Exhibit 10.1

 

AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER

 

Amendment No.2, dated as of May 5, 2003 (this “Amendment”) to the Agreement and
Plan of Merger entered into as of December 23, 2002, and as amended by that
certain Amendment No. 1 to Agreement and Plan of Merger dated as of February 24,
2003 [collectively, the “Agreement”] by and among MTR Gaming Group, Inc., a
Delaware corporation (“Parent”), Racing Acquisition, Inc., an Ohio corporation
and wholly owned subsidiary of Parent (“Merger Subsidiary”), and Scioto Downs,
Inc., an Ohio corporation (the “Company”). Parent, Merger Subsidiary and the
Company are referred to collectively herein as (the “Parties”).

 

RECITALS

 

WHEREAS, upon the expiration of the Due Diligence Period, the Parent elected,
subject to the terms and conditions of the Agreement, to proceed with the
contemplated acquisition of the Company.

 

WHEREAS, contemporaneously with the execution of the Agreement, the Parent
advanced to the Company the sum of One Million Dollars ($1,000,000.00) [the
“Improvement Amount”] which was intended to provide the Company with sufficient
funds for the payment of accrued indebtedness, general operating expenses, and
capital expenditures prior to the consummation of the acquisition by the Parent
of the Company pursuant to the terms and conditions of the Agreement (the
“Acquisition”).

 

WHEREAS, 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.

 

WHEREAS, Parent has agreed to extend additional amounts to the Company, in an
aggregate principal amount of up to One Million Dollars ($1,000,000.00) [the
“Loan”], pursuant to the terms and conditions set forth in a Loan Agreement,
Promissory Note and Mortgage of even date herewith.

 

WHEREAS, in consideration for the Loan, and on account of Parent’s extensive
experience in the racing, simulcasting, gaming and food service businesses, the
Company has entered into a Management Agreement, of even date herewith, pursuant
to which the Parent will manage the business operations of the Company, subject
to the approval of the Ohio Racing Commission, if required.

 

WHEREAS, as described herein, the Parties would like to make certain clarifying
and substantive amendments to the Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements as set forth herein, and other good and
valuable

 

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consideration, the receipt and sufficiency of which are acknowledged, the
parties, intending to be legally bound, hereby agree as follows:

 

1.                                       Incorporation.  The recitals set forth
above are incorporated herein as though more fully set forth.  And, unless
otherwise provided, all defined terms shall have the meaning ascribed in the
Agreement.

 

2.                                       Substitution of Section 1.08.  Section
1.08 of the Agreement is hereby replaced and superceded by the following:

 

“The closing of the transactions contemplated by this Agreement (“Closing”)
shall take place at such place as shall be agreed upon by the Parties commencing
at 9:00 a.m. local time within fifteen (15) days after the approval of the
Agreement and Plan of Merger and the merger by the shareholders of the Company
provided that all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby and the closing conditions set forth in Article
VI of this agreement (in each case other than conditions with respect to actions
the Parties will take at the closing) have been satisfied or waived and all
required approvals have been received (the “Closing Date”).”

 

3.                                       Assignability of Contingent
Consideration.  The right to receive Contingent Consideration may not be sold,
transferred, pledged or assigned other than by will or the laws of descent and
estate.  Section 2 of this Amendment is a clarification of the Agreement and not
a substantive change.

 

4.                                       Substitution of Section 5.12.  As a
clarification of the Agreement and not as a substantive change, Section 5.12 of
the Agreement is hereby replaced and superceded by the following:

 

“Section 5.12.  Track Business Contingent Earnout Payment.  Track Business
Contingent Earnout Payment shall mean, for each of ten (10) calendar years
beginning on January 1 of the year next following the year in which the
Triggering Event (as defined below) occurs (the “Contingent Payment Period”), an
amount equal to ten percent (10%) of the amount by which EBITDA (defined below)
for the Company for each calendar year of the Contingent Payment Period exceeds
the annual EBITDA average for the Company for the three (3) fiscal years ending
October 31, 2000, 2001 and 2002 (the “Track Base”), provided, however, that the
Track Business Contingent Earnout Payment shall not be less than $2,000,000
annually, and provided further that if less than all the shares of Exchange
Stock are delivered to the Disbursing Agent subject to the election to receive
the Contingent Consideration under Section 1.04(b) of this Agreement, then the
Track Business Contingent Earnout Payment and such $2,000,000 amount shall be
reduced by a pro rated amount, which amount shall equal (x) 100% less (y) the
percentage of the Exchange Shares designated in all Notices of Election to
receive the Contingent Consideration.  Not later than ten (10) business days
after EBITDA, and thus the amount of Track Business Contingent Earnout Payment
due for a particular calendar year, has been established, Parent will deposit
the Track Business Contingent Earnout Payment for that year with the Disbursing
Agent in cash or other immediately available funds in trust for the benefit of
the persons who held shares of Common Stock in the Company as of

 

