Exhibit
10.13


 


FIRST
AMENDMENT


TO
STOCK PURCHASE AGREEMENT


 


This FIRST AMENDMENT
TO STOCK PURCHASE AGREEMENT (this “First
Amendment”) is dated as of July 26, 2006 and entered into by and
between MAGNA ENTERTAINMENT CORP., a Delaware corporation (“Seller”), and PA MEADOWS, LLC, a Delaware
limited liability company (“Purchaser”),
and is made with reference to that certain Stock Purchase Agreement, dated as
of November 8, 2005 (the “Purchase
Agreement”), by and between Seller
and Purchaser. Capitalized terms used herein without definition shall have the
same meanings herein as set forth in the Amended Purchase Agreement (as defined
below).


 


RECITALS


 


WHEREAS, as a
result of further negotiations between Seller and Purchaser since the signing
of the Purchase Agreement, Seller and Purchaser have decided to amend the terms
of the Purchase Agreement by entering into this First Amendment in order
to,  (i) reduce the Purchase Price for
the Shares from $225,000,000 to $200,000,000, (ii) reduce the Holdback Amount
from $39,000,000 to $25,000,000,  (iii)
permit the payment of the Purchase Price in the form of two notes, a Tranche A
Note for $175,000,000 and a Tranche B Note for $25,000,000 and (iv) amend other
provisions of the Purchase Agreement as set forth in the Amended Purchase
Agreement;


 


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


 


Section 1.                                          AMENDMENT OF
PURCHASE AGREEMENT


 


As of the date hereof, the Purchase Agreement and the
exhibits thereto shall be and are hereby amended and modified to read in their
entirety as set forth in Annex A hereto (as set forth in such Annex A,
the “Amended Purchase Agreement”),
and as so amended are hereby ratified, approved and confirmed in each and every
respect. The parties hereto agree and acknowledge that the schedules to the
Purchase Agreement delivered on November 8, 2005 shall be the schedules to the
Amended Purchase Agreement, and Seller has delivered a certificate as of the date
hereof to Purchaser in accordance with Section 8.03(b) of the Amended Purchase
Agreement related to such schedules.


 


Section 2.                                          MISCELLANEOUS


 


2.1                               Fees
and Expenses.  Except as otherwise expressly provided in the Amended
Purchase Agreement, all costs and expenses, including, without limitation, fees
and disbursements of counsel, financial advisors and accountants, incurred in
connection with this First Amendment and the transactions contemplated hereby
shall be paid by the party incurring such costs and expenses.


 

















 


2.2                               Notices.
All notices, requests, claims, demands and other communications hereunder shall
be made as set forth in Section 11.02 of the Amended Purchase Agreement.


 


2.3                               Public
Announcements. Unless otherwise required by applicable law or stock
exchange requirements, no party to this First Amendment shall make any public
announcements in respect of this First Amendment or the transactions
contemplated hereby or otherwise communicate with any news media without prior
consent of the other party, and the parties will cooperate as to the timing and
contents of any such announcement. Seller and Purchaser acknowledge that OCM
HoldCo LLC and Seller will be making filings with the Securities and Exchange
Commission and each of Seller and Purchaser agrees to cooperate in reviewing
and providing any comments on such submissions in a timely fashion.


 


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


 


2.5                               Severability.
If any term or other provision of this First Amendment is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this First Amendment shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this First Amendment so as to effect the original intent
of the parties as closely as possible in a mutually acceptable manner in order
that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.


 


2.6                               Assignment.
This First Amendment shall not be assigned by operation of law or otherwise,
except that prior to the Closing, Purchaser, without the consent of Seller, but
with at least 10 Business Days’ prior written notice, may transfer or cause to
be transferred all of the equity interests of Purchaser to a wholly owned
direct or indirect subsidiary of Cannery Casino Resorts, LLC, a Nevada limited
liability company.


 


2.7                               No
Third-Party Beneficiaries. This First Amendment is for the sole benefit
of the parties hereto and their permitted assigns and, except as otherwise
expressly provided in the Amended Purchase Agreement, nothing herein, express
or implied, is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or
by reason of this First Amendment.


 


2.8                               Amendment.
This First Amendment may not be amended or modified except by an instrument in
writing signed by Seller and Purchaser.


 


2.9                               Governing
Law; Jurisdiction; Service of Process. This First Amendment shall be
governed by, and construed in accordance with, the laws of the State of New
York. Seller and Purchaser 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


 


2

















 


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


 


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


 


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


 


2.12                        Specific Performance.
The parties hereto agree that irreparable damage would occur in the event any
provision of this First Amendment was not performed in accordance with the
terms hereof and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or equity.


 


2.13                        Prevailing Party.
The prevailing party or parties in any arbitration, mediation, court action, or
other adjudicative proceeding arising out of or relating to this First
Amendment shall be reimbursed by the party or parties who do not prevail for
their reasonable attorneys, accountants and experts fees and for the costs of
such proceeding.


 


[The remainder of
page intentionally left blank.]


 


3

















 


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


 


 


	
   

  	
  PA MEADOWS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William J. Paulos

  	
   

  
	
   

  	
   

  	
  Name:  William J. Paulos

  
	
   

  	
   

  	
  Title:  Authorized
  Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MAGNA ENTERTAINMENT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ B. Tohana

  	
   

  
	
   

  	
   

  	
  Name:  Blake Tohana

  
	
   

  	
   

  	
  Title:  Authorized
  Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary Lyn Seymor

  	
   

  
	
   

  	
   

  	
  Name:  Mary Lyn Seymor

  
	
   

  	
   

  	
  Title:  Authorized
  Signatory

  



 


 


Signature
Page to Amendment to

Stock Purchase Agreement


 

















 


STOCK PURCHASE AGREEMENT


 


dated November 8,
2005


 


between


 


MAGNA ENTERTAINMENT CORP.


 


and PA MEADOWS, LLC


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01

  	
  Certain Defined Terms

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  PURCHASE AND SALE

  	
  10

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01

  	
  Purchase and Sale

  	
  10

  
	
   

  	
   

  	
   

  
	
  SECTION 2.02

  	
  Purchase Price

  	
  10

  
	
   

  	
   

  	
   

  
	
  SECTION 2.03

  	
  Closing

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND WARRANTIES OF SELLER

  	
  11

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01

  	
  Incorporation and Authority of Seller

  	
  11

  
	
   

  	
   

  	
   

  
	
  SECTION 3.02

  	
  Organization, Authority and Qualification of the
  Companies

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 3.03

  	
  Capital Stock of the Companies; Ownership of the
  Shares

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 3.04

  	
  Subsidiaries

  	
  13

  
	
   

  	
   

  	
   

  
	
  SECTION 3.05

  	
  No Conflict

  	
  14

  
	
   

  	
   

  	
   

  
	
  SECTION 3.06

  	
  Consents and Approvals

  	
  15

  
	
   

  	
   

  	
   

  
	
  SECTION 3.07

  	
  Financial Information, Books and Records

  	
  15

  
	
   

  	
   

  	
   

  
	
  SECTION 3.08

  	
  No Undisclosed Liabilities

  	
  16

  
	
   

  	
   

  	
   

  
	
  SECTION 3.09

  	
  Conduct in the Ordinary Course; Absence of Certain
  Changes, Events and Conditions

  	
  16

  
	
   

  	
   

  	
   

  
	
  SECTION 3.10

  	
  Litigation

  	
  17

  
	
   

  	
   

  	
   

  
	
  SECTION 3.11

  	
  Compliance with Applicable Laws

  	
  18

  
	
   

  	
   

  	
   

  
	
  SECTION 3.12

  	
  Environmental Matters

  	
  18

  
	
   

  	
   

  	
   

  
	
  SECTION 3.13

  	
  Title to Assets; Real Property

  	
  20

  
	
   

  	
   

  	
   

  
	
  SECTION 3.14

  	
  Intellectual Property Rights

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 3.15

  	
  Insurance

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 3.16

  	
  Employee Benefit Matters

  	
  23

  
	
   

  	
   

  	
   

  
	
  SECTION 3.17

  	
  Labor Matters

  	
  26

  
	
   

  	
   

  	
   

  
	
  SECTION 3.18

  	
  Taxes

  	
  27

  
	
   

  	
   

  	
   

  
	
  SECTION 3.19

  	
  Material Contracts

  	
  29

  
	
   

  	
   

  	
   

  
	
  SECTION 3.20

  	
  Racing License

  	
  31

  



 


i

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 3.21

  	
  Suppliers

  	
  31

  
	
   

  	
   

  	
   

  
	
  SECTION 3.22

  	
  Books and Records

  	
  31

  
	
   

  	
   

  	
   

  
	
  SECTION 3.23

  	
  Brokers

  	
  32

  
	
   

  	
   

  	
   

  
	
  SECTION 3.24

  	
  Racing Days

  	
  32

  
	
   

  	
   

  	
   

  
	
  SECTION 3.25

  	
  Related Parties

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES OF PURCHASER

  	
  32

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01

  	
  Incorporation and Authority of Purchaser

  	
  32

  
	
   

  	
   

  	
   

  
	
  SECTION 4.02

  	
  No Conflict

  	
  33

  
	
   

  	
   

  	
   

  
	
  SECTION 4.03

  	
  Consents and Approvals

  	
  33

  
	
   

  	
   

  	
   

  
	
  SECTION 4.04

  	
  Investment Purpose

  	
  34

  
	
   

  	
   

  	
   

  
	
  SECTION 4.05

  	
  Financing

  	
  34

  
	
   

  	
   

  	
   

  
	
  SECTION 4.06

  	
  Brokers

  	
  34

  
	
   

  	
   

  	
   

  
	
  SECTION 4.07

  	
  Specified Investors; Cannery Casino Resorts

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  ADDITIONAL AGREEMENTS

  	
  34

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01

  	
  Conduct of Business Prior to the Closing

  	
  34

  
	
   

  	
   

  	
   

  
	
  SECTION 5.02

  	
  Access to Information

  	
  35

  
	
   

  	
   

  	
   

  
	
  SECTION 5.03

  	
  Books and Records

  	
  36

  
	
   

  	
   

  	
   

  
	
  SECTION 5.04

  	
  Governmental Approvals and Consents; Application
  Fee; Closing Conditions

  	
  36

  
	
   

  	
   

  	
   

  
	
  SECTION 5.05

  	
  Confidentiality

  	
  41

  
	
   

  	
   

  	
   

  
	
  SECTION 5.06

  	
  Use of Magna Name

  	
  42

  
	
   

  	
   

  	
   

  
	
  SECTION 5.07

  	
  Investigation

  	
  43

  
	
   

  	
   

  	
   

  
	
  SECTION 5.08

  	
  Limited Non-Compete

  	
  43

  
	
   

  	
   

  	
   

  
	
  SECTION 5.09

  	
  Remediation

  	
  44

  
	
   

  	
   

  	
   

  
	
  SECTION 5.10

  	
  No Negotiation

  	
  45

  
	
   

  	
   

  	
   

  
	
  SECTION 5.11

  	
  Title

  	
  45

  
	
   

  	
   

  	
   

  
	
  SECTION 5.12

  	
  Further Action

  	
  46

  
	
   

  	
   

  	
   

  
	
  SECTION 5.13

  	
  Excluded Items

  	
  46

  
	
   

  	
   

  	
   

  
	
  SECTION 5.14

  	
  Estoppels

  	
  46

  



 


ii

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 5.15

  	
  Cooperation in Preparation of Alternative
  Application

  	
  46

  
	
   

  	
   

  	
   

  
	
  SECTION 5.16

  	
  Financial Statements

  	
  46

  
	
   

  	
   

  	
   

  
	
  SECTION 5.17

  	
  Separation

  	
  48

  
	
   

  	
   

  	
   

  
	
  SECTION 5.18

  	
  Notification

  	
  48

  
	
   

  	
   

  	
   

  
	
  SECTION 5.19

  	
  Environmental Report

  	
  48

  
	
   

  	
   

  	
   

  
	
  SECTION 5.20

  	
  XpressBet Matters

  	
  48

  
	
   

  	
   

  	
   

  
	
  SECTION 5.21

  	
  [Reserved]

  	
  49

  
	
   

  	
   

  	
   

  
	
  SECTION 5.22

  	
  Phase I

  	
  49

  
	
   

  	
   

  	
   

  
	
  SECTION 5.23

  	
  Slot Machine Taxes

  	
  49

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  EMPLOYEE MATTERS

  	
  49

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01

  	
  Arrangements; Payroll Obligations

  	
  49

  
	
   

  	
   

  	
   

  
	
  SECTION 6.02

  	
  Benefit Plans and Transferred Employee Related
  Obligations

  	
  50

  
	
   

  	
   

  	
   

  
	
  SECTION 6.03

  	
  Intentionally Omitted

  	
  50

  
	
   

  	
   

  	
   

  
	
  SECTION 6.04

  	
  Intentionally Omitted

  	
  51

  
	
   

  	
   

  	
   

  
	
  SECTION 6.05

  	
  Employee Benefits Indemnity

  	
  51

  
	
   

  	
   

  	
   

  
	
  SECTION 6.06

  	
  Third-Party Claims

  	
  51

  
	
   

  	
   

  	
   

  
	
  SECTION 6.07

  	
  Survival

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  TAX MATTERS

  	
  52

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01

  	
  Indemnity

  	
  52

  
	
   

  	
   

  	
   

  
	
  SECTION 7.02

  	
  Returns and Payments

  	
  53

  
	
   

  	
   

  	
   

  
	
  SECTION 7.03

  	
  Refunds

  	
  53

  
	
   

  	
   

  	
   

  
	
  SECTION 7.04

  	
  Contests

  	
  54

  
	
   

  	
   

  	
   

  
	
  SECTION 7.05

  	
  Time of Payment

  	
  55

  
	
   

  	
   

  	
   

  
	
  SECTION 7.06

  	
  Cooperation and Exchange of Information

  	
  55

  
	
   

  	
   

  	
   

  
	
  SECTION 7.07

  	
  Conveyance Taxes

  	
  55

  
	
   

  	
   

  	
   

  
	
  SECTION 7.08

  	
  Miscellaneous

  	
  56

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  CONDITIONS TO CLOSING

  	
  56

  
	
   

  	
   

  	
   

  
	
  SECTION 8.01

  	
  Conditions to Obligations of All Parties

  	
  56

  



 


iii

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 8.02

  	
  Conditions to Obligations of Seller

  	
  57

  
	
   

  	
   

  	
   

  
	
  SECTION 8.03

  	
  Conditions to Obligations of Purchaser

  	
  58

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  INDEMNIFICATION

  	
  61

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01

  	
  Survival

  	
  61

  
	
   

  	
   

  	
   

  
	
  SECTION 9.02

  	
  Indemnification by Purchaser

  	
  61

  
	
   

  	
   

  	
   

  
	
  SECTION 9.03

  	
  Indemnification by Seller

  	
  63

  
	
   

  	
   

  	
   

  
	
  SECTION 9.04

  	
  Indemnification Procedures, Etc

  	
  69

  
	
   

  	
   

  	
   

  
	
  SECTION 9.05

  	
  Payments

  	
  72

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  TERMINATION, AMENDMENT AND WAIVER

  	
  72

  
	
   

  	
   

  	
   

  
	
  SECTION 10.01

  	
  Termination

  	
  72

  
	
   

  	
   

  	
   

  
	
  SECTION 10.02

  	
  Effect of Termination

  	
  74

  
	
   

  	
   

  	
   

  
	
  SECTION 10.03

  	
  Waiver

  	
  74

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  GENERAL PROVISIONS

  	
  74

  
	
   

  	
   

  	
   

  
	
  SECTION 11.01

  	
  Expenses; Pro-rations

  	
  74

  
	
   

  	
   

  	
   

  
	
  SECTION 11.02

  	
  Notices

  	
  75

  
	
   

  	
   

  	
   

  
	
  SECTION 11.03

  	
  Public Announcements

  	
  76

  
	
   

  	
   

  	
   

  
	
  SECTION 11.04

  	
  Headings

  	
  76

  
	
   

  	
   

  	
   

  
	
  SECTION 11.05

  	
  Severability

  	
  76

  
	
   

  	
   

  	
   

  
	
  SECTION 11.06

  	
  Entire Agreement

  	
  76

  
	
   

  	
   

  	
   

  
	
  SECTION 11.07

  	
  Assignment

  	
  77

  
	
   

  	
   

  	
   

  
	
  SECTION 11.08

  	
  No Third-Party Beneficiaries

  	
  77

  
	
   

  	
   

  	
   

  
	
  SECTION 11.09

  	
  Amendment

  	
  77

  
	
   

  	
   

  	
   

  
	
  SECTION 11.10

  	
  Governing Law; Jurisdiction; Service of Process

  	
  77

  
	
   

  	
   

  	
   

  
	
  SECTION 11.11

  	
  WAIVER OF JURY TRIAL

  	
  77

  
	
   

  	
   

  	
   

  
	
  SECTION 11.12

  	
  Counterparts

  	
  77

  
	
   

  	
   

  	
   

  
	
  SECTION 11.13

  	
  Specific Performance

  	
  77

  
	
   

  	
   

  	
   

  
	
  SECTION 11.14

  	
  Prevailing Party

  	
  77

  



 


iv

















 


	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit 1.01A

  	
   

  	
  Form of Note Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit 1.01B

  	
   

  	
  Meadows Facility

  
	
   

  	
   

  	
   

  
	
  Exhibit 1.01C

  	
   

  	
  MEC Items

  
	
   

  	
   

  	
   

  
	
  Exhibit 1.01D

  	
   

  	
  Off-Track Betting Facilities

  
	
   

  	
   

  	
   

  
	
  Exhibit 1.01E

  	
   

  	
  Racing Services Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit 1.01F

  	
   

  	
  XpressBet Amendments

  
	
   

  	
   

  	
   

  
	
  Exhibit 5.11

  	
   

  	
  Title Commitment

  
	
   

  	
   

  	
   

  
	
  Exhibit 5.13

  	
   

  	
  Excluded Items

  
	
   

  	
   

  	
   

  
	
  Exhibit 8.02(g)

  	
   

  	
  Form of Opinion of Purchaser Parties’ Counsel

  
	
   

  	
   

  	
   

  
	
  Exhibit 8.03(j)

  	
   

  	
  Form of Opinion of Seller Parties’ Counsel

  



 


v

















 


STOCK PURCHASE AGREEMENT, dated November 8, 2005
(this “Agreement”), between MAGNA ENTERTAINMENT CORP., a Delaware
corporation (“Seller”), and PA MEADOWS, LLC, a Delaware limited
liability company (“Purchaser”).


 


WHEREAS, Seller owns (a) all the issued and
outstanding shares of common stock of MEC Pennsylvania Racing, Inc., a
Pennsylvania corporation (“MECPenn”), (b) all the issued and outstanding
shares of common stock of Mountain Laurel Racing, Inc., a Delaware corporation
(“MLR”), and (c) all the issued and outstanding shares of common
stock of Washington Trotting Association, Inc., a Delaware corporation (“WTA”)
(MECPenn, MLR and WTA being collectively referred to herein as the “Companies,”
and each individually as a “Company,” and the issued and outstanding
shares of common stock of the Companies being referred to herein collectively
as the “Shares”); and


 


WHEREAS, Seller wishes to sell to Purchaser, and
Purchaser wishes to purchase from Seller, the Shares upon the terms and subject
to the conditions set forth herein;


 


NOW, THEREFORE, in consideration of the premises and
of the mutual agreements and covenants hereinafter set forth, Seller and
Purchaser hereby agree as follows:


 


ARTICLE
I


 


DEFINITIONS


 


SECTION 1.01                    Certain
Defined Terms. (a) As used in this Agreement, the following terms
shall have the following meanings:


 


“Action” means any
claim, action, suit, arbitration, inquiry, proceeding or investigation by or
before any Governmental Authority.


 


“Affiliate” of a
specified Person means 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.


 


“Business Day”
means 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 Toronto or the City
of Los Angeles.


 


“Code” or “Internal
Revenue Code” means the Internal Revenue Code of 1986, as amended.


 


“Commission” means
the Pennsylvania Harness Racing Commission established by the Pennsylvania Act.


 


“Company Disclosure
Schedule” means the Disclosure Schedule dated as of the date hereof
delivered to Purchaser by Seller.


 


“Consummation Date”
shall have the meaning assigned to such term in the Note Agreement.


 


1

















 


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


 


“Employee” means
those Persons employed by the Companies and Subsidiaries immediately prior to
the Closing, including those employees on any authorized leave of absence,
including, without limitation, vacation, disability (work-related or otherwise)
or sick leave, whether or not such employees return to active employment with
any Company or Subsidiary.


 


“Encumbrance” means
a pledge, lien, security interest, mortgage, charge, adverse claim of ownership
or use, option, right of way, right of first refusal or other encumbrance of
any kind.


 


“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.


 


“ERISA Affiliate”
shall have the meaning assigned to such term in the Note Agreement.


 


“Escrow Agreement”
shall have the meaning ascribed to such term in the Holdback Agreement.


 


“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and any successor law
and regulations issued pursuant thereto.


 


“Excluded Subsidiaries”
means Allegheny Harness Racing Association, Inc., Allegheny Thoroughbred Racing
Association, Inc. and 20002 Delaware Inc.


 


“GAAP” means
United States generally accepted accounting principles in effect from time to
time applied consistently throughout the period involved.


 


“Gaming Act” means
the Pennsylvania Race Horse Development and Gaming Act, as amended, and any
rules or regulations promulgated thereunder.


 


“Gaming Board”
means the Pennsylvania Gaming Control Board established by the Gaming Act.


 


“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 Commission and the Gaming Board.


 


2

















 


“Governmental Order”
means any order, writ, judgment, injunction, decree, stipulation, determination
or award entered by or with any Governmental Authority.


 


“Gulfstream Loan
Agreement” means the Amended and Restated Loan Agreement dated
July 22, 2005 by and among Gulfstream Park Racing Association, Inc., MID
Islandi SF, MECPenn, MLR, WTA, Remington Park, Inc. and GPRA Thoroughbred
Training Center, Inc., as amended, restated or modified from time to time.


 


“Holdback Agreement”
means the Holdback Agreement by and between Seller and Purchaser, substantially
in the form attached to the Note Agreement as Exhibit H, as it may be amended
from time to time.


 


“Holdback Documents”
means the Holdback Agreement, the Escrow Agreement, the Escrow Security (as
defined in the Holdback Agreement), any other documents entered into in
replacement or substitution thereof and any other documents or instruments
executed and delivered in connection therewith.


 


“HSR Act” means
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder.


 


“Intellectual Property
Rights” means all (a) patent and patent applications,
(b) trademarks, service marks, logos, trade dress, trade names and
corporate names and registrations and applications for registration thereof,
including without limitation, the name “The Meadows”, (c) copyrights,
whether registered or unregistered, and registrations and applications for
registration thereof and (d) trade secrets, formulas, inventions,
invention disclosures, computer software and other proprietary business and
intellectual property rights that have been in the last three years or are
employed in the conduct of the business of the Companies and the Subsidiaries
as it is now being conducted, but excluding the Magna Name.


 


“IRS” means the Internal
Revenue Service of the United States.


 


“knowledge of Seller”
or “Seller’s knowledge” means the actual knowledge of Drew Shubeck,
David Wiegmann, Michael Jeannot, Tom Hodgson, Brian Budden, Andrew Staniusz and
Scott Daruty or such other knowledge that such applicable person should
reasonably have acquired through the performance of his job in accordance with
his duties.


 


“Law” or “Laws”
means 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.


 


“Lease” means the
Lease Agreement, dated as of July 22, 2003, as modified by that certain Lease
Renewal, dated as of July 30, 2004, as further modified by that certain Lease
Renewal, dated as of March 3, 2005 by and between MEC Penn, as tenant, and D.
Fuchs Enterprises, LLC, as landlord.


 


3

















 


“Liabilities”
means any and all debts, liabilities and obligations of any kind, character or
nature whatsoever, whether accrued or fixed, known or unknown, asserted or
unasserted, absolute or contingent, matured or unmatured, secured or unsecured
or determined or determinable, including, without limitation, those arising
under any Law (excluding any Environmental Law), Action or Governmental Order
and those arising under any contract, agreement, arrangement, commitment,
guarantee or undertaking.


 


“Losses” of a
Person means any and all claims, actions or causes of action, assessments,
losses, damages, deficiencies, liabilities, costs, awards, judgments and
expenses (including reasonable legal and expert fees and expenses, interest,
penalties, and all reasonable amounts paid in investigation, defense or
settlement of any of the foregoing) suffered or incurred by such Person.


 


“Material Adverse
Effect” means any circumstance, change in, or effect on any Company or
Subsidiary that is or would reasonably be expected to be materially adverse to
the business, assets, condition (financial or otherwise), or the results of
operations of the Companies and the Subsidiaries, taken as a whole, and taking
into account the prospects of obtaining and maintaining a Conditional Category
1 license and a Category 1 license under the Gaming Act and developing a casino
on the Real Property (it being understood that such taking into account of such
prospects shall in no event be interpreted as any Company or any Subsidiary
being required to be qualified or licensed to conduct any gaming operations in
any jurisdiction on or prior to the Closing Date); provided, however, that “Material Adverse
Effect” shall not include any circumstance, change in or effect on any Company
or any Subsidiary directly or indirectly arising out of or attributable to
(a) changes or effects in the financial or securities markets or the
regulatory conditions or the economy in general that generally affect the
gaming industry or the industries in which the Companies and their respective
Subsidiaries operate, (b) any actions taken or omitted to be taken by
Seller or the Companies or any Subsidiary pursuant to the terms of this
Agreement or any actions taken by Purchaser or (c) any effects resulting
solely from the announcement of the transactions contemplated by this
Agreement.


 


“Meadows Facility”
means the racetrack facility, buildings, improvements, land and other assets
located on the land described on Exhibit 1.01B hereto.


 


“MEC Items” means
those items as set forth on Exhibit 1.01C.


 


“MID Bridge Loan
Agreement” means the Bridge Loan Agreement dated July 22, 2005 by and
among Seller, MECPenn, MLR, WTA and MID Islandi SF, as amended, restated or
modified from time to time.


 


“MID Loan Documents”
means the Magna Loan Documents (as defined in the Note Agreement).


 


“Note Agreement”
means that certain Post-Closing and Note Issuance Agreement dated on or about
the Closing Date among Purchaser in its capacity as purchaser hereunder and
borrower thereunder, certain Affiliates of Purchaser, Seller in its capacity


 


4

















 


as seller hereunder and agent thereunder, and the
holders of the Tranche A Note and Tranche B Note party thereto from time to
time, substantially in the form attached hereto as Exhibit 1.01A, as it
may be amended from time to time.


 


“Note Documents”
shall have the meaning assigned to such term in the Note Agreement.


 


“OTB Facilities”
means the off track betting facilities identified on Exhibit 1.01D hereto.


 


“Pennsylvania Act”
means the Pennsylvania Race Horse Industry Reform Act, as amended, and the
rules and regulations of the Commission promulgated thereunder.


 


“Permits” means
all permits, licenses, franchises, approvals, authorizations, registrations,
certificates, variances and similar rights obtained, or required to be
obtained, from Governmental Authorities (other than Environmental Permits).


 


“Person” means an
individual, corporation, partnership, joint venture, limited liability company,
person (including, without limitation, a “person” as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended), trust,
association or another entity.


 


“Post-Closing Period”
means any Tax period beginning after the Closing Date.


 


“Pre-Closing Period”
means any Tax period ending on or before the Closing Date.


 


“Purchaser Disclosure
Schedule” means the Disclosure Schedule dated as of the date hereof
delivered to Seller by Purchaser.


 


“Purchaser Material
Adverse Effect” means any circumstance, change in, or effect on Purchaser
that is or would reasonably be expected to be materially adverse to the
business, assets, condition (financial or otherwise), or the results of
operations of Purchaser, taken as a whole and taking into account the prospects
of obtaining and maintaining a Conditional Category 1 license and a
Category 1 license under the Gaming Act and developing a casino on the Real
Property (it being understood that such taking into account of such prospects
shall in no event be interpreted as Purchaser being required to be qualified or
licensed to conduct any gaming operations in any jurisdictions on or prior to
the Closing Date); provided, however, that “Purchaser Material
Adverse Effect” shall not include any circumstance, change in or effect on
Purchaser directly or indirectly arising out of or attributable to
(a) changes or effects in the financial or securities markets or the
regulatory conditions or the economy in general that generally affect the
gaming industry or the industries in which Purchaser operates, (b) any
actions taken or omitted to be taken by Purchaser pursuant to the terms of this
Agreement or any actions taken by Seller or (c) any effects resulting solely
from the announcement of the transactions contemplated by this Agreement.


