institution as security for its obligations to such financial institution.

 

ARTICLE XI

EVENTS OF DEFAULT AND TERMINATION

 

11.01                     Termination by Owner For Cause.  Owner may terminate
the Manager’s employment under this Agreement in any of the following events:

 

A.  If the Manager fails, in a material manner, to perform or observe any
provision of this Agreement to be performed or observed by the Manager, and
further fails to cure such default within fifteen (15) days after the giving of
written notice of default by or on behalf of Owner, which notice shall state the
nature of the default in reasonable detail. Notwithstanding the

 

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foregoing, if the default is of such a nature that it cannot reasonable be cured
within such fifteen (15) days, then the default shall be deemed to have been
timely cured if the Manager commences a cure within such fifteen (15) days, and
thereafter diligently prosecutes such cure and completely cures such default
within a reasonable period of time.

 

B.  If the Manager repeatedly and persistently fails, in a material manner, to
perform or observe the provisions of this Agreement to be performed or observed
by the Manager, or persistently fails to follow the Operating Plan agreed upon
between the parties.

 

C.  If Manager files a voluntary petition in bankruptcy, or if there is filed
against Manager any involuntary bankruptcy petition or other insolvency
proceeding initiated by Manager’s creditors, which involuntary filing is not
dismissed within sixty (60) days after it is filed.

 

D.  If any supervisory employee of Manager commits any fraud, malfeasance, gross
negligence, material misrepresentation, unless within five (5) days after
written notice from Owner, Manager terminates the employment of such supervisory
employee at the Facility.

 

11.02                     Termination by Manager For Cause.

 

A.                                   The Manager may terminate its obligations
of further performance under this Agreement if Owner fails, in a material
manner, to perform or observe any material provision of this Agreement to be
performed or observed by Owner, and further fails to cure such default within
fifteen (15) days after the giving of written notice of default by or on behalf
of the Manager, which notice shall state the nature of the default in reasonable
detail. Notwithstanding the foregoing, if the default is of such a nature that
it cannot reasonable be cured within such fifteen (15) days, then the default
shall be deemed to have been timely cured if Owner commences a cure within such
fifteen (15) days, and thereafter diligently prosecutes such cure and completely
cures such default within a reasonable period of time.   If Owner fails to
timely cure as provided above, then the Manager may terminate its obligation to
provided further services hereunder, effective as of a date specified by the
Manager which is not less than sixty (60) days from the expiration of Owner’s
fifteen (15) day cure period.

 

B.                                     If any governmental agency having
jurisdiction over the Manager’s racing operations or gaming operations in
another state (1) orders Manager to discontinue its employment at the Facility,
or (2) advises Manager that its authority to conduct gaming operations in such
other state will be suspended or revoked unless Manager’s affiliation with the
Owner is not terminated.  If Manager is so advised under clause (2), Manager
shall promptly give written notice of such event to the Owner, and the Owner
shall be entitled to contest such action to the extent permitted by law. 
Notwithstanding the Owner’s contesting such action, Manager shall be entitled to
terminate the further performance of its services under this Agreement, as of
the latest date that Manager can do so without suffering suspension or loss of
its license, unless the Owner obtains a court order restraining the government
agency from suspending or revoking Manager’s license.

 

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11.03                     Rights of Non-Defaulting Party.  Upon the occurrence
of any event of default pursuant to section 11.01 or 11.02, and the applicable
grace periods having expired, either Owner (in the event of default under
Section 11.01) or Manager (in the event of default pursuant to Section 11.02)
may, without prejudice to any other recourse at law or in equity which it may
have, give to the other party notice of its intention to terminate this
Agreement after the expiration of a period of thirty (30) days from the date of
such notice and, upon the expiration of such period, the term of this Agreement
shall expire unless such default has been cured within such thirty (30) day
period.

