Exhibit
10.1


ASSET PURCHASE AGREEMENT


dated as of November 7,
2006


by and among


ZIA PARTNERS, LLC, as Seller,


ZIA PARK LLC, as Buyer


and


PENN NATIONAL GAMING, INC.,
as Parent Guarantor

(solely with respect to Section 2.6 and ARTICLES VI and XII)
















TABLE
OF CONTENTS


	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE I

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PURCHASE AND
  SALE OF ASSETS

  
	
   

  
	
  Section 1.1

  	
   

  	
  Purchase and Sale of Assets

  	
   

  	
  1

  
	
  Section 1.2

  	
   

  	
  Excluded Assets

  	
   

  	
  3

  
	
  Section 1.3

  	
   

  	
  Excluded Liabilities

  	
   

  	
  4

  
	
  Section 1.4

  	
   

  	
  Assumed Liabilities

  	
   

  	
  5

  
	
  Section 1.5

  	
   

  	
  Retention and Removal of Excluded Assets

  	
   

  	
  5

  
	
  Section 1.6

  	
   

  	
  Assignability and Consents

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PURCHASE AND
  SALE OF ASSETS; PURCHASE PRICE

  
	
   

  
	
  Section 2.1

  	
   

  	
  Purchase and Sale of Assets and Assumption of
  Liabilities

  	
   

  	
  7

  
	
  Section 2.2

  	
   

  	
  Purchase Price

  	
   

  	
  7

  
	
  Section 2.3

  	
   

  	
  Deposit

  	
   

  	
  9

  
	
  Section 2.4

  	
   

  	
  Post-Closing Adjustment to Purchase Price

  	
   

  	
  11

  
	
  Section 2.5

  	
   

  	
  Allocation of Total Consideration

  	
   

  	
  12

  
	
  Section 2.6

  	
   

  	
  Parent Guarantee

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRORATIONS AND
  ADJUSTMENTS

  
	
   

  
	
  Section 3.1

  	
   

  	
  Adjustments

  	
   

  	
  13

  
	
  Section 3.2

  	
   

  	
  Accounts Receivable

  	
   

  	
  14

  
	
  Section 3.3

  	
   

  	
  Accounts Payable

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CLOSING

  
	
   

  
	
  Section 4.1

  	
   

  	
  Closing

  	
   

  	
  14

  
	
  Section 4.2

  	
   

  	
  Deliveries at Closing

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  REPRESENTATIONS
  AND WARRANTIES OF SELLER

  
	
   

  
	
  Section 5.1

  	
   

  	
  Organization of Seller

  	
   

  	
  16

  
	
  Section 5.2

  	
   

  	
  Authority; No Conflict; Required Filings and
  Consents

  	
   

  	
  17

  



 









 



 


	
  Section 5.3

  	
   

  	
  Financial Statements

  	
   

  	
  18

  
	
  Section 5.4

  	
   

  	
  No Undisclosed Liabilities

  	
   

  	
  18

  
	
  Section 5.5

  	
   

  	
  Real Property

  	
   

  	
  18

  
	
  Section 5.6

  	
   

  	
  Intellectual Property

  	
   

  	
  20

  
	
  Section 5.7

  	
   

  	
  Agreements, Contracts and Commitments

  	
   

  	
  20

  
	
  Section 5.8

  	
   

  	
  Litigation; Orders

  	
   

  	
  21

  
	
  Section 5.9

  	
   

  	
  Environmental Matters

  	
   

  	
  21

  
	
  Section 5.10

  	
   

  	
  Permits; Compliance with Laws

  	
   

  	
  22

  
	
  Section 5.11

  	
   

  	
  Labor Matters

  	
   

  	
  23

  
	
  Section 5.12

  	
   

  	
  Employee Benefits

  	
   

  	
  25

  
	
  Section 5.13

  	
   

  	
  Brokers

  	
   

  	
  26

  
	
  Section 5.14

  	
   

  	
  Insurance

  	
   

  	
  26

  
	
  Section 5.15

  	
   

  	
  Personal Property

  	
   

  	
  26

  
	
  Section 5.16

  	
   

  	
  Sufficiency of Assets

  	
   

  	
  26

  
	
  Section 5.17

  	
   

  	
  Computer Software

  	
   

  	
  27

  
	
  Section 5.18

  	
   

  	
  Taxes

  	
   

  	
  27

  
	
  Section 5.19

  	
   

  	
  Customer Information

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  REPRESENTATIONS
  AND WARRANTIES OF BUYER AND PARENT GUARANTOR

  
	
   

  
	
  Section 6.1

  	
   

  	
  Organization

  	
   

  	
  27

  
	
  Section 6.2

  	
   

  	
  Authority; No Conflict; Required Filings and
  Consents

  	
   

  	
  27

  
	
  Section 6.3

  	
   

  	
  Brokers

  	
   

  	
  29

  
	
  Section 6.4

  	
   

  	
  Financing

  	
   

  	
  29

  
	
  Section 6.5

  	
   

  	
  Licensability

  	
   

  	
  29

  
	
  Section 6.6

  	
   

  	
  Litigation

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COVENANTS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Conduct of Business of Seller

  	
   

  	
  29

  
	
  Section 7.2

  	
   

  	
  Cooperation; Notice; Cure

  	
   

  	
  32

  
	
  Section 7.3

  	
   

  	
  No Solicitation

  	
   

  	
  32

  
	
  Section 7.4

  	
   

  	
  Employee Matters

  	
   

  	
  33

  
	
  Section 7.5

  	
   

  	
  Access to Information and the Property

  	
   

  	
  34

  
	
  Section 7.6

  	
   

  	
  Governmental Approvals.

  	
   

  	
  36

  
	
  Section 7.7

  	
   

  	
  Publicity

  	
   

  	
  38

  
	
  Section 7.8

  	
   

  	
  Further Assurances and Actions

  	
   

  	
  38

  
	
  Section 7.9

  	
   

  	
  Transfer Taxes; HSR Filing Fee

  	
   

  	
  39

  
	
  Section 7.10

  	
   

  	
  Accounts Receivable; Assumed Current Liabilities;
  Accounts Payable and Other Excluded Current Liabilities

  	
   

  	
  39

  
	
  Section 7.11

  	
   

  	
  Inventoried Automobiles

  	
   

  	
  39

  
	
  Section 7.12

  	
   

  	
  Insurance Policies

  	
   

  	
  40

  
	
  Section 7.13

  	
   

  	
  Transfer of Utilities

  	
   

  	
  40

  




 iii
 






 



 


	
  Section
  7.14

  	
   

  	
  Certain Transactions

  	
   

  	
  40

  
	
  Section 7.15

  	
   

  	
  Insurance; Casualty and Condemnation

  	
   

  	
  40

  
	
  Section 7.16

  	
   

  	
  No Control

  	
   

  	
  41

  
	
  Section 7.17

  	
   

  	
  Customer Database; Audit Right

  	
   

  	
  42

  
	
  Section 7.18

  	
   

  	
  Motorsports Entertainment Complex

  	
   

  	
  42

  
	
  Section 7.19

  	
   

  	
  Non-Solicitation

  	
   

  	
  42

  
	
  Section 7.20

  	
   

  	
  Non-Competition

  	
   

  	
  43

  
	
  Section 7.21

  	
   

  	
  Amended Ground Lease

  	
   

  	
  43

  
	
  Section 7.22

  	
   

  	
  Domain Names

  	
   

  	
  44

  
	
  Section 7.23

  	
   

  	
  Pre-Closing Financial Statements

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CONDITIONS TO
  CLOSING

  
	
   

  
	
  Section 8.1

  	
   

  	
  Conditions to Each Party’s Obligation to Effect the
  Closing

  	
   

  	
  44

  
	
  Section 8.2

  	
   

  	
  Additional Conditions to Obligations of Buyer

  	
   

  	
  45

  
	
  Section 8.3

  	
   

  	
  Additional Conditions to Obligations of Seller

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TERMINATION AND
  AMENDMENT

  
	
   

  
	
  Section 9.1

  	
   

  	
  Termination

  	
   

  	
  47

  
	
  Section 9.2

  	
   

  	
  Effect of Termination

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SURVIVAL;
  INDEMNIFICATION

  
	
   

  
	
  Section 10.1

  	
   

  	
  Survival of Representations, Warranties, Covenants
  and Agreements

  	
   

  	
  50

  
	
  Section 10.2

  	
   

  	
  Indemnification

  	
   

  	
  51

  
	
  Section 10.3

  	
   

  	
  Interpretation

  	
   

  	
  51

  
	
  Section 10.4

  	
   

  	
  Procedure for Claims between Parties

  	
   

  	
  52

  
	
  Section 10.5

  	
   

  	
  Defense of Third Party Claims

  	
   

  	
  52

  
	
  Section 10.6

  	
   

  	
  Limitations on Indemnity

  	
   

  	
  53

  
	
  Section 10.7

  	
   

  	
  Payment of Damages

  	
   

  	
  53

  
	
  Section 10.8

  	
   

  	
  Exclusive Remedy

  	
   

  	
  53

  
	
  Section 10.9

  	
   

  	
  Treatment of Indemnification Payments

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PROPERTY

  
	
   

  
	
  Section 11.1

  	
   

  	
  As Is

  	
   

  	
  54

  
	
  Section 11.2

  	
   

  	
  Title to Real Property

  	
   

  	
  55

  




 iv
 






 



 


	
  ARTICLE XII

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  
	
   

  
	
  Section 12.1

  	
   

  	
  Definitions

  	
   

  	
  57

  
	
  Section 12.2

  	
   

  	
  Governing Law; Consent to Jurisdiction; Waiver of
  Trial by Jury

  	
   

  	
  67

  
	
  Section 12.3

  	
   

  	
  Notices

  	
   

  	
  68

  
	
  Section 12.4

  	
   

  	
  Interpretation

  	
   

  	
  68

  
	
  Section 12.5

  	
   

  	
  Entire Agreement

  	
   

  	
  69

  
	
  Section 12.6

  	
   

  	
  Severability

  	
   

  	
  69

  
	
  Section 12.7

  	
   

  	
  Assignment

  	
   

  	
  70

  
	
  Section 12.8

  	
   

  	
  Parties of Interest

  	
   

  	
  70

  
	
  Section 12.9

  	
   

  	
  Counterparts

  	
   

  	
  70

  
	
  Section 12.10

  	
   

  	
  Mutual Drafting

  	
   

  	
  70

  
	
  Section 12.11

  	
   

  	
  Amendment

  	
   

  	
  70

  
	
  Section 12.12

  	
   

  	
  Extension; Waiver

  	
   

  	
  70

  
	
  Section 12.13

  	
   

  	
  Time of Essence

  	
   

  	
  71

  
	
  Section 12.14

  	
   

  	
  Seller Disclosure Letter

  	
   

  	
  71

  



 



 v
 






 



EXHIBITS


	
  Exhibit A

  	
   

  	
  Deposit Escrow Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Warranty Deed

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Form of Bill of Sale and Assignment

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Form of Assignment and Assumption of Assumed
  Contracts and Assumed Liabilities

  
	
   

  	
   

  	
   

  
	
  Exhibit E

  	
   

  	
  Form of Non-Foreign Affidavit

  
	
   

  	
   

  	
   

  
	
  Exhibit F

  	
   

  	
  Form of Confirmation of Transfer of Inventoried
  Vehicles

  
	
   

  	
   

  	
   

  
	
  Exhibit G

  	
   

  	
  Form of Bill of Sale – Passenger /Delivery Vehicles

  
	
   

  	
   

  	
   

  
	
  Exhibit H

  	
   

  	
  Liquor License Purchase and Sale Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit I

  	
   

  	
  Form of Assignment of Leases

  
	
   

  	
   

  	
   

  
	
  Exhibit J

  	
   

  	
  Title Commitment and the UCC-11 Search

  
	
   

  	
   

  	
   

  
	
  Exhibit K

  	
   

  	
  Transition Services Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit L

  	
   

  	
  Form of Allocation Agreement

  



 



 vi
 






 



TABLE OF DEFINITIONS


	
  Terms

  	
   

  	
  Cross Reference

  in Agreement

  
	
   

  	
   

  	
   

  
	
  401(k) Plan

  	
   

  	
  Section 7.4(d)

  
	
  Accounts Receivable

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Acquired Personal Property

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Acquisition Proposal

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Adjustment Notes

  	
   

  	
  Section 2.2(b)

  
	
  Adjustments

  	
   

  	
  ‎Section
  2.2(b)

  
	
  Affiliate

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Alcoholic Beverage Approvals

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Allocation

  	
   

  	
  Section 2.5

  
	
  Amended Ground Lease

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Assumed Contracts

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Assumed Current Liabilities

  	
   

  	
  ‎Section
  1.4(a)

  
	
  Assumed Liabilities

  	
   

  	
  ‎Section
  1.4

  
	
  Assumed Software

  	
   

  	
  Section 5.17

  
	
  Base Purchase Price

  	
   

  	
  ‎Section
  2.2(a)

  
	
  Base Rate

  	
   

  	
  ‎Section
  8.2(h)

  
	
  Books and Records

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Business Day

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Business

  	
   

  	
  ‎Section
  2.2(b)

  
	
  Buyer 401(k) Plan

  	
   

  	
  Section 7.4(d)

  
	
  Buyer Indemnified Parties

  	
   

  	
  ‎Section
  10.2(a)

  
	
  Buyer Indemnified Party

  	
   

  	
  ‎Section
  10.2(a)

  
	
  Buyer

  	
   

  	
  Preamble

  
	
  Cap

  	
   

  	
  ‎Section
  10.6(a)

  
	
  Cash On Hand

  	
   

  	
  ‎Section
  2.4(d)

  
	
  Casualty Termination Event

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Closing Balance Sheet

  	
   

  	
  ‎Section
  2.4(a)

  
	
  Closing Date Cash On Hand

  	
   

  	
  ‎Section
  2.4(a)

  
	
  Closing Date Working Capital

  	
   

  	
  ‎Section
  2.4(a)

  
	
  Closing Date

  	
   

  	
  ‎Section
  4.1

  
	
  Closing

  	
   

  	
  ‎Section
  4.1

  
	
  COBRA

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Code

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Compass Loan Documents

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Confidentiality Agreement

  	
   

  	
  ‎Section
  7.5(a)

  
	
  Contract

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Customer Database

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Customer Information

  	
   

  	
  Section 7.17(a)

  
	
  Damages

  	
   

  	
  ‎Section
  10.2(a)

  
	
  Deposit Escrow Agreement

  	
   

  	
  Section 2.3(a)

  




 vii
 






 



 


	
  Deposit Escrow Net Earnings

  	
   

  	
  Section 2.3(a)

  
	
  Deposit

  	
   

  	
  ‎Section
  2.3(a)

  
	
  Employee Records

  	
   

  	
  Section 12.1(a)

  
	
  Employees

  	
   

  	
  Section 12.1(a)

  
	
  Encumbrances

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Environmental Condition

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Environmental Laws

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Environmental Liabilities

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Environmental Report

  	
   

  	
  ‎Section
  8.2(g)

  
	
  ERISA Affiliate

  	
   

  	
  Section 5.12(c)

  
	
  Escrow Agent

  	
   

  	
  ‎Section
  2.3(a)

  
	
  Escrow Costs

  	
   

  	
  Section 2.3(a)

  
	
  Escrow Funds Replacement Amount

  	
   

  	
  ‎Section
  2.3(a)

  
	
  Escrow Funds

  	
   

  	
  Section 2.3(a)

  
	
  Escrow Termination Date

  	
   

  	
  Section 2.3(a)

  
	
  Estimated Cash On Hand

  	
   

  	
  ‎Section
  2.2(c)

  
	
  Estimated Working Capital

  	
   

  	
  ‎Section
  2.2(c)

  
	
  Exchange Act

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Excluded Assets

  	
   

  	
  ‎Section
  1.2

  
	
  Excluded Contracts

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Excluded Current Assets

  	
   

  	
  Section 1.2(a)

  
	
  Excluded Current Liabilities

  	
   

  	
  Section 1.3(b)

  
	
  Excluded Liabilities

  	
   

  	
  ‎Section
  1.3

  
	
  Excluded Personal Property

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Existing Allocation Agreement

  	
   

  	
  ‎Section
  5.10(d)

  
	
  Existing Ground Lease

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Final Determination Date

  	
   

  	
  Section 2.4(c)

  
	
  Final Purchase Price Adjustment

  	
   

  	
  ‎Section
  2.4(c)

  
	
  Financial Information

  	
   

  	
  ‎Section
  5.3

  
	
  GAAP

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Gaming Approvals

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Gaming Authorities

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Gaming Laws

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Governmental Approvals

  	
   

  	
  ‎Section
  7.6(a)

  
	
  Governmental Entity

  	
   

  	
  ‎Section
  5.2(c)

  
	
  Ground Lease Estoppel and Consent Certificate

  	
   

  	
  ‎Section
  12.1(a)‎

  
	
  Hazardous Activity

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Hazardous Substance

  	
   

  	
  ‎Section
  12.1(a)

  
	
  HSR Act

  	
   

  	
  ‎Section
  5.2(c)

  
	
  Hubbard

  	
   

  	
  Section
  12.1(a)

  
	
  Improvements

  	
   

  	
  Section 12.1(a)

  
	
  Inactive Employee

  	
   

  	
  Section 12.1(a)

  
	
  Indemnified Party

  	
   

  	
  Section 10.4

  
	
  Indemnifying Parties

  	
   

  	
  ‎Section
  10.4

  
	
  Indemnifying Party

  	
   

  	
  ‎Section
  10.4

  
	
  Individual Machine Adjustment

  	
   

  	
  ‎Section
  2.2(d)

  




 viii
 






 



 


	
  Initial Scheduled Closing Date

  	
   

  	
  Section 12.1(a)

  
	
  Inspection

  	
   

  	
  ‎Section
  7.5(a)

  
	
  Intellectual Property

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Inventoried Vehicles

  	
   

  	
  ‎Section
  7.11(c)

  
	
  IRS

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Knowledge of Seller

  	
   

  	
  Section 12.1(a)

  
	
  L/C Amount

  	
   

  	
  ‎Section
  2.3(a)

  
	
  L/C Delivery Date

  	
   

  	
  ‎Section
  2.3(a)

  
	
  Land

  	
   

  	
  ‎Section
  5.5(b)

  
	
  Law

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Lease Documents

  	
   

  	
  ‎Section
  5.5(e)

  
	
  Leased Property

  	
   

  	
  ‎Section
  5.5(a)

  
	
  Leases

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Legal Proceeding

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Letters of Credit

  	
   

  	
  Section 2.3(a)

  
	
  Liabilities

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Licensed Parties

  	
   

  	
  Section 5.10(a)

  
	
  Liens

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Liquor License Purchase and Sale Agreement

  	
   

  	
  Recitals

  
	
  Liquor License

  	
   

  	
  ‎Recitals

  
	
  Material Assumed Contracts

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Material Portion of the Property

  	
   

  	
  Section 12.1(a)

  
	
  Minimum Cash On Hand

  	
   

  	
  ‎Section
  2.4(d)

  
	
  Monetary Encumbrances

  	
   

  	
  ‎Section
  11.2(b)

  
	
  Non-Assignable Asset

  	
   

  	
  ‎Section
  1.6(a)

  
	
  Notice

  	
   

  	
  ‎Section
  10.4

  
	
  Operating Agreements

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Option Agreement

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Order

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Ordinary Course of Business

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Outside Date

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Owner’s Title Policy

  	
   

  	
  ‎Section
  8.2(c)

  
	
  Parent Guarantor

  	
   

  	
  Preamble

  
	
  Passenger/Delivery Vehicles

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Payroll Taxes

  	
   

  	
  Section 7.4(g)

  
	
  Permitted Additional Gaming Machines

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Permitted Encumbrances

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Person

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Personal Property

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Pre-Closing Employee Liabilities

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Pre-Closing Financial Information

  	
   

  	
  ‎Section
  7.23

  
	
  Pre-Closing Tax Liability

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Pre-Closing Tax Period

  	
   

  	
  Section 12.1(a)

  
	
  Preliminary Closing Balance Sheet

  	
   

  	
  ‎Section
  2.2(c)

  
	
  Preliminary Purchase Price Adjustment

  	
   

  	
  ‎Section
  2.2(c)

  
	
  Privacy Obligations

  	
   

  	
  ‎Section
  5.6(d)

  




 ix
 






 



 


	
  Property Employee

  	
   

  	
  Section 12.1(a)

  
	
  Property Material Adverse Effect

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Property Specific Data

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Property

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Purchase Price

  	
   

  	
  ‎Section
  2.2(a)

  
	
  Purchased Assets

  	
   

  	
  ‎Section
  1.1

  
	
  Purchased Current Assets

  	
   

  	
  ‎Section
  1.1(c)

  
	
  Purchased Machines Adjustment

  	
   

  	
  Section 2.2(d)

  
	
  Reference Balance Sheet

  	
   

  	
  ‎Section
  2.2(b)

  
	
  Reference Date Working Capital

  	
   

  	
  ‎Section
  2.2(b)

  
	
  Reference Date

  	
   

  	
  ‎Section
  2.2(b)

  
	
  Release

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Representatives

  	
   

  	
  ‎Section
  7.3(a)

  
	
  Required Consents

  	
   

  	
  Section 4.2(m)

  
	
  Retained Employees

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Ruidoso Downs

  	
   

  	
  ‎Recitals

  
	
  Securities Act

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Seller Benefit Plans

  	
   

  	
  ‎Section
  5.12(a)

  
	
  Seller Disclosure Letter

  	
   

  	
  ‎ARTICLE
  V

  
	
  Seller Indemnified Parties

  	
   

  	
  ‎Section
  10.2(b)

  
	
  Seller Indemnified Party

  	
   

  	
  ‎Section
  10.2(b)

  
	
  Seller Permits

  	
   

  	
  ‎Section
  5.10(a)

  
	
  Seller

  	
   

  	
  Preamble

  
	
  Seller’s Knowledge

  	
   

  	
  Section 12.1(a)

  
	
  Shortfall Amount

  	
   

  	
  ‎Section
  7.15(a)

  
	
  Straddle Period

  	
   

  	
  Section 12.1(a)

  
	
  Subsidiary

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Survey

  	
   

  	
  ‎Section
  11.2(a)

  
	
  Survival Period

  	
   

  	
  ‎Section
  10.1(b)

  
	
  Tax Return

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Tax

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Taxes

  	
   

  	
  Section 12.1(a)

  
	
  Third Party Claim

  	
   

  	
  ‎Section
  10.5

  
	
  Threshold

  	
   

  	
  ‎Section
  10.6(a)

  
	
  Title Commitment

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Title Insurer

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Total Consideration

  	
   

  	
  Section 2.2(a)

  
	
  Total Escrow Funds Amount

  	
   

  	
  Section 2.3(a)

  
	
  Transfer Time

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Transferred Employees

  	
   

  	
  ‎Section
  7.4(a)

  
	
  Transferred Intellectual Property

  	
   

  	
  ‎Section
  12.1(a)

  
	
  WARN Act

  	
   

  	
  ‎Section
  12.1(a)

  
	
  Water Rights

  	
   

  	
  Section
  5.5(b)

  
	
  Working Capital

  	
   

  	
  ‎Section
  2.4(d)

  



 



 x















ASSET
PURCHASE AGREEMENT


THIS ASSET PURCHASE
AGREEMENT (this “Agreement”) is made and entered into as of November 7,
2006, by and among Zia Partners, LLC, a New Mexico limited liability company (“Seller”),
Zia Park LLC, a Delaware limited liability company (“Buyer”), and
(solely with respect to Section 2.6 and ARTICLE VI and XII hereof) Penn
National Gaming, Inc., a Pennsylvania corporation (“Parent Guarantor”).
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in Section 12.1(a) hereof.


WHEREAS, Seller owns and
operates the Property (commonly known as Black Gold Casino and Zia Park
Racetrack);


WHEREAS, Buyer, a wholly
owned subsidiary of Parent Guarantor, desires to purchase and acquire, and
Seller desires to sell and transfer to Buyer, Seller’s interest in the Property
and the Business, in each case on the terms and subject to the conditions set
forth in this Agreement;


WHEREAS, Parent Guarantor
desires to guarantee the performance by Buyer of Buyer’s obligations under this
Agreement as set forth in Section 2.6 hereof;


WHEREAS, Buyer, Ruidoso
Downs Racing, Inc., a New Mexico corporation and an Affiliate of Seller (“Ruidoso
Downs”), and (solely with respect to specified sections thereof) Seller
have entered into a Liquor License Purchase and Sale Agreement, dated as of the
date hereof, and in the form attached hereto as Exhibit H (the “Liquor
License Purchase and Sale Agreement”), for the sale by Ruidoso Downs to
Buyer, and the purchase by Buyer from Ruidoso Downs, on the Closing Date, of
the liquor license (No. 2969) (the “Liquor License”) currently owned by
Ruidoso Downs and leased by Seller from Ruidoso Downs in connection with the
sale and service of alcoholic beverages at the Property; and


WHEREAS, Seller, Ruidoso
Downs and Buyer also have entered into a Transition Services Agreement, dated
as of the date hereof, and in the form attached hereto as Exhibit K, for
the transitional use of certain personnel and certain services provided to the
Property by Seller, Ruidoso Downs and their Affiliates, and certain other
matters set forth therein.


NOW, THEREFORE, the
parties hereto, in consideration of the premises and of the mutual
representations, warranties and covenants contained herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, agree as follows:


ARTICLE
I


PURCHASE
AND SALE OF ASSETS


Section 1.1             Purchase and Sale
of Assets.  Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing (subject
to Section 1.6 hereof), Seller shall sell, convey, assign and transfer to
Buyer, and Buyer shall purchase and acquire from Seller, all of Seller’s right,
title and interest in and to those rights and assets set forth below, but
excluding the Excluded Assets (the “Purchased Assets”):









 



(a)           the Property;


(b)           Cash On Hand as of the
Closing Date, which, in accordance with Section 2.2(c), shall be no less than
Minimum Cash On Hand;


(c)           other than the Excluded
Current Assets, all current assets (other than Cash On Hand) reflected on the
Reference Balance Sheet (the “Purchased Current Assets”);


(d)           the Assumed Contracts;


(e)           the Acquired Personal
Property;


(f)            the Transferred
Intellectual Property;


(g)           the Books and Records;


(h)           the Assumed Software;


(i)            with respect to the
Property, the Seller Permits, and pending applications therefor, to the extent
transferable by Law;


(j)            the Customer Database;


(k)           Employee Records;


(l)            to the extent relating
to (x) the Purchased Assets or (y) any of the Assumed Liabilities, all rights,
claims, rebates, discounts and credits (including all indemnities, warranties
and similar rights), performance and other bonds, security and other deposits,
advance payments, and prepaid rents in favor of Seller;


(m)          subject to Section 1.5(b)
and Section 7.15 hereof, if, prior to the Closing Date, the Property is
destroyed, damaged or taken in condemnation, the insurance proceeds or
condemnation award payable to Seller, or any of its Affiliates or any of their
respective Representatives or any transferable or assignable claim for
insurance proceeds or condemnation award payable to Seller or any of its
Affiliates or any of their respective Representatives with respect thereto;


(n)           all assets to which
Buyer is entitled under the prorations contemplated hereby, including, without
limitation, the proration provisions set forth in ARTICLE III hereof;


(o)           all Seller’s rights
under the Amended Ground Lease;


(p)           all manufacturers’ and
other warranties applicable to the Property or the Purchased Assets;


(q)           other than related to
the Excluded Current Assets or as provided for in Section 7.12, claims,
deposits, prepayments, prepaid assets, refunds, causes of action, rights of
recovery, rights of setoff and rights of recoupment of Seller relating to the
Business or the Property as of the Closing Date, including any such rights of
Seller under any property, casualty, workers’



 2
 






 



compensation or, subject to the second proviso in
Section 7.15(a)(i), other insurance policy (provided that Seller shall not be required
to sell, convey, assign or transfer to Buyer any insurance
policies but shall instead cancel such policies as provided in Section
7.12);


(r)            all assets to which
Buyer is entitled under the provisions of ARTICLE III hereof; and


(s)           any other tangible or
intangible assets owned, leased or licensed by Seller (other than the Excluded
Assets) which are located at the Property or used in the Business.


