Document:

Exhibit 10.1

20005 DELAWARE INC.

- and -

SLRD THOROUGHBRED TRAINING CENTER, INC.

 

 

SAN LUIS REY DOWNS 

SAN DIEGO, CALIFORNIA

AGREEMENT
OF PURCHASE AND SALE

TABLE OF CONTENTS

ARTICLE 1

INTERPRETATION

	
  1.1

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
  1.2

  	
   

  	
  Extended Meanings

  	
   

  	
  5

  
	
  1.3

  	
   

  	
  Headings

  	
   

  	
  5

  
	
  1.4

  	
   

  	
  Currency

  	
   

  	
  5

  
	
  1.5

  	
   

  	
  Severability

  	
   

  	
  5

  
	
  1.6

  	
   

  	
  Governing Law

  	
   

  	
  6

  
	
  1.7

  	
   

  	
  Time

  	
   

  	
  6

  
	
  1.8

  	
   

  	
  Schedules

  	
   

  	
  6

  
	
   

  	
   

  	
  ARTICLE 2

  	
   

  	
   

  
	
   

  	
   

  	
  AGREEMENT
  OF PURCHASE AND SALE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Purchase and Sale

  	
   

  	
  6

  
	
  2.2

  	
   

  	
  Initial Deliveries by Vendor

  	
   

  	
  6

  
	
  2.3

  	
   

  	
  Physical Inspections

  	
   

  	
  9

  
	
  2.4

  	
   

  	
  Purchaser’s Investigations

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE 3

  	
   

  	
   

  
	
   

  	
   

  	
  PURCHASE
  PRICE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Method of Payment of Purchase Price

  	
   

  	
  10

  
	
  3.2

  	
   

  	
  Adjustments

  	
   

  	
  10

  
	
  3.3

  	
   

  	
  Holdback

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE 4

  	
   

  	
   

  
	
   

  	
   

  	
  CONDITIONS
  OF CLOSING

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Conditions for Vendor

  	
   

  	
  12

  
	
  4.2

  	
   

  	
  Conditions for Purchaser

  	
   

  	
  12

  
	
  4.3

  	
   

  	
  Non-Satisfaction of Conditions

  	
   

  	
  14

  
	
  4.4

  	
   

  	
  Reasonable Efforts to Satisfy Conditions

  	
   

  	
  15

  
	
  4.5

  	
   

  	
  Separate Tax Parcel

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE 5

  	
   

  	
   

  
	
   

  	
   

  	
  TITLE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Search of Title

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE 6

  	
   

  	
   

  
	
   

  	
   

  	
  CLOSING
  MATTERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Closing Arrangements

  	
   

  	
  16

  
	
  6.2

  	
   

  	
  Vendor’s Documents

  	
   

  	
  16

  
	
  6.3

  	
   

  	
  Purchaser’s Documents

  	
   

  	
  17

  
	
  6.4

  	
   

  	
  Taxes and Fees

  	
   

  	
  17

  
	
  6.5

  	
   

  	
  Escrow Closing

  	
   

  	
  18

  

 

 i
 

 

	
  

  	
   

  	
  ARTICLE 7

  	
   

  	
   

  
	
   

  	
   

  	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Representations, Warranties and Covenants of the
  Vendor

  	
   

  	
  18

  
	
  7.2

  	
   

  	
  Representations and Warranties of the Purchaser

  	
   

  	
  22

  
	
  7.3

  	
   

  	
  Survival

  	
   

  	
  23

  
	
  7.4

  	
   

  	
  Non-Waiver

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE 8

  	
   

  	
   

  
	
   

  	
   

  	
  INTERIM
  MATTERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  Interim Period

  	
   

  	
  24

  
	
  8.2

  	
   

  	
  Approvals of the Purchaser

  	
   

  	
  24

  
	
  8.3

  	
   

  	
  Notice of Default

  	
   

  	
  24

  
	
  8.4

  	
   

  	
  Approvals

  	
   

  	
  25

  
	
  8.5

  	
   

  	
  Risk of Condemnation and Eminent Domain

  	
   

  	
  25

  
	
  8.6

  	
   

  	
  General Covenants of the Vendor

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE 9

  	
   

  	
   

  
	
   

  	
   

  	
  ENVIRONMENTAL
  INDEMNIFICATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
   

  	
  Environmental Indemnification by the Vendor

  	
   

  	
  26

  
	
  9.2

  	
   

  	
  Assignability of Environmental Indemnification

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE 10

  	
   

  	
   

  
	
   

  	
   

  	
  FUTURE
  DEVELOPMENT OF THE LANDS AND RELATED MATTERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.1

  	
   

  	
  Covenants of the Vendor

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE 11

  	
   

  	
   

  
	
   

  	
   

  	
  GENERAL

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.1

  	
   

  	
  As-Is/Where-Is Transaction

  	
   

  	
  28

  
	
  11.2

  	
   

  	
  Obligations as Covenants

  	
   

  	
  28

  
	
  11.3

  	
   

  	
  Tender

  	
   

  	
  28

  
	
  11.4

  	
   

  	
  Relationship of the Parties

  	
   

  	
  29

  
	
  11.5

  	
   

  	
  Amendment of Agreement

  	
   

  	
  29

  
	
  11.6

  	
   

  	
  Notices

  	
   

  	
  29

  
	
  11.7

  	
   

  	
  Lawyers as Agents

  	
   

  	
  30

  
	
  11.8

  	
   

  	
  Confidentiality

  	
   

  	
  30

  
	
  11.9

  	
   

  	
  No Solicitation

  	
   

  	
  30

  
	
  11.10

  	
   

  	
  Further Assurances

  	
   

  	
  30

  
	
  11.11

  	
   

  	
  Entire Agreement

  	
   

  	
  30

  
	
  11.12

  	
   

  	
  Waiver

  	
   

  	
  31

  
	
  11.13

  	
   

  	
  Survival after Termination

  	
   

  	
  31

  
	
  11.14

  	
   

  	
  Survival

  	
   

  	
  31

  
	
  11.15

  	
   

  	
  Assignment

  	
   

  	
  31

  
	
  11.16

  	
   

  	
  Successors and Assigns

  	
   

  	
  31

  
	
  11.17

  	
   

  	
  Counterparts

  	
   

  	
  31

  

 

 ii

AGREEMENT
OF PURCHASE AND SALE

MEMORANDUM OF AGREEMENT made as of the 7th day of June, 2007.

B E T W E E N:

20005 DELAWARE INC.,

(hereinafter referred to as the “Purchaser”),

OF
THE FIRST PART,

- and –

SLRD
THOROUGHBRED TRAINING CENTER, INC.,

(hereinafter
referred to as the “Vendor”),

OF
THE SECOND PART.

WHEREAS the Vendor is the owner of the Subject Assets (as hereinafter
defined);

WHEREAS the Vendor wishes to sell the Subject Assets and the Purchaser
wishes to purchase the Subject Assets from the Vendor on the terms and
conditions contained in this Agreement;

NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and the sum of $10.00 paid by each of the Vendor
and the Purchaser to the other and for other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged), the parties
hereto covenant and agree as follows:

ARTICLE 1 

INTERPRETATION

1.1                                                                               Definitions

In this Agreement the terms defined in this Section 1.1 shall have the
following meanings, unless the context expressly or by necessary implication
otherwise requires:

“Adjustment
Date” means the Closing Date;

“Adjustments”
has the meaning ascribed thereto in Section 3.2;

“Agreement”, “this
Agreement”, “the Agreement”, “hereto”, “hereof”, “herein”, “hereby”, “hereunder”
and similar expressions mean or refer to this Agreement, as amended or
supplemented from time to time in writing by the parties hereto;

“Applicable
Laws” means all statutes, laws, by-laws, regulations,
ordinances and orders of governmental or other public authorities having
jurisdiction;

“Approved Contracts” means any Contracts
entered into after the date of this Agreement for which the Purchaser has been
given its approval in accordance with Section 8.2;

“Approved Leases”  means any Leases entered into after
the date of this Agreement for which the Purchaser has been given its approval
in accordance with Section 8.2;

“Article”,
“Section”
and “Subsection”
mean and refer to the specified Article, Section and Subsection of this
Agreement;

“Balance”  has
the meaning ascribed thereto in Section 3.1;

“Business Day” means any day other than a Saturday, Sunday
or other day on which commercial banks are authorized or obligated to close
under the laws of the United States of America or the State of California;

“Claims”  means
claims, suits, proceedings, liabilities, obligations, losses, damages,
penalties, judgments, costs, expenses, fines, disbursements, legal fees on a
substantial indemnity basis, interest, demands and actions of any nature or any
kind whatsoever;

“Closing” means the closing of the Transaction;

“Closing Date” means June 7, 2007,
as such date may be extended in accordance with the provisions of this
Agreement, or such other date as the Vendor and the Purchaser may agree in
writing;

“Closing Documents” means the agreements, instruments and other
deliveries to be delivered on the Closing pursuant to Sections 6.2 and 6.3;

“Contracts” means any contracts and agreements entered
into by the Vendor or by which the Vendor is bound in respect of the severance,
development, construction, management, leasing, maintenance or operation of the
Lands;

