Document:

EXHIBIT
10.13

 

MEMBER CONTROL AGREEMENT

 

OF

 

NORTH METRO HARNESS INITIATIVE, LLC

 

This Member Control Agreement of NORTH METRO HARNESS INITIATIVE, LLC, a
Minnesota limited liability company (the “Company”) is entered into and shall
be effective as of June 8, 2004 (the “Effective Date”), by and between
Southwest Casino and Hotel Corp., a Minnesota corporation (“Southwest”),
MTR-Harness, Inc., a Minnesota corporation (“MTR-Harness”) and MTR Gaming
Group, Inc., a Delaware corporation (“MTR”), the parent of MTR-Harness.

 

RECITALS

 

A.                                   Southwest
caused the Company to be formed in Minnesota as a single-member limited
liability company on June 16, 2003 (the “Formation Date”) and, since the
Formation Date, has operated the Company as an entity that is disregarded as a
separate entity from its owner for federal and state income tax purposes.

 

B.                                     Since
the Formation Date, Southwest has contributed funds to the Company, expended
funds on behalf of the formation and establishment of the Business (defined
below) of the Company and acquired certain assets, including the Real Estate
Options (defined below).

 

C.                                     Upon
the admission of MTR-Harness as a Member (defined below) of the Company in
exchange for its Initial Capital Contribution (defined below), the Company will
be converted from a disregarded entity into a “partnership” for federal income
tax purposes, as described in Situation 2 of IRS Revenue Ruling 99-5, 1999-1
C.B. 434, whereby (i) Southwest will be treated as making its Capital
Contribution in cash, a cash commitment, and by contributing all of the assets
and liabilities of the Business as such assets and liabilities exist on the
Effective Date, and (ii) MTR-Harness will be considered to contribute its
Capital Contribution in cash and a cash commitment, with each such Capital
Contribution made in exchange for the Membership Interests described in this
Agreement.

 

D.                                    Southwest
and MTR-Harness each have a fifty percent (50%) Percentage Interest (as defined
below) in the Company.

 

E.                                      Southwest
and MTR-Harness, as all of the Members of the Company desire to enter into this
Member Control Agreement (within the meaning of Minn. Stat. § 322B.37) to
govern the business and affairs of the Company to the fullest extent permitted
by law.

 

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

 

 

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

 

ARTICLE I

DEFINITIONS

 

For the purposes of this Agreement (as defined below) the following
terms shall have the following meanings:

 

1.                                       Act
– The Minnesota Limited Liability Company Act, Minn. Stat. § 322B.01 et
seq., as amended from time to time.

 

2.                                       Additional
Member - A Member other than Southwest, MTR-Harness or a Substitute Member
who has acquired a Membership Interest from the Company.

 

3.                                       Affiliate
– As applied to any specified Person or Organization means any other Person or
Organization (and all natural Persons related by blood, adoption or marriage to
such other Person) directly or indirectly controlling, controlled by, or under
direct or indirect common control with, such specified Person.  The term “control” (including, with
correlative meanings, the terms “controlling,” “controlled by” and “under
common control with”), as applied to any Person, means the possession, directly
or indirectly, of 20% or more of the voting power (or in the case of a Person
which is not a corporation, 20% or more of the ownership interests, beneficial
or otherwise) of such Person or Organization or the power otherwise to direct
or cause the direction of the management and policies of that Person or
Organization, whether through voting, by contract or otherwise.  For purposes of this paragraph, “voting
power” of any Person or Organization means the total number of votes which may
be cast by the holders of the total number of outstanding equity interests of
any class or classes of such Person or Organization in any election of
directors of such Person or Organization or individuals serving on a committee
or board serving a function comparable to that served by a board of directors
of a corporation.  All directors and
executive officers of a corporation and all directors and members of a board or
Board of Directors or similar committee of a Person or Organization organized
as a limited liability company shall be deemed to be Affiliates of such Person.

 

4.                                       Agreement
- This Member Control Agreement established pursuant to Minn. Stat.
§ 322B.37.

 

5.                                       Articles
- The Amended and Restated Articles of Organization of the Company filed with
the Minnesota Secretary of State on or before the Effective Date, as properly
adopted and subsequently amended from time to time by the Members and filed
with the Minnesota Secretary of State.

 

6.                                       Assignee
- A transferee of a Membership Interest who has not been admitted as a
Substitute Member.

 

 

7.                                       Bankrupt
Member - The terms “Bankruptcy” and “Bankrupt,” and variations thereof,
shall mean any of the following: (i) the initiation by a Member of a
proceeding, or initiation of any proceeding against a Member which has not been
vacated, discharged or bonded off within sixty (60) days of initiation, under
any federal, state or local bankruptcy or insolvency law, (ii) an assignment by
a Member for the benefit of creditors, (iii) the admission by a Member in
writing of his inability to pay his debts as they become due, or (iv) the
consent of a Member to the appointment of a receiver or trustee for all or a
substantial part of his property, or court appointment of such receiver or
trustee which is not suspended or terminated within sixty (60) days after
appointment.

 

8.                                       Board
of Directors (“Board”) – Has the meaning assigned in Article VII,
Section 4.

 

9.                                       Budgets
– Has the meaning assigned in Article VII, Section 8.

 

10.                                 Business
– Has the meaning assigned in Article III, Section 2.

 

11.                                 Business
Day - Any day other than Saturday, Sunday, or any legal holiday observed in
the State of Minnesota.

 

12.                                 Capital
Account - The account maintained for a Member or Assignee determined in
accordance with Article VIII, Section 4.

 

13.                                 Capital
Contribution - Any actual contribution of cash or Property made by or on
behalf of a Member, but exclusive of any obligation to contribute cash or
Property to the Company that has not been funded.

 

14.                                 Capital
Contribution Commitment –The commitment by MTR-Harness to contribute up to
an additional Seven Million Four Hundred Ninety Thousand Dollars
($7,490,000.00) to the Company subsequent to the occurrence of a Licensing
Event and the commitment by Southwest to contribute fund all costs (other than
$10,000 contributed by MTR-Harness) prior to the Licensing Event and to
contribute up to an additional One Million Five Hundred Thousand Dollars
($1,500,000.00) to the Company subsequent to the occurrence of a Licensing
Event, as referenced in Article VIII, Section 1.

 

15.                                 Catch-Up
Contribution – Means a Capital Contribution in the amount of Two Million
Nine Hundred Ninety Thousand Dollars ($2,990,000.00) to be made in cash by
MTR-Harness upon the occurrence of a Licensing Event without any further
approval or action by the Board or Members. 
The Catch-Up Contribution is intended to be in such amount that
MTR-Harness’ cumulative Capital Contributions to the Company (including its
Initial Capital Contribution) immediately after such Catch-Up Contribution will
be an amount equal to three (3) times Southwest’s Matched Pre-Licensing Costs.

 

16.                                 Closing
Date – The date, which is expected to be the same date as the Effective
Date, on which MTR-Harness acquired a fifty percent (50%) Percentage Interest

 

 

in the Company
pursuant to the terms and conditions of this Agreement and a Purchase
Agreement, dated the Closing Date between the Company, Southwest and MTR Gaming
Group, Inc., with such admission of MTR-Harness as a Member causing the Company
to convert from a disregarded entity to a partnership for federal income tax
purposes.

 

17.                                 Code
- The Internal Revenue Code of 1986, as amended from time to time.

 

18.                                 Company
– NORTH METRO HARNESS INITIATIVE, LLC, a limited liability company formed under
the laws of the State of Minnesota.

 

19.                                 Company
Liability - Any enforceable debt or obligation for which the Company is
liable or which is secured by any Company Property.

 

20.                                 Company
Property - Any Property owned by the Company.

 

21.                                 Director
– Has the meaning assigned in Article VII, Section 4.

 

22.                                 Disposition
(Dispose) – With respect to any Membership Interest, means any sale,
assignment, transfer, exchange, mortgage, pledge, grant, hypothecation, or
other transfer, absolute or as security or encumbrance (including disposition
by operation of law).

 

23.                                 Dissociation
(Dissociated) - Any action which causes a Person to cease to be a Member as
described in Article XI hereof.

 

24.                                 Dissolution
Event - An event, the occurrence of which will result in the dissolution of
the Company under Article XV, unless the Members elect to avoid
dissolution where the Members have the power to so elect.

 

25.                                 Distribution
- A transfer of cash or other Property to a Member on account of a Membership
Interest as described in Article IX and Article XV.

 

26.                                 Effective
Date – Has the meaning assigned in the preamble hereto.

 

27.                                 Formation
Date – Has the meaning assigned in the preamble hereto.

 

28.                                 Gaming
Authority – Any governmental gaming authority having jurisdiction over MTR
or its subsidiaries, Southwest or the Company including, but not limited to the
Minnesota Racing Commission, Minnesota Gaming Control Board, South Dakota
Division of Gaming, Colorado Division of Gaming, National Indian Gaming
Commission, Cheyenne and Arapaho Tribes Gaming Commission, the Pennsylvania
Horse Racing Commission, the West Virginia Lottery Commission, the West
Virginia Racing Commission, the Ohio Racing Commission, and the Nevada Gaming
Control Board.

 

 

29.                                 Initial
Capital Contributions – The Capital Contributions made by the Managing
Members in cash or Property on the Effective Date, as described in
Article VIII, Section 1.

 

30.                                 Licensing
Event – The date on which a license is issued and received by the Company
from the Minnesota Racing Commission allowing the Company to construct and
operate a harness racing track and card room in Columbus Township, Anoka
County, Minnesota (the “License”).

 

31.                                 Managing
Members – Southwest and MTR-Harness (each a Managing Member and
collectively the Managing Members and sometimes referred to as the Co-Managing
Members).

 

32.                                 Matched
Pre-Licensing Costs – Shall mean One Million Dollars ($1,000,000.00) of Southwest’s
Pre-Licensing Costs.

 

33.                                 Member
– Southwest, MTR-Harness, any Substituted Member or any Additional Member, and,
unless the context expressly indicates to the contrary, includes Managing
Members and Assignees.

 

34.                                 Membership
Interest – The individual equity interest of the respective Members in and
to the Company, which interest is to be maintained as a single interest and
which is not to be divided into any subinterest, such as an interest in
separate financial or management rights or otherwise.

 

35.                                 Monthly
Installment – Shall mean the return to Southwest of the Unmatched
Pre-Licensing Costs to be paid, subject to the availability of sufficient
distributable cash, in the form of twenty-four (24) equal monthly installments
over a twenty-four (24) month period.

 

36.                                 MTR
– MTR Gaming Group, Inc., a Delaware corporation.

 

37.                                 MTR-Harness
- MTR-Harness, Inc., a Minnesota corporation wholly owned by MTR.

 

38.                                 MTR-Harness
Maximum Capital Contribution – The Seven Million Five Hundred Thousand
Dollar ($7,500,000.00) Capital Contribution made, or to be made, by
MTR-Harness, comprised of MTR-Harness’ Initial Capital Contribution and Capital
Contribution Commitment, which amount may only be increased with the consent of
MTR-Harness.

 

39.                                 Net
Losses - The losses and deductions of the Company determined in accordance
with accounting principles consistently applied from year to year employed
under the method of accounting adopted by the Company and as reported
separately or in the aggregate, as appropriate, on the tax return of the
Company filed for federal income tax purposes.

 

 

40.                                 Net
Profits - The income and gains of the Company determined in accordance with
accounting principles consistently applied from year to year employed under the
method of accounting adopted by the Company as reported separately or in the
aggregate, as appropriate, on the tax return of the Company filed for federal
income tax purposes.

 

41.                                 Notice
– Any notice made pursuant to this Agreement shall be in writing.  Notice to the Company shall be considered
given when mailed by certified mail, postage prepaid, return receipt requested,
addressed to both Managing Members in care of the Company at the address of the
principal office identified in Article II, Section 6.  Notice to a Member shall be considered given
when mailed by certified mail, postage prepaid, return receipt requested,
addressed to such Member at the address reflected in the Agreement unless the
Member has given the Company a Notice of a different address.  Notice to any Director shall be as provided
in Article VII, Section 4.3. 
Any notice hereunder shall be considered given three (3) days after
being mailed by certified mail, postage prepaid, return receipt requested.

 

42.                                 Officers
– Shall mean the General Manager appointed by the Co-Managing Members and such
other individuals as may be appointed by the Board of Directors, as more fully
described Article VII, Section 5.

 

43.                                 Organization
- A Person other than a natural person. 
An Organization includes, without limitation, corporations (both
non-profit and other corporations), partnerships (both limited and general),
joint ventures, limited liability companies, and unincorporated associations,
but the term does not include joint tenancies and tenancies by the entirety.

 

44.                                 Pre-Licensing
Costs – Documented out-of-pocket costs incurred prior to the occurrence of
a Licensing Event in connection with the preparation of the license application
and pursuit of the license approval, the real property options, engineering and
design work, environmental assessments and other costs related to the Business
on or before the occurrence of the Licensing event, provided that such costs
shall exclude corporate overheard and provided further that Southwest or the
Company shall have capitalized (rather than deducted) such costs on its tax
returns for the periods prior to or including the occurrence of the Licensing
Event.  The purpose of the
above-mentioned requirement that Southwest or the Company shall have
capitalized such costs on its tax return is to avoid a variation between the
basis of the property to the Company and its fair market value at the time of
contribution and, accordingly, to avoid a special allocation of income, gain,
loss and deduction pursuant to Section 704(c) of the Code.  Except for the exclusion of corporate
overhead, there is no prohibition on such costs being reflected as intangible
assets on the Company’s financial statements. 
Pre-Licensing Costs are divided into two categories: Match Pre-Licensing
Costs and Unmatched Pre-Licensing Costs.

