Exhibit
10.3


 


PURCHASE
AND SALE AGREEMENT


 


THIS PURCHASE AND SALE
AGREEMENT (this “Agreement”) is made and entered into as of
February 9, 2004, by and among HHLV MANAGEMENT COMPANY, LLC, a Nevada
limited liability company (“Seller”), SPEAKEASY GAMING OF FREMONT, INC.,
a Nevada corporation (“Buyer”) and MTR GAMING GROUP, INC., a Delaware corporation (“Guarantor”).


 


WHEREAS,
Harrah’s Operating Company, Inc., a Delaware corporation (“HOC”), has
entered into an Asset Purchase Agreement dated January 21, 2004 (the “Horseshoe
Purchase Agreement”) between HOC and Horseshoe Club Operating Company, a
Nevada corporation (“Horseshoe”), pursuant to which HOC agreed to
purchase certain assets and assume certain liabilities of Horseshoe;


 


WHEREAS,
HOC subsequently assigned, transferred and conveyed all of its right, title and
interest under the Horseshoe Purchase Agreement to Seller, its wholly owned
subsidiary;


 


WHEREAS,
Seller desires to cause Horseshoe to convey and transfer to Buyer the Horseshoe
Property (defined herein) at the Horseshoe Closing (defined herein) (pending
satisfaction or waiver of all conditions to the Horseshoe Closing), and Buyer
desires to acquire Horseshoe Property and to obligate itself to receive the
Horseshoe Property immediately upon the Horseshoe Closing;


 


WHEREAS,
Seller is acquiring the Primary Assets, the WSOP Chips and the HLC Shares (the
“Seller Property”) from Horseshoe pursuant to the Horseshoe Purchase
Agreement and desires to retain, and not to transfer to Buyer any right, title
and interest in and to, the Seller Property;


 


WHEREAS,
concurrent with the closing of the transactions contemplated in this Agreement,
Buyer and Seller shall enter into a Joint Operating License Agreement, attached
hereto as Exhibit A, pursuant to which Seller or an affiliate of Seller
will operate some or all of the Horseshoe Property as specified therein (the “Joint
Operating Agreement”); and


 


WHEREAS,
all defined terms used but not otherwise defined herein shall have the meaning
ascribed to them in the Horseshoe Purchase Agreement;


 


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.  ASSIGNMENT OF ASSETS


 


Section 1.1                                      Assignment
of Assets.  Upon the terms and
subject to the conditions set forth in this Agreement, Seller hereby agrees to
cause Horseshoe to assign, transfer and convey to Buyer all of Seller’s right,
title and interest under the Horseshoe Purchase Agreement in and to the
Horseshoe Property at the Speakeasy Closing (defined herein).  Buyer hereby agrees to accept the assignment
and transfer of the Horseshoe Property, and hereby obligates itself to


 


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receive, immediately
following the Horseshoe Closing, all of the Horseshoe Property.  The parties acknowledge that the purpose and
intent of this section is to cause the Horseshoe Property to be
transferred directly from Horseshoe to Buyer without Seller ever taking title
to such property.


 


Section 1.2                                      Purchase
Price.  As consideration for the
right to receive the Horseshoe Property, Buyer shall cause to be paid to Seller
the Purchase Price (defined herein), which shall be calculated and paid as
follows:


 


(a)                                  Within one (1) business day after
the date of this Agreement, Buyer shall deposit with the Escrow Agent (defined
herein) an amount equal to Two Million Five Hundred Thousand Dollars
($2,500,000) (the “Initial Deposit”), which amount shall be held subject
to the terms of the Escrow Agreement (defined herein);


 


(b)                                 On the Due Diligence Deadline
(defined herein), Buyer shall deposit with the Escrow Agent an additional
amount equal to Two Million Five Hundred Thousand Dollars ($2,500,000) (the “Additional
Deposit,” and together with the Initial Deposit, the “Deposit”),
which amount shall be held by the Escrow Agent subject to the terms of the
Escrow Agreement;


 


(c)                                  At the Speakeasy Closing, Buyer
shall pay to Seller an additional amount equal to Fifteen Million Dollars
($15,000,000) (the “Initial Purchase Price”); and


 


(d)                                 In addition to the amounts set forth
above, Buyer shall pay to Seller the additional payments as determined pursuant
to Section 1.3 hereof (each an “Additional Purchase Price”).


 


All amounts paid pursuant to the
foregoing shall be paid by wire transfer of immediately available funds to the
Escrow Agent or to an account designated by Seller, as applicable.  The Deposit, Initial Purchase Price and the
Additional Purchase Price are collectively referred to herein as the “Purchase
Price.”


 


Section 1.3                                      Additional
Purchase Price.  On the thirtieth
(30th) day following the Adjustment Date (defined herein), Buyer
shall pay to Seller:


 


(a)                                  EBITDA Adjustment. 
An amount equal to Five Million Dollars ($5,000,000), which amount shall
be payable by Buyer if and only if (i) EBITDA for the Hotel/Casino is greater
than zero for the nine month period immediately preceding the Adjustment Date,
or (ii) Buyer terminates the Joint Operating Agreement prior to the end of the
term set forth therein;


 


(b)                                 Lease Negotiation Adjustment. 
In the case of either (x) a renegotiated lease (each such lease, a “Renegotiated
Lease”) or (y) a definitive agreement to extinguish such lease and purchase
the existing fee interest subject to such lease (each such purchase and buyout,
a “Lease Buyout”), an amount (which shall not exceed in aggregate Five
Million Dollars ($5,000,000)) equal to the difference between the Initial Lease
Amount and the Final Lease Amount multiplied by 0.50.


 


(c)                                  Lease Buyout. Buyer and Seller acknowledge and
agree, that following the date hereof, Seller may engage in certain Lease
Buyouts.  With respect to each Lease
Buyout, in the event that the purchase price negotiated by Seller for such
Lease Buyout is:


 


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(i)                                     less than the discounted present
value (computed using a discount rate of 10% per annum) of the remaining
monthly lease payments for the lease subject to the Lease Buyout, calculated by
assuming that the monthly payment of such lease is equal to the monthly payment
amount set forth on Exhibit E and by assuming that all renewal rights
will be exercised and by taking into account any escalation or other adjustment
provisions, Buyer shall be obligated to pay and otherwise assume responsibility
for payment, in accordance with the definitive agreement for such Lease Buyout,
of the purchase price of the Lease Buyout; or


 


(ii)                                  greater than the discounted present
value (computed using a discount rate of 10% per annum) of the remaining
monthly lease payments for the lease subject to the Lease Buyout, calculated by
assuming that the monthly payment of such lease is equal to the monthly payment
amount set forth on Exhibit E and by assuming that all renewal rights
will be exercised and by taking into account any escalation or other adjustment
provisions, Seller may conclude negotiations and consummate the Lease Buyout
only upon prior written consent by Buyer.


 


(d)                                 Remaining Rent. 
In the event of a Lease Buyout, Seller shall continue to pay to Buyer
the remaining lease payments that would have been otherwise been payable but
for the Lease Buyout until the Adjustment Date.