“Deed” has the
meaning ascribed thereto in Subsection 6.2(a);

“Due Diligence” has the meaning ascribed thereto in Section
2.4(a);

“Due Diligence Date” means June 6, 2007;

“Encumbrances” means all mortgages, pledges, charges,
liens, debentures, trust deeds, assignments by way of security, security
interests, conditional sales contracts or other title retention agreements or
similar interests or instruments charging, or creating a security interest in
the Subject Assets or any part thereof or interest therein, and any agreements,
leases, licences, occupancy agreements, options, easements, rights of way,
restrictions, executions or other encumbrances (including notices or other
registrations in

 2
 

respect of any of the foregoing) affecting
title to the Subject Assets or any part thereof or interest therein;

“Enterprises LLC” means San Luis Rey Downs
Enterprises LLC;

“Environmental Laws” means all applicable federal, state,
municipal and local laws, including without limitation all statutes, by-laws
and regulations and all orders, directives and decisions rendered by, and
policies, instructions, guidelines and similar guidance of, any ministry,
department or administrative or regulatory agency relating to the protection of
the environment, occupational health and safety or the manufacture, processing,
distribution, use, treatment, storage, disposal, packaging, transport,
handling, containment, clean-up or other remediation or corrective action of
any Hazardous Substances;

“Environmental Permits” means all licences, permits, approvals,
consents, certificates, registrations and other authorizations issued pursuant
to Environmental Laws;

“Environmental Remediation”
has the meaning ascribed thereto in Section 3.3;

“Environmental Reports” means reports, audits and studies of the
nature described in Subsections 2.2(i);

“Escrow
Agent” has the meaning ascribed thereto in Section 6.1;

“Execution Date”
means the date as of which this Agreement is made, as set out in the first page
of this Agreement;

“Existing
Contracts”  means Contracts in force on the date of this
Agreement, which are listed on Schedule B attached hereto;

“Existing Leases” means Leases in force on the date of this
Agreement, which are listed on Schedule C attached hereto;

“Final Adjustment Date” has the meaning ascribed thereto in Section
3.2;

“Governmental Authority” means any government, regulatory authority,
government department, agency, commission, board, tribunal or court having
jurisdiction over the property;

“Hazardous Substances” means any pollutants, contaminants,
chemicals, deleterious substances, waste (including without limitation
industrial, toxic or hazardous wastes), petroleum or petroleum products,
asbestos, PCBs, underground storage tanks and the contents thereof, flammable
materials, radioactive materials, and/or molds as defined in Environmental
Laws;

“Holdback Amount”
has the meaning ascribed thereto in Section 3.3;

“Indemnity Period”
has the meaning ascribed thereto in Section 9.1;

 3
 

“Interim
Closing Documents” has the meaning ascribed thereto in Section 6.5;

“Lands”  means the fee simple interest in lands and
premises having an area of approximately 204.73 acres,
and legally described in the attached Schedule A, together with any and all
improvements located on or in the Lands and any and all development and density
rights, easements, rights-of-way and other rights and interests appurtenant
thereto and any and all improvements located therein;

“Leases”  means any agreements to lease, leases,
renewals of leases and other rights (including licences) granted by or on
behalf of the Vendor or its predecessors in title as owner of the Lands which
entitle any Person to possess or occupy any space on or within the Lands,
together with all security, guarantees and indemnities relating thereto;

“Non-Waiver Notice” has the meaning ascribed thereto in
Subsection 2.4(b);

“Notice” has the meaning ascribed thereto in Section
11.5;

“Occupancy Agreement”
means the occupancy agreement dated November 7, 1999 between the Vendor, as
landlord, and Enterprises LLC, as tenant, in respect of certain premises more
particularly described therein, as amended by addendum effective April 5, 2002
between the Vendor and Enterprises LLC;

“Permits” means,
to the extent assignable, all the right, title, benefit and interest of the
Vendor in any and all licenses, (other than pari mutuel or other horse racing
or gaming related licenses), franchises, governmental and other approvals,
development rights and permits relating to the Lands in the Vendor’s possession
or control;

“Permitted
Encumbrances” means unregistered and registered encumbrances,
liens, agreements and other instruments affecting the Lands which have been
accepted by the Purchaser by notice in writing to the Vendor on or before the
Due Diligence Date or have been deemed to be accepted by the Purchaser as per
the terms of Subsection 4.2(m);

“Person”
means an individual, partnership, corporation, trust, unincorporated
organization, government, or any department or agency thereof, and the
successors and assigns thereof or the heirs, executors, administrators or other
legal representatives of an individual;

“Purchase Price” means the amount of Twenty-Four Million Dollars ($24,000,000.00) subject
to the adjustments provided for in Section 3.2;

“Purchaser’s Solicitors” means Davies Ward Phillips & Vineberg LLP, Suite 4400, 1 First Canadian Place,
100 King Street West, Toronto, Ontario, Canada or such other firm or firms of
solicitors acting for the Purchaser and notice of which is provided to the
Vendor in accordance with this Agreement;

“Registration Documents” has the meaning ascribed thereto in Section
6.5 hereof;

“Requisitions Notice” has the meaning ascribed thereto in Section
5.1;

 4
 

“Statement
of Adjustments” has the meaning ascribed thereto in Section 3.2;

“Subject Assets” means the Lands, the Permits, the
Environmental Permits and all other assets, undertaking and property, tangible
or intangible, of the Vendor, if any, relating exclusively to the Lands;

“Tenants”  means all Persons having a right to possess
or occupy the Lands or any part thereof now or hereafter pursuant to a Lease;

“Time of Closing”
means 9:00 a.m. (Toronto time) on the Closing Date, or such other time on the
Closing Date as the Vendor and the Purchaser may agree;

“Title Commitment”
has the meaning ascribed thereto in Subsection 4.2(m);

“Title Insurer”
means Fidelity National Title
Insurance Company;

“Transaction” means the transaction of purchase and sale
of the Subject Assets provided for in this Agreement;

“Triple Net Lease” means the lease referred
to in Subsection 6.2(i); and

“Vendor’s Solicitors” means Sherry Meyerhoff Hanson & Crance LLP, 610 Newport Center Drive,
Suite 1200, Newport Beach, California 92660 , USA, or such other firm or firms of
solicitors acting for the Vendor from time to time and notice of which is
provided to the Purchaser in accordance with this Agreement.

1.2                                                                               Extended  Meanings

Words importing the singular include the plural and vice versa.  Words importing the masculine gender include
the feminine and neuter genders.

1.3                                                                               Headings

The
division of this Agreement into Articles, Sections, Subsections and other
subdivisions, the insertion of headings and the inclusion of a table of
contents are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.

1.4                                                                               Currency

Unless otherwise expressly stated in this Agreement, all references to
money shall refer to U.S. currency.

1.5                                                                               Severability

If any provision contained in this Agreement which is not a fundamental
term hereof, or its application to any Person or circumstance, shall to any
extent be invalid or unenforceable, the remainder of this Agreement or the
application of such provision to Persons or circumstances other than those to
which it is held invalid or unenforceable shall not be

 5
 

affected, and each provision of this
Agreement shall be separately valid and enforceable to the fullest extent
permitted by law.

1.6                                                                               Governing Law

This Agreement shall be governed by and construed in accordance with
the laws of the State of California and the applicable laws of the United
States of America.  References to
statutes shall be deemed to be references to such statutes as they exist on the
date of this Agreement.

1.7                                                                               Time

Time
shall be of the essence of this Agreement. 
Except as expressly set out in this Agreement, the computation of any
period of time referred to in this Agreement shall exclude the first day and
include the last day of such period.  If
the time limited for the performance or completion of any matter under this
Agreement expires or falls on a day that is not a Business Day, the time so
limited shall extend to the next following Business Day.  The time limited for performing or completing
any matter under this Agreement may be extended or abridged by an agreement in
writing by the parties or by their respective solicitors. All references herein
to time are references to Toronto time.

1.8                                                                               Schedules

The following schedules form part of this Agreement:

	
  Schedule A

  	
  –

  	
  Legal Description of the Lands

  
	
  Schedule B

  	
  –

  	
  List of Existing Contracts

  
	
  Schedule C

  	
  –

  	
  List of Existing Leases

  

 

ARTICLE 2 

AGREEMENT OF PURCHASE AND SALE

2.1                                                                               Purchase and Sale

The Purchaser hereby offers and agrees to purchase the Subject Assets
from the Vendor, and the Vendor hereby agrees to sell the Subject Assets to the
Purchaser, all for the Purchase Price in accordance with, and subject to, the
terms and conditions of this Agreement.

