Exhibit 10.15


 




 





 


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


 




 





 

















 


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

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Authorization and Issuance of the Notes

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Sale and Purchase

  	
  17

  
	
   

  	
   

  	
   

  
	
  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

  	
  18

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Optional Prepayment of Notes

  	
  19

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Notice of Optional Prepayment

  	
  19

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Intentionally Left Blank

  	
  19

  
	
   

  	
   

  	
   

  
	
  3.6

  	
  Payment

  	
  19

  
	
   

  	
   

  	
   

  
	
  3.7

  	
  Risk of Loss

  	
  19

  
	
   

  	
   

  	
   

  
	
  3.8

  	
  Maximum Lawful Rate

  	
  20

  
	
   

  	
   

  	
   

  
	
  3.9

  	
  Certain Waivers

  	
  20

  
	
   

  	
   

  	
   

  
	
  3.10

  	
  Stock Transfer

  	
  20

  
	
   

  	
   

  	
   

  
	
  3.11

  	
  Termination of Note

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  CONDITIONS

  	
  22

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Conditions to Obligations of Purchaser and Seller

  	
  22

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Conditions to Acceptance of Notes by Seller

  	
  24

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Conditions to Issuance of Notes by Borrower

  	
  25

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Conditions to the Second Closing

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  REPRESENTATIONS AND WARRANTIES

  	
  28

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Representations and Warranties of Borrower

  	
  28

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Representations and Warranties of Magna

  	
  30

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Effect of Representations and Warranties

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  TRANSFER OF NOTES

  	
  32

  



 


i

















 


	
  6.1

  	
  Restricted Notes

  	
  32

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Legends; Holder’s Representations

  	
  32

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Transfer of Notes

  	
  32

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Registration of Notes

  	
  33

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Replacement of Lost Notes

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  COVENANTS

  	
  34

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Affirmative Covenants

  	
  34

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Negative Covenants

  	
  37

  
	
   

  	
   

  	
   

  
	
  7.3

  	
  Covenant Performance

  	
  44

  
	
   

  	
   

  	
   

  
	
  7.4

  	
  Magna Covenants

  	
  44

  
	
   

  	
   

  	
   

  
	
  7.5

  	
  Covenant Performance

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  EVENTS OF DEFAULT

  	
  45

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Specified Events of Default by Borrower

  	
  45

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Consequences of Specified Event of Default

  	
  47

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Security

  	
  48

  
	
   

  	
   

  	
   

  
	
  8.4

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

  	
  48

  
	
   

  	
   

  	
   

  
	
  8.5

  	
  Event of Default by Seller

  	
  48

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  AGENT

  	
  49

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Authorization and Action

  	
  49

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Delegation of Duties

  	
  50

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Exculpatory Provisions

  	
  50

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Reliance

  	
  50

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  Non-Reliance on Agent and Other Holders

  	
  51

  
	
   

  	
   

  	
   

  
	
  9.6

  	
  Agent in its Individual Capacity

  	
  51

  
	
   

  	
   

  	
   

  
	
  9.7

  	
  Successor Agent

  	
  51

  
	
   

  	
   

  	
   

  
	
  9.8

  	
  Collections and Disbursements

  	
  51

  
	
   

  	
   

  	
   

  
	
  9.9

  	
  Reporting

  	
  52

  
	
   

  	
   

  	
   

  
	
  9.10

  	
  Consent of Holders

  	
  52

  
	
   

  	
   

  	
   

  
	
  9.11

  	
  This Article Not Applicable to Loan Parties

  	
  53

  



 


ii

















 


	
  ARTICLE 10

  	
  MISCELLANEOUS

  	
  53

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Successors and Assigns

  	
  53

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Modifications and Amendments

  	
  54

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  No Implied Waivers; Cumulative Remedies; Writing
  Required

  	
  54

  
	
   

  	
   

  	
   

  
	
  10.4

  	
  Reimbursement of Expenses

  	
  54

  
	
