Document:

Exhibit 10.1

 

THE ST. PAUL TRAVELERS COMPANIES, INC.

385 Washington Street

St. Paul, Minnesota 55102

 

As of April 1, 2004

 

 

Jay S. Fishman

1200 Mount Curve Avenue

Minneapolis, Minnesota 55403

 

Dear Jay:

 

I am writing this letter on behalf of the Board of Directors (the “Board”)
of The St. Paul Travelers Companies, Inc. (the “Company”) to confirm the
terms and conditions of your employment with the Company.

 

1.             Term of Employment.  Your employment under this Letter Agreement
commenced as of the effective date (the “Effective Date”) of the consummation of the
combination transaction contemplated by the Agreement of Plan and Merger
effective as of November 16, 2003 among The St. Paul Companies, Inc. (“The St. Paul”),
Travelers Property Casualty Corp. and Adams Acquisition Corp. (as amended)
(such transaction, the “Merger”) and, subject to termination as
provided in Section 9, will end on the fifth anniversary of the Effective
Date; provided
that on the fourth and each subsequent anniversary of the Effective Date, the
term of your employment will automatically be extended by an additional year
unless the Company or you give the other party written notice, at least 30 days
prior to the applicable anniversary of the Effective Date, that you do not or
it does not want the term to be so extended. 
Such employment period, as may be extended, will hereinafter be referred
to as the “Term”.

 

2.             Title and Duties.

 

(a)   Position.  During the Term, you will serve as Chief
Executive Officer of the Company, and, beginning as of January 1, 2006 or,
if earlier, the date that the current Chairman of the Board steps down from
such position (the earlier of such dates is hereinafter referred to as the “Relevant
Date”) so long as you are employed by the Company on the Relevant
Date, you will also serve as Chairman of the Board of the Company.  You will have such duties and
responsibilities and power and authority as those normally associated with such
position or positions, as applicable, in public companies of a similar stature,
plus any additional duties, responsibilities and/or power and authority
assigned to you by the Board which are consistent with such position(s).  You will report solely and directly to the
Board, and all other executives, other than the executive Chairman of the Board
during the period commencing on the Effective Date and ending on the Relevant
Date (the “Relevant Period”), will report to you.

 

(b)   Board and Committees.  During the Term, the Company will use its
best efforts to cause you to be nominated for and elected to the Board, as well
as to the Executive Committee of the Board, including any successor committee
performing a similar function (the “Executive Committee”).  During the Relevant Period, you will jointly
preside with the executive Chairman of the Board at meetings of the Board and
of the Executive Committee, and thereafter during the Term, you will solely
preside at such meetings.

 

 

(c)   Outside Interests.  Nothing contained in this Letter Agreement
shall preclude you from (i) serving on the board of directors of any
business corporation; (ii) serving on the board of or working for any
charitable or community organization or (iii) pursuing your personal financial
and legal affairs, so long as the foregoing activities, individually or
collectively, do not materially interfere with the performance of your duties
hereunder and do not violate the provisions of Section 12(b) hereof.

 

3.             Base Salary.  During the Term, the Company will pay you a
minimum base salary at the annual rate of $1,000,000 (the “Base Salary”), payable in
accordance with the Company’s regular payroll practices.  The Compensation Committee (the “Committee”)
of the Board will review your Base Salary annually and may, in its sole
discretion, increase the Base Salary based on your performance and the
Company’s performance.

 

4.             Bonus.  During the Term, you will be eligible to
receive an annual bonus (the “Annual Bonus”) pursuant to the Company’s
annual incentive plan, with a target bonus opportunity of one hundred fifty
percent (150%) of Base Salary (the “Target Bonus”).  The performance objectives for your Annual Bonus will be
determined by the Committee in consultation with you as promptly as practicable
after the Effective Date, but will nevertheless be consistent with performance
objectives set for other senior executives of the Company.

 

5.             Annual Long-Term
Incentive Grant.  In
February 2005 and in each calendar year of the Term thereafter, you will
receive a long-term incentive grant, consisting of stock options, restricted
stock, other equity-based awards, or a combination thereof, as determined by
the Committee, (the “Annual Equity Grant”) with a then present
value equal to not less than $6.25 million (such value to be based on a
Black-Scholes valuation, in the case of options and similar awards, and on a
valuation method mutually acceptable to you and the Committee, in the case of
other awards).  Any annual cash
incentive earned pursuant to Section 4 hereof and paid in the form of
equity-based awards shall not be considered in valuing your entitlement under
this Section 5.  Subject to the
specific terms of this Letter Agreement, the terms and conditions of your
Annual Equity Grant will provide for four (4) year vesting in equal
installments and will otherwise be determined in accordance with the Company’s
1994 Stock Incentive Plan as it exists on the date hereof or as amended in any
respect that is not materially unfavorable to you or in accordance with any
successor plan to the extent not materially less favorable to you, and the Company’s
policy governing similar awards to other senior executives as in effect from
time to time.  Any portion of an Annual
Equity Grant that is not fully vested will become fully vested upon termination
of your employment due to death or Disability (as defined below in
Section 8), or in the event you terminate your employment for Good Reason
(as defined below in Section 8) or in the event you are terminated by the
Company without Cause (as defined below in Section 8).

 

6.             Prior Stock Option
Grants.  You affirm and acknowledge
that (a) so long as you remain employed as Chief Executive Officer by the
Company, and so long as on and after the Relevant Date, you also remain
employed thereafter as Chairman of the Board of the Company, you would not
intend to exercise any of the stock options that were granted to you by The St.
Paul before 2004 until after they would have been exercisable in accordance
with their terms and vesting schedules in effect on November 16, 2003 and
(b) the stock option granted to you by The St. Paul on February 2, 2004
will not become exercisable in connection with the Merger, notwithstanding the
terms of the Letter Agreement dated as of October 11, 2001 between The St.
Paul and you (the “Old Letter Agreement”), and will, instead,
become exercisable in accordance with the terms contained in the term sheet
governing such stock option.

 

7.             Other Benefits.

 

(a)   Employee Benefits.  You will be eligible to participate in the
employee benefit plans, programs and arrangements maintained by the Company, on
terms and conditions that are no less favorable than those applicable to any
other senior executive of the Company. 
The Company acknowledges that in connection with your commencement of
employment with The St. Paul pursuant to the Old Letter Agreement, you received
four (4) years of service credit as of the effective date of such 

 

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commencement under all such
plans, programs and arrangements (except with respect to any tax-qualified or
stock-based plans, programs and arrangements) and that The St. Paul waived any
waiting periods or similar requirements for all medical, dental and other
health plans.

 

(b)   Vacation.  You will be entitled to four (4) weeks paid
vacation per calendar year in accordance with the Company’s vacation policy as
in effect from time to time.

 

(c)   Legal and Other Fees.  The Company will reimburse you for
reasonable legal and other professional and out-of-pocket expenses incurred by
you in connection with the preparation and negotiation of this Letter
Agreement.

 

(d)   Transportation.  You will be required for security purposes
to use the Company aircraft for all business travel and personal travel; provided,
however, that if you use the aircraft for international personal
travel you will compensate the Company for such use at the then applicable
first class rate.  The Company will
provide you with other transportation on a basis consistent with that
customarily provided to executives of a similar stature and will gross you up
for any income taxes incurred by you as a result of the provision of such other
transportation.  The Company will also
gross you up for any income taxes incurred by you as a result of any imputation
of income in connection with the use of the aircraft for business travel
between the New Jersey region and St. Paul, Minnesota, Baltimore, Maryland and
Hartford, Connecticut and of Company-arranged ground transportation for
business travel when you are on the East Coast.

 

(e)   Reimbursement.  The Company will reimburse you for all
reasonable expenses and disbursements in carrying out your duties and
responsibilities under this Letter Agreement in accordance with Company policy
for senior executives as in effect from time to time.

 

(f)    Professional Fees.  The Company will reimburse you for all
reasonable financial planning and tax preparation expenses up to $25,000
annually.

 

8.             Termination of
Employment.

 

(a)   Resignation for Good Reason or
Termination Without Cause. 
If you terminate your employment for Good Reason or you are terminated
by the Company without Cause, you will receive, immediately upon the
effectiveness of any such termination, a lump-sum cash payment equal to the sum
of

 

(i)   any earned but unpaid Base
Salary or other amounts (including reimbursable expenses and any vested amounts
or benefits owing under or in accordance with the Company’s otherwise
applicable employee benefit plans or programs, including retirement plans and
programs) accrued or owing through the date of termination and

 

(ii)  three (3) times the sum of your
(A) then Base Salary and (B) the greater of your then Target
Bonus and Annual Bonus for the immediately preceding year; provided that you execute a
release substantially in the form attached hereto as Exhibit A
concurrently with such payment.

 

In addition to the foregoing lump-sum
payment,

 

(x)            the Company will continue your
participation in the Company’s medical and dental plans (or if you are
ineligible to continue to participate under the terms thereof, in substitute
arrangements adopted by the Company providing substantially comparable
benefits), but only until, in the case of such medical and dental plans, the
earlier of three (3) years following the date of such termination of 

 

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employment and the date on which you become
covered by a similar plan maintained by any subsequent employer,

 

(y)           all unvested stock options, restricted stock
and other equity awards then held by you will fully vest and become
exercisable, if applicable, as of the effective date of such termination,

 

(z)            with respect to options and any similar
equity awards (i.e. containing or requiring an exercise or similar action)
held by you at the time of such termination, such awards will remain
exercisable (as if you had remained in your initial position with the Company
throughout such term) for the lesser of five (5) years and the remainder of the
full term of such options, except that, in the case of the termination of your
employment by the Company without Cause, any such awards granted to you after
the date hereof will remain exercisable (as if you had remained in your initial
position with the Company throughout such term) for the lesser of one (1) year
and the remaining term of such options.

 

Notwithstanding the foregoing and the
Company’s Amended and Restated Special Severance Policy (as it exists on the
date hereof, regardless of whether or not it is subsequently modified or
terminated, the “Policy”), you affirm and acknowledge that you will not
exercise your right to terminate your employment for any reason during the
twelve (12) month period following the Effective Date or to terminate your
employment for any reason during the thirty (30) day period commencing one year
after the Effective Date and to have such termination be treated as a
termination for Good Reason under the Old Letter Agreement or a Qualifying
Termination (as defined in the Policy) under the Policy; provided that you reserve
the right to terminate your employment for Good Reason under this Letter
Agreement.

 

(b)   Termination Other than for Good Reason
or for Cause.  If you
terminate your employment other than for Good Reason or if your employment is
terminated by the Company for Cause, you will receive no further payments,
compensation or benefits under this Letter Agreement, except you will be
eligible to receive, immediately upon the effectiveness of such termination,
amounts (including reimbursable expenses and any vested amounts or benefits
owing under or in accordance with the Company’s otherwise applicable employee
benefit plans or programs, including retirement plans and programs) accrued or
owing prior to the effectiveness of your termination and such compensation or
benefits that have been earned and will become payable without regard to future
services.  In addition, if your
employment is terminated by you other than for Good Reason, any vested stock
options then outstanding will remain exercisable for thirty (30) days after
such termination (although no further stock options will vest during such
additional thirty (30) day period); provided that an option will not otherwise
be exercisable beyond the stated term of such stock option.

 

(c)   Disability or Death.  If your employment terminates by reason of
death or Disability, you or your beneficiaries will receive (i) a pro rata portion
of your Base Salary and Target Bonus for the year, calculated by multiplying
your Base Salary and Target Bonus by a fraction, the numerator of which is the
number of days in the year elapsed prior to such death or Disability and the
denominator of which is 365, and (ii) all other unpaid amounts (including
reimbursable expenses and any vested amounts or benefits owing under or in
accordance with the Company’s otherwise applicable employee benefit plans or
programs, including retirement plans and programs) accrued or owing prior to
the effectiveness of such termination. 
In addition, all unvested stock options, restricted stock and other
stock awards will immediately vest and, along with previously vested stock
options, will remain exercisable (as if you had remained in your initial
position with the Company throughout such term) for (x) three (3) years, in the
case of termination due to Disability and (y) one (1) year, in the case of
termination due to death (provided that a stock option will not
otherwise be exercisable beyond the stated term of such stock option).

 

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(d)   Retirement.  In addition to benefits to which you may be
entitled pursuant to this Letter Agreement, your entitlements in connection
with a termination of your employment pursuant to your retirement under the
Company’s otherwise applicable employee benefit and retirement plans and
programs, including without limitation under the Company’s stock option and
equity award plans, shall be determined in accordance with such applicable
employee benefit and retirement plans and programs and stock option and equity
award plans, as applicable, including with respect to the vesting of and
exercise period of stock options and awards, and the characterization of your
termination of employment for purposes of this Letter Agreement shall not
affect any benefit to which you may be entitled upon “retirement” meeting the
conditions set forth in such plan or program and impacted by this Agreement.

