Exhibit 10.25

 

FIRST AMENDMENT TO NOTE AGREEMENT

 

This FIRST AMENDMENT TO POST-CLOSING AND NOTE ISSUANCE AGREEMENT (this “First
Amendment”) is dated as of November 14, 2006 and entered into by and between
MAGNA ENTERTAINMENT CORP., a Delaware corporation (“Agent”), and PA MEADOWS,
LLC, a Delaware limited liability company (“Borrower”), and is made with
reference to that certain Post-Closing and Note Issuance Agreement, dated as of
July 26, 2006 (the “Note Agreement”), by and among Agent, Borrower, the Holders
from time to time party thereto and, solely for purposes of Section 10.15
thereof, the Parent Entities. Capitalized terms used herein without definition
shall have the same meanings herein as set forth in the Amended Note Agreement
(as defined below).

 

RECITALS

 

WHEREAS, as a result of further negotiations between Agent and Borrower since
the signing of the Note Agreement, Agent and Borrower have decided to amend the
terms of the Note Agreement by entering into this First Amendment in order to
(i) change the Holdback Agreement to be delivered upon the Tranche B Junior
Notes maturing to defer payment until the opening of a permanent casino and
eliminate the equity guarantee and security and (ii) amend other provisions of
the Note Agreement as set forth in the Amended Note Agreement.

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, the parties hereto agree as follows:

 

SECTION 1

 

AMENDMENT OF NOTE AGREEMENT

 

As of the date hereof, (i) the Note Agreement shall be and is hereby amended and
modified to read in its entirety as set forth in Annex A hereto and (ii) Exhibit
H to the Note Agreement shall be and is hereby amended and modified to read in
its entirety as set forth in Annex B hereto (as set forth in such Annexes A and
B, the “Amended Note Agreement”) and as so amended are hereby ratified, approved
and confirmed in each and every respect. The parties hereto agree and
acknowledge that the schedules and other exhibits to the Note Agreement
delivered on July 26, 2006 shall be the schedules and such other exhibits to the
Amended Note Agreement.

 

SECTION 2

 

MISCELLANEOUS

 

2.1          Fees and Expenses. Except as otherwise expressly provided in the
Amended Note Agreement, all costs and expenses, including, without limitation,
fees and

 

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disbursements of counsel, financial advisors and accountants, incurred in
connection with this First Amendment and the transactions contemplated hereby
shall be paid by the party incurring such costs and expenses.

 

2.2          Notices. All notices, requests, claims, demands and other
communications hereunder shall be made as set forth in Section 10.6 of the
Amended Note Agreement.

 

2.3          Headings. The headings contained in this First Amendment are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this First Amendment.

 

2.4          Severability. If any term or other provision of this First
Amendment is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this First Amendment
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. 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 First Amendment 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 hereby be consummated as
originally contemplated to the greatest extent possible.

 

2.5          Amendment. This First Amendment may not be amended or modified
except by an instrument in writing signed by Agent and Borrower.

 

2.6          Governing Law; Jurisdiction; Service of Process. This First
Amendment shall be governed by, and construed in accordance with, the laws of
the State of New York. Agent and Borrower hereby agree and consent to the
exclusive jurisdiction of, and service of process and venue in, the United
States District Court for the Southern District of New York and the courts of
the State of New York located in the County of New York, State of New York and
waives any objection with respect thereto, for the purpose of any action, suit
or proceeding arising out of or relating to this First Amendment.

 

2.7          WAIVER OF JURY TRIAL. EACH OF BORROWER AND AGENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS FIRST AMENDMENT OR THE ACTIONS OF BORROWER OR AGENT IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.

 

2.8          Counterparts. This First Amendment may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

 

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[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

 

 

 

PA MEADOWS, LLC

 

 

 

 

 

By:

 /s/ William J. Paulos

 

 

 

Name:

William J. Paulos

 

 

Title:

Authorized Signatory

 

 

 

 

 

MAGNA ENTERTAINMENT CORP.

 

 

 

 

 

By:

 /s/ Blake Tohana

 

 

 

Name:

Blake Tohana

 

 

Title:

EVP & CFO

 

 

 

 

 

 

 

By:

 /s/ William Ford

 

 

 

Name:

William Ford

 

 

Title:

Secretary

 

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POST-CLOSING AND NOTE ISSUANCE AGREEMENT

 

 

by and among

 

PA MEADOWS, LLC,

AS PURCHASER AND BORROWER,

and

 

MAGNA ENTERTAINMENT CORP.,

AS SELLER AND AGENT,

 

and

 

THE HOLDERS FROM TIME TO TIME PARTY HERETO

and

 

SOLELY WITH RESPECT TO SECTION 10.15 HEREOF, THE PARENT ENTITIES PARTY HERETO

 

July 26, 2006

 

 

 

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TABLE OF CONTENTS

 

ARTICLE 1

DEFINITIONS

2

1.1

Certain Definitions

2

1.2

Accounting Principles

16

1.3

Other Definitional Provisions; Construction

16

 

 

 

ARTICLE 2

ISSUE AND SALE OF NOTES

16

2.1

Authorization and Issuance of the Notes

16

2.2

Sale and Purchase

16

2.3

The Closing

17

 

 

 

ARTICLE 3

REPAYMENT OF THE NOTES

17

3.1

Interest

17

3.2

Repayment of the Notes; Exchange of Tranche B Junior Notes

17

3.3

Optional Prepayment of Notes

18

3.4

Notice of Optional Prepayment

18

3.5

Intentionally Left Blank

18

3.6

Payment

18

3.7

Risk of Loss

18

3.8

Maximum Lawful Rate

19

3.9

Certain Waivers

19

3.10

Stock Transfer

20

3.11

Termination of Note

21

 

 

 

ARTICLE 4

CONDITIONS

21

4.1

Conditions to Obligations of Purchaser and Seller

21

4.2

Conditions to Acceptance of Notes by Seller

23

4.3

Conditions to Issuance of Notes by Borrower

24

4.4

Conditions to the Second Closing

25

 

 

 

ARTICLE 5

REPRESENTATIONS AND WARRANTIES

27

5.1

Representations and Warranties of Borrower

27

5.2

Representations and Warranties of Magna

29

5.3

Effect of Representations and Warranties

31

 

 

 

ARTICLE 6

TRANSFER OF NOTES

31

 

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6.1

Restricted Notes

31

6.2

Legends; Holder’s Representations

31

6.3

Transfer of Notes

31

6.4

Registration of Notes

32

6.5

Replacement of Lost Notes

33

 

 

 

ARTICLE 7

COVENANTS

33

7.1

Affirmative Covenants

33

7.2

Negative Covenants

36

7.3

Covenant Performance

43

7.4

Magna Covenants

43

7.5

Covenant Performance

44

 

 

 

ARTICLE 8

EVENTS OF DEFAULT

44

8.1

Specified Events of Default by Borrower

44

8.2

Consequences of Specified Event of Default

46

8.3

Security

47

8.4

Application of Proceeds of Collateral and Payments after Specified Event of
Default

47

8.5

Event of Default by Seller

47

 

 

 

ARTICLE 9

AGENT

48

9.1

Authorization and Action

48

9.2

Delegation of Duties

49

9.3

Exculpatory Provisions

49

9.4

Reliance

49

9.5

Non-Reliance on Agent and Other Holders

50

9.6

Agent in its Individual Capacity

50

9.7

Successor Agent

50

9.8

Collections and Disbursements

50

9.9

Reporting

51

9.10

Consent of Holders

51

9.11

This Article Not Applicable to Loan Parties

52

 

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ARTICLE 10

MISCELLANEOUS

52

10.1

Successors and Assigns

52

10.2

Modifications and Amendments

53

10.3

No Implied Waivers; Cumulative Remedies; Writing Required

53

10.4

Reimbursement of Expenses

53

10.5

Holidays

53

10.6

Notices

53

10.7

Survival

54

10.8

Governing Law; Jurisdiction; Service of Process

54

10.9

WAIVER OF JURY TRIAL

55

10.10

Severability

55

10.11

Headings

55

10.12

Indemnity

55

10.13

Counterparts

60

10.14

Confidentiality

60

10.15

Provisions Applicable to Parent Entities

61

10.16

Pennsylvania Accounts

63

 

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ANNEX

 

 

 

Annex A

Holder and Payment Information

 

 

 

 

SCHEDULES

 

 

 

Schedule 4.1(a)

Jurisdictions

 

Schedule 5.1(d)

Borrower Ownership Chart

 

Schedule 5.1(f)

Borrower Activities

 

Schedule 5.2(d)

Deposit Accounts Schedule

 

Schedule 7.2(g)

Affiliate Transactions

 

 

 

 

EXHIBITS

 

 

 

EXHIBIT A-1

Form of Tranche A Junior Notes

 

EXHIBIT A-2

Form of Tranche B Junior Notes

 

EXHIBIT B

Form of Subsidiary Guaranty

 

EXHIBIT C

Form of Security Agreement

 

EXHIBIT D

Form of Mortgage

 

EXHIBIT E

Form of MID Forbearance and Release Agreement

 

EXHIBIT F

Intentionally Left Blank

 

EXHIBIT G

Form of Equity Commitment Agreement

 

EXHIBIT H

Form of Holdback Agreement

 

EXHIBIT I-1

Form of Closing Date Legal Opinion of MT&O

 

EXHIBIT I-2

Form of Closing Date Opinion of Pennsylvania Counsel

 

EXHIBIT J

Form of Legal Opinion re Holdback Agreement

 

EXHIBIT K

Intentionally Left Blank

 

EXHIBIT L

Form of Closing Date Legal Opinion of Magna In-house Counsel

 

EXHIBIT M

Form of MID Pledge Agreement

 

 

iv

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POST-CLOSING AND NOTE ISSUANCE AGREEMENT

 

THIS POST-CLOSING AND NOTE ISSUANCE AGREEMENT (this “Agreement”), dated as of
July 26, 2006, is by and among PA MEADOWS, LLC, a Delaware limited liability
company (“Borrower” or “Purchaser”), MAGNA ENTERTAINMENT CORP., a Delaware
corporation (“Magna”), in its capacity as Seller under the Acquisition Agreement
(Magna, in such capacity, is sometimes referred to herein as “Seller”) and in
its capacity as administrative and collateral agent for Holders (in such
capacity “Agent”), the Holders from time to time party hereto, and, solely for
purposes of Section 10.15 of this Agreement, PA MezzCo, LLC, a Delaware limited
liability company (“MezzCo”), and Cannery Casino Resorts, LLC, a Nevada limited
liability company (“CCR” and, together with MezzCo, the “Parent Entities”).
Capitalized terms used and not defined elsewhere in this Agreement are defined
in Article 1 hereof.

 

RECITALS

 

Purchaser and Seller are parties to the Acquisition Agreement which provides
for, among other things, the purchase by Purchaser and the sale by Seller of all
of the outstanding shares of Capital Stock of the Acquired Companies (the
“Acquired Shares”), and the payment of the purchase price therefor, each in
accordance with the terms of the Acquisition Agreement. In connection with the
entry by Purchaser and Seller into a First Amendment to Stock Purchase
Agreement, Purchaser and Seller have agreed that (A) Purchaser will issue and
Seller will accept, for the purpose of paying the consideration for the
acquisition of all of the Acquired Shares by Purchaser in accordance with the
terms and upon satisfaction of the conditions of the Acquisition Agreement
(i) Tranche A Junior Notes in the aggregate principal amount of $175,000,000
representing the part of such consideration required to be paid in cash
thereunder and (ii) Tranche B Junior Notes in the aggregate principal amount of
$25,000,000 representing the Holdback Amount (as defined in the Holdback
Agreement); (B) if the Notes are not satisfied at a Second Closing as set forth
herein, the Acquired Shares will be transferred back to Seller (subject to the
Prior Liens) in full satisfaction of the Notes and the acquisition of the
Acquired Shares by Purchaser shall be rescinded, including for all tax purposes;
and (C) this Agreement shall define certain of the rights and obligations of
Purchaser and Seller as they relate to the Notes and the Acquired Companies and
the other matters set forth herein.

 

NOW, THEREFORE, the parties hereto, in consideration of the premises and their
mutual covenants and agreements herein set forth and intending to be legally
bound hereby, covenant and agree as follows:

 

1

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ARTICLE 1

 

DEFINITIONS

 

1.1                                 Certain Definitions. In addition to other
words and terms defined elsewhere in this Agreement, the following words and
terms shall have the meanings set forth below:

 

“Acquired Companies” shall mean MECPenn, MLR and WTA.

 

“Acquired Shares” shall have the meaning assigned to such term in the recitals

 

“Acquisition Agreement” shall mean the Stock Purchase Agreement dated as of
November 8, 2005 between Seller and Purchaser, as amended by the First Amendment
to Stock Purchase Agreement dated as of July 26, 2006 between Seller and
Purchaser.

 

“Affiliate” shall mean with respect to any Person, a Person that, directly or
indirectly, through one or more intermediaries, Controls, is Controlled By or is
Under Common Control With, such specified Person, including such specified
Person’s Subsidiaries. Without limiting the foregoing, the direct or indirect
ownership of ten percent (10%) or more of the equity securities of a Person
shall be deemed to constitute control, except for purposes of Section  10.14.
Notwithstanding anything to the contrary herein, neither Agent, Holders nor any
of their respective Affiliates shall be deemed to be Affiliates of any Loan
Party by virtue of the transactions contemplated in this Agreement, the Racing
Services Agreement or the Acquisition Agreement and OCM HoldCo, Millennium
Gaming and their respective Affiliates shall be deemed to be Affiliates of the
Loan Parties.

 

“Agent” shall have the meaning assigned to such term in the preamble hereto and
any successor agent provided for hereunder.

 

“Agreement” shall have the meaning assigned to such term in the preamble hereto.

 

“Borrower” shall have the meaning assigned to such term in the preamble hereto.

 

“Borrower LLC Agreement” shall mean the Limited Liability Company Agreement of
Borrower dated as of November 8, 2005.

 

“Borrower Ownership Chart” shall have the meaning assigned to such term in
Section 5.1(d).

 

“Business” shall mean the business of the Meadows Companies as of the date
hereof, including all Racing Operations (as defined in the Racing Services
Agreement) and the gaming business contemplated by the Transaction Documents,
including the development thereof and the obtaining of all required or useful
licenses, permits or approvals of any Governmental Authority.

 

“Business Day” shall mean any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in the City of New
York.

 

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“By-laws” shall mean the by-laws, partnership agreement, operating agreement or
analogous instrument of any Person, as applicable.

 

“Capital Stock” means the capital stock of or membership or other equity
interests in a Person.

 

“Capitalized Leases” shall mean, with respect to any Person, leases of (or other
agreements conveying the right to use) any property (whether real, personal or
mixed) by such Person as lessee that, in accordance with GAAP, either would be
required to be classified and accounted for as capital leases on a balance sheet
of such Person or otherwise be disclosed as such in a note to such balance
sheet.

 

“Cash Equivalents” means, as at any date of determination, Investments meeting
the requirements of any of Section 7.2(i)(i) through (v) with a maturity of not
more than six months from the date of acquisition.

 

“CCR” shall have the meaning assigned to such term in the preamble hereto.

 

“CCR Transaction” means the exchange by OCM AcquisitionCo of exchangeable notes
for not less than thirty-three and one-third percent (331/3%) and no more than
fifty percent (50%) of the issued and outstanding shares of CCR.

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. § 9604, et seq.).

 

“Change of Control” shall mean the occurrence of any of the following:

 

(a)                                  the failure at any time of Bill Paulos and
Bill Wortman (or their heirs) to legally and beneficially own and control 100%
of the issued and outstanding Capital Stock of Millennium Gaming or to have the
ability to elect all of the Governing Body of Millennium Gaming; or the failure
at any time of Millennium Gaming to legally and beneficially control at least
fifty percent (50%) of the issued and outstanding shares of CCR or, together
with the Persons described in clause (b) or (c) of this definition, to have the
ability to elect all of the Governing Body of each Parent Entity;

 

(b)                                 prior to the occurrence of the CCR
Transaction, the failure at any time of OCM HoldCo to legally and beneficially
own and control exchangeable notes convertible into at least thirty-three and
one-third percent (33-1/3%) and no more than fifty percent (50%) of the issued
and outstanding shares of CCR;

 

(c)                                  following the occurrence of the CCR
Transaction, the failure at any time of OCM HoldCo to legally and beneficially
own and control at least thirty-three and one-third percent (33-1/3%) and no
more than fifty percent (50%) of the issued and outstanding shares of CCR;

 

(d)                                 the failure at any time of PA MezzCo to
legally and beneficially own and control 100% of the issued and outstanding
shares of Capital Stock of Borrower or the

 

3

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failure at any time of PA MezzCo to have the ability to elect all of the
Governing Body of Borrower;

 

(e)                                  the failure at any time of CCR to legally
and beneficially own and control 100% of the issued and outstanding voting
shares of Capital Stock of PA MezzCo or the failure at any time of CCR to have
the ability to elect all of the Governing Body of PA MezzCo;

 

(f)                                    the failure at any time of the persons
listed on the Borrower Ownership Chart as direct or indirect owners of OCM
HoldCo or such other persons designated by Oaktree Capital Management to legally
and beneficially own and control 100% of the issued and outstanding Capital
Stock of OCM HoldCo or have the ability to elect all the Governing Body of OCM
HoldCo; or

 

(g)                                 the failure at any time of Borrower to
legally and beneficially own and control 100% of the issued and outstanding
shares of Capital Stock of each of the Meadows Companies or the failure at any
time of Borrower to have the ability to elect all of the Governing Body of each
of the Meadows Companies;

 

provided, however, notwithstanding the foregoing, a Change of Control hereunder
shall not be deemed to occur, to the extent that changes are made in the
ownership of Borrower as reflected on the Borrower Ownership Chart in order
(i) to facilitate the approval of the issuance of the Gaming License, (ii) in
response to a request from the PGCB or other Governmental Authority, or (iii) to
structure the ownership of Borrower in a manner that would not result in the
payment of any additional fee upon the closing of the CCR Transaction under the
PA Gaming Act or the PA Gaming Regulations, including without limitation,
pursuant to Section 1209 of the PA Gaming Act, and so long as the Agent does not
reasonably determine that such change would preclude the Consummation Date
occurring by the Deadline Date or change or adversely affect Borrower’s ability
to satisfy its obligations as contemplated hereby or the economics of the
transactions contemplated hereby. Borrower shall provide notice to Agent prior
to making any change in the structure reflected in the Borrower Ownership Chart.

 

As used herein, the term “beneficially own” or “beneficial ownership” shall be
determined in accordance with Rule 13d-3 promulgated under the Exchange Act.

 

“Charter Documents” shall mean the articles of incorporation, certificate of
incorporation, certificate of limited partnership, certificate of limited
liability company, charter or analogous organizational instrument of any Person
filed with the appropriate Governmental Authorities, as applicable.

 

“Citibank Base Rate” shall mean the rate of interest publicly announced by
Citibank, N.A., New York, New York, from time to time as its base rate.

 

“Claim Notice” has the meaning assigned to such term in Section 10.12(g) hereof.

 

“Closing” shall have the meaning assigned to such term in Section 2.3.

 

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“Closing Date” shall mean the date and time for delivery of the Notes as finally
determined pursuant to Section 2.3 hereof.

 

“Code” shall mean the Internal Revenue Code of 1986.

 

“Conditional/Category 1 Gaming License” shall mean a Conditional Category 1
License or a Category 1 License, in each case under the PA Gaming Act.

 

“Consummation Date” shall mean the day identified in a written notice from
Borrower to Agent that is a date on or prior to the date that is thirty-five
(35) days (or if Borrower does not deliver any such written notice, such
thirty-fifth day) following the earlier to occur of (a) the PGCB Approval Date,
and (b) the PGCB Issuance Date; provided, however, that at the election of
Borrower, it may provide written notice to the Agent on or prior to thirty five
days after the PGCB Approval Date that the Consummation Date shall not occur if
(1) the lenders specified in the Financing Commitment Letter are not reasonably
satisfied with the conditions contained in the approval for issuance of the
Conditional/Category 1 Gaming License to WTA, or (2) the lenders specified in
the Financing Commitment Letter reasonably object to the existence of any
pending legal challenge to the approval by the PGCB.

 

“Contingent Obligation” as applied to any Person, shall mean any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof,
(ii) with respect to any letter of credit issued for the account of that Person
or as to which that Person is otherwise liable for reimbursement of drawings, or
(iii) under Interest Rate Protection Agreements. Contingent Obligations shall
include (a) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (1) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (2) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclauses
(1) or (2) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.