 


“Purchaser Note
Developments” shall have the meaning assigned to such term in the Note
Agreement.


 


5

















 


“Purchaser’s
Accountants” means Piercy Bowler Taylor & Kern.


 


“Racing Services
Agreement” means the Racing Services Agreement by and between Affiliates of
Purchaser and Seller in the form attached hereto as Exhibit 1.01E, as it may be
amended from time to time.


 


“Real Property”
means the real property owned, leased or subleased by any Company or any
Subsidiary, together with all buildings, structures and facilities located
thereon.


 


“Reference Balance
Sheet Date” means December 31, 2004.


 


“Reference Balance
Sheet” means with respect to the Companies and their Subsidiaries the
audited combined balance sheet of the Companies and their Subsidiaries dated as
of December 31, 2004, a copy of which is set forth in Section 3.07 of the
Company Disclosure Schedule, including the notes and schedules thereto.


 


“Regulation S-X”
means Regulation S-X promulgated by the Securities and Exchange Commission.


 


“Repayment Date”
means the date on which (i) Purchaser shall have paid the Tranche A Note
in cash in full in accordance with its terms and (ii) the Holdback
Documents shall have been executed and delivered in accordance with
Section 3.2 of the Note Agreement in replacement of the Tranche B Note.


 


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


 


“Seller Note
Developments” shall have the meaning assigned to such term in the Note
Agreement.


 


“Seller Notes”
means the Tranche A Note and the Tranche B Note.


 


“Seller’s Accountants”
means Ernst & Young, L.L.P.


 


“Specified Funds”
means the two funds that own, as of the date hereof, all of the indirect
non-voting interest in Purchaser.


 


“Specified Investor”
means each Person that owns as of the date hereof a 5% or greater partnership
interest in the Specified Funds (other than the principals of Purchaser’s
equity sponsor and other than any owners of Millennium Gaming, Inc. (including
without limitation Mr. William Paulos and Mr. William Wortman)).


 


“Stock Transfer”
shall have the meaning assigned to such term in the Note Agreement.


 


“Stock Transfer
Trigger Date” shall mean the earlier of (i) the date on which any of the
events set forth in clauses (i)-(vi) of Section 3.10(a) of the Note Agreement
occurs


 


6

















 


or (ii) the date any remedies under Section 8.2(c) of
the Note Agreement may be exercised by Seller.


 


“Subsidiary” or “Subsidiaries”
means any and all corporations, partnerships, joint ventures and other entities
Controlled By any Company, directly or indirectly through one or more
intermediaries other than the Excluded Subsidiaries. As of the date hereof,
Subsidiaries of Companies are set forth on Section 3.04(a) of the Company
Disclosure Schedule and shall, for the sake of clarity, include MECRacing and
exclude the Excluded Subsidiaries. All references to “Subsidiary” or
“Subsidiaries” herein including any reference to any Company’s Subsidiary or
“its Subsidiaries” or “their Subsidiaries” (referring to any Company’s
Subsidiaries) shall exclude the Excluded Subsidiaries.


 


“Tax” or “Taxes”
means any and all U.S. federal, state, local or foreign taxes, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority or amount owing
to any party relating to Taxes arising under any Tax law or agreement
(including any joint venture or partnership agreement), including, without
limitation: taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers’ compensation, unemployment
compensation, or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs duties, tariffs and similar
charges, whether disputed or not and including any obligations to indemnify or
otherwise assume or succeed to the Tax liability of any other Person.


 


“Tax Return” means
any return, declaration, report, claim for refund, form of other information or
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendments thereof.


 


“Tranche A Note”
means the Tranche A Junior Notes issued by Purchaser on the Closing Date
pursuant to the Note Agreement in an aggregate principal amount of
$175,000,000, as it may be amended or replaced from time to time in accordance
with the Note Agreement.


 


“Tranche B Note”
means the Tranche B Junior Notes issued by Purchaser on the Closing Date
pursuant to the Note Agreement in an aggregate principal amount of $25,000,000,
as it may be amended or replaced from time to time in accordance with the Note
Agreement.


 


“Transaction Documents”
means this Agreement, the Racing Services Agreement, the XpressBet Amendments
and the Holdback Documents.


 


“XpressBet Amendments”
means the XpressBet Lease Amendment, XpressBet Wagering Agreement Amendment and
the XpressBet Banking Agreement Amendment.


 


“XpressBet Banking
Agreement Amendment” means the First Amendment to the letter agreement
regarding Pennsylvania account wageror bank accounts, dated as of


 


7

















 


October 5, 2005, by and between WTA and MLR, on
the one hand, and XpressBet, Inc., on the other hand, substantially in the form
attached hereto as Exhibit 1.01F-1.


 


“XpressBet Lease
Amendment” means the First Amendment to the Lease Agreement, dated
July 15, 2005, by and between MECPenn and XpressBet, Inc., substantially
in the form attached hereto as Exhibit 1.01F-2.


 


“XpressBet Wagering
Agreement Amendment” means the First Amendment to the Advanced Account
Wagering and Services Agreement, effective as of July 15, 2005 and dated
as of August 9, 2005, by and between WTA and MLR, on the one hand, and
XpressBet, Inc., on the other hand, substantially in the form attached hereto
as Exhibit 1.01F-3.


 


(b)                                 Each
of the following terms is defined in the section set forth opposite such terms
below:


 


	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  2004 Audited Balance
  Sheet

  	
   

  	
  5.16(b)

  
	
  2005 Audited Financial
  Statements

  	
   

  	
  5.16(a)

  
	
  2006 Interim Financial
  Statements

  	
   

  	
  5.16(a)

  
	
  2005 Quarterly Financial
  Statements

  	
   

  	
  5.16(a)

  
	
  Action Notice

  	
   

  	
  8.03(m)

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Applicable Date

  	
   

  	
  9.02(a)

  
	
  Applicable Local
  Authorities

  	
   

  	
  9.03(a)

  
	
  Alternative Scenario

  	
   

  	
  5.04(c)(i)

  
	
  Annual Applicable
  Amount

  	
   

  	
  9.03

  
	
  Assets

  	
   

  	
  3.13(a)

  
	
  Benefit Plans

  	
   

  	
  3.16(a)

  
	
  CERCLA

  	
   

  	
  3.12(c)

  
	
  Claim Notice

  	
   

  	
  9.04(a)

  
	
  Closing

  	
   

  	
  2.03(a)

  
	
  Closing Date

  	
   

  	
  2.03(a)

  
	
  COBRA

  	
   

  	
  6.02(c)

  
	
  Commission Approval

  	
   

  	
  8.01(c)

  
	
  Company; Companies

  	
   

  	
  Recitals

  
	
  Company Employees

  	
   

  	
  6.01

  
	
  Company Financial
  Statements

  	
   

  	
  3.07(a)

  
	
  Company Interim
  Financial Statements

  	
   

  	
  3.07(a)

  
	
  Company Plans

  	
   

  	
  3.16(a)

  
	
  Confidentiality
  Agreement

  	
   

  	
  5.05(a)

  
	
  Contest

  	
   

  	
  7.04(b)

  
	
  Election

  	
   

  	
  7.08(a)

  
	
  Employee Agreements

  	
   

  	
  3.16(a)

  
	
  Environmental Actions

  	
   

  	
  3.12(c)

  
	
  Environmental Laws

  	
   

  	
  3.12(c)

  
	
  Environmental Permits

  	
   

  	
  3.12(c)

  



 


8

















 


	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Excluded Items

  	
   

  	
  5.13

  
	
  Existing Stock

  	
   

  	
  5.06(b)

  
	
  Former Subsidiaries

  	
   

  	
  3.04(d)

  
	
  Fundamental
  Representations

  	
   

  	
  9.01

  
	
  Gaming Application

  	
   

  	
  5.04(c)(i)

  
	
  Gaming Application Fee

  	
   

  	
  5.04(d)

  
	
  Hazardous Materials

  	
   

  	
  3.12(c)

  
	
  Indemnified Party

  	
   

  	
  9.04(a)

  
	
  Indemnifying Party

  	
   

  	
  9.04(a)

  
	
  Insured Exception

  	
   

  	
  5.11(c)

  
	
  lease

  	
   

  	
  3.19(a)

  
	
  Local Applicable Date

  	
   

  	
  9.03(a)

  
	
  Local Share Assessment
  Losses

  	
   

  	
  9.03(a)

  
	
  Local Tax Assessment
  Date

  	
   

  	
  9.03(a)

  
	
  Magna Name

  	
   

  	
  5.06(a)

  
	
  Material Contracts

  	
   

  	
  3.19(a)

  
	
  MEC Health Plan

  	
   

  	
  6.02(a)

  
	
  MECPenn

  	
   

  	
  Recitals

  
	
  MECPenn Common Stock

  	
   

  	
  3.03(a)

  
	
  MECRacing

  	
   

  	
  3.20

  
	
  MLR

  	
   

  	
  Recitals

  
	
  MLR Common Stock

  	
   

  	
  3.03

  
	
  Multiemployer Plans

  	
   

  	
  3.16(a)

  
	
  Non-Competition
  Covenant

  	
   

  	
  5.08(a)

  
	
  Non-Competition Period

  	
   

  	
  5.08(a)

  
	
  Other Purchaser
  Materials

  	
   

  	
  5.04(e)

  
	
  Paddock Refurbishment

  	
   

  	
  3.13(e)

  
	
  Pension Survival Period

  	
   

  	
  9.03(a)(viii)

  
	
  Permitted Exceptions

  	
   

  	
  3.13(a)

  
	
  Phase I

  	
   

  	
  5.22

  
	
  Proposed Development

  	
   

  	
  3.13(e)

  
	
  Purchaser’s Notice

  	
   

  	
  5.11(c)

  
	
  Purchase Price

  	
   

  	
  2.02

  
	
  Purchaser

  	
   

  	
  Preamble

  
	
  Purchaser Application
  Materials

  	
   

  	
  5.04(e)

  
	
  Purchaser Developments

  	
   

  	
  8.02(b)

  
	
  Qualified Plans

  	
   

  	
  3.16(h)

  
	
  Releases

  	
   

  	
  3.12(c)

  
	
  Replacement Trigger

  	
   

  	
  5.04(d)

  
	
  RCRA

  	
   

  	
  3.12(c)

  
	
  Seller

  	
   

  	
  Preamble

  
	
  Seller Developments

  	
   

  	
  8.03(b)

  
	
  Shares

  	
   

  	
  Recitals

  
	
  Specified Notes

  	
   

  	
  5.01(c)

  
	
  Survey

  	
   

  	
  5.11(a)

  



 


9

















 


	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Tax Adjusted Local
  Share Assessment Losses

  	
   

  	
  9.03(a)

  
	
  Tax Benefit

  	
   

  	
  9.03(a)

  
	
  Terminating Purchaser’s
  Breach

  	
   

  	
  10.01(d)

  
	
  Terminating Seller’s
  Breach

  	
   

  	
  10.01(c)

  
	
  Title Commitment

  	
   

  	
  5.11(a)

  
	
  Title Company

  	
   

  	
  5.11(a)

  
	
  Title Objection

  	
   

  	
  5.11(b)

  
	
  Title Policy

  	
   

  	
  8.03(k)

  
	
  Transaction Scenario

  	
   

  	
  5.04(c)(i)

  
	
  Transferred Employees

  	
   

  	
  6.01

  
	
  True-Up

  	
   

  	
  9.03(a)

  
	
  WTA

  	
   

  	
  Recitals

  
	
  WTA Common Stock

  	
   

  	
  3.03

  



 


ARTICLE
II


 


PURCHASE
AND SALE


 


SECTION 2.01                    Purchase
and Sale. Upon the terms and subject to the conditions set forth in this
Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase
from Seller, on the Closing Date, the Shares.


 


SECTION 2.02                    Purchase
Price. The aggregate purchase price for the Shares (and the limited
non-compete set forth in Section 5.08) shall be $200,000,000 (the “Purchase
Price”), of which (i) $175,000,000 shall be paid with the issuance of
the Tranche A Note to Seller or its permitted designee in accordance with the
Note Agreement on the Closing Date as provided in Section 2.03(c) and
(ii) $25,000,000 shall be paid with the issuance of the Tranche B Note to
Seller or its permitted designee in accordance with the Note Agreement on the
Closing Date as provided in Section 2.03(c) (in each case together with the
execution and delivery of each of the other Note Documents). Within 30 days
after Closing, Seller will provide Purchaser with an allocation of the Purchase
Price (less the $2,000,000 allocated pursuant to Section 5.08 hereof) among
MECPenn, MLR, WTA and the Subsidiaries for approval, such approval not to be
unreasonably withheld. The allocation shall be adjusted by the parties to
reflect any payments made under the Seller Notes in a manner consistent with
the initial allocation. The parties agree that the allocation determined under
this Section 2.02 shall be binding and the parties shall not take a position
that is inconsistent with such allocation in any matter.


 


SECTION 2.03                    Closing.
(a) Subject to the terms and conditions of this Agreement, the sale and
purchase of the Shares contemplated hereby shall take place at a closing (the “Closing”)
to be held at 10:00 a.m., New York time, no later than two Business Days after
the last of the conditions to Closing set forth in Sections 8.01, 8.02 and 8.03
has been satisfied or waived (other than conditions which, by their nature, are
to be satisfied on the Closing Date). The Closing will occur at the offices of
O’Melveny & Myers LLP, 7 Times Square, New York, New York, or at such other
time or on such other date or at such other place as Seller and


 


10

















 


Purchaser may
mutually agree upon in writing (the day on which the Closing takes place being
the “Closing Date”).


 


(b)                                 At
the Closing, Seller shall deliver or cause to be delivered to Purchaser stock
certificates evidencing the Shares duly endorsed in blank or accompanied by
stock powers duly executed in blank, in proper form for transfer and with all
required stock transfer tax stamps affixed.


 


(c)                                  At
the Closing, against delivery of the stock certificates evidencing the Shares,
Purchaser shall deliver to Seller or its permitted designee in accordance with
the Note Agreement (i) the executed Tranche A Note in an aggregate
principal amount equal to $175,000,000 and (ii) the executed Tranche B
Note in an aggregate principal amount equal to $25,000,000, in each case
together with the other Note Documents executed by each party thereto (other
than Seller).


 


ARTICLE
III


 


REPRESENTATIONS
AND WARRANTIES OF SELLER


 


Seller represents and warrants to Purchaser as of the
date hereof (other than such representations and warranties as are made as of
another date) as follows:


 


SECTION 3.01                    Incorporation
and Authority of Seller. Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware. Seller is duly
qualified as a foreign corporation to do business in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities as currently conducted makes such qualification necessary, except
for such failures to be so qualified that would not have a Material Adverse
Effect. Seller has all necessary corporate power and authority to enter into
this Agreement and the other Transaction Documents to which Seller is a party,
to carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby or thereby. The execution and delivery by
Seller of this Agreement and any other Transaction Document to which Seller is
a party, the performance by Seller of its obligations hereunder and thereunder
and the consummation by Seller of the transactions contemplated hereby and
thereby have been duly authorized by all requisite corporate action on the part
of Seller. This Agreement has been duly executed and delivered by Seller, and
(assuming due authorization, execution and delivery by Purchaser) this
Agreement constitutes a legal, valid and binding obligation of Seller
enforceable against it in accordance with its terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors’ rights generally and subject, as to enforceability,
to the effect of general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). When each Transaction
Document to which Seller is or will be a party has been duly executed and
delivered by Seller (assuming due authorization, execution and delivery by each
other party thereto), such Transaction Document will constitute a legal and
binding obligation of Seller enforceable against it in accordance with its
terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors’ rights generally
and subject, as to enforceability, to the effect of general


 


11

















 


principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).


 


SECTION 3.02                    Organization,
Authority and Qualification of the Companies. Each Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all necessary corporate power and authority
to own, operate or lease the properties and assets now owned, operated or
leased by it and to carry on its business as it has been and is currently
conducted. Section 3.02 of the Company Disclosure Schedule sets forth each
jurisdiction in which each Company is licensed or qualified to do business, and
each Company is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business as currently conducted makes such licensing or
qualification necessary, except as set forth on Section 3.02 of the Company
Disclosure Schedule and except for such failures which would not have a
Material Adverse Effect. All corporate actions taken by each Company in connection
with this Agreement and the other Transaction Documents will be duly authorized
on or prior to the Closing, and none of the Companies has taken any such action
that conflicts with, constitutes a default under or results in a violation of
any provision of its Certificate of Incorporation (or Articles of
Incorporation) or By-laws. True, complete and correct copies of the Certificate
of Incorporation and By-laws (or similar organizational documents) of each
Company, each as in effect on the date hereof, have been delivered by Seller to
Purchaser.


 


SECTION 3.03                    Capital
Stock of the Companies; Ownership of the Shares. (a) The authorized
capital stock of MECPenn consists of 1,000 shares of common stock, par value
$1.00 per share (“MECPenn Common Stock”), the authorized capital stock
of MLR consists of 10,000 shares of common stock, no par value (“MLR Common
Stock”), and the authorized capital stock of WTA consists of 10,000 shares
of common stock, no par value (“WTA Common Stock”). As of the date
hereof, 100 shares of MECPenn Common Stock, 100 shares of MLR Common Stock and
100 shares of WTA Common Stock are issued and outstanding, all of which have
been validly authorized and are validly issued, fully paid and nonassessable.
None of the Shares was issued in violation of any preemptive rights. There are
no options, warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character relating to the capital stock of
any Company or obligating Seller or any Company to issue or sell any shares of
capital stock of, or any other interest in, any Company. Except as set forth in
Section 3.03 of the Company Disclosure Schedule or except as may arise from the
MID Loan Documents or the Note Documents, there are no outstanding contractual
obligations of any Company to repurchase, redeem or otherwise acquire any
shares of its common stock or to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any other Person.
Except as disclosed in Section 3.03 of the Company Disclosure Schedule, the
Shares constitute all the issued and outstanding capital stock of the Companies
and are owned of record and beneficially solely by Seller free and clear of all
Encumbrances (other than the Encumbrances contemplated by the MID Loan
Documents or the Note Documents).


 


(b)                                 Upon
consummation of the transactions contemplated by this Agreement and
registration of the Shares in the name of Purchaser in the respective stock
records of the Companies, Purchaser, assuming it shall have purchased the
Shares for value in good faith and without notice of any adverse claim, will
own all the issued and outstanding capital stock of each


 


12

















 


Company free and
clear of all Encumbrances (other than the Encumbrances contemplated by the MID
Loan Documents or the Note Documents), assuming the release of the Encumbrances
disclosed in Section 3.03 of the Company Disclosure Schedule, and the Shares
will be fully paid and nonassessable. There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with
respect to the voting or transfer of any of the Shares.


 


SECTION 3.04                    Subsidiaries.
(a) Section 3.04(a) of the Company Disclosure Schedule sets forth a true
and complete list of all Subsidiaries, listing for each Subsidiary its name,
type of entity, the jurisdiction and date of its incorporation or organization,
its authorized capital stock, partnership capital or equivalent, the number and
type of its issued and outstanding shares of capital stock, partnership
interests or similar ownership interests and the current ownership of such
shares, partnership interests or similar ownership interests. All such shares,
partnership interests or similar ownership interests have been validly
authorized and are validly issued, fully paid and nonassessable. None of such
shares, partnership interests or similar ownership interests was issued in
violation of any preemptive rights. There are no options, warrants, convertible
securities or other rights, agreements, arrangements or commitments of any
character relating to the shares, partnership interests or similar ownership
interests of any Subsidiary or obligating any Company or Subsidiary to issue or
sell any shares, partnership interests or similar ownership interests of, or
any other interest in, any Subsidiary. Except as set forth in Section 3.04 of
the Company Disclosure Schedule or except as may arise from the MID Loan
Documents or the Note Documents, there are no outstanding contractual
obligations of any Subsidiary to repurchase, redeem or otherwise acquire any of
its shares, partnership interests or similar ownership interests or to provide
funds to, or make any investment (in the form of a loan, capital contribution
or otherwise) in, any other Person. Except as disclosed in Section 3.04(a) of
the Company Disclosure Schedule, the shares, partnership interests or similar
ownership interests set forth in Section 3.04(a) of the Company Disclosure
Schedule constitute all the issued and outstanding shares, partnership
interests or similar ownership interests of the Subsidiaries and are owned of
record and beneficially solely by the Company or Companies indicated on Section
3.04(a) of the Company Disclosure Schedule, free and clear of all Encumbrances
(other than the Encumbrances contemplated by the MID Loan Documents or the Note
Documents).


 


(b)                                 Except
as set forth on Section 3.04(b) of the Company Disclosure Schedule, other than
the Subsidiaries, there are no other corporations, partnerships, joint
ventures, associations or other entities in which any Company owns, of record
or beneficially, any direct or indirect equity or other interest or any right
(contingent or otherwise) to acquire the same. Except as set forth on Section
3.04(b) of the Company Disclosure Schedule, other than the Subsidiaries, none
of the Companies is a member of (nor is any part of the business of Company and
its Subsidiaries as currently conducted on the date of this Agreement conducted
through) any partnership. Except as set forth in Section 3.04(b) of the Company
Disclosure Schedule, none of the Companies is a participant in any joint
venture or similar arrangement.


 


(c)                                  Each
Subsidiary that is a corporation: 
(i) is a corporation duly organized and validly existing under the
laws of its jurisdiction of incorporation, (ii) has all necessary power
and authority to own, operate or lease the properties and assets owned,
operated or leased by such Subsidiary and to carry on its business as it has been
and is currently conducted by such Subsidiary, and (iii) is duly licensed
or qualified to do business and is in good standing in each


 


13

















 


jurisdiction in
which the properties owned or leased by it or the operation of its business
makes such licensing or qualification necessary or desirable, except as set
forth in Section 3.04(c) of the Company Disclosure Schedule and except for such
failures which would not have a Material Adverse Effect. Each Subsidiary that
is not a corporation:  (i) is duly
organized and validly existing under the laws of its jurisdiction of
organization, (ii) has all necessary power and authority to own, operate
or lease the properties and assets owned, operated or leased by such Subsidiary
and to carry on its business as it has been and is currently conducted by such
Subsidiary and (iii) is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which the properties owned or leased
by it or the operation of its business makes such licensing or qualification
necessary or desirable, except as set forth in Section 3.04(c) of the Company
Disclosure Schedule and except for such failures which would not have a
Material Adverse Effect. Section 3.04(c) of the Company Disclosure Schedule
sets forth each jurisdiction in which each Subsidiary is licensed or qualified
to do business. All corporate or entity actions taken by each Subsidiary in
connection with this Agreement and the other Transaction Documents will be duly
authorized on or prior to the Closing, and none of the Subsidiaries has taken
any such action that conflicts with, constitutes a default under or results in
a violation of any provision of its Certificate of Incorporation (or Articles
of Incorporation) or By-laws (or similar organizational documents). True,
complete and correct copies of the Certificate of Incorporation and By-laws (or
similar organizational documents) of each Subsidiary, each as in effect on the
date hereof, have been delivered by Seller to Purchaser.


 


(d)                                 Section
3.04(d) of the Company Disclosure Schedule sets forth a true and complete list
of any and all former Subsidiaries of the Companies or the Subsidiaries (the “Former
Subsidiaries”). Neither of the Former Subsidiaries has engaged in or
conducted any business or transactions or entered into any material contracts
or agreements. Each of the Former Subsidiaries was dissolved in accordance with
the laws of the State of Delaware, and at the time of dissolution, all
Liabilities of the Former Subsidiaries were satisfied by Seller, and Seller has
received confirmation from the applicable Governmental Authorities that the
entities have been dissolved in accordance with applicable Law and that all Tax
Liabilities have been satisfied.


 


SECTION 3.05                    No
Conflict. The execution, delivery and performance by Seller of this
Agreement and the other Transaction Documents to which Seller is or will be a
party do not and will not (a) violate, conflict with or result in the
breach of any provision of the Certificate of Incorporation or By-laws (or
similar organizational documents) of Seller, the Companies or any Subsidiary,
(b) assuming that all consents, approvals, authorizations and other
actions described in Section 3.06 have been obtained and all filings and
notifications listed in Section 3.06 of the Company Disclosure Schedule
have been made, conflict with or violate, or give any Governmental Authority
the right to challenge the transactions contemplated by this Agreement or any
other Transaction Document to which Seller is a party, or to exercise any
remedy or obtain any relief under, any Law or Governmental Order, including
without limitation any state takeover or similar statute or regulation,
applicable to Seller, the Companies or any Subsidiary or (c) assuming that
all consents, approvals, authorizations and other actions described in
Section 3.06 have been obtained and all filings and notifications listed
in Section 3.06 of the Company Disclosure Schedule have been made, except
as set forth in Section 3.05(c) of the Company Disclosure Schedule, conflict
with, result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under,


 


14

















 


require any
consent or provision of notice under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation
of, or result in the creation of any Encumbrance on any of the Shares or on any
of the assets or properties of Seller, the Companies or any Subsidiary (other
than the Encumbrances contemplated by the MID Loan Documents or the Note
Documents) pursuant to, any (i) Material Contract, (ii) any Permit
under which the consequences of a default or termination would have a Material
Adverse Effect or (iii) any Environmental Permit.


 


SECTION 3.06                    Consents
and Approvals. The execution and delivery by Seller of this Agreement and
any other Transaction Document to which Seller is a party do not or will not,
and the performance by Seller of this Agreement and any other Transaction
Document to which Seller is a party will not, require any consent, approval,
authorization or other action by, or filing with or notification to, any
Governmental Authority, except (a) the notification requirements of the
HSR Act, (b) as described in Section 3.06 of the Company Disclosure
Schedule, and (c) as may be necessary as a result of any facts or
circumstances relating solely to Purchaser. Except for the consent of MID Islandi
SF in connection with the MID Bridge Loan Agreement, the Gulfstream Loan
Agreement and the documents related thereto, the execution and delivery by
Seller of this Agreement and any other Transaction Document contemplated hereby
to which Seller is a party do not or will not, and the performance by Seller of
this Agreement and any Transaction Document to which Seller is a party will
not, require the consent, approval or authorization of the shareholders of
Seller.


 


SECTION 3.07                    Financial
Information, Books and Records. (a) True, complete and correct copies
of the audited combined balance sheet of the Companies and their Subsidiaries
as of December 31, 2004 and the audited combined financial statements for
each of the two fiscal years ended as of December 31, 2003 and 2002 and
the related audited combined statements of income and cash flows of the
Companies and their Subsidiaries, together with all related notes and schedules
thereto (the “Company Financial Statements”) and (B) the combined
statement of income of the Companies and their Subsidiaries for the 9 month
period ending September 30, 2005 (the “Company Interim Financial
Statements”) have been delivered by Seller to Purchaser. The Company
Financial Statements and the Company Interim Financial Statements (i) were
prepared in accordance with the books of account and other financial records of
the Companies and the Subsidiaries, (ii) present fairly the financial
condition and results of operations of the Companies and the Subsidiaries as of
the dates thereof or for the periods covered thereby, (iii) have been
prepared in accordance with GAAP, applied on a basis consistent with the past
practices of Seller and the Companies and (iv) include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the financial condition of the Companies and the Subsidiaries
and the results of the operations of the Companies and the Subsidiaries as of
the dates thereof or for the periods covered thereby. To the extent delivered
prior to the Closing Date, the financial statements delivered pursuant to
Section 5.16, when delivered (i) will be prepared in accordance with the
books of account and other financial records of the Companies and the
Subsidiaries, (ii) will present fairly the financial condition and results
of operations of the Companies and the Subsidiaries as of the dates thereof or
for the periods covered thereby, (iii) will have been prepared in
accordance with GAAP, applied on a basis consistent with the past practices of
Seller and the Companies and (iv) will include all adjustments (consisting
only of normal recurring accruals) that are necessary for a fair presentation
of the financial condition of the Companies and the Subsidiaries and the
results of


 


15

















 


the operations of
the Companies and the Subsidiaries as of the dates thereof or for the periods
covered thereby.


 


(b)                                 The
books of account and other financial records of the Companies and the
Subsidiaries:  (i) reflect all items
of income and expense and all assets and Liabilities required to be reflected
therein in accordance with GAAP applied on a basis consistent with the past
practices of the Companies and the Subsidiaries, respectively and (ii) are
in all material respects complete and correct, and do not contain or reflect
any material inaccuracies or discrepancies. The Companies and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP.


 


(c)                                  All
accounts receivable of the Companies and the Subsidiaries, whether reflected on
the Company Financial Statements or otherwise, represent sales actually made in
the ordinary course of business or finance charges imposed in the ordinary
course of business related to such sales. The allowance for possible losses as
reflected on the Company Financial Statements as of and for the period ended on
the Reference Balance Sheet Date was adequate as of such date and was
calculated consistent with past practice.


 


SECTION 3.08                    No
Undisclosed Liabilities. To the knowledge of Seller, except as set forth in
Section 3.08 of the Company Disclosure Schedule and except under the Note
Documents, there are no Liabilities of any Company or any Subsidiary, other
than Liabilities (a) reflected or reserved against on the Reference
Balance Sheet and (b) incurred since the date of the Reference Balance
Sheet in the ordinary course of the business, consistent with the past
practice, of the Companies and the Subsidiaries.


 


SECTION 3.09                    Conduct
in the Ordinary Course; Absence of Certain Changes, Events and Conditions.
Since the Reference Balance Sheet Date, except as disclosed in Section 3.09 of
the Company Disclosure Schedule and except for entry into the Note Documents,
and the MID Forbearance Agreement, the business of the Companies and the
Subsidiaries has been conducted in the ordinary course and consistent with past
practice. As amplification and not limitation of the foregoing, except as
disclosed in Section 3.09 of the Company Disclosure Schedule and except for
entry into the Note Documents and the MID Forbearance Agreement, since the
Reference Balance Sheet Date until the date hereof, neither the Companies nor
any Subsidiary has:


 


(a)                                  changed
any Company’s or Subsidiary’s authorized or issued shares of capital stock,
partnership interests or similar ownership interests; granted any option or
right to purchase any such shares, partnership interests or similar ownership
interests; issued any security convertible into such shares, partnership
interests or similar ownership interests; granted any registration rights; or
purchased, redeemed, retired, or otherwise acquired any such shares,
partnership interests or similar ownership interests;


 


(b)                                 other
than as described in Section 5.01(c) or Section 8.03(p), declared, set aside or paid any dividend
or made any distribution with respect to any Company’s or Subsidiary’s shares
of capital stock, partnership interests or similar ownership interests (whether
in cash or in kind);


 


16

















 


(c)                                  amended
the organizational documents of any Company or Subsidiary;


 


(d)                                 paid
or increased any material bonuses, salaries, or other compensation to any
stockholder, director, officer, or (except in the ordinary course of business)
employee or entered into any material employment, severance, or similar
Material Contract with any director, officer, or employee;


 


(e)                                  adopted,
or materially increased the payments to or benefits under, any profit sharing,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any employees of any Company or Subsidiary;


 


(f)                                    suffered
any damage to or destruction or loss of any asset or property of any Company or
Subsidiary not covered by insurance and in excess of $100,000;


 


(g)                                 entered
into, amended, extended, terminated, or received notice of termination of, or
acceleration of obligations under, (i) any license, lease,
distributorship, dealer, sales representative, joint venture, partnership,
credit, collective bargaining, indemnification or similar agreement, or
(ii) any contract, agreement or transaction involving a total remaining
commitment by or to any Company or Subsidiary of at least $100,000;


 


(h)                                 sold,
leased, or otherwise disposed of any material asset or property of any Company
or Subsidiary or mortgaged, pledged, or suffered the imposition of any
Encumbrance on any material asset or property of any Company or Subsidiary,
including the sale, lease, or other disposition of any material Intellectual
Property Rights;


 


(i)                                     committed
to make any capital expenditures, in excess of $1,000,000 in the aggregate for
the period from the Reference Balance Sheet Date until September 30, 2005,
or in excess of $500,000 in the aggregate for the period from October 1,
2005 until the Closing Date, in each case except as set forth on the Reference
Balance Sheet;


 


(j)                                     compromised,
canceled, waived or released any claims or rights with a value to any Company
or Subsidiary in excess of $100,000;


 


(k)                                  made
any material change in the accounting methods used by the Companies or the
Subsidiaries at the time of preparation of the Reference Balance Sheet;


 


(l)                                     made
any material election with respect to Taxes affecting any Company or Subsidiary
or settlement or compromise affecting any Company or Subsidiary of any material
Tax liability or refund;


 


(m)                               suffered
any Material Adverse Effect; or


 


(n)                                 entered
into any agreement to do any of the foregoing.


 


SECTION 3.10                    Litigation.
Except as set forth in Section 3.10 of the Company Disclosure Schedule, there
are no Actions pending or, to the knowledge of Seller, threatened against or by
either any Company or Subsidiary or affecting any of their respective


 


17

















 


assets or
properties (or by or against Seller or any Affiliate thereof and relating to
the Companies and the Subsidiaries), which involve a claim or potential claim
or group of related claims of liability in excess of $25,000 or which seek or
would seek to restrain or enjoin any activities of any Company or Subsidiary or
to impose any criminal or civil penalties or sanctions on any Company or any
Subsidiary. Except as set forth in Section 3.10 of the Company Disclosure
Schedule, none of the Companies or Subsidiaries nor any of their assets or
properties is subject to any Governmental Order, nor, to the knowledge of
Seller, are there any such Governmental Orders threatened to be imposed by any
Governmental Authority.


 


SECTION 3.11                    Compliance
with Applicable Laws. (a) Except as set forth in Section 3.11(a) of
the Company Disclosure Schedule, since April 5, 2001, no Company or
Subsidiary has violated or failed to comply with any statute, law, regulation,
rule, or Governmental Order of any Governmental Authority applicable to its
business or operations as currently being conducted in any respect that would
have a material effect to the detriment of the business or operations of the
Companies and Subsidiaries. The conduct of the business of each Company and
Subsidiary as currently being conducted is in conformity with all federal,
state and local governmental and regulatory requirements applicable to its
business and operations, except where such nonconformities would not have a
material effect to the detriment of the business or operations of the Companies
and Subsidiaries. No Company or Subsidiary, or any officer or agent thereof,
has made any illegal or improper payment to, or provided any illegal or
improper benefit or inducement for, any government official, supplier, customer
or other person in an attempt to influence any person to take or refrain from
taking any action relating to any Company or Subsidiary, except where such
illegal or improper payment, benefit or inducement would not have a material
effect to the detriment of the business or operations of the Companies and the
Subsidiaries.


 


(b)                                 Each
Company and Subsidiary has all material Permits required to own and use its
assets and to conduct its business as now being conducted. Each such Permit is
set forth on Section 3.11(b) of the Company Disclosure Schedule and is valid
and in full force and effect. Each Company and Subsidiary is in compliance with
all such Permits and no Company or Subsidiary is in default under any such
Permit or has received any notice of violation or noncompliance or claim of
default with respect thereto, except where such noncompliance, default or the
effect of receipt of such notice would not, individually or in the aggregate,
have a Material Adverse Effect.


 


SECTION 3.12                    Environmental
Matters. (a) Except as disclosed in Section 3.12 of the Company
Disclosure Schedule:  (i) to
Seller’s knowledge, the Companies and the Subsidiaries are, and have been since
April 5, 2001, in material compliance with all applicable Environmental
Laws and have obtained and are, and have been since April 5, 2001, in
compliance with all required Environmental Permits, which are set forth on
Section 3.12 of the Company Disclosure Schedule, and are valid and in full
force and effect; (ii) there are no Environmental Actions pending or
threatened in writing against any of Seller, the Companies or Subsidiaries with
respect to the business or operations of the Companies or Subsidiaries or the
Real Property; (iii) to Seller’s knowledge, no Hazardous Materials have
been released into the environment by any of the Companies or Subsidiaries on
any of the Real Property except as authorized under Environmental Law and no condition
exists that would require investigation or remediation under any Environmental
Law; (iv) to Seller’s knowledge, there are no underground


 


18

















 


storage tanks at
any facilities owned or operated by any Company or Subsidiary; (v) to
Seller’s knowledge, all underground storage tanks maintained at such facilities
are in good working order, do not leak into soil or groundwater, and are in
compliance with Environmental Laws or for which there is any pending or threatened
action seeking to require remediation or clean up; (vi) to Seller’s
knowledge, none of such facilities contains any asbestos or polychlorinated
biphenyls; (vii) to Seller’s knowledge, none of the Companies nor any
Subsidiary has sent Hazardous Materials to a disposal location owned or
operated by a third party that requires remediation or clean up or for which
there is any pending or threatened Action seeking to require remediation or
clean up; and (viii) Seller has provided Purchaser with copies of any and
all written environmental assessment or audit reports generated within the last
three years and in the possession of Seller or their respective attorneys,
agents or consultants, that relate to the business of the Companies and the
Subsidiaries or the Real Property. Except as disclosed in Section 3.12 of
the Company Disclosure Schedule, Seller, the Companies and the Subsidiaries
have not received since April 5, 2001 any written notice of any actual,
alleged or potential noncompliance with, liability under, or claimed violation
of, any Environmental Laws, including without limitation, from any government
agency or prosecutor, from any private citizen acting in the public interest or
from any prior owner or operator of the Real Property, and, to the knowledge of
Seller, there has not occurred and there does not exist any event or condition
which would cause noncompliance with, liability under, or violation of, any
Environmental Laws. Except as disclosed in Section 3.12 of the Company
Disclosure Schedule, Seller, the Companies and the Subsidiaries have not
received any notice of violation or noncompliance or claim of default with
respect to any Environmental Permit.


 


(b)                                 Purchaser
acknowledges that (i) the representations and warranties contained in
Section 3.05 (as it relates to Environmental Permits) and this Section 3.12 are
the only representations and warranties being made with respect to compliance
with or liability under Environmental Laws or with respect to any environmental
matter, including natural resources, related in any way to the Companies, the
Subsidiaries or the Real Property or to this Agreement or its subject matter,
and (ii) no other representation contained in this Agreement shall apply
to any such matters and no other representation or warranty, express or
implied, is being made with respect thereto.


 


(c)                                  For
purposes of this Agreement:


 


“CERCLA” means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended.


 


“Environmental Actions”
means any and all Actions arising out of, or related to the presence, Release
or threatened Release of any Hazardous Materials, including Actions alleging
common law liability arising out of, or related to the presence, Release or
threatened Release of any Hazardous Materials.


 


“Environmental Laws”
means any civil and criminal Laws, rules, Permits or Governmental Orders
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,


 


19

















 


investigation, control, exposure or cleanup of
Hazardous Materials, wastes, substances, storm water or waste water.


 


“Environmental Permits”
means any permit, approval, identification number, license or other
authorization obtained, or required of any Company or Subsidiary to be
obtained, under any Environmental Law.


 


“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.”


 


“RCRA” means the
Resource Conservation and Recovery Act, as amended.


 


“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.


 


SECTION 3.13                    Title
to Assets; Real Property. (a) Except as set forth in Section 3.13(a)
of the Company Disclosure Schedule, and excluding the Real Property, each
Company and Subsidiary has good and marketable title to, or valid leasehold
interests in, all the tangible personal properties and personal assets used by
it or located on its premises that are material to the conduct of its business
or which are shown on the Company Financial Statements (collectively, the “Assets”),
except for such as are no longer useful in the conduct of its business or as
have been disposed of in the ordinary course of business. All such assets and
properties (including leasehold interests) are free and clear of Encumbrances
except for (i) Encumbrances that would not unreasonably interfere with the
use or operation of the Assets; (ii) liens for taxes not yet due or being
contested in good faith by appropriate procedures and for which there are
adequate reserves on the books; (iii) mechanics, carriers, workmen’s,
repairmen’s or other like liens arising or incurred in the ordinary course of
business for amounts that are not delinquent and which are not, individually or
in the aggregate, material to the business of the Companies and the
Subsidiaries, (iv) in the case of Assets other than Real Property, liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business,
(v) any Encumbrances for the obligations of third party lessors,
(vi) those items set forth in Section 3.13(a) of the Company Disclosure
Schedule, or (vii) Encumbrances contemplated by the MID Loan Documents or
the Note Documents (the “Permitted Exceptions”). The Real Property will
be free and clear of all monetary Encumbrances as of the Closing, other than
Encumbrances contemplated by the MID Loan Documents or the Note Documents.
Seller has no knowledge of any matters that would affect the marketability of
title of the Real Property other than as set forth on the applicable Title
Policy.


 


20

















 


(b)                                 Section
3.13(b) of the Company Disclosure Schedule lists:  (i) the street address of each parcel of
Real Property; (ii) if such property is owned by any Company or
Subsidiary, the owner of such property; (iii) if such property is leased
or subleased by any Company or Subsidiary as lessee, the landlord under the
lease, the rental amount currently being paid, and the expiration of the term
of such lease or sublease; and (iv) the current use of such property.
Seller has delivered or made available to Purchaser true, complete and correct
copies of any leases affecting the Real Property.


 


(c)                                  As
is the case with most harness racing facilities of the age of the Meadows
Facility, most of the Assets are old and need periodic repair and replacement.
Nevertheless, to Seller’s knowledge, as of the date hereof and as of the
Closing (subject to Seller Developments in the latter case) (i) all of the
material equipment, inventory and other items of tangible property and assets
included in the Assets are at such times in a condition sufficient for the
operation of the business currently being conducted at the Real Property and
(ii) each material building or material improvement on any of the Real
Property is at such times in a condition sufficient for the operation of the
business currently being conducted at the Real Property.


 


(d)                                 To
the knowledge of Seller, the real property improvements at the Real Property,
and the current use and operation thereof, are in compliance with and
authorized by applicable zoning and other land use regulations and none of
Seller, the Companies or the Subsidiaries has received any written notice that
any Governmental Authority or other Person considers any of the Real Property,
or the improvements thereat, to violate any such regulations. There is no
Action pending or, to the knowledge of Seller, threatened:  (i) to take all or any portion of the
Real Property or the improvements through eminent domain, (ii) to modify
the zoning or other governmental rules or restrictions applicable to the use or
development of the Real Property or improvements, or (iii) that would
reasonably be expected to have a material adverse effect on the ownership or
leasehold interest in the Real Property. There is no Action brought with
respect to the Real Property, pending against Seller, the Companies or the
Subsidiaries, or as to which Seller has knowledge, or, to the knowledge of
Seller, threatened, that would have a Material Adverse Effect on the value,
use, development or occupancy of the Real Property, other than Actions that are
general in nature concerning the Gaming Act or not based upon land, zoning, use
or Laws related to the ownership and development of real property interests.
The Companies and the Subsidiaries are permitted by the appropriate Governmental
Authorities to occupy the Meadows Facility.


 


(e)                                  Immediately
following the consummation of the transactions contemplated by this Agreement,
either a Company or a Subsidiary, as the case may be, will continue to own, or
lease, under valid and subsisting leases, or otherwise retain its respective
interest in the Assets without incurring any material penalty or other adverse
consequence, including, without limitation, any material increase in rentals,
royalties, or licenses or other fees imposed as a result of, or arising from
the consummation of the transactions contemplated by this Agreement, and,
except as otherwise contemplated in the Racing Services Agreement,
collectively, the Companies and the Subsidiaries will have all of the assets
and rights that are necessary and sufficient for the conduct of the business of
the Companies and the Subsidiaries in substantially the same manner as
currently conducted. Except as otherwise contemplated in the Racing Services
Agreement, immediately following the Closing, either a Company or a Subsidiary,
as the case may be, shall own and possess all documents, books, records,
agreements,


 


21

















 


contracts,
Permits, warranties, plans, specifications, drawings, customer lists, supplier
lists and financial data of any sort used in the conduct of the business of the
Companies and the Subsidiaries as currently conducted.


 


(f)                                    Seller
acknowledges that it intended, and that Purchaser intends, to (i) develop
a portion of the owned Real Property located in North Strabane Township in the
Commonwealth of Pennsylvania with a casino and certain uses ancillary thereto
(the “Proposed Development”) and (ii) refurbish the paddock area
currently located on such property (the “Paddock Refurbishment”). None
of Seller, the Companies or any Subsidiary has received any written notice from
a Governmental Authority indicating that either the Proposed Development or the
Paddock Refurbishment will be prohibited by any Governmental Authority, Law or
Environmental Law or challenged by any Governmental Authority.


 


(g)                                 The
Real Property is connected to adequate sanitary sewer, storm sewer, water,
electricity, gas, telephone and all other utilities and services necessary for
the current use of the Real Property in accordance with all applicable Laws of
any Governmental Authority having or claiming jurisdiction thereover and to the
knowledge of Seller, there has not occurred any event or condition which would
result in termination of such connections. There is to the knowledge of Seller,
no present or threatened ban or moratorium on new connections or additional
flows to the sewage treatment plant serving the Real Property.


 


SECTION 3.14                    Intellectual
Property Rights. The Companies and the Subsidiaries each have good, valid
and marketable title to, or the right to use, all Intellectual Property Rights.
To the knowledge of Seller, all current and former employees of the Companies
and the Subsidiaries have assigned to each, respectively, all Intellectual
Property Rights that such employees have created while in the scope of their
employment with each, respectively, including, without limitation, copyrights
in works made for hire and patents, except where failure to assign such
Intellectual Property Rights could not reasonably be expected to materially
impair the ability of the Companies or the Subsidiaries to continue to obtain
free of charge the benefits of such Intellectual Property Rights. Section 3.14
of the Company Disclosure Schedule lists each registered Intellectual Property
Right owned by the Companies and the Subsidiaries. The Company Disclosure
Schedule lists each material contract, license and agreement with respect to
Intellectual Property Rights pursuant to which any of the Companies or the
Subsidiaries has granted any Person the right to reproduce, distribute, market
or exploit Intellectual Property Rights. There is no Action, pending, or to
Seller’s knowledge, threatened that challenges the validity of ownership or use
of any Intellectual Property Rights of the Companies and the Subsidiaries. To
Seller’s knowledge, no third party’s operations or products infringe on the
Intellectual Property Rights in any material respect. To Seller’s knowledge,
neither the Companies’ nor any Subsidiary’s operations and products infringe in
any material respect on the intellectual property rights of any other Person.
Seller, the Companies and the Subsidiaries have not received since
April 5, 2001 any written claim of infringement with respect to any
Intellectual Property Rights used by the Companies or the Subsidiaries.


 


SECTION 3.15                    Insurance.
Section 3.15 of the Company Disclosure Schedule sets forth a complete list of
all material insurance policies (including policies providing property,
casualty, liability and workers’ compensation coverage and bond and surety arrangements) with respect
to which any Company or Subsidiary is a party, a named insured or


 


22

















 


otherwise the
beneficiary of coverage (together with the policy owner, limit and premium for
each such policy). Such coverage or similar insurance coverage has been
maintained with respect to the Companies and the Subsidiaries at all times in
the past three years. With respect to each such insurance policy:  (a) such policy is in full force and
effect; (b) no Company or Subsidiary, nor Seller, nor, to the knowledge of
Seller, any other party to such policy is in material breach or default
thereunder and all premiums due are currently paid, and no event has occurred
which, with or without notice or the lapse of time, would constitute such a
material breach or default, or permit termination, modification or acceleration
under such policy; (c) no party to such policy has repudiated any material
provision thereof; and (d) none of Seller, any Company or any Subsidiary has
received any written notice that such policy has been or will be cancelled or
terminated or will not be renewed on substantially the same terms.


 


SECTION 3.16                    Employee
Benefit Matters. (a) Section 3.16(a) of the Company Disclosure
Schedule lists (i) each employee benefit plan, program, arrangement and
contract (including, without limitation, any “employee benefit plan” as defined
in Section 3(3) of ERISA) maintained, contributed to or sponsored by any Company
or any Subsidiary excluding Multiemployer Plans (the “Benefit Plans”),
(ii) all Benefit Plans as to which any Company or Subsidiary is or was the
“administrator” or “plan sponsor,” as those terms are defined in Section 3 of
ERISA, without regard to whether or not such Plan is an ERISA plan, at any time
within the past three years (the “Company Plans”), (iii) all
material employment, termination, severance or other contracts or agreements
(including, without limitation, collective bargaining agreements and other labor
union agreements), in respect of any Employee, to which a Company or a
Subsidiary is a party or, with respect to which, a Company or a Subsidiary has
any obligation (collectively, the “Employee Agreements”) and (iv) 
any multiemployer plans (as defined in Section 3 (37) of ERISA), pursuant to
which Seller, a Company or a Subsidiary contributes, or has an obligation to
contribute, in respect of any Employee, former employee, officer or director of
the Companies or Subsidiaries (together with any multiemployer plans to which
Seller, a Company or a Subsidiary has contributed, or had an obligation to
contribute, since April 5, 2001, the “Multiemployer Plans”).
Section 3.16(a) of the Disclosure Schedule identifies which Benefit Plans are
Company Plans and Multiemployer Plans and, for each Multiemployer Plan, sets
forth, to the extent such information is in the possession of Seller, a Company
or a Subsidiary, the amount of potential withdrawal liability of the Companies
as of its last valuation date.


 


(b)                                 Seller
has made available to Purchaser a copy of (i) the most recent three annual
reports (Form 5500) filed with the IRS, including all schedules and attachments
thereto for each Benefit Plan, (ii) a copy of each Benefit Plan,
(iii) if applicable, each trust agreement relating to such Benefit Plan,
(iv) the most recent summary plan description for each Benefit Plan for
which a summary plan description is required and the most recent summaries and
descriptions furnished to participants regarding Company Plans for which a
summary plan description is not required, (v) the most recent
determination letter, if any, issued by the IRS with respect to any Benefit
Plan qualified under Section 401(a) of the Internal Revenue Code, (vi) all
Company personnel and employment manuals and policies, (vii) all
collective bargaining agreements pursuant to which contributions are being made
or obligations are owed by a Company or Subsidiary, (viii) all
registration statements filed with respect to any Company Plan, (ix) all
insurance policies purchased by or to provide benefits under any Company Plan,
(x) all contracts with third party administrators, actuaries, investment
managers, consultants, and other independent contractors that relate to any
Company Plan, (xi) all reports submitted within the


 


23

















 


three years
preceding the date of this Agreement by third party administrators, actuaries,
investment managers, consultants, or other independent contractors with respect
to any Company Plan, and all such reports in the possession of Seller, a
Company or a Subsidiary relating to a Multiemployer Plan, (xii) all
notices that were given by any Company or any Subsidiary with respect to any
Company Plan, or by any Company Plan, to the IRS or the PBGC pursuant to
statute, within the three years preceding the date of this Agreement, including
notices that are expressly mentioned elsewhere in this Section 3.16,
(xiii) all notices that were given by the IRS, the PBGC, or the Department
of Labor to a Company or a Subsidiary with respect to any Company Plan if such
notice could result in material liability to a Company, a Subsidiary or to any
Company Plan, within the three years preceding the date of this Agreement, and
(xiv) all other material correspondence with any Governmental Authority
relating to any Benefit Plan.


 


(c)                                  No
Benefit Plan is subject to Title IV of ERISA.


 


(d)                                 Seller
has made available to Purchaser (i) copies of all material employment
agreements with officers of the Companies and the Subsidiaries;
(ii) copies of all material severance agreements, programs and policies of
the Companies and the Subsidiaries with or relating to the Employees; and
(iii) copies of all material plans, programs, agreements and other
arrangements of the Companies and the Subsidiaries with or relating to the
Employees which contain change in control provisions.


 


(e)                                  Except
as provided in Section 3.16(e) of the Company Disclosure Schedule or as
otherwise required by Law, no Company Plan provides retiree medical or retiree
life insurance benefits to any person.


 


(f)                                    Set
forth in Section 3.16(f) of the Company Disclosure Schedule is a true and
complete list of all individuals employed by the Companies or any Subsidiary as
of the date hereof that receive annual salary and wages in excess of $100,000
annually, the position of and base compensation payable to each such individual
and bonus, deferred or contingent compensation and other like benefits paid or
payable in 2004 to each such individual.


 


(g)                                 Seller,
each Company and each Subsidiary has complied in all material respects with the
provisions of each Benefit Plan, with ERISA, the Code and other applicable
Laws, and has timely made all contributions and other payments required by and
due under the terms of each Benefit Plan and each Multiemployer Plan. To the
knowledge of Seller, all Companies and Subsidiaries have made appropriate
entries in their financial records and financial statements for all obligations
and liabilities of such Companies and Subsidiaries under such Benefit Plans
that have accrued but are not yet due. To the knowledge of Seller, no Action is
pending or threatened with respect to any Multiemployer Plan or the assets of
any Multiemployer Plan (other than claims for benefits in the ordinary course).
No Action is pending or, to the knowledge of Seller, threatened with respect to
any Benefit Plan or the assets of any Benefit Plan (other than claims for
benefits in the ordinary course) and, to the knowledge of Seller, no fact or
event exists that could give rise to any such Action. There are no audits,
inquiries or proceedings pending or, to the knowledge of Seller, threatened by
any Governmental Authority against any Benefit Plan.


 


24

















 


(h)                                 Each
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
(collectively, the “Qualified Plans”) has timely received a favorable
determination letter from the IRS stating that the Qualified Plan is so
qualified and each trust established in connection with any Qualified Plan
which is intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the IRS that it is
exempt, and, to the knowledge of Seller, no fact or event has occurred since
the date of such determination letter or letters from the IRS to adversely
affect the qualified status of any such Qualified Plan or the exempt status of
any such trust.


 


(i)                                     Except
as set forth in Section 3.16(i) of the Disclosure Schedule:


 


(i)                                     To
Seller’s knowledge, no transaction prohibited by ERISA § 406 and no
“prohibited transaction” under Code Section 4975 has occurred with respect
to any Benefit Plan that would be expected to have a Material Adverse Effect.


 


(ii)                                  To
Seller’s Knowledge, all filings required by ERISA and the Code as to each
Company Plan have been timely filed and all notices and disclosures to
participants required by ERISA or the Code have been timely provided.


 


(iii)                               All
contributions and payments made or accrued with respect to all Benefit Plans
are deductible under Code Section 162 or Section 404. No amount or
any asset of any Benefit Plan is subject to tax as unrelated business taxable
income.


 


(iv)                              Each
Company Plan that is not a Qualified Plan can be terminated within thirty days,
without payment of any additional contribution or amount and without the
vesting or acceleration of any benefits promised by such Company Plan.


 


(v)                                 To
the knowledge of Seller, no event has occurred or circumstance exists that
could result in a material increase in premium costs of the Company Plans that
are insured, or a material increase in benefit costs of such Company Plans that
are self-insured.


 


(vi)                              No
accumulated funding deficiency, whether or not waived, exists with respect to
any Benefit Plan, and no event has occurred or circumstance exists that may
result in an accumulated funding deficiency as of the last day of the current
plan year of any such Benefit Plan.


 


(vii)                           No
Company or Subsidiary has withdrawn or partially withdrawn from any Multiemployer
Plan with respect to which there is any outstanding liability as of the date of
the Agreement. To the knowledge of Seller, no event has occurred or
circumstance exists, including but not limited to the transactions contemplated
by this Agreement, that presents a risk of the occurrence of any withdrawal
from, or the termination, reorganization, or insolvency of, any Multiemployer
Plan that could result in any liability of either Company, any Subsidiary or
Purchaser to a Multiemployer Plan.


 


(viii)                        No
Company or Subsidiary has received notice from any Multiemployer Plan that it
is in reorganization or is insolvent, that increased contributions may be


 


25

















 


required to avoid a reduction in plan benefits or the
imposition of any excise Tax, or that such plan intends to terminate or has
terminated.


 


(ix)                                To
the knowledge of Seller, no Multiemployer Plan to which either Company or any
Subsidiary contributes, or has contributed since April 5, 2001, immediately
preceding the date hereof is a party to any pending merger or asset or
liability transfer or is subject to any proceeding brought by the PBGC.


 


(x)                                   No
payment that is owed or may become due to any director, officer, Employee, or
agent of either Company or Subsidiary will be non-deductible to such Company or
Subsidiary or subject to tax under Code Section 280G or Section 4999;
nor will either Company or Subsidiary be required to “gross up” or otherwise
compensate any such Person because of the imposition of any excise tax on a
payment to such person.


 


(xi)                                The
consummation of the transactions contemplated by this Agreement will not result
in the payment, vesting, or acceleration of any benefit, except as may be
required by a Qualified Plan pursuant to Section 411(d)(3) of the Code.


 


(xii)                             No
event has occurred that could result in any material liability of either any
Company or any Subsidiary as the result of it being treated, together with one
or more other Persons, as a single employer under Code Section 414 or
similar provisions of ERISA.


 


SECTION 3.17                    Labor
Matters. Except as set forth on Section 3.17 of the Company Disclosure
Schedule:  (a) there are no material
Actions or controversies pending or, to the knowledge of Seller, threatened,
between any Company or Subsidiary and any of the Employees or former employees
of the Companies or the Subsidiaries, and, to the knowledge of Seller, there is
no event or condition which would reasonably be expected to give rise to any
such Action or controversy; (b) no Company or Subsidiary is a party to any
collective bargaining agreement or other labor union contract applicable to
Persons employed thereby, and to Seller’s knowledge, currently there are no
organization campaigns, petitions or other unionization activities seeking
recognition of a collective bargaining unit which could affect any Company or
Subsidiary; (c) during the past five years, there have been no unfair
labor practice complaints pending against any Company or Subsidiary before the
National Labor Relations Board; (d) during the past five years, there have
been no strikes, slowdowns, work stoppages, lockouts, or, to Seller’s
knowledge, threats thereof, by or with respect to any employees of any Company
or Subsidiary; (e) neither the Companies nor any Subsidiaries have
breached, in any material respect, or otherwise failed to comply, in any
material respect, with the provisions of any collective bargaining or union
contract and there are no grievances outstanding against the Companies or
Subsidiaries under any such agreement or contract; (f) neither the
Companies nor any Subsidiaries are parties to, or otherwise bound by, any
Governmental Order, consent decree with, or citation by, any Governmental
Authority relating to employees or employment practices; (g) there is no
charge or proceeding with respect to a violation of any occupational safety or
health standards that has been asserted or is now pending or, to Seller’s
knowledge, threatened with respect to the Companies or Subsidiaries; and
(h) there is no charge of discrimination in employment or employment
practices, for any reason, including, without limitation, age, gender, race,
religion or other legally protected category, which has been asserted or is now
pending or,


 


26

















 


to Seller’s
knowledge, threatened before the United States Equal Employment Opportunity
Commission or any other Governmental Authority. The relations of WTA and MLR
with owners and trainers who have participated in racing at the Meadows
Facility within the past year are satisfactory, and, to the knowledge of
Seller, there is no event or condition that would reasonably be expected to
materially affect adversely such relations as a whole. Except as set forth in
Section 3.17 of the Company Disclosure Schedule, the persons employed in the
XpressBet, Inc. business are employees of XpressBet, Inc. and have no
employment relationship with any of the Companies or Subsidiaries nor are any
such persons entitled to payment from any Company or any Subsidiary for
services performed.


 


SECTION 3.18                    Taxes.
(a) Except as set forth in Section 3.18 of the Company Disclosure
Schedule:  (i) all Tax Returns in
respect of Taxes required to be filed with respect to the Companies and each
Subsidiary (including the consolidated federal income tax return of Seller and
any state Tax Return that includes the Companies or any Subsidiary on a
consolidated or combined basis) have been timely filed; (ii) all Taxes
owing with respect to the assets, operations, and activities of the Companies
and each Subsidiary have been timely paid; (iii) all such Tax Returns are
true, complete and correct in all material respects; (iv) no adjustment
relating to such Tax Returns has been proposed by any Tax authority (insofar as
either relates to the activities or income of the Companies or any Subsidiary
or could result in Liability of the Companies or any Subsidiary on the basis of
joint and/or several liability) and, to the knowledge of Seller, no basis
exists for any such adjustment; (v) there are no pending or, to the
knowledge of Seller, threatened Actions or proceedings for the assessment or
collection of Taxes against the Companies or any Subsidiary or (insofar as
either relates to the activities or income of the Companies or any Subsidiary
or could result in Liabilities of the Companies or any Subsidiary on the basis
of joint and/or several liability) any corporation that was included in the
filing of a Tax Return with Seller on a consolidated or combined basis;
(vi) no claim has been made by a Tax authority in a jurisdiction where Tax
Returns are not filed by or on behalf of the Companies or any Subsidiary that a
Company or a Subsidiary is or may be subject to taxation by that jurisdiction;
(vii) from and after January 1, 2001, the Companies and each
Subsidiary (other than any such Subsidiary which is not a partnership) have
been and continue to be a member of the affiliated group (within the meaning of
Section 1504(a)(1) of the Code) with which Seller files a consolidated Tax Return,
and has not been includible in any other consolidated Tax Return for any
taxable period for which the statute of limitations has not expired;
(viii) all Tax Returns filed with respect to Tax years of the Companies
and each Subsidiary through the Tax year ended 2001 have been examined and
closed or are Tax Returns with respect to which the applicable period for
assessment under applicable law, after giving effect to extensions or waivers,
has expired; and (ix) there are no Encumbrances for Taxes (other than
Taxes not yet due and payable) upon any of the assets of the Companies or any
Subsidiary.


 


(b)                                 Except
as disclosed with reasonable specificity in Section 3.18 of the Company
Disclosure Schedule, there are no outstanding waivers or agreements extending
the statute of limitations for any period with respect to any Tax to which the
Companies or any Subsidiary may be subject.


 


(c)                                  (i) Section
3.18 of the Company Disclosure Schedule lists all income, franchise and similar
Tax Returns (federal, state, local and foreign) filed with respect to each of
the Companies and the Subsidiaries for taxable periods ended on or after
January 1, 2001,


 


27

















 


indicates for
which jurisdictions Tax Returns have been filed on the basis of a unitary
group, indicates the most recent income, franchise or similar Tax Return for
each relevant jurisdiction for which an audit has been completed or the statute
of limitations has lapsed and indicates all Tax Returns that currently are the
subject of audit; (ii) Seller has delivered to Purchaser copies of all
federal, state and foreign income, franchise and similar Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by the Companies or any Subsidiary since January 1, 2001;
(iii) Section 3.18 of the Company Disclosure Schedule lists all closing
agreements and Tax rulings received (and all such agreements and rulings that,
since January 1, 2001, have been requested) from any Tax authority with
respect to the Companies or any Subsidiary. None of the Companies or
Subsidiaries or their respective Affiliates, has received a Tax opinion with
respect to any transaction relating to a Company or a Subsidiary other than a
transaction in the ordinary course of business. Seller has delivered to
Purchaser copies of all pro forma federal income Tax Returns of the
Subsidiaries, prepared in connection with Seller’s or any other consolidated
federal income Tax Return, accompanied by a schedule reconciling the items in
the pro forma Tax Return to the items as included in the consolidated Tax
Return for all taxable years ending on or after January 1, 2001.


 


(d)                                 Except
as disclosed with reasonable specificity in Section 3.18 of the Company
Disclosure Schedule, each of the Companies and Subsidiaries have withheld and
paid each Tax required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other party, and complied with all information reporting and
backup withholding requirements, including maintenance of required records with
respect thereto.


 


(e)                                  Except
as disclosed with reasonable specificity in Section 3.18 of the Company
Disclosure Schedule, none of the Companies or Subsidiaries is a party to any
Tax allocation, Tax sharing or Tax reimbursement agreement or arrangement with
any Person.


 


(f)                                    Except
as disclosed with reasonable specificity in Section 3.18 of the Company
Disclosure Schedule, no Company or Subsidiary will have any taxable income or
gain as a result of prior intercompany transactions that have been deferred and
that will be taxed as a result of the changes in ownership contemplated by this
Agreement.


 


(g)                                 Except
as disclosed with reasonable specificity in Section 3.18 of the Company
Disclosure Schedule, Purchaser is not required to withhold Tax on the purchase
of the Shares by reason of Section 1445 of the Code. Seller is not a “foreign
person” (as that term is defined in Section 1445 of the Code). Except as
disclosed with reasonable specificity in Section 3.18 of the Company
Disclosure Schedule, none of the Companies or Subsidiaries has entered into any
compensatory agreements with respect to the performance of services payment
under which would result in a nondeductible expense pursuant to Sections 162(m)
or 280G of the Code or an excise tax to the recipient of such payment pursuant
to Sections 409A or 4999 of the Code; none of the Companies or Subsidiaries has
agreed to make, and none is required to make, any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise; no
Tax asset of a Company or Subsidiary is currently subject to a limitation under
Sections 382 or 383 of the Code or similar provisions of state, local or
foreign law; none of the Companies or Subsidiaries has been the “distributing
corporation” (within the meaning of Section 355(c)(2) of the Code) with respect
to a transaction described in Section 355 of the Code


 


28

















 


within the 3-year
period ending as of the date of this Agreement; none of the Companies or
Subsidiaries has made or is bound by any election under Section 197 of the
Code; none of the Companies or Subsidiaries is a party to any understanding or
arrangement described in Section 6662(d)(2)(C)(ii) of the Code, a
“reportable transaction” within the meaning of Treasury Regulations
Section 1.6011-4(b) or a “listed transaction” within the meaning of
Treasury Regulation Section 1.6011-4(b)(2).


 


(h)                                 Except
as disclosed with reasonable specificity in Section 3.18 of the Company
Disclosure Schedule, the amount of the liability for the Companies and
Subsidiaries for unpaid Taxes for all periods ending on or before the date of
the most recent Company Financial Statements does not, in the aggregate, exceed
the amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) solely with respect to the Companies and Subsidiaries as of
such date, and the amount of their liability for unpaid Taxes for all periods
ending on or before the Closing Date shall not, in the aggregate, exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals are reflected on the Company Financial
Statements, as adjusted for transactions through the Closing Date that either
(i) occur in the ordinary course of business or (ii) are contemplated
by this Agreement. Except as disclosed with reasonable specificity in Section
3.18 of the Company Disclosure Schedule, no item of income or gain reported for
financial purposes in any Pre-Closing Period is required to be included in
taxable income for a Post-Closing Period.


 


SECTION 3.19                    Material
Contracts. (a) Section 3.19(a) of the Company Disclosure Schedule
lists each of the following contracts and agreements of the Companies and the
Subsidiaries other than the Note Documents and the MID Forbearance Agreement,
(such contracts and agreements, together with all contracts, agreements, leases
and subleases concerning the occupancy, management or operation of any Real
Property (including without limitation, brokerage contracts) listed or
otherwise disclosed in Section 3.13(a) or 3.13(b) of the Company Disclosure
Schedule to which the Companies or any Subsidiary is a party and all agreements
relating to Intellectual Property Rights set forth in Section 3.14 of the
Company Disclosure Schedule, being “Material Contracts”):


 


(i)                                     each
contract and agreement for the furnishing of services to or by the Companies,
any Subsidiary or otherwise related to the business of the Companies and the
Subsidiaries as currently conducted under the terms of which the Companies or
any Subsidiary:  (A) is likely to
receive, pay or otherwise give consideration of more than $50,000 in the
aggregate during the calendar year ended December 31, 2005, (B) is
likely to receive, pay or otherwise give consideration of more than $100,000 in
the aggregate over the remaining term of such contract or (C) cannot be
cancelled by the Companies or such Subsidiary without penalty or further
payment and without more than 30 days’ notice;


 


(ii)                                  all
broker, distributor, dealer, manufacturer’s representative, franchise, agency,
sales promotion, market research, marketing consulting and advertising
contracts and agreements to which the Companies or any Subsidiary is a party;


 


(iii)                               all
management contracts and contracts with independent contractors or consultants
(or similar arrangements) to which the Companies or any Subsidiary is a


 


29

















 


party and which are not cancelable without penalty or
further payment and without more than 30 days’ notice;


 


(iv)                              all
contracts and agreements relating to indebtedness (including, without
limitation, guarantees) of the Companies or any Subsidiary;


 


(v)                                 all
contracts and agreements with any Government Authority to which any Company or
Subsidiary is a party;


 


(vi)                              all
contracts or agreements to which any Company or any Subsidiary is a party that
provide for, or restrict, (A) the future acquisition or disposition of Assets
(other than in the ordinary course of business and other than anti-assignment
provisions) or (B) any merger or business combination;


 


(vii)                           all
contracts and agreements that limit or purport to limit the ability of the
Companies or any Subsidiary to compete in any line of business or with any
Person or in any geographic area or during any period of time;


 


(viii)                        any
contracts or agreements to which any Company or any Subsidiary is a party that
provide for any joint venture, partnership or similar arrangement by any
Company or any Subsidiary;


 


(ix)                                all
contracts and agreements between or among the Companies or any Subsidiary on
the one hand and Seller or any Affiliate of Seller (other than the Companies or
any Subsidiary) on the other hand;


 


(x)                                   any
collective bargaining contracts or agreement or contracts or agreements with
any labor organization, union or association to which any Company or any
Subsidiary is a party;


 


(xi)                                any
employment agreement involving payments of base cash compensation annually by
any Company or Subsidiary in excess of $100,000;


 


(xii)                             all
contracts and agreements entered into by any Company or any Subsidiary on or
after April 5, 2001 that provide for indemnification by any Company or any
Subsidiary with respect to Liabilities relating to the Real Property or current
or former business or operations of the Companies and the Subsidiaries or any
of their predecessors or with respect to Liabilities under any Environmental
Laws or for the investigation, remediation or clean-up of any Hazardous
Materials; and


 


(xiii)                          any
other contract or agreement to which any Company or any Subsidiary is a party
under which the consequences of a default or termination would have a Material
Adverse Effect.


 


For purposes of this Section 3.19 and Sections 3.09,
3.13 and 3.14, the term “lease” shall include any and all leases,
subleases, occupancy agreements, sale/leaseback agreements or similar
arrangements.


 


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(b)                                 Except
as disclosed in Section 3.19(b) of the Company Disclosure Schedule, each
Material Contract:  (i) is valid and
binding on the Companies or a Subsidiary and is in full force and effect and
(ii) upon consummation of the transactions contemplated by this Agreement,
except to the extent that any consents set forth in Section 3.05(c) of the
Company Disclosure Schedule are not obtained, shall continue in full force and
effect without penalty or other adverse consequence. Neither the Companies nor
any Subsidiary is in breach of, or default under, any Material Contract, and,
to the knowledge of Seller, no event or condition has occurred that, with or
without notice or lapse of time or both, would constitute a breach of or
default under any Material Contract.


 


(c)                                  Except
as disclosed in Section 3.19(c) of the Company Disclosure Schedule, to the
knowledge of Seller, no other party to any Material Contract is in breach
thereof or breach thereunder.


 


SECTION 3.20                    Racing
License. Each of WTA and MLR has been granted permission to conduct harness
racing with pari-mutuel wagering pursuant to the Pennsylvania Act. MEC Racing
Management (“MECRacing”) has received permission from the Commission to
own and operate the OTB Facilities pursuant to the Pennsylvania Act, to conduct
interstate simulcasting pursuant to the Pennsylvania Act and to conduct
intrastate simulcasting pursuant to the Pennsylvania Act, all for and on behalf
of WTA and MLR and pursuant to the licenses held by WTA and MLR. The location
and description of each OTB Facility is set forth on Section 3.20 of the
Company Disclosure Schedule. In 2003 and 2004, WTA and MLR have operated race
meetings at the Meadows Facility in fulfillment of their respective allocations
of racing days by the Commission and their obligations under their agreement
with the Meadows Standardbred Owners’ Association. To Seller’s knowledge, since
April 5, 2001, except as disclosed on Section 3.20 of the Company
Disclosure Schedule, no Company or Subsidiary has:


 


(a)                                  falsified
answers or made misrepresentations to the Commission in any document required
to be filed under the Pennsylvania Act;


 


(b)                                 issued
or caused to be issued false or misleading advertisements which would have a
Material Adverse Effect;


 


(c)                                  knowingly
permitted on the grounds or within the enclosure of the Meadows Facility or the
OTB Facilities, illegal lotteries, pool selling, touting or bookmaking or any
other kind of illegal gambling which would have a Material Adverse Effect.


 


SECTION 3.21                    Suppliers.
To the knowledge of Seller, no supplier of any Company or Subsidiary intends to
cease doing business with such Company or Subsidiary or materially alter the
amount of business it is presently doing with such Company or Subsidiary.


 


SECTION 3.22                    Books
and Records. The minute books and corporate records of each Company and
Subsidiary contain, in all material respects, accurate copies of the minutes of
all formal board of directors or shareholder or similar meetings held since
April 5, 2001 and of all written consents executed after April 5,
2001 in lieu of the holding of any such meeting to the extent that such
meetings or written consents involve material actions.


 


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SECTION 3.23                    Brokers.
No broker, finder or investment banker is entitled to any brokerage, finder’s
or other fee or commission in connection with the transactions contemplated by
this Agreement or any other Transaction Document based upon arrangements made
by or on behalf of Seller.


 


SECTION 3.24                    Racing
Days. Each of WTA and MLR meets the eligibility requirements of Sections
1302 and 1303 of the Gaming Act. In each of 2003 and 2004, WTA and MLR
conducted live racing at The Meadows for at least 100 days for each license
held. In 2005, WTA and MLR are scheduled to conduct at least 100 days of live
racing at The Meadows for each license held. To Seller’s knowledge, there are
no events or circumstances that have occurred or that are planned by Seller or
any Company or any Subsidiary that would, prior to Closing, cause WTA or MLR to
cease meeting the eligibility requirements of Sections 1302 and 1303 of the
Gaming Act.


 


SECTION 3.25                    Related
Parties.


 


(a)                                  Except
as set forth on Section 3.25 of the Company Disclosure Schedule, and except as
may arise from this Agreement or any other Transaction Document or any Note Documents
entered into in connection with the transactions contemplated hereby and except
under the MID Loan Documents, since April 5, 2001, neither Seller nor any
Affiliate of Seller (other than the Companies and the Subsidiaries)
(a) has or has had any interest in any property (whether real, personal or
mixed and whether tangible or intangible) used in or pertaining to the business
or operations of the Companies and the Subsidiaries; (b) is, or has owned
(of record or as a beneficial owner), an equity interest or any financial or
profit interest or a Person that has had a material business dealing or a
material financial interest in any transaction with the Companies or
Subsidiaries; or (c) is a party to any contract with, or has any claim or
right against, the Companies or Subsidiaries that would survive after the
Closing Date.


 


(b)                                 As
of the date hereof, the relationship between WTA and MLR, on the one hand, and
XpressBet, Inc., on the other hand, has been formalized to provide for
(i) an agreement for the provision of account wagering services by
XpressBet, Inc. to WTA and MLR with respect to WTA’s and MLR’s Pennsylvania
account wagering customers and (ii) a lease for the premises occupied by
XpressBet, Inc. at the Meadows Facility. Such agreement and lease have been
approved by the Commission.


 


ARTICLE
IV


 


REPRESENTATIONS
AND WARRANTIES OF PURCHASER


 


Purchaser represents and warrants to Seller as of the
date hereof (other than such representations and warranties as are made as of
another date) as follows:


 


SECTION 4.01                    Incorporation
and Authority of Purchaser. Purchaser is a limited liability company duly
formed, validly existing and in good standing under the laws of the state of
Delaware and has all necessary limited liability company power and authority to
enter into this Agreement and the other Transaction Documents to which
Purchaser is a party, to carry out its obligations hereunder and thereunder and
to consummate the transactions 


 


32

















 


contemplated hereby
and thereby. The execution and delivery by Purchaser of this Agreement and any
other Transaction Document to which Purchaser is a party, the performance by
Purchaser of its obligations hereunder and thereunder and the consummation by
Purchaser of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of Purchaser. This Agreement has
been duly executed and delivered by Purchaser, and (assuming due authorization,
execution and delivery by Seller) constitutes a legal, valid and binding
obligation of Purchaser enforceable against Purchaser in accordance with its
terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors’ rights generally
and subject, as to enforceability, to the effect of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law). When each Transaction Document to which Purchaser is a
party has been duly executed and delivered by Purchaser (assuming due
authorization, execution and delivery by each other party thereto), such
Transaction Document will constitute a legal and binding obligation of
Purchaser enforceable against it in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors’ rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).


 


SECTION 4.02                    No
Conflict. The execution, delivery and performance by Purchaser of this
Agreement and any other Transaction Document to which Purchaser is or will be a
party do not and will not (a) violate or conflict with the certificate of
formation or limited liability company agreement (or other similar applicable
documents) of Purchaser, (b) assuming that all consents, approvals,
authorizations and other actions described in Section 4.03 have been
obtained and all filings and notifications listed in Section 4.03 of
Purchaser Disclosure Schedule have been made, and except as may result from any
facts or circumstances relating solely to Seller, conflict with or violate, or
give any Governmental Authority the right to challenge the transactions
contemplated by this Agreement or any other Transaction Document to which
Seller is a party, or to exercise any remedy or obtain any relief under, any
Law or Governmental Order, including without limitation any state takeover or
similar statute or regulation, applicable to Purchaser or (c) assuming
that all consents, approvals, authorizations and other actions described in
Section 4.03 have been obtained and all filings and notifications listed
in Section 4.03 of Purchaser Disclosure Schedule have been made, and
except as may result from any facts or circumstances relating solely to Seller,
result in any breach of, conflict with, or constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent or provision of notice under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of any Encumbrance on any of the assets or properties of Purchaser
pursuant to any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument relating to
such assets or properties to which Purchaser or any of its subsidiaries is a party
or by which any of such assets or properties is bound or affected, other than
Encumbrances contemplated by the MID Loan Documents or the Note Documents.


 


SECTION 4.03                    Consents
and Approvals. The execution and delivery by Purchaser of this Agreement
and any other Transaction Document to which Purchaser is a party do not, and
the performance by Purchaser of this Agreement and any other Transaction
Document to which Purchaser is a party will not, require any material consent,
approval,


 


33

















 


authorization or
other action by, or filing with or notification to, any Governmental Authority,
except (a) as set forth on Section 4.03 of Purchaser Disclosure Schedule,
(b) the notification requirements of the HSR Act, and (c) as may be
necessary as a result of any facts or circumstances relating solely to Seller.


 


SECTION 4.04                    Investment
Purpose. Purchaser is acquiring the Shares solely for the purpose of
investment and not with a view to, or for offer or sale in connection with, any
distribution thereof. Purchaser acknowledges that the Shares are not registered
under the Securities Act, and that the Shares may not be transferred or sold
except pursuant to the registration provisions of the Securities Act or
pursuant to an applicable exemption therefrom and subject to state securities
laws and regulations, as applicable.


 


SECTION 4.05                    Financing.
Purchaser has received and has provided to Seller a commitment letter relating
to the financing of the Purchase Price. Purchaser has committed sources that
would provide it with sufficient funds to pay the Tranche A Notes on the
Consummation Date subject to the conditions contained in such commitment
letter.


 


SECTION 4.06                    Brokers.
No broker, finder or investment banker is entitled to any brokerage, finder’s
or other fee or commission in connection with the transactions contemplated by
this Agreement or any other Transaction Document based upon arrangements made
by or on behalf of Purchaser.


 


SECTION 4.07                    Specified
Investors; Cannery Casino Resorts. There are no more than five Specified
Investors. Each Specified Investor is a qualified purchaser as defined under
the Investment Company Act of 1940, as amended. Cannery Casino Resorts, LLC, a
Nevada limited liability company, directly or indirectly owns all of the assets
related to the Cannery Casino and Hotel and holds the management rights to the
Rampart Casino.


 


ARTICLE
V


 


ADDITIONAL
AGREEMENTS


 


SECTION 5.01                    Conduct
of Business Prior to the Closing. (a) Unless Purchaser otherwise
agrees in writing and except as otherwise set forth in Section 5.01 of the
Company Disclosure Schedule, between the date of this Agreement and the Closing
Date, Seller shall cause each Company and Subsidiary to (i) conduct its
business only in the ordinary course and consistent with past practice,
(ii) use commercially reasonable efforts to preserve intact the business
organization, assets and prospects of each Company and Subsidiary, subject to
the conduct of its business in the ordinary course of business and consistent
with past practice, (iii) use commercially reasonable efforts to keep
available to Purchaser the services of the present officers and key employees
of each Company and Subsidiary and (iv) use commercially reasonable
efforts to preserve the current relationships of each Company and Subsidiary
with its respective customers, suppliers, distributors and other Persons with
which each Company and Subsidiary has significant business relationships.
Seller shall cause WTA and MLR to continue to operate race meetings at the
Meadows Facility in fulfillment of their respective allocations of racing days
by the Commission and their obligations under their agreement with the Meadows
Standardbred Owners’ Association. Between the date hereof and the Closing Date,
Seller will


 


34

















 


cause the
Companies and the Subsidiaries not to enter into any contract, agreement or
arrangement that would impose any restrictions or requirements on the operation
of a gaming operation on the Real Property.


 


(b)                                 Between
the date hereof and the Closing Date, Seller shall cause WTA and MLR to apply
for allocations of racing days pursuant to Section 207 of the Pennsylvania Act
to conduct race meetings with pari-mutuel wagering in 2006. The number of racing
days sought shall be approximately 200 to 215 or such other number of races as
WTA, MLR and the Meadows Standardbred Owners’ Association shall agree,
provided, that in no event shall the number of racing days be less than the
number set forth in Section 1303 of the Gaming Act. Between the date hereof and
the Closing Date, neither the Companies nor any Subsidiary will do any of the
things enumerated in the second sentence of Section 3.09 (including, without
limitation, clauses (a) through (n) thereof) to the extent any such thing is
within the control of Company and the Subsidiaries, without the prior written
consent of Purchaser; provided that the Companies and the Subsidiaries shall
have the right, without the consent of Purchaser, to engage in the activities
set forth in Section 5.01 of the Company Disclosure Schedule.


 


(c)                                  Purchaser
acknowledges that Seller intends to distribute as a dividend or contribute as a
capital contribution, or cause the
distribution or contribution of, prior to or at the Closing, (i) amounts
owing pursuant to the intercompany accounts between the Companies and the
Subsidiaries, on the one hand, and their respective Affiliates (including
Seller and its Affiliates but not including any Company or any Subsidiary), on
the other hand, (ii) the Excluded Subsidiaries, and (iii) one or more
notes in an aggregate amount no greater than $25,000,000 (the “Specified
Notes”), and that such distribution or contribution will not result in a breach
of this Agreement. Purchaser acknowledges that Seller intends to convert 20002
Delaware Inc. into a single member limited liability company and subsequently
cause MECPenn to distribute all interest in such limited liability company to
Seller as a dividend prior to Closing. In the event that Magna pays or declares
a dividend of the Specified Notes, Magna agrees that it shall, the next
Business Day and no later than one Business Day before Closing, contribute the
Specified Notes back to each of the Companies making the respective
distribution and causing each of the Companies’ net worth to be unaffected by
the distribution of the Specified Notes and the recontribution to the
Companies.


 


(d)                                 Seller
agrees to cause intercompany accounts between Seller or its Affiliates (other
than the Companies and Subsidiaries), on the one hand, and the Companies and
Subsidiaries, on the other hand, to be settled prior to Closing.


 


SECTION 5.02                    Access
to Information. From the date hereof until the Closing, Seller shall cause
the officers, directors, employees, agents, representatives, accountants and
counsel of each Company and Subsidiary to: 
(i) afford the officers, employees and authorized agents,
accountants, counsel, and representatives of Purchaser reasonable access, upon
reasonable notice and during normal business hours, to (A) the assets
(including the Real Property) for inspection and testing (it being understood
that the cost of such inspection and testing shall be borne by Purchaser and
any testing that is other than a Phase I testing shall be conducted only after
obtaining the approval of Seller, and Purchaser shall promptly indemnify Seller
Indemnified Parties for any Losses in accordance with Article IX hereof arising
from injury to person or physical damage to property incurred by any Company or
any Subsidiary as a


 


35

















 


result of the
testing conducted pursuant to this Section 5.02, other than as a result of
the gross negligence or willful misconduct of Company or any Subsidiary and in
no event as a result of the discovery of an environmental matter as a result of
such testing) and (B) the officers, directors, employees, accountants and
other representatives of Seller and each Company and Subsidiary who have
relevant knowledge relating to any Company or Subsidiary; provided, however,
that such access shall not unreasonably interfere with any of the business or
operations of any Company or Subsidiary or the duties of any such officer,
director, employee, accountant or other representative, and (ii) promptly
furnish to the officers, employees, and authorized agents, accountants, counsel
and representatives of Purchaser such financial and operating data and other
information regarding employees, assets, properties, goodwill and business of
each Company and Subsidiary as Purchaser may reasonably request.


 


SECTION 5.03                    Books
and Records. (a) In order to facilitate the resolution of any claims
made against or incurred by Seller prior to the Closing, or for any other
reasonable purpose, for a period of five years after the Closing, Purchaser
shall (i) retain the books and records (including personnel files) of the
Companies and Subsidiaries relating to periods prior to the Closing in a manner
reasonably consistent with the prior practices of the respective Companies and
Subsidiaries and (ii) upon reasonable notice, afford the officers,
employees and authorized agents and representatives of Seller reasonable access
(including the right to make, at Seller’s expense, photocopies), during normal
business hours, to such books and records.


 


(b)                                 In
order to facilitate the resolution of any claims made by or against or incurred
by Purchaser, the Companies or any Subsidiary after the Closing, or for any
other reasonable purpose, for a period of five years following the Closing,
Seller shall (i) retain the books and records (including personnel files)
of Seller which relate to the Companies and the Subsidiaries and their
operations for periods prior to the Closing and (ii) upon reasonable
notice, afford the officers, employees and authorized agents and
representatives of Purchaser, the Companies or any Subsidiary reasonable access
(including the right to make, at Purchaser’s expense, photocopies), during
normal business hours, to such books and records.


 


(c)                                  Neither
Purchaser nor Seller shall be obligated to provide the other party with access
to any books or records (including personnel files) pursuant to this Section
5.03 where such access would violate any Law or Environmental Law.


 


SECTION 5.04                    Governmental
Approvals and Consents; Application Fee; Closing Conditions. (a) Each
party hereto will use its commercially reasonable efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Authorities
that may be or become necessary for its execution and delivery of this
Agreement and the performance of its obligations pursuant to this Agreement and
any agreement or document contemplated hereby and will cooperate fully with the
other party in promptly seeking to obtain all such authorizations, consents,
orders and approvals. Each party hereto agrees to make an appropriate filing of
a Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby no later than January 15, 2006 and to
supply promptly any additional information and documentary material that may be
requested pursuant to the HSR Act. The parties hereto will not willfully and
unreasonably take any action that will have the effect of delaying, impairing
or impeding the receipt of any required approvals.


 


36

















 


(b)                                 Purchaser
and Seller shall as soon as practicable, but in no event later than 30 days
after the date hereof, unless sooner required by the Pennsylvania Act, the
regulations of the Commission or the Commission, together file with the
Commission the applications, affidavits (including without limitation the
affidavits specified pursuant to Section 204 of the Pennsylvania Act ) and
other information required pursuant to the Pennsylvania Act and regulations of
the Commission necessary to obtain approval from the Commission for the
purchase of the Companies by Purchaser and for Seller’s management of the
racing operations of the Meadows Facility under the Racing Services Agreement.
In addition, both Purchaser and Seller shall furnish to the Commission such
other information, financial statements and other documentation as the
Commission requires concerning Purchaser or Seller or any of their respective
Affiliates and will make available representatives of Purchaser or Seller to
meet with the Commission, or its staff, to expedite the ability of the
Commission to complete its work and make the determinations required by Article
VIII of this Agreement as expeditiously as practicable. Purchaser and Seller
agree to provide formal notice to the Commission of the change of ownership of
the Companies within 10 days after the Closing Date.


 


(c)                                  Gaming
Application.


 


(i)                                     Until
the earlier of (A) the Repayment Date and (B) the date of the Stock
Transfer, Purchaser and Seller each will use commercially reasonable efforts to
promptly make available or file with the Gaming Board such information as it or
its staff may request under the Gaming Act. Purchaser and Seller will, not
later than December 20, 2005 (or two weeks before such other date as the
Gaming Board may select for submission of applications so long as filing on
such later date does not provide an advantage to other applicants or is
otherwise detrimental to the Companies’ application or to their right to timely
obtain a Conditional Category 1 license or Category 1 license for gaming from
the Gaming Board), file with the Gaming Board the application for Conditional
Category 1 license as required by the Gaming Act (the “Gaming
Application”). The Gaming Application will be drafted to reflect two
different scenarios — one in which Purchaser is the operator and owner of the
Meadows Facility and the operator of the gaming operations with an Affiliate of
Seller serving as a manager of the racing operations of the Meadows Facility (such
scenario, the “Transaction Scenario”) and one in which Seller or one or
more of its Affiliates is the operator and owner of the Meadows Facility (the “Alternative
Scenario”). In addition, until the earlier of (A) the Repayment Date
and (B) the date of the Stock Transfer, both Purchaser and Seller shall
furnish to the Gaming Board such other information, financial statements and
other documentation as the Gaming Board requires concerning Purchaser or Seller
and will make available representatives of Purchaser or Seller to meet with the
Gaming Board, or its staff, to expedite the ability of the Gaming Board to
complete its work. For the avoidance of doubt, while Purchaser and Seller will
both use reasonable efforts to accomplish the matters set forth in this Section
and to assemble such application, Purchaser shall be responsible for all items
with respect to the Gaming Application other than the MEC Items. Prior to the
Closing Date, Purchaser and Seller agree to discuss with the Gaming Board
whether there are any deficiencies in the MEC Items that have been provided to
the Gaming Board in respect of the Gaming Application filed by Purchaser and
Seller agrees to use its commercially reasonable efforts to remedy such
deficiencies. Seller agrees that, after the Closing Date and until the earlier
of (i) the


 


37

















 


Repayment Date, and (ii) a Stock Transfer Trigger
Date, it shall use its commercially reasonable efforts to fulfill any
requirements related to the MEC Items and any other items requested from Seller
by the Gaming Board with respect to the Gaming Application filed by Purchaser.


 


(ii)                                  Each
of Purchaser and Seller agrees to use its best efforts to complete the Gaming
Application for submission to the Gaming Board on or before December 20,
2005, and agrees to have a weekly scheduled telephone call or meeting at which
the individuals with responsibility for organizing each of the Purchaser’s and
Seller’s efforts in connection with the filing of the Gaming Application review
and discuss the progress being made to complete the Gaming Application.


 


(iii)                               Either
party shall notify the other upon becoming aware that the Gaming Board may
consider, identify or support an Action that could jeopardize Seller’s ability
to obtain a Conditional Category 1 license or Category 1 license in its own
name if Seller continues to pursue a Conditional Category 1 license or a
Category 1 license with Purchaser prior to the Closing Date. Prior to
termination of this Agreement, Seller and Purchaser agree not to take any
action that could reasonably be expected to impede the consideration of the
Gaming Application for the Transaction Scenario (it being acknowledged that
Seller’s exercise of its rights under Section 5.15 or under the Note Documents
or Seller’s or Purchaser’s exercise of rights under Section 10.01 shall not be
considered an action that constitutes a breach of the obligations set forth in
this sentence). Prior to the earlier of Closing or termination of this
Agreement, Seller and Purchaser agree to use their best efforts, to permit
Seller and Purchaser to jointly pursue the Gaming Application for the
Transaction Scenario (it being acknowledged that Seller’s exercise of its
rights under Section 5.15 or Seller’s or Purchaser’s exercise of rights
under Section 10.01 shall not be considered an action that constitutes a
breach of the obligations set forth in this sentence). Seller agrees to make
itself available to participate in meetings, appearances and hearings to assist
in the joint efforts of Seller and Purchaser to pursue the Gaming Application
for the Transaction Scenario.


 


(d)                                 Simultaneously
with the submission of the Gaming Application, Purchaser shall at its cost take
such steps as are necessary, including but not limited to the posting of a
letter of credit, the posting of a bond or the payment of a fee, to satisfy any
monetary or financial requirements that the Gaming Board may require in
conjunction with submission and maintenance of the Gaming Application (the “Gaming
Application Fee”). Until thirty days after the earlier of (i) the date
on which this Agreement is terminated prior to Closing and (ii) the date
of the Stock Transfer (the earlier of clause (i) and (ii) being the
“Replacement Trigger”), Purchaser shall maintain the Gaming Application Fee. If
(i) the fee is paid by Purchaser in cash to the Gaming Board to satisfy the
requirements of the Gaming Board, (ii) a Replacement Trigger occurs,
(iii) Seller uses such fee in furtherance of its application with the Gaming
Board after such Replacement Trigger (or to the extent Seller actually receives
the benefit of such fee), and (iv) Purchaser executes documentation in
form and substance satisfactory to Seller confirming that Seller is entitled
to, and has full rights with respect to, the fee that Purchaser has paid to the
Gaming Board and that Purchaser releases all rights with respect thereto, then
Seller shall, to the extent Purchaser does not receive a refund of such fee
from the Gaming Board and to the extent Seller receives the benefit of such
fee, reimburse Purchaser for the Gaming


 


38

















 


Application Fee
(but only to the extent Seller receives the benefit of such fee) promptly, and
in any event within 30 days of the occurrence of the circumstances set forth in
clauses (i) through (iv) above (or if Seller does not use such fee in
furtherance of its application with the Gaming Board but instead actually
receives the benefit of such fee, then within thirty days after receipt by Seller
of such benefit). To the extent that Purchaser has not received a refund of its
Gaming Application Fee, Seller agrees to use its commercially reasonable
efforts to receive the benefit from the fee should Seller or any Affiliate
pursue a gaming license and to reimburse Purchaser in accordance with the
preceding sentence to the extent of the benefit received. To the extent that
Seller intends to continue with its application with the Gaming Board after the
Replacement Trigger, Seller agrees to use commercially reasonable efforts to
replace within thirty days the Gaming Application Fee theretofore maintained by
Purchaser as expeditiously as possible after the Replacement Trigger, and to
use its commercially reasonable efforts in cooperating with Purchaser to cause
the withdrawal of such Gaming Application Fee. For the period of up to thirty
days after the Replacement Trigger during which Purchaser maintains a letter of
credit to maintain the Gaming Application Fee, Seller agrees to reimburse
Purchaser for the letter of credit fee incurred by Purchaser in maintaining
such letter of credit for such 30 day period after the Replacement Trigger (it
being understood that such reimbursement obligation shall only apply to the
extent the incurrence of such costs resulted in out of pocket expenditures by
Purchaser and equity holders of Purchaser (rather than out of pocket
expenditures by any of the Companies or any of their respective Subsidiaries)).


 


(e)                                  Upon
the termination of this Agreement for any reason other than consummation of the
transactions contemplated by this Agreement, Purchaser and Seller agree to take
such actions as are necessary as soon as possible to amend the Gaming
Application to remove the Transaction Scenario. In addition, upon the
termination of this Agreement for any reason other than consummation of the
transactions contemplated by this Agreement or, after the Closing, upon the
consummation of the Stock Transfer, Purchaser shall permit Seller to use and
continue to have submitted with the Gaming Application all architectural,
design and construction plans and any other materials prepared by Purchaser or
its agents or consultants (the “Purchaser Application Materials”); provided,
however that Seller agrees to reimburse Purchaser for the reasonable and direct
costs incurred by Purchaser with respect to the Purchaser Application Materials
used by Seller (it being understood that such reimbursement obligation shall
only apply to the extent the incurrence of such costs resulted in out of pocket
expenditures by Purchaser and equity holders of Purchaser (rather than out of
pocket expenditures by any of the Companies or any of their respective
Subsidiaries)). Purchaser shall also permit Seller to use any other plans and
materials developed or obtained by Purchaser in connection with the development
and construction of the casino or other gaming activities at the Meadows (the
“Other Purchaser Materials”); provided, however, that Seller agrees to
reimburse Purchaser for the reasonable and direct costs incurred by Purchaser
with respect to the Other Purchaser Materials used by Seller (it being
understood that such reimbursement obligation shall only apply to the extent
the incurrence of such costs resulted in out of pocket expenditures by
Purchaser and equity holders of Purchaser (rather than out of pocket
expenditures by any of the Companies or any of their respective Subsidiaries)).
In addition, Seller acknowledges that it has separate reimbursement obligations
to Purchaser pursuant to a letter dated May 24, 2006 for expenses for
other professional services.


 


39

















 


(f)                                    Upon
the Closing, Purchaser and Seller agree to take such actions as are necessary
as soon as possible to amend the Gaming Application to remove the Alternative
Scenario. On and after the Closing Date and until the earlier of (i) the
Repayment Date and (ii) a Stock Transfer Trigger Date, Seller agrees to
use commercially reasonable efforts to support the application of Purchaser
under the Transaction Scenario and Seller and Purchaser agree to use
commercially reasonable efforts to obtain all necessary approvals from
Governmental Authorities for MEC Pennsylvania Racing Services, Inc. to
undertake its responsibilities under the Racing Services Agreement. After the
Closing Date, Seller agrees to provide Purchaser for filing with the Gaming
Board the information (if any) that Purchaser reasonably considers necessary,
or that the Gaming Board requests, in order to qualify Seller as a lender in
connection with the Tranche A and Tranche B Notes, and thereafter, to use its
commercially reasonable efforts to obtain the necessary approvals, if any, from
the Gaming Board to permit the Tranche A and Tranche B Notes to remain
outstanding in accordance with the terms of the Note Documents.


 


(g)                                 Seller
and Purchaser shall use commercially reasonable efforts to give all notices to
and obtain all consents from all third parties and Governmental Authorities
that are described in Section 3.05(c) or Section 3.06 of the Company
Disclosure Schedule and Section 4.03 of Purchaser Disclosure Schedule,
including but not limited to the Commission Approval. Seller and Purchaser
agree to consider comments and input from Governmental Authorities and to use
commercially reasonable efforts to consider means in which to address such
comments and input without resulting in changing or adversely affecting the
economics of the transactions contemplated hereby or the ability of either
party to close such transactions.


 


(h)                                 Without
limiting the generality of the parties’ undertakings pursuant to Section
5.04(a) though (g), each of the parties hereto shall use all reasonable efforts
to (i) respond to any inquiries by any Governmental Authority regarding
antitrust or other matters with respect to the transactions contemplated by
this Agreement or any agreement or document contemplated hereby,
(ii) avoid the imposition of any order or the taking of any action that
would restrain, alter or enjoin the transactions contemplated by this Agreement
and (iii) in the event any Governmental Order adversely affecting the
ability of the parties to consummate the transactions contemplated by this
Agreement or any agreement or document contemplated hereby has been issued, to
have such Governmental Order vacated or lifted.


 


(i)                                     If
any consent, approval or authorization necessary to preserve any right or
benefit under any lease, license, contract, commitment or other agreement or
arrangement to which the Company or any Subsidiary is a party is not obtained
prior to the Closing, Seller shall, subsequent to the Closing, cooperate with
Purchaser and the Companies in attempting to obtain such consent, approval or
authorization as promptly thereafter as practicable. If such consent, approval
or authorization cannot be obtained, Seller shall use its commercially
reasonable efforts to provide such Company or such Subsidiary, as the case may
be, with the rights and benefits of the affected lease, license, contract,
commitment or other agreement or arrangement for the term thereof, and, if
Seller provides such rights and benefits, such Company or such Subsidiary, as
the case may be, shall assume all obligations and burdens thereunder. Seller
shall have no obligation under this Section 5.04(i) after a Stock Transfer
Trigger Date.


 


(j)                                     From
the date hereof until the Closing, each party hereto shall, and Seller shall
cause each Company and Subsidiary to, use all commercially reasonable efforts
to take


 


40

















 


such actions as
are necessary to expeditiously satisfy the closing conditions set forth in
Article VIII hereof. From the Closing Date until the earlier of (i) the
Consummation Date and (ii) a Stock Transfer Trigger Date,
(a) Purchaser shall, and Purchaser shall cause each Company and Subsidiary
to, use its respective commercially reasonable efforts to take such actions as
are necessary to cause the Consummation Date to occur, including, without
limitation, satisfying its lenders with respect to any condition imposed by the
Gaming Board in its approval for issuance of the Conditional Category 1 or
Category 1 License to WTA, and (b) Seller shall use its commercially
reasonable efforts to cooperate with Purchaser with respect thereto.


 


(k)                                  [Reserved]


 


(l)                                     Until
the earlier of (i) the Repayment Date and (ii) the date of the Stock
Transfer, all analyses, appearances, meetings, discussions, presentations,
memoranda, briefs, filings, arguments, and proposals made by or on behalf of
either party before any Governmental Authority, including the Gaming Board and
the Commission, or the staff or regulators of any Governmental Authority, in
connection with the transactions contemplated hereunder (but, for the avoidance
of doubt, not including any interactions between Seller, the Companies or the
Subsidiaries with Governmental Authorities in the ordinary course of the
conduct of its business operations, any disclosure which is not permitted by
law or any disclosure containing confidential information) shall be disclosed
to the other party hereunder in advance of any filing, submission or
attendance, it being the intent that the parties will consult and cooperate
with one another, and consider in good faith the views of one another, in
connection with any such analyses, appearances, meetings, discussions,
presentations, memoranda, briefs, filings, arguments, and proposals. Until the
earlier of (i) the Repayment Date and (ii) the date of the Stock
Transfer, each party shall give notice to the other party with respect to any
meeting, discussion, appearance or contact with any Governmental Authority or
the staff or regulators of any Governmental Authority, with such notice being
sufficient to provide the other party with the opportunity to attend and
participate in such meeting, discussion, appearance or contact.


 


(m)                               Notwithstanding
anything in this Agreement to the contrary, the parties agree that at any time
after the date which is 14 days prior to the date, if any, identified by
the Gaming Board after which continued pursuit by Seller of a Conditional Category
1 license with Purchaser pursuant to the Gaming Application would jeopardize
Seller’s ability to obtain a Conditional Category 1 license or a Category 1
license in its own name, Seller shall not have any obligation during the period
of such jeopardy to comply with any of its obligations under Section 5.04,
Section 5.12 and any other provision of this Agreement that would require
Seller to directly or indirectly comply with any of its obligations under
Section 5.04 or 5.12; provided, however, if the Closing hereunder is
reasonably capable of occurring prior to the date identified by the Gaming
Board, then Seller shall continue to comply with its obligations under Section
5.04 and 5.12 and any other provision of this Agreement that would require
Seller to directly or indirectly comply with any of its obligations under
Section 5.04 or 5.12 until such time as Seller terminates the Agreement in
accordance with the provisions of Section 10.01(k) hereof.


 


SECTION 5.05                    Confidentiality.
(a) The terms of the letter agreement dated September 9, 2005 (the “Confidentiality
Agreement”) between Seller and Millennium Management Group, LLC are hereby
incorporated herein by reference as if Purchaser were a party thereto and shall
continue in full force and effect until the Repayment Date, at which time


 


41

















 


such
Confidentiality Agreement and the obligations of Purchaser under this Section
5.05 shall terminate; provided, however, that the Confidentiality
Agreement shall terminate only in respect of that portion of the Information
(as defined in the Confidentiality Agreement) exclusively relating to the
transactions contemplated by this Agreement. If this Agreement is, for any
reason, terminated prior to the Closing or if the Closing occurs but the
Repayment Date does not occur, the Confidentiality Agreement shall continue in
full force and effect.


 


(b)                                 Prior
to a Stock Transfer Trigger Date, Seller agrees to, and shall cause its agents,
representatives, Affiliates, employees, officers and directors to, protect (and
not disclose or provide access to any Person) all confidential information
relating to trade secrets, price, customer and supplier lists and pricing and
marketing plans with respect to the business of the Companies and the
Subsidiaries and all other information that Seller regards as confidential
information as of the date hereof with respect to the business of the Companies
and the Subsidiaries as currently conducted, 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 confidential information, as Seller 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 Seller and its 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 Seller
or its respective agents, representatives, Affiliates, employees, officers or
directors (provided that information provided to or filed with the Commission
or any other 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 this 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
Seller or Purchaser (provided that Seller provides prompt notice to Purchaser
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,
so long as the Tranche A Note or Tranche B Note is outstanding, this Section
5.05(b) shall not apply to the exceptions to confidentiality set forth in
Section 10.14 of the Note Agreement.


 


SECTION 5.06                    Use
of Magna Name. (a) Purchaser hereby acknowledges that all right, title
and interest in and to the trade names of Seller, the names “Magna,” MEC,”
“XpressBet,” and “Call-A-Bet” and all similar or related names and all
derivations or acronyms thereof and all trademarks, service marks, trade names,
collective marks, certification marks, trade dress, designs or logos containing
or incorporating the foregoing, including registrations and applications for
registration thereof (collectively, the “Magna Name”), are owned
exclusively by Seller and its Affiliates (other than the Companies and their Subsidiaries),
and that, except as provided in Section 5.06(b), any and all right of the
Companies and the Subsidiaries in the Magna Name shall terminate as of the
Closing Date and shall immediately revert back to Seller and its Affiliates
(other than the Companies and their Subsidiaries). On or before the Closing
Date, Seller shall take any and all actions necessary to transfer the domain
name of “meadowsracing.com” and any rights associated therewith to an entity
designated by Purchaser. To the extent that the transfer is not made prior to
the Closing Date, Seller and such


 


42

















 


entity designated
by Purchaser shall enter into such arrangements as may be reasonably acceptable
to each to provide such designee with the right to use the domain name.


 


(b)                                 Purchaser
shall, promptly following the Closing Date, cause each Company and Subsidiary
to remove or obliterate the Magna Name from all of its existing stocks of
signs, letterheads, advertisements and promotional materials and other
documents and materials (“Existing Stock”) or to cease using such
Existing Stock. Notwithstanding the foregoing, in the event that removal or
obliteration of the Magna Name from certain items of Existing Stock or the
cessation of the use thereof is impracticable, each Company and Subsidiary may
use such items of Existing Stock, so long as a mark or some other designation
identifying that each Company or Subsidiary is an Affiliate of Purchaser (and
not of Seller) is clearly indicated on such items of Existing Stock, until such
items of Existing Stock is depleted, or a period of three (3) months from the
Closing Date, whichever occurs first. Except as expressly provided in this
Agreement, no other right to use the Magna Name is granted by Seller to
Purchaser, Companies and Subsidiaries, whether by implication or otherwise.


 


(c)                                  Purchaser
shall, as soon as practicable after the Repayment Date, but in no event later
than 10 Business Days after such date, cause MECPenn, MEC Pennsylvania Food
Service, Inc. and MECRacing to file amended articles of incorporation with the
appropriate authorities changing their corporate names to a corporate name that
does not contain the word “Magna” or any Magna Name.


 


SECTION 5.07                    Investigation.
(a) Purchaser acknowledges and agrees that (i) has made its own
inquiry and investigation into, and, based thereon, has formed an independent
judgment concerning, the Companies and Subsidiaries and (ii) it has not,
for purposes of entering into this Agreement, relied on any representation or
warranty or other statement or omission of Seller or any of its directors,
officers, employees, agents, stockholders, Affiliates, consultants, counsel,
accountants, investment bankers or representatives, other than the
representations and warranties contained in this Agreement (including the
Exhibits and the Company Disclosure Schedule).


 


(b)                                 In
connection with Purchaser’s investigation of the Companies and Subsidiaries,
Purchaser has received from Seller certain estimates, projections, forecasts,
plans and budgets for the Companies and Subsidiaries, including, without
limitation, projected income statement and balance sheet information. Purchaser
acknowledges that there are uncertainties inherent in attempting to make such
estimates, projections, forecasts, plans and budgets, that Purchaser is
familiar with such uncertainties and that Purchaser is taking full
responsibility for making its own evaluation of the adequacy and accuracy of
all estimates, projections, forecasts, plans and budgets so furnished to it.
Accordingly, Seller makes no representation or warranty with respect to any
estimates, projections, forecasts, plans or budgets referred to in this
Section 5.07, except that they have been prepared in the ordinary course
of business consistent with past practice.


 


SECTION 5.08                    Limited
Non-Compete. (a) As an inducement for Purchaser to enter into this
Agreement and in consideration of the receipt of $2,000,000 (which amount is
included in the Purchase Price), Seller agrees that for a period commencing on
the Closing Date and ending on the later of (i) five years from the
Closing Date and (ii) twelve months after the


 


43

















 


termination of the
Racing Services Agreement for any reason (the “Non-Competition Period”),
except with Purchaser’s prior written consent, Seller shall not directly or
indirectly (including through MEC Pennsylvania Racing Services, Inc.) own or
operate a pari-mutuel wagering facility with expanded gaming within 100 miles
of the Meadows Facility (the “Non-Competition Covenant”).
Notwithstanding the foregoing, the Non-Competition Covenant shall not apply
(i) to Thistledown (located in North Randall, Ohio) or operation of the
Meadows Facility pursuant to the Racing Services Agreement or (ii) after a
Stock Transfer Trigger Date.


 


(b)                                 Seller,
for itself and its Affiliates, agrees that a breach or violation of the
Non-Competition Covenant shall entitle Purchaser, as a matter of right, to an
injunction issued by any court of competent jurisdiction restraining any
further or continued breach of violation of such covenant. Such right to an
injunction shall be cumulative, and in addition to, and not in lieu of, any
other remedies to which Purchaser may show itself justly entitled. Further,
during any period in which Seller or any of its Affiliates are in breach of the
Non-Competition Covenant, the time period of such covenant shall be extended
for an amount of time that Seller or any of its Affiliates are in breach
hereof, with the effect that the total duration of the Non-Competition Covenant
shall be the original period plus the actual amount of time that Seller or any
of its Affiliates are in breach.


 


(c)                                  Further,
Seller, for itself and its Affiliates, agrees that the Non-Competition Covenant
is appropriate and reasonable when considered in light of the nature and extent
of the business conducted by Purchaser. Seller, for itself and its Affiliates,
acknowledges and agrees that: 
(i) Purchaser would not enter into this Agreement unless Seller,
for itself and its Affiliates, agreed to the Non-Competition Covenant; and
(ii) it has read and understands the terms of this Agreement, including,
without limitation, the Non-Competition Covenant, and has been provided the
opportunity to discuss this Agreement and such covenant with Purchaser and
counsel of its choice and has carefully considered the nature and extent of the
restrictions upon it and the rights and remedies conferred upon Purchaser
hereunder. Seller, for itself and its Affiliates, hereby acknowledges and
agrees that Purchaser has a legitimate interest in protecting its business and
that the Non-Competition Covenant is reasonable in limitations as to time,
scope, geographical area and activity, and is fully required and is no greater
than necessary to protect the legitimate business interests of Purchaser.
Seller, for itself and its Affiliates, further agrees that the Non-Competition
Covenant is not unduly harsh or oppressive to Seller, or any of its Affiliates,
in curtailing their legitimate efforts to earn a livelihood and does not stifle
the inherent skill and experience of Seller, or any of its Affiliates, or
confer a benefit upon Purchaser disproportionate to the detriment to Seller, or
any of its Affiliates, or harm in any manner whatsoever the public interest or
operate as a bar to the sole means of support of Seller, or any of its
Affiliates.


 


(d)                                 Seller,
for itself and its Affiliates, agrees that if the Non-Competition Covenant
should be held by any Governmental Authority to be void or unenforceable in any
particular area or jurisdiction, then Purchaser and Seller shall consider this
Agreement to be modified so as to eliminate that particular area or
jurisdiction as to which the Non-Competition Covenant is held to be void or
otherwise enforceable, and as to all other areas and jurisdictions and scope
covered by this Agreement, the terms hereof shall remain in full force and
effect as originally written. Further, if the Non-Competition Covenant should
be held by any Governmental Authority to be effective in any particular area or
jurisdiction or scope only if said


 


44

















 


covenant is
modified to limit its duration or scope, then Seller and Purchaser shall
consider the Non-Competition Covenant to be amended and modified with respect
to that particular area or jurisdiction so as to comply with the order of any
Governmental Authority, and as to all other political subdivisions of the
United States, the Non-Competition Covenant shall remain in full force and
effect as originally written.


 


SECTION 5.09                    Remediation.
Seller hereby agrees that after the Repayment Date it will complete items (1)
and (2) on Part D of NPDES Permit #PA0252905 issued on August 11, 2005 by
the Department of Environmental Protection of the Commonwealth of Pennsylvania
on or before the deadline for completion specified in such items, but only to
the extent such items are not completed in connection with the backside
improvements required by Section 1404 of the Gaming Act. Seller further
agrees it will complete any other matters arising under the NPDES Permit #
PA0252905 during the two years on and after the Repayment Date.


 


SECTION 5.10                    No
Negotiation. Until the earlier of (a) the Closing Date and
(b) such time, if any, as this Agreement is terminated pursuant to this
Agreement, Seller will not, and will cause the Companies and the Subsidiaries,
and each of their employees, financial advisors, attorneys, accountants and
other representatives, not to directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, or
provide any non-public information to, any Person (other than Purchaser)
relating to any transaction involving the sale of any of the Companies or the
Subsidiaries or the Assets (other than sales of Assets in the ordinary course
of business) of the Companies or the Subsidiaries or any of the capital stock
of the Company or the Subsidiaries, or any merger, consolidation, business
combination, or similar transaction involving the Companies or the
Subsidiaries.


 


SECTION 5.11                    Title.


 


(a)                                  Seller
has provided Purchaser, for each parcel of owned Real Property, with a title
commitment issued by First American Title Insurance Company (the “Title
Company”), in the form attached as Exhibit 5.11 hereto (the “Title
Commitment”), together with complete and legible copies of all recorded
documents listed as exceptions. Purchaser shall cause an ALTA survey of the
owned Real Property certified in favor of Purchaser, Seller and Title Company
(the “Survey”) to be prepared at Purchaser’s expense, and Seller shall
cooperate with Purchaser in the preparation of the Survey.


 


(b)                                 At
the Closing, the Title Company shall irrevocably commit to issue (i) an
ALTA extended coverage owner’s title insurance policy in the form of the Title
Commitment for each of Seller’s interests in the owned Real Property containing
the endorsements set forth on Exhibit 5.11 hereto and (ii) such other
title insurance policy or policies as are required by the Note Documents.
Seller covenants and agrees that it will provide such information and execute
such documents as are reasonable and customary as required by the Title Company
to issue the applicable Title Policy in conformity with the Title Commitment.


 


(c)                                  If,
after the date hereof and prior to the Closing, the Title Company revises the
Title Commitment to disclose any title exception or the Survey depicts any
matter (each, a “Title Objection”), in each case, that is not a
Permitted Exception, then Purchaser may provide written notice of objection to
Seller (“Purchaser’s Notice”) of such matters within 10 days after


 


45

















 


receiving written
notice of such Title Objection and complete and legible copies of any recorded
documents relating thereto. Seller shall make reasonable efforts to cure each
Title Objection included in Purchaser’s Notice or to cause the Title Company to
eliminate each Title Objection as an exception to the Title Commitment or to
remove it from the Survey. Any Title Objection that is cured or that the Title
Company is willing to insure over on terms acceptable to Seller and Purchaser
is herein referred to as an “Insured Exception.”  The Insured Exceptions shall be deemed to be
acceptable to Purchaser. If any Title Objection cannot be cured and the Title
Company will not insure over it on terms acceptable to Seller and Purchaser,
then Purchaser shall have a right to terminate this Agreement if such Title
Objection would have a Material Adverse Effect.


 


SECTION 5.12                    Further
Action. Each of the parties hereto shall execute and deliver such documents
and other papers and take such further actions as may be reasonably required to
carry out the provisions hereof and give effect to the transactions
contemplated by this Agreement.


 


SECTION 5.13                    Excluded
Items. The parties agree that all assets exclusively related to Seller’s
account wagering operations (i.e., XpressBet, Inc. (formerly known as
Call-A-Bet)) and all Liabilities associated therewith (the “Excluded Items”)
have been or will be transferred to XpressBet, Inc. prior to Closing. Seller
will transfer, sell or otherwise dispose of the Excluded Items identified on
Exhibit 5.13 prior to the Closing Date so that none of the Companies or
Subsidiaries shall have any direct or indirect ownership in, or any Liability
(other than Liability under any agreement by and between any Company or
Subsidiary and XpressBet, Inc.) for, the Excluded Items as of the Closing Date.


 


SECTION 5.14                    Estoppels.
Prior to the Closing, Seller shall use commercially reasonable efforts to
obtain estoppel certificates from third parties under the leases of Real
Property, in a form consistent with the form of any estoppel certificates
incorporated into such leases, or has been delivered in the past under such
leases.


 


SECTION 5.15                    Cooperation
in Preparation of Alternative Application. Any time on or after
December 1, 2005, upon the request of Seller, Purchaser shall assist
Seller in compiling an application for a Conditional Category 1 license and Category
1 license to conduct slot machine gaming pursuant to the Gaming Act on the
basis that Seller will be submitting such application as the operator and owner
of the Meadows Facility, which efforts shall include, without limitation,
allowing Seller to use and submit with its application all Purchaser
Application Materials; provided, however that Seller agrees to reimburse
Purchaser for the reasonable and direct costs incurred by Purchaser with
respect to the Purchaser Application Materials used by Seller in the event that
this Agreement is terminated.


 


SECTION 5.16                    Financial
Statements. (a) Seller agrees to prepare, and use its commercially
reasonable efforts, including expending additional funds for expediting fees or
similar fees to Seller’s Accountants, to cause Seller’s Accountants to assist
Seller in preparing the following materials in a timely fashion after execution
of this Agreement or, in the case of periods ending on and after the date of
this Agreement, in a timely fashion after passage of the ending date for such
period:  (i) an audited combined
balance sheet of the Companies and their Subsidiaries (excluding the Excluded
Subsidiaries) as of December 31, 2005 and the related


 


46

















 


audited statements
of income, equity and cash flows for the year then ended in compliance with
GAAP and meeting all requirements of Regulation S-X (the “2005 Audited
Financial Statements”); (ii) unaudited combined balance sheets of the
Companies and their Subsidiaries (excluding the Excluded Subsidiaries) as of
March 31, 2005, June 30, 2005 and September 30, 2005 and the
related statements of income, equity and cash flows for the three months, six
months and nine months, respectively, then ended in compliance with GAAP and meeting
all requirements of Regulation S-X (taking into account Rule 10-01 thereunder)
(the “2005 Quarterly Financial Statements”), together with a SAS 100
review thereof by Seller’s Accountants in a form reasonably satisfactory to
Purchaser and Purchaser’s Accountants; and (iii) with respect to each
fiscal quarter in 2006 ending prior to the Repayment Date and any shorter
period from the prior quarter end to the Repayment Date, an unaudited combined
balance sheet of the Companies and their Subsidiaries (excluding, the Excluded
Subsidiaries) as of the last day of each such fiscal quarter or such shorter
period and the related statements of income, equity and cash flows for the
latest year-to-date period ended as of such day in compliance with GAAP and
meeting all requirements of Regulation S-X (taking into account Rule 10-01
thereunder) (the “2006 Interim Financial Statements”), together with a
SAS 100 review thereon by Seller’s Accountants in a form reasonably
satisfactory to Purchaser and Purchaser’s Accountants. On and after the Closing
and through the Repayment Date, Purchaser agrees to cooperate with Seller and
Seller’s Accountants in connection with the preparation of any unaudited
financial statements for any period ending on the Repayment Date, or any fiscal
quarter ending prior to the Repayment Date. To the extent that Purchaser
requires any audited financial statement for any period beginning and ending
within 2006 for which an audit has not already been prepared by Seller’s
Accountant on or prior to the Closing Date, then Seller and Purchaser shall
cooperate with Seller’s Accountants or such other accountants as are required,
if Seller’s Accountants are not able to prepare such financial statements, to
prepare audited financial statements for the requested period.


 


(b)                                 Seller
shall, and shall cause the officers, directors, employees, agents,
representatives, accountants and counsel of Seller and each Company and
Subsidiary to, cooperate with Purchaser and its financing sources and their
respective officers, employees and authorized agents, accountants, counsel and
representatives in connection with the obtaining of financing of the Purchase
Price (and any refinancings thereof) (each, a “Financing”) and any
Securities and Exchange Commission registration process contemplated by a
Financing or any filings otherwise required to be made with the Securities and
Exchange Commission by Purchaser, its Affiliates or OCM HoldCo, LLC. Such
cooperation shall include, without limitation: (i) the provision of auditor’s
consents with respect to the inclusion of the audited combined balance sheet of
the Companies and their Subsidiaries (excluding the Excluded Subsidiaries) as
of December 31, 2004 (the “2004 Audited Balance Sheet”) and the
2005 Audited Financial Statements in filings and marketing materials;
(ii) the provision of accountant’s comfort letters with respect to the
2004 Audited Balance Sheet, 2005 Audited Financial Statements, 2005 Quarterly
Financial Statements, the 2006 Interim Financial Statements, financial data
derived from books and records prior to Closing and customary negative
assurances with respect to matters relating to the foregoing; (iii) the
provision of customary representations to accountants in connection with
audits, reviews and comfort letters; (iv) provision of the unaudited
combined balance sheets of the Companies and their Subsidiaries (excluding the
Excluded Subsidiaries) as of March 31, 2004, June 30, 2004 and
September 30, 2004 and the related statements of income, equity and cash
flows for the three, six and nine months, respectively, then ended;
(v) responding


 


47

















 


to due diligence
requests from financing sources; and (vi) providing customary legal
opinions to financing sources. Notwithstanding the foregoing, Seller shall not
be required to provide or prepare audited financial statements for any period
prior to January 1, 2006, other than the 2004 Audited Balance Sheet and
the 2005 Audited Financial Statements.


 


(c)                                  Purchaser
shall pay for all costs and expenses reasonably incurred by Seller after the
Closing as a result of Seller’s efforts under the last sentence of Section
5.16(a); provided that, in the event that the Repayment Date occurs, Seller
shall reimburse Purchaser for the first audit requested pursuant to the last
sentence of Section 5.16(a) for any period on or prior to the Repayment Date.
Seller shall reimburse Purchaser on the Repayment Date, and if such payment is
not made in cash, then Seller or Agent under the Note Agreement shall provide a
direction letter that permits Purchaser to retain a portion of the amount to be
paid on the Tranche A Note equal to the reimbursement owed by Seller. To the
extent that the reimbursement obligation is not known until after the Repayment
Date, Seller shall pay any reimbursable amount in cash or Purchaser may offset
the amount against any amount owed to Seller or its Affiliates under any
Transaction Document.


 


SECTION 5.17                    Separation.
Seller shall use commercially reasonable efforts to separate the agreement
listed on Section 5.17 of the Company Disclosure Schedule, such that WTA
and MLR are licensees of, and responsible for, only those seat licenses
allocated as of the date hereof to the Meadows Facility and the OTB Facilities.
If such separation has not occurred prior to the Closing Date, Seller shall
indemnify WTA and MLR for any Losses related to sites authorized to use
software under the agreement listed on Section 5.17 of the Company
Disclosure Schedule other than the Meadows Facility and the OTB Facilities.


 


SECTION 5.18                    Notification.
Seller and Purchaser shall promptly, and in any event prior to the Closing,
notify the other party in writing of all events, circumstances, facts and
occurrences which such party becomes aware of if such events, circumstances,
facts and occurrences would reasonably be expected to result in
a Purchaser Material Adverse Effect or a Material Adverse Effect.


 


SECTION 5.19                    Environmental
Report. Seller shall exercise its best efforts (at no material cost to
Seller) to cause the consultant(s) which issued the Phase I Environmental
Site Assessment dated October 28, 2005 prepared by AMEC Earth &
Environmental and the Phase I obtained by Seller pursuant to
Section 5.22 to permit Purchaser and any lender providing financing to
Purchaser with respect to or secured by any of the Real Property, to rely on
such reports to the full extent that Seller may rely on such reports.


 


SECTION 5.20                    XpressBet
Matters. Seller shall use commercially reasonable efforts to complete on or
before the Closing Date the formalization of the relationship between WTA and
MLR, on the one hand, XpressBet, Inc., on the other hand, to enter into
(i) a formal agreement for the provision of banking services by XpressBet,
Inc. to WTA and MLR with respect to the accounts of WTA’s and MLR’s
Pennsylvania account wagering customers and (ii) separate tote structures
and service agreements for WTA and MLR, on the one hand, and XpressBet, Inc.,
on the other hand. Seller shall seek Commission approval for each of such
agreements.


 


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SECTION 5.21                    [Reserved]


 


SECTION 5.22                    Phase
I. Seller agrees to cause, at its expense, a Phase I environmental
assessment to be conducted by AMEC Earth and Environmental, Inc. (or other reputable
consultant agreed to by Purchaser) on the real property located on
Section 5.22 of the Company Disclosure Schedule (the “Phase I”).
Seller shall deliver the Phase I to Purchaser within sixty days after the date
hereof. Seller and Purchaser acknowledge that to the extent a circumstance,
event or occurrence is disclosed in the Phase I that, if known by Seller as of
the date hereof, would have resulted in Seller’s representations in Section
3.12 being untrue, that such a circumstance, event or occurrence constitutes a
Seller Development as defined in Section 8.03(b).


 


SECTION 5.23                    Slot
Machine Taxes. Seller and Purchaser shall use commercially reasonable
efforts to support the interpretation by all relevant Governmental Authorities
that the local share assessment payable by each slot machine licensee under
Section 1403(b) of the Gaming Act shall not in any circumstance exceed four
percent (4%) of the gross terminal revenue from slot machines in operation at
such licensee’s facility, including amounts payable by such licensee in respect
of such local share assessment to the State Gaming Fund established by Section
1403(a) of the Gaming Act and amounts to be paid to any other Governmental
Authorities under Section 1403(c).


 


ARTICLE
VI


 


EMPLOYEE
MATTERS


 


SECTION 6.01                    Arrangements;
Payroll Obligations. (a) Immediately prior to Closing, all employees
of the Company and its Subsidiaries (other than those listed on Schedule
6.01(a) of the Company Disclosure Schedules, which listed employees are
hereinafter referred to as the “Company Employees”) shall be transferred
to MEC Pennsylvania Racing Services, Inc. and shall be employees of MEC
Pennsylvania Racing Services, Inc. rather than any Company or any of its
Subsidiaries. Such employees who are so transferred shall be referred to as the
“Transferred Employees”. Seller agrees that Purchaser shall not assume
or be responsible for, and shall be indemnified against, any and all
Liabilities related to the Transferred Employees and the transfer of the
Transferred Employees to MEC Pennsylvania Racing Services, Inc., including
without limitation, any payroll, vacation, sick leave, severance, WARN Act,
COBRA costs or similar amounts.


 


(b)                                 Seller
will be responsible under the Racing Services Agreement for the payroll obligations
with respect to the Company Employees who are the responsibility of MEC
Pennsylvania Racing Services, Inc. under the Racing Services Agreement
(including, without limitation, the satisfaction of all payroll withholding tax
obligations) for the Companies and Subsidiaries payable after the Closing Date.
Subject to Section 6.03 and anything to the contrary in the Racing Services
Agreement, Seller agrees that Purchaser shall not assume or be responsible for,
and shall be indemnified against, any and all Liabilities related to the
Company Employees who are the responsibility of MEC Pennsylvania Racing
Services, Inc. under the Racing Services Agreement, including without
limitation, any payroll, vacation, sick leave, severance, WARN Act, COBRA
costs, workers compensation or similar amounts. Except with


 


49

















 


respect to any
vacation benefits, Multiemployer Plans and the MEC Health Plan, the Company
Employees do not participate in any Benefit Plans.


 


SECTION 6.02                    Benefit
Plans and Transferred Employee Related Obligations. (a) Seller agrees
to continue coverage of the Transferred Employees under its or its Affiliates’
employee benefit plans in accordance with their terms and its or its
Affiliates’ personnel policies on and after the Closing Date. As of the Closing
Date, each Company Employee who was covered by the health plan listed on
Section 6.02 of the Company Disclosure Schedule (the “MEC Health Plan”)
shall cease to be covered by such health plan. Seller agrees, at its sole cost
and expense, to create a separate employee plan in the name of Purchaser to
provide to such Company Employees substantially similar benefits to those
provided for under the MEC Health Plan, except in instances where the benefit
cannot be replicated because of the different provider. Seller shall remain
obligated for any and all benefits and benefit entitlements under the Benefit
Plans that were earned or accrued by any Company Employee or any Transferred
Employee or former employees of any Company or Subsidiary on and prior to the
Closing Date. With respect to the Benefit Plans that provide welfare benefits,
Seller represents, warrants and agrees that there will be no disruption in the
coverage for the Transferred Employees under such welfare plans as a result of
their transfer to MEC Pennsylvania Racing Services, Inc. To the extent that
there is a termination in coverage under the MEC Health Plan for the Company
Employees covered thereby as of the Closing Date, Seller represents, warrants
and agrees that either it or the applicable insurance carrier, as set forth in
the MEC Health Plan, shall remain obligated to reimburse such Company Employees
for eligible health care benefit expenses and services incurred prior to the
Closing; provided that such Company Employees’ claims for reimbursement
for such expenses and services are delivered to the appropriate party within
applicable time limits, as set forth in the MEC Health Plan. An expense or
service is deemed to be incurred, with respect to the MEC Health Plan, when the
medical services are performed, and, with respect to plans that provide welfare
benefits other than medical or dental benefits, when the event giving rise to
such expense or service occurs.


 


(b)                                 Seller
agrees that it shall remain obligated for any expenses or Losses incurred in
connection with any claim of an Employee or a former employee of any Company or
Subsidiary arising on or prior to the Closing Date under the workers’
compensation laws of any state (a “Workers’ Compensation Claim”).


 


(c)                                  Seller
agrees to remain obligated to provide continuation health care coverage, in accordance
with Section 4980B of the Code and Sections 601 to 608 of ERISA (“COBRA”),
to all Employees or former employees of any Company or Subsidiary and their
qualified beneficiaries (i) who incur a qualifying event on or prior to
the Closing Date and (ii) to whom Seller, any Company, or any Subsidiary
are, on the Closing Date, (A) providing such continuation coverage or
(B) under an obligation to provide such continuation coverage at the
election of the Employee or former employee or his or her qualified
beneficiary.


 


(d)                                 Seller
agrees that it shall be obligated to make contributions on behalf of Companies
and Subsidiaries to any Multiemployer Plan in respect of the Company Employees
to the extent set forth in the Racing Services Agreement.


 


SECTION 6.03                    Intentionally
Omitted.


 


50

















 


SECTION 6.04                    Intentionally
Omitted.


 


SECTION 6.05                    Employee
Benefits Indemnity.


 


(a)                                  Seller
agrees to indemnify Purchaser against and hold Purchaser harmless from all
Losses arising out of:


 


(i)                                     the
breach of any representation, warranty, covenant or agreement of Seller made in
Section 3.16 or Section 3.17 hereof or this Article VI;


 


(ii)                                  any
and all Liabilities related to, arising out of or associated with the
Transferred Employees (including their transfer to MEC Pennsylvania Racing
Services, Inc.);


 


(iii)                               any
and all Liabilities arising prior to the Closing under or with respect to
employment, working conditions, wages and/or compensation, benefits, claims and
all other matters related to employees, agents and other personnel of the
Companies and the Subsidiaries and of Seller and its subsidiaries; and


 


(iv)                              any
and all Actions by, and all Liabilities related to, employees or independent
contractors of Companies and the Subsidiaries and of Seller and its
subsidiaries arising prior to the Closing, including without limitation, any
Actions or Liabilities arising out of any employee benefit plan or arrangement,
any Actions or Liabilities for accrued vacation and sick time of the employees,
Seller’s, the Companies’ or any of their Affiliates’ failure to deposit or fund
any amounts withheld from employees pursuant to any retirement plan or
arrangement or retiree medical plan or arrangement, or any unfunded retirement
plan or arrangement (whether or not payment is currently due under Law) or any
obligations to current or former plan participants or beneficiaries under any
plan or arrangement intended to provide benefits to current or former employees
of Seller, the Companies or any of their Affiliates.


 


(b)                                 Purchaser
agrees to indemnify Seller against and hold Seller harmless from all Losses
arising out of the breach of any representation, warranty, covenant or
agreement of Purchaser made in this Article VI.


 


SECTION 6.06                    Third-Party
Claims. Nothing in this Agreement is intended, or shall be construed, to
confer upon any person, other than the parties hereto and their successors and
permitted assigns, any rights or remedies by reason of this Article VI.


 


SECTION 6.07                    Survival.
The covenants and agreements of the parties hereto contained in this Article VI
shall survive the Closing and shall remain in full force and effect
indefinitely.


 


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ARTICLE
VII


 


TAX
MATTERS


 


SECTION 7.01                    Indemnity.
(a) Seller agrees to indemnify and hold harmless Purchaser, the Companies
and each Subsidiary against the following Taxes in excess of the amount, if
any, paid on account of Taxes pursuant to Section 15.6.5 of the Racing
Services Agreement to the extent taken into account in determining the payment
pursuant to such section, and, except as otherwise provided in Section 7.04,
against any loss, damage, liability or expense, including reasonable fees for
attorneys and other outside consultants, incurred in contesting or otherwise in
connection with any such Taxes: 
(i) Taxes imposed on the Companies or any Subsidiary with respect
to taxable periods of such Person ending on or before the Closing Date;
(ii) with respect to taxable periods beginning before the Closing Date and
ending after the Closing Date, Taxes imposed on the Companies or any Subsidiary
which are allocable, pursuant to Section 7.01(b), to the portion of such period
ending on the Closing Date; (iii) Taxes imposed on any member of any
affiliated group with which any of the Companies and the Subsidiaries file or
have filed a Tax Return on a consolidated or combined basis that includes the
Companies’ and the Subsidiaries’ taxable periods ending on or before the
Closing Date; and (iv) any and all Taxes of any Person (other than the
Companies and the Subsidiaries) imposed on any of the Companies or the
Subsidiaries as a transferee or successor, by contract or pursuant to any Law.
Purchaser shall be responsible for and agrees to pay all Taxes and associated expenses
not allocated to Seller pursuant to the first sentence hereof; and Purchaser
agrees to indemnify and hold harmless Seller against all such Taxes and
expenses.


 


(b)                                 In
the case of Taxes that are payable with respect to a taxable period that begins
before the Closing Date and ends after the Closing Date, the portion of any
such Tax that is allocable to the portion of the period ending on the Closing
Date shall be:


 


(i)                                     in
the case of Taxes that are either (x) based upon or related to income or
receipts, or (y) imposed in connection with any sale or other transfer or
assignment of property (real or personal, tangible or intangible) (other than
conveyances pursuant to this Agreement, as provided under Section 7.07), deemed
equal to the amount which would be payable if the taxable year ended with the
Closing Date; and


 


(ii)                                  in
the case of Taxes imposed on a periodic basis with respect to the assets of the
Companies or any Subsidiary, or otherwise measured by the level of any item,
deemed to be the amount of such Taxes for the entire period (or, in the case of
such Taxes determined on an arrears basis, the amount of such Taxes for the
immediately preceding period), multiplied by a fraction the numerator of which
is the number of days in the period ending on the Closing Date and the
denominator of which is the number of days in the entire period.


 


Purchaser shall provide Seller for its review and
comment any Tax Returns filed by or with respect to any of the Companies or any
of the Subsidiaries during the period beginning on the day after the Closing
Date and ending on the earlier of the Repayment Date and the date of the Stock
Transfer.


 


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(c)                                  Any
indemnity payable under this Section 7.01 shall be net of any Tax benefit
enjoyed by the applicable indemnified party, determined in a manner consistent
with the last two sentences in Section 9.02(b) or Section 9.03(c) hereof.


 


SECTION 7.02                    Returns
and Payments. (a) From the date of this Agreement through and after
the Closing Date, Seller shall prepare and file or otherwise furnish in proper
form to the appropriate Governmental Authority (or cause to be prepared and
filed or so furnished) in a timely manner all Tax Returns relating to the
Companies and the Subsidiaries that are due on or before or relate to any
taxable period ending on or before the Closing Date (and Purchaser shall do the
same with respect to any taxable period ending after the Closing Date). Tax
Returns of the Companies and the Subsidiaries not yet filed for any taxable
period that begins before the Closing Date shall be prepared in a manner
consistent with past practices employed with respect to the Companies and the
Subsidiaries (except to the extent counsel for Seller or the Companies renders
a legal opinion that there is no reasonable basis in law therefor or determines
that a Tax Return cannot be so prepared and filed without being subject to
penalties). With respect to any Tax Return required to be filed by Purchaser or
Seller with respect to the Companies and the Subsidiaries and as to which an
amount of Tax is allocable to the other party under Section 7.01(b), the filing
party shall provide the other party and its authorized representatives with a
copy of such completed Tax Return and a statement certifying the amount of Tax
shown on such Tax Return that is allocable to such other party pursuant to
Section 7.01(b), together with appropriate supporting information and schedules
at least 20 Business Days prior to the due date (including any extension
thereof) for the filing of such Tax Return, and such other party and its
authorized representatives shall have the right to review and comment on such
Tax Return and statement prior the filing of such Tax Return.


 


(b)                                 Seller
shall pay or cause to be paid when due and payable all Taxes described in
Sections 7.01(a)(i) and 7.01(a)(ii), and Purchaser shall so pay or cause to be
paid Taxes for any taxable period ending after the Closing Date (subject to its
right of indemnification from Seller by the date set forth in Section 7.05 for
Taxes attributable to the portion of any Tax period that includes the Closing
Date pursuant to Sections 7.01(a) and 7.01(b)).


 


SECTION 7.03                    Refunds.
Any Tax refund (including any interest with respect thereto), and any equivalent
benefit through a reduction in tax liability for a post-Closing Date period,
relating to the Companies or any Subsidiary for any taxable period prior to the
Closing Date shall be the property of Seller, and if received by Purchaser or
the Companies or any Subsidiary shall be paid over to Seller within five
Business Days of the earlier of receipt or entitlement thereto; provided,
however, that any Tax benefit obtained by Purchaser, the Companies or
any Subsidiary as a result of utilizing any net operating loss carryforward or
other carryforward (which may be subject to adjustments) which is allocable to
the Companies or any Subsidiary shall be retained by Purchaser, the Companies
or such Subsidiary. Purchaser shall cause the Companies and the Subsidiaries to
elect, where permitted by law, to carry forward any net operating loss,
charitable contribution or other item arising after the Closing Date that
could, in the absence of such election, be carried back to a taxable period of
the Companies ending on or before the Closing Date in which the Companies are
included in a consolidated, combined or unitary Tax return; provided that, if
such election to carry forward an item is not available, any cash refund
received by Seller with respect to such carryback shall be paid over to
Purchaser within five Business Days of actual receipt. Purchaser shall, if Seller
so requests and at Seller’s


 


53

















 


expense, cause the
relevant entity to file for and obtain any refunds or equivalent amounts to
which Seller is entitled under this Section 7.03. Purchaser shall permit Seller
to control (at Seller’s expense) the prosecution of any such refund claim, and
shall cause the relevant entity to authorize by appropriate power of attorney such
persons as Seller shall designate to represent such entity with respect to such
refund claim; provided, however, that Seller shall not take any
action in the prosecution of such refund claims that would be materially
detrimental to Purchaser, the Companies or the Subsidiaries (including for this
purpose the tax positions of such entities). In the event that any refund or
credit of Taxes for which a payment has been made to Seller pursuant to this
Section 7.03 is subsequently reduced or disallowed, Seller shall indemnify and
hold harmless the payor for any Tax Liability, including interest and penalties
assessed against such payor by reason of the reduction or disallowance.


 


SECTION 7.04                    Contests.
(a) After the Closing, Purchaser shall promptly notify Seller in writing
upon the commencement of any Tax audit or administrative or judicial proceeding
that could affect Seller, and shall also separately notify Seller, in writing,
of a proposed assessment or claim in an audit or administrative or judicial
proceeding of Purchaser or of any of the Companies and the Subsidiaries which,
if determined adversely to the taxpayer, would be grounds for indemnification
under this Article VII. If Purchaser fails to give Seller prompt notice of an
asserted Tax liability as required by this Section 7.04, then (a) if
Seller is precluded by the failure to give notice within 30 days of the
commencement of such proceeding from contesting the asserted Tax liability in
both the administrative and judicial forums, then Purchaser shall have sole
responsibility for such Tax liability or (b) if Seller is not precluded
from contesting but such failure to give notice within 30 days of the
commencement of such proceeding results in detriment to Seller, then any amount
that Seller is otherwise required to pay to Purchaser pursuant to Section 7.01
with respect to such liability shall be reduced by the amount of such
detriment.


 


(b)                                 Seller
may elect to direct, through counsel of its own choosing and at its own
expense, any audit, claim for refund and administrative or judicial proceeding
involving any asserted liability with respect to which indemnity may be sought
under this Article VII (any such audit, claim for refund or proceeding relating
to an asserted tax liability are referred to herein collectively as a “Contest”).
If Seller elects to direct the Contest of an asserted Tax liability, it shall
within 30 days of receipt of the notice of asserted tax liability notify
Purchaser of its intent to do so, and Purchaser shall cooperate and shall cause
each Subsidiary and any successor to a Subsidiary or its successor to
cooperate, at Seller’s expense, in each phase of such Contest. Purchaser also
may participate in any such audit or proceeding and, if Seller does not assume
the defense of any such audit or proceeding, Purchaser may defend the same in
such manner as it may deem appropriate, including, but not limited to, settling
such audit or proceeding after giving five Business Days’ prior written notice
to Seller setting forth the terms and conditions of settlement. In the event
that issues relating to a potential adjustment for which Seller would be liable
are required to be dealt with in the same proceeding as separate issues
relating to a potential adjustment for which Purchaser would be liable,
Purchaser shall have the right, at its expense, to control the audit or
proceeding with respect to the latter issues. If Seller chooses to direct the
Contest, Purchaser shall promptly empower and shall cause the appropriate
Subsidiary or its successor promptly to empower (by power of attorney and such
other documentation as may be appropriate) such representatives of Seller as it
may designate to represent Purchaser or the Subsidiary or its successor in the
Contest insofar as the Contest involves an asserted tax


 


54

















 


liability for
which Seller would be liable under this Article VII. If Seller assumes the
defense of a Contest, Seller shall not enter into any compromise or agree to
settle any claim pursuant to any Tax audit or proceeding which would adversely
affect Purchaser for any taxable year without the written consent of Purchaser,
which consent shall not be unreasonably withheld.


 


SECTION 7.05                    Time
of Payment. Payment by Seller of any amounts due under this Article VII
shall be made (i) at least three Business Days before the due date of the
applicable estimated or final Tax Return required to be filed by Purchaser on
which is required to be reported income for a period ending after the Closing
Date for which Seller is responsible under Sections 7.01(a) and 7.01(b) and
with respect to which Tax must be paid, and (ii) within five Business Days
following an agreement between Seller and Purchaser that an indemnity amount is
payable or a “determination” as defined in Section 1313(a) of the Code. If
liability under this Article VII is in respect of costs or expenses other than
Taxes, payment by Seller of any amounts due under this Article VII shall be
made within five Business Days after the date when Seller has been notified by
Purchaser that Seller has a liability for a determinable amount under this
Article VII and is provided with calculations or other materials supporting
such liability.


 


SECTION 7.06                    Cooperation
and Exchange of Information. Upon the terms set forth in Section 5.02 of
this Agreement, Seller and Purchaser will provide each other with such
cooperation and information as either of them reasonably may request of the
other in filing any Tax Return, amended Tax Return or claim for refund,
determining a liability for Taxes or a right to a refund of Taxes,
participating in or conducting any audit or other proceeding in respect of
Taxes or making representations to or furnishing information to parties
subsequently desiring to purchase any of the Companies or the Subsidiaries or
any part of the business of the Companies and the Subsidiaries from Purchaser.
Such cooperation and information shall include providing copies of relevant Tax
Returns or portions thereof, together with accompanying schedules, related work
papers and documents relating to rulings or other determinations by Tax
authorities. Each of Seller and Purchaser shall retain all Tax Returns,
schedules and work papers, records and other documents in its possession
relating to Tax matters of the Companies and the Subsidiaries for each taxable
period first ending after the Closing Date and for all prior taxable periods
until the later of (i) the expiration of the statute of limitations of the
taxable periods to which such Tax Returns and other documents relate, without
regard to extensions except to the extent notified by the other party in
writing of such extensions for the respective Tax periods, or (ii) six
years following the due date (without extension) for such Tax Returns. Any
information obtained under this Section 7.6 shall be kept confidential except
as may be otherwise necessary in connection with the filing of Tax Returns or
claims for refund or in conducting an audit or other proceeding.


 


SECTION 7.07                    Conveyance
Taxes. Seller and Purchaser shall each pay 50% of any real property
transfer or gains, sales, use, transfer, value added, stock transfer, and stamp
taxes, any transfer, recording, registration, and other fees, and any similar
Taxes which become payable in connection with the transactions contemplated by
this Agreement, and shall file such applications and documents as shall permit
any such Tax to be assessed and paid on or prior to the Closing Date in
accordance with any available pre-sale filing procedure. Each party hereto shall
execute and deliver all instruments and certificates necessary to enable the
other party or parties to comply with the foregoing.


 


55

















 


SECTION 7.08                    Miscellaneous.
(a) Seller and Purchaser agree to treat all payments made by either of
them to or for the benefit of the other (including any payments to the
Companies or any Subsidiary) under this Article VII, under other indemnity
provisions of this Agreement and for any misrepresentations or breaches of
warranties or covenants as adjustments to the Purchase Price or as capital
contributions for Tax purposes and that such treatment shall govern for
purposes hereof.


 


(b)                                 All
amounts payable under any tax sharing agreement or arrangement between Seller
and the Companies or any Subsidiary for any taxable period ending on or prior
to the Closing Date shall be calculated on a basis consistent with that used to
date and shall be considered as an intercompany account owing to or from an
Affiliate as of the Closing Date for purposes of Section 5.01(c). Any tax
sharing agreement or arrangement between Seller and/or its Affiliates, on the
one hand, and the Companies or any Subsidiary, on the other hand, shall be
terminated immediately prior to the Closing and shall have no further effect
for any taxable year or period (whether past, present or future) and no
additional payments shall be made thereunder in respect of a redetermination of
tax liabilities or otherwise.


 


(c)                                  Notwithstanding
any provision in this Agreement to the contrary, the obligations of Seller to
indemnify and hold harmless Purchaser, the Companies and the Subsidiaries
pursuant to this Article VII, and the representations and warranties contained
in Section 3.18, shall terminate at the close of business on the 60th day
following the expiration of the applicable statute of limitations with respect
to the Tax liabilities in question (giving effect to any waiver, mitigation or
extension thereof).


 


(d)                                 For
purposes of this Article VII, “Purchaser” and “Seller,” respectively, shall
include each member of the affiliated group of corporations of which it is or
becomes a member (other than the Companies and the Subsidiaries, except to the
extent expressly referenced).


 


(e)                                  In
the event that Purchaser transfers the Shares back to Seller in satisfaction of
the Notes pursuant to Section 3.10 of the Note Agreement, then Seller and
Purchaser shall treat the acquisition of the Shares by Purchaser from Seller as
being rescinded for all tax purposes and neither Seller nor Purchaser nor any
other 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.


 


ARTICLE
VIII


 


CONDITIONS
TO CLOSING


 


SECTION 8.01                    Conditions
to Obligations of All Parties. The obligations of each party hereto to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to the Closing, of each of the following conditions:


 


(a)                                  HSR
Act. Any waiting period (and any extension thereof) under the HSR Act
applicable to the purchase of the Shares contemplated hereby shall have expired
or shall have been terminated;


 


56

















 


(b)                                 No
Order. No Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any Governmental Order which is in effect and has the
effect of making the transactions contemplated by this Agreement illegal,
otherwise restraining or prohibiting consummation of such transactions or
causing any of the transactions contemplated hereunder to be rescinded
following completion thereof;


 


(c)                                  Commission
Approvals. Purchaser and Seller shall have received preliminary approval
from the Commission of (i) the purchase of the Companies by Purchaser and
(ii) Seller’s management of the racing operations of the Meadows Facility
under the Racing Services Agreement (collectively, the “Commission Approval”),
each in form and substance satisfactory to Seller and Purchaser in their
reasonable discretion; and


 


(d)                                 No
Proceeding or Litigation. No Action shall have been commenced or threatened
by or before any Governmental Authority against either Seller or Purchaser,
seeking to restrain or materially and adversely alter the transactions
contemplated hereby which is reasonably likely to render it impossible or
unlawful to consummate such transactions.


 


SECTION 8.02                    Conditions
to Obligations of Seller. The obligations of Seller to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or waiver, at or prior to the Closing, of each of the following conditions:


 


(a)                                  Representations
and Warranties; Covenants. (i) The representations and warranties of
Purchaser contained in this Agreement shall be true and correct as of the date
hereof, except as would not have a Purchaser Material Adverse Effect, other
than such representations and warranties as are made as of another date, which
shall be true and correct on and as of such date, except as would not have a
Purchaser Material Adverse Effect, (ii) the covenants and agreements
contained in this Agreement to be complied with by Purchaser on or before the
Closing shall have been complied with in all material respects, and
(iii) Seller shall have received a certificate of Purchaser to such effect
signed by a duly authorized officer thereof;


 


(b)                                 Changes
Since the Date of Signing. (i) Seller shall have received a
certificate of Purchaser (1) indicating which, if any, representations and
warranties of Purchaser contained in this Agreement would not be true and
correct if made on the Closing 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 date and (2) describing the circumstances, if any, which
would cause such representations and warranties to not be so true and correct
if made on the Closing Date (or on such other date if made on another date) as
a result of events, occurrences or change of circumstances that has occurred
since the date of this Agreement (such circumstances, “Purchaser
Developments”), and (ii) if there are such Purchaser Developments that
would result in a Purchaser Material Adverse Effect, Seller shall have the
right to not proceed with the Closing; provided, that Purchaser
Developments will not constitute a breach of representation or warranty by
Purchaser hereunder whether or not Seller proceeds with the Closing and whether
or not the Repayment Date occurs;


 


(c)                                  Resolutions.
Seller shall have received a true and complete copy, certified by the Secretary
or an Assistant Secretary of Purchaser (or equivalent officer), of the
resolutions, if any, duly and validly adopted by the Board of Directors of
Purchaser evidencing its


 


57

















 


authorization of
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;


 


(d)                                 Incumbency
Certificate. Seller shall have received a certificate of the Secretary or
an Assistant Secretary (or equivalent officer) of Purchaser certifying the
names and signatures of the officers of Purchaser authorized to sign this
Agreement and the other documents to be delivered hereunder;


 


(e)                                  XpressBet
Amendments. Each party to the XpressBet Amendments (other than XpressBet,
Inc.) shall have delivered to Seller an executed counterpart of each of the
XpressBet Amendments;


 


(f)                                    Racing
Services Agreement. MECRacing, MECPenn, WTA and MLR shall have delivered to
Seller an executed counterpart of the Racing Services Agreement;


 


(g)                                 Legal
Opinion. Seller shall have received from Purchaser’s counsel a legal
opinion, addressed to Seller and dated the Closing Date, substantially in the
form of Exhibit 8.02(g); and


 


(h)                                 Note
Documents. Each party to the Note Documents (other than Seller) shall have
executed and delivered each of the Note Documents and each of the conditions in
Sections 4.1 and 4.2 of the Note Agreement shall have been satisfied (or waived
in writing by Seller).


 


SECTION 8.03                    Conditions
to Obligations of Purchaser. The obligations of Purchaser to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or waiver, at or prior to the Closing, of each of the following conditions:


 


(a)                                  Representations
and Warranties; Covenants. (i) The representations and warranties of
Seller contained in this Agreement shall be true and correct as of the date
hereof, except as would not have a Material Adverse Effect, other than such
representations and warranties as are made as of another date, which shall be
true and correct on and as of such date, except as would not have a Material
Adverse Effect, (ii) the covenants and agreements contained in this
Agreement to be complied with by Seller on or before the Closing shall have
been complied with in all material respects, and (iii) Purchaser shall
have received a certificate of Seller to such effect signed by a duly
authorized officer thereof;


 


(b)                                 Changes
Since the Date of Signing. (i) Purchaser shall have received a
certificate of Seller (1) indicating which, if any, representations and
warranties of Seller contained in this Agreement would not be true and correct
if made on the Closing 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 date and (2) describing the circumstances, if any, which would cause
such representations and warranties to not be so true and correct if made on
the Closing Date (or on such other date if made on another date) as a result of
events, occurrences or change of circumstances that has occurred since the date
of this Agreement (such circumstances, the “Seller Developments”), and
(ii) if there are Seller Developments which would result in a Material
Adverse Effect, Purchaser shall have the right to not proceed with the Closing;
provided, that Seller Developments will not constitute a breach of
representation or warranty by


 


58

















 


Seller hereunder
whether or not Purchaser proceeds with the Closing and whether or not the
Repayment Date occurs;


 


(c)                                  Resolutions.
Purchaser shall have received a true and complete copy, certified by the
Secretary or an Assistant Secretary (or equivalent officer) of Seller, of the
resolutions duly and validly adopted by the Board of Directors of Seller
evidencing its authorization of the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby;


 


(d)                                 Incumbency
Certificate. Purchaser shall have received a certificate of the Secretary
or an Assistant Secretary (or equivalent officer) of Seller certifying the
names and signatures of the officers of Seller authorized to sign this
Agreement and the other documents to be delivered hereunder;


 


(e)                                  Resignations
of Directors. The members of the Board of Directors of each Company and
Subsidiary shall have resigned;


 


(f)                                    [Reserved]


 


(g)                                 XpressBet
Amendments. XpressBet, Inc. shall have delivered to Purchaser an executed
counterpart of each of the XpressBet Amendments;


 


(h)                                 Racing
Services Agreement. MEC Pennsylvania Racing Services, Inc. shall have
delivered to Purchaser an executed counterpart of the Racing Services
Agreement;


 


(i)                                     FIRPTA.
Seller shall have provided Purchaser with a certificate pursuant to Treasury Regulations
Sections 1.1445-2(b) that the Seller is not a foreign person under the
provisions of the Internal Revenue Code;


 


(j)                                     Legal
Opinion. Purchaser shall have received from one or more of Seller’s counsel
(including internal counsel) one or more legal opinions, each addressed to
Purchaser and dated the Closing Date, substantially in the forms attached
hereto as Exhibit 8.03(j);


 


(k)                                  Title
Insurance. For each parcel of owned Real Property, the Title Company shall
be irrevocably committed to issue an ALTA extended owner’s coverage title
insurance policy (each, a “Title Policy”) in the form of the relevant
Title Commitment insuring fee title in such Real Property, vested in the
applicable Company or Subsidiary, in such amount as shall be reasonably requested
by Purchaser, but not in excess of $53,000,000 for the Meadows Facility Real
Property, subject only to Permitted Exceptions and Insured Exceptions and
containing such affirmative coverages and endorsements described in Section
5.11;


 


(l)                                     Employees.
The Transferred Employees shall no longer be employees of the Companies or the
Subsidiaries;


 


(m)                               Gaming
License. No Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any Governmental Order which is in effect, no Action shall have
been commenced by or before any Governmental Authority (provided that if
any such


 


59

















 


Action has been
commenced by or before any Governmental Authority, Purchaser shall have 10 days
from receipt of written notice from Seller of such Action to provide a written
notice to Seller (“Action Notice”) that it considers such Action to be
non-frivolous and that based on such Action it will not close the transaction
contemplated hereunder, and if Purchaser does not provide an Action Notice with
respect to such Action within such 10 day period, the commencement or existence
of such Action shall not be the basis of a claim for a failure of a condition
to the Purchaser’s obligations to consummate the transactions contemplated
hereunder) and no Law shall have been enacted or adopted and remain in effect
which would have or has had, as applicable, the effect of (i) having a
material and adverse effect on the right of Purchaser to own and control the
Companies and the Subsidiaries following completion of the transactions
contemplated hereunder or (ii) having a material adverse effect on the
ability of WTA or MLR to obtain a Conditional Category 1 license or Category 1
license under the Gaming Act, or to own or operate a temporary or permanent
facility at the Meadows Facility containing at least 3,000 slot machines no
later than March 31, 2007, in each case of clause (i) or (ii) other than
such Laws that would have such material and adverse effect solely due to the bad
acts or bad character issues of Purchaser or any of its Affiliates;


 


(n)                                 MEC
Items. Seller and Purchaser shall not have received notification from the
Gaming Board or its staff that the Gaming Application filed with the Gaming
Board by Purchaser for a Conditional Category 1 license will be subject to
being declared or deemed incomplete with respect to the MEC Items and such
matters have not been rectified to the satisfaction of the Gaming Board.


 


(o)                                 [Reserved]


 


(p)                                 Excluded
Subsidiaries. Each of the Excluded Subsidiaries shall have been sold or
transferred to Seller or any Affiliate of Seller (other than any Company or any
Subsidiary). Seller agrees that neither the Companies nor the Subsidiaries
shall retain any Liabilities related to the Excluded Subsidiaries;


 


(q)                                 Financial
Statements. Purchaser shall have received the 2005 Audited Financial
Statements, the 2005 Quarterly Financial Statements (accompanied by the SAS 100
review thereon by Seller’s Accountants as required by Section 5.16 hereof), and
the 2006 Interim Financial Statements (accompanied by the SAS 100 review
thereon by Seller’s Accountants as required by Section 5.16 hereof); provided,
that with respect to any period from the end of the previous fiscal quarter to
the Closing Date (it being understood that any determination of Closing or
Closing Date in this Agreement shall be determined without giving effect to the
closing condition relating to the foregoing deliverables with respect to such
interim periods and/or fiscal quarters set forth in this Section 8.03(q)), and
if any 2006 fiscal quarter has ended after 45 days prior to the Closing Date,
the foregoing deliverables with respect to such interim periods and/or fiscal
quarters need not be provided on or prior to the Closing Date, but shall be provided
not later than 45 days after the end of such period; and


 


(r)                                    Note
Document Conditions. Each party to the Note Documents (other than the Loan
Parties, Parent Entites and OCM AcquisitionCo (each as defined in the Note
Agreement)) shall have executed and delivered each of the Note Documents and
each of the


 


60

















 


conditions in
Sections 4.1 and 4.3 of the Note Agreement shall have been satisfied (or waived
in writing by Purchaser).


 


ARTICLE
IX


 


INDEMNIFICATION


 


SECTION 9.01                    Survival.
Subject to the limitations and other provisions of this Agreement, the
representations, warranties, covenants and agreements of the parties contained
herein shall survive the Closing and shall remain in full force and effect
until the date that is 15 months from the earlier of the Stock Transfer
Trigger Date and the Seller Note Certificate Date; provided, however,
(w) that the covenants and agreements set forth in Sections 5.03, 5.04, 5.05,
5.06, 5.08, 5.09, 5.12, 5.15, 5.16, 5.17 and 5.23 and in Article VI, Article XI
and this Article IX 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;
(x) that the representations and warranties set forth in Section 3.18
(relating to Taxes) and the agreements in Article VII shall remain in full
force and effect as provided in Section 7.08(c); (y) the representations
and warranties set forth in Section 3.12 (relating to environmental matters)
shall survive for a period of seven years from the Closing Date; and
(z) the representations and warranties set forth in the 1st, 3rd,
and 4th sentences of Section 3.01, Section 3.02, Section 3.03, all
of Section 3.04(a) excluding the 1st sentence and the 1st
and 2nd sentences of Section 4.01 (collectively, the “Fundamental
Representations”) shall survive indefinitely. Whether or not Purchaser or
Seller proceeds to the Repayment Date after the delivery of the Seller Note
Certificate (as defined in the Note Agreement), (i) the Seller Note
Developments and the Purchaser Note Developments, as applicable, will not
constitute a breach of representation or warranty by Seller or Purchaser,
respectively, hereunder and (ii) any breach of any representation or warranty
by Seller made under the Seller Note Certificate will not constitute a breach
of representation or warranty of Seller to the extent (a) 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; or (b) resulting from (1) any actions taken or
omitted to be taken by Seller, Purchaser or any of their respective Affiliates
in compliance with the terms of the Note Documents or the Transaction Documents
or (2) any actions taken or omitted to be taken by or on behalf of any of the
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 Purchaser or any of its Affiliates (other than the Companies).


 


SECTION 9.02                    Indemnification
by Purchaser. (a) Purchaser agrees, subject to the other terms and
conditions of this Agreement, to indemnify Seller and its Affiliates and the
officers, directors, employees and agents of each of the foregoing (all such
Persons being included within the definition of “Seller” only for purposes of
this Section 9.02, Article VI and Article VII) against and hold them
harmless from all Losses arising out of (i) the breach of any
representation, warranty, covenant or agreement of Purchaser herein (other than
Article VI and Article VII, it being understood that the sole remedy for
any such breach thereof shall be pursuant to Article VI or Article VII
respectively, as applicable), (ii) subject to the terms of the Racing
Services Agreement, the conduct of the business of each Company and Subsidiary
by Purchaser following the Closing Date and (iii) any employee benefit
plan (as defined in Section 3(3) of


 


61

















 


ERISA) maintained,
sponsored or contributed to by Purchaser or any current or former ERISA
Affiliate of Purchaser (other than the Companies and their Subsidiaries),
including without limitation any multiemployer plan (as defined in Section
3(37) of ERISA). Anything in Section 9.01 to the contrary notwithstanding,
no claim may be asserted, nor, subject to the last sentence of this Section
9.02(a), may any action be commenced, against Purchaser for breach of any
representation, warranty, covenant or agreement contained herein, unless
written notice of such claim or action is received by Purchaser describing in
reasonable detail the facts and circumstances with respect to the subject
matter of such claim or action on or prior to the date on which the
representation, warranty, covenant or agreement on which such claim or action
is based ceases to survive as set forth in Section 9.01 (the “Applicable
Date”), irrespective of whether the subject matter of such claim or action
shall have occurred before or after such date. If a claim or a potential claim
arises, Purchaser and Seller 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 parties’
satisfaction within such reasonable period of time, either party may commence
legal proceedings to resolve such claim or potential claim (but in no event
(other than as described in the next sentence) after the Applicable Date). If
Seller becomes aware of any such claim or potential claim within ninety days
prior to the Applicable Date and promptly gives such written notice thereof as
aforesaid on or prior to the Applicable Date, then upon the giving of such
notice, Seller and its Affiliates, or any of them, shall have the right to
commence legal proceedings for a period of up to ninety days subsequent to the date
of such written notice for the enforcement of their rights under Section 9.02
with respect to the matters indicated in such notice.


 


(b)                                 Payments
by Purchaser pursuant to Section 9.02(a) shall be limited to the amount of
any liability or damage that remains after deducting therefrom any Tax benefit
to Seller and any insurance proceeds and any indemnity, contribution or other
similar payment recovered by Seller from any third party with respect thereto
(it being agreed that Seller 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,
Seller shall reimburse Purchaser for such reduction in Losses for which Seller
was indemnified prior to the realization of such reduction of Losses). A Tax
benefit to Seller for purposes of this Section 9.02 shall be reasonably
determined by Seller’s Accountants as the difference between (i) the
amount of federal, state and local Tax Liabilities of Seller 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 of Seller 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. Seller
shall provide Purchaser with calculations and/or other information reasonably
supporting the determination of the amount of the Tax benefit.


 


(c)                                  No
claim may be made against Purchaser for indemnification pursuant to Section
9.02(a)(i) (other than breaches and claims under Section 2.03(c) and the
Fundamental Representations) with respect to any individual item of liability
or damage arising out of a breach of a representation or warranty of Purchaser
or of a covenant or agreement to be performed by Purchaser prior to the Closing
Date, unless the aggregate of all such Losses of Seller with respect to
Sections 9.02(a)(i) (other than breaches and claims under Section 2.03(c) and
the Fundamental Representations) shall exceed $1,000,000, and Purchaser shall
be required to pay or be liable only for amounts in excess of such aggregate
amount. Seller shall not be indemnified pursuant


 


62

















 


to Section
9.02(a)(i) with respect to any individual item of liability or damage (other
than breaches and claims under Section 2.03(c) and the Fundamental
Representations) if the aggregate of all liabilities and damages of Seller for
which Seller has received indemnification pursuant to Sections 9.02(a)(i) shall
have exceeded $20,000,000 (including any amounts paid or payable by Purchaser
or any of its Affiliates under the Note Documents to the extent such amounts
are liabilities and damages that would have been payable under Section
9.02(a)(i) (other than breaches and claims under Section 2.03(c) and the
Fundamental Representations) but excluding any principal or interest payment
under the Seller Notes and any other amounts paid or payable by Purchaser or
any of its Affiliates under the Note Documents with respect to any other
liabilities and damages).


 


(d)                                 Except
as set forth in this Agreement (including the Exhibits and the Purchaser
Disclosure Schedule), the other Transaction Documents and the Note Documents,
Purchaser is not making any representation, warranty, covenant or agreement
with respect to the matters contained herein. Anything herein to the contrary
notwithstanding and except as set forth in this Agreement and the Note
Documents, no breach of any representation, warranty, covenant or agreement
contained herein shall give rise to any right on the part of Seller, after the
consummation of the purchase and sale of the Shares contemplated by this
Agreement, to rescind this Agreement or any of the transactions contemplated
hereby.


 


SECTION 9.03                    Indemnification
by Seller. (a) Seller agrees, subject to the other terms and
conditions of this Agreement, to indemnify Purchaser and its Affiliates and the
officers, directors, employees and agents of each of the foregoing (all such
Persons being included in the definition of “Purchaser” only for purposes of
this Section 9.03, Article VI and Article VII) against and hold it
harmless from all Losses arising out of the following:


 


(i)                                     the
breach of any representation, warranty, covenant or agreement of Seller herein
(other than Article VI and Article VII and Sections 3.16, 3.17 and 3.18,
it being understood that the sole remedy for any such breach thereof shall be
pursuant to Article VI or Article VII respectively, as applicable);


 


(ii)                                  any
and all Liabilities related to, arising out of or associated with the Excluded
Items or the business or operations of XpressBet, Inc., or any predecessor or
successor (including the Companies and the Subsidiaries but only to the extent
that the business or operations of the Companies and the Subsidiaries related
to the account wagering business now conducted by XpressBet, Inc.), prior to,
on and after the Closing Date, including, without limitation, any Liabilities
related to, arising out of or associated with the formalizing of the
relationship between XpressBet, Inc., Seller, any Company and its Subsidiaries;


 


(iii)                               any
and all Liabilities related to, arising out of or associated with the Excluded
Subsidiaries or the Former Subsidiaries;


 


(iv)                              any
Liability, obligation or responsibility under or related to Environmental Laws,
whether such Liability or obligation or responsibility is known or unknown,
contingent or accrued, arising from acts, omissions, conduct or circumstances
occurring between April 5, 2001 and the Closing Date;


 


63

















 


(v)                                 any
Liability, obligation or responsibility under or required by Environmental Law,
whether such Liability, obligation or responsibility is known or unknown,
contingent or accrued, arising from acts, omissions, conduct or circumstances
occurring prior to April 5, 2001 and the occurrence or existence of which
is a violation of Environmental Law existing as of the Closing Date.


 


(vi)                              those
matters set forth in the following Sections of the Company Disclosure
Schedules:  Schedule 3.05(c) (item
(b) only), Schedule 3.10(a) (except for items (g) and (h) under the headings
“Litigation Not Covered by Insurance”) and Schedule 3.11(a) (under the heading
“OSHA Citation”);


 


(vii)                           any
liability, obligation or responsibility under the Lease Agreement, including
without limitation, (A) base rent payable under the Lease or otherwise to the
landlord thereunder for any period on or prior to the Closing Date; and (B) any
penalties, damages or claims assessed by the landlord under the Lease in
connection with any default under the Lease or damage to the premises leased
under the Lease; and


 


(viii)                        any
withdrawal liability that becomes due and payable to any Multiemployer Plans
listed in Schedule 3.16(a) during the period commencing on the Closing Date and
ending on the fifth anniversary of the Closing (the “Pension Survival Period”)
by the Companies or any of their Subsidiaries; provided, however, that if
Operator (as defined in the Racing Services Agreement) terminates the Racing
Services Agreement pursuant to Sections 15.4.3, 15.4.6, 15.4.7 (to the extent
that the revocation, suspension, withdrawal or failure of renewal of any
license referenced in Section 15.4.7 is caused by act or omisssion of any Owner
(as defined in the Racing Services Agreement) or any of its Affiliates),
15.4.10, or 15.4.12 of the Racing Services Agreement , then the Pension
Survival Period shall terminate on the date of termination of Operator’s
services under the Racing Services Agreement and this indemnity shall not apply
to any withdrawal liability that becomes due and payable to any Multiemployer
Plans on and after the date of such termination or as a result of the
termination of, or as a result of any actions or omissions of Owners (as
defined in the Racing Services Agreement) or any of their Affiliates that gave
rise to the termination of, the Operator’s services under the Racing Services
Agreement pursuant to the aforementioned sections of the Racing Services
Agreement.


 


Seller and Purchaser agree that the following amounts
will annually be determined and, to the extent claimed by Purchaser and
acknowledged by Seller, shall be Agreed Upon Losses (as defined in the Holdback
Agreement), and, to the extent claimed by Purchaser (and to the extent such
claim has not become an Agreed Upon Loss or a Non-Loss (as defined in the
Holdback Agreement)), shall be Disputed Losses (as defined in the Holdback
Agreement) on each January 31 occurring within five years of the Repayment Date
and on the fifth anniversary of the Repayment Date (each a “Local Tax
Assessment Date”) in an amount equal to the lesser of (i) the Maximum
Amount then in effect, and (ii) the Annual Applicable Amount. The “Annual
Applicable Amount” for any such date means 50% of the Tax Adjusted ocal Share
Assessment Losses (i) with respect to the first January 31 occurring
after the Repayment Date, for the period (if any) from the Repayment Date to
the December 31 immediately preceding such January 31, (ii) with
respect to any subsequent January 31 occurring


 


64

















 


prior to the fifth
anniversary of the Repayment Date, for the twelve-month period ending on the
immediately preceding December 31 (or, if shorter, for the period
commencing on the Repayment Date and ending on the immediately preceding
December 31), and (iii) with respect to the fifth anniversary of the
Repayment Date, for the period from the January 1 occurring the day after
the most recent December 31 described in clause (ii) above to such fifth
anniversary, as applicable. If North Strabane Township were to change its
fiscal year, then the references to December 31 in the preceding sentence
would be to the end of the new fiscal year, and the references to
January 31 would be to the month end next succeeding the new fiscal year
end.


 


The “Local Share Assessment Losses” for any period
means the positive amount, if any, calculated as follows:  (i) the local share assessment for such
period paid by Purchaser or WTA to the Applicable Local Authorities pursuant to
Section 1403(C)(3) of the Gaming Act, minus (ii) two percent (2%) of the
aggregated daily gross terminal revenue from slot machines in operation at
WTA’s gaming facility for such period as calculated by the Department of
Revenue of the Commonwealth of Pennsylvania minus (iii) the incremental
portion, if any, of such local share assessment for such period paid by
Purchaser or WTA to the Applicable Local Authorities pursuant to Section
1403(C)(3) of the Gaming Act which results from a change in law or regulation,
or interpretation thereof or from any other change thereto, in each case that
occurs after the end of the first legislative session of the Pennsylvania state
legislature following the Closing Date (the “Local Applicable Date”) minus
(iv) any Refund received in such period from any Applicable Local
Authority; provided, however, that if there is any change to Section 1403(C)(3)
of the Gaming Act or interpretation thereof prior to the Local Applicable Date,
then for purposes of calculating the Local Share Assessment Losses, the amount
in clause (i) above shall be the lesser of (a) the amount described in
clause (i) above and (b) the minimum annual dollar amount (which amount is
currently $10,000,000) required under such Section 1403(C)(3) after giving
effect to any such change (prorated if such period is less than a year), or, if
there is no minimum annual amount after giving effect to such change, then
$10,000,000 (prorated if such period is less than a year).


 


The “Tax Adjusted Local Share Assessment Losses” for
any period means the Local Share Assessment Losses for such period net of any
Tax Benefits the Companies actually recognize in the taxable year in which or
with which such period ends (“Current Tax Year”) that are directly attributable
to any Local Share Assessment Losses. For this purpose, the Companies shall be
deemed to recognize a Tax benefit (“Tax Benefit”) with respect to a taxable
year if, and to the extent that, the Companies’ cumulative liability for Taxes
through the end of such taxable year, calculated by excluding any Tax items
attributable to the Local Share Assessment Losses from all taxable years,
exceeds the Companies’ cumulative liability for Taxes through the end of such
taxable year, calculated by taking into account any Tax items attributable to
the Local Share Assessment Losses for all taxable years (to the extent
permitted by relevant Tax law and treating such Tax items as the last items
claimed for any taxable year). If the relevant income Tax return for the
Current Tax Year has not yet been filed when making the cumulative liability
for Taxes calculations described above, Taxes for the Current Tax Year shall be
reasonably estimated in those calculations. If an estimate is made pursuant to
the previous sentence, once the relevant income Tax return is filed, the
previously estimated calculation shall be finalized, and an appropriate upward
or downward adjustment to the Agreed Upon Losses shall be made at the next
Local Tax Assessment Date (the “True-Up”) (or if the income Tax return is filed
after the final Local Tax Assessment Date and the estimate is finalized after
such date, Purchaser will pay


 


65

















 


to Seller or
Seller will pay to Purchaser, as appropriate, in cash an amount equal to the
True Up; provided that in the event Seller owes any True Up amount in cash
pursuant to the foregoing provision, Seller shall be required to pay Purchaser
such amount in cash only to the extent that it has previously received cash
from Releases (as defined in the Holdback Agreement) that it would not have
received but for the under estimation of taxes that resulted in such True Up
amount). The last determination of Tax Benefits shall be for the taxable year
following the last taxable year in which local share assessments attributable
to the five year period following the Repayment Date are deducted, and no
further adjustments for Tax Benefits shall be made in subsequent taxable years.
In no event shall the cumulative Tax Benefit adjustments exceed the cumulative
Local Share Assessment Losses for the five years following the Repayment Date
to which the Tax Benefits are attributable. The parties agree to act in good
faith when making the Tax Benefit calculations, to make such calculations
treating the Companies as a single taxpayer, and to not take into account any
payments made by the Companies to, or received by the Companies from, any
Affiliate of Purchaser (other than the Companies) unless such payments are de
minimis. For purposes of this paragraph, the term “Companies” shall also
include MEC Pennsylvania Food Services, Inc., MEC Racing Management, and any
other subsidiaries of any of the Companies.


 


In the event that Purchaser or any of its Affiliates
receives a Refund during or after the sixth year following the Repayment Date,
and Seller has borne a portion of the cost of the local share assessment for
the year to which the Refund is attributable because there were Local Share
Assessment Losses for such year (other than any such Refund that was deducted
pursuant to clause (iv) of the Local Share Assessment Losses calculation for
any period within such five years), Purchaser agrees to give written notice
thereof to Seller within five (5) Business Days of receipt of each Refund and
an amount equal to the following will be due from Purchaser to Seller:  (a) 50% of the lesser of (i) such
Refund amount and (ii) the Local Share Assessment Losses for the year to
which the Refund is attributable, minus (b) any Tax liability to Purchaser
related to the portion of the Refund creditable or payable to Seller pursuant
to clause (a) (the “Seller Credit”). If receipt of such Refund occurs following
the fifth anniversary of the Repayment Date, Purchaser agrees to pay the Seller
Credit to Seller in cash within fifteen days of receipt of the Refund.


 


Notwithstanding anything to the contrary contained in
this Agreement or any of the other Transaction Documents or any of the Note
Documents, Seller’s indemnification obligations under this paragraph with
respect to the Annual Applicable Amount shall only reduce the Holdback Amount
and under no circumstances is Seller or any of its Affiliates required to pay
Purchaser or any of its Affiliates any cash or any other consideration (other
than a reduction in the Maximum Amount to the extent described above).


 


“Applicable Local Authorities” means North Strabane
Township and other local authorities in Pennsylvania that are entitled to the
local share assessment paid by Purchaser or WTA pursuant to Section 1403(C)(3)
of the Gaming Act. The term shall also include the Department of Revenue and
the Treasury Department of the Commonwealth of Pennsylvania and the
Pennsylvania Department of Economic and Community Development in their
capacities or on behalf of the local authorities described in the preceding
sentence.


 


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“Refund” means any rebates, reimbursements, credits,
refunds or other relief from any Applicable Local Authority credited to or paid
to Purchaser or any of its Affiliates or any grant or funding paid to Purchaser
or any of its Affiliates from any Applicable Local Authority, in each instance,
directly related to a local share assessment previously paid by Purchaser or
WTA with respect to the five years following the Repayment Date pursuant to
Section 1403(C)(3) of the Gaming Act. To the extent the “Refund” for any period
exceeds the excess, if any, of clause (i) of the definition of Local Share
Assessment Losses for such period over the sum of clauses (ii) and (iii) of the
definition of Local Share Assessment Losses for such period, then such excess
shall be deemed to be a Refund received in the next period.


 


Anything in Section 9.01 to the contrary notwithstanding,
no claim may be asserted nor, subject to the second to the last sentence of
this Section 9.03(a), may any action be commenced against Seller for breach of
any representation, warranty, covenant or agreement contained herein, unless
written notice of such claim or action is received by Seller describing in
reasonable detail the facts and circumstances with respect to the subject
matter of such claim or action on or prior to the Applicable Date, irrespective
of whether the subject matter of such claim or action shall have occurred
before or after such date. If a claim or a potential claim arises, Purchaser
and Seller 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 parties’ satisfaction within such
reasonable period of time, either party may commence legal proceedings to
resolve such claim or potential claim (but in no event (other than as described
in the next sentence) after the Applicable Date). If Purchaser becomes aware of
any such claim or potential claim within ninety days prior to the Applicable
Date and promptly gives such written notice thereof as aforesaid on or prior to
the Applicable Date, then upon the giving of such notice, Purchaser and its
Affiliates, or any of them, shall have the right to commence legal proceedings
for a period of up to ninety days subsequent to the date of such written notice
for the enforcement of their rights under Section 9.03 with respect to the
matters indicated in such notice. To the extent that Seller’s undertakings set
forth in this Section 9.03 may be unenforceable, Seller shall contribute the
maximum amount that it is permitted to contribute under applicable law to the payment
and satisfaction of all Losses incurred by Purchaser, the Companies and the
Subsidiaries.


 


(b)                                 No
claim may be made against Seller for indemnification pursuant to Section
9.03(a)(i) (other than breaches and claims under the Fundamental Representations
and Section 3.12 (as to environmental matters)) with respect to any
individual item of liability or damage arising out of a breach of a
representation or warranty of Seller or of a covenant or agreement to be
performed by Seller prior to the Closing Date, unless the aggregate of all such
Losses of Purchaser with respect to Section 9.03(a)(i) (other than breaches and
claims under the Fundamental Representations and Section 3.12 (as to
environmental matters)) shall exceed $1,000,000, and Seller shall be required
to pay or be liable only for amounts in excess of such aggregate amount.
Purchaser shall not be indemnified pursuant to Section 9.03(a)(i) with
respect to any individual item of liability or damage (other than breaches and
claims under the Fundamental Representations and Section 3.12 (as to
environmental matters)) if the aggregate of all liabilities and damages of
Purchaser for which Purchaser has received indemnification pursuant to
Section 9.03(a)(i) shall have exceeded $20,000,000 (including any amounts
paid or payable by Seller or any of its Affiliates under the Note Documents and
the Holdback Documents to the extent such amounts are liabilities and damages
that would have been payable


 


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under Section
9.03(a)(i) (other than breaches and claims under Section 3.12 (as to
environmental matters) and the Fundamental Representations) but excluding any
amounts paid or payable by Seller or any of its Affiliates under the Note
Documents and the Holdback Documents with respect to any other liabilities and
damages).


 


(c)                                  Payments
by Seller pursuant to this Section 9.03 and Sections 6.05 and 7.01 shall be
limited to the amount of any liability or damage that remains after deducting
therefrom (i) any Tax benefit to Purchaser, (ii) any insurance
proceeds and any indemnity, contribution or other similar payment recovered by
Purchaser from any third party with respect thereto (it being agreed that
Purchaser 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,
Purchaser shall reimburse Seller for such reduction in Losses for which
Purchaser was indemnified prior to the realization of reduction of such
Losses), and (iii) any amount paid pursuant to Section 15.6.5 of the
Racing Services Agreement with respect to the subject matter in dispute to the
extent taken into account in determining the payment pursuant to such section.
A Tax benefit to Purchaser for purposes of
this Section 9.03 will be reasonably determined by Purchaser’s Accountants as
the difference between (i) the amount of federal, state and local Tax
Liabilities of Purchaser 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
Purchaser 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. Purchaser shall
provide Seller with calculations and/or other information reasonably supporting
the determination of the Tax benefit.


 


(d)                                 Except
as set forth in this Agreement (including the Exhibits and the Company
Disclosure Schedule), the other Transaction Documents and the Note Documents, Seller
is not making any representation, warranty, covenant or agreement with respect
to the matters contained herein. Anything herein to the contrary
notwithstanding and except as set forth in this Agreement and the Note
Documents, no breach of any representation, warranty, covenant or agreement
contained herein shall give rise to any right on the part of Purchaser, after
the consummation of the purchase and sale of the Shares contemplated hereby, to
rescind this Agreement or any of the transactions contemplated hereby.


 


(e)                                  Seller
and its Affiliates shall have no liability under any provision of this
Agreement for any liabilities and damages to the extent that such liabilities
and damages relate to actions taken by Purchaser or its Affiliates, including,
without limitation, each Company and Subsidiary, after the Closing Date.


 


(f)                                    Seller
and its Affiliates shall have no liability under any provision of this
Agreement for any liabilities and damages to the extent that such liabilities
and damages are obligations of MEC Pennsylvania Racing Services, Inc. under the
Racing Services Agreement to the extent satisfied thereunder.


 


(g)                                 Notwithstanding
anything herein or in the Racing Services Agreement to the contrary,
(i) prior to the Repayment Date, subject to the next sentence, all of the


 


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indemnification
obligations of Seller and its Affiliates under this Agreement (including
without limitation under Articles VI, VII and IX hereof) and the Racing
Services Agreement (including without limitation any guaranty obligations of
Seller thereunder) shall be deferred, and Purchaser and its Affiliates shall
not be able to set off their obligations to Seller and its Affiliates against
such indemnification obligations, until the Repayment Date (and, subject to the
next sentence, no such obligations of Seller or any of its Affiliates shall be
payable prior to the Repayment Date) and (ii) on the Repayment Date, to
the extent there are Losses agreed to or proven to be payable on or prior to
the Repayment Date (pursuant to a final, nonappealable adjudication) under this
Agreement or the Racing Services Agreement, as the case may be, the obligations
with respect to any such agreed to or proven Losses shall be satisfied by a
reduction of the Tranche B Note (and thereafter, the Tranche A Note) on the
Repayment Date in an amount equal to the aggregate amount of such agreed to or
proven Losses. Notwithstanding anything herein or in the Racing Services
Agreement to the contrary, upon the earlier of the date of the Stock Transfer
and the completion of all of Seller’s rights and remedies under the Note
Agreement, neither Seller nor any of its Affiliates shall have any
indemnification obligations under this Agreement (including without limitation
under Articles VI, VII and IX hereof) or the Racing Services Agreement
(including without limitation any guaranty obligations of Seller thereunder)
other than for Losses, in each case, which have resulted in out-of-pocket
expenditures by Purchaser’s equity holders as a result of Seller’s breach of
representation, warranty or covenant under this Agreement or under the Racing
Services Agreement. Nothing in this Agreement or in any of the Transaction
Documents shall limit any rights or claims Seller or any of its Affiliates may
have under the Note Documents. Notwithstanding this Section 9.03(g), the
procedures set forth in Section 9.04 shall continue to apply to any claims that
arise prior to the Repayment Date.


 


(h)                                 Notwithstanding
anything herein or in the Racing Services Agreement to the contrary, (i)  prior to the earlier of the Repayment Date
and the Stock Transfer Trigger Date, all of the indemnification obligations of
Purchaser and its Affiliates under this Agreement (including without limitation
under Articles VI, VII and IX hereof) and the Racing Services Agreement shall
be deferred, and Seller and its Affiliates shall not be able to set off their
obligations to Purchaser and its Affiliates against such indemnification
obligations, until the earlier of the Repayment Date and the Stock Transfer
Trigger Date (and no such obligation of Purchaser or any of its Affiliates
shall be payable prior to the earlier of the Repayment Date and the Stock
Transfer Trigger Date) and (ii) on the earlier of the Repayment Date or the
Stock Transfer Trigger Date, to the extent that there are Losses agreed to or
proven to be payable on or prior to the Repayment Date or Stock Transfer
Trigger Date, as applicable, under this Agreement or the Racing Services
Agreement, as the case may be, the obligations shall be paid in cash. Nothing
in this Agreement or in any of the Transaction Documents shall limit any rights
or claims Purchaser or any of its Affiliates may have under the Note Documents.


 


SECTION 9.04                    Indemnification
Procedures, Etc. (a) Each of Purchaser and Seller (for purposes of
this Section 9.04(a), an “Indemnified Party”) agrees to give the
indemnifying party under Section 6.05, 7.01, 9.02 or 9.03, as applicable
(for purposes of this Section 9.04(a), 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 6.05, 7.01, 9.02 or 9.03, as applicable, provided, however,
that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from


 


69

















 


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 9.04(a),
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 9.04(a) 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.


 


(b)                                 Neither
Seller nor Purchaser shall have any liability to Purchaser or Seller (as
defined in Section 9.03(a) and Section 9.02(a), respectively), as the
case may be, under Article VI, Article VII or this Article IX for
consequential or punitive damages, except that this Section 9.04(b) 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 Article VI, Article VII or this Article IX and
paid or payable by an Indemnified Party.


 


(c)                                  Each
of Seller and Purchaser hereby acknowledges and agrees that, from and after the
Closing, other than the claims, remedies and other rights of Seller, Purchaser
and


 


70

















 


their respective
Affiliates under the Note Documents, the sole and exclusive remedy of Seller or
Purchaser (as defined in Section 9.02(a) and Section 9.03(a),
respectively), as the case may be, against Purchaser or Seller, 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
Article IX and in Article VI and Article VII, 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 Purchaser and Seller hereby waives, on behalf of itself and any other
Purchaser or Seller (as defined in Section 9.02(a) and 9.03(a), respectively),
as the case may be, to the fullest extent permitted under applicable law, any
and all rights, claims and causes of action such Purchaser and Seller (or,
after the Closing, any Company or Subsidiary), as the case may be, may have
against Seller or Purchaser, as the case may be, (other than pursuant to this
Article IX, Article VI, or Article VII, as applicable) 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 Seller, Purchaser and their respective Affiliates under the
Note Documents. Nothing in the forgoing provisions of this Section 9.04(c)
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 Racing Services Agreement, the Note Documents, 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).


 


(d)                                 Each
of Purchaser and Seller agrees that, in the event an Indemnifying Party elects
to assume the defense of any claim or proceeding, it will refrain from making
any public announcements in respect of such claim or otherwise communicating
with the news media.


 


(e)                                  Purchaser
and Seller 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 Purchaser and Seller with respect to such a claim at
the address specified in this Agreement. From and after the Closing, neither
the Companies nor the Subsidiaries shall have any Liability to Seller or its
Affiliates for any breaches of the representations, warranties, agreements or
covenants of Seller, the Companies or the Subsidiaries set forth herein (other
than such agreements and covenants of the Companies or the Subsidiaries set
forth herein to the extent such agreements and covenants are to be performed
after the Closing). From and after the Closing, neither Seller nor its
Affiliates shall seek indemnification or contribution from any Company or
Subsidiary (including any of its employees or agents) for any such breaches
(other than breaches of such agreements and covenants to be performed after the
Closing Date) or in respect of any other payments required to be made by Seller
or its Affiliates (other than the Companies or the Subsidiaries) pursuant to
this Agreement. Nothing in the foregoing provisions of this
Section 9.04(e) 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 Racing Services Agreement, the Note
Documents, the Holdback Documents, the Equity Commitment Agreement


 


71

















 


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).


 


SECTION 9.05                    Payments.
Subject to Section 9.03(g), once a Loss is agreed to by the Indemnifying Party
or finally adjudicated to be payable pursuant to Section 6.05,
Section 7.01 or this Article IX, the Indemnifying Party shall satisfy its
obligations within fifteen (15) Business Days of such final, nonappealable
adjudication by wire transfer of immediately available funds; provided,
that during the term of any of the Holdback Documents, if the Indemnifying
Party is Seller and the Losses are covered under the Holdback Documents, then
such obligations shall be satisfied in accordance with the provisions of the
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 or in
Section 9.03(g)) 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 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 Seller Notes) shall be
treated as an adjustment to the Purchase Price.


 


ARTICLE
X


 


TERMINATION,
AMENDMENT AND WAIVER


 


SECTION 10.01              Termination.
This Agreement may be terminated at any time prior to the Closing:


 


(a)                                  by
the mutual written consent of Seller and Purchaser;


 


(b)                                 by
Seller if the condition set forth in Section 8.03(n) of this Agreement has not
been satisfied or waived by Purchaser by July 31, 2006;


 


(c)                                  by
Purchaser, upon a material breach of any representation, warranty, covenant or
agreement of Seller set forth in this Agreement such that the conditions set
forth in Section 8.03 would not be satisfied or if any representation or
warranty of Seller shall have become untrue such that Purchaser would have the
right not to proceed with the Closing pursuant to Section 8.03(b) (a “Terminating
Seller’s Breach”); provided, however, that if such
Terminating Seller’s Breach is curable by Seller through the exercise of its
reasonable efforts within 30 days from the date Seller becomes aware thereof
and is cured, Purchaser may not terminate this Agreement pursuant to this
Section 10.01(c) solely by reason of such Terminating Seller’s Breach;


 


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(d)                                 by
Seller, upon a material breach of any representation, warranty, covenant or
agreement of Purchaser set forth in this Agreement such that the conditions set
forth in Section 8.02 would not be satisfied or if any representation or
warranty of Purchaser shall have become untrue such that Seller would have the
right not to proceed with the Closing pursuant to Section 8.02(b) (a “Terminating
Purchaser’s Breach”); provided, however, that if such
Terminating Purchaser Breach is curable by Purchaser through the exercise of
its reasonable efforts within 30 days from the date Purchaser becomes aware
thereof and is cured, Seller may not terminate this Agreement pursuant to this
Section 10.01(d) solely by reason of such Terminating Purchaser’s Breach;


 


(e)                                  by
Purchaser or Seller in the event that any Governmental Authority shall have
issued an order, decree or ruling or taken any other action restraining or
enjoining the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable;


 


(f)                                    by
Seller, upon receiving an Action Notice from the Purchaser;


 


(g)                                 [reserved];


 


(h)                                 by
Seller upon failure to submit the Gaming Application to the Gaming Board by
December 20, 2005 in accordance with Section 5.04(c) or the failure
by Purchaser to satisfy and continue to satisfy the Gaming Application Fee
requirement in accordance with Section 5.04(d); provided, however
that if the failure to submit such Gaming Application is the result of the
failure of Seller to make reasonable efforts in accordance with Section
5.04(c), Seller may not terminate pursuant to this Section 10.01(h);


 


(i)                                     by
Seller or Purchaser if the condition set forth in Section 8.01(c) of this
Agreement has not been satisfied or waived by both Purchaser and Seller by
July 31, 2006;


 


(j)                                     [reserved];


 


(k)                                  by
Seller, at any time after the date which is 5 Business Days prior to the date,
if any, identified by the Gaming Board after which continued pursuit by Seller
of a Conditional Category 1 license with Purchaser pursuant to the Gaming
Application would jeopardize Seller’s ability to obtain a Conditional Category
1 license or a Category 1 license in its own name;


 


(l)                                     by
Seller or Purchaser if it reasonably determines that Closing has become
impossible due to events or circumstances that have occurred since the date of
this Agreement; provided however that the right to terminate this Agreement
under this Section 10.01(l) shall not be available to a party whose failure to
fulfill any obligation under this Agreement shall have been the cause of, or
shall have resulted in, the Closing becoming impossible; or


 


(m)                               by
Seller or Purchaser if the Closing shall not have occurred prior to July 31,
2006.


 


Time shall be of the essence in this Agreement.


 


73

















 


SECTION 10.02              Effect
of Termination. In the event of termination of this Agreement in accordance
with this Agreement, this Agreement shall forthwith become void and there shall
be no liability on the part of any party hereto (a) except as set forth in
Sections 5.04(e), 5.05 and 5.15 and the second, third and fourth sentences
of Section 5.04(d) and Article XI hereof and (b) nothing herein shall
relieve any party hereto from liability for any willful breach of any provision
hereof (including, without limitation, Section 5.10).


 


SECTION 10.03              Waiver.
At any time prior to the Closing, each of the parties hereto may
(a) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound by such extension
or waiver, as applicable. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder shall
not constitute a waiver of any of such rights.


 


ARTICLE
XI


 


GENERAL
PROVISIONS


 


SECTION 11.01              Expenses;
Pro-rations.


 


(a)                                  Except
as otherwise 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 and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred. Seller shall pay
(i) the cost of the Title Commitments; (ii) the portion of the
premium attributable to the standard coverage portion of the Title Policies
(excluding the costs of any endorsements requested by Purchaser, except as are
necessary to cure any Title Objection or obtained in connection with an Insured
Exception); (iii) Seller’s share of the pro-rations described in this
Section 11.01; and (iv) one-half of the HSR filing fee. Purchaser shall
pay (i) the portion of the premium attributable to any endorsements to the
Title Policies (except as set forth in the preceding sentence) and the portion
of the premium attributable to the “extended coverage” portion of the Title
Policies; (ii) Purchaser’s share of the pro-rations described in this
Section 11.01; and (iii) one-half of the HSR filing fee.


 


(b)                                 All
non-delinquent real estate Taxes and assessments on the Real Property will be
prorated as of the Closing based on the actual current Tax bill. If the Closing
takes place before the real estate Taxes are fixed for the Tax year in which
the Closing occurs, the apportionment of real estate Taxes will be made on the
basis of the real estate Taxes for the immediately preceding Tax year applied
to the latest assessed valuation. All delinquent Taxes and all delinquent
assessments, if any, on the Real Property will be satisfied at the Closing by
Seller. All supplemental Taxes billed after the Closing for periods prior to
the Closing will be paid promptly by Seller. Any Tax refunds received by
Purchaser which are allocable to the


 


74

















 


period prior to
the Closing (less Purchaser’s reasonable out-of-pocket costs in connection with
any such refund proceedings) will be paid by Purchaser to Seller.


 


(c)                                  With
respect to rent and other amounts payable by Seller in connection with any
leases, all such rent and other amounts will be prorated as of the Closing. Any
delinquent rent or other payments payable by Seller in connection with the
leases will be satisfied at the Closing by Seller.


 


(d)                                 With
respect to rent and other amounts payable to Seller in connection with any
leases, all rents which are actually received by Seller as of the Closing will
be prorated. Delinquent rents and rents not paid by Closing will not be
prorated and Seller can continue to collect such rents, provided that Purchaser
shall not have the obligation to pursue any Action or other proceedings in
connection therewith. Rents allocable to the period prior to the Closing will
be the property of Seller and rents allocable to the period after the Closing
will be the property of Purchaser.


 


(e)                                  All
pro-rations will be made as of the date of the Closing based on a 365-day year
or the number of days in the month during which the Closing occurs, as
applicable.


 


SECTION 11.02              Notices.
All notices, requests, claims, demands and other communications hereunder shall
be in writing and shall be given or made on the date delivered by hand or by
internationally recognized courier service such as Federal Express or by other
messenger (or if delivery is refused, upon presentment), or upon receipt by
facsimile transmission (without confirmation), or upon delivery by registered
or certified mail (postage prepaid, return receipt requested) to the parties
hereto 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 11.02):


 


(a)                                  if
to Seller:


 


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:  Joseph K.
Kim, Esq.


 


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(b)                                 if
to Purchaser:


 


PA Meadows, LLC


211 North Rampart Blvd.


Las Vegas, Nevada 89115


Facsimile: 702-507-5992


Attn:  William
Paulos


William Wortman


 


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.


 


and a copy to:


 


Santoro, Driggs, Walch, Kearney, Johnson &
Thompson

400 South Fourth Street

Suite 300

Las Vegas, NV 89101


Facsimile: 
702-791-1912

Attn:  Michael Kearney


 


SECTION 11.03              Public
Announcements. Unless otherwise required by applicable law or stock
exchange requirements, no party to this Agreement shall make any public
announcements in respect of this Agreement or the transactions contemplated
hereby or otherwise communicate with any news media without prior consent of
the other party, and the parties will cooperate as to the timing and contents
of any such announcement.


 


SECTION 11.04              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.


 


SECTION 11.05              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.


 


SECTION 11.06              Entire
Agreement. This Agreement, the Note Documents and the Transaction Documents
constitute the entire agreement of the parties hereto with respect


 


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to the subject
matter hereof and supersedes all prior agreements and undertakings, both
written and oral, other than the Confidentiality Agreement, between Seller and
Purchaser (or Millennium Management Group, LLC) with respect to the subject
matter hereof and except as otherwise expressly provided herein.


 


SECTION 11.07              Assignment.
This Agreement shall not be assigned by operation of law or otherwise, except
that prior to the Closing, Purchaser, without the consent of Seller, but with
at least 10 Business Days’ prior written notice to Seller, may transfer or
cause to be transferred all of the equity interests of Purchaser to a wholly
owned direct or indirect subsidiary of Cannery Casino Resorts, LLC, a Nevada
limited liability company.


 


SECTION 11.08              No
Third-Party Beneficiaries. Except as provided in Article IX, this Agreement
is for the sole benefit of the parties hereto and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person or entity any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.


 


SECTION 11.09              Amendment.
This Agreement may not be amended or modified except by an instrument in
writing signed by Seller and Purchaser.


 


SECTION 11.10              Governing
Law; Jurisdiction; Service of Process. (a) 
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York. Seller and Purchaser hereby agree and
consent to the exclusive jurisdiction of, and service of process and venue in,
the United States District Court for the Southern District of New York and the
courts of the State of New York located in the County of New York, State of New
York and waives any objection with respect thereto, for the purpose of any
action, suit or proceeding arising out of or relating to this Agreement.


 


SECTION 11.11              WAIVER
OF JURY TRIAL. EACH OF PURCHASER AND SELLER 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 PURCHASER OR SELLER IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.


 


SECTION 11.12              Counterparts.
This Agreement 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.


 


SECTION 11.13              Specific
Performance. The parties hereto agree that irreparable damage would occur
in the event any provision of this Agreement was not performed in accordance
with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity.


 


SECTION 11.14              Prevailing
Party. The prevailing party or parties in any arbitration, mediation, court
action, or other adjudicative proceeding arising out of or relating to


 


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this Agreement shall
be reimbursed by the party or parties who do not prevail for their reasonable
attorneys, accountants and experts fees and for the costs of such proceeding.


 


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IN WITNESS WHEREOF, Seller and Purchaser have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.


 


 


	
   

  	
  PA MEADOWS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
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  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MAGNA ENTERTAINMENT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title: 

  



 


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