 

For purposes of this Letter Agreement, “Cause” means (i) your willful
and continued failure to substantially perform your duties hereunder; (ii) your
conviction of, or plea of guilty or nolo contendere to, a felony or other crime
involving moral turpitude; or (iii) your engagement in any malfeasance or fraud
or dishonesty of a substantial nature in connection with your position with the
Company or other willful act that materially damages the reputation of the
Company; provided,
however, no such act, omission or event will be treated as “Cause”
under this Letter Agreement unless (A) you have been provided a detailed,
written statement of the basis for the Company’s belief that such act, omission
or event constitutes “Cause” and an opportunity to meet with the Board
(together with your counsel if you choose to have your counsel present at such
meeting) after you have had a reasonable period in which to review such
statement and if the allegation is made under clause (i) or (iii) above, have
had at least a thirty (30) day period to take corrective action and (B) the
Board after such meeting (if you meet with the Board) and after the end of such
thirty (30) day correction period determines reasonably and in good faith and
by the affirmative vote of at least two-thirds (2/3) of the members of the
Board then in office at a meeting called and held for such purpose that “Cause”
continues to exist under this Letter Agreement.  For purposes of this paragraph, (X) no act or failure to act will
be considered “willful” unless it is done, or omitted to be done, in bad
faith and without reasonable belief that the action was in the best interest of
the Company and (Y) it shall be understood that poor Company performance, in
and of itself, shall not constitute Cause under this paragraph in the absence
of evidence of the conduct specified above on your part.

 

For purposes of the Letter Agreement, “Good Reason” means (i) the
Company reduces your Base Salary or your Target Bonus or reduces the value of your
Annual Equity Grant without your express written consent; (ii) (A) the Board
fails to elect you as a member of the Board as of the Effective Date or during
the Term fails to nominate you for reelection to the Board or fails to elect
you to the Executive Committee or effects any removal of you as a member of the
Board or a member of the Executive Committee (unless removal from the Executive
Committee is due to a change in law or regulation or is in accordance with
widely accepted corporate governance practices), (B) in the event you are not
elected to the Board at any annual or special meeting of the stockholders, the
Board does not immediately thereafter elect you to the Board (to the extent
legally permitted to do so) or (C) you do not become Chairman of the Board of
the Company on the Relevant Date, as defined in Section 2 (for the
avoidance of doubt, your not being Chairman of the Board of the Company during
the Relevant Period will not constitute “Good Reason” under this Letter
Agreement); (iii) the Company reduces the scope of your duties,
responsibilities or authority without your express written consent (it being
understood, without limitation, that such a reduction will be deemed to have
occurred in all events if, following a Change in Control as defined in the
Policy(1), (X) the Company or any entity that may have succeeded it ceases to
have a class of voting equity securities registered under Section 12 of
the Securities Exchange Act of 1934 or (Y) a person or group beneficially owns,
as such terms are used for purposes of section 13(d) of such act,  more than 40% of the voting power of the
voting securities of the Company); (iv) the Company requires you to report to
anyone other than the Board or appoints any other person (other than the
executive Chairman of the Board during the Relevant Period) to a position of
equal or higher authority or having a direct reporting responsibility to the
Board (other than the Company’s 

 

(1) 
For ease of reference, this definition is reproduced in its entirety in
Exhibit B.

 

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internal auditors); (v) the Company breaches any other provision of
this Letter Agreement, or (vi) the Company elects not to extend the Term
pursuant to Section 1 prior to the time when you shall have attained age
65; provided,
however, that if you voluntarily consent to any reduction described
above in lieu of exercising your right to resign for Good Reason and deliver
such consent to the Company in writing then such reduction, transfer or change
will not constitute “Good Reason” hereunder, but you will have the right to
resign for Good Reason under this Letter Agreement as a result of any
subsequent reduction described above.

 

For purposes of this Letter Agreement, “Disability” will mean “total
and permanent disability” as defined in the Company’s long-term disability plan
for senior executives (or such other Company-provided long-term disability
benefit plan sponsored by the Company in which you participate at the time the
determination of Disability is made).

 

9.             Indemnification.

 

(a)   The Company will indemnify and
make permitted advances to you to the fullest extent permitted by applicable
law, if you are made or threatened to be made a party to a proceeding by reason
of your being or having been an officer, director or employee of the Company or
any of its subsidiaries or affiliates or your having served on any other
enterprise as a director, officer or employee at the request of the
Company.  In addition, the Company will
maintain insurance, at its expense, to protect you against any such expense,
liability or loss to which you would be entitled to indemnification or
reimbursement under the foregoing sentence.

 

(b)   The Company will indemnify you
and hold you harmless from and against any and all losses, costs, expenses,
liabilities, penalties, claims and other damages incurred or resulting from any
claim brought by your immediately prior employer, Citigroup Inc. (or an
affiliate thereof); provided, however, that you promptly
notify the Company in writing of the commencement of any action or other
assertion of a claim.  The Company will
assume the defense of any such action or claim with counsel selected by it and
reasonably acceptable to you (the fees and expenses of such counsel will be
paid by the Company).  You will have the
right to participate in such defense and to employ counsel reasonably
acceptable to the Company at the Company’s expense.  You agree to cooperate with the Company in the defense of any
such action or claim, including providing it with records and information that
are reasonably relevant thereto.  You
agree not to admit any liability with respect to, or settle, compromise or
discharge such action or claim without the Company’s written consent (which
will not be unreasonably withheld).

 

10.           Change in Control.

 

(a)   General.  In the event of a Change in Control, you
will be entitled to the benefits provided under the Policy as if your
employment terminated under the circumstances provided under the Policy.  For purposes of the Policy, you will be
deemed to be a Tier 1 Employee (as defined in the Policy).

 

(b)   Tax Indemnity.

 

(i)           If the Company or the
Company’s independent accountants determine that any payments and benefits
called for under this Letter Agreement together with any other payments and
benefits made available to you by the Company or an affiliate of the Company
will result in you being subject to an excise tax under § 4999 of the
Internal Revenue Code (the “Code”) or if such an excise tax is assessed
against you as a result of any such payments and other benefits, the Company
will make a Gross Up Payment (as defined below) to or on behalf of you as and
when any such determination or assessment is made; provided you take such
action (other than 

 

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waiving your right to any
payments or benefits) as the Company reasonably requests under the
circumstances to mitigate or challenge such tax.

 

(ii)          Any determinations under
this Section 10 will be made in accordance with § 280G of the Code
and any applicable related regulations (whether proposed, temporary or final)
and any related Internal Revenue Service rulings and any related case law.  If the Company reasonably requests that you
take action to avoid assessment of, or to mitigate or challenge, any such tax
or assessment, including restructuring your right to receive any payments or
benefits under this Letter Agreement (other than under this Section 10),
you agree to consider such request (but in no event to waive or limit your
right to any payments or benefits in a manner that would not be neutral to you
from a financial point of view), and in connection with any such consideration,
the Company will provide you with such information and such expert advice and
assistance from the Company’s independent accountants, lawyers and other
advisors as you may reasonably request and will pay for all expenses incurred
in effecting your compliance with such request and any related taxes, fines,
penalties, interest and other assessments.

 

(iii)         Nothing in this
Section 10 is intended to violate the Sarbanes-Oxley Act and to the extent
that any advance or payment obligation hereunder would do so, such obligation
shall be modified so as to make the advance a nonrefundable payment to you and the
payment obligation null and void.

 

(iv)        The term “Gross Up
Payment” for purposes of this Section 10 will mean a payment to
or on behalf of you which will be sufficient to pay (A) any excise tax
described in this Section 10 in full, (B) any interest or penalties
assessed by the Internal Revenue Service on you which are related to the
payment of such excise tax and (C) any federal, state and local income tax and
social security and other employment tax on the payment made to pay such excise
tax and any related interest or penalties and on any payments made to avoid
assessment of, or mitigate or challenge, the payment of such tax as well as any
additional taxes on such payments.

 

(v)         Finally, you and the
Company acknowledge and agree that a Gross Up Payment is intended to put you in
the same after-tax position which you would have been in if there was no excise
tax under § 4999 of the Code on any of your payments or benefits described
in this Section 10.  Therefore, you
agree to return to the Company the excess of any Gross Up Payment made to you
over the payment which would have been sufficient to put you in the same
after-tax position which you would have been in if there was no excise tax
under § 4999 of the Code on any of your payments or benefits described in
this Section 10, and the Company agrees that any such return on one date
will not alter the Company’s obligation to make one, or more than one,
additional Gross Up Payment at any later date to the extent necessary to put
you in the same after-tax position which you would have been in if there was no
excise tax under § 4999 of the Code on any of your payments or benefits
described in this Section 10.

 

The Company affirms and acknowledges that any payments and benefits
that you receive in connection with the Merger will be covered by this
Section 10.

 

(c)   Continued Effect.  This Section 10 will continue in effect
until you agree that all of the Company’s obligations to you under this
Section 10 have been satisfied in full or a court of competent jurisdiction
makes a final determination that the Company has no further obligations to you
under this Section 10, whichever comes first.

 

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11.           Covenants.  In exchange for the remuneration outlined
above, in addition to providing service to the Company as set forth in this
Letter Agreement, you agree to the following covenants:

 

(a)   Confidentiality.  You acknowledge that during your employment,
you will occupy a position of trust and confidence.  Accordingly, you agree that following any termination of your
employment, you will keep confidential any trade secrets and confidential or
proprietary information of the Company which are now known to you or which
hereafter may become known to you as a result of your employment or association
with the Company and will not at any time directly or indirectly disclose any
such information to any person, firm or corporation, or use the same in any way
other than in connection with the business of the Company during, and at all times
after, the termination of your employment. 
For purposes of this Letter Agreement, “trade secrets and confidential or
proprietary information” means information unique to the Company
which has a significant business purpose and is not known or generally
available from sources outside the Company or typical of industry practice, but
will not include any of the foregoing (i) that becomes a matter of public
record or is published in a newspaper, magazine or other periodical available
to the general public, other than as a result of any act or omission of you or
(ii) that is required to be disclosed by any law, regulation or order of any
court or regulatory commission, department or agency; provided that you give
prompt notice of such requirement to the Company to enable the Company to seek
an appropriate protective order or confidential treatment.

 

(b)   Non-Competition.  You further covenant that during the Term
and for the three (3) year period (the “Restricted Period”) following termination
of your employment for Cause or following your termination of employment
without Good Reason, you will not, for yourself or on behalf of any other
person, partnership, company or corporation, directly or indirectly, acquire
any financial or beneficial interest in (except as provided in the next
sentence), be employed by, or own, manage, operate or control any entity which
is primarily engaged in the property and casualty insurance business in the
United States.  Notwithstanding the
preceding sentence, you will not be prohibited from owning less than five
percent (5%) of any publicly traded corporation, whether or not such
corporation is in competition with the Company.

 

(c)   Non-Solicitation of Employees.  You further covenant that during the Term
and (x) during the Restricted Period following termination of your employment
by the Company for Cause or by you without Good Reason, or (y) for the one (1)
year period following the termination of your employment for any other reason,
you will not, directly or indirectly, hire, or cause to be hired by an employer
with whom you may ultimately become associated, any senior executive of the
Company at the time of termination of your employment with the Company (defined
for such purposes to include executives that report directly to you or that
report directly to such executives that report directly to you).

 

(d)   Equitable Relief and Other Remedies.  You acknowledge and agree that the Company’s
remedies at law for a breach or threatened breach of any of the provisions of
this Section 11 would be inadequate and, in recognition of this fact, you
agree that, in the event of such a breach or threatened breach, in addition to
any remedies at law, the Company, without posting any bond, will be entitled to
obtain equitable relief in the form of specific performance, temporary
restraining order, a temporary or permanent injunction or any other equitable
remedy which may then be available.

 

(e)   Reformation.  If it is determined by a court of competent
jurisdiction in any state that any restriction in this Section 11 is
excessive in duration or scope or is unreasonable or unenforceable under the
law of that state, it is the intention of the parties that such restriction may
be modified or amended by the court to render it enforceable to the maximum extent
permitted by the law of that state.

 

(f)    Survival of Provisions.  Without effect as to the survival of other
provisions of this Letter Agreement intended to survive the termination or
expiration of your employment, the obligations 

 

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contained in this
Section 11 will survive the termination or expiration of your employment
with the Company and will be fully enforceable thereafter.