 


(e)                                  Speakeasy’s Remittance Amount. 
Notwithstanding anything in this Section 1.3 to the contrary, if
and so long as Seller has failed to pay to Buyer the Speakeasy’s Remittance
Amount (as defined in the Joint Operating Agreement), after notice and
opportunity to cure pursuant to the Joint Operating Agreement, Buyer shall have
no obligation to deliver the Additional Purchase Price pursuant to Sections
1.3(a) or (b) to Seller until such delinquent Speakeasy’s Remittance Amount has
been paid to Buyer.


 


(f)                                    Definitions. 
For purposes of this Section 1.3, the term


 


(i)                                     “Initial Lease Amount” shall mean,
with respect to each lease which is the subject of a Renegotiated Lease or
Lease Buyout, the discounted present value as of the Adjustment Date (computed
using a discount rate of 10% per annum) of the monthly lease payments of such
lease, calculated assuming a lease term of thirty years and a monthly payment
equal to the monthly payment amount set forth on Exhibit E.


 


(ii)                                  “Final Lease Amount” shall mean, (a)
with respect to each Renegotiated Lease the discounted present value as of the
Adjustment Date (computed using a discount rate of 10% per annum) of the
aggregate amount of the lease payments of the Renegotiated Leases effective
immediately following Adjustment Date, calculated assuming such leases continue
in effect for a term of thirty years from the Adjustment Date, or (b) with
respect to each Lease Buyout, the purchase price of the Lease Buyout
established pursuant to Section 1.3(c).


 


Section 1.4                                      Due
Diligence Period.  Buyer shall
perform its due diligence review relative to the Horseshoe Property, which
review must be completed on or before the deadline on February 13, 2004
for effecting a wire transfer of Federal (same day) funds (the “Due
Diligence Deadline”).  Unless this Agreement
is otherwise previously terminated pursuant to Section 6.1(a), 6.1(b),
6.1(c), 6.1(d) or 6.1(e) Buyer shall deliver the Additional Deposit to Escrow
Agent on or before the Due Diligence Deadline. 
From and after the Due Diligence Deadline, the Deposit shall be
non-refundable to Buyer except as set forth in Section 6.1.


 


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Section 1.5                                      Escrow
Agreement.  Within one (1) business
day after the date hereof, Buyer, Seller and Nevada Title Company, a Nevada
corporation (“Escrow Agent”) shall have entered into that certain
Deposit Escrow Agreement, attached hereto as Exhibit B (the “Escrow
Agreement”).  The Deposit amounts
will be retained in escrow by the Escrow Agent pursuant to the Escrow Agreement
for the benefit of Buyer and Seller, and shall be released pursuant to the
terms thereof.


 


Section 1.6                                      Main
Property Lease.  Seller hereby
assigns, transfers and conveys to Buyer all of its rights under
Section 4.2(k) of the Horseshoe Purchase Agreement to enter into the Main
Property Lease with Horseshoe, which lease shall be substantially in the form
attached hereto as Exhibit C.


 


ARTICLE II.  CLOSING


 


Section 2.1                                      Time
and Place.  Unless this Agreement is
earlier terminated pursuant to Article VI, the closing of the transactions
contemplated by this Agreement, including the transfer of the Horseshoe
Property to Buyer (the “Speakeasy Closing”), shall take place
concurrently with the Horseshoe Closing, following satisfaction or waiver of
the conditions set forth in Article V, at the time and place provided for
in the Horseshoe Purchase Agreement (the “Speakeasy Closing Date”).


 


Section 2.2                                      Deliveries
at the Speakeasy Closing.  At the
Speakeasy Closing, Buyer shall deliver to Seller the Initial Purchase Price
Amount.  Additionally, Buyer shall
deliver to Seller and Seller shall deliver to Buyer (where applicable), or
cause Horseshoe to deliver to Buyer (where applicable), each of the following:


 


(a)                                  Bill of Sale for Personal Property. 
A Bill of Sale and Assignment executed by Buyer and Horseshoe, in
substantially the form attached as Exhibit A to the Horseshoe
Purchase Agreement, conveying to Buyer all the Personal Property, other than
the Restricted Gaming Equipment (as defined in the Joint Operating Agreement)
(which equipment shall be conveyed to Buyer pursuant to the terms of the Joint
Operating Agreement) and any Personal Property that is included among the
Seller Property.


 


(b)                                 Grant, Bargain, Sale Deed. 
A Grant, Bargain, Sale Deed executed by Horseshoe, in the substantially
the form attached as Exhibit B to the Horseshoe Purchase Agreement,
conveying all Owned Property to Buyer.


 


(c)                                  Assumed Contracts. 
Assignment and assumption agreements executed by Buyer and Horseshoe, in
substantially the form attached as Exhibit C-1 to the Horseshoe
Purchase Agreement, transferring all of the Assumed Contracts, other than any
Assumed Contracts relating to the Seller Property, to Buyer.


 


(d)                                 Assignment of Leased Property. 
Assignment and assumption agreements, executed by Buyer and Horseshoe,
in substantially the form attached as Exhibit C-2 to the Horseshoe
Purchase Agreement, transferring all of the Leased Property to Buyer, together
with a copy of each Estoppel Certificate and Consent, in the form attached as
Exhibit G to the Horseshoe Purchase Agreement, executed and delivered by
landlord of each Leased Property to


 


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Seller pursuant to the
Horseshoe Purchase Agreement, which Estoppel Certificate and Consent shall also
include Buyer and its lender as addressee’s thereof and entitled to rely
thereon.


 


(e)                                  Main Property Lease. 
The Main Property Lease executed by Buyer and Horseshoe, in
substantially the form attached as Exhibit C.


 


(f)                                    Joint Operating Agreement. 
A copy of the Joint Operating Agreement executed by Buyer and Seller, in
substantially the form attached hereto as Exhibit A.


 


(g)                                 Intellectual Property License
Agreement.  An Intellectual Property License Agreement
executed by Buyer and Seller, in substantially the form attached hereto as Exhibit
D.


 


ARTICLE III.  REPRESENTATIONS AND WARRANTIES


 


Section 3.1                                      Representations
and Warranties of Seller.  Seller
represents and warrants to Buyer that the statements contained in this
Section 3.1 are true and correct as of the date of this Agreement and
other than with respect to Section 3.1(c), shall be true and correct as of
the Speakeasy Closing. 


 


(a)                                  Authority; No Conflict; Required
Filings and Consents.


 


(i)                                     Seller has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. 
The execution and delivery of this Agreement and the consummation by
Seller of the transactions to which it is a party that are contemplated by this
Agreement by Seller have been duly authorized by all necessary corporate action
on the part of Seller.  This Agreement
has been duly executed and delivered by Seller and constitutes the valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, subject, as to enforcement, to (A) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereinafter in
effect affecting creditors’ rights generally and (B) general principles of
equity.


