Document:

ex101to8k05558_08172009.htm

    
      Exhibit
10.1

       

       

       

      

    

    INVESTMENT
AGREEMENT

     

    dated as
of August 19, 2009

     

    

     

    between

     

    EMPIRE
RESORTS, INC.

     

    and

     

    KIEN
HUAT REALTY III LIMITED

     

    
      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

    

    Table of Contents

     

    

     

    Page

     

    
      
        	
                ARTICLE I

                PURCHASE;
      CLOSINGS

              
	
                1.1

              	
                Purchase
      and Sale

              	
                1

              
	
                1.2

              	
                Purchase
      Price Calculation

              	
                2

              
	
                1.3

              	
                Initial
      Closing

              	
                2

              
	
                1.4

              	
                Closing

              	
                5

              
	
                ARTICLE
      II

                REPRESENTATIONS
      AND WARRANTIES

              
	
                2.1

              	
                Disclosure

              	
                7

              
	
                2.2

              	
                Representations
      and Warranties of the Company

              	
                8

              
	
                2.3

              	
                Representations
      and Warranties of the Investor

              	
                25

              
	
                ARTICLE
      III

                COVENANTS

              
	
                3.1

              	
                Stockholder
      Meeting

              	
                27

              
	
                3.2

              	
                Conduct
      of the Business

              	
                28

              
	
                3.3

              	
                Preferred
      Stock Terms

              	
                30

              
	
                3.4

              	
                Takeover
      Statutes

              	
                31

              
	
                3.5

              	
                HSR
      Act

              	
                31

              
	
                3.6

              	
                Regulatory
      Matters

              	
                31

              
	
                3.7

              	
                Amendment
      to Series A Preferred Stock

              	
                32

              
	
                3.8

              	
                Use
      of First Tranche Consideration

              	
                32

              
	 
      	 
      	 
      
	
                ARTICLE
      IV

                ADDITIONAL
      AGREEMENTS

              
	
                4.1

              	
                Governance
      Matters

              	
                32

              
	
                4.2

              	
                No
      Solicitation

              	
                35

              
	
                4.3

              	
                Legend

              	
                35

              
	
                4.4

              	
                Certain
      Transactions

              	
                36

              
	
                4.5

              	
                Option
      Matching Rights

              	
                36

              
	
                4.6

              	
                Indemnity

              	
                37

              

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        	
                4.7

              	
                Exchange
      Listing

              	
                39

              
	
                4.8

              	
                Certain
      Transactions

              	
                39

              
	
                4.9

              	
                Loan
      Agreement

              	
                40

              
	 
      	 
      	 
      
	
                ARTICLE
      V

                TERMINATION

              
	
                5.1

              	
                Termination
      Prior to the Initial Closing

              	
                40

              
	
                5.2

              	
                Termination
      After the Initial Closing and Prior to the Closing

              	
                40

              
	
                5.3

              	
                Effects
      of Termination

              	
                41

              
	
                5.4

              	
                Termination
      Fee

              	
                41

              
	 
      	 
      	 
      
	
                ARTICLE
      VI

                MISCELLANEOUS

              
	
                6.1

              	
                Survival

              	
                42

              
	
                6.2

              	
                Expenses

              	
                42

              
	
                6.3

              	
                Amendment

              	
                42

              
	
                6.4

              	
                Waivers

              	
                42

              
	
                6.5

              	
                Counterparts
      and Facsimile

              	
                42

              
	
                6.6

              	
                Governing
      Law

              	
                43

              
	
                6.7

              	
                WAIVER
      OF JURY TRIAL

              	
                43

              
	
                6.8

              	
                Notices

              	
                43

              
	
                6.9

              	
                Entire
      Agreement, Etc

              	
                44

              
	
                6.10

              	
                Other
      Definitions or Interpretations

              	
                44

              
	
                6.11

              	
                Captions

              	
                45

              
	
                6.12

              	
                Severability

              	
                45

              
	
                6.13

              	
                No
      Third Party Beneficiaries

              	
                45

              
	
                6.14

              	
                Time
      of Essence

              	
                45

              
	
                6.15

              	
                Public
      Announcements

              	
                45

              
	
                6.16

              	
                Specific
      Performance

              	
                45

              
	 
      	 
      	 
      

      

    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    LIST
OF EXHIBITS

     

    
      
        	
                Exhibit
      A:

              	
                Form
      of Stockholder Voting Agreement

              
	
                Exhibit
      B:

              	
                Form
      of Registration Rights Agreement

              
	
                Exhibit
      C:

              	
                Form
      of Consulting Agreement

              
	
                Exhibit
      D:

              	
                Form
      of Legal Opinion

              
	
                Exhibit
      E:

              	
                Form
      of Amendment to the Company By-Laws

              
	
                Exhibit
      F:

              	
                List
      of Options and Warrants

              

      

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    

    
      INDEX
OF DEFINED TERMS

       

      
        	
                Term

              	
                Location
      of

                Definition

              
	
                Affiliate

              	
                6.10(a)

              
	
                Agreement

              	
                Preamble

              
	
                Alternative
      Investment Proposal

              	
                4.2(c)

              
	
                Authorized
      Preferred Stock

              	
                2.2(b)

              
	
                Benefit
      Plan

              	
                2.2(r)(1)

              
	
                Board
      of Directors

              	
                1.3(b)(2)(B)

              
	
                Board
      Representatives

              	
                4.1(a)

              
	
                business
      day

              	
                6.10(e)

              
	
                Capitalization
      Date

              	
                2.2(b)

              
	
                CERCLA

              	
                2.2(s)

              
	
                Certificate
      of Incorporation

              	
                2.2(a)(1)

              
	
                Charter
      Amendment

              	
                2.2(d)(1)(B)

              
	
                Closing

              	
                1.4(a)

              
	
                Closing
      Date

              	
                1.4(a)

              
	
                Closing
      Date Option Schedule

              	
                4.5

              
	
                Code

              	
                2.2(i)

              
	
                Common
      Stock

              	
                Recitals

              
	
                Company

              	
                Preamble

              
	
                Company
      By-Laws

              	
                2.2(a)(1)

              
	
                Company
      Financial Statements

              	
                2.2(f)

              
	
                Company
      IT Systems

              	
                2.2(u)(5)

              
	
                Company
      Material Adverse Effect

              	
                2.1(b)

              
	
                Company
      Reports

              	
                2.2(g)(1)

              
	
                Company
      Significant Agreement

              	
                2.2(l)

              
	
                Company
      Subsidiary

              	
                2.2(a)(2)

              
	
                Company
      Voting Proposals

              	
                2.2(d)(1)(B)

              
	
                Consulting
      Agreement

              	
                1.3(a)(1)(C)

              
	
                control/controlled
      by/under common control with

              	
                6.10(a)

              
	
                Disclosure
      Schedule

              	
                2.1(a)

              
	
                ERISA

              	
                2.2(r)(1)

              
	
                ERISA
      Affiliate

              	
                2.2(r)(1)

              
	
                Exchange
      Act

              	
                2.2(g)(1)

              
	
                First
      Tranche

              	
                1.1(a)(1)

              
	
                First
      Tranche Consideration

              	
                1.2(a)(1)

              
	
                Fraud

              	
                2.2(u)(1)(B)

              
	
                Fraud
      Losses

              	
                2.2(u)(1)

              
	
                GAAP

              	
                2.1(b)

              
	
                Games

              	
                2.2(u)(1)(B)

              
	
                Gaming/Racing
      Authority

              	
                2.2(t)(4)

              
	
                Gaming/Racing
      Facility

              	
                2.2(t)(4)

              
	
                Gaming/Racing
      Law

              	
                2.2(t)(4)

              

      

       

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

       

      
        	
                Term

              	
                Location
      of

                Definition

              
	
                Gaming/Racing
      Permits

              	
                2.2(t)(4)

              
	
                Governmental
      Entity

              	
                1.3(b)(1)(A)

              
	
                HSR
      Act

              	
                3.5

              
	
                Indemnified
      Party

              	
                4.6(c)

              
	
                Indemnifying
      Party

              	
                4.6(c)

              
	
                Initial
      Closing

              	
                1.3(a)

              
	
                Initial
      Closing Date

              	
                1.3(a)

              
	
                Intellectual
      Property

              	
                2.2(x)

              
	
                Investor

              	
                Preamble

              
	
                Investor
      CFO Nominee

              	
                4.1(d)

              
	
                Investor
      Material Adverse Effect

              	
                2.3(a)

              
	
                Liens

              	
                2.2(c)

              
	
                Loan
      Agreement

              	
                4.9

              
	
                Losses

              	
                4.6(a)

              
	
                Mandatory
      Voting Proposals

              	
                2.2(d)(1)

              
	
                material

              	
                2.1(b)

              
	
                Multiemployer
      Plan

              	
                2.2(r)(5)

              
	
                Option
      Exercise Notice

              	
                4.5

              
	
                Option
      Plan Amendment

              	
                3.1(d)

              
	
                Option
      Rights Notice

              	
                4.5

              
	
                Option
      Schedule

              	
                2.2(b)

              
	
                Pension
      Plan

              	
                2.2(r)(1)

              
	
                Person

              	
                6.10(f)

              
	
                Pre-Closing
      Period

              	
                3.2

              
	
                Preferred
      Stock Issuance Event

              	
                2.2(d)(1)

              
	
                Previously
      Disclosed

              	
                2.1(c)

              
	
                Purchase
      Price

              	
                1.1(b)

              
	
                Registration
      Rights Agreement

              	
                1.3(a)(1)(B)

              
	
                Representatives

              	
                4.2(c)

              
	
                Required
      Charter Amendment Vote

              	
                2.2(d)(1)(B)

              
	
                Required
      Company Stockholder Vote

              	
                2.2(d)(1)(B)

              
	
                Required
      Share Issuance Vote

              	
                2.2(d)(1)(A)

              
	
                Rights
      Plan

              	
                2.2(b)(1)

              
	
                SEC

              	
                2.1(c)(2)(A)

              
	
                Second
      Tranche

              	
                1.1(a)(2)

              
	
                Second
      Tranche Consideration

              	
                1.2(b)

              
	
                Securities
      Act

              	
                2.2(g)(1)

              
	
                Series
      A Preferred Stock

              	
                2.2(b)

              
	
                Series
      B Preferred Stock

              	
                2.2(b)

              
	
                Series
      E Preferred Stock

              	
                2.2(b)

              
	
                Series
      F Preferred Stock

              	
                1.1(a)(2)(A)

              
	
                Share
      Issuance

              	
                2.2(d)(1)(A)

              
	
                Special
      Meeting

              	
                1.4(b)(1)(C)

              

      

       

      
        
          
          

        

        
          v

          
            

          

        

        
          
          

        

      

       

      
        	
                Term

              	
                Location
      of

                Definition

              
	
                Stockholder
      Voting Agreement

              	
                Recitals

              
	
                Subsidiary

              	
                2.2(a)(2)

              
	
                Survival
      Period

              	
                6.1

              
	
                Takeover
      Statutes

              	
                2.2(v)

              
	
                Tax/Taxes

              	
                2.2(i)

              
	
                Tax
      Return

              	
                2.2(i)

              
	
                Threshold
      Amount

              	
                4.6(e)

              
	
                Total
      Investment

              	
                1.1(a)(2)

              
	
                Video
      Lottery Business

              	
                2.2(u)(5)

              
	
                Voting
      Debt

              	
                2.2(b)

              

      

    

    

    
      
        
        

      

      
        vi

        
          

        

      

      
        
        

      

    

    

    INVESTMENT AGREEMENT, dated as
of August 19, 2009 (this “Agreement”), between Empire Resorts,
Inc., a Delaware corporation (the “Company”), and Kien Huat
Realty III Limited, an Isle of Man corporation (the “Investor”).

     

    RECITALS:

     

    A.           The Investment. The
Company intends to sell to the Investor, and the Investor intends to purchase
from the Company, as an investment in the Company, (i) shares of common stock,
par value $0.01 per share, of the Company (the “Common Stock”) and (ii)
shares of Series F Preferred Stock (as defined below), in the case of this
clause (ii), to be issued only upon the occurrence of the Preferred Stock
Issuance Event (as defined below).

     

    B.           The Stockholder Voting
Agreement. Concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to the Investor’s willingness to
enter into this Agreement, certain stockholders of the Company are entering into
a Stockholder Voting Agreement, dated as of the date of this Agreement, in the
form attached hereto as Exhibit A (the “Stockholder Voting
Agreement”), pursuant to which such stockholders, among other things,
agree to vote all of the shares of voting capital stock of the Company that such
stockholders own in favor of the Company Voting Proposals (as defined
below).

     

    NOW, THEREFORE, in
consideration of the premises, and of the representations, warranties, covenants
and agreements set forth herein, the parties agree as follows:

     

    ARTICLE
I

     

    

     

    PURCHASE;
CLOSINGS

     

    1.1           Purchase and
Sale.  (a) Upon the terms and subject to the conditions set
forth in this Agreement, and in reliance upon the representations and warranties
hereinafter set forth:

     

    (1)           at
the Initial Closing (as defined below), the Company shall issue, sell and
deliver to the Investor 6,804,188 shares of Common Stock (the “First Tranche”);
and

     

    (2)           at
the Closing (as defined below), following, subject to and conditioned (A) upon
approval of the Mandatory Voting Proposals (as defined below), the Company shall
issue, sell and deliver to the Investor 27,701,852 shares of Common Stock or (B)
upon the occurrence of the Preferred Stock Issuance Event, the Company shall
issue, sell and deliver to the Investor (i) the full number of shares of Common
Stock that remain authorized but not issued or otherwise reserved for issuance
and (ii) shares of a new series of preferred stock (the “Series F Preferred Stock”),
which shall be the capital equivalent of the Common Stock and be issued upon
terms mutually agreeable to the Company and the Investor reflecting the vote and
economics of such number of shares of Common Stock as is the difference obtained
by subtracting the number of shares of Common Stock delivered to the Investor
under (i) above from 27,701,852 (either A or B, the “Second Tranche” and together
with the First Tranche, the “Total
Investment”).  In the case of either (A) or (B),
notwithstanding anything that may be interpreted to the contrary elsewhere in
this Agreement, the Total Investment shall equal one share less than 50.0% of
the voting power of the Company immediately following the Closing.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    (b)           The
aggregate consideration to be paid by the Investor for the Total Investment
shall be equal to the First Tranche Consideration (as defined below) plus the
Second Tranche Consideration (as defined below) (the First Tranche Consideration
and the Second Tranche Consideration, together, the “Purchase Price”), in each
case, to be paid in the manner and at the times set forth in Sections 1.2 to
1.4.

     

    1.2           Purchase Price
Calculation.  (a) At the Initial Closing, the Investor shall
pay to the Company by wire transfer of immediately available funds to an account
designated in writing by the Company an amount equal to $11,000,000 (the “First Tranche Consideration”)
in exchange for the First Tranche.

     

    (b)           At
the Closing, following, subject to and conditioned upon approval of the
Mandatory Voting Proposals or the occurrence of the Preferred Stock Issuance
Event, the Investor shall pay by wire transfer of immediately available funds to
an account designated in writing by the Company an amount equal to $44,000,000
(the “Second Tranche
Consideration”) in exchange for the Second Tranche.

     

    1.3           Initial
Closing.  (a) Subject to the satisfaction or, if permissible,
waiver of the conditions set forth in Section 1.3(b), the closing of the
purchase of the First Tranche by the Investor (the “Initial Closing”) shall take
place at the offices of Cleary Gottlieb Steen & Hamilton LLP, One Liberty
Plaza, New York, NY 10006 at 10:00 a.m., New York City time, on August 19, 2009
or at such other date and place as the parties may otherwise agree (the “Initial Closing
Date”).

     

    (1)           At
the Initial Closing, the Company shall deliver, or cause to be delivered, as the
case may be, to the Investor the following:

     

    (A)           a
certificate representing a number of shares of Common Stock equal to the First
Tranche;

     

    (B)           a
duly executed counterpart to the registration rights agreement substantially in
the form attached hereto as Exhibit B (the “Registration Rights
Agreement”);

     

    (C)           a
duly executed counterpart to the consulting agreement substantially in the form
attached hereto as Exhibit C (the “Consulting
Agreement”);

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (D)           a
legal opinion in the form attached as Exhibit
D;

     

    (E)           reimbursement
of the Investor’s expenses through the Initial Closing Date in accordance with
Section 6.2 of this Agreement; and

     

    (F)           such
other certificates, instruments of conveyance or documents as may be reasonably
requested by the Investor to carry out the intent and purposes of this
Agreement.

     

    (2)           At
the Initial Closing, the Investor shall deliver, or cause to be delivered, as
the case may be, to the Company the following:

     

    (A)           the
First Tranche Consideration, which may be paid net of the amount to be
reimbursed under (1)(E) above;

     

    (B)           a
duly executed counterpart to the Registration Rights Agreement; and

     

    (C)           such
other certificates or documents as may be reasonably requested by the Company to
carry out the intent and purposes of this Agreement.

     

    (b)           Initial Closing
Conditions. (1) The obligation of the Investor, on the one hand, and the
Company, on the other hand, to consummate the Initial Closing is subject to the
fulfillment or written waiver by the Investor and the Company prior to the
Initial Closing of the following conditions:

     

    (A)           no
provision of any applicable law or regulation and no judgment, injunction, order
or decree shall prohibit the Initial Closing or shall prohibit or restrict the
Investor or its Affiliates (as defined below) from owning or voting the Common
Stock (other than on an interim basis pending receipt of the requisite
Gaming/Racing Permits (as defined below)) in any court, administrative agency or
commission or other governmental authority or instrumentality, whether federal,
state, local or foreign, or any applicable self-regulatory organization,
including any Gaming/Racing Authority (as defined below) (each, a “Governmental Entity”),
seeking to effect any of the foregoing;

     

    (B)           the
Company shall have applied to NASDAQ to authorize the shares of Common Stock to
be issued at the Initial Closing for listing on NASDAQ or such other market on
which the Common Stock is then listed or quoted, subject only to official notice
of issuance; and

     

    (C)           the
Investor shall have received all requisite Gaming/Racing Permits or shall have
executed an escrow agreement with a duly qualified nominee if and to the extent
permitted under applicable Gaming/Racing Law (as defined below) to act as
nominee holder of the Common Stock.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (2)           The
obligation of the Investor to consummate the purchase of the First Tranche to be
purchased by it at the Initial Closing is subject to the further fulfillment or
written waiver by the Investor prior to the Initial Closing of each of the
following conditions:

     

    (A)           the
representations and warranties of the Company contained in this Agreement,
without regard to any materiality or Company Material Adverse Effect (as defined
below) qualifier contained therein, shall be true and correct when made and on
and as of the Initial Closing Date as if made at and as of the Initial Closing
Date (except for any representations and warranties made as of a specified date,
which shall be true and correct as of the specified date), except where the
failure of such representations and warranties to be true and correct has not
had and would not reasonably be expected to have a Company Material Adverse
Effect. The Investor shall have received a certificate signed on behalf of the
Company by the chief executive officer or the chief financial officer of the
Company to such effect;

     

    (B)           the
board of directors of the Company (the “Board of Directors”) shall
have duly adopted and declared effective an amendment to the Company By-Laws (as
defined below) substantially in the form attached hereto as Exhibit
E;

     

    (C)           the
Company shall have delivered to the Investor a duly executed copy of the
Registration Rights Agreement substantially in the form attached hereto as Exhibit
B;

     

    (D)           the
Company shall have delivered to the Investor a duly executed copy of the
Consulting Agreement substantially in the form attached hereto as Exhibit
C;

     

    (E)           the
Company shall have delivered the legal opinion referred to in clause (a)(1)(D)
above; and

     

    (F)           the
Board of Directors shall have adopted resolutions appointing Colin Au and G.
Michael Brown to serve as members of the Board of Directors.

     

    (3)           The
obligation of the Company to consummate the Initial Closing is subject to the
further fulfillment or written waiver by the Company prior to the Initial
Closing of each of the following conditions:

     

    (A)           the
representations and warranties of the Investor contained in this Agreement,
without regard to any materiality or Investor Material Adverse Effect (as
defined below) qualifier contained therein, shall be true and correct in all
material respects when made and on and as of the Initial Closing Date as if made
at and as of the Initial Closing Date (except for any representations and
warranties made as of a specified date, which shall be true and correct in all
material respects as of the specified date). The Company shall have received a
certificate signed by a duly authorized officer of the Investor to such effect;
and

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (B)           the
Investor shall have delivered to the Company a duly executed copy of the
Registration Rights Agreement substantially in the form attached hereto as Exhibit
B.

     

    1.4           Closing.  (a)
The closing of the purchase of the Second Tranche by the Investor (the “Closing”) shall take place at
the offices of Cleary Gottlieb Steen & Hamilton LLP, One Liberty Plaza, New
York, NY 10006 at 10:00 a.m., New York City time, on a date to be specified by
the Company and the Investor, which shall be no later than the third business
day after satisfaction or waiver of the conditions set forth in Section 1.4(b)
below (the “Closing
Date”).

     

    (1)           At
the Closing, the Company shall deliver, or cause to be delivered, as the case
may be, to the Investor the following:

     

    (A)           certificates
representing a number of shares of Common Stock and, if applicable, Series F
Preferred Stock equal to the Second Tranche;

     

    (B)           a
duly executed counterpart to the Loan Agreement (as defined below);

     

    (C)           reimbursement
of the Investor’s expenses from the Initial Closing Date through the Closing
Date in accordance with Section 6.2 of this Agreement; and

     

    (D)           such
other certificates, instruments of conveyance or documents as may be reasonably
requested by the Investor to carry out the intent and purposes of this
Agreement.