 

“Control” (including the terms “Controlled By” and “Under Common Control With”)
means the possession, directly or indirectly or as a trustee or executor (in
each case, acting in a fiduciary capacity), of the power to direct or cause the
direction of the management or policies of

 

5

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a Person, whether through the ownership of equity securities, as trustee or
executor (in each case, acting in a fiduciary capacity), by contract or credit
arrangement or otherwise.

 

“Deadline Date” shall mean October 31, 2006; provided, however, that in the
event the PGCB Issuance Date or PGCB Approval Date occurs prior to October 31,
2006, the Deadline Date shall be thirty-six (36) days following the PGCB
Issuance Date or PGCB Approval Date, as applicable.

 

“Default” shall mean any event or condition that, but for the giving of notice
or the lapse of time, or both, would constitute a Specified Event of Default.

 

“Environmental Laws” means any civil and criminal Laws, rules, permits or orders
of Governmental Authorities relating to or addressing pollution or protection of
the environment, public health or safety, including, without limitation, those
relating to the presence, use, production, processing, generation, handling,
labeling transportation, treatment, storage, disposal, distribution, testing,
processing, Release, threatened Release or discharge, investigation, control,
exposure or cleanup of Hazardous Materials, wastes, substances, storm water or
waste water.

 

“Equity Commitment Agreement” means the agreement between OCM AcquisitionCo and
Agent dated as of the date hereof and in the form of Exhibit G annexed hereto.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974 and the
rules and regulations of any governmental agency or authority, as from time to
time in effect, promulgated thereunder.

 

“ERISA Affiliate” as applied to any Person, means (i) any corporation which is a
member of a controlled group of corporations within the meaning of
Section 414(b) of the Code of which that Person is a member; (ii) any trade or
business (whether or not incorporated) which is a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the Code
of which that Person is a member; and (iii) any member of an affiliated service
group within the meaning of Section 414(m) or (o) of the Code of which that
Person, any corporation described in clause (i) above or any trade or business
described in clause (ii) above is a member, provided, however, that none of the
Meadows Companies shall be considered an ERISA Affiliate of Borrower. Any former
ERISA Affiliate of Borrower or its Subsidiaries shall continue to be considered
an ERISA Affiliate within the meaning of this definition with respect to the
period such entity was an ERISA Affiliate of Borrower or its Subsidiaries and
with respect to liabilities arising after such period for which Borrower or its
Subsidiaries could be liable under the Code or ERISA.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934 and any successor
statute.

 

“Excluded Items” shall mean all of Borrower’s right, title and interest in and
to, and any and all claims or rights of Borrower arising from, and all damages,
recovery, indemnity or other remedies of Borrower arising from or out of:
(i) the Acquisition Agreement, (ii) the other Transaction Documents entered into
in connection with the Acquisition Agreement, (iii) the MID Forbearance
Agreement, (iv) the Borrower LLC Agreement, (v) Borrower’s officers, directors

 

6

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and employees (including for service as an officer, director or employee of any
of the Meadows Companies), provided that the applicable officer, director or
employee waives and releases all claims against the Meadows Companies, Magna and
its Affiliates for claims related to service as an officer, director and
employee of the Meadows Companies, (vi) Borrower’s attorney-client relationship
and privilege, and any and all records, communications, files, documents and
instruments protected by the attorney-client privilege or work product doctrine
of Borrower, (vii) any agreement by and between Borrower and any Affiliate or
Parent Entity (other than the Meadows Companies and their Subsidiaries) except
to the extent required to be transferred to the Meadows Companies as
contemplated by Section 3.10 hereof in connection with a Stock Transfer,
(viii) all Purchaser Application Materials (as defined in Section 5.04(e) of the
Acquisition Agreement) except to the extent permitted to be used by Borrower or
a Meadows Company in accordance with Section 5.04(e) of the Acquisition
Agreement, (ix) any commitment letter, agreement and other supporting
documentation with a lender or other financing source for financing in
contemplation of the Second Closing or thereafter, including the Financing
Commitment Letter, (x) the letter of credit posted with the PGCB related to the
WTA Application and all supporting documentation, (xi) the Permitted Payments
and any agreements evidencing any Permitted Payments, and (xii) proceeds of any
of the foregoing.

 

“Financing Commitment Letter” shall have the meaning assigned to such term in
Section 4.2(c) hereof.

 

“Financing Statements” shall have the meaning assigned to such term in
Section 4.1 hereof.

 

“Fiscal Year” or “fiscal year” shall mean each twelve month period ending on
December 31 of each year.

 

“GAAP” shall have the meaning assigned to such term in Section 1.2 hereof.

 

“Gaming License Application Event” shall mean the occurrence of any of the
following:

 

(a)                                  any conviction in any jurisdiction of any
directors, owners or key employee qualifiers of Borrower or of any of its direct
or indirect Affiliates or owners, of a felony or gambling related offense,
including without limitation, which offense would cause Borrower or any of its
Affiliates or any such directors, owners or key employee qualifiers to be denied
or disqualified from obtaining a Conditional/Category 1 Gaming License, as
provided in Section 1213 of the Pennsylvania Race Horse Development and Gaming
Act (Act 71) codified at Title 4 of the Pennsylvania Consolidated Statutes,
Sections 1101-1904 (the “PA Gaming Act”) and Section 435.1(n)(i) and (ii) of the
regulations promulgated by the PGCB thereunder (the “PA Gaming Regulations”);

 

(b)                                 any failure of Borrower or any of its direct
or indirect Affiliates, or any of their respective directors, owners or key
employee qualifiers (as defined in the PA Gaming Act), to provide any
supplementary information that the PGCB, its designees, bureaus, agents or
employees, or the Pennsylvania State Police, including, but not limited to, any
requests described in Sections 1207(11) and 1313(b) of the Act or

 

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Sections 421.4(b), 423.1(d), 423.4(c), 435.1(b), (c) and (d), or 441.3(b) of the
PA Gaming Regulations; and

 

(c)                                  any failure to maintain the bond or letter
of credit during the period that WTA has an application for a
Conditional/Category 1 Gaming License on file with the PGCB, as required by
Section 1313(c) of the PA Gaming Act and Section 441(10)(a) of the PA Gaming
Regulations;

 

(d)                                 any failure of Borrower, any of its direct
or indirect Affiliates or owners, any of their respective key employee
qualifiers, or any other person or entity that holds a direct or indirect
interest in the Borrower or any of its direct or indirect Affiliates, to comply
with a notice from the PGCB to divest the interest in the Borrower or any of its
direct or indirect Affiliates, or owners, as set forth in Section 1312 of the PA
Gaming Act and Section 441.8 of the PA Gaming Regulations;

 

(e)                                  any transfer of the equity interests of any
Person that owns directly or indirectly any of the equity interests of Borrower
to the extent that such transfer could reasonably be expected to delay in any
material respect the approval by the PGCB of the Conditional/Category 1 Gaming
License to WTA, it being understood that the consummation of the CCR Transaction
and any other ownership change contemplated by the Borrower Ownership Chart or
in response to any inquiry or request by the PGCB shall not be deemed to
constitute an event under this clause (e); or

 

(f)                                    the commencement by Borrower or any
person or entity directly or indirectly Affiliated with or related to Borrower,
or the participation as a party by Borrower or any such person or entity, in any
ongoing civil proceeding in which Borrower or any person affiliated with or
related to Borrower is seeking to overturn or otherwise challenge a decision or
order of the PGCB or the Pennsylvania Harness Racing Commission pertaining to
the approval, denial or conditioning of a license to conduct harness horse race
meetings with pari-mutuel wagering or to operate slot machines, as set forth in
Section 1308(c) of the PA Gaming Act;

 

and in each event as set forth in subsections (a) through (e) of this
definition, the event or failure would reasonably be expected to result in the
disapproval of the application of WTA for a Conditional/Category 1 Gaming
License or a material delay in the issuance of such license prior to the
Deadline Date, and, if such event is subject to cure (e.g. providing
information, eliminating a Person from an application, etc.), such event shall
not have been cured on or prior to the earlier of (i) the date required by the
PGCB or (ii) thirty days after such event or failure (unless Borrower is making
commercially reasonable efforts to diligently pursue a cure in which case it
shall be sixty days).

 

“Governing Body” means the board of directors or other body having the power to
direct or cause the direction of the management and policies of a Person that is
a corporation, partnership, trust or limited liability company.

 

“Governmental Authority” means any government, any governmental or
government-appointed entity, department, commission, board, agency, regulatory
authority or

 

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instrumentality, and any court, tribunal, or judicial body, whether federal,
state, local or foreign, or any arbitral body, including, without limitation,
the Pennsylvania Harness Racing Commission and the PGCB.

 

“Hazardous Materials” means (a) any petroleum, petroleum products, by-products
or breakdown products, radioactive materials, asbestos-containing materials,
urea formaldehyde foam, heavy metals or polychlorinated biphenyls, (b) any
waste, chemical, material or substance defined or regulated as toxic or
hazardous under any applicable Environmental Law or (c) anything that is a
“hazardous substance” pursuant to CERCLA or any similar applicable state law,
anything that is a “solid waste” or “hazardous waste” pursuant to RCRA or any
similar applicable state law or any “pesticide,” “pollutant,” “contaminant,”
“toxic chemical” or “noise.”

 

“Holdback Agreement” shall mean the holdback agreement to be entered into
between Borrower and Agent pursuant to Section 3.2 hereto, in the form of
Exhibit H hereto.

 

“Holdback Documents” shall mean the Holdback Agreement.

 

“Holder” shall mean (i) Seller, as the initial holder of the Notes, and
(ii) permitted transferees of Notes pursuant to Sections 6.2 and 6.3 hereof.

 

“Indebtedness” shall mean, for any Person at the time of any determination,
without duplication, all obligations, contingent or otherwise, of such Person
that, in accordance with GAAP, should be classified upon the balance sheet of
such Person as indebtedness, but in any event including:  (i) all obligations
for borrowed money, (ii) all obligations arising from installment purchases of
property or representing the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business on terms customary in the trade), (iii) all
obligations evidenced by notes, bonds, debentures, acceptances or instruments,
or arising out of letters of credit or bankers’ acceptances issued for such
Person’s account, (iv) all obligations, whether or not assumed, secured by any
Lien or payable out of the proceeds or production from any property or assets
now or hereafter owned or acquired by such Person, (v) all Contingent
Obligations for which such Person is obligated, (vi) the capitalized portion of
lease obligations under Capitalized Leases, (vii) all obligations for which such
Person is obligated pursuant to any Interest Rate Protection Agreements or
derivative agreements or arrangements, and (viii) all obligations of such Person
upon which interest charges are customarily paid or accrued.

 

“Indemnified Party” has the meaning assigned to such term in
Section 10.12(g) hereof.

 

“Indemnifying Party” has the meaning assigned to such term in
Section 10.12(g) hereof.

 

“Interest Rate Protection Agreement” shall mean any interest rate swap, interest
rate cap, interest rate collar or other interest rate hedging agreement or
arrangement.

 

“Investment” as applied to any Person shall mean the amount paid or agreed to be
paid or loaned, advanced or contributed to other Persons, and in any event shall
include (i) any direct or indirect purchase or other acquisition of any notes,
obligations, instruments, stock, securities or

 

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ownership interest (including partnership interests and joint venture interests)
and (ii) any capital contribution to any other Person.

 

“Laws” shall mean any statute, law, ordinance, regulation, rule, code, order,
other requirement or rule of law of any country or any state, province,
locality, region or area therein, or any other jurisdiction.

 

“Lien” shall mean any security interest, pledge, bailment, mortgage,
hypothecation, deed of trust, conditional sales and title retention agreement
(including any lease in the nature thereof), charge, encumbrance or other
similar arrangement or interest in real or personal property, now owned or
hereafter acquired, whether such interest is based on common law, statute or
contract.

 

“Loan Parties” shall mean each of Borrower and its Subsidiaries, including the
Meadows Companies.

 

“Losses” shall have the meaning assigned to such term in
Section 10.12(h) hereof.

 

“Magna” shall have the meaning assigned to such term in the preamble hereto.

 

“Magna Bridge Loan Agreement” shall mean the Bridge Loan Agreement dated as of
July 22, 2005 by and among Magna, the guarantors party thereto and MID, acting
through its Zug branch, as amended, restated or modified from time to time.

 

“Magna Development Loan Agreement” shall mean the Amended and Restated Loan
Agreement (Reconstruction of Gulfstream Park, Florida) dated as of July 22, 2005
by and among Gulfstream Park Racing Association, Inc., MID, acting through its
Zug branch, MEC, WTR, MLR, Remington Park, Inc. and GPRA Thoroughbred Training
Center, Inc., as amended, restated or modified from time to time.

 

“Magna Event of Default” shall have the meaning assigned to such term in
Section 8.5 hereof.

 

“Magna Event of Default Notice” shall have the meaning assigned to such term in
Section 8.5 hereof.

 

“Magna Loan Documents” shall mean the Magna Development Loan Agreement, the
Magna Bridge Loan Agreement, and all other agreements, instruments and documents
delivered in connection therewith.

 

“Material Adverse Effect” shall mean (a) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of the Meadows Companies taken as a whole or (b) the material impairment of the
ability of any Loan Party, Parent Entity or OCM AcquisitionCo to perform, or of
Agent or Holders to enforce, the obligations of the Loan Parties, Parent
Entities or OCM AcquisitionCo under the Note Documents, subject to the Prior
Liens.

 

“Maturity Date” shall mean the earliest of

 

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(a)                                  the Consummation Date;

 

(b)                                 five (5) Business Days after the occurrence
of any of the events set forth in clauses (i)-(vi) of Section 3.10(a) hereof;
and

 

(c)                                  the occurrence of a Specified Event of
Default under Section 8.1(g) or Section 8.1(h) hereof.

 

“Meadows Companies” shall mean the Acquired Companies and their Subsidiaries
existing immediately prior to the Closing Date.

 

“Meadows Facility” shall have the meaning assigned to that term in the
Acquisition Agreement.

 

“MECPenn” shall mean MEC Pennsylvania Racing, Inc., a Pennsylvania corporation.

 

“MezzCo” shall have the meaning assigned to such term in the preamble.

 

“MID” shall mean MID Islandi, SF., a partnership formed under the laws of
Iceland.

 

“MID Forbearance Agreement” means the Forbearance and Release Agreement by and
among MID, MECPenn, WTA, MLR, MEC and Borrower in the form of Exhibit E hereto.

 

“MID Liens” shall mean the Liens of MID created pursuant to, and securing the
obligations outstanding under, the Magna Bridge Loan Agreement, the Magna
Development Loan Agreement, and the agreements and documents related thereto.

 

“MID Pledge Agreement” shall mean the Assignment Agreement by and between MID
and Magna in the form of Exhibit M hereto.

 

“Millennium Gaming” shall mean Millennium Gaming, Inc., a Nevada corporation.

 

“MLR” shall mean Mountain Laurel Racing, Inc., a Delaware corporation.

 

“Mortgage” shall have the meaning assigned to such term in Section 4.1 hereof.

 

“Multiemployer Plan” shall mean a multiemployer plan (as defined in
Section 3(37) of ERISA) pursuant to which Borrower or its Subsidiaries or any of
their respective ERISA Affiliates contributes or has an obligation to
contribute, in respect of any Employee, officer or director of the Borrower or
its Subsidiaries or any of their respective ERISA Affiliates (together with any
multiemployer plans to which Borrower or its Subsidiaries or any of their
respective ERISA Affiliates has contributed or had an obligation to contribute).

 

“Net Insurance/Condemnation Proceeds” means any cash payments or proceeds
received by Borrower or any of its Subsidiaries (a) under any business
interruption or casualty insurance policy in respect of a covered loss
thereunder or (b) as a result of the taking of any assets of Borrower or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such

 

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power under threat of such a taking, in each case net of (i) any actual and
reasonable documented costs incurred by Borrower or any of its Subsidiaries in
connection with the adjustment or settlement of any claims of Borrower or such
Subsidiary in respect thereof and (ii) payment of the outstanding principal
amount of, premium or penalty, if any, and interest on any Indebtedness (other
than the Notes or the Indebtedness secured by the Prior Liens) that is
(A) secured by a Lien on the stock or assets in question and that is required to
be repaid under the terms thereof and (B) actually paid or payable within sixty
days of receipt of such cash payment to a Person that is not a Loan Party or an
Affiliate of a Loan Party.

 

“Note Documents” shall mean this Agreement, the Notes, the Subsidiary Guaranty,
the Equity Commitment Agreement and the Security Documents, and all other
agreements, instruments and documents delivered in connection therewith.

 

“Notes” shall mean the Tranche A Junior Notes and the Tranche B Junior Notes.

 

“Obligations” shall mean and include the principal of and interest (if any) on
the Notes and shall mean any and all of each Loan Party’s Indebtedness and/or
liabilities to Agent or Holders of every kind, nature and description, direct or
indirect, secured or unsecured, joint, several, joint and several, absolute or
contingent, due or to become due, now existing or hereafter arising, contractual
or tortious, liquidated or unliquidated, and arising under this Agreement or
under any Note Document or in any way related hereto or thereto (including all
interest accruing after the commencement of any bankruptcy or similar proceeding
whether or not enforceable in such proceeding) and all obligations of any Loan
Party to Agent or Holders to perform acts or refrain from taking any action
required under this Agreement or under any Note Document.

 

“Occupancy Agreement” means any material lease, agreements to lease, license and
any other form of occupancy agreement affecting any of the real property assets
of Borrower or any of its Subsidiaries.

 

“OCM AcquisitionCo” shall mean OCM AcquisitionCo, LLC, a Nevada limited
liability company.

 

“OCM HoldCo” shall mean OCM HoldCo, LLC, a Delaware limited liability company.

 

“Operator” shall have the meaning assigned to such term in the Racing Services
Agreement.

 

“PA Gaming Act” shall have the meaning assigned to that term in the definition
of “Gaming License Application Event.”

 

“PA Gaming Regulations” shall have the meaning assigned to that term in the
definition of “Gaming License Application Event.”

 

“Parent Entities” shall have the meaning assigned to such term in the preamble
hereto.

 

“Permitted Development” shall mean road and other infrastructure improvements
and the building of the temporary or permanent casino, in each case associated
with the Meadows Facility.

 

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“Permitted Liens” shall have the meaning assigned to such term
Section 7.2(b) hereof.

 

“Permitted Payments” shall mean amounts payable to Borrower for payments made in
good faith for the benefit of a Meadows Company on account of the Racing
Operations (as defined in the Racing Services Agreement) and other Business of
the Meadows Companies (excluding any amount or payment relating to the Permitted
Development or any gaming license or gaming business contemplated by the
Transaction Documents), including, without limitation, return of equity funds or
loans made to the Meadows Companies by Borrower for purposes that are permitted
under this definition.

 

“Person” shall mean an individual, corporation, partnership, joint venture,
limited liability company, person (including, without limitation, a “person” as
defined in Section 13(d)(3) of Exchange Act), trust, association or another
entity.

 

“PGCB” shall mean the Pennsylvania Gaming Control Board.

 

“PGCB Approval Date” shall mean the day on which the PGCB approves the issuance
of a Conditional/Category 1 Gaming License to WTA. The PGCB Approval Date shall
be determined without regard to whether or not any conditions contained in the
approval for issuance of the license are reasonably acceptable to the lender
specified in the Financing Commitment Letter. Borrower and Agent acknowledge
that the PGCB Approval Date shall be no earlier than September 28, 2006.

 

“PGCB Issuance Date” shall mean the day on which payment is made of the license
fee imposed pursuant to Section 1209(a) of the PA Gaming Act for the
Conditional/Category 1 Gaming License issued to WTA.

 

“Plan” shall mean any employee benefit plan (within the meaning of
Section 3(3) of ERISA), other than a Multiemployer Plan, maintained, contributed
to or sponsored by any of Borrower or its Subsidiaries or any of their
respective ERISA Affiliates.

 

“Prior Liens” shall mean the MID Liens.

 

“Purchaser” shall have the meaning assigned to such term in the preamble hereto.

 

“Purchaser Note Certificate Date” shall have the meaning assigned to that term
in Section 4.4 hereof.

 

“Purchaser Note Developments” shall have the meaning assigned to such term in
Section 4.4 hereof.

 

“Racing Services Agreement” shall mean the Racing Services Agreement dated as of
the Closing Date among MEC Racing Management, MLR, WTA, MEC, MEC Pennsylvania
Food Service, Inc. and MECPenn.

 

“RCRA” shall mean the Resource Conservation and Recovery Act (42 U.S.C. § 6901
et seq.).

 

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“Register” has the meaning assigned to such term in Section 6.4(a).

 

“Release” means any release, spill, emission, leaking, dumping, injection,
pouring, deposit, discharge, dispersal, leaching or migration of a Hazardous
Material into the environment (including ambient air, surface water, ground
water, land surface or subsurface strata) or within any building, structure or
facility.