 

12.           Coordination.  With regard to the equity grants, payments
and benefits described in this Letter Agreement (the “Contract Rights”), the
provisions of this Letter Agreement, to the extent that they are more favorable
to you, will control over any provisions to the contrary in any plan, program,
or equity grant applicable to you.  The
Company will not impose any restrictions not contained in this Letter Agreement
on the Contract Rights, and will not condition any future equity grants,
payments or benefits not contemplated by this Letter Agreement upon your
agreement to any additional restrictions on the Contract Rights.  However, nothing will limit the Company’s
discretion to include any new or different terms, conditions or restrictions in
any future equity grant, payment or benefit to you not contemplated by this
Letter Agreement.

 

13.           Representations.  By signing this Letter Agreement where
indicated below, you represent that, except as previously disclosed to the
Company, are not subject to any employment agreement or non-competition
agreement that could subject the Company to any future liability or obligation
to any third party as a result of the execution of this Letter Agreement and
your appointment to the positions which the Company described above.

 

14.           Miscellaneous
Provisions.

 

(a)   This Letter Agreement may not
be amended or terminated without the prior written consent of you and the
Company.

 

(b)   This Letter Agreement may be
executed in any number of counterparts which together will constitute but one
agreement.

 

(c)   This Letter Agreement will be
binding on and inure to the benefit of our respective successors and, in your
case, your heirs and other legal representatives.  If you should die while any amount would still be payable to you
hereunder had you continued to live, all such amounts, unless otherwise
provided herein, will be paid in accordance with the terms of this Letter
Agreement to your devisee, legatee or other designee or, if there is no such
designee, to your estate.  The rights
and obligations described in this Letter Agreement may not be assigned by either
party without the prior written consent of the other party.

 

(d)   All disputes arising under or
related to this Letter Agreement will be settled by arbitration under the
Commercial Arbitration Rules of the American Arbitration Association then in
effect, such arbitration to be held in Minneapolis, Minnesota, as the sole and
exclusive remedy of either party.  Any
judgment on the award rendered by such arbitration may be entered in any court
having jurisdiction over such matters. 
All costs and expenses of such arbitration, including your reasonable
costs and expenses, will be borne by the Company.

 

(e)   All notices under this Letter
Agreement will be in writing and will be deemed effective when delivered in
person, or five (5) days after deposit thereof in the U.S. mail, postage
prepaid, for delivery as registered or certified mail, addressed to the
respective party at the address set forth below or to such other address as may
hereafter be designated by like notice. 
Unless otherwise notified as set forth above, notice will be sent to
each party as follows:

 

You, to:

 

The address listed above or such other
address as is maintained in the Company’s records

 

9

 

The Company,
to:

 

The St. Paul Travelers Companies, Inc.

385 Washington Street

St. Paul, Minnesota 55102

Attention: 
General Counsel

 

In lieu of personal notice or notice or notice by deposit in the U.S.
mail, a party may give notice by confirmed telegram, telex or fax, which will
be effective upon receipt.

 

(f)    This Letter Agreement will be
governed by and construed and entered in accordance with the laws of the State
of Minnesota without reference to rules relating to conflict of laws.

 

(g)   This Letter Agreement
supersedes the Old Letter Agreement and the letter of understanding dated
November 16, 2003 (as amended on February 11, 2004) from you to the
Board of Directors of The St. Paul. 
This Letter Agreement also supersedes any inconsistent provisions of any
plan or arrangement that would otherwise be applicable to you to the extent
such provisions would limit any rights granted to you hereunder or expand any
restrictions imposed on you hereby.

 

10

 

This Letter Agreement is intended to be a binding obligation upon both
the Company and yourself.  If this
Letter Agreement correctly reflects your understanding, please sign and return
one copy to John MacColl for the Company’s records.

 

 

	
   

  	
  THE ST. PAUL TRAVELERS COMPANIES, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Leslie B. Disharoon

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director

  	
   

  

 

The above Letter Agreement correctly reflects our understanding, and I
hereby confirm my agreement to the same.

 

 

	
  Dated as of April 1, 2004

  	
  /s/ Jay S. Fishman

  	
   

  
	
   

  	
  Jay S. Fishman

  	
   

  

 

 

Exhibit A

 

FULL AND COMPLETE RELEASE

 

I,
                            ,
in consideration for the payment of the severance described in my Letter
Agreement dated
                       ,
2004, for myself and my heirs, executors, administrators and assigns, do hereby
knowingly and voluntarily release and forever discharge The St. Paul Travelers
Companies, Inc. (the “Company”) and its respective predecessors,
successors and affiliates and current and former directors, officers and
employees from any and all claims, actions and causes of action under those
federal, state and local laws prohibiting employment discrimination based on
age, sex, race, color, national origin, religion, disability, veteran or
marital status, sexual orientation or any other protected trait or
characteristic, or retaliation for engaging in any protected activity,
including without limitation, the Age Discrimination in Employment Act of 1967,
29 U.S.C. § 621 et seq., as amended by the Older Workers
Benefit Protection Act, P.L. 101-433, the Equal Pay Act of 1963, 9 U.S.C.
§ 206, et
seq., Title VII of The Civil Rights Act of 1964, as amended, 42
U.S.C. § 2000e et seq., the Civil Rights Act of 1866, 42
U.S.C. § 1981, the Civil Rights Act of 1991, 42 U.S.C. § 1981a, the
Americans with Disabilities Act, 42 U.S.C. § 12101, et seq., the Rehabilitation
Act of 1973, 29 U.S.C. § 791 et seq., the Family and Medical Leave Act
of 1993, 28 U.S.C. §§ 2601 and 2611 et seq., whether KNOWN OR UNKNOWN, fixed
or contingent, which I ever had, now have, or may have, or which my heirs,
executors, administrators or assigns hereafter can, will or may have from the
beginning of time through the date on which I sign this Full and Complete
Release (this “Release”), including without limitation those arising out of
or related to my employment or separation from employment with the Company
(collectively the “Released Claims”).

 

I warrant and represent that I have made no sale, assignment or other
transfer, or attempted sale, assignment or other transfer, of any of the
Released Claims.

 

I fully understand and agree that:

 

1.                                       this Release is
in exchange for severance payment to which I would otherwise not be entitled;

 

 

2.                                       no rights or
claims are released or waived that may arise after the date this Release is
signed by me;

 

3.                                       I am here
advised to consult with an attorney before signing this Release;

 

4.                                       I have 21 days
from my receipt of this Release within which to consider whether or not to sign
it;

 

5.                                       I have 7 days
following my signature of this Release to revoke the Release; and

 

6.                                       this Release
will not become effective or enforceable until the revocation period of 7 days
has expired.

 

If I choose to revoke this Release, I must do so by notifying the
Company in writing.  This written notice
of revocation must be mailed by U.S. first class mail or by U.S. certified mail
within the 7 day revocation period and addressed as follows:

 

The St. Paul Travelers Companies, Inc.

Attention:  General Counsel

385 Washington Street

St. Paul, Minnesota 55102

 

This Release is the complete understanding between me and the Company
in respect of the subject matter of this Release and supersedes all prior
agreements relating to the same subject matter.  I have not relied upon any representations, promises or
agreements of any kind except those set forth herein in signing this Release.

 

In the event that any provision of this Release should be held to be
invalid or unenforceable, each and all of the other provisions of this Release
will remain in full force and effect. 
If any provision of this Release is found to be invalid or
unenforceable, such provision will be modified as necessary to permit this
Release to be upheld and enforced to the maximum extent permitted by law.

 

This Release is to be governed and enforced under the laws of the State
of Minnesota (except to the extent that Minnesota conflicts of law rules would
call for the application of the law of another jurisdiction).

 

This Release inures to the benefit of the Company and its successors
and assigns.

 

A-2

 

I have carefully read this Release, fully understand each of its terms
and conditions, and intend to abide by this Release in every respect.  As such, I knowingly and voluntarily sign
this Release.

 

	
   

  	
   

  	
   

  
	
   

  	
  Jay S. Fishman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
				

 

 

Exhibit B

 

For ease of reference, the definition of Change in Control in the
Policy is reproduced in its entirety below:

 

(d)           “Change
in Control” means the occurrence of any one of the following events”

 

(i)            individuals who, on February 1, 1999,
constitute the Board (the “Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board, provided that any person becoming
a director subsequent to February 1, 1999, whose election or nomination
for election was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an Incumbent
Director; provided,
however, that no individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election contest
(as described in Rule 14a-11 under the Securities Exchange Act of 1934 (the
“Act”)) (“Election Contest”) or any other actual or threatened solicitation of
proxies or consents by or on behalf of any “person” (as such term is defined in
Section 3(a) (9) of the Act) other than the Board (“Proxy Contest”),
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest, shall be deemed to be an Incumbent Director;

 

(ii)           any person is or becomes a “beneficial
owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company’s then outstanding securities eligible to vote for the election
of the Board (the “Company Voting Securities”); provided, however, that the
event described in this paragraph (ii) shall not be deemed to be a Change in
Control of the Company by virtue of any of the following acquisitions:  (A) by the Company or any Subsidiary, (B) by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities, or (D) pursuant to any
acquisition by Participant or any group of persons including Participant (or
any entity controlled by Participant or any group of persons including Participant);

 

(iii)          the consummation of a merger, consolidation,
statutory share exchange or similar form of corporate transaction involving the
Company or any of its Subsidiaries that requires the approval of the Company’s
stockholders, whether for such transaction or the issuance of securities in the
transaction (a “Reorganization”), or sale or other disposition of all or
substantially all of the Company’s assets to an entity that is not an affiliate
of the Company (a “Sale”), unless immediately following such Reorganization or
Sale:  (A) more than 60% of the total
voting power of (x) the corporation resulting from such Reorganization or Sale
(the “Surviving Company”), or (y) if applicable, the ultimate parent
corporation that directly or indirectly has beneficial ownership of 100% of the
voting securities eligible to elect directors of the Surviving Company (the
“Parent Company”), is represented by Company Voting Securities that were
outstanding immediately prior to such Reorganization or Sale (or, if applicable,
is represented by shares into which such Company Voting Securities were
converted pursuant to such Reorganization or Sale), and such voting power among
the holders thereof is in substantially the same proportion as the voting power
of such Company Voting Securities among the holders thereof immediately prior
to the Reorganization or Sale, (B) no person (other than any employee benefit
plan (or related trust) sponsored or maintained by the Surviving Company or the
Parent Company), is or becomes the beneficial owner, directly or indirectly, of
30% or more of the total voting power of the outstanding voting securities
eligible to elect directors of the Parent Company (or, if there is no Parent
Company, the Surviving Company) and (C) at least a majority of the members of
the board of directors of the Parent Company (or, if there is no Parent
Company, the Surviving Company) following the consummation of the
Reorganization or Sale were Incumbent Directors at the time of the Board’s
approval of the execution of the initial agreement providing for such
Reorganization or Sale (any Reorganization or Sale which 

 

 

satisfies all of the criteria specified in
(A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”);
or

 

(iv)          the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company.

 

Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 30% of the Company Voting Securities as a result of the
acquisition of Company Voting Securities by the Company which reduces the
number of Company Voting Securities outstanding; provided that if after such
acquisition by the Company such person becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.

 

B-2EXHIBIT
10.2

 

PURCHASE AGREEMENT

 

Purchase Agreement, dated as of May 6, 2004 (this
“Agreement”) by and among MTR-Harness,
Inc., a Minnesota corporation (“MTR-Harness”), Southwest Casino and
Hotel Corp., a Minnesota corporation (“Southwest”), and North Metro Harness
Initiative, LLC (the “LLC”), a Minnesota limited liability company.  Each of MTR-Harness, Southwest, and the LLC
is deemed a “party” to this Agreement and hereinafter may collectively be
referred to as the “Parties.”

 

RECITALS

 

A.                                   MTR Gaming Group,
Inc. (“MTR”) and Southwest, through their respective subsidiaries and
affiliates, have extensive experience in the gaming business in various
jurisdictions.

 

B.                                     The LLC, a
wholly owned subsidiary of Southwest, has filed an application with the
Minnesota Racing Commission to build a harness horse race track with
pari-mutuel wagering and card room (it being understood that existing law would
not permit the operation of a card room until the racetrack had conducted fifty
(50) days of live racing) in Anoka County, Minnesota (the “Facility”).

 

C.                                     In view of
MTR’s expertise (including, but not limited to, operation of  thoroughbred and harness horse racing
tracks, operation of slot machines at racetracks, and working with state
regulators and legislators with respect to racing and gaming matters) and
ability to contribute funds to construct the Facility, the parties would like
for MTR-Harness (the “Purchaser”), subject to the terms and conditions set
forth herein, to acquire an interest in the LLC (the “Transaction”).