 


(ii)                                  The execution and delivery of this
Agreement by Seller does not, and the consummation by Seller of the
transactions to which it is a party that are contemplated by this Agreement
will not, (A) conflict with, or result in any violation or breach of, any
provision of the certificate of incorporation, bylaw or other organizational
document of Seller, (B) 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 note, bond,
mortgage, indenture, lease, contract or obligation to which Seller is a party
or by which any of them or any of its properties or assets may be bound, or
(C) subject to the governmental filings and other matters referred to in
Section 3.1(b)(iii), conflict with or violate any permit, concession,
franchise, license, judgment, or Law applicable to Seller or any of its or
their properties or assets, except in the case of clauses (B) and (C) for any
such conflicts, violations, defaults, terminations, cancellations or
accelerations which (x) are not, individually or in the aggregate,
reasonably likely to have a material adverse effect on Seller or (y) would
not impair or delay the Speakeasy Closing.


 


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(iii)                               No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Seller in connection with the
execution and delivery of this Agreement by Seller or the consummation by
Seller of the transactions to which it is or they are a party that are
contemplated hereby or thereby, except for (A) the filing of the
pre-merger notification report under the HSR Act, (B) any approvals and
filing of notices required under the Gaming Laws applicable to Buyer or Seller,
(C) such consents, approvals, orders, authorizations, permits, filings, or
registrations related to, or arising out of, compliance with statutes, rules or
regulations regulating the consumption, sale or serving of alcoholic beverages,
(D) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities
laws or (E)  such other filings, consents, approvals, orders,
registrations and declarations as may be required under the laws of any
jurisdiction in which Seller conducts any business or owns any assets the
failure of which to make or obtain would not be reasonably likely to have a
material adverse effect on Seller.


 


(b)                                 Brokers. Neither of Seller nor any
Representative of Seller 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, except that
Seller has retained CB Richard Ellis as financial advisor and Seller shall be
responsible for any compensation due to CB Richard Ellis as a result of such
arrangement.  Seller agrees to
indemnify, save and hold harmless Buyer from and against any Damages (defined
herein) that arise out of or are related to a breach of the representation and
warranty or the inaccuracy of the representation made by Seller to Buyer in
this Section 3.1(b).


 


(c)                                  Environmental Matters. 
To the Knowledge of Seller, the Hotel/Casino is not in material
violation of any applicable environmental laws, other than as disclosed in the
Phase I Report; provided, however,
that Seller makes no representation regarding the presence of
asbestos-containing building materials and lead-based paints on the
Hotel/Casino.


 


Section 3.2                                      Representations
and Warranties of Buyer.  Buyer
represents and warrants to Seller that the statements contained in this
Section 3.2 are true and correct as of the date of this Agreement and
shall be true and correct as of the Speakeasy Closing.


 


(a)                                  Authority; No Conflict; Required
Filings and Consents.


 


(i)                                     Other than obtaining Board Approval
(defined herein), Buyer has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement.  The execution and
delivery of this Agreement and, but for Board Approval, the consummation by
Buyer of the transactions to which it is a party that are contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Buyer.  This Agreement has been
duly executed and delivered by Buyer and constitutes the valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
subject, as to enforcement, to (A) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereinafter in effect affecting
creditors’ rights generally and (B) general principles of equity.


 


(ii)                                  The execution and delivery of this
Agreement by Buyer does not, and the consummation by Buyer of the transactions
to which it is a party that are contemplated by this


 


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Agreement will not,
(A) conflict with, or result in any violation or breach of, any provision
of the certificate of incorporation, bylaw or other organizational document of
Buyer, (B) 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 note, bond, mortgage, indenture, lease,
contract or obligation to which Buyer is a party or by which any of them or any
of its properties or assets may be bound, or (C) subject to the
governmental filings and other matters referred to in Section 3.2(b)(iii),
conflict with or violate any permit, concession, franchise, license, judgment,
or Law applicable to Buyer or any of its or their properties or assets, except
in the case of clauses (B) and (C) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which (x) are not,
individually or in the aggregate, reasonably likely to have a material adverse
effect on Buyer or (y) would not impair or delay the Speakeasy Closing.


 


(iii)                               No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Buyer in connection with the execution
and delivery of this Agreement by Buyer or the consummation by Buyer of the
transactions to which it is or they are a party that are contemplated hereby or
thereby, except for (A) the filing of the pre-merger notification report
under the HSR Act, (B) any approvals and filing of notices required under
the Gaming Laws applicable to Buyer or Seller, (C) such consents,
approvals, orders, authorizations, permits, filings, or registrations related
to, or arising out of, compliance with statutes, rules or regulations
regulating the consumption, sale or serving of alcoholic beverages,
(D) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities
laws or (E)  such other filings, consents, approvals, orders,
registrations and declarations as may be required under the laws of any
jurisdiction in which Buyer conducts any business or owns any assets the
failure of which to make or obtain would not be reasonably likely to have a
material adverse effect on Buyer.


 


(b)                                 Brokers.  Neither of Buyer nor any Representative of
Buyer 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.  Buyer agrees to indemnify, save and hold harmless Seller from and
against any Damages that arise out of or are related to a breach of the
representation and warranty or the inaccuracy of the representation made by
Buyer to Seller in this Section 3.2(b).


 


(c)                                  Financing.  Buyer will have available on the Speakeasy Closing and at
such other times as required by this Agreement sufficient funds to enable Buyer
to pay the respective portions of the Purchase Price and all fees and expenses
necessary or related to the consummation of the transactions contemplated by
this Agreement.  Buyer acknowledges that
its obligation to consummate the transactions set forth in this Agreement are
not subject to any contingency relating to its ability to obtain financing.


 


(d)                                 Buyer Accepts “As Is.” 
Buyer has examined, or shall have examined as of the Due Diligence
Deadline, the Horseshoe Property; Buyer is, or shall be as of the Due Diligence
Deadline fully familiar with the physical condition of the Horseshoe Property;
and, except as otherwise expressly provided in this Agreement, Buyer agrees to
accept the Horseshoe Property at the Speakeasy Closing in its “as is” condition
as of the Speakeasy Closing Date, subject to


 


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reasonable use, wear,
tear and natural deterioration of the Horseshoe Property between the date of
this Agreement and the Speakeasy Closing Date, and further subject to the
provisions of this Agreement, and further agrees that Seller shall not be
liable for any latent or patent defects in the Horseshoe Property or bound in
any manner whatsoever by any guarantees, promises, projections, operating
expenses, set-ups or other information pertaining to the Horseshoe Property
made, furnished or claimed to have been made or furnished by Seller or any other
person or entity, whether verbally, or in writing, except as expressly set
forth in this Agreement.


 


(e)                                  No Representations or Warranties. 
Buyer acknowledges that neither Seller nor any of the partners,
employees, agent or attorneys of Seller have made and do not make any verbal or
written representations or warranties whatsoever to Buyer, whether express or
implied, and, in particular, that no such representations and warranties have
been made with respect to the physical condition or operation of the Horseshoe
Property, the actual or projected revenue and expenses of the Horseshoe
Property, the zoning and other laws, regulations and rules applicable to the
Horseshoe Property or the compliance of the Horseshoe Property therewith, the
quantity, quality or condition of the articles of personal property and
fixtures included in this Agreement, the use or occupancy of all or any portion
of the Horseshoe Property or any other matter or thing affecting or relating to
the Horseshoe Property, except as, and solely to the extent specifically set
forth in this Agreement, and Buyer has not relied upon any such representations
or warranties or upon any statements made in any informational materials with
respect to the Horseshoe Property provided by Seller or any person or entity,
and has entered into this Agreement after having made and relied solely upon
its own independent investigation, inspection, analysis, appraisal and
evaluation of facts and circumstances. 
Buyer acknowledges that it has not relied, and is not relying, upon any
representations or warranties other than the representations and warranties
expressly set forth in this Agreement.