     

    (2)           At
the Closing, the Investor shall deliver, or cause to be delivered, as the case
may be, to the Company the following:

     

    (A)           the
Second Tranche Consideration, which may be paid net of the amount to be
reimbursed under (1)(D) above;

     

    (B)           a
duly executed counterpart to the Loan Agreement; and

     

    (C)           such
other certificates or documents as may be reasonably requested by the Company to
carry out the intent and purposes of this Agreement.

     

    (b)           (1)           The
obligations of the Investor, on the one hand, and the Company, on the other
hand, to consummate the Closing is subject to the fulfillment or written waiver
by the Investor and the Company prior to the Closing of the following
conditions:

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (A)           no
provisions of any applicable law or regulation and no judgment, injunction,
order or decree shall prohibit the Closing or shall prohibit or restrict the
Investor or its Affiliates from owning or voting the Common Stock or, if
applicable, the Series F Preferred Stock (other than on an interim basis pending
receipt of the requisite Gaming/Racing Permits) and no lawsuit shall have been
commenced by a Governmental Entity seeking to effect any of the
foregoing;

     

    (B)           the
Company shall have applied to NASDAQ to authorize the shares of Common Stock to
be issued at the Initial Closing for listing on NASDAQ or such other market on
which the Common Stock is then listed or quoted, subject only to official notice
of issuance;

     

    (C)           (i)
the Mandatory Voting Proposals shall have been approved at a duly called and
held special meeting of the Company’s stockholders (the “Special Meeting”), at which a
quorum is present, by the Required Company Stockholder Vote (as defined below);
or (ii) the Preferred Stock Issuance Event shall have taken place and the
Company shall have filed a certificate of designation, amending its Certificate
of Incorporation creating and authorizing the issuance of the Series F Preferred
Stock;

     

    (D)           the
Investor shall have received all requisite Gaming/Racing Permits or shall have
executed an escrow agreement with a duly qualified nominee permitted under
applicable Gaming/Racing Law to act as nominee holder of the Common Stock and,
if applicable, the Series F Preferred Stock.

     

    (2)           The
obligation of the Investor to consummate the purchase of the Second Tranche to
be purchased by it at the Closing is subject to the further fulfillment or
written waiver by the Investor prior to the Closing of each of the following
conditions:

     

    (A)           the
representations and warranties of the Company contained in this Agreement,
without regard to any materiality or Company Material Adverse Effect qualifier
contained therein, shall have been true and correct when made, except where the
failure of such representations and warranties to be true and correct has not
had and would not reasonably be expected to have a Company Material Adverse
Effect; and

     

    (B)           the
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement on or prior to the Closing Date and
the Investor shall have received a certificate signed on behalf of the Company
by the chief executive officer or the chief financial officer of the Company to
such effect.

     

    (3)           The
obligation of the Company to consummate the Closing is subject to the further
fulfillment or written waiver by the Company prior to the Closing of each of the
following conditions:

     

    
      
        
        

      

      
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    (A)           the
representations and warranties of the Investor contained in this Agreement,
without regard to any materiality or Investor Material Adverse Effect qualifier
contained therein, shall have been true and correct in all material respects
when made; and

     

    (B)           the
Investor shall have performed in all material respects all obligations required
to be performed by it under this Agreement on or prior to the Closing Date and
the Company shall have received a certificate signed on behalf of the Investor
by a duly authorized officer of the Investor to such effect.

     

    ARTICLE
II

     

    REPRESENTATIONS
AND WARRANTIES

     

    2.1           Disclosure.  (a)
On or prior to the date hereof, the Company delivered to Investor and the
Investor delivered to the Company a schedule (“Disclosure Schedule”) setting
forth, among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement contained in
a provision hereof or as an exception to one or more representations or
warranties contained in Section 2.2 with respect to the Company, or in Section
2.3 with respect to the Investor, or to one or more covenants contained in
Article III.

     

    (b)           As
used in this Agreement, any reference to any fact, change, circumstance or
effect being “material”
with respect to the Company means such fact, change, circumstance or effect is
material in relation to the business, assets, results of operations or financial
condition of the Company and the Company Subsidiaries taken as a
whole.  As used in this Agreement, the term “Company Material Adverse
Effect” means any circumstance, event, change, development or effect
that, individually or in the aggregate, (1) is material and adverse to the
business, assets, results of operations or financial condition of the Company
and the Company Subsidiaries taken as a whole, (2) would materially impair the
ability of the Company to perform its obligations under this Agreement or to
consummate the Initial Closing or the Closing or (3) would materially adversely
affect the ability of the Investor to own, hold or vote the shares of Common
Stock or Series F Preferred Stock acquired under this Agreement or otherwise
materially adversely limit the Investor’s conduct in respect of the Company;
provided, however, that in determining
whether a Company Material Adverse Effect has occurred, there shall be excluded
any effect to the extent resulting from the following: (A) changes, after the
date hereof, in generally accepted accounting principles in the United States
(“GAAP”) or regulatory
accounting principles, (B) changes, after the date hereof, in laws, rules and
regulations of general applicability or interpretations thereof by Governmental
Entities not specific to this Agreement or any of the transactions contemplated
hereby, (C) actions or omissions of the Company expressly required by the terms
of this Agreement or taken with the prior written consent of the Investor, (D)
changes in general economic, monetary or financial conditions, including changes
in prevailing interest rates, credit markets, secondary mortgage market
conditions or housing price appreciation/depreciation trends, (E) changes, in
and of themselves, in the market price or trading volumes of the Common Stock or
the Company’s other securities (but not the underlying causes of such changes),
(F) the failure of the Company to meet any internal or public projections,
forecasts, estimates or guidance for any period ending on or after December 31,
2008 (but not the underlying causes of such failure), and (G) changes in global
or national political conditions, including the outbreak or escalation of war or
acts of terrorism; except, with respect to clauses (A), (B), (D) and (G), to the
extent that the effects of such changes have a disproportionate effect on the
Company and the Company Subsidiaries, taken as a whole, relative to other
similarly situated participants in the industries or markets in which they
operate.

     

    
      
        
        

      

      
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    (c)           “Previously Disclosed” with
regard to (1) the Investor, means information set forth on its Disclosure
Schedule, provided,
however, that
disclosure in any section of such Disclosure Schedule shall apply only to the
indicated section of this Agreement except to the extent that it is reasonably
apparent from the face of such disclosure that such disclosure is relevant to
another section of this Agreement, and (2) the Company, means information
publicly disclosed by the Company in (A) its Annual Report on Form 10-K for the
fiscal year ended December 31, 2008, as filed by it with the Securities and
Exchange Commission (“SEC”) on March 3, 2009 and
amended by it on April 30, 2009, (B) its Definitive Proxy Statement on Schedule
14A, as filed by it with the SEC on May 22, 2009, (C) its quarterly report on
Form 10-Q filed on May 8, 2009 for the quarter ended March 31, 2009, (D) its
quarterly report on Form 10-Q for the quarter ended June 30, 2009 filed on
August 17, 2009 or (E) any Current Report on Form 8-K filed or furnished by it
with the SEC since January 1, 2009 and publicly available prior to the date of
this Agreement (excluding any risk factor disclosures contained in such
documents under the heading “Risk Factors” and any disclosure of risks included
in any “forward-looking statements” disclaimer or other statements that are
similarly non-specific and are predictive or forward-looking in
nature).

     

    2.2           Representations and
Warranties of the Company.  Except as Previously Disclosed, the
Company represents and warrants to the Investor, as of the date of this
Agreement and as of the Initial Closing Date (except to the extent made only as
of a specified date in which case as of such date), that:

     

    (a)           Organization and
Authority.  (1) The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware, is duly qualified to
do business and is in good standing in all jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and where failure to be so qualified would have a Company Material
Adverse Effect, and has the corporate power and authority to own its properties
and assets and to carry on its business as it is now being
conducted.  The Company has furnished to the Investor true, correct
and complete copies of the Company’s certificate of incorporation (the “Certificate of
Incorporation”) and by-laws (the “Company By-Laws”) as in
effect on the date of this Agreement.

     

    
      
        
        

      

      
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    (2)           Each
Company Subsidiary is duly organized and validly existing under the laws of its
jurisdiction of organization, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified and where failure to be
so qualified would have a Company Material Adverse Effect, and has the corporate
power and authority and governmental authorizations to own its properties and
assets and to carry on its business as it is being conducted.  As used
herein, “Subsidiary”
means, with respect to any Person, any corporation, partnership, joint venture,
limited liability company or other entity (A) of which such Person or a
subsidiary of such Person is a general partner or (B) of which a majority of the
voting securities or other voting interests, or a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the board of directors or Persons performing similar functions with
respect to such entity, is directly or indirectly owned by such Person and/or
one or more subsidiaries thereof; “Company Subsidiary” means any
Subsidiary of the Company.  Schedule 2.2(b) contains a correct and
complete list of the Company Subsidiaries as of the date hereof.

     

    (b)           Capitalization.  The
authorized capital stock of the Company consists of 75,000,000 shares of Common
Stock and 5,000,000 shares of preferred stock, par value $.01 per share, of the
Company (the “Authorized
Preferred Stock”).  As of the close of business on August 18,
2009 (the “Capitalization
Date”), there were (not including any shares of Common Stock being issued
in connection with this Agreement) 34,037,961 shares of Common Stock outstanding
and 1,774,955 shares of Authorized Preferred Stock outstanding, consisting of
1,730,697 shares of Series E Preferred Stock (“Series E Preferred Stock”)
and 44,258 shares of 7.75% B Series Convertible Preferred Stock (“Series B Preferred
Stock”).  As of the close of business on the Capitalization
Date, no shares of Common Stock or Authorized Preferred Stock were reserved or
to be made available for issuance, except for (1) 40,000 shares of Authorized
Preferred Stock designated as Series A Junior Participating Preferred Stock, par
value $.01 per share (the “Series A Preferred Stock”),
reserved or to be made available for issuance upon the exercise of rights
granted under the Rights Agreement, dated as of March 24, 2008 between the
Company and Continental Stock Transfer & Trust Company, as rights agent (the
“Rights Plan”), and (2)
5,175,160 shares of Common Stock reserved or to be made available for issuance
upon conversion of the Company’s 5 1⁄2% Secured Convertible Notes due 2014 and
7,917,870 shares of Common Stock for issuance upon exercise of options and
warrants outstanding as of the Capitalization Date.  Attached hereto
as Exhibit F is
a true and complete list of all options and warrants outstanding as of the date
of this Agreement, setting forth for each the name of the holder, the number of
shares of Common Stock subject to such options and warrants, the expiry date and
vesting schedule and the exercise price thereof (the “Option
Schedule”).  All of the options and warrants listed on the
Option Schedule have been duly granted under option plans that were authorized
by vote of the stockholders of the Company.  All of the issued and
outstanding shares of Common Stock and Authorized Preferred Stock have been, and
all Common Stock to be issued upon exercise of options or warrants on the Option
Schedule will be, duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.  No bonds, debentures, notes or
other indebtedness having the right to vote on any matters on which the
stockholders of the Company may vote (“Voting Debt”) are issued and
outstanding.  Other than the Common Stock (and, as of the Closing,
upon the occurrence of the Preferred Stock Issuance Event, the Series F
Preferred Stock), no capital stock is issued and outstanding except for the
Series E Preferred Stock, each holder of which is entitled to 1/4 of one vote
and the Series B Preferred Stock, each holder of which is entitled to 8/10 of
one vote.  As of the date of this Agreement, except (i) pursuant to
any cashless exercise provisions of any Company stock options or pursuant to the
surrender of shares to the Company or the withholding of shares by the Company
to cover tax withholding obligations under the Benefit Plans (as defined below),
and (ii) as set forth elsewhere in this Section 2.2(b), the Company does not
have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of, or securities or rights convertible into or exchangeable for, any
shares of Common Stock or Authorized Preferred Stock or any other equity
securities of the Company or Voting Debt or any securities representing the
right to purchase or otherwise receive any shares of capital stock of the
Company (including any rights plan or agreement).

     

    
      
        
        

      

      
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    (c)           Company’s
Subsidiaries.  The Company owns, directly or indirectly, all of
the issued and outstanding shares of capital stock or all other equity interests
in each of the Company Subsidiaries, free and clear of any liens, charges,
encumbrances, adverse rights or claims and security interests whatsoever (“Liens”), and all of such
shares or equity interests are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.  No Company Subsidiary has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock, any other equity security or any Voting Debt of such Company
Subsidiary or any securities representing the right to purchase or otherwise
receive any shares of capital stock, any other equity security or Voting Debt of
such Company Subsidiary.

     

    (d)           Authorization.  (1)
The Company has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder. The execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby have been duly and unanimously authorized by
the Board of Directors.  This Agreement has been duly and validly
executed and delivered by the Company and, assuming due authorization, execution
and delivery by the Investor, is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. Except for the
Required Company Stockholder Vote, no other corporate proceedings are necessary
for the execution and delivery by the Company of this Agreement, the performance
by it of its obligations hereunder or the consummation by it of the transactions
contemplated hereby. The only vote of the stockholders of the Company required
to approve any of the transactions contemplated herein is an affirmative vote of
(A) a majority of the stockholders voting at a stockholders meeting to approve
the issuance of the Second Tranche for purposes of Rule 5635(b) and Rule 5635(d)
of the NASDAQ Marketplace Rules (the “Share Issuance”), provided
that the total votes cast at the meeting represent over 50% in interest of all
securities entitled to vote (the “Required Share Issuance
Vote”); and (B) a majority of the stockholders outstanding and entitled
to vote on the record date for a meeting to approve the amendment of the
Company’s Certificate of Incorporation (the “Charter Amendment” and,
together with the Share Issuance, the “Mandatory Voting Proposals”
and, collectively with the Option Plan Amendment (as defined below), the “Company Voting Proposals”) to
increase the number of authorized shares of Common Stock to 95,000,000 (the
“Required Charter Amendment
Vote” and, together with the Required Share Issuance Vote, the “Required Company Stockholder
Vote”), provided that, if the Required Share Issuance Vote in favor of
the Share Issuance is obtained but the Required Charter Amendment Vote in favor
of the Charter Amendment is not obtained (the “Preferred Stock Issuance
Event”), the Investor shall be entitled to receive a combination of
Common Stock and Series F Preferred Stock in the amounts and upon the terms set
forth in Section 1.1(a).  To the Company’s knowledge, all shares of
Common Stock, Series B Preferred Stock and Series E Preferred Stock outstanding
on the record date for a meeting at which a vote is taken with respect to the
Company Voting Proposals shall be eligible to vote on the Charter Amendment and
the Option Plan Amendment and all shares outstanding other than those issued to
the Investor at the Initial Closing shall be eligible to vote on the Share
Issuance.  The Board of Directors has unanimously adopted a resolution
declaring the Charter Amendment advisable and directing that it be recommended
to the stockholders of the Company for approval at the Special
Meeting.

     

    
      
        
        

      

      
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    (2)           Neither
the execution and delivery by the Company of this Agreement, nor the
consummation of the transactions contemplated hereby, nor compliance by the
Company with any of the provisions hereof, will (A) violate, conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation
of any Lien upon any of the material properties or assets of the Company or any
Company Subsidiary under any of the terms, conditions or provisions of (i)
subject  in the case of the authorization and issuance of the Second
Tranche to receipt of the Required Company Stockholder Vote or the occurrence of
the Preferred Stock Issuance Event, the Certificate of Incorporation or Company
By-Laws (or similar governing documents) or the certificate of incorporation,
charter, bylaws or other governing instrument of any Company Subsidiary or (ii)
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company or any Company Subsidiary is
a party or by which it may be bound, or to which the Company or any Company
Subsidiary or any of the properties or assets of the Company or any Company
Subsidiary may be subject, or (B) except as set forth in Section 2.2(d)(2) of
the Disclosure Schedule, subject to compliance with the statutes and regulations
referred to in Section 2.2(e), violate any law, statute, ordinance, rule,
regulation, permit, concession, grant, franchise or any judgment, ruling, order,
writ, injunction or decree applicable to the Company or any Company Subsidiary
or any of their respective properties or assets except in the case of clauses
(A)(ii) and (B) for such violations, conflicts and breaches as would not
reasonably be expected to have a Company Material Adverse Effect.

     

    
      
        
        

      

      
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    (e)           Governmental
Consents.  Other than as Previously Disclosed, Gaming/Racing
Authority approvals and the securities or blue sky laws of the various states,
no material notice to, registration, declaration or filing with, exemption or
review by, or authorization, order, consent or approval of, any Governmental
Entity, nor expiration or termination of any statutory waiting periods, is
necessary for the consummation by the Company of the transactions contemplated
by this Agreement.

     

    (f)           Financial
Statements.  Each of the consolidated balance sheets of the
Company and the Company Subsidiaries and the related consolidated statements of
income, stockholders’ equity and cash flows, together with the notes thereto
(collectively, the “Company
Financial Statements”) included in any Company Report filed with the SEC
prior to the date of this Agreement, (1) have been prepared from, and are in
accordance with, the books and records of the Company and the Company
Subsidiaries, (2) complied as to form, as of their respective date of filing
with the SEC, in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto,
(3) have been prepared in accordance with GAAP applied on a consistent basis
during the period involved and (4) present fairly in all material respects the
consolidated financial position of the Company and the Company Subsidiaries as
of the dates set forth therein and the consolidated results of operations,
changes in stockholders’ equity and cash flows of the Company and the Company
Subsidiaries for the periods stated therein, subject, in the case of any
unaudited financial statements, to normal recurring year-end audit
adjustments.

     

    (g)           Reports.  (1)
Since December 31, 2006, the Company and each Company Subsidiary has timely
filed all material reports, registrations, documents, filings, statements and
submissions, together with any required amendments thereto, that it was required
to file with any Governmental Entity (the foregoing, collectively, the “Company Reports”) and has
paid all fees and assessments due and payable in connection therewith. As of
their respective dates, the Company Reports complied in all material respects
with all statutes and applicable rules and regulations of the applicable
Governmental Entities.  To the knowledge of the Company, as of the
date of this Agreement, there are no outstanding comments from the SEC or any
other Governmental Entity with respect to any Company Report.  In the
case of each such Company Report filed with or furnished to the SEC, such
Company Report did not, as of its date or if amended prior to the date of this
Agreement, as of the date of such amendment, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made in it, in light of the
circumstances under which they were made, not misleading and complied as to form
in all material respects with the applicable requirements of the Securities Act
of 1933, as amended (the “Securities Act”), and the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”).  With respect to all other Company Reports, the Company
Reports were complete and accurate in all material respects as of their
respective dates.  No executive officer of the Company or any Company
Subsidiary has failed in any respect to make the certifications required of him
or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.

     

    
      
        
        

      

      
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    (2)           The
records, systems, controls, data and information of the Company and the Company
Subsidiaries are recorded, stored, maintained and operated under means
(including any electronic, mechanical or photographic process, whether
computerized or not) that are under the exclusive ownership and direct control
of the Company or the Company Subsidiaries or their accountants (including all
means of access thereto and therefrom), except for any non-exclusive ownership
and non-direct control that would not reasonably be expected to have a Company
Material Adverse Effect on the system of internal accounting controls described
below in this Section 2.2(g). The Company (A) has implemented and maintains
disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange
Act) to ensure that material information relating to the Company, including the
consolidated Company Subsidiaries, is made known to the chief executive officer
and the chief financial officer of the Company by others within those entities,
and (B) has disclosed, based on its most recent evaluation prior to the date
hereof, to the Company’s outside auditors and the audit committee of the Board
of Directors (i) any significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting (as defined in
Rule 13a-15(f) of the Exchange Act) that are reasonably likely to adversely
affect the Company’s ability to record, process, summarize and report financial
information and (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s
internal controls over financial reporting.  Since December 31, 2006
and until the date of this Agreement, (x) neither the Company nor any Company
Subsidiary nor, to the knowledge of the Company, any director, officer,
employee, auditor, accountant or representative of the Company or any Company
Subsidiary has received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or oral, regarding
the accounting or auditing practices, procedures, methodologies or methods of
the Company or any Company Subsidiary or their respective internal accounting
controls, including any material complaint, allegation, assertion or claim that
the Company or any Company Subsidiary has engaged in questionable accounting or
auditing practices, and (y) no attorney representing the Company or any Company
Subsidiary, whether or not employed by the Company or any Company Subsidiary,
has reported evidence of a material violation of securities laws, breach of
fiduciary duty or similar violation by the Company or any of its officers,
directors, employees or agents to the Board of Directors or any committee
thereof or to any director or officer of the Company.

     

    
      
        
        

      

      
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    (h)           Properties and
Leases.  Except as would not reasonably be expected to have a
Company Material Adverse Effect, the Company and the Company Subsidiaries have
good and marketable title to all real properties and all other properties and
assets owned by them, in each case free from liens, encumbrances, claims and
defects that would affect the value thereof or interfere with the use made or to
be made thereof by them.  Except as would not reasonably be expected
to have a Company Material Adverse Effect, the Company and the Company
Subsidiaries hold all leased real or personal property under valid and
enforceable leases with no exceptions that would interfere with the use made or
to be made thereof by them.