2.2                                                                               Initial Deliveries by Vendor 

No later than 5:00 p.m. on the Business Day prior to the Closing Date,
the Vendor shall have delivered to the Purchaser the following in respect of
the Subject Assets:

 6
 

(a)                                  (i) copies of all Existing Leases; and (ii) a
copy of each notice of default, if any, received or sent by or on behalf of the
Vendor in respect of any Existing Lease
if the default referred to in such notice is still outstanding;

(b)                                 (i) copies of all Existing Contracts; and (ii)
a copy of each notice of default, if any, received or sent by or on behalf of
the Vendor in respect of any Existing Contract if the default referred to in such notice is still
outstanding;

(c)                                  the most current survey of the Lands, if any,
in the Vendor’s possession, which shows the Lands, as currently constituted,
together with all title deeds in respect of the Lands;

(d)                                 all plans, specifications, drawings and
operation manuals relating to the Lands in the possession or control of the
Vendor;

(e)                                  copies of realty tax assessments, notices and
tax bills relating to the Lands in the possession or control of the Vendor and
copies of any notices of any outstanding realty tax appeals and correspondence
relating thereto;

(f)                                    a list of outstanding work orders, notices,
directives and letters of non-compliance issued by any governmental or
other authority affecting the Lands, if any, and a copy of each of them of
which the Vendor has received written notice;

(g)                                 a list of all outstanding litigation,
arbitration, mediation or other proceedings affecting or relating to the Lands
to which the Vendor is a party or in respect of which it has been formally
notified and of all threatened litigation, arbitration, mediation or other
proceedings affecting or relating to the Lands of which the Vendor has received
written notice;

(h)                                 a list of any third party consents, waivers
or assumptions which are necessary to permit the conveyance of the Subject
Assets to the Purchaser;

(i)                                     all reports, audits or studies relating to
environmental matters in respect of the Lands (including, without limitation,
compliance of the Lands with Environmental Laws) which is in the possession or
control of the Vendor (including, without limitation, any such document
prepared for any purchaser or prospective purchaser which is in the possession
or control of the Vendor);

(j)                                     copies of each report, audit or study of the
soil conditions of the Lands, or any part thereof, prepared by a Person other
than the Vendor or its manager which is in the possession or control of the
Vendor;

(k)                                  copies of each report, audit or study
relating to the physical condition of the Lands, or any part thereof, prepared
by a Person other than the Vendor or its manager which is in the possession or
control of the Vendor (including, without limitation, any such document
prepared for any purchaser or prospective purchaser which is in the possession
or control of the Vendor);

 7
 

(l)                                     copies of all architectural agreements,
engineering agreements, development agreements, development permits, building
permits, occupancy permits and other operating permits and licences relating to
the Lands and all agreements with and permits and licences from federal, state
or municipal Governmental Authorities or owners of adjoining lands relating to
the development or operation of the Lands, in each case in the Vendor’s
possession or control;

(m)                               evidence, reasonably satisfactory to the
Purchaser, that the Lands constitute a properly subdivided, legally existing
lot or parcel of land that may be legally conveyed by the Vendor to the
Purchaser at Closing without any further approval by any Governmental
Authority; and

(n)                                 such other written information,
correspondence and documentation relating to the Subject Assets that is in the possession or control of the
Vendor and which the Purchaser requests, acting reasonably.

As used in this Section 2.2, the term “control of
the Vendor” shall be limited to, in addition to the Vendor,
materials in the possession of management of Magna Entertainment Corp., legal
counsel to the Vendor, or any consultants, advisors or other third party
professionals commissioned, retained or instructed by the Vendor.  Notwithstanding any other provision in
this Agreement to the contrary, it is acknowledged and agreed that the Vendor
has specifically excluded from the foregoing materials contemplated in
Subsections 2.2(a) – (n), and thereby has not provided to the Purchaser, the
Vendor’s financial projections, forecasts, budgets, appraisals and internal
memoranda relating to the Lands.

The Vendor will execute and deliver to the Purchaser within two (2)
Business Days after receipt of a written request from the Purchaser or the
Purchaser’s Solicitors, authorizations that may be sent by the Purchaser or the
Purchaser’s Solicitors to Governmental Authorities that authorizes such
Governmental Authorities to reveal to the Purchaser and the Purchaser’s
Solicitors all information, if any, on any files they have in respect of the
Lands.

Upon compliance by the
Vendor with all of its obligations set out in the preceding paragraphs of this
Section 2.2, the Vendor shall deliver to the Purchaser a notice stating that it
has done so.

Any lists, documentation or other information provided by the Vendor
pursuant to this Section shall be amended or supplemented, as necessary from
time to time, until 5:00 p.m. on the second (2nd)
Business Day immediately preceding the Due Diligence Date.  In addition, if the Vendor becomes aware of a
failure to provide any document or other information that it is required to provide
in accordance with this Section at any time prior to the Due Diligence Date, it
shall forthwith advise the Purchaser in writing of such failure and deliver
such information to the Purchaser.  In
the event of any such failure by the Vendor, at the Purchaser’s discretion, the
Due Diligence Date and the Closing Date shall each automatically be extended to
the date which is five (5) Business Days after the Purchaser receives such
document or information from the Vendor.

 8

2.3                          Physical Inspections

(a)           At any time, and from time to time
prior to Closing, and upon prior notice in writing to the Vendor from the
Purchaser of at least one (1) Business Day (or, in respect of the physical
inspections of particular premises that are leased on or within the Lands, such
longer notice period as the Vendor advises the Purchaser is necessary to comply
with the terms of the relevant Existing Leases or the Approved Leases (if
any)), the Purchaser and/or its representatives shall be entitled to enter onto
the Lands on any Business Day, at the Purchaser’s sole risk and expense, for
the purpose of conducting examinations, investigations, inspections, tests and
audits relating to the Subject Assets. 
Without limiting the generality of the foregoing, such examinations,
investigations, inspections, tests and audits may include:

(i)             environmental audits,
assessments or inspections of the Lands; and

(ii)          tests relating to soil, groundwater and underground conditions of the
Lands.

Notwithstanding the foregoing,
the Purchaser agrees not to conduct any invasive tests relating to soil,
groundwater and underground conditions of the Lands.

(b)           The Vendor shall execute such
authorizations as are submitted by the Purchaser’s Solicitors to the Vendor’s
Solicitors in order to enable the Purchaser’s Solicitors to obtain information
from Governmental Authorities concerning the Lands, which authorizations are to be
executed and delivered within two (2) Business Days after submission to the
Vendor’s Solicitors, and which authorizations may request information but shall
not request or suggest inspections by any Authority.

(c)           Unless
the Vendor otherwise agrees in writing, the Purchaser and its representatives
shall not enter onto the Lands and
perform such investigations, inspections, tests or audits unless accompanied by
a representative of the Vendor, provided that the Vendor shall make a
representative available on a reasonable basis upon receiving such notice.  For greater certainty, nothing herein shall
restrict the Purchaser from enjoying the same access to the Lands as would any other member of the
public enjoying lawful access to the Lands.  The Purchaser shall pay all costs of any
repairs required to be made to the Lands
as a result of the aforesaid investigations, inspections, tests and
audits, and shall fully indemnify the Vendor from all costs of repairing any
damage caused by such inspections, tests or audits and all Claims relating to
any such inspections, tests and audits and from all Claims incurred by the
Vendor as a result thereof including, without limitation, any builders’ liens
registered against the Lands as
a result thereof.  This indemnity shall
survive termination of this Agreement regardless of the cause of such
termination. If the Purchaser does not
perform such repairs, the Vendor shall have the right to perform, or cause to
be performed, such work and to obtain reimbursement for the reasonable, out-of-pocket
costs of such work from the Purchaser, provided that the Vendor shall, if
possible in the circumstances, provide the Purchaser with advance written
notice of the work to be done, but the failure to give such notice shall not
affect the rights of the Vendor hereunder or otherwise render the Vendor liable
to the Purchaser.

(d)           The provisions of this Section 2.3
shall survive the termination of this Agreement.

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2.4                          Purchaser’s Investigations

(a)           On
or before 5:00 p.m. on
the Due Diligence Date the Purchaser may conduct (subject to compliance with
other relevant provisions of this Agreement) all investigations, inspections,
reviews, tests and audits relating to the Lands (including, without limitation,
title to the Subject Assets and compliance with Applicable Laws) and the
Transaction (collectively referred to herein as the “Due Diligence”) which the Purchaser deems necessary or
desirable in its discretion.

(b)           The
obligation of the
Purchaser to complete the Transaction pursuant to this Agreement is subject to
the condition that the Purchaser is satisfied with the Due Diligence in its
sole and absolute discretion on or before 5:00 p.m. on the Due Diligence
Date.  The Purchaser shall be deemed to
be satisfied with the results of its Due Diligence unless it delivers to the
Vendor on or before 5:00 p.m. on the Due Diligence Date a written notice (the “Non-Waiver Notice”)
stating that it does not waive the condition contained in this Subsection
2.4(b).  If the Purchaser delivers the
Non-Waiver Notice to the Vendor prior to 5:00 p.m. on the Due Diligence Date,
then this Agreement shall automatically terminate at such time and, upon such
termination, the Purchaser and the Vendor shall be released from all
obligations under this Agreement (except for those obligations which are
expressly stated to survive the termination of this Agreement).

ARTICLE 3

PURCHASE PRICE

3.1                          Method of Payment of Purchase
Price

On Closing, the
Purchase Price shall be satisfied by payment to the Vendor, or as the Vendor
directs in writing, by wire transfer of an amount (the “Balance”) equal to the Purchase Price, as
adjusted pursuant to Section 3.2, less the Holdback Amount.

