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EXHIBIT 10.1  

 
 

AGREEMENT OF SALE  
    

        THIS AGREEMENT OF SALE (this "Agreement") is made this 3rd day of November, 2005 between  PALM MEADOWS ESTATES,
 LLC, a Delaware limited liability company, having an address at 337 Magna Drive, Aurora, Ontario, Canada L4G7K1
("Seller") and TOLL BROS., INC., a Pennsylvania corporation, having an address at 250 Gibraltar Road, Horsham, PA 19044 ("Buyer"). 

 
 

WITNESSETH:    
    

        In consideration of the covenants and provisions contained herein, and subject to the terms and conditions hereinafter set forth, the parties hereto, intending to
be legally bound, agree as follows: 

	1.
	Sale.    Seller
hereby agrees to sell and convey to Buyer, who hereby agrees to purchase from Seller, that certain tract of land consisting of
approximately 157.3 acres, located in Palm Beach County, Florida, more particularly described in Exhibit "A" attached hereto (the "Property"). The Property includes (i) all
tenements, hereditaments, appurtenances, easements, covenants, permits, approvals, escrows and other rights arising from or appertaining exclusively to the Property; (ii) all structures,
fixtures, systems, improvements, topsoil, trees, shrubbery and landscaping situated on, in or under or used exclusively in connection with the Property; (iii) all agreements that are in force
and effect and exclusively benefit the Property; (iv) all intangible property now or hereafter owned by Seller and used by Seller exclusively in connection with the Property; and (v) all
surveys, plans, specifications, environmental records, reports and other engineering information to which Seller knowingly has in its possession, or obtains prior to Closing (as hereinafter
defined), relating exclusively to the Property (collectively, "Seller's Plans"). 

In
addition to the Property, Seller agrees to sell and convey to Buyer, who hereby agrees to purchase from Seller, density rights for up to 236 residential units attributable to the Palm
Meadows Thoroughbred Training Center (the "Training Center") located adjacent to the Property and owned by Seller's affiliate, the exact extent of such density rights to be finally determined
during the due diligence period and subject to the approval of Buyer and Seller(the "Density Rights"). 

	2.
	Purchase
Price.    The purchase price (the "Purchase Price") for the Property, together with the Density Rights, shall be
Fifty-One Million Dollars ($51,000,000). The Purchase Price shall be paid as follows:

	(a)
	Upon
the date hereof, Buyer shall deliver to Akerman, Senterfitt & Eidson, P.A., as escrow agent ("Escrow Agent"), Buyer's check in the amount of One Million Dollars
($1,000,000) (such amount and the amount specified in the next sentence, together with any interest thereon, the "Deposit") to be held in escrow in accordance with this Agreement. Concurrently with
the expiration of the Due Diligence Period (as defined below), Buyer shall deliver to Escrow Agent an additional $2,000,000, bringing the total amount of the Deposit to $3,000,000 plus any
interest thereon. Upon the expiration of the Due Diligence Period, the Deposit shall become non-refundable, except in the event of a failure of title, condemnation or a default by Seller.

	(b)
	At
Closing, the Deposit shall be paid to Seller and credited to Buyer and Buyer shall pay Seller the balance of the Purchase Price, subject to all adjustments as provided herein, by
certified or title company check or by wire transfer of immediately available funds.

	3.
	Title.

	(a)
	Within
ten (10) days from the date hereof or as soon thereafter as reasonably possible, Seller shall, at Seller's expense, provide to Buyer an owner's title insurance
commitment applicable to the Property, dated no earlier than forty (40) days prior to the date hereof (the "Commitment") from First American Title Insurance Company (the "Title
Company"), which shall set forth the Title Company's commitment to insure in Buyer good and marketable title to the Property as of the Closing, free and clear of all liens, subject, however, to any
existing privileges or rights of public service companies and any other easements, covenants, and restrictions of record, and any matters approved of by Buyer in accordance with
Section 3(b) below (such matters, collectively, the "Permitted Exceptions"); otherwise title to the Property shall be good and marketable and such as will be insured by the Title
Company, at such Title Company's regular rates. At Closing, Seller shall provide to the Title Company such releases, documents, indemnities and affidavits (including an affidavit of title) as shall be
necessary to permit Buyer to obtain title insurance without exception for filed and unfiled mechanics liens and shall also provide to the Title Company a form 1099S information return relating
to the Property. Without limiting the foregoing, at Closing, Title Company shall deliver to Buyer an endorsement to the Commitment which shall update the status of record title of the Property to the
most current date available from the Title Company, delete all title exceptions that are not Permitted Exceptions, delete any new exceptions not initially appearing in the Commitment, and delete the
gap period exception. The cost of the update endorsement shall be borne by Seller. The cost of any other endorsements requested by Buyer shall be borne by Buyer. Seller shall pay the title premium for
the base title policy. 

3

 

	(b)
	Concurrent
with providing the Commitment, Seller shall deliver to Buyer copies of all documents listed on Schedule B of the Commitment. Buyer shall have thirty (30) days
from Buyer's receipt of the Commitment (and all Schedule B documents) to notify Seller of any matters of title set forth in the Commitment which are disapproved by Buyer. The failure of
Buyer to deliver any such written notice of disapproval within the aforesaid period shall be deemed to constitute Buyer's approval of the condition of title of the Property as shown in the Commitment
(or, with respect to any updated or amended Commitment, on or before the thirtieth (30th) day following Buyer's receipt of such updated or amended Commitment), excepting
any matter(s) susceptible of satisfaction and removal at or prior to Closing by the payment of money, including without limitation unpaid mortgages, judgments, taxes, sewer and water charges,
and assessments (each a "Liquidated Lien" and, collectively, the "Liquidated Liens"), which Liquidated Liens Seller shall satisfy at or prior to Closing. If Buyer disapproves of any matter shown in
the Commitment (or any update or amendment thereof) by delivering timely written notice of such disapproval to Seller, as provided above, Seller shall notify Buyer within ten (10) days
of receiving Buyer's notice of disapproval whether or not Seller will attempt to cure such title defects. If Seller shall be unwilling or unable within thirty (30) days to eliminate, or if the
Title Company does not agree to insure over (in a manner satisfactory to Buyer in its sole discretion), any such matter or matters within the aforesaid time periods, then Buyer shall elect, by
written notice to Seller delivered within seven (7) days after the expiration of the aforesaid period of thirty (30) days (or within seven (7) days after Seller notifies
Buyer of Seller's unwillingness or inability to correct any such matter, as the case may be), either:

	(i)
	to
waive such disapproval and to accept title to the Property subject to such title matters disclosed by the Commitment (or an update thereto, if applicable)
which Seller shall be unable or unwilling to correct, provided that Seller shall pay or satisfy all Liquidated Liens at Closing; or

	(ii)
	to
terminate this Agreement, in which event the Deposit shall immediately be returned to Buyer. In the event of such termination, this Agreement shall be null and void
and the parties shall have no further liability or obligation hereunder.

	4.
	Closing.    The
closing on the Property ("Closing") shall take place at the office of Seller's Attorney in Palm Beach County, Florida on the date
that is thirty (30) days after the expiration of the Due Diligence Period.

	5.
	Possession.    Possession
is to be given at the time of Closing, free of all leases and other occupancy, by special warranty deed
(the "Deed"). At Closing, Seller shall also execute and deliver to Buyer an assignment of the Density Rights, which shall be sufficient to transfer all of the Density Rights to Buyer for
application to the Property. 

4

 
	6.
	Apportionments.    Taxes
shall be apportioned pro-rata as of the Closing date. For purposes of making such apportionments, Seller
shall be responsible for producing on or prior to Closing copies of all tax bills and receipts of payment or tax searches from the taxing authority. Any transfer taxes shall be the responsibility of
Seller and Seller shall pay any roll-back taxes and/or agricultural recoupment taxes if and when owing as of the date hereof. Seller shall also be responsible to pay the cost of
documentary stamps due on the Deed and title premium and expenses for the Commitment. Buyer shall pay the cost of recording the Deed and the assignment of Density Rights, the cost of any survey
required for title insurance purposes and any and all costs associated with Buyer's financing this transaction including, but not limited to, mortgagee title insurance. All other costs in connection
with the Closing shall be paid in accordance with local practice in Palm Beach County.

	7.
	Formal
Tender Waived.    Formal tender of an executed deed and purchase money is hereby waived in order to declare default.

	8.
	Buyer's
Default.    Should Buyer fail to close on the date of Closing under Section 4 above, or, within ten (10) days after receipt
of written notice from Seller, perform any of Buyer's obligations under this Agreement, then the Deposit shall be retained by Seller as Seller's sole and exclusive remedy for such breach as liquidated
damages.

	9.
	Seller's
Default.    Should Seller violate or fail to fulfill and perform any of the terms or conditions of this Agreement within thirty
(30) days after receipt of written notice from Buyer, then Buyer shall be entitled to pursue any right, power or remedy available to Buyer at law or in equity, including the right to
specifically enforce this Agreement against Seller, provided that, in no event shall Buyer be entitled to damages in excess of $3,000,000.00 (which is in addition to the return of the Deposit) or to
any consequential or punitive damages at all.

	10.
	Condemnation.    If,
prior to Closing, any portion of the Property is condemned, Buyer shall have the option of (i) terminating this
Agreement, in which event this Agreement shall be null and void and the Deposit shall be refunded to Buyer, or (ii) proceeding with the Closing, in which event the entire condemnation proceeds
shall be delivered to Buyer at Closing hereunder (and, in connection with the foregoing, Seller expressly acknowledges and agrees that Seller will not settle any proceeding or agree to any
condemnation award or compensation without Buyer's prior written consent, given or withheld in Buyer's sole discretion), or, if Seller has not yet received such proceeds, then the right to receive
such proceeds shall be assigned to Buyer at Closing hereunder by instrument acceptable to Buyer. Buyer shall exercise its option within fifteen (15) days after it receives written notice from
Seller of any such condemnation together with all information reasonably necessary for Buyer to make an informed decision, including, without limitation, the amount of compensation most recently
offered by the condemning authority.

	11.
	Compliance
with Notices, Ordinances.    Seller shall comply with any notices given or ordinances enacted by any governing authority prior to the
Closing date for which a lien could be filed against the Property.

	12.
	Brokers.    Buyer
and Seller mutually represent to each other that no brokers, agents or finders brought about this Agreement or the conveyance
of the Property to Buyer pursuant hereto. Buyer and Seller each agree to indemnify and hold the other harmless from and against any liability arising from its own breach of the above representation.

	13.
	Due
Diligence Period.    Between the time of execution of this Agreement and Closing, Seller agrees that Buyer, its representatives and
consultants shall have the right to enter upon the Property to perform engineering, environmental and such other feasibility studies as Buyer determines in its sole discretion, provided that Buyer
give at least twenty-four (24) hours prior notice for each such entry to Seller's agent, Jan Hansen, c/o MEC Developments, Inc., 901 South Federal Highway, Hallandale
Beach, Florida 33009, fax number (954) 455-6600 and telephone number (954) 457-6100. Buyer and Seller further agree that from the date of this Agreement
until February 28, 2006 (the "Due Diligence Period"), should Buyer desire not to purchase the Property as a result of such studies, or as a result of Buyer's dissatisfaction with the
Property based upon Buyer's review of Seller's Plans or for any other reason whatsoever, Buyer shall have the right to terminate this Agreement upon written notice to Seller, in which case the Deposit
shall be returned to Buyer (except in the case of a termination for a reason that is not a Good Faith Termination, in which case the disbursement of the Deposit shall be governed by the following
paragraph) and there shall be no further liability of the parties hereunder. Failure to notify Seller prior to the expiration of the Due Diligence Period shall act as Buyer's election to waive this
contingency. 

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In
the event Buyer terminates this Agreement during the Due Diligence Period for a reason that is not a Good Faith Termination (as such term is hereafter defined), a portion of the Deposit
equal to $250,000 shall be delivered to Seller in order to compensate Seller for (i) Seller's costs and expenses negotiating this Agreement, (ii) the time and effort of Seller spent
fulfilling its obligations under this Agreement prior to the termination by Buyer, and (iii) the lost opportunities and carrying costs incurred by Seller in holding the Property off of the
market pursuant to this Agreement during the Due Diligence Period, and the balance of the Deposit shall be returned to Buyer. Upon the disbursement of the Deposit in accordance with the preceding
sentence, there shall be no further liability of the parties hereunder as the result of a termination by Buyer for a reason that is not a Good Faith Termination. 

For
purposes hereof, a "Good Faith Termination" means any termination by Buyer during the Due Diligence Period for a reason which is related to the feasibility of the intended development of the
Property (which relationship shall be determined by Buyer in the exercise of its reasonable discretion), such as: (1) the existence of any wetlands or endangered species on the Property,
(2) the environmental condition of the Property, (3) the condition of title to the Property or any matter disclosed by a survey of the Property, (4) the ability of existing
off-site infrastructure (including roads, water and sewer capacity) to serve the Property for Buyer's intended use, (5) the ability of Buyer to obtain all necessary governmental and
quasi-governmental entitlements (including without limitation density rights) to develop the Property for Buyer's intended use, (6) unsatisfactory conditions set forth in traffic reports,
(7) concurrency issues related to the development of the Property, and (8) off-site conditions which could have a material negative impact on the intended development of the
Property. 

If
Buyer causes any damage to the Property as a result of its studies performed pursuant to this Section 13, and Buyer elects not to purchase the Property, Buyer shall repair such
damage. Buyer may not conduct any invasive or destructive testing without the prior written consent of Seller. Buyer or Buyer's agents will carry not less than One Million Dollars ($1,000,000.00)
comprehensive general liability insurance with contractual liability endorsement that insures Buyer's indemnity obligations hereunder, and, upon request of Seller, will provide Seller with written
evidence of same. Buyer shall indemnify, defend and hold Seller free and harmless from and against any and all losses, liabilities, damages, costs and expenses, including reasonable attorneys' fees
arising from or in any way related to such physical inspections and any further inspections Buyer or any of its agents or representatives may conduct upon the Property prior to the Closing. 