 

 

45.                                 Percentage
Interest - A Member’s share of the Net Profits and Net Losses of the
Company (except as otherwise provided in Article IX) and, subject to the
payment of disproportionate Distributions to MTR-Harness until MTR-Harness and
Southwest have each received a return of their Capital Contributions as
provided in Article IX, a Member’s right to receive Distributions of the
Company’s assets.

 

46.                                 Person
- An individual, trust, estate, or any incorporated or unincorporated organization
permitted to be a member of a limited liability company under the laws of the
State of Minnesota.

 

47.                                 Preferred
Return – means the amount accrued for each taxable year (or portion
thereof) of the Company commencing on the Effective Date by applying the Prime
Rate, as in effect from time to time, to the sum of (i) the Unrecovered
Unmatched Pre-Licensing Costs and (ii) the Unrecovered Preferred Return.

 

48.                                 Prime
Rate - Prime Rate shall mean the “prime rate” as published in the “Money
Rates” Section of The Wall Street
Journal; however, if such rate is, at any time during the term of
this Agreement, no longer so published, the term “Prime Rate” shall mean the
average of the prime interest rates which are announced, from time to time, by
the three (3) largest banks (by assets) headquartered in the United States
which publish a prime, base or reference rate, in any case not to exceed the
maximum rate permitted by law.

 

49.                                 Proceeding
- Any judicial or administrative trial, hearing or other activity, civil
criminal or investigative, the result of which may be that a court, arbitrator,
or governmental agency may enter a judgment, order, decree or other
determination which, if not appealed and reversed, would be binding upon the
Company, a Member or other person subject to the jurisdiction of such court,
arbitrator, or governmental agency, including an appeal or review of same.

 

50.                                 Property
- Any property real or personal, tangible or intangible, including money and
any legal or equitable interest in such property, excluding services and
promises to perform services in the future.

 

51.                                 Real
Estate Options – The options to acquire the Real Property which were
contributed to the Company by Southwest as part of Southwest’s Initial Capital
Contribution.

 

52.                                 Real
Property – The real property which is referred to in Article III and
which is more fully described in Exhibit B attached hereto and made a
part hereof.

 

53.                                 Regulations
- Except where the context indicates otherwise, the permanent, temporary,
proposed, or proposed and temporary regulations of the U.S. Treasury
Department, promulgated under the Code, as such regulations may be lawfully
changed from time to time.

 

 

54.                                 Resignation
- The act by which a Managing Member ceases to be a Managing Member.

 

55.                                 Southwest
Maximum Capital Contribution - The sum of the Matched Pre-Licensing Costs,
the Unmatched Pre-Licensing Costs, and Southwest’s commitment to contribute up
to an additional One Million Five Hundred Thousand Dollar ($1,500,000.00)
subsequent to the occurrence of the Licensing Event, which amount may only be
increased with the consent of Southwest.

 

56.                                 Substitute
Member - An Assignee who has been admitted to all of the rights of
membership pursuant to the Agreement.

 

57.                                 Suitable
Person – A Person licensable by each Gaming Authority having jurisdiction
over the Company’s Business or any Member’s or their Affiliate’s business
operations at the time of any such determination.

 

58.                                 Taxable
Year - The taxable year of the company as determined pursuant to
Section 706 of the Code, which shall be the calendar year ended
December 31 unless properly changed by the Managing Members or Board.

 

59.                                 Taxing
Jurisdiction - Any state, local, or foreign government that collects tax,
interest or penalties, however designated, on any Member’s share of the Net
Profits of the Company.

 

60.                                 Unmatched
Pre-Licensing Costs – Shall mean the amount of Southwest’s Pre-Licensing
Costs in excess of One Million Dollars ($1,000,000.00).

 

61.                                 Unrecovered
Preferred Return – Shall mean the cumulative amount of accrued but unpaid
Preferred Return.

 

62.                                 Unrecovered
Unmatched Pre-Licensing Costs – Shall mean the aggregate Unmatched
Pre-Licensing Costs less the amount of such Unmatched Pre-Licensing Costs paid
to Southwest in the form of Monthly Installments pursuant to Article IX,
Section 3 or otherwise returned to Southwest pursuant to Article IX,
Section 4.

 

63.                                 Unsuitable
Person – A Person not licensable by each Gaming Authority having
jurisdiction over the Company’s Business or any Member’s or their Affiliate’s
business operations at the time of any such determination.

 

ARTICLE II

FORMATION

 

1.                                       Organization.  Southwest organized the Company as a
Minnesota Limited Liability Company pursuant to the provision of the Act and
filed the Company’s original Articles of Organization on June 16,
2003.  At all times since its formation
and through the Effective Time, the Company has been disregarded as an entity
separate from Southwest for federal and state income tax purposes.  On

 

 

the Effective
Date, MTR-Harness acquired a fifty percent (50%) Percentage Interest from the
Company, and the revised Articles were filed with the Minnesota Secretary of
State on or before the Effective Date. 
On the Effective Date, the Company converted into a partnership for
federal and applicable state income tax purposes.

 

2.                                       Agreement.  For and in consideration of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Members executing
the Agreement hereby agree to the terms and conditions of the Agreement, as it
may from time to time be amended according to its terms.  It is the express intention of the Members
that the Agreement shall be the sole source of agreement of the parties.  Consistent with such intention, the Members
acknowledge that the Company’s Operating Agreement, dated July 16, 2003,
is no longer in force and effect.

 

3.                                       Name.  The name of the Company is NORTH METRO
HARNESS INITIATIVE, LLC, a limited liability company, and all business of the
Company shall be conducted under that name or under any other name, but in any
case, only to the extent permitted by applicable law.

 

4.                                       Term.  The duration of the Company shall be
perpetual, unless the Company shall be sooner dissolved and its affairs are
wound up in accordance with the Act or this Agreement.

 

5.                                       Registered
Agent and Office.  The registered
agent for the service of process shall be Thomas E. Fox and the registered office shall be that location
reflected in the Articles of Organization as filed in the Minnesota Secretary
of State’s office.  The Members, may,
from time to time, change the registered agent or office through appropriate
filings with the Minnesota Secretary of State’s office.  In the event the registered agent ceases to
act as such for any reason or the registered office shall change, the Managing
Members or Board shall promptly designate a replacement registered agent or
file a notice of change of address as the case may be.  If the Managing Members or Board shall fail
to designate a replacement-registered agent or change of address of the
registered office, any Member may designate a replacement-registered agent or
file a notice of change of address.

 

6.                                       Principal
Office.  The principal office of the
Company shall be located at:

 

2001 Killebrew Drive

Suite 306

Bloomington, Minnesota 55425

 

The Managing Members shall have the authority upon their unanimous
agreement to change the principal office of the Company.

 

 

ARTICLE III

NATURE OF BUSINESS

 

1.                                       General
Powers.  The Company may engage in
any lawful business permitted by the Act or the laws of any jurisdiction in
which the Company may do business.  The
Company shall have the authority to do all things necessary or convenient to
accomplish its purpose and operate its business as described in the Agreement
and this Article III. 
Notwithstanding the foregoing, the Company exists only for the purpose
specified in Section 2 of this Article III, and may not conduct any
other business without the unanimous consent of the Managing Members.

 

2.                                       Harness
Race Track.  The Company’s business
(the “Business”) may include, but shall not be limited to, the purchase of the
real property described in Exhibit B attached hereto and made a part hereof
(the “Real Property”), and the operation of card games and a harness horse
racetrack thereon, together with all of the normal ancillary functions and
facilities, such as stables, a clubhouse, a grandstand, restaurants,
pari-mutuel wagering, together with the operation of other ancillary businesses
on the Real Property, such as nightclubs, a hotel and such other activities
(including the additional authorized gaming described in Article VIII,
Section 3) as may be permitted by law from time to time.

 

ARTICLE IV

ACCOUNTING AND RECORDS

 

1.                                       Records
to be Maintained.  The Company shall
maintain the following records at its principal office:

 

1.1                                 A
current list of the full name and last known business address of each Member;

 

1.2                                 A
copy of the Articles and all amendments thereto, together with executed copies
of any powers of attorney pursuant to which any articles have been executed;

 

1.3                                 Copies
of the Company’s federal, foreign, state, and local income tax returns and
reports, if any, for the three most recent years;

 

1.4                                 Copies
of this Agreement including all amendments thereto; and

 

1.5                                 Any
financial statements of the Company for the seven (7) most recent years.

 

2.                                       Reports
to Members:

 

2.1                                 The
Board shall provide  to the Members
other than Assignees, (a) unaudited balance sheets, income statements and
changes in financial position (“Financial Statements”) for each calendar
quarter within fifteen (15) days following the end of such calendar quarter and
(b) audited

 

 

Financial
Statements for each calendar year on or before the end of the fifth (5th)
Friday following the end of such calendar year, or at such other times as may
be agreed to by the Members.

 

2.2                                 The
Board shall provide all Members with such information returns required by the
Code and the laws of the applicable state or states in which the Company
operates.

 

3.                                       Accounts.  The Board shall maintain a record of each
Member’s Capital Account in accordance with Article VIII.

 

4.                                       Accountant.  The Managing Members jointly, or the Board,
shall determine the firm or firms of accountants to assist the Company with
financial statements and tax matters. 
Notwithstanding the foregoing, if necessary in order to satisfy the
requirements of Article IV, Section 2.1, the Company shall utilize
the accounting firm selected by MTR-Harness.

 

ARTICLE V

NAMES AND ADDRESSES OF MEMBERS

 

The name and addresses of the Members are as reflected on Exhibit A
attached hereto and by this reference made a part hereof as if set forth fully
herein.

 

ARTICLE VI

RIGHTS AND DUTIES OF MEMBERS

 

1.                                       Management
Rights.  All Members (other than
Assignees) who have not Dissociated shall be entitled to vote on any matter
submitted to a vote of the Members. 
Whenever any matter is required or allowed to be approved by the
Members, under the Act or this Agreement (which shall take precedence over the
Act to the fullest extent permitted by law), such matter shall be considered
approved or consented to upon the receipt of the requisite approval or consent,
either in writing or at a meeting of the Members.  Assignees and, in the case of approvals to withdrawal where
consent of the remaining Members is required, Members who have Dissociated,
shall not be considered Members entitled to vote for the purpose of determining
an approval action.

 

2.                                       Liability
of Members.  No Member shall be
liable as such, for any Company Liability. 
The failure of the Company to observe any formalities or requirements
relating to the exercise of its powers or management of its Business or affairs
under this agreement or the Act shall not be grounds for imposing personal
liability on the Members, Managing Members or Directors or Officers for
liabilities of the limited liability company.

 

3.                                       Indemnification.  The Company shall indemnify the Members,
Managing Members, Directors and Officers and their agents for all costs,
losses, claim, judgments, liabilities, and damages paid or accrued by such
Member, Managing Member, Director, Officer or agent in connection with the
Business of the

 

 

Company, to the
fullest extent provided or allowed by the laws of the State of Minnesota.

 

4.                                       Representations
and Warranties.  Each Member, and in
the case of an Organization, the person executing the Agreement, hereby
represents and warrants to the Company and each other Member that: (i) if
that Member is an Organization, it is duly organized, validly existing, and in
good standing under the law of its State of organization and that it has full
organizational power to execute and agree to the Agreement and to perform its
obligations hereunder; (ii) the Member is acquiring its interest in the
Company for the Member’s own account as an investment and without an intent to
distribute the interest; and (iii) the Member acknowledges that the
interests have not been registered under the Securities Act of 1933 or any state
securities laws, and may not be resold or transferred by the Member without
appropriate registration or the availability or an exemption from such
requirements.

 

5.                                       Conflicts
of Interest:

 

5.1                                 Independent
Ventures; Nonsolicitation.  Each of
the Members and MTR covenants and agrees that while it may currently engage or
hold interests in other business ventures of varied kinds and descriptions for
its own account, including other investments which include but are not limited
to gaming and real estate ventures, that it shall not compete directly, or
indirectly through any Affiliate, with the Company’s Business (as the same may
evolve from time to time) in the State of Minnesota for so long as such Person
is a Member and for a two (2) year period thereafter.  Further, each Member agrees to present any opportunities within
the scope of the Business in Minnesota to the Board of Directors promptly after
such Member or its Affiliates becomes aware of such opportunity, however,
neither the Company nor any of the Members shall have any rights by virtue of
this Agreement in any: (i) existing business ventures; or (ii) future
business ventures outside of Minnesota, or to the income or profits derived
therefrom.  No Member or its Affiliates
shall solicit any employee of the Company to become employed by such Member or
its Affiliates for so long as such Member is a Member of the Company and for a
one (1) year period thereafter.

 

5.2                                 Lending
Money.  A Member may lend money to
and transact other business with the Company upon such terms and conditions as
consented to by all of the Managing Members or the Board, which loans shall
bear interest at the Prime Rate plus 200 basis points (Prime Rate + 2%) unless
the Managing Members or Board shall otherwise agree.  The rights and obligations of a Member who lends money to or
transacts business with the Company are the same as those of a Person or
Organization who is not a Member, subject to other applicable law.  No transaction with the Company shall be
voidable solely because a Member has a direct or indirect interest in the
transaction if all of the Managing Members or the

 

 

Board, knowing the
material facts of the transaction and the Member’s interest, unanimously
authorize, approve, or ratify the transaction.