 


(f)                                    Licensability of Principals.  Neither Buyer nor any of its Representatives
or affiliates has ever been denied a gaming license by a Governmental Entity or
Gaming Authority.  Buyer and each of its
Representatives and affiliates is in good standing in each of the jurisdictions
in which Buyer or any of its affiliates owns or operates gaming
facilities.  There are no facts known to
Buyer, which if known to the regulators under the Gaming Laws, that would (a)
be reasonably likely to result in the denial, revocation, limitation or
suspension of an existing  gaming
license, or (b) result in a negative outcome under any gaming licensing or
suitability proceedings necessary for Buyer to consummate this Agreement or
enter into the Joint Operating Agreement. 
A negative outcome shall not include a gaming license that is limited in
duration so long as such license is sufficient for Buyer to consummate this
Agreement and enter into the Joint Operating Agreement.


 


(g)                                 Compliance with Gaming Laws.


 


(i)                                     Buyer, and to its knowledge, each of
its directors, officers, key employees and persons performing management
functions similar to officers and partners hold all permits, registrations,
findings of suitability, licenses, variances, exemptions, certificates of
occupancy, orders and approvals of all Governmental Entities under the Gaming
Laws necessary to conduct the business and operations of Buyer, each of which
is in full force and effect in all material respects, except for such permits,
registrations, findings of suitability, licenses, variances, exemptions,
certificates of occupancy, orders and approvals the failure of which to hold
would not, individually or in the aggregate, be reasonably likely to have a
material adverse effect on


 


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Buyer (the “Buyer
Permits”) and 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 Buyer Permit that
currently is in effect the loss of which either, individually or in the
aggregate, would be reasonably likely to have a material adverse effect on
Buyer.  Buyer, and to its knowledge,
each of its directors, officers, key employees and persons performing
management functions similar to officers and partners are in compliance with
the terms of the Buyer Permits, except for such failures to comply, which
singly or in the aggregate, would not, individually or in the aggregate, be
reasonably likely to have a material adverse effect on Buyer.  Buyer has not received notice of any
investigation or review by any Governmental Entity under any Gaming Law with
respect to Buyer or any of its Affiliates that is pending, and, to the
knowledge of Buyer, no investigation or review is threatened, nor has any
Governmental Entity indicated any intention to conduct the same.


 


(ii)                                  Neither Buyer, nor any director,
officer, key employee or partner of Buyer or their affiliates 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 which did or would be
reasonably likely to result in fines or penalties of Fifty Thousand Dollars
($50,000) or more.  To the knowledge of
Buyer, there are no facts, which if known to the regulators under the Gaming
Laws could reasonably be expected to result in the revocation, limitation or
suspension of a license, finding of suitability, registration, permit or
approval of them, or any of their officers, directors, key employees or persons
performing management functions similar to an officer or partner, or limited
partner under any Gaming Laws.  Neither
Buyer nor any officer, director, key employee or person performing management
function similar to an officer or partner of Buyer or their Affiliates, has suffered
a suspension or revocation of any Buyer Permit held under the Buyer Gaming
Laws.


 


ARTICLE IV.  COVENANTS


 


Section 4.1                                      Hotel/Casino
Tenants.  Buyer acknowledges
Seller’s obligations under Section 6.11 of the Horseshoe Purchase
Agreement and agrees not to take any action, prior to, or following the
Speakeasy Closing, that would have the effect or could reasonably be
anticipated to have the effect of preventing Seller from fulfilling its
obligations Section 6.11 of the Horseshoe Purchase Agreement.


 


Section 4.2                                      Horseshoe
Property.  Buyer acknowledges that
the Horseshoe Property transferred hereunder does not consist of all the
Purchased Assets identified in the Horseshoe Purchase Agreement, and that some
of the Purchased Assets will be retained by Seller, including the Primary
Assets, the WSOP Chips, the HLC Shares and any rights to the tickets for the
National Finals Rodeo (the “Rodeo Tickets”), and buyer expressly
disclaims any rights to the Primary Assets, the WSOP Chips, the HLC Shares and
the Rodeo Tickets.  Buyer further
acknowledges that it will take some of Horseshoe Property subject to various
restrictions and covenants set forth in the Horseshoe Purchase Agreement,
including without limitation, the restrictions and limitations affecting the
Statue of Benny Binion set forth in Section 1.4 of the Horseshoe Purchase
Agreement.  Buyer further acknowledges
that nothing in this Agreement or the Joint Operating Agreement shall be deemed
to confer upon Buyer any rights under the Horseshoe Purchase Agreement.


 


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Section 4.3                                      Further
Assurances and Actions.


 


(a)                                  Subject to the terms and conditions
herein, each of the parties hereto agrees to use its reasonable best 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, (i) using
their respective reasonable best efforts to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Entities and parties to contracts with each party hereto 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
Speakeasy Closing any further action is necessary to carry out the purposes of
this Agreement or to vest Buyer with full title to the Horseshoe Property, the
proper officers and/or directors of Buyer and Seller shall take all such
necessary action (including executing and delivering further notices,
assumptions, releases and acquisitions).


 


Section 4.4                                      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 or any listing agreement with the New York Stock
Exchange or the Nasdaq Stock Market.  Notwithstanding anything to the contrary
herein, (a) Buyer and Seller may make any public statement in response to
specific questions by the press, 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 and (b) each of
Buyer and Seller shall use commercially reasonable efforts to ensure that its
press releases and the press releases of its affiliates concerning the Project
shall first be submitted to the Committee (as defined in the Joint Operating
Agreement) for the Committee’s approval, with the exception of any press
releases required to be made by a party or its affiliates pursuant to various
securities laws applicable to such party or its affiliates.


 


Section 4.5                                      Governmental
Approvals.


 


(a)                                  The parties hereto shall cooperate
with each other and use their reasonable best 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, proper or advisable under applicable
Law to consummate and make effective the transactions governed by this
Agreement, (ii) obtain from any Governmental Entities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to avoid any
action or proceeding by any Governmental Entity in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions governed herein, and (iii) make all necessary filings, and
thereafter make any other required submissions with respect to this Agreement,
as required under (A) any applicable


 


10

















 


federal or state
securities Laws, (B) Gaming Laws and (C) any other applicable Law,
(collectively, the “Governmental Approvals”), and to comply with the
terms and conditions of all such Governmental Approvals.  The parties hereto and their Representatives
and affiliates shall, as promptly as possible after the date hereof, file all
required initial applications and documents in connection with obtaining the
Governmental Approvals (including without limitation under applicable Gaming
Laws) and shall act diligently and promptly to pursue the Governmental
Approvals 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 reasonable best efforts to schedule and
attend any hearings or meetings with Governmental Entities to obtain the
Governmental Approvals as promptly as possible.  Seller shall have the right to review in advance and, to the
extent practicable, Seller will consult with Buyer on, in each case, subject to
applicable Laws relating to the exchange of information (including, without
limitation, antitrust Laws and Gaming Laws), all the information relating to
Seller and any of its 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.  Buyer will promptly notify
Seller in writing of the receipt of any communications from Governmental Entities
relating to Governmental Approvals.