   

  	
   

  	
   

  
	
  10.5

  	
  Holidays

  	
  54

  
	
   

  	
   

  	
   

  
	
  10.6

  	
  Notices

  	
  54

  
	
   

  	
   

  	
   

  
	
  10.7

  	
  Survival

  	
  55

  
	
   

  	
   

  	
   

  
	
  10.8

  	
  Governing Law; Jurisdiction; Service of Process

  	
  55

  
	
   

  	
   

  	
   

  
	
  10.9

  	
  WAIVER OF JURY TRIAL

  	
  56

  
	
   

  	
   

  	
   

  
	
  10.10

  	
  Severability

  	
  56

  
	
   

  	
   

  	
   

  
	
  10.11

  	
  Headings

  	
  56

  
	
   

  	
   

  	
   

  
	
  10.12

  	
  Indemnity

  	
  56

  
	
   

  	
   

  	
   

  
	
  10.13

  	
  Counterparts

  	
  61

  
	
   

  	
   

  	
   

  
	
  10.14

  	
  Confidentiality

  	
  61

  
	
   

  	
   

  	
   

  
	
  10.15

  	
  Provisions Applicable to Parent Entities

  	
  62

  
	
   

  	
   

  	
   

  
	
  10.16

  	
  Pennsylvania Accounts

  	
  64

  



 


iii

















 


	
  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 Documents

  
	
  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

















 


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

















 


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   , 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.


 


2

















 


“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

















 


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.


 


4

















 


“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

















 


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.


 


“Escrow Agent” shall mean JP Morgan Chase Bank, N.A., in its capacity
as escrow agent under the Escrow Agreement or any other escrow agent reasonably
acceptable to Borrower and Agent.


 


“Escrow Agreement” shall mean the escrow agreement to be entered into
between Borrower and Agent pursuant to Section 3.2 hereto, substantially in the
form of Exhibit I to the applicable Holdback Agreement.


 


6

















 


“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
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,


 


7

















 


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 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


 


8

















 


(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 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, the Escrow
Agreement and the Escrow Security (as defined in 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.


 


9

















 


“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
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.


 


10

















 


“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


 


(g)           the
Consummation Date;


 


(h)           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


 


(i)            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


 


11

















 


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 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.”


 


12

















 


“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.


 


“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.


 


13

















 


“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.).


 


“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


 


14

















 


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.


 


“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.


 


15

















 


“Transaction Documents” shall mean, collectively, the Note Documents,
the Acquisition Agreement, the Racing Services Agreement, the Holdback
Documents, 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.


 


“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).


 


16

















 


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.


 


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   , 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.


 


17

















 


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 and of the Escrow Agreement executed
by Borrower and the Escrow Agent in the form annexed to such Holdback
Agreement, together with an opinion of counsel (satisfactory to Agent)
substantially in the form of Exhibit J attached hereto, and Borrower shall have
satisfied each of the conditions set forth in Section 2.01 of such Holdback
Agreement and Section 1(a) of such Escrow Agreement and shall have caused the
issuance and delivery to the Escrow Agent of the L/C (as defined in such
Holdback Agreement) or such other security as may replace the L/C as provided
for in the Holdback Agreement in an aggregate amount equal to the full amount
of the Holdback Amount (as defined in such Holdback Agreement) (which amount is
subject to adjustment in accordance with Section 9.03(g) of the Acquisition
Agreement), and upon such deliveries being made to Agent and Escrow Agent, upon
the Escrow Agent having executed and delivered the applicable Holdback
Documents, 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.