 

5.3                                 Affiliated
Member Contracts.  A Member may
contract with the Company to provide certain services to the Company either
directly or through an Affiliate or Subsidiary of such entity (a “Contracting
Member”) on such terms and conditions as are consented to by all of the
Managing Members or the Board.  The
rights of such Contracting Member shall be the same as an unaffiliated Person
and no such contract shall be voidable solely because of such affiliation if
all of the Managing Members or the Board, knowing the material facts of the
transaction and the Contracting Member’s interest, authorize, approve, or
ratify the transaction.

 

ARTICLE VII

MANAGING MEMBERS; BOARD OF DIRECTORS

 

1.                                       Co-Managing
Members.  Except as otherwise
specifically provided herein or by law that cannot be modified by this
Agreement, or as otherwise delegated to the Board of Directors, the management
of the Company and its business, and other operating matters, shall be the
responsibility of both Southwest and MTR-Harness, acting in their capacity as Co-Managing
Members of the Company, who shall exercise such management power through the
Board of Directors.  The Company shall
have no Board of Governors as provided under the Act, but shall have a Board of
Directors as described in Section 4 of this Article VII.  All decisions, both ordinary and
extraordinary, shall be made by the Board of Directors, including, but not
limited to those matters set forth in Article VII, Section 2, below.  The Directors shall devote such time and
energy to the business and purposes of the Company to the extent necessary for
the prudent and efficient carrying on thereof. 
The acts of the Board of Directors shall bind the Company.  Any and all documents, agreements,
instruments or certificates executed by both of the Managing Members or any
Person authorized by the Board shall be effective and binding upon the Company
without the need for the consent or approval of any other Member or Director.

 

2.                                       Board
of Directors Authority.  Subject to
those restrictions set forth in Section 3 of this Article VII, the
Board of Directors, acting through its duly authorized and empowered Company
Officers, is hereby authorized for, and in the name of, at the expense of, and
on behalf of the Company:

 

2.1                                 To
enter into any kind of activity and to perform and carry out contracts of any
kind necessary to, or in connection with, or incidental to the accomplishment
of the purposes of the Company, so long as said activities and contracts may be
lawfully carried on or performed by a limited liability company under
applicable laws and regulations;

 

2.2                                 To
acquire by option, lease or purchase, finance, refinance, improve, grant
options, sell all or any portion of the Real Property, convey, assign,

 

 

mortgage, or
otherwise transfer all or any portion of the real or personal property of the
Company;

 

2.3                                 To
develop, maintain, lease and execute such documents ancillary to those
activities involving the development of the Real Property;

 

2.4                                 To
prepare, execute and deliver any and all agreements, contracts, documents,
regulatory filings with governmental authorities, certifications and
instruments necessary or convenient in connection with the acquisition,
development, construction, leasing, managing, maintenance and operation of the
Company’s Business or Property;

 

2.5                                 The
Managing Members shall, upon advice of counsel to the Company, amend any
provision of this Agreement if necessary in order to cause such provision to
comply with Section 704 of the Code and the Regulations thereunder
relating to Company allocations being respected for federal income tax
purposes; and

 

2.6                                 To
initiate, defend, adjust, settle, compromise, or pay any disputed claim,
obligation, debt, demand, suit, litigation or judgment by or against the
Company (including, without limitation, any claim to insurance proceeds).

 

3.                                       Restrictions
on Authority.

 

3.1                                 Acts
in Violation of Act, Law or Agreement. 
With respect to the Company and its business and Property, the Managing
Members shall have no authority on behalf of the Company to perform any act in
violation of the (i) Act, (ii) any other applicable law (gaming or otherwise,
(iii) any regulations thereunder, or (iv) this Agreement.

 

3.2                                 Additional
Restricted Actions.  Unless
otherwise determined by both Managing Members or the unanimous consent of all
the Directors on the Board of Directors, neither the Managing Members nor Board
of Directors shall:

 

a.                                       cause
the Company to form any subsidiary or acquire any equity interest or other
interest in any other Person or Organization;

 

b.                                      cause
the Company to make any capital expenditure in excess of Twenty Five Thousand
Dollars ($25,000) or otherwise outside the ordinary course of business, unless
set forth in the Budgets;

 

c.                                       cause
the Company to enter into any contract involving annual payments by the Company
in excess of Twenty Five Thousand Dollars ($25,000), unless set forth in the
Budgets;

 

d.                                      cause
the Company to establish or adopt any new employee plan, amend any existing
employee plan or pay any bonus or make any

 

 

profit sharing or
similar payment to, or increase the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
Directors, Officers or employees, except for merit increases or cost of living
adjustments given to employees in the ordinary course of business;

 

e.                                       cause
the Company to change any of its methods of accounting or accounting practices
in any respect, except as required by generally accepted accounting principals
or applicable laws;

 

f.                                         cause
the Company to commence any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding and any informal proceeding), prosecution, contest, hearing,
inquiry, inquest, audit, examination or investigation involving any government
entity or third party and involving an amount in excess of One Hundred Thousand
Dollars ($100,000.00);

 

g.                                      cause
the Company to (i) acquire, dispose of, transfer, lease, license, mortgage,
pledge or encumber any fixed or other assets, other than in the ordinary course
of business; (ii) incur, assume or prepay any indebtedness, liability or
obligation or any other liabilities or issue any debt securities, other than in
the ordinary course of business; (iii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person, other than in the ordinary course of
business; or (iv) make any loans, advances or capital contributions to, or
investments in, any other person, other than in the ordinary course of
business; or

 

h.                                      cause
the Company to transfer to any person or entity any intellectual property or
intangible asset other than in the ordinary course of business.

 

i.                                          operate
the Company in a manner inconsistent with the Budgets.

 

4.                                       Board
of Directors.

 

4.1                                 Except
as to any decision that is expressly designated to be made only by the Managing
Members, the Business of the Company shall be managed by and under the
authority of a Board of Directors.  The
Board of Directors shall have the exclusive authority and full discretion to
manage the Business of the Company, subject to the terms of this Agreement
where decisions are only to be made by the Managing Members.  The Members agree that the Directors are not
“governors” (as defined in the Act) but rather are representatives of the
Managing Members, and the acts of the Board of Directors are the acts and
decisions of the Managing

 

 

Members and are
binding on all the Members.  The Board
of Directors shall have all right, power and authority, on behalf of and in the
name of the Company, to enter into, execute, acknowledge and deliver any and
all contracts, agreements or other instruments, and to take any and all other
actions, which the Board of Directors deems necessary, proper, or desirable to
carry out its responsibilities under this Agreement.

 

4.2                                 Except
as provided in Section 4.10 of this Article VII, the  Board of Directors shall be composed of four
(4) Directors.  The Managing Members
shall each appoint two (2) individuals to serve as Directors.  Each of the two (2) Directors appointed by a
Managing Member shall serve until the earlier of (i) the date of the Director’s
death, disability, resignation, or removal, (ii) the date on which a successor
Director is appointed by the action of the Managing Member which appointed such
Director, or (iii) the date on which the Managing Member that appointed such
Director is no longer a Member. 
Directors need not be Members or residents of the State of Minnesota.  Any Director may resign at any time upon
written notice to the Board of Directors. 
A resignation shall be effective when given unless the notice specifies
a different date.  The Managing Member
appointing a Director may, at any time by delivery of notice to all the Members
and Directors, remove such Director for any reason or for no reason and replace
any Director who has been removed or who has otherwise ceased to be a
Director.  No Member shall have the right
to appoint, vote for or otherwise interfere with any other Member’s right to
appoint a Director hereunder.

 

4.3                                 Regular
meetings of the Board of Directors shall be called by the Chairman of the Board
and held not less frequently than quarterly. 
Special meetings of the Board of Directors may be called for any purpose
or purposes by any two Directors, who may designate the time and place of the
meeting.  If the place for any meeting
of the Board of Directors is not otherwise designated, the place of meeting
shall be the principal office of the Company. 
The Chairman of the Board shall preside at all meetings of the Board of
Directors.  Written notice stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called shall be delivered not less than 5 nor more than 30 days
before the date of the meeting.  Notices
must be in writing and must be given either personally, by overnight courier or
by facsimile and will be deemed given when received if given personally, one business
day after having been sent by overnight courier to the Director’s business
office, and upon telephonic verification of receipt if sent by facsimile to the
facsimile number of the Director’s business office given by the Director to the
Company from time to time.

 

4.4                                 Directors
may participate in and hold a meeting by means of a conference telephone call
or other similar communication equipment by means of which all persons
participating in the meeting can hear each other. Such

 

 

participation
shall be made available at the request of any Director.  Participation in such a meeting shall
constitute presence of a person at a meeting, except where the person
participates solely for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened. At any
meeting of the Directors, the presence in person or by telephone (or other
electronic means) of all of the Directors (in person or by proxy pursuant to
Section 4.6) shall constitute a quorum.

 

4.5                                 All
determinations, acts and designations to be made hereunder by the Board of
Directors shall be final and binding for all purposes of this Agreement.  Each Director shall have one (1) vote on any
matter.  At any meeting of the Directors
at which a quorum is present, the affirmative vote of three (3) Directors shall
constitute an act of the Board of Directors, except to the extent this
Agreement may otherwise require the unanimous consent of all Directors to take
any action.  No Person or Organization
shall be required to inquire into, and Persons or Organizations dealing with
the Company are entitled to rely conclusively on, the right, power and
authority of the Board of Directors to bind the Company.

 

4.6                                 A
Director may vote on any matter, or execute any consent in lieu of a meeting,
either in person or by proxy executed in writing by the Director. A telegram,
telex, cablegram, or similar transmission by the Director, or a photographic,
photostatic, facsimile, or similar reproduction of a writing executed by the
Director shall be treated as an execution in writing for this purpose.  Any Director may appoint another Director or
another individual employee of the Managing Member as such Director’s proxy and
the proxy may be limited in scope or with full discretion.  Proxies for use at any meeting of the
Directors shall be filed with the Board of Directors before or at the time of
the meeting or execution of the written consent, as the case may be.  No proxy shall be valid after eleven months
from the date of its execution unless otherwise provided in the proxy.  A proxy shall be revocable.

 

4.7                                 Any
action permitted to be taken at any meeting of the Board of Directors may be
taken without a meeting if a written consent thereto is signed by all the
Directors necessary to take such action at a duly called meeting.

 

4.8                                 The
Board of Directors may establish and maintain one or more committees and
appoint two or more Directors to serve on such committees.  In the discretion of the Board of Directors,
any committee may also be comprised of individuals who are not Directors,
except that any person who is not a Director shall act in an advisory role only
on such committee and shall have no vote on committee matters.  The Board of Directors may, to the fullest
extent permitted by law, make a revocable delegation to such committees of all
or any portion of its powers and authority. 
Any delegation to such a committee shall be set forth in a 

 

 

writing approved
by the Board of Directors in accordance with this Agreement.  All procedural provisions made applicable to
the Board of Directors hereunder shall be equally applicable to any committee
formed under this Section 4.8.

 

4.9                                 The
Company shall reimburse the Directors (or any committee member) for all
out-of-pocket travel expenses associated with attending a meeting of the Board
of Directors (or any committee thereof). 
Unless approved by the Board of Directors, the Company may not pay
compensation to any Director (or any committee member) in his or her capacity
as such, unless such Director (or committee member) is neither an Affiliate of
any Member nor an employee of the Company, any Member or an Affiliate of any
Member.

 

4.10                           In
the event that two or more of James B. Druck, Thomas E. Fox and Jeffrey S.
Halpern cease to be members of the Board of Directors of Southwest, MTR-Harness
shall have the right to require that Board of Directors of the Company be
comprised of an odd number of Directors, at least one of whom is an independent
Director who is not affiliated with either Southwest or MTR-Harness.

 

5.                                       Officers.

 

5.1                                 The
Co-Managing Members shall appoint a General Manager having the functions
described in Section 5.2 of this Article VII as an Officer of the
Company.  In addition to the General
Manager appointed by the Co-Managing Members, the  Board of Directors may also elect or designate, by resolution or
otherwise, individuals as officers of the Company  and revocably delegate to such Officers such powers, authority,
and responsibilities of the Board of Directors as are (i) set forth in
Section 5.2 below or in the designation or delegation and (ii) necessary
to carry out and implement the management decisions of the Board of Directors
or Managing Members.  The Company shall
not have any “Chief Manager” as such term is defined in the Act.  The Board of Directors may remove any
Officer, with or without cause, at any time. 
Any Officer may resign at any time by giving written notice to the
Company.  Any resignation shall take
effect at the date of the receipt of such notice or at any later time specified
in such notice (unless such Officer is otherwise removed prior to such date);
and, unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective.  Any removal or resignation is without
prejudice to the rights, if any, of the Company or the Officer under any
contract of employment with the Company.

 

5.2                                 The
following Officers of the Company, to the extent named, shall have the
following duties:

 

 

a.                                       Chairman
of the Board:  The Chairman of the
Board, if there is one, shall be a Director and shall preside at meetings of
all of the Members, if  any, and at all
meetings of the Board of Directors.  The
Chairman of the Board shall be appointed and removed in the manner provided in
the definition of such term.  The
Chairman of the Board may execute contracts and agreements (i) in the ordinary
course of the Company’s business, or (ii) the execution of which has been
authorized by the Board of Directors, in the name and behalf of the Company and
shall have such other powers and perform such duties as may be delegated to him
by the Board of Directors.  Unless
otherwise determined by the Board, which may increase, decrease or terminate
the term of any Chairman of the Board at any time, the office of Chairman shall
rotate among the Directors appointed by each of the Managing Members. The
initial Chairman shall be appointed by MTR-Harness. Except as otherwise
provided in the preceding sentence, each Chairman of the Board’s term shall be
limited to two calendar years after the first such term which first term shall
end on December 31, 2005.