3.2                                                                               Adjustments

(a)           The
Purchase Price shall be adjusted as set out in this Section (such adjustments
being referred to herein as the “Adjustments”).  Adjustments shall be made as of the
Adjustment Date.  Each of the Vendor and
the Purchaser shall be responsible for their respective expenses as set forth
in this Agreement.

(b)           The
Vendor (or its or the Purchaser’s agent) shall prepare and deliver to the
Purchaser at least one (1) Business Day prior to Closing a statement (the “Statement of Adjustments”) of the
Adjustments to be made on Closing with all Adjustments made as of the Closing
Date. The Statement of Adjustments shall have annexed to it complete details of
the calculations used by the Vendor to arrive at all debits and credits on the
Statement of Adjustments.  The Vendor
shall give to the Purchaser access to the Vendor’s working papers and back up
materials in order to confirm the Statement of Adjustments.

If the final cost or amount of any item which is to be adjusted on
Closing cannot be determined at Closing, then an initial Adjustment for such
item shall be made at Closing, such amount to be estimated by the Vendor and
the Purchaser, each acting reasonably, on the basis of the best evidence
available at the Closing as to what the final cost or amount of such item will

 10
  
 

be.  In
each case when such cost or amount is determined the Vendor or the Purchaser,
as the case may be, shall within thirty (30) days thereafter provide a complete
statement of such final determination to the other and within thirty (30) days
thereafter (or if there is a dispute over such amount, within thirty (30) days
after the matter is determined by the accountants pursuant to Subsection
3.2(d)) the necessary adjusting payment shall be made.

(c)           The
Purchaser shall provide the Vendor and its auditors, during normal business
hours at any time and from time to time after Closing upon reasonable prior
notice to the Purchaser, access to the books, files and records of the
Purchaser, for the purpose of calculating or verifying the amount of any
Adjustments.  In the absence of agreement
by the parties hereto, the final cost or amount of an item shall be determined
by a firm of chartered accountants appointed jointly by the Vendor and the
Purchaser within ten (10) Business Days after the issue is referred by one of
the parties to the accountants for such determination.  The cost of such accountants’ determination
shall be shared equally between the parties hereto.

(d)           No
Adjustments (including readjustments of amounts initially adjusted for at
Closing) may be claimed by either party after the first anniversary of the
Closing (the “Final Adjustment Date”).  Based solely upon the Adjustments (including
readjustments) claimed by either party before the Final Adjustment Date, the
Purchaser shall prepare and deliver to the Vendor on or before the twentieth
(20th) day of the
calendar month following the month in which the Final Adjustment Date occurs
(or, if such day is not a Business Day on the next following Business Day) a
statement of Readjustments which shall set out all final Adjustments (including
readjustments) that have not previously been determined and paid and also
setting out the amount of the adjusting payment to be made by the Vendor or the
Purchaser, as the case may be, within thirty (30) days after such statement of
Readjustments is delivered to the Vendor (or if there is a dispute over such
statement, within thirty (30) days after all disputes with respect to such
statement are determined by the accountants pursuant to Subsection 3.2(c)) the
necessary adjusting payment shall be made by the Vendor or the Purchaser, as
the case may be.

3.3                                                                               Holdback

(a)           On Closing, Two Hundred and Fifty Thousand Dollars ($250,000.00) of the Purchase Price
(the “Holdback Amount”) shall be retained by
the Purchaser and applied (subject to this Section 3.3) by the Purchaser
towards: (i) the cost of the environmental audit described in paragraph (b)
below; and (ii) any costs that the Purchaser, acting in its sole discretion,
incurs in connection with bringing the Lands into compliance with Environmental
Laws and/or removing Hazardous Substances from the Lands (collectively, the “Environmental Remediation”) following the
Closing Date.

(b)           As soon as reasonably practicable
following the Closing, the Purchaser shall engage an environmental consultant
to conduct an environmental audit to determine the required Environmental
Remediation, if any.  In the event such
environmental audit (a written copy of which shall be provided to the Vendor)
concludes that no Environmental Remediation is required, the Purchaser shall
pay to the Vendor, as soon as reasonably practicable thereafter, the remaining
Holdback Amount.  In any event, the Purchaser
shall pay to the Vendor, within six (6) months of the Closing Date, the
remaining Holdback Amount, provided, however, that if the Purchaser has, within
that time frame, commenced Environmental Remediation as a result of, or

 11
  
 

in connection
with, the environmental audit, the Holdback Amount shall remain the property of
the Purchaser (and the Vendor shall have no rights in respect thereof or
entitlement thereto), with the costs of the required Environmental Remediation
being deducted from such amount, and the remaining Holdback Amount (if any)
shall be paid to the Vendor upon completion of the required Environmental
Remediation.  For greater certainty, in
the event that the amount required to complete the Environmental Remediation is
greater than or equal to the remaining Holdback Amount, upon completion of such
Environmental Remediation, no amount shall be returned to the Vendor.  The Purchaser hereby covenants and agrees
that in the event that the environmental audit indicates that Environmental
Remediation is or may be required, the Purchaser shall use commercially
reasonably efforts to complete such Environmental Remediation as soon as
reasonably practicable thereafter.

(c)           The Vendor and the Purchaser hereby
agree that, as soon as reasonably practicable following the Closing, they will
explore obtaining (at the Vendor’s sole cost and expense) environmental risk
insurance in respect of the Lands, which if obtained on terms and conditions
acceptable to the Purchaser, acting reasonably, may be used to immediately
reduce the Holdback Amount.

ARTICLE 4

CONDITIONS OF CLOSING

4.1                                                                               Conditions for Vendor

The obligation of the Vendor to complete the Transaction shall be
subject to the satisfaction of the following conditions:

(a)                                  by Closing, all of the terms, covenants and
conditions of this Agreement to be complied with or performed by the Purchaser
shall have been complied with or performed in all material respects;

(b)                                 on the Closing Date, the representations,
warranties and covenants of the Purchaser set out in Section 7.2 shall be true
or fulfilled, as the case may be; and

(c)                                  by Closing, the Vendor shall have obtained
the approval of the Board of Directors of Magna Entertainment Corp.

The conditions set forth in this Section 4.1 are for the sole benefit
of the Vendor and each condition may be waived in whole or in part by the
Vendor by notice to the Purchaser on or before the applicable date referred to
above.

4.2                                                                               Conditions for Purchaser

The obligation of the Purchaser to complete the Transaction shall be
subject to the satisfaction of the following conditions:

(a)                                  by 5:00 p.m. on the Due Diligence Date, the
Purchaser shall not have delivered a Non-Waiver Notice, it being agreed that
the decision of the Purchaser to deliver

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such
Non-Waiver Notice shall be made by the Purchaser in its sole and absolute
discretion;

(b)                                 by Closing, the Vendor shall have obtained
the approval of the Board of Directors of Magna Entertainment Corp. and the
Purchaser shall have obtained the approval of the Board of Directors of MI
Developments Inc.;

(c)                                  by Closing, all of the terms, covenants and
conditions of this Agreement to be complied with or performed by the Vendor
shall have been complied with or performed in all material respects;

(d)                                 on the Closing Date, the Vendor shall deliver
a notice of termination to Enterprises LLC in respect of the Occupancy
Agreement, with a copy of such notice to be delivered to the Purchaser;

(e)                                  on Closing, the representations, warranties
and covenants of the Vendor set out in this Agreement shall be true or
fulfilled, as the case may be, in all material respects;

(f)                                    on the Closing Date, no material adverse
change shall have occurred with respect to the financial, legal or physical
condition of the Subject Assets;

(g)                                 on or before the Closing Date, the Vendor
shall have caused the delivery of all consents and approvals and execution of
all assumptions required in connection with the Transaction under the Permitted
Encumbrances, the Existing Leases, the Approved Leases (if any), the Existing
Contracts and the Approved Contracts (if any);

(h)                                 by the Closing Date, no action or proceeding,
at law or in equity, shall have been commenced by any Person to enjoin,
restrict or prohibit the Closing which has not, by the Closing Date, been
dismissed, quashed or permanently stayed without any further right of appeal or
right to seek leave to appeal;

(i)                                     on the Closing Date there shall not exist any
default or any event which, with the passage of time or the giving of notice or
both, would constitute a default in the performance and/or observance of the
obligations on the part of the Vendor under any of the Existing Leases, the
Approved Leases (if any), the Existing Contracts, the Approved Contracts (if
any) or the Permitted Encumbrances;

(j)                                     on Closing there shall not exist:

(i)             any information or documentation relating to
the Lands which was not disclosed or made available by the Vendor, as
applicable, to the Purchaser as required by Section 2.2; or

(ii)          any incompleteness of the information or documentation provided to the
Purchaser pursuant to Section 2.2 with respect to the subject matter of such
information or documentation; or

 13
  
 

(iii)       any inaccuracy in any of the information or documentation provided to
the Purchaser pursuant to Section 2.2,

the
effect of which lack of disclosure, incompleteness or inaccuracy is that the
Purchaser was not aware of facts or circumstances which result, or could be
reasonably expected to result, in a material adverse change in the value of the
Lands;

(k)                                  the Purchaser shall have received evidence
that the Lands constitute a properly subdivided, legally existing lot or parcel
of land that may be legally conveyed by the Vendor to the Purchaser at Closing
without any further approval by any Governmental Authority;

(l)                                     on Closing the Vendor shall have delivered
possession of the Lands to the Purchaser, subject to the lease between the
Purchaser and the Vendor; and

(m)                               on Closing, the Vendor shall transfer to the
Purchaser good and marketable title in fee simple to the Lands, and the
Purchaser shall have obtained a title insurance commitment (the “Title Commitment”) in favour of the Purchaser, in form and
content satisfactory to the Purchaser, each free from any Encumbrances, other
than Permitted Encumbrances, it being understood that an owner’s title
insurance policy (the “Title Policy”)
in favour of the Purchaser for the full amount of the Purchase Price will be
issued as soon as practical thereafter. For greater certainty, to the extent
the Vendor is unable or unwilling to cure, prior to Closing, any objection to
the title exceptions raised in the draft Title Commitment delivered to the
Purchaser, and the Transaction contemplated hereunder is nevertheless
completed, the Purchaser shall be conclusively deemed to have accepted such
exceptions as Permitted Encumbrances.