 


(b)                                 Buyer and Seller each shall use its
reasonable best 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.


 


Section 4.6                                      Joint
Operating Agreement.  Prior to the
expiration of the Due Diligence Deadline, Buyer and Seller agree to use
commercially reasonable efforts to prepare a schedule of “Operating
Contracts” to be attached as an exhibit to the Joint Operating Agreement.


 


Section 4.7                                      Corporate
Approvals.  Buyer agrees to use its
best efforts to obtain the approval of the board of directors of MTR Gaming Group,
Inc. (“Board Approval”) to the consummation by Buyer of the transactions
contemplated herein, and to cause the necessary corporate consideration thereof
to occur no later than the third (3rd) business day following the
date hereof.


 


Section 4.8                                      Guaranty
of Buyer Obligations.


 


(a)                                  In consideration of, and as a
material inducement to, Seller entering into this Agreement, Guarantor hereby
unconditionally and absolutely guaranties unto Seller, its successors and
assigns, the due and complete performance and payment (and not merely
collection) in full of all obligations and liabilities, including without
limitation full, prompt and complete payment of the Purchase Price, of Buyer
pursuant to this Agreement, as and when due and payable, subject to the terms
and conditions of the Agreement (the “Guaranteed Obligations”).  Guarantor agrees that Seller shall be
entitled to enforce directly against Guarantor any of the Guaranteed
Obligations to the extent that Buyer fails to perform its obligations.


 


11

















 


Notwithstanding any of
the foregoing, nothing herein shall be deemed to waive or limit Seller’s
ability to assert any claims, defenses or other rights that Seller may have
under the Agreement.


 


(b)                                 The guaranty provided for in this
Section 4.8 is independent of and in addition to any security or other
remedies which Seller has or may have for performance of any of the obligations
on the part of Buyer; and Guarantor and Buyer agree that Seller shall not be
required to resort to any other security or other remedies before proceeding
upon this guaranty, but that Seller may proceed hereunder against Guarantor and
Buyer, or any of them, at any time it sees fit, independently of or
concurrently with any other remedies it may have.


 


Section 4.9                                      Title
to Horseshoe Property.  Seller shall
deliver the Horseshoe Property to Buyer, free and clear of any and all security
interests, Liens, Encumbrances, restrictions, leases, options to purchase,
options to lease, covenants, assessments, defects, claims or exceptions
(collectively, “Property Restrictions”), except for any Property
Restrictions permitted pursuant to the Horseshoe Purchase Agreement or the
Horseshoe Transfer Documents (defined herein). 
Seller agrees to cooperate with Buyer at no out-of-pocket cost to
Seller, with respect to any claims of Buyer pursuant to the Horseshoe Transfer
Documents.


 


Section 4.10                                Horseshoe
Purchase Agreement.  HHLV shall use
its commercially reasonable efforts to effect the consummation of the transactions
contemplated in the Horseshoe Purchase Agreement pursuant to the terms thereof.


 


Section 4.11                                Exchange
of Information.  Each of Buyer and
Seller agree to use their best efforts to promptly share with the other, as
soon as practical after it becomes known to such party, any information,
notices or communications concerning the environmental conditions affecting the
Horseshoe Property; provided, however,
Seller’s obligation pursuant to this Section 4.11 shall be limited to
information, notices and communications actually received by Seller at the
corporate headquarters of HOC.


 


ARTICLE V.  CONDITIONS TO CLOSING


 


Section 5.1                                      Conditions
to Each Party’s Obligation to Effect the Closing.  The respective obligations of each party to this Agreement to effect
the Closing shall be subject to the satisfaction or waiver by each party prior
to the Closing of the following conditions:


 


(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, rule, regulation which is in effect (whether temporary, preliminary or
permanent) and which prevents or prohibits the consummation of the transactions
contemplated by this Agreement.  No
Governmental Entity or other person shall have instituted any Action (defined
herein) which, if the relief requested were granted, would prevent or prohibit
the consummation of the transactions contemplated by this Agreement.


 


(b)                                 Governmental Approvals. 
Buyer and Seller shall have obtained all Government Approvals required
or necessary in connection with the transactions contemplated by this Agreement
and necessary for ownership and operation of the Horseshoe Property (including,
without limitation any Governmental Approvals necessary under applicable Gaming
Laws for the operation of the Horseshoe Property as described in the Joint
Operating Agreement, and


 


12

















 


approval, licensing or
registration of both Buyer and Seller and their (i) executive officers,
directors, key employees or persons performing management functions similar to
officers, (ii) partners and (iii) limited partners, each, as required by any
Governmental Entity) and such Governmental Approvals shall be in full force and
effect.


 


Section 5.2                                      Additional
Conditions to Obligations of Buyer. 
The obligation of Buyer to effect the Speakeasy Closing is subject to
satisfaction of each of the following conditions prior to the Speakeasy
Closing, any of which may be waived in writing exclusively by Buyer.


 


(a)                                  Representations and Warranties. 
Other than with respect to Section 3.1(c), the representations and
warranties of Seller contained in this Agreement shall be true and correct at
and as of the Speakeasy 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).


 


(b)                                 Closing Deliveries. 
Seller shall have delivered (where applicable), or caused Horseshoe to
have delivered (where applicable), all of the deliverables set forth in
Section 2.2.


 


Section 5.3                                      Additional
Conditions to Obligations of Seller. 
The obligation of Seller to effect the Speakeasy Closing is subject to
satisfaction of each of the following conditions prior to the Speakeasy
Closing, any of which may be waived in writing exclusively by Seller.


 


(a)                                  Representations and Warranties. 
The representations and warranties of Buyer contained in this Agreement
shall be true and correct at and as of the Speakeasy 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).


 


(b)                                 Closing Deliveries. 
Buyer shall have delivered all of the deliverables set forth in
Section 2.2.