 

11.04                     Remedying Defaults.  Notwithstanding anything to the
contrary contained in this Agreement, either Owner or Manager shall be entitled
to remedy any default of the other under this Agreement with reasonable notice
to the other or without notice in the event of any emergency or apprehended
emergency, without prejudice to any rights under this Agreement and the party so
remedying such default shall be repaid upon demand by the other for the cost of
remedying such default, together with interest on such cost from the date of
incurring such cost at the Interest Rate.

 

11.05                     Accounting on Termination.  If this Agreement is
terminated, Manager shall be entitled (in addition to any rights or remedies
available to it at law or in equity) to all sums, charges and fees which it is
entitled to receive under this Agreement payable up to and including the date of
termination, together with costs and expenses, if any, reimbursable to it
pursuant to Section 8.02 or for which it may be responsible arising out of
anything done within the scope of its responsibilities under this Agreement to
the date of termination.  The amount of all of such sums, charges, fees and
costs and expenses shall be ascertained for the period ending on the date of
such termination and shall be paid to Manager on the later of the date on which
such sums, charges, fees and costs and expenses are ascertained and the date
which is twenty (20) days after the date of such termination.

 

11.06                     Claims on Termination.  Notwithstanding anything
contained in this Agreement, the termination of this Agreement shall not
prejudice any cause of action, claim or right of Owner or Manager against the
other on account of any default by the other of its obligations under this
Agreement or arising as a result of the termination of this Agreement, and any
term, covenant, condition or provision of this Agreement referable thereto shall
not merge, but shall survive, the termination of this Agreement; provided that
such legal proceedings shall not involve issues which have previously been
submitted to and settled by arbitration in accordance with this Agreement unless
such legal proceedings involve the enforcement of an arbitration decision or
award made in respect of such issues.

 

11.07                     Arbitration

 

(A)  Resolution of Accounting Disputes.

 

1.                                              All disputes relating to the
calculation of the Manager Fees (including without limitation, disputes
concerning the computation of Operating Expenses for the Managed Businesses),
and all other disputes concerning accounting issues, shall initially be
submitted to non-binding mediation to be conducted before a

 

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single mediator who is an independent certified public accountant mutually
agreeable to the parties. If the parties are not able to agree on the selection
of the mediator, one shall be appointed by mutual agreement of the attorneys for
the parties.

 

2.                                       All disputes concerning accounting
issues which are not resolved by mediation pursuant to subsection 11.07(A)(1)
shall be submitted to binding arbitration to be conducted in accordance with the
then-prevailing rules of the American Arbitration Association applicable to Ohio
disputes.

 

(B)                                Resolution of Non-Accounting Disputes.

 

1.                                       Except as provided in Section
11.07(B)(2) below, the parties hereby agree that all controversies, claims and
disputes or difference arising out of or in connection with to the transactions
contemplated by this Agreement, other than those relating to accounting issues
to which section 8.1 would apply (collectively, the “Controversies”), shall, to
the maximum extent allowed by law, be resolved by binding arbitration before the
American Arbitration Association according to the rules and practices of such
association from time-to-time in force.  Controversies include (without
limitation): (A) all questions relating to the breach of any obligation,
warranty, promise, right or condition hereunder; and (B) any question as to
whether the right to arbitrate exists.   The arbitration shall be conducted
within Franklin County, Ohio unless the parties agree otherwise in writing.  The
parties agree to request the Arbitrator to prepare a written decision, setting
forth the Arbitrator’s reasons for making the award, but the foregoing shall not
be construed as expanding the grounds upon which any court may review or refuse
to confirm the Arbitrator’s award.

 

2.                                       Notwithstanding the provisions of 
Section 11.07(B)(1), Owner reserves the right to apply to a court of competent
jurisdiction for injunctive or other equitable relief if the Manager fails or
refuses to vacate Owner’s premises after termination of this Agreement by Owner,
either with or without cause.  Such right shall be in addition to, and not in
lieu of, Owner’s right to seek monetary damages for any failure of the Manager
to vacate the premises or other breach of this Agreement.