 

“Required Holders” shall mean, at any time, Holders holding a pro rata
percentage of the outstanding principal amount of the Notes aggregating more
than 50% at such time.

 

“Restricted Payment” means (i) any dividend or other distribution, direct or
indirect, on account of any shares of any class of stock or ownership interests
of Borrower or any Subsidiary of Borrower now or hereafter outstanding, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
or ownership interests of Borrower or any Subsidiary of Borrower now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock or ownership interests of Borrower or any
Subsidiary of Borrower now or hereafter outstanding, (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Indebtedness (other than
the Notes and other Obligations) contractually subordinated in right of payment
to any Note or (v) any payment of any management or other fee or any other
amount of any nature payable to any Parent Entity, OCM HoldCo, Millennium
Gaming, or any of their respective Affiliates.

 

“RSA Special Capital Expenditures” shall mean Capital Expenditures required to
be paid by the Subsidiary Guarantors to maintain the Racing Operations (as
defined in the Racing Services Agreement) pursuant to Section 11.6.1 of the
Racing Services Agreement.

 

“Second Closing” shall have the meaning assigned to such term in
Section 3.2(a) hereof.

 

“Securities Act” shall mean the Securities Act of 1933, and any successor
statute.

 

“Security Agreement” shall have the meaning assigned to such term in Section 4.1
hereof.

 

“Security Documents” shall mean the Security Agreement, the Mortgage, the
Financing Statements, and all other documents, instruments and other materials
necessary to create or perfect the security interests created pursuant to the
Security Agreement and the other Security Documents, subject to the Prior Liens.

 

“Seller” shall have the meaning assigned to such term in the preamble hereto.

 

“Seller Note Certificate Date” shall have the meaning assigned to such term in
Section 4.4 hereof.

 

“Seller Note Developments” shall have the meaning assigned to such term in
Section 4.4 hereof.

 

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“Specified Default Trigger Event” shall have the meaning assigned to such term
in Section 8.2(c) hereof.

 

“Specified Event of Default” shall have the meaning assigned to such term in
Section 8.1 hereof.

 

“Specified Event of Default Notice” shall have the meaning assigned to such term
in Section 8.2(b) hereof.

 

“Stock Transfer” shall mean the transfer by Borrower to Magna of the Acquired
Shares (subject to the Prior Liens but not subject to any other liens created by
the Borrower).

 

“Subsidiary” of any corporation shall mean any other corporation or limited
liability company of which the outstanding Capital Stock possessing a majority
of voting power in the election of directors (otherwise than as the result of a
default) is owned or controlled by such corporation directly or indirectly
through Subsidiaries.

 

“Subsidiary Guarantor” means each Subsidiary of Borrower, including the Meadows
Companies.

 

“Subsidiary Guaranty” means the Subsidiary Guaranty executed and delivered by
existing Subsidiaries of Borrower on the Closing Date.

 

“Tax” or “Taxes” shall have the meaning ascribed to such term in the Acquisition
Agreement.

 

“Third Party” means any person that is not, and is not an Affiliate of,
Borrower, Parent Entities, OCM Acquisition, OCM HoldCo, or Millennium Gaming.

 

“Tranche A Junior Notes” shall mean any promissory notes of Borrower issued
pursuant to Section 2.1(a), substantially in the form of Exhibit A-1 annexed
hereto, including any such Notes issued in substitution therefor pursuant to
Section 6.3 and 6.4 hereof.

 

“Tranche B Junior Notes” shall mean any promissory notes of Borrower issued
pursuant to Section 2.1(b), substantially in the form of Exhibit A-2 annexed
hereto, including any such Notes issued in substitution therefor pursuant to
Section 6.3 and 6.4 hereof.

 

“Transaction Documents” shall mean, collectively, the Note Documents, the
Acquisition Agreement, the Racing Services Agreement, the Holdback Agreement,
the XpressBet Amendments, the MID Forbearance Agreement and all other agreements
contemplated hereby and thereby to which any of the Loan Parties or any of their
Affiliates is a party.

 

“Transactions” shall mean the issuance of the Notes, the transfer of the
Acquired Shares, the forbearance of the MID Liens pursuant to the MID
Forbearance Agreement, the Second Closing and/or the Stock Transfer, each as
contemplated by this Agreement, the Notes, the MID Forbearance Agreement and all
other agreements contemplated hereby and thereby.

 

“WTA” shall mean Washington Trotting Association, Inc., a Delaware corporation.

 

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“XpressBet Amendments” shall have the meaning set forth in the Acquisition
Agreement.

 

1.2                                 Accounting Principles. The character or
amount of any asset, liability, capital account or reserve and of any item of
income or expense to be determined, and any consolidation or other accounting
computation to be made, and the construction of any definition containing a
financial term, pursuant to this Agreement shall be determined or made in
accordance with generally accepted accounting principles in the United States of
America consistently applied (“GAAP”), unless such principles are inconsistent
with the express requirements of this Agreement.

 

1.3                                 Other Definitional Provisions; Construction.
Whenever the context so requires, neuter gender includes the masculine and
feminine, the singular number includes the plural and vice versa. The words
“hereof” “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not in any particular
provision of this Agreement, and references to section, article, annex,
schedule, exhibit and like references are references to this Agreement unless
otherwise specified. A Default or Specified Event of Default shall “continue” or
be “continuing” until such Default or Specified Event of Default has been cured
or waived as provided herein. References in this Agreement to any Persons shall
include such Persons, successors and permitted assigns. Unless otherwise
expressly provided herein, references to applicable laws, Charter Documents,
agreements (including without limitation the Note Documents) and other
contractual instruments shall be deemed to include all subsequent amendments,
restatements, extensions, supplements and other modifications thereto in
accordance with the terms hereof and thereof.

 

The use of the terms “Purchaser” and “Borrower” for PA Meadows, LLC and
“Seller,” “Agent,” and “Magna” for Magna Entertainment Corp. is for descriptive
purposes only and the use of any term is not intended to affect or limit in any
way the rights and obligations of PA Meadows, LLC or Magna Entertainment Corp
hereunder or in any other Note Document, the Acquisition Agreement or any
Transaction Document (as defined in the Acquisition Agreement).

 

ARTICLE 2

 

ISSUE AND SALE OF NOTES

 

2.1                                 Authorization and Issuance of the Notes. In
accordance with the Acquisition Agreement, Purchaser has duly authorized the
issuance to Seller of (a) $175,000,000 in aggregate principal amount of
Purchaser’s Tranche A Junior Notes and (b) $25,000,000 in aggregate principal
amount of Purchaser’s Tranche B Junior Notes.

 

2.2                                 Sale and Purchase. Subject to the terms and
conditions and in reliance upon the representations, warranties and agreements
set forth herein and in the Acquisition Agreement, Borrower shall issue to
Seller, and Seller shall accept from Purchaser, for the purpose of paying the
consideration for the acquisition of all of the Acquired Shares by Purchaser in
accordance with the terms of the Acquisition Agreement, the Tranche A Junior
Notes in the aggregate principal amount of $175,000,000 and the Tranche B Junior
Notes in the aggregate principal amount of $25,000,000, in each case in
accordance with the terms of the Acquisition Agreement.

 

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2.3                                 The Closing. Delivery of the Notes (the
“Closing”) in exchange for all outstanding shares of Capital Stock of the
Acquired Companies shall be made at the offices of O’Melveny & Myers LLP, 7
Times Square, New York, New York, commencing at 10:00 a.m., New York time, on
July 26, 2006 or at such place or on such other date as may be mutually
agreeable to Borrower and Seller, subject to the satisfaction of the conditions
set forth in Sections 4.1, 4.2 and 4.3. The date and time of the Closing as
finally determined pursuant to this Section 2.3 are referred to herein as the
“Closing Date.”  Such deliveries shall be made to Seller in accordance with the
terms of the Acquisition Agreement and this Agreement. If the Closing Date does
not occur on or prior to July 31, 2006, the Note Agreement shall terminate and
be of no further force and effect except as provided herein.

 

ARTICLE 3

 

REPAYMENT OF THE NOTES

 

3.1                                 Interest. From and after the earliest of
(a) the Consummation Date, (b) a Specified Default Trigger Event, and (c) five
(5) Business Days after the Deadline Date, the Notes shall accrue interest on
the outstanding principal thereof, at a rate per annum equal to the Citibank
Base Rate plus two percent (2%), which interest shall compound monthly until
paid in full, provided, however, that upon the occurrence of a Deadline Date
that occurs prior to the PGCB Approval Date, if the Borrower and Agent are
engaged in discussions to consummate the Second Closing, then no interest will
accrue on the Notes, and interest will not commence accruing until the earliest
of (A) agreement by Borrower and Agent as to any interest accrual and (B) from
and after five days after either party delivers (i) a notice pursuant to
Section 3.10(a) hereof or (ii) a notice terminating such discussions. Any
interest payable hereunder shall be calculated on the basis of a 360-day year
comprised of 12 thirty-day months and actual days elapsed. The amount of
interest shall be calculated by Agent and such calculations by Agent shall,
absent manifest error, be conclusive and binding.

 

3.2                                 Repayment of the Notes; Exchange of Tranche
B Junior Notes. In accordance with the terms of this Section 3.2, Borrower
covenants and agrees to repay or satisfy, as applicable, the unpaid principal
balance of the Notes and interest, if any, in full, on the Maturity Date and
Holders agree to accept in full satisfaction of the Notes on the Maturity Date
the applicable deliveries provided for, in each case, as follows:

 

(a)                                  In the event that the Maturity Date occurs
under clause (a) of the definition of Maturity Date or Seller and Purchaser
otherwise elect to have the Second Closing (as defined below), then, Seller and
Purchaser shall take the following actions and deliver the following documents
at a closing to occur on such Maturity Date or such other elected date, subject
to satisfaction of the conditions set forth in Section 4.4 hereof (the “Second
Closing”): (i) Borrower shall repay to Agent, for the ratable benefit of Holders
of the Tranche A Junior Notes, the unpaid principal balance of the Tranche A
Junior Notes together with interest, if any, accrued under the Notes in full in
cash with immediately available funds, and (ii) Borrower shall cause to be
delivered to Seller an executed counterpart of the Holdback Agreement executed
by Borrower in the form of Exhibit H attached hereto, together with an opinion
of counsel (satisfactory to Agent)

 

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substantially in the form of Exhibit J attached hereto, and upon such delivery
being made to Agent, and the payment in full in cash of the Tranche A Junior
Notes together with interest in cash, if any, under the Notes being received by
Agent, the entire principal amount of the Notes outstanding shall be deemed
repaid in full and the Notes shall be deemed to be cancelled.

 

(b)                                 In the event the Maturity Date arises in
accordance with clause (b) of the definition of Maturity Date, then upon the
consummation of a Stock Transfer and the payment of interest, if any, accrued on
the Notes, the entire principal amount of the Notes outstanding shall be deemed
repaid in full and the Notes shall be deemed to be cancelled and the acquisition
of the Acquired Shares by Purchaser shall be deemed to have been rescinded,
including for all tax purposes.

 

3.3                                 Optional Prepayment of Notes. Borrower
may prepay to Agent the outstanding principal amount of the Notes and interest,
if any, in whole or in part, at any time and from time to time. Any optional
payments pursuant to this Section 3.3 shall be applied, first, ratably to prepay
any amounts outstanding under the Tranche A Junior Notes, and second, ratably to
prepay any amounts outstanding under the Tranche B Junior Notes. The Tranche B
Junior Notes may be prepaid by the delivery of the items set forth in
Section 3.2(a)(ii) together with interest (if any) on such Notes; provided
however, that the Tranche B Junior Notes may not be prepaid prior to the
prepayment of the Tranche A Junior Notes.

 

3.4                                 Notice of Optional Prepayment. If Borrower
shall elect to prepay any Notes pursuant to Section 3.3 hereof, Borrower shall
give notice of such prepayment to Agent, specifying (i) the date on which such
prepayment is to be made, and (ii) the principal amount of such Notes to be
prepaid on such date. Notice of prepayment shall not cause the Notes to become
due and payable, and such notice may be withdrawn at any time.

 

3.5                                 Intentionally Left Blank.

 

3.6                                 Payment. Borrower will pay all sums becoming
due on any Note to Agent by the method and at the address specified for such
purpose in Annex A, or by such other method or at such other address as Agent
shall have from time to time specified to Borrower in writing for such purpose,
without the presentation or surrender of such Note or the making of any notation
thereon, except that each Holder shall surrender its Note(s) for cancellation
reasonably promptly after payment or prepayment in full of such Note(s) at
Borrower’s principal executive office.

 

3.7                                 Risk of Loss.

 

(a)                                  Condemnation. If the whole of the Meadows
Facility, or a portion thereof that would reasonably be expected to limit or
inhibit the ability to conduct gaming operations at the Meadows Facility, delay
the issuance of the Conditional/Category 1 Gaming License or create or cause a
restriction on operation of the temporary or permanent casino for any period of
time, is taken or condemned in any eminent domain, condemnation, compulsory
acquisition or like proceeding by any competent authority for any public or
quasi-public use or purpose, in each case as reasonably determined by Borrower
to be material, then Borrower may transfer to Magna within thirty days of such

 

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action, the Acquired Shares (subject to the Prior Liens but not subject to any
Liens created by Borrower) in accordance with Section 3.10 hereof and the entire
principal amount of the Notes outstanding shall be deemed repaid in full and the
Notes shall be deemed to be cancelled and the acquisition of the Acquired Shares
by Purchaser shall be deemed to have been rescinded, including for all tax
purposes, in accordance with Section 3.10 hereof. Upon the Stock Transfer, the
Meadows Companies will be entitled to participate, on their behalf and on behalf
of the Holders, in the condemnation proceeding as a defendant and have their
share of the award determined by the court overseeing the condemnation
proceeding and subject to the Prior Liens, the Meadows Companies will be
entitled to all Net Insurance/Condemnation Proceeds, other than Permitted
Payments.

 

(b)                                 Destruction. If all or a portion of the
Meadows Facility is destroyed in whole or in part by fire or other casualty, and
such destruction would reasonably be expected to limit or inhibit the ability to
conduct gaming operations at the Meadows Facility, delay the issuance of the
Conditional/Category 1 Gaming License or create or cause a restriction on the
operation of the temporary or permanent casino for any period of time, in each
case as reasonably determined by Borrower to be material, then Borrower
may elect within thirty (30) days after the date of the casualty to transfer to
Magna the Acquired Shares (subject to the Prior Liens but not subject to any
Liens created by Borrower) in accordance with Section 3.10 hereof and the entire
principal amount of the Notes outstanding shall be deemed repaid in full and the
Notes shall be deemed to be cancelled and the acquisition of the Acquired Shares
by Purchaser shall be deemed to have been rescinded, including for all tax
purposes, in accordance with Section 3.10 hereof. All proceeds from the
insurance policies maintained under the Racing Services Agreement to rebuild the
Meadows Facility shall from and after such transfer be for the benefit of the
Meadows Companies, and subject to the Prior Liens, the Meadows Companies will be
entitled to all Net Insurance/Condemnation Proceeds, other than Permitted
Payments.

 

3.8                                 Maximum Lawful Rate. This Agreement, the
Notes and the other Note Documents are hereby limited by this Section 3.8. In no
event, whether by reason of acceleration of the maturity of the amounts due
hereunder or otherwise, shall interest and fees contracted for, charged,
received, paid or agreed to be paid to Holders exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever, interest
and fees would otherwise be payable to Agent or Holders in excess of the maximum
amount permissible under applicable law, the interest and fees shall be reduced
to the maximum amount permitted under applicable law. If from any circumstance
Agent or Holders shall have received anything of value deemed interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excess of interest shall be applied to the reduction of the principal amount of
the Notes, in such manner as may be determined by Holders, and not to the
payment of fees or interest, or if such excessive interest exceeds the unpaid
balance of the principal amount of the Notes, such excess shall be refunded to
Borrower.

 

3.9                                 Certain Waivers. Borrower waives to the
fullest extent under applicable law any rights to presentment, demand, protest
or (except as expressly required hereby) notice of any kind.

 

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3.10                           Stock Transfer.

 

(a)                                  Stock Transfer Triggers. Borrower shall
immediately (and in any event within five Business Days) consummate a Stock
Transfer and pay any interest accrued (if any) under the Notes as contemplated
by Section 3.2(b):  (i) upon Purchaser’s or Seller’s notice after Purchaser’s
election to not proceed with the Second Closing as a result of Seller Note
Developments that would result in a Seller Material Adverse Effect in accordance
with Section 4.4(a)(i) hereof or the failure of the conditions set forth in
Section 4.4(a)(ii) or 4.4(a)(iii) to be satisfied or waived, (ii) upon Seller’s
or Purchaser’s notice after Seller’s election to not proceed with the Second
Closing as a result of Purchaser Note Developments that would result in a
Purchaser Material Adverse Effect, (iii) upon a Specified Event of Default
Notice by Agent hereunder or the occurrence of a Specified Default Trigger
Event; (iv) upon a Magna Event of Default Notice by Borrower hereunder, (v) upon
Borrower’s election to effect a Stock Transfer pursuant to Section 3.7 or
(vi) upon demand by Agent or Borrower at any time after the Deadline Date so
long as the Consummation Date has not occurred.

 

(b)                                 Approvals. If completion of the Stock
Transfer requires the approval of or filing with any Governmental Authority, the
parties will use commercially reasonable efforts to obtain such approvals and
make such filings. To the extent that the transfer of the Acquired Shares is
delayed for a period of time to obtain any approval or comply with any filing
requirement, then the period of time for Borrower to complete the Stock Transfer
shall be extended for the period of time to obtain the approval or comply with
the filing requirement (and any associated waiting period) so long as the
Borrower is continuing to use its commercially reasonable efforts to obtain such
approvals and make such filings. Borrower agrees to enter into an irrevocable
escrow or other arrangement reasonably satisfactory to Borrower and Magna so
that the Acquired Shares shall be automatically returned to Magna upon receipt
of the approval or compliance with the filing requirement.

 

(c)                                  Completion. Upon the completion of a Stock
Transfer and the payment of interest (if any) accrued under the Notes, the
entire principal amount of the Notes outstanding shall be deemed repaid in full,
the Notes shall be deemed to be cancelled and the acquisition of the Acquired
Shares by Purchaser shall be deemed to have been rescinded, including for all
tax purposes. In the event that Purchaser transfers the Acquired Shares back to
Seller in satisfaction of the Notes pursuant to this Section 3.10, then
Purchaser and Seller shall treat the acquisition of the Acquired Shares by
Purchaser from Seller as being rescinded for all tax purposes and no Person
shall take any position inconsistent therewith unless otherwise required by a
“determination” (as defined in Section 1313(a)(1) of the Code) or by applicable
state or local income or franchise tax law.

 

(d)                                 Further Assurances. In the event that any
assets or rights used in the conduct of the Business (other than the Excluded
Items) are held by Borrower (or any of its Affiliates, but only if predominantly
related to the Meadows Companies), Borrower shall transfer (and cause to be
transferred, as the case may be) such assets and rights to the Meadows Companies
prior to the Stock Transfer. Upon or following a Stock

 

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Transfer, the Borrower shall promptly execute and deliver to Magna such other
instruments of sale, transfer, conveyance, assignment and confirmation and take
such other actions as Magna may reasonably deem necessary in order to effectuate
the Stock Transfer and any transfer contemplated by the preceding sentence.
Following a Stock Transfer, upon the request of Magna, Borrower shall cooperate
with Magna to facilitate the preparation of financial statements for the Meadows
Companies during the period from the Closing Date through the date of the Stock
Transfer, including access to accounting records, journals and work papers of
the Meadows Companies during such period.

 

(e)                                  Deemed Representations. In the event of a
Stock Transfer, the Borrower shall be deemed to have represented, as of the date
of the consummation of the Stock Transfer, that it shall not have taken, and
shall not have permitted any Meadows Company to take, any action or cause any
event to occur that would result in any of the representations or warranties set
forth in Section 3.03 (other than the second sentence of Section 3.03(a)) and
Section 3.04(a) (other than the first sentence thereof) of the Acquisition
Agreement to not be true and correct as of the date of the consummation of the
Stock Transfer.

 

3.11                           Termination of Note. Subject to
Section 10.12(a) hereof, this Agreement shall terminate and be of no further
force and effect, and the Borrower, the Holders and the Agent shall have no
further rights or obligations hereunder, upon the repayment of the Notes
(including interest thereunder in full) in accordance with Section 3.2 or
Section 3.3 hereof, the completion of a Stock Transfer in accordance with
Section 3.2(b) hereof and the payment of interest under the Notes as required by
Section 3.2(b) or the exhaustion of the Agent’s and Holders’ exercise of the
rights and remedies under Sections 8.2, 8.3 and 8.4 hereof.