 


ARTICLE VI.  TERMINATION AND AMENDMENT


 


Section 6.1                                      Termination.  This Agreement may be terminated at any time
prior to the Closing, or such earlier time as specified below, (with respect to
Sections 6.1(b) through 6.1(i) by written notice by the terminating party to
the other party):


 


(a)                                  by mutual agreement of Seller and
Buyer, each in its sole and absolute discretion;


 


(b)                                 by Seller in the event the Horseshoe
Purchase Agreement is terminated for any reason;


 


(c)                                  by Buyer, on or prior to the Due
Diligence Deadline, if Buyer is not reasonably satisfied with its due diligence
investigation and delivers to Seller a written notice setting forth with
reasonable specificity the reasons for its dissatisfactions with its due
diligence review; provided, however,
that no such termination right shall exist for any matters relating to
environmental conditions affecting the Horseshoe Property, Buyer having already
satisfied itself that the provisions of Article VIII of this Agreement, in
light of the Phase I Report, adequately protect Buyer’s interest regarding
environmental matters;


 


13

















 


(d)                                 by Buyer, on or prior to the third
business day after the date hereof, if Buyer is not able to obtain the Board
Approval;


 


(e)                                  by Buyer if there is a material breach
of any representation or warranty set forth in Article III hereof or any
covenant or agreement to be complied with or performed by Seller pursuant to
the terms of this Agreement or the failure of the condition set forth in
Section 5.1(c), as it applies to Buyer, to be satisfied (and such
condition is not waived in writing by Buyer) on or prior to the Speakeasy
Closing Date (any such breach or failure, a “Seller Default”), provided, however, that Buyer may not
terminate this Agreement prior to the Speakeasy Closing unless Buyer shall have
delivered written notice to Seller of the Seller Default and Seller has had
five business (5) days to cure such Seller Default;


 


(f)                                    by Seller if there is a material
breach of any representation or warranty set forth in Article III hereof
or any covenant or agreement to be complied with or performed by Buyer pursuant
to the terms of this Agreement or the failure of the condition set forth in
Section 5.1(c), as it applies to Seller, to be satisfied (and such condition
is not waived in writing by Seller) on or prior to the Speakeasy Closing Date
(any such breach or failure, a “Buyer Default”), provided, however, that Seller may not
terminate this Agreement prior to the Speakeasy Closing unless Seller shall
have delivered written notice to Buyer of the Buyer Default and Buyer has had
five business (5) days to cure such Buyer Default; or


 


(g)                                 by either Buyer or Seller, if the
transactions contemplated hereby shall not have been consummated within 10
business days following the Horseshoe Closing (the “Outside Date”),
which Outside Date may be extended by Buyer or Seller in its sole discretion
(upon written notice thereof to the other party) twice, in each case for a
period of thirty days; provided, however, that Buyer or Seller may only extend the Outside
Date hereunder, if the only conditions remaining to be satisfied under this
Agreement are those conditions set forth in Section 5.1(a) or 5.1(b); provided, further, that the right to
terminate this Agreement under this Section 6.1(g) shall not be available
to Buyer, if a Buyer Default exists, or to Seller, if a Seller Default exists.


 


Section 6.2                                      Effect
of Termination.


 


(a)                                  Liability. 
In the event of termination of this Agreement as provided in
Section 6.1, this Agreement shall immediately become void and there shall
be no Liability or obligation on the part of Buyer or Seller, or their
respective affiliates or Representatives, other than Sections 4.4, 6.2(b), 8.2,
8.3 and 8.4; provided, however, that nothing contained in this Section 6.2
shall relieve or limit the Liability of either party to this Agreement for any
fraudulent or willful breach of this Agreement.


 


(b)                                 Application of Deposit. 
In the event this Agreement is terminated:


 


(i)                                     pursuant to Section 6.1(b),
6.1(c), 6.1(d), 6.1(e) or 6.1(g), then Buyer shall be entitled to receive the
Deposit from Escrow;


 


(ii)                                  pursuant to Section 6.1(f),
then Seller shall be entitled to receive the Deposit from Escrow; and


 


14

















 


(iii)                               pursuant to Section to 6.1(a),
then Buyer shall be entitled to receive the Deposit from Escrow, unless
otherwise agreed to by the parties.


 


(c)                                  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 Speakeasy Closing is consummated.


 


ARTICLE VII.  TITLE TO REAL PROPERTY


 


Section 7.1                                      Title
Commitment and UCC-11 Search.  No later than the fifth (5th) day after the date of
this Agreement, Seller shall deliver to Buyer the Title Commitment issued to
Seller by the Title Insurer under the Horseshoe Purchase Agreement and
the UCC-11 Search delivered to Seller under the Horseshoe Purchase
Agreement.  Seller shall deliver the
Title Policy to Buyer at the Speakeasy Closing and shall pay the premium for
the Title Policy.  Seller shall provide
Buyer with an updated Title Commitment and UCC Search not later than five (5)
business days prior to the Speakeasy Closing.


 


Section 7.2                                      Survey.  Seller agrees to
deliver to Buyer the Survey (as delivered to Seller by Horseshoe under the
Horseshoe Purchase Agreement), and shall, at Buyer’s sole cost and expense,
cause the Survey to be updated and recertified to Buyer and delivered to Buyer
not less than 5 days prior to the Speakeasy Closing.


 


ARTICLE VIII.  ENVIRONMENTAL REMEDIATION


 


Section 8.1                                      Remediation
and Testing Costs.  Buyer shall pay
the first $1,000,000 of the costs of any Required Remediation and Testing,
regardless of when such costs are incurred. 
If and to the extent the costs of the Required Remediation and Testing
exceed $1,000,000, then Seller shall reimburse Buyer (or its assignees, transferees
and successors-in-interest) for the costs in excess of $1,000,000 (whether
incurred by any of them) up to a total maximum amount of $1,000,000.  If and to the extent such Required
Remediation and Testing costs exceed $2,000,000, Buyer shall remain solely
responsible for such excess costs.  In
no event shall Seller be responsible for any portion of any Required
Remediation and Testing in excess of $1,000,000, regardless of the total costs
of the Required Remediation and Testing. 
Buyer and Seller each agree to promptly notify the other upon receipt of
any notice received prior to the expiration of the Joint Operating Agreement,
relating to Required Remediation and Testing from any governmental authority or
agency with regulatory control or jurisdiction over environmental matters.


 


Section 8.2                                      Payment.  Amounts payable by Seller hereunder, shall
be paid to Buyer within five (5) business days of delivery by Buyer to Seller
of a demand for payment together with copies of applicable invoices and
evidence of payment.


 


Section 8.3                                      Conditions
to Seller’s Obligation.  Seller’s
obligation to pay any amount of the costs of Required Remediation shall be
subject to Seller’s receipt of evidence, reasonably satisfactory to Seller,
that (1) Buyer has paid $1,000,000 towards costs associated with Required Remediation
and (2) any amounts in excess of Buyer’s $1,000,000 are actually related to
Required Remediation.


 


15

















 


ARTICLE IX.  INDEMNIFICATION


 


Section 9.1                                      Indemnification.


 


(i)                                     From and after the Speakeasy Closing,
Seller shall indemnify, save and hold harmless Buyer and its affiliates (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 and costs of mitigation,
that arise out of or are related to the Assumed Liabilities (“Damages”).


 


(ii)                                  In calculating amounts payable to a
Buyer Indemnified Party, the amount of the Damages (a) shall not be duplicative
of any other loss for which an indemnification claim has been made and (b)
shall be computed net of any amounts actually recovered by Buyer Indemnified
Party under any insurance policy with respect to such Damages.


 


(iii)                               Notwithstanding anything to the
contrary contained in this Agreement or otherwise, there shall be no
indemnification pursuant to this Agreement for any special, incidental,
punitive, consequential or similar damages (including damages for lost
profits).


 


Section 9.2                                      Procedure
for Claims between Parties.  If a
claim for Damages is to be made by a Buyer Indemnified Party, the indemnified
party shall give written notice briefly describing the claim and the total
monetary damages sought (each, a “Notice”) to Seller as soon as
practicable after such Buyer Indemnified Party becomes aware of any fact,
condition or event which may give rise to Damages for which indemnification may
be sought under this Article VIII. 
Any failure to submit any such notice of claim to Seller shall not
relieve Seller of any Liability hereunder, except to the extent that Seller
demonstrates that it was actually prejudiced by such failure, and then only to
the extent of such failure.


 


Section 9.3                                      Defense
of Third Party Claims.  If any
lawsuit or enforcement action is filed against Buyer Indemnified Party by any
third party (each, a “Third Party Claim”) for which indemnification
under this Article VIII may be sought, Notice thereof shall be given to
Seller as promptly as practicable.  Any
failure to submit any such notice of claim to Seller shall not relieve Seller
of any Liability hereunder, except to the extent that Seller demonstrates that
it was actually prejudiced by such failure, and then only to the extent of such
failure.  After such Notice, Seller
shall be entitled (i) to take control of the defense and investigation of such
Third Party Claim, (ii) to employ and engage attorneys of its own choice to
handle and defend the same and (iii) to compromise or settle such claim.  The Buyer Indemnified Party may, at its own
cost and expense, participate in the investigation, trial and defense of any
Third Party Claim.


 


ARTICLE X.  MISCELLANEOUS


 


Section 10.1                                Definitions.


 


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


 


“Action” shall
mean any action, claim, suit, litigation, proceeding, labor dispute, arbitral
action, governmental audit, inquiry, criminal prosecution, investigation or
unfair labor practice charge or complaint.


 


16

















 


“Additional Deposit”
has the meaning set forth in Section 1.2(b).


 


“Additional Purchase
Price” has the meaning set forth in Section 1.2(d).


 


“Adjustment Date”
means the date upon which the initial term of the Joint Operating Agreement
terminates, or in the event such term is extended pursuant to the terms
thereof, such later date upon which the term of the Joint Operating Agreement
terminates.


 


“Board Approval” has the meaning set forth in
Section 4.7.


 


“Buyer Default”
has the meaning set forth in Section 6.1(e).


 


“Damages” has the
meaning set forth in Section 8.1(c).


 


“Deposit” has the
meaning set forth in Section 1.2(b).


 


“Due Diligence
Deadline” has the meaning set forth in Section 1.4.


 


“EBITDA” means, for any period, the Net Income of Seller
with respect to the Project (defined in the Joint Operating Agreement) for such
period adjusted to add thereto (to the extent deducted in determining Net
Income for such period), without duplication, the sum of (i) Interest Expense,
(ii) income taxes (excluding any state and local gaming fees, charges or
taxes), and (iii) depreciation and amortization expense as reported in the
income statement of HHLV.


 


“Escrow Agent” has
the meaning set forth in Section 1.5.


 


“Escrow Agreement”
has the meaning set forth in Section 1.5.


 


“Final Lease Amount”
has the meaning set forth in Section 1.3(f).


 


“Gaming Authorities”
means any governmental authority or agency with regulatory control or
jurisdiction over the conduct of lawful gaming or gambling.


 


“Gaming Laws” means
any federal, state, local or foreign statute, ordinance, rule, regulation,
permit, consent, registration, finding of suitability, approval, license,
judgment, order, decree, injunction or other authorization, including any
condition or limitation placed thereon, governing or relating to the current or
contemplated casino and gaming activities and operations and manufacturing and
distributing operations of Buyer, Seller or any of its affiliates.


 


“Government Approvals”
has the meaning set forth in Section 4.5.


 


“Guaranteed
Obligations” has the meaning set forth in Section 4.8(a).


 


“Horseshoe” has
the meaning set forth in the Recitals hereto.


 


“Horseshoe Closing”
means the Closing as defined in the Horseshoe Purchase Agreement.


 


“Horseshoe Property”
means all of the Purchased Assets, including without limitation: (a) the real
property set forth on Exhibit F and (b) the domain names “binions.com,” “binions.org”


 


17

















 


and
“binions.net” and (c) the following telephone numbers: (702) 382-1600 and (800)
937-6537 but excluding: (w) the Primary Assets, (x) the HLC Shares, (y)
the WSOP Chips and (z) any Rodeo Tickets.


 


“Horseshoe Purchase
Agreement” has the meaning set forth in the Recitals hereto.


 


“Horseshoe Transfer Documents”
means all of the documents delivered pursuant to Section 2.2(a), 2.2(b),
2.2(c), 2.2(d) and 2.2(e) collectively.


 


“Initial Deposit”
has the meaning set forth in Section 1.2(a).


 


“Initial Lease Amount”
has the meaning set forth in Section 1.3(f).


 


“Initial Purchase
Price” has the meaning set forth in Section 1.2(c).


 


“Interest Expense”
means, for any period, the aggregate amount (without duplication) of interest
expensed in accordance with GAAP during such period in respect of all
indebtedness of HHLV.


 


“Joint Operating
Agreement” has the meaning set forth in the Recitals hereto.


 


“Knowledge of Seller”
shall mean the current actual knowledge of Jonathan S. Halkyard, Vice President
and Treasurer of Harrah’s Entertainment, Inc., of the inaccuracy of a
statement.  For the avoidance of doubt,
“Knowledge of Seller” is not meant to imply that any independent investigation
was undertaken to determine the accuracy of any such statement.


 


“Lease Buyout” has
the meaning set forth on Section 1.3(b).


 


“Net Income”
means, with respect to HHLV, for any period, the net income (or loss)
(determined in accordance with GAAP) for such period, adjusted to exclude (only
to the extent included in computing such net income (or loss) and without
duplication) all gains or losses which are either extraordinary (as determined
in accordance with GAAP) or are either unusual or nonrecurring (including from
the sale of assets outside of the ordinary course of business or from the
issuance or sale of capital stock).


 


“Phase I Report”
shall mean that certain ASTM Phase I Site Assessment of the Horseshoe Property
conducted by Western Technologies Inc. and to be delivered to Seller prior to
February 13, 2004, and all appendices, exhibits attached thereto, and any
and all reports or references cited therein.


 


“Property Restrictions”
has the meaning set forth in Section 4.9.


 


“Purchase Price”
has the meaning set forth in Section 1.2.


 


“Renegotiated Lease”
has the meaning set forth in Section 1.3(b).


 


“Required Remediation
and Testing” shall mean any (i) investigation, testing, monitoring, study,
remediation, cleanup, construction, operation and maintenance, oversight,
implementation or other activity at or in the vicinity of the Horseshoe
Property that relates to the


 


18

















 


environmental conditions
identified in the Phase I Report, (ii) such other environmental conditions that
require such activities under applicable environmental laws (including without
limitation, removal, abatement, remediation or repair of asbestos-containing
building materials or lead-based paints that would be required by applicable
law or would be performed by a reasonably prudent operator in order to reopen
the Hotel/Casino and to commence operations of the Hotel/Casino in
substantially the same manner as the Hotel/Casino was operated prior to
January 9, 2004) or (iii) any other investigation, testing, monitoring,
study, remediation, cleanup, construction, operation and maintenance or
oversight required by Environmental Laws (as defined in the Joint Operating
Agreement) prior to the expiration of the Joint Operating Agreement.  For the avoidance of doubt, the term
“Required Remediation and Testing” shall not include any environmental
remediation that may be required in connection with any remodeling, renovation
or construction projects that may occur at the Hotel/Casino; all such projects
(and any associated costs) shall be addressed in the Joint Operating Agreement.