 

(C)                                Period of Limitations.  Any mediation and any
arbitration shall be brought within three (3) years after the date that the
dispute arose.  In the case of accounting issues, the dispute shall be deemed to
arise at such time as the party bringing the claim first had access to written
reports or accountant work papers that contain sufficient detail that a
reasonably diligent business person would be able to discern that an issue
exists as to the treatment of any item of revenue or expense.

 

ARTICLE XII

MANAGER’S LIABILITY

 

12.01                     Standard of Care.  Manager shall not, in the
performance of its obligations under this Agreement, be liable to Owner or to
any other Person for any act or omission (whether negligent, tortuous or
otherwise) of Manager or any of its Affiliates or any of their respective

 

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directors, officers, employees, consultants, agents or representatives, except
only to the extent such liabilities, obligations, claims, costs and expenses
arise out of or are caused by the willful misconduct, gross negligence or bad
faith of Manager or any of its Affiliates or any of their respective directors,
officers, employees, consultants, agents or representatives.

 

ARTICLE XIII

ACKNOWLEDGMENTS

 

13.01                     Owner’s Acknowledgments

 

Owner acknowledge that:

 

(a)                                  in entering into this Agreement, Owner has
not relied on any statement, study, representation or warranty of Manager, any
of its Affiliates or any Person actually or apparently engaged by them or on
their behalf, express or implied, relating to the Managed Businesses, including
(without limitation) any statement, study, representation or warranty relating
to the compliance of the Managed Businesses with Applicable Law or any
projection or pro forma statements of earnings or profit or loss or statements
as to future success of the  Managed Businesses which may have been prepared by
or on behalf of Manager, any of its Affiliates or any Person actually or
apparently engaged by them or on their behalf, and Owner understands that no
guarantee is made or implied by Manager; and

 

(b)                                 Manager would suffer substantial damages,
would be irreparably harmed and would not have an adequate remedy at law in the
event that this Agreement is wrongfully terminated by Owner.  Accordingly, Owner
agrees that Manager shall be entitled to seek injunctive relief to prevent a
wrongful termination of this Agreement by Owner in addition to any other remedy
which Manager may be entitled to at law or in equity or under this Agreement. 
Owner further agrees to indemnify and hold Manager and its Affiliates and any of
their respective officers, directors, employees or agents harmless from and
against any loss of any kind or nature arising out of a wrongful termination of
this Agreement by Owner.

 

13.02                     Manager’s Acknowledgments.  Owner would suffer
substantial damages, would be irreparably harmed and would not have an adequate
remedy at law in the event that this Agreement is wrongfully terminated by
Manager.  Accordingly, Manager agrees that Owner shall be entitled to seek
injunctive relief to prevent a wrongful termination of this Agreement by Manager
in addition to any other remedy which Owner may be entitled to at law or in
equity under this Agreement.  Manager further agrees to indemnify and hold Owner
and any of their respective officers, directors, employees or agents harmless
from and against any loss of any kind or nature arising out of a wrongful
termination of this Agreement by Manager.

 

ARTICLE XIV

GENERAL PROVISIONS

 

14.01                     Entire Agreement.   This Agreement, together with all
schedules attached hereto and thereto, constitutes the entire agreement between
the parties with respect to the subject matter contemplated herein and therein
and supersedes all oral statements and prior writings with

 

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respect to the subject matter contemplated herein and therein.  Any other
agreements regarding the subject matter contemplated herein or therein, whether
written or oral, are terminated.

 

14.02                     Modification and Changes.  This Agreement cannot be
changed or modified except by another agreement in writing signed by all the
parties or by their respective duly authorized agents.

 

14.03                     Partial Invalidity.  In the event that any one or more
of the phrases, sentences, clauses, Articles or Sections contained in this
Agreement shall be declared invalid or unenforceable by order, decree or
judgment of any court having jurisdiction, or shall be or become invalid or
unenforceable by virtue of any Applicable Law, the remainder of this Agreement
shall be construed as if such phrases, sentences, clauses, Articles or Sections
had not been inserted except when such construction (a) would operate as an
undue hardship on either party or (b) would constitute a substantial deviation
from the general intent and purposes of the parties as reflected in this
Agreement.  In the event of either (a) or (b) above, the parties shall use their
best efforts to negotiate a mutually satisfactory amendment to this Agreement to
circumvent such adverse construction.  If no such amendment has been agreed upon
within sixty (60) days after the initial request by any party to negotiate such
amendment, such dispute shall, if requested by Owner or Manager, be resolved by
arbitration in accordance with the provisions of Section 11.07.