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the Record Date and elected to receive the Adjusted Merger Consideration.  The
Disbursement Agent will disburse the Track Business Contingent Earnout Payment
to those persons who were record owners of the Company’s Common Stock as of the
Record Date (each a “Prior Holder”) and elected to receive the Contingent
Consideration as follows:  with respect to each Exchange Share for which the
Prior Holder elected the Contingent Consideration, the Prior Holder will receive
a fraction of the Track Business Contingent Earnout Payment in which the
numerator is 1 and  the denominator is the total number of Exchange Shares for
which all Prior Holders elected the Contingent Consideration.  Unless and until
there has been a Triggering Event, Parent shall have no obligations and no
person shall have any rights with respect to a Track Business Contingent Earnout
Payment.  For purposes of this Agreement, Triggering Event shall mean (i) state
or federal legislation shall have been enacted that permits the Company to
operate enhanced forms of gaming not permitted by law as of the Effective Date,
exclusive of parimutuel or internet wagering, at Scioto Downs; and (ii) the
Company shall have in fact commenced operating such enhanced forms of gaming at
Scioto Downs.  For purposes of the Track Business Contingent Payments described
above, the term “EBITDA” will mean, for any period, the Company’s earnings
before interest, taxes, depreciation and amortization as determined by Parent’s
independent auditors, whose determination shall be final, absent manifest
error.  For purposes of establishing the Track Base, EBITDA will mean, for any
period, the Company’s earnings before interest, taxes, depreciation and
amortization as determined by the Company’s independent auditors, whose
determination shall be final, absent manifest error.  Notwithstanding anything
in this Agreement to the contrary, no person shall have any right to any portion
of a Track Business Contingent Earnout Payment to the extent prohibited by
applicable law, including but not limited to the Racing Laws.  In the event a
governmental authority determines that receipt of a portion of a Track Business
Contingent Earnout Payment is prohibited, absent receipt of a license issued by
such governmental authority, then for a period of one (1) year from the date of
such determination (the “Licensing Period”), the Disbursement Agent will
continue to hold the Track Business Contingent Earnout Payment in trust.  During
the Licensing Period, any Prior Holder who obtains all necessary governmental
approvals to receive a portion of a Track Business Contingent Earnout Payment
(each an “Eligible Prior Holder”) shall receive such Eligible Prior Holder’s
allocable share of the Track Business Contingent Earnout Payment (calculated as
set forth above) promptly upon providing to the Disbursing Agent evidence of
such approvals in a form reasonably satisfactory to Parent.  Upon the expiration
of the Licensing Period, Parent shall be entitled to require the Disbursing
Agent to deliver to it any funds that had been made available to the Disbursing
Agent and not disbursed to Prior Holders (including, without limitation, all
interest and other income received by the Disbursing Agent in respect of all
such funds).  Upon expiration of the Licensing Period, Parent shall deposit with
the Disbursing Agent in trust for the benefit of any Prior Holder who, during
the Licensing Period shall not have become an Eligible Prior Holder (each an
“Ineligible Prior Holder”) in cash or other immediately available funds an
amount equal to $15.00 per share of the Company’s Common Stock owned by such
Ineligible Prior Holder as of the Effective Date (the “Alternative Payment”). 
Upon disbursement of the Alternative Payment by the Disbursing Agent, an
Ineligible Prior Holder shall have no further rights pursuant to Section 1.04(b)
of this Agreement.”

 

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5.                                       Break Up Fee.  The Company agrees to
pay Parent a fee equal to One Million Nine Hundred Thousand Dollars
($1,900,000.00) within two business days of the termination of this Agreement
if:

 

(a) the Parent terminates the Agreement pursuant to clause (v) of Section 7.01; 
or

 

(b) the Agreement is terminated for any reason at a time in which Parent was not
in material breach of its representations, warranties, covenants and agreements
contained in the Agreement and was entitled to terminate this Agreement pursuant
to clause (iv) or (vi) of Section 7.01; provided that, in the event of the
foregoing:  (A) prior to the time of the Special Meeting, a proposal by a third
party relating to an Acquisition Transaction had been publicly proposed or
publicly announced; and (B) on or prior to the 12th month anniversary of the
termination of this Agreement, the Company or any of its subsidiaries or
affiliates enters into an agreement or letter of intent (or resolves or
announces an intention to do so) with respect to an Acquisition Transaction
involving a person, entity or group if such person, entity or group (or any
member of such group, or any affiliate of any of the foregoing) made a proposal
with respect to an Acquisition Transaction on or after the date hereof and prior
to the Special Meeting and such Acquisition Transaction is consummated.

 

6.                                       Entire Agreement.  Except as expressly
amended or modified by the terms of this Amendment, the Agreement shall remain
unmodified and in full force and effect.

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment, or
have caused this Amendment to be duly executed with legal and binding effect by
their respective authorized officers, in their individual capacity, as of the
date first written above.

 

 

 

SCIOTO DOWNS, INC.

 

 

 

 

     By:

/s/ Edward T. Ryan

 

 

Name:

Edward T. Ryan

 

Title:

President

 

 

 

 

 

 

 

 

MTR GAMING GROUP, INC.

 

 

 

 

     By:

/s/ Edson R. Arneault

 

 

Name:

Edson R. Arneault

 

Title:

President and Chief Executive Officer

 

 

 

 

 

 

 

 

RACING ACQUISITION, INC.

 

 

 

 

     By:

/s/ Edson R. Arneault

 

 

Name:

Edson R. Arneault

 

Title:

President

 

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