 

b.                                      General
Manager:  The General Manager shall
conduct the day to day operations of the Company, including the making of
expenditures in connection therewith, in a manner which implements the
management decisions of the Board of Directors or Managing Members and is  consistent with the Budgets.

 

c.                                       President
and Chief Executive Officer:  The
President and Chief Executive Officer shall be the chief executive officer of
the Company, and subject only to the Board of Directors of the Company, shall
have general authority over, and general management and control of, the
Property, business and affairs of the Company. 
The President and Chief Executive Officer shall see that all orders and
resolutions of the Board of Directors are implemented.  The President and Chief Executive Officer
may execute contracts and agreements (i) in the ordinary course of the
Company’s business, or (ii) the execution of which has been authorized by the
Board of Directors.

 

d.                                      Vice
President:  The Vice President, or
if there shall be more than one, the vice-presidents in the order determined by
the Board of Directors, shall, in the absence or disability of the President
and Chief Executive Officer, perform the duties and exercise the powers of the
President and Chief Executive Officer, and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.

 

 

e.                                       Secretary
and Assistant Secretaries:  The
Secretary shall attend all meetings of the Board of Directors and all meetings
of the Members and record all the proceedings of the meetings of the Company
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required.  The Secretary shall give, or cause to be
given, notice of all meetings of the Members and special meetings of the Board
of Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or President and Chief Executive Officer, under whose
supervision the Secretary shall be.  The
Assistant Secretary, or if there be more than one, the Assistant Secretaries in
the order determined by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties 
and have such other powers as the Board of Directors may from time to
time prescribe.

 

f.                                         Treasurer
and Chief Financial Officer; Assistant Treasurer:  The Treasurer and Chief Financial Officer shall have the custody
of the funds and securities of the Company and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Company and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Company in such depositories as may be designated by the Board of
Directors.  The Treasurer and Chief
Financial Officer shall disburse the funds of the Company as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors at its regular
meetings or when the Board of Directors so requires, an account of all his
transactions as Treasurer and Chief Financial Officer and of the financial
condition of the Company.  The Assistant
Treasurer, or if there shall be more than one, the Assistant Treasurers in the
order determined by the Board of Directors, shall, in the absence or disability
of the Treasurer, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe

 

6.                                       Indemnification.  No Member or Director (each, an Indemnified
Party), shall be liable to the Company or any Member for any loss suffered by
the Company or any Member which arises out of any act or omission of the
Indemnified Party involving the exercise of discretion or business judgment, if
(i) such act or omission was committed, or omitted, by the Indemnified
Party in good faith and in the reasonable belief that such act or omission was
in the best interests of the Company, (ii) such act or omission was within
the scope of the authority

 

 

conferred on the
Indemnified Party by this Agreement, as applicable, and did not constitute or
involve a material, and grossly negligent or willful, breach of any warranty,
representation or legal or contractual obligation or duty by the Indemnified
Party, (iii) such act or omission did not constitute or involve any gross
negligence or willful misconduct of or by the Indemnified Party, and
(iv) such act or omission did not constitute all or part of an interested
party transaction not expressly approved by the Managing Member or Board of
Directors.  Each Indemnified Party shall
be indemnified, defended and held harmless by the Company against any losses,
judgments, liabilities, amounts and expenses (including reasonable attorneys’
fees and legal costs and disbursements as well as reasonable amounts paid in
settlement of any claims) arising out of or in connection with any act or
omission for which such Indemnified Party is not liable to the Company pursuant
to the provisions of the immediately preceding sentence; provided, however,
that any indemnity under this Section 6 shall be paid only out of and to
the extent of Company Property, including any applicable insurance proceeds.

 

7.                                       Resolution
of Deadlocks.  In the event
Southwest and MTR-Harness, either through the Board or directly, are unable to
reach a decision on any material matter, including, but not limited to, budget
disputes or matters subject to Section 2 of this Article VII after a
period of fifteen (15) days when discussion of the action by the Board first
commenced, either of such Managing Members may require that the matter be
decided pursuant to the terms and conditions of this Section 7 of this
Article VII by sending written notice to the other Managing Member.  In order to resolve the matter, Southwest
and MTR-Harness shall (i) each present the issue to the Chief Executive
Officers of Southwest and MTR who shall meet face-to-face or by telephone and
who shall have one day to reach agreement, or (ii) utilize the dispute
resolution procedures for mediation described in Article XVII, Section 7,
except that the following sentences shall be applied by the mediator or arbiter
in resolving any such deadlock.  The
parties acknowledge that MTR-Harness has particular expertise with regard to
horse racing and that Southwest has particular expertise with regard to card
games, and that MTR-Harness and Southwest have equivalent expertise as to
slots, video lottery terminals and other electronic games.  Accordingly, the third party mediator or
arbiter, as the case may be, shall be instructed to give additional weight to
MTR’s views regarding horse racing matters and to Southwest’s views regarding
card game matters, but no special weight to either party as to slots, video
lottery terminals and other electronic game matters.

 

8.                                       Budgets.  On or before sixty (60) days prior to the
end of each fiscal year, the Board shall meet for the purpose of preparing the
Company’s annual operating budget for the upcoming fiscal year and the
Company’s capital expenditure budget (collectively, the “Budgets”).  In connection with its preparation of the
Budgets, the Board shall prepare a comparative analysis of the budgets for the
preceding years.  The Board shall
finalize and approve the Budgets within thirty (30) days prior to the end of
the fiscal year.  In the event a Budget
for the next succeeding year is not approved, as provided for herein, the
Company shall

 

 

continue to
operate its business in accordance with the Budgets for the preceding year, to
the extent practicable, until the deadlock concerning the Budgets is resolved
and an annual operating budget approved. 
No action taken by the parties in the discharge of their respective
obligations hereunder shall be deemed a waiver of any claim causing the
deadlock on the Budgets.

 

9.                                       Sale
of Membership Interest Pursuant to Bankruptcy Court Order.  Notwithstanding any provision in this
Agreement to the contrary, in the event that a Managing Member becomes Bankrupt
and the Bankruptcy Court (i) stays the operation of Article XIV,
Section 1 and Article XV, Section 2.2 and (ii) orders the sale
of the Membership Interest of the Bankrupt Managing Member to a Person other
than the Managing Member who is not Bankrupt, the Managing Member who is not
Bankrupt shall become the sole Managing Member and shall have the sole
authority to appoint Directors.

 

ARTICLE VIII

CAPITAL ACCOUNTS & CONTRIBUTIONS

 

1.                                       Initial
Capital Contributions and Capital Contribution Commitments.    MTR-Harness and Southwest have made the
Capital Contribution Commitments as described on Exhibit A.  Southwest has funded, and shall continue to
fund, all costs prior to the Licensing Event (other than MTR-Harness’ initial
$10,000.00 Capital Contribution) and shall receive a Capital Account credit
equal to its Pre-Licensing Costs. 
MTR-Harness’s Initial Capital Contribution is in the amount of $10,000
on the Effective Date, with MTR-Harness making an additional Catch-Up
Contribution immediately upon the occurrence of a Licensing Event.  Subsequent to the occurrence of a Licensing
Event and the contribution by MTR-Harness of the Catch-Up Contribution, any
portion of a Member’s Capital Contribution Commitment that has not been funded
after such Catch-Up Contribution is made may be called for by the Board at any
time with such capital called for in a manner that results in Capital Contributions
(excluding Unmatched Pre-Licensing Costs) having been made by the Members on a
cumulative basis in the ratio of 75% by MTR-Harness up to its commitment to
contribute additional funds of up to Four Million Five Hundred Thousand Dollars
($4,500,000.00) and 25% by Southwest up to its commitment to contribute
additional funds of up to One Million Five Hundred Thousand Dollars
($1,500,000.00), all as described in Exhibit A.  In its discretion, the Board can choose to draw down less than
the Member’s respective Capital Contribution Commitments, provided that
cumulative Capital Contributions (excluding Unmatched Pre-Licensing Costs) have
been made on a 75/25 basis by MTR-Harness and Southwest, respectively.  No interest shall accrue on any Capital
Contribution (except for Southwest’s entitlement to receive the Preferred
Return) and no Member shall have the right to withdraw or be repaid any Capital
Contribution except as provided in this Agreement.  The failure to meet a
Capital Call pursuant to this Section 1 shall be subject to the default
provisions in Section 4 below.  MTR
hereby guarantees the

 

 

obligations of MTR-Harness to make all agreed Capital Contributions
described in this Article VIII.

 

2.                                       Additional
Capital Contributions Agreed Upon by the Managing Members.  In addition to the Capital Contribution
Commitments made by each of the Managing Members, the Managing Members may
unanimously determine from time to time that additional Capital Contributions
(in excess of the Capital Contribution Commitments) are needed to enable the
Company to conduct its Business.  Upon
the unanimous determination of the Managing Members, the Company may either
seek additional Capital Contributions from the Members or seek Capital
Contributions from third parties either in the full amount of the Capital
Contributions needed or such lesser amount equal to the amounts required less
the additional Capital Contributions to be made by the Members.  The Managing Members shall be entitled to
adjust the Percentage Interests and other allocation and Distribution
provisions in Articles IX and XV to properly reflect any additional Capital
Contributions made by them or any third party pursuant to this
Article VIII, Section 2, and make any such other modifications to this
Agreement as all of the Managing Members shall determine to be appropriate as a
result of such additional Capital Contributions.

 

3.                                       Additional
Authorized Gaming.  In the event
that Minnesota law authorizes additional forms of gaming such as slot machines
and video lottery terminals, and the Co-Managing Members have determined that
it is in the Company’s interest to implement such additional forms of gaming,
each of Southwest and MTR-Harness has agreed to fund all Company expenditures
necessary to implement such additional forms of gaming jointly on a going
forward basis in reliance upon each of the other’s agreement to make such
additional contributions to the Company in the event additional capital is
needed by the Company to implement the additional forms of gaming.  It is contemplated that additional Capital
Contributions required in excess of the Member’s Capital Contribution
Commitments will be made by the Members in accordance with their respective
Percentage Interests unless the Members shall unanimously determine
otherwise.  The Members acknowledge that
such agreement was an inducement to make their investment in the Company, and,
accordingly, within thirty (30) days of the Managing Members’ determination as
to the need for additional capital beyond that contemplated by a Company budget
or within thirty (30) days after either of Southwest or MTR-Harness makes
demand thereof to the other, each Member shall contribute to the capital of the
Company its required pro rata percentage share of the required capital.

 

4.                                       Default.  In the event that either Southwest or
MTR-Harness fails to make any Capital Contribution described in Section 1
or an additional contribution described in Sections 2 or 3, whether in
whole or in part, within the time specified in this Article VIII,
Section 4 (the “Defaulting Member”) the other Managing Member (the
“Non-Defaulting Member”) shall send an additional notice to the Defaulting
Member (and to MTR if MTR-Sub is the Defaulting Member) setting forth such fact
and the amount unpaid, and the Defaulting Member shall have a further period of
ten (10) business days from receipt of such notice to make the full amount of

 

 

such
contribution.  If at the end of such ten
(10) business day period, the Defaulting Member shall still have failed to make
such contribution, in whole or in part and the Non-Defaulting Member shall have
made its contribution, the Non-Defaulting Member may, at any time thereafter,
elect to make the contribution which the Defaulting Member shall have failed to
make, and in such event, the Non-Defaulting Member shall have the right to have
the aggregate Membership Interests of the Members in the Company, modified as
of any date from and including the date such Non-Defaulting Member made the
Defaulting Member’s contribution through and including the date of such
election to modify the Membership Interests and, upon such election, the
Membership Interests shall be automatically modified as of such date so that
the Non-Defaulting Members’ aggregate Membership Interests shall be the sum of
(i) its aggregate Membership Interests prior to such date plus (ii) an
additional percentage Membership Interest calculated at a rate of 115% of the
Default Percentage (defined below).  The
Defaulting Member’s aggregate Membership Interests as of such date shall then
automatically become (x) its aggregate Membership Interests prior to such date
minus (y) a percentage Membership Interest calculated at a rate of 115% of the
Default Percentage.  For purposes of this
Article VIII, Section 4, the term “Default Percentage” shall mean the
percentage that the amount contributed by the Non-Defaulting Member in respect
of the contribution which the Defaulting Member failed to fund represents in
relationship to the total cumulative Capital Contributions made by all the
Members as of the date of such determination. 
Notwithstanding the above, the
Defaulting Member may cure the “Default” by reimbursing the Non-Defaulting
Member for  the Default Percentage plus
interest at the rate of fifteen percent (15%) per annum (notwithstanding
anything in Article VI, Section 5.2 to the contrary) paid within 90
days of the date of the additional contribution.  Further, a Defaulting Member’s Percentage Interest may not under
any circumstance hereunder, be reduced to less than 25%  and each Managing Member will continue to
retain the same voting rights in the Company, including the right to appoint
two (2) Directors to the Board of Directors pursuant to Article VII,
Section 4.2.  Notwithstanding the
previous sentence, if MTR-Harness fails to make its full Catch-up Contribution,
its Percentage Interest shall be reduced to a percentage equal to its actual
Capital Contribution divided by its full Catch-up Contribution then multiplied
by 50%, which, for the avoidance of doubt, would result in a Percentage
Interest calculated as follows if MTR-Harness had made a $3,000,000 Capital
Contribution of a required $4,500,000 Capital Contribution obligation —
$3,000,000/$4,500,000 X 50% = 33%. 
Furthermore, if MTR-Harness fails to make its full Catch-up
Contribution, it shall forfeit its voting rights and the right to elect any
persons to the Board of Directors and Exhibit A will be amended accordingly.