 

14.04                     Counterparts.  This Agreement may be executed
simultaneously in two counterparts, each of which counterparts shall be deemed
an original.  In proving this Agreement it shall not be necessary to produce or
account for more than one of the counterparts.

 

14.05                     Waivers.  No failure by a party to insist upon the
strict performances of any provision of this Agreement, or to exercise any right
or remedy consequent upon the breach thereof, shall constitute a waiver of any
such breach or any subsequent breach of such provision.  No provision of this
Agreement and no breach thereof shall be waived, altered or modified except by
written instrument.  No waiver of any breach shall affect or alter this
Agreement, but each and every provision of this Agreement shall continue in full
force and effect with respect to any other breach then existing or subsequent
breach thereof.

 

14.06                     Enurement.  This Agreement shall endure to the benefit
of and be binding upon each of the parties and their respective successors and
permitted assigns.  There are no intended third party beneficiaries.

 

14.07                     Applicable Law.  This Agreement shall be construed,
interpreted and applied in accordance with, and shall be governed by, the laws
of the State of Ohio and the federal laws of the United States of America
applicable therein.

 

14.08                     Jurisdiction.  The parties irrevocably:

 

(a)                                  submit and consent to the non-exclusive
jurisdiction of the courts of the State of Ohio located in Columbus, Ohio as
regards any suit, action or other legal proceedings arising out of this
Agreement;

 

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(b)                                 waive, and agree not to assert, by way of
motion, as a defense or otherwise, in any such suit, action or proceedings, any
claim that they are not personally subject to the jurisdiction of the courts of
the State of Ohio located in Columbus, Ohio, that the suit, action or proceeding
is brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper, or that this Agreement or the subject matter hereof may
not be enforced in such courts; and

 

(c)                                  agree not to seek, and hereby waive any
review by any court which may be called upon to enforce the judgment of the
courts referred to in Section 14.08(a), of the merits of any such suit, action
or proceeding in the event of failure of any party to defend or appear in any
such suit, action or proceeding.

 

14.09                     Notices.  Except as may otherwise be provided in this
Agreement, all notices, demands, statements, requests, consents, approvals and
other communications (collectively, “Notices”) required or permitted to be given
hereunder, or which are to be given with respect to this Agreement, shall be in
writing, duly executed by an authorized officer or agent of the party so giving
such Notice, and either personally delivered to any duly authorized
representative of the party receiving such Notice or sent by facsimile
transmission, registered or certified mail, or by courier service, return
receipt requested, addressed:

 

If to Owner:

 

Scioto Downs, Inc.

 

 

6000 South High Street

 

 

Columbus, OH 43207

 

 

Attn:  Edward T. Ryan

 

 

Phone:  (614) 491-2515

 

 

Fax: (614) 491-2866

 

 

 

With a copy to:

 

Chester Willcox & Saxbe LLP

 

 

65 East State Street

 

 

Suite 1000

 

 

Columbus, OH 43215-4213

 

 

Attn:  Roderick H. Willcox

 

 

Phone:  (614) 221-4000

 

 

Fax:  (614) 221-4012

 

 

 

If to Manager, to:

 

MTR Gaming Group, Inc.