 

ARTICLE 4

 

CONDITIONS

 

4.1                                 Conditions to Obligations of Purchaser and
Seller. The obligation of Purchaser to issue the Notes and the obligation of
Seller to accept the Notes are subject to, prior to or at the Closing, the
delivery of the following documents or agreements and the satisfaction of the
following conditions:

 

(a)                                  Note Documents. The following Note
Documents shall be entered into by the parties thereto:

 

(i)                                     Tranche A Junior Notes in the aggregate
principal amount of $175,000,000 and Tranche B Junior Notes in the aggregate
principal amount of $25,000,000;

 

(ii)                                  A Subsidiary Guaranty substantially in the
form of Exhibit B attached hereto;

 

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(iii)                               An Equity Commitment Agreement substantially
in the form of Exhibit G attached hereto;

 

(iv)                              Junior Security Agreements for each of
Borrower and the Meadows Companies substantially in the form of Exhibit C
attached hereto (the “Security Agreement”);

 

(v)                                 UCC-1 Financing Statements (the “Financing
Statements”) for the Loan Parties and jurisdictions listed on
Schedule 4.1(a)(v) hereto, subject to the Prior Liens;

 

(vi)                              Certificates of insurance for all insurance of
the Loan Parties existing on the Closing Date together with any endorsements or
loss payee designations requested by Seller;

 

(vii)                           A mortgage substantially in the form of
Exhibit D attached hereto (the “Mortgage”) and for the real property identified
therein; and

 

(viii)                        A lender’s endorsement to the title policy to be
delivered by Seller to Purchaser pursuant to Section 5.11 of the Acquisition
Agreement shall be issued in favor of Agent and in a form reasonably
satisfactory to Agent.

 

(b)                                 Forbearance and Pledge Agreement.

 

(i)                                     Agent, Purchaser, the Acquired Companies
and MID shall have executed the MID Forbearance Agreement, which shall be on
terms satisfactory to MID, Agent and Purchaser.

 

(ii)                                  Agent and MID shall have executed the MID
Pledge Agreement which shall be satisfactory to Agent and MID.

 

(c)                                  Acquisition Agreement Conditions. Each
condition set forth in Article VIII of the Acquisition Agreement shall have been
satisfied except to the extent waived by the party or parties having the right
to the fulfillment of such condition.

 

(d)                                 Regulatory Approvals. All authorizations,
approvals or other actions shall have been obtained from any Governmental
Authority, and all notices to or filings with any Governmental Authority shall
have been made, in each case, to the extent required by Purchaser or Seller in
connection with the execution, delivery and performance by Loan Parties or their
Affiliates of the Note Documents to which they are parties and the consummation
of the transactions contemplated by the Note Documents.

 

(e)                                  Intentionally Omitted.

 

(f)                                    No Default. No Default or Specified Event
of Default shall have occurred and be continuing nor shall it be reasonably
anticipated that there will be any Specified Event of Default immediately after
giving effect to the execution of the Note Documents.

 

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(g)                                 Consents. The parties shall have received
all third party consents necessary or advisable in connection with the
Transactions, in each case to the extent reasonably required by Purchaser or
Seller, including without limitation any consents required pursuant to the Magna
Bridge Loan Agreement and the Magna Development Loan Agreement.

 

4.2                                 Conditions to Acceptance of Notes by Seller.
The obligation of Seller to accept the Notes is subject to the satisfaction,
prior to or at the Closing, of the following conditions:

 

(a)                                  Representations and Warranties True. The
representations and warranties contained in Article IV of the Acquisition
Agreement and Section 5.1 and 10.15(a) hereof shall be true and correct at and
as of the Closing Date as though then made.

 

(b)                                 Closing Documents. Borrower will have
delivered or caused to be delivered to Agent all of the following documents in
form and substance reasonably satisfactory to Agent:

 

(i)                                     certificates of good standing issued as
of a recent date prior to the Closing Date for Borrower issued by its
jurisdiction of organization;

 

(ii)                                  a copy of the Charter Documents of
Borrower, certified by the appropriate governmental official of the jurisdiction
of its organization as of a recent date prior to the Closing Date;

 

(iii)                               a copy of the Borrower LLC Agreement,
certified as of the Closing Date by the secretary, assistant secretary or
manager, as applicable, of Borrower;

 

(iv)                              a certificate of the secretary, assistant
secretary, or manager of Borrower, certifying (A) as to the names and true
signatures of the officers or other authorized person of the Borrower authorized
to sign the Note Documents and the other documents to be delivered by the
Borrower hereunder and (B) certifying the Charter Documents or By-laws of the
Borrower on the Closing Date;

 

(v)                                 copies of the resolutions duly adopted by
the Borrower’s board of managers authorizing the execution, delivery and
performance by the Borrower of the Note Documents and each of the other
agreements, instruments and documents contemplated hereby to which the Borrower
is a party, and the consummation of all of the other Transactions, certified as
of the Closing Date by the secretary, assistant secretary, or manager of the
Borrower;

 

(vi)                              a certificate of the secretary or assistant
secretary, of each of the Meadows Companies, certifying (A) as to the names and
true signatures of the officers or other authorized person of the respective
Meadows Company authorized to sign the Note Documents and the other documents to
be delivered by such Person hereunder and (B) certifying that there has been and
will be no change in the Charter Documents or By-laws of such Person on the
Closing Date other than as disclosed therein;

 

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(vii)                           copies of the resolutions duly adopted by each
of the Meadows Companies’ and each of the Parent Entity’s board of directors,
board of managers or other governing body, authorizing the execution, delivery
and performance by the respective Meadows Company or Parent Entity, as the case
may be, of the Note Documents and, in the case of the Meadows Companies, each of
the other agreements, instruments and documents contemplated hereby to which the
respective Meadows Company is a party, certified as of the Closing Date by the
secretary, assistant secretary or manager of the respective Meadows Company;

 

(viii)                        a certificate dated as of the Closing Date from an
officer, or manager of Borrower stating that the conditions specified in this
Section 4.2 have been fully satisfied or waived by Agent; and

 

(ix)                                an opinion of Munger, Tolles & Olson LLP,
counsel to the Borrower and the Parent Entities, in the form of Exhibit I-1
hereto and an opinion of Fox Rothschild, counsel to the Borrower, in the form of
Exhibit I-2 hereto.

 

(c)                                  Financing Commitment Letter. Purchaser
shall have delivered to Seller a fully executed commitment letter relating to
the financing intended to be used to repay the Tranche A Junior Note in full on
the Second Closing, which commitment letter shall be in form and substance
satisfactory to Seller (such letter, the “Financing Commitment Letter”).

 

(d)                                 Waiver. Any condition specified in this
Section 4.2 may be waived by Agent, and any condition specified in Section 4.1,
on account of Seller, may be waived by Agent.

 

4.3                                 Conditions to Issuance of Notes by Borrower.
The obligation of Borrower to issue the Notes is subject to the satisfaction,
prior to or at the Closing, of the following conditions:

 

(a)                                  Representations and Warranties True. The
representations and warranties contained in Section 5.2 hereof shall be true and
correct at and as of the Closing Date as though then made.

 

(b)                                 Closing Documents. Seller will have
delivered or caused to be delivered to Purchaser all of the following documents
in form and substance reasonably satisfactory to Purchaser:

 

(i)                                     certificates of good standing issued as
of a recent date prior to the Closing Date for Magna issued by its jurisdiction
of organization;

 

(ii)                                  a copy of the Charter Documents of Magna,
certified by the appropriate governmental official of the jurisdiction of its
organization as of a recent date prior to the Closing Date;

 

(iii)                               a copy of the By-laws of Magna, certified as
of the Closing Date by the secretary or assistant secretary, as applicable, of
Magna;

 

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(iv)                              a certificate of the secretary or assistant
secretary of Magna, certifying (A) as to the names and true signatures of the
officers or other authorized person of Magna authorized to sign the Note
Documents and the other documents to be delivered by Magna hereunder and
(B) certifying that there has been no change in the Charter Documents or By-laws
of Magna on the Closing Date;

 

(v)                                 copies of the resolutions duly adopted by
Magna authorizing the execution, delivery and performance by Magna of this
Agreement and the other agreements, instruments and documents contemplated
hereby to which Magna is a party, and the consummation of all of the other
Transactions, certified as of the Closing Date by the secretary or assistant
secretary, or manager of Magna;

 

(vi)                              a certificate dated as of the Closing Date
from an officer, or manager of Magna stating that the conditions specified in
this Section 4.3 have been fully satisfied or waived by Purchaser; and

 

(vii)                           an opinion of in-house counsel of Seller and the
Agent, in the form of Exhibit L hereto.

 

(c)                                  Waiver. Any condition specified in this
Section 4.3 may be waived by Borrower, and any condition specified in
Section 4.1, on account of Purchaser, may be waived by Borrower.

 

4.4                                 Conditions to the Second Closing.

 

(a)                                  Conditions to Obligations of Purchaser. The
obligation of Purchaser to consummate the Second Closing is subject to the
satisfaction, prior to or at the Second Closing, of the following conditions:

 

(i)                                     at the Second Closing (or, if Purchaser
delivers a written notice to Seller referencing this Section 4.4(a)(i) and
indicating that Purchaser expects that the Second Closing will occur, or that
the PGCB Issuance Date will occur, then no later than five days after Seller’s
receipt of such written notice), Purchaser shall have received a certificate
from Seller (i) indicating which, if any, representations and warranties of
Seller contained in the Acquisition Agreement would not be true and correct if
made on the date of the delivery of such certificate with respect to facts and
circumstances arising after the Closing Date (the “Seller Note Certificate
Date”) other than such representations and warranties as are made as of another
date, which would not be true and correct as of such other date, and
(ii) describing the circumstances, if any, which would cause such
representations and warranties to not be so true and correct if made on the
Seller Note Certificate Date (or on such other date if made on another date) as
a result of events, occurrences or change in circumstances that has occurred
since the Closing Date (such circumstances, the “Seller Note Developments”);
provided, however, that Seller Note Developments shall not include (a) breaches
of representations and warranties not within the knowledge of Seller (or not
within

 

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what reasonably should have been within the knowledge of Seller) with respect to
facts and circumstances relating to any period after the Closing Date and
(b) breaches of representations and warranties to the extent resulting from
(1) any actions taken or omitted to be taken by Seller, Purchaser or any of
their respective Affiliates in compliance with the terms of the Transaction
Documents or (2) any actions taken or omitted to be taken by or on behalf of any
of the Meadows Companies (not within the sole or shared control of the Operator
under the Racing Services Agreement) after the Closing Date (other than
activities taken or omitted to be taken by Operator under the Racing Services
Agreement) or by or on behalf of the Borrower or any of its Affiliates (other
than the Meadows Companies); and if there are Seller Note Developments that
would result, together with Seller Developments (as defined in the Acquisition
Agreement), in a Seller Material Adverse Effect (as defined in the Acquisition
Agreement with reference to the “Closing Date” to be “Seller Note Certificate
Date” for purposes of this certificate), Purchaser shall have the right not to
proceed to the Second Closing pursuant to a written notice delivered to Seller
not more than five (5) days following the Seller Note Certificate Date and such
election shall constitute a failure of the conditions to the Second Closing
pursuant to this Section 4.4(a)(i), and Purchaser or Seller shall have the right
to provide a notice for a Stock Transfer under Section 3.10; provided that
Seller Note Developments will not constitute a breach of representation or
warranty by Seller hereunder, under such certificate or under the Acquisition
Agreement whether or not Purchaser proceeds with the Second Closing;

 

(ii)                                  the MID Liens (and all other Liens created
by MID or its Affiliates) and the Liens created pursuant to the Note Documents
shall be released in a manner whereby release occurs concurrently with
Borrower’s performance under Section 3.2(a) hereof and there shall be no other
Liens on the Acquired Shares other than any Liens granted by Borrower or the
Acquired Companies after the Closing Date and Permitted Exceptions (as defined
in the Acquisition Agreement); and

 

(iii)                               the Subsidiary Guaranty shall be terminated
by Magna in a manner whereby termination occurs concurrently with the Borrower’s
performance under Section 3.2(a) hereof and the Subsidiary Guaranty shall be of
no further force and effect.

 

(b)                                 Conditions to Obligations of Seller. The
obligation of Seller to consummate the Second Closing is subject to the
satisfaction, prior to or at the Second Closing, of the following condition:

 

(i)                                     pursuant to a written notice delivered
to Purchaser prior to the earlier of the date not more than five (5) days
following the Seller Note Certificate Date or the date of the Second Closing,
Seller shall have received a certificate from Purchaser (i) indicating which, if
any, representations and warranties of Purchaser contained in the Acquisition
Agreement would not be true and correct if made on the date of the delivery of
such certificate with respect to facts and

 

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circumstances arising after the Closing Date (the “Purchaser Note Certificate
Date”) other than such representations and warranties as are made as of another
date, which would not be true and correct on and as of such other date, and
(ii) describing the circumstances, if any, which would cause such
representations and warranties to not be so true and correct if made on the
Purchaser Note Certificate Date (or on such other date if made on another date)
as a result of events, occurrences or change in circumstances that has occurred
since the Closing Date (such circumstances, the “Purchaser Note Developments”),
and, if there are Purchaser Note Developments that would result, together with
Purchaser Developments (as defined in the Acquisition Agreement), in a Purchaser
Material Adverse Effect (as defined in the Acquisition Agreement with reference
to “Closing Date” to be “Purchaser Note Certificate Date” for purposes of this
Certificate), Agent shall have the right not to proceed to the Second Closing
pursuant to a written notice delivered not more than five (5) days following the
Purchaser Note Certificate Date and such election shall constitute a failure of
the conditions to the Second Closing pursuant to this Section 4.4(b)(i), and
Agent or Seller shall have the right to provide a notice for a Stock Transfer
under Section 3.10; provided that Purchaser Note Developments will not
constitute a breach of representation or warranty by Purchaser hereunder, under
such certificate or under the Acquisition Agreement whether or not Seller
proceeds with the Second Closing.

 

ARTICLE 5

 

REPRESENTATIONS AND WARRANTIES

 

5.1                                 Representations and Warranties of Borrower.
As a material inducement to Seller to enter into this Agreement and accept the
Notes, Borrower hereby represents and warrants to Agent with respect to Borrower
only, and not with respect to Seller or the Meadows Companies, as follows:

 

(a)                                  Organization, Powers, Qualification, Good
Standing. Borrower is a limited liability company duly formed, validly existing
and in good standing under the laws of the State of Delaware.

 

(b)                                 Authorization of Note Issuance, etc.

 

(i)                                     Authorization. The execution, delivery
and performance of each of the Note Documents to which Borrower is a party have
been duly authorized by all necessary action on the part of Borrower. The
execution, delivery and performance of each of the Note Documents have been
authorized by all necessary action on the part of each of the Meadows Companies
that is party thereto.

 

(ii)                                  No Conflict; Litigation. The execution,
delivery and performance by Borrower of the Note Documents to which it is a
party and the consummation

 

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of the transactions contemplated by the Note Documents do not and will not
(i) violate any provision of any law or any governmental rule or regulation
applicable to Borrower, the Charter Documents of Borrower or any order, judgment
or decree of any court or other Governmental Authority binding on Borrower,
(ii) conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation of
Borrower, (iii) result in or require the creation or imposition of any Lien upon
any of the properties or assets of Borrower (other than any Liens in favor of
Agent or the Prior Liens), or (iv) require any approval of stockholders or any
approval or consent of any Person under any material contractual obligation of
Borrower. There is no Action (as defined in the Acquisition Agreement) against
or affecting Borrower pending or, to Borrower’s knowledge, threatened, which, if
determined adversely to Borrower, could reasonably be expected to have a
Material Adverse Effect or which purports to affect the legality, validity and
enforceability of any Note Document.

 

(iii)                               Governmental Consents. The execution,
delivery and performance by Borrower of the Note Documents to which it is a
party and the consummation of the transactions contemplated by the Note
Documents do not require authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority, except to the extent
obtained and delivered to Agent prior to the date of this Agreement.

 

(iv)                              Binding Obligation. Each of the Note Documents
to which Borrower is a party has been duly executed and delivered by Borrower
and is the legally valid and binding obligation of Borrower, enforceable against
Borrower in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors’ rights generally or by equitable principles relating to
enforceability.

 

(c)                                  Matters Relating to Collateral.

 

(i)                                     Governmental Authorizations. To
Borrower’s knowledge, no authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority is required for the pledge
or grant by Borrower of the Liens purported to be created pursuant to any of the
Security Documents, except for filings or recordings contemplated by the
Security Documents and except as may be required, in connection with the
disposition of any collateral pledged pursuant to the Security Documents, by
laws generally affecting the offering and sale of securities.

 

(ii)                                  Perfection. To Borrower’s knowledge, the
security interests in the collateral granted to Agent by Borrower constitute
valid security interests in the Borrower’s interest in the collateral securing
the payment of the Notes. Assuming all filings and other actions necessary or
desirable to perfect and protect such security interests have been duly made or
taken, to Borrower’s knowledge, the security interests in the Borrower’s
interest in the collateral granted to Agent by

 

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Borrower will constitute perfected security interests therein prior to all other
Liens (except for the Prior Liens).

 

(d)                                 Capitalization and Related Matters. The
authorized Capital Stock of Borrower and the number and ownership of all
outstanding Capital Stock of Borrower and its direct and indirect owners are as
set forth on the Borrower Ownership Chart annexed as Schedule 5.1(d) hereto (the
“Borrower Ownership Chart”). Borrower will not be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its Capital Stock. There are no agreements among the Borrower’s
equityholders with respect to the voting or transfer of Borrower’s Capital Stock
other than as described on the Borrower Ownership Chart. Borrower does not own,
or hold any rights to acquire, any shares of stock or any other security or
interest in any other Person (other than the Meadows Companies), and Borrower
has no Subsidiaries (other than the Meadows Companies).

 

(e)                                  Compliance with Acquisition Agreement.
Borrower is not in material breach of any representation, warranty, covenant or
agreement of Borrower contained in the Acquisition Agreement, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a breach.

 

(f)                                    Activities of Borrower. As of the Closing
Date, Borrower has at no time entered into any agreements or conducted any
business other than entering into the Transaction Documents to which it is a
party, and the other agreements set forth on Schedule 5.1(f) hereto and
performing its obligations thereunder.

 

(g)                                 Deposit Accounts. Except as is listed on the
“Deposit Accounts Schedule” attached hereto as Schedule 5.2(d), as of the
Closing Date, Borrower does not maintain any deposit securities or other
account, including term deposit, certificate of deposit money market account,
with any Person.

 

(h)                                 Employee Benefit Plans. Borrower does not
maintain, contribute to or sponsor any employee benefit plans (within the
meaning of Section 3(3) of ERISA). The Borrower’s only ERISA Affiliate is
Cannery Casino Resorts, LLC, which does not maintain, sponsor or contribute to
any employee benefit plans that are subject to Title IV of ERISA and has not
maintained, sponsored or contributed to any such employee benefit plans at any
time during the preceding six years.

 

5.2                                 Representations and Warranties of Magna. As
a material inducement to Borrower to enter into this Agreement and issue the
Notes, Magna hereby represents and warrants to Borrower as follows:

 

(a)                                  Organization, Powers, Qualification, Good
Standing. Magna has all requisite corporate power and authority to enter into
the Note Documents to which it is a party and to carry out the transactions
contemplated thereby.

 

(b)                                 Authorization, etc.

 

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(i)                                     Authorization of Borrowing. The
execution, delivery and performance of the Note Documents to which it is a party
and the MID Forbearance Agreement have been duly authorized by all necessary
action on the part of Magna.

 

(ii)                                  No Conflict; Litigation. The execution,
delivery and performance by Magna and the consummation of the transactions
contemplated by the Note Documents and the MID Forbearance Agreement do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Magna, the Charter Documents of Magna, or any order,
judgment or decree of any court or other Governmental Authority binding on
Magna,  (ii) conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any material contractual obligation of
Magna,  (iii) result in or require the creation or imposition of any Lien upon
any of the properties or assets of Magna (other than the Prior Liens), or
(iv) require any approval of stockholders or any approval or consent of any
Person under any material contractual obligation of Magna. There are no Actions
against or affecting Magna pending or, to Magna’s knowledge, threatened, which,
if determined adversely to Magna could reasonably be expected to have a Material
Adverse Effect or which purports to affect the legality, validity and
enforceability of any Note Document or the MID Forbearance Agreement.