The Purchased Assets
shall be conveyed to Buyer free and clear of all Liabilities and Liens other
than (i) the Assumed Liabilities and (ii) the Permitted Encumbrances.


Notwithstanding anything
to the contrary herein, any Purchased Asset which consists of source code, or
any other property which can be transmitted via remote telecommunications, will
be delivered to Buyer on the Closing Date via remote telecommunications.


Section 1.2             Excluded Assets.
 Notwithstanding anything to the contrary
contained in this Agreement, from and after the Closing Date, Seller shall
retain all of its right, title and interest in and to each and all of the
following assets (the “Excluded Assets”):


(a)           all current assets of
the type designated on the Reference Balance Sheet as to be retained by Seller
(the “Excluded Current Assets”);


(b)           the Excluded Contracts;


(c)           any rights, claims,
causes of action and credits (including all indemnities, warranties and similar
rights) in favor of Seller or any of its Affiliates or Representatives to the
extent relating to (i) any other Excluded Asset or (ii) any Excluded Liability;


(d)           the corporate charter
or other organizational documents, minute and stock books and records,
corporate seals, Tax Returns (including supporting schedules) of Seller or any
of its Affiliates;


(e)           except as otherwise set
forth in Section 7.4, all pension plans and the assets thereof and all other
employee benefit plans and arrangements and the assets thereof;


(f)            all indebtedness or
accounts payable owing from any Affiliate of Seller to Seller;


(g)           any refund, credit,
claim or entitlement with respect to Taxes of Seller or its Affiliates, or with
respect to the Purchased Assets, attributable to Tax periods (or portions
thereof) ending on or before the Closing Date;


(h)           the Excluded Personal
Property; and


(i)            any assets set forth
on Section 1.2 of the Seller Disclosure Letter.



 3
 






 



Section 1.3             Excluded
Liabilities.  Other than the Assumed
Liabilities, Buyer is not, and shall not be deemed to be, assuming or taking
the Purchased Assets subject to any obligations or liabilities of Seller or any
of its Affiliates, of any kind or nature whatsoever, whether known or unknown,
fixed or contingent, including without limitation (collectively, the “Excluded
Liabilities”):


(a)           any Liability in
respect of any Excluded Asset;


(b)           except for the Assumed
Current Liabilities, all current liabilities reflected on the Reference Balance
Sheet (the “Excluded Current Liabilities”);


(c)           all Liabilities set
forth on Section 1.3 of the Seller Disclosure Letter;


(d)           all Liabilities of
Seller pursuant to the prorations contemplated hereby, including, without
limitation, the proration provisions set forth in ARTICLE III hereof;


(e)           all Liabilities under
indebtedness of Seller (including without limitation under the Compass Loan
Documents and including any indebtedness or accounts payable owing from Seller to
any Affiliate of Seller);


(f)            all Pre-Closing Tax
Liabilities;


(g)           all Pre-Closing
Employee Liabilities;


(h)           all Liabilities of
Seller pursuant to ARTICLE III hereof;


(i)            all Liabilities of
Seller that (i) by their terms should have been performed on or prior to the
Closing Date, and/or (ii) arise from events or circumstances, including for
claims, pending or threatened litigation, acts, omissions, events or
occurrences relating to the Purchased Assets or the Business, to the extent
occurring on or prior to the Closing Date, or the operation of the Property,
the Business or the Purchased Assets on or prior to the Closing Date (including
without limitation any Liabilities with respect to escheatable property, any
Liabilities in connection with any products or services offered by Seller on or
prior to the Closing Date and any Liabilities for acts or omissions of Seller
or any of its Affiliates or any of their respective Representatives on or prior
to the Closing Date), in each case, other than the Assumed Liabilities;


(j)            all Liabilities,
including, without limitation, Environmental Liabilities, under, pursuant or
relating to any Environmental Laws relating to, resulting from, caused by or
arising out of ownership, operation, use or control of the Property or the
Business to the extent arising out of activities or circumstances occurring
prior to the Closing Date, including, without limitation, any Liability
relating to contamination or exposure to Hazardous Substances at or
attributable to the Property or the Business to the extent arising out of
activities or circumstances occurring prior to the Closing Date; and


(k)           any Liabilities of
Seller not specifically assumed by Buyer hereunder.



 4
 






 



Section 1.4             Assumed
Liabilities.  Upon the terms and
subject to the conditions set forth in this Agreement, as of the Closing Date,
Buyer agrees to assume, satisfy, perform, pay, discharge and be solely
responsible for each of the following Liabilities (the “Assumed Liabilities”):


(a)           all current Liabilities
of the type designated on the Reference Balance Sheet as to be assumed by Buyer
(the “Assumed Current Liabilities”);


(b)           all Liabilities
relating to, or arising in respect of, (i) the Purchased Assets accruing,
arising out of, or relating to events, occurrences, acts or omissions happening
from and after the Closing Date or the operation of the Property, the Business
or the Purchased Assets from and after the Closing Date, and (ii) all Assumed
Contracts which were not fully performed and were not required to have been so
performed, prior to the Closing Date, excluding any Liability resulting from
any breach thereof on or prior to the Closing Date by Seller or any of its
Affiliates or any of their respective Representatives, to the extent of such
breach;


(c)           all Liabilities of
Seller with respect to entertainment, dining and other reservations made by
patrons relating to the Property or the Business from and after the Closing
Date;


(d)           all Liabilities for
Taxes arising from and attributable to the ownership of any portion of the
Purchased Assets or the other Assumed Liabilities after the Closing Date;


(e)           all Liabilities
relating to Transferred Employees accruing from and after the Closing Date to
the extent arising out of or relating to their employment by Buyer;


(f)            all Liabilities under,
pursuant or relating to any Environmental Laws, including, without limitation,
Environmental Liabilities, relating to, resulting from, caused by or arising
out of ownership, operation, use or control of the Property or the Business,
accruing, arising out of, or relating to events, occurrences, acts or omissions
happening from and after the Closing Date, including, without limitation, any
Liability relating to contamination or exposure to Hazardous Substances at or
attributable to the Property or the Business; provided,
however, that Seller shall retain liability for the Liabilities set
forth in Section 1.3(j) hereof; and


(g)           to the extent lawfully
transferable, all obligations, commitments and Liabilities under any Seller
Permits assigned to Buyer pursuant to Section 1.1(i) hereof.


Section 1.5             Retention and
Removal of Excluded Assets


(a)           Notwithstanding
anything to the contrary contained in this Agreement, Seller and its Affiliates
may retain and use, at their own expense, archival copies of all of the Assumed
Contracts and other documents or materials transferred hereunder, in each case,
which (i) are used in connection with Seller’s or its Affiliates’ businesses,
other than the Business; (ii) Seller in good faith determines it is reasonably
likely to need access to in connection with the defense (or any counterclaim,
cross-claim or similar claim in connection therewith) of any suit, claim,
action, proceeding or investigation against or by Seller or any of its
Affiliates; or (iii) Seller in good faith determines it is reasonably likely to
need access to in connection with any filing, report, or investigation to or by
any Governmental Authority; provided,
that notwithstanding anything to the contrary herein, neither Seller nor its
Affiliates shall be entitled to retain any



 5
 






 



copies of or use the
Customer Database or any documents or materials relating thereto or containing
any of the data or information therein, including without limitation any
summaries or analyses thereof, and Seller shall, and shall cause its Affiliates
to, comply with their obligations under Section 7.17 hereof.


(b)           All items located at
the Property that constitute Excluded Assets may be removed on or prior to the
Closing Date (or within a reasonable period of time mutually agreed to by Buyer
and Seller following the Closing Date) by Seller, its Affiliates, the owners of
the Excluded Assets, or their respective Representatives, with the removing
party making all repairs necessitated by such removal, but without any
obligation on the part of Seller, its Affiliates, or any removing party to
replace any item so removed. Seller hereby reserves unto itself and its
Affiliates and the owners of the Excluded Assets, and their respective
Representatives, a right of entry into the Property at reasonable times for a
reasonable period of time following the Closing Date, as mutually agreed to by
Buyer and Seller, to effect such removal; provided,
however, that any such removal of
Excluded Assets shall not materially interfere with Buyer’s business operations
at the Property. In the event that any Excluded Assets are removed following
the Closing Date, Seller shall provide Buyer prior notice and Buyer shall be
permitted, at its discretion, to be present during such removal of the Excluded
Assets. All risk of loss relative to any Excluded Assets that are located on
the Property after the Closing Date shall remain with Seller. If Seller does
not remove any of the Excluded Assets within a reasonable period of time as mutually agreed to by
Buyer and Seller following the Closing Date, all such remaining Excluded Assets
shall be deemed to be abandoned and Buyer may dispose of any such remaining
Excluded Assets.


Section 1.6             Assignability and
Consents.


(a)           Notwithstanding
anything to the contrary contained in this ARTICLE I, if the sale, conveyance,
assignment, attempted sale, conveyance, assignment or transfer to Buyer of any
Contract (other than the Amended Ground Lease and any other Contract listed in
Section 4.2(m) of the Seller Disclosure Letter) that is part of the Purchased
Assets is, by its terms, nonassignable without the consent of a third party
(other than an Affiliate of Seller, in which case Seller covenants and agrees
to cause such Affiliate to render such consent) and such authorizations, approvals,
consents or waivers shall not have been obtained prior to the Closing Date
(each, a “Non-Assignable Asset”), in either case (provided that such
authorization, approval, consent or waiver is not a Required Consent), the
Closing shall proceed, but the Closing shall not constitute the sale,
conveyance, assignment, transfer or delivery of any such Non-Assignable Asset,
and this Agreement shall not constitute a sale, conveyance, assignment,
transfer or delivery of any such Non-Assignable Asset unless and until such
authorization, approval, consent or waiver is obtained; provided, however,
that nothing in this Section 1.6 shall relieve the parties of their obligations
under Section 7.8 hereof and notwithstanding anything in this Agreement,
receipt of the Required Consents shall be a condition to Buyer’s obligation to
effect the Closing. After the Closing, Seller and Buyer shall use commercially
reasonable efforts to obtain any such authorizations, approvals, consents or
waivers related to the Non-Assignable Assets, and Buyer and Seller shall
cooperate with each other in any arrangement commercially reasonable to provide
that Buyer shall receive the interest of Seller in the benefits under any such
Non-Assignable Asset until such time as such third party consent, approval or
waiver shall have been obtained, and each of Buyer and Seller shall cooperate
with the other party in any such



 6
 






 



commercially reasonable arrangement, including
performance by Seller as agent if commercially reasonable to Seller. Seller
shall promptly pay over to Buyer the amount of all payments received by it in
respect of all of its Non-Assignable Assets.


(b)           Once authorization,
approval or waiver of or consent for the sale, conveyance, assignment or
transfer of any such Non-Assignable Asset is obtained, Seller shall convey,
assign, transfer and deliver any such Non-Assignable Asset at no additional
cost to Buyer, and such Non-Assignable Asset shall thereafter constitute a
Purchased Asset.


ARTICLE
II


PURCHASE
AND SALE OF ASSETS; PURCHASE PRICE


Section 2.1             Purchase and Sale
of Assets and Assumption of Liabilities. 


On the terms and subject
to the conditions set forth in this Agreement, at the Closing, Buyer agrees to
purchase, acquire, assume and accept from Seller, and Seller agrees to sell,
transfer, assign, convey and deliver to Buyer, all of the Purchased Assets and
the Assumed Liabilities.


Section 2.2             Purchase Price.



(a)           In consideration for
the sale, transfer, assignment, conveyance and delivery to Buyer of the
Purchased Assets, at the Closing, Buyer shall (i) deliver or cause to be
delivered to Seller an aggregate amount in cash equal to the sum (such sum, the
“Purchase Price”) of: 
(1) Two Hundred Million United States Dollars ($200,000,000) (the “Base
Purchase Price”) against which the amount of the Deposit shall be credited,
(2) the Preliminary Purchase Price Adjustment, if any, in accordance with
Section 2.2(c) hereof, (3) the dollar amount of Estimated Cash On Hand in
accordance with Section 2.2(c) hereof, and (4) the Purchased Machines Adjustment,
if any, in accordance with Section 2.2(d) hereof, which sum shall be delivered
by wire transfer or otherwise in immediately available funds in accordance with
instructions delivered by Seller to Buyer at least two (2) Business Days prior
to the Closing Date, and (ii) assume the Assumed Liabilities (the Purchase
Price, together with the Assumed Liabilities, the “Total Consideration”).
The Total Consideration shall be subject to a Final Purchase Price Adjustment
after the Closing pursuant to Section 2.4 hereof. Buyer shall be entitled to
(x) deduct and withhold, from any payment otherwise payable pursuant to this
Agreement to Seller, the amounts required to be deducted and withheld under the
Code, or any provision of state, local, or foreign tax law, with respect to the
making of such payment, as long as Buyer pays such amount to such proper taxing
authority, and (y) deduct from the Purchase Price any shortfall in capital
expenditures made by Seller in accordance with Section 7.1(a)(xv) hereof.


(b)           Seller has delivered to
Buyer an unaudited consolidated balance sheet of the business operated at the
Property (the “Business”) and related data of Seller as of June 30, 2006
(the “Reference Date”), a copy of which is set forth in Section 2.2(b)
of the Seller Disclosure Letter (the “Reference Balance Sheet”). The
Reference Balance Sheet reflects the adjustments agreed to by Buyer and Seller
and so noted as “Adjustment Notes” set forth therein (the



 7
 






 



“Adjustments”), and except for the Adjustments,
has been prepared in accordance with GAAP and on a basis consistent with the
unaudited Financial Information.


(c)           At least three (3)
Business Days before the Closing, Seller shall deliver to Buyer a preliminary
Closing Balance Sheet (prepared as of the end of the most recent calendar month
for which balance sheet data is available in the Ordinary Course of Business)
(the “Preliminary Closing Balance Sheet”). The Preliminary Closing
Balance Sheet will reflect the
Adjustments and, except for the Adjustments, will be prepared in accordance
with GAAP and on a basis consistent with the unaudited Financial Information.
The Preliminary Closing Balance Sheet will set forth a good faith estimate of
the amount of (i) Working Capital of the Business as of the Closing Date (such
estimate, the “Estimated Working Capital”) and (ii) Cash On Hand of
the Business as of the Closing Date (such estimate, the “Estimated Cash On
Hand”), which shall be no less than Minimum Cash On Hand, and Seller shall
make such transfers and deposits of funds prior to the Closing necessary to
cause Estimated Cash on Hand to not be less than the Minimum Cash on Hand. The “Preliminary
Purchase Price Adjustment” (which may be positive or negative) shall equal
the difference between (x) Estimated Working Capital and (y) zero, and shall be
made as follows:  (i) if the Estimated
Working Capital is greater than zero, then the Preliminary Purchase Price
Adjustment shall be positive, and (ii) if the Estimated Working Capital is less
than zero, then the Preliminary Purchase Price Adjustment shall be negative.


(d)           If Seller has purchased
for cash any Permitted Additional Gaming Machines prior to the Closing, then an
adjustment to the Purchase Price (such adjustment, the “Purchased Machines
Adjustment”) shall be made as set forth in Section 2.2(a)(i)(4). The amount
of the Purchased Machines Adjustment shall equal the sum of the Individual
Machine Adjustment (as defined below) for each Permitted Additional Gaming
Machine so purchased. The “Individual Machine Adjustment” for any
Permitted Additional Gaming Machine so purchased shall equal the product of (i)
the aggregate dollar amount paid in cash by Seller for its purchase of such
Permitted Additional Gaming Machine, multiplied by (ii) the quotient determined
by dividing (A) (x) 60 minus (y) the number of months between the date such
Permitted Additional Gaming Machine is purchased and the Closing Date (with any
partial month being rounded to the nearest whole month period), by (B) 60.


(e)           At or prior to Closing,
(i) Seller shall make such transfers of funds, settle such intercompany
accounts and take such other actions as are necessary to make effective, as of
the Closing, the Adjustments, and (ii) Seller shall have paid off, had released
or otherwise satisfied, in each case unconditionally, (x) all Liens on the
Purchased Assets that secure Liabilities under the Compass Loan
Documents and (y) any other Liens on the Purchased Assets (other than
Permitted Encumbrances), and shall deliver to Buyer evidence of the unconditional
payment, release or satisfaction of the matters set forth in (x) and (y) hereof
satisfactory to Buyer.


(f)            Except
as otherwise set forth herein, each party shall pay its own costs and expenses
arising in connection with this Agreement and the Closing (including, without
limitation, its own attorneys’ and advisors’ fees, charges and disbursements).
The following costs shall be allocated between the parties as follows:  (i) any Escrow Costs and any title fees and
costs shall be paid one-half (1¤2)
by Seller and one-half (1¤2)
by Buyer or, if the Escrow Costs are paid out of the Deposit as contemplated in
Section 2.3(a)(i), Buyer and Seller shall make mutually agreeable arrangements
so that such Escrow Costs are in effect paid one-half (1¤2) by



 8
 






 



 


Seller and one-half (1¤2) by Buyer;
(ii) the cost of the updated and recertified Survey shall be paid by Buyer;
(iii) the cost of the Owner’s Title Policy shall be paid by Seller with respect
to the portion of the cost attributable to obtaining a NM 1 ALTA 10-17-92
policy or any endorsements required pursuant to Section 11.2(b) hereof
(including all endorsements listed on the attachment to the Title Commitment),
and the portion of the cost attributable to obtaining extended coverage or any
endorsements requested by Buyer (other than any endorsements that are required
pursuant to Section 11.2(b) hereof) shall be paid by Buyer; (iv) all recording
fees shall be paid by Seller; and (v) any and all amounts or penalties due and
payable in connection with the discharge and satisfaction of any Liens (other
than the Permitted Encumbrances) in accordance with the terms hereof, shall be
paid by Seller.


Section 2.3             Deposit. 


(a)           On the date hereof,
Buyer shall deposit an amount equal to Ten Million United States Dollars
($10,000,000) (such amount, including any and all income and interest earned or
accrued thereon, the “Deposit”) with First American Title Insurance Co.
(the “Escrow Agent”), pursuant to the terms of an escrow agreement dated
as of the date hereof and attached hereto as Exhibit A (the “Deposit
Escrow Agreement”) executed and delivered by Buyer, Seller and the Escrow
Agent. At the Closing, the Deposit shall be credited against the Purchase Price
and shall continue to be held by the Escrow Agent pursuant to this Section
2.3(a) and in accordance with the terms of the Deposit Escrow Agreement until
released pursuant to this Section 2.3(a) and the terms of the Deposit Escrow
Agreement. Upon termination of this Agreement, the Deposit shall be payable
pursuant to Section 9.2(c) hereof, and thereafter shall be promptly released by
the Escrow Agent to Buyer or Seller, as applicable, pursuant to Section 9.2(c)
hereof and the terms of the Deposit Escrow Agreement. Following the Closing,
the Deposit shall be held and disbursed as provided in the Deposit Escrow
Agreement, which shall provide, among other things, that (i) any fees or
expenses payable to the Escrow Agent under the Deposit Escrow Agreement on
account of, in connection with or related to the Deposit (the “Escrow Costs”)
shall first be paid out of any income and interest accrued on the Deposit; (ii)
the Deposit shall be disbursed to Buyer to satisfy any obligations of Seller
under Section 2.4(c)(i); (iii) the Deposit shall be disbursed to the Buyer
Indemnified Parties to satisfy any indemnification obligations of Seller under
Section 10.2(a); (iv) any income or interest on the Deposit (net of any Escrow
Costs) shall be distributed to Seller as provided in the Deposit Escrow
Agreement (such net amount, the “Deposit Escrow Net Earnings”); (v) on
the six month anniversary of the Closing Date, if on such date the amount of
funds held by the Escrow Agent pursuant to the Deposit Escrow Agreement (the
funds held by the Escrow Agent at any date of determination, the “Escrow
Funds” as of such date) exceeds Five Million United States Dollars
($5,000,000), then such excess shall be distributed by the Escrow Agent to
Seller in accordance with the Deposit Escrow Agreement, such that immediately
following such distribution, the Escrow Funds shall equal in the aggregate Five
Million United States Dollars ($5,000,000); and (vi) as of the date twelve
(12) months following the Closing Date (the “Escrow Termination Date”),
any Escrow Funds (following any payments made against the Deposit pursuant to Section
10.7) (other than any amount of cash required to satisfy the maximum amount of
the aggregate of any claims for indemnification for which written notice has
been given to Seller in accordance with Section 10.4 and which as of such
Escrow Termination Date have not been finally determined), including any income
or interest accrued thereon but less any Escrow Costs and less any amounts then
due and payable from the Escrow Funds to any Buyer Indemnified Party
pursuant to Section 10.2(a),



 9
 






 



shall be distributed by
the Escrow Agent to Seller in accordance with the Deposit Escrow Agreement.
Pending distribution pursuant to this Section 2.3(a), the Deposit shall be held
in trust pursuant to the Deposit Escrow Agreement and shall not be used except
as permitted by the Deposit Escrow Agreement; provided,
that Seller and Buyer may direct the Escrow Agent to invest the Deposit as set
forth in the Deposit Escrow Agreement.


On the Closing Date or
any time after the Closing Date but before the Escrow Termination Date, for
purposes of securing any obligations of Seller under Section 2.4(c) and any
indemnification obligations of Seller under this Agreement, Seller shall have
the right and option, to be exercised at the election of Seller in its sole and
absolute discretion, to deliver, or cause to be delivered, to the Escrow Agent
one or more irrevocable standby letters of credit issued by a commercial bank
or banks rated “AA” or higher (as modified from time to time, the “Letters
of Credit”) in favor of the Escrow Agent with respect to all or
a portion of the Escrow Funds then held by the Escrow Agent on the L/C
Delivery Date (as defined below) (the amount of Escrow Funds with respect to
which Seller elects to deliver or cause to be delivered Letters of Credit, the “Escrow
Funds Replacement Amount,” and the total amount of Escrow Funds held
by the Escrow Agent prior to any such replacement with Letters of Credit, the “Total
Escrow Funds Amount”), in an aggregate initial principal amount (the “L/C
Amount”) equal to the Escrow Funds Replacement Amount. In the event
that Seller elects to exercise the right set forth in this paragraph, Seller
shall deliver written notice to such effect to Buyer and the Escrow Agent
within two (2) Business Days prior to the estimated date of delivery of the
Letters of Credit (the “L/C Delivery Date”) in accordance with the terms
hereof, which notice shall include the Escrow Funds
Replacement Amount. Upon receiving such notice and the Letters of
Credit:  (i) if the Escrow Funds
Replacement Amount is equal to the Total Escrow Funds Amount, the
Escrow Agent shall promptly liquidate all investments in the Escrow Fund and
distribute all of the cash remaining in the Escrow Fund to Seller, as
instructed by Seller; and (ii) if the Escrow Funds Replacement Amount
is less than the Total Escrow Funds Amount, the Escrow Agent shall
(x) promptly liquidate that portion of the investments and/or cash in the
Escrow Fund in an amount equal to the Escrow Funds Replacement Amount
and distribute the same, as instructed by Seller, and (y) continue to hold
all of the investments and cash remaining in the Escrow Fund after
such distribution pursuant to the first paragraph of this Section 2.3(a)
and the terms of the Deposit Escrow Agreement such that, immediately
following the distribution referred to in the immediately preceding clause (x),
the L/C Amount plus the investments and cash remaining in the Escrow
Fund total the Total Escrow Funds Amount. Any Letters of Credit shall have
an expiry no earlier than the Escrow Termination Date and shall have drawing
conditions and other terms, and be in a form, reasonably satisfactory to Buyer
and consistent with the terms hereof. If, pursuant to this paragraph and the
Deposit Escrow Agreement, Seller elects to (and does) deliver one or more
Letters of Credit, for all purposes under this Agreement, the term “Escrow
Fund” shall include the amounts available under the Letters of Credit, and
in such case the Escrow Agent shall make each distribution to be paid to Buyer
in accordance with this Agreement (i) first, by distributing any cash or
liquidating any investments held in the Escrow Funds to permit the making of
such distribution, and (ii) then, if the aggregate amount of such cash and
investments is not sufficient to make such distribution, by drawing against the
Letters of Credit, on a pro rata basis in accordance with the respective
principal amount of each Letter of Credit.



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(b)           Seller and Buyer agree
to execute and be bound by such other reasonable and customary escrow
instructions as may be necessary or reasonably required by the Escrow Agent or
the parties hereto in order to consummate the purchase and sale contemplated
herein, or otherwise to distribute and pay the funds held in escrow as provided
in this Agreement and the Deposit Escrow Agreement; provided, that such escrow instructions are consistent with
the terms of this Agreement and the Deposit Escrow Agreement. In the event of
any inconsistency between the terms and provisions of such supplemental escrow
instructions and the terms and provisions of this Agreement, or any
inconsistency between the terms and provisions of the Deposit Escrow Agreement
and the terms and provisions of this Agreement, the terms and provisions of
this Agreement shall control, absent an express written agreement between the
parties hereto to the contrary which acknowledges this Section 2.3(b).


Section 2.4             Post-Closing
Adjustment to Purchase Price


(a)           As soon as reasonably
practical following (but not more than thirty (30) days after) the Closing Date,
Buyer shall prepare (and shall consult with Seller in preparing) an unaudited
consolidated balance sheet of the Business as of the Closing Date (the “Closing
Balance Sheet”). The Closing Balance Sheet will reflect the Adjustments
and, except for the Adjustments, will be prepared in accordance with GAAP and
on a basis consistent with the unaudited Financial Information. The Closing
Balance Sheet will set forth (i) the actual amount of Working Capital of the
Business as of the Closing Date (the “Closing Date Working Capital”) and
(ii) the actual amount of Cash On Hand of the Business as of the Closing Date
(the “Closing Date Cash On Hand”).