The conditions set forth in this Section 4.2 are for the sole benefit
of the Purchaser and each condition may be waived in whole or in part by the
Purchaser by notice to the Vendor on or before the applicable date referred to
above.

4.3                                                                               Non-Satisfaction of Conditions

In the event any condition set forth in Section 4.1 or 4.2 is not
satisfied or waived on or before the applicable date and time referred to
therein, then this Agreement shall be terminated and of no further force or
effect whatsoever without any further action by either party hereto, and
neither party to this Agreement shall have a Claim against any other party
hereto with respect to this Agreement unless the reason for the condition not
being satisfied is the breach by such other party of an obligation under this
Agreement, in which case a Claim may be made against such other party.
Notwithstanding any other provisions of this Agreement, if by 5:00 p.m. on the
applicable date referred to in Section 4.1 or 4.2, as the case may be, the
party having the benefit of the relevant condition has not given notice to the
other party that such condition has been satisfied or waived, then it shall be
conclusively deemed for the purpose of this Agreement to have neither been
satisfied nor waived.

 14
  
 

4.4                                                                               Reasonable Efforts to Satisfy
Conditions

The Vendor shall act in good faith and use reasonable efforts in the
circumstances to satisfy or cause to be satisfied those conditions set out in
Section 2.3 and 4.2 which are within its reasonable control and the Purchaser
shall act in good faith and use reasonable efforts in the circumstances to
satisfy or cause to be satisfied those conditions set out in Sections 4.1 that
are within its reasonable control.

4.5                                                                               Separate
Tax Parcel

In the event that on
Closing the Lands do not constitute a separate tax parcel, the Transaction
shall be completed and the parties shall pro rate the realty taxes with the
Purchaser providing a cheque payable to the taxing authority for its pro rata
share of realty taxes in respect of the Lands accruing after the Closing Date
to the Vendor within ten (10) Business Days of the receipt of an invoice from
the Vendor for such amount.  The Vendor
undertakes to forward such cheque, along with its pro rata share of the taxes,
to the taxing authority on or before the date such taxes are due. The parties
agree to cooperate with each other in order to have the separate tax parcel for
the Lands created, if it is not already a separate tax parcel at the Closing
Date, as soon as reasonably possible after the Closing Date.

ARTICLE 5

TITLE

5.1                                                                               Search of Title

The Purchaser shall be allowed until 5:00 p.m. on the Due Diligence
Date, at its own expense, to examine title to the Lands and the other matters
referred to in the next paragraph and to submit to the Vendor its objections to
the title to the Lands and such matters.

If the Purchaser has any valid objections based on, if applicable: (a)
title to the Lands, (b) the Lands not complying with all Applicable Laws
(including Environmental Laws and zoning and building laws, by-laws and
codes), or (c) the existence of any outstanding municipal or other governmental
work orders or deficiency notices relating to the Lands, then the Purchaser
shall deliver a notice in writing to the Vendor (the “Requisitions Notice”) listing any and all
such objections in reasonable detail on or before 5:00 p.m. on the Due
Diligence Date.  If any such objections
cannot be satisfied or corrected prior to the Closing Date, then the Purchaser
may, by written notice to the Vendor, waive such objections; and if such waiver
is not so made then either party may terminate this Agreement by delivering
notice to the other party to such effect and this Agreement, notwithstanding
any intermediate act or negotiations in respect of such objection, shall be
terminated, upon delivery of notice by either party.

Except for any valid objection so made, and except for any objection
going to the root of title or for any other matter or thing arising on or
before the Due Diligence Date, the Purchaser shall be conclusively deemed to
have accepted the Vendor’s title to the Lands and satisfied itself with respect
to the other matters referred to in this Section 5.1.

 15
  
 

ARTICLE 6

CLOSING MATTERS

6.1                                                                               Closing Arrangements

Provided that all
conditions precedent to the Purchaser’s obligations to close as set forth in
this Agreement have been satisfied and fulfilled, or waived by the Purchaser,
as the case may be, the Purchaser shall pay the Purchase Price, subject to the
pro-rations adjustments described in Section 3.2 herein, in cash by wire
transfer of immediately available U.S. currency to the Title Insurer, acting as
escrow agent (the “Escrow Agent”),
in accordance with the terms and conditions of this Agreement. The Purchaser
shall deposit the Purchase Price with the Escrow Agent, to be held in escrow,
as early as reasonably practicable on the Closing Date. The Escrow Agent shall
hold and disburse the Purchase Price per the terms of this Agreement and
pursuant to and in accordance with the Statement of Adjustments mutually agreed
to and executed by the Vendor and the Purchaser.

6.2                                                                               Vendor’s Documents

The Vendor shall deliver or
cause to be delivered at the Closing the following:

(a)                                  a special warranty deed containing
covenants of further assurance (the “Deed”) in
respect of the Lands, in favour of the
Purchaser, duly executed by the Vendor;

(b)                                 such notices as the Purchaser may reasonably
require be given to the Tenants under the Existing Leases and the Approved
Leases (if any) and other parties to the assigned Existing Contracts and the
Approved Contracts (if any) of the sale of the Lands to the Purchaser;

(c)                                  a direction of the Vendor as to the payment
of the Balance, if there is any payee other than the Vendor;

(d)                                 an undertaking by the Vendor to re-adjust the
Adjustments as provided in Section 3.2;

(e)                                  subject to the terms of Subsection 4.2(m),
good and valid discharges or releases in registrable form of all Encumbrances,
other than Permitted Encumbrances;

(f)                                    all agreements, notices and other documents
required to be executed and delivered by the Vendor pursuant to the terms of
the Existing Leases, the Approved Leases (if any), the Existing Contracts, the
Approved Contracts (if any), the Permitted Encumbrances and all consents and
approvals from, and notifications to, any other Persons required thereunder in
connection with this Transaction;

(g)                                 copies of all records (including computer
records), documents, information and data (including computer data) relating to
the Lands in the possession or control of the Vendor, including without
limitation, all title documents and accounting and payment records;

 16
  
 

(h)                                 if
so requested by the Purchaser, reliance letters, in form and content acceptable
to the Purchaser, acting reasonably, from each Person who has issued the
reports delivered pursuant to Section 2.2;

(i)                                     the Triple Net Lease between the Purchaser,
as landlord, and the Vendor, as tenant, in respect of the Lands, duly executed
by the Vendor, such Triple Net Lease to be upon terms and conditions
satisfactory to the Vendor and the Purchaser;

(j)                                     affidavits
in favour of the Title Insurer, in form and content satisfactory to the Title
Insurer, to remove standard exceptions in the Title Commitment, or as may
otherwise be required by the Title Insurer; and

(k)                                  all other conveyances and other documents
which are required and which the Purchaser has reasonably requested to give
effect to this Transaction, including the proper transfer, assignment and
conveyance of the Subject Assets by the Vendor to the Purchaser, subject to the
Permitted Encumbrances.

6.3                                                                               Purchaser’s Documents

The Purchaser shall deliver or cause to be delivered at the Closing the
following:

(a)                                  a wire transfer for the amount payable to the
Vendor on Closing pursuant to Section 3.1;

(b)                                 an undertaking by the Purchaser to re-adjust
the Adjustments as provided in Section 3.2;

(c)                                  the Triple Net Lease, duly executed by the
Purchaser;
and

(d)                                 all other documents which the Vendor has
reasonably requested to give effect to this Transaction.

6.4                                                                               Taxes and Fees

On the Closing
Date, the Vendor and the
Purchaser shall have the responsibility of equally splitting all state or
county transfer taxes and documentary stamps, if any, including those payable
in connection with the recording of the Deed, occasioned by the conveyance of
the Lands from the Vendor to the Purchaser, as well as any notary fees incurred
in connection therein. On the Closing Date, the Vendor shall pay all costs and
expenses arising from the Purchaser’s search of title to the Lands.  On the Closing Date, the Purchaser shall pay
the cost of recording the Deed. The cost of removing any Encumbrances from
title to the Lands shall be at the Vendor’s expense. Any deferred taxes,
roll-back taxes and/or realty taxes (including local improvement charges
and assessments) owing or accrued in respect of the Lands that would have been due by the Vendor prior to the Closing
Date shall be paid by the Vendor on or prior to the Closing Date.  Each party shall pay its own legal fees with
respect to this Agreement and the Transaction. 
The Purchaser shall be responsible for costs and expenses, including the
premium, incurred in connection with the Title Policy. The Vendor shall be
responsible for all costs and

 17
  
 

expenses incurred in obtaining: (i) any
consents or approvals required to subdivide and legally convey the Lands to the
Purchaser (or to confirm that the Lands are presently subdivided and legally
conveyable); and (ii) an updated survey of the Lands, as commissioned by the
Purchaser.  Escrow Closing costs, if any,
shall be shared equally between the Vendor and the Purchaser.