 

D.                                    In connection
with the Transaction, MTR-Harness has filed an application for a Class A and
Class B license with the Minnesota Racing Commission (the “Racing Commission”).

 

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

PURCHASE OF INTEREST IN THE
LLC

 

SECTION 1.1 PURCHASE OF INTEREST IN THE
LLC.  Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date (as hereinafter
defined), MTR-Harness shall contribute to the LLC the sum of Ten Thousand Dollars ($10,000) [the
“MTR-Harness Capital Contribution”]. 
Concurrently with the contribution by MTR-Harness of the MTR-Harness
Capital Contribution, (a) the LLC shall 
adopt and file with the Minnesota Secretary of State Amended and
Restated Articles of Organization in the form of Exhibit A attached hereto and

 

 

made a part hereof,  (b) the LLC shall terminate its existing
Operating Agreement dated as of July 16, 2003 (c) the LLC shall deliver to
MTR-Harness and to Southwest certificates evidencing their membership interests
in the LLC, and (d) Southwest and MTR-Harness shall execute a Member Control
Agreement in the form of Exhibit B attached hereto and made a part hereof.  In addition, Southwest and the LLC shall
terminate their existing Management Agreement dated June 18, 2003 (the
“Existing Management Agreement”) if the Racing Commission has confirmed to the
satisfaction of the Parties that the termination of such Management Agreement
will not interfere with the Class A License filed by the LLC with the Racing
Commission.  If the Parties are unable
to obtain such confirmation, Southwest shall enter into an agreement with
MTR-Harness (the “Southwest/MTR-Harness Agreement”) pursuant to which Southwest
shall pay to MTR-Harness fifty percent of the management fees received by
Southwest from the LLC pursuant to the Existing Management Agreement.  MTR-Harness’ interest in the LLC shall be
evidenced by a certificate (the “MTR-Harness Certificate”).

 

SECTION 1.2 CLOSING.  The Transaction contemplated by this Agreement shall take place
at a closing (the “Closing”) to be held at the offices of Southwest or at such
other place on which the parties may mutually agree subsequent to the
expiration of the Due Diligence Period and within five (5) days following
satisfaction of Articles VI, VII and VIII, below (the date on which the Closing
takes place being the “Closing Date”).

 

ARTICLE II

REPRESENTATIONS AND
WARRANTIES OF THE SELLERS

 

Southwest and the LLC (collectively, the “Sellers”)
hereby jointly and severally represent and warrant to the Purchaser, except as
set forth in the correspondingly numbered Schedules attached hereto, as set
forth below.

 

SECTION 2.1 ORGANIZATION.  Each of Southwest and the LLC is duly
organized, validly existing and in good standing under the laws of the
respective jurisdiction of its incorporation or organization, as the case may
be, and each of Southwest and the LLC have all requisite power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted.  The LLC has no
subsidiaries nor does it hold any equity interests in any other person or
entity including any other corporation, partnership, limited liability company,
business trust or joint venture.  Each
of Southwest and the LLC is duly qualified or licensed to do business as a
foreign corporation or other entity and is in good standing in each
jurisdiction in which the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly qualified
and in good standing would not have a Material Adverse Effect.  The LLC has made available to Purchaser
complete and correct copies of the articles of organization and other
organizational documents as currently in effect.  Schedule 2.1 contains a list of all the subsidiaries of
Southwest (other than the LLC) and indicates the percentage of such subsidiary
owned by Southwest and the state of incorporation of each such subsidiary.

 

SECTION 2.2 CAPITALIZATION.  Southwest owns one hundred percent (100%) of
the equity interests of the LLC.  There
are no existing encumbrances  with
respect to the equity interests of the LLC including, but not limited to, (a)
options, warrants, calls, subscriptions or other rights, convertible
securities, agreements or commitments of any character obligating the LLC to
issue, transfer or sell any shares of capital stock or other equity interest in
the LLC or securities

 

 

convertible into or
exchangeable for such shares or equity interests in the LLC; (b) contractual
obligations of the LLC to repurchase, redeem or otherwise acquire any capital
stock or equity interests of the LLC or (c) voting trusts or similar agreements
to which the LLC is a party with respect to the equity interests of the LLC.  There are no loans, mortgages, notes or
obligations of any kind or character secured by any equity interest in the
LLC.  Schedule 2.2 contains a list
of all officers, directors and owners of more than 5% of the issued and
outstanding equity securities of Southwest, assuming, with respect to any
holder, that such holder has exercised or converted, as the case may be, any
options, warrants or equity or debt instruments convertible into the equity
securities of Southwest.

 

SECTION 2.3 AUTHORIZATION; VALIDITY OF
AGREEMENT.  Each of Southwest and the
LLC has the power and authority to enter into, execute, deliver and perform
this Agreement and to consummate the Transaction contemplated hereby.  This Agreement has been duly executed and
delivered by each of the Sellers and, assuming due and valid authorization,
execution and delivery hereof by MTR, this Agreement constitutes a valid and
binding obligation of each of the Sellers, enforceable against each of the
Sellers in accordance with its terms.

 

SECTION 2.4 CONSENTS AND APPROVALS; NO VIOLATIONS.  Except with respect to the Minnesota Racing
Commission and subject to Section 8.1(b), neither the execution, delivery,
nor performance of this Agreement by each of Southwest and the LLC nor the consummation
of the Transaction contemplated hereby will (a) violate any provision of the
certificate or articles of incorporation, bylaws or other organizational
documents of either of Southwest or the LLC; (b) result in a violation or
breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default (or give rise to any obligation, right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of either of Southwest or the LLC, or give rise to any obligation, right
of termination, cancellation, acceleration or increase of any obligation or a
loss of material benefit under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which either of Southwest or the LLC is a
party or by which either of Southwest or the LLC or any of its properties or
assets is bound (each, an “LLC Contract” or a “Southwest Contract” as the
context may require); (c) violate any order, writ, judgment, injunction,
decree, law, statute, rule or regulation applicable to either of Southwest, the
LLC or any of Southwest’s or the LLC’s properties or assets, or (d) except for
those filings required pursuant to applicable state and federal securities
laws, require on the part of either of Southwest and the LLC any filing or
registration with, notification to, or authorization, consent or approval of,
any court, legislative, executive or regulatory authority or agency
(“Government Entity”).

 

SECTION 2.5 THE LLC FINANCIAL STATEMENTS.  Sellers have, prior to the date of this
Agreement, delivered to the Purchasers true and complete copies of the LLC’s
unaudited year-end balance sheet, income statement and statement of cash flow
for the twelve month period ended December 31, 2003 and the three month
period ended March 31, 2004; shall deliver successive monthly financial
statements within fifteen days following the end of each month; and shall deliver
audited financial statements for
the LLC’s fiscal year ended December 31, 2003 as soon as such audited
financial statements become available and no later than the time that such
audited financial statements are delivered to the Minnesota Racing Commission
(collectively, the “LLC Financial Statements”).

 

 

SECTION 2.6 NO UNDISCLOSED LIABILITIES.  Except (a) for liabilities and
obligations incurred in the Ordinary Course of Business (as hereinafter
defined) after March 31, 2004 ,
(b) for liabilities and obligations disclosed in or covered by the LLC
Financial Statements, (c) for liabilities disclosed on Schedule 2.6,
and (d) for liabilities and obligations incurred in connection with the
Transaction contemplated hereby or otherwise as contemplated by this Agreement,
since March 31, 2004, the
LLC has not incurred any liabilities or obligations that would be required to
be reflected or reserved against in a balance sheet of the LLC, prepared in
accordance with GAAP.  Action taken by
or on behalf of the LLC shall not be deemed to have been taken in the “Ordinary
Course of Business” unless such action is: 
(a) recurring in nature, consistent with normal day-to-day operations;
(b) taken in good faith in accordance with sound and prudent business
practices; and (c) not required to be authorized by the LLC’s members, and does
not require any other separate or special authorization of any nature.

 

SECTION 2.7 ABSENCE OF CERTAIN CHANGES.  Since March 31, 2004, except as set forth on Schedule 2.7, the
LLC has not (a) suffered any change or changes constituting in the aggregate, a
Material Adverse Effect (as hereinafter defined) and to each of Sellers’
Knowledge (as defined in Section 10.1), no event has occurred that is
reasonably likely to have a Material Adverse Effect; (b) suffered any loss,
damage or destruction to, or any interruption in the use of any of the LLC’s
assets (whether or not covered by insurance) that would constitute a Material
Adverse Effect; (c) amended its articles of organization or bylaws; (d) split,
combined or reclassified the equity interests of the LLC; (e) declared or
set aside or paid any dividend or other distribution with respect to the equity
interests of the LLC, (f) changed its accounting principles, practices or
methods, except as required by GAAP or applicable law; (g) made any capital
expenditure in excess of Twenty
Thousand Dollars ($20,000); (h) written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable
or other indebtedness; (i) pledged or hypothecated any of its assets or
otherwise permitted any of its assets to become subject to any encumbrance;
(j) entered into any transaction outside the Ordinary Course of Business;
(k) incurred, assumed or otherwise become subject to any liability or
obligation, other than in the Ordinary Course of Business; (l) waived or
released any material right; (m) approved any material increase, direct or
indirect, or other material change in the compensation paid or payable to any
officer, director, employee, independent contractor or agent of the LLC, or
established or created any employment, deferred compensation or severance
agreement or employee benefit plan or amended any of the foregoing; (n)
suffered any material loss of personnel, authorized any change in the terms and
conditions of the employment of senior members of management of the LLC or
incurred any labor trouble; (o) made any arrangements relating to any
royalty, dividend or similar payment entered into by the LLC based on the sales
volume of the LLC (other than sales commission arrangements), other than in the
Ordinary Course of Business; (p) entered into any material agreement with
respect to the endorsement of products or services, other than in the Ordinary
Course of Business; (q) revalued any of its material assets; (r) amended
or terminated any Material Agreement (as defined in Section 2.14); (s)
amended its application for a Class A license filed with the Racing Commission
or (t) agreed, committed, offered, or attempted to take any of the actions
referred to in clauses (a) through (s).

 

As used in this Agreement, “Material Adverse Effect”
means any material adverse change in, or material adverse effect on, the
business, financial condition, prospects or operations of a Person (as hereinafter
defined), taken as a whole (including, but not limited to, changes or adverse
affects resulting from changes in legislation); provided, however, that any
adverse effect on a

 

 

Person resulting from the
execution of this Agreement, the announcement of this Agreement and the
Transaction contemplated hereby shall be excluded from the determination of
Material Adverse Effect.  “Person” means
a natural person or any partnership, limited liability company, trust, estate,
association, corporation, custodian, nominee or any other individual or entity
in its own or any representative, capacity or any other entity.

 

SECTION 2.8 EMPLOYEE BENEFIT PLANS; ERISA.  (a) There are no Employee Plans (defined
below) that are currently maintained or contributed to by the LLC, that have
previously been maintained or contributed to by the LLC, or with respect to
which the LLC has incurred or could incur any liability.  For purposes of this Section 2.8, the
term Employee Plan shall include (a) all “Employee Benefit Plans” as defined by
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), (b) all specified fringe benefit plans as defined in
Section 6039D of the Internal Revenue Code of 1986, as amended (the
“Code”), and (c) all other bonus, incentive compensation, deferred
compensation, profit sharing, stock option, stock appreciation right, stock
bonus, stock purchase, employee stock ownership, savings, life insurance, group
insurance, or fringe benefit plan, and any other employee compensation or
benefit plan, agreement, policy, practice, commitment, contract, or
understanding (whether qualified or nonqualified, currently effective or
terminated, written or unwritten, funded or unfunded), and any trust, escrow or
other agreement related thereto.

 

(b)                                 The LLC has complied with
the continuation coverage provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”) with respect to all current
employees and former employees and other “Qualified Beneficiaries” (as defined
in Code Section 4980B(g)(1) and ERISA Section 607(3)).  All Employee Plans that are “Group Health
Plans,” as defined in Section 5000(b) of the Code, have been operated in conformance with the Medicare as
Secondary Payer provisions of the Social Security Act, and no Person is subject
to liability under Section 5000(a) of the Code with respect to any such Employee Plan.

 

(c)                                  The LLC has maintained
workers’ compensation coverage as required by applicable state law through
purchase of insurance and not by self-insurance or otherwise.

 

(d)                                 Except as required by
statute, the consummation of the Transaction contemplated by this Agreement
will not accelerate the time of vesting or the time of payment, or increase the
amount, of compensation due to any employee, officer, former employee or former
officer of the LLC.

 

(e)                                  Except for the continuation
coverage requirements of COBRA, the requirements of other applicable law, or
benefits, the full cost of which is borne by the current or former employee (or
his or her beneficiary), the LLC has no obligations or potential liability for
medical expenses incurred by employees following termination of employment or
retirement under any of the Employee Plans.