 

(iii)                               Governmental Consents. The execution,
delivery and performance by Magna and the Meadows Companies of the Note
Documents to which they are parties and the MID Forbearance Agreement and the
consummation of the transactions contemplated by the Note Documents and the MID
Forbearance Agreement do not and will not require authorization, approval or
other action by, and no notice to or filing with, any Governmental Authority,
except to the extent obtained by Magna prior to the date of this Agreement.

 

(iv)                              Binding Obligation. Each of the Note Documents
to which Magna is a party and the MID Forbearance Agreement has been duly
executed and delivered by Magna and is the legally valid and binding obligation
of Magna, enforceable against Magna, in accordance with its respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors’ rights generally or by
equitable principles relating to enforceability.

 

(c)                                  Compliance with Acquisition Agreement.
Seller is not in material breach of any representation, warranty, covenant or
agreement of Seller contained in the Acquisition Agreement, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a breach.

 

(d)                                 Deposit Accounts. Except as is listed on the
schedule attached hereto as Schedule 5.2(d), as of the Closing Date, the Meadows
Companies do not maintain any deposit securities or other account, including
term deposit, certificate of deposit money market account, with any Person.

 

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(e)                                  Magna Loan Documents; MID Liens. Seller has
not received from MID or given to MID a written notice of any event of default
under the Magna Bridge Loan Agreement or the Magna Development Loan Agreement
that has occurred and is continuing or of the occurrence or declaration of the
maturity of the obligations outstanding (whether by acceleration or by its
terms) under the Magna Loan Agreement or the Magna Development Loan Agreement.
There are no Liens on the Acquired Shares or the assets or properties of the
Acquired Companies in favor of MID or its Affiliates except as are subject to
the MID Forbearance Agreement.

 

(f)                                    MID Forbearance Agreement. The MID
Forbearance Agreement is enforceable against MID, in accordance with its
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors’
rights generally or by equitable principles relating to enforceability.

 

5.3                                 Effect of Representations and Warranties.
Purchaser’s representations made in Section 5.1(c) shall not form the basis for
any claim against Purchaser unless Purchaser has acted fraudulently and with
willful intention to deceive Seller.

 

ARTICLE 6

 

TRANSFER OF NOTES

 

6.1                                 Restricted Notes. Holders acknowledge that
the Notes have not been registered under the Securities Act and may be resold
only if in compliance with the terms of this Agreement and only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, and that Borrower is not required to register the
Notes.

 

6.2                                 Legends; Holder’s Representations. Each of
the Holders hereby represents and warrants to Borrower that it is an “accredited
investor” within the meaning of Rule 501(a) under the Securities Act and is
acquiring the Notes for investment for its own account, with no present
intention of dividing its participation with others or reselling or otherwise
distributing the same in violation of this Agreement, the Securities Act or any
applicable state securities laws. Borrower may place an appropriate legend on
the Notes owned by Holders concerning the restrictions set forth in this
Article 6. Upon the assignment or transfer by any Holder or any of its
successors or assignees of all or any part of the Notes in compliance with the
terms of this Agreement, the term “Holder” as used herein shall thereafter mean,
to the extent thereof, the then holder or holders of such Notes, or portion
thereof. In the event that any Person other than Magna or MID shall become a
Holder, such person shall make all necessary filings with the PGCB and any other
relevant Governmental Authority requiring a filing.

 

6.3                                 Transfer of Notes.

 

(a)                                  Restrictions. A Holder may not transfer,
assign or pledge any Note except as permitted by the terms of this Agreement.
The initial Holder of the Tranche A Junior Notes and the Tranche B Junior Notes
is Seller, it being understood that Seller will pledge the Notes to MID pursuant
to the MID Pledge Agreement. Seller shall not

 

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transfer or otherwise assign the Notes to anyone other than MID until after a
Specified Default Trigger Event. Holders of a Tranche A Junior Note may pledge
or assign all or a part of such Tranche A Junior Note to MID or to Magna. Magna
may also (a) assign the payment stream from a Note to MID and deliver to
Borrower an irrevocable instruction to pay any proceeds payable to Magna on it
to MID, (b) issue a note from Magna to MID secured by the payment stream from
such Note and deliver to Borrower an irrevocable instruction to pay any proceeds
payable to such Holder on such Note to MID in satisfaction of such Note, and
(c) pledge the Tranche B Junior Note to MID. The Holders have assigned the
payment stream from all Tranche A Junior Notes by the “Direction” as defined and
set forth in the MID Forbearance Agreement. Holders of a Tranche B Junior Note
may not sell participations in such Tranche B Junior Note. None of the
restrictions on the transfer or participation of the Notes shall be applicable
after a Specified Default Trigger Event.

 

(b)                                 Procedure. Subject to Section 6.2 hereof and
the restrictions set forth in this Section 6.3, any Holder may transfer a Note
to a new Holder as permitted by this Agreement, or may exchange a Note for Notes
of different denominations (but not of different tranches), by surrendering such
Note to Borrower duly endorsed for transfer or accompanied by a duly executed
instrument of transfer naming the new Holder (or the current Holder if submitted
for exchange only), together with written instructions for the issuance of one
or more new Notes specifying the respective principal amounts of each new Note
and the name of each new Holder and each address therefor. Borrower shall
simultaneously deliver to such Holder or its designee such new Notes, shall mark
the surrendered Notes as canceled and shall provide notice of such transfer to
Agent. For avoidance of doubt, in the event that the Tranche B Junior Note is
divided or transferred, Borrower’s delivery requirement under
Section 3.2(a)(ii) shall not be altered. In lieu of the foregoing procedures,
subject to Section 6.2 hereof and the restrictions set forth in this
Section 6.3, a Holder may assign a Note (in whole but not in part) to a new
Holder by sending written notice to Borrower and Agent of such assignment
specifying the new Holder’s name and address; in such case, Borrower shall
promptly acknowledge such assignment in writing to both the old and new Holder.

 

6.4                                 Registration of Notes.

 

(a)                                  Borrower will maintain (and make available
for inspection by the Holders upon prior notice at reasonable times) at its
address referred to in Section 10.6(b) a register for the recordation, of, and
shall record, the names and addresses of the Holders and the respective amounts
of the Notes for each Holder from time to time (the “Register”). Borrower shall
deem and treat the Persons listed as the Holder in the Register as the holders
and owners of the corresponding Notes listed therein for all purposes hereof;
all amounts owed with respect to any Note shall be owed to the Holder listed in
the Register as the owner thereof; and any request, authority or consent of any
Person who, at the time of making such request, or giving such authority or
consent, is listed in the Register as a Holder shall be conclusive and binding
on the Borrower, absent manifest error, subject to the entries in the Register,
which shall, absent manifest error, govern in the event of any inconsistency
with any Holder’s records. Failure to make any

 

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recordation in the Register or in any Holder’s records, or any error in such
recordation, shall not affect any Notes or any obligation thereunder.

 

(b)                                 Upon receipt of a Note pursuant to
Section 6.3 above, the Borrower will record the relevant information in the
Register.

 

6.5                                 Replacement of Lost Notes. Upon receipt of
evidence reasonably satisfactory to Borrower of the mutilation, destruction,
loss or theft of any Notes and the ownership thereof and an indemnity from the
Holder or, in the case of a Holder other than MID or Magna, a bond, if
reasonably requested by Borrower, Borrower shall, upon the written request of
any Holder, execute and deliver in replacement thereof new Notes in the same
form, in the same original principal amount and dated the same date as the Notes
so mutilated, destroyed, lost or stolen; and such Notes so mutilated, destroyed,
lost or stolen shall then be deemed no longer outstanding hereunder. If the
Notes being replaced have been mutilated, they shall be surrendered to Borrower.

 

ARTICLE 7

 

COVENANTS

 

7.1                                 Affirmative Covenants. Borrower covenants
that, so long as all or any of the principal amount of the Notes shall remain
outstanding, following the Closing Date:

 

(a)                                  Existence. Borrower shall, and shall cause
each of the Meadows Companies to do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence.

 

(b)                                 Businesses and Properties; Compliance with
Laws. Borrower shall not, and shall cause each of the Meadows Companies not to,
interfere with Operator’s performance of its duties under the Racing Services
Agreement, including with respect to its operation of the business of the
Meadows Companies, including at all times, Operator’s actions to (i) do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect the rights, licenses (including without limitation all harness racing
licenses and all gaming licenses), registrations, permits, certifications,
approvals, consents, franchises, patents, copyrights, trademarks and trade names
of the Meadows Companies, and any other trade names that may be material to the
conduct of their businesses; (ii) comply in all material respects with all laws
and regulations applicable to the operation of such business, including but not
limited to, all Environmental Laws, whether now in effect or hereafter enacted
and with all other applicable laws and regulations, (iii) take all action that
may be required to obtain, preserve, renew and extend all rights, patents,
copyrights, trademarks, tradenames, franchises, registrations, certifications,
approvals, consents, licenses, permits and any other authorizations of the
Meadows Companies that may be material to the operation of such business,
(iv) maintain, preserve and protect all property material to the conduct of such
business, and (v) except for obsolete or worn out equipment, keep their property
in good repair, working order and condition and from time to time make, or cause
to be

 

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made, all needful and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times. Borrower agrees
that it will not, and will not permit any of its Subsidiaries, to terminate the
services of the Operator under the Racing Services Agreement until after the
Maturity Date and in accordance with the terms of the Racing Services Agreement.
Borrower shall not deposit or cause to be deposited Hazardous Materials on any
real property owned by the Meadows Companies.

 

(c)                                  Conditional/Category 1 Gaming License and
Related Licenses. Borrower shall, and shall cause each of its Subsidiaries, to
use its commercially reasonable efforts to (A) comply with Section 5.04 of the
Acquisition Agreement and (B) comply with the requirements of all applicable
laws, rules, regulations and orders of any Governmental Authority (including all
Environmental Laws), noncompliance with which could reasonably be expected to
result in, individually or in the aggregate, the loss of the harness racing
licenses of Borrower or any of its Subsidiaries, or in the ability of WTA to
maintain its application and obtain approval for and the issuance of a
Conditional/Category 1 Gaming License. Notwithstanding the foregoing, Borrower
shall not be required to comply with the foregoing covenant to the extent any
failure to comply or breach is caused by Operator’s breach of its obligations
under the Racing Services Agreement or Seller’s breach of its representations
and warranties in the Acquisition Agreement.

 

(d)                                 Insurance. Borrower shall not interfere with
the Operator’s obligation to provide and pay for insurance pursuant to
Section 18.1 of the Racing Services Agreement.

 

(e)                                  Obligations and Taxes. Other than taxes,
assessments and charges that are the responsibility of the Operator under the
Racing Services Agreement, including without limitation, under Section 3.1.15 of
the Racing Services Agreement or that relate to periods on or before the date of
this Agreement, Borrower shall, and shall cause each of the Meadows Companies to
pay and discharge promptly when due all taxes, assessments and governmental
charges or levies imposed upon them or upon their income or profits or in
respect of their properties before the same shall become delinquent or in
default, as well as all bona fide claims for labor, materials and supplies or
otherwise, which, if unpaid, might give rise to Liens or charges upon the
properties of the Meadows Companies or any part thereof; provided, however, that
Borrower and the Meadows Companies shall not be required to pay and discharge or
to cause to be paid and discharged any such tax, assessment, charge, levy or
claim (i) so long as the validity or amount thereof shall be contested in good
faith by appropriate actions and Borrower and the Meadows Companies shall, to
the extent required by GAAP, have set aside on their books adequate reserves
with respect thereto or (ii) caused by the actions of the Operator. Borrower
will not permit any of the Meadows Companies to file or consent to the filing of
any consolidated income tax return with any Person (other than with the
Borrower). Notwithstanding the foregoing, Borrower shall not be required to
comply with the foregoing covenant to the extent any failure to so comply is
caused by Operator’s breach of its obligations under the Racing Services
Agreement or Magna’s breach of its representations, warranties or covenants
under the Acquisition Agreement.

 

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(f)                                    Notices. Borrower shall give Agent prompt
written notice of the following:

 

(i)                                     Default. Any Default or Specified Event
of Default, specifying the nature and extent thereof and the action (if any)
that is proposed to be taken with respect thereto;

 

(ii)                                  Licenses:  (A) promptly upon any executive
officer of Borrower obtaining knowledge of (1) the institution of, or written
threat by, any Governmental Authority of any proceeding against Borrower or any
of its Subsidiaries directly related to WTA’s application for a
Conditional/Category 1 Gaming License or (2) any material development in any
proceeding before the Harness Racing Commission or the PGCB (in which Seller is
not already present, a party or otherwise a recipient of notice), that, in any
case, (x) would reasonably appear likely to impair the ability of the relevant
Subsidiary of Borrower to obtain or maintain, as the case may be, a harness
racing license or a Conditional/Category 1 Gaming License; or (y) seeks to
enjoin or otherwise prevent such Loan Party from obtaining a
Conditional/Category 1 Gaming License, written notice thereof together with such
other information as may be reasonably requested by Agent to enable Agent and
its counsel to evaluate any of such proceedings (other than material that is
attorney-client privileged) and (B) as often as may be reasonably requested by
Agent (but not more often than weekly), an update, in reasonable detail, of the
status of Borrower’s and its Subsidiaries’ pending application for a
Conditional/Category 1 Gaming License;

 

(iii)                               Jurisdiction. Any change in the name of
Borrower or any Meadows Company or change in the jurisdiction of formation of
Borrower or any Meadows Company;

 

(iv)                              Orders; Injunctions. Promptly upon any
executive officer of Borrower obtaining knowledge of the issuance by any court
or governmental agency or authority of any injunction, order, decision or other
restraint prohibiting, or having the effect of prohibiting, the making or
maintaining of any indebtedness hereunder or the initiation of any litigation or
similar proceeding seeking any such injunction, order or other restraint; and

 

(v)                                 Litigation. Promptly upon any executive
officer of Borrower obtaining knowledge of the notice, filing or commencement of
any action, suit or proceeding against any of Borrower or its Subsidiaries
whether at law or in equity or by or before any court or any federal, state,
municipal or other governmental agency or authority and that, if adversely
determined against any of Borrower or its Subsidiaries, could result in
uninsured liability in excess of $500,000 in the aggregate.

 

(g)                                 Financial Records; Access to Premises and
Inspections and Other Matters. Borrower shall maintain financial records in
accordance with generally accepted practices or consistent with their past
practice. Except with respect to the Excluded Items, the

 

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Agent may reasonably request to permit any authorized representative designated
by the Agent to upon reasonable notice to visit and inspect the properties and
financial records of the Loan Parties and to make extracts from such financial
records or permit any authorized representative designated by the Agent to
discuss the affairs, finances and conditions of the Loan Parties with the Loan
Parties’ chief executive officer or chief financial officer and such other
officers as the Loan Parties shall deem appropriate, and the Loan Parties’
independent public accountants, and the Loan Parties shall reasonably cooperate
with any such requests.

 

(h)                                 Financing Commitment Letter. Borrower shall,
and Borrower shall cause each Meadows Company to, use commercially reasonable
efforts to take such actions as are necessary to expeditiously close the
financings on the terms set forth in the Financing Commitment Letter and, in the
event that the Consummation Date occurs, subject to Borrower’s right not to
proceed to the Second Closing to the extent provided under Section 4.4(a), use
commercially reasonable efforts to cause the Second Closing to occur. Borrower
agrees to provide Agent with an opportunity periodically to discuss progress on
the financings with the lenders signatory to the Financing Commitment Letter as
reasonably requested by Agent.

 

(i)                                     Compliance with Acquisition Agreement.
Borrower shall comply in all material respects with its obligations under the
Acquisition Agreement, except where any failure to so comply is caused by
Operator’s breach of its obligations under the Racing Services Agreement.

 

(j)                                     Further Assurances. Borrower shall, and
shall cause the Meadows Companies to, promptly upon request by Agent, do,
execute, acknowledge, deliver, record, rerecord, file, refile, register and
reregister, any and all such further acts, deeds, conveyances, security
agreements, financing statements and continuations thereof, termination
statements, notices of assignment, transfers, certificates, assurances and other
instruments that Agent may reasonably require from time to time in order (i) to
carry out more effectively the purposes of the Note Documents, (ii) subject to
the Prior Liens, to subject to the Liens created by any of the Security
Documents any of the properties, rights or interests covered by any of the
Security Documents, (iii) subject to the Prior Liens, to perfect and maintain
the validity, effectiveness and priority of any of the Security Documents and
the Liens intended to be created thereby, and (iv) subject to the Prior Liens,
to better assure, convey, grant, assign, transfer, preserve, protect and confirm
to Agent the rights granted or now or hereafter intended to be granted to Agent
under any Note Document or under any other document executed in connection
therewith, except for the Excluded Items.

 

7.2                                 Negative Covenants. Borrower covenants that,
so long as all or any part of the principal amount and interest, if any, of the
Notes shall remain outstanding and unless otherwise consented to by Agent:

 

(a)                                  Indebtedness. Borrower shall not, and shall
not permit any of the Meadows Companies to, directly or indirectly, create,
incur, assume, guarantee or be or remain liable for, contingently or otherwise,
or suffer to exist any Indebtedness, except:

 

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(i)                                     Indebtedness under the Note Documents;

 

(ii)                                  Indebtedness of the Meadows Companies
outstanding immediately prior to the Closing Date;

 

(iii)                               Indebtedness of a Meadows Company to any
other Meadows Company; provided that, to the extent permitted by the Prior
Liens, (A) a security interest in all such intercompany Indebtedness shall have
been granted to Agent and (B) such intercompany Indebtedness shall be evidenced
by a promissory note and such promissory note shall have been pledged to Agent
pursuant to the Security Agreement;

 

(iv)                              Indebtedness of Borrower not in excess of
$1,000,000 in the aggregate and for which no Meadows Company shall be liable;

 

(v)                                 the endorsement of negotiable instruments
for deposit or collection or similar transactions constituting Contingent
Obligations in the ordinary course of business;

 

(vi)                              obligations evidencing or arising out of
bonds, letters of credit, deposits or similar requirements imposed by the
Pennsylvania Harness Racing Commission under applicable laws and regulations;

 

(vii)                           obligations of Borrower or the Meadows Companies
evidencing or arising out of bonds, letters of credit, deposits or similar
requirements imposed by the PGCB under applicable law or regulations, it being
understood that the Meadows Companies shall not be permitted to incur, guaranty
or otherwise become liable for any obligations described in this clause
(vii) unless such obligation has been funded or equity support reasonably
satisfactory to Magna has been provided by Affiliates of Borrower (other than
any Meadows Company) that will be enforceable obligations against Affiliates of
Borrower (other than any Meadows Company) after a Stock Transfer; and

 

(viii)                        obligations of the Meadows Companies to the
Borrower constituting Permitted Payments.

 

(b)                                 Negative Pledge; Liens. Borrower shall not,
and shall not permit any of the Meadows Companies to, directly or indirectly,
create, incur, assume or suffer to exist any Lien of any kind on the Acquired
Shares or the shares of stock or other equity interests in any Subsidiaries of
the Acquired Companies, except the Prior Liens, the Liens created pursuant to
the Note Documents and any Liens existing immediately prior to the Closing Date.
Borrower shall not permit any of the Meadows Companies to, directly or
indirectly, create, incur, assume or suffer to exist any Lien of any kind on any
of their properties or assets of any kind, except the following (collectively,
“Permitted Liens”):

 

(i)                                     Liens created pursuant to the Note
Documents;

 

(ii)                                  the MID Liens;

 

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(iii)                               Liens for or priority claims imposed by law
that are incidental to the conduct of business or the ownership of properties
and assets (including mechanic’s, warehousemen’s, attorneys’ and statutory
landlords’ liens) and deposits, pledges or liens to secure statutory
obligations, surety or appeal bonds or other liens of like general nature
incurred in the ordinary course of business and not in connection with the
borrowing of money; provided, however, that in each case, the obligation secured
is not overdue, or, if overdue, is being contested in good faith and, to the
extent required by GAAP, adequate reserves have been set up by Borrower or its
Subsidiaries as the case may be;

 

(iv)                              Liens securing the payments of taxes,
assessments and governmental charges or levies incurred in the ordinary course
of business that either (a) are not delinquent, or (b) are being contested in
good faith by appropriate actions and as to which, to the extent required  by
GAAP, adequate reserves have been set aside on their books; and

 

(v)                                 Liens of the Meadows Companies existing
immediately prior to the Closing Date (including as reflected on the title
policy delivered pursuant to Section 4.1 hereof).

 

Except as provided in the Magna Loan Documents and the Note Documents, Borrower
shall not, and shall not permit any of the Meadows Companies to, directly or
indirectly, enter into any agreement prohibiting the creation or assumption of
any Lien upon any of the properties or assets of the Borrower or the Meadows
Companies, whether now owned or hereafter acquired.