 

5.                                       Maintenance
of Capital Accounts.  The Company
shall establish and maintain “Capital Accounts” for each Member and
Assignee.  Each Member’s Capital Account
shall be increased by (i) the amount of any money actually contributed by
the Member to the capital of the Company, (ii) the fair market value of any
Property contributed, as determined by the Company and the contributing Member
at arm’s length (net of liabilities assumed by the Company or subject to which
the Company takes such Property, within the meaning of Section 752 if the

 

 

Code), and (iii)
the Member’s share of Net Profits and of any separately allocated items of
income or gain except adjustments pursuant to the Code (including any gain and
income from unrealized income with respect to accounts receivable allocated to
the member to reflect the difference between the book value and the tax basis
of assets contributed by the Member). 
Each Member’s Capital Account shall be decreased by (x) the amount of
any money distributed to the Member by the Company, (y) the fair market value
of any Property distributed to the Member (net of liabilities of the Company
assumed by the Member or subject to which the Member takes such Property within
the meaning of Section 752 of the Code), and (z) the Member’s share of Net
Losses and any separately allocated items of deduction or loss (including any
loss or deduction allocated to the Member to reflect the difference between the
book value and tax basis of assets contributed by the Member).

 

6.                                       Distribution
of Assets.  If the Company at any
time distributes any of its assets in-kind to any Member, the Capital Account
of each Member shall be adjusted to account for that Member’s allocable share
(as determined under Article IX below) of the Net Profits or Net Losses
that would have been realized by the Company had it sold the assets that were
distributed at their respective fair market values immediately prior to their
distribution.

 

7.                                       Sale
or Exchange of Membership Interest. 
In the event of a permitted sale or exchange or other Disposition of a
Membership Interest in the Company, the Capital Account of the Transferring
Member shall become the Capital Account of the Assignee, to the extent it
relates to the Membership Interest transferred.

 

8.                                       Compliance
with Section 704(b) of the Code. 
The provisions of this Article VIII as they relate to the
maintenance of Capital Accounts are intended, and shall be construed, and, if
necessary, modified to cause the allocations of profits, losses, income, gain
and credit pursuant to Article IX to have substantial economic effect
under the Regulations promulgated under Section 704(b) of the Code, in
light of the distributions made pursuant to Articles IX and XV and the Capital
Contributions made pursuant this Article VIII.  Notwithstanding anything herein to the contrary, this Agreement
shall not be constructed as creating a deficit restoration obligation or
otherwise personally obligate any Member to make a Capital Contribution in
excess of the Capital Contribution Commitments.

 

ARTICLE IX

ALLOCATIONS AND DISTRIBUTIONS

 

1.                                       Allocations
of Net Profits and Net Losses. 
Except as may be required by Section 704 of the Code and the
regulations thereunder, Net Profits, Net Losses, and other items of income,
gain, loss, deduction and credit for periods beginning on or after the
Effective Date shall be apportioned among the Members pro-rata in accordance
with their Percentage Interests; provided, however, that (i) Net Losses shall
first be allocated to the Members based on their respective cumulative Capital
Contribution amounts at the end of any fiscal year in which such Net

 

 

Losses are
incurred (prior to making any allocations hereunder), with the first Net
Profits arising thereafter applied as a “chargeback” to any such Net Losses in
the reverse order thereof and (ii) after applying Net Profits as a “chargeback”
pursuant to clause (i), above, Net Profits shall next be allocated to Southwest
to the extent of the Preferred Return accrued by Southwest during the taxable
year.

 

2.                                       Tax
Distributions.  The following
Distributions (“Tax Distributions”) shall take priority over any other
Distributions provided in Sections 3 or 4 hereunder:

 

2.1                                 On
or before the 15th day of April, June, September, and December of each
year (or such other dates as the Board of Directors shall determine more
closely corresponds with the Members’ estimated tax payment requirements under
applicable law), the Board of Directors shall cause the Company to make a
Distribution to the Members in an amount equal to 40% of the estimated taxable
income of the Company for the portion of the fiscal year ending on the close of
the month immediately preceding such date, minus Distributions previously made
during the fiscal year for such year under this Section 2.1.  Each such Distribution shall be accompanied
by information concerning the calculation of the amount of such Distribution.

 

2.2                                 Within
90 days after the end of each fiscal year, the Board of Directors shall cause
the Company to make a Distribution to the Members in an amount equal to 40% of
the taxable income of the Company for such prior fiscal year, as determined by
the Board of Directors, minus Distributions previously made during such fiscal
year for such year under Section 2.1.

 

2.3                                 All
Tax Distributions required under this Section 2 shall be made to the
Members in accordance with the Members’ respective shares of the taxable income
of the Company on which the 40% amount was computed.

 

3.                                       Operating
Distributions.  Upon a determination
by the Board as to the amount of distributable cash available, in light of
applicable state law, and unless otherwise unanimously agreed to by the
Managing Members or required pursuant to Article XV, and after any Tax
Distribution has been made, other Distributions (other than pursuant to
Section 4 or upon dissolution subject to Article XV) shall be made to
the Members as follows:  (i) first, to
Southwest to the extent of its Unrecovered Preferred Return, (ii) second, to
Southwest to the extent of the current Monthly Installment and any past due
Monthly Installments, (iii) third, until such time as the Members have received
a return of their respective Capital Contributions, such Distributions shall be
made in proportion to each Member’s Capital Contributions (excluding Unmatched
Pre-Licensing Costs) until they are fully repaid, and (iv) thereafter,  to the Members in proportion to their
Percentage Interests.  It is the
intention of the Managing Members that (i) the Company commence payment Monthly
Installments as soon as practicable following the opening of the Business and
(ii) the Company shall not make any payments pursuant clause (iii), above,
until such time as the Monthly Installments have

 

 

commenced.  Notwithstanding the foregoing, there is no
requirement that Southwest shall have received a return of all of its Unmatched
Pre-Licensing Costs prior to the payment by the Company of distributions to the
Members pursuant to clause (iii), above. 
To the contrary, the Company may make distributions pursuant to clause
(iii), above, providing that there shall be no Unrecovered Preferred Return and
no past due Monthly Installments.   The first Monthly Installment shall be paid
at the time determined by the Board of Directors pursuant to this
Article IX, Section 3.  The
determination as to whether subsequently Monthly Installments are past due
shall be determined by reference to time at which the first Monthly Installment
was paid.

 

4.                                       Non-Operating
Distributions.  Unless otherwise
unanimously agreed to by the Managing Members, or required pursuant to
Article XV, and after any Tax Distribution associated with any net income
or gain arising from such event is made, net proceeds generated by the Company
from events arising other than pursuant to normal day-to-day Business
operations shall be distributed to the Members within five (5) Business Days
after the event giving rise to such net proceeds, as follows:

 

(1)                                  First,
to the establishment of such additional reserves as the Managing Members deem
appropriate;

 

(2)                                  Second,
to the Members, pro rata in proportion to the amount of funds (or value of
property) which they have loaned to the Company until such Loans are repaid in
full, together with accrued interest thereon;

 

(3)                                  Third,
to Southwest to the extent of its Unrecovered Preferred Return;

 

(4)                                  Fourth,
to Southwest to the extent of its Unrecovered Unmatched Pre-Licensing Costs;

 

(5)                                  Fifth,
until such time as the Members have received a return (including pursuant to
any Distributions pursuant to Section 3 of this Article IX) of their
cumulative Capital Contributions (excluding Southwest’s Unmatched Pre-Licensing
Costs), to the Members in proportion to such Capital Contributions until they
are fully repaid;

 

 (6)                               Sixth,
to the Members in accordance with their respective positive Capital Accounts
until each Capital Account is at zero (0) (after providing for an allocation to
such Capital Accounts for Net Profits or Net Loss related to the event causing
such non-operating Distribution as well as for Business operations for such
fiscal year); and

 

(7)                                  Thereafter,
if any cash proceeds remain, to the Members, in accordance with their
Percentage Interests.

 

5.                                       Withholding
on Distributions.  The amount of any
Distributions required by applicable foreign, federal, state or local law to be
withheld and remitted by the

 

 

 

Company to any
governmental authority shall be treated as if such amount was distributed to
the Member for whose benefit such withholding was made as if the amount was
actually distributed to the Member for purposes of this Article IX or
Article XV

 

ARTICLE X

TAXES

 

1.                                       Elections.  The Managing Members or Board of Directors
may make any tax elections for the Company under the Code or the tax law of any
state or other jurisdiction having taxing jurisdiction over the Company.

 

2.                                       Method
of Accounting.  The records of the
Company shall be maintained on the accrual method of accounting.

 

3.                                       Partnership.  The Company shall be taxable as a
“partnership” for federal income tax purposes after the Effective Date unless
the Board shall otherwise determine to change such classification.

 

4.                                       Tax
Matters Partner.                                    The
Member with the greatest cash Capital Contribution in the Company at any point
in time during 2004 shall act as the Tax Matters Member for the Company, as
defined in Section 6231 of the Code. 
Subject to Article X, Section 1, the Tax Matters Member shall
have the authority to perform any and all actions permitted by
Section 6221 through 6231 of the Code in connection with any
proceedings pertaining to federal income tax issues.  The Tax Matters Member shall have the right to engage counsel to
represent the Company in connection with any audit or other investigation, and
the fees and expenses of such counsel and of any litigation arising out of or
in connection with such audit or investigation shall be borne by the
Company.  The Tax Matters Member shall
be indemnified and held harmless by the Company for any act or omission
performed or omitted by it in its capacity as the Tax Matters Member.  All expenses incurred by the Tax Matters
Member in connection with any administrative proceeding before the Internal
Revenue Service (the IRS) and/or judicial review of such proceedings, including
reasonable attorney’s fees, shall be deemed a Company expense.  In the event the Tax Matters Member elects
to file a petition for readjustment of any Company tax item (in accordance with
Section 6226(a) of the Code), such petition shall be filed in any court
having jurisdiction over any tax or other matter.  In the event that the IRS, or any other governmental agency with
jurisdiction, shall conduct, commence or give notification of intent to conduct
or commence any audit or other investigation of the books, records, tax
returns, documents or affairs of the Company, the Tax Matters Member shall
respond to such audit or other investigation for and on behalf of the Company
and shall keep all other Members informed with respect thereto.

 

 

ARTICLE XI

DISSOCIATION OF A MEMBER

 

1.                                       Dissociation.  Irrespective of any contrary provision under
the Act, a Person shall cease to be a Member only upon the happening of any of
the following events:

 

1.1                                 the
withdrawal of a Member with the consent of all of the Managing Members;

 

1.2                                 that
Member is found to be an Unsuitable Person as more fully set forth in
Article XIII, Section 5, below;

 

1.3                                 the
Bankruptcy of a Member, if all of the Managing Members, except any Bankrupt
Managing Member, shall so elect;

 

1.4                                 in
the case of a Member that is a separate Organization other than a corporation,
the dissolution and commencement of winding up of that separate Organization;
or

 

1.5                                 in
the case of a Member that is a corporation, the filing of a certificate of
dissolution, or its equivalent, for that corporation or the revocation of its
charter.

 

The parties intend that none of the events described above or any other
similar events should cause a dissolution and winding up of the Company.  Dissolution is only expected to occur upon
the occurrence of the events described in Article XV, Section 1.

 

2.                                       Rights
of Member Who Has Dissociated.  In
the event any Member dissociates in accordance with Section 1 above:

 

2.1                                 And,
notwithstanding the last sentence of Section 1 above or Article XV,
Section 1, the Dissociation causes a dissolution and winding up of the
Company under Article XV, then to the extent permitted by the Gaming
Authorities, the Member shall be entitled to participate in the winding up of
the Company to the same extent as any other Member except that any Distribution
to which the Member would have been entitled shall be reduced by the damages
sustained by the Company or any other Member as a result of the Dissociation
dissolution and winding up; or

 

2.2                                 If
the Dissociation does not cause a dissolution and winding up of the Company
under Article XV, then to the extent permitted by the Gaming Authorities
the Member or its successor shall be subject to the Member buy-out provisions
of Article XIV, except that if the Dissociation is caused by the
dissolution of MTR-Harness, MTR shall replace MTR-Harness as a Managing Member
and assume all of the rights and obligations of MTR-Harness hereunder.

 

 

ARTICLE XII

INSPECTION OF RECORDS; BANK ACCOUNTS

 

1.                                       Rights
of Members to Inspect Records. 
Pursuant to the Act, a Member may inspect and copy, in person or by
agent, from time to time on a reasonable written demand during regular business
hours at the principal place of business of the Company:

 

a.                                       true
and full information regarding the state of the business and financial
condition of the Company;

 

b.                                      a
copy of the Articles of Organization and this Agreement and all amendments
thereto;

 

c.                                       a
current lists of the names and last known business, residence, or mailing
address of all members;

 

d.                                      a
copy of the Company’s federal, state and local income tax returns; and

 

e.                                       other
information regarding the affairs of the Company as is just and reasonable for
any purpose reasonably related to the Member’s interest as a Member.

 

2.                                       Bank
Accounts.  The funds of the Company
shall be deposited in the name of the Company, in such bank account or accounts
as all of the Managing Members or Board deem advisable and the Board shall
arrange for the appropriate conduct and function of such accounts.

 

ARTICLE XIII

ADMISSION OF ADDITIONAL MEMBERS; TRANSFERS OF
INTERESTS

 

1.                                       Disposition
of a Member’s Membership Interest.

 

1.1                                 No
Disposition of a Member’s Membership Interest shall be made unless the assignee
is an Suitable Person, and all of the Managing Members, in their sole and
absolute discretion, unanimously consent in writing to such assignment, which
consent may be conditioned upon the determination by the Managing Members
(based, if they deem it advisable, upon an opinion of counsel) that such
assignment is not in violation of any applicable federal or state securities
law, does not violate any gaming laws or rules promulgated by any Gaming
Authority having jurisdiction over the Business of the Company, does not adversely
affect the Company’s status as a limited liability company and will not cause
the dissolution of the Company under the applicable laws of the State of
Minnesota.  Notwithstanding any
provision in this Agreement to the contrary, a change in the control of
Southwest or MTR shall not be deemed to be a 

 

 

disposition of a
Member’s Membership Interest.  A change
in the control of MTR-Harness, however, shall be deemed to be such a
disposition.

 

1.2                                 Except
as provided in Section 2 of this Article XIII the assignee of the
Membership Interest, shall not become a Member, but instead shall be entitled
only to receive such Distributions and allocations as shall have been made to
the assignor Member had such assignor Member continued to be a Member.

 

2.                                       Substitute
Members and Additional Members.  The
assignee of a Membership Interest shall become a Substitute Member only if (i)
the assignor Member so provides in the instrument of assignment, (ii) the
assignee agrees in writing to be bound by the provisions of this Agreement and
of the Articles and any amendments hereto and thereto, (iii) all of the
Managing Members consent to the substitution in writing (which consent may be
withheld in their sole and absolute discretion), (iv) to the extent required by
any Gaming Authority, the licensure of such person has occurred; and (v) the
satisfaction of completion by the Managing Members of due diligence on said
person to determine if it is a Suitable Person.  Similarly, a Person seeking to acquire a Membership Interest from
the Company shall become an Additional Member only if (x) such Person agrees in
writing to be bound by the provisions of this Agreement and of the Articles and
any amendments hereto and thereto, (y) all of the Managing Members consent in
writing (which consent may be withheld in their sole and absolute discretion)
and (z) the provisions of clauses (iv) and (v) above are met.

 

3.                                       Members.  Unless named in this Agreement, or unless
admitted to the Company as above provided, no Person shall be considered a Member,
and the Company, each Member, and any other persons having business with the
Company need deal only with Members so named or so admitted.  They shall not be required to deal with any
other person by reason of an assignment by a Member or by reason of the death
of a Member, except as otherwise provided in this Agreement.  In the absence of substitution of a Member
for an assigning or deceased Member, any payment to a Member or to his
executors or administrators shall acquit the Company of all liability to any
other persons who may be interested in such payments by reason of an assignment
by the Member or by reason of his death.

 

4.                                       Gaming
Authority Approvals. 
Notwithstanding any provisions of this Agreement to the contrary, all
assignments of and Dispositions of Membership Interests and all admissions of
Additional Members shall be subject to the receipt of any required approvals
from the Gaming Authorities having jurisdiction over the Business of the
Company.

 

5.                                       Determination
that Member is Unsuitable Person. 
If any Gaming Authority determines that a Person is an Unsuitable Person
and that the continued participation of such Person in the Company would
jeopardize any gaming license held or being sought by MTR, Southwest, the
Company or their Affiliates, the Company shall purchase, and the Unsuitable
Person shall sell, all of such Person’s

 

 

Membership
Interest.  The purchase price shall be
determined in accordance with the procedures set forth in Article XIV.

 

ARTICLE XIV

MEMBER BUY-OUT PROVISION; RIGHT OF FIRST
REFUSAL

 

1.                                       Membership
Buy-Out Provision.                   In
the event of a material breach of this Agreement or the Articles, the Bankruptcy of a Managing Member, or a
determination that a Managing Member has become an Unsuitable Person, the
Managing Member who is not in breach, Bankrupt or an Unsuitable Person
(the “Offering Member”) may elect to purchase all of the Membership Interests
of the other Managing Member (the “Receiving Member”).   If the Offering Member elects, in its sole
discretion, not to purchase all of the Membership Interests of the Receiving
Member, the Company shall purchase all of the Membership Interests of the
Receiving Member.  Where this provision
applies, such Offering Member shall forward to the Receiving Member a bona
fide, written offer (the “Offer”) for the purchase of all of the Receiving
Member’s Membership Interests.  The
Offer shall state a purchase price (the “Offering Price”) for all of the
Company’s assets (the “Assets”), free and clear of all liabilities, as
determined in good faith by the Offering Member, taking into account the price
that an arms-length buyer would likely pay for the Assets. The Offer shall also
state the “Buyout Price,” which shall be the amount that would be distributed
to the Receiving Member with respect to its Membership Interests as a final
liquidating distribution if the Assets were sold for an all-cash price equal to
the Offering Price on the date the Offering Member’s notice is given, and the
proceeds of the sale were distributed in liquidation, without reserves, in the
manner set forth in Section 3.2 of Article XV, reduced by damages, if
any, incurred by the Company or any Member as a result of the breach,
Bankruptcy or Unsuitable Person status of the Receiving Member.  If the Offering Member does not take the
action described above, the Company shall take such action acting through the
Board of Directors, but excluding in the determination any Directors appointed
by the Receiving Member, with the two Directors appointed by the Offering
Member determining the Buyout Price and presenting it to the Receiving
Member.    The Membership Interest of
the Receiving Member shall be promptly transferred to the Purchaser hereunder,
whether the Offering Member or the Company, without any further action required
by the Receiving Member, upon the transfer of the Buyout Price to the Receiving
Member.   The Buyout Price shall be paid
in the form of a 5-year note having the terms described in Article XV,
Section 2.2 below.  The Receiving
Member hereby appoints the Directors appointed by the Offering Member as its
power of attorney to transfer the Receiving Member’s Membership Interest to the
Offering Member or the Company, as applicable, upon payment of the Buyout Price
pursuant to the payment terms described in Article XV,
Section 2.2.  In the event of a
Bankruptcy or determination of unsuitability, if the Receiving Member disputes
the amount of the Buyout Price, the Membership Interest shall be transferred
hereunder notwithstanding such dispute, and such dispute over the amount of the
Buyout Price shall be resolved pursuant to the binding arbitration provisions
of Article XVII, Section 7(ii). 
In the event of a dispute related to the existence of a material breach of
this Agreement, the dispute shall be likewise resolved by the binding
arbitration provisions of Article XVII, Section 7(ii), but the
Membership Interest shall be transferred only after a determination in
arbitration that such material default has occurred.  Except in the case of a determination pursuant to the binding
arbitration provisions of Article XV, Section 7(ii) that the
Receiving Member was not Bankrupt or an Unsuitable Person,

 

 

the Receiving
Member shall have no right of redemption with respect to its Membership
Interest transferred pursuant to this Article XIV, Section 1.

 

2.                                       Right
of First Refusal. If at any time any Member  receives a Bona Fide Offer (the “Offer”) for the purchase of all
or a portion its Membership Interest (including an offer received by MTR to
purchase all or a portion of its shares of MTR-Harness), which Offer the Member
(hereinafter sometimes called the “Selling Member”) is willing to accept, the
Member shall notify all of the other Members in writing of the Offer, enclosing
a true copy of the Offer. The Company, and/or all of the separate Members, in
that order of priority, shall have the first right to purchase the Membership
Interest which is the subject of the Offer at the price, and upon the terms and
conditions (except for time and place of closing which shall be as hereinafter
provided) contained in the Offer.

 

Notice of intention of the Company to purchase shall be given to the
Selling Member and to all other Members within fifteen (15) days after receipt
of notice from the Selling Member of the Offer.  If the Company does not give timely notice of an intent to
purchase, then any or all of the other Members shall have the option, which may
be exercised by providing written notice to the Selling Member within fifteen
(15) days after the expiration of the time within which the Company had the
first right to purchase (i.e., within thirty (30) days after the receipt of the
aforesaid notice from the Selling Member) to purchase the interest of the
Selling Member as set forth in the terms and conditions of the Offer.  Thereupon, each such Purchasing Member shall
be entitled to purchase such portion of the Selling Member’s interest which is
the subject of the Offer in such proportion as the Purchasing Member’s interest
bears to the total interest in the Company of all of the Members who actually
purchase the Selling Member’s interest, which is the subject of the Offer.

 

The closing of the sale to the Company or to the Purchasing Member(s),
as the case may be (hereinafter the “Purchaser”) shall take place within ninety
(90) days after the giving of the notice required of the Selling Member as
aforesaid, on such date and at such time (during normal business hours) and at
such reasonable place as shall be designated by the Purchaser in its notice to
the Selling Member. If neither the Company nor any Member shall become the
Purchaser, pursuant to the provisions of this Article XIV, Section 2,
then the Selling Member may, subject to Article XIII, sell to the bona
fide offeror such portion or all of its Membership as is set forth in the
Offer, at a price not below nor upon terms more advantageous to the offeror
than the price and the terms contained in the Offer, provided that such
sale is closed within ninety (90) days after the date of the Offer. If it is
not closed within such period then the rights of the Company and of the
separate Members under this Article XIV, Section 2 shall be fully
restored and reinstated as if the Offer had never been made and the Selling
Member may not thereafter dispose of all or any part of its interest without
again giving the Company, and all of the separate Members, the first option to
purchase the Membership Interest of the Selling Member.  Notwithstanding such sale, the offeror shall
become a voting Member only with the unanimous consent of all of the Managing
Members.

 

 

ARTICLE XV

DISSOLUTION AND WINDING UP

 

1.                                       Events
of Dissolution.  The Company shall
continue until the occurrence of any one of the following dissolution events,
at which time the Company shall dissolve:

 

1.1                                 An
election to dissolve the Company made in writing unanimously by all of the
Managing Members.

 

1.2                                 The
sale, exchange or other disposition of all or substantially all of the
Company’s Property, unless the Company receives a purchase money note in
consideration of such sale in which event dissolution shall occur upon final
payment thereof.

 

1.3                                 A
judicial determination of dissolution under the Act.

 

No other events or actions, including any such events or actions
described in the Act or Article XI, Section 1 above, shall cause a
dissolution of the Company.

 

2.                                       Election
to Continue Doing Business.  If an
event or action occurs, other than those described in Sections 1.1, 1.2 or 1.3
above, and despite the last sentence of Section 1 or the last sentence of
Article XI, Section 1, providing that such event or action will not
cause a dissolution of the Company, it is determined that the Company is
nevertheless subject to dissolution:

 

2.1                                 As
set forth in the Act, notwithstanding the occurrence of a dissolution event
(other than where dissolution occurs pursuant to Section 1.1, 1.2 or 1.3
above), the Company may continue to carry on its business and affairs following
such dissolution event if, within ninety (90) days after such dissolution event
there remains at least one Member (the “Remaining Member(s)”), and all of the
Managing Members or all Remaining Member(s) consent to so continue the business
and affairs of the Company without dissolution.

 

2.2                                 In
the event the surviving Members shall determine that they wish to continue the
Company, and the Member Buy-Out provisions set forth in Article XIV,
Section 1 are not applicable to the Selling Members (defined below),
including by reason of Article XI, Section 2.2, Article XIII,
Section 5, or Article XIV, such Members, hereinafter called the
“Purchasing Members,” shall have the absolute option and right to purchase the
Membership Interests of the other Members, hereinafter called the “Selling
Members.”  For this purpose the
Purchasing Members’ group and the Selling Members’ group shall each promptly
appoint an

 

 

appraiser to
determine the value of the Membership Interests.  In respect to those items upon which the appraisers disagree,
they shall together appoint a third appraiser, who shall determine items and
shall render a written report of his opinion with respect thereto.  All appraisers appointed shall be appraisers
who have qualified to give expert valuation testimony.  The values contained in the said written
reports shall be used to determine the purchase price of the Membership Interests
of the Selling Members.  Within sixty
(60) days after all of the said written reports have been rendered, the
Purchasing Members shall notify the Selling Members in writing of their
decision whether to exercise the option. 
The option is granted to all the Purchasing Members in proportion to
their respective Membership Interests; but if any such Member does not desire
to exercise the option, then his portion may be taken up pro rata by the
remaining Purchasing Members, as the case may be.  Settlement shall be completed within thirty (30) days after
notice of the exercise of the option. 
The terms of payment of the purchase price shall be: no cash down
payment, the balance payable in equal monthly installments over a period of
five (5) years with interest on the unpaid balance at the Prime Rate.  The obligation of the Purchasing Members to
the Selling Members shall be evidenced by a promissory note or notes, secured
by a pledge of the purchased interests and the filing of a financing statement
with respect thereto.

 

3.                                       Procedures
Upon Dissolution.

 

3.1                                 Upon
Dissolution of the Company, the Managing Members or, if there is only one
Managing Member, such Person, shall proceed with dispatch and without any
unnecessary delay to sell or otherwise liquidate the assets of the Company, and
shall distribute the proceeds thereof in accordance with Article XV,
Section 3.2, below.

 

3.2                                 Upon
dissolution and liquidation of the Company, the net proceeds of liquidation
shall be applied and distributed in the following order of priority:

 

3.2.1                        First, to the payment of the
debts and liabilities of the Company (other than any loans or advances that may
have been made by any of the Members) and the expenses of liquidation;

 

3.2.2                        Second, to the creation of any
reserves which the Managing Members may deem reasonably necessary for the
payment of any contingent or unforeseen liabilities or obligations of the
Company or of the Members arising out of or in connection with the Business and
operations of the Company;

 

3.2.3                        Third, in accordance with the
Non-Operating Distribution provisions of Article IX, Section 4.

 

 

3.3                                 A
reasonable time shall be allowed for the orderly liquidation of the Company’s
assets and the discharge of its liabilities, unless the Managing Members shall
have agreed to make any in-kind distributions.

 

3.4                                 The
Company shall terminate and wind up when all assets owned by the Company shall
have been disposed of and the net proceeds, after satisfaction of liabilities
to Company creditors, shall have been distributed among the Members.

 

ARTICLE XVI

AMENDMENT

 

1.                                       Agreement
may be Modified.  The Agreement may
be modified as provided in this Article XVI (as the same may, time to time
be amended).

 

2.                                       Amendment
or Modification of Agreement.  The
Agreement may be amended or modified from time to time only by a written
instrument adopted by all of the Managing Members.

 

ARTICLE XVII

MISCELLANEOUS PROVISIONS

 

1.                                       Pronouns
and Plurals.  Except where the same
shall not be appropriate: references herein to the singular shall include the
plural and to the plural shall include the singular; references to the
masculine gender shall include the feminine and neuter genders (and vice
versa).

 

2.                                       Waiver.  No consent or waiver, express or implied, by
any Member to or of any breach or default by any other Member in the
performance by the other of his or her obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default by the
other in the performance by such other party of the same or any other
obligations of such Member hereunder. 
Failure on the part of any Member to object to or complain of any act or
failure to act of any of the other Members or to declare any of the other
Members in default, irrespective of how long such failure continues, shall not
constitute a waiver by such Member of its rights hereunder.

 

3.                                       Severability.  If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.

 

4.                                       Titles
and Captions.  All
section titles or captions contained in this Agreement are for convenience
only and shall not be deemed a part of the context of this Agreement.

 

 

5.                                       Agreement
in Counterparts.  This Agreement may
be executed in several counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.  In addition, this Agreement may contain more
than one counterpart of the signatures page and the Agreement may be executed
by the affixing of the signatures of each of the Members to one of such
counterpart signature pages; all of such signature pages shall be read as
though one, and shall have the same force and effect as though all of the
signers had signed a single signature page. 
Each party shall become bound by this Agreement immediately upon
affixing his, her or its signature hereto, independent of the signature of any
other party.

 

6.                                       Binding
Agreement.  Subject to the
restrictions on transfers set forth herein, this Agreement shall inure to the
benefit of and be binding upon the undersigned Members and their respective
heirs, executors, legal or personal representatives, successors and
assigns.  In this context, whenever in
this instrument a reference to any party or Member is made, such reference
shall be deemed to include a reference to the heirs, executors, legal or
personal representatives, successors and assigns of such party or Member.

 

7.                                       Governing
Law; Disputes.  It is the intent of
the parties hereto that all questions with respect to the construction of this
Agreement and the rights and liabilities of the parties hereto shall be
determined in accordance with the provisions of the laws of the State of
Minnesota.  Venue for any disputes shall
be in Minneapolis, Minnesota.  To
resolve disputes the parties shall (i) first, engage in non-binding
mediation with a single mediator, with such mediation session before the
mediator not to exceed two (2) business days and, (ii) second, if such
mediation is unsuccessful, submit the dispute to binding arbitration under
American Arbitration Association rules using a single arbiter.  The prevailing party in any mediation or
arbitration with respect to any disputes relating to the Agreement shall be
entitled to recover its reasonable attorneys fees from the other party for all
matters, including but not limited to appeals with such fees to be awarded by
the mediator or arbiter.

 

8.                                       WAIVER
OF JURY TRIAL.  EACH MEMBER
IRREVOCABLY WAIVES ANY AND ALL RIGHT THE MEMBER MAY HAVE TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT.  THE MEMBERS ACKNOWLEDGE THAT THE FOREGOING
WAIVER IS KNOWING AND VOLUNTARY.

 

9.                                       Confidentiality.  Each Member agrees that this Agreement, and
all information (other than information which is a matter of public record or
is provided by other sources readily available to the public) shared or
developed on behalf of the Company and its activities shall be kept strictly
confidential, except in discussions with or filings with Gaming Authorities, or
a Member’s financiers, attorneys, accountants, investment bankers or
prospective investors.  No disclosures, press releases,
or announcements concerning the Company shall be made by any Member, except the
Company may make such public disclosures that its counsel

 

 

deems necessary or
advisable under federal securities laws, as determined by all of the Managing
Members.  Each Member hereby
acknowledges that the securities of MTR are publicly traded and covenants that
while in possession of material non-public information concerning MTR, such
Member will neither trade in MTR’s securities nor advise others with respect to
such trading.

 

10.                                 Further
Assurances.  Each Member agrees that
it will, at any time and from time-to-time, upon the request of the Managing
Members, do, execute, acknowledge or deliver all such further acts, deeds,
assignments, conveyances and assurances as may be reasonably required to
effectuate the transactions contemplated by this Agreement.

 

11.                                 Investment
Objectives.  Each Member, by such
Member’s signature hereto, warrants that each such Member is acquiring an
interest in the Company for such Member’s own account for investment only and
without any present intention of selling the same.  Each Member further covenants and agrees that it shall be
responsible, at its sole cost and expense, for making any public filings
required by virtue of its ownership interest in the Company.  Further, and to that end, the Members shall
look to their own counsel and not the Managing Member for guidance as to the
filing of such matters.

 

12.                                 Entire
Agreement.  This Agreement, unless
subsequently amended in the manner provided in Article XVI, contains the
final and entire agreement among the parties hereto, and they shall not be
bound by any terms, conditions, statements or representations, oral or written,
not herein contained.

 

13.                                 No
Cumulative Voting.  No Members shall
have any cumulative voting rights.

 

14.                                 Preemptive
Rights.  Except as otherwise
expressly provided in this Agreement, or as determined by all of the Managing
Members, no Members shall have preemptive rights to contribute additional
capital as provided in the Act.

 

IN WITNESS WHEREOF, the parties have executed this Agreement effective
on the date first set forth above.

 

	
   

  	
  MTR-HARNESS,
  INC.,

  
	
   

  	
  a Minnesota
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /S/  Edson R. Arneault

  	
   

  
	
   

  	
  By:

  	
  Edson R.
  Arneault

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SOUTHWEST CASINO
  & HOTEL CORP.,

  
	
   

  	
  a Minnesota
  corporation

  

 

 

	
   

  	
  /S/

  	
  James B. Druck

  	
   

  
	
   

  	
  By:

  	
  James B. Druck

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MTR GAMING
  GROUP, INC.

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /S/  Edson R. Arneault

  	
   

  
	
   

  	
  By:

  	
  Edson R.
  Arneault

  
	
   

  	
  Its:

  	
  President

  
						

 

 

EXHIBIT A

 

PERCENTAGE INTERESTS AND CAPITAL
CONTRIBUTION COMMITMENT

 

	
  PERCENTAGE
  INTERESTS

  AND CAPITAL CONTRIBUTION

  COMMITMENT

  Member

  	
   

  	
  Percentage
  Interest

  	
   

  	
  Maximum
  Capital

  Contribution Commitment

  
	
  MTR-Harness

  c/o MTR Gaming Group, Inc.

  P.O. Box 356

  State Route 2 South

  Chester, WV 26034

  	
   

  	
  50

  	
  %

  	
  $7,490,000(1)

  
	
  Southwest Casino
  & Hotel Corp.

  2001 Killebrew Drive, Suite 306

  Minneapolis, MN 55425

  	
   

  	
  50

  	
  %

  	
  $1,500,000 Plus
  Pre-Licensing Costs(2)

  
	
  TOTAL

  	
   

  	
  100

  	
  %

  	
  $8,990,000

  

 

(1)               MTR-Harness contributed $10,000 in cash on
the Effective Date of this Agreement, will contribute the $2,990,000.00
Catch-Up Contribution on the date of any Licensing Event and has committed to
contribute additional funds in excess of the Catch-Up Contribution of up to
$4,500,000.00 to increase its cumulative Capital Contributions to the Company
to the MTR-Harness Maximum Capital Contribution of $7,500,000 upon the call for
such additional capital by the Board of Directors.

 

(2)               Southwest shall fund all costs prior to the
Licensing Event (other than MTR-Harness’ initial $10,000.00 Capital
Contribution) and shall receive Capital Account credit with respect to all of
its Pre-Licensing Costs.  Southwest has
further committed to contribute additional funds of up to $1,500,000.00
subsequent to the occurrence of the Licensing Event upon the call for such
additional capital by the Board of Directors.EXHIBIT
10.14

 

FOURTH
AMENDMENT TO THIRD

AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS FOURTH
AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (“Fourth Amendment”)
is made and entered into as of the 4th day of June, 2004, by and among MTR
GAMING GROUP, INC., a Delaware corporation (“MTRI”), MOUNTAINEER PARK, INC., a
West Virginia corporation (“MPI”), SPEAKEASY GAMING OF LAS VEGAS, INC., a
Nevada corporation (“SGLVI”), SPEAKEASY GAMING OF RENO, INC., a Nevada
corporation (“SGRI”), PRESQUE ISLE DOWNS, INC., a Pennsylvania corporation
(“PIDI”), SCIOTO DOWNS, INC., an Ohio corporation (“SDI”), successor by merger
to RACING ACQUISITION, INC., an Ohio corporation and SPEAKEASY GAMING OF
FREMONT, INC., a Nevada corporation (“SGFI” and together with MTRI, MPI, SGLVI,
SGRI, PIDI and SDI, collectively referred to as the “Borrowers”), WELLS FARGO
BANK, National Association, NATIONAL CITY BANK OF PENNSYLVANIA, BRANCH BANKING
AND TRUST COMPANY and THE CIT GROUP/EQUIPMENT FINANCING, INC. (each
individually a “Lender” and collectively the “Lenders”), WELLS FARGO BANK,
National Association, as the swingline lender (herein in such capacity,
together with its successors and assigns, the “Swingline Lender”), WELLS FARGO
BANK, National Association, as the issuer of letters of credit (in such
capacity, together with it successors and assigns, the “L/C Issuer”), and WELLS
FARGO BANK, National Association, as administrative and collateral agent for
the Lenders, Swingline Lender and L/C Issuer (herein, in such capacity, called
the “Agent Bank” and, together with the Lenders, Swingline Lender and L/C
Issuer collectively referred to as the “Banks”).

 

R E C I T A L S:

 

WHEREAS:

 

A.                                   MTRI,
MPI, SGLVI, SGRI, PIDI and SDI, as borrowers, and Banks entered into a Third
Amended and Restated Credit Agreement dated as of March 28, 2003, as
amended by First Amendment to Amended and Restated Credit Agreement dated as of
June 18, 2003, as further amended by Second Amendment to Amended and
Restated Credit Agreement dated as of November 12, 2003 and as further
amended by Third Amendment to Third Amended and Restated Credit Agreement dated
as of February 25, 2004 (collectively, the “Existing Credit Agreement”)
for the purpose of establishing a revolving line of credit in the principal
amount of Fifty Million

 

 

Dollars ($50,000,000.00), including subfacilities for the funding of
swingline advances and issuance of Letters of Credit.

 

B.                                     MTRI
has or is about to create a new wholly-owned Unrestricted Subsidiary to be
known as MTR-Harness, Inc., a Minnesota corporation (“MTR Harness”).  MTR Harness has proposed investing up to
Seven Million Five Hundred Thousand Dollars ($7,500,000.00) for a fifty percent
(50.0%) equity interest in North Metro Harness Initiative, LLC, a Minnesota
limited liability company (“North Metro”) that has applied to the Minnesota
Racing Commission for a license to own and operate a harness race tack and card
club in Anoka County, Minnesota.

 

C.                                     The
Borrower Consolidation has requested Banks to amend the Existing Credit
Agreement for the purposes of: (i) amending Section 6.05 for the purpose
of permitting the Borrower Consolidation to make Distributions to MTR Harness
up to the aggregate amount of Ten Million Dollars ($10,000,000.00), and
(ii) amending Section 6.08 for the purpose of permitting the Borrower
Consolidation to make Investments in MTR Harness up to the aggregate amount of
Ten Million Dollars ($10,000,000.00).

 

D.                                    Subject
to the terms and conditions hereinafter set forth Requisite Lenders have
approved the amendments requested as set forth above.

 

NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree to the amendments and modifications to the Existing
Credit Agreement as specifically hereinafter provided as follows:

 

1.                                       Definitions.  As of the Effective Date, Section 1.01
of the Existing Credit Agreement entitled “Definitions” shall be and is hereby
amended to include the following definitions. 
Those terms which are currently defined by Section 1.01 of the
Existing Credit Agreement and which are also defined below shall be superseded
and restated by the applicable definition set forth below:

 

“Credit
Agreement” shall mean the Existing Credit Agreement as amended by the Fourth
Amendment, together with all Schedules, Exhibits and other attachments thereto,
as it may be further amended, modified, extended, renewed or restated from time
to time.

 

“Distributions”
shall mean and collectively refer to any and all cash dividends on stock,
loans, management fees, payments, advances or other distributions, fees or
compensation of any kind or character whatsoever, other than within the
Borrower Consolidation, but shall not include (i) consideration paid in
the ordinary course of business for tangible and intangible assets in an arms
length

 

 

exchange for fair market value,
(ii) trade payments made and other payments for liabilities incurred in
the ordinary course of business, or (iii) compensation to officers,
directors and employees of Borrowers in the ordinary course of business.  For the purpose of clarification, capital
contributions, advances and other Investments made by the Borrower
Consolidation in Unrestricted Subsidiaries shall constitute Distributions.

 

“Existing
Credit Agreement” shall have the meaning set forth in Recital Paragraph A
of the Fourth Amendment.

 

“Fourth
Amendment” shall mean the Fourth Amendment to Third Amended and Restated Credit
Agreement dated as of June 4, 2004.

 

“Fourth
Amendment Effective Date” shall mean June 4, 2004, subject to the
satisfaction of each of the Conditions Precedent set forth in Paragraph 5
of the Fourth Amendment.

 

“MTR Harness”
shall have the meaning set forth in Recital Paragraph B.

 

“North Metro”
shall have the meaning set forth in Recital Paragraph B.

 

2.                                       Notice
of Creation of MTR Harness as an Unrestricted Subsidiary, Nonrecourse
Indebtedness and Stock Pledge.

 

a.                                       Banks
do hereby acknowledge receipt of notice of the creation of MTR Harness as a
wholly owned Unrestricted Subsidiary of MTRI and further acknowledge the
description of the New Venture in which MTR Harness will hold a fifty percent
(50.0%) equity interest has complied with the requirements of Section 5.27
of the Credit Agreement.

 

b.                                      No
member of the Borrower Consolidation shall be directly or indirectly liable for
any Indebtedness, contingent or otherwise, of MTR Harness or North Metro, other
than MTRI’s commitment to make an Investment in MTR Harness in an aggregate
amount up to Seven Million Five Hundred Thousand Dollars ($7,500,000.00).

 

c.                                       MTRI shall
execute and deliver to Timothy J. Henderson (“TJH”), as escrow holder, a duly
executed Subsidiary Stock Pledge of the capital stock of MTR Harness, together
with the original stock certificate evidencing MTRI’s one hundred percent
(100%) ownership of MTR Harness to be held by TJH pending approval by the
applicable Gaming Authorities. 
Borrowers agree to use their best efforts to procure all necessary
approvals to such Subsidiary Stock Pledge as soon as

 

 

reasonably practical, but in any event within
one hundred twenty (120) days of the Fourth Amendment Effective Date.

 

3.                                       Restatement
of Section 6.05.  As of the
Fourth Amendment Effective Date, Section 6.05 of the Existing Credit
Agreement entitled “Restriction on Distributions” shall be and is hereby
deleted in its entirety and the following is substituted as a full restatement
thereof:

 

“Section 6.05.  Restriction
on Distributions.  No member of the
Borrower Consolidation shall make any Distributions, other than:
(a) Distributions to other members of the Borrower Consolidation,
(b) Distributions made in connection with Insider Cash Loans and Insider
Non-Cash Loans, (c) Share Repurchases to the extent permitted by
Section 6.08(i), and (d) Distributions to MTR Harness up to the
maximum cumulative aggregate amount of Ten Million Dollars ($10,000,000.00).”

 

4.                                       Restatement
of Section 6.08.  As of the
Fourth Amendment Effective Date, Section 6.08 of the Existing Credit
Agreement entitled “Investment Restrictions” shall be and is hereby deleted in
its entirety and the following is substituted as a full restatement thereof:

 

“Section 6.08.  Investment
Restrictions.  Other than
Investments permitted hereinbelow or approved in writing by Requisite Lenders,
the Borrower Consolidation shall not make any Investments (whether by way of
loan, stock purchase, capital contribution, or otherwise) other than the
following:

 

a.                                       Cash,
Cash Equivalents and direct
obligations of the United States Government;

 

b.                                      Prime
commercial paper (AA rated or better);

 

c.                                       Certificates
of Deposit or Repurchase Agreement issued by a commercial bank having capital
surplus in excess of One Hundred Million Dollars ($100,000,000.00);

 

d.                                      Money
market or other funds of nationally recognized institutions investing solely in
obligations described in (a), (b) and (c) above;

 

 

e.                                       Insider
Cash Loans not exceeding One Million Five Hundred Thousand Dollars
($1,500,000.00) in the aggregate during any Fiscal Year, provided that each of
such Insider Cash Loans shall bear interest at a rate no less than the Prime
Rate plus one percent (1.0%) per annum and shall in each instance be fully due
and payable on or before two (2) years from the date such Insider Cash Loan is
advanced by any member of the Borrower Consolidation;

 

f.                                         Insider
Non-Cash Loans to the extent permitted by Law;

 

g.                                      the
amounts owing to SGRI under the terms of the RRLLC Note and SGRI Loan
Documents;

 

h.                                      Capital
Expenditures to the extent permitted under Section 6.06;

 

i.                                          Share
Repurchases up to the maximum cumulative aggregate amount of Thirty Million
Dollars ($30,000,000.00) during the period commencing on the Closing Date and
ending at Credit Facility Termination;

 

j.                                          New
Venture Investments, exclusive of the acquisition of the Horseshoe Property as
provided in subparagraph k below, but including, without limitation, the Scioto
Merger and all Alternative Payments which may be made under the terms thereof
following the Scioto Merger Effective Date, the exercise of the option to
acquire the Green Shingle Property or any other Acquisition made in connection
with the SDI Facility, the PIDI Facility or any New Venture, no greater than
the cumulative maximum aggregate amount of Fifty Million Dollars
($50,000,000.00) through Credit Facility Termination, so long as:

 

(i)                                     in
each instance the New Venture or assets acquired by such New Venture Investment
is concurrently pledged as additional Collateral securing the Bank Facilities;

 

(ii)                                  each
of the New Acquisition Certifications are made and delivered by Borrowers with
respect to any real property to be added as Collateral; and

 

 

(iii)                               no
Default or Event of Default shall have occurred and remains continuing;

 

k.                                       Acquisition
of the Horseshoe Property pursuant to the terms of the HHLV Purchase Agreement
and Joint Operating Agreement, so long as:

 

(i)                                     concurrently
with the Horseshoe Acquisition Date and the effective date of the Joint
Operating Agreement, SGFI’s right to all payments to be paid to SGFI under the
Joint Operating Agreement, including, without limitation, the “Speakeasy’s
Remittance Amounts,” as therein defined, be collaterally assigned to and a
security interest perfected in favor of Agent Bank, on behalf of the Banks;

 

(ii)                                  Agent
Bank is designated with SGFI as an additional loss payee and party insured
pursuant to Section 7.02 of the Joint Operating Agreement, under the
policies of insurance maintained pursuant to Section 7.01 of the Joint
Operating Agreement; and

 

(iii)                               no
Default or Event of Default shall have occurred and remains continuing;

 

l.                                          the
Green Shingle Loan up to the maximum amount of Two Million Six Hundred Thousand
Dollars ($2,600,000.00), subject to compliance with the requirements of
Section 3.21(c); and

 

m.                                    Investments
made in MTR Harness up to the maximum cumulative aggregate amount of Ten
Million Dollars ($10,000,000.00).”

 

5.                                       Conditions
Precedent to Fourth Amendment Effective Date.  The occurrence of the Fourth Amendment Effective Date is subject
to Agent Bank having received the following documents and payments, in each
case in a form and substance reasonably satisfactory to Agent Bank, and the
occurrence of each other condition precedent set forth below on or before
June 9, 2004:

 

 

a.                                       due
execution by Borrowers and Agent Bank of six (6) duplicate originals of this
Fourth Amendment;

 

b.                                      organizational
and corporate documentation of MTR Harness, consisting of:

 

(i)             a
Certificate of Good Standing for MTR Harness issued by the Minnesota Secretary
of State and dated within thirty (30) calendar days of the Fourth Amendment
Effective Date;

 

(ii)          a
copy of the articles of incorporation and by-laws of MTR Harness certified as
of the Fourth Amendment Effective Date to be true, correct and complete by a
duly Authorized Officer of the Borrowers; and

 

(iii)       Subsidiary
Stock Pledge executed by MTRI pledging the capital stock of MTR Harness as
additional Collateral under the Credit Agreement, together with the stock
certificate evidencing MTRI’s ownership of such capital stock and a stock power
executed in blank.

 

c.                                       reimbursement
to Agent Bank by Borrowers for all reasonable fees and out-of-pocket expenses
incurred by Agent Bank in connection with the Fourth Amendment, but not limited
to, reasonable attorneys’ fees of Henderson & Morgan, LLC and all other
like expenses remaining unpaid as of the Fourth Amendment Effective Date; and

 

d.                                      such
other documents, instruments or conditions as may be reasonably required by
Agent Bank.

 

6.                                       Representations
of Borrowers.  Borrowers hereby
represent to the Banks, which representations shall survive the Fourth
Amendment Effective Date and be deemed incorporated into Article IV of the
Credit Agreement, that:

 

a.                                       the
representations and warranties contained in Article IV of the Existing
Credit Agreement and contained in each of the other Loan Documents (other than
representations and warranties which expressly speak only as of a different
date, which shall be true and correct in all material respects as of such date)
are true and correct on and as of the Fourth Amendment Effective Date in all material
respects as though such representations and warranties had been made on and as
of the Fourth Amendment Effective Date, except to the extent that such
representations and warranties are not true and correct as a result of a change
which is permitted by the

 

 

Credit Agreement or by any other Loan
Document or which has been otherwise consented to by Agent Bank or, where
applicable, the Requisite Lenders;

 

b.                                      since
the date of the most recent financial statements referred to in
Section 5.08 of the Existing Credit Agreement, no Material Adverse Change
has occurred and no event or circumstance which could reasonably be expected to
result in a Material Adverse Change has occurred;

 

c.                                       no
event has occurred and is continuing which constitutes a Default or Event of
Default under the terms of the Credit Agreement; and

 

d.                                      the
execution, delivery and performance of this Fourth Amendment has been duly
authorized by all necessary action of Borrowers and this Fourth Amendment
constitutes the valid, binding and enforceable obligation of Borrowers.

 

7.                                       Incorporation
by Reference.  This Fourth Amendment
shall be and is hereby incorporated in and forms a part of the Existing Credit
Agreement.

 

8.                                       Governing
Law.  This Fourth Amendment to
Credit Agreement shall be governed by the internal laws of the State of Nevada
without reference to conflicts of laws principles.

 

9.                                       Counterparts.  This Fourth Amendment may be executed in any
number of separate counterparts with the same effect as if the signatures
hereto and hereby were upon the same instrument.  All such counterparts shall together constitute one and the same
document.

 

10.                                 Continuance
of Terms and Provisions.  All of the
terms and provisions of the Credit Agreement shall remain unchanged except as
specifically modified herein.

 

 

IN WITNESS
WHEREOF, Borrowers and the Agent Bank (acting on behalf of the Lenders pursuant
to Section 10.11 of the Credit Agreement) have executed this Fourth
Amendment as of the day and year first above written.

 

	
  BORROWERS:

  	
   

  
	
   

  	
   

  
	
  MTR GAMING GROUP, INC.,

  	
   

  
	
  a Delaware corporation

  	
   

  
	
   

  	
   

  
	
  By 

  	
  /S/ Edson R. Arneault

  	
   

  	
   

  
	
   

  	
  Edson R. Arneault

  	
   

  
	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
  MOUNTAINEER PARK, INC.,

  	
   

  
	
  a West Virginia corporation

  	
   

  
	
   

  	
   

  
	
  By 

  	
  /S/ Edson R. Arneault

  	
   

  	
   

  
	
   

  	
  Edson R. Arneault,

  	
   

  
	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
  SPEAKEASY GAMING OF LAS
  VEGAS,

  	
   

  
	
  INC., a Nevada corporation

  	
   

  
	
   

  	
   

  
	
  By 

  	
  /S/ Edson R. Arneault

  	
   

  	
   

  
	
   

  	
  Edson R. Arneault,

  	
   

  
	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
  SPEAKEASY GAMING OF RENO,

  	
   

  
	
  INC., a Nevada corporation

  	
   

  
	
   

  	
   

  
	
  By 

  	
  /S/ Edson R. Arneault

  	
   

  	
   

  
	
   

  	
  Edson R. Arneault,

  	
   

  
	
   

  	
  President

  	
   

  

 

 

	
  PRESQUE ISLE DOWNS, INC.,

  	
   

  
	
  a Pennsylvania corporation

  	
   

  
	
   

  	
   

  
	
  By 

  	
  /S/ Edson R. Arneault

  	
   

  	
   

  
	
   

  	
  Edson R. Arneault,

  	
   

  
	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
  AGENT BANK:

  	
   

  
	
   

  	
   

  
	
  WELLS FARGO BANK,

  	
   

  
	
  National Association,

  	
   

  
	
  Agent Bank, on behalf of the
  Lenders,

  	
   

  
	
  Swingline Lender and L/C
  Issuer

  	
   

  
	
   

  	
   

  
	
  By 

  	
  /S/ Rochanne Hackett

  	
   

  	
   

  
	
   

  	
  Rochanne Hackett,

  	
   

  
	
   

  	
  Vice President

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