 

 

State Route 2 South

 

 

P.O. Box 356

 

 

Chester, WV 26034

 

 

Attn:  Edson R. Arneault

 

 

Fax (304) 387-8304

 

 

 

With a copy to:

 

Ruben & Aronson, LLP

 

 

4800 Montgomery Lane

 

 

Suite 150

 

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Bethesda, MD  20814

 

 

Attn.: Robert L. Ruben, Esquire

 

 

Phone: (301) 951-9696

 

 

Fax:  (301) 951-9636

 

All Notices shall be effective for all purposes upon personal delivery thereof
or, if sent by facsimile transmission, shall be effective on the date of
transmission duly shown on the confirmation slip, or, if sent by mail or air
freight or courier service, shall be effective on the date of delivery duly
shown on the return receipt.  Any party may at any time change the addresses for
Notices to such party by providing a Notice in the manner set forth in this
Section 14.09.

 

14.10                   Time of Essence.   Time shall be of the essence of each
and every term and obligation of this Agreement.

 

14.11                     Estoppel Certificates. Each party shall, upon at least
ten (10) days written notice, execute and deliver to any other party, and to any
other Person having or about to have a bona fide interest in the Managed
Businesses as such other party may designate in writing, a statement certifying
that this Agreement is unmodified and in full force and effect, or if not,
stating the details of any modification and stating that as modified it is in
full force and effect, the date to which payments have been paid and whether or
not, to the knowledge of the certifying party, there is any existing default on
the part of any other party.

 

14.12                     Solicitation of Employees of the Managed Businesses. 
Neither Manager nor any of its Affiliates shall solicit the employment of any
employee of the Managed Businesses after the termination of this Agreement.

 

14.13                     Access to Operating Policies and Procedures.  Manager
agrees to provide Owner and its representative at all reasonable times
throughout the Term access to the operating policies and procedures of Manager
applicable to the Managed Businesses for examination by Owner and its
representatives; provided that all requests for such access shall be made to
Manager and such access shall be subject to such restrictions as are necessary
so as not to interfere with the normal operations of Manager.

 

[Remainder of the Page Blank]

 

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

 

 

OWNER:

 

 

 

SCIOTO DOWNS, INC.

 

 

 

 

 

 

 

 

/s/ Edward T. Ryan

 

By:

Edward T. Ryan

 

Its:

President

 

 

 

 

 

MANAGER:

 

 

 

 

 

MTR GAMING GROUP, INC.

 

 

 

 

 

 

 

 

/s/ Edson R. Arneault

 

By:

Edson R. Arneault

 

Its:

President

 

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SCHEDULE “A”

 

DEFINITIONS

 

“Accounting Period” means, as the context may require, a month, calendar
quarter, or calendar year (or portion thereof).

 

“Accounting Year” means, unless the context otherwise requires, a calendar year
ending December 31st (or portion thereof).

 

“Affiliate” means, with respect to any Person, any other Person controlling,
controlled by or under common control with such first Person.

 

“Applicable Law” means all laws, statutes, regulations, codes, by-laws,
ordinances, treaties, orders, judgments, decrees, directives, rules, guidelines,
orders, policies and other requirements of any Governmental Authority having
jurisdiction, whether or not having the force of law.

 

“Available Cash” means all amounts of money available to Manager following
satisfaction of amounts payable in accordance with the Operating Budget.

 

“Bank Accounts” has the meaning set out in Section 5.01.

 

“Budget” shall have the meaning set forth in Section 3.07

 

“Business day” means any day of the year on which banks are not required or
authorized to close in Columbus, Ohio.

 

“Control” means direct or indirect (i) ownership of a majority of voting shares
or other interests in a Person, or (ii) in the absence of such majority
ownership, the effective control over the decision-making process of a Person.

 

“EBITDA” shall mean with reference to any Person, for any Accounting Period
under review, the sum of (i) net income for that period determined in accordance
with GAAP, less (ii) any one-time non-cash gains reflected in such net income,
plus (iii) any losses on sales of assets and other extraordinary losses and
one-time non-cash charges, plus (iv) interest expense (expensed and capitalized)
for that period, plus (v) the aggregate amount of federal and state taxes on or
measured by income for that period (whether or not payable during that period),
plus (vi) depreciation, amortization and all other non-cash expenses for that
period, plus (vii) preopening expenses for that period, in each case determined
in accordance with GAAP and, in the case of items (iii), (iv), (v), (vi) and
(vii), only to the extent deducted in the determination of Net Income for that
period.