 

Borrower shall not, and shall not permit any of the Meadows Companies to,
directly or indirectly, create or otherwise cause or become effective any
consensual encumbrance or restriction of any kind on the ability of any such
Subsidiary to (i) pay dividends or make any other distributions on any of such
Subsidiary’s Capital Stock owned by Borrower or any other Subsidiary of
Borrower, (ii) repay or prepay any Indebtedness owed by such Subsidiary to
Borrower or any other Subsidiary of Borrower, (iii) make loans or advances to
Borrower or any other Subsidiary of Borrower, or (iv) transfer any of its
property or assets to Borrower or any other Subsidiary of Borrower, except as
provided in the Note Documents or the Magna Loan Documents.

 

(c)                                  Contingent Obligations. The Meadows
Companies shall not become liable for any Contingent Obligations, except for the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and as otherwise expressly
permitted to be incurred by the Meadows Companies under Section 7.2(a).

 

(d)                                 Capital Expenditures. Except for the RSA
Special Capital Expenditures, the Meadows Companies shall not make or commit to
make any payments on account of the purchase or lease of any assets that if
purchased would constitute fixed assets or that if leased would constitute a
Capitalized Lease.

 

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(e)                                  Mergers, etc. Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, merge into or
consolidate or combine with any other Person, or purchase, lease or otherwise
acquire (in one transaction or a series of related transactions) all or any
material portion of (or in the case of the Meadows Companies, any portion of)
the property or assets of any Person other than purchases or other acquisitions
of inventory, materials, leases, property and equipment in the ordinary course
of business including, without limitation, property permitted to be acquired
pursuant to Section 7.2(d) hereof.

 

(f)                                    Sales of Assets. Borrower shall not sell
or transfer the Acquired Shares except pursuant to a Stock Transfer. Borrower
shall not permit any of the Meadows Companies to, directly or indirectly, sell,
transfer or otherwise dispose of any of its assets, except as follows:

 

(i)                                     inventory sold in the ordinary course of
business;

 

(ii)                                  acquisition, sale and investment in Cash
Equivalents in accordance with Section 7.2(i) hereof;

 

(iii)                               sales, assignments, transfers or
dispositions of accounts in the ordinary course of business for purposes of
collection;

 

(iv)                              disposition of obsolete, worn out or surplus
property in the ordinary course of business; and

 

(v)                                 in order to resolve disputes that occur in
the ordinary course of business, the Meadows Companies may discount or otherwise
compromise for less than the face value thereof, notes or accounts receivable.

 

(g)                                 Affiliate Transactions. Borrower shall not
permit any of the Meadows Companies to, directly or indirectly, make any loan or
advance to any director, officer or employee of Borrower or the Meadows
Companies or any Affiliate of Borrower or any of the Meadows Companies, or enter
into or be a party to any transaction or arrangement with any Affiliate of
Borrower or any of the Meadows Companies, including, without limitation, the
purchase from, sale to or exchange of property with, any merger or consolidation
with or into, or the rendering of any service by or for, any Affiliate of the
Borrower, except for the transactions specified on Schedule 7.2(g) hereto and,
in any such event, pursuant to the reasonable requirements of the Meadows
Companies and upon fair and reasonable terms no less favorable to the Meadows
Companies than would be obtained in a comparable arm’s-length transaction with a
Person other than an Affiliate.

 

(h)                                 Restricted Payments. Borrower shall not, and
shall not permit any of the Meadows Companies to, declare, order, or pay, make
or set apart any sum for any Restricted Payment, except the following Restricted
Payments shall be permitted:  (i) any Meadows Company may make a Restricted
Payment to Borrower if Borrower uses such amount to make Restricted Payments to
each of its members for the state and federal income taxes incurred by any such
member with respect to income of the Meadows

 

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Companies incurred after the Closing Date in accordance with the terms the
Borrower LLC Agreement as in effect on the date hereof; provided that Borrower
shall deliver simultaneously with the making of any such payment to Agent an
Officers’ Certificate signed by the chief financial officer of Borrower, setting
forth the amount of any such payment and (ii) payments to Borrower to reimburse
it for any Permitted Payments, provided that Borrower shall deliver
simultaneously with the making of any such payment to Agent a Officer’s
Certificate signed by the chief financial officer of Borrower setting forth the
amount of any such payment.

 

(i)                                     Advances, Investments and Loans.
Borrower shall not, and shall not permit any of the Meadows Companies to,
directly or indirectly, purchase or hold any stock, other securities or
evidences of Indebtedness of, or make or acquire or permit to exist any loan or
advance to, or make any investment or acquire any interest whatsoever in, any
other Person, except:

 

(i)                                     securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof;

 

(ii)                                  United States dollar-denominated time
deposits, certificates of deposit and bankers acceptances of any bank or any
bank whose short-term debt rating from Standard & Poor’s Ratings Group, a
division of The McGraw-Hill Companies, Inc. (“S&P”), is at least A-1 or the
equivalent or from Moody’s Investors Service, Inc. (“Moody’s”) is at least P-1
or the equivalent;

 

(iii)                               in commercial paper with a rating of at
least A-1 or the equivalent by S&P or at least P-1 or the equivalent by Moody’s;

 

(iv)                              marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof and, at the time of acquisition,
having one of the two highest ratings obtainable from either S&P or Moody’s;

 

(v)                                 Investments in money market funds
substantially all the assets of which are comprised of securities of the types
described in clauses (i) through (iv) above;

 

(vi)                              Investments (including debt obligations)
received in connection with the bankruptcy or reorganization of suppliers and
customers and in settlement of delinquent obligations of, and other disputes
with, customers and suppliers arising in the ordinary course of business;

 

(vii)                           receivables created or acquired in the ordinary
course of business and payable on customary trade terms;

 

(viii)                        in the case of the Subsidiary Guarantors, deposits
made in the ordinary course of business consistent with past practices to secure
the performance of leases of a Subsidiary Guarantor;

 

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(ix)                                advances to employees of a Subsidiary
Guarantor in the ordinary course of business for business expenses; provided,
however, that the aggregate amount of such advances at any time outstanding
shall not exceed $100,000;

 

(x)                                   Investments outstanding immediately prior
to the Closing Date; and

 

(xi)                                Investments by Borrower in any Subsidiary
Guarantor (including the Acquired Shares) or by any Subsidiary Guarantor in any
other Subsidiary Guarantor.

 

(j)                                     Amendment of Certain Documents; Issuance
of Capital Stock. Borrower shall not, and shall not permit any of its
Subsidiaries to, amend, terminate, modify or waive or agree to the amendment,
modification or waiver of any term or provision of the Charter Documents of
Borrower and its Subsidiaries that, in any such case, would reasonably be
expected to be adverse to Holders without Agent’s consent. Borrower shall not,
and shall not permit any of its Subsidiaries, to issue any Capital Stock or any
warrants, options or other rights to acquire any Capital Stock.

 

(k)                                  Business. Borrower shall not engage in any
business other than owning the Capital Stock of the Acquired Companies and
taking actions and entering into agreements and arrangements, to facilitate the
Permitted Development, to obtain financing for the Second Closing and for the
Business after the Second Closing, and to undertake any and all other actions as
required under the Acquisition Agreement, the Note Agreement, the Racing
Services Agreement and the Note Documents. Borrower shall not permit any of the
Meadows Companies to engage, directly or indirectly, in any business other than
the Business; provided that none of the Meadows Companies shall incur any
obligations or liabilities in connection with the Permitted Development or in
connection with the gaming business contemplated by the Transaction Documents,
except that the Meadows Companies may take actions that do not require the
expenditure of their own funds to facilitate the satisfaction of the conditions
set forth in the definition of Consummation Date unless funds or equity support
reasonably satisfactory to Magna has been provided by Affiliates of Borrower
(other than any Meadows Company) and the obligation to provide such funds is
enforceable against Affiliates of Borrower (other than any Meadows Company)
after a Stock Transfer. Borrower shall not acquire or form or permit to exist
any Subsidiaries other than the Meadows Companies without the consent of the
Seller. Borrower shall not interfere, and shall not allow the Meadows Companies
to interfere, with Operator’s (i) conduct of its business in the ordinary course
and consistent with past practice or its obligations under the Racing Services
Agreement, (ii) efforts to preserve intact the business organization, assets and
prospects of the Meadows Companies and (iii) efforts to preserve the current
relationships of each Meadows Company with its respective customers, suppliers,
distributors and other Persons with which each Meadows Company has significant
business relationships.

 

(l)                                     Fiscal Year; Accounting. Borrower shall
not, and shall not permit any of the Meadows Companies to, change their  Fiscal
Year from ending on December 31 or

 

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method of accounting (other than immaterial changes in methods), except as
required by GAAP.

 

(m)                               Establishment of New or Changed Business
Locations. Borrower shall not permit any of the Meadows Companies to relocate
its principal executive offices or other facilities or establish new business
locations or store any inventory or other assets at a location not identified to
Agent on or before the date hereof, without providing not less than twenty (20)
days advance written notice to Agent.

 

(n)                                 Changed or Additional Business Names.
Borrower shall not permit any of the Meadows Companies to, directly or
indirectly, change its corporate name or establish new or additional trade
names.

 

(o)                                 Sales and Leasebacks. Borrower shall not
permit any of the Meadows Companies to, directly or indirectly, become or remain
liable as lessee or as a guarantor or other surety with respect to any lease,
whether an operating lease or a Capitalized Lease, of any property (whether
real, personal or mixed), whether now owned or hereafter acquired, (i) that
Borrower or any of its Subsidiaries has sold or transferred or is to sell or
transfer to any other Person or (ii) that Borrower or any of its Subsidiaries
intends to use for substantially the same purpose as any other property that has
been or is to be sold or transferred by Borrower or any of its Subsidiaries to
any Person in connection with such lease.

 

(p)                                 Licenses and Permits. Borrower shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, pledge
any licenses or permits, held by it or any of its Subsidiaries, to any third
party other than pursuant to the Prior Liens and to Agent to secure the Notes.

 

(q)                                 Occupancy Agreements. Except for the Racing
Services Agreement and agreements entered into by the Operator under the Racing
Services Agreement, Borrower shall not permit any of the Meadows Companies to,
directly or indirectly, enter into Occupancy Agreements for any space which
constitutes any material part of its real property assets or any of them without
the prior written approval of Agent, other than stall agreements, horsemen’s
quarters and leases for operations such as blacksmiths and veterinarians on
market terms and consistent with past practice and renewals or extensions of
Occupancy Agreements existing immediately prior to the Closing Date.

 

(r)                                    Use. Borrower shall not permit any of its
Subsidiaries to, directly or indirectly, permit any of their real property
assets or any portion thereof to be converted, or take any preliminary actions
which could lead to a conversion to, condominium or cooperative form of
ownership.

 

(s)                                  Property Manager. Borrower shall not permit
any of the Meadows Companies to, directly or indirectly, enter into any property
management agreement in respect of any of their real property assets without
Agent’s prior written consent.

 

(t)                                    No Commingling Funds. Except as provided
to the contrary in the Racing Service Agreement, Borrower shall not, and shall
not permit any of its Subsidiaries to,

 

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directly or indirectly, commingle any assets or funds of Borrower or any of the
Subsidiary Guarantors with assets or funds of any of their respective
shareholders, members, partners, principals, Affiliates or any other Person.

 

(u)                                 ERISA. Borrower and its ERISA Affiliates
shall have no Plan or Multiemployer Plan other than (i) plans that are not
subject to Title IV of ERISA, (ii) the Plans and Multiemployer Plans of the
Meadows Companies existing as of the Closing Date and (iii) the Plan created
pursuant to Section 6.02(a) of the Acquisition Agreement.

 

(v)                                 Real Property. Borrower shall not permit any
of the Meadows Companies to acquire any fee interest in real property or
leasehold property.

 

(w)                               Deposit Accounts. The Borrower shall not
establish or permit to exist any deposit, securities or other account of any of
the Meadows Companies unless a control agreement has been entered into with
respect to such account with MID and Agent other than (x) accounts of the
Meadows Companies in existence immediately prior to the Closing and (y) accounts
consisting solely of Excluded Items.

 

7.3                                 Covenant Performance. Notwithstanding any
other provision of this Agreement, Borrower and its Subsidiaries shall be deemed
to not be in breach of any covenant set forth in this Article 7 or under any
other provision of this Agreement or any other Note Document, to the extent that
such breach is the result of (a) any act or omissions by or on behalf of the
Meadows Companies occurring prior to the Closing Date or by or on behalf of
Seller, (b) any act or omission by the Operator or any employee under the
supervision of the Operator or any failure by the Operator to perform any
obligation under the Racing Services Agreement or (c) a failure by Magna to
comply with its obligations under the Acquisition Agreement, this Note Agreement
or any Note Document. The covenants agreed to by Borrower under this Agreement
shall not impose upon Borrower or any of its Subsidiaries any obligation to take
any action to enforce the provisions of the Racing Services Agreement or remedy
any failure of Operator to perform services thereunder. Borrower shall have no
liability for, and shall not be in breach of this Agreement, for any action
taken or omission by the Operator under the Racing Services Agreement that could
be construed as a breach of the covenants and agreements in this Agreement.

 

7.4                                 Magna Covenants. Magna covenants that, so
long as the Notes shall remain outstanding and prior to the delivery of a
Specified Event of Default Notice:

 

(a)                                  Bankruptcy. Seller and its Subsidiaries
shall not take any action or make any filing to commence an involuntary case
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect or file any petition thereunder
relating to or against Borrower or any other Loan Party. Seller and its
Subsidiaries shall not seek the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) for Borrower or any other
Loan Party or any of its Subsidiaries or for any substantial part of its
property, or for the winding-up or liquidation of their affairs.

 

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(b)                                 Notices. Magna shall give Purchaser prompt
written notice of (i) written notice received from MID or written notice
delivered by Magna to MID of any default or event of default under, or the
occurrence or declaration of the maturity of the obligations outstanding under
(whether by acceleration or by its terms), any of the Magna Bridge Loan
Agreement or the Magna Development Loan Agreement, with an explanation
specifying the nature and extent thereof and the action (if any) that is
proposed to be taken with respect thereto, (ii) any amendment, modification,
termination, cancellation, or any notice given or agreement relating to, the MID
Forbearance Agreement and not otherwise provided to Purchaser, or (iii) promptly
upon any executive officer of Magna obtaining knowledge of the issuance by any
court or governmental agency or authority of any injunction, order, decision or
other restraint prohibiting, or having the effect of prohibiting, the making or
maintaining of any indebtedness hereunder or the initiation of any litigation or
similar proceeding seeking any such injunction, order or other restraint.

 

(c)                                  Racing Services Agreement. Magna agrees
that neither it nor its Affiliates will take any action to terminate the Racing
Services Agreement until after the earlier of (a) the Consummation Date, (b) a
Specified Default Trigger Event, and (c) five (5) Business Days after the
Deadline Date and in accordance with the Racing Services Agreement.

 

(d)                                 Compliance with Acquisition Agreement.
Seller shall comply in all material respects with its obligations under the
Acquisition Agreement.

 

(e)                                  Liens. Magna shall not, and shall not
permit any Affiliate, directly or indirectly, to create, incur, or assume after
the date hereof any Lien of any kind on the Acquired Shares or the Meadows
Companies, except the Prior Liens and Liens pursuant to the Note Documents and
with respect to the Meadows Companies, any Liens in the ordinary course of
business pursuant to performance under the Racing Services Agreement.

 

7.5                                 Covenant Performance. Notwithstanding any
other provision of this Agreement, Magna shall not be deemed to be in breach of
any covenant set forth in this Article 7 or under any other provision of this
Agreement, to the extent that such breach is the result of (a) any act or
omissions by or on behalf of the Meadows Companies occurring after the Closing
Date or by or on behalf of Borrower, or (b) a failure by Borrower to comply with
its obligations under the Acquisition Agreement, this Note Agreement or any Note
Document.

 

ARTICLE 8

 

EVENTS OF DEFAULT

 

8.1                                 Specified Events of Default by Borrower. A
“Specified Event of Default” shall mean the occurrence of one or more of the
following described events:

 

(a)                                  Borrower or its Subsidiaries shall default
in the payment of principal of or interest on the Notes (whether by payment of
cash or, subject to Section 3.2(a), delivery

 

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by it of Holdback Agreement) when due, whether at maturity or by acceleration or
otherwise, or the failure to make a Stock Transfer as required under
Section 3.10 hereof;

 

(b)                                 Borrower or its Subsidiaries shall have
defaulted under any agreement under which any Indebtedness in an aggregate
amount of $5 million or more is created and the holder of such Indebtedness
shall have accelerated the maturity of such Indebtedness or otherwise commenced
the exercise of remedies to collect such Indebtedness;

 

(c)                                  any representation or warranty in any Note
Document made by any Borrower, any Parent Entity or OCM AcquisitionCo, or any
certificate or financial statement furnished pursuant to the provisions hereof,
shall prove to have been false or misleading in any material respect as of the
time made or furnished or deemed made or furnished and is reasonably expected to
result in Borrower’s inability to consummate the Second Closing on or prior to
the Deadline Date;

 

(d)                                 any Loan Party shall default in the
performance of any covenant, condition or provision of Section 7.1(a), Sections
7.2(a)-(k), Section 7.2(m) and Section 7.2(n) and such default, if reasonably
capable of cure and if not as a result of a willful or knowing breach of the
Agreement by Borrower or its Affiliates, shall not be remedied for a period of
five (5) Business Days after the earlier of (i) written notice from Agent to
Borrower of such default or (ii) an executive officer of Borrower obtaining
knowledge of such default;

 

(e)                                  any Loan Party shall default in the
performance of any other covenant, condition or provision of this Agreement, the
Notes, the other Note Documents or the Acquisition Agreement, and such default
shall not be remedied for a period of twenty (20) days after written notice from
Agent of such default and the default is reasonably expected to result in
Borrower’s inability to consummate the Second Closing on or prior to the
Deadline Date;

 

(f)                                    Parent Entities shall default in the
performance of any covenant, condition or provision of Section 10.15(b);

 

(g)                                 a proceeding shall have been instituted in a
court having jurisdiction in the premises seeking a decree or order for relief
in respect of any Loan Party or any of its Subsidiaries or OCM AcquisitionCo in
an involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
any Loan Party or any of its Subsidiaries or OCM AcquisitionCo or for any
substantial part of its property, or for the winding-up or liquidation of their
affairs, and such proceeding shall remain undismissed or unstayed and in effect
for a period of sixty (60) days;

 

(h)                                 any Loan Party or any of its Subsidiaries
shall commence a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law, or shall consent to
the appointment of or taking possession by a receiver,

 

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liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of any Loan Party or any of its Subsidiaries or OCM AcquisitionCo or
for any substantial part of their property, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay their debts as they
become due, or shall take any action in furtherance of any of the foregoing;

 

(i)                                     OCM AcquisitionCo shall default under
any of its payment or other material obligations under the Equity Commitment
Agreement or, any Affiliate shall default under any of its material obligations
related thereto or contest the validity, enforceability of, or deny liability
under, any of the obligations related thereto;

 

(j)                                     Borrower or any Subsidiary takes action
to repudiate or contest the security interests in favor of Agent or MID, other
than to enforce the MID Forbearance Agreement;

 

(k)                                  any Note Document, the Acquisition
Agreement or the Racing Services Agreement shall at any time after the Closing
Date cease for any reason to be in full force and effect or otherwise
unenforceable (other than as a result of action by Seller); or the Security
Documents shall cease to create perfected security interests in favor of Agent
in any material portion of the collateral subject to or purported to be subject
thereto, subject to no other Liens other than Permitted Liens; or any Loan Party
or Affiliate thereof shall contest the validity or enforceability of any Note
Document or any provision thereof in writing or deny in writing that it has any
further liability, under any Note Document or any provision thereof to which it
is a party;

 

(l)                                     a Gaming License Application Event shall
have occurred and be continuing; or

 

(m)                               a Change of Control shall have occurred.

 

In the event that Seller is in default under its obligations in the Acquisition
Agreement, the Racing Services Agreement, this Agreement or any related
agreement or document and a Specified Event of Default is caused by the default
by Seller in its obligations hereunder or thereunder, then no such Specified
Event of Default by Borrower shall be deemed to have occurred and no remedies
pursuant to Section 8.2 hereof with respect to such Specified Event of Default
shall be available to Agent.

 

8.2                                 Consequences of Specified Event of Default.

 

(a)                                  Bankruptcy. If a Specified Event of Default
specified in paragraphs (g) or (h) of Section 8.1 hereof shall occur, the unpaid
balance of the Notes and interest accrued thereon and all other obligations of
the Loan Parties to the holders thereof hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or (except as
expressly required hereby) notice of any kind, all of which are hereby expressly
waived.