     

    (i)           Taxes.  (1)
Each of the Company and the Company Subsidiaries has (x) duly and timely
filed (including pursuant to applicable extensions granted without penalty) all
material Tax Returns (as hereinafter defined) required to be filed by it and
(y) paid in full all Taxes due or made adequate provision in the financial
statements of the Company (in accordance with GAAP) for any such Taxes (as
hereinafter defined), whether or not shown as due on such Tax Returns; (2) no
material deficiencies for any Taxes have been proposed, asserted or assessed in
writing against or with respect to any Taxes due by or Tax Returns of the
Company or any of the Company Subsidiaries which deficiencies have not since
been resolved, except for Taxes proposed, asserted or assessed that are being
contested in good faith by appropriate proceedings and for which reserves
adequate in accordance with GAAP have been provided; and (3) there are no
material Liens for Taxes upon the assets of either the Company or the Company
Subsidiaries except for statutory liens for current Taxes not yet due or Liens
for Taxes that are being contested in good faith by appropriate proceedings and
for which reserves adequate in accordance with GAAP have been
provided.  None of the Company or any of the Company Subsidiaries has
been a “distributing
corporation” or a “controlled corporation” in
any distribution occurring during the last two years in which the parties to
such distribution treated the distribution as one to which Section 355 of the
Internal Revenue Code of 1986, as amended (the “Code”), is
applicable.  None of the Company or any Company Subsidiary has engaged
in any transaction that is a “listed transaction” for
federal income tax purposes within the meaning of Treasury Regulations section
1.6011-4, which has not yet been the subject of an audit.  To the
Company’s knowledge, to the extent the Company or any Company Subsidiary has or
will record for GAAP purposes an allowance for loan losses or similar reserve
for bad debts, the Company can properly record for GAAP purposes at such time a
deferred tax asset for the related deduction for Taxes.  The Company
is not currently and has not been within the prior 5-year period a “U.S. Real Property Holding
Company” as defined for U.S. federal income tax purposes.  For
purposes of this Agreement, “Taxes” shall mean all taxes,
charges, levies, penalties or other assessments imposed by any United States
federal, state, local or foreign taxing authority, including any income, excise,
property, sales, transfer, franchise, payroll, withholding, social security or
other taxes, together with any interest or penalties attributable thereto, and
any payments made or owing to any other Person measured by such taxes, charges,
levies, penalties or other assessment, whether pursuant to a tax indemnity
agreement, tax sharing payment or otherwise (other than pursuant to commercial
agreements or Benefit Plans (as defined below)).  For purposes of this
Agreement, “Tax Return”
shall mean any return, report, information return or other document (including
any related or supporting information) required to be filed with any taxing
authority with respect to Taxes, including without limitation all information
returns relating to Taxes of third parties, any claims for refunds of Taxes and
any amendments or supplements to any of the foregoing

     

    
      
        
        

      

      
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    (j)           Absence of Certain
Changes.  Since December 31, 2008, (1) the Company and the
Company Subsidiaries have conducted their respective businesses in all material
respects in the ordinary course, consistent with prior practice, (2) the Company
has not made or declared any distribution in cash or in kind to its stockholders
or issued or repurchased any shares of its capital stock or other equity
interests and (3) no event or events have occurred that has had or would
reasonably be expected to have a Company Material Adverse Effect.

     

    (k)           No Undisclosed
Liabilities.  Neither the Company nor any of the Company
Subsidiaries has any liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) which are not properly reflected or reserved
against in the Company Financial Statements to the extent required to be so
reflected or reserved against in accordance with U.S. generally accepted
accounting practices, except for (1) liabilities that have arisen since December
31, 2008 in the ordinary and usual course of business and consistent with past
practice, (2) contractual liabilities under (other than liabilities arising from
any breach or violation of) agreements Previously Disclosed or not required by
this Agreement to be so disclosed and (3) liabilities that have not had and
would not reasonably be expected to have a Company Material Adverse
Effect.

     

    (l)           Commitments and
Contracts.  The Company has Previously Disclosed or provided to
the Investor true, correct and complete copies of, each of the following to
which the Company or any Company Subsidiary is a party or subject (whether
written or oral, express or implied) (each, a “Company Significant
Agreement”):

     

    (1)           any
contract or agreement which is a “material contract” within the meaning of Item
601(b)(10) of Regulation S-K to be performed in whole or in part after the date
of this Agreement;

     

    (2)           any
contract or agreement which limits the freedom of the Company or any of the
Company Subsidiaries to compete in any line of business;

     

    (3)           any
material contract or agreement with a labor union or guild (including any
collective bargaining agreement);

     

    (4)           any
contract or agreement which grants any Person a right of first refusal, right of
first offer or similar right with respect to any material properties, assets or
businesses of the Company or the Company Subsidiaries;

     

    (5)           any
contract relating to the acquisition or disposition of any material business or
material assets (whether by merger, sale of stock or assets or otherwise), which
acquisition or disposition is not yet complete or where such contract contains
continuing material obligations, including continuing material indemnity
obligations, of the Company or any of the Company Subsidiaries;

     

    
      
        
        

      

      
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    (6)           any
contract or agreement which is a consulting agreement or service contract
(including data processing, software programming and licensing contracts and
outsourcing contracts) which involves the payment of $250,000 or more in annual
fees;

     

    (7)           any
contract or agreement that contains a “change of control”, assignment or similar
clause that would be triggered by the transactions contemplated herein;
and

     

    (8)           any
contract or agreement which obligates the Company to manage any gaming assets on
behalf of an unrelated third party.

     

    Except as
Previously Disclosed: (A) each of the Company Significant Agreements is valid
and binding on the Company and the Company Subsidiaries, as applicable, and in
full force and effect; (B) the Company and each of the Company Subsidiaries, as
applicable, are in all material respects in compliance with and have in all
material respects performed all obligations required to be performed by them to
date under each Company Significant Agreement; and (C) as of the date hereof,
neither the Company nor any of the Company Subsidiaries knows of, or has
received notice of, any material violation or default (or any condition which
with the passage of time or the giving of notice would cause such a violation of
or a default) by any party under any Company Significant
Agreement.  To the Company’s knowledge as of the date hereof, except
as Previously Disclosed, there are no material transactions, or series of
related transactions, agreements, arrangements or understandings, nor are there
any currently proposed material transactions, or series of related transactions,
between the Company or any Company Subsidiary, on the one hand, and any current
or former director or executive officer of the Company or any Company Subsidiary
or any Person who beneficially owns 5% or more of the outstanding shares of
Common Stock (or any of such Person’s immediate family members or Affiliates
(other than Company Subsidiaries)), on the other hand, other than Benefit Plans
entered into in the ordinary course of business.

     

    (m)           Offering of Common
Stock.  Neither the Company nor any Person acting on its behalf
has taken any action (including any offering of any securities of the Company
under circumstances which would require the integration of such offering with
the offering of any of the Common Stock to be issued pursuant to this Agreement
under the Securities Act and the rules and regulations of the SEC thereunder)
which might subject the offering, issuance or sale of any of the Common Stock to
the Investor pursuant to this Agreement to the registration requirements of the
Securities Act.

     

    (n)           Status of Common Stock and
Preferred Stock.  The shares of Common Stock to be issued in
the First Tranche pursuant to this Agreement have been duly authorized by all
necessary corporate action. When issued and sold against receipt of the
consideration therefor as provided in this Agreement, such shares of Common
Stock will be validly issued, fully paid and nonassessable, will not subject the
holders thereof to personal liability and will not be subject to preemptive
rights of any other stockholder of the Company.  The shares of Common
Stock and, if applicable, Series F Preferred Stock to be issued in the Second
Tranche, following, subject to and conditioned upon approval of the Mandatory
Voting Proposals or upon the occurrence of the Preferred Stock Issuance Event,
and filing of the related certificate of amendment and/or certificate of
designations with the Delaware Secretary of State, have been duly authorized by
all necessary corporate action and when so issued upon such approval of the
Mandatory Voting Proposals or upon the occurrence of the Preferred Stock
Issuance Event, will be validly issued, fully paid and nonassessable, will not
subject the holders thereof to personal liability and will not be subject to
preemptive rights of any other stockholder of the Company.

     

    
      
        
        

      

      
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    (o)           Litigation and Other
Proceedings.  Except as set forth in Section 2.2(o) of the
Disclosure Schedule, there is no pending or, to the knowledge of the Company,
threatened, claim, action, suit, investigation or proceeding, against the
Company or any Company Subsidiary or to which any of their assets are subject,
nor is the Company or any Company Subsidiary subject to any order, judgment or
decree, in each case except as would not reasonably be expected to have a
Company Material Adverse Effect.  Except as would not reasonably be
expected to have a Company Material Adverse Effect, there is no unresolved
violation, criticism or exception by any Governmental Entity with respect to any
report or relating to any examinations or inspections of the Company or any
Company Subsidiaries.

     

    (p)           Compliance with Laws;
Insurance.  The Company and each Company Subsidiary have all
material permits, licenses, franchises, authorizations, orders and approvals of,
and have made all filings, applications and registrations with, Governmental
Entities that are required in order to permit them to own or lease their
properties and assets and to carry on their business as currently conducted and
that are material to the business of the Company or such Company Subsidiary. The
Company and each Company Subsidiary has complied in all material respects and is
not in default or violation in any respect of, and none of them is, to the
knowledge of the Company, under investigation with respect to or, to the
knowledge of the Company, has been threatened to be charged with or given notice
of any material violation of, any applicable material domestic (federal, state
or local) or foreign law, statute, ordinance, license, rule, regulation, policy
or guideline, order, demand, writ, injunction, decree or judgment of any
Governmental Entity, other than such noncompliance, defaults or violations that
would not reasonably be expected to have a Company Material Adverse
Effect.  Except for statutory or regulatory restrictions of general
application, no Governmental Entity has placed any material restriction on the
business or properties of the Company or any Company Subsidiary.

     

    (1)           The
Company and each Company Subsidiary are presently insured, and during each of
the past five calendar years (or during such lesser period of time as the
Company has owned such Company Subsidiary) have been insured, for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured.

     

    
      
        
        

      

      
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    (q)           Labor.  Except
as set forth in Section 2.2(q) of the Disclosure Schedule, employees of the
Company and the Company Subsidiaries are not represented by any labor union nor
are any collective bargaining agreements otherwise in effect with respect to
such employees. No labor organization or group of employees of the Company or
any Company Subsidiary has made a pending demand for recognition or
certification, and there are no representation or certification proceedings or
petitions seeking a representation proceeding presently pending or threatened to
be brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority.  There are no organizing activities,
strikes, work stoppages, slowdowns, lockouts, material arbitrations or material
grievances, or other material labor disputes pending or threatened against or
involving the Company or any Company Subsidiary.

     

    (r)           Company Benefit
Plans.

     

    (1)           With
respect to each Benefit Plan, the Company and the Company Subsidiaries have
complied, and are now in compliance, in all material respects, with all
provisions of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), the Code and
all laws and regulations applicable to such Benefit Plan; and (B) each Benefit
Plan has been administered in all material respects in accordance with its
terms.  Neither the Company nor any of the Company Subsidiaries nor
any ERISA Affiliate maintain, or have maintained, a defined benefit plan within
the meaning of Section 3(35) of ERISA.  Neither the Company nor any of
the Company Subsidiaries nor any ERISA Affiliate have any current or potential
liability under applicable law, including under Title IV or ERISA, with respect
to any Pension Plan.  “Benefit Plan” means each
material written or oral employment, consulting, retention, severance, employee
benefit or other similar plan, contract, arrangement, policy, program or
undertaking whether funded or unfunded, registered or unregistered, providing
for (including any insured or self-insured arrangements) workers’ compensation,
supplemental unemployment benefits, retirement, pension, superannuation or
supplemental pension benefits, life, health, disability or accident benefits
(including any “voluntary
employees’ beneficiary association” as defined in Section 501(c)(9) of
the Code providing for the same or other benefits) or for deferred compensation,
profit-sharing bonuses, stock options, stock appreciation rights, phantom stock,
stock purchases or other forms of incentive compensation, profit sharing or
post-retirement insurance, compensation or benefits, in each case, which is
entered into, maintained, sponsored, contributed to or required to be
contributed to, as the case may be, by the Company or any Company Subsidiary or
under which the Company or any Company Subsidiary may incur any liability or
pursuant to which payments are made, or benefits are provided to, or an
entitlement to payments or benefits may arise with respect to any directors, or
officers of the Company or any Company Subsidiaries or any employees or former
employees of the Company or any Company Subsidiaries or any individual working
on contract for the Company or any Company Subsidiaries (or any spouses,
dependants, survivors or beneficiaries of any such Persons). “ERISA Affiliate” means any
trade or business, whether or not incorporated, all of which together with the
Company would be deemed to be a “single employer” within the
meaning of Section 4001(a) or (b) of ERISA or Section 414 of the
Code.  “Pension
Plan” means any “employee pension benefit
plan” as defined in Section 3(2) of ERISA (other than a Multiemployer
Plan (as defined herein)), which the Company or any of the Company Subsidiaries
or any ERISA Affiliate sponsors, maintains or administers or to which the
Company or any of the Company Subsidiaries or any ERISA Affiliate contributes or
is required to contribute, which covers any current or former employee of the
Company or any Company Subsidiaries or any ERISA Affiliate.

     

    
      
        
        

      

      
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    (2)           Except
for liabilities fully reserved for or identified in the Financial Statements,
and except as disclosed on the Disclosure Schedule, no claim has been made, or
to the knowledge of the Company or any of the Company Subsidiaries threatened,
against the Company or any of the Company Subsidiaries related to the employment
and compensation of employees or any Benefit Plan, including without limitation
any claim related to the purchase of employer securities or to expenses paid
under any defined contribution pension plan.  To the Company’s
knowledge, neither the Company nor any of the Company Subsidiaries has any
liability with respect to any transaction in violation of Section 404 or 406 of
ERISA or any “prohibited transaction,” as defined in Section
4975(c)(1) of the Code, for which no exemption exists under Section 408 of ERISA
or Section 4975(c)(2) or (d) of the Code.  Neither the Company nor any
of the Company Subsidiaries has knowingly participated in a violation of Part 4
of Title I, Subtitle B of ERISA by any plan fiduciary of any Benefit
Plan.  The Secretary of Labor of the United States has not asserted a
civil penalty against the Company or any of the Company Subsidiaries under
Section 502(l) of ERISA that remains unpaid.

     

    (3)           Each
Benefit Plan which covers current or former employees of the Company or any of
the Company Subsidiaries or any ERISA Affiliates that is intended to be
qualified within the meaning of Section 401 of the Code has either (A) received
a favorable determination or opinion letter from the Internal Revenue Service
regarding its Tax qualification (and no event has occurred which, since the date
of any such letter, would reasonably be expected to result in the revocation of
such determination letter) or (B) applied, or will apply, for such letter during
the applicable remedial amendment period.

     

    (4)           No
Benefit Plan provides any health, life or other welfare benefits to any current
or future retired or former employees of the Company or any of the Company
Subsidiaries (or to the beneficiaries or dependants of any such Person), other
than as required by Section 4980B of the Code.

     

    
      
        
        

      

      
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    (5)           Neither
the Company nor any of the Company Subsidiaries nor any ERISA Affiliate has
contributed to, currently contributes to, or is required to contribute to or
participate in any Multiemployer Plan.  “Multiemployer Plan” means any
“multiemployer plan” as defined in Section 4001(a)(3) of ERISA, to which the
Company or any of the Company Subsidiaries or any ERISA Affiliate contributes,
or to which the Company or any of the Company Subsidiaries or any ERISA
Affiliate has an obligation to contribute, which covers any current or former
employee of the Company, any Company Subsidiary or any ERISA
Affiliate.

     

    (6)           Except
as set forth in Section 2.2(r) of the Disclosure Schedule, neither the execution
or delivery of this Agreement nor the consummation of the transactions
contemplated by this Agreement will, either alone or in conjunction with any
other event (whether contingent or otherwise), (A) result in any payment or
benefit becoming due or payable, or required to be provided, to any current or
former director, employee or independent contractor of the Company or any
Company Subsidiary, (B) increase the amount or value of any benefit or
compensation otherwise payable or required to be provided to any current or
former director, employee or independent contractor, or result in the
acceleration of the time of payment, vesting or funding of any such benefit or
compensation or (C) result in any amount failing to be deductible by reason of
Section 280G of the Code.

     

    (7)           No
Benefit Plan provides any employee or independent contractor of the Company or
any Company Subsidiary with a “gross up” or similar payment in respect of any
Taxes that may become payable under Section 409A of Section 4999 of the
Code.  Each Benefit Plan that is a “nonqualified deferred compensation
plan” (as defined under Section 409A of the Code) has, since January 1, 2005,
been operated in good faith compliance with Sections 409A(a)(2), (3), and (4) of
the Code.

     

    (8)           Except
for benefits accrued, and claims incurred by not yet reported, and except for
any provision in any Benefit Plan that provides otherwise, the Company may
unilaterally amend, modify, vary, revise, revoke, terminate or merge, in whole
or in part, each Benefit Plan, subject only to approvals required by applicable
law.

     

    (s)           Environmental
Liability.  There is no legal, administrative, arbitral or
other proceeding, claim, action or notice of any nature seeking to impose, or
that could result in the imposition of, on the Company or any Company
Subsidiary, any liability or obligation of the Company or any Company Subsidiary
with respect to any environmental health or safety matters or any private or
governmental, health or safety investigations or remediation activities of any
nature arising under common law or under any local, state or federal
environmental, health or safety statute, regulation or ordinance, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (“CERCLA”),
pending or, to the Company’s knowledge, threatened against the Company or any
Company Subsidiary the result of which has had or would reasonably be expected
to have a Company Material Adverse Effect; to the Company’s knowledge, there is
no reasonable basis for, or circumstances that are reasonably likely to give
rise to, any such proceeding, claim, action, investigation or remediation; and
to the Company’s knowledge, neither the Company nor any Company Subsidiary is
subject to any agreement, order, judgment, decree, letter or memorandum by or
with any court, Governmental Entity or third party imposing any such
environmental liability.

     

    
      
        
        

      

      
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    (t)           Gaming
Approvals.  Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect on the
Company, (1) the Company has all Gaming/Racing Permits required to operate its
Gaming/Racing Facilities, (2) there have been no adversarial proceedings by any
Gaming/Racing Authority to rescind or suspend the Company’s Gaming/Racing
Permits since December 31, 2006, and (3) to the knowledge of the Company, no
Gaming/Racing Authority is investigating or has concluded that the Company has
breached any Gaming/Racing Law governing or relating to any current or
contemplated casino, pari-mutuel, lottery or other gaming activities and
operations of the Company and its Subsidiaries, including, the rules and
regulations established by any Gaming/Racing Authority.

     

    (4)           In
this Agreement:

    

    “Gaming/Racing Authority”
means any agency, authority, board, bureau, commission, department,
office or instrumentality of any nature whatsoever of the United States federal
or foreign government, any state, province or any city or other political
subdivision or otherwise and whether now or hereafter in existence or any
officer or official thereof, including, without limitation, the New York State
Racing and Wagering Board, the New York State Division of the Lottery, the
National Indian Gaming Commission and the Bureau of Indian Affairs, with
authority to regulate any gaming operation owned, managed or operated by the
Company or any of the Company Subsidiaries.

     

    “Gaming/Racing Facility”
means the Monticello Raceway and each other property at which any gambling,
gaming or casino activities are conducted by the Company or any of the Company
Subsidiaries.

     

    “Gaming/Racing Law” means all
statutes, rules, regulations, ordinances, codes and administrative or judicial
precedents pursuant to which any Gaming/Racing Authority possesses regulatory,
licensing or permit authority over gambling, gaming or casino activities
conducted by the Company or any Company Subsidiary within its jurisdiction,
including the New York State Racing, Pari-Mutuel Wagering and Breeding Law and
the related rules and regulations, the New York State Lottery for Education Law
and the related rules and regulations, Part C, Chapter 383, Laws of New York
2001, as amended, known as the “video lottery gaming
law.”

     

    
      
        
        

      

      
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    “Gaming/Racing Permits” means
the licenses, permits or other authorizations required to own, operate and
otherwise conduct unrestricted gaming operations at the Gaming/Racing
Facilities.

     

    (u)           Fraud; Infrastructure; Data
Security.

     

    (1)           The
Company and the Company Subsidiaries have taken all commercially reasonable
actions consistent with standards in the Video Lottery Business (as defined
below) in order to detect (A) fraud committed against or (B) any other conduct
designed to violate the integrity of any game or gaming device operated by, in
each case the Company or a Company Subsidiary as part of the Video Lottery
Business (such games and gaming devices, collectively the “Games” and such fraud or
other conduct, collectively “Fraud”) by any Person,
including players participating in such Games and employees and independent
contractors of the Company or the Company Subsidiaries. The Company and the
Company Subsidiaries have taken all commercially reasonable actions consistent
with standards in the Video Lottery Business in order to minimize any losses
incurred by the Games as a result of Fraud (“Fraud Losses”). The Company
and the Company Subsidiaries have audited and continue to audit the Games on a
regular basis in order to ascertain whether any Fraud has occurred as well as
the amount of any Fraud Losses.

     

    (2)           The
material Company IT Systems (as defined below) have been properly maintained by
technically competent personnel in accordance with standards set by the
manufacturers or otherwise in accordance with standards prudent in the Video
Lottery Business for proper operation, monitoring and use. The material Company
IT Systems are in good working condition to perform all information technology
operations reasonably necessary for the conduct of the Video Lottery Business
effectively. Neither the Company nor any Company Subsidiary has experienced
within the past twelve months any material disruption to, or material
interruption in, its conduct of the Video Lottery Business attributable to a
defect, bug, breakdown or other failure or deficiency on the part of the Company
IT Systems.

     

    (3)           Except
for scheduled or routine maintenance which would not reasonably be expected to
cause any material disruption to, or material interruption in, the conduct of
the Video Lottery Business, the Company IT Systems are in all material respects
available for use during normal working hours and other times when the Games are
available to players. The Company and the Company Subsidiaries have taken
commercially reasonable steps to provide for the backup and recovery of the data
and information critical to the conduct of the Video Lottery Business (including
such data and information that is stored on magnetic or optical media in the
ordinary course) without material disruption to, or material interruption in,
the conduct of the Video Lottery Business.

     

    
      
        
        

      

      
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    (4)           The
Company and Company Subsidiaries have taken commercially reasonable actions,
consistent with standards in the Lottery Business and/or the Video Lottery
Business, with respect to the Company IT Systems to detect and prevent the
disclosure to unauthorized Persons of, and keep secure, any material
confidential information, trade secrets, or other material proprietary
information stored on Company IT Systems including the designs, policies,
processes, and procedures comprising the material Games and material information
relating to the composition and structure of the Company IT
Systems.