 

“EBITDA Fee” shall have the meaning set forth in Section 7.01.

 

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“Facility” has the meaning set forth in the Recitals.

 

“Food Service Business” shall have the meaning set forth in the Recitals.

 

“Gaming Business” shall have the meaning set forth in the Recitals.

 

“Generally Accepted Accounting Principles” or “GAAP” means generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other entity as may be in
general use by significant segments of the accounting profession, which are
applicable to the circumstances as of the date of determination.

 

“Governmental Authority” shall mean any governmental or quasi-governmental body
or agency having jurisdiction over the Facility, the Owner, or the Manager,
including, without limitation, the County of Franklin, the City of Columbus, the
Ohio Racing Commission, and the State of Ohio.

 

“Interest” means (i) in respect of Owner, the right, title and interest of Owner
in and to the Facility, and (ii) in respect of Manager, the right, title and
interest of Manager in and to the business of Manager of operating and managing
the Managed Businesses.

 

“Interest Rate” shall have the meaning set forth in Section 5.3.

 

“Managed Businesses” shall have the meaning set forth in the Recitals

 

“Manager Fees” shall collectively refer to the Gross Revenue Fee and EBITDA Fee.
For purposes of this Agreement it is acknowledged and understood by the parties
that revenue from the Racing and Simulcast Businesses shall be based upon
pari-mutuel “take out” or gross commissions and not “handle” net of any
pari-mutuel taxes and amounts payable to any Horseman’s Association(s).

 

“Manager’s Representatives” shall have the meaning set forth in Section 9.03.

 

“Notices” shall have the meaning set forth in Section 14.09.

 

“Operating Expenses” means all operating expenses determined in accordance with
Generally Accepted Accounting Principles, including (without limitation) (i)
real property Taxes, provided that any assessments or re-assessments are
directly allocable to the Managed Businesses and are amortized over the longest
amortization period permitted by Applicable Law, and personal property Taxes,
(ii) insurance premiums, (iii) employee remuneration, bonuses, profit sharing,
retirement and severance costs, health insurance, labor union dues and funding
and other similar benefits, (iv) the  Net Win Fee, (v) the cost of any audit,
(vi) maintenance and utilities.  Operating Expenses do not include (i) interest,
(ii) income or franchise Taxes, (iii) depreciation, (iv) amortization, (v) the
EBITDA Fee, and (vi) the salaries of senior executive supervisory

 

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personal who are employees of Manager, who are based outside of the Facility,
and who devote only a portion of their duties to the Managed Businesses.

 

“Operating Plan” shall have the meaning set forth in Section 3.06.

 

“Owner’s Representatives” shall have the meaning set forth in Section 9.03.

 

“Person” means any individual, partnership, corporation, Governmental Authority,
trust, trustee, unincorporated organization and the heirs, executors,
administrators or other legal representatives of any individual.

 

“Qualified Person” means a Person that, in respect of   the operation of a
harness horse racing track having the same or similar size, character and
reputation of the Facility, (i) has adequate financial capacity to perform the
obligations of Owner under this Agreement, (ii) is not of ill repute, and (iii)
is not a Person whose prior activities, criminal record, if any, reputation,
habits and   associations would cause a prudent business Person not to associate
with such Person in a commercial venture.

 

“Racing Business” shall have the meaning set forth in the Recitals.

 

“Simulcast Business” shall have the meaning set forth in the Recitals.

 

“Taxes” means all taxes imposed by any Governmental Authority, including
(without limitation) income, profits, real property, personal property, goods
and services, gross receipts or occupancy, sales, use, transfer, purchase,
franchise, stamp, ad valorem, value added, capital stock or surplus, occupation,
excise, payroll, unemployment, disability, employees’ income withholding, social
security or withholding taxes.

 

“U.S. Dollars” or “$” means the lawful currency of the United States.

 

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