6.5                                                                               Escrow Closing

All deliveries to be made pursuant to Section 6.2 and 6.3 on the
Closing Date (with the exception of the Registration Documents (as defined
below)) (the “Interim Closing Documents”)
shall be delivered into escrow at the offices of the Purchaser’s Solicitors on
or before the Closing Date.  The
Registration Documents shall be delivered into escrow at the offices of the
Escrow Agent on or before the Closing Date. Such Closing Documents shall be
held by the Purchaser’s Solicitors and the Escrow Agent, as the case may be, in
escrow until the Vendor and the Purchaser, each acting reasonably, are
satisfied that all conditions set forth in Sections 4.1 and 4.2 to be satisfied
on or before Closing have been satisfied other than the registration of the
Deed and any other documents, instruments or agreements required to evidence
the transfer of legal title to the Lands from the Vendor in favour of the
Purchaser (collectively, the “Registration
Documents”).  At such time as
all the conditions set forth in Sections 4.1 and 4.2 to be satisfied on or
before Closing have been satisfied, the Vendor and the Purchaser shall provide
written instructions to the Escrow Agent confirming same and instructing the
Escrow Agent to release the Registration Documents from escrow for the purposes
of registration.  Upon (i) such
registrations being completed, or (ii) the Title Insurer receiving a gap
indemnity from the Vendor in form and content satisfactory to the Title
Insurer, all other Closing Documents (and funds) shall thereupon be released
from escrow by the Purchaser’s Solicitors and the Escrow Agent, as the case may
be, and delivered to the parties entitled thereto.

ARTICLE 7 

REPRESENTATIONS, WARRANTIES AND COVENANTS

7.1                                                                               Representations,
Warranties and Covenants of the Vendor

The Vendor hereby represents, warrants and covenants to and in favour
of the Purchaser, as of the Closing Date, as follows:

(a)                                  the Vendor is a C-corporation company for
U.S. tax purposes and is duly formed and subsisting under the laws of the State
of Delaware, is properly qualified to do business in the State of California,
and has the corporate power, authority, right and capacity to own the Lands and
to enter into, execute and deliver this Agreement and to carry out the
transactions contemplated by this Agreement in the manner contemplated by this
Agreement;

(b)                                 the transactions contemplated by this
Agreement have been duly and validly authorized by all requisite corporate
proceedings, and subject to Section 4.1(c), upon execution and delivery by the
Vendor and the Purchaser, this Agreement and all other documents and agreements
to be delivered by the Vendor pursuant to this Agreement shall constitute
legal, valid and binding obligations of the Vendor;

 18
  
 

(c)                                  neither the execution of this Agreement nor
its performance by the Vendor will result in a breach of any term or provision
or constitute a default under the constating documents or by-laws of the
Vendor or any indenture, mortgage, deed of trust or any other agreement to
which the Vendor is a party or by which it is bound and no approval or other
documentation is necessary to enable the Vendor to complete the Transaction
pursuant to this Agreement in compliance with all existing obligations of the
Vendor and in compliance with all Permitted Encumbrances and any other
obligations or agreements which affect the Lands;

(d)                                 there are no actions, suits or proceedings
pending or threatened against the Vendor which affect the Subject Assets or the
occupancy or use of the Lands by the Vendor or by the Tenants, in law or in
equity, which could affect the validity of this Agreement or any transaction
provided for in this Agreement, the title to the Subject Assets or any part of
the Subject Assets, the value of the Subject Assets or the conveyance of any of
the Subject Assets to the Purchaser;

(e)                                  no Person has any right of first refusal or
option to purchase the Lands, or any part of the Lands; the Vendor has obtained
all consents necessary to this sale of the Lands and no further consents or
approvals are required in connection therewith;

(f)                                    the Vendor is the sole registered owner of
the Lands;

(g)                                 to the best knowledge of the Vendor, after
due inquiry of all its directors, officers and employees who could reasonably
be expected to have relevant information, the Purchaser’s acquisition of the
Lands and the thoroughbred training facility operated thereon and the
subsequent leaseback of such Lands to the Vendor shall not require the Vendor
to become licensed by, or otherwise submit to the regulatory regime of, the
California Horse Racing Board or any other regulatory or licensing body;

(h)                                 to the best knowledge of the Vendor, after
due inquiry of all its directors, officers and employees who could reasonably
be expected to have relevant information, neither the Vendor nor any prior
owner of the Lands has (i) made any commitments to any Person relating to the
Lands that would impose an obligation on the Purchaser to make contributions of
money or land, or to install or maintain any improvements thereon, or (ii)
executed or caused to be executed any document with, or for the benefit of, any
Governmental Authority restricting the use, development or occupancy of the
Lands;

(i)                                     subject to the terms of Subsection 4.2(m),
with the exception of the Permitted Encumbrances and obligations which may
arise under the Existing Leases or the Approved Leases, on the Closing Date,
there will be no Encumbrances on the title to the Subject Assets or any part
thereof;

(j)                                     (i) the Existing Leases disclosed to the
Purchaser pursuant to Section 2.2 and the Approved Leases (if any) are the only
Leases and constitute, in each case, the

 19
  
 

entire agreement between the
Vendor and the Tenants with respect to the lease or occupancy of space on or
within the Lands; (ii) the Existing Contracts disclosed to the Purchaser
pursuant to Section 2.2 and the Approved Contracts (if any) are the only
Contracts relating to or affecting the Lands as of the date hereof; (iii) the
Existing Leases and the Approved Leases (if any) will be the only Leases
affecting the Lands on Closing; (iv) the Existing Contracts disclosed to the
Purchaser on the list delivered pursuant to Section 2.2 and Approved Contracts
(if any) will be the only Contracts affecting the Lands on Closing; and (vi)
each of the Existing Leases, Approved Leases (if any), Existing Contracts
(including Permitted Encumbrances) and Approved Contracts (if any) is in full
force and effect and there is no default under any of them other than as
disclosed in writing to the Purchaser pursuant to Section 2.2;

(k)                                  as of the date of this Agreement, the Vendor
has not received any written request from any Tenant to assign the Existing
Leases, other than as disclosed in writing to the Purchaser pursuant to Section
2.2;

(l)                                     the documents and information delivered or
made available to the Purchaser pursuant to Section 2.2 constitute all of the
material documentation with respect to the Subject Assets within the Vendor’s
possession or control;

(m)                               the Lands constitute a properly subdivided,
legally existing parcel of land that may be legally conveyed by the Vendor to
the Purchaser at Closing without any further approval by any Governmental
Authority;

(n)                                 to
the best knowledge of the Vendor, after due inquiry of all its directors,
officers and employees who could reasonably be expected to have relevant
information, the boundary survey prepared
by Wootton Land Consultants and dated May 25, 2007 describes the
Lands as it exists today, and there have been no material alterations or
additions to the Lands since the date of the survey which would have materially
affected the outline or setbacks of same, nor have there been any buildings
erected on the Lands therein;

(o)                                 there is direct access to, and egress from,
the Lands from adjacent public roadways;

(p)                                 the Vendor is not a “foreign
corporation”, “foreign partnership”, “foreign trust”, “foreign estate”, “foreign
person”, “affiliate” of a “foreign person” or a “United States intermediary” of
a “foreign person” within the meaning of the
IRC, Sections 897 and 1445, the
Foreign Investments in Real Property Tax Act of 1980, the International Foreign Investment Survey Act of 1976,
the Agricultural Foreign Investment
Disclosure Act of 1978, or the regulations promulgated pursuant to
such Acts or any amendments to such Acts;

(q)                                 the Vendor and each Person owning an interest
(directly or indirectly) in the Vendor is not: (i) identified on the “Specially
Designated Nationals or Blocked Persons List” maintained by the Office of
Foreign Assets Control, Department of

 20
  
 

Treasury (the “OFAC”) and/or
any other similar list maintained by the OFAC or the United States Department
of Commerce, Bureau of Industry and Security of any other United States
Governmental Authority pursuant to Applicable Laws; and (ii) a person or entity
with whom a United States person is prohibited to engage in transactions pursuant
to any trade embargo, economic sanction, or other prohibition of Applicable
Laws, or Executive Order of the President of the United States or United
Nations decree or resolution, provided however that this Subsection shall not
apply to any Person to the extent that such Person’s interest in the Vendor is
through a U.S. Publicly-Traded Entity and as used in this Agreement, “U.S. Publicly-Traded Entity” means a Person (other than an
individual) whose securities are listed on a national securities exchange, or
quoted on an automated quotation system, in the United States, or a
wholly-owned subsidiary of such a Person;