	14.
	"AS
IS" Sale; Proximity to Training Center.

	(a)
	Buyer
acknowledges and agrees that except for the representations and warranties of Seller set forth in this Agreement that expressly survive Closing, and in any
document(s) delivered at Closing, neither Seller nor anyone acting on Seller's behalf has made any representation or warranty, either express, implied or statutory, with respect to the
Property, its present condition (environmental, physical or otherwise) or its fitness or suitability for a particular purpose, merchantability or compliance with governmental laws, ordinances or
regulations. Buyer agrees that except for the representations and warranties of Seller set forth in this Agreement that expressly survive Closing, and in any document(s) delivered at Closing,
it is purchasing the Property AS IS and WITH ALL FAULTS based on Buyer's independent investigation and inspection of the Property and Buyer's independent evaluation of the Property and associated due
diligence that Buyer has the right and opportunity to evaluate, including applicable statutes, ordinances, governmental regulations and other laws. Buyer hereby acknowledges that any studies, plans,
surveys, reports or any similar documentation provided by Seller to Buyer is done so as an accommodation to Buyer and not as an inducement to Buyer nor as a representation, confirmation or warranty of
any kind by Seller with respect to such documentation, and that Seller does not bear or assume any liability whatsoever to Buyer with respect to Buyer's use of or reliance upon such documentation. 

6

 

	(b)
	Buyer
expressly acknowledges that the Training Center located adjacent to the Property is used for the boarding and running of horses, the housing of Training Center workers, and
other uses related to the operations of the Training Center. Buyer shall be entitled to determine during the Due Diligence Period whether Buyer believes the equestrian usage of the Training Center
would in any way interfere with Buyer's intended development of the Property. In the event the Closing occurs, Seller is selling the Property to Buyer in reliance upon Buyer's agreement that it will
not at any time in the future challenge Seller's right to use the Training Center for any legally permitted use, including, without limitation, composting, and this provision will survive Closing and
the delivery of the deed. 

Further,
Buyer covenants and agrees that Buyer will include in its agreements of sale with third-party homebuyers for homes at the Property, a provision in which the third-party homebuyer acknowledges
and accepts the existence of the Training Center and the current and existing condition, use and operations of the Training Center. Buyer will also make reference to the current existence of the
Training Center in any public offering statement and Declaration of Covenants for the Property. 

	15.
	Seller's
Representations and Warranties.    Seller represents and warrants to Buyer as follows:

	(a)
	The
Property and the Density Rights are not subject to any lease, option, right of first refusal or agreement of sale. Seller has the full power and authority to execute, deliver and
perform this Agreement and all agreements and documents referred to in this Agreement. The person who has executed this Agreement on behalf of Seller has the authority to do so.

	(b)
	There
is no action, suit or proceeding pending or threatened against Seller or, to the best of Seller's knowledge and belief, affecting the Property or relating to or arising out of
the ownership of the Property, including without limitation, general or special assessment proceedings of any kind, or condemnation or eminent domain actions or proceedings of any kind.

	(c)
	Other
than the receipt by Seller of a release of its Mortgage, which Seller covenants to obtain prior to Closing, neither the entering into of this Agreement, the consummation of the
sale, nor the conveyance of the Property or the assignment of the Density Rights to Buyer, has or will constitute a violation or breach of any of the terms of any contract or other instrument to which
Seller is a party or to which Seller or the Property is subject.

	(d)
	To
the best of Seller's knowledge and belief and except as may be disclosed by Seller to Buyer in writing, no portion of the Property contains any substance which may be classified as
a hazardous, toxic, chemical or radioactive substance, or a contaminant or pollutant (together, "Hazardous Substances") under applicable federal, state or local law, ordinance, rule or regulation
("Applicable Laws") that may require any cleanup, remediation or other corrective action pursuant to such Applicable Laws. Except for the farming operation formerly conducted on the Property, Seller
has not used any portion of the Property, nor given any other person or entity the right to use the Property, for the purpose of storage, generation, manufacture, disposal, transportation or treatment
of any such Hazardous Substances in violation of Applicable Laws. Further, to the best of Seller's knowledge and belief, no underground storage tanks are or have been located at the Property.

	(e)
	To
the best of Seller's knowledge and belief, no written notice by any governmental or other public authority has been served upon Seller, or anyone on its behalf, relating to
violations of any applicable housing, building, safety, fire or other ordinances or any of the Applicable Laws.

	(f)
	Seller's
Plans (if any) will be provided to Buyer by Seller promptly upon request following the execution of this Agreement, and have been or will be paid for in full by
Seller. 

7

 

	(g)
	Seller
will promptly cooperate (at no cost to Seller) with Buyer in a commercially reasonable manner in connection with Buyer's efforts to obtain permits and approvals for the
residential development of the Property. In furtherance thereof, after Closing, Seller shall promptly execute such applications and other governmental documentation as Buyer deems necessary in
connection with such permits and approvals. Further, prior to Closing, Seller agrees to sign land development applications, provided that Seller reasonably approves the content of such applications,
which consent shall not be unreasonably withheld, and further provided that such filings and applications will have no permanent effect on the zoning or current use of the Property in the event that
Buyer did not complete Closing. 

Terms
such as "to the best of Seller's knowledge and belief" mean that no employee of Seller directly involved in the operation of the Property has any actual knowledge contrary to the stated fact and
that such employee has no duty to investigate or inquire so as to obtain any such actual knowledge to the contrary. 

	16.
	Buyer's
Representations and Warranties

	(a)
	Buyer
has the full power and authority to execute, deliver and perform this Agreement and all agreements and documents referred to in this Agreement. The person who executed this
Agreement on behalf of Buyer has the authority to do so.

	(b)
	Neither
the entering into of this Agreement or the consummation of this purchase will constitute a violation or breach of any of the terms of any contract or other instrument to which
Buyer is a party.

	17.
	Operations
Pending Closing.    Between the date of execution of this Agreement and the Closing date:

	(a)
	Seller
shall maintain the Property, or cause the Property to be maintained, in its present state of repair and in substantially the same condition as on the date hereof except for
changes in its condition effected by extreme weather events or similar conditions beyond the power of Seller to prevent.

	(b)
	Excluding
back-up offers, which Seller shall have the right to accept so long as they are expressly conditioned upon Buyer terminating this Agreement during the Due
Diligence Period or otherwise failing to close, Seller shall not enter into any lease, agreement of sale, option, or any other agreement or contract affecting the Property. Seller shall not grant any
easements or further encumber the Property, without the prior written consent of Buyer.

	(c)
	Seller
shall comply with all covenants, conditions, restrictions, laws, statutes, rules, regulations and ordinances applicable to the Property for which any such
non-compliance would create an obligation or liability running with the land to Buyer's detriment.

	(d)
	Seller
shall not, in violation of any Applicable Laws, use, manufacture, store, generate, handle, or dispose of any Hazardous Substances, or use or permit the Property to be used for
such purposes, or emit, release or discharge any such Hazardous Substances into the air, soil, surface water or groundwater comprising the Property.

	18.
	Conditions
to Buyer's Obligations.    Buyer's obligation to complete Closing under this Agreement is expressly conditioned upon the following,
and Buyer shall have the right, exercisable at any time and from time to time, to waive any one or more of such conditions without affecting any of Buyer's other rights, conditions or obligations:

	(i)
	all
representations and warranties of Seller herein being true and correct in all material respects as of the date of this Agreement and at the Closing date; and 

8

 

	(ii)
	Seller
having performed all of its obligations under Section 17. 

If
any of the foregoing conditions are not satisfied as of Closing, Buyer may either waive such condition and proceed to Closing or give Seller written notice specifying the condition not satisfied,
whereupon Seller shall have thirty (30) days in which to cause such condition to be satisfied. If, after such thirty (30) day period, Seller has not caused the
condition(s) described in Buyer's written notice to be satisfied, Buyer's sole options shall be to close this transaction, without adjustment in Purchase Price or any other change in the terms
of Closing, or to terminate this Agreement, whereupon the Deposit shall be returned to Buyer in full and the parties shall have no further obligations hereunder. In no event shall the failure of any
of the conditions under this paragraph be deemed an event of Seller's default, except the failure to comply with Sections 15(b), (c) and (d) which shall be
considered a default if not cured within such 30-day period. 

	19.
	Survival.    Notwithstanding
any Section of this Agreement that provides that a party or parties shall have no further liability or obligations
to the other in the event of a termination of this Agreement, Sections 6, 12, 13, 14, 23 and 24 of this Agreement shall survive Closing or such earlier termination of the
Agreement. The representations warranties and covenants set forth in Sections 15, 16 and 17 shall survive the Closing for twelve (12) months. Any representation, warranty,
covenant, promise or obligation in this Agreement which is not by expressed language intended to survive Closing shall merge into the deed of conveyance.

	20.
	Notices.    Any
notice required to be given hereunder shall be given in writing and either (i) sent by United States registered or
certified mail, with postage prepaid, return receipt requested, (ii) sent by Federal Express or another nationally recognized overnight courier, (iii) hand delivered, or (iv) sent
by facsimile transmission with a hard copy sent on the same day by a nationally recognized overnight courier. All notices shall be deemed to have been given upon actual delivery or upon documented
first-attempted delivery, if actual delivery is refused or otherwise not possible. All notices shall be addressed to the following address or at such other address as may hereafter be substituted by
notice in writing therefor. 

To
Seller: 

Jan
Hansen

c/o MEC Developments, Inc.,

901 South Federal Highway

Hallandale Beach, Florida 33009

Telephone: (954) 457-6100

Fax: (954) 455-6600 

With
a copy to: 

Scott
Daruty, Esquire

c/o Magna Entertainment Corp.

285 West Huntington Drive

Arcadia, California

Telephone: (626) 574-6322

Fax: (626) 821-1559 

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To
Buyer: 

Toll
Bros., Inc.

250 Gibraltar Road

Horsham, PA 19044

Attn: Don Liu, Esquire

Senior Vice President and General Counsel

Telephone: (215) 938-8006

Fax: (215) 938-8255 

With
a copy to: 

Ed
Weber, Senior Vice President

(at same address) 

With
a copy to: 

Toll
Bros., Inc.

Florida East Coast Division

5300 West Atlantic Avenue, Suite 300

Delray Beach, Florida 33484

Attn: Michael Donnelly, Vice President

Telephone: (561) 637-8890

Fax: (561) 637-0262 

	21.
	Recording.    No
memorandum of this Agreement may be recorded in the recorder's office, registry of deeds or any other office or place of public
record.

	22.
	Entire
Agreement.    This Agreement contains the entire agreement between Seller and Buyer and there are no other terms, obligations, covenants,
representations, statements or conditions, oral or otherwise, of any kind whatsoever. This Agreement may be amended only by a writing signed by both parties.

	23.
	Assignment;
Right of First Refusal.    The identity of Buyer, its reputation for excellence in residential development and its high standards
and development capabilities are all inducements for Seller to sell the Property on the terms and conditions of this Agreement. As an affiliate of the owner of adjacent property, it is Seller's
expectation that the Property will be developed as a residential community consisting of Toll Brothers homes and homes built by other homebuilders of comparable size and style as the Toll Brothers
homes constructed on the Property. Therefore, this Agreement shall not be assignable by Buyer to any entity in which Buyer does not retain at least a fifty percent (50%) interest. 

Furthermore,
Magna Entertainment Corp. ("MEC") shall have the following rights with respect to the sale of any part of the Property (except for a sale of residential units to homebuyers in the
ordinary course of Buyer's business): 

	(i)
	MEC
shall have a right of first refusal with respect to any bulk sale of the entire Property which occurs prior to the time Buyer begins to construct homes on the
Property. MEC shall have 15 days after written notice from Buyer to elect to exercise said right. If MEC exercises such right, then MEC shall re-purchase the Property at the lesser
of (a) the purchase price to be paid by said bulk purchaser, and (b) the price paid by Buyer under this Agreement, plus the cost of any infrastructure improvements installed by Buyer at
the Property, and the carrying costs incurred by Buyer for the Property, including interest on the Purchase Price at the rate of ten percent (10%) per annum. 

10

 

	(ii)
	For
a period of seven (7) years from the date of Closing, MEC shall have a right of first refusal with respect to the sale of any improved or partially improved
lots at the Property. MEC shall have 15 days after written notice from Buyer to elect to exercise said right in writing. If MEC exercises such right, then MEC shall purchase such lots on the
same terms and conditions of such proposed sale. Notwithstanding the foregoing, the right of first refusal granted under this Section 22 shall not apply to the sale by Buyer of up to 20% of the
approved lots yielded by the Property to parties other than third-party homebuyers, provided that Buyer has recorded against the Property architectural restrictions which provide that any homes built
at the Property must be consistent and compatible with homes constructed by Toll Brothers at the Property and such homes are of the same size, quality, color palate and style as the homes constructed
by Toll Brothers at the Property.

	(iii)
	The
rights under this Section 22 shall be referenced in the deed, and shall expressly state that they are not binding on any third party homebuyer. 

For
purposes of this right of first refusal, a sale of the Property shall include, but not be limited to a sale of shares, membership interests or other ownership rights in the entity to whom Seller
conveys title pursuant to this Agreement to any person or entity that is not then owned and controlled by Buyer. Furthermore, for purposes of this right of first refusal, the Property shall include
the Density Rights. 

This
Agreement shall extend to and bind the permitted assigns of the respective parties hereto. 

	24.
	Miscellaneous.

	(a)
	As
used herein, the phrases "the date hereof" and "the date of this Agreement" shall mean the date at the beginning of this Agreement.

	(b)
	This
Agreement may be signed in one or more counterparts (or with counterpart signature pages) which, taken together, shall constitute a fully executed Agreement and shall be
considered a single document.