(b)           The Closing Balance
Sheet, including the Closing Date Working Capital, shall become final and
binding upon the parties unless within sixty (60) days following the Closing
Date, Seller and Buyer have been unable to agree on a final Closing Balance
Sheet, including the Closing Date Working Capital, in which case Seller and
Buyer shall negotiate in good faith to resolve any differences for an
additional thirty (30) days. If by the end of the additional thirty (30) day
period such differences have not been resolved, they shall be resolved by the
Chicago, Illinois office of an accounting firm mutually acceptable to Seller and
Buyer, and such firm’s opinion thereon and the resulting Closing Balance Sheet,
including the Closing Date Working Capital, shall be final, binding and not
subject to any appeal. The fees and expenses of such accounting firm in
connection with any such resolution shall be paid one-half (1⁄2) by Seller and
one-half (1⁄2) by Buyer.


(c)           Within ten (10) days
following the final determination (such date of final determination, the “Final
Determination Date”) of the Closing Balance Sheet and the Closing Date
Working Capital, a final adjustment to the Total Consideration (the “Final
Purchase Price Adjustment”) shall be made and paid as follows (it being
agreed that any amounts payable pursuant to Section 2.4(c)(i) and (ii) may, if
applicable, be offset against each other):


(i)            (x)
if the Closing Date Working Capital is less than the Estimated Working Capital,
then Seller shall promptly pay, or cause to be paid to Buyer, in cash, an
amount equal to the amount of such difference; provided,
however, that Buyer shall, to the extent that any Escrow Funds
remain available, have the right, at its option, first be paid by the Escrow
Agent from the Escrow Funds pursuant to Section 2.3(a) hereof and



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in
accordance with the Deposit Escrow Agreement; and (y) if the Closing Date Working
Capital is greater than the Estimated Working Capital, then Buyer shall
promptly pay, or cause to be paid to Seller, in cash, an amount equal to the
amount of such difference; and


(ii)           (x)
if the Closing Date Cash On Hand is less than the Estimated Cash On Hand, then
Seller shall promptly pay, or cause to be paid to Buyer, in cash, an amount
equal to the amount of such difference; provided,
however, that Buyer shall, to the extent that any Escrow Funds
remain available, have the right, at its option, first be paid by the Escrow
Agent from the Escrow Funds pursuant to Section 2.3(a) hereof and in accordance
with the Deposit Escrow Agreement; and (y) if the Closing Date Cash On Hand is
greater than the Estimated Cash On Hand, then Buyer shall promptly pay, or
cause to be paid to Seller, in cash, an amount equal to the amount of such
difference.


(d)           As used herein, (i) the
term “Working Capital” means the calculation, using the same methodology
set forth on the Reference Balance Sheet, of the Purchased Current Assets minus
the Assumed Current Liabilities, (ii) the term “Cash On Hand” means all
cash, cash equivalents or similar cash items of Seller held at the Property as
of the Closing, including without limitation, cash contained in the cage, TITO
(Ticket-In, Ticket-Out) exchange devices, slot booths, count rooms and drop
boxes at the Property, and (iii) the term “Minimum Cash On Hand” means
Two Million United States Dollars ($2,000,000).


(e)           Any and all payments
required to be made pursuant to this Section 2.4 shall be made by wire transfer
or otherwise in immediately available funds in accordance with instructions
delivered by the applicable payee to the applicable payor prior to the time
such payment is required to be made.


(f)            Nothing in this
Section 2.4 shall preclude any party from exercising, or shall adversely affect
or otherwise limit in any respect the exercise of, any right or remedy
available to it hereunder for any misrepresentation or breach of warranty
hereunder, but neither Buyer nor Seller shall have any right to dispute the
Closing Balance Sheet, the Closing Date Working Capital or the Closing Date
Cash on Hand, or any portion thereof once it has been finally determined in
accordance with Section 2.4(b).


Section 2.5             Allocation of
Total Consideration.  The Total
Consideration shall be allocated among the Purchased Assets as shall be
mutually agreed upon between the Buyer and Seller prior to the Closing (the “Allocation”)
(and each party agrees not to unreasonably withhold or delay its agreement
thereto); provided, that no more
than One Million United States Dollars ($1,000,000) of the Total Consideration
shall be allocated to the covenant not to compete set forth in Section 7.20
hereof. If (i) the Internal Revenue Service determines to contest the
amount allocated pursuant to the Allocation to the covenant not to complete,
then, the defense shall be jointly controlled by Buyer and Seller
(with each party bearing its own expenses) and such
contest shall not be pursued beyond an administrative appeal
proceeding within the Internal Revenue Service; and (ii) upon final
settlement of such contest, Seller is required to allocate more than One
Million United States Dollars ($1,000,000) of the Total Consideration to the
covenant not to compete set forth in Section 7.20 hereof, then Buyer shall pay
Seller an amount equal to twenty percent (20%) of the excess of the amount of
such allocation over One Million United States Dollars ($1,000,000). The
Allocation shall be subject to modification as agreed to



 12
 






 



by Buyer and Seller to
reflect the Final Purchase Price Adjustment or any other adjustment to the
Total Consideration pursuant to this Agreement, and to the extent traceable to
a particular Purchased Asset, as agreed to by Buyer and Seller, shall be allocated
to, and thereby increase or decrease as the case may be, the purchase price of
such Purchased Asset. To the extent that a component of the Final Purchase
Price Adjustment or any other adjustment to the Total Consideration pursuant to
this Agreement cannot be traced to a particular Purchased Asset, such component
shall be apportioned among the Purchased Assets as agreed to by Buyer and
Seller. Each party to this Agreement agrees that it will report the transaction
completed pursuant to this Agreement (including, without limitation, the filing
of Internal Revenue Service Form 8594) in accordance with the Allocation, and
that no party will take a position inconsistent with the Allocation unless
otherwise required by applicable Law.


Section 2.6             Parent Guarantee.
 Parent Guarantor hereby guarantees,
absolutely and unconditionally, the timely and complete performance by Buyer of
the obligations of Buyer, and the payment by Buyer of the amounts required to
be paid by Buyer, in each case as provided for in this Agreement and hereby
agrees to pay any and all reasonable expenses (including reasonable attorneys’
fees and disbursements) which may be paid or incurred by Seller in enforcing
any rights with respect to, or collecting against, Parent Guarantor or Buyer.
Parent Guarantor agrees that the guarantee in this Section 2.6 constitutes a
guarantee of payment and not of collection, and Seller shall not be obligated
to initiate, pursue or exhaust any form of recourse or obtain any judgment
against Buyer or others or to realize upon or exhaust any collateral security
held by or available to Seller before being entitled to payment from Parent
Guarantor. The liability of Parent Guarantor shall not be limited, diminished
or affected by (i) any failure by Seller to file or enforce any claim against
Buyer or others (in administration, bankruptcy or otherwise), or (ii) any other
circumstance which might otherwise constitute a legal or equitable discharge of
a guarantor. Parent Guarantor waives diligence, presentment, protest, notice of
dishonor or protest or default, demand for payment upon Buyer or the
undersigned, notice of acceptance, and all other notices and demands
whatsoever. The guarantee set forth in this Section 2.6 is a continuing
guarantee, and it will not be discharged until, and will remain in full force
and effect until, performance or payment in full of all actions and other
obligations of Buyer provided in this Agreement or, if earlier, termination of
this Agreement in accordance with ARTICLE IX. To the extent this Agreement
requires the Buyer to act (or refrain from acting) in connection with any
Federal income tax matter as to which the Buyer is a disregarded entity, Parent
Guarantor guarantees that it shall instead act (or refrain from acting) in
accordance with the Buyer’s obligations hereunder.


ARTICLE
III


PRORATIONS
AND ADJUSTMENTS


Section 3.1             Adjustments.  Notwithstanding any provision in ARTICLE II,
in preparing the Preliminary Closing Balance Sheet and the Closing Balance
Sheet and in making the calculations of Estimated Working Capital and Closing
Date Working Capital, the following provisions shall be observed.


(a)           Seller shall be liable
for the portion of the Taxes allocable to the portion of the Straddle Period
ending on and including the Closing Date, which shall be in the case of Taxes



 13
 






 



imposed on a periodic basis, the amount of such Taxes
for the entire period (or, in the case of such Taxes determined on an arrears
basis (such as real property taxes), the amount of such Taxes for the
immediately preceding period) multiplied by a fraction the numerator of which
is the number of calendar days in the Straddle Period ending on and including
the Closing Date and the denominator of which is the number of calendar days in
the entire relevant Straddle Period.


(b)           Utility (which shall
include water, gas, electric, sewer, fuel and the like) meters will be read, to
the extent that the utility company will do so, during the daylight hours on
the Closing Date (or as near as practicable prior thereto), with charges to
that time paid by Seller and charges thereafter paid by Buyer. Charges for
utilities which are un-metered, or the meters for which have not been read on
the Closing Date, will be prorated between Buyer and Seller as of the Transfer
Time.


(c)           All income and expenses
pursuant to the Assumed Contracts will be prorated between Buyer and Seller as
of the Closing Date on the Preliminary Closing Balance Sheet and the Closing
Date Balance Sheet. Seller shall receive a credit on the Preliminary Closing
Balance Sheet for (a) the amount of any prepaid rents or other amounts related
to periods from and after the Closing Date and (b) security deposits, or other
deposits previously paid by Seller under the Assumed Contracts, less any such
amounts paid to and collected by Seller under its Assumed Contracts. Any
amounts received by Buyer under its Assumed Contracts related to any period
prior to the Closing Date shall be promptly paid to Seller. Any amounts
received by Seller under the Assumed Contracts related to any period after the
Closing Date shall be promptly paid to Buyer.


Section 3.2             Accounts
Receivable.  The collection of all
Accounts Receivable of Seller accruing prior to the Transfer Time shall be the
responsibility of Seller, except that following the Closing, the collection of
Accounts Receivable that are Purchased Current Assets shall be the
responsibility of Buyer, in each case subject to the obligations of the parties
set forth in Section 7.10 hereof.


Section 3.3             Accounts Payable.
 The payment of all accounts payable of
Seller and all other Excluded Current Liabilities shall be the responsibility
of Seller, as further set forth in Section 7.10 hereof.


ARTICLE
IV


CLOSING


Section 4.1             Closing.  Unless this Agreement is earlier terminated
pursuant to ARTICLE IX hereof, the closing of the transactions contemplated by
this Agreement, including the purchase and sale of the Purchased Assets (the “Closing”),
shall take place on the third (3rd)
Business Day following satisfaction or waiver of the conditions set forth in ARTICLE
VIII hereof (other than those conditions to be satisfied or waived at the
Closing), at 9:00 a.m., New York time, at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, Four Times Square, New York, New York 10036, unless
another time and place are agreed to by the parties (the “Closing Date”).



 14














 


Section 4.2             Deliveries at Closing.  The following documents will be executed and
delivered, as applicable, by Buyer or Seller at or prior to the Closing:


(a)           Warranty Deed. Seller shall
execute and deliver to Buyer a duly executed and acknowledged Warranty Deed in
the form attached as Exhibit B, which form may be modified to the extent
required by local Law, conveying to Buyer the Land.


(b)           Bill of Sale and Assignment.
Seller shall execute and deliver to Buyer, and Buyer shall execute an
acceptance of, a Bill of Sale and Assignment in the form attached as Exhibit
C, which form may be modified to the extent required by local Law,
conveying to Buyer the Purchased Assets.


(c)           Assumed Contracts; Assumed
Liabilities. Buyer and Seller shall execute and deliver an Assignment and
Assumption of Assumed Contracts and Assumed Liabilities in the form attached as
Exhibit D, which form may be modified to the extent required by local
Law, to transfer the Assumed Liabilities, Assumed Contracts and Assumed
Software to Buyer, and Buyer and Seller each agrees to execute and deliver such
other assumption agreements or other documents reasonably required by any
Person (and reasonably acceptable to Buyer) to effectuate the assumption of the
Assumed Liabilities and the Purchased Assets.


(d)           Purchase Price. Buyer shall
deliver or cause to be delivered to Seller cash in the amount of the Purchase
Price (against which the amount of the Deposit shall be credited) pursuant to
Section 2.2 hereof.


(e)           Closing Escrow Agreement. If
either Buyer or Seller so requests, Buyer, Seller and the Escrow Agent shall
execute and deliver, not later than two (2) Business Days prior to the Closing,
a closing escrow agreement (in form and substance reasonably acceptable to
Buyer, Seller and the Escrow Agent), providing for the appointment and
responsibilities of such escrow agent with respect to implementation of the
Closing.


(f)            Buyer Certificates. Buyer
shall deliver to Seller the certificates required by Section 8.3(a) and (b)
hereof.


(g)           Seller Certificates. Seller
shall deliver to Buyer the certificates required by Section 8.2(a) and (b)
hereof.


(h)           Customer Database. Seller
shall deliver to Buyer the Customer Database, which shall be in the format and
contain the information set forth on Section 4.2(h) of the Seller Disclosure
Letter, together with all of the other information required to be surrendered
and delivered to Buyer pursuant to Section 7.17.


(i)            Non-Foreign Affidavit. Seller
(or the appropriate Affiliate of Seller if Seller is a disregarded entity for
tax purposes) shall execute and deliver a Non-Foreign Affidavit in the form
attached as Exhibit E.


(j)            Transfer of Inventoried Vehicles.
Buyer and Seller shall confirm the transfer of Inventoried Vehicles by
executing and delivering a Confirmation of Transfer of Inventoried



 15
 






 



Vehicles in the form
attached as Exhibit F, which form may be modified to the extent required
by local Law.


(k)           Vehicle Titles. Seller shall
execute and deliver to Buyer certificates of title, endorsed for transfer to
Buyer, for its Passenger/Delivery Vehicles along with a Bill of Sale —
Passenger/Delivery Vehicles therefor in the form attached as Exhibit G,
which form may be modified to the extent required by local Law.


(l)            Assignment of Lease. Seller
and Buyer shall each execute and deliver an Assignment of Leases with respect
to the Leases in the form attached hereto as Exhibit I, which form may
be modified to the extent required by local Law.


(m)          Consents. Seller shall deliver
to Buyer all executed consents and approvals (in form and substance reasonably
acceptable to Buyer) listed on Section 4.2(m) of the Seller Disclosure Letter
(the “Required Consents”), including, without limitation, the Ground
Lease Estoppel and Consent Certificate.


(n)           Gift Certificates. Seller
shall deliver to Buyer a schedule (which may be in electronic form) of all
outstanding gift certificates, the Liability therefor which is to be
transferred to Buyer.


(o)           Owner’s Affidavit. Seller
shall execute and deliver to the Title Insurer such proof of authority,
organizational documents and owner’s affidavits as reasonably required by the
Title Insurer, and in a form reasonably acceptable to Seller, as necessary to
issue the Owner’s Title Policy (including causing the deletion of the standard
pre-printed exceptions).


(p)           Survey and Title Policy.
Seller shall deliver (or cause to be delivered) to Buyer the updated and
recertified Survey and the Owner’s Title Policy.


(q)           Access. Seller shall deliver
to Buyer all keys, security cards, security codes, remote devices, and all
other items required for access to all parts of the Property.


(r)            Other Documents. Each party
shall deliver any other documents, instruments or agreements which are
reasonably requested by the other party, the Title Insurer or the Escrow Agent
that are reasonably necessary to consummate the transactions contemplated
hereby and have not previously been delivered.


ARTICLE
V


REPRESENTATIONS
AND WARRANTIES OF SELLER


Seller represents and
warrants to Buyer with respect to the Purchased Assets and the Assumed
Liabilities, except as set forth herein and in the referenced section of the
Disclosure Letter delivered by Seller to Buyer on the date of this Agreement
(the “Seller Disclosure Letter”), as follows:


Section 5.1             Organization of Seller.  Seller is duly organized and validly existing
under the laws of its state of organization and has all requisite power and
authority to carry on its



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business as now being
conducted. Seller is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so qualified, licensed or
in good standing would not, individually or in the aggregate, have a Property
Material Adverse Effect. Seller does not have any Subsidiaries.


Section 5.2             Authority; No Conflict; Required
Filings and Consents. 


(a)           Seller has all requisite power and
authority to enter into this Agreement and the other agreements contemplated
hereby and to consummate the transactions to which it is a party that are
contemplated by this Agreement and the other agreements contemplated hereby.
The execution and delivery of this Agreement and the other agreements contemplated
hereby by Seller and the consummation by it of the transactions to which it is
a party that are contemplated by this Agreement and the other agreements
contemplated hereby have been duly authorized by all necessary action on the
part of Seller and its members. Each of this Agreement and the other agreements
contemplated hereby have been, or will be prior to Closing, as applicable, duly
executed and delivered by Seller, and assuming this Agreement and the other
agreements contemplated hereby constitute, or will constitute prior to Closing,
as applicable, the valid and binding obligation of the other parties hereto,
constitute, or will constitute prior to Closing, as applicable, the valid and
binding obligation of Seller, enforceable against Seller in accordance with
their terms, subject, as to enforcement, to (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereinafter in
effect affecting creditors’ rights generally and (ii) general principles of
equity.


(b)           The execution and delivery of this
Agreement and the other agreements contemplated hereby by Seller do not, and
the consummation by Seller of the transactions contemplated by this Agreement
and the other agreements contemplated hereby will not, (i) conflict with, or
result in any violation or breach of, any provision of the organizational
documents of Seller, (ii) result in any violation or breach of, or constitute
(with or without notice or lapse of time, or both) a default (or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
any material benefit) under, or require a consent or waiver under, any of the
terms, conditions or provisions of any bond, mortgage, indenture, Assumed
Contract, Lease, or other Contract or obligation to which Seller is a party or
by which Seller may be bound, (iii) subject to the governmental filings and
other matters referred to in Section 5.2(c) hereof, contravene, conflict with,
or result in a violation of any of the terms or requirements of, or give any
Governmental Entity or any other Person the right to revoke, withdraw, suspend,
cancel, terminate, or modify, in each case in any respect, any permit,
concession, franchise, license, judgment, or Law applicable to Seller or (iv)
result in the imposition or creation of any Lien upon or with respect to the
Property other than a Permitted Encumbrance, except in the case of clauses (ii)
and (iii) for any such conflicts, violations, breaches, contraventions,
defaults, terminations, cancellations, accelerations or losses, failures to
obtain any such consent or waiver, or any such revocation, withdrawal,
suspension, cancellation, termination or modification which (x) would not,
individually or in the aggregate, have a Property Material Adverse Effect or
(y) would not prevent or materially delay the Closing or prevent, materially
delay or adversely affect the performance by Seller of the transactions
contemplated by this Agreement or the other agreements contemplated hereby.



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(c)           No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency, commission, Gaming Authority or other governmental
authority or instrumentality (“Governmental Entity”) or any other person
is required by or with respect to Seller in connection with the execution and
delivery of this Agreement or the other agreements contemplated hereby by
Seller or the consummation by Seller of the transactions to which it is a party
that are contemplated hereby or thereby, except for (i) the filing of the
notification report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (“HSR Act”), (ii) any approvals or filing of notices
required under the Gaming Laws, (iii) any consents, approvals, orders,
authorizations, registrations, permits, declarations or filings required by, of
or with respect to Buyer or any of its Subsidiaries, Affiliates or key
employees (including, without limitation, under the Gaming Laws), and (iv) such
consents, approvals, orders, authorizations, permits, filings, declarations or
registrations of which the failure to make or obtain would not, individually or
in the aggregate, have a Property Material Adverse Effect or prevent or
materially delay the Closing or prevent, materially delay or adversely affect
the performance by Seller of the transactions contemplated by this Agreement or
the other agreements contemplated hereby.


Section 5.3             Financial Statements.  Section 5.3 of the Seller Disclosure Letter
contains a true and complete copy of (i) the audited balance sheets, statements
of income, cash flow statements and all other financial information relating to
the Property and the Business for the twelve (12) month periods ending December
31, 2004 and December 31, 2005, and (ii) the unaudited balance sheet, statement
of income, cash flow statement and all other financial information relating to
the Property and the Business for each of the monthly periods ended in January
2006 through September 2006 ((i)
and (ii), collectively, the “Financial Information”). Except as noted
therein and except, with respect to the unaudited Financial Information, for
normal period-end adjustments and the lack of footnotes, the Financial
Information was prepared in accordance with GAAP in effect at the time of such
preparation applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes to such financial statements) and
fairly presented in all material respects the consolidated financial position
of the Business as of such date and for such period. Notwithstanding the
foregoing, Buyer acknowledges that such Financial Information was prepared by
Seller or its Affiliates for internal purposes, reflects allocation of some but
not necessarily all costs incurred by Affiliates of Seller for its benefit, and
that no representation or warranty is made that Buyer will be able to operate
the Property or the Business for the costs reflected in the Financial
Information.


Section 5.4             No Undisclosed Liabilities.  Except for (i) Liabilities reflected or
reserved against in the Financial Information, and (ii) Excluded Liabilities,
Seller has no material Liabilities with respect to the Property or the
Business.


Section 5.5             Real Property. 


(a)           Section 5.5(a) of the Seller
Disclosure Letter contains a complete and accurate list of all real property
leased by Seller (the “Leased Property”).


(b)           Section 5.5(b) of the Seller
Disclosure Letter contains a complete and accurate list of all real property
and associated water rights (the “Water Rights”) owned by Seller



 18
 






 



(collectively, the “Land”).
Seller does not license, or otherwise use or occupy, any real property other
than the Leased Property and the Land.


(c)           Seller has a valid leasehold interest
in the Leased Property.


(d)           Seller has a valid fee simple
interest in the Land, subject to the Permitted Encumbrances.


(e)           The Water Rights are valid and in
good standing in their entirety and no part of the Water Rights has been
forfeited or abandoned.


(f)            True and correct copies of the
Leases (together with all guarantees, amendments and modification thereof, the “Lease
Documents”) have been delivered to Buyer. The Lease Documents are
unmodified and in full force and effect, and there are no other agreements,
written or oral, for the use and occupancy of the Leased Property. Neither
Seller, nor to the Knowledge of Seller, any landlord or other party, is in
default under the Lease Documents.


(g)           To the Knowledge of Seller, (i)
neither the Land nor the Leased Property is in violation of any applicable
Laws, except for such violations which, individually or in the aggregate, would
not adversely affect in any material respect Seller’s current use of the Land
and the Leased Property; (ii) there are no material defects in the physical
condition of the Land or the Leased Property and the Improvements are free from
structural defects, with all building systems being in good working order and
condition, ordinary wear and tear excepted, with no capital improvements or
material repairs currently necessary or contemplated; (iii) the Improvements
have not suffered any damage by fire or other casualty loss or destruction that
has not been repaired and restored to its condition prior to such casualty;
(iv) the Improvements are in good condition and repair and are adequate for the
use, occupancy and operation of the Property and the Business; and (v) no
brokerage commissions or finder’s fees are owed with respect to the Land, the
Leased Property or the Business.


(h)           Seller has not received written
notice of, nor does Seller have any Knowledge of, any Legal Proceeding pending
(or, to the Knowledge of Seller, threatened) relating to the Land or the Leased
Property or the interests of Seller therein, which would be reasonably likely
to interfere in any material respects with the use, occupancy, ownership,
improvement, development and/or operation of the Land or the Leased Property or
the interests of Seller therein.


(i)            With the exception of the Lease
Documents themselves and all matters of record that are disclosed by the Title
Commitment, there are no Contracts or other Liabilities outstanding relative to
the material encumbrance, lease, sublease or transfer of the Land or the Leased
Property and there are no Persons in possession or claiming possession or the
right to use the Land or the Leased Property. Seller has received no written
notice that either the whole or any part of the Land or the Leased Property is
subject to any pending suit for condemnation or other taking by any
Governmental Entity, and Seller does not have any Knowledge that such
condemnation or other taking is threatened or contemplated. Seller has not
entered into any agreement in lieu of condemnation therefor.



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(j)            To the Knowledge of Seller, the
Property is free of Encumbrances that would materially impair the use of the
Property for the purposes for which it is held by Seller or the financeability
of the Property.


Section 5.6             Intellectual Property. 


(a)           Section 5.6(a) of the Seller
Disclosure Letter lists all (i) trademark and service mark registrations and
applications and web domain URLs that are included in the Transferred
Intellectual Property and (ii) trademark, service mark and trade name license
agreements which are included in the Transferred Intellectual Property. To
Seller’s Knowledge, Seller owns or possesses adequate and enforceable rights to
use the Transferred Intellectual Property as set forth on Section 5.6(a) of the
Seller Disclosure Letter.


(b)           The conduct of the Business as
currently conducted does not, and, to the Knowledge of Seller, immediately
following the Closing, will not, infringe, misappropriate, or otherwise violate
any Person’s Intellectual Property rights, and there has been no such claim
asserted or threatened in the past six (6) years against Seller or, to the
Knowledge of Seller, any other Person.


(c)           To the Knowledge of Seller, no Person
is infringing, misappropriating, or otherwise violating any Intellectual
Property owned, used, or held for use by Seller in the conduct of the Business,
and no such claims have been asserted or threatened against any Person by
Seller or, to the Knowledge of Seller, by any other Person, in the past three
(3) years.


(d)           Seller has at all times complied in
all material respects with all applicable Laws, contractual obligations, and
its own rules, policies, and procedures relating to privacy, data protection,
and the collection and use of personal information collected, used, or held for
use by Seller in the conduct of the Business (the foregoing, collectively “Privacy
Obligations”). No claims have been asserted to Seller in writing or to
Seller’s Knowledge threatened against Seller alleging a violation of any
Privacy Obligations. Seller takes reasonable measures to ensure that such
information is protected against unauthorized access, use, modification, or
other misuse.


Section 5.7             Agreements, Contracts and
Commitments.  True and correct copies
of the Assumed Contracts (other than purchase orders entered into in the
Ordinary Course of Business) have been made available to Buyer and a list of
such Assumed Contracts is included in Section 1.1(d) of the Seller Disclosure
Letter and (i) each Material Assumed Contract is valid and binding upon Seller
(and, to Seller’s Knowledge, on all other parties thereto), in accordance with
its terms and is in full force and effect, (ii) there is no material breach or
material violation of or default by Seller under any of the Assumed Contracts,
whether or not such breach, violation or default has been waived, (iii) to
Seller’s Knowledge there is no material breach or material violation of or
default by any other Person under any of the Assumed Contracts, and (iv) no
event has occurred with respect to Seller, which, with notice or lapse of time
or both, would constitute a breach, violation or default of, or give rise to a
right of termination, modification, cancellation, foreclosure, imposition of a
Lien, prepayment or acceleration under, any of the Material Assumed Contracts.
Section 5.7 of the Seller Disclosure Letter sets forth, to Seller’s Knowledge,
as of the date hereof, any breach or violation of or default by Seller or any
other Person under any of the Assumed Contracts, whether or not such breach,
violation or default has



 20
 






 



been waived. Prior to the
Closing, Seller shall update Section 5.7 of the Seller Disclosure Letter so
that it sets forth, to Seller’s Knowledge, as of the Closing Date, any breach
or violation of or default by Seller or any other Person under any of the
Assumed Contracts, whether or not such breach, violation or default has been
waived.