(r)                                    there are no outstanding obligations relating
to any written notice or order issued by any Governmental Authority in respect
of the Lands alleging any deficiency or non-compliance with any
agreements (including any development or site plan agreements), zoning laws or
by-laws or Environmental Laws of which the Vendor has received written
notice except as have been or will be made available to the Purchaser pursuant
to Section 2.2, and other than as disclosed in writing to the Purchaser, there
shall not be any such outstanding obligations as of the Closing Date, and as of
the Closing Date there are no threatened nor, to the best knowledge of the
Vendor, after due inquiry of all of its directors, officers and employees who
could reasonably be expected to have relevant information, pending notices or
orders relating to any such deficiency or non-compliance;

(s)                                  any fee due to any real estate broker or
agent in respect of this Agreement or the Transaction shall be paid by the
Vendor and the Vendor shall indemnify the Purchaser for any such fees to the
extent a claim is made against the Purchaser relating thereto;

(t)                                    to the best knowledge of the Vendor, after
due inquiry of all of its directors, officers and employees who could
reasonably be expected to have relevant information, the Lands and use thereof
have been, are in compliance with, Environmental Laws, except as specifically
disclosed in Environmental Reports delivered to the Purchaser pursuant to
Section 2.2;

(u)                                 except as have been or will be made available
to the Purchaser pursuant to Section 2.2, there are no environmental
investigations, assessments or audit reports relating to the Lands (including,
without limiting the generality of the foregoing, any Phase I, II or III
environmental assessment reports) undertaken by the Vendor or any other Person
of which the Vendor has knowledge which are in the possession or control of the
Vendor and, to best knowledge of the Vendor, after due inquiry of all of its
directors, officers and employees who could reasonably be expected to have
relevant information, except as specifically disclosed in Environmental Reports
delivered to the Purchaser pursuant to Section 2.2, no underground storage
tanks are or have been located on the Lands;

 21
  
 

(v)                                 except as specifically disclosed in
Environmental Reports delivered to the Purchaser pursuant to Section 2.2: (i)
the Vendor has not received any written notice from any competent authority of,
or been prosecuted for, non-compliance with Environmental Laws in respect of
the Lands or use thereof nor has the Vendor or (to the best knowledge of the
Vendor, after due inquiry of all of its directors, officers and employees who
could reasonably be expected to have relevant information) any previous owner
of the Lands settled any allegation of such non-compliance prior to prosecution;  (ii) there are no notices, orders or
directions relating to environmental matters received by the Vendor requiring,
or notifying the Vendor that it is or may be responsible for, any containment,
clean-up, remediation, or corrective action or any work, repairs, construction
or capital expenditures to be made under any Environmental Laws with respect to
the Lands; and (iii) neither the Vendor nor (to the best knowledge of the
Vendor, after due inquiry of all its directors, officers and employees who
could reasonably be expected to have relevant information) any tenant of the
Lands, past or present, has caused or permitted, nor has there been, any
release, emission, spill or discharge in any manner whatsoever, of any
Hazardous Substance on, in, around, from or in connection with the Lands, or
its use or operation which would reasonably be expected to adversely affect the
value of the Lands or in respect of which the owner or occupant of the Lands
would reasonably be expected to incur any liability;

(w)                               the Vendor has not used, or permitted to be
used, except in compliance with all Environmental Law, the Lands to generate,
manufacture, process, distribute, use, treat, store, dispose of, transport or
handle any Hazardous Substance; and

(x)                                   the Vendor has not received any written
notice of any, and there is no threatened nor, to the best knowledge of the
Vendor (after due inquiry of all its directors, officers and employees who
could reasonably be expected to have relevant information) pending eminent domain,
condemnation or rezoning proceedings with respect to the Lands or any part of
the Lands;

7.2                                                                               Representations and Warranties of
the Purchaser

The Purchaser represents and warrants to and in favour of the Vendor,
as of the Closing Date, as follows:

(a)                                  the Purchaser is a corporation duly existing
under the laws of the State of Delaware and has the corporate power, authority, right and capacity through its
general partner,  to enter into
this Agreement and to carry out the transactions contemplated by this Agreement
in the manner contemplated by this Agreement;

(b)                                 the transactions contemplated by this
Agreement will, by the Closing Date, have been duly and validly authorized by
all requisite corporate proceedings; upon execution and delivery by the Vendor
and the Purchaser, this Agreement and all other documents and agreements to be
delivered by the Purchaser pursuant to this

 22
  
 

Agreement shall constitute
legal, valid and binding obligations of the Purchaser; and

(c)                                  the Purchaser has not dealt with, used or engaged
any real estate broker or agent in respect of this Agreement or the
Transaction.

7.3                                                                               Survival

(a)           The representations, warranties and
covenants set out in Sections 7.1 and 7.2 shall be true or fulfilled, as the
case may be, in all material respects on Closing.

(b)           The representations, warranties and
certifications contained in this Agreement or in any Closing Documents shall
not merge on Closing but shall survive for a period of twelve (12) months after
the Closing Date (the “Survival Period”).  The representations and warranties in
Subsections 7.1(t) — 7.1(w) shall survive the Closing for a period of two (2)
years.  The party which has received a
representation, warranty or certification, whether in this Agreement or in any
Closing Document, shall give written notice to the other party of each breach
of the representation, warranty or certification, together with details
thereof, promptly after becoming aware of the breach and no later than the last
day of the Survival Period. 
Notwithstanding any other provision of this Agreement or of any Closing
Document, no Claim may be asserted or pursued against any party hereto, or any
action, suit or other proceedings commenced or pursued, for or in respect of
any breach of any representation, warranty or certification made by such party
in this Agreement or in any Closing Document unless written notice of such
Claim is received by such party describing in detail the facts and
circumstances with respect to the subject matter of such Claim on or prior to
the last day of the Survival Period, irrespective of whether the subject matter
of such Claim shall have occurred before or after such date; and upon the
expiry of the Survival Period all such representations, warranties and
certifications shall cease to have any effect except to the extent a written
notice of Claim has been previously given in respect thereof in accordance with
this Subsection.

(c)           Each indemnity contained in any
Closing Documents shall not merge on Closing, and there shall be no limitation
upon the period for making a Claim in respect of any indemnity in any Closing
Documents and such indemnities shall survive Closing for an unlimited period,
unless otherwise expressly provided in this Agreement.

(d)           The provisions of this Section 7.3
shall survive and not merge upon Closing.

Notwithstanding anything
contained in this Agreement to the contrary, all of the representations,
warranties and certifications (the “Representations”)
which are made by the Vendor and set forth in this Agreement or in any of the
documents or instruments required to be delivered by the Vendor under this
Agreement shall be subject to the following conditions and limitation: in the
event that prior to the Closing, the Purchaser gains current actual knowledge
of a fact or circumstance which, by its nature and plainly on its face,
indicates that a Representation is, was or has become untrue or inaccurate,
then the Purchaser shall not have the right to bring any lawsuit or other legal
action against the Vendor, nor pursue any other remedies against the Vendor, as
a result of the breach of the Representation caused thereby, but the Purchaser’s
sole right shall be to terminate this Agreement and not proceed with Closing,
in which event there

 23
  
 

shall be no liability on
the part of the Vendor for breaches of Representations of which the Purchaser
had current actual knowledge prior to Closing. For greater certainty and
notwithstanding the foregoing, the parties hereto acknowledge and agree that
the mere delivery by the Vendor to the Purchaser, and possession by the
Purchaser, of the documents and instruments contemplated in Section 2.2 shall
not be sufficient to constitute actual knowledge on the part of the Purchaser
that a Representation is, was or has become untrue or inaccurate.

7.4                                                                               Non-Waiver

The Vendor agrees that the Purchaser’s right to do searches, reviews,
examinations, investigations, inspections, assessments, audits and analyses,
and the exercise of such right, shall not affect, reduce or mitigate any of the
representations, warranties and covenants of the Vendor contained in this
Agreement or any of the damages and costs owing by the Vendor to the Purchaser
as a result of any breach of such representations, warranties and covenants.

ARTICLE 8

INTERIM MATTERS

8.1                                                                               Interim Period

Upon acceptance of this Agreement and thereafter so long as this
Agreement is in effect, (a) the Vendor shall not offer the Subject Assets or
any part of the Subject Assets or any interest therein for sale to any Person
other than the Purchaser nor will it solicit, directly or indirectly, or deal
with any offers to purchase the Subject Assets or any part of the Subject
Assets or any interest therein.

8.2                                                                               Approvals of the Purchaser

While this Agreement is in effect, the Vendor agrees that it shall not
amend, cancel or accept a surrender or forfeiture of any Leases or Contracts
without the prior written approval of the Purchaser, which may arbitrarily and
unreasonably be withheld, and it shall not enter into any Lease or Contract
without the prior written approval of the Purchaser, which may arbitrarily and
unreasonably be withheld.

The Vendor shall provide
the Purchaser with a complete copy of any Approved Lease or Approved Contract
and of any document which creates, amends, cancels, surrenders or forfeits any
Lease or Contract within three (3) Business Days after it is entered into by
the parties thereto.