	(c)
	In
the event any dispute between the parties hereto should result in arbitration or litigation, or if any action at law or in equity is taken to enforce or interpret the terms and
conditions of this Agreement, the prevailing party shall (in addition to any other relief to which that party may be entitled) be reimbursed for all reasonable costs and expenses incurred in
connection with mediation or litigation, including, without limitation, reasonable attorneys' fees, accountants' fees and experts' fees incurred at trial and all appellate levels.

	(d)
	If
any date on which a time period scheduled to expire herein is a Saturday, Sunday or holiday, the subject date shall be extended to the next business day.

	(e)
	Buyer
acknowledges that Seller will issue a press release upon execution of this Agreement, which press release will make reference to this Agreement, including the parties hereto and
the purchase price.    Seller will provide Buyer with a copy of such press release prior to issuance. Buyer acknowledges that Seller may also be required to file this Agreement with
securities regulators and or the stock exchanges on which Seller's shares trade.

	25.
	Escrow
of Deposit.

	(a)
	The
Deposit shall be held in escrow and released by the Escrow Agent as provided in this Agreement.

	(b)
	The
Deposit shall be held in an interest bearing account.

	(c)
	Escrow
Agent and its partners and employees are acting as agents only, and will in no case be held liable either jointly or severally to either party for the performance of any term
or covenant of this Agreement or for damages for the nonperformance hereof, nor shall Escrow Agent be required or obligated to determine any questions of fact or law. Escrow Agent's only
responsibility hereunder shall be for the safekeeping of the Deposit and the full and faithful performance by Escrow Agent of the duties imposed by this Section 25. 

11

 

	(d)
	Escrow
Agent shall be obligated to disburse the Deposit only upon the written instructions of both parties, should Escrow Agent in its sole discretion request such instructions; and
in the absence of such instructions or in the event of any dispute, Escrow Agent shall be and is hereby authorized, but not obligated, to pay the entire amount of the Deposit into court, and any
expenses to Escrow Agent for so doing shall be payable out of the Deposit. Notwithstanding the foregoing, until the expiration of the Due Diligence Period, Escrow Agent shall be obligated to return
the Deposit to Buyer upon the unilateral instructions of Buyer following notice of Buyer's termination of this Agreement pursuant to Section 13 above.

	(e)
	Nothing
contained herein shall be deemed to prohibit Escrow Agent from acting as attorney for Seller in the transaction contemplated in this Agreement, in any controversies or other
matters arising out of this Agreement, or the performance or breach thereof, or in any other matter. 

[signatures on following page]

12

 

        IN
WITNESS WHEREOF, the parties hereto have hereunto set their hands the day and year first above written. 

	 	 	 	BUYER:

TOLL BROS., INC.

	 ATTEST:

	 	 	 
	By:	 	 	By:	 
	 	
	 	 	

	 Name:

Title:	 	Name:

Title:
	 	 	 	Date of Execution:

	 	 	 	 	

	 

	 	 	 	

 SELLER:

PALM MEADOWS ESTATES, LLC

	 WITNESS:

	 	 	 
	By:	 	 	By:	 
	 	
	 	 	

	 Name:

Title:	 	Name:

Title:
	 	 	 	Date of Execution:

	 	 	 	 	

	
 By:	
 	
 	

By:	

 
	 	
	 	 	

	 Name:

Title:	 	Name:

Title:
	 	 	 	Date of Execution:

	 	 	 	 	

	 

13

 
 
 

JOINDER BY ESCROW AGENT  
    

        Akerman, Senterfitt & Eidson, P.A., the Escrow Agent named in the foregoing Agreement of Sale, hereby joins in such Agreement to evidence its agreement to
hold the Deposit, and otherwise to perform its obligations as escrow agent, all as provided for in Section 24. 

ESCROW
AGENT:
 AKERMAN, SENTERFITT & EIDSON, P.A.

 

	By:	 	 	 
	 	 	
	 
	 Name:

Title:	 

	Date of Execution:	 
	 	

	 

14

 
 
 

EXHIBIT A
  
  PROPERTY DESCRIPTION  
    

All
of Parcel B and the South 80 feet of Parcel A, PALM BEACH THOROUGHBRED TRAINING FARM, according to the Plat thereof, as recorded in Plat Book 96, Pages 164 through 171 of the
Public Records of Palm Beach County, Florida. 

15

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AGREEMENT OF SALE

WITNESSETH

JOINDER BY ESCROW AGENT

EXHIBIT A PROPERTY DESCRIPTIONQuickLinks
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EXHIBIT 10.1  

	 

	 

	 

	 

STOCK PURCHASE AGREEMENT 

dated
November 8, 2005 

between

MAGNA
ENTERTAINMENT CORP. 

and
PA MEADOWS, LLC 

	 

	 

	 

	 

 
 

TABLE OF CONTENTS    
    

	 
	 	 
	 	Page

	 ARTICLE I

DEFINITIONS
	 SECTION 1.01	 	Certain Defined Terms	 	1
	 ARTICLE II

PURCHASE AND SALE
	 SECTION 2.01	 	Purchase and Sale	 	9
	 SECTION 2.02	 	Purchase Price	 	9
	 SECTION 2.03	 	Closing	 	9
	 ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER
	 SECTION 3.01	 	Incorporation and Authority of Seller	 	10
	 SECTION 3.02	 	Organization, Authority and Qualification of the Companies	 	11
	 SECTION 3.03	 	Capital Stock of the Companies; Ownership of the Shares	 	11
	 SECTION 3.04	 	Subsidiaries	 	12
	 SECTION 3.05	 	No Conflict	 	13
	 SECTION 3.06	 	Consents and Approvals	 	14
	 SECTION 3.07	 	Financial Information, Books and Records	 	14
	 SECTION 3.08	 	No Undisclosed Liabilities	 	15
	 SECTION 3.09	 	Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions	 	15
	 SECTION 3.10	 	Litigation	 	16
	 SECTION 3.11	 	Compliance with Applicable Laws	 	17
	 SECTION 3.12	 	Environmental Matters	 	17
	 SECTION 3.13	 	Title to Assets; Real Property	 	19
	 SECTION 3.14	 	Intellectual Property Rights	 	21
	 SECTION 3.15	 	Insurance	 	21
	 SECTION 3.16	 	Employee Benefit Matters	 	22
	 SECTION 3.17	 	Labor Matters	 	25
	 SECTION 3.18	 	Taxes	 	26
	 SECTION 3.19	 	Material Contracts	 	28
	 SECTION 3.20	 	Racing License	 	30

 

	 SECTION 3.21	 	Suppliers	 	30
	 SECTION 3.22	 	Books and Records	 	30
	 SECTION 3.23	 	Brokers	 	30
	 SECTION 3.24	 	Racing Days	 	30
	 SECTION 3.25	 	Related Parties	 	31
	 ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 SECTION 4.01	 	Incorporation and Authority of Purchaser	 	31
	 SECTION 4.02	 	No Conflict	 	32
	 SECTION 4.03	 	Consents and Approvals	 	32
	 SECTION 4.04	 	Investment Purpose	 	32
	 SECTION 4.05	 	Financing	 	33
	 SECTION 4.06	 	Brokers	 	33
	 SECTION 4.07	 	Specified Investors; Cannery Casino Resorts	 	33
	 ARTICLE V

ADDITIONAL AGREEMENTS
	 SECTION 5.01	 	Conduct of Business Prior to the Closing	 	33
	 SECTION 5.02	 	Access to Information	 	34
	 SECTION 5.03	 	Books and Records	 	34
	 SECTION 5.04	 	Governmental Approvals and Consents; Application Fee; Closing Conditions	 	35
	 SECTION 5.05	 	Confidentiality	 	39
	 SECTION 5.06	 	Use of Magna Name	 	40
	 SECTION 5.07	 	Investigation	 	40
	 SECTION 5.08	 	Limited Non-Compete	 	41
	 SECTION 5.09	 	Remediation	 	42
	 SECTION 5.10	 	No Negotiation	 	42
	 SECTION 5.11	 	Title	 	42
	 SECTION 5.12	 	Further Action	 	43
	 SECTION 5.13	 	Excluded Items	 	43
	 SECTION 5.14	 	Estoppels	 	43

ii

 

	 SECTION 5.15	 	Cooperation in Preparation of Alternative Application	 	43
	 SECTION 5.16	 	Financial Statements	 	44
	 SECTION 5.17	 	Separation	 	45
	 SECTION 5.18	 	Notification	 	45
	 SECTION 5.19	 	Environmental Report	 	45
	 SECTION 5.20	 	XpressBet Matters	 	45
	 SECTION 5.21	 	Office Lease	 	45
	 SECTION 5.22	 	Phase I	 	45
	 SECTION 5.23	 	Holdback Arrangements	 	46
	 ARTICLE VI

EMPLOYEE MATTERS
	 SECTION 6.01	 	Arrangements; Payroll Obligations	 	46
	 SECTION 6.02	 	Benefit Plans and Transferred Employee Related Obligations	 	47
	 SECTION 6.03	 	Intentionally Omitted	 	48
	 SECTION 6.04	 	Intentionally Omitted	 	48
	 SECTION 6.05	 	Employee Benefits Indemnity	 	48
	 SECTION 6.06	 	Third-Party Claims	 	49
	 SECTION 6.07	 	Survival	 	49
	 ARTICLE VII

TAX MATTERS
	 SECTION 7.01	 	Indemnity	 	49
	 SECTION 7.02	 	Returns and Payments	 	50
	 SECTION 7.03	 	Refunds	 	50
	 SECTION 7.04	 	Contests	 	51
	 SECTION 7.05	 	Time of Payment	 	52
	 SECTION 7.06	 	Cooperation and Exchange of Information	 	52
	 SECTION 7.07	 	Conveyance Taxes	 	53
	 SECTION 7.08	 	Miscellaneous	 	53
	 ARTICLE VIII

CONDITIONS TO CLOSING
	 SECTION 8.01	 	Conditions to Obligations of All Parties	 	54

iii

 

	 SECTION 8.02	 	Conditions to Obligations of Seller	 	54
	 SECTION 8.03	 	Conditions to Obligations of Purchaser	 	56
	 ARTICLE IX

INDEMNIFICATION
	 SECTION 9.01	 	Survival	 	58
	 SECTION 9.02	 	Indemnification by Purchaser	 	59
	 SECTION 9.03	 	Indemnification by Seller	 	60
	 SECTION 9.04	 	Indemnification Procedures, Etc	 	62
	 SECTION 9.05	 	Payments	 	64
	 ARTICLE X

TERMINATION, AMENDMENT AND WAIVER
	 SECTION 10.01	 	Termination	 	65
	 SECTION 10.02	 	Effect of Termination	 	66
	 SECTION 10.03	 	Waiver	 	66
	 ARTICLE XI

GENERAL PROVISIONS
	 SECTION 11.01	 	Expenses; Pro-rations	 	67
	 SECTION 11.02	 	Notices	 	68
	 SECTION 11.03	 	Public Announcements	 	69
	 SECTION 11.04	 	Headings	 	69
	 SECTION 11.05	 	Severability	 	69
	 SECTION 11.06	 	Entire Agreement	 	69
	 SECTION 11.07	 	Assignment	 	69
	 SECTION 11.08	 	No Third-Party Beneficiaries	 	70
	 SECTION 11.09	 	Amendment	 	70
	 SECTION 11.10	 	Governing Law; Jurisdiction; Service of Process	 	70
	 SECTION 11.11	 	WAIVER OF JURY TRIAL	 	70
	 SECTION 11.12	 	Counterparts	 	70
	 SECTION 11.13	 	Specific Performance	 	70
	 SECTION 11.14	 	Prevailing Party	 	70

iv

 

EXHIBITS

	Exhibit 1.01A	 	Form of Holdback Agreement
	Exhibit 1.01B	 	Meadows Facility
	Exhibit 1.01C	 	MEC Items
	Exhibit 1.01D	 	Off-Track Betting Facilities
	Exhibit 1.01E	 	Racing Services Agreement
	Exhibit 1.01F	 	XpressBet Amendments Term Sheet
	Exhibit 5.11	 	Title Commitment
	Exhibit 5.13	 	Excluded Items
	Exhibit 8.02(g)	 	Form of Opinion of Purchaser Parties' Counsel
	Exhibit 8.03(j)	 	Form of Opinion of Seller Parties' Counsel

v

  

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

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

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

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

 
 

ARTICLE I
  
    DEFINITIONS    
    

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

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

        "Affiliate"
of a specified Person means a Person that, directly or indirectly, through one or more intermediaries, Controls, is Controlled By or is Under
Common Control With, such specified Person, including such specified Person's Subsidiaries. 

        "Business
Day" means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the City of
Toronto or the City of Los Angeles. 

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

        "Commission"
means the Pennsylvania Harness Racing Commission established by the Pennsylvania Act. 

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

1

 

        "Control"
(including the terms "Controlled By" and "Under Common Control With") means the
possession, directly or indirectly or as a trustee or executor (in each case, acting in a fiduciary capacity), of the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, as trustee or executor (in each case, acting in a fiduciary capacity), by contract or credit arrangement or otherwise. 

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

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

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

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

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

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

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

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

        "Gaming
Board" means the Pennsylvania Gaming Control Board established by the Gaming Act. 

        "Governmental
Authority" means any government, any governmental or government-appointed entity, department, commission, board, agency, regulatory authority
or instrumentality, and any court, tribunal, or judicial body, whether federal, state, local or foreign, or any arbitral body, including, without limitation, the Commission and the Gaming Board. 

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

2

 

        "Gulfstream
Loan Agreement" means the Amended and Restated Loan Agreement dated July 22, 2005 by and among Gulfstream Park Racing
Association, Inc., MID Islandi SF, MECPenn, MLR, WTA, Remington Park, Inc. and GPRA Thoroughbred Training Center, Inc. 

        "Holdback
Agreement" means the Holdback Agreement by and between Seller and Purchaser, substantially in the form attached hereto as Exhibit 1.01A, as
it may be amended from time to time. 