 

(b)                                 Specified Event of Default. If any other
Specified Event of Default shall occur, Agent, upon direction of Required
Holders, may by written notice to Borrower (a

 

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“Specified Event of Default Notice”), declare the entire unpaid balance of the
Notes, to be forthwith due and payable, and the same shall thereupon become
immediately due and payable, without presentment, demand, protest or (except as
expressly required hereby) notice of any kind, all of which are hereby expressly
waived and Borrower shall comply with the terms of Section 3.10 and promptly
complete the Stock Transfer.

 

(c)                                  Other Rights and Remedies. After a
Specified Event of Default Notice and upon the failure of Borrower to comply
with the provisions of Section 3.10 or upon the occurrence of a Specified Event
of Default specified in paragraphs (g) or (h) of Section 8.1 (and without any
notice) (any such event, a “Specified Default Trigger Event”), Agent
may exercise any and all other rights and remedies available at law or in equity
or pursuant to any Note Document, including, exercise its rights with respect to
the collateral.

 

8.3                                 Security. Payments of principal of the Notes
under this Agreement or the other Note Documents are secured pursuant to the
terms of the Security Documents.

 

8.4                                 Application of Proceeds of Collateral and
Payments after Specified Event of Default. Upon the delivery of a Specified
Event of Default Notice, if requested by Required Holders, or upon acceleration
of the obligations under the Note Documents pursuant to Section 8.2(a), (a) all
payments received by Agent, whether from Borrower or any Subsidiary Guarantor or
otherwise, and (b) all proceeds received by Agent in respect of any sale of,
collection from, or other realization upon all or any part of the collateral
under any Security Document, subject to the Prior Liens, may, in the discretion
of Agent, be held by Agent as collateral for, and/or (then or at any time
thereafter) applied in full or in part by Agent, in each case in the following
order of priority:

 

(i)                                     to the payment of all out of pocket
costs and expenses of such sale, collection or other realization and all amounts
for which Agent is entitled to compensation, reimbursement and indemnification
under any Note Document and all advances made by Agent thereunder for the
account of the applicable Loan Party, all in accordance with the other terms of
this Agreement and the Note Documents;

 

(ii)                                  thereafter, to the payment of all
obligations under the Tranche A Junior Notes for the ratable benefit of the
Holders thereof;

 

(iii)                               thereafter, to the payment of all
obligations under the Tranche B Junior Notes for the ratable benefit of the
Holders thereof;

 

(iv)                              thereafter, to the payment of all other
Obligations; and

 

(v)                                 thereafter, to the payment to or upon the
order of such Loan Party or to whosoever may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.

 

8.5                                 Event of Default by Seller. A “Magna Event
of Default” shall mean the occurrence of one or more of the following described
below:

 

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(a)                                  any material representation or warranty in
any Note Document made by Seller, or any certificate or financial statement
furnished pursuant to the provisions hereof, shall prove to have been false or
misleading in any material respect as of the time made or furnished or deemed
made or furnished and is reasonably expected to result in (i) Borrower’s
inability to consummate the Second Closing on or prior to the Deadline Date or
(ii) the inability of WTA to obtain approval of a gaming license from the PGCB
by the Deadline Date;

 

(b)                                 Seller shall default in the performance of
any covenant, condition or provision of Section 7.4(a);

 

(c)                                  Seller shall default in the performance of
any other covenant, condition or provision of this Agreement, the Notes, the
other Note Documents, the Racing Services Agreement or the Acquisition
Agreement, and such default shall not be remedied for a period of twenty (20)
days after written notice from Borrower of such default and the default is
reasonably expected to result in (i) Borrower’s inability to consummate the
Second Closing on or prior to the Deadline Date or (ii) the inability of WTA to
obtain approval of a gaming license from the PGCB on or prior to the Deadline
Date;

 

(d)                                 MID takes any action or institutes any
proceeding to enforce its rights against the Meadows Companies or their assets
or properties, or against the Capital Stock of any of the Meadows Companies, in
each case in violation of the MID Forbearance Agreement;

 

(e)                                  any Person takes any action or institutes
any proceeding against the Capital Stock of the Meadows Companies arising from
Liens existing immediately prior to the Closing Date (other than MID in respect
of the Prior Liens) and such action or proceeding shall remain pending,
undismissed or unresolved fifteen (15) days after the earlier of (i) written
notice from Borrower of such action or proceeding or (ii) any executive officer
of Seller obtaining knowledge of such action or proceeding; and

 

(f)                                    Seller or Operator shall default in the
payment when due of any amounts, or the performance of any material covenant,
condition or provision of, the letter between Magna, MEC Pennsylvania Racing
Services and Borrower dated the date hereof.

 

If a Magna Event of Default shall occur, Borrower may give written notice
thereof (a “Magna Event of Default Notice”), and upon such notice, cause the
Stock Transfer provided for in Section 3.10.

 

ARTICLE 9

 

AGENT

 

9.1                                 Authorization and Action. Each Holder and
each subsequent holder of any Note by its acceptance thereof, hereby designates
and appoints Magna as Agent hereunder and authorizes Magna to take such actions
as agent on its behalf and to exercise such powers as are delegated to Agent by
the terms of this Agreement and the other Note Documents, together with

 

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such powers as are reasonably incidental thereto. Agent shall not have any
duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Holder, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of Agent shall
be read into this Agreement or otherwise exist for Agent. In performing its
functions and duties hereunder, Agent shall act solely as agent for Holders and
does not assume, nor shall be deemed to have assumed, any obligation or
relationship of trust or agency with or for any Loan Party or any of its
Affiliates or any of their respective successors or assigns. Agent shall not be
required to take any action on behalf of the Holders that exposes Agent to
personal liability or that is contrary to this Agreement or applicable Laws. The
appointment and authority of Agent hereunder shall terminate at the indefeasible
payment in full of the Notes and other Obligations, if any.

 

9.2                                 Delegation of Duties. Agent may execute any
of its duties under this Agreement by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. Agent shall not be responsible to any Holder for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.

 

9.3                                 Exculpatory Provisions. Neither Agent nor
any of its directors, officers, agents or employees shall be (i) liable to any
Holder for any action lawfully taken or omitted to be taken by it or them under
or in connection with this Agreement (except for its, their or such Person’s own
gross negligence or willful misconduct, unless such action was taken or omitted
to be taken by Agent at the direction of the Required Holders), or
(ii) responsible in any manner to any of Holders for any recitals, statements,
representations or warranties made by the Loan Parties or any of their
Affiliates contained in this Agreement, any other Note Document or in any
certificate, report, statement or other document referred to or provided for in,
or received under or in connection with, any Note Document for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of any Note
Document or any other document furnished in connection herewith, or for any
failure of any of any Loan Party or any of its Affiliates to perform their
respective obligations hereunder, or for the satisfaction of any condition
specified in Article 4. Agent shall not be under any obligation to any Holder to
ascertain or to inquire as to the observance or performance of any of the
agreements or covenants contained in, or conditions of, any Note Document, or to
inspect the properties, books or records of any Loan Party or any of its
Affiliates.

 

9.4                                 Reliance. As between the Agent and the
Holders, the Agent shall in all cases be entitled to rely, and shall be fully
protected in relying, upon any document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any Loan Party or its Affiliates), independent
accountants and other experts selected by Agent. As between the Agent and the
Holders, Agent shall in all cases be fully justified in failing or refusing to
take any action under this Agreement or any other document furnished in
connection herewith unless it shall first receive such advice or concurrence of
the Required Holders or all of Holders, as applicable, as it deems appropriate
or it shall first be indemnified to its satisfaction by Holders; provided, that,
unless and until Agent shall have received such advice, Agent may take or
refrain from taking any action, as Agent shall deem advisable and in the best
interests of Holders  As between the Agent and the Holders, Agent shall in all
cases be fully protected in acting, or in refraining from acting, in accordance
with a request

 

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of the Required Holders or all of Holders, as applicable, and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
Holders.

 

9.5                                 Non-Reliance on Agent and Other Holders.
Each Holder expressly acknowledges that neither Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by Agent or hereafter taken,
including, without limitation, any review of the affairs of any Loan Party or
any of its Affiliates, shall be deemed to constitute any representation or
warranty by Agent. Each Holder represents and warrants to Agent that it has and
will, independently and without reliance upon Agent or any other Holder and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of each Loan
Party or any of its Affiliates and made its own decision to enter into this
Agreement.

 

9.6                                 Agent in its Individual Capacity. Agent, and
each of its Affiliates may make loans to, purchase securities from, provide
services to, accept deposits from and generally engage in any kind of business
with any Loan Party or its Subsidiaries or any Affiliate of Borrower or any of
its Subsidiaries as though Agent were not Agent hereunder.

 

9.7                                 Successor Agent. In the event that an event
of default has occurred and is continuing under the Magna Bridge Loan Agreement
or the Magna Development Loan Agreement, MID Islandi shall be entitled to
require that Magna resign as Agent and to appoint MID Islandi, MID or one of its
Subsidiaries as replacement Agent hereunder, upon three (3) Business Days’
notice to Borrower and Magna, and Magna will, upon the direction of the MID
Islandi as aforesaid, resign as Agent, and the Person designated by MID Islandi
as replacement agent shall become Agent hereunder and under the Note Documents
for all purposes hereof and thereof. After any retiring Agent’s resignation
hereunder as Agent, the provisions of Article 9 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement.

 

9.8                                 Collections and Disbursements.

 

(a)                                  Agent will have the right to collect and
receive all payments of the Notes, and to collect and receive all reimbursements
due hereunder, together with all fees, charges or other amounts due under this
Agreement and the other Note Documents with regard to the Notes, and Agent will
remit to each Holder, according to its pro rata percentage, all such payments
actually received by Agent in accordance with the settlement procedures
established from time to time. Settlements shall occur on such dates as Agent
may elect in its sole discretion, but which shall be no later than two
(2) Business Days following receipt thereof.

 

(b)                                 If any such payment received by Agent is
rescinded or otherwise required to be returned for any reason at any time,
whether before or after termination of this Agreement or the other Note
Documents, each Holder will, upon written notice from Agent, promptly pay over
to Agent its pro rata percentage of the amounts so rescinded or returned,
together with interest and other fees thereon so rescinded or returned and such
amounts shall continue to be secured under the Security Documents.

 

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(c)                                  All payments by Agent and Holders to each
other hereunder shall be in immediately available funds. Agent will at all times
maintain proper books of accounts and records reflecting the interest of each
Holder in the Notes, in a manner customary to Agent’s keeping of such records,
which books and records shall be available for inspection by each Holder at
reasonable times during normal business hours, at such Holder’s sole expense.
Agent may treat the payees of any Note as the Holder thereof until written
notice of the due transfer thereof shall have been received by Agent in
accordance with Section 6.3. In the event that any Holder shall receive any
payment in reduction of the Notes in an amount greater than its applicable pro
rata percentage in respect of obligations to Holders evidenced hereby
(including, without limitation amounts obtained by reason of setoffs) such
Holder shall hold such excess in trust for Agent (on behalf of all other
Holders) and shall promptly remit to Agent such excess amount so that the
amounts received by each Holder hereunder shall at all times be in accordance
with its applicable pro rata percentage. If, however, any Holder that has
received any such excess amount fails to remit such amount to Agent, Agent shall
reallocate the amounts paid on the next payment date to each Holder so that,
after giving effect to such payments, the pro rata obligations owed by Borrower
or its Affiliates to each Holder shall be in an amount equal to the pro rata
amount owed by Borrower or its Affiliates before the date of the payment of such
excess amount. In no event shall any Holder be deemed to have a participation or
other right in, to or against any other Holder’s Note as a result of the payment
of any excess amount.

 

9.9                                 Reporting. During the term of this
Agreement, Agent will promptly furnish each Holder such reports and other
information in Agent’s possession as any Holder may reasonably request. Agent
will promptly notify Holders when it receives actual knowledge of any Specified
Event of Default under the Note Documents.

 

9.10                           Consent of Holders.

 

(a)                                  Except as expressly provided herein, Agent
shall have the sole and exclusive right to service, administer and monitor the
Notes and the Note Documents related thereto, including, without limitation, the
right to exercise all rights, remedies, privileges and options under this
Agreement and under the other Note Documents, including, without limitation, the
credit judgment with respect to the purchasing of the Notes and the
determination as to the basis on which and extent to which acceptances of Notes
may be made.

 

(b)                                 Notwithstanding anything to the contrary
contained in Section 9.10(a) above, Agent shall not without the prior written
consent of Required Holders:  (i) extend any payment date under the Notes,
(ii) reduce any interest rate applicable to any of the Notes, (iii) waive any
Specified Event of Default under Section 8.1(a), (iv) compromise or settle all
or a portion of the Indebtedness under the Notes except by a Stock Transfer or
as contemplated by the Second Closing, (v) release any obligor from the
Indebtedness under the Notes except in connection with full payment and
satisfaction of all Indebtedness under the Notes, a Stock Transfer or as
contemplated by the Second Closing, (vi) amend the definition of Required
Holders, or (vii) amend this Section 9.10(b).

 

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(c)                                  [Intentionally Omitted.]

 

(d)                                 Agent shall have the sole and exclusive
right, after consultation (to the extent reasonably practicable under the
circumstances) with all Holders and, unless otherwise directed in writing by
Required Holders, to exercise or refrain from exercising any and all rights,
remedies, privileges and options under this Agreement or the other Note
Documents and available at law or in equity to protect the rights of Agent and
Holders and collect the Indebtedness under the Notes, including, without
limitation, instituting and pursuing all legal actions brought against each Loan
Party or any of their respective its Subsidiaries or to collect the Indebtedness
under the Notes, or defending any and all actions brought by any Loan Party or
any of their respective Subsidiaries or other Person; or incurring expenses or
otherwise making expenditures to protect the collateral, the Notes or Agent’s or
any Holder’s rights or remedies.

 

(e)                                  Each Holder hereby further authorizes
Agent, on behalf of and for the benefit of Holders, to enter into each Security
Document as secured party and to be the agent for and representative of Holders
under the Subsidiary Guaranty, the Equity Commitment Agreement, the MID
Forbearance Agreement, and the other Note Documents and each Holder agrees to be
bound by the terms of Security Document, the Subsidiary Guaranty, the Equity
Commitment Agreement, the MID Forbearance Agreement and the other Note
Documents.

 

(f)                                    Except with respect to a Stock Transfer,
upon the proposed sale or other disposition of any collateral under the Security
Documents to any Person (other than an Affiliate of Borrower) that is permitted
by this Agreement or to which Requisite Holders have otherwise consented, or the
sale or other disposition of all of the Capital Stock of a Subsidiary Guarantor
to any Person (other than an Affiliate of Borrower) that is permitted by this
Agreement or to which Requisite Holders have otherwise consented, for which a
Loan Party desires to obtain a security interest release or a release of the
Subsidiary Guaranty from Agent,  Agent shall, at Agent’s expense, execute and
deliver such releases of its security interest in such collateral or such
Subsidiary Guaranty, as may be reasonably requested by Borrower.

 

9.11                           This Article Not Applicable to Loan Parties. This
Article 9 is included in this Agreement solely for the purpose of determining
certain rights as between Agent and Holders and does not create, nor shall it
give rise to, any rights in or obligations on the part of the Loan Parties and
all rights and obligations of the Loan Parties under this Agreement shall be
determined by reference to the provisions of this Agreement other than this
Article 9.

 

ARTICLE 10

 

MISCELLANEOUS

 

10.1                           Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that (i) neither Borrower nor Parent Entities
may assign or transfer their respective rights hereunder or any

 

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interest herein or delegate their duties hereunder without the consent of
Required Holders and (ii) Magna and Holders shall have the right to assign their
rights hereunder and under the Notes only in accordance with Article 6 and
Article 9, as the case may be.

 

10.2                           Modifications and Amendments. The provisions of
this Agreement may be modified, waived or amended, but only by a written
instrument signed by Borrower and Agent and, only with respect to Section 10.15,
by the Parent Entities.

 

10.3                           No Implied Waivers; Cumulative Remedies; Writing
Required. No delay or failure in exercising any right, power or remedy hereunder
shall affect or operate as a waiver thereof; nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce such a
right, power or remedy preclude any further exercise thereof or of any other
right, power or remedy. The rights and remedies hereunder are cumulative and not
exclusive of any rights or remedies that Agent or Holders may have. Any waiver,
permit, consent or approval of any kind or character of any breach or default
under this Agreement or any such waiver of any provision or condition of this
Agreement must be in writing, satisfy the conditions set forth in Section 9.10
and shall be effective only to the extent in such writing specifically set
forth.

 

10.4                           Reimbursement of Expenses. Except as expressly
provided herein, all costs and expenses, including without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement shall be paid by the party incurring such costs
and expenses. Purchaser and Seller shall split the cost of the title insurance
policy referred to in Section 4.1 hereof, all recording or filing fees, taxes
and other out-of-pocket costs arising under or relating to the Security
Documents and a Stock Transfer, including the perfection of any Lien thereunder,
and expenses incurred pursuant to Section 9.10(f) hereof and 7.1(j) hereof.
Purchaser shall be responsible for all fees and expenses (including attorney’s
fees) incurred after a Specified Default Trigger Event in enforcing any
obligations hereunder or under the other Note Documents of or in collecting any
payments due from any Loan Party hereunder or under the other Note Documents
(including in connection with the sale of, collection from, or other realization
upon any of the collateral securing the obligations hereunder or the enforcement
of the Note Documents) or pursuant to any insolvency or bankruptcy proceedings.

 

10.5                           Holidays. Whenever any payment or action to be
made or taken hereunder or under the Notes shall be stated to be due on a day
that is not a Business Day, such payment or action shall be made or taken on the
next following Business Day, and such extension of time shall be included in
computing interest or fees, if any, in connection with such payment or action.

 

10.6                           Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt but in no
event less than three days after delivery in accordance herewith) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.6):

 

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(a)                                  if to Seller or Agent:

 

Magna Entertainment Corp.

337 Magna Drive

Aurora, Ontario

L4G 7K1, Canada

Facsimile:  905-726-7177

Attn:  CEO/General Counsel

 

with a copy to:

 

O’Melveny & Myers LLP

400 South Hope Street

15th Floor

Los Angeles, CA 90071

Facsimile:  213-430-6407

Attn:                    Thomas W. Baxter, Esq.

Joseph K. Kim, Esq.

 

(b)                                 if to Borrower:

 

PA Meadows, LLC

211 North Rampart Blvd.

Las Vegas, NV  89145

Facsímile:  702-507-5992

Attn:                    William Wortman

William Paulos

 

with a copy to:

 

Munger, Tolles & Olson, LLP

355 S. Grand Avenue, 35th Floor

Los Angeles, CA 90071-1560

Facsimile:  213-687-3702

Attn:  Sandra Seville-Jones, Esq.

 

(c)                                  if to Holders other than Seller:

 

As set forth on Annex A

 

10.7                           Survival. All representations and warranties
contained herein or made in writing in connection herewith shall survive the
execution and delivery of this Agreement and the delivery and acceptance of the
Notes.

 

10.8                           Governing Law; Jurisdiction; Service of Process.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of New York. Agent, Holders, Borrower and Parent Entities hereby
agree and consent to the exclusive jurisdiction of, and service of process and
venue in, the United States District Court for the Southern District of

 

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New York and the courts of the State of New York located in the County of New
York, State of New York and waive any objection with respect thereto, for the
purpose of any action, suit or proceeding arising out of or relating to this
Agreement.

 

10.9                           WAIVER OF JURY TRIAL. EACH OF THE HOLDERS,
BORROWER, PARENT ENTITIES AND AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS
OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT THEREOF.

 

10.10                     Severability. 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, 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 hereby is not affected in any manner
adverse to any party. 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 hereby be consummated as originally
contemplated to the greatest extent possible.

 

10.11                     Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

10.12                     Indemnity.

 

(a)                                  Survival. Subject to the limitations and
other provisions of this Agreement, the representations, warranties, covenants
or agreements of the parties contained herein shall survive the date of the
Second Closing and the Stock Transfer and shall remain in full force and effect
until the date that is six months from the Second Closing, the completion of a
Stock Transfer or the exhaustion of the Agent’s and Holders’ exercise of the
rights and remedies under Sections 8.2, 8.3 and 8.4; provided, however, (i) that
the covenants and agreements set forth in Section 3.2 (with respect to the
payment of the Notes and interest thereunder), Section 3.10 (in the case of a
Stock Transfer), Section 7.2(j), the third sentence of Section 7.2(k),
Article IX and Article X (including this Section 10.12), other than
Section 10.15(a), shall remain in full force and effect for the applicable
periods specified in the respective Sections or Articles or, if no such period
is specified, indefinitely; and (ii) the representations and warranties set
forth in Sections 5.1(a), 5.1(b)(i), 5.1(d), 5.1(i), 5.2(a), and 5.2(b)(i),
shall survive indefinitely.