Section 5.8             Litigation; Orders. 


(a)           Except as set forth in Section 5.8 of
the Seller Disclosure Letter, there are no pending Legal Proceedings that are
material, individually or in the aggregate, that have been commenced by or
against Seller or that otherwise relate to or may adversely affect the Business
or any of the Purchased Assets. To the Knowledge of Seller, (i) no such Legal
Proceeding has been threatened, and (ii) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Legal Proceeding.


(b)           There are no Orders that are
material, individually or in the aggregate, to which Seller, the Business or
any of the Purchased Assets is subject, and Seller is not subject to any such
Order that relates to the Business or any of the Purchased Assets. To the
Knowledge of Seller, no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation
of or failure to comply with any term or requirement of any such Order to which
Seller, the Business or any of the Purchased Assets is subject.


Section 5.9             Environmental Matters.  Except as specifically set forth in Section
5.9 of the Seller Disclosure Letter:


(a)           With respect to the Property and the
Business, Seller, the Property and the Business have complied with and are
currently in material compliance with all applicable Environmental Laws, which
compliance includes, without limitation, the possession by Seller of all
permits and other governmental authorizations required under all Environmental
Laws, and compliance with the material terms and conditions thereof, and
assurance that all existing site conditions (including any on-site wells) are
in material compliance with applicable requirements for operation or closure,
as appropriate, and that any such wells requiring closure have been closed in
material compliance with all applicable requirements.


(b)           Seller has not received any Order,
citation, directive, inquiry, notice, summons, warning or other communication
from (i) any Governmental Entity, Person, employee or private citizen, or (ii)
the current or prior owner or operator of any portion of the Property, of any
alleged, actual or potential violation of or failure to comply with any
Environmental Law, of any alleged, actual or potential Environmental Condition,
or of any actual or threatened obligation to undertake or bear the cost of any
Environmental Liability with respect to any portion of the Property or the
Business.


(c)           There are no pending or, to the Knowledge
of Seller, threatened, claims, Legal Proceedings, Encumbrances, or other
restrictions of any nature, resulting from any Environmental Condition or
arising under or pursuant to any Environmental Law, with respect to or
affecting any of the Property or the Business.


(d)           To Seller’s Knowledge, none of the
following exists at, on, in or under any portion of the Property or related to
the Business:  (i) underground storage
tanks, (ii) asbestos-containing



 21
 






 



material in any form or
condition, (iii) polychlorinated biphenyls, or (iv) landfills, surface
impoundments, dumps, or disposal areas. Other than in material compliance with
Environmental Laws, Seller has not permitted or conducted, nor is Seller aware
of, any Hazardous Activity conducted with respect to the Property or relating
to the Business.


(e)           To the Knowledge of Seller, in
connection with the Business, there has been no Release, or threat of Release,
of any Hazardous Substances at or from the Property or at any other locations
where any Hazardous Substances were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the Property or
the Business. To the Knowledge of Seller, Seller has not in connection with the
Business treated, stored, disposed of, arranged for or permitted the disposal
of, transported, handled, or released any substance, including, without
limitation, any Hazardous Substance in a manner that has given or would give
rise to an Environmental Liability.


(f)            Seller has delivered to Buyer (to the
extent in the possession of or reasonably available to Seller) true and
complete copies of all environmental assessments and results of any reports,
studies, analyses, tests, or monitoring possessed, received or initiated by
Seller (or otherwise in the possession of or reasonably available to Seller)
pertaining to Hazardous Substances, Releases, Environmental Conditions or
Hazardous Activities in, on, or under the Property or relating to the Business,
or concerning compliance by Seller or the Business, with any Environmental
Laws.


(g)           Seller is not required by virtue of
the transactions set forth herein and contemplated hereby, or as a condition to
the effectiveness of any transactions contemplated hereby, (i) to perform a
site assessment for Hazardous Substances, (ii) to remove or remediate Hazardous
Substances, (iii) to give notice to or receive approval from any Governmental
Entity, or (iv) to record or deliver to any person or entity any disclosure
document or statement pertaining to environmental matters.


Section 5.10           Permits; Compliance with Laws.



(a)           Seller and, to Seller’s Knowledge,
each of its managers, members, officers and Persons required to be licensed
under applicable Laws to perform such Person’s function with Seller
(collectively, “Licensed Parties”), hold all material permits,
registrations, findings of suitability, licenses, variances, exemptions,
certificates of occupancy, orders and approvals of all Governmental Entities
(including all authorizations under Gaming Laws), necessary to conduct the
business and operations conducted at the Property and in connection with the
Business, each of which is in full force and effect in all material respects
(the “Seller Permits”) and, to Seller’s Knowledge, no event has occurred
which permits, or upon the giving of notice or passage of time or both, would
permit, revocation, non-renewal, modification, suspension, limitation or
termination of any Seller Permit that currently is in effect. Seller, and to
Seller’s Knowledge, each of its Licensed Parties, in each case whose position
is related to the Property, are in compliance in all material respects with the
terms of the Seller Permits. The operations conducted by Seller at the Property
and in connection with the Business are not being conducted and have not been
conducted in material violation of any applicable Law of any Governmental
Entity (including, without limitation, any Gaming Laws). Seller has not
received a written notice of any material investigation or review by any
Governmental Entity with respect to Seller or the



 22
 






 



Property that is pending,
and, to Seller’s Knowledge, no material investigation or review is threatened,
nor has any Governmental Entity indicated in writing any intention to conduct
the same.


(b)           Neither Seller nor, to Seller’s Knowledge,
any of its Licensed Parties, in each case whose position is related to the
Property or the Business, has received any written claim, demand, notice,
complaint, court order or administrative order from any Governmental Entity in
the past three (3) years under or relating to any violation or possible
violation of any Gaming Laws related to actions or inactions at the Property
which did or would be reasonably likely to result in fines or penalties equal
to or greater than Twenty Five Thousand United States Dollars ($25,000). To
Seller’s Knowledge, there are no facts, which if known to the Gaming
Authorities will or would be reasonably likely to result in the revocation,
limitation or suspension of any Gaming Approval.


(c)           Neither Seller nor, to Seller’s
Knowledge, any of its Licensed Parties, has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of property,
however characterized, to any finder, agent, government official or other
Person, in the United States or any other country, in any manner related to the
Business, which would be illegal under any applicable Law.


(d)           All gaming machines used on the
Property or in connection with the Business have been approved by the
appropriate Gaming Authorities with jurisdiction thereon and are owned by
Seller or are subject to the Allocation Agreement and Memorandum of
Understanding between Seller and Ruidoso Downs dated as of January 27, 2005, as
amended (the “Existing Allocation Agreement”), which Existing Allocation
Agreement has been approved by the New Mexico Gaming Control Board. The
Existing Allocation Agreement is valid and binding upon Seller (and, to Seller’s
Knowledge, on all other parties thereto), in accordance with its terms and is
in full force and effect, (ii) there is no breach or violation of or default by
Seller under the Existing Allocation Agreement, whether or not such breach,
violation or default has been waived, (iii) to Seller’s Knowledge, there is no
breach or violation of or default by any other Person under the Existing
Allocation Agreement, and (iv) no event has occurred with respect to Seller,
which, with notice or lapse of time or both, would constitute a breach,
violation or default of, or give rise to a right of termination, modification,
cancellation, foreclosure, imposition of a Lien, prepayment or acceleration
under, the Existing Allocation Agreement.


Section 5.11           Labor Matters. 


(a)           Seller has provided to Buyer a list
(which list is set forth in Section 5.11(a) of the Seller Disclosure Letter)
setting forth, as of October 27, 2006, the following information for each of
the Employees:  name, job title (or
positions held), date of hire, the current annual base salary (or hourly rate)
and most recent bonus paid.


(b)           To its Knowledge, Seller has good
labor relations with employees employed by it. Seller and its employees, agents
or representatives have not committed any material unfair labor practice as
defined in the National Labor Relations Act. Seller is neither party to, nor
bound by (and none of its respective properties or assets is bound by or
subject to), any labor agreement, collective bargaining agreement, work rules
or practices, or any other labor-related agreements



 23
 






 



or arrangements with any
labor union, labor organization, trade union or works council. There are no
labor agreements, collective bargaining agreements, work rules or practices, or
any other labor-related agreements or arrangements that pertain to any of the
Employees and are enforceable against Seller. No Employees are represented by
any labor union, labor organization, trade union or works council with respect
to their employment with Seller.


(c)           No labor union, labor organization,
trade union, works council, or group of employees of Seller has made a pending
demand for recognition or certification, and there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or to Seller’s Knowledge threatened in writing to be brought
or filed with the National Labor Relations Board or any other labor relations
tribunal or authority. To the Knowledge of Seller, there are no labor union
organizing activities with respect to any of the Employees. There are no actual
or, to the Knowledge of Seller, threatened material arbitrations, material
grievances, labor disputes, strikes, lockouts, slowdowns or work stoppages
against or affecting Seller, nor has there been any of the foregoing during the
5-year period before the date of this Agreement.


(d)           All personnel policies, rules and
procedures applicable to the Employees are in writing. There are no written
personnel manuals, handbooks, policies, rules or procedures applicable to any
of the Employees, other than those set forth in Section 5.11(d) of the Seller
Disclosure Letter, true and complete copies of which have heretofore been
provided to Buyer.


(e)           Seller is and has been in material
compliance with all applicable Laws respecting employment and employment
practices, including, without limitation, all Laws respecting terms and conditions
of employment, health and safety, wages and hours, child labor, immigration,
employment discrimination, disability rights or benefits, equal opportunity,
plant closures and layoffs, affirmative action, workers’ compensation, labor
relations, employee leave issues and unemployment insurance. Seller is not
delinquent in accordance with Seller’s payment policies in payments to any
Employees or former employees for any services or amounts required to be
reimbursed or otherwise paid. Seller is not a party to, or otherwise bound by,
any Order solely binding against Seller and/or its Affiliates relating to
Employees or employment practices.


(f)            Section 5.11(f) of the Seller
Disclosure Letter contains a true and complete list of the names and the sites
of employment or facilities of those individuals who suffered an “employment
loss” (as defined in the WARN Act) at any site of employment or facility of
Seller during the 90-day period prior to the date of this Agreement. Section
5.11(f) of the Seller Disclosure Letter shall be updated immediately prior to
the Closing Date with respect to the 90-day period prior to the Closing Date.


(g)           The execution of this Agreement and
the consummation of the transactions contemplated by this Agreement will not
result in any breach or other violation of any collective bargaining agreement,
employment agreement, consulting agreement or any other labor-related agreement
to which Seller is a party and/or is bound by and/or that pertains to any of
the Employees.



 24
 






 



Section 5.12           Employee Benefits. 


(a)           Section 5.12 of the Seller Disclosure
Letter sets forth an accurate and complete list of all bonus, stock option,
stock purchase, restricted stock, incentive, fringe benefit, profit-sharing,
pension or retirement, deferred compensation, medical, life insurance,
disability, accident, salary continuation, severance, accrued leave, vacation,
sick pay, sick leave, supplemental retirement and unemployment benefit plans,
programs, arrangements, commitments and/or practices (whether or not insured,
whether qualified or nonqualified, subject to ERISA or not, defined under
Section 3(3) of ERISA or not, written or unwritten) for the benefit of any
current or former employees, directors or consultants of Seller at the
Property, as of the date of this Agreement (all of the foregoing plans,
programs, arrangements, commitments, practices and Contracts referred to above
are referred to, the “Seller Benefit Plans”).


(b)           True and complete copies of the
Seller Benefit Plans (which shall include all summary plan descriptions,
summaries of material modifications and memoranda, employee handbooks and other
written communications regarding the Seller Benefit Plans), have been made
available by Seller to Buyer.


(c)           At no time has Seller or any trade or
business, whether or not incorporated (an “ERISA Affiliate”), that
together with Seller would be deemed a “single employer” within the meaning of
Section 4001(b)(1) of ERISA ever maintained, established, sponsored,
participated in or contributed to any plan that is subject to Title IV of
ERISA.


(d)           At no time has Seller or any ERISA
Affiliate ever contributed to or been requested to contribute to any “multiemployer
pension plan,” as such term is defined in Section 3(37) of ERISA or a plan that
is funded, in whole or in part, through a voluntary employees’ beneficiary
association exempt from Tax under Section 501(c)(9) of the Code.


(e)           Except for the continuation coverage
requirements of COBRA or death benefits or retirement benefits under any “employee
pension plan” as that term is defined in Section 3(2) of ERISA, Seller has no
obligations or potential liability for benefits to employees, former employees
or their respective dependents following termination of employment or
retirement under any of the Seller Benefit Plans.


(f)            Each of the Seller Benefit Plans
that is intended to be “qualified” within the meaning of Section 401(a) of the
Code is so qualified. Each such Seller Benefit Plan is either a prototype plan
entitled to rely on the opinion letter issued by the IRS as to the qualified
status of such plan under Section 401(a) of the Code, to the extent provided in
Revenue Procedure 2005-16, or has received a favorable determination letter
from the IRS. No event has occurred which would affect such qualified status.


(g)           The consummation of the transactions
contemplated by this Agreement will not, either alone or in combination with
any other event, (i) entitle any current or former employee, officer or
director of Seller to severance pay, unemployment compensation or any other
similar termination payment, or (ii) accelerate the time of payment or vesting,
or increase the amount of or otherwise enhance any benefit due any such
employee, officer or director. No amounts payable under any of the Seller
Benefit Plans or any other contract, agreement or arrangement



 25
 






 



with respect to which
Seller may have any liability could fail to be deductible for federal income
tax purposes by virtue of Section 280G of the Code.


(h)           There are no pending or, to Seller’s
knowledge, threatened or anticipated claims by or on behalf of any Seller
Benefit Plan, by any employee or beneficiary under any such Seller Benefit Plan
or otherwise involving any such Seller Benefit Plan (other than routine claims
for benefits).


(i)            Each of the Seller Benefit Plans has
been operated and administered in all material respects in accordance with
applicable Laws, including but not limited to ERISA and the Code.


(j)            Neither Seller nor any ERISA
Affiliate has, prior to the Closing Date and in any material respect, violated
any of the health care continuation requirements of COBRA or the Health
Insurance Portability Accountability Act of 1996, as amended, or any similar
provision of state law applicable to its employees.


Section 5.13           Brokers.  Neither Seller nor any of its Representatives
has employed any broker, financial advisor or finder or incurred any Liability
for any brokerage fees, commissions or finder’s fees in connection with the
transactions contemplated by this Agreement. Seller agrees to indemnify, defend
and hold Buyer free and harmless from and against any and all loss, liability,
cost, damage and expense, including without limitation, reasonable attorneys’
fees, in connection with any and all fees, commissions and finder fees claimed
in connection with this transaction. The provisions of this Section 5.13 shall
survive the Closing or earlier termination of this Agreement.


Section 5.14           Insurance.  The insurance policies maintained by Seller
or its Affiliates in respect of the Property insure against risks and
liabilities customary in Seller’s industry. Neither Seller nor its Affiliates
is in material breach of any such policies and all such policies are in full
force and effect.


Section 5.15           Personal Property.  Except for Permitted Encumbrances, Seller has
good and valid title to, or an adequate leasehold interest in, or other legal
right to, all material tangible personal property necessary to conduct its
business as presently conducted, excluding the Excluded Personal Property.
Notwithstanding anything contained in this Section 5.15, the representations
contained herein do not concern Land, Leased Property or Intellectual Property,
which are the subject of the representations in Section 5.5 and Section 5.6
hereof, respectively.


Section 5.16           Sufficiency of Assets.  The Purchased Assets constitute all of the
tangible and intangible assets related to the Property and the Business that
are reasonably necessary to operate the Property and the Business immediately
following Closing in substantially the same manner the Property and the
Businesses are currently being operated. None of Seller’s Affiliates or
Representatives own, lease or license any assets used in the operation of the
Business, or employ any Persons that work at the Property or in the Business,
except as set forth in Section 5.16 of the Seller Disclosure Letter.



 26














 


Section 5.17           Computer Software.  Section 5.17 of the Seller Disclosure Letter
sets forth a true and correct list of all material computer software used at
the Property or relating to the Business (“Assumed Software”).


Section 5.18           Taxes.


(a)           Seller has timely filed all material
Tax Returns required to be filed by Seller, and such Tax Returns are true,
correct, and complete in all material respects.


(b)           All Taxes for which Seller is or may
be liable in respect of taxable periods (or portions thereof) ending on or
before the Closing Date, whether or not shown (or required to be shown) on a
Tax Return, have been timely paid, or in the case of Taxes not yet due and
payable, an adequate accrual in accordance with GAAP for the payment of all
such Taxes as of the Reference Date has been established on the Reference
Balance Sheet.  All liabilities for Taxes
attributable to the period commencing on the date following the date of the
Reference Balance Sheet were incurred in the Ordinary Course of Business and
are consistent in type and amount with Taxes attributable to similar prior
periods.


(c)           No Federal, state, local or foreign
audits are presently pending with regard to any Taxes or Tax Returns of Seller
and no such audit has been threatened in writing.


(d)            There are no Encumbrances for Taxes
on the property or assets of Seller other than Permitted Encumbrances.


Section 5.19           Customer Information.  There is no Customer Information relating to
the Business that is (x) kept, maintained or stored other than by Seller or (y)
not deliverable to Buyer pursuant to the terms of this Agreement, including
without limitation pursuant to Section 7.17 and Section 4.2(h) hereof.


ARTICLE
VI


REPRESENTATIONS
AND WARRANTIES OF BUYER AND PARENT GUARANTOR


Buyer and Parent
Guarantor each jointly and severally represent and warrant to Seller, except as
set forth herein, as follows:


Section 6.1             Organization.  Each of Parent Guarantor and Buyer is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate or limited liability company power and
authority, as applicable to consummate the transactions contemplated by this
Agreement and the other agreements contemplated hereby to which it is a party.


Section 6.2             Authority; No Conflict; Required
Filings and Consents.


(a)           Parent Guarantor and Buyer have all
requisite corporate or limited liability company power and authority, as
applicable, to enter into this Agreement and the other agreements contemplated
hereby to which it is a party and to consummate the transactions contemplated
by this Agreement and the other agreements contemplated hereby to which it is a



 27
 






 



party.  The
execution and delivery by Parent Guarantor and Buyer of this Agreement and the
other agreements contemplated hereby to which it is a party and the
consummation by Parent Guarantor and Buyer of the transactions to which it is a
party that are contemplated by this Agreement and the other agreements
contemplated hereby to which it is a party have been duly authorized by all
necessary corporate or limited liability company action, as applicable, on the
part of Parent Guarantor and Buyer.  This
Agreement and the other agreements contemplated hereby to which Parent
Guarantor or Buyer is a party have been, or will be at Closing, as applicable,
duly executed and delivered by Parent Guarantor or Buyer, respectively, and
constitute, or will constitute at Closing, as applicable, the valid and binding
obligation of Parent Guarantor or Buyer, respectively, enforceable against Parent
Guarantor or Buyer, respectively, in accordance with their terms, subject, as
to enforcement, to (i) applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereinafter in effect affecting creditors’
rights generally and (ii) general principles of equity.


(b)           The execution and delivery by Buyer
of this Agreement and the other agreements contemplated hereby to which Parent
Guarantor or Buyer is a party do not, and the consummation by Buyer of the
transactions to which it is a party that are contemplated by this Agreement and
the other agreements contemplated hereby will not, (i) conflict with, or result
in any violation or breach of, any provision of the organizational documents of
Parent Guarantor or Buyer, respectively, (ii) result in any material violation
or breach of, or constitute (with or without notice or lapse of time, or both)
a default (or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of any material benefit) under, or require a consent
or waiver under, any of the terms, conditions or provisions of any material
bond, mortgage, indenture, lease, or other material Contract or obligation to
which Parent Guarantor or Buyer is a party or by which it or any of its
properties or assets may be bound, or (iii) subject to the governmental filings
and other matters referred to in Section 6.2(c) hereof, contravene, conflict
with or result in a violation of any of the terms or requirements of, or give
any Governmental Entity or any other Person the right to revoke, withdraw,
suspend, cancel, terminate, or modify, in each case in any material respect,
any material permit, concession, franchise, license, judgment, or Law
applicable to Parent Guarantor or Buyer or any of its properties or assets,
except, in the case of clauses (ii) and (iii), for any such contraventions,
conflicts, breaches, violations, terminations or defaults, or failure to obtain
such consents or waivers, or revocations, withdrawals, suspensions,
cancellations, terminations or modifications that would not, individually or in
the aggregate, prevent or materially delay the Closing or prevent, materially
delay or adversely affect the performance by Parent Guarantor or Buyer of the
transactions contemplated by this Agreement or the other agreements
contemplated hereby to which it is a party.


(c)           No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by, of or with respect to Parent Guarantor or Buyer in connection
with the execution and delivery by Parent Guarantor or Buyer of this Agreement
or the other agreements contemplated hereby to which Parent Guarantor or Buyer
is a party or the consummation by Parent Guarantor or Buyer of the transactions
contemplated hereby or by the other agreements contemplated hereby to which
Parent Guarantor or Buyer is a party, except for (i) the filing of the
notification report under the HSR Act, (ii) any approvals or filing of notices
required under the Gaming Laws, (iii) such consents, approvals, orders,
authorizations, permits, filings, declarations or registrations related to, or
arising out of, 



 28
 






 



compliance with statutes, rules or regulations
regulating the consumption, sale or serving of alcoholic beverages or the renaming
or rebranding of the operations at the Property, (iv) any consents, approvals,
orders, authorizations, registrations, permits, declarations or filings
required by Seller or its Subsidiaries, Affiliates or key employees (including,
without limitation, under the Gaming Laws), and (v) such consents, approvals,
orders, authorizations, permits, filings, declarations or registrations of
which the failure to make or obtain would not, individually or in the
aggregate, prevent or materially delay the Closing or prevent, materially delay
or adversely affect the performance by Parent Guarantor or Buyer of the
transactions contemplated by this Agreement or the other agreements
contemplated hereby to which it is a party.


Section 6.3             Brokers.  None of Parent Guarantor, Buyer nor any of
their respective Representatives has employed any broker, financial advisor or
finder or incurred any Liability for any brokerage fees, commissions or finder’s
fees in connection with the transactions contemplated by this Agreement.


Section 6.4             Financing.  Parent Guarantor has available on the date
hereof, and Parent Guarantor and Buyer will have available on the Closing Date,
sufficient funds to enable Parent Guarantor or Buyer to pay the Purchase Price
and all fees and expenses necessary or related to the consummation of the
transactions contemplated by this Agreement.


Section 6.5             Licensability.  Each of Parent Guarantor and Buyer is in good
standing in each of the jurisdictions in which it owns or operates gaming
facilities.


Section 6.6             Litigation.  As of the date hereof, there are no actions,
claims, suits or proceedings pending, and neither Parent Guarantor nor Buyer
has received notice of any action, claim, suit or proceeding threatened, in
each case against Parent Guarantor or Buyer before any Governmental Entity,
which, if determined adversely, would, individually or in the aggregate,
prevent or materially delay the Closing or prevent, materially delay or
adversely affect the performance by Parent Guarantor or Buyer of the transactions
contemplated by this Agreement or the other agreements contemplated hereby to
which it is a party.


ARTICLE
VII


COVENANTS


Section 7.1             Conduct of Business of Seller.


(a)           During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement and the Closing, subject to the limitations set forth below, Seller
shall (except to the extent that Buyer shall otherwise consent in writing,
which consent may not be unreasonably withheld or delayed), carry on its business
in the Ordinary Course of Business, maintain the Purchased Assets in good
working order and condition and in a state of repair consistent with the
Ordinary Course of Business and the state of repair and condition on the date
hereof, ordinary wear and tear excepted, comply with all applicable Laws and
Seller Permits in all material respects, pay its Liabilities and Taxes when due
(subject to good faith disputes over such Liabilities or Taxes), and use all
commercially reasonable efforts consistent with past practices and policies to
preserve intact its present business organization, keep



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available the services of its present officers and key
employees and preserve its relationships with customers, employees, suppliers,
distributors, and others having business dealings with it.  Without limiting the generality of the
foregoing, except as expressly contemplated by this Agreement or as disclosed
on Section 7.1 of the Seller Disclosure Letter, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Closing, without the written consent of Buyer (which consent
shall not be unreasonably withheld or delayed), Seller agrees that it shall
not:


(i)            sell, pledge, lease, license,
dispose of, abandon, grant, encumber or otherwise authorize or permit the sale,
pledge, disposition, grant or Encumbrance of the Purchased Assets except for
(1) sales of current assets in the Ordinary Course of Business in connection
with operation of the Property, or (2) sales of equipment and other non-current
assets in the Ordinary Course of Business in connection with operation of the
Property in an amount not to exceed, individually or in the aggregate, the
amounts set forth on Section 7.1(a)(i)(2) of the Seller Disclosure Letter;


(ii)           incur any Liabilities, except in the
Ordinary Course of Business;


(iii)          materially violate, materially modify,
materially amend or terminate the Existing Ground
Lease (other than as set forth in Section 7.21), the Amended Ground Lease or any
of the Assumed Contracts or waive, release or assign any material rights or
claims, except in the Ordinary Course of Business or as required by applicable
Law;


(iv)          cause or permit the Purchased Assets
to be subjected to, or permit to exist on the Purchased Assets, any Lien or
Encumbrance, other than Permitted Encumbrances;


(v)           fail to maintain the existing
insurance coverage of all types relating to the Purchased Assets (however, in
the event that any such coverage shall be terminated or lapse, Seller may
procure substitute insurance policies which in all material respects are in at
least such amounts and against such risks as are currently covered by such
policies);


(vi)          award or increase any bonuses,
salaries or other compensation, except in the Ordinary Course of Business, to
any Employee that is not an officer of Seller, or enter into any employment,
severance, or similar Contract with any Employee that is not an officer of
Seller;


(vii)         make any loans to any of its officers,
directors, employees, affiliates, agents or consultants or made any change in
its existing borrowing or lending arrangements for or on behalf of any of such
persons, whether pursuant to an employee benefit plan or otherwise;


(viii)        except pursuant to its existing terms,
grant, issue, accelerate, pay, accrue or agree to pay or make any accrual or
arrangement for payment of salary or other payments or benefits pursuant to, or
adopt any new, or amend any existing, Seller Benefit Plan;


(ix)           enter into or terminate or provide
notice of termination of (1) any license, distributorship, dealer, sales
representative, joint venture or similar agreement, or (2) any Contract or
transaction, or series of related contracts or transactions which (v)
involve(s) a total remaining commitment by or to Seller in excess of One
Hundred Thousand United States Dollars



 30
 






 



($100,000), (w) expire(s) after the date which is
twelve (12) months following the date hereof, (x) regardless of length,
involve(s) aggregate consideration in excess of Two Hundred Thousand United
States Dollars ($200,000) per year, (y) is or are between Seller and any
Affiliates of Seller, or (z) contain(s) any restrictions on the Business or the
operations of the Property following the Closing unless such Contract,
transaction or series of related contracts or transactions is or are cancelable
upon thirty (30) days’ notice or less without cause and without payment of any
consideration for early termination; provided,
however, that Seller may enter
into purchase orders in the Ordinary Course of Business without any consent
from Buyer;


(x)            fail to maintain inventory levels
(both consumables and non-consumables) in such quality and quantity as is
substantially consistent with Seller’s past practices at the Property and in
the Ordinary Course of Business;


(xi)           make any material changes to
advertising or marketing activities relating to the Property or the Business,
other than in the Ordinary Course of Business;


(xii)          terminate any of the Employees, except
in the Ordinary Course of Business or as required by applicable Law;


(xiii)         transfer any of the Employees to any
property or business owned or operated by Seller or Seller’s Affiliates (other
than the Property);


(xiv)        authorize or make capital expenditures
in the aggregate in excess of the amount set forth on Section 7.1(a)(xiv) of
the Seller Disclosure Letter (excluding (i) the purchase of Permitted
Additional Gaming Machines and (ii) the capital expenditures required to be
made by Section 7.1(a)(xv));


(xv)         fail to make capital expenditures:  (a) to purchase and install the gaming
machines described in Section 7.1(a)(xv) of the Seller Disclosure Letter or (b)
required to be made under any Gaming Law or by any Gaming Authority; provided, that if Seller fails to make any
such expenditures referred to in the immediately preceding clause (a) or (b),
the Purchase Price payable to Buyer pursuant to Section 2.2 hereof shall be
reduced by an amount equal to the difference between (x) the amount that Seller
should have expended pursuant to this Section 7.1(a)(xv) and (y) the amount
that Seller in fact spent.


(xvi)        close or shut down the Business or the
Property, except for such closures or shutdowns which are (1) required by
action, order, writ, injunction, judgment or decree or otherwise required by
Law, or (2) due to acts of God or other force majeure events;


(xvii)       delete, damage or erase any Property
Specific Data, other than in the Ordinary Course of Business;


(xviii)      fail to file any Tax Return for any
Pre-Closing Tax Period when due, or fail to pay any Taxes required to be paid
unless such Tax is described in Section 7.1(a)(xviii) of the Seller Disclosure
Letter as being contested in good faith; or


(xix)         agree, whether or not in writing, to do
any of the foregoing, or to authorize or announce an intention to do any of the
foregoing.



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Section 7.2             Cooperation; Notice; Cure.  Subject to compliance with applicable Law
(including, without limitation, antitrust Laws and Gaming Laws), from the date
hereof until the earlier of the termination of this Agreement and the Closing,
Seller and Buyer shall confer on a regular and frequent basis with one or more
Representatives of the other party to report on the general status of ongoing
operations of the Property and the Business. 
Seller and Buyer shall promptly notify each other in writing of, and
will use commercially reasonable efforts to cure before the Closing Date, any
fact, event, transaction or circumstance, as soon as practical after it becomes
known to such party, that (a) causes or would reasonably be expected to cause
any representation, warranty, covenant or agreement of Seller or Buyer,
respectively, under this Agreement to be breached in any material respect, (b)
renders or could render untrue in any material respect any representation or
warranty of Seller or Buyer, respectively, contained in this Agreement, or (c)
results in or would reasonably be expected to result in, the failure of such
party to timely satisfy any of the closing conditions specified in ARTICLE VIII
hereof, as applicable.  Nothing contained
in Section 7.1 hereof shall prevent Seller from giving such notice, using such
efforts or taking any action to cure or curing any such event, transaction or
circumstance.  No notice given pursuant
to this Section 7.2 shall have any effect on the representations, warranties,
covenants or agreements contained in this Agreement for purposes of determining
satisfaction of any condition or any right to, or obligation of,
indemnification contained herein.


Section 7.3             No Solicitation.


(a)           Prior to the earlier of the
termination of this Agreement in accordance with Section 9.1 hereof and the
Closing, Seller shall not, directly or indirectly, through any of its officers,
directors, employees, financial advisors, agents or other representatives
(collectively, “Representatives”; which term, in the case of Seller, for
the avoidance of doubt, shall include R. D. Hubbard) or Affiliates (1) solicit,
negotiate, respond to or encourage any inquiries, offers or proposals that
constitute or may reasonably be expected to lead to an Acquisition Proposal,
(2) participate in any discussions or negotiations concerning, or provide any
information to any Person (or group of Persons) other than Buyer or its
Affiliates concerning, or for the purposes of making, or take any other action
to facilitate the making of, any proposal that constitutes or may reasonably be
expected to lead to any Acquisition Proposal, or (3) enter into, approve, agree
to or recommend any Acquisition Proposal. 
Seller shall, and shall cause its Representatives to, immediately cease
any and all existing activities, discussions and negotiations with any persons
or entities conducted heretofore with respect to any proposal that constitutes
or may reasonably be expected to lead to any Acquisition Proposal.


(b)           Upon execution of this Agreement,
Seller shall, and shall cause its Representatives to, (i) cease immediately and
cause to be terminated any and all existing discussions or negotiations with
any parties conducted heretofore with respect to an Acquisition Proposal and
(ii) exercise any rights under a confidentiality agreement or similar agreement
to request that any non-public information provided by Seller or its
Representatives to any third party (other than Buyer or its Affiliates) in
connection with an Acquisition Proposal (including any analysis, extracts or
summaries thereof) be destroyed or returned to Seller, to the extent permitted
under any such confidentiality agreement.



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Section 7.4             Employee Matters.


(a)           Between the date hereof and the
Closing Date, Buyer shall make offers of employment, effective as of the
Closing Date, to all Property Employees (with such offers to Property Employees
being, in the aggregate, on substantially the same terms and conditions of
employment as those provided by Seller immediately prior to the Closing Date),
other than the Property Employees that are set forth on Section 7.4(a) of the
Seller Disclosure Letter; provided,
however, that (i) Buyer, in its
sole discretion, may interview any or all Property Employees within the thirty
(30) day period prior to the Closing Date, and (ii) Buyer shall not be required
to make offers of employment to any Property Employees who the Buyer reasonably
determines it is prohibited from hiring and/or employing under any applicable
Law (including without limitation any Gaming Law).  The Property Employees who timely and
properly accept Buyer’s offers of employment shall commence employment with
Buyer effective as of the Closing Date and are hereinafter collectively
referred to as the “Transferred Employees.”  Buyer shall not have any obligation to make
offers of employment to, or to otherwise hire or employ, any of the Inactive
Employees.  Subject to Section 7.4(f)
hereof, nothing herein shall restrict Buyer from terminating the employment,
for any reason, of any Transferred Employee following the Closing Date.  Buyer shall not have any liability with
respect to any Retained Employees.


(b)           With respect to any employee or
employee benefit plan, program or arrangement maintained by Buyer (including any
severance plan), for all purposes of determining eligibility to participate and
vesting but not for purposes of benefit accrual, a Transferred Employee’s
service with Seller shall be treated as service with Buyer; provided, however, that such service need
not be recognized to the extent that such recognition would result in any
duplication of benefits.


(c)           Buyer shall waive, or cause to be
waived, to the extent permitted by Buyer’s benefit plan, any pre-existing
condition limitation under any welfare benefit plan maintained by Buyer or any
of its Affiliates in which Transferred Employees (and their eligible
dependents) will be eligible to participate from and after the Closing, except
to the extent such pre-existing condition limitation would have been applicable
under the comparable Seller welfare benefit plan immediately prior to the
Closing.  Buyer shall recognize the
dollar amount of all expenses incurred by each Transferred Employee (and his or
her eligible dependents) during the calendar year in which the Closing occurs
for purposes of satisfying such year’s deductible and co-payment limitations
under the relevant welfare benefit plans in which they will be eligible to
participate from and after the Closing, to the extent such deductible and
co-payment credits are permitted by Buyer’s benefit plans.


(d)           Unless otherwise agreed to prior to
the Closing Date between Buyer and Seller, Seller shall take all steps
necessary or appropriate so that each Transferred Employee shall cease to
accrue benefits under its employee pension benefit plans effective as of the
Closing Date.  As soon as practicable
following the Closing Date, Buyer and Seller shall take all action as may be
necessary and appropriate to allow each Transferred Employee who is a
participant in the Ruidoso Downs Racing, Inc. Retirement Savings Plan, as
amended (the “401(k) Plan”) to be given the opportunity to elect to “roll
over” his or her account balance to a comparable pension plan sponsored by
Buyer (the “Buyer 401(k) Plan”), provided such “roll over” is in
accordance with the provisions of such plans and applicable Law.  Following such roll over, Buyer and the



 33
 






 



Buyer 401(k) Plan (or any successor thereto) shall be
solely responsible for all liabilities under the Buyer 401(k) Plan relating to
such Transferred Employees.


(e)           Unless otherwise agreed to prior to
the Closing Date between Buyer and Seller, Seller shall be responsible for any
claims incurred by a Transferred Employee prior to the Closing Date, under an
employee welfare benefit plan sponsored or maintained by Seller, and Buyer
shall be responsible for any claims incurred on or after the Closing Date by
Transferred Employees under an employee welfare benefit plan under which such
Transferred Employees may participate following the Closing Date.  For purposes of the preceding provisions of
this paragraph, a medical/dental claim shall be considered incurred on the date
when the medical/dental services are rendered or medical/dental supplies are
provided, and not when the condition arose or when the course of treatment
began; provided, however, that claims relating to a
hospital confinement that begins prior to the Closing Date but continues on the
Closing Date or thereafter shall be treated as incurred before the Closing
Date.  Claims of Transferred Employees
and their eligible beneficiaries and dependents for short-term or long-term
disability benefits that arise out of occurrences prior to the Closing Date
shall be the sole responsibility of the Seller and the Seller Benefit Plans.  Claims of Transferred Employees and their
eligible beneficiaries and dependents for short-term or long-term disability
benefits that arise out of occurrences on or after the Closing Date shall be
the sole responsibility of the Buyer.


(f)            Unless otherwise agreed to prior to
the Closing Date between Buyer and Seller, Seller and its respective Affiliates
shall be responsible for any COBRA obligations (including the provision of any
COBRA notices) under Section 4980B of the Code with respect to any Property
Employee who has a qualifying event occurring prior to the Closing Date or is
an M&A Qualified Beneficiary as defined under Section 54.4980B-9 of the
Treasury Regulations.


(g)           Seller shall transfer to Buyer copies
of any records (including, but not limited to, IRS Forms W-4) relating to
withholding and payment of Federal, state, and local income, disability,
unemployment, FICA, and similar taxes (collectively, “Payroll Taxes”)
with respect to wages paid by Seller during the calendar year of the Closing to
the Transferred Employees.  In accordance
with Revenue Procedure 2004-53 and comparable state and local Payroll Tax Laws,
(i) Buyer may elect to (but only upon written notice to Seller no later than 90
days after the Closing, but in no event later than December 31 of the year of
Closing) provide Forms W-2, Wage and Tax Statements, for the calendar year of
the Closing setting forth the aggregate amount of wages paid to, and Payroll
Taxes withheld in respect thereof, Transferred Employees for the calendar year
of the Closing by Seller and Buyer as predecessor and successor employers,
respectively, and (ii) Seller and Buyer agree to cooperate fully with each
other in connection therewith and with any required notifications and transfers
for state unemployment tax purposes, including experience ratings, employee
wage bases and other related information.


Section 7.5             Access to Information and the
Property.


(a)           Upon reasonable notice, subject to
applicable Law, including without limitation, antitrust Laws and Gaming Laws,
Seller shall afford Buyer’s Representatives reasonable access, during normal
business hours during the period from the date hereof to the Closing, to the
Property, including without limitation, its data center facilities for hardware
and software deployment, training, testing and pre-cutover systems engineering
to facilitate a timely systems



 34
 






 



transition at the Transfer Time, and to all its
personnel, properties, books, Seller Benefit Plans, insurance records,
Contracts and records, expressly excluding, however, the Excluded Assets and
the Excluded Liabilities, and, during such period, Seller shall furnish
promptly to Buyer all (i) copies of monthly financial reports and
development reports, (ii) when available, the unaudited financial
information related to the Property and the Business for the nine (9) months
ended September 30, 2006 and all subsequent quarterly periods,
(iii) when available, the audited financial information related to the
Property and the Business for the twelve (12) months ended December 31,
2006, and (iv) all other information concerning Seller, the Business, the
Property and the Employees as Buyer may reasonably request (collectively, the “Inspection”);
provided, however, that (1) Buyer
shall provide Seller with at least twenty-four (24) hours’ prior notice of any
Inspection; (2) if Seller so requests, Buyer’s Representatives shall be
accompanied by a Representative of Seller; (3) Buyer shall not initiate contact
with employees or other representatives of Seller other than Seller’s Representatives
or other individuals designated by any of Seller’s Representatives without the
prior written consent of Seller’s Representatives, which consent shall not be
unreasonably withheld or delayed; (4) Buyer shall not unduly interfere with the
operation of the Business; (5) Buyer shall have no right to perform invasive
testing on the Land or Leased Property without the prior written consent of
Seller, which consent may not be unreasonably withheld or delayed; and (6)
Buyer shall, at its sole cost and expense, promptly repair any damage to the
Property or any other property owned by a Person other than Buyer arising from
or caused by such Inspection, and shall reimburse Seller for, and indemnify,
defend and hold Seller harmless with respect to, any loss to the extent arising
directly and solely from or caused by any Inspection (but not with respect to
any pre-existing conditions or contamination at or from the Property).  No information or knowledge obtained in any
investigation pursuant to this Section 7.5 shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions to
the obligations of the parties to consummate the transactions contemplated
hereby.


(b)           Following the Closing, upon
reasonable notice, each of Buyer and Seller shall (and shall cause their
respective Affiliates and Representatives, to) provide the other parties hereto
and their respective Affiliates and Representatives with reasonable access and
duplicating rights, during normal business hours and on reasonable notice, to
all of Buyer’s and Seller’s personnel, properties, books, insurance records,
Seller Benefit Plans, contracts, commitments and records related to the
Purchased Assets, the Assumed Liabilities or the Employees and shall cooperate with
the requesting party, as reasonably necessary for such requesting party to
pursue any suit, claim, action, proceeding or investigation relating to the
claims in connection with this Agreement and the transactions contemplated
hereby, to prepare any Tax Returns, or for any other proper purpose, including,
without limitation, any suit, claim, action, proceeding or investigation
related to the Excluded Assets, Excluded Liabilities, Retained Employees and
Transferred Employees and Buyer shall provide reasonable services of the
Transferred Employees to assist Seller in preparing any required Tax Returns
and financial books and records of Seller for any period that includes the
Closing Date; provided, however, that (i) Seller shall provide
Buyer with at least twenty-four (24) hours’ prior written notice; (ii) if Buyer
so requests, Seller’s Representatives shall be accompanied by a Representative
of Buyer; (iii) Seller shall not interfere with the operation of the Business;
and (iv) Buyer shall not be required to incur any costs in connection with the
rights granted to Seller in this Section 7.5(b).



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(c)           Notwithstanding the foregoing, no
party shall be required to provide any information which (i) they reasonably
believe they may not provide to the requesting party or its respective
Affiliates and Representatives by reason of applicable Law or by a
confidentiality agreement with a third party, and if, in the case of a
confidentiality agreement, the non-requesting party has used commercially
reasonable efforts (which shall not require any party hereto to incur any
material cost or other monetary obligations to any third party) to obtain the
consent of such party to such disclosure, or (ii) constitutes information
protected by the attorney/client or attorney work product privilege or
both.  If any material is withheld by the
non-requesting party pursuant to the immediately preceding sentence, such
non-requesting party shall inform the requesting party as to the general nature
of the material which is being withheld.


(d)           Each of Buyer and Seller will hold
and will cause its Affiliates and Representatives to hold any information
furnished, revealed or otherwise made known to it pursuant to Section 7.5(a) or
(b) hereof by Seller or Buyer, respectively, which is nonpublic, in confidence
and in accordance with the confidentiality agreement dated August 1, 2006
between Seller and Parent Guarantor (the “Confidentiality Agreement”).  The Confidentiality Agreement shall survive
the Closing and continue in full force and effect thereafter.


Section 7.6             Governmental Approvals.


(a)           Buyer and Seller shall cooperate with
each other and use their commercially reasonable efforts to (i) as promptly as
practicable, take, or cause to be taken, all appropriate action, and do or
cause to be done, all things necessary under applicable Law or otherwise to
consummate and make effective the transactions governed by this Agreement as
promptly as practicable, (ii) obtain from any Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders,
including without limitation, Buyer’s Gaming Approvals, required (A) to be
obtained or made by Seller or Buyer or any of their respective Affiliates or
any of their respective Representatives, and (B) to avoid any action or proceeding
by any Governmental Entity (including, without limitation, those in connection
with the HSR Act and antitrust and competition Laws of any other applicable
jurisdiction), in each case in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, and (iii) make all necessary filings, and thereafter make
any other required submissions with respect to this Agreement, as required
under (A) any applicable federal or state securities Laws, (B) the HSR Act and
antitrust and competition Laws of any other applicable jurisdiction, (C) the
Gaming Laws and (D) any other applicable Law ((A), (B), (C) and (D),
collectively, the “Governmental Approvals”), and to comply with the
terms and conditions of all such Governmental Approvals.  The parties hereto and their respective
Representatives and Affiliates shall file (x) within thirty (30) days after the
date hereof, all required initial applications and documents in connection with
obtaining the approvals under applicable Gaming Laws, (y) within forty-five
(45) days after the date hereof, all required initial applications and
documents in connection with obtaining approvals with respect to the HSR Act
and antitrust and competition Laws of any other applicable jurisdiction, and
(z) as soon as reasonably practicable after the date hereof, all Governmental
Approvals other than those set forth in clauses (x) and (y) above; provided, that Buyer, Seller and each of
their respective Representatives and Affiliates shall re-make any such filings
required to be made at a later date in the event that any previously made
filing lapses or such re-filing is otherwise required by any Governmental
Entity.  With respect to all filings, the
parties hereto and their respective



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Representatives and Affiliates shall act diligently
and promptly to pursue the Governmental Approvals, including, without
limitation, filing such additional applications and documents as may be
required, and shall cooperate with each other in connection with the making of
all filings referenced in the preceding sentence, including providing copies of
all such documents to the non-filing party and its advisors prior to filing
and, if requested, to accept all reasonable additions, deletions or changes
suggested in connection therewith.  Buyer
and Seller shall use commercially reasonable efforts to schedule and attend any
hearings or meetings with Governmental Entities to obtain the Governmental
Approvals as promptly as possible.  Buyer
and Seller shall have the right to review in advance and, to the extent
practicable, each will consult the other parties hereto on, in each case,
subject to applicable Laws relating to the exchange of information (including,
without limitation, antitrust laws and any Gaming Laws), all the information
relating to Buyer or Seller, as the case may be, and any of their respective
Affiliates or Representatives which appear in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in
connection with the transactions governed by this Agreement.


(b)           Without limiting Section 7.6(a)
hereof, Buyer and Seller shall:


(i)            each use its commercially reasonable
efforts to avoid the entry of, or to have vacated or terminated, any decree,
order, or judgment that would restrain, prevent or delay the Closing, on or
before the Outside Date, including defending through litigation on the merits
any claim asserted in any court by any Person; and


(ii)           each use its commercially reasonable
efforts to avoid or eliminate each and every impediment under any antitrust,
competition or trade regulation Law that may be asserted by any Governmental
Entity with respect to the Closing so as to enable the Closing to occur as soon
as reasonably possible (and in any event no later than the Outside Date),
including implementing, contesting or resisting any litigation before any court
or quasi-judicial administrative tribunal seeking to restrain or enjoin the
Closing; provided, however, that
neither Buyer nor Seller nor any of their respective Affiliates shall be
required to commit to any divestitures, licenses or hold separate or similar
arrangements with respect to its, or their respective assets or conduct of
business arrangements.


(c)           Buyer and Seller shall promptly
advise each other upon receiving any communication from any Governmental Entity
whose consent or approval is required for consummation of the transactions
governed by this Agreement which causes such party to reasonably believe that
there is a reasonable likelihood that such consent or approval from such
Governmental Entity will not be obtained or that the receipt of any such
approval will be materially delayed. 
Buyer and Seller shall use their commercially reasonable efforts to
take, or cause to be taken, all actions reasonably necessary to defend any
lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions governed by this Agreement, seeking to prevent
the entry by any Governmental Entity of any decree, injunction or other order
challenging this Agreement or the consummation of the transactions governed by
this Agreement, appealing as promptly as possible any such decree, injunction
or other order and having any such decree, injunction or other order vacated or
reversed.



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(d)           From the date of this Agreement until
the Closing, each party shall promptly notify the other party hereto in writing
of any pending or, to the knowledge of Buyer or Seller, as appropriate,
threatened action, suit, arbitration or other proceeding or investigation by
any Governmental Entity or any other Person (i) challenging or seeking damages
in connection with the Closing or any of other transaction governed by this
Agreement, or (ii) seeking to restrain, delay or prohibit the consummation of
the Closing.


Section 7.7             Publicity.  Seller and Buyer shall agree on the form and
content of the initial press release regarding the transactions contemplated
hereby and thereafter shall consult with each other before issuing, provide
each other the opportunity to review and comment upon and use all reasonable
efforts to agree upon, any press release or other public statement with respect
to any of the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation and
prior to considering in good faith any such comments, except as may be required
by applicable Law (including without limitation the Securities Act, the
Exchange Act and any Gaming Laws) or any listing agreement with, or the rules
and regulations of, the NASDAQ Stock Market or the National Association of
Securities Dealers, Inc.  Notwithstanding
anything to the contrary herein, Buyer and Seller or their respective Affiliates
may make any public statement in response to specific questions by the press,
analysts, investors or those attending industry conferences or financial
analyst conference calls, so long as any such statements are not inconsistent
with previous press releases, public disclosures or public statements made
jointly by Buyer and Seller and do not reveal non-public information regarding
Buyer or Seller.


Section 7.8             Further Assurances and Actions.


(a)           Subject to the terms and conditions
herein, each party hereto agrees to use its commercially reasonable efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable
Laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using their
respective commercially reasonable efforts (i) to obtain all Seller Permits and
consents of parties to Contracts as are necessary for consummation of the
transactions contemplated by this Agreement, and (ii) to fulfill all conditions
precedent applicable to such party pursuant to this Agreement.


(b)           In case at any time after the Closing
any further action is necessary to carry out the purposes of this Agreement or
to vest Buyer with full title to the Purchased Assets the proper officers,
directors, members, and/or managers of Buyer and Seller and their Affiliates as
applicable, shall take all action reasonably necessary (including (i) executing
and delivering further affidavits, instruments, notices, assumptions, releases
and acquisitions and (ii) transferring the Purchased Assets from Affiliates of
Seller to Seller, as applicable) and Seller shall bear the cost of any such
necessary action; provided, that
if such action is necessary due to events or circumstances particular to Buyer,
Buyer shall bear the cost of such action.


(c)           After the Closing, Seller shall refer
to Buyer all inquiries relating to the Purchased Assets and as soon as
reasonably practicable deliver to Buyer (i) any mail, packages and other
communications addressed to Seller relating to the Purchased Assets and (ii)
any cash or other property that Seller receives and that properly belongs to
Buyer pursuant to the terms hereof,



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including any collections on accounts receivable in
accordance with Section 7.10 hereof, insurance proceeds, payments and interest
payable thereon.


Section 7.9             Transfer Taxes; HSR Filing Fee.


(a)           All transfer, documentary, sales,
use, stamp, registration, gross receipts and other such Taxes (including all
applicable real estate transfer or gains Taxes) and related fees (including any
penalties, interest and additions to Tax) incurred with respect to the transfer
of the Purchased Assets pursuant to this Agreement shall be borne by Buyer.
Except as required by applicable Law, Buyer shall prepare, execute and file all
Tax Returns and other documentation relative to the transfer of the Purchased
Assets or Assumed Liabilities on a timely basis as may be required to comply
with the provisions of any such Tax Laws.


(b)           The filing fees pursuant to the
notifications under the HSR Act shall be borne by Buyer, but Seller shall pay
all costs and fees in connection with any subsequent filings, correspondence or
other documentation which relates only to Seller.


Section 7.10           Accounts Receivable; Assumed
Current Liabilities; Accounts Payable and Other Excluded Current Liabilities.


(a)           Seller agrees that after the Closing
Date, Buyer shall have the right and authority to collect for its own account
or the account of its Affiliates all Accounts Receivable which are not Excluded
Assets. Seller agrees that it will promptly transfer and deliver to Buyer any
cash or other property which Seller may receive in respect of such Accounts
Receivable. Buyer agrees that after the Closing Date, Seller shall have the
right and authority to collect for its own account or the account of its
Affiliates all Accounts Receivable which are Excluded Assets. Buyer agrees that
it will promptly transfer and deliver to Seller any cash or other property
which Buyer may receive in respect of such Accounts Receivable that are
Excluded Assets.


(b)           Following the Closing Date, Buyer
shall make prompt payments when due in respect of, or otherwise satisfy when
due, all Assumed Current Liabilities, other than those which are being
contested in good faith by appropriate proceedings. Following the Closing Date,
Seller shall make prompt payments when due in respect of, or otherwise satisfy
when due, all accounts payable of Seller and all other Excluded Current
Liabilities, other than those which are being contested in good faith by
appropriate proceedings. In respect of expenses that are accrued in whole or in
part prior to the Closing Date, which become payable after the Closing Date and
which do not appear on the Preliminary Closing Balance Sheet or the Closing
Balance Sheet, such expenses shall be prorated between Buyer and Seller as of
the Closing Date on the Final Determination Date. Within ten (10) days of the
Final Determination Date, the amount, if any, pursuant to this Section 7.10(b)
due from Buyer to Seller or due from Seller to Buyer shall be paid in cash by
wire transfer of immediately available funds from Buyer to Seller or from
Seller to Buyer, as applicable.


Section 7.11           Inventoried Automobiles.   Effective as of the Transfer Time,
Representatives of Buyer and Seller shall take inventory of all motor vehicles
that were valet checked and placed in the care of Seller by: (i) marking all
such motor vehicles with a sticker or tape, (ii) preparing an inventory of such
motor vehicles (“Inventoried Vehicles”) indicating the 



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check number applicable thereto, and (iii)
transferring control of the Inventoried Vehicles to an authorized
Representative of Buyer and securing a receipt for such Inventoried Vehicles.
Pursuant to ARTICLE X hereof, Seller shall be responsible for and indemnify
Buyer against claims of alleged missing motor vehicles not contained on the
list of Inventoried Vehicles, and Buyer shall be responsible for and indemnify
Seller against claims of alleged missing motor vehicles listed on the list of
Inventoried Vehicles.


Section 7.12           Insurance Policies.   Seller’s fire and casualty insurance and other
insurance policies shall be cancelled by Seller or any of its Affiliates as of
the Closing Date, and any refunded premiums shall be retained by Seller. Buyer
will be solely responsible for acquiring and placing its casualty insurance,
business interruption insurance, liability insurance and other insurance policies
for periods after the Closing.


Section 7.13           Transfer of Utilities.   Prior
to the Closing, Seller shall notify all utility companies servicing the
Property of the anticipated change in ownership of the Property and request
that all billings after the Closing be made to Buyer at the Property address.
Buyer shall provide any information necessary for such transaction and shall be
responsible for paying, before the Closing, all deposits required by utility
companies in order to continue service at the Property for periods after the
Transfer Time and shall take any other action and make any other payments
required to assure uninterrupted availability of utilities at the Property for
all periods after Closing. Following Closing, all utility deposits made by
Seller will be refunded directly to Seller by the utility company holding same
or Buyer shall, if delivered to Buyer, promptly forward any such deposits to
Seller.


Section 7.14           Certain Transactions.   Prior to the Closing, Buyer shall not take,
or agree to commit to take, any action that would or is reasonably likely to
materially delay the receipt of, or materially impact the ability of a party to
obtain, any Governmental Approval necessary for the consummation of the
transactions contemplated by this Agreement.


Section 7.15           Insurance; Casualty and
Condemnation.


(a)           Prior to the Closing and
notwithstanding the pendency of this Agreement, the entire risk of loss or
damage by earthquake, hurricane, tornado, flood, landslide, fire, acts of war,
terrorism, terrorist activities or other casualty shall be borne and assumed by
Seller. If, prior to the Closing, any portion of the Property is damaged by
earthquake, hurricane, tornado, flood, landslide, fire, acts of war, terrorism,
terrorist activities or other casualty, and such casualty, destruction, loss or
damage does not result in a Casualty Termination Event, then Seller shall
promptly repair or replace such damaged Property to substantially the same
condition as, or better condition than, it was immediately prior to such
casualty, destruction, loss or damage. In the event that it is not feasible to
complete the repair or replacement prior to the Closing Date, the Closing shall
proceed as scheduled and Seller shall, as of the Closing Date, (i) promptly pay
to Buyer all insurance proceeds received by Seller or its Affiliates to date
with respect to such casualty, destruction, loss or damage, less any proceeds
applied to the physical restoration of the Property; provided, that if such insurance proceeds are not sufficient
for Buyer to repair or restore the Property to substantially the same condition
as it was in immediately prior to such casualty, destruction, loss or damage,
Seller shall pay Buyer an additional amount equal to such shortfall (the “Shortfall
Amount”); and provided, further, that if any such insurance
proceeds 



 40
 






 



remain unused after Buyer has repaired or restored the
Property to substantially the same condition as it was in immediately prior to
such casualty, destruction, loss or damage, then Buyer shall remit to Seller an
amount equal to such remaining unused insurance proceeds; and (ii) assign to
Buyer all rights of Seller and its Affiliates against third parties (other than
against its insurance carriers) with respect to any causes of action, whether
or not litigation has commenced as of the Closing Date, in connection with such
casualty, destruction, loss or damage; provided, however, that the proceeds of such
insurance shall not be subject to any applicable deductibles and co-payment
provisions, which shall be the responsibility of Seller and shall be paid to
Buyer or applied to such repair or replacement as applicable; and provided, further, that any recovery of
money from any third Person pursuant to the rights conveyed under this
subsection (ii) shall be paid, following the payment of Buyer’s out of pocket
fees and expenses, to Seller until Seller has been repaid the Shortfall Amount.
The obligations of Seller pursuant to the prior sentence shall constitute full
compensation for the damage to the Property, and, after the Closing, Seller
shall have no responsibility for restoration or repair of the Property or any
resultant loss, directly, by subrogation, or otherwise.


(b)           If, prior to the Closing, any portion
of the Property is damaged by earthquake, hurricane, tornado, flood, landslide,
fire, acts of war, terrorism, terrorist activities or other casualty, and such
casualty, destruction, loss or damage results, individually or in the
aggregate, in a Casualty Termination Event, then Buyer shall have fifteen (15)
days from the date upon which it receives a notice from Seller indicating that
a Casualty Termination Event may have occurred to exercise its termination
right under Section 9.1(g) hereof; provided,
however, that, if requested by
Buyer, Seller and Buyer shall discuss and consult in good faith for a period of
up to thirty (30) days after any such casualty, destruction, loss or damage to
determine whether such casualty, destruction, loss or damage (individually or
together with any prior casualties) actually constitutes a Casualty Termination
Event; provided, further, that if Buyer makes such
request, Buyer shall have an additional fifteen (15) days after the expiration
of such period to exercise its termination right under Section 9.1(g) hereof
with respect to such casualty. In the event that Buyer elects not to exercise
its termination right under this Section 7.15(b) and Section 9.1(g) hereof,
then the provisions of Section 7.15(a) hereof shall apply as if such casualty,
destruction, loss or damage did not result in a Casualty Termination Event.


(c)           If, prior to the Closing, all or any
Material Portion of the Property is taken by condemnation, eminent domain, or
payment in lieu of condemnation (or is the subject of a pending or contemplated
taking which has not been consummated), Seller shall immediately notify Buyer
of such fact. In such event, Buyer shall have the option to exercise its
termination right under Section 9.1(g) hereof upon written notice to Seller
given not later than thirty (30) days after Buyer’s receipt of such notice from
Seller. If Buyer does not elect to terminate this Agreement or if the taking is
not of a Material Portion of the Property, Seller shall assign and turn over to
Buyer, and Buyer shall be entitled to receive and keep, all awards for such
taking and Buyer shall be deemed to have accepted the Property subject to the
taking without reduction in the Purchase Price.


Section 7.16           No Control.   Except as permitted by the terms of this
Agreement, prior to the Closing, Buyer shall not directly or indirectly
control, supervise, direct or interfere with, or attempt to control, supervise,
direct or interfere with, the Property. Until the Closing, the 



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operations and affairs of the Property and the
Business are the sole responsibility of and under Seller’s complete control,
except as provided for in this Agreement.


Section 7.17           Customer Database; Audit Right.


(a)           At the Closing, Seller shall, and
shall cause all of its Affiliates to, (i) surrender and deliver to Buyer the
Customer Database, together with, in each case, in such electronic form as
reasonably requested by Buyer and in hard copy form, any and all records, data
and information relating to visitors to the Property and customers of the
Business kept, maintained or stored by Seller, including without limitation any
and all copies, notes, compilations, studies, summaries and analyses of the
Customer Database and all other documents which contain, reflect or are based
upon, in whole or in part, the Customer Database, or any derivatives of any of
the foregoing (collectively, the “Customer Information”), and (ii)
permanently destroy and securely erase any Customer Information recorded on any
electronic media, optical device or other storage device that is not included
in the Purchased Assets, except as is necessary to maintain the Customer
Database and to permit Seller to comply with its obligation set forth in
Section 4.2(h) hereof; provided,
that notwithstanding anything to the contrary herein, Seller shall take all
actions required in the Ordinary Course of Business to maintain and keep
updated the Customer Database after the date hereof and until and including the
Closing Date.


(b)           If the revenues of the Business for
any quarter in the period commencing with the first day of the first quarter
after the Closing Date occurs and ending on the last day of the quarter in
which the twelve (12) month anniversary of the Closing Date occurs decline by
ten percent (10%) or more from the revenues of the corresponding quarter of the
prior year, Buyer shall have the right, at any time during such period or
within a reasonable period of time thereafter, to select a mutually agreeable
third party to conduct an audit of the records of Seller and any of its
Affiliates and to carry out such other procedures as such third party may deem
necessary to confirm that Seller has fully complied with its obligations under
this Section 7.17(b). Seller shall promptly provide such third party with
access during normal business hours and on reasonable notice to all of Seller’s
and its Affiliate’s personnel, books, records, properties and other information
reasonably requested by such third party and shall cooperate with such third
party as reasonably necessary for such third party to carry out its audit and
other procedures contemplated by this Section 7.17(b).


Section 7.18           Motorsports Entertainment Complex.   On or
before June 30, 2007, (i) if the Closing shall not have
occurred, Seller shall, and shall cause its Affiliates to, and
(ii) if the Closing shall have occurred, Buyer shall, and shall cause
its Affiliates to, take any and all actions required to cause the
Property to qualify as a “motorsports entertainment complex” within the meaning
of Section 168(i)(15) of the Code (including without limitation, in the case of
(i) above, all such reasonable action and acts of preparation by Seller and its
Affiliates as would reasonably enable Buyer and its Affiliates to cause the
Property to so qualify after the Closing).


Section 7.19           Non-Solicitation.  


(a)           Seller shall not, and shall cause its
Affiliates not to, directly or indirectly, until the date that is twelve (12)
months following the Closing Date, hire, solicit, recruit, request, cause,
induce or encourage to leave their employment (such conduct is collectively
referred to as 



 42
 






 



“solicitation”) any employees of the Business or
Seller or any persons who left their employment in connection with the Business
or ceased working for Seller or at the Business or the Property in the
aforementioned capacity less than six (6) months prior to the solicitation,
except for those individuals listed in Section 7.19(a) of the Seller Disclosure
Letter. The immediately preceding sentence shall not apply to (x) a general
solicitation of the public for employment so long as such general solicitation
is not targeted to any employee, manager or officer of Buyer or any Person or
category of Persons referred to in the immediately preceding sentence, (y) the
hiring, soliciting, recruiting or other such action of any Person who responds
to such a general solicitation described in the preceding clause (x), or (z)
the hiring of any Person who initiates contact with Seller or any of Seller’s
Affiliates regarding such employment without any encouragement or solicitation
by Seller or any of Seller’s Affiliates prior to such Person’s initial contact.


(b)           Seller shall not, and shall cause its
Affiliates not to, directly or indirectly, communicate, regardless of means,
with any Person whose information appears on the Customer Database (other than
those Persons who are also customers of Ruidoso Downs and whose names also
appear in the customer records of Ruidoso Downs, kept in the Ordinary Course of
Business thereof, as of a date that is prior to August 7, 2006); provided, that nothing in this Agreement
shall prevent Seller or any of its Affiliates from marketing to any Person in
the Customer Database who (x) initiates gaming or racing activities at any of
the other properties or facilities of Seller or any of its Affiliates,
including Ruidoso Downs, and prior to such activities, Seller has not breached
the terms of this Agreement with respect to such Person, or (y) is contacted by
Seller or its Affiliates as part of a general marketing campaign without use of
the Customer Information.


(c)           If this Agreement is terminated
pursuant to Section 9.1 hereof, Section 7.19(a) hereof and Section 7.19(b)
hereof shall cease to have any force or effect upon and following such
termination.


Section 7.20           Non-Competition.   Until the earlier of the termination of this
Agreement pursuant to Section 9.1 hereof and the date that is five (5) years
following the Closing Date, Seller shall not, and shall cause its Affiliates
not to, directly or indirectly (or commence any activities to) build, manage,
control, work for, provide services to, engage in, or commence activities to
purchase, plan, develop, or own any interest in, any business involving gaming
or racing activities located within a 125 mile radius of the Property, or make,
directly or indirectly, any application to a Gaming Authority in connection
with any of the foregoing. If this Agreement is terminated pursuant to Section
9.1 hereof, this Section 7.20 shall cease to have any force or effect upon and
following such termination. As provided in Section 2.5 hereof, a portion of the
Total Consideration not exceeding One Million United States Dollars
($1,000,000) shall be allocated to the rights or obligations under this Section
7.20.


Section 7.21           Amended Ground Lease.   Prior
to the Closing, Seller shall request from lessor under the Existing Ground
Lease, and use commercially reasonable efforts to deliver at Closing, an
Amended Ground Lease, the terms of which (i) shall provide that the term of the
Amended Ground Lease shall be for a minimum duration of ten (10) years
following the Closing Date, (ii) shall approve the transfer of the Existing
Ground Lease to, and assumption thereof by, Buyer pursuant to this Agreement,
and (iii) shall not contain any differences from the terms of the Existing
Ground Lease which are materially adverse to Seller or Buyer. Notwithstanding 



 43
 






 



anything to the contrary herein, Seller shall be
solely responsible for any assignment fee incurred pursuant to Paragraph 11 of
the Existing Ground Lease or similar such provision in the Amended Ground Lease
and any other fees and expenses in connection with delivering the Amended
Ground Lease.


Section 7.22           Domain Names.   Prior to the Closing, Seller shall take such
action and execute such documentation as is necessary to transfer ownership and
control to Buyer and make Buyer the registrant and administrative contact for
the Internet domain name set forth on Section 5.6(a) of the Disclosure Letter.


Section 7.23           Pre-Closing Financial Statements.   Seller
shall use its commercially reasonable efforts to deliver to Buyer as soon as
available (the timing of which availability shall be consistent with Seller’s
past practices) following the end of each month true and complete copies of (i)
the unaudited balance sheet, statement of income and cash flow statement
relating to the Property and the Business (x) for each of the monthly periods
starting with the month immediately following the last monthly period covered
by the Financial Information and ending with the month immediately prior to the
Closing Date and (y) for each day of the month of the Closing Date, from the
beginning of such month until the Closing Date (or such other financial
information as would be consistent with past practices relating to such days of
the month if financial statements relating to the same would not be available
in the Ordinary Course of Business), and (ii) the audited balance sheet,
statement of income and cash flow statement relating to the Property and the
Business for the twelve (12) month period ending December 31, 2006 and for any
subsequent twelve (12) month periods ending on or prior to the Closing Date
((i) and (ii), collectively, the “Pre-Closing Financial Information”).
Except as noted therein and except for normal period-end adjustments and the
lack of footnotes, the Pre-Closing Financial Information shall be prepared in
accordance with GAAP in effect at the time of such preparation applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements) and shall fairly present in all
material respects the consolidated financial position of the Business as of
such date and for such period, subject to normally recurring year-end audit
adjustments. Notwithstanding the foregoing, Buyer acknowledges that such Pre-Closing
Financial Information shall be prepared by Seller or its Affiliates for
internal purposes, reflects allocation of some but not necessarily all costs
incurred by Affiliates of Seller for its benefit, and that no representation or
warranty is made that Buyer will be able to operate the Property or the
Business for the costs reflected in the Pre-Closing Financial Information.


ARTICLE
VIII


CONDITIONS
TO CLOSING


Section 8.1             Conditions to Each Party’s
Obligation to Effect the Closing.  
The respective obligations of each party to this Agreement to effect the
Closing is subject to the satisfaction of each of the following conditions on
or prior to the Closing Date, any of which may be waived in whole or in part in
a writing executed by all of the parties hereto:


(a)           No Injunctions.  No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any order, executive order, stay,
decree, judgment or injunction or statute, 



 44
 






 



rule, or regulation (in each case, whether temporary,
preliminary or permanent) to prevent or prohibit the consummation of any of the
transactions contemplated by this Agreement or to make it illegal for either
party hereto to perform its obligations hereunder.


(b)           Governmental Consents.  All Gaming Approvals (other than Alcoholic
Beverage Approvals) required in connection with the transactions contemplated
by this Agreement shall have been obtained, and any applicable waiting periods,
together with any extensions thereof, under the HSR Act and the antitrust or
competition Laws of any other applicable jurisdiction shall have expired or
been terminated.


Section 8.2             Additional Conditions to
Obligations of Buyer.   The
obligation of Buyer to effect the Closing is subject to the satisfaction of
each of the following conditions on or prior to the Closing Date, any of which
may be waived in whole or in part in writing exclusively by Buyer:


(a)           Representations and Warranties.  (i) The representations and warranties of
Seller contained in this Agreement shall be true and correct (without giving
effect to any limitation as to materiality or Property Material Adverse Effect
set forth therein) at and as of the Closing as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such earlier date), except where the failure of such representations and
warranties to be true and correct would not, individually or in the aggregate,
result in a Property Material Adverse Effect, and (ii) there shall have
occurred no Property Material Adverse Effect. Buyer shall have received a
certificate signed on behalf of Seller by an officer of Seller to such effect.


(b)           Performance of Obligations of
Seller.  Seller shall have performed
in all material respects all covenants, agreements and obligations required to
be performed by it under this Agreement at or prior to the Closing, including
without limitation delivery of the Required Consents and all other items listed
in Section 4.2 hereof that are to be delivered by Seller. Buyer shall have
received a certificate signed on behalf of Seller by an officer of Seller to
such effect.


(c)           Title.  The updated Title Commitment and UCC-11 Search
do not show any additional material Liens or Encumbrances (other than Permitted
Encumbrances) from the original Title Commitment and UCC-11 Search, and the
updated and recertified Survey does not show any new matters affecting the
Land, in each case, that have not been cured by Seller, all pursuant to the
terms of Section 11.2 hereof. Title Insurer shall be prepared and irrevocably
committed to issue to Buyer (with an effective date as of the Closing Date), as
to the Land, a NM 1 ALTA 10-17-92 policy of title insurance in favor of Buyer
for the Land, (i) showing fee title to the Land vested in Buyer or its nominee,
(ii) including those endorsements listed on the attachment to the Title
Commitment or as reasonably requested by Buyer (provided that such endorsements
are available in the State of New Mexico), (iii) containing no exceptions other
than the applicable Permitted Encumbrances, (iv) stating liability coverage in
such amounts as shall be determined by Buyer (provided that the aggregate
amount of liability coverage shall not exceed the amount of the Purchase
Price), and (v) issued at the minimum statutory rate (the “Owner’s Title
Policy”).



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(d)           Amended Ground Lease.  Buyer shall have received the executed Amended
Ground Lease and the executed Ground Lease Estoppel and Consent Certificate,
and the Amended Ground Lease shall have been completely and unconditionally
transferred to Buyer.


(e)           Release of Liens.  All Liens on the Purchased Assets that secure
Liabilities under the Compass Loan Documents shall have been
unconditionally released, and there shall be no Liens on the
Purchased Assets (other than Permitted Encumbrances), and Buyer shall have
received evidence of the foregoing satisfactory to Buyer.


(f)            Domain Names.  Prior to the Closing, Seller shall have taken
such action and executed such documentation as is necessary to transfer
ownership and control to Buyer and make Buyer the registrant and administrative
contact for the Internet domain name set forth on Section 5.6(a) of the
Disclosure Letter.


(g)           Agreements with Ruidoso Downs.


(i)            Buyer and Ruidoso Downs shall have
entered into the Allocation Agreement in the form attached hereto as Exhibit
L.


(ii)           The closing of the transfer of the
Liquor License from Ruidoso Downs to Buyer shall have occurred in accordance
with the terms of the Liquor License Purchase and Sale Agreement.


(iii)          The Option Agreement shall be in full force
and effect and Ruidoso Downs and Hubbard shall be in material compliance
therewith.


(h)           Water Rights.  Prior to the Closing, Seller shall have
executed and delivered conveyances to Buyer of all Water Rights, including the
wells and well rights associated with all Water Rights, which conveyances shall
be satisfactory to Buyer in its sole discretion and shall include satisfactory
conveyance of those well rights associated with the water rights set forth in
New Mexico State Engineer File Numbers L-2685 and L-2685-A (including
satisfactory prior conveyances of such well rights to Seller).


(i)            Legality of Improvements. 
As of the Closing, the Improvements on the Land shall be in compliance in all
material respects with all Laws, and Seller shall have obtained (and there
shall be in full force and effect) all required Seller Permits, in each case
with respect to (i) a portion of the Improvements being located within
a flood hazard area designated as Flood Zone AO-1, by the Federal
Emergency Management Agency, and (ii) a portion of the Improvements being
located upon the drainage easement created by that certain Warranty Deed of
Easement, dated October 27, 1943, which was filed in Book 76, Page 169 of the
Deed Records of Lea County, New Mexico on November 12, 1943.


Section 8.3             Additional Conditions to
Obligations of Seller.   The
obligations of Seller to effect the Closing are subject to the satisfaction of
each of the following conditions on or prior to the Closing Date, any of which
may be waived in whole or in part in writing exclusively by Seller:



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(a)           Representations and Warranties.
 The representations and warranties of
Buyer contained in this Agreement that are qualified as to materiality (or any
variation thereof) shall be true and correct and such representations and
warranties that are not qualified shall be true in all material respects at and
as of the Closing as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such earlier date).
Seller shall have received a certificate signed on behalf of Buyer by its chief
executive officer or chief financial officer to such effect.


(b)           Performance of Obligations of
Buyer.  Buyer shall have performed in
all material respects all covenants, agreements and obligations required to be
performed by it under this Agreement at or prior to the Closing, including
without limitation delivery of items listed in Section 4.2 hereof that are to
be delivered by Buyer. Seller shall have received a certificate signed on behalf
of Buyer by an officer of Buyer to such effect.


ARTICLE
IX


TERMINATION
AND AMENDMENT


Section 9.1             Termination.   This Agreement may be terminated at any time
prior to the Closing by written notice by the terminating party to the other
party (except in the case of termination pursuant to Section 9.1(a) hereof,
which requires mutual agreement of both parties):


(a)           by mutual agreement of Seller and
Buyer;


(b)           by either Buyer or Seller, if the
transactions contemplated hereby shall not have been consummated on or prior to
the Outside Date; provided, however, that the right to terminate this Agreement
under this Section 9.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
materially contributed to, the failure of the Closing to occur on or before the
Outside Date;


(c)           by either Buyer or Seller, if any
Gaming Authority has made a final nonappealable written determination that such
Gaming Authority will not issue to Buyer all Gaming Approvals;


(d)           by either Buyer or Seller, if (i) a
court of competent jurisdiction or other Governmental Entity shall have issued
a nonappealable final order, decree or ruling or taken any other nonappealable
final action, in each case, having the effect of permanently restraining,
enjoining or otherwise prohibiting the Closing and the transactions
contemplated hereby, or (ii) notwithstanding anything to the contrary contained
in this Agreement, a Governmental Entity shall have enacted, issued,
promulgated, enforced or entered, any order, executive order, stay, decree,
judgment or injunction or statute, rule, or regulation (in each case, whether
temporary, preliminary or permanent) to prevent or prohibit the consummation of
any of the transactions contemplated by this Agreement or to make it illegal
for either party hereto to perform its obligations hereunder; provided, however, that the right to terminate this
Agreement under this Section 9.1(d) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of,
or materially contributed to, such action;



 47
 






 



(e)           by Buyer, if Seller has breached any
representation, warranty, covenant or agreement on the part of Seller set forth
in this Agreement, or any other event has occurred, which (i) would result in a
failure of a condition set forth in Section 8.2(a), (b), (c), (d), (e), (f),
(g), (h) or (i) hereof and (ii) is not cured in all material respects within
thirty (30) days after written notice thereof; provided,
however, that if such breach or other event cannot reasonably be
cured within such thirty (30) day period but can be reasonably cured prior to
the Outside Date, and Seller is diligently proceeding to cure such breach or
other event, this Agreement may not be terminated pursuant to this Section
9.1(e); provided, further, that Buyer’s right to
terminate this Agreement under this Section 9.1(e) shall not be available if,
at the time of such intended termination, Seller has the right to terminate
this Agreement under Section 9.1(b), (c), (d) or (f) hereof;


(f)            by Seller, if Buyer has breached any
representation, warranty, covenant or agreement on the part of Buyer set forth
in this Agreement, or any other event has occurred, which (i) would result in a
failure of a condition set forth in Section 8.3(a) or (b) hereof and (ii) is
not cured in all material respects within thirty (30) days after written notice
thereof; provided, however, that if such breach
or other event cannot reasonably be cured within such thirty (30) day period
but can be reasonably cured prior to the Outside Date, and Buyer is diligently
proceeding to cure such breach or other event, this Agreement may not be
terminated pursuant to this Section 9.1(f); provided, further, that Seller’s
right to terminate this Agreement under this Section 9.1(f) shall not be
available if, at the time of such intended termination, Buyer has the right to
terminate this Agreement under Section 9.1(b), (c), (d), (e) or (g) hereof;


(g)           by Buyer, in the event that any condemnation
occurring prior to the Closing results, individually or in the aggregate, in a
taking of a Material Portion of the Property, or in the event that any casualty
occurring prior to the Closing results, individually or in the aggregate, in a
Casualty Termination Event; provided, however,
that the termination rights set forth in this Section 9.1(g) shall be subject
to the terms and conditions set forth in Section 7.15 hereof.


Section 9.2             Effect of Termination.  


(a)           Liability.   In the
event of termination of this Agreement as provided in Section 9.1 hereof, this
Agreement shall immediately become void and there shall be no Liability on the
part of Buyer or Seller, or their respective Affiliates or Representatives,
other than pursuant to this Section 9.2 and ARTICLE XII hereof; provided, however, that nothing contained in this Section


[remainder
of page left intentionally blank]



 48














 


9.2 shall relieve or limit the Liability of either
party to this Agreement for any fraud or willful misconduct of such party or
any willful breach of this Agreement by such party.


(b)           Fees and Expenses. Except as
otherwise expressly provided in this Agreement, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or not the Closing
is consummated; provided, however,
that the parties shall equally share the cancellation charges, if any, of
Escrow Agent and Title Insurer.


(c)           SOLE
AND EXCLUSIVE REMEDY. BY INITIALING BELOW,


	
  On behalf of Buyer:

  	
   

  	
  On behalf of Seller:

  
	
   

  	
   

  	
   

  
	
  Initials:

  	
  /s/ R.I.

  	
   

  	
   

  	
  Initials:

  	
  /s/ BR

  	
   

  
	
  Name:

  	
  Robert S. Ippolito

  	
   

  	
  Name:

  	
  Bruce Rimbo

  
	
  Title:

  	
  Secretary/Treasurer of

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
     Penn National Gaming, Inc.,

  	
   

  	
   

  	
   

  
	
   

  	
     Manager

  	
   

  	
   

  	
   

  
							



 


THE PARTIES HERETO AGREE THAT (i) THE PROVISIONS
CONTAINED IN THIS SECTION 9.2 ARE AN INTEGRAL PART OF THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT, THAT THE DAMAGES RESULTING FROM THE TERMINATION OF THIS
AGREEMENT AS SET FORTH IN THIS SECTION 9.2 ARE UNCERTAIN AND INCAPABLE OF
ACCURATE CALCULATION AND THAT THE AMOUNTS PAYABLE PURSUANT TO SECTION 9.2
HEREOF ARE REASONABLE FORECASTS OF THE ACTUAL DAMAGES WHICH MAY BE INCURRED BY
THE PARTIES UNDER SUCH CIRCUMSTANCES, AND (ii) THE AMOUNTS PAYABLE PURSUANT TO
SECTION 9.2 HEREOF CONSTITUTE LIQUIDATED DAMAGES AND NOT A PENALTY AND SHALL BE
THE SOLE AND EXCLUSIVE REMEDY IN THE EVENT OF TERMINATION OF THIS AGREEMENT ON
THE BASES SPECIFIED IN SUCH SECTION (IT BEING AGREED AND UNDERSTOOD THAT
NOTHING IN THIS SECTION 9.2 IS INTENDED TO LIMIT SELLER’S REMEDY IN THE EVENT
OF ANY FRAUD OR WILLFUL MISCONDUCT OF BUYER OR ANY WILLFUL BREACH OF THIS
AGREEMENT BY BUYER OR BUYER’S REMEDY IN THE EVENT OF ANY FRAUD OR WILLFUL
MISCONDUCT OF SELLER OR ANY WILLFUL BREACH OF THIS AGREEMENT BY SELLER).


[remainder of page left intentionally blank]



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(i)            Upon the termination of this
Agreement pursuant to Section 9.1(a), (b), (c), (d), (e), or (g) hereof, the
Deposit, including, for the avoidance of doubt, any income or interest earned
or accrued thereon, shall be paid to Buyer; provided,
that the Deposit, including, for the avoidance of doubt, any income or interest
earned or accrued thereon, shall be paid to Seller if:  (i) in the case of a termination pursuant to
Section 9.1(c) hereof, a final nonappealable written determination that a
Gaming Authority will not issue to Buyer all Gaming Approvals (other than
Alcoholic Beverage Approvals) provides that Buyer received such determination
because of reasons that were not primarily caused by, and are not primarily
attributable to or related to, Seller or Seller’s business, past or present
activities, Licensed Parties, facts or circumstances, or (ii) in the case of a
termination pursuant to Section 9.1(b) hereof as a result of Buyer’s failure to
obtain Gaming Approvals (other than Alcoholic Beverage Approvals) by the
Outside Date, a Gaming Authority has informed Buyer that Buyer’s failure to
obtain Gaming Approvals (other than Alcoholic Beverage Approvals) prior to the
Outside Date was because of reasons that were not primarily caused by, and are
not primarily attributable to or related to, Seller or Seller’s business, past
or present activities, Licensed Parties, facts or circumstances.


(ii)           Upon the termination of this
Agreement pursuant to Section 9.1(f) hereof, the Deposit, including, for the
avoidance of doubt, any income or interest earned or accrued thereon, shall be
paid to Seller.


ARTICLE X


SURVIVAL;
INDEMNIFICATION


Section 10.1           Survival
of Representations, Warranties, Covenants and Agreements.  


(a)           No investigation made or disclosure
received by or on behalf of any other party hereto, any Person controlling any
such party or any of their Representatives, whether prior to or after the
execution of this Agreement, shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of
determining satisfaction of any condition or any right to, or obligation of,
indemnification contained herein.


(b)           The representations and warranties
made by Seller and Buyer in this Agreement shall survive the Closing until (and
claims based upon or arising out of such representations and warranties may be
asserted at any time before) eighteen (18) months after the Closing Date; provided, that the representations and
warranties set forth in Section 5.1, Section 5.2(a), Section 5.18 and Section
6.2(a) hereof shall survive the Closing until sixty (60) days following (and
claims based upon or arising out of such representations and warranties may be
asserted at any time before) the expiration of the applicable statute of
limitations. The period of time a representation or warranty survives the
Closing pursuant to the preceding sentence shall be the “Survival Period”
with respect to such representation or warranty. The parties intend for the
preceding two sentences to shorten the otherwise applicable statute of
limitations (except for Section 5.1, Section 5.2(a), Section 5.18 and Section
6.2(a)) and agree that, subject to the last sentence of this Section 10.1(b),
no claim may be brought based upon, directly or indirectly, any of the
representations and warranties contained in this Agreement after the Survival
Period with respect to such representation or warranty. The covenants and
agreements of the parties hereto



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in this Agreement shall survive the Closing without
any contractual limitation on the period of survival (other than those
covenants and agreements that are expressly required to remain in full force
and effect for a specified period of time). The termination of the
representations and warranties provided herein shall not affect a party in
respect of any claim made by such party in reasonable detail in a writing
received by the indemnifying party prior to the expiration of the Survival
Period provided herein.


Section 10.2           Indemnification.


(a)           From and after the Closing, Seller
shall indemnify, save and hold harmless Buyer and its Affiliates and their
respective Representatives (each, a “Buyer Indemnified Party” and
collectively, the “Buyer Indemnified Parties”) from and against any and
all costs, losses, Liabilities, obligations, damages, claims, demands and
expenses (whether or not arising out of third party claims), including
interest, penalties, reasonable attorneys’ fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (collectively, “Damages”),
incurred in connection with, arising out of or resulting from:


(i)            any breach of any representation or
warranty made by Seller in this Agreement (without giving effect to any
qualifiers or exceptions relating to knowledge, materiality or Property
Material Adverse Effect);


(ii)           any breach of any covenant or
agreement made, or to be performed, by Seller in this Agreement (without giving
effect to any qualifiers or exceptions relating to knowledge, materiality or
Property Material Adverse Effect);


(iii)          the Excluded Liabilities; and


(iv)          the Excluded Assets.


(b)           From and after the Closing, Buyer
shall indemnify, save and hold harmless Seller and its Affiliates and their
respective Representatives (each, a “Seller Indemnified Party” and
collectively, the “Seller Indemnified Parties”) from and against any and
all Damages incurred in connection with, arising out of or resulting from:


(i)            any breach of any representation or
warranty made by Buyer in this Agreement (without giving effect to any
qualifiers or exceptions relating to knowledge or materiality);


(ii)           any breach of any covenant or
agreement made, or to be performed, by Buyer in this Agreement (without giving
effect to any qualifiers or exceptions relating to knowledge or materiality);
and


(iii)          the Assumed Liabilities.


Section 10.3           Interpretation.  Notwithstanding anything in this Agreement to
the contrary, the term Damages shall not include any consequential, special or
incidental damages, claims for lost profits, or punitive or similar damages.



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Section 10.4           Procedure
for Claims between Parties.  If a
claim for Damages is to be made by a Buyer Indemnified Party or Seller
Indemnified Party (each, an “Indemnified Party” and collectively, the “Indemnified
Parties”) entitled to indemnification hereunder, such party shall give
written notice briefly describing the claim and the total monetary damages
sought (each, a “Notice”) to the indemnifying party hereunder (the “Indemnifying
Party” and collectively, the “Indemnifying Parties”) as soon as
practicable after such Indemnified Party becomes aware of any fact,
circumstance, condition or event which may give rise to Damages for which
indemnification may be sought under this ARTICLE X. Any failure to submit any
such notice of claim to the Indemnifying Party shall not relieve any
Indemnifying Party of any Liability hereunder, except to the extent that the
Indemnifying Party was materially prejudiced by such failure.


Section 10.5           Defense
of Third Party Claims.  If any
lawsuit or enforcement action is filed against an Indemnified Party by any
third party (each, a “Third Party Claim”) for which indemnification
under this ARTICLE X may be sought, Notice thereof shall be given to the
Indemnifying Party as promptly as practicable. The failure of any Indemnified
Party to give timely Notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the Indemnifying Party was
materially prejudiced by such failure. The Indemnifying Party shall be
entitled, if it so elects at its own cost, risk and expense, (i) to take
control of the defense and investigation of such Third Party Claim, (ii) to
employ and engage attorneys of its own choice (provided
that such attorneys are reasonably acceptable to the Indemnified Party) to
handle and defend the same, unless the Indemnified Party has been advised in
writing by counsel that there may be one or more legal defenses available to
such Indemnified Party that are different from or additional to those available
to an applicable Indemnifying Party, in which event such Indemnified Party
shall be entitled, at the Indemnifying Parties’ reasonable cost, risk and
expense, to separate counsel to defend against only such claims for which there
may be one or more legal defenses available to such Indemnified Party that are
different from or additional to those available to the Indemnifying Party (provided that such counsel is reasonably
acceptable to the Indemnifying Party), and (iii) to compromise or settle such
claim, which compromise or settlement shall be made only (x) with the written
consent of the Indemnified Party, such consent not to be unreasonably withheld
or delayed, or (y) if such compromise or settlement contains an unconditional
release of the Indemnified Party in respect of such claim. If the Indemnifying
Party elects to assume the defense of a Third Party Claim, the Indemnified
Party shall cooperate in all reasonable respects with the Indemnifying Party
and its attorneys in the investigation, trial and defense of such Third Party
Claim and any appeal arising therefrom; provided,
however, that the Indemnified Party may, at its own cost,
participate in the investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom. In the case of a Third Party Claim in respect
of Taxes, (i) at the request of the Indemnified Party, the defense shall be
jointly controlled by the Indemnifying Party and the Indemnified Party (the
reasonable costs of such defense to be borne by the Indemnifying Party), and
(ii) the Indemnifying Party shall not settle or compromise any such Third Party
Claim without the Indemnified Party’s prior written consent. The parties shall
cooperate with each other in any notifications to insurers. If the Indemnifying
Party fails to assume the defense of such claim within fifteen (15) Business
Days after receipt of the Notice, the Indemnified Party against which such
claim has been asserted will have the right to undertake, at the Indemnifying
Parties’ reasonable cost, risk and expense, the defense, compromise or
settlement of such Third Party Claim on behalf of and for the account and risk
of the Indemnifying Parties; provided,
however, that such claim shall not be compromised or settled



 52
 






 



without the written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld or delayed. If the Indemnified
Party assumes the defense of the claim, the Indemnified Party will keep the
Indemnifying Party reasonably informed of the progress of any such defense,
compromise or settlement.


Section 10.6           Limitations on Indemnity.


(a)           No Buyer Indemnified Party shall seek,
or be entitled to, indemnification from any of the Indemnifying Parties
pursuant to Section 10.2(a) hereof unless and until the aggregate claims for
Damages of the Buyer Indemnified Parties for which indemnification is sought
pursuant to Section 10.2(a) hereof are greater than Five Hundred Thousand
United States Dollars ($500,000) (the “Threshold”) and then only for the
excess over the Threshold but not in excess of Ten Million United States
Dollars ($10,000,000) (the “Cap”); provided,
however, that neither the Cap nor
the Threshold shall be applicable to any claims for Damages of the Buyer
Indemnified Parties for which indemnification is sought with respect to (i)
Section 5.1, Section 5.2(a), Section 5.18, Section 7.17, Section 7.20, Section
10.2(a)(iii) or Section 10.2(a)(iv) hereof, (ii) any liability for Tax in
respect of which a claim may be made hereunder, or (iii) fraud or willful
misconduct of Seller or willful breach of this Agreement by Seller.


(b)           In calculating the amount of any
Damages payable to a Buyer Indemnified Party or a Seller Indemnified Party
hereunder, the amount of the Damages (i) shall not be duplicative of any other
Damage for which an indemnification claim has been made and (ii) shall be
computed net of any amounts actually recovered by such Indemnified Party under
any insurance policy with respect to such Damages (net of any out-of-pocket
costs and expenses incurred in obtaining such insurance proceeds). If an
Indemnifying Party pays an Indemnified Party for a claim and subsequently
insurance proceeds in respect of such claim are collected by the Indemnified
Parties, then the Indemnified Party promptly shall remit the insurance proceeds
(net of any out-of-pocket costs and expenses incurred in obtaining such
insurance proceeds) to Indemnifying Party. The Indemnified Parties shall use
reasonable best efforts to obtain from any applicable insurance company any
insurance proceeds in respect of any claim for which the Indemnified Parties
seek indemnification under this ARTICLE X, provided,
however, that an Indemnified Party shall have no obligation to
initiate, pursue or exhaust any remedies against any insurance policy or
proceeds prior to seeking indemnification under this ARTICLE X.


Section 10.7           Payment of Damages.  An Indemnified Party shall be paid in cash by
an Indemnifying Party the amount to which such Indemnified Party may become
entitled by reason of the provisions of this ARTICLE X, within five (5)
Business Days after such amount is determined either by mutual agreement of the
parties or on the date on which both such amount and an Indemnified Party’s
obligation to pay such amount have been determined by a final judgment of a
court or administrative body having jurisdiction over such proceeding; provided, however, that any Buyer
Indemnified Party shall, to the extent that any Escrow Funds remain available,
first be paid by the Escrow Agent from the Escrow Funds pursuant to Section
2.3(a) hereof and in accordance with the Deposit Escrow Agreement.


Section 10.8           Exclusive Remedy.  After the Closing, the indemnities provided
in this ARTICLE X shall constitute the sole and exclusive remedy of any
Indemnified Party for Damages arising out of, resulting from or incurred in
connection with any claims regarding



 53
 






 



matters arising under or otherwise relating to this
Agreement; provided, however,
that this exclusive remedy for Damages does not preclude a party from bringing
an action for specific performance or other equitable remedy to require a party
to perform its obligations under this Agreement. Without limiting the
foregoing, Buyer and Seller each hereby waive (and, by their acceptance of the
benefits under this Agreement, each Buyer Indemnified Party and Seller
Indemnified Party hereby waives), from and after the Closing, any and all rights,
claims and causes of action (other than claims of, or causes of action arising
from, fraud, willful misconduct or willful breach of this Agreement) such party
may have against the other party arising under or based upon this Agreement or
any schedule, exhibit, Disclosure Letter, document or certificate delivered in
connection herewith, and no legal action sounding in tort, statute or strict
liability may be maintained by any party (other than a legal action brought
solely to enforce the provisions of this ARTICLE X). Notwithstanding anything
to the contrary in this Section 10.8, in the event of fraud or willful
misconduct of, or willful breach of the representations, warranties, covenants
or agreements contained herein by, Buyer or Seller, any Indemnified Party shall
have all remedies available at law or in equity with respect thereto.


Section 10.9           Treatment of Indemnification
Payments.  All indemnification
payments made pursuant to this ARTICLE X shall be treated by the parties for
income Tax purposes as adjustments to the Purchase Price, unless otherwise
required by applicable Law.


ARTICLE
XI


PROPERTY


Section 11.1           As Is.  Buyer or its Representatives have fully
examined and inspected the Purchased Assets prior to the execution of this
Agreement, and subject to the provisions of this ARTICLE XI, Buyer agrees to
accept the Purchased Assets in an “AS IS” condition as of the Closing. Buyer
agrees that, except as provided in ARTICLE V hereof, Buyer is not relying upon
any representations, statements, or warranties (oral or written, implied or
express) of any officer, employee, agent, Affiliate or Representative of
Seller, or any salesperson or broker (if any) involved in this transaction as
to the Purchased Assets, including, but not limited to:  (a) any representation, statements or
warranties as to the physical condition of the Purchased Assets; (b) the
fitness and/or suitability of the Purchased Assets for use as a race track
and/or casino; (c) the past, current or future financial performance of the
Purchased Assets; (d) the compliance of the Purchased Assets with applicable
Laws, including building, zoning, subdivision, environmental, or land use Laws,
codes, ordinances, rules or regulations; (e) the state of repair of the
Purchased Assets, including, without limitation, the Improvements; (f) the
value of the Purchased Assets; (g) the manner or quality of construction of the
Purchased Assets; (h) the income derived or to be derived from the Purchased
Assets; or (i) the fact that the Purchased Assets may be located on earthquake
faults or in seismic hazardous zones. Buyer, for itself and its successors and
assigns, waives any right to assert any claim against Seller, at Law or in
equity, relating to any such matter, whether latent or patent, disclosed or
undisclosed, known or unknown, in contract or tort, now existing or hereafter
arising, except with respect to the representations and warranties in ARTICLE V
hereof.



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Section 11.2           Title to Real Property.  


(a)           Title Insurance Commitment.
Buyer agrees to accept (i) the Title Commitment and the UCC-11 Search attached
hereto as Exhibit J, subject to the removal of all exceptions that have
been marked-out and all objections and other matters that have been noted
therein, and (ii) that certain as-built survey, dated October 30, 2006, issued
by Pettigrew and Associates, made in accordance with ALTA / ACSM minimum
technical standards and the Laws of the State of New Mexico, certified to Buyer
(and its nominees), Title Insurer and any other persons or entities as Buyer may
reasonably request, showing the entire Land, all adjoining streets and roads
(including, without limitation, the points of ingress and egress thereto), the
location by metes and bounds and the exact dimensions of the Land, a legal
description of the Land, the exact location of all Improvements, set back
lines, protrusions, encroachments and easements (to the extent locatable) on
and upon the Land, together with all rights-of-way (to the extent locatable)
and other matters relating to the Land (the “Survey”), as evidence of
the status of Seller’s title to the Land.


(b)           Defects. Buyer agrees to
accept title to the Land subject to all matters shown by the Title Commitment
attached hereto as Exhibit J, subject to the removal of all exceptions
that have been marked-out and all objections and other matters that have been
noted therein, and the Survey, subject to the removal of all exceptions and
other matters that have been marked-out and all objections that have been noted
in the Title Commitment. Seller shall take all reasonable action necessary to
remove from title to the Land, or, in the alternative, shall obtain for Buyer
title insurance from the Title Insurer, in form and substance reasonably
satisfactory to Buyer, insuring over, the exceptions or matters that have
been marked-out or noted in the Title Commitment or UCC-11 Search attached
hereto as Exhibit J.  Title
defects will not be deemed to include any matters shown by the Title Commitment
or UCC-11 Search attached hereto as Exhibit J, except with respect to
the exceptions that have been marked-out and the objections and other
matters that have been noted therein. Notwithstanding the foregoing, Seller
shall use commercially reasonable efforts (i) to provide to Buyer, to the
extent reasonably available, such additional information as Buyer may
reasonably request to determine the status and effect on the Land and
Improvements of the Encumbrances referenced as Exceptions 17, 23, 25 and 26,
(ii) to cooperate with Buyer in causing the Encumbrance referenced as Exception
23 on Schedule B Part II to the Title Commitment to be relocated of record and
(iii) to provide to Buyer, to the extent reasonably available, such additional
information as Buyer may reasonably request to determine whether the
Improvements located within the hazard area designated as Flood Zone AO-1, by
the Federal Emergency Management Agency, were built in accordance with all
building codes and regulations that apply to improvements built in
such an area. The Title Commitment and UCC-11 Search shall be updated at or
shortly before Closing. If the updated Title Commitment or UCC-11 Search shows
defects in title not shown by the Title Commitment or UCC-11 Search, or, if the
Land or Seller’s interest therein, should become subject to a lien or other financial
encumbrance, and Seller has received an itemized written notice of such defects
within ten (10) Business Days after the date of delivery of the updated Title
Commitment or UCC-11 Search to Buyer or, if earlier, the Closing Date, Seller
shall take all reasonable action necessary to remove from title to the Land any
exceptions and matters so objected to by Buyer, or, in the alternative, Seller
shall obtain for Buyer title insurance from the Title Insurer insuring over
such exceptions or matters, such insurance to be in form and substance
reasonably satisfactory to Buyer. Failure to notify Seller within the specified
period of title defects revealed



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by the updated Title Commitment or UCC-11 Search shall
be deemed a waiver of Buyer’s right to disapprove of the status of Seller’s
title, and Buyer shall then accept such title as is described in the Title
Commitment and UCC-11 Search (except with respect to all exceptions that have
been marked-out and all objections that have been noted therein) as updated,
without reserving any claim against Seller for title defects. In order to cure
a Monetary Encumbrance or to attempt to cure any other title defects, Seller
shall have the option to extend the Closing Date for a period of thirty (30)
days, by giving written notice of such extension election to Buyer at or before
the Closing Date. Cure of Monetary Encumbrances shall be effected by the
payment and release of such Monetary Encumbrance of record. Notwithstanding the
foregoing or anything to the contrary contained herein, (i) Seller shall
discharge and remove any and all Liens affecting the Land that are shown by the
Title Commitment or UCC-11 Search, as the same may be updated, which secure an
obligation to pay money (other than installments of real estate taxes not
delinquent as of the Closing), even though Buyer does not expressly disapprove
of the same, and (ii) Seller shall be obligated to cure all monetary
encumbrances that are not disclosed by the Title Commitment or UCC-11 Search
(other than governmental taxes and assessments and the encumbrances created or
suffered by Buyer) which are unpaid and liquidated at Closing (the “Monetary
Encumbrances”), if any, which encumber the Property or the Business or
Seller’s interest therein between the date of this Agreement and the Closing,
in the manner provided below.


(c)           Failure to Cure Title Defects.
 If Seller fails to discharge and remove
all liens which secure an obligation to pay money or to cure the Monetary
Encumbrances that it is obligated to cure in accordance with Section 11.2(b),
such failure shall be a default by Seller subject to the remedies of ARTICLE
IX. If Seller is not successful in its efforts to cure or remove any other
material title defects it is obligated to cure in accordance with Section 11.2(b)
on or before the Closing Date, or the end of the extension period, if elected,
then this Agreement shall, at the option of Buyer (to be exercised by written
notice to Seller no later than the original or extended Closing Date, as
applicable), be terminated, Escrow Agent shall return the Deposit to Buyer and
Buyer and Seller shall be released and discharged from any further obligation
to each other hereunder; provided, that
if Buyer so elects, Buyer may accept such title as is tendered by Seller
without reduction in the Purchase Price, or reservation of claim against
Seller.


(d)           Survey.  Buyer shall have the right to cause the Survey
to be recertified to Buyer, Title Insurer and any other Persons as Buyer may
reasonably request, at or shortly before the Closing Date. If the recertified
Survey reveals any matters not shown on the existing Survey, then such
disclosure shall be a title defect as to which the provisions of Section
11.2(b) and Section 11.2(c) shall govern Buyer’s and Seller’s rights and obligations.



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ARTICLE
XII


MISCELLANEOUS


Section 12.1           Definitions.


(a)           For purposes of this Agreement, the
term:


“Accounts Receivable”
means, as of the Closing Date, all accounts receivable (including receivables
and revenues for food, beverages, telephone and casino credit), or overdue
accounts receivable to Seller, in each case, due and owing by any third party.


“Acquired Personal
Property” means the Personal Property, excluding the Excluded Personal
Property and excluding Personal Property to the extent that such Personal
Property is an Excluded Current Asset.


“Acquisition Proposal”
means (a) any proposal or offer from any Person relating to any direct or
indirect acquisition, sale, lease, purchase or other disposition or acquisition
of any of the Purchased Assets (including, without limitation, through a
purchase of limited liability company or other interests of Seller or any of
its direct or indirect parents or members or other interest holders), in a
single transaction or series of transactions, (b) any tender offer or exchange
offer, or (c) any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Seller and a third party, in each case, other than the transactions
contemplated by this Agreement. The parties agree and acknowledge that,
notwithstanding anything in the previous sentence, none of the transactions or
actions relating solely to the Excluded Assets shall be deemed to be an
Acquisition Proposal.


“Affiliate” means,
with respect to any Person, any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first-mentioned Person, including without limitation
each of the individual members of Seller in their individual capacities.


“Alcoholic Beverage
Approvals” means those licenses, permits, approvals, authorizations,
registrations, findings of suitability, franchises, entitlements, waivers and
exemptions required for the sale and service of liquor by Parent Guarantor or
any of its subsidiaries (including Buyer) at the Property from the Alcohol and
Gaming Division of the Regulation and Licensing Department of the State of New
Mexico.


“Amended Ground Lease”
means the Existing Ground Lease, as amended as described in Section 7.21.


“Assumed Contracts”
means the Operating Agreements relating to the Property or the Business as set
forth on Section 1.1(d) of the Seller Disclosure Letter and all purchase orders
relating to the Property or the Business; provided,
that Assumed Contracts shall not be deemed to include any Excluded Contracts.
If, prior to the Closing Date, Seller reasonably determines that there are any
Contracts that, pursuant to the terms hereof, are Assumed Contracts (excluding
all purchase orders entered into in the Ordinary Course of Business), Seller
shall amend Section 1.1(d) of the Seller Disclosure Letter to include such
Assumed Contracts and such Assumed



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Contracts shall be and hereby are Assumed Contracts
hereunder; provided, however, that Buyer’s consent shall be
required for any such amendment (which consent shall not be unreasonably
withheld or delayed, and which consent shall be deemed to have been given if
Buyer has not objected to any such amendment within ten (10) Business Days
after being provided with notice thereof), other than an amendment to include
as an Assumed Contract a Contract entered into in accordance with Section
7.1(a)(ix) hereof.


“Books and Records”
means, to the extent transferable by applicable Law, (i) all books and records
of Seller relating to the Property or the Business (except to the extent
related to the Excluded Liabilities or the Excluded Assets, including without
limitation, all architectural, structural, service manuals, engineering and
mechanical plans, electrical, soil, wetlands, environmental, and similar
reports, studies and audits and (ii) all plans and specifications for the
Property.


“Business Day”
means any Monday through Friday, inclusive, other than any such days that
financial institutions within the State of New Mexico are authorized or
required to close; provided, that
any reference in this Agreement to any day other than a Business Day shall be
deemed a reference to a calendar day.


“Casualty Termination
Event” means that any of the following has occurred:  (i) a loss of access to the Property that
continues, or is reasonably likely to continue, for thirty (30) days or more,
or (ii) any damage to the Property which shall cost an amount equal to or
greater than Ten Million United States Dollars ($10,000,000) to repair or will
impair the value of the Property by such amount.


“COBRA” means the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.


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


“Compass Loan
Documents” means all documentation relating to the loan agreements dated
March 4, 2004 and March 20, 2006, by and between Seller as borrower and Compass
Bank as lender, including without limitation the line of credit mortgage, dated
as of March 4, 2004, by and between Seller as grantor and Compass Bank as
lender, the mortgage, dated as of March 20, 2006, by and between Seller as
grantor and Compass Bank as lender, and the commercial security agreement,
dated as of March 20, 2006, by and between Seller as grantor and Compass Bank as
lender.


“Contract” means
any agreement, contract, lease, power of attorney, note, loan, evidence of
indebtedness, purchase order, letter of credit, settlement agreement, franchise
agreement, undertaking, covenant not to compete, employment agreement, license,
instrument, obligation, commitment, understanding, policy, purchase and sales
order, quotation and other executory commitment to which any Person is a party
or to which any of the assets of such Person are subject, whether oral or
written, express or implied.


“Customer Database”
means all customer databases, customer lists, historical records of customers
and any other customer information of Seller collected and used by Seller in
connection with marketing and promoting the Business.



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“Employee Records”
means records of Seller that relate to Employees, but only to the extent that
such records may be transferred under applicable Law, including, but not
limited to, records pertaining to: (i) skill and development training, (ii)
seniority histories, (iii) salary and benefit information, (iv) Occupational,
Safety and Health Administration reports and records, and (v) active medical
restriction forms (it being agreed and understood that with respect to the
foregoing clause (v), such forms have been made available to Buyer, but nothing
herein shall be deemed to require that Buyer accept any such forms).


“Employees” means
the Property Employees and the Inactive Employees.


“Encumbrances”
means Liens, covenants, conditions, restrictions, agreements, easements, title
defects, options, rights of first offer, rights of first refusal, restrictions
on transfer, rights of other parties, limitations on use, limitations on voting
rights, or other encumbrances of any kind or nature.


“Environmental
Condition” means, as relating to the Property or the Business, the Release
into the environment of any Hazardous Substance as a result of which Seller or
the Business (i) has or may become liable to any Governmental Entity or Person
for an Environmental Liability, (ii) is or was in violation of any
Environmental Law, (iii) has or may be required to incur response costs for
investigation or remediation, or (iv) by reason of which the Property or any
other assets of Seller or the Business, may be subject to any Lien under
Environmental Laws.


“Environmental Laws”
means all foreign, federal, state and local statutes or laws, judgments,
orders, regulations, licenses, permits, rules and ordinances, and common law,
relating to pollution or protection of health, safety or the environment, land
use or protection of natural resources, including, but not limited to the
Federal Water Pollution Control Act (33 U.S.C. §1251 et seq.), Resource
Conservation and Recovery Act (42 U.S.C. §6901 et seq.), Safe Drinking
Water Act (42 U.S.C. §300(f) et seq.), Toxic Substances Control Act (15
U.S.C. §2601 et seq.), Clean Air Act (42 U.S.C. §7401 et seq.),
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
§9601 et seq.) and other similar state and local statutes, laws, rules,
regulations and ordinances.


“Environmental
Liabilities” means all Liabilities (including, without limitation, all
reasonable fees, disbursements and expenses of counsel, expert and consulting
fees and costs of investigations and feasibility studies and responding to
requests for information or documents, clean-up, corrective action or
remediation fees or costs), fines, penalties, restitution and monetary
sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future, resulting from any claim or demand, by any
Person or Governmental Entity, under, pursuant to or relating to any
Environmental Law, or arising from or relating to Environmental Conditions
relating to the Property or the Business.


“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated from time to time thereafter.


“Excluded Contracts”
means all Contracts listed on Section 1.2(b) of the Seller Disclosure Letter.



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“Excluded Personal
Property” means those items set forth and identified as such in Section
1.2(h) of the Seller Disclosure Letter hereto.


“Existing Ground Lease”
means that certain Lease, dated December 10, 2004, by and between the
Commissioner of Public Lands, as lessor, and Seller, as lessee.


“GAAP” means
United States generally accepted accounting principles, consistently applied.


“Gaming Approvals”
means all licenses, permits, approvals, authorizations, registrations, findings
of suitability, franchises, entitlements, waivers and exemptions issued by any
Gaming Authority necessary for or relating to the conduct of activities by any
party hereto or any of its Affiliates, including, without limitation, the
ownership, operation, management and development of the Property or the
Business, including without limitation all Alcoholic Beverage Approvals.


“Gaming Authorities”
means those federal, state, local and other governmental, regulatory and
administrative authorities, agencies, boards and officials responsible for, or
involved in, the regulation of gaming or racing or similar activities or the
sale of liquor by Parent Guarantor or any of its subsidiaries, and all state
and local regulatory and licensing bodies with authority over gaming, racing
and liquor in the State of New Mexico and its political subdivisions, including
without limitation the Alcoholic Beverage Approvals.


“Gaming Laws” mean
all laws pursuant to which any Gaming Authority possesses regulatory, licensing
or permit authority over gaming or racing or similar activities or the sale of
liquor.


“Ground Lease Estoppel
and Consent Certificate” means a letter executed by an authorized agent of
the Commissioner of Public Lands, which shall include a consent to the
assignment of the Amended Ground Lease from Seller to Buyer and shall contain
the following certifications:  (i) that
the Commissioner of Public Lands is the owner in fee simple of the Leased
Property; (ii) that the Commissioner of Public Lands leased the Leased Property
to Seller pursuant only to the Amended Ground Lease, which is in full force and
effect in accordance with its terms and which has not been assigned,
supplemented, modified or otherwise amended; (iii) that the Commissioner of
Public Lands has not mortgaged the fee simple estate in the Leased Property and
there are no fee simple mortgages, deeds of trust or other security interests
encumbering such fee simple estate; (iv) that, to the knowledge of the
Commissioner of Public Lands, there are no defaults, and each of the parties’
applicable obligations have been performed to date; (v) that, to the knowledge
of the Commissioner of Public Lands, there are no offsets, counterclaims,
defenses, deductions or credits whatsoever, or any amounts owing, with respect
to the applicable lease; and (vi) that the Commissioner of Public Lands agrees
to the term of the lease, the options to extend, the security deposit, the rent
and the transferability thereof to Buyer, in each case as stated in the Amended
Ground Lease.


“Hazardous Activity”
means the distribution, generation, handling, importing, management,
manufacturing, processing, production, refinement, Release, storage, transfer,
transportation, treatment, or use of Hazardous Substances in, on, under, about,
or from the Property or any part thereof into the environment.



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“Hazardous Substance”
means any pollutant, contaminant, chemical, substance, waste and any toxic,
infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical,
or chemical compound, or hazardous substance, material or waste, whether solid,
liquid or gas, that is defined under or subject to regulation, control or
remediation under any Environmental Laws, including without limitation,
asbestos or asbestos-containing materials, urea formaldehyde foam insulation,
polychlorinated biphenyls, crude oil or any fraction thereof, all forms of
natural gas, petroleum products or by-products or derivatives, lead or
lead-based paints or materials, radon, fungus, mold, mycotoxins or other
substances that may have an adverse effect on human health or the environment.


“Hubbard” means
R.D. Hubbard, an individual.


“Improvements”
means all buildings, improvements and structures now or hereafter located on or
in the Land or the Leased Property, including, without limitation, all
buildings located at 1461 Highway 70 West, in the City of Hobbs, County of Lea,
State of New Mexico, commonly known as the “Black Gold Casino” and the “Zia
Park Racetrack.”


“Inactive Employee”
shall mean any individual who is, as of the Closing Date, employed by Seller at
the Property, and who is on long-term disability, leave of absence or is on
extended paid or unpaid leave of absence status, including leave under the U.S.
Federal Family and Medical Leave Act.


“Intellectual Property”
means all intellectual property or other proprietary rights of every kind,
foreign or domestic, including all patents, patent applications, inventions
(whether or not patentable), processes, products, technologies, discoveries,
copyrightable and copyrighted works, apparatus, trade secrets, trademarks and
service marks (including the goodwill of the Business and the Property
connected with the use of such trademarks and service marks), trademark and
service mark registrations and applications, domain names, trade names, trade
secrets, know-how, trade dress, copyright registrations, customer lists,
confidential marketing and customer information, licenses, confidential
technical information, and all documentation thereof.


“IRS” means the
Internal Revenue Service, a division of the United States Treasury Department,
or any successor thereto.


“Knowledge of Seller”
or “Seller’s Knowledge” means the actual knowledge of the following
Persons: R.D. Hubbard, Bruce Rimbo, Bob Little and Tom Reese.


“Law” means any
foreign or domestic law, statute, code, ordinance, rule, regulation, order,
judgment, writ, stipulation, award, injunction, decree or arbitration award,
policies, guidance, court decision, rule of common law or finding, including,
without limitation, the Gaming Laws.


“Leases” means
leases, subleases, occupancy and concession agreements affecting the Property,
including, without limitation, the Amended Ground Lease.


“Legal Proceeding”
means any action, arbitration, audit, hearing, investigation, litigation, or
suit (whether civil, criminal, administrative, investigative, or informal)
commenced or brought



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by any Person or Governmental Entity, or conducted, or
heard by or before or otherwise involving any Governmental Entity, arbitrator
or court of law.


“Liabilities”
means any direct or indirect liability, indebtedness, obligation, commitment,
expense, claim, deficiency, guaranty or endorsement of or by any Person of any
type, whether accrued, absolute, contingent, matured, unmatured, liquidated,
unliquidated, known or unknown.


“Liens” means any
mortgage, pledge, lien, security interest, conditional or installment sale
agreement, option, right of first refusal, restriction, exaction, imposition,
charge or other claims of third parties of any kind or nature.


“Material Assumed
Contracts” means all Assumed Contracts denoted with an asterisk on Section
1.1(d) of the Seller Disclosure Letter.


“Material Portion of
the Property” means (i) a loss of access to the Property that continues, or
is reasonably likely to continue, for seven (7) days, or (ii) any portion of
the Property whose taking would impair the value of the Property by an amount
equal to or greater than Ten Million United States Dollars ($10,000,000).


“Operating Agreements”
means all service contracts, equipment leases, software license agreements,
sign leases, Leases and other Contracts affecting the Property or the Business
and all Contracts by which Seller grants or receives any right to use any
Intellectual Property owned, used in, or held for use in the Business (other
than Contracts granting rights to use readily available commercial software
that is generally available on nondiscriminatory pricing terms and having an
acquisition price of less than $50,000.00 in the aggregate for all such related
Contracts), other than Contracts that relate to the Excluded Assets.


“Option Agreement”
means that certain Option Agreement, dated as of the date hereof, by and among
Ruidoso Downs, Hubbard (solely with respect to specified sections thereof) and
Buyer.


“Order” means any
award, decision, injunction, judgment, order, ruling, subpoena, or verdict
entered, issued, made, or rendered by any court, administrative agency, or
other Governmental Entity or by any arbitrator.


“Ordinary Course of
Business” shall describe any action taken by a Person if such action is
consistent with such Person’s past practices and is taken in the ordinary
course of such Person’s normal day to day operations.


“Outside Date”
means May 7, 2007 (the “Initial
Scheduled Closing Date”); provided,
that (x) if all the conditions set forth in ARTICLE VIII hereof, other than
Buyer’s receipt of required Gaming Approvals and the satisfaction of the
condition set forth in Section 8.1(b) hereof, have been satisfied or waived,
and (y) Buyer and its Representatives and Affiliates are diligently pursuing
the required Governmental Approvals and no Gaming Authority has made a final
nonappealable written determination that such Gaming Authority will not issue
to Buyer all Gaming Approvals, then the Outside Date shall mean (i) the date
that is three (3) months after the Initial Scheduled Closing Date, to which
Buyer may, in its sole discretion, elect to extend the Outside Date, or (ii)
such later date (which date may be no later than the date that is six (6)



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months after the Initial Scheduled Closing Date) to
which Buyer, in its sole discretion, elects from time to time to extend further
the Outside Date by paying to Seller interest, calculated at a rate equivalent
to the 90-day United States Treasury bill rate, on a notional amount equal to
(x) the Base Purchase Price, less (y) the Deposit (such interest
payments to start accruing from but not including the Initial Scheduled Closing
Date and to be paid monthly in arrears beginning on the one (1) month
anniversary of the Initial Scheduled Closing Date and ending upon and including
the earlier of (A) the Closing and (B) the termination of this Agreement
pursuant to Section 9.1 hereof); provided,
that in the event that Buyer has elected to extend the Outside Date from the
Initial Scheduled Closing Date by paying to Seller interest, and Buyer fails to
make any such interest payment, Seller shall provide Buyer written notice of
Buyer’s failure to make any such interest payment and that Buyer shall have
five (5) Business Days from its receipt of such notice to make such interest
payment (if Buyer so elects) and only if Buyer fails to make such interest
payment within this period shall Seller have the right to terminate this
Agreement pursuant to Section 9.1(b). Notwithstanding the foregoing, for the
purposes of the adjustments and prorations contemplated hereby, the Closing
shall be deemed to occur at the Transfer Time.


“Passenger/Delivery
Vehicles” means those certain passenger or delivery vehicles and
recreational vehicles identified as such in Section 1.1(e) of the Seller
Disclosure Letter.


“Permitted Additional
Gaming Machines” means new slot machines listed on Schedule 12.1(a), in
good condition and working order, which may be purchased by Seller prior to the
Closing on commercially reasonable and arm’s length terms from a third party
which is not an Affiliate of Seller and in accordance with applicable Law.


“Permitted
Encumbrances” means:


(i)            Liens or Encumbrances for mechanics’
and materialmen’s Liens or Encumbrances not filed of record that shall be paid
in the Ordinary Course of Business and charges, assessments and other
governmental charges not delinquent or which are currently being contested in
good faith by appropriate proceedings or for which Seller shall have provided
bond or other security reasonably satisfactory to Buyer;


(ii)           Liens or Encumbrances for Taxes not
yet due and payable;


(iii)          Liens or Encumbrances in respect of
judgments or awards with respect to which Seller shall in good faith currently
be prosecuting an appeal or other proceeding for review and with respect to
which Seller shall have secured a stay of execution pending such appeal or such
proceeding for review; provided,
that Seller shall have provided bond or other security reasonably satisfactory
to Buyer and agrees to pay any such judgment or award once finally adjudicated;


(iv)          Liens and Encumbrances created or
approved by Buyer;


(v)           easements, leases, reservations or
other rights of others in, or minor defects and irregularities in title to, the
property or assets of Seller; provided, that
all such easements, leases, reservations or other rights of others in or minor
defects and irregularities in title as to the Land and Improvements are shown
as exceptions on the Title Commitment and are not marked-out, objected to or
noted on the Title Commitment attached hereto as Exhibit J;



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(vi)          zoning and subdivision ordinances;


(vii)         terms and conditions of licenses,
permits and approvals for the Land as are identified in the Title Commitment,
and Laws of any Governmental Entity having jurisdiction over the Property;


(viii)        the Lease Documents and any exceptions
described therein and Assumed Contracts for any areas of the applicable Land or
the applicable Property;


(ix)           any Liens or Encumbrances or
privilege vested in any other lessor, or any licensor or permitter for rent or
other obligations of Seller relative to any Assumed Contracts so long as the
payment of such rent or the performance of such obligations is not delinquent;


(x)            subject to Section 11.2(b) and (d)
hereof, any Liens or Encumbrances identified in the Title Commitment and UCC-11
Search attached hereto as Exhibit J or the Survey; and


(xi)           any Assumed Liability.


“Person” means an
individual, corporation, limited liability company, partnership, association,
trust, unincorporated organization, other entity or group.


“Personal Property”
means, as it relates to the Property or the Business, all office, casino,
showroom, restaurant, bar, convention, meeting and other furniture,
furnishings, appliances, equipment, equipment manuals, slot machines, gaming
tables and gaming paraphernalia (including parts or inventories thereof),
including, without limitation, (a) slot machine tokens not currently in
circulation, and (b) Passenger/Delivery Vehicles, computer hardware, software,
point of sale equipment, telephone numbers, two-way security radios and base
station, maintenance equipment, tools, signs and signage, office supplies,
cleaning supplies in unopened cases or bulk containers or packages; linens,
uniforms, silverware, glassware, chinaware, pots, pans and utensils, and food,
beverage, and alcoholic beverage inventories owned by Seller and located at the
Property on the Closing Date.


“Pre-Closing Employee
Liabilities” means all Liabilities arising out of or relating primarily to
employment of any of the Employees prior to and through the Closing Date,
including without limitation, any and all severance obligations or other
Liabilities relating to the termination of any of the Employees, except as
otherwise set forth in Section 7.4 hereto, and all Liabilities related to
Retained Employees, whether occurring prior to or following the Closing Date.


“Pre-Closing Tax
Liability” means any (i) Liability for Taxes imposed on Seller arising
from, in connection with, or related to a Pre-Closing Tax Period, and with
respect to a Straddle Period, the portion of the Tax allocable to the portion
of the Straddle Period ending on and including the Closing Date under Section
3.1(a), or (ii) any Liability for Taxes of Seller arising from, in connection
with, or related to any transactions contemplated by this Agreement.


“Pre-Closing Tax
Period” means any taxable period ending on (and including) or before the
Closing Date.



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“Property” means
(a) the Land, (b) the Leased Property, (c) the Improvements, (d) all apparatus,
equipment, fixtures and appliances owned by the Seller and affixed to and used
in connection with the operation or occupancy of the Land and the Leased
Property and/or any of the Improvements (such as heating, air conditioning or
mechanical systems and facilities used to provide any utility services,
refrigeration, ventilation, waste disposal or other services) and now or
hereafter located on or in the Land, the Leased Property or any of the
Improvements, and (e) all of Seller’s rights, privileges and easements
appurtenant to or used in connection with the Land, the Leased Property and/or
any of the Improvements, including, without limitation, all minerals, oil, gas
and other hydrocarbon substances, all development rights, air rights, water,
water rights and water stock relating to the Land or the Leased Property, all
strips and gores, all of Seller’s right, title and interest in and to any
streets, alleys, easements, rights-of-way, public ways, or other rights of
Seller appurtenant, adjacent or connected to the Land or the Leased Property.


“Property Employee”
means any individual who is, as of the Closing Date, employed by Seller or any
of its Affiliates at the Property, including any individual who is actively at
work or on approved leave of absence but excluding any Inactive Employee.


“Property Material
Adverse Effect” means changes, events or effects that are materially
adverse to the Property, the Purchased Assets or the business, financial
condition or results of operations of the Business, provided, however,
that any adverse change, event or effect arising from or related to: (i) (x)
conditions affecting the United States economy generally; (y) national or
international political or social conditions or acts of terrorism, including
the engagement by the United States in hostilities; or (z) financial, banking
or securities markets generally (including any disruption thereof and any
decline in the price of any security index or any market index); provided that, in the case of each of
clauses (x), (y) and (z), such change, event or condition (I) occurs after the
date hereof, (II) is not specifically directed at Seller, the Property, the
Purchased Assets or the Business and (III) does not disproportionately affect
the Property, the Purchased Assets or the business, financial condition or
results of operations of the Business relative to other participants in Seller’s
industry in the State of New Mexico; (ii) any action taken by Seller (with the
prior written consent of Buyer) in accordance with this Agreement; or (iii) any
action taken by Buyer or Parent Guarantor or any of their respective Affiliates
or Representatives, shall not be taken into account in determining whether a “Property
Material Adverse Effect” has occurred or would reasonably be expected to occur.


“Property Specific
Data” means, as it relates to the Property or the Business, all
property-specific software computer records or data (such as future
reservations and booking information), whether on tape, disc or other
computerized format that is (i) owned by Seller, (ii) used exclusively in
connection with the Property or the Business, (iii) non-proprietary, and (iv)
not part of the Customer Database.


“Release” means
any spilling, leaking, emitting, discharging, depositing, escaping, leaching,
dumping, migrating or other release or dispersion into the environment, whether
intentional or unintentional.



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“Retained Employees”
means (i) the Inactive Employees, (ii) the Property Employees who are not
Transferred Employees, whether or not offered employment by Buyer, and (iii)
the Property Employees who are listed on Section 7.4(a) of the Seller
Disclosure Letter.


“Securities Act”
means the Securities Act of 1933, as amended, or any similar federal law then
in force.


“Straddle Period”
means any taxable period beginning prior to the Closing Date and ending after
the Closing Date.


“Subsidiary”
means, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner or managing member or (ii) at
least 50% of the securities or other equity interests having by their terms
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is,
directly or indirectly, owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries.


“Tax” or “Taxes”
means any and all Federal, state, local, and foreign taxes, and other
assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto any liability pursuant to a tax sharing, allocation, or indemnification
agreement, any liability determined by reference to the tax liability of
another person, or any tax liability arising from, in connection with, or
related to the Assumed Contracts that is attributable to any Pre-Closing Tax
Period.


“Tax Returns” mean
all Federal, state, local, and foreign tax and information returns,
declarations, statements, reports, schedules, forms, and similar documentation
and in each case any amendments thereto.


“Title Commitment”
means that certain Title Insurance Commitment which is annexed as Exhibit J
to this Agreement, along with the legible copies of all documents referenced as
exceptions therein.


“Title Insurer”
means the First American Title Insurance Company.


“Transfer Time”
means 12:30 a.m. Hobbs, New Mexico time on the Closing Date, except that, with
respect to any employee of the Business whose shift begins prior to and ends
after such time, “Transfer Time” shall mean the end of such shift.


“Transferred
Intellectual Property” means all Intellectual Property used at the Property
and in the operation of the Business, together with all rights to sue,
counterclaim, and to collect damages and payments for and recover for any and
all legal and equitable claims of past, present, and future infringements,
damages, or other unauthorized use thereof, and all income, royalties, damages,
and payments now or hereafter due or payable with respect to the foregoing
Intellectual Property.


“WARN Act” means
the Worker Adjustment and Retraining Notification Act of 1988, as amended.



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Section 12.2           Governing Law; Consent to
Jurisdiction; Waiver of Trial by Jury.


(a)           This Agreement and the transactions
contemplated hereby, and all disputes between the parties under or related to
this Agreement or the facts and circumstances leading to its execution, whether
in contract, tort or otherwise, shall be governed by and construed in
accordance with the Laws of the State of Delaware, applicable to contracts
executed in and to be performed entirely within the State of Delaware, without
regard to the conflicts of laws principles thereof.


(b)           Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of any Delaware State court, or Federal court of the
United States of America, sitting in Delaware, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the agreements delivered in connection herewith or the
transactions contemplated hereby or thereby or for recognition or enforcement
of any judgment relating thereto, and each of the parties hereby irrevocably
and unconditionally (i) agrees not to commence any such action or
proceeding except in such courts, (ii) agrees that any claim in respect of
any such action or proceeding may be heard and determined in such Delaware
State court or, to the extent permitted by Law, in such Federal court,
(iii) waives, to the fullest extent it may legally and effectively do so,
any objection which it may now or hereafter have to the laying of venue of any
such action or proceeding in any such Delaware State or Federal court,
(iv) waives, to the fullest extent permitted by Law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
Delaware State or Federal court, and (v) to the extent such party is not
otherwise subject to service of process in the State of Delaware, appoints
Corporation Service Company as such party’s agent in the State of Delaware for
acceptance of legal process and agrees that service made on any such agent
shall have the same legal force and effect as if served upon such party
personally within such state. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by Law. Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 12.3 hereof. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by Law.


(c)           EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES
SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG



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OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 12.2(c).


Section 12.3           Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, transmitted by facsimile (which is confirmed) or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):


(a)           if to Buyer or Parent Guarantor, to


Zia Park LLC

c/o Penn National Gaming, Inc.

825 Berkshire Boulevard

Wyomissing, Pennsylvania 19610

Attn:  General Counsel

Fax:  (610) 373-4710


with a copy to:


Skadden, Arps, Slate,
Meagher & Flom LLP

300 South Grand Avenue

Los Angeles, CA 90071

Attn:  Rodrigo A. Guerra, Esq.

Fax:  (213) 621-5217


(b)           if
to Seller, to


Zia Partners, LLC

1461 Highway 70 West

P.O. Box 449

Ruidoso Downs, New Mexico 88346

Attn:  R.D. Hubbard

Fax:   (505) 378-8525


with a copy to:


Davis Graham & Stubbs
LLP

1550 17th Street, Suite 500

Denver, Colorado 80202

Attn:  Jennings J. Newcom, Esq. 

Fax:  (303) 893-1379


Section 12.4           Interpretation.  For all purposes of this Agreement, except as
otherwise expressly provided:


(a)           defined terms shall have the meanings
assigned to them in this Agreement and include the plural as well as the
singular;



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(b)           all accounting terms not otherwise
defined herein have the meanings assigned under GAAP, as in effect on the date
hereof, unless otherwise stated;


(c)           all references in this Agreement to
designated “Articles,” “Sections” and other subdivisions are to the designated
Articles, Sections and other subdivisions of the body of this Agreement;


(d)           all references in this Agreement to
designated Exhibits or Schedules are to the designated Exhibit or Schedule to
this Agreement, unless otherwise indicated;


(e)           pronouns of either gender or neuter
shall include, as appropriate, the other pronoun forms;


(f)            the words “herein,” “hereof,” “herewith,”
“hereby,” “hereunder” and “hereto” and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision;


(g)           the words “include,” “including” and
other words of similar import mean “include, without limitation” or “including,
without limitation,” regardless of whether any reference to “without limitation”
or words of similar import is made;


(h)           the phrase “made available” in this
Agreement shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made available;


(i)            each of Buyer, Seller and Parent
Guarantor will be referred to herein individually as a “party” and collectively
as “parties” (except where the context otherwise requires); and


(j)            the table of contents, table of
definitions and 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 12.5           Entire Agreement.  This Agreement and all documents and
instruments referred to herein constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof; provided, that the Confidentiality Agreement shall remain in
full force and effect after the Closing. Each party hereto agrees that, except
for the representations and warranties contained in this Agreement and the
Seller Disclosure Letter, no party makes any other representations or
warranties, and each hereby disclaims any other representations and warranties
made by itself or any of its respective Affiliates or Representatives or other
representatives, with respect to the execution and delivery of this Agreement
or the transactions contemplated hereby, notwithstanding the delivery or
disclosure to any of them or their respective representatives of any
documentation or other information with respect to any one or more of the
foregoing.


Section 12.6           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



 69
 






 



in any manner materially 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 an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.


Section 12.7           Assignment.  With the exception of an assignment by Buyer
to one of its Affiliates, written notice of which shall be given to Seller,
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by operation of Law (including, without limitation,
by merger or consolidation) or otherwise without the prior written consent of
the other party; provided, however,
that any assignment by Buyer to one of its Affiliates shall not be valid under
this Agreement unless (a) such Affiliate assumes all of Buyer’s agreements and
obligations hereunder, (b) no such assignment shall relieve Buyer from any of
its agreements and obligations hereunder, and (c) no such assignment in any way
(x) shall materially adversely effect the ability to receive, or
materially delay the receipt of, the Gaming Approvals or antitrust approvals
contemplated by this Agreement or (y) shall materially adversely affect or materially
delay the Closing of the transactions contemplated by this Agreement. Any
assignment in violation of this Section 12.7 shall be void.


Section 12.8           Parties of Interest.  This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective
successors and assigns, and nothing in this Agreement, express or implied is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.


Section 12.9           Counterparts.  This Agreement may be executed by facsimile
and/or 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 12.10         Mutual Drafting.  Each party hereto has participated in the
drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties. In the event of any ambiguity or
question of intent arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.


Section 12.11         Amendment.  This Agreement may be amended by the parties
but only by an instrument in writing signed on behalf of each of the parties.


Section 12.12         Extension; Waiver.  At any time prior to the Closing, any party
by action taken or authorized by its board of directors or members or board of
managers, as applicable, may, to the extent legally allowed, (i) extend the
time for or waive the performance of any of the obligations or other acts of
any other party hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements or conditions contained here.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party.



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Section 12.13         Time of Essence.  Time is of the essence with respect to this
Agreement and all terms, provisions, covenants and conditions herein.


Section 12.14         Seller Disclosure Letter.  The Seller Disclosure Letter shall be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Agreement.


[SIGNATURE
PAGE FOLLOWS]



 71














 


IN WITNESS WHEREOF, the
undersigned have caused this Agreement to be signed by their respective duly
authorized officers as of the date first written above.


	
  

  	
  ZIA PARTNERS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:.

  	
  /s/ Bruce Rimbo

  	
   

  
	
   

  	
  Name: Bruce
  Rimbo

  
	
   

  	
  Its: Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZIA
  PARK LLC

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Robert S.
  Ippolito

  	
   

  
	
   

  	
  Name: Robert S.
  Ippolito

  
	
   

  	
  Its:
  Secretary/Treasurer

  
	
   

  	
   

  	
  of Penn National Gaming, Inc., Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PENN
  NATIONAL GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (solely
  with respect to Section 2.6 and ARTICLE

  VI and XII)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Robert S.
  Ippolito

  	
   

  
	
   

  	
  Name: Robert S.
  Ippolito

  
	
   

  	
  Its:
  Secretary/Treasurer

  
					



 


SIGNATURE PAGE TO ASSET
PURCHASE AGREEMENT