     

    (5)           In
this Agreement:

     

    “Company IT Systems” means any
and all information technology and computer systems (including computers,
software, programs, databases, middleware, firmware and other embedded software,
servers, workstations, terminals, routers, hubs, switches, networks, data
communications lines, hardware and other equipment and all other information
technology equipment) relating to the transmission, storage, maintenance,
organization, presentation, generation, processing or analysis of data and
information whether or not in electronic format, which technology and systems
are used in or necessary to the conduct of the Video Lottery Business, including
the end-products used by the players of the Games and any of the aforementioned
types of information technology and computer systems supporting the provision of
the Games.

     

    “Video Lottery Business”
means any business involving the provision of any or all of the following: (i)
interactive electronic gaming devices (including so called “video lottery terminals” and
“slot machines”) which
are activated by the player by the insertion of a coin or other consideration
constituting the player’s wager and which display the play and outcome of a game
of chance (such as “five card
draw” poker, “Blackjack,” or “21” and simulated spinning
reels with fruit and bars) upon such player-activation using microprocessors and
video display; (ii) central processing systems used in connection with the
operation of interactive gaming devices described in clause (i); and (iii) any
services related thereto.

     

    (v)           Anti-takeover Provisions Not
Applicable.  The Board of Directors has taken all necessary
action to approve this Agreement and the transactions contemplated hereby,
including the acquisition by the Investor of Common Stock and, if applicable,
Series F Preferred Stock hereunder, and the Stockholder Voting Agreement and the
covenants and agreements to be entered into thereby by the parties thereto, for
purposes of Section 203 of the Delaware General Corporation Law that such
transactions and agreements will not restrict any future “business combination”
involving the Investor as an “interested stockholder” (as each such term is
defined in Section 203) and to ensure that the transactions contemplated hereby
will be deemed to be exceptions to the provisions of Section 203 of the Delaware
General Corporation Law, and that any other similar “moratorium,” “control
share,” “fair price,” “takeover” or “interested stockholder” law (in all cases,
as they may be amended, succeeded or modified, “Takeover Statutes”) does not
and will not apply to this Agreement or to any of the transactions contemplated
hereby.

     

    
      
        
        

      

      
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    (w)           Rights
Plan.  The Company has taken all actions necessary to render
the Rights Plan inapplicable to this Agreement and the transactions contemplated
hereby.

     

    (x)           Intellectual
Property.  The Company and the Company Subsidiaries own (free
and clear of any Liens) or have a valid license to use all Intellectual Property
used in or necessary to carry on their business as currently
conducted.  Neither the Company nor any such Company Subsidiary has
received any notice of infringement of or conflict with, and to the Company’s
knowledge, there are no infringements of or conflicts with, the rights of others
with respect to the use of any Intellectual Property.  To the
knowledge of the Company, no Intellectual Property owned or licensed by the
Company or any of the Company Subsidiaries is being used or enforced in a manner
that would be expected to result in the abandonment, cancellation or
unenforceability of such Intellectual Property, except for such infringement or
violation as would not reasonably be expected to result in a Company Material
Adverse Effect.  “Intellectual Property” shall
mean trademarks, service marks, brand names, certification marks, trade dress
and other indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including divisions, continuations, continuations in part and renewal
applications), and any renewals, extensions or reissues thereof, in any
jurisdiction; nonpublic information, trade secrets and confidential information
and rights in any jurisdiction to limit the use or disclosure thereof by any
Person; writings and other works, whether copyrightable or not, in any
jurisdiction; and registrations or applications for registration of copyrights
in any jurisdiction, and any renewals or extensions thereof; and any similar
intellectual property or proprietary rights.

     

    (y)           Knowledge as to
Conditions.  As of the date of this Agreement, the Company
knows of no reason why any regulatory approvals and, to the extent necessary,
any other approvals, authorizations, filings, registrations, and notices
required or otherwise a condition to the consummation of the transactions
contemplated by this Agreement will not be obtained.

     

    
      
        
        

      

      
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    (z)           Brokers and
Finders.  Except for KPMG Corporate Finance LLC (whose fees
have been disclosed in full to the Investor and will be paid in full by the
Company or a Company Subsidiary and to whom all continuing payment obligations
in respect of fees will be terminated or satisfied in full), neither the Company
nor any Company Subsidiary nor any of their respective officers or directors has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder’s fees, and no broker or
finder has acted directly or indirectly for the Company or any Company
Subsidiary, in connection with this Agreement or the transactions contemplated
hereby.

     

    2.3           Representations and
Warranties of the Investor.  Except as Previously Disclosed,
the Investor hereby represents and warrants to the Company, as of the date of
this Agreement and as of the Initial Closing Date, that:

     

    (a)           Organization and
Authority.  The Investor is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, is
duly qualified to do business and is in good standing in all jurisdictions where
its ownership or leasing of property or the conduct of its business requires it
to be so qualified and where failure to be so qualified would be reasonably
expected to have an Investor Material Adverse Effect and the Investor has the
corporate or other power and authority and governmental authorizations to own
its properties and assets and to carry on its business as it is now being
conducted.   For purposes of this Agreement, the term “Investor Material Adverse
Effect” means any material adverse effect on the ability of the Investor
to consummate the transactions contemplated by this Agreement.

     

    (b)           Authorization.  (1)
The Investor has the corporate or other power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance of this Agreement by the Investor and the consummation of the
transactions contemplated hereby have been duly authorized by the Investor’s
board of directors and no further approval or authorization by any of its
stockholders is required. This Agreement has been duly and validly executed and
delivered by the Investor and assuming due authorization, execution and delivery
by the Company, is a valid and binding obligation of the Investor enforceable
against the Investor in accordance with its terms.

     

    (2)           Neither
the execution, delivery and performance by the Investor of this Agreement, nor
the consummation of the transactions contemplated hereby, nor compliance by the
Investor with any of the provisions hereof, will (A) violate, conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation
of any Lien upon any of the properties or assets of such Investor under any of
the terms, conditions or provisions of (i) its articles of incorporation or
bylaws or similar governing documents or (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which the Investor is a party or by which it may be bound, or to
which the Investor or any of the properties or assets of the Investor may be
subject, or (B) subject to compliance with the statutes and regulations referred
to in the next paragraph, violate any law, statute, ordinance, rule or
regulation, permit, concession, grant, franchise or any judgment, ruling, order,
writ, injunction or decree applicable to the Investor or any of its properties
or assets except in the case of clauses (A)(ii) and (B) for such violations,
conflicts and breaches as would not reasonably be expected to have an Investor
Material Adverse Effect.

     

    
      
        
        

      

      
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    (3)           Other
than as Previously Disclosed, Gaming/Racing Authority approvals and the
securities or blue sky laws of the various states, no notice to, registration,
declaration or filing with, exemption or review by, or authorization, order,
consent or approval of, any Governmental Entity, nor expiration or termination
of any statutory waiting period, is necessary for the consummation by the
Investor of the transactions contemplated by this Agreement.

     

    (c)           Purchase for
Investment.  The Investor acknowledges that the Common Stock to
be acquired by it in the First Tranche and the Common Stock and, if applicable,
Series F Preferred Stock to be acquired by it in the Second Tranche have not
been registered under the Securities Act or under any state securities laws. The
Investor (1) is acquiring the Common Stock and, if applicable, the Series F
Preferred Stock pursuant to an exemption from registration under the Securities
Act solely for investment with no present intention to distribute any of the
Common Stock or Series F Preferred Stock to any Person, (2) will not sell or
otherwise dispose of any of the Common Stock or Series F Preferred Stock, except
in compliance with the registration requirements or exemption provisions of the
Securities Act and any other applicable securities laws, (3) has such knowledge
and experience in financial and business matters and in investments of this type
that it is capable of evaluating the merits and risks of its investment in the
Common Stock and, if applicable, the Series F Preferred Stock, and of making an
informed investment decision and (4) is an “accredited investor” (as that
term is defined by Rule 501 of the Securities Act).

     

    (d)           Ownership.  As
of the date of this Agreement, the Investor and its Affiliates are not the
record or beneficial owners of shares of Common Stock or securities convertible
into or exchangeable for Common Stock.

     

    (e)           Financial
Capability.  The Investor currently has or at the Initial
Closing or Closing will have available funds necessary to consummate the Initial
Closing or Closing, respectively, on the terms and conditions contemplated by
this Agreement

     

    (f)           Knowledge as to
Conditions.  As of the date of this Agreement, the Investor
knows of no reason why any regulatory approvals and, to the extent necessary,
any other approvals, authorizations, filings, registrations, and notices
required or otherwise a condition to the consummation of the transactions
contemplated by this Agreement will not be obtained.

     

    
      
        
        

      

      
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    (g)           Brokers and
Finders.  Neither the Investor nor its Affiliates nor any of
their respective officers or directors has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder’s fees, and no broker or finder has acted directly or
indirectly for the Investor, in connection with this Agreement or the
transactions contemplated hereby.

     

    ARTICLE
III

     

    COVENANTS

     

    3.1           Stockholder
Meeting.

     

    (a)           The
Company shall call the Special Meeting, as promptly as practicable following the
Initial Closing to approve the Company Voting Proposals. The Board of Directors
shall recommend to the Company’s stockholders that such stockholders vote in
favor of the Company Voting Proposals.  In connection with the Special
Meeting, the Company shall promptly prepare (and the Investor will reasonably
cooperate with the Company to prepare) and file (but in no event more than 15
business days after the date of this Agreement) with the SEC a preliminary proxy
statement.  Following the filing of the preliminary proxy statement,
the Company shall use its reasonable best efforts to promptly respond to any
comments of the SEC or its staff and to cause a definitive proxy statement
related to the Special Meeting to be mailed to the Company’s stockholders not
more than five business days after clearance thereof by the SEC, and shall use
its reasonable best efforts to solicit proxies for such Company Voting
Proposals. The Company shall notify the Investor promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to such proxy statement or for additional
information and will supply the Investor with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to such proxy statement. If at any
time prior to the Special Meeting there shall occur any event that is required
to be set forth in an amendment or supplement to the proxy statement, the
Company shall as promptly as practicable prepare and mail to its stockholders
such an amendment or supplement. The proxy statement, at the time it is first
mailed and at the time of the Special Meeting, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations of the SEC promulgated thereunder.  Each of the
Investor and the Company agree promptly to correct any information provided by
it or on its behalf for use in the proxy statement if and to the extent that
such information shall have become false or misleading in any material respect,
and the Company shall as promptly as practicable prepare and mail to its
stockholders an amendment or supplement to correct such information to the
extent required by applicable laws and regulations. The Company shall consult
with the Investor prior to filing any proxy statement, or any amendment or
supplement thereto, and provide the Investor with a reasonable opportunity to
comment thereon and shall give reasonable consideration to all comments proposed
by the Investor.

     

    
      
        
        

      

      
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    (b)           The
Investor, on the one hand, and the Company, on the other hand, agrees, upon
request, to furnish the other party with all information concerning itself, its
Affiliates, directors, officers, partners and stockholders and such other
matters as may be reasonably necessary or advisable in connection with the proxy
statement in connection with any such stockholders meeting and any other
statement, filing, notice or application made by or on behalf of such other
party or any of its Subsidiaries to any Governmental Entity in connection with
the Closing and the other transactions contemplated by this
Agreement.

     

    (c)           Unless
this Agreement has been terminated pursuant to Section 5.1 or 5.2, the Investor
hereby agrees that at any meeting of the stockholders of the Company held to
vote on the Company Voting Proposals, however called, the Investor shall vote,
or cause to be voted, all of the shares of Common Stock beneficially owned by
the Investor and its Affiliates in favor of the Charter Amendment, the Option
Plan Amendment and, to the extent permitted to so vote, the Share
Issuance.

     

    (d)           The
Company, shall include in the proxy statement prepared in connection with the
Special Meeting and shall recommend that the stockholders vote for, a proposal
to amend the Company’s 2005 Equity Incentive Plan to increase the number of
shares of the Company’s Common Stock subject to the 2005 Equity Incentive Plan
from 8,500,000 shares to 10,500,000 shares (the “Option Plan
Amendment”).

     

    3.2           Conduct of the
Business.  Prior to the earlier of the Closing and the
termination of this Agreement pursuant to Section 5.1 or 5.2 (the “Pre-Closing Period”), the
Company shall, and shall cause each Company Subsidiary to, use commercially
reasonable efforts to carry on its business in the ordinary course of business
and use reasonable best efforts to maintain and preserve its and such Company
Subsidiary’s business (including its organization, assets, properties, goodwill
and insurance coverage) and preserve its business relationships with customers,
strategic partners, suppliers, distributors and others having business dealings
with it.

     

    Without
limiting the generality of the foregoing and except as otherwise expressly
provided in or contemplated by this Agreement, during the Pre-Closing Period,
without the prior written consent of the Investor, the Company will not and will
not permit any Company Subsidiary to:

    

    (a)           issue,
sell, grant options or rights to purchase, or authorize or propose the issuance,
sale, grant of options or rights to purchase any capital stock of the Company or
of any Company Subsidiary, other than shares of Common Stock issued upon
exercise of options or warrants listed on the Option Schedule and other than the
grant to directors, officers or employees of the Company of options in respect
of not more than one million shares of Common Stock;

     

    
      
        
        

      

      
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    (b)           acquire
or redeem, directly or indirectly, or amend any securities of the Company or any
Company Subsidiary;

     

    (c)           split,
combine or reclassify its capital stock or declare, set aside, make or pay any
dividend or distribution (whether in cash, stock or property) on any shares of
its capital stock (other than cash dividends paid to the Company by any wholly
owned Company Subsidiary);

     

    (d)           (i) make
or offer to make any acquisition, by means of a merger, consolidation,
recapitalization or otherwise, of any business, assets or securities (other than
any acquisition of assets in the ordinary course of business consistent with
past practice) or any sale, lease, encumbrance or other disposition of assets or
securities, in each case involving the payment or receipt of consideration of
$1,000,000 or more, (ii) adopt a plan of complete or partial liquidation,
dissolution, recapitalization or restructuring or (iii) enter into an
agreement that, if it were in existence on the date of this Agreement, would by
virtue of its nature or terms be a Company Significant Agreement or amend, or
grant any release or relinquishment of any rights under, or terminate any such
agreement or Company Significant Agreement;

     

    (e)           incur,
create, assume or otherwise become liable for any indebtedness, other than trade
payables incurred in the ordinary course of business consistent with past
practice;

     

    (f)           assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person;

     

    (g)           make
any loans, advances or capital contributions to, or investments in, any other
Person other than a Company Subsidiary that is, directly or indirectly, wholly
owned by the Company;

     

    (h)           change
any of the accounting methods, principles or practices used by it except as
required by GAAP or applicable law;

     

    (i)           except
as required by law, make any Tax election or settle or compromise any material
federal, state or local income Tax liability;

     

    (j)           except
as required by law, propose or adopt any amendments to the Certificate of
Incorporation or the Company By-laws;

     

    (k)           agree
to grant or grant any stock-related, cash-based, performance or similar awards
or bonuses;

     

    
      
        
        

      

      
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    (l)           enter
into any new, or amend, terminate or renew any existing, employment, severance,
consulting or salary continuation agreements with or for the benefit of any
officers, directors or employees, or grant any increases in the compensation or
benefits to officers, directors and employees (other than normal increases to
Persons who are not officers or directors in the ordinary course of business
consistent with past practices and that, in the aggregate, do not result in a
material increase in benefits or compensation expense of the
Company);

     

    (m)           incur
any material capital expenditure or any obligations, liabilities or indebtedness
in respect thereof;

     

    (n)           except
as required by law, adopt, amend or terminate any Benefit Plan;

     

    (o)           settle
or agree to settle any suit, action, claim, proceeding or investigation
(including any suit, action, claim, proceeding or investigation relating to this
Agreement or the transactions contemplated hereby) or pay, discharge or satisfy
or agree to pay, discharge or satisfy any claim, liability or obligation
(absolute or accrued, asserted or unasserted, contingent or otherwise) if such
settlement, payment, discharge or satisfaction involves an amount greater than
or equal to $1,000,000 or imposes any restriction on or requirement for the
conduct of business of the Company or any Company Subsidiary;

     

    (p)           enter
into any agreement or understanding or arrangement with respect to the voting or
registration of the securities of the Company or of any Company
Subsidiary;

     

    (q)           convene
any regular or special meeting (or any adjournment thereof) of the stockholders
of the Company other than the Special Meeting or Special Meetings contemplated
by Section 3.1; or

     

    (r)           agree
in writing or otherwise to take any of the foregoing actions.

     

    3.3           Preferred Stock
Terms.  Following the Initial Closing and in preparation for
the possibility of the Preferred Stock Issuance Event, the Company and the
Investor shall cooperate in good faith to prepare a mutually agreeable
certificate of designations authorizing the issuance of the Series F Preferred
Stock and setting forth the terms thereof.  Such certificate of
designations shall be agreed to by both parties and completed as soon as
possible following the Initial Closing but in no event later than the date of
the Special Meeting.  

     

    3.4           Takeover
Statutes.  If any Takeover Statute is or may become applicable
to this Agreement, the Stockholder Voting Agreement or the transactions
contemplated by this Agreement or the Stockholder Voting Agreement, the Board of
Directors shall grant such approvals and take such actions as are necessary so
that such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement and the Stockholder Voting Agreement and
otherwise act to eliminate or minimize the effects of such statute or regulation
on such transactions.

     

    
      
        
        

      

      
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    3.5           HSR
Act.  If required by the Hart-Scott Rodino Antitrust
Improvements Act of 1976 (the “HSR Act”), each party hereto
agrees to make an appropriate filing of a Notification and Report Form pursuant
to the HSR Act with respect to the transactions contemplated by this Agreement
as soon as practicable and to supply promptly any additional information and
documentary material that may be requested pursuant to the HSR
Act.  The parties hereto will not take any action that will have the
effect of delaying, impairing or impending the receipt of any required
approvals.  Without limiting the generality of the foregoing, the
Investor shall not, at any time prior the Closing Date, acquire a controlling
interest in any other entity engaged in the gaming industry with principal
operations within 75 miles of Monticello, New York.

     

    3.6           Regulatory
Matters.  Each party shall execute and deliver both before and
after the Initial Closing or Closing, as applicable, such further certificates,
agreements and other documents and take such other actions as the other party
may reasonably request to consummate or implement the transactions contemplated
herein or to evidence such events or matters. In particular, the Investor shall
make a good faith effort to promptly obtain or submit, and the Company shall
cooperate as may reasonably be requested by the Investor to help the Investor
promptly obtain or submit, as the case may be, as promptly as practicable, the
approvals and authorizations of, filings and registrations with, and
notifications to the Gaming/Racing Authorities pursuant to Gaming/Racing Law, to
the extent required for the transactions contemplated by this
Agreement.  In addition, the Investor agrees, if and to the extent
permitted by the Gaming/Racing Authorities and applicable Gaming/Racing Law, to
engage a duly qualified nominee to act as nominee holder of the Common Stock
and, if applicable, the Series F Preferred Stock for so long as the
Gaming/Racing Permits required for the Investor to hold the Common Stock and, if
applicable, Series F Preferred Stock shall not have been
obtained.  The parties mutually agree that, to the extent any
Governmental Entity determines that any provision of this Agreement violates the
applicable rules or laws supervised by such Governmental Entity and requests or
requires that such provisions be amended or deleted, the parties will negotiate
in good faith such revisions to this Agreement as will both give effect to such
Governmental Entity’s request and result in the transactions contemplated by
this Agreement proceeding as nearly as possible to the full financial and other
terms as are contemplated by this Agreement.

     

    3.7           Amendment to Series A
Preferred Stock.  Promptly following the date of this
Agreement, the Company shall file an amendment to the certificate of
designations in respect of the Series A Preferred Stock, or take such other
steps as are necessary, in order to increase the number of shares of Series A
Preferred Stock that are authorized to 95,000.

     

    3.8           Use of First Tranche
Consideration.  Promptly following the Initial Closing and, in
any event, prior to August 30, 2009 (assuming the Initial Closing shall have
occurred by such date), the Company shall make a payment to the holders of the
Company’s 51⁄2% Secured Convertible Notes due 2014 in the amount of the full
amount due to such holders in respect of interest due and payable on July 31,
2009.

     

    
      
        
        

      

      
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    ARTICLE
IV

     

    ADDITIONAL
AGREEMENTS

     

    4.1           Governance
Matters.  (a) Subject to the provisions of this Section 4.1,
the Company will cause three people nominated by the Investor (the “Board Representatives”) to be
elected or appointed to the Board of Directors, each of whom will be designated
to a different “class” of directors, subject to satisfaction of all legal and
governance requirements regarding service as a director of the Company and to
the reasonable approval of the Governance Committee of the Board of Directors
(such approval not to be unreasonably withheld or delayed).  Two of
such Board Representatives shall be appointed as of the Initial Closing Date and
one additional Board Representative shall be appointed as of the Closing
Date.  If, at any time, following the earlier to occur of (x) the
Closing and (y) the termination of this Agreement pursuant to Section 5.2, the
Investor shall cease to own capital stock of the Company with at least 24% of
the voting power of the Company outstanding at such time, the number of people
whom the Investor is entitled to designate for election to the Board of
Directors shall be reduced as follows:  (i) to two, for so long as the
Investor shall own capital stock of the Company with at least 16% (but less than
24%) of the voting power of the Company; (ii) to one, for so long as the
Investor shall own capital stock of the Company with at least 8% (but less than
16%) of the voting power of the Company; and (iii) to zero, at any time that the
Investor owns no capital stock or capital stock with less than 8% of the voting
power of the Company.  After such appointments, so long as the
Investor is entitled to designate one or more Board Representatives under this
Agreement, the Company will be required (i) at any annual meeting at which the
term of a Board Representative is scheduled to expire, if the Investor remains
entitled to a number of Board Representatives that includes such Board
Representative, to recommend to its stockholders the election of such Board
Representative, subject to satisfaction of all legal and governance requirements
regarding service as a director of the Company and to the reasonable approval of
the Governance Committee of the Board of Directors (such approval not to be
unreasonably withheld or delayed), to the Board of Directors and (ii) to appoint
one of the Board Representatives chosen by the Investor to serve as Chairman of
the Board of Directors.  At the option of the Board Representatives,
the Board of Directors shall cause one of the Board Representatives to be
appointed to each of the Audit, Compensation and Corporate Governance and
Nominations Committees of the Board of Directors (or any successor committee
thereto), provided that such Board Representative meets the qualifications for
service on such Committees.

     

    (b)           Except
as otherwise provided in Section 4.1(a), the Investor shall have the power to
designate each of the Board Representative’s replacement upon the death,
resignation, retirement, disqualification or removal from office of any such
director, such replacement to meet all applicable independence standards if the
director to be replaced met (and was required to meet) such standards. The Board
of Directors will use its reasonable best efforts to take all action required to
fill the vacancy resulting therefrom with such Person.

     

    
      
        
        

      

      
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    (c)           Each
Board Representative, during the time that such Board Representative is serving
as a member of the Board of Directors, shall be entitled to the same
compensation, indemnification insurance, indemnification and advancement of
expenses in connection with his or her role as a director as the other members
of the Board of Directors in similar capacities, and each Board Representative
shall be entitled to reimbursement for documented, reasonable out-of-pocket
expenses incurred in attending meetings of the Board of Directors or any
committees thereof, to the same extent as the other members of the Board of
Directors.  The Company shall notify each Board Representative of all
regular and special meetings of the Board of Directors and shall notify the
Board Representative of all regular and special meetings of any committee of the
Board of Directors of which such Board Representative is a
member.  The Company shall provide each Board Representative with
copies of all notices, minutes, consents and other materials provided to all
other members of the Board of Directors concurrently as such materials are
provided to the other members.

     

    (d)           Following
the Closing, the Investor shall have the right to, and shall within a reasonable
time following the Closing, nominate for consideration by the Board of Directors
a Person to serve as chief financial officer of the Company (the “Investor CFO Nominee”) who
shall, subject to applicable law and upon approval of the Company’s Governance
Committee and Board of Directors, serve as the chief financial officer of the
Company.  The Company Governance Committee and the Board of Directors
shall duly and in a timely manner consider the appointment of the Investor CFO
Nominee as the Company’s chief financial officer.  If the Investor CFO
Nominee is rejected by either the Company Governance Committee or the Board of
Directors, the Investor shall have the opportunity to present an alternate
nominee within a reasonable time following notification of such rejection until
such time that an Investor CFO Nominee is approved for appointment as chief
financial officer of the Company.

     

    (e)           Following
the Closing and until such time thereafter as the Investor shall cease to own
capital stock of the Company with at least 30% of the voting power of the
Company outstanding at such time, the Board of Directors shall not take or
commit to take any of the following actions with respect to either the Company
or any Company Subsidiary unless the vote authorizing any such action includes
the affirmative vote of the Board Representatives:

     

    (A)           the
sale or disposition of (including by way of a series of transactions or by way
of merger, consolidation, sale of capital stock, asset sale or similar
transaction) all or a material portion of the businesses or assets of the
Company and the Company Subsidiaries taken as a whole or any material
acquisition by the Company or any Company Subsidiary;

     

    (B)           any
amendment, alteration or repeal of any provision of the Certificate of
Incorporation or the Company By-Laws or equivalent constituent documents of the
Company Subsidiaries, except as necessary to comply with applicable laws, rules
and regulations.

     

    
      
        
        

      

      
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    (C)           declare,
authorize, set aside or pay any dividend or distribution on any of the Company’s
capital stock or issue, purchase or redeem any of its capital stock (other than
in connection with the exercise of terms of existing shares of capital stock or
other securities);

     

    (D)           any
material borrowings or financial accommodation (in whatever form, including
finance leases) in excess of $5,000,000 and not already in place as of the
Closing Date;

     

    (E)           the
approval of the Company’s annual budget (including operating and capital plans),
business plan and any related material business policies, and any material
amendments and deviations from any of the foregoing resulting from management
decisions;

     

    (F)           the
entry into of any contract or agreement which obligates the Company to manage
any gaming assets on behalf of an unrelated third party;

     

    (G)           the
appointment of, or the approval of the retention, termination or change
(including a change in responsibilities or compensation) of the chief executive
officer, chief financial officer, or officers with substantially equivalent
responsibilities;

     

    (H)           any
liquidation, bankruptcy, dissolution, recapitalization, reorganization, or
assignment to the Company’s creditors, or any similar transaction;

     

    (I)           increase
or decrease in the size of the Board of Directors;

     

    (J)           the
settlement of any material litigation, arbitration, or administrative proceeding
if such settlement is for the payment or receipt of an amount greater than or
equal to $1,000,000 or imposes any restriction on or requirement for the conduct
of business of the Company or any Company Subsidiary; or

     

    (K)           approve
or authorize the entry into any agreement that, if it were in existence on the
date of this Agreement, would by virtue of its nature or terms be a Company
Significant Agreement.

     

    4.2           No
Solicitation.  Each of the Company, its Subsidiaries and their
respective Representatives (as defined below) has ceased and caused to be
terminated all solicitations, discussions and negotiations existing as of the
date of this Agreement with any Persons with respect to any inquiry, offer or
proposal from any Person or group other than the Investor or any of its
Affiliates relating to any transaction or proposed transaction or series of
related transactions involving: (a) any direct or indirect investment or
purchase by any Person or “group” (as defined under Section 13(d) of the
Exchange Act) of a twenty percent (20%) interest or more in the total
outstanding shares of any class of equity or voting securities of the
Company,  or any tender offer or exchange offer that if consummated
would result in any Person or “group” beneficially owning twenty percent (20%)
or more of the total outstanding shares of any class of equity or voting
securities of the Company, (b) any sale or disposition of consolidated assets,
or rights of the Company (including for this purpose the outstanding assets,
rights and equity securities of the Subsidiaries of the Company) to any Person
or “group” for consideration equal to twenty percent (20%) or more of the
aggregate fair market value of all of the outstanding shares of Common Stock, or
(c) any consolidation, merger, business combination, recapitalization,
liquidation, dissolution or similar transaction with respect to the Company (any
of the foregoing inquiries, offers or proposals being an “Alternative Investment
Proposal”). Except as provided in this Section 4.2, from the date hereof,
until the earlier of the termination of this Agreement or the Closing, the
Company shall not and shall not authorize or permit its officers, directors,
employees, investment bankers, attorneys, accountants, financial or other
advisors or other agents or those of any Company Subsidiary (collectively,
“Representatives”) to,
directly or indirectly, (1) solicit, initiate, propose or knowingly encourage or
take any other action to knowingly facilitate the submission of an Alternative
Investment Proposal, (2) enter into any letter of intent, memorandum of
understanding, agreement, option agreement or other agreement or arrangement
with respect to any Alternative Investment Proposal, (3) enter into, continue,
participate, engage or knowingly assist in any manner in negotiations or
discussions with, or provide any non-public information or data to, any Person
(other than the Investor or any of its Affiliates or representatives) relating
to any Alternative Investment Proposal, or grant any waiver or release under any
standstill or (4) exempt any Person (other than the Investor and their
respective Affiliates) from the restrictions on “business combinations”
contained in Section 203 of the Delaware General Corporation Law (or any similar
provision) or otherwise cause such restrictions or the restrictions of any other
Takeover Statute not to apply.

     

    
      
        
        

      

      
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    4.3           Legend.  (a)
The Investor agrees that all certificates or other instruments representing the
Common Stock acquired pursuant to this Agreement will bear a legend
substantially to the following effect:

     

    THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND MAY NOT
BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION
STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR
SUCH LAWS.

     

    (b)           Upon
request of the Investor, upon receipt by the Company of an opinion of counsel
reasonably satisfactory to the Company to the effect that such legend is no
longer required under the Securities Act and applicable state laws, the Company
shall promptly cause the legend to be removed from any certificate for any
Common Stock to be transferred in accordance with the terms of this Agreement.
The Investor acknowledges that the Common Stock have not been registered under
the Securities Act or under any state securities laws and agrees that it will
not sell or otherwise dispose of any of the Common Stock, except in compliance
with the registration requirements or exemption provisions of the Securities Act
and any other applicable securities laws.

     

    
      
        
        

      

      
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    4.4           Certain
Transactions.  The Company will not merge or consolidate into,
or sell, transfer or lease all or substantially all of its property or assets
to, any other party unless the successor, transferee or lessee party, as the
case may be (if not the Company), expressly assumes the due and punctual
performance and observance of each and every covenant and condition of this
Agreement to be performed and observed by the Company.

     

    4.5           Option Matching
Rights.  No later than three Business Days following the
Closing Date, the Company shall deliver to the Investor a comprehensive
schedule, which shall include (i) a list of all outstanding options and warrants
issued by the Company as of the Closing, whether pursuant to any Benefit Plan,
any management equity rights plan or other equity-based employee benefits plan
or arrangement that has been duly authorized by the Board of Directors or a
committee thereof or otherwise, including the names of the option holders, the
exercise price and the expiry date and vesting schedule for the options and a
reconciliation of any options and warrants listed on the Option Schedule or
otherwise that have been exercised between the date of this Agreement and the
Closing Date, (ii) the 166,667 warrants issued to the Park Avenue Bank pursuant
to that certain Common Stock Purchase Warrant, dated as of July 27, 2009 and
(iii) the 111,111 warrants issued to Alan Lee pursuant to that certain Common
Stock Purchase Warrant, dated as of July 27, 2009 (the “Closing Date Option
Schedule”).  The Investor shall have matching rights under this
Section 4.5 with respect to the first one million options or warrants issued
after the Initial Closing Date to officers and directors of the Company who held
either of such positions as of July 31, 2009, and, to the extent any of such
options or warrants are issued after the Closing Date, such options or warrants
issued after the Closing Date shall be deemed included on the Closing Date
Option Schedule for purposes of this Section 4.5.  If at any time
after the Closing Date, any of the options or warrants listed on the Closing
Date Option Schedule (or so deemed included) are exercised, the Company shall
deliver to the Investor a written notice (the “Option Exercise Notice”) of
such exercise no more than five (5) business days after such exercise (and, if
practicable, prior to the date of the consummation of such exercise), which
Option Exercise Notice shall include information about the date of the exercise,
the exercise price, the number of options or warrants exercised and the name of
the option or warrant holder exercising such option or warrant.  The
Investor shall then have the right to elect, within ten (10) business days
following delivery of the Option Exercise Notice, to purchase an equal number of
shares of Common Stock as are being issued to the exercising option or warrant
holder at the exercise price for the applicable option or warrant.

     

    4.6           Indemnity.  (a)
The Company agrees to indemnify and hold harmless the Investor and its
Affiliates and each of their respective officers, directors, partners, members
and employees, and each Person who controls such Investor within the meaning of
the Exchange Act and the regulations thereunder, to the fullest extent lawful,
from and against any and all actions, suits, claims, proceedings, costs, losses,
liabilities, damages, expenses (including reasonable attorneys’ fees and
disbursements), amounts paid in settlement and other costs (collectively, “Losses”) arising out of or
resulting from (1) any inaccuracy in or breach of the Company’s representations
or warranties in this Agreement or (2) the Company’s breach of agreements or
covenants made by the Company in this Agreement or (3) any action, suit, claim,
proceeding or investigation by any Governmental Entity, stockholder of the
Company or any other Person (other than the Company) relating to this Agreement
or the transactions contemplated hereby (other than any Losses attributable to
the acts, errors or omissions on the part of such Investor, but not including
the transactions contemplated hereby).

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    (b)           The
Investor agrees to indemnify and hold harmless each of the Company and its
Affiliates and each of their respective officers, directors, partners, members
and employees, and each Person who controls the Company within the meaning of
the Exchange Act and the regulations thereunder, to the fullest extent lawful,
from and against any and all Losses arising out of or resulting from (1) any
inaccuracy in or breach of such Investor’s representations or warranties in this
Agreement or (2) such Investor’s breach of agreements or covenants made by the
Investor in this Agreement.

     

    (c)           A
party entitled to indemnification hereunder (each, an “Indemnified Party”) shall
give written notice to the party indemnifying it (the “Indemnifying Party”) of any
claim with respect to which it seeks indemnification promptly after the
discovery by such Indemnified Party of any matters giving rise to a claim for
indemnification; provided that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 4.6 unless and to the
extent that the Indemnifying Party shall have been actually prejudiced by the
failure of such Indemnified Party to so notify such party. Such notice shall
describe in reasonable detail such claim. In case any such action, suit, claim
or proceeding is brought against an Indemnified Party, the Indemnified Party
shall be entitled to hire, at its own expense, separate counsel and participate
in the defense thereof; provided, however, that the
Indemnifying Party shall be entitled to assume and conduct the defense thereof,
unless the counsel to the Indemnified Party advises such Indemnifying Party in
writing that such claim involves a conflict of interest (other than one of a
monetary nature) that would reasonably be expected to make it inappropriate for
the same counsel to represent both the Indemnifying Party and the Indemnified
Party, in which case the Indemnified Party shall be entitled to retain its own
counsel at the cost and expense of the Indemnifying Party (except that the
Indemnifying Party shall only be liable for the legal fees and expenses of one
law firm for all Indemnified Parties, taken together with respect to any single
action or group of related actions). If the Indemnifying Party assumes the
defense of any claim, all Indemnified Parties shall thereafter deliver to the
Indemnifying Party copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the claim, and each Indemnified
Party shall cooperate in the defense or prosecution of such claim. Such
cooperation shall include the retention and (upon the Indemnifying Party’s
request) the provision to the Indemnifying Party of records and information that
are reasonably relevant to such claim, and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Indemnifying Party shall not be liable for
any settlement of any action, suit, claim or proceeding effected without its
written consent; provided, however, that the
Indemnifying Party shall not unreasonably withhold or delay its consent. The
Indemnifying Party further agrees that it will not, without the Indemnified
Party’s prior written consent (which shall not be unreasonably withheld or
delayed), settle or compromise any claim or consent to entry of any judgment in
respect thereof in any pending or threatened action, suit, claim or proceeding
in respect of which indemnification has been sought hereunder unless such
settlement or compromise includes an unconditional release of such Indemnified
Party from all liability arising out of such action, suit, claim or
proceeding.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    (d)           For
purposes of the indemnity contained in Section 4.6(a)(1) and Section 4.6(b)(1),
all qualifications and limitations set forth in such representations and
warranties as to “materiality,” “Company Material Adverse Effect,” “Investor
Material Adverse Effect” and words of similar import, shall be disregarded in
determining whether there shall have been any inaccuracy or breach of any
representations and warranties in this Agreement.

     

    (e)           The
Company shall not be required to indemnify the Indemnified Parties pursuant to
Section 4.6(a)(1), disregarding all qualifications or limitations set forth in
such representation and warranties as to “materiality,” “Company Material
Adverse Effect” and words of similar import, unless and until the aggregate
amount of all Losses incurred with respect to all claims pursuant to Section
4.6(a)(1) exceed $500,000 (the “Threshold Amount”), in which
event the Company shall be responsible for all such Losses.  The
Investor shall not be required to indemnify the Indemnified Parties pursuant to
Section 4.6(b)(1), disregarding all qualifications or limitations set forth in
such representation and warranties as to “materiality,” “Company Material
Adverse Effect” and words of similar import, unless and until the aggregate
amount of all Losses incurred with respect to all claims pursuant to Section
4.6(b)(1) exceed the Threshold Amount, in which event the Investor shall be
responsible for all such Losses.  The cumulative indemnification
obligation of (1) the Company to the Investor and all of the Indemnified Parties
affiliated with (or whose claims are permitted by virtue of their relationship
with) the Investor or (2) the Investor to the Company and the Indemnified
Parties affiliated with (or whose claims are permitted by virtue of their
relationship with the) Company for inaccuracies in or breaches of
representations and warranties shall in no event exceed the Purchase
Price.

     

    (f)           Any
claim for indemnification pursuant to this Section 4.6 for breach of any
representation or warranty can only be brought on or prior to the first
anniversary of the Closing Date; provided that if notice of a
claim for indemnification pursuant to this Section 4.6 for breach of any
representation or warranty is brought prior to such first anniversary, then the
obligation to indemnify in respect of such breach shall survive as to such
claim, until such claim has been finally resolved.

     

    (g)           The
indemnity provided for in this Section 4.6 shall be the sole and exclusive
monetary remedy of Indemnified Parties after the Closing for any inaccuracy of
any representation or warranty or any other breach of any covenant or agreement
contained in this Agreement; provided that nothing herein
shall limit in any way any such party’s remedies in respect of fraud by any
other party in connection with the transactions contemplated hereby. No party to
this Agreement (or any of its Affiliates) shall, in any event, be liable or
otherwise responsible to any other party (or any of its Affiliates) for any
consequential or punitive damages of such other party (or any of its Affiliates)
arising out of or relating to this Agreement or the performance or breach
hereof.

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    (h)           No
investigation by any Investor of the Company or by the Company of any Investor
prior to or after the date hereof shall limit any Indemnified Party’s exercise
of any right hereunder or be deemed to be a waiver of any such
right.

     

    (i)           Any
indemnification payments pursuant to this Section 4.6 shall be treated as an
adjustment to the purchase price for the Securities for U.S. federal income and
applicable state and local Tax purposes, unless a different treatment is
required by applicable law.

     

    4.7           Exchange
Listing.  The Company shall promptly use its reasonable best
efforts to cause the shares of Common Stock to be issued pursuant to this
Agreement to be approved for listing on NASDAQ, subject to official notice of
issuance (and, in the case of the shares of Common Stock issuable upon receipt
of the approval of the Company Voting Proposals), as promptly as practicable,
and in any event before the Closing if permitted by the rules of
NASDAQ.

     

    4.8           Certain
Transactions.

     

    (a)           The
Investor shall not, at any time prior to the second anniversary of the Closing
Date, (i) propose a merger or other similar business combination between itself
or one of its Affiliates and the Company that would result in squeeze-out of the
other stockholders of the Company or (ii) cause the Company to voluntarily
delist the Common Stock from NASDAQ pursuant to NASDAQ Rule 5830(j) unless the
Company at such time is approved for listing on The New York Stock
Exchange.

     

    (b)           The
Investor shall not, at any time prior to the repayment in full or redemption of
the Company’s 51⁄2% Secured Convertible Notes due 2014, knowingly take any action
that would cause a “Change of Control” (as defined in the indenture for such
Notes) to occur.

     

    (c)           Other
than the limited restriction set forth in Section 3.5 hereof prior to the
Closing, but without derogation of any duty arising under applicable law, the
Investor, including any Affiliate or stockholder thereof (and the partners,
members, stockholders and officers of such Affiliates or stockholders), may
engage in and have an interest in other business ventures of every nature and
description, independently or with others, including, but not limited to, the
ownership, financing, leasing, operating, construction, management, and
development of any gaming, racing, lottery or other related
business.  None of the Company, the Investor or any other Person shall
have any rights by virtue of this Agreement in and to such independent ventures
or the income or profits derived therefrom.

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    4.9           Loan
Agreement.  Following the Initial Closing, the Company and the
Investor shall cooperate in good faith to prepare and negotiate a mutually
agreeable loan agreement (the “Loan Agreement”) to be
entered into by the parties at the Closing pursuant to which the Investor will
make available to the Company a loan of up to the lesser of (x) $10,000,000 and
(y) the maximum amount the Company is then permitted to borrow (taking into
account other indebtedness of the Company at such time) under the terms of the
indenture for the Company’s 51⁄2% Secured Convertible Notes due 2014, such loan to
be secured by all of the assets of the Company and the Company Subsidiaries,
including a mortgage of the real property owned by Monticello Raceway
Management, Inc., and otherwise on customary terms including an interest rate of
LIBOR plus 5.00%, a two-year term, and payment of an origination or commitment
fee of $150,000 and of an availability fee on undrawn amounts equal to 1% of the
average daily unused amount of the commitment.  The loan will be
interest only during the term thereof.  The proceeds of this loan
shall be permitted to be used, among other things, to repay in full, purchase or
acquire by assignment any remaining obligation of the Company under its loan
agreement with The Park Avenue Bank and for working capital
purposes.  The parties will cooperate to arrange for an assignment of
the mortgage from The Park Avenue Bank to the lender under the Loan
Agreement.

     

    ARTICLE
V

     

    TERMINATION

     

    5.1           Termination Prior to the
Initial Closing.  This Agreement may be terminated prior to the
Initial Closing:

     

    (a)           by
mutual written agreement of the Company and the Investor;

     

    (b)           by
either party, upon written notice to the other party, in the event that the
Initial Closing does not occur on or before August 31, 2009; provided, however, that the right to
terminate this Agreement pursuant to this Section 5.1(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or shall have resulted in, the failure of the Initial
Closing to occur on or prior to such date; or

     

    (c)           by
either party, upon written notice to the other parties, in the event that any
Governmental Entity shall have issued any order, decree or injunction or taken
any other action restraining, enjoining or prohibiting the Initial Closing, and
such order, decree, injunction or other action shall have become final and
nonappealable.

     

    5.2           Termination After the
Initial Closing and Prior to the Closing.  This Agreement may
be terminated after the Initial Closing and prior to the Closing:

     

    (a)           by
mutual written agreement of the Company and the Investor;

     

    (b)           by
either party, upon written notice to the other party, in the event that the
Closing does not occur on or before the date that is 180 days from the date of
this Agreement; provided, however, that the right to
terminate this Agreement pursuant to this Section 5.2(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or shall have resulted in, the failure of the Closing to
occur on or prior to such date; or

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

     

    (c)           by
the Investor if at the Special Meeting (or any adjournment thereof) at which a
vote on the Mandatory Voting Proposals is taken, the Required Share Issuance
Vote in favor of the Share Issuance shall not have been obtained.

     

    5.3           Effects of
Termination.

     

    (a)           In
the event of any termination of this Agreement as provided in Section 5.1, this
Agreement (other than this Section 5.3(a) and Sections 6.2 through 6.16,
inclusive) shall forthwith become wholly void and of no further force and
effect; provided that nothing herein shall relieve any party from liability for
intentional breach of this Agreement.

     

    (b)           In
the event of termination of this Agreement as provided in Section 5.2, this
Agreement (other than this Section 5.3(b) and Sections 3.4, 3.6, 4.1, 4.3, 4.4,
4.5, 4.6, 4.7, 5.4 and Article VI) shall forthwith become wholly void and of no
further force and effect; provided that nothing herein shall relieve any party
from liability for intentional breach of this Agreement; provided further that
any such termination shall not serve to rescind the transactions consummated at
the Initial Closing.

     

    5.4           Termination
Fee.  If this Agreement is terminated by either party pursuant
to Section 5.2(b) hereof (other than if such termination is due to the failure
of the condition set forth in Section 1.4(b)(1)(A) or (D) to be met), if at the
time of such termination the Special Meeting shall not have been held or the
Required Share Issuance Vote in favor of the Share Issuance shall not have been
obtained, or by the Investor pursuant to Section 5.2(c) hereof, then in such
event the Company shall pay to the Investor a cash fee of $2,750,000, such
payment to be made within three (3) business days following such termination by
wire transfer of immediately available funds to an account designated by the
Investor.  The Company acknowledges that the agreements contained in
this Section 5.4 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, the Investor would not have
entered into this Agreement.  Accordingly, in the event that the
Company shall fail to pay the termination fee when due, and in order to obtain
such payment, the Investor commences a suit or other proceeding which results in
a judgment or similar award against the Company for payment of the termination
fee, then the Company shall reimburse the Investor for its costs and expenses
(including attorneys’ fees and expenses of enforcement) in connection with such
suit or proceeding, together with interest on the amounts owed at the prime
lending rate prevailing at such time, as published in the Wall Street Journal,
plus two percent per annum from the date such amounts were required to be paid
until the date actually received by the Investor.  In no event shall
the Investor be entitled to recover more than one termination fee under this
Section 5.4.  If the Investor shall have received payment in full of
the termination fee and any other amounts payable under this Section 5.4, such
fee shall be the Investor’s sole and exclusive remedy against the Company other
than for intentional breach of this Agreement.  Except for any
liability of the Company for intentional breach of this Agreement, upon payment
in full of the termination fee and any other amounts payable as provided under
this Section 5.4, none of the Company, or any of its Affiliates, stockholders,
directors, officers, employees or other agents or representatives shall have any
further liability or obligation to the Investor relating to or arising out of
this Agreement or the transactions contemplated hereby, except under the
Sections specifically referenced in Section 5.3(b).

     

    
      
        
        

      

      
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    ARTICLE
VI

     

    MISCELLANEOUS

     

    6.1           Survival.  Each
of the representations and warranties set forth in this Agreement shall survive
the Closing under this Agreement but only for a period of one year following the
Closing Date (or until final resolution of any claim or action arising from the
breach of any such representation and warranty, if notice of such breach was
provided prior to the first anniversary of the Closing Date) (the “Survival Period”) and
thereafter shall expire and have no further force and effect, including in
respect of Section 4.6, provided that, if the Closing
does not take place, the Survival Period shall be deemed to have begun on the
Initial Closing Date and shall expire one year
thereafter.   Except as otherwise provided herein, all covenants
and agreements contained herein, other than those which by their terms are to be
performed in whole or in part after the Initial Closing Date or Closing Date, as
applicable, shall terminate as of the Initial Closing Date or Closing Date, as
applicable.

     

    6.2           Expenses.  Whether
or not the transactions contemplated by this Agreement are consummated, and
except as otherwise expressly set forth herein, all legal and other costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses, provided that legal costs of
the Investor payable to Cleary Gottlieb Steen & Hamilton LLP shall be paid
in their entirety by the Company, such costs to be payable from time to time
including at and as of the Initial Closing and at and as of the
Closing.

     

    6.3           Amendment.  No
amendment or waiver of any provision of this Agreement will be effective with
respect to either party unless made in writing and signed by an officer of a
duly authorized representative of such party.  No failure or delay by
either party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege.  The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by
law.

     

    6.4           Waivers.  The
conditions to each party’s obligation to consummate the Initial Closing and the
Closing are for the sole benefit of such party and may be waived by such party
in whole or in part to the extent permitted by applicable law. No waiver of any
party to this Agreement, as the case may be, will be effective unless it is in a
writing signed by a duly authorized officer of the waiving party that makes
express reference to the provision or provisions subject to such
waiver.

     

    
      
        
        

      

      
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    6.5           Counterparts and
Facsimile.  For the convenience of the parties hereto, this
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
will together constitute the same agreement. Executed signature pages to this
Agreement may be delivered by facsimile and such facsimiles will be deemed as
sufficient as if actual signature pages had been delivered.

     

    6.6           Governing
Law.  This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such State. The parties hereby irrevocably
and unconditionally consent to submit to the exclusive jurisdiction of the state
and federal courts located in the Borough of Manhattan, State of New York for
any actions, suits or proceedings arising out of or relating to this Agreement
and the transactions contemplated hereby.

     

    6.7           WAIVER OF JURY
TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     

    6.8           Notices.  Any
notice, request, instruction or other document to be given hereunder by any
party to the other will be in writing and will be deemed to have been duly given
(a) on the date of delivery if delivered personally or by telecopy or facsimile,
upon confirmation of receipt, (b) on the first business day following the date
of dispatch if delivered by a recognized next-day courier service, or (c) on the
third business day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice.

     

    (a)           If
to the Investor:

     

    Kien Huat
Realty III Limited

    c/o Kien
Huat Realty Sdn Bhd.

    22nd
Floor Wisma Genting

    Jalan
Sultan Ismail

    50250
Kuala Lumpur

    Malaysia

    Attention:  Gerard
Lim

    Fax: +603
2162 4951

    

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

     

    Cleary
Gottlieb Steen & Hamilton LLP

    One
Liberty Plaza

    New York,
NY 10006

    Attention:
Steven L. Wilner 

      Fax:  (212)
225-3999

    

    

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    (b)           If
to the Company:

     

    Empire
Reports, Inc.

    Monticello
Casino and Raceway

    Route
17B, P.O. Box 5013

    Monticello,
NY  12701

    Attention:  Joseph
Bernstein

    Fax:  (845)
807-0000

     

    

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

     

    Olshan
Grundman Frome Rosenzweig & Wolosky LLP

    Park
Avenue Tower

    65 East
55th
Street

    New York,
NY  10022

    Attention:  Robert
H. Friedman

    Fax:  (212)
451-2222

     

    6.9           Entire Agreement,
Etc.  (a) This Agreement (including the Exhibits, Schedules and
Disclosure Schedules hereto) constitutes the entire agreement, and supersedes
all other prior agreements, understandings, representations and warranties, both
written and oral, among the parties, with respect to the subject matter hereof;
and (b) this Agreement will not be assignable by operation of law or otherwise
(any attempted assignment in contravention hereof being null and
void).

     

    6.10           Other Definitions or
Interpretations.  Wherever required by the context of this
Agreement, the singular shall include the plural and vice versa, and the
masculine gender shall include the feminine and neuter genders and vice versa,
and references to any agreement, document or instrument shall be deemed to refer
to such agreement, document or instrument as amended, supplemented or modified
from time to time.

     

    (a)           the
term “Affiliate” means,
with respect to any Person, any Person directly or indirectly controlling,
controlled by or under common control with, such other Person. For purposes of
this definition, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control with”)
when used with respect to any Person, means the possession, directly or
indirectly, of the power to cause the direction of management or policies of
such Person, whether through the ownership of voting securities by contract or
otherwise;

     

    (b)           the
term “beneficial owner”
shall have the meaning given to such term in Rule 13d-3 under the Exchange
Act.

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    (c)           the
word “or” is not
exclusive;

     

    (d)           the
words “including,”
“includes,” “included” and “include” are deemed to be
followed by the words “without limitation”; and

     

    (e)           the
terms “herein,” “hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision;

     

    (f)           “business day” means any day
except Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York generally are authorized or
required by law or other governmental actions to close;

     

    (g)           “Person” has the meaning given
to it in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act; and

     

    (h)           all
article, section, paragraph or clause references not attributed to a particular
document shall be references to such parts of this Agreement, and all exhibit,
annex and schedule references not attributed to a particular document shall be
references to such exhibits, annexes and schedules to this
Agreement.

     

    6.11           Captions.  The
article, section, paragraph and clause captions herein are for convenience of
reference only, do not constitute part of this Agreement and will not be deemed
to limit or otherwise affect any of the provisions hereof.

     

    6.12           Severability.  If
any provision of this Agreement or the application thereof to any Person
(including, the officers and directors of the Investor and the Company) or
circumstance is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions hereof, or the application of
such provision to Persons or circumstances other than those as to which it has
been held invalid or unenforceable, will remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination,
the parties shall negotiate in good faith in an effort to agree upon a suitable
and equitable substitute provision to effect the original intent of the
parties.

     

    6.13           No Third Party
Beneficiaries.  Nothing contained in this Agreement, expressed
or implied, is intended to confer upon any Person or entity other than the
parties hereto, any benefit right or remedies, except that the provisions of
Section 4.6 shall inure to the benefit of the Persons referred to in that
Section.

     

    6.14           Time of
Essence.  Time is of the essence in the performance of each and
every term of this Agreement.

     

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

    6.15           Public
Announcements.  Subject to each party’s disclosure obligations
imposed by law or regulation or the rules of any stock exchange upon which its
securities are listed, each of the parties hereto will cooperate with each other
in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement and any of the
transactions contemplated by this Agreement, and no party hereto will make any
such news release or public disclosure without first consulting with the other
party hereto and receiving its consent (which shall not be unreasonably withheld
or delayed) and each party shall coordinate with the other with respect to any
such news release or public disclosure.

     

    6.16           Specific
Performance.  The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms.  It is accordingly
agreed that the parties shall be entitled to seek specific performance of the
terms hereof, this being in addition to any other remedies to which they are
entitled at law or equity.

     

    * *
*

     

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, this
Agreement has been duly executed and delivered by the duly authorized officers
of the parties hereto as of the date first herein above written.

     

    
      
        	 
      	
                EMPIRE
      RESORTS, INC.

              
	 
      	 
      
	 
      	 
      
	 
      	
                By:

              	/s/
      Joseph E. Bernstein
	 
      	 
      	
                Name:

              	Joseph
      E. Bernstein  
	 
      	 
      	
                Title:

              	Chief
      Executive Officer

      

      

      

      
        	 
      	
                KIEN
      HUAT REALTY III LIMITED

              
	 
      	 
      
	 
      	 
      
	 
      	
                By:

              	/s/
      Gerard Lim
	 
      	 
      	
                Name:

              	Gerard
      Lim  
	 
      	 
      	
                Title:

              	Authorized
      Signatoryex102to8k05558_08172009.htm

    Exhibit 10.2

     

    
      
         

         

          
            

          

        

         

      

      REGISTRATION
RIGHTS AGREEMENT

       

      by and
between

       

      Kien Huat
Realty III Limited

       

      and

       

      Empire
Resorts, Inc.

       

       

       

      _____________________

       

      Dated as
of August 19, 2009

       

       

      
         

        
          

        

      

      
         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      TABLE
OF CONTENTS

       

      
        
          
            
              
                	 	 	
                        Page

                      
	
                        Section
      1

                      	
                        Certain
      Definitions

                      	
                        1

                      
	
                        Section
      2

                      	
                        Registration

                      	
                        5

                      
	
                        Section
      3

                      	
                        Piggyback
      Registrations

                      	
                        8

                      
	
                        Section
      4

                      	
                        Suspension
      Periods

                      	
                        9

                      
	
                        Section
      5

                      	
                        Holdback
      Agreements

                      	
                        10

                      
	
                        Section
      6

                      	
                        Registration
      Procedures

                      	
                        10

                      
	
                        Section
      7

                      	
                        Registration
      Expenses

                      	
                        15

                      
	
                        Section
      8

                      	
                        Indemnification

                      	
                        15

                      
	
                        Section
      9

                      	
                        Securities
      Act Restrictions

                      	
                        18

                      
	
                        Section
      10

                      	
                        Transfers
      of Rights

                      	
                        18

                      
	
                        Section
      11

                      	
                        Miscellaneous

                      	
                        19

                      
	 
      	 
      	 
      
	
                        Annex
      A

                      	
                        Form
      of Opinions of Counsel

                      	 
      

              

            

          

        

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      THIS
REGISTRATION RIGHTS AGREEMENT (this “Agreement”)
is made and entered into as of August 19, 2009, by and between Kien Huat Realty
III Limited, an Isle of Man corporation (the “Investor”),
and Empire Resorts, Inc., a Delaware corporation (the “Company”).

       

      WHEREAS,
the Company and the Investor are parties to that certain Investment Agreement,
dated August 19, 2009 (the “Investment
Agreement”), pursuant to which the Company has agreed to issue an
aggregate of up to 34,506,040 shares of common stock, par value $.01 per share
(the “Company
Shares”) in exchange for the Purchase Price (as defined in the Investment
Agreement); and

       

      WHEREAS,
in connection with the consummation of the transactions contemplated by the
Investment Agreement, the parties desire to enter into this Agreement in order
to create certain registration rights for the Investor as set forth
below.

       

      NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained and other good and valid consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:

      
         

        SECTION
1

         

        CERTAIN
DEFINITIONS

         

        1.1           As
used in this Agreement, the terms below shall have the meanings specified
below:

         

        “Adverse
Effect” shall have the meaning specified in Section
2(d).

         

        “Affiliate”
means, with respect to any Person, any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person.  For purposes of this definition, “control”
(including, with correlative meaning, the terms “controlling”
and “controlled”)
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.

         

        “Agreement”
shall have the meaning specified in the preamble to this Agreement.

         

        “Availability
Default” shall have the meaning specified in Section
2(g).

         

        “beneficially
own” means, with respect to any Person, securities of which such Person
or any of such Person’s Affiliates, directly or indirectly, has “beneficial
ownership” as determined pursuant to Rule 13d-3 and Rule 13d-5
of the Exchange Act, including securities beneficially owned by others with whom
such Person or any of its Affiliates has agreed to act together for the purpose
of acquiring, holding, voting or disposing of such securities; provided
that a Person shall not be deemed to “beneficially
own” (a) securities tendered pursuant to a tender or exchange offer
made by such Person or any of such Person’s Affiliates until such tendered
securities are accepted for payment, purchase or exchange; (b) any security
as a result of an oral or written agreement, arrangement or understanding to
vote such security if such agreement, arrangement or
understanding:  (i) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the Exchange Act; and (ii) is
not also then reportable by such Person on Schedule 13D under the Exchange
Act (or any comparable or successor report).

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        “Business
Day” means a day other than a Saturday, a Sunday or a day on which
commercial banking institutions in the State of New York are authorized or
obligated by law to close.

         

        “Company”
shall have the meaning specified in the preamble to this Agreement.

         

        “Company
Shares” shall have the meaning specified in the first recital to this
Agreement.

         

        “Effectiveness
Default” shall have the meaning specified in Section
2(g).

         

        “Exchange
Act” means the Securities Exchange Act of 1934 and the rules promulgated
by the SEC thereunder.

         

        “Filing
Default” shall have the meaning specified in Section
2(g).

         

        “FINRA”
means the Financial Industry Regulatory Authority created in July 2007 through
the consolidation of the National Association of Securities Dealers and the
member regulation, enforcement and arbitration functions of the
NYSE.

         

        “Form S-3”
means a registration statement on Form S-3 under the Securities Act or such
successor forms thereto permitting registration of securities under the
Securities Act.

         

        “Governmental
Entity” means any federal, state, local or foreign court, government or
political subdivision or department thereof, or any governmental administrative
or regulatory body.

         

        “Holdback
Agreement” shall have the meaning specified in Section 5.

         

        “Holdback
Period” shall have the meaning specified in Section 5.

         

        “Indemnified
Party” shall have the meaning specified in Section 8(c).

         

        “Indemnifying
Party” shall have the meaning specified in Section 8(c).

         

        “Initial
Registration Request” shall have the meaning specified in Section 2(a).

         

        “Investor”
shall have the meaning specified in the preamble to this
Agreement.  References herein to the Investor shall apply to Permitted
Transferees who obtains the rights of the Investor pursuant to Section
10, provided
that (a) all obligations of the Investor and its Permitted Transferees hereunder
shall be several, and not joint and several; and (b) for purposes of all
thresholds and limitations herein, the actions of the Investor and any Permitted
Transferees shall be aggregated.

         

        “Investment
Agreement” means the agreement specified in the first recital hereto, as
such agreement may be amended, supplemented or otherwise modified from time to
time.

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

         

        “IRA”
means that certain Investor Rights Agreement, dated as of July 27, 2009, by and
among the Company and the Warrantholders.

         

        “Minimum
Amount” means, at any time, 5% of the total Company Shares then
outstanding.

         

        “Park
Avenue Holders” means (a) each of the persons who executes the IRA as
“Warrantholders”; and (b) any other person (i) who is a transferee, directly or
indirectly, of shares registrable pursuant to the IRA from a Warrantholder and
(ii) who shall have become a party to the IRA in accordance with its
terms.

         

        “Person”
means an individual, corporation, partnership, trust, limited liability company,
branch of any legal entity, unincorporated organization, joint stock company,
joint venture, association, other entity or Governmental Entity.

         

        “Permitted
Transferee” means any Affiliate of the Investor to whom rights and
obligations are transferred under this Agreement.

         

        “Piggyback
Registration” shall have the meaning specified in Section 3(a).

         

        “Prospectus”
means the prospectus or prospectuses (whether preliminary or final) included in
any Registration Statement and relating to Registrable Securities, as amended or
supplemented, and including all material incorporated by reference in such
prospectus or prospectuses.

         

        “Purchase
Price” shall have the meaning specified in the Investment
Agreement.

         

        “Registrable
Securities” means, at any time, (a) Company Shares issued to the Investor
pursuant to the terms of the Investment Agreement or acquired and held by the
Investor whether or not from the Company; and (b) any Company Shares or any
other security issued by the Company after the date hereof in respect of the
Company Shares referenced in (a) by way of a share dividend or share split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, until, in respect of any Company Shares, the earliest
to occur of the date on which (i) the resale of such Company Shares has been
registered pursuant to the Securities Act and such Company Shares have been
disposed of in accordance with the Registration Statement relating to such
resale; (ii) such Company Shares are sold to the Company; and (iii) the entire
amount of the Registrable Securities held by the Investor may be sold in a
single sale pursuant to Rule 144 of the Securities Act.

         

        “Registration”
shall have the meaning specified in Section
2(a).

         

        “Registration
Expenses” shall have the meaning specified in Section 7(a).

         

        “Registration
Statement” means any registration statement of the Company which covers
any of the Registrable Securities pursuant to the provisions of this Agreement
whether or not pursuant to a request of the Investor, including the Prospectus,
amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all documents incorporated by
reference in such Registration Statement.

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        “S-3
Shelf Registration Statement” means a Registration Statement (including
any amendment or supplement thereto) on Form S-3 for the continuous sale or
resale of securities including Registrable Securities.

         

        “SEC”
means the Securities and Exchange Commission.

         

        “Securities
Act” means the Securities Act of 1933 and the rules promulgated by the
SEC thereunder.

         

        “Suspension
Period” shall have the meaning specified in Section 4.

         

        “Termination
Date” means the first date on which there are no Registrable
Securities.  For the avoidance of doubt, this Agreement shall not
terminate upon the termination of the Investment Agreement.

         

        “underwritten
offering” means a registered offering in which securities of the Company
are sold to one or more underwriters on a firm commitment basis for offering to
the public.

         

        1.2           Interpretation.  When
a reference is made in this Agreement to an article, section, exhibit or
schedule, such reference shall be to an article or section of, or an
exhibit or schedule to, this Agreement unless otherwise
indicated.  The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.  Whenever the words
“include,”
“includes”
or “including”
are used in this Agreement, they shall be deemed to be followed by the words
“without limitation.”  Unless the context otherwise requires, the
words “hereof,”
“herein”
and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.  All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.  The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine genders of
such term.  Any agreement, instrument or statute defined or referred
to herein or any agreement or instrument that is referred to herein means such
agreement, instrument or statute as from time to time amended, modified,
supplemented or replaced, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor agreements, instruments or statutes.  Any agreement or
instrument referred to herein shall include reference to all exhibits, schedules
and other documents or agreements attached thereto or incorporated
therein.

         

        SECTION
2

         

        REGISTRATION

         

        (a)           Right
to Request Registration.  Subject to the provisions of this
Agreement, at any time until the Termination Date, the Investor may request that
the Company register (a “Registration”)
for public resale by the Investor all or any portion of the Registrable
Securities held by the Investor; provided,
however,
that immediately upon execution of this Agreement, the Investor shall be deemed
to have requested that the Company register all of the Company Shares issued to
the Investor pursuant to the terms of the Investment Agreement on an S-3 Shelf
Registration Statement (the “Initial
Registration Request”).  Upon such request, and subject to
Sections
4 and 6,
the Company shall use reasonable best efforts (i) to, at any time when the
Company is eligible to use Form S-3, file an S-3 Shelf Registration Statement
(or any amendment or supplement thereto) covering the number of Registrable
Securities specified in such request under the Securities Act for public resale
in accordance with the method of disposition specified in such request within 15
Business Days after the date of the Investor’s written request therefor; (ii) if
the Company is not eligible to file an S-3 Shelf Registration Statement, to file
a Registration Statement (other than an S-3 Shelf Registration Statement)
registering for resale such number of Registrable Securities as requested to be
so registered pursuant to this Section
within 20 Business Days after the date of the Investor’s request therefor; and
(iii) to cause such Registration Statement to be declared effective by the SEC
as soon as practicable thereafter.  If permitted under the Securities
Act, such Registration Statement shall be one that is automatically effective
upon filing.  Notwithstanding anything contained herein to the
contrary, the Company shall not be obligated to (i) effect a Registration
pursuant to this Section
2(a) within 120 days after the effective date of a previous Registration;
(ii) to effect a Registration pursuant to this Section
2(a) unless the request is for a number of Registrable Securities with a
market value that is equal to at least $100,000 as of the date of such request;
or (iii) to effect more than five Registrations pursuant to this Section
2(a).

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

         

        (b)           Underwritten
Offerings.  At the request of the Investor, any sale of
Registrable Securities, whether pursuant to a Registration or an existing S-3
Shelf Registration Statement, shall be an underwritten offering; provided, however,
that (based on the then-current outstanding Company Shares) the number of
Registrable Securities included in such offering would be at least equal to the
Minimum Amount; and provided
further,
that the Company shall not be required to provide for or cooperate with a sale
of Registrable Securities, whether pursuant to a Registration or an existing S-3
Shelf Registration Statement, pursuant to an underwritten offering as requested
by the Investor, on more than two occasions in any 12-month period unless
consented to by the Company.

         

        (c)           Selection
of Underwriters.  If any of the Registrable Securities are to
be sold in an underwritten offering initiated by the Investor, the Investor
shall select the managing underwriter or underwriters to lead the offering,
subject to the reasonable consent of the Company.

         

        (d)           Priority.  The
Company may include Company Shares other than Registrable Securities in a
Registration for any accounts (including for the account of the Company) on the
terms provided in this Agreement.  For any underwritten offering, the
Company may include Company Shares other than Registrable Securities for any
accounts (including for the account of the Company), but only with the consent
of the managing underwriters of such offering.  If the managing
underwriters of the requested offering advise the Company and the Investor that
in their opinion the number of Company Shares proposed to be included in the
offering exceeds the number of Company Shares that can be sold in such
underwritten offering without having the effect of materially delaying or
jeopardizing the success of the offering (including the price per share of
Company Shares proposed to be sold in such offering) (an “Adverse
Effect”), the Company shall include in such offering (i) first, the
number of Registrable Securities that the Investor proposes to sell; (ii)
second, the number of Company Shares proposed to be included therein by any Park
Avenue Holder thereof, pro rata among such Park Avenue Holders on the basis of
the number of Company Shares owned by each such Park Avenue Holder; and (iii)
third, the number of Company Shares proposed to be included therein by any other
Persons (including Company Shares to be sold for the account of the Company)
allocated among such Persons in such manner as the Company may
determine.  If the number of Company Shares that the managing
underwriters determine can be sold in such underwritten offering without having
an Adverse Effect is less than the number of Company Shares proposed to be
registered pursuant to clause (i) above by the Investor, the full amount of
Company Shares to be sold shall be allocated to the Investor.

         

        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

         

        (e)           Right
to Effect Sales.  The Investor shall be entitled, at any time
and from time to time when an S-3 Shelf Registration Statement is effective and
until the Termination Date, to offer and sell such Registrable Securities as are
then registered pursuant to such Registration Statement, but only upon not less
than 10 Business Days’ prior written notice to the Company (if such sale is to
be underwritten) or such other period as may be reasonably necessary for the
Company to comply with the covenants contained in Section
6(a), in each case to the extent relevant to such
offering.  The Investor shall give the Company prompt written notice
of the consummation of each such sale (whether or not
underwritten).

         

        (f)           Effective
Period of Registration Statements.

         

        (i)           The
Company shall use reasonable best efforts to keep the Registration Statement
effective for a period of 366 days, in the case of an S-3 Shelf Registration
Statement, or 180 days in the case of any other Registration Statement or, if
shorter in each case, until the first to occur of (x) the date on which all
Registrable Securities covered by such Registration Statement shall have been
sold by the Investor; and (y) the Termination Date, provided
that such period in (x) shall be extended by the number of days in any
Suspension Period commenced pursuant to Section
4 during such period (as it may be so extended) and by the number of days
in any period commenced during such period (as it may be so
extended).

         

        (g)           Liquidated
Damages.  Subject to the terms and conditions of this Agreement
(including Sections
4 and 6
hereof), if the Company does not (i) file an S-3 Shelf Registration Statement
(or such other Registration Statement as may be appropriate in the
circumstances) as and when required under this Agreement with respect to any
Registrable Securities, other than as a result of the SEC being unable to accept
such filings (a “Filing
Default”); or (ii) cause (A) such S-3 Shelf Registration Statement (or
such other Registration Statement) to be declared effective by the SEC; and (B)
such Registrable Securities to be approved for listing on NASDAQ within 10
Business Days of the Investor request (an “Effectiveness
Default”), then the Company shall pay the Investor (or, if applicable,
the relevant Permitted Transferee(s)) cash in an amount equal to 1% of the value
of such Registrable Securities held by the Investor (or, if applicable, the
relevant Permitted Transferee(s)) at the close of business on the second
Business Day following such Filing Default or Effectiveness
Default.  Following effectiveness of the Registration Statement and
listing of the Registrable Securities on NASDAQ, subject to the terms and
conditions of this Agreement (including Sections
4 and 6
hereof), if at any time the Registration Statement ceases to be effective and
available for resale of the Registrable Securities covered by such Registration
Statement (an “Availability
Default”), the Company shall pay the Investor (or such Permitted
Transferee(s)) cash in an amount equal to 1% of the value of the Registrable
Securities subject to such Registration Statement (or, if applicable, the
relevant Permitted Transferees) for each month that such Availability Default
continues (pro rated for any partial month).  Payment of liquidated
damages resulting from an Availability Default shall be made on the first day of
each month or such earlier date as such Availability Default shall have been
cured.  Any amount due but not paid by the Company pursuant to this
subsection shall bear interest at a daily compounded rate equal to 12% per annum
or the highest rate permitted by applicable law, whichever is lower, from and
including the due date therefor through but excluding the date of
payment.  Liquidated damages payable hereunder shall be paid by wire
transfer of immediately available funds to an account designated in writing by
the Investor to the Company.

         

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

         

        (h)           Investment
Agreement Restrictions.  Nothing in this Agreement shall affect
the provisions of the Investment Agreement related to Company Shares, which
shall apply independently hereof in accordance with the terms
thereof.

         

        SECTION
3

         

        PIGGYBACK
REGISTRATIONS

         

        (a)           Right
to Piggyback.  Whenever prior to the Termination Date the
Company proposes to register any Company Shares under the Securities Act (other
than on a registration statement on Form S-8 or S-4), whether for its own
account or for the account of one or more holders of Company Shares (other than
the Investor), and the form of registration statement to be used may be used for
any registration of Registrable Securities (a “Piggyback
Registration”), the Company shall give written notice to the Investor of
its intention to effect such a registration and, subject to Sections 3(b)
and 3(c),
shall include in such registration statement and in any offering of Company
Shares to be made pursuant to that registration statement all Registrable
Securities with respect to which the Company has received a written request for
inclusion therein from the Investor within five Business Days after the
Investor’s receipt of the Company’s notice or, in the case of a primary
offering, such shorter time as is reasonably specified by the Company in light
of the circumstances (provided
that only Registrable Securities of the same class or classes as Company Shares
being registered may be requested to be included).  The Company shall
have no obligation to proceed with any Piggyback Registration and may abandon,
terminate and/or withdraw such registration for any reason at any
time.  If the Company or any other Person other than the Investor
proposes to sell Company Shares in an underwritten offering pursuant to a
registration statement on Form S-3 under the Securities Act, such offering shall
be treated as a primary or secondary underwritten offering pursuant to a
Piggyback Registration.

         

        (b)           Priority
on Primary Piggyback Registrations.  If a Piggyback
Registration is initiated as a primary underwritten offering on behalf of the
Company and the managing underwriters advise the Company and the Investor (if
the Investor has elected to include Registrable Securities in such Piggyback
Registration) that in their opinion the number of Company Shares proposed to be
included in such offering exceeds the number of Company Shares (of any class)
which can be sold in such offering without having an Adverse Effect, the Company
shall include in such registration and offering (i) first, the number of
Company Shares that the Company proposes to sell; and (ii) second, the
number of Company Shares proposed to be included therein by any Park Avenue
Holder thereof, pro rata among such Park Avenue Holders on the basis of the
number of Company Shares owned by each such Park Avenue Holder; and (iii) third,
the number of Company Shares requested to be included therein by other holders
of Company Shares, including the Investor (if the Investor has elected to
include Registrable Securities in such Piggyback Registration), pro rata among
all such other holders on the basis of the number of Company Shares requested to
be included therein by all such other holders or as such other holders and the
Company may otherwise agree (with allocations among different classes of Company
Shares, if more than one are involved, to be determined by the
Company).  If the number of Company Shares that may be sold is less
than the number of Company Shares proposed to be registered pursuant to clause
(i) above by the Company, the full amount of Company Shares to be sold shall be
allocated to the Company.

         

        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

        

         

        (c)           Priority
on Secondary Piggyback Registrations.  If a Piggyback
Registration is initiated as an underwritten registration on behalf of a holder
of Company Shares other than the Investor (and the Investor has elected to
include Registrable Securities in such Piggyback Registration), and the managing
underwriters advise the Company that in their opinion the number of Company
Shares proposed to be included in such registration exceeds the number of
Company Shares (of any class) which can be sold in such offering without having
an Adverse Effect, then the Company shall include in such registration
(i) first, the number of Company Shares requested to be included therein by
the holder(s) initially requesting such registration; (ii) second, the
number of Company Shares requested to be included therein by other holders of
Company Shares, including the Investor (if the Investor has elected to include
Registrable Securities in such Piggyback Registration), pro rata among such
holders on the basis of the number of Company Shares requested to be included
therein by such holders or as such holders and the Company may otherwise agree
(with allocations among different classes of Company Shares, if more than one
are involved, to be determined by the Company); and (iii) third, the number
of Company Shares that the Company proposes to sell.

         

        (d)           Selection
of Underwriters.  If any Piggyback Registration is a primary or
secondary underwritten offering, the Company, subject to the rights of the Park
Avenue Holders pursuant to the IRA, shall have the right to select the managing
underwriter or underwriters to administer any such offering.

         

        (e)           Basis
of Participation.  The Investor may not sell Registrable
Securities in any offering pursuant to a Piggyback Registration unless it (i)
agrees to sell such Company Shares on the same basis provided in the
underwriting or other distribution arrangements approved by the Company and that
apply to the Company and/or any other holders involved in such Piggyback
Registration; and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, lockups and other documents
required under the terms of such arrangements.

         

        SECTION
4

         

        SUSPENSION
PERIODS

         

        The
Company may (i) delay the filing or effectiveness of a Registration
Statement in conjunction with a Registration or (ii) prior to the pricing of any
underwritten offering or other offering of Registrable Securities pursuant to a
Registration, delay such underwritten or other offering (and, if it so chooses,
withdraw any Registration Statement that has been filed), but in each case
described in clauses (i) and (ii) only if the Company determines in its
reasonable judgment (A) that proceeding with such an offering would require the
Company to disclose material information that would not otherwise be required to
be disclosed at that time and that the disclosure of such information at that
time would not be in the Company’s best interest; or (B) that the registration
or offering to be delayed would, if not delayed, materially adversely affect the
Company and its subsidiaries taken as a whole or materially interfere with, or
jeopardize the success of, any pending or proposed material transaction,
including any debt or equity financing, any acquisition or disposition, any
recapitalization or reorganization or any other material transaction, whether
due to commercial reasons, a desire to avoid premature disclosure of information
or any other reason.  Any period during which the Company has delayed
a filing, effectiveness or an offering pursuant to this Section is herein called
a “Suspension
Period.”  The Company shall provide prompt written notice to
the Investor of the commencement and termination of any Suspension Period (and
any withdrawal of a Registration Statement pursuant to this Section) but shall
not be obligated under this Agreement to disclose the reasons
therefor.  The Investor shall keep the existence of any Suspension
Period confidential and refrain from making offers and sales of Registrable
Securities (and direct any other Affiliates making such offers and sales to
refrain from doing so) during each Suspension Period.  In no event (x)
may the Company deliver notice of a Suspension Period to the Investor more than
two times in any calendar year; (y) shall a Suspension Period or Suspension
Periods be in effect for an aggregate of 60 days or more in any calendar year
and (z) may the Company deliver notice of a Suspension Period to the Investor or
otherwise attempt to exercise its rights pursuant to clauses (i) and (ii) of
this Section
4 in connection with the Initial Registration Request.

         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

         

        SECTION
5

         

        HOLDBACK
AGREEMENTS

         

        The
restrictions in this Section shall apply for as long as the Investor is the
beneficial owner of any Registrable Securities.  If the Company sells
Company Shares or other securities convertible into or exchangeable for (or
otherwise representing a right to acquire) Company Shares in a primary
underwritten offering pursuant to any registration statement under the
Securities Act (but only if the Investor is provided its piggyback rights, if
any, in accordance with Sections
3(a) and 3(b)),
or if any other Person sells Company Shares in a secondary underwritten offering
pursuant to a Piggyback Registration in accordance with Sections
3(a) and 3(c),
and if the managing underwriters for such offering advise the Company (in which
case the Company promptly shall notify the Investor) that a public sale or
distribution of Company Shares outside such offering would materially adversely
affect such offering, then, if requested by the Company, the Investor shall
agree, as contemplated in this Section, not to sell, or request the registration
of, any Registrable Securities (or any securities of any Person that are
convertible into or exchangeable for, or otherwise represent a right to acquire,
any Registrable Securities) for a period (each such period, a “Holdback
Period”) beginning on the 15th day
before the pricing date for the underwritten offering and extending through the
earlier of (a) the 90th day
after such pricing date (subject to customary extensions); and (b) such
earlier day (if any) as may be designated for this purpose by the managing
underwriters for such offering (each such agreement of the Investor, a “Holdback
Agreement”).  Each Holdback Agreement shall be in writing in
form and substance satisfactory to the Company and the managing
underwriters.  Notwithstanding the foregoing, the Investor shall not
be obligated to make a Holdback Agreement unless the Company and each selling
shareholder in such offering also execute agreements substantially similar to
such Holdback Agreement relating to public sales or distributions of Company
Shares outside the applicable offering.

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

         

        SECTION
6

         

        REGISTRATION
PROCEDURES

         

        (a)           Whenever
the Investor requests that any Registrable Securities be registered pursuant to
this Agreement, the Company shall use reasonable best efforts to effect, as soon
as practicable and otherwise as and when provided herein, the registration and
(if applicable) the sale of such Registrable Securities in accordance with the
intended methods of disposition thereof, and, pursuant thereto, the Company
shall, as soon as practicable as provided herein:

         

        (i)           subject
to the other provisions of this Agreement, use reasonable best efforts to
prepare and file with the SEC a Registration Statement with respect to such
Registrable Securities and cause such Registration Statement to become effective
(unless it is automatically effective upon filing);

         

        (ii)           use
reasonable best efforts to prepare and file with the SEC such amendments and
supplements to such Registration Statement and the Prospectus used in connection
therewith as may be necessary to comply with the applicable requirements of the
Securities Act and to keep such Registration Statement effective for the
relevant period required hereunder, but no longer than is necessary to complete
the distribution of Company Shares covered by such Registration Statement, and
to comply with the applicable requirements of the Securities Act with respect to
the disposition of all Company Shares covered by such Registration Statement
during such period in accordance with the intended methods of disposition set
forth in such Registration Statement;

         

        (iii)           use
reasonable best efforts to obtain the withdrawal of any order suspending the
effectiveness of any Registration Statement, or the lifting of any suspension of
the qualification or exemption from qualification of any Registrable Securities
for sale in any jurisdiction in the United States;

         

        (iv)           deliver,
without charge, such number of copies of the preliminary and final Prospectus
and any supplement thereto as the Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities of the Investor covered
by such Registration Statement in conformity with the requirements of the
Securities Act;

         

        (v)           use
reasonable best efforts to register or qualify such Registrable Securities under
such other securities or blue sky laws of such U.S. jurisdictions as the
Investor reasonably requests and continue such registration or qualification in
effect in such jurisdictions for as long as the applicable Registration
Statement may be required to be kept effective under this Agreement; provided
that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it or any of its subsidiaries would not
otherwise be required to qualify but for this subparagraph (v);
(B) subject itself or any of its subsidiaries to taxation in any such
jurisdiction; or (C) consent to general service of process for itself or
any of its subsidiaries in any such jurisdiction;

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

         

        (vi)           notify
the Investor and each distributor of such Registrable Securities identified by
the Investor, at any time when a Prospectus relating thereto would be required
under the Securities Act to be delivered by such distributor, of the occurrence
of any event as a result of which the Prospectus included in such Registration
Statement contains an untrue statement of a material fact or omits a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and, at the request of the Investor,
the Company shall use reasonable best efforts to prepare, as soon as practical,
a supplement or amendment to such Prospectus so that, as thereafter delivered to
any prospective purchasers of such Registrable Securities, such Prospectus shall
not contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;

         

        (vii)           on
the effective date of any Registration Statement filed pursuant to Section
2(a), the Company shall cause to be delivered to the Investor (i) an
opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP, counsel for the
Company (or such other counsel reasonably acceptable to the Investor), dated the
effective date and addressed to the Investor, substantially to the effect set
forth in Annex
A hereto and otherwise in form and substance reasonably satisfactory to
the Investor; and (ii) to the extent allowed pursuant to professional standards,
a customary comfort letter of Friedman LLP, independent accountants to the
Company, dated the effective date and addressed to the Investor, confirming that
they are independent accountants within the meaning of the Securities Act and
the Exchange Act and the respective applicable rules and regulations adopted by
the SEC thereunder and otherwise in form and substance reasonably satisfactory
to the Investor;

         

        (viii)                      in
the case of any block trade (whether on a principal or agency basis) involving
Registrable Securities, whether pursuant to a Registration Statement or
otherwise, take all such other customary and reasonable actions as the Investor
or the relevant dealer may request in order to facilitate the disposition of
such Registrable Securities pursuant to such block trade, including the entry
into any agreement for the indemnification of such dealer and the provision of
opinions of counsel and comfort letters that are consistent with customary and
reasonable practices for such transactions;

         

        (ix)           in
the case of an underwritten offering in which the Investor participates pursuant
to a Registration or a Piggyback Registration, enter into an underwriting
agreement in substantially the form used by the Company at that time for
underwritten offerings of that kind, with appropriate modification, containing
such provisions (including provisions for indemnification, lockups, opinions of
counsel and comfort letters), and take all such other customary and reasonable
actions as the managing underwriters of such offering may request in order to
facilitate the disposition of such Registrable Securities (including, making
members of senior management of the Company available at reasonable times and
places to participate in  “road-shows” that the managing underwriter
determines are necessary to effect the offering);

         

        (x)           to
the extent not prohibited by applicable law, (A) make reasonably available,
for inspection by the Investor, a prospective purchaser in case of a block
trade, or the managing underwriters in case of an underwritten offering and any
attorneys and accountants acting for the Investor, such prospective purchaser or
such managing underwriters, pertinent corporate documents and financial and
other records of the Company and its subsidiaries; (B) cause the Company’s
officers and employees to supply information reasonably requested by the
Investor, such prospective purchaser or such managing underwriters or attorneys
in connection with such offering; (C) make the Company’s independent
accountants available for the Investor’s, such prospective purchaser’s or such
managing underwriter’s due diligence and have them provide customary comfort
letters to the Investor  or such managing underwriters in connection
therewith; and (D) cause the Company’s counsel to furnish customary legal
opinions to the Investor or such  managing underwriters in connection
therewith; provided,
however,
that such records and other information shall be subject to such confidential
treatment as is customary for  due diligence reviews;

         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

         

        (xi)           use
reasonable best efforts to cause all such Registrable Securities to be listed on
NASDAQ or any successor primary securities exchange (if any) on which Company
Shares are then listed;

         

        (xii)           provide
a transfer agent and registrar for all such Registrable Securities not later
than the effective date of such Registration Statement and, a reasonable time
before any proposed sale of Registrable Securities pursuant to a Registration
Statement, provide the transfer agent with printed certificates for the
Registrable Securities to be sold or such other applicable evidence of such
Registrable Securities, subject to the provisions of Section 10;

         

        (xiii)                      make
generally available to its shareholders a consolidated earnings statement (which
need not be audited unless required by law, including the Securities Act) for a
period of 12 months beginning after the effective date of the Registration
Statement as soon as reasonably practicable after the end of such period, which
earnings statement shall satisfy the requirements of an earning statement under
Section 11(a) of the Securities Act and Rule 158 thereunder;
and

         

        (xiv)                      promptly
notify the Investor and the managing underwriters of any underwritten offering,
if any:

         

        (A)           when
the Registration Statement, any pre-effective amendment, the Prospectus or any
Prospectus supplement or any post-effective amendment to the Registration
Statement has been filed and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective;

         

        (B)           of
any request by the SEC for amendments or supplements to the Registration
Statement or the Prospectus or for any additional information regarding the
Investor;

         

        (C)           of
the notification to the Company by the SEC of its initiation of any proceeding
with respect to the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement; and

         

        (D)           of
the receipt by the Company of any notification with respect to the suspension of
the qualification of any Registrable Securities for sale under the applicable
securities or blue sky laws of any jurisdiction.

         

        For the
avoidance of doubt, the provisions of clauses (ix), (xiii) and (xiv) of
this Section shall apply only in respect of an underwritten offering and only if
the number of Registrable Securities to be sold in the offering would (based on
the then-current outstanding Company Shares) be at least equal to the Minimum
Amount.

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

         

        (b)           No
Registration Statement (including any amendments thereto) shall contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein not misleading,
and no Prospectus (including any supplements thereto) shall contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, in each case, except for any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission of a
material fact made in reliance on and in conformity with written information
furnished to the Company by or on behalf of the Investor or any underwriter or
other distributor specifically for use therein.

         

        (c)           At
all times after the Company has filed a Registration Statement with the SEC
pursuant to the requirements of the Securities Act and until the Termination
Date, the Company shall use reasonable best efforts to continuously maintain in
effect the registration of Company Shares under Section 12 of the Exchange
Act and to use reasonable best efforts to file all reports required to be filed
by it under the Securities Act and the Exchange Act.

         

        (d)           The
Company may require the Investor and each distributor of Registrable Securities
as to which any Registration is being effected to furnish to the Company
documentation and information regarding such Person and the distribution of such
securities as the Company may from time to time reasonably request in connection
with such Registration.

         

        (e)           The
Investor agrees by having Company Shares treated as Registrable Securities
hereunder that, upon being advised in writing by the Company of the occurrence
of an event pursuant to Section 6(a)(vi),
the Investor will immediately discontinue (and direct any other Affiliates
making offers and sales of Registrable Securities to immediately discontinue)
offers and sales of Registrable Securities pursuant to any Registration
Statement (other than those pursuant to a plan that is in effect prior to such
time and that complies with Rule 10b5-1 of the Exchange Act) until it is advised
in writing by the Company that the use of the Prospectus may be resumed and is
furnished with a supplemented or amended Prospectus as contemplated by Section 6(a)(vi),
and, if so directed by the Company, the Investor will deliver to the Company all
copies, other than permanent file copies then in the Investor’s possession, of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice.

         

        (f)           The
Company may prepare and deliver an issuer free writing prospectus (as such term
is defined in Rule 405 under the Securities Act) in lieu of any supplement
to a Prospectus, and references herein to any “supplement” to a Prospectus shall
include any such issuer free-writing prospectus.  Neither the Investor
nor any other seller of Registrable Securities may use a free writing prospectus
to offer or sell any such shares without the Company’s prior written
consent.

         

        (g)           It
is understood and agreed that any failure of the Company to file a registration
statement or any amendment or supplement thereto or to cause any such document
to become or remain effective or usable within or for any particular period of
time as provided in Section 2,
3,
or 6
or otherwise in this Agreement, due to reasons that are not reasonably within
its control, or due to any refusal of the SEC to permit a registration statement
or prospectus to become or remain effective or to be used because of unresolved
SEC comments thereon (or on any documents incorporated therein by reference)
despite the Company’s good faith and reasonable best efforts to resolve those
comments, shall not be a breach of this Agreement (and will not trigger any
liquidated damages under Section
2(g)).

         

        
          
            
            

          

          
            13

            
              

            

          

          
            
            

          

        

         

        (h)           It
is further understood and agreed that the Company shall not have any obligations
under this Section at any time on or after the Termination Date, unless an
underwritten offering in which the Investor participates has been priced but not
completed prior to the Termination Date, in which event the Company’s
obligations under this Section shall continue with respect to such offering
until it is so completed (but not more than 90 days after the commencement of
the offering).

         

        (i)           Notwithstanding
anything to the contrary in this Agreement, the Company shall not be required to
file a Registration Statement or include Registrable Securities in a
Registration Statement unless it has received from the Investor, at least five
Business Days prior to the anticipated filing date of the Registration
Statement, information and documents reasonably required by the Company to be
provided by the Investor.

         

        SECTION
7

         

        REGISTRATION
EXPENSES

         

        (a)           All
reasonable expenses incident to the Company’s performance of or compliance with
this Agreement, including all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, FINRA filing fees, listing
application fees, printing expenses, transfer agent’s and registrar’s fees, cost
of distributing Prospectuses in preliminary and final form as well as any
supplements thereto, and fees and disbursements of counsel for the Company and
all independent certified public accountants and other Persons retained by the
Company (but not including any underwriting discounts or commissions
attributable to the sale of Registrable Securities or fees and expenses of
counsel and any other advisors representing any underwriters or other
distributors), shall be borne by the Company (such expenses being herein called
“Registration
Expenses”).  The Investor shall bear the cost of all
underwriting discounts and commissions associated with any sale of Registrable
Securities and shall pay all of its own costs and expenses of any sale under
this Agreement, including all fees and expenses of any counsel (and any other
advisers) representing the Investor and any stock transfer taxes.

         

        (b)           The
obligation of the Company to bear the expenses described in Section 7(a)
shall apply irrespective of whether a registration, once properly demanded or
requested becomes effective or is withdrawn or suspended; provided,
however,
that Registration Expenses for any Registration Statement withdrawn solely at
the request of the Investor (unless withdrawn following commencement of a
Suspension Period pursuant to Section 4)
shall be borne by the Investor.

         

        
          SECTION
8

           

          INDEMNIFICATION

           

          (a)           The
Company shall indemnify, to the fullest extent permitted by law, the Investor
and each Person who controls the Investor (within the meaning of the Securities
Act) against all losses, claims, damages, liabilities, judgments, costs
(including reasonable costs of investigation) and expenses (including reasonable
attorneys’ fees) arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus or any amendment thereof or supplement thereto (including any “free
writing prospectus” filed by the Company (as defined in Rule 433 under the
Securities Act)) or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are made in
reliance and in conformity with information furnished in writing to the Company
by the Investor expressly for use therein.  In connection with an
underwritten offering in which the Investor participates conducted pursuant to a
registration effected hereunder, the Company shall indemnify each participating
underwriter and each Person who controls such underwriter (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the Investor.

        

         

        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

         

         

        (b)           In
connection with any Registration Statement in which the Investor is
participating, the Investor shall furnish to the Company in writing such
information as the Company reasonably requests for use in connection with any
such Registration Statement or Prospectus, or amendment or supplement thereto,
and shall indemnify, to the fullest extent permitted by law, the Company, its
officers and directors and each Person who controls the Company (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities,
judgments, costs (including reasonable costs of investigation) and expenses
(including reasonable attorneys’ fees) arising out of or based upon any untrue
or alleged untrue statement of material fact contained in the Registration
Statement or Prospectus, or any amendment or supplement thereto (including any
“free writing prospectus” (as defined in Rule 405 of the Securities Act and
required to be filed by the Company with the SEC or retained by the Company
under Rule 433 of the Securities Act), or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that the same are made in reliance and in conformity with information furnished
in writing to the Company by or on behalf of the Investor expressly for use
therein.  The Investor agrees that, unless it has or shall have
obtained the prior written consent of the Company, it has not made and will not
make any offer relating to the Registrable Securities that would constitute a
“free writing prospectus”  (as defined in Rule 405 of the Securities
Act).

         

        (c)           Any
Person entitled to indemnification hereunder (an “Indemnified
Party”) shall give written notice to the party indemnifying it (the
“Indemnifying
Party”) of any claim with respect to which it seeks indemnification
promptly after discovery by such Indemnified Party of any matters giving rise to
a claim for indemnification.  Such notice shall describe such claim in
reasonable detail.  Failure to so notify the Indemnifying Party shall
not relieve the Indemnifying Party from any liability that it may have to an
Indemnified Party except to the extent that the Indemnifying Party is actually
prejudiced thereby.  The Indemnified Party shall permit such
Indemnifying Party to assume the defense of such claim with counsel reasonably
satisfactory to the Indemnified Party.  An Indemnifying Party who is
entitled to, and elects to, assume the defense of a claim shall not be obligated
to pay the fees and expenses of more than one counsel (in addition to one local
counsel) for Persons indemnified (hereunder or otherwise) by such Indemnifying
Party with respect to such claim (and all other claims arising out of the same
circumstances), unless in the reasonable judgment of any Indemnified Party there
may be one or more legal or equitable defenses available to such Indemnified
Party which are in addition to or may conflict with those available to another
Indemnified Party with respect to such claim, in which case such maximum number
of counsel for all Indemnified Parties shall be two rather than
one.  If any Indemnifying Party is entitled to, and elects to, assume
the defense of a claim, the Indemnified Party shall continue to be entitled to
participate in the defense thereof, with counsel of its own choice, but, except
as set forth above, the Indemnifying Party shall not be obligated to reimburse
the Indemnified Party for the costs thereof.  If the Indemnifying
Party assumes the defense of any claim, all Indemnified Parties shall deliver to
the Indemnifying Party copies of all notices and documents (including court
papers) received by the Indemnified Party related to the claim, and each
Indemnified Party shall cooperate in the defense or prosecution of such
claim.  Such cooperation shall include the retention and (upon the
Indemnifying Party’s request) the provision to the Indemnifying Party of records
and information that are reasonably relevant to such claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.  The Indemnifying
Party shall not be subject to any liability for any settlement made by the
Indemnified Party without the Indemnifying Party's written consent (but such
consent will not be unreasonably withheld or delayed).  The
Indemnifying Party shall not consent to the entry of any judgment or enter into
or agree to any settlement relating to a claim or action for which any
Indemnified Party would be entitled to indemnification by any Indemnifying Party
hereunder unless such judgment or settlement imposes no ongoing obligations on
any such Indemnified Party and includes as an unconditional term the giving, by
all relevant claimants and plaintiffs to such Indemnified Party, of a release,
reasonably satisfactory in form and substance to such Indemnified Party, from
all liabilities in respect of such claim or action for which such Indemnified
Party would be entitled to such indemnification.  The Indemnifying
Party shall not be liable hereunder for any amount paid or payable or incurred
pursuant to or in connection with any judgment entered or settlement effected
with the consent of an Indemnified Party unless the Indemnifying Party has also
consented to such judgment or settlement.

         

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

        

         

        (d)           The
indemnification provided for under this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Party or any officer, director or controlling Person of such Indemnified Party
and shall survive the transfer of securities and the Termination Date but only
with respect to offers and sales of Registrable Securities made before the
Termination Date or during the period following the Termination Date referred to
in Section
6(h).

         

        (e)           If
the indemnification provided for in or pursuant to this Section is due in
accordance with the terms hereof, but is held by a court to be unavailable or
unenforceable in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then each applicable Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the statements or omissions which result
in such losses, claims, damages, liabilities or expenses as well as any other
relevant equitable considerations.  The relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Indemnifying
Party or by the Indemnified Party, and by such Party’s relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.  In no event shall the liability of the
Indemnifying Party be greater in amount than the amount for which such
Indemnifying Party would have been obligated to pay by way of indemnification if
the indemnification provided for under Section 8(a)
or 8(b)
hereof had been available under the circumstances.

         

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

         

        SECTION
9

         

        SECURITIES
ACT RESTRICTIONS

         

        The
Registrable Securities are restricted securities under the Securities Act and
may not be offered or sold except pursuant to an effective registration
statement or an available exemption from registration under the Securities
Act.  Accordingly, the Investor shall not, directly or through others,
offer or sell any Registrable Securities except pursuant to a Registration
Statement or pursuant to an exemption from, or a transaction not subject to,
registration under the Securities Act.

         

        SECTION
10

         

        TRANSFERS
OF RIGHTS  

         

        If the
Investor transfers any Registrable Securities to an Affiliate, such Affiliate
shall be a Permitted Transferee and such Permitted Transferee shall, together
with all other such Permitted Transferees and the Investor, also have the rights
of the Investor under this Agreement with respect to such Registrable Securities
(including all of the Investor’s rights in Section
8), but only if the Permitted Transferee signs and delivers to the
Company a written acknowledgment that it has joined with the Investor and the
other Permitted Transferees as a party to this Agreement and has assumed,
severally but not jointly, the rights and obligations of the Investor hereunder
with respect to the Registrable Securities transferred to it by the
Investor.  Each such transfer shall be effective when (but only when)
the Permitted Transferee has signed and delivered the written acknowledgment to
the Company's reasonable satisfaction.  Upon any such effective
transfer, the Permitted Transferee shall automatically have the rights so
transferred, and the Investor’s obligations under this Agreement, and the rights
with respect to the Registrable Securities not so transferred, shall
continue.  Notwithstanding any other provision of this Agreement, no
Person who acquires securities transferred in violation of this Agreement or the
Investment Agreement, or who acquires securities that are not or upon
acquisition cease to be Registrable Securities, shall have any rights under this
Agreement with respect to such securities, and such securities shall not have
the benefits afforded hereunder to Registrable Securities.

         

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

         

        SECTION
11

         

        MISCELLANEOUS

         

        (a)           Notices.  All
notices, requests, demands, consents and other communications given or required
to be given under this Agreement and under the related documents shall be in
writing and delivered to the applicable party at the address indicated
below:

         

        (i)           If
to the Investor:

         

        Kien Huat
Realty III Limited

        c/o Kien
Huat Realty Sdn Bhd.

        22nd
Floor Wisma Genting

        Jalan
Sultan Ismail

        50250
Kuala Lumpur

        Malaysia

        Attention:  Gerard
Lim

        Fax:  +603
2162 4951

         

        with a
copy to:

         

        Cleary
Gottlieb Steen & Hamilton LLP

        One
Liberty Plaza

        New York,
NY 10006

        Attention:  Steven
L. Wilner

        Fax:  (212)
225-3999

         

        (ii)           If
to the Company:

         

        Empire
Reports, Inc.

        Monticello
Casino and Raceway

        Route
17B, P.O. Box 5013

        Monticello,
NY  12701

        Attention:  Joseph
Bernstein

        Fax:  (845)
807-0000

         

        with a
copy to:

         

        Olshan
Grundman Frome Rosenzweig & Wolosky LLP

        Park
Avenue Tower

        65 East
55th Street

        New York,
NY 10022

        Attention:  Robert
H. Friedman

        Fax:  (212)
451-2222

         

         

        or, as to
each party at such other address as shall be designated by such party in a
written notice to the other parties complying as to delivery with the terms of
this subsection.  All notices may be sent by facsimile, or registered
or certified mail, return receipt requested, postage prepaid.  Notice
shall be effective upon actual receipt thereof at designated
address.

         

        
          
            
            

          

          
            18

            
              

            

          

          
            
            

          

        

         

        (b)           No
Waivers.  Any term, condition or provision of this Agreement
may be waived to the extent permitted by law in writing at any time by the party
that is entitled to the benefits thereof.  The waiver of any breach of
any provision under this Agreement by any party shall not be deemed to be a
waiver of any preceding or subsequent breach under this Agreement.  No
such waiver shall be effective unless in writing.

         

        (c)           Assignment.  Neither
this Agreement nor any right, remedy, obligation nor liability arising hereunder
or by reason hereof shall be assignable by any party hereto without the prior
written consent of the other party, and any attempt to assign any right, remedy,
obligation or liability hereunder without such consent shall be void, except an
assignment, in the case of a merger or consolidation where such party is not the
surviving entity, or a sale of substantially all of its assets, to the entity
which is the survivor of such merger or consolidation or the purchaser in such
sale; provided,
however,
that the Investor shall have the right to assign its rights and obligations
hereunder to one or more of its Affiliates in connection with a transfer to such
Affiliate(s) of Registrable Securities.

         

        (d)           No
Third-Party Beneficiaries.  Except as provided in Section
8, nothing contained in this Agreement, expressed or implied, is intended
to confer upon any person or entity other than the Company and the Investor (and
any Permitted Transferee to which an assignment is made in accordance with this
Agreement), any benefits, rights, or remedies.

         

        (e)           Governing
Law; Submission to Jurisdiction; Waiver of Jury Trial,
Etc.  This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such State.  The parties hereto
agree that any suit, action or proceeding brought by either party seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby shall be brought in
any federal or state court located in New York County, New York.  Each
of the parties hereto submits to the jurisdiction of any such court in any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of, or in connection with, this Agreement or the transactions
contemplated hereby and hereby irrevocably waives the benefit of jurisdiction
derived from present or future domicile or otherwise in such action or
proceeding.  Each party hereto irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.

         

        (f)           Counterparts;
Effectiveness.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.

         

        (g)           Entire
Agreement.  This Agreement contains the entire understanding of
and all agreements between the parties hereto with respect to the subject matter
hereof and supersedes any prior or contemporaneous agreements or understandings,
oral or written, pertaining to any such matters which agreements or
understandings shall be of no force or effect for any purpose.

         

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

         

        (h)           Severability.  If
any provision of this Agreement, as applied to any part or circumstance, shall
be adjudged by a court of competent jurisdiction to be void, invalid or
unenforceable, the same shall in no way affect any other provision of this
Agreement, the application of any such provision and any other circumstances or
the validity or enforceability of the other provisions of this
Agreement.

         

        (i)           Amendments.  The
provisions of this Agreement, including the provisions of this sentence, may be
amended, modified or supplemented, only with the prior written consent of the
Company and the Investor.

         

        [Execution
Page Follows]

         

        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

         

        IN
WITNESS WHEREOF, this Agreement has been duly executed by each of the parties
hereto as of the date first written above.

         

        
          
            	 
      	
                    Empire
      Reports, Inc.

                  
	 
      	 
      
	 
      	
                    By:

                  	/s/
      Joseph E. Bernstein
	 
      	 
      	
                    Name:

                  	Joseph
      E. Bernstein  
	 
      	 
      	
                    Title:

                  	Chief
      Executive Officer

          

          

             

            
              
                	 
      	
                        
                          Kien
      Huat Realty III Limited

                        

                      
	 
      	 
      
	 
      	
                        By:

                      	/s/
      Gerard Lim
	 
      	 
      	
                        Name:

                      	Gerard
      Lim
	 
      	 
      	
                        Title:

                      	Authorized
      Signatory  

              

               

              
                
                  
                  

                

                
                  
                  

                  
                    

                  

                

                
                  
                  

                

              

               

            

          

        

        Annex
A

        Form of
Opinions of Counsel

         

        (i)                      The
Company is validly existing as a corporation under the laws of its jurisdiction
of organization, with corporate power to own its properties and conduct its
business as described in the Registration Statement and the prospectus included
therein, as amended or supplemented to the effective date of the Registration
Statement (the “Final
Prospectus”) and to perform its obligations under the Investment
Agreement and the Registration Rights Agreement;

         

        (ii)                      The
execution and delivery of the Investment Agreement and the Registration Rights
Agreement (the “Transaction
Documents”) have been duly authorized by the Company, and the Transaction
Documents are the valid and binding agreements of the Company, enforceable
against the Company in accordance with their operative terms;

         

        (iii)                      The
Registration Statement has become effective under the Securities Act; any
required filing of the Final Prospectus and any amendments or supplements
thereto pursuant to Rule 424(b) under the Securities Act has been made in
the manner and within the time period required by Rule 424(b); to the
knowledge of such counsel, no stop order suspending the effectiveness of the
Registration Statement or any notice objecting to its use has been issued by the
SEC, no proceedings for that purpose have been instituted or threatened by the
SEC, and the Registration Statement and the Final Prospectus (other than the
financial statements and related notes, financial statement schedules and other
financial, accounting and statistical information contained therein or omitted
thereunder, as to which such counsel need express no opinion) comply as to form
in all material respects with the applicable requirements of the Securities Act
and the rules thereunder; and although counsel is not passing upon and does not
assume responsibility for the independent review or verification or accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Final Prospectus, such counsel has no reason to believe that on
the effective date the Registration Statement contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Final Prospectus as of its date included any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading (in
each case, other than the financial statements and other financial and
statistical information contained therein, as to which such counsel need express
no opinion);

         

        (iv)                      The
Company’s authorized equity capitalization as
of                ,
20   is as set forth in the Registration Statement and the Final
Prospectus; the statement under the caption “Description of Capital Stock” in
the Registration Statement, to the extent they constitute matters of law or
legal conclusions, constitute an accurate summary in all material respects of
such matters and conclusions; the shares of the Company common stock to be sold
pursuant to the Transaction Documents have been duly and validly authorized and,
when issued and delivered in accordance with the Transaction Documents, will be
validly issued, fully paid and nonassessable; the certificate for the Company’s
common stock complies in all material respects with the applicable statutory
requirements; and, to the knowledge of such counsel, the holders of outstanding
shares of capital stock of the Company are not entitled to preemptive or other
rights to subscribe for the Registrable Securities;

         

        
          
            
            

          

          
            A-1

            
              

            

          

          
            
            

          

        

         

        (v)                      None
of the issue of such Registrable Securities, the consummation of any other of
the transactions contemplated by the Investment Agreement and the Registration
Rights Agreement, or the fulfillment of the terms thereof will conflict with,
result in a breach or violation of, or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or its subsidiaries
pursuant to, (i) the charter or by-laws of the Company or its subsidiaries,
(ii) the terms of any indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which the Company or its subsidiaries is a party or
bound or to which its or their property is subject, which documentation is filed
or incorporated by reference as an exhibit to the Registration Statement, or
(iii) any federal or New York statute, law, rule or regulation, or any
judgment, order or decree known to us to be applicable to the Company or its
subsidiaries of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or its
subsidiaries or any of its or their properties, except in the case of clauses
(ii) and (iii) for any conflicts, breaches, violations or impositions which
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on the Company and its subsidiaries, taken as a whole;
and

         

        (vi)                      No
consent, approval, authorization or other order of, or registration or filing
with, any court or other governmental authority or agency under any applicable
law, is required in connection with the Company’s execution and performance of
its obligations under the Investment Agreement and the Registration Rights
Agreement, except such as have been obtained and such as may be required under
the Securities Act, the Exchange Act, applicable rules under the Securities Act
and the Exchange Act and applicable Nasdaq listing standards (provided that
counsel provides no opinion as to any necessary qualification under state
securities or blue sky laws of the various jurisdictions in which the
Registrable Securities are being offered and no opinion with respect to FINRA
rules and regulations).

         

        
          
            
            

          

          
            A-2

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