 


“Rodeo Tickets”
has the meaning set forth in Section 4.2.


 


“Seller Default”
has the meaning set forth in Section 6.1(e).


 


“Seller Property”
has the meaning set forth in the Recitals hereto.


 


“Speakeasy Closing”
has the meaning set forth in Section 2.1.


 


“Speakeasy Closing
Date” has the meaning set forth in Section 2.1.


 


“WSOP Chips” means
those certain gaming chips and tokens relating to and used in connection with,
the operation of the World Series of Poker or bearing the World Series of Poker
trademark in existence prior to the Speakeasy Closing.


 


Section 10.2                                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
the 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 Nevada, applicable to contracts
executed in and to be performed entirely within the State of Nevada.


 


(b)                                 Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of any Nevada State court, or Federal court of the
United States of America, sitting in Nevada, 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 (A) agrees not to commence any such action or
proceeding except in such courts, (B) agrees that any claim in respect of
any such action or proceeding may be heard and determined in such Nevada State
court or, to the extent permitted by Law, in such Federal court,
(C) 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 Nevada State or Federal court and
(D) waives, to the fullest extent permitted by Law, the defense


 


19

















 


of an inconvenient forum
to the maintenance of such action or proceeding in any such Nevada State or
Federal court.  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 11.3.  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 EACH PARTY 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 (A) 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, (B) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND
(D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.2(c).


 


20

















 


Section 10.3                                Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (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 Seller, to:

  

  Harrah’s Operating Company, Inc.

  c/o Harrah’s Entertainment, Inc.

  One Harrah’s Court

  Las Vegas, NV 89199-4312

  Attn:  General Counsel and Jonathan
  Halkyard

  Telecopy:  (702) 407-6286

  	
   

  	
  with a copy to:

  

  Latham & Watkins LLP

  650 Town Center Dr., Suite 2000

  Costa Mesa, CA 92626-1925

  Attn:  Charles K. Ruck, Esq.

  Telecopy:  (714) 755-8290

  
	
   

  	
   

  	
   

  
	
  (b)                                 if to Buyer, to:

  

  Speakeasy Gaming of Fremont, Inc.

  3227 Civic Center Drive

  Las Vegas, NV 89030

  Attention: Roger Szepelak

  Telecopy: (702) 399-4108

  	
   

  	
  with a copy to:

  

  Ruben & Aronson, LLP

  4800 Montgomery Lane, Suite 150

  Bethesda, MD 20814

  Attention: Robert L. Ruben, Esq.

  Telecopy: (301) 951-9636

  



 


Section 10.4                                Miscellaneous.


 


(a)                                  Interpretation. 
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section or Exhibit or
Schedule of this Agreement unless otherwise indicated.  The table of contents 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.  Whenever the words “include,” “includes” or “including” are used
in this Agreement they shall be deemed to be followed by the words “without limitation.”


 


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


 


(c)                                  Entire Agreement; No Third Party
Beneficiaries.  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.


 


(d)                                 Confidential
Information.  Until the Speakeasy
Closing, Buyer agrees for itself and its affiliates, agents, representatives
and consultants to hold in the strictest confidence and not to disclose to any
person, entity, party, firm or corporation (other than agents or
representatives of Buyer who are also bound by this Section 10.4(d))
without the prior express written consent of Seller (except as may be advised
by outside counsel to be disclosed for purposes of compliance with laws and
regulations including but not limited to applicable securities laws, gaming
laws and/or NASDAQ Marketplace Rules) any of Seller’s confidential


 


21

















 


data, whether related to
the Project or to general business matters, which shall come into their
possession or knowledge (unless such information is already publicly available
through no action of Speakeasy). 
Without limiting the foregoing, the parties agree that the Purchase
Price and other economic terms relating to or contained in this Agreement shall
remain confidential until the Speakeasy Closing.  Thereafter, Speakeasy and Guarantor may make such public
disclosures as advised by their outside counsel for purposes of compliance with
laws and regulations including but not limited to applicable securities laws,
gaming laws and/or NASDAQ Marketplace Rules.


 


(e)                                  Severability. 
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner 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.


 


(f)                                    Assignment. 
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 express written consent of
each party, except that either party may, without the consent of the other
party, transfer or assign all of its rights hereunder to a wholly-owned
subsidiary or affiliate of such party. 
Any assignment in violation of the preceding sentence shall be void.


 


(g)                                 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.


 


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


 


(i)                                     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.


 


(j)                                     Amendment. 
This Agreement may not be amended except by an instrument in writing
signed on behalf of each of Buyer and Seller.


 


(k)                                  Extension; Waiver. 
At any time prior to the Speakeasy Closing, Buyer and Seller, by action
taken or authorized by appropriate corporate action may, to the extent legally
allowed


 


22

















 


(i) extend the time
for or waive the performance of any of the obligations or other acts of the
other parties 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.


 


(l)                                     No Warranty. 
Seller makes no representation or warranty, express or implied, at law
or in equity, in respect of the Horseshoe Property, including, without
limitation, with respect to merchantability, habitability or fitness for any
particular purpose, and any such other representations or warranties are hereby
expressly disclaimed.


 


(m)                               Time of Essence. 
Time is of the essence with respect to this Agreement and all terms,
provisions, covenants and conditions hereof.


 


[SIGNATURE PAGE FOLLOWS]


 


23

















 


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.


 


 


	
   

  	
  HHLV MANAGEMENT
  COMPANY, LLC,

  
	
   

  	
  a Nevada limited
  liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Harrah’s
  Operating Company, Inc.,

  
	
   

  	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  	
  Its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jonathan S.
  Halkyard

  	
   

  
	
   

  	
   

  	
  Name:

  	
   Jonathan S. Halkyard

  	
   

  
	
   

  	
   

  	
  Its:

  	
  VP and Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MTR
  GAMING GROUP, INC.,

  
	
   

  	
  a
  Delaware corporation,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Edson R. Arneault

  	
   

  
	
   

  	
  Name:

  	
   Edson R. Arneault

  	
   

  
	
   

  	
  Its:

  	
  President
  and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPEAKEASY GAMING OF
  FREMONT, INC.,

  
	
   

  	
  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Roger M. Szepelak

  	
   

  
	
   

  	
  Name:

  	
   Roger M. Szepelak

  	
   

  
	
   

  	
  Its:

  	
  VP
  and Chief Operating Officer

  	
   

  
												



 

















 


Table of Exhibits


 


	
  Exhibit A – Joint
  Operating Agreement

  
	
  Exhibit B – Escrow
  Agreement

  
	
  Exhibit C – Main
  Property Lease

  
	
  Exhibit D –
  Intellectual Property License Agreement

  
	
  Exhibit E –
  Schedule of Leases

  
	
  Exhibit F –
  Schedule of Real Property