 

(f)                                    None of the transactions
contemplated by this Agreement will result in an amendment, modification or
termination of any of the Employee Plans. 
No written or oral representations have been made to any employee or
former employee of the LLC promising or guaranteeing any employer payment or
funding for the continuation of medical, dental, life or disability coverage
for any period of time beyond the Closing (except to the extent of coverage

 

 

required under COBRA).  No written or oral representations have been
made to any employee or former employee of the LLC concerning the employee
benefits of the LLC.

 

SECTION 2.9 LITIGATION.  (a) There is no action, suit,
proceeding or investigation pending or, to the Knowledge of Sellers,
threatened, involving or affecting the LLC, by or before any Government Entity
or by any third party.  There is no
action, suit, proceeding or investigation, which Sellers currently intend to
initiate.

 

(b)                                 The LLC is not subject to
any continuing order of, consent decree, settlement agreement or other similar
written agreement with, or, to the Knowledge of Sellers, continuing
investigation by, any Government Entity, or any judgment, order, writ,
injunction, decree, or award of any Government Entity, court, or arbitrator,
including, without limitation, cease-and-desist or other orders.

 

SECTION 2.10 NO DEFAULT; COMPLIANCE WITH
APPLICABLE LAWS.

 

(a)                                  The LLC is not, nor have
Sellers received written notice alleging that the Sellers may be, in default or
violation of any term, condition or provision of (i) its articles of
organization; (ii) any of the Material Agreements (as defined in
Section 2.14); (iii) any note, bond, mortgage, indenture, pledge, security
agreement, credit agreement, guarantee, suretyship arrangement or other
instrument in respect of indebtedness for borrowed money to which the LLC is a
party or the LLC or any of its assets is bound; or (iv) any statute, law,
ordinance, rule, regulation, judgment, decree, order, arbitration award or
material licenses, permits, consents, approvals and authorizations of a
Government Entity (collectively “Permits”) applicable to the LLC including,
without limitation, laws, rules and regulations relating to the environment,
insurance, occupational health and safety, employee benefits, wages, workplace
safety, equal employment opportunity, and race, religious or sex
discrimination.

 

(b)                                 Except for  the Permits set forth in Schedule 2.10
attached hereto and made a part hereof, The LLC has all Permits necessary to
conduct its business in the manner and in the areas in which it is presently
being conducted, and all such Permits are valid and in full force and effect.

 

SECTION 2.11 TAXES.

 

(a)                                  The Sellers have (i) timely
filed all Tax Returns (as hereinafter defined) required to be filed by it
(except for a California franchise tax return for a prior year which was filed
delinquently), and all such Tax Returns were true, correct and complete in all
material respects when filed and (ii) paid or accrued all Taxes (as hereinafter
defined) whether or not shown to be due on such Tax Returns other than such
Taxes that are being contested in good faith by the LLC.

 

(b)                                 Sellers have not received
written notice of any ongoing federal, state, local or foreign audits or
examinations of any Tax Return of the LLC.

 

(c)                                  There are no outstanding
written requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any material Taxes or
deficiencies against the LLC.

 

 

(d)                                 There are no material
statutory liens for Taxes upon the assets of the LLC which are not provided for
in the LLC Financial Statements, except liens for Taxes not yet due and payable
and liens for Taxes that are being contested in good faith.

 

(e)                                  The provisions for Taxes on
the LLC Financial Statements are sufficient in all material respects for the
payment of all accrued and unpaid federal, state, county and local Taxes of any
nature, and any applicable Taxes owing to any foreign jurisdiction, whether or
not assessed or disputed, as of such date.

 

(f)                                    All Taxes and other
assessments and levies which the LLC was required to withhold or collect have
been withheld and collected and have been paid over to the proper governmental
authorities when due (without regard to any extensions).

 

“Taxes” shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, withholding, social
security, occupation, use, service, service use, value added, license, net
worth, payroll, franchise, transfer and recording taxes, fees and charges,
imposed by the United States Internal Revenue Service or any taxing authority
(whether domestic or foreign, including, without limitation, any state, local
or foreign government or any subdivision or taxing agency thereof (including a
United States possession), whether computed on separate, consolidated, unitary,
combined or any other basis; and such term shall include any interest,
penalties or additional amounts attributable to, or imposed upon, or with
respect to, any such Taxes, charges, fees, levies or other assessments.

 

“Tax Return” shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with respect to Taxes.

 

SECTION 2.12 SITE OF FACILITY; OPTION
AGREEMENTS.  Attached hereto as Exhibit
C and made a part hereof is a copy of the Real Estate Option Agreement
effective as of March 1, 2003 by and between Southwest Entertainment, Inc.
as the buyer thereunder and Steven J. Sadowski and Christine Sadowski with
respect to 165 acres of real property located in Columbus Township, Anoka
County, Minnesota (Parcel Identification Numbers:  243222310001, 243222320001, 243222330001, and 243222340001) [the
“Sadowski Option”].  Attached hereto as
Exhibit D and made a part hereof is a copy of the Real Estate Option Agreement
entered into as of July 17, 2003 by and between Southwest Entertainment,
Inc. as the buyer thereunder and Richard Klenck and Darlene Klenck with respect
to 13.4 acres of real property located in Columbus Township, Anoka County,
Minnesota (Parcel Identification Number 2432223400012) [the “Klenck
Option”].  The Sadowski Option and
Klenck Option are in full force and effect and there have not been any defaults
thereunder.  Except as set forth in
Schedule 2.12, neither the Sadowski Option nor the Klenck Option have  been amended.  The real property subject to the Sadowski Option and the Klenck
Option constitutes the entire site for the contemplated Facility.  Other than its interest pursuant to the
Sadowski Option and the Klenck Option, the LLC does not own any real
property.  Except for the real property
subject to the Sadowski Option and the Klenck Option, neither of the Sellers
has entered into any agreements or has any ongoing negotiations for the
purchase of real property in Anoka County, Minnesota.

 

 

SECTION 2.13 INTELLECTUAL PROPERTY.  Schedule 2.13 attached hereto sets
forth all the LLC’s Intellectual Property (as defined below) including, but not
limited to, trademark registrations or notices of intent to use and internet
domain name registrations.  Except as
set forth in Schedule 2.13, there are no pending or threatened claims
against the LLC of which Sellers have been given written notice, by any Person
relating to the LLC’s use or ownership of any trademarks, trademark
registrations, trade names, service marks, service names, logos, assumed names,
copyrights and copyright registrations, patents and all applications therefor
(“Intellectual Property”).  The LLC has
such rights, by license, lease or other agreement, with respect to the
Intellectual Property used in the LLC’s business as currently conducted
(collectively, the “LLC Intellectual Property”) as are necessary to permit the
LLC to conduct its business as currently conducted, except where the failure to
have such rights, individually or in the aggregate, would not have a Material
Adverse Effect.  Except as set forth in
Schedule 2.13, the LLC has not received any notice or other communication
(in writing or otherwise) of, and no inquiry by Sellers has revealed, any
actual, alleged, possible or potential infringement of any the LLC’s
Intellectual Property by any other Person.

 

SECTION 2.14 CONTRACTS.

 

Schedule 2.14 sets forth all the written
Material Agreements (defined below) relating to the LLC other than Material
Agreements that were included in the Racing Application filed by the Company
with the Minnesota Racing Commission (a copy of which has been provided to the
Purchaser).  Sellers have delivered or
made available to MTR copies of all written Material Agreements.  Each Material Agreement is in full force and
effect and is valid and enforceable by the LLC in accordance with its terms
except to the extent that such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting enforcement of creditors’ rights and laws
concerning equitable remedies.  To the
Knowledge of Sellers, no other Person is in default in the observance or the
performance of any term or obligation to be performed by it under any Material
Agreement.  As used in this Agreement,
“Material Agreement(s)” shall mean each agreement, arrangement, instrument,
bond, commitment, franchise, indemnity, indenture, lease, license or
understanding to which the LLC is a party or to which the LLC or any of its
respective properties is subject that (i) obligates the LLC to pay an amount in
excess of Twenty Five Thousand Dollars ($25,000) in any twelve (12) month
period beginning after December 31, 2003; (ii) provides for the extension
of credit to an unaffiliated third party in an amount greater than Twenty Five
Thousand Dollars ($25,000); (iii) provides for a guaranty by the LLC of
obligations of others in excess of Twenty Five Thousand Dollars ($25,000); (iv)
constitutes an employment agreement, consulting agreement or personal service
contract not terminable on less than sixty (60) days’ notice without penalty;
(v) expressly limits, in any material respect, the ability of the LLC to engage
in any business, compete with any Person or expand the nature or geographic
scope of its business; (vi) pursuant to which the LLC is entitled to receive an
amount in excess of Twenty Five Thousand Dollars ($25,000) in any twelve month
period beginning after December 31, 2003; or (vii) pursuant to which the
LLC has the obligation or right to purchase or lease real property.

 

SECTION 2.15 LABOR MATTERS.  The LLC is neither a party to, nor bound by,
any collective bargaining agreement, project labor agreement, contract or other
agreement or understanding with any labor union or labor or organization and
there is no unfair labor practice or labor arbitration proceeding pending or,
to the Knowledge of Sellers, threatened against Sellers

 

 

relating to the LLC.  The LLC is not delinquent in payments to any
of its employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it or amounts required to be
reimbursed to such employees.  Upon
termination of employment of any of said employees, no severance or other
payments will become due.  The LLC does
not have any policy, practice, plan or program of paying severance pay or any
form of severance compensation in connection with the termination of employment
or services.  The LLC is and heretofore
has been in compliance with all applicable laws and regulations respecting
labor, employment, fair employment practices, terms and conditions of employment,
and wages and hours.  There are no
charges of employment discrimination or unfair labor practices.  There are no grievances, complaints or
charges that have been filed under any dispute resolution procedure (including,
but not limited to, any proceedings under any dispute resolution procedure
under any collective bargaining agreement).

 

SECTION 2.16 ENVIRONMENTAL MATTERS.  Except as set forth in Schedule 2.16
attached hereto and made a part hereof, the LLC is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and no material expenditures are or will be
required in order to comply with any such existing statute, law or
regulation.  Except as set forth in
Schedule 2.16, no Hazardous Materials (as defined below) are used or have
been used, stored, or disposed of by the LLC or, to the Knowledge of Sellers,
by any other Person on any property owned, leased, under option, or used by the
LLC.  For the purposes of the preceding
sentence, “Hazardous Materials” shall mean (a) materials which are listed or
otherwise defined as “Hazardous” or “Toxic” under any applicable local, state,
federal and/or foreign laws and regulations that govern the existence and/or
remedy of contamination on property, the protection of the environment from
contamination, the control of hazardous wastes, or other activities involving
hazardous substances, including building materials, or (b) any petroleum
products or nuclear materials.  Except
as set forth in Schedule 2.16, to the Knowledge of Sellers, no site owned,
operated, under option or leased by the LLC contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls (“PCBs”) or
equipment containing PCBs, or any urea formaldehyde foam insulation.

 

SECTION 2.17 SUBSIDIARIES.  The LLC does not own or control any equity
security or other interest of any other corporation, limited partnership or
other business entity.  The LLC is not a
participant in any joint venture, partnership or similar agreement.

 

SECTION 2.18 BROKER OR FINDERS.  Sellers represent that no agent, broker,
investment banker, financial advisor or other firm or Person is or will be
entitled to any broker’s or finder’s fee or any other commission or similar fee
from Sellers in connection with the Transaction contemplated by this
Agreement.  If, contrary to the Parties’
belief, compensation is payable to John Swiatek in connection with the
Transaction, Southwest shall pay, and shall indemnify and hold Purchaser and
the LLC harmless with respect to such compensation.  The scope of this Section 2.18 and of Section 3.5 is
limited to fees and commissions resulting from the acquisition by MTR-Harness
of an interest in the LLC, and neither Section 2.18 nor Section 3.5
pertain to fees and commissions arising in connection with any other financing
by Sellers or any real property acquisition by the Company.

 

 

SECTION 2.19 INSURANCE.

 

(a)                                  Schedule 2.19 sets
forth, with respect to each insurance policy maintained by or at the expense
of, or providing coverage with respect to the property or operations of, the
LLC:

 

(i)                                     the name of the insurance
carrier that issued such policy and the policy number of such policy;

 

(ii)                                  whether such policy is a
“Claims Made” or an “Occurrences” policy; and

 

(iii)                               the per incident and
aggregate policy coverage limit.

 

Schedule 2.19 also identifies (A) each pending
application for insurance that has been submitted by or on behalf of the LLC,
and (B) each self-insurance or risk-sharing arrangement affecting the LLC or
any of its assets.  Sellers have delivered
to Purchaser accurate and complete copies of all of the insurance policies
identified in Schedule 2.19 (including all renewals thereof and
endorsements thereto) and all of the pending applications identified in
Schedule 2.19.

 

(b)                                 Each of the policies
identified in Schedule 2.19 is valid and enforceable by the LLC except to
the extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors’ rights and laws concerning
equitable remedies.  All of the
information contained in the applications submitted in connection with said
policies was (at the times said applications were submitted) accurate and
complete, and all premiums and other amounts owing with respect to said
policies have been paid in full on a timely basis.

 

(c)                                  There is no pending claim
under or based upon any of the policies identified in Schedule 2.19, and
to the Knowledge of Sellers, no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for any such claim.

 

(d)                                 Sellers’ have not received:

 

(i)                                     any notice or other
communication (in writing or otherwise) regarding the actual or possible
cancellation or invalidation of any of the policies identified in
Schedule 2.19 or regarding any actual or possible adjustment in the amount
of the premiums payable with respect to any of said policies;

 

(ii)                                  any notice or other
communication (in writing or otherwise) regarding any actual or possible
refusal of coverage under, or any actual or possible rejection of any claim
under, any of the policies identified in Schedule 2.19; or

 

(iii)                               any indication that the
issuer of any of the policies identified in Schedule 2.19 may be unwilling
or unable to perform any of its obligations thereunder.

 

SECTION 2.20 RELATED PARTY TRANSACTIONS.

 

(a)                                  Except as set forth in
Schedule 2.20, no Related Party (as defined below) has (i) entered into,
or has had any direct or indirect financial interest in, any LLC Contract or
any transaction or business dealing of any nature involving the LLC, (ii) had
any direct or indirect

 

 

interest of any nature in
any amount and in or otherwise relating to the LLC, or (iii) been indebted to
the LLC.

 

(b)                                 Except as set forth in
Schedule 2.20, no Related Party (or any employee of, consultant to or
other Representative (as defined below) of a Related Party) provides, or has
provided, any materials, services or support to the LLC, whether or not for
compensation.

 

(c)                                  Except as set forth in
Schedule 2.20, no Related Party presently acquires, or has acquired, any
materials, services or support from the LLC, whether or not for compensation.

 

(d)                                 Except as set forth in
Schedule 2.20, no Related Party has any claim or right against the
LLC.  No event has occurred, and to the
Knowledge of Sellers, no condition or circumstance exists, that would (with or
without notice or lapse of time) directly or indirectly give rise to or serve
as a basis for any claim or right in favor of any Related Party against the
LLC.

 

(e)                                  A “Related Party” means any
person who is or, at any time during the five (5) year period immediately
preceding the date hereof, has been the beneficial owner of five percent or
more of the shares of Southwest, a member, director or officer of the LLC or
Southwest, any member of the family of any such individual, or any entity that
is an affiliate of any one of the foregoing.

 

(f)                                    “Representatives” of a
specified party shall mean officers, directors, employees, attorneys,
accountants, advisors and other representatives of such party.

 

SECTION 2.21 FULL DISCLOSURE.

 

(a)                                  Neither this Agreement nor
any schedule, exhibit or certificate delivered pursuant hereto contains or will
contain any untrue statement of a material fact.

 

(b)                                 All of the information set
forth in the schedules, and all other information regarding the LLC and its
business, condition, assets, liabilities, operations, financial performance and
net income that has been furnished to the Purchaser or any of its
Representatives by or on behalf of Sellers or their Representatives, including
copies of the Material Agreements and other documents, is accurate and complete
in all material respects.

 

(c)                                  Sellers have provided the
Purchaser and its Representatives with full and complete access to all of LLC’s
records and other documents and data.

 

SECTION 2.22 MEMBER DISTRIBUTIONS.  The LLC has not, since March 31, 2004,
(a) declared, set aside or paid any dividend or other distribution, whether
payable in cash, stock or other property, in respect of its capital stock or
equity interests or (b) directly or indirectly redeemed, purchased or otherwise
acquired any shares of its equity interests or other securities.

 

ARTICLE III

REPRESENTATIONS AND
WARRANTIES OF PURCHASER

 

Purchaser hereby represents and warrants to Sellers
as of the date hereof and as of the Closing Date, as set forth below.

 

 

SECTION 3.1 ORGANIZATION.  MTR is, and MTR-Harness will be, a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and MTR has, and MTR-Harness will
have, all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as is now being conducted.  MTR is, and MTR-Harness will be, duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not have a Material Adverse Effect.

 

SECTION 3.2 AUTHORIZATION; VALIDITY OF
AGREEMENT; NECESSARY ACTION.  Both MTR
and MTR-Harness have the corporate power and authority to execute and deliver
this Agreement and to consummate the Transaction contemplated hereby, subject
to Section 8.2(m).  The execution
and delivery by both MTR and MTR-Harness of this Agreement have been duly
authorized by all necessary corporate proceedings, and no other corporate
action on the part of MTR or MTR-Harness is necessary to authorize the
execution and delivery by MTR and MTR-Harness of this Agreement. This Agreement
has been duly executed and delivered by MTR and MTR-Harness and, assuming due
and valid authorization, execution and delivery hereof by Sellers, is a valid
and binding obligation of MTR and MTR-Harness enforceable against each of MTR
and MTR-Harness in accordance with its terms. 
Notwithstanding anything in this Article III to the contrary, MTR
and MTR-Harness have disclosed to Sellers that, as of the date this Agreement,
the Purchaser has not yet received the consent to the transaction of (i) MTR’s
Board of Directors, (ii) MTR’s existing lender, Wells Fargo Bank, National
Association, and (iii) all necessary regulatory and governmental authorities,
including but not limited to the Minnesota Racing Commission.

 

SECTION 3.3 CONSENTS AND APPROVALS; NO
VIOLATIONS.  Neither the execution,
delivery nor performance of this Agreement by MTR nor the consummation by MTR
of the Transaction contemplated hereby, will, subject to Section 8.2(m),
(a) violate any provision of the certificate of incorporation or bylaws of
Purchaser; (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Purchaser, or give rise to any obligation, right of
termination, cancellation, acceleration or increase of any obligation or a loss
of material benefit under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Purchaser is a party or by which Purchaser or
any of its properties or assets may be bound; (c) violate any order, writ,
judgment, injunction, decree, law, statute, rule or regulation applicable to
Purchaser or any of its properties or assets, or (d) except for those
filings required pursuant to applicable state and federal securities laws,
require on the part of Purchaser any filing or registration with, notification
to, or authorization, consent or approval of any Government Entity other than
the Minnesota Racing Commission and notification to the West Virginia Racing
Commission, West Virginia Lottery Commission, Pennsylvania Racing Commission,
Ohio Racing Commission, and Nevada Gaming Control Board.

 

SECTION 3.4. CAPITALIZATION.  MTR owns 100% of the equity interests of
MTR-Harness.

 

 

SECTION 3.5 BROKERS OR FINDERS.  Purchaser represents that no agent, broker,
investment banker, financial advisor or other firm or Person is or will be
entitled to any broker’s or finder’s fee or any other commission or similar fee
from the Purchaser in connection with the Transaction contemplated by this
Agreement.

 

ARTICLE IV

COVENANTS

 

SECTION 4.1 FURTHER ASSURANCES.  Each Party agrees to use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Transaction contemplated by
this Agreement.

 

SECTION 4.2 PROPRIETARY INFORMATION.  Each Party shall keep and retain in
confidence and shall not use for any purpose other than to evaluate the
Transaction contemplated under this Agreement any and all of the confidential
and proprietary information respecting the other parties set forth or
referenced in the schedules or otherwise provided to the receiving party by the
disclosing party in connection with or in anticipation of the Closing,
irrespective of the form in which it is delivered or when delivered (the
“Proprietary Information”).  The
preceding requirement shall not apply to Proprietary Information that (a) a
party was in the possession of, or was rightfully known by, the receiving party
or its Representatives,  without an obligation to maintain its
confidentiality prior to receipt from the disclosing party or its
Representatives, (b) is or becomes generally known to the public without
violation of this Agreement, (c) is obtained by the receiving party or its
Representatives in good faith from a third party having the right to disclose
it without an obligation of confidentiality, or (d) is independently developed
by the receiving party or its Representatives without the participation of
individuals who have had access to the Proprietary Information.  In the event the Agreement is terminated
prior to Closing for any reason, the receiving party agrees to either return to
the disclosing party all of the Proprietary Information subject to this
Section 4.2 (including all copies) in its possession or under its control
or to purge, shred or otherwise destroy all such Proprietary Information not
returned, at the option of the disclosing party.  The receiving party shall, and shall cause each of its Representatives
to, keep and maintain all Proprietary Information subject to this
Section 4.2 confidential in any case in which the Closing does not occur
and not avail itself of or use any of such Proprietary Information for its own
benefit.  The receiving party shall
promptly certify its compliance with the foregoing in the event of any
termination of the Agreement.

 

SECTION 4.3  INTENTIONALLY DELETED.

 

SECTION 4.4 CONFIDENTIALITY; PUBLICITY.  During the period between the date hereof
and the Closing Date (the “Pre-Closing Period”):

 

(a)                                  Sellers and Purchaser, and
their respective Representatives shall keep confidential the existence and
terms of this Agreement prior to the issuance or dissemination of any mutually
agreed upon press release or other disclosure of the Transaction contemplated
hereunder;

 

(b)                                 none of Sellers, Purchaser
nor their respective Representatives shall issue or disseminate any press
release or other publicity or otherwise make any disclosure of any nature

 

 

regarding the Transaction
contemplated by this Agreement, except as required by federal securities laws
or other applicable laws and except as otherwise agreed by the parties;

 

(c)                                  if either party is required
by law to make any disclosure regarding the Transaction contemplated by this
Agreement, such party shall advise the other party, at least two (2) business
days prior to making such disclosure, of the nature and content of the intended
disclosure; and

 

(d)                                 Sellers acknowledge that
MTR’s securities are publicly traded. 
Sellers agree that while in possession of material non-public
information concerning MTR, Sellers will not trade in the securities of MTR nor
tip or advise others with respect to such trading.

 

SECTION 4.5 ACCESS AND INVESTIGATION; DUE
DILIGENCE REVIEW.

 

(a)                                  Purchaser shall have from
the date hereof until Friday May 14, 2004 to determine the suitability of the
transactions contemplated hereby, in its sole and absolute discretion (the “Due
Diligence Period”).   In this regard,
the Sellers shall use their reasonable efforts to grant to Purchaser and its
Representatives a right of entry to the real property comprising the site of
the contemplated race track site and shall provide to Purchaser all information
it may reasonably request concerning the business, operations, and development
activities of the LLC, including but not limited to access to personnel,
financial statements, appraisals, equipment lists, finance documents, corporate
organization documents of the LLC, revenue sharing agreements involving
parimutuel wagering, management agreements and similar material contracts,
Phase I Environmental Studies, title reports, surveys, inspections, as-built
drawings, if any, and other engineering tests, and such other studies Purchaser
deems necessary and customary in connection with its evaluation of the LLC and
of the Transaction.  In addition,
Purchaser may review all contracts as well as leases and other ownership
documents, review zoning ordinances, and governmental regulations affecting the
LLC.  Further, the Sellers will use
their reasonable efforts to arrange meetings between Purchaser and any
governmental (or quasi-governmental) officials, vendors, union representatives
and creditors and investment bankers that Purchaser deems reasonably necessary
for its evaluation of the LLC and the transactions contemplated hereby.     Purchaser agrees that it shall bear the
cost and expense of its due diligence investigation.

 

(b)                                 Subsequent to the expiration
of the Due Diligence Period, Sellers and their Representatives will compile and
provide Purchaser and its Representatives with such additional financial,
operating and other data and information regarding the LLC as Purchaser may
request in good faith.

 

ARTICLE V

INDEMNIFICATION

 

SECTION 5.1 INDEMNIFICATION BY SOUTHWEST.  Subject to the limits set forth in this
Article V, Southwest agrees to indemnify, defend and hold Purchaser, and
their respective officers, directors and agents, harmless from and in respect
of any and all losses, damages, liability, costs and expenses (including, without
limitation, reasonable expenses of investigation and defense fees and
disbursements of counsel and other professionals) (collectively, “Losses”),
arising directly or indirectly out of or directly or indirectly due to any
inaccuracy of any representation or the

 

 

breach of any warranty,
covenant, undertaking or other agreement of Sellers contained in this
Agreement, including the Exhibits and Schedules attached hereto and
incorporated by reference herein as set forth in Section 10.6 hereof.

 

SECTION 5.2 INDEMNIFICATION BY PURCHASER.  Subject to the limits set forth in this
Article V, Purchaser and MTR collectively agree to indemnify, defend and
hold Southwest and its respective officers, directors, managers and agents,
harmless from and in respect of any and all Losses arising directly or
indirectly out of or directly or indirectly due to any inaccuracy of any
representation or the breach of any warranty, covenant, undertaking or other
agreement of Purchaser contained in this Agreement.

 

SECTION 5.3 SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND COVENANTS; LIMITATIONS ON INDEMNITY.  The representations and warranties of the parties contained in
this Agreement or in any instrument delivered pursuant to this Agreement will
survive the Closing Date and will remain in full force and effect thereafter
for a period of twelve (12) months from the Closing Date; provided, however,
that the representations and warranties contained in Section 2.11 will
remain in full force and effect for a period equal to the applicable statute of
limitations; and provided, further, that such representations or warranties
shall survive (if at all) beyond such period with respect to any inaccuracy
therein or breach thereof, notice of which shall have been duly given within
such time period in accordance with this Article V.  Anything to the contrary contained herein
notwithstanding, Purchaser shall not be entitled to recover Losses from
Southwest nor shall Southwest be entitled to recover Losses from the Purchaser
unless and until the total of all claims for Losses with respect to any
inaccuracy or breach of any such representations or warranties or breach of any
covenants, undertakings or other agreements, whether such claims are brought
under this Article V or otherwise, exceeds Seventy-Five Thousand Dollars
($75,000) in the aggregate.  If the
total amount of such Losses exceeds Seventy-Five Thousand Dollars ($75,000),
then the party entitled to recover hereunder shall be entitled to recover the
full amount of such losses and not merely the portion of such damages exceeding
Seventy-Five Thousand Dollars ($75,000). 
Notwithstanding anything to the contrary contained herein, Southwest’s
maximum aggregate liability under this Section 5.3 shall not exceed the
amount of the MTR-Harness Capital Contribution under the Member Control
Agreement (including the Catch-Up Contribution and any additional Capital
Contributions).

 

SECTION 5.4 NOTICE AND OPPORTUNITY TO
DEFEND.  If an event occurs which a
party asserts is an indemnifiable event pursuant to Section 5.1 or 5.2,
the party seeking indemnification (the “Indemnitee”) shall promptly notify the
other party obligated to provide indemnification (the “Indemnifying
Party”).  If such event involves (a) any
claim or (b) the commencement of any action or proceeding by a third Person,
the Indemnitee will give such Indemnifying Party prompt written notice of such
claim or the commencement of such action or proceeding; provided, however, that
the Indemnitee’s failure to provide prompt notice as provided herein will
relieve the Indemnifying Party of its obligations hereunder only to the extent
that such failure prejudices the Indemnifying Party hereunder.  If any such action is brought against any
Indemnitee and it notifies the Indemnifying Party of the commencement thereof,
the Indemnifying Party shall be entitled to participate therein and, to the
extent that it wishes, to assume the defense thereof, with counsel reasonably
satisfactory to the Indemnitee.  After
notice from the Indemnifying Party to the Indemnitee of such election to so
assume the defense thereof, the Indemnifying Party shall not be liable to the
Indemnitee for any legal expenses of other counsel or

 

 

any other expenses
subsequently incurred by the Indemnitee in connection with the defense thereof,
and the Indemnitee agrees to cooperate fully with the Indemnifying Party and
its counsel in the defense against any such asserted liability.  The Indemnitee shall have the right to
participate at its own expense in the defense of such asserted liability.  In no event shall an Indemnifying Party be
liable for any settlement effected by the Indemnitee without the consent of the
Indemnifying Party, which will not be unreasonably withheld.  In no event shall an Indemnifying Party
effect any settlement without the consent of the Indemnitee, which will not be
unreasonably withheld.

 

SECTION 5.5 MITIGATION OF LOSS.  Each Indemnitee is obligated to use
reasonable efforts to mitigate to the fullest extent practicable the amount of
any Loss for which it is entitled to seek indemnification hereunder.

 

SECTION 5.6 SUBROGATION.  Upon making any payment of Losses of the
Indemnitee, the Indemnifying Party will, to the extent of such payment, be
subrogated to all rights of the Indemnitee against any third party in respect
of the Loss to which the payment relates; provided, however, that until the
Indemnitee recovers full payment of its Loss, any and all claims of the
Indemnifying Party against any such third party on account of such payment are
hereby made expressly subordinated and subjected in right of payment of the
Indemnitee’s rights against such third party. 
Without limiting the generality of any other provision hereof, each such
Indemnitee and Indemnifying Party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the above described
subrogation and subordination rights.

 

SECTION 5.7 INVESTIGATION.  The representations, warranties, covenants
and obligations of the parties, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or
the knowledge of, the other parties, any of the other Indemnitees or any of
their Representatives.

 

ARTICLE VI

PRE-CLOSING COVENANTS OF
SELLERS

 

SECTION 6.1 FILINGS AND CONSENTS.

 

(a)                                  Sellers covenant and agree
that each filing or notice required to be made or given (pursuant to any
applicable legal requirement, order or contract, or otherwise) by Sellers in
connection with the execution and delivery of this Agreement or in connection
with the consummation or performance of the Transaction contemplated hereby
shall be made or given as promptly as practicable after the date of this
Agreement;

 

(b)                                 Sellers shall use their
reasonable efforts to obtain or cause to be obtained each consent or estoppel
letter required to be obtained (pursuant to any applicable legal requirement,
order or contract, or otherwise) by Sellers in connection with the execution
and delivery of this Agreement or in connection with the consummation or
performance of the Transaction contemplated hereby (including the approval by
the Minnesota Racing Commission of the LLC’s racing application and the
Purchaser’s application to acquire an equity interest in the LLC) as promptly
as practicable after the date of this Agreement and each of such consents shall
remain in full force and effect through the Closing Date;

 

 

(c)                                  Sellers shall promptly
deliver to the Purchaser a copy of each filing made, each notice given and each
consent obtained by Sellers during the Pre-Closing Period; and

 

(d)                                 During the Pre-Closing
Period, Sellers and their Representatives shall cooperate with Purchaser and
the Purchaser’s Representatives, and prepare and make available such documents
and take such other actions as Purchaser may request in good faith.

 

SECTION 6.2 NOTIFICATION.

 

(a)                                  During the Pre-Closing
Period, Sellers shall promptly notify the Purchaser of:

 

(i)                                     the discovery by Sellers of
any event, condition, fact or circumstance that occurred or existed on or prior
to the date of this Agreement and that caused or constitutes a breach of any
representation or warranty made by Sellers in this Agreement;

 

(ii)                                  any event, condition, fact
or circumstance that occurs, arises or exists after the date of this Agreement
and that would cause or constitute a breach of any representation or warranty
made by Sellers in this Agreement if (i) such representation or warranty had
been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (ii) such extent, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;

 

(iii)                               any breach of any covenant
or obligation of Sellers; and

 

(iv)                              any event, condition, fact
or circumstance that may make the timely satisfaction of any of the conditions
set forth Article VIII impossible or unlikely.

 

(b)                                 Sellers shall have the
obligation to supplement any section of the schedules prior to Closing with
respect to any transaction which occurs during the Pre-Closing Period
pertaining to the LLC including, but not limited to, any matter described in
Section 6.2(a) above.   Such
supplementation is not a waiver by the Purchaser of any breach of a representation
or warranty as to the matter so supplemented.

 

SECTION 6.4 NO NEGOTIATION.  During the Pre-Closing Period, neither
Sellers nor their Representatives directly or indirectly:

 

(a)                                  shall solicit or encourage
the initiation of any inquiry, proposal or offer from any Person (other than
Purchaser) relating to any Acquisition Transaction;

 

(b)                                 shall participate in any
discussions or negotiations with, or provide any non-public information to, any
Person (other than Purchaser) relating to any Acquisition Transaction; or

 

(c)                                  shall consider the merits of
any unsolicited inquiry, proposal or offer from any Person (other than
Purchaser) relating to any Acquisition Transaction.

 

SECTION 6.5 FURTHER ASSURANCES.  During the Pre-Closing Period, Sellers shall
not take any action or omit to take any action, the taking or omission of which
would or could reasonably be expected to result in any of the representations
and warranties set forth in Article II

 

 

of this Agreement becoming
untrue, in any of the conditions of Closing set forth in Article VIII not
being satisfied.

 

SECTION 6.6 STOCKHOLDER DISTRIBUTIONS.  The LLC shall not, from the date hereof
through the Closing, (a) declare, set aside or pay any dividend or other
distribution, whether payable in cash, stock or other property, in respect of
its equity interests (b) directly or indirectly redeem, purchase or otherwise
acquire any shares of its equity interest or other securities.

 

SECTION 6.7  DEALINGS WITH
MINNESOTA RACING COMMISSION.  Except to
the extent impracticable, Sellers shall not discuss material matters with the
Minnesota Racing Commission without providing Purchaser and its representatives
with reasonable notice and an opportunity to participate in such
discussions.  Sellers shall not make any
written submission to the Minnesota Racing Commission involving a material
matter without first providing Purchaser and its representatives with a
reasonable opportunity to review such submission.

 

ARTICLE VII

PRE-CLOSING COVENANTS OF THE
PURCHASER

 

SECTION 7.1 CONSENTS.  Purchaser shall use its reasonable efforts to obtain each of the
consents referred to in Section 8.2(m) herein within thirty (30) days
after the date of this Agreement.

 

SECTION 7.2 FURTHER ASSURANCES.  During the Pre-Closing Period, Purchaser shall
not take any action or omit to take any action, the taking or omission of which
would or could reasonably be expected to result in any of the representations
and warranties set forth in Article III of this Agreement becoming untrue
or in any of the conditions of closing set forth in Article VIII not being
satisfied, other than in accordance with the fiduciary obligation of the Board
of Directors, as determined under applicable law.

 

SECTION 7.3 
DEALINGS WITH MINNESOTA RACING COMMISSION.  Except to the extent impracticable, Purchaser shall not discuss
material matters with the Minnesota Racing Commission without providing Sellers
and their representatives with reasonable notice and an opportunity to
participate in such discussions. 
Purchaser shall not make any written submission to the Minnesota Racing
Commission without first providing Sellers and their representatives with a
reasonable opportunity to review such submission.

 

ARTICLE VIII

CONDITIONS

 

SECTION 8.1 CONDITIONS TO EACH PARTY’S
OBLIGATION TO EFFECT THE CLOSING.  The
obligations of Sellers, on the one hand, and Purchaser, on the other, to
consummate the Closing are subject to the satisfaction (or, if permissible,
waiver by the party for whose benefit such conditions exist) of the following
conditions:

 

(a)                                  no court, arbitrator or
Government Entity shall have issued any order, decree or ruling, and there
shall not be any statute, rule or regulation, restraining, enjoining or
prohibiting the

 

 

consummation of the
Transaction contemplated by this Agreement; provided that the parties shall
have used their best efforts to cause any such order, decree, statute, rule or
regulation to be vacated or lifted; and

 

(b)                                 all action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the Transaction contemplated hereby shall have been duly and
validly taken by the respective boards of directors of Southwest, the LLC,
MTR  and MTR-Harness and, where
applicable, their members and shareholders.

 

SECTION 8.2 CONDITIONS TO THE OBLIGATIONS OF
THE PURCHASER.  The obligations of the
Purchaser to consummate the Transaction contemplated hereby are subject to the
satisfaction (or waiver by the Purchaser) of the following further conditions:

 

(a)                                  The representations and
warranties of Sellers shall be true and correct in all material respects as of
the Closing Date as if made at and as of such time (other than those
representations and warranties that address matters only as of a particular
date or only with respect to a specific period of time which need to be true
and accurate only as of such date or with respect to such period);

 

(b)                                 Sellers shall have performed
in all material respects the obligations hereunder required to be performed by
them at or prior to the Closing Date;

 

(c)                                  The Purchaser shall have
received a certificate signed by a duly authorized executive officer of
Southwest, dated as of the Closing Date, to the effect that, to the best of his
or her Knowledge, the conditions set forth in Section 8.2(a) and 8.2(b)
have been satisfied; and (ii) a certificate of the secretary or assistant
secretary of Southwest certifying that such officer was authorized under
Southwest’s bylaws to sign the certificate in his or her capacity as stated in
the officer’s certificate;

 

(d)                                 there shall have been no
Material Adverse Effect with respect to the LLC’s business, condition
(financial or otherwise), assets, liabilities, operations or financial
performance since the date of this Agreement.

 

(e)                                  there shall have been no
distributions, payments or similar transfers of money;

 

(f)                                    since the date of this
Agreement, there shall not have been commenced or threatened against the LLC or
against any Person affiliated with the LLC, any proceeding:

 

(1)                                  involving any challenge to,
or seeking damages or other relief in connection with, the Transaction
contemplated hereunder, or

 

(2)                                  that are reasonably likely
to have the effect of preventing, delaying, making illegal or otherwise
interfering with the Transaction contemplated hereunder or having a Material
Adverse Effect on the LLC;

 

(g)                                 the LLC shall have
adopted  Amended and Restated Articles
of Organization in the form of Exhibit A and shall have filed such Amended and
Restated Articles of Organization with the Minnesota Secretary of State’s
Office.;

 

 

(h)                                 the LLC and Southwest shall
have terminated the Existing Management Agreement or, alternatively, Southwest
and  MTR-Harness shall have executed the
Southwest/MTR-Harness Agreement;

 

(i)                                     the LLC shall have
terminated its existing Operating Agreement dated as of July 16, 2003;

 

(j)                                     Southwest and the Purchaser
shall have executed a Member Control Agreement in the form of Exhibit B;

 

(k)                                  the Sadowski Option and the
Klenck Option shall have been assigned to the LLC and shall be valid and in
full force and effect;

 

(l)                                     the LLC shall have received
estoppel certificates, executed not more than thirty (30) days prior to the
Closing Date, from (i)  from Steven J.
Sadowski and Christine Sadowski confirming that the Sadowski Option is in full
force and effect and that there have been no uncured defaults thereunder by the
Sellers and (ii)   from Richard Klenck
and Darlene Klenck confirming that the Klenck Option is in full force and
effect and that there have been no uncured defaults thereunder by the Sellers;
and

 

(m)                               the Purchaser shall have
received the consent to the Transaction of (i) MTR’s Board of Directors, (ii)
MTR’s Compliance Committee, (iii) MTR’s existing lender, Wells Fargo Bank,
National Association, and (iv) all necessary regulatory and governmental
authorities, including but not limited to the Minnesota Racing Commission,
having jurisdiction over the transaction or MTR.

 

SECTION 8.3 CONDITIONS TO THE OBLIGATIONS OF
SELLERS.  The obligations of Sellers to
consummate the Transaction contemplated hereby are subject to the satisfaction
(or waiver by Seller) of the following conditions:

 

(a)                                  the representations and
warranties of the Purchaser shall be true and correct in all material respects
as of the Closing Date as if made at and as of such time (other than those
representations and warranties that address matters only as of a particular
date or only with respect to a specific period of time which need to be true
and accurate only as of such date or with respect to such period);

 

(b)                                 The Purchaser shall have
performed in all material respects all of the obligations hereunder required to
be performed by the Purchaser, at or prior to the Closing Date;

 

(c)                                  Sellers shall have received
(i) a certificate signed by a duly authorized executive officer of Purchaser,
dated as of the Closing Date, to the effect that, to the best of his or her
Knowledge the conditions set forth in Section 8.3(a) and
Section 8.3(b) have been satisfied and (ii) a certificate of the secretary
or assistant secretary of the Purchaser certifying that such officer was
authorized under the Purchaser’s bylaws to sign the certificate in his or her
capacity as stated in the officer’s certificate;

 

(d)                                 since the date of this
Agreement, there shall not have been commenced or threatened against the
Purchaser or against any Person affiliated with Purchaser, any proceeding;

 

 

(1)                                  involving any challenge to,
or seeking damages or other relief in connection with, the Transaction
contemplated hereunder, or

 

(2)                                  that are reasonably likely
to have the effect of preventing, delaying, making illegal or otherwise
interfering with the Transaction contemplated hereunder or having a Material
Adverse Effect on the LLC; and

 

(e)                                  the LLC shall have
adopted  Amended and Restated Articles
of Organization in the form of Exhibit A and shall have filed such Amended and
Restated Articles of Organization with the Minnesota Secretary of State’s
Office.;

 

(f)                                    Southwest and the Purchaser
shall have executed a Member Control Agreement in the form of Exhibit B;

 

(g)                                 Purchaser shall have
deposited in escrow the MTR-Harness Capital Contribution.

 

ARTICLE IX

TERMINATION

 

SECTION 9.1 TERMINATION.  This Agreement may be terminated and the
Transaction contemplated hereby abandoned at any time prior to the Closing Date:

 

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

 

(b)                                 by either Sellers or the
Purchaser if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the consummation of the Transaction contemplated hereby and such
order, decree, ruling or any other action shall have become final and
non-appealable;

 

(c)                                  by Purchaser before the
expiration of the Due Diligence Period;

 

(d)                                 by the Purchaser if there
shall have been any material breach of a representation and warranty or
material obligation of Sellers hereunder and, if such breach is curable, such
default shall not have been remedied within ten (10) days after receipt by
Sellers of notice in writing from the Purchaser specifying such breach and
requesting that it be remedied provided that such ten (10) day period shall be
extended for so long as the Sellers shall be making all reasonable attempts to
cure such breach unless the breach is not susceptible of a cure; and

 

(e)                                  by Sellers if there shall
have been any material breach of a representation and warranty or material
obligation of the Purchaser hereunder and, if such breach is curable, such
default shall have not been remedied within ten (10) days after receipt by the
Purchaser of notice in writing from Sellers specifying such breach and
requesting that it be remedied; provided, that such ten (10) day period shall
be extended for so long as the Purchaser shall be making all reasonable
attempts to cure such breach, unless the breach is not susceptible of a cure.

 

SECTION 9.2 EFFECT OF TERMINATION.  In the event of the termination of this
Agreement pursuant to Sections 9.1(a), 9.1(b) or 9.1(c) above, this Agreement
shall forthwith become of no further effect and there shall be no liability or
obligation on the part of any party or

 

 

their respective officers or
directors.  In the event of the
termination of this Agreement as provided in Sections 9.1(d) or (e), the party
who breached shall remain fully liable for such breach.

 

ARTICLE X

MISCELLANEOUS

 

SECTION 10.1 KNOWLEDGE.  The term “Knowledge” as used in this
Agreement with respect to the Sellers shall mean the actual knowledge of
Sellers’ officers, directors and counsel after Reasonable Inquiry.  “Reasonable Inquiry” shall mean such inquiry
and investigation as are reasonable and customary under the circumstances.

 

SECTION 10.2 GOVERNING LAW AND CONSENT TO
JURISDICTION.  The laws of the State of
Minnesota (irrespective of its choice of law principles) shall govern all
issues concerning the validity of this Agreement, the construction of its terms
and the interpretation and enforcement of the right and duties of the
parties.  Each party irrevocably submits
to the exclusive jurisdiction of the courts of the State of Minnesota and the
Federal courts of the United States of America located in Minnesota (and the
Minnesota state and Federal courts having jurisdiction over appeals therefrom)
in respect of the transaction contemplated by this Agreement, the other agreements
and documents referred to herein and the Transaction contemplated by this
Agreement and such other documents and agreements.

 

SECTION 10.3 AMENDMENT AND MODIFICATION.  Subject to applicable law, this Agreement
may be amended, modified and supplemented in any and all respects only by
written agreement duly executed and delivered by all of the parties.

 

SECTION 10.4 NOTICES.  All notices, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly given (a) when delivered by
hand or by Federal Express or a similar overnight courier; (b) five (5) days
after being deposited in any United States Post Office enclosed in a postage
prepaid, registered or certified envelope addressed; or (c) when successfully
transmitted by telecopier (with a confirming copy of such communication to be
sent as provided in clauses (a) or (b) above), to the receiving party at the
address or telecopier number set forth below (or at such other address or
telecopier number for a party as shall be specified by like notice); provided
however, that any notice of change of address or telecopier number shall be
effective only upon receipt:

 

(a)                                  if to MTR-Harness, to:

 

MTR-Harness, Inc.

MTR Gaming Group, Inc.

State Route 2 South

P.O. Box 356

Chester, WV 26034

Telephone: 
(304) 387-8300

Telecopier: 
(304) 387-8304

Attn:  Edson
R. Arneault, President

 

with a copy (which shall not constitute notice) to:

 

 

Ruben & Aronson, LLP

4800 Montgomery Lane

Suite 150

Bethesda, MD 20814

Telephone: 
(301) 951-9696

Telecopier: 
(301) 951-9636

Attn:  Robert
L. Ruben, Esq.

 

(b)                                 if to Southwest or to the LLC, to:

 

Southwest Casino and Hotel Corp.

2001 Killebrew Drive, Suite 306

Minneapolis, MN 55425

Telephone: 
(952) 853-9990

Telecopier: 
(952) 853-9991

Attn:  James B. Druck, President

 

with a copy (which shall not constitute notice) to:

 

D. William Kaufman

Oppenheimer Wolff & Donnelly LLP

45 South Seventh Street

3500 Plaza VII Building

Minneapolis, MN 55402

Telephone:  (612) 607-7485

Telecopier:  (612) 607-7100

 

SECTION 10.5 COUNTERPARTS.  This Agreement may be executed in multiple
counterparts, all of which shall together be considered out and the same
agreement.

 

SECTION 10.6 INCORPORATION BY REFERENCE.  The Preamble and Recitals to this Agreement
and the Exhibits and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.

 

SECTION 10.7 ENTIRE AGREEMENT; THIRD PARTY
BENEFICIARIES.  This Agreement
(including the documents incorporated herein by reference in Section 10.6
hereof and other documents and instruments referred to herein) (a) constitutes
the entire agreement and supersedes any prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof and (b) except as expressly provided herein, are not intended to confer
upon any Person other than the parties herein any rights or remedies hereunder.

 

SECTION 10.8 SERVICE OF PROCESS.  Each party irrevocably consents to the
service of process outside the territorial jurisdiction of the courts referred
to in Section 10.2 hereof in any such action or proceeding by mailing
copies thereof by registered United States mail, postage prepaid, return
receipt requested, to its address as specified in or pursuant to
Section 10.4 hereof.  However, the
foregoing shall not limit the right of a party to effect service of process on
the other party by any other legally available method.

 

 

SECTION 10.9 SPECIFIC PERFORMANCE.  Each party acknowledges and agrees that, in
the event of any breach of this Agreement by the other party, the non-breaching
party would be irreparably and immediately harmed and could not be made whole
by monetary damages.  It is accordingly
agreed that (a) the breaching party will waive, in any action for specific
performance, the defense of adequacy of a remedy at law and (b) the
non-breaching party will be entitled, in addition to any other remedy to which
it may be entitled at law or in equity, including, but not limited to,
temporary or permanent injunctions, to compel specific performance of this
Agreement in any action instituted in accordance with Section 10.2.

 

SECTION 10.10 ASSIGNMENT.  Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either party
(whether by operation of law or otherwise) without the prior written consent of
the other party.  Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by the parties and their respective permitted successors
and assigns.

 

SECTION 10.11 EXPENSES.  Except as otherwise provided herein, all
costs and expenses incurred in connection with the transactions contemplated
hereby, this Agreement and the consummation of the Transaction contemplated
hereby shall be paid by the party incurring such costs and expenses, whether or
not the Transaction contemplated hereby is consummated.

 

SECTION 10.12 WAIVERS.  Except as otherwise provided in this
Agreement, any failure of either party to comply with any obligation, covenant,
agreement or condition herein may be waived by the party or parties entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.

 

SECTION 10.13 ATTORNEY FEES.  In the event of a dispute with respect to
the subject matter of this Agreement, the prevailing party in any proceeding,
including arbitration commenced to resolve such disputes, shall be entitled to
an award of its reasonable attorney fees and court or arbitration costs
incurred in resolving or settling the dispute, in addition to any and all other
damages or relief which the court or arbitrator may deem proper.

 

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

 

 

MTR-HARNESS,
INC.,

a
Minnesota corporation

 

 

	
  By:

  	
  /S/  Edson R. Arneault

  	
   

  
	
   

  	
  Name:

  	
  Edson
  R. Arneault

  
	
   

  	
  Title:

  	
  President

  
				

 

 

SOUTHWEST
CASINO & HOTEL CORP.,

a
Minnesota corporation

 

 

	
  By:

  	
  /S/
  Jeffrey  S. Halpern

  	
   

  
	
   

  	
  Name:

  	
  Jeffrey
  Halpern

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
				

 

 

NORTH
METRO HARNESS INITIATIVE, LLC,

a
Minnesota LLC

 

 

	
  By:

  	
  /S/
  Jeffrey S. Halpern

  	
   

  
	
   

  	
  Name:

  	
  Jeffrey
  S. Halpern

  
	
   

  	
  Title:

  	
  Manager/Vice
  President

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