8.3                                                                               Notice of Default

The Vendor shall forthwith provide to the Purchaser (i) a copy of any
notices that it receives in respect of the Existing Leases, Approved Leases (if
any), Existing Contracts and/or Approved Contracts (if any) alleging default on
the part of the Vendor or requesting the Vendor to perform any obligation
thereunder and any notice alleging default under the Leases, or any Contract
that it sends to another Person, in either case after the date this Agreement
is executed and delivered by the parties hereto; (ii) a copy of any work
orders, state or federal environmental

 24
  
 

orders or deficiency notices of any nature
issued by any Governmental Authorities having jurisdiction relating to the
Lands; and (iii) a copy of any notice from a Tenant received after the date of
this Agreement by the Vendor which indicates the intention of a Tenant to
vacate or assign, as the case may be, its interest in the Lands prior to the
scheduled expiry date of its Existing Lease or requests an abatement or
deferral of rent.

8.4                                                                               Approvals

(a)           Whenever in this Agreement it is
stated that the approval or consent of a party is required, it is understood
that, except where otherwise specifically so stated, such approval or consent
shall be in writing, and shall not be unreasonably withheld or delayed.  Furthermore, with respect to such approvals
or consents, unless specifically otherwise stated:

(i)             the party whose approval or consent is
required shall, within three (3) Business Days after receipt of request for
approval or consent, together with available background information relating to
the required decision to enable an informed decision, advise the requesting
party in writing either that it consents or approves, or that it withholds its
consent or approval and in which case it shall set forth, in reasonable
details, its reasons for such withholding; and

(ii)          in the event the notification mentioned in paragraph (i) above is not
delivered within the applicable time limit, the party whose consent or approval
is requested shall conclusively be deemed not to have given its consent or
approval in writing.

8.5                                                                               Risk of Condemnation and Eminent
Domain

The Vendor shall promptly notify the Purchaser in the event that it
receives a notice of condemnation and/or exercise of eminent domain in respect
of all or any material part of the Lands, as applicable, and such notice shall
include a copy of the notice of condemnation and/or exercise of eminent domain
and copies of all correspondence relating thereto in the possession of the
Vendor.  If notice of condemnation and/or
exercise of eminent domain is given prior to Closing, the Purchaser may elect
by notice in writing given to the Vendor within ten (10) Business Days after
receipt from the Vendor of notice of the proposed condemnation and/or exercise
eminent domain either:

(a)                                  to complete the Transaction, in which case
the Purchaser shall continue to be bound by this Agreement except that any compensation
awarded for expropriation and all right and claim of the Vendor to any such
proceeds and compensation not paid by the Closing Date shall be assigned to the
Purchaser; or

(b)                                 to terminate this Agreement, in which event
none of the parties shall have any further liability to the other arising out
of this Agreement.

If the notice of the
proposed condemnation and/or exercise of eminent domain is received by the
Vendor at such time that there would be insufficient time for the Purchaser to

 25
  
 

make its election
hereunder, the Closing Date shall be postponed to a date which is five (5)
Business Days after the Purchaser’s election.

8.6                                                                               General Covenants of the Vendor

The Vendor covenants and agrees with the Purchaser that from and after
the date hereof:

(a)                                  the Vendor shall diligently make all payments
to be made and otherwise observe and perform or cause to be observed or
performed all covenants and obligations to be observed or performed by the
Vendor under the Contracts and the Leases;

(b)                                 the Vendor shall not (i) create or permit to
exist any encumbrance against or affecting the Lands or any part thereof or
interest therein or (ii) amend any of the Permitted Encumbrances, except in
each case with the prior written approval of the Purchaser, which approval
shall not be unreasonably withheld by the Purchaser in respect of Permitted
Encumbrances; and

(c)                                  the Vendor shall not consent to or initiate
any amalgamation, winding-up, dissolution, liquidation, reorganization,
reconstruction, arrangement, consolidation, merger or other corporate procedure
whatsoever without the prior written consent of the Purchaser, which consent
may be withheld by the Purchaser in its sole and absolute discretion.

ARTICLE 9

ENVIRONMENTAL INDEMNIFICATION

9.1                                                                               Environmental
Indemnification by the Vendor

For a period of two (2)
years after the Closing Date and no longer (the “Indemnity
Period”) the Vendor agrees to indemnify and save harmless each of
the Purchaser, its directors, officers, employees and agents and any successor
to the Purchaser’s interest in the Lands (including, without limitation,
persons to whom this indemnity is assigned) and all directors, officers,
employees and agents of such successors, from and against any and all Claims
suffered or incurred by any such person as a result of or arising directly or
indirectly out of or in connection with any one or more of the following:

(a)                                  any
event occurring or any condition existing on or prior to the Closing Date
relating to the Lands which now or hereafter constitutes a violation of, or
gives rise to any liability under, Environmental Laws; and

(b)                                 any
generation, manufacture, processing, distribution, use, presence, treatment,
storage, disposal, release, transport or handling of any Hazardous Substance
in, on, under or from the Lands, whether by the Vendor or any tenant or any
other person prior to the Time of Closing, and whether or not known at the Time
of Closing.

 26
  

For greater certainty,
the Vendor’s obligation to indemnify and save harmless as provided above exists
regardless of whether there has been a breach of any of the provisions
contained in Section 7.1 hereof and regardless of the current actual
knowledge of the Purchaser as at the Closing Date and shall not be limited in
any way by Section 7.3 hereof. 
Furthermore, the Vendor’s obligations to indemnify and save harmless the
Purchaser as provided for in this Section 9.1, and the amount of any such
indemnification, shall in no way be capped or otherwise limited by the
provisions of Section 3.3 hereof.

9.2                                                                               Assignability
of Environmental Indemnification

During the Indemnity
Period, the Purchaser may, at any time and from time to time, assign all or any
part of the benefit of the indemnity set out in Section 9.1 to any purchaser
of, or lender to the Purchaser in respect of, the Lands, by delivering a notice
in writing to the Vendor setting out the Purchaser’s intention to assign all or
part of the benefit of the indemnity and the identity of the person or persons
to whom the assignment is to be made. 
Upon any such assignment, the Vendor shall be bound to indemnify the
person or persons named in such notice to the extent of the assignment of the
indemnity as if such person or persons were a party to this Agreement as the
Purchaser.  No such assignments shall
relieve the Vendor of the obligation to indemnify under Section 9.1 and such
obligations shall continue unaffected by the assignment for the Indemnity
Period. Any such assignee may make a further assignment during the Indemnity
Period in accordance with the foregoing provisions, as if all references
therein to the Purchaser were to such assignee.

ARTICLE 10 

FUTURE DEVELOPMENT OF THE LANDS AND RELATED MATTERS

10.1                                                                        Covenants
of the Vendor

(a)           It is acknowledged that on Closing,
the Triple Net Lease shall be executed and delivered by each of the Vendor and
the Purchaser.  It is further
acknowledged that the Purchaser shall not take an assignment of the Vendor’s
right, title and/or interest in and to any of the Existing Leases, the Approved
Leases (if any), the Existing Contracts or the Approved Contracts (if any) and
that the Vendor shall maintain all such Existing Leases, Approved Leases (if
any), Existing Contracts and Approved Contracts (if any) in its name, subject
to any modifications or amendments (approved by the Purchaser) necessary to
reflect the sale of the Subject Assets to the Purchaser.  The Vendor covenants and agrees with the
Purchaser that, from and after the Closing, it shall observe and perform, or
cause to be observed and performed, all covenants and obligations to be
observed and performed by the Vendor under the Leases, Approved Leases (if
any), Existing Contracts and/or Approved Contracts (if any) and shall indemnify
and save harmless the Purchaser, its partners, employees and agents, from and
against any and all Claims arising from or in connection with a breach by the
Vendor, its shareholders, directors, officers, employees, agents or those for whom
it is responsible at law, of any of the covenants and/or obligations of the
Vendor under or in respect of the Existing Leases, the Approved Leases (if
any), the Existing Contracts and/or the Approved Contracts (if any).

(b)           The Vendor covenants and agrees with
the Purchaser that in the event the Purchaser seeks to amend any zoning
by-laws, site plans or development agreements or take any

 27
 

other action affecting the Lands in order to
facilitate the future development of the Lands, the Vendor shall, upon the
reasonable request of the Purchaser, fully and promptly co-operate with the
Purchaser in connection with any such amendments. In furtherance thereof, the
Vendor shall, upon the reasonable request of the Purchaser, execute and
deliver, make or cause to be made, all such further acts, deeds, assurances and
things as may be reasonably required or necessary to effect such amendments.

(c)           The provisions of this Section 10.1
shall survive the Closing.

ARTICLE 11

GENERAL

11.1                                                                        As-Is/Where-Is
Transaction

The Purchaser
acknowledges and agrees that except as expressly provided in this Agreement or
in any Closing Documents provided by the Vendor to the Purchaser at Closing,
and without derogating from any indemnities provided by the Vendor herein or in
any Closing Documents, the Vendor makes no representation, warranty or
covenant, express, implied or statutory, of any kind whatsoever with respect to
the Subject Assets, including, without limitation, representation, warranty or
covenant as to title, survