Exhibit
10.1


 


AMENDMENT NO. 2 TO
AGREEMENT AND PLAN OF MERGER


 


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


 


RECITALS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2

















 


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


 


3

















 


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


 


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


 


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


 


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


 


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


 


	
   

  	
   

  	
  SCIOTO DOWNS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
       By:

  	
  /s/ Edward T. Ryan

  	
   

  
	
   

  	
  Name:

  	
  Edward T. Ryan

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MTR GAMING GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
       By:

  	
  /s/ Edson R. Arneault

  	
   

  
	
   

  	
  Name:

  	
  Edson R. Arneault

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RACING ACQUISITION, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
       By:

  	
  /s/ Edson R. Arneault

  	
   

  
	
   

  	
  Name:

  	
  Edson R. Arneault

  
	
   

  	
  Title:

  	
  President

  
					



 


4