        "Holdback
Amount" shall have the meaning ascribed to such term in the Holdback Agreement. 

        "Holdback
Documents" means the Holdback Agreement, the Escrow Agreement, and the Escrow Security (as defined in the Holdback Agreement) or the
Holdback Guarantee as agreed to in accordance with Section 5.23. 

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

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

        "IRS"
means the Internal Revenue Service of the United States. 

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

        "Law"
or "Laws" means any statute, law, ordinance, regulation, rule, code, order, other requirement or rule of law of any
country or any state, province, locality, region or area therein, or any other jurisdiction. 

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

3

 

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

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

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

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

        "MID
Bridge Loan Agreement" means the Bridge Loan Agreement dated July 22, 2005 by and among Seller, MECPenn, MLR, WTA and MID Islandi SF. 

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

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

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

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

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

4

 

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

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

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

        "Purchaser's
Accountants" means Piercy Bowler Taylor & Kern. 

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

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

        "Reference
Balance Sheet Date" means December 31, 2004. 

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

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

        "Seller's
Accountants" means Ernst & Young, L.L.P. 

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

5

 

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

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

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

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

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

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

        "XpressBet
Banking Agreement Amendment" means the First Amendment to the letter agreement regarding Pennsylvania account wageror bank accounts, dated as of
October 5, 2005, by and between WTA and MLR, on the one hand, and XpressBet, Inc., on the other hand, the terms of which Purchaser and Seller will negotiate in good faith based on the
term sheet attached hereto as Exhibit 1.01F. 

        "XpressBet
Lease Amendment" means the First Amendment to the Lease Agreement, dated July 15, 2005, by and between MECPenn and XpressBet, Inc.,
the terms of which Purchaser and Seller will negotiate in good faith based on the term sheet attached hereto as Exhibit 1.01F. 

6

  

        "XpressBet
Wagering Agreement Amendment" means the First Amendment to the Advanced Account Wagering and Services Agreement, effective as of July 15,
2005 and dated as of August 9, 2005, by and between WTA and MLR, on the one hand, and XpressBet, Inc., on the other hand, the terms of which Purchaser and Seller will negotiate in good
faith based on the term sheet attached hereto as Exhibit 1.01F. 

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

	Term 
	 	Section

	2004 Audited Balance Sheet	 	5.16(b)
	2005 Audited Financial Statements	 	5.16(a)
	2006 Interim Financial Statements	 	5.16(a)
	2005 Quarterly Financial Statements	 	5.16(a)
	Action Notice	 	8.03(m)
	Agreement	 	Preamble
	Applicable Date	 	9.02(a)
	Alternative Scenario	 	5.04(c)(i)
	Assets	 	3.13(a)
	Benefit Plans	 	3.16(a)
	CERCLA	 	3.12(c)
	Claim Notice	 	9.04(a)
	Closing	 	2.03(a)
	Closing Date	 	2.03(a)
	Closing Extension	 	2.03
	COBRA	 	6.02(c)
	Commission Approval	 	8.01(c)
	Company; Companies	 	Recitals
	Company Employees	 	6.01
	Company Financial Statements	 	3.07(a)
	Company Interim Financial Statements	 	3.07(a)
	Company Plans	 	3.16(a)
	Confidentiality Agreement	 	5.05(a)
	Contest	 	7.04(b)
	Election	 	7.08(a)
	Employee Agreements	 	3.16(a)
	Environmental Actions	 	3.12(c)
	Environmental Laws	 	3.12(c)
	Environmental Permits	 	3.12(c)
	Excluded Items	 	5.13
	Existing Stock	 	5.06(b)
	Former Subsidiaries	 	3.04(d)
	Fundamental Representations	 	9.01
	Gaming Application	 	5.04(c)(i)
	Gaming Application Fee	 	5.04(d)
	Hazardous Materials	 	3.12(c)

7

 

	Holdback Guarantee	 	5.23
	Indemnified Party	 	9.04(a)
	Indemnifying Party	 	9.04(a)
	Insured Exception	 	5.11(c)
	lease	 	3.19(a)
	Magna Name	 	5.06(a)
	Material Contracts	 	3.19(a)
	MEC Health Plan	 	6.02(a)
	MECPenn	 	Recitals
	MECPenn Common Stock	 	3.03(a)
	MECRacing	 	3.20
	MLR	 	Recitals
	MLR Common Stock	 	3.03
	Multiemployer Plans	 	3.16(a)
	Non-Competition Covenant	 	5.08(a)
	Non-Competition Period	 	5.08(a)
	Paddock Refurbishment	 	3.13(e)
	Permitted Exceptions	 	3.13(a)
	Phase I	 	5.22
	Proposed Development	 	3.13(e)
	Purchaser's Notice	 	5.11(c)
	Purchase Price	 	2.02
	Purchaser	 	Preamble
	Purchaser Application Materials	 	5.04(e)
	Purchaser Developments	 	8.02(b)
	Qualified Plans	 	3.16(h)
	Releases	 	3.12(c)
	RCRA	 	3.12(c)
	Satisfaction Date	 	2.03
	Seller	 	Preamble
	Seller Developments	 	8.03(b)
	Shares	 	Recitals
	Sponsor	 	5.23
	Survey	 	5.11(a)
	Terminating Purchaser's Breach	 	10.01(d)
	Terminating Seller's Breach	 	10.01(c)
	Title Commitment	 	5.11(a)
	Title Company	 	5.11(a)
	Title Objection	 	5.11(b)
	Title Policy	 	8.03(k)
	Transaction Scenario	 	5.04(c)(i)
	Transferred Employees	 	6.01
	WTA	 	Recitals
	WTA Common Stock	 	3.03

8

 
 
 

ARTICLE II
  
    PURCHASE AND SALE    
    

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

        SECTION 2.02    Purchase
Price. The aggregate purchase price for the Shares (and the limited non-compete set forth in
Section 5.08) shall be $225,000,000 (the "Purchase Price"), of which (i) $225,000,000 minus the Holdback Amount shall be
paid in cash to Seller on the Closing Date as provided in Section 2.03(c) and (ii) the Holdback Amount shall be paid in accordance with and at the times set forth in the
Holdback Agreement or the Holdback Guarantee, as the case may be. Within 30 days after Closing, Seller will provide Purchaser with an allocation of the Purchase Price (less the $2,000,000
allocated pursuant to Section 5.08 hereof) among MECPenn, MLR, WTA and the Subsidiaries for approval, such approval not to be unreasonably withheld. The parties agree that such allocation shall
be binding and the parties shall not take a position that is inconsistent with such allocation in any matter. 

        SECTION 2.03    Closing.
(a) Subject to the terms and conditions of this Agreement, the sale and purchase of the Shares contemplated
hereby shall take place at a closing (the "Closing") to be held at 10:00 a.m., Los Angeles time, no later than two Business Days after the last of the
conditions to Closing set forth in Sections 8.01, 8.02 and 8.03 has been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing
Date) ("Satisfaction Date"); provided, that so long as Purchaser needs additional time in order to obtain the bridge financing for the
Purchase Price less the Holdback Amount (the "Closing Extension") and so long as Purchaser is using its best efforts towards obtaining such financing and Closing,
the Closing shall be held no later than four weeks after the last of such conditions to Closing has been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the
Closing Date). In the event that the Closing Extension occurs and at the end of the Closing Extension, the last of the conditions to Closing set forth in Sections 8.01, 8.02 and
8.03 has been satisfied (other than conditions which, by their nature, are to be satisfied on the Closing Date), and Purchaser fails to consummate the transaction contemplated hereby, then
Seller shall have the right to terminate this Agreement. In the event that the Closing Extension occurs and events take place after the Satisfaction Date that cause one or more conditions to Closing
to not be satisfied at the end of the Closing Extension (other than conditions which, by their nature, are to be satisfied on the Closing Date), then the party that has the right not to close as a
result of such condition or conditions not being so satisfied shall, within two Business Days after the end of the Closing Extension, either waive all such conditions and proceed to Closing or
terminate this Agreement; provided, however, that such right to not close due to such events or due to such condition(s) not being
satisfied and such right to terminate this Agreement shall not be available to a party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted
in, such events or such condition(s) not being satisfied. The Closing will occur at the offices of O'Melveny & Myers LLP, 400 South Hope, Los Angeles, California, or at
such other time or on such other date or at such other place as Seller and Purchaser may mutually agree upon in writing (the day on which the Closing takes place being the
"Closing Date"). 

9

 

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

        (c)   At
the Closing, against delivery of the stock certificates evidencing the Shares, Purchaser shall deliver to Seller (i) cash in an amount equal to the Purchase
Price, minus the Holdback Amount, by wire transfer in immediately available funds, to an account or accounts designated at least two Business Days prior to the Closing
Date by Seller in a written notice to Purchaser and (ii) with respect to the Holdback Amount, the deliveries contemplated by Section 8.02(h). 

 
 

ARTICLE III
  
    REPRESENTATIONS AND WARRANTIES OF SELLER    
    

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

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

10

 

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

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

        (b)   Upon
consummation of the transactions contemplated by this Agreement and registration of the Shares in the name of Purchaser in the respective stock records of the
Companies, Purchaser, assuming it shall have purchased the Shares for value in good faith and without notice of any adverse claim, will own all the issued and outstanding capital stock of each Company
free and clear of all Encumbrances, assuming the release of the Encumbrances disclosed in Section 3.03 of the Company Disclosure Schedule, and the Shares will be fully paid and nonassessable.
There are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Shares. 

11

 

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

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

12

 

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

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

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

13

 

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

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

14

 

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

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

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

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

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

        (b)   other
than the sale or transfer of the capital stock of the Excluded Subsidiaries prior to the Closing as described in Section 8.03(p), declared, set aside
or paid any dividend or made any distribution with respect to any Company's or Subsidiary's shares of capital stock, partnership interests or similar ownership interests (whether in cash or in kind)
except as set forth in Section 5.01(c) hereto; 

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

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

15

 

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

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

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

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

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

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

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

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

        (m)  suffered
any Material Adverse Effect; or 

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

        SECTION 3.10    Litigation.
Except as set forth in Section 3.10 of the Company Disclosure Schedule, there are no Actions pending or,
to the knowledge of Seller, threatened against or by either any Company or Subsidiary or affecting any of their respective assets or properties (or by or against Seller or any Affiliate thereof
and relating to the Companies and the Subsidiaries), which involve a claim or potential claim or group of related claims of liability in excess of $25,000 or which seek or would seek to restrain or
enjoin any activities of any Company or Subsidiary or to impose any criminal or civil penalties or sanctions on any Company or any Subsidiary. Except as set forth in Section 3.10 of the Company
Disclosure Schedule, none of the Companies or Subsidiaries nor any of their assets or properties is subject to any Governmental Order, nor, to the knowledge of Seller, are there any such Governmental
Orders threatened to be imposed by any Governmental Authority. 

16

 

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

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

17

 

        SECTION 3.12    Environmental
Matters. (a) Except as disclosed in Section 3.12 of the Company Disclosure Schedule:
(i) to Seller's knowledge, the Companies and the Subsidiaries are, and have been since April 5, 2001, in material compliance with all applicable Environmental Laws and have obtained and
are, and have been since April 5, 2001, in compliance with all required Environmental Permits, which are set forth on Section 3.12 of the Company Disclosure Schedule, and are valid and
in full force and effect; (ii) there are no Environmental Actions pending or threatened in writing against any of Seller, the Companies or Subsidiaries with respect to the business or
operations of the Companies or Subsidiaries or the Real Property; (iii) to Seller's knowledge, no Hazardous Materials have been released into the environment by any of the Companies or
Subsidiaries on any of the Real Property except as authorized under Environmental Law and no condition exists that would require investigation or remediation under any Environmental Law;
(iv) to Seller's knowledge, there are no underground storage tanks at any facilities owned or operated by any Company or Subsidiary; (v) to Seller's knowledge, all underground storage
tanks maintained at such facilities are in good working order, do not leak into soil or groundwater, and are in compliance with Environmental Laws or for which there is any pending or threatened
action seeking to require remediation or clean up; (vi) to Seller's knowledge, none of such facilities contains any asbestos or polychlorinated biphenyls; (vii) to Seller's knowledge,
none of the Companies nor any Subsidiary has sent Hazardous Materials to a disposal location owned or operated by a third party that requires remediation or clean up or for which there is any pending
or threatened Action seeking to require remediation or clean up; and (viii) Seller has provided Purchaser with copies of any and all written environmental assessment or audit reports generated
within the last three years and in the possession of Seller or their respective attorneys, agents or consultants, that relate to the business of the Companies and the Subsidiaries or the Real
Property. Except as disclosed in Section 3.12 of the Company Disclosure Schedule, Seller, the Companies and the Subsidiaries have not received since April 5, 2001 any written notice of
any actual, alleged or potential noncompliance with, liability under, or claimed violation of, any Environmental Laws, including without limitation, from any government agency or prosecutor, from any
private citizen acting in the public interest or from any prior owner or operator of the Real Property, and, to the knowledge of Seller, there has not occurred and there does not exist any event or
condition which would cause noncompliance with, liability under, or violation of, any Environmental Laws. Except as disclosed in Section 3.12 of the Company Disclosure Schedule, Seller, the
Companies and the Subsidiaries have not received any notice of violation or noncompliance or claim of default with respect to any Environmental Permit. 

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

        (c)   For
purposes of this Agreement: 

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

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

        "Environmental
Laws" means any civil and criminal Laws, rules, Permits or Governmental Orders relating to or addressing pollution or protection of the
environment, public health or safety, including, without limitation, those relating to the presence, use, production, processing, generation, handling, labeling transportation, treatment, storage,
disposal, distribution, testing, processing, Release, threatened Release or discharge, investigation, control, exposure or cleanup of Hazardous Materials, wastes, substances, storm water or waste
water. 

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

18

 

        "Hazardous
Materials" means (a) any petroleum, petroleum products, by-products or breakdown products, radioactive materials,
asbestos-containing materials, urea formaldehyde foam, heavy metals or polychlorinated biphenyls, (b) any waste, chemical, material or substance defined or regulated as toxic or hazardous under
any applicable Environmental Law or (c) anything that is a "hazardous substance" pursuant to CERCLA or any similar applicable state law, anything that is a "solid waste" or "hazardous waste"
pursuant to RCRA or any similar applicable state law or any "pesticide," "pollutant," "contaminant," "toxic chemical" or "noise." 

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

        "Release"
means any release, spill, emission, leaking, dumping, injection, pouring, deposit, discharge, dispersal, leaching or migration of a Hazardous
Material into the environment (including ambient air, surface water, ground water, land surface or subsurface strata) or within any building, structure or facility. 

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

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

19

 

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

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

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

20

 

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

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

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

        SECTION 3.15    Insurance.
Section 3.15 of the Company Disclosure Schedule sets forth a complete list of all material insurance
policies (including policies providing property, casualty, liability and workers' compensation coverage and bond and surety arrangements) with respect to which any Company or Subsidiary is a party, a
named insured or otherwise the beneficiary of coverage (together with the policy owner, limit and premium for each such policy). Such coverage or similar insurance coverage has been maintained with
respect to the Companies and the Subsidiaries at all times in the past three years. With respect to each such insurance policy: (a) such policy is in full force and effect; (b) no
Company or Subsidiary, nor Seller, nor, to the knowledge of Seller, any other party to such policy is in material breach or default thereunder and all premiums due are currently paid, and no event has
occurred which, with or without notice or the lapse of time, would constitute such a material breach or default, or permit termination, modification or acceleration under such policy; (c) no
party to such policy has repudiated any material provision thereof; and (d) none of Seller, any Company or any Subsidiary has received any written notice that such policy has been or will be
cancelled or terminated or will not be renewed on substantially the same terms. 

21

 

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

        (b)   Seller
has made available to Purchaser a copy of (i) the most recent three annual reports (Form 5500) filed with the IRS, including all schedules and
attachments thereto for each Benefit Plan, (ii) a copy of each Benefit Plan, (iii) if applicable, each trust agreement relating to such Benefit Plan, (iv) the most recent summary
plan description for each Benefit Plan for which a summary plan description is required and the most recent summaries and descriptions furnished to participants regarding Company Plans for which a
summary plan description is not required, (v) the most recent determination letter, if any, issued by the IRS with respect to any Benefit Plan qualified under Section 401(a) of
the Internal Revenue Code, (vi) all Company personnel and employment manuals and policies, (vii) all collective bargaining agreements pursuant to which contributions are being made or
obligations are owed by a Company or Subsidiary, (viii) all registration statements filed with respect to any Company Plan, (ix) all insurance policies purchased by or to provide
benefits under any Company Plan, (x) all contracts with third party administrators, actuaries, investment managers, consultants, and other independent contractors that relate to any Company
Plan, (xi) all reports submitted within the three years preceding the date of this Agreement by third party administrators, actuaries, investment managers, consultants, or other independent
contractors with respect to any Company Plan, and all such reports in the possession of Seller, a Company or a Subsidiary relating to a Multiemployer Plan, (xii) all notices that were given by
any Company or any Subsidiary with respect to any Company Plan, or by any Company Plan, to the IRS or the PBGC pursuant to statute, within the three years preceding the date of this Agreement,
including notices that are expressly mentioned elsewhere in this Section 3.16, (xiii) all notices that were given by the IRS, the PBGC, or the Department of Labor to a Company or a
Subsidiary with respect to any Company Plan if such notice could result in material liability to a Company, a Subsidiary or to any Company Plan, within the three years preceding the date of this
Agreement, and (xiv) all other material correspondence with any Governmental Authority relating to any Benefit Plan. 

22

 

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

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

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

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

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

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

23

 

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

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

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

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

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

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

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

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

      (viii)  No
Company or Subsidiary has received notice from any Multiemployer Plan that it is in reorganization or is insolvent, that increased contributions may be required to
avoid a reduction in plan benefits or the imposition of any excise Tax, or that such plan intends to terminate or has terminated. 

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

24

 

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

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

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

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

25

  

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

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

26

 

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

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

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

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

        (g)   Except
as disclosed with reasonable specificity in Section 3.18 of the Company Disclosure Schedule, Purchaser is not required to withhold Tax on the purchase of
the Shares by reason of Section 1445 of the Code. Seller is not a "foreign person" (as that term is defined in Section 1445 of the Code). Except as disclosed with reasonable
specificity in Section 3.18 of the Company Disclosure Schedule, none of the Companies or Subsidiaries has entered into any compensatory agreements with respect to the performance of services
payment under which would result in a nondeductible expense pursuant to Sections 162(m) or 280G of the Code or an excise tax to the recipient of such payment pursuant to
Sections 409A or 4999 of the Code; none of the Companies or Subsidiaries has agreed to make, and none is required to make, any adjustment under Section 481(a) of the Code
by reason of a change in accounting method or otherwise; no Tax asset of a Company or Subsidiary is currently subject to a limitation under Sections 382 or 383 of the Code or similar
provisions of state, local or foreign law; none of the Companies or Subsidiaries has been the "distributing corporation" (within the meaning of Section 355(c)(2) of the Code) with
respect to a transaction described in Section 355 of the Code within the 3-year period ending as of the date of this Agreement; none of the Companies or Subsidiaries has made or is
bound by any election under Section 197 of the Code; none of the Companies or Subsidiaries is a party to any understanding or arrangement described in Section 6662(d)(2)(C)(ii) of
the Code, a "reportable transaction" within the meaning of Treasury Regulations Section 1.6011-4(b) or a "listed transaction" within the meaning of Treasury Regulation
Section 1.6011-4(b)(2). 

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

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

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

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

        (iii)  all
management contracts and contracts with independent contractors or consultants (or similar arrangements) to which the Companies or any Subsidiary is a party
and which are not cancelable without penalty or further payment and without more than 30 days' notice; 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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        SECTION 3.25    Related
Parties. 

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

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

 
 

ARTICLE IV
  
    REPRESENTATIONS AND WARRANTIES OF PURCHASER    
    

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

        SECTION 4.01    Incorporation
and Authority of Purchaser. Purchaser is a limited liability company duly formed, validly existing and in good
standing under the laws of the state of Delaware and has all necessary limited liability company power and authority to enter into this Agreement and the other Transaction Documents to which Purchaser
is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Purchaser of this Agreement and any
other Transaction Document to which Purchaser is a party, the performance by Purchaser of its obligations hereunder and thereunder and the consummation by Purchaser of the transactions contemplated
hereby and thereby have been duly authorized by all requisite action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser, and (assuming due authorization,
execution and delivery by Seller) constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law). When each Transaction Document to which Purchaser is a party has been duly executed and delivered by Purchaser (assuming
due authorization, execution and delivery by each other party thereto), such Transaction Document will constitute a legal and binding obligation of Purchaser enforceable against it in accordance with
its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to the
effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 

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

        SECTION 4.03    Consents
and Approvals. The execution and delivery by Purchaser of this Agreement and any other Transaction Document to
which Purchaser is a party do not, and the performance by Purchaser of this Agreement and any other Transaction Document to which Purchaser is a party will not, require any material consent, approval,
authorization or other action by, or filing with or notification to, any Governmental Authority, except (a) as set forth on Section 4.03 of Purchaser Disclosure Schedule, (b) the
notification requirements of the HSR Act, and (c) as may be necessary as a result of any facts or circumstances relating solely to Seller. 

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

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        SECTION 4.05    Financing.
At or before two Business Days after the date the last of the conditions to the obligations of Purchaser to
consummate the transaction contemplated hereby have been satisfied or waived (other than such conditions which, by their nature, are to be satisfied on the Closing Date) or, so long as Purchaser needs
additional time in order to obtain the bridge financing for the Purchase Price less the Holdback Amount and so long as Purchaser is using its best efforts towards obtaining such financing and Closing,
at or before four weeks after such date, Purchaser will have all funds necessary to consummate the transactions contemplated by this Agreement. 

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

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

 
 

ARTICLE V
  
    ADDITIONAL AGREEMENTS    
    

        SECTION 5.01    Conduct
of Business Prior to the Closing. (a) Unless Purchaser otherwise agrees in writing and except as otherwise
set forth in Section 5.01 of the Company Disclosure Schedule, between the date of this Agreement and the Closing Date, Seller shall cause each Company and Subsidiary to (i) conduct its
business only in the ordinary course and consistent with past practice, (ii) use commercially reasonable efforts to preserve intact the business organization, assets and prospects of each
Company and Subsidiary, subject to the conduct of its business in the ordinary course of business and consistent with past practice, (iii) use commercially reasonable efforts to keep available
to Purchaser the services of the present officers and key employees of each Company and Subsidiary and (iv) use commercially reasonable efforts to preserve the current relationships of each
Company and Subsidiary with its respective customers, suppliers, distributors
and other Persons with which each Company and Subsidiary has significant business relationships. Seller shall cause WTA and MLR to continue to operate race meetings at the Meadows Facility in
fulfillment of their respective allocations of racing days by the Commission and their obligations under their agreement with the Meadows Standardbred Owners' Association. Between the date hereof and
the Closing Date, Seller will cause the Companies and the Subsidiaries not to enter into any contract, agreement or arrangement that would impose any restrictions or requirements on the operation of a
gaming operation on the Real Property. 

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

        (c)   Purchaser
acknowledges that Seller intends to distribute as a dividend or contribute as a capital contribution, or cause the distribution or contribution of, prior to or
at the Closing, (i) amounts owing pursuant to the intercompany accounts between the Companies and the Subsidiaries, on the one hand, and their respective Affiliates (including Seller and its
Affiliates but not including any Company or any Subsidiary), on the other hand, and (ii) the Excluded Subsidiaries, and that such distribution or contribution will not result in a breach of
this Agreement. Purchaser acknowledges that Seller intends to convert 20002 Delaware Inc. into a single member limited liability company and subsequently cause MECPenn to distribute all
interest in such limited liability company to Seller as a dividend prior to Closing. 

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

        SECTION 5.02    Access
to Information. From the date hereof until the Closing, Seller shall cause the officers, directors, employees,
agents, representatives, accountants and counsel of each Company and Subsidiary to: (i) afford the officers, employees and authorized agents, accountants, counsel, and representatives of
Purchaser reasonable access, upon reasonable notice and during normal business hours, to (A) the assets (including the Real Property) for inspection and testing (it being understood that
the cost of such inspection and testing shall be borne by Purchaser and any testing that is other than a Phase I testing shall be conducted only after obtaining the approval of Seller, and
Purchaser shall promptly indemnify Seller Indemnified Parties for any Losses in accordance with Article IX hereof arising from injury to person or physical damage to property incurred by any
Company or any Subsidiary as a result of the testing conducted pursuant to this Section 5.02, other than as a result of the gross negligence or willful misconduct of Company or any Subsidiary
and in no event as a result of the discovery of an environmental matter as a result of such testing) and (B) the officers, directors, employees, accountants and other representatives of Seller
and each Company and Subsidiary who have relevant knowledge relating to any Company or Subsidiary; provided, however, that such access shall
not unreasonably interfere with any of the business or operations of any Company or Subsidiary or the duties of any such officer, director, employee, accountant or other representative, and
(ii) promptly furnish to the officers, employees, and authorized agents, accountants, counsel and representatives of Purchaser such financial and operating data and other information regarding
employees, assets, properties, goodwill and business of each Company and Subsidiary as Purchaser may reasonably request. 

34

 

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

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

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

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

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

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        (c)   Gaming
Application. 

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

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

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

36

 

        (d)   Simultaneously
with the submission of the Gaming Application, Purchaser shall at its cost take such steps as are necessary, including but not limited to the posting of a
letter of credit, the posting of a bond or the payment of a fee, to satisfy any monetary or financial requirements that the Gaming Board may require in conjunction with submission and maintenance of
the Gaming Application (the "Gaming Application Fee"). Until the earlier of the (i) grant of a Conditional Category 1 license for gaming at the
Meadows Facility to Purchaser or (ii) two weeks after the termination of this Agreement for any reason other than consummation of the transactions contemplated by this Agreement, Purchaser
shall maintain the Gaming Application Fee. If the fee is paid by Purchaser in cash to the Gaming Board to satisfy the requirements of the Gaming Board, and this Agreement is terminated, then Seller
shall, to the extent Purchaser does not receive a refund of such fee from the Gaming Board, reimburse Purchaser for the Gaming Application Fee within two weeks after such termination of this Agreement
if (i) Seller uses such fee in furtherance of its application with the Gaming Board after such termination, and (ii) Purchaser executes documentation in form and substance satisfactory
to Seller confirming that Seller is entitled to, and has full rights with respect to, the fee that Purchaser has paid to the Gaming Board and that Purchaser releases all rights with respect thereto.
To the extent that Seller intends to continue with its application with the Gaming Board after the termination of this Agreement, Seller agrees to use best efforts to replace the Gaming Application
Fee theretofore maintained by Purchaser as expeditiously as possible after the termination of the Agreement. 

        (e)   Upon
the termination of this Agreement for any reason other than consummation of the transactions contemplated by this Agreement, Purchaser and Seller agree to take such
actions as are necessary as soon as possible to amend the Gaming Application to remove the Transaction Scenario. In addition, Purchaser shall permit Seller to use and continue to have submitted with
the Gaming Application all architectural, design and construction plans and any other materials prepared by Purchaser or its agents or consultants (the "Purchaser Application
Materials"); provided, however that Seller agrees to reimburse Purchaser for the reasonable and direct costs incurred by Purchaser with respect to the
Purchaser Application Materials used by Seller in the event that this Agreement is terminated for any reason other than consummation of the transactions contemplated by this Agreement. 

        (f)    Upon
the Closing, Purchaser and Seller agree to take such actions as are necessary as soon as possible to amend the Gaming Application to remove the Alternative
Scenario, if required by the Gaming Board. 

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

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

        (i)    If
any consent, approval or authorization necessary to preserve any right or benefit under any lease, license, contact, commitment or other agreement or arrangement to
which the Company or any Subsidiary is a party is not obtained prior to the Closing, Seller shall, subsequent to the Closing, cooperate with Purchaser and the Companies in attempting to obtain such
consent, approval or authorization as promptly thereafter as practicable. If such consent, approval or authorization cannot be obtained, Seller shall use its commercially reasonable efforts to provide
such Company or such Subsidiary, as the case may be, with the rights and benefits of the affected lease, license, contract, commitment or other agreement or arrangement for the term thereof, and, if
Seller provides such rights and benefits, such Company or such Subsidiary, as the case may be, shall assume all obligations and burdens thereunder. 

        (j)    From
the date hereof until the Closing, each party hereto shall, and Seller shall cause each Company and Subsidiary to, use all commercially reasonable efforts to take
such actions as are necessary to expeditiously satisfy the closing conditions set forth in Article VIII hereof. 

        (k)   Promptly
upon the signing of this Agreement, Purchaser shall use its best efforts, and shall continue to use its best efforts, to obtain the evidence necessary to
satisfy the condition set forth in Section 8.03(o) as soon as practicable after the signing of this Agreement. 

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

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        (m)  Notwithstanding
anything in this Agreement to the contrary, the parties agree that at any time after the date which is 14 days prior to the date, if any,
identified by the Gaming Board after which continued pursuit by Seller of a Conditional Category 1 license with Purchaser pursuant to the Gaming Application would jeopardize Seller's ability to
obtain a Conditional Category 1 license or a Category 1 license in its own name, Seller shall not have any obligation during the period of such jeopardy to comply with any of its
obligations under Section 5.4, Section 5.12 and any other provision of this Agreement that would require Seller to directly or indirectly comply with any of its obligations under
Section 5.4 or 5.12. 

        SECTION 5.05    Confidentiality.
(a) The terms of the letter agreement dated September 21, 2005
(the "Confidentiality Agreement") between Seller and Millennium Management Group, LLC are hereby incorporated herein by reference as if Purchaser were a
party thereto and shall continue in full force and effect until the Closing, at which time such Confidentiality Agreement and the obligations of Purchaser under this Section 5.05 shall
terminate; provided, however, that the Confidentiality Agreement shall terminate only in respect of that portion of the Information
(as defined in the Confidentiality Agreement) exclusively relating to the transactions contemplated by this Agreement. If this Agreement is, for any reason, terminated prior to the Closing, the
Confidentiality Agreement shall continue in full force and effect. 

        (b)   Seller
agrees to, and shall cause its agents, representatives, Affiliates, employees, officers and directors to, protect (and not disclose or provide access to
any Person) all confidential information relating to trade secrets, price, customer and supplier lists and pricing and marketing plans with respect to the business of the Companies and the
Subsidiaries and all other information that Seller regards as confidential information as of the date hereof with respect to the business of the Companies and the Subsidiaries as currently conducted,
by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized disclosure or use of such confidential information, as Seller uses to protect its own
confidential information of a like nature; provided, however, that this sentence shall not apply to any information that, at the time of
disclosure, (i) is disclosed by and between Seller and its agents, representatives, Affiliates, employees, officers or directors on a need-to-know basis (provided that
such Persons are bound by a duty of confidentiality), (ii) is available publicly and was not disclosed in breach of this Agreement by Seller or its respective agents, representatives,
Affiliates, employees, officers or directors (provided that information provided to or filed with the Commission or any other Governmental Authority shall not be deemed to be publicly available by
virtue of such filing), or (iii) is required to be disclosed in compliance with Section 5.04 of this Agreement, federal and state laws or regulations or the regulations governing any
national securities exchange or quotation system or is requested by a regulatory body that has authority over Seller or Purchaser (provided that Seller provides prompt notice to Purchaser of the
disclosure requirement and uses its reasonable efforts to disclose only such confidential information as is legally required to be disclosed and exercises reasonable efforts to obtain assurance that
such confidential information will be accorded confidential treatment). 

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

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

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

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

40

 

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

        SECTION 5.08    Limited
Non-Compete. (a) As an inducement for Purchaser to enter into this Agreement and in consideration
of the receipt of $2,000,000 in cash (which amount is included in the Purchase Price), Seller agrees that for a period commencing on the Closing Date and ending on the later of (i) five years
from the Closing Date and (ii) twelve months after the termination of the Racing Services Agreement for any reason (the "Non-Competition
Period"), except with Purchaser's prior written consent, Seller shall not directly or indirectly (including through MEC Pennsylvania Racing Services, Inc.) own or operate a
pari-mutuel wagering facility with expanded gaming within 100 miles of the Meadows Facility (the "Non-Competition
Covenant"). Notwithstanding the foregoing, the Non-Competition Covenant shall not apply to Thistledown (located in North Randall, Ohio) or operation of the Meadows Facility
pursuant to the Racing Services Agreement. 

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

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

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

        SECTION 5.09    Remediation.

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

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

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        SECTION 5.11    Title.

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

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

        (c)   If,
after the date hereof, the Title Company revises the Title Commitment to disclose any title exception or the Survey depicts any matter (each, a "Title
Objection"), in each case, that is not a Permitted Exception, then Purchaser may provide written notice of objection to Seller ("Purchaser's Notice") of
such matters within 10 days after receiving written notice of such Title Objection and complete and legible copies of any recorded documents relating thereto. Seller shall make reasonable
efforts to cure each Title Objection included in Purchaser's Notice or to cause the Title Company to eliminate each Title Objection as an exception to the Title Commitment or to remove it from the
Survey. Any Title Objection that is cured or that the Title Company is willing to insure over on terms acceptable to Seller and Purchaser is herein referred to as an "Insured
Exception." The Insured Exceptions shall be deemed to be acceptable to Purchaser. If any Title Objection cannot be cured and the Title Company will not insure over it on terms
acceptable to Seller and Purchaser, then Purchaser shall have a right to terminate this Agreement if such Title Objection would have a Material Adverse Effect. 

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

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

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

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

        SECTION 5.16    Financial
Statements. (a) Seller agrees to prepare, and use its commercially reasonable efforts, including expending
additional funds for expediting fees or similar fees to Seller's Accountants, to cause Seller's Accountants to assist Seller in preparing the following materials in a timely fashion after execution of
this Agreement or, in the case of periods ending on and after the date of this Agreement, in a timely fashion after passage of the ending date for such period: (i) an audited combined balance
sheet of the Companies and their Subsidiaries (excluding the Excluded Subsidiaries) as of December 31, 2005 and the related audited statements of income, equity and cash flows for the year then
ended in compliance with GAAP and meeting all requirements of Regulation S-X (the "2005 Audited Financial Statements"); (ii) unaudited
combined balance sheets of the Companies and their Subsidiaries (excluding the Excluded Subsidiaries) as of March 31, 2005, June 30, 2005 and September 30, 2005 and the related
statements of income, equity and cash flows for the three months, six months and nine months, respectively, then ended in compliance with GAAP and meeting all requirements of
Regulation S-X (taking into account Rule 10-01 thereunder) (the "2005 Quarterly Financial Statements"), together with a
SAS 100 review thereof by Seller's Accountants in a form reasonably satisfactory to Purchaser and Purchaser's Accountants; and (iii) with respect to each fiscal quarter in 2006 and any
shorter period from the prior quarter end to the Closing Date, an unaudited combined balance sheet of the Companies and their Subsidiaries (excluding, the Excluded Subsidiaries) as of the last day of
each such fiscal quarter or such shorter period and the related statements of income, equity and cash flows for the latest year-to-date period ended as of such day in
compliance with GAAP and meeting all requirements of Regulation S-X (taking into account Rule 10-01 thereunder) (the "2006 Interim
Financial Statements"), together with a SAS 100 review thereon by Seller's Accountants in a form reasonably satisfactory to Purchaser and Purchaser's Accountants. 

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

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

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

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

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

        SECTION 5.21    Office
Lease. Seller agrees to use its commercially reasonable efforts (without the payment of any material consent or
release fee or other out of pocket expenses) to complete the assignment of the lease identified on Section 5.21 of the Company Disclosure Schedule to Seller or an Affiliate, and for the release
of the Companies and Subsidiaries from any Liabilities related thereto. 

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

        SECTION 5.23    Holdback
Arrangements. Promptly after the date hereof, Purchaser agrees to negotiate with Seller in good faith the terms of
a guarantee (relating to an amount equal to the face amount of the Five-Year L/C (as defined in the Holdback Agreement)) and related documentation (including without limitation a
holdback agreement, an escrow agreement and related letter of credit) (collectively, the "Holdback Guarantee") relating to the Holdback Amount. Purchaser agrees to cause
the larger of the Specified Funds or a fund of comparable size, duration, financial liquidity, terms and otherwise reasonably acceptable to Seller (the "Sponsor")
to issue the Holdback Guarantee. The terms of the Holdback Guarantee shall be such that the security arrangement and economic and credit terms with respect to the Holdback Amount is in all material
respects the same as the security arrangement and economic and credit terms under the Holdback Agreement, Escrow Agreement and the related letters of credit; provided, the
parties acknowledge the inherent difference between drawing down a letter of credit and collecting on a guaranty. The Holdback Guarantee shall, at a minimum, contain terms and provisions upon which
the obligations thereunder would extend beyond the date on which any final release were to be paid to Seller, and to the extent that such Holdback Guarantee were to expire pursuant to its terms or the
Sponsor were to liquidate or otherwise dissolve or other matters were to create a situation in which the Holdback Guarantee was unavailable or materially became less secure to satisfy the payment
obligations of Purchaser as set forth in the Holdback Agreement, then the Sponsor will agree to abide by the provisions set forth in Section 3.05 of the Holdback Agreement, make full payment of
any remaining obligations to pay the releases to the escrow agent or provide a letter of credit from an L/C Issuer (as defined in the Holdback Agreement). The parties agree that such guarantee
shall be reduced in a manner similar to the reduction of the stated amount of the Five-Year L/C (as defined in the Holdback Agreement). Seller and Purchaser agree to negotiate the
terms of the Holdback Guarantee within thirty days after the date hereof, and to the extent that they are unable, in good faith, to reach agreement on the terms of a Holdback Guarantee, the parties
will submit their last proposals to three arbitrators (one picked by Seller, one by Buyer, and one by each of Seller's and Buyer's arbitrators) for binding baseball arbitration, to be completed
in an accelerated manner (but in no event later than April 30, 2006) in accordance with the rules and regulations of the American Arbitration Association. 

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ARTICLE VI
  
    EMPLOYEE MATTERS    
    

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

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

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

47

  

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

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

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

        SECTION 6.03    Intentionally
Omitted. 

        SECTION 6.04    Intentionally
Omitted. 

        SECTION 6.05    Employee
Benefits Indemnity. 

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

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

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

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

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

48

 

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

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

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

 
 

ARTICLE VII
  
    TAX MATTERS    
    

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

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

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

49

 

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

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

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

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

50

 

        SECTION 7.03    Refunds.
Any Tax refund (including any interest with respect thereto), and any equivalent benefit through a reduction in tax
liability for a post-Closing Date period, relating to the Companies or any Subsidiary for any taxable period prior to the Closing Date shall be the property of Seller, and if received by
Purchaser or the Companies or any Subsidiary shall be paid over to Seller within five Business Days of the earlier of receipt or entitlement thereto; provided,
however, that any Tax benefit obtained by Purchaser, the Companies or any Subsidiary as a result of utilizing any net operating loss carryforward or other carryforward
(which may be subject to adjustments) which is allocable to the Companies or any Subsidiary shall be retained by Purchaser, the Companies or such Subsidiary. Purchaser shall cause the Companies and
the Subsidiaries to elect, where permitted by law, to carry forward any net operating loss, charitable contribution or other item arising after the Closing Date that could, in the absence of such
election, be carried back to a taxable period of the Companies ending on or before the Closing Date in which the Companies are included in a consolidated, combined or unitary Tax return; provided
that, if such election to carry forward an item is not available, any cash refund received by Seller with respect to such carryback shall be paid over to Purchaser within five Business Days of actual
receipt. Purchaser shall, if Seller so requests and at Seller's expense, cause the relevant entity to file for and obtain any refunds or equivalent amounts to which Seller is entitled under this
Section 7.03. Purchaser shall permit Seller to control (at Seller's expense) the prosecution of any such refund claim, and shall cause the relevant entity to authorize by appropriate
power of attorney such persons as Seller shall designate to represent such entity with respect to such refund claim; provided, however, that
Seller shall not take any action in the prosecution of such refund claims that would be materially detrimental to Purchaser, the Companies or the Subsidiaries (including for this purpose the tax
positions of such entities). In the event that any refund or credit of Taxes for which a payment has been made to Seller pursuant to this Section 7.03 is subsequently reduced or disallowed,
Seller shall indemnify and hold harmless the payor for any Tax Liability, including interest and penalties assessed against such payor by reason of the reduction or disallowance. 

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

51

 

        (b)   Seller
may elect to direct, through counsel of its own choosing and at its own expense, any audit, claim for refund and administrative or judicial proceeding involving
any asserted liability with respect to which indemnity may be sought under this Article VII (any such audit, claim for refund or proceeding relating to an asserted tax liability are
referred to herein collectively as a "Contest"). If Seller elects to direct the Contest of an asserted Tax liability, it shall within 30 days of receipt of the
notice of asserted tax liability notify Purchaser of its intent to do so, and Purchaser shall cooperate and shall cause each Subsidiary and any successor to a Subsidiary or its successor to cooperate,
at Seller's expense, in each phase of such Contest. Purchaser also may participate in any such audit or proceeding and, if Seller does not assume the defense of any such audit or proceeding, Purchaser
may defend the same in such manner as it may deem appropriate, including, but not limited to, settling such audit or proceeding after giving five Business Days' prior written notice to Seller setting
forth the terms and conditions of settlement. In the event that issues relating to a potential adjustment for which Seller would be liable are required to be dealt with in the same proceeding as
separate issues relating to a potential adjustment for which Purchaser would be liable, Purchaser shall have the right, at its expense, to control the audit or proceeding with respect to the latter
issues. If Seller chooses to direct the Contest, Purchaser shall promptly empower and shall cause the appropriate Subsidiary or its successor promptly to empower (by power of attorney and such
other documentation as may be appropriate) such representatives of Seller as it may designate to represent Purchaser or the Subsidiary or its successor in the Contest insofar as the Contest involves
an asserted tax liability for which Seller would be liable under this Article VII. If Seller assumes the defense of a Contest, Seller shall not enter into any compromise or agree to settle any
claim pursuant to any Tax audit or proceeding which would adversely affect Purchaser for any taxable year without the written consent of Purchaser, which consent shall not be unreasonably withheld. 

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

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

52

 

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

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

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

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

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

53

 
 
 

ARTICLE VIII
  
    CONDITIONS TO CLOSING    
    

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

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

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

        (c)   Commission
Approvals.    Purchaser and Seller shall have received final approval (excluding any appeal period, if applicable) from
the Commission of (i) the purchase of the Companies by Purchaser and (ii) Seller's management of the racing operations of the Meadows Facility under the Racing Services Agreement
(collectively, the "Commission Approval"), each in form and substance satisfactory to Seller and Purchaser in their reasonable discretion; and 

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

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

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

54

 

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

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

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

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

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

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

        (h)   Holdback.    Purchaser
shall have delivered to Seller (i) an executed counterpart of the Holdback Agreement executed by
Purchaser and the Escrow Agreement executed by Purchaser and the escrow agent party thereto and shall have satisfied each of the conditions set forth in Section 2.01 of the Holdback Agreement
and Section 1(a) of the Escrow Agreement and shall have caused the issuance of two letters of credit for the benefit of Seller for the full amount of the Holdback Amount, or
(ii) an executed counterpart of the Holdback Guarantee and the related documents agreed upon in accordance with Section 5.23 hereof and shall have caused the actions to have been taken
under these documents contemplated at the Closing Date, including without limitation the Holdback Guarantee executed by Sponsor, an executed counterpart of the related holdback agreement executed by
Purchaser and the related escrow agreement executed by Purchaser and the escrow agent party thereto and shall have caused the issuance of a letter of credit (in the form of the
Two-Year L/C (as defined in the Holdback Agreement)) for the benefit of Seller for the full amount of the Holdback Amount (between such letter of credit and such guarantee), in each
case for clauses (i) and (ii) in scope, form and substance satisfactory to Seller in its reasonable discretion and complying with the requirements of the Holdback Agreement
and the Escrow Agreement or the Holdback Guarantee, as the case may be. 

55

 

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

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

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

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

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

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

        (f)    Release
from MID Guarantees.    Companies and their Subsidiaries shall have been released from the guaranties, security
agreements, environmental indemnity agreements and other related agreements, executed in favor of MID Islandi SF in connection with the Gulfstream Loan Agreement and the MID Bridge Loan Agreement; 

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

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

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

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

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

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

        (m)  Gaming
License.    No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order
which is in effect, no Action shall have been commenced by or before any Governmental Authority (provided that if any such Action has been commenced by or before any
Governmental Authority, Purchaser shall have 10 days from receipt of written notice from Seller of such Action to provide a written notice to Seller ("Action
Notice") that it considers such Action to be non-frivolous and that based on such Action it will not close the transaction contemplated hereunder, and if Purchaser does not
provide an Action Notice with respect to such Action within such 10 day period, the commencement or existence of such Action shall not be the basis of a claim for a failure of a condition to
the Purchaser's obligations to consummate the transactions contemplated hereunder) and no Law shall have been enacted or adopted and remain in effect which would have or has had, as applicable, the
effect of (i) having a material and adverse effect on the right of Purchaser to own and control the Companies and the Subsidiaries following completion of the transactions contemplated
hereunder or (ii) having a material adverse effect on the ability of WTA or MLR to obtain a Conditional Category 1 license or Category 1 license under the Gaming Act, or to own or
operate a temporary or permanent facility at the Meadows Facility containing at least 3,000 slot machines no later than December 31, 2006, in each case of
clause (i) or (ii) other than such Laws that would have such material and adverse effect solely due to the bad acts or bad character issues of Purchaser or any of its
Affiliates; 

        (n)   MEC
Items.    Seller shall have delivered (in one or more deliveries) written confirmation or other objectively reasonable
evidence from the Gaming Board or its staff that the Gaming Application will not be subject to being declared or deemed incomplete with respect to the MEC Items delivered to the Gaming Board; 

57

 

        (o)   Specified
Investors.    Purchaser shall have received evidence reasonably satisfactory to it that none of the Specified Investors
shall be required to make disclosures or take actions beyond the disclosures or actions required in either New Jersey or Nevada in connection with gaming applications in such states, unless
such disclosures or actions are disclosures or actions that such Specified Investors are willing to make or take, as the case may be; 

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

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

        (r)   Gaming
Licenses.    The Gaming Board shall have approved the issuance (which issuance shall become effective after consummation of
the transactions contemplated hereby) of a Conditional Category 1 license or a Category 1 license to any Company or any Affiliate thereof. 

 
 

ARTICLE IX
  
    INDEMNIFICATION    
    

        SECTION 9.01    Survival.
Subject to the limitations and other provisions of this Agreement, the representations, warranties, covenants and
agreements of the parties contained herein shall survive the Closing and shall remain in full force and effect until the date that is 15 months from the Closing Date;
provided, however, (w) that the covenants and agreements set forth in Sections 5.03, 5.04, 5.05, 5.06, 5.08, 5.09, 5.12, 5.15,
5.16 and 5.17 and in Article VI, Article XI and this Article IX shall remain in full force and effect for the applicable periods specified in the respective
Sections or Articles or, if no such period is specified, indefinitely; (x) that the representations and warranties set forth in Section 3.18 (relating to Taxes) and the agreements in
Article VII shall remain in full force and effect as provided in Section 7.08(c); (y) the representations and warranties set forth in Section 3.12 (relating to
environmental matters) shall survive for a period of seven years; and (z) the representations and warranties set forth in the 1st, 3rd, and 4th
sentences of Section 3.01, Section 3.02, Section 3.03, all of Section 3.04(a) excluding the 1st sentence and the 1st and
2nd sentences of Section 4.01 (collectively, the "Fundamental Representations") shall survive indefinitely. 

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        SECTION 9.02    Indemnification
by Purchaser. (a) Purchaser agrees, subject to the other terms and conditions of this Agreement, to
indemnify Seller and its Affiliates and the officers, directors, employees and agents of each of the foregoing (all such Persons being included within the definition of "Seller" only for
purposes of this Section 9.02, Article VI and Article VII) against and hold them harmless from all Losses arising out of (i) the breach of any representation, warranty,
covenant or agreement of Purchaser herein (other than Article VI and Article VII, it being understood that the sole remedy for any such breach thereof shall be pursuant to
Article VI or Article VII respectively, as applicable), and (ii) subject to the terms of the Racing Services Agreement, the conduct of the business of each Company and Subsidiary
by Purchaser following the Closing Date. Anything in Section 9.01 to the contrary notwithstanding, no claim may be asserted, nor, subject to the last sentence of this
Section 9.02(a), may any action be commenced, against Purchaser for breach of any representation, warranty, covenant or agreement contained herein, unless written notice of such claim or
action is received by Purchaser describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or action on or prior to the date on which the
representation, warranty, covenant or agreement on which such claim or action is based ceases to survive as set forth in Section 9.01 (the "Applicable
Date"), irrespective of whether the subject matter of such claim or action shall have occurred before or after such date. If a claim or a potential claim arises, Purchaser and Seller
shall promptly work in good faith to determine the validity of such claim or potential claim within a reasonable period of time and if such claim or potential claim is not resolved to both parties'
satisfaction within such reasonable period of time, either party may commence legal proceedings to resolve such claim or potential claim (but in no event (other than as described in the next
sentence) after the Applicable Date). If Seller becomes aware of any such claim or potential claim within ninety days prior to the Applicable Date and promptly gives such written notice thereof as
aforesaid on or prior to the Applicable Date, then upon the giving of such notice, Seller and its Affiliates, or any of them, shall have the right to commence legal proceedings for a period of up to
ninety days subsequent to the date of such written notice for the enforcement of their rights under Section 9.02 with respect to the matters indicated in such notice. 

        (b)   Payments
by Purchaser pursuant to Section 9.02(a) shall be limited to the amount of any liability or damage that remains after deducting therefrom any Tax
benefit to Seller and any insurance proceeds and any indemnity, contribution or other similar payment recovered by Seller from any third party with respect thereto (it being agreed that Seller
will use its commercially reasonable efforts to recover such proceeds and payments and that, promptly after the realization of any insurance proceeds, indemnity, contribution or other similar payment,
Seller shall reimburse Purchaser for such reduction in Losses for which Seller was indemnified prior to the realization of such reduction of Losses). A Tax benefit to Seller for purposes of this
Section 9.02 shall be reasonably determined by Seller's Accountants as the difference between (i) the amount of federal, state and local Tax Liabilities of Seller and its Affiliates for
the year with respect to which the indemnity payment is made, and (ii) the amount of federal, state and local Tax Liabilities of Seller and its Affiliates for the year with respect to which the
indemnity payment is made but without the effect of event that gave rise to the indemnity payment. Seller shall provide Purchaser with calculations and/or other information reasonably supporting the
determination of the amount of the Tax benefit. 

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        (c)   No
claim may be made against Purchaser for indemnification pursuant to Section 9.02(a)(i) (other than breaches and claims under
Section 2.03(c) and the Fundamental Representations) with respect to any individual item of liability or damage arising out of a breach of a representation or warranty of
Purchaser or of a covenant or agreement to be performed by Purchaser prior to the Closing Date, unless the aggregate of all such Losses of Seller with respect to
Sections 9.02(a)(i) (other than breaches and claims under Section 2.03(c) and the Fundamental Representations) shall exceed $1,000,000, and Purchaser shall be
required to pay or be liable only for amounts in excess of such aggregate amount. Seller shall not be indemnified pursuant to Section 9.02(a)(i) with respect to any individual item of
liability or damage (other than breaches and claims under Section 2.03(c) and the Fundamental Representations) if the aggregate of all liabilities and damages of Seller for which
Seller has received indemnification pursuant to Sections 9.02(a)(i) shall have exceeded $22,500,000. 

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

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

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

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

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

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

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

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

        Anything
in Section 9.01 to the contrary notwithstanding, no claim may be asserted nor, subject to the second to the last sentence of this
Section 9.03(a), may any action be commenced against Seller for breach of any representation, warranty, covenant or agreement contained herein, unless written notice of such claim or
action is received by Seller describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or action on or prior to the Applicable Date, irrespective of
whether the subject matter of such claim or action shall have occurred before or after such date. If a claim or a potential claim arises, Purchaser and Seller shall promptly work in good faith to
determine the validity of such claim or potential claim within a reasonable period of time and if such claim or potential claim is not resolved to both parties' satisfaction within such reasonable
period of time, either party may commence legal proceedings to resolve such claim or potential claim (but in no event (other than as described in the next sentence) after the Applicable Date).
If Purchaser becomes aware of any such claim or potential claim within ninety days prior to the Applicable Date and promptly gives such written notice thereof as aforesaid on or prior to the
Applicable Date, then upon the giving of such notice, Purchaser and its Affiliates, or any of them, shall have the right to commence legal proceedings for a period of up to ninety days subsequent to
the date of such written notice for the enforcement of their rights under Section 9.03 with respect to the matters indicated in such notice. To the extent that Seller's undertakings set forth
in this Section 9.03 may be unenforceable, Seller shall contribute the maximum amount that it is permitted to contribute under applicable law to the payment and satisfaction of all Losses
incurred by Purchaser, the Companies and the Subsidiaries. 

        (b)   No
claim may be made against Seller for indemnification pursuant to Section 9.03(a)(i) (other than breaches and claims under the Fundamental
Representations and Section 3.12 (as to environmental matters)) with respect to any individual item of liability or damage arising out of a breach of a representation or warranty of
Seller or of a covenant or agreement to be performed by Seller prior to the Closing Date, unless the aggregate of all such Losses of Purchaser with respect to Section 9.03(a)(i) (other
than breaches and claims under the Fundamental Representations and Section 3.12 (as to environmental matters)) shall exceed $1,000,000, and Seller shall be required to pay or be liable
only for amounts in excess of such aggregate amount. Purchaser shall not be indemnified pursuant to Section 9.03(a)(i) with respect to any individual item of liability or damage (other
than breaches and claims under the Fundamental Representations and Section 3.12 (as to environmental matters)) if the aggregate of all liabilities and damages of Purchaser for which
Purchaser has received indemnification pursuant to Section 9.03 (a)(i) shall have exceeded $22,500,000. 

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        (c)   Payments
by Seller pursuant to this Sections 9.03, 6.06 and 7.01 shall be limited to the amount of any liability or damage that remains after
deducting therefrom (i) any Tax benefit to Purchaser, (ii) any insurance proceeds and any indemnity, contribution or other similar payment recovered by Purchaser from any third party
with respect thereto (it being agreed that Purchaser will use its commercially reasonable efforts and will cause Companies and Subsidiaries to use their respective commercially reasonable
efforts, to recover such proceeds and payments and that, promptly after the realization of any insurance proceeds, indemnity, contribution or other similar payment, Purchaser shall reimburse Seller
for such reduction in Losses for which Purchaser was indemnified prior to the realization of reduction of such Losses), and (iii) any amount paid pursuant to Section 15.6.5 of the Racing
Services Agreement with respect to the subject matter in dispute to the extent taken into account in determining the payment pursuant to such section. A Tax benefit to Purchaser for purposes of this
Section 9.03 will be reasonably determined by Purchaser's Accountants as the difference between (i) the amount of federal, state and local Tax Liabilities of Purchaser and its Affiliates
(including the Companies and the Subsidiaries) for the year with respect to which the indemnity payment is made, and (ii) the amount of federal, state and local Tax Liabilities of Purchaser and
its Affiliates (including the Companies and the Subsidiaries) for the year with respect to which the indemnity payment is made but without the effect of event that gave rise to the indemnity payment.
Purchaser shall provide Seller with calculations and/or other information reasonably supporting the determination of the Tax benefit. 

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

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

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

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        SECTION 9.04    Indemnification
Procedures, Etc. (a) Each of Purchaser and Seller (for purposes of this
Section 9.04(a), an "Indemnified Party") agrees to give the indemnifying party under Section 6.05, 7.01, 9.02 or 9.03, as applicable
(for purposes of this Section 9.04(a), an "Indemnifying Party") prompt written notice (a "Claim Notice") of any
claim, assertion, event or proceeding by or in respect of a third party of which it has knowledge concerning any liability or damage as to which it may request indemnification under
Section 6.05, 7.01, 9.02 or 9.03, as applicable, provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any liability hereunder unless (and then solely to the extent) the Indemnifying Party thereby is materially prejudiced by the delay. The Indemnifying Party shall have the right to
assume, through counsel of its own choosing, the defense or settlement of any such claim or proceeding at its own expense. If the Indemnifying Party elects to assume the defense of any such claim or
proceeding, the Indemnified Party may participate in such defense, but in such case the expenses of the Indemnified Party shall be paid by it; provided,
however, that if there exists or is reasonably likely to exist a conflict of interest (including, without limitation, if there may be one or more legal or equitable
defenses available to the Indemnified Party which are different from or in addition to those of the Indemnifying Party and representation by the same counsel would be inappropriate due to the actual
or potential differences between the parties) that would make it inappropriate in the reasonable judgment of the Indemnified Party for the same counsel to represent both the Indemnified Party and the
Indemnifying Party, then the Indemnified Party shall be entitled to retain its own counsel, in each jurisdiction for which the Indemnified Party determines counsel is required, at the expense of the
Indemnifying Party. With reasonable notice, the Indemnified Party shall provide the Indemnifying Party with reasonable access to its records and personnel relating to any such claim, assertion, event
or proceeding during normal business hours and shall otherwise cooperate with the Indemnifying Party in the defense or settlement thereof, and the Indemnifying Party shall reimburse the Indemnified
Party for all its reasonable out-of-pocket expenses in connection therewith. If the Indemnifying Party elects to assume the defense of any such claim or proceeding, the
Indemnified Party shall not pay, or permit to be paid, any part of any claim or demand arising from such asserted liability unless the Indemnifying Party consents in writing to such payment or unless
the Indemnifying Party, subject to the penultimate sentence of this Section 9.04(a), withdraws from the defense of such asserted liability or unless a final judgment from which no appeal
may be taken by or on behalf of the Indemnifying Party is entered against the Indemnified Party for such liability. If the Indemnifying Party shall fail to defend, or if after commencing or
undertaking any such defense, fails to prosecute or withdraws from such defense, the Indemnified Party shall have the right to undertake the defense or settlement thereof, at the expense of the
Indemnifying Party. If the Indemnified Party assumes the defense of any such claim or proceeding pursuant to this Section 9.04(a) and proposes to settle such claim or proceeding
prior to a final judgment thereon or to forego any appeal with respect thereto, then the Indemnified Party shall give the Indemnifying Party prompt written notice thereof and the Indemnifying Party
shall have the right to participate in the settlement or assume or reassume the defense of such claim or proceeding. Neither the Indemnified Party nor the Indemnifying Party shall settle any claim or
proceeding without the written approval of the Indemnifying Party (in the case of a settlement by the Indemnified Party) or of the Indemnified Party (in the case of a settlement by the
Indemnifying Party), which approval shall not be unreasonably withheld. 

        (b)   Neither
Seller nor Purchaser shall have any liability to Purchaser or Seller (as defined in Section 9.03(a) and
Section 9.02(a), respectively), as the case may be, under Article VI, Article VII or this Article IX for consequential or punitive damages, except that
this Section 9.04(b) shall not limit an Indemnified Party's right to recover fees or expenses of counsel or reimbursement or indemnity for claims by third parties to the extent otherwise
provided for in Article VI, Article VII or this Article IX and paid or payable by an Indemnified Party. 

63

 

        (c)   Each
of Seller and Purchaser hereby acknowledges and agrees that, from and after the Closing, the sole and exclusive remedy of Seller or Purchaser (as defined in
Section 9.02(a) and Section 9.03(a), respectively), as the case may be, against Purchaser or Seller, as the case may be, with respect to any and all claims relating to the
subject matter of this Agreement shall be pursuant to the indemnification provisions set forth in this Article IX and in Article VI and Article VII, except for any claims
arising out of fraud and where a party is entitled to seek injunctive relief because there is no adequate remedy at law. In furtherance of the foregoing, each of Purchaser and Seller hereby waives, on
behalf of itself and any other Purchaser or Seller (as defined in Section 9.02(a) and 9.03(a), respectively), as the case may be, to the fullest extent permitted
under applicable law, any and all rights, claims and causes of action such Purchaser and Seller (or, after the Closing, any Company or Subsidiary), as the case may be, may have against Seller
or Purchaser, as the case may be, (other than pursuant to this Article IX, Article VI, or Article VII, as applicable) relating to the subject matter of this Agreement arising
under or based upon any law, rule, regulation, order, judgment or decree applicable to it or by which any of the properties of it or any of its subsidiaries is bound or affected, subject to the
exception set forth in the immediately preceding sentence. Nothing in the forgoing provisions of this Section 9.04(c) shall limit any rights or claims any party hereto, any Company, any
Subsidiary or MEC Pennsylvania Racing Services, Inc. may have under the Racing Services Agreement. 

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

        (e)   Purchaser
and Seller hereby consent to the non-exclusive jurisdiction of any court in which an Action by a third party is brought against any Indemnified
Party for purposes of any claim that an Indemnified Party may have under this Agreement with respect to such Action or the matters alleged therein and agree that process may be served on Purchaser and
Seller with respect to such a claim at the address specified in this Agreement. From and after the Closing, neither the Companies nor the Subsidiaries shall have any Liability to Seller or its
Affiliates for any breaches of the representations, warranties, agreements or covenants of Seller, the Companies or the Subsidiaries set forth herein. From and after the Closing, neither Seller nor
its Affiliates shall seek indemnification or contribution from any Company or Subsidiary (including any of its employees or agents) for any such breaches or in respect of any other payments required
to be made by Seller or its Affiliates pursuant to this Agreement. Nothing in the foregoing provisions of this Section 9.04(e) shall limit any rights or claims any party hereto, any
Company, any Subsidiary or MEC Pennsylvania Racing Services, Inc. may have under the Racing Services Agreement. 

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        SECTION 9.05    Payments.
Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to
Section 6.05, Section 7.01 or this Article IX, the Indemnifying Party shall satisfy its obligations within fifteen (15) Business Days of such final, nonappealable
adjudication by wire transfer of immediately available funds; provided, that during the term of any of the Holdback Documents, if the Indemnifying Party is Seller and the
Losses are covered under the Holdback Documents, then such obligations shall be satisfied in accordance with the provisions of the Holdback Documents. The parties hereto agree that should an
Indemnifying Party not make full payment of any such obligations (other than such obligations described in the proviso set forth in the immediately preceding sentence) within such fifteen
(15) Business Day period, any amount payable shall accrue interest, compounded annually, calculated from the date of agreement of the Indemnifying Party or final, nonappealable adjudication
through the date such payment has been made, on the basis of the average of the daily rate of interest publicly announced by Citibank N.A. in New York, New York from time to time as its
base rate from the date of such agreement or such adjudication to the date of such payment. The parties hereto agree that any indemnification made pursuant to this Agreement (including without
limitation any indemnification covered by the Holdback Documents) shall be treated as an adjustment to the Purchase Price. 

 
 

ARTICLE X
  
    TERMINATION, AMENDMENT AND WAIVER    
    

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

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

        (b)   by
Seller if the condition set forth in Section 8.03(n) of this Agreement has not been satisfied or waived by Purchaser by June 30, 2006; 

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

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

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

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

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

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

        (i)    by
Seller or Purchaser if the condition set forth in Section 8.01(c) of this Agreement has not been satisfied or waived by both Purchaser and Seller by
April 30, 2006; 

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

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

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

        (m)  by
Seller or Purchaser if the Closing shall not have occurred prior to September 15, 2006. 

        Time
shall be of the essence in this Agreement. 

        SECTION 10.02    Effect
of Termination. In the event of termination of this Agreement in accordance with this Agreement, this Agreement
shall forthwith become void and there shall be no liability on the part of any party hereto (a) except as set forth in Sections 5.04(e), 5.05 and 5.15 and the last
three sentences of Section 5.04(d) and Article XI hereof and (b) nothing herein shall relieve any party hereto from liability for any willful breach of any provision hereof
(including, without limitation, Section 5.10). Failure to provide the Purchase Price less the Holdback Amount for any reason upon satisfaction of the conditions to Purchaser's obligations set
forth herein shall constitute willful breach. The foregoing sentence shall not be construed to limit the provisions of Section 9.04(b). 

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

 
 

ARTICLE XI
  
    GENERAL PROVISIONS    
    

        SECTION 11.01    Expenses;
Pro-rations. 

        (a)   Except
as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have
occurred. Seller shall pay (i) the cost of the Title Commitments; (ii) the portion of the premium attributable to the standard coverage portion of the Title Policies (excluding the costs
of any endorsements requested by Purchaser, except as are necessary to cure any Title Objection or obtained in connection with an Insured Exception); (iii) Seller's share of the
pro-rations described in this Section 11.01; and (iv) one-half of the HSR filing fee. Purchaser shall pay (i) the portion of the premium
attributable to any endorsements to the Title Policies (except as set forth in the preceding sentence) and the portion of the premium attributable to the "extended coverage" portion of the Title
Policies; (ii) Purchaser's share of the pro-rations described in this Section 11.01; and (iii) one-half of the HSR filing fee. 

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

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

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

67

 

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

        SECTION 11.02    Notices.
All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given
or made (and shall be deemed to have been duly given or made upon receipt but in no event less than three days after delivery in accordance herewith) by delivery in Person, by courier service,
by cable, by telecopy or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party
as shall be specified in a notice given in accordance with this Section 11.02): 

	(a)	 	if to Seller:
	
 	
 	

Magna Entertainment Corp.

337 Magna Drive

Aurora, Ontario

L4G 7K1, Canada

Facsimile: 905-726-7177

Attn: CEO/General Counsel
	
 	
 	

with a copy to:
	
 	
 	

O'Melveny & Myers LLP

400 South Hope Street

15th Floor

Los Angeles, CA 90071

Facsimile: 213-430-6407

Attn: Joseph K. Kim, Esq.
	
 (b)	
 	

if to Purchaser:
	
 	
 	

PA Meadows, LLC

c/o Oaktree Capital Management, LLC

333 S. Grand Avenue, 28th Floor

Los Angeles, California 90071-1560

Facsimile: 213-830-6394

Attn: John B. Frank, Esq.

Skardon F. Baker

68

 

	 	 	with a copy to:
	
 	
 	

Munger, Tolles & Olson, LLP

355 S. Grand Avenue, 35th Floor

Los Angeles, CA 90071-1560

Facsimile: 213-687-3702

Attn: Sandra Seville-Jones, Esq.
	
 	
 	

and a copy to:
	
 	
 	

Santoro, Driggs, Walch, Kearney, Johnson & Thompson

400 South Fourth Street

Suite 300

Las Vegas, N.V. 89101

Facsimile: 702-791-1912

Attn: Michael Kearney

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

        SECTION 11.04    Headings.
The headings contained in this Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. 

        SECTION 11.05    Severability.
If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the greatest extent possible. 

        SECTION 11.06    Entire
Agreement. This Agreement and the Transaction Documents constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, other than the Confidentiality Agreement, between Seller and Purchaser
(or Millennium Management Group, LLC) with respect to the subject matter hereof and except as otherwise expressly provided herein. 

69

 

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

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

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

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

        SECTION 11.11    WAIVER
OF JURY TRIAL. EACH OF PURCHASER AND SELLER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PURCHASER OR SELLER IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF. 

        SECTION 11.12    Counterparts.
This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 

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

        SECTION 11.14    Prevailing
Party. The prevailing party or parties in any arbitration, mediation, court action, or other adjudicative
proceeding arising out of or relating to this Agreement shall be reimbursed by the party or parties who do not prevail for their reasonable attorneys, accountants and experts fees and for the costs of
such proceeding. 

70

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

	 	 	PA MEADOWS, LLC
	
 	
 	

By:	

 
	 	 	 	
 Name:

Title:
	
 	
 	
MAGNA ENTERTAINMENT CORP.
	
 	
 	

By:	

/s/  TOM HODGSON      
 Name: Tom Hodgson

Title: President and Chief Executive Officer
 
	
 	
 	

By:	

/s/  BLAKE TOHANA      
 Name: Blake Tohana

Title: Executive Vice-President and Chief Financial Officer
 

S-1

QuickLinks

TABLE OF CONTENTS

ARTICLE I DEFINITIONS

ARTICLE II PURCHASE AND SALE

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER

ARTICLE V ADDITIONAL AGREEMENTS

ARTICLE VI EMPLOYEE MATTERS

ARTICLE VII TAX MATTERS

ARTICLE VIII CONDITIONS TO CLOSING

ARTICLE IX INDEMNIFICATION

ARTICLE X TERMINATION, AMENDMENT AND WAIVER

ARTICLE XI GENERAL PROVISIONS

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