 

(b)                                 Indemnification by Borrower. Borrower
agrees, subject to the other terms and conditions of this Agreement, to
indemnify Agent, Holders and their respective Affiliates and the officers,
directors, employees and agents of each of the foregoing (each being an “Agent
Indemnified Person”) against and hold them harmless from all Losses arising out
of the breach of any representation, warranty, covenant or agreement of any Loan
Party, OCM AcquisitionCo or any Parent Entity under this Agreement or under any
other Note Document.

 

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(c)                                  Tax Benefit. Except in respect of any
payments attributable to a failure to timely repay or satisfy the Notes as
expressly provided in Section 3.2(a) or Section 3.10, respectively, of this
Agreement, payments by Borrower pursuant to Section 10.12(b) shall be limited to
the amount of any liability or damage that remains after deducting therefrom any
Tax benefit to Agent Indemnified Persons and any insurance proceeds and any
indemnity, contribution or other similar payment recovered by Agent Indemnified
Persons from any third party with respect thereto (it being agreed that any such
Agent Indemnified Person(s) will use its commercially reasonable efforts to
recover such proceeds and payments and that, promptly after the realization of
any insurance proceeds, indemnity, contribution or other similar payment, such
Agent Indemnified Person(s) shall reimburse Borrower for such reduction in
Losses for which such Agent Indemnified Person(s) was indemnified prior to the
realization of such reduction of Losses). A Tax benefit to an Agent Indemnified
Person for purposes of this Section 10.12 shall be reasonably determined by
Seller’s Accountants (as defined in the Acquisition Agreement) as the difference
between (i) the amount of federal, state and local Tax Liabilities of such Agent
Indemnified Person and its Affiliates for the year with respect to which the
indemnity payment is made, and (ii) the amount of federal, state and local Tax
Liabilities (as such terms are defined in the Acquisition Agreement) of such
Agent Indemnified Person and its Affiliates for the year with respect to which
the indemnity payment is made but without the effect of event that gave rise to
the indemnity payment. Magna shall provide Borrower with calculations and/or
other information reasonably supporting the determination of the amount of the
Tax benefit.

 

(d)                                 Limitation on Claims. No claim may be made
against Borrower for indemnification pursuant to Section 10.12(b) in the event
that the Notes are fully paid in accordance with the terms of Section 3.2(a) of
this Agreement, other than claims for out-of-pocket expenditures suffered by
Magna and the Meadows Companies, as a result of any Loan Party’s, OCM
AcquisitionCo’s or Parent Entity’s breach of this Agreement or any other Note
Document.

 

Anything in Section 10.12 to the contrary notwithstanding, no claim may be
asserted nor may any action be commenced against Magna or Borrower, as the case
may be, for breach of any representation, warranty, covenant or agreement
contained herein, unless written notice of such claim or action is received by
Magna  or Borrower, respectively, describing in reasonable detail the facts and
circumstances with respect to the subject matter of such claim or action. If a
claim or a potential claim arises, Borrower and Magna  shall promptly work in
good faith to determine the validity of such claim or potential claim within a
reasonable period of time and if such claim or potential claim is not resolved
to both the indemnified and indemnifying parties’ satisfaction within such
reasonable period of time, either party may commence legal proceedings to
resolve such claim or potential claim.

 

(e)                                  Indemnification by Magna. Magna agrees,
subject to the other terms and conditions of this Agreement, to indemnify
Borrower and its Affiliates and the officers, directors, employees and agents of
each of the foregoing (each being a “Borrower Indemnified Person”) against and
hold it harmless from (i) all Losses arising out of the breach of any
representation, warranty, covenant or agreement of Agent or any Holder

 

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under this Agreement, the Notes or any Security Document and (ii) if the Second
Closing does not occur, but the Stock Transfer occurs (or Magna and Borrower
consummate a mutually agreed upon alternative method for the return of all of
the rights, properties and business of the Meadows Companies to Magna), then any
Liability (as defined in the Acquisition Agreement) of Borrower to third parties
arising out of Borrower’s ownership of the Meadows Companies, but only to the
extent such Liability also arises from acts or omissions, or circumstances
existing on or prior to the Closing Date.

 

(f)                                    Tax Benefit. Payments by Magna pursuant
to Section 10.12(e) shall be limited to the amount of any liability or damage
that remains after deducting therefrom (i) any Tax benefit to Borrower
Indemnified Persons, and (ii) any insurance proceeds and any indemnity,
contribution or other similar payment recovered by Borrower Indemnified Persons
from any third party with respect thereto (it being agreed that any such
Borrower Indemnified Person(s) will use its commercially reasonable efforts and
will cause Companies and Subsidiaries to use their respective commercially
reasonable efforts, to recover such proceeds and payments and that, promptly
after the realization of any insurance proceeds, indemnity, contribution or
other similar payment, such Borrower Indemnified Person(s) shall reimburse Agent
for such reduction in Losses for which such Borrower Indemnified Person(s) was
indemnified prior to the realization of reduction of such Losses). A Tax benefit
to a Borrower Indemnified Person for purposes of this Section 10.12(f) will be
reasonably determined by Borrower’s Accountants (as defined in the Acquisition
Agreement) as the difference between (i) the amount of federal, state and local
Tax Liabilities of such Borrower Indemnified Person and its Affiliates
(including the Companies and the Subsidiaries) for the year with respect to
which the indemnity payment is made, and (ii) the amount of federal, state and
local Tax Liabilities of such Borrower Indemnified Person and its Affiliates
(including the Companies and the Subsidiaries) for the year with respect to
which the indemnity payment is made but without the effect of event that gave
rise to the indemnity payment. Borrower shall provide Magna with calculations
and/or other information reasonably supporting the determination of the Tax
benefit.

 

(g)                                 Limitation on Claims. No claims may be made
against Magna for indemnification pursuant to Section 10.12(e) in the event that
a Stock Transfer has been consummated (other than a Stock Transfer as a result
of a Magna Event of Default Notice) or the exercise of Agent’s and Holders’
rights and remedies under Sections 8.2, 8.3 and 8.4, other than out-of-pocket
expenditures suffered by Borrower or its equity holders (rather than
out-of-pocket expenditures suffered by any of the Meadows Companies) as a result
of Magna’s breach under this Agreement, the Notes or any Security Document.

 

(h)                                 Third Party Indemnification Procedures, Etc.
Each Agent Indemnified Person or Borrower Indemnified Person, as applicable,
(for purposes of this Section 10.12(h), an “Indemnified Party”) shall give the
indemnifying party, as applicable (for purposes of this Section 10.12(h), an
“Indemnifying Party”) prompt written notice (a “Claim Notice”) of any claim,
assertion, event or proceeding by or in respect of a third party of which it has
knowledge concerning any liability or damage as to which it may request
indemnification under Section 10.12 provided, however, that no delay on the
part 

 

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of the Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any liability hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is materially prejudiced by the delay.
The Indemnifying Party shall have the right to assume, through counsel of its
own choosing, the defense or settlement of any such claim or proceeding at its
own expense. If the Indemnifying Party elects to assume the defense of any such
claim or proceeding, the Indemnified Party may participate in such defense, but
in such case the expenses of the Indemnified Party shall be paid by it;
provided, however, that if there exists or is reasonably likely to exist a
conflict of interest (including, without limitation, if there may be one or more
legal or equitable defenses available to the Indemnified Party which are
different from or in addition to those of the Indemnifying Party and
representation by the same counsel would be inappropriate due to the actual or
potential differences between the parties) that would make it inappropriate in
the reasonable judgment of the Indemnified Party for the same counsel to
represent both the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of the Indemnifying Party. With reasonable notice, the Indemnified
Party shall provide the Indemnifying Party with reasonable access to its records
and personnel relating to any such claim, assertion, event or proceeding during
normal business hours and shall otherwise cooperate with the Indemnifying Party
in the defense or settlement thereof, and the Indemnifying Party shall reimburse
the Indemnified Party for all its reasonable out-of-pocket expenses in
connection therewith. If the Indemnifying Party elects to assume the defense of
any such claim or proceeding, the Indemnified Party shall not pay, or permit to
be paid, any part of any claim or demand arising from such asserted liability
unless the Indemnifying Party consents in writing to such payment or unless the
Indemnifying Party, subject to the penultimate sentence of this
Section 10.12(h), withdraws from the defense of such asserted liability or
unless a final judgment from which no appeal may be taken by or on behalf of the
Indemnifying Party is entered against the Indemnified Party for such liability.
If the Indemnifying Party shall fail to defend, or if after commencing or
undertaking any such defense, fails to prosecute or withdraws from such defense,
the Indemnified Party shall have the right to undertake the defense or
settlement thereof, at the expense of the Indemnifying Party. If the Indemnified
Party assumes the defense of any such claim or proceeding pursuant to this
Section 10.12(h) and proposes to settle such claim or proceeding prior to a
final judgment thereon or to forego any appeal with respect thereto, then the
Indemnified Party shall give the Indemnifying Party prompt written notice
thereof and the Indemnifying Party shall have the right to participate in the
settlement or assume or reassume the defense of such claim or proceeding.
Neither the Indemnified Party nor the Indemnifying Party shall settle any claim
or proceeding without the written approval of the Indemnifying Party (in the
case of a settlement by the Indemnified Party) or of the Indemnified Party (in
the case of a settlement by the Indemnifying Party), which approval shall not be
unreasonably withheld.

 

(i)                                     Limitation on Claims. “Losses” of a
Person means any and all claims, actions or causes of action, assessments,
losses or damages, deficiencies, liabilities, costs, awards, judgments, and
expenses (including reasonable legal and expert fees and expense, interest,
penalties and all reasonable amounts paid in investigation, defense, or

 

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settlement of any of the foregoing) suffered or incurred by such persons.
Neither Magna nor Borrower shall have any liability to any Borrower Indemnified
Person or Agent Indemnified Person, as the case may be, under Section 10.12 for
consequential or punitive damages. This Section 10.12(i) shall not limit an
Indemnified Party’s right to recover fees or expenses of counsel or
reimbursement or indemnity for claims by third parties to the extent otherwise
provided for in this Section 10.12 and paid or payable by an Indemnified Party.
“Losses” of Borrower Indemnified Persons shall be limited to Losses suffered by
Borrower and the equity holders of Borrower, and shall not include Losses
suffered by the Meadows Companies.

 

(j)                                     Exclusive Remedy. Each of Magna and
Borrower hereby acknowledges and agrees that, from and after the consummation of
the Second Closing in accordance with Section 3.2(a) of this Agreement, or the
consummation of the Stock Transfer in accordance with Section 3.10 of this
Agreement, the sole and exclusive remedy of Agent Indemnified Persons or
Borrower Indemnified Persons, as the case may be, against Borrower or Magna, as
the case may be, with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions set
forth in this Section 10.12, except for any claims arising out of fraud and
where a party is entitled to seek injunctive relief because there is no adequate
remedy at law. In furtherance of the foregoing, each of Borrower and Magna
hereby waives, from and after the consummation of the Second Closing in
accordance with Section 3.2(a) of this Agreement or the consummation of the
Stock Transfer in accordance with Section 3.10 of this Agreement, and on behalf
of itself and any other Borrower Indemnified Persons or Agent Indemnified
Persons, as the case may be, to the fullest extent permitted under applicable
law, any and all rights, claims and causes of action such Borrower Indemnified
Persons and Agent Indemnified Persons, as the case may be, may have against
Magna or Borrower, as the case may be, (other than pursuant to this
Section 10.12) relating to the subject matter of this Agreement arising under or
based upon any law, rule, regulation, order, judgment or decree applicable to it
or by which any of the properties of it or any of its subsidiaries is bound or
affected, subject to the exception set forth in the immediately preceding
sentence and subject to the claims, remedies and other rights of Magna, Borrower
and their respective Affiliates under the Note Documents. Nothing in the
forgoing provisions of this Section 10.12(j) shall limit any rights or claims
any party hereto, any Company, any Subsidiary or MEC Pennsylvania Racing
Services, Inc. or any of their respective Affiliates may have under the
Acquisition Agreement, the Racing Services Agreement, the Holdback Agreement,
the Equity Commitment Agreement or any agreements related thereto.

 

(k)                                  Public Announcements. Each of Borrower and
Magna agrees that, in the event an Indemnifying Party elects to assume the
defense of any claim or proceeding under Section 10.12(h), to the extent
permitted by applicable law, it will refrain from making any public
announcements in respect of such claim or otherwise communicating with the news
media.

 

(l)                                     Jurisdiction. Borrower and Magna hereby
consent to the non-exclusive jurisdiction of any court in which an Action by a
third party is brought against any Indemnified Party for purposes of any claim
that an Indemnified Party may have under

 

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this Agreement with respect to such Action or the matters alleged therein and
agree that process may be served on Borrower and Magna with respect to such a
claim at the address specified in this Agreement. Nothing in the foregoing
provisions of this Section 10.12(l) shall limit any rights or claims any party
hereto, any Company, any Subsidiary, MEC Pennsylvania Racing Services, Inc. or
any of their respective Affiliates may have under the Acquisition Agreement, the
Racing Services Agreement, the Holdback Agreement, the Equity Commitment
Agreement or any agreements related thereto  (including any agreements
guarantying the obligations under or otherwise lending credit support to the
Holdback Documents or Equity Commitment Agreement).

 

(m)                               Payments. Notwithstanding any other provisions
of this Section 10.12, the obligations of Magna and Borrower to indemnify any
Borrower Indemnified Person or Agent Indemnified Person, respectively, shall be
deferred until the earliest to occur of the Second Closing, the Maturity Date,
the Specified Default Trigger Event or the Deadline Date; provided however, that
Section 10.12(h) shall not be so deferred. Once a Loss is agreed to by the
Indemnifying Party or finally adjudicated to be payable pursuant to this
Section 10.12, the Indemnifying Party shall satisfy its obligations within
fifteen (15) Business Days after such agreement is reached or such final
adjudication by wire transfer of immediately available funds; provided, however,
that during the term of the Holdback Agreement, Borrower Indemnified Persons
shall satisfy any such required payments solely pursuant to the terms of the
Holdback Agreement. The parties hereto agree that should an Indemnifying Party
not make full payment of any such obligations (other than such obligations
described in the proviso set forth in the immediately preceding sentence) within
such fifteen (15) Business Day period, any amount payable shall accrue interest,
compounded annually, calculated from the date of agreement of the Indemnifying
Party or final, nonappealable adjudication through the date such payment has
been made, on the basis of the average of the daily rate of interest publicly
announced by Citibank N.A. in New York, New York from time to time as its base
rate from the date of such agreement or such adjudication to the date of such
payment. The parties hereto agree that if the Second Closing is consummated any
indemnification made pursuant to this Agreement (including without limitation
any indemnification covered by the Holdback Agreement or any indemnification
resulting in the reduction of amounts owing under the Notes) shall be treated as
an adjustment to the Purchase Price (as defined in the Acquisition Agreement).

 

10.13                     Counterparts. This Agreement and each of the other
Note Documents may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.

 

10.14                     Confidentiality. Prior to the occurrence of any of the
events set forth in Section 3.10(a)(i)-(vi), each Holder and Agent shall, and
shall cause its respective agents, representatives, Affiliates, employees,
officers and directors to, protect (and not disclose or provide access to any
Person) all information obtained from Borrower or any of its Subsidiaries in
connection with this Agreement by using the same degree of care, but no less
than a reasonable degree of care, to prevent the unauthorized disclosure or use
of such information, as such Holder or Agent uses to protect its own
confidential information of a like nature; provided,

 

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however, that this sentence shall not apply to any information that, at the time
of disclosure, (i) is disclosed by and between such Holder or Agent and its
respective agents, representatives, Affiliates, employees, officers or directors
on a need-to-know basis (provided that such Persons are bound by a duty of
confidentiality), (ii) is available publicly and was not disclosed in breach of
this Agreement by such Holder or Agent or its respective agents,
representatives, Affiliates, employees, officers or directors (provided that
information provided to or filed with any Governmental Authority shall not be
deemed to be publicly available by virtue of such filing), or (iii) is required
to be disclosed in compliance with Section 5.04 of the Acquisition Agreement,
federal and state laws or regulations or the regulations governing any national
securities exchange or quotation system or is requested by a regulatory body
that has authority over such Holder, Agent or Borrower (provided that such
Holder or Agent, as the case may be, provides prompt notice to Borrower of the
disclosure requirement and uses its reasonable efforts to disclose only such
confidential information as is legally required to be disclosed and exercises
reasonable efforts to obtain assurance that such confidential information will
be accorded confidential treatment); provided further that this sentence shall
not apply to any disclosure in connection with the exercise of any remedies
under the Note Documents or any action, suit or proceeding relating to the Note
Documents or the enforcement of rights thereunder or, following the occurrence
of a Specified Event of Default, disclosure to a prospective Holder of the
Notes.

 

Notwithstanding anything herein to the contrary, information required to be
treated as confidential by reason of the foregoing shall not include, and Agent
and each Holder may disclose to any and all Persons, without limitation of any
kind, any information with respect to United States federal income tax treatment
and United States federal income tax structure of the transactions contemplated
hereby and all materials of any kind (including opinions or other tax analyses)
that are provided to Agent or such Holder relating to such tax treatment and tax
structure.

 

10.15                     Provisions Applicable to Parent Entities.

 

(a)                                  As a material inducement to Seller, Agent
and Holders to enter into this Agreement and accept the Notes, each Parent
Entity hereby severally represents, warrants and covenants to Agent and Holders
as follows:

 

(i)                                     Organization, Powers, Qualification,
Good Standing. CCR is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Nevada. MezzCo is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each Parent Entity has all requisite
power and authority to enter into this Agreement and the other Transaction
Documents to which it is or may become a party and to carry out the transactions
contemplated hereby and thereby.

 

(ii)                                  Authorization. The execution, delivery and
performance of Transaction Documents to which a Parent Entity is party have been
duly authorized by all necessary action on the part of such Parent Entity.

 

(iii)                               No Conflict. The execution, delivery and
performance by each Parent Entity of the Transaction Documents to which a Parent
Entity is party and

 

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the consummation of the transactions contemplated thereby do not and will not
(i) violate any provision of any law or any governmental rule or regulation
applicable to any Parent Entity, the Charter Documents of any Parent Entity or
any order, judgment or decree of any court or other Governmental Authority
binding on any Parent Entity, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
material contractual obligation of any Parent Entity, or (iii) require any
approval of stockholders of any Parent Entity.

 

(iv)                              Governmental Consents. The execution, delivery
and performance by each Parent Entity of the Transaction Documents to which any
Parent Entity is party and the consummation of the transactions contemplated
thereby do not and will not require authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority.

 

(v)                                 Binding Obligation. Each of the Transaction
Documents to which any Parent Entity is party has been duly executed and
delivered by each Parent Entity and is the legally valid and binding obligation
of such Parent Entity, enforceable against such Parent Entity in accordance with
its respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors’
rights generally or by equitable principles relating to enforceability.

 

(b)                                 No Parent Entity shall directly or
indirectly, including as a result of any action of any of its respective
Affiliates, cause or permit Borrower or any of its Subsidiaries to:

 

(i)                                     commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect or file any petition thereunder,

 

(ii)                                  consent to the institution of any
proceeding or petition under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect,

 

(iii)                               consent to the entry of an order for relief
in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law,

 

(iv)                              apply for or consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property,

 

(v)                                 make any assignment for the benefit of
creditors,

 

(vi)                              admit in writing its inability, to pay its
debts as such debts become due, or

 

(vii)                           adopt any resolution or otherwise authorize any
action to approve any of the actions referred to in clauses (i) through
(vi) above.

 

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10.16                     Pennsylvania Accounts. Notwithstanding any other
provision of this Note Agreement or any Note Document, collateral for the
Obligations (or any other obligations of the Borrower and the Meadows Companies)
shall not include amounts held in account for the Commonwealth of Pennsylvania
as specified by Chapter 12 of the Pennsylvania Race Horse Development and Gaming
Act (Act 71) (4 Pa.C.S.A. §1401, et seq.).

 

*          *          *

 

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SIGNATURE PAGE TO

POST-CLOSING AND NOTE ISSUANCE AGREEMENT

 

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

 

 

BORROWER:

 

 

 

PA MEADOWS, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

SOLELY WITH RESPECT TO SECTION 10.15,
PARENT ENTITIES:

 

 

 

CANNERY CASINO RESORTS, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

PA MEZZCO, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

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

 

 

AGENT:

 

 

 

MAGNA ENTERTAINMENT CORP.

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

HOLDERS:

 

 

 

MAGNA ENTERTAINMENT CORP.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

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