 


(c)           In
connection with the delivery of the applicable Holdback Documents by the Escrow
Agent, the parties will jointly exercise commercially reasonable efforts to
cause the Escrow Agent to enter into the applicable Holdback Documents, it
being understood that if for any reason the Holdback Documents are not
delivered because the Escrow Agent is unwilling to execute them and delivery by
the Escrow Agent of the applicable Holdback Documents and the Second Closing is
capable of occurring with the exception of the Escrow Agent’s signature to the
Holdback Documents, then Agent and Borrower will use commercially reasonable
efforts to replace the Escrow Agent or


 


18

















 


provide
another acceptable alternative, and the Maturity Date, the Second Closing and
the Deadline Date will be deferred to the earliest Business Day that is
commercially practicable but no longer than thirty days.


 


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 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


 


19

















 


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.


 


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


 


20

















 


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 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


 


21

















 


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;


 


(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”);


 


22

















 


(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.


 


(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.


 


23

















 


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;


 


(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


 


24

















 


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;


 


(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


 


25

















 


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 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


 


26

















 


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
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


 


27

















 


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 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


 


28

















 


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


 


29

















 


(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.


 


(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.


 


30

















 


(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.


 


(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


 


31

















 


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
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


 


32

















 


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 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.


 


33

















 


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 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


 


34

















 


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.


 


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


 


35

















 


(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 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


 


36

















 


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:


 


(i)            Indebtedness
under the Note Documents;


 


37

















 


(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;


 


38

















 


(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.


 


39

















 


(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


 


40

















 


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;


 


41

















 


(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


 


42

















 


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,


 


43

















 


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.


 


44

















 


(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


 


45

















 


by
it of Holdback Documents) 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,


 


46

















 


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


 


47

















 


(a
“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:


 


48

















 


(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


 


49

















 


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


 


50

















 


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).


 


52

















 


(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


 


53

















 


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):


 


54

















 


(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


 


55

















 


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.


 


56

















 


(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


 


57

















 


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


 


58

















 


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


 


59

















 


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 Documents, 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).


 


(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.


 


60

















 


(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 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 Documents, 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 any Holdback Documents, Borrower Indemnified
Persons shall satisfy any such required payments solely pursuant to the terms
of such Holdback Documents. 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 Documents 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


 


61

















 


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, 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.


 


62

















 


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


 


63

















 


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


 


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.).


 


*          *          *


 


64

















 


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:

  	
    /s/ William J.
  Paulos

  
	
   

  	
   

  	
  Name:  William J.
  Paulos

  
	
   

  	
   

  	
  Title:    Authorized
  Signatory

  
	
   

  	
   

  
	
   

  	
  SOLELY WITH RESPECT TO SECTION 10.15,

  PARENT ENTITIES:

  
	
   

  	
   

  
	
   

  	
  CANNERY CASINO RESORTS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ William J.
  Paulos

  	
   

  
	
   

  	
   

  	
  Name:  William J.
  Paulos

  
	
   

  	
   

  	
  Title:    Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PA MEZZCO, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ William J.
  Paulos

  	
   

  
	
   

  	
   

  	
  Name:  William J.
  Paulos

  
	
   

  	
   

  	
  Title:    Authorized
  Signatory

  



 

















 


	
   

  	
  AGENT:

  
	
   

  	
   

  
	
   

  	
  MAGNA
  ENTERTAINMENT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ B. Tohana

  	
   

  
	
   

  	
   

  	
  Name:  Blake Tohana

  
	
   

  	
   

  	
  Title:    Executive
  Vice President & CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Mary Lyn
  Seymor

  	
   

  
	
   

  	
   

  	
  Name:  Mary Lyn
  Seymor

  
	
   

  	
   

  	
  Title:    Controller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOLDERS:

  
	
   

  	
   

  
	
   

  	
  MAGNA
  ENTERTAINMENT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ B. Tohana

  	
   

  
	
   

  	
   

  	
  Name:  Blake Tohana

  
	
   

  	
   

  	
  Title:    Authorized
  Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Mary Lyn
  Seymor

  	
   

  
	
   

  	
   

  	
  Name:  Mary Lyn
  Seymor

  
	
   

  	
   

  	
  Title:    Authorized
  Signatory

  
					



 

















 


	
  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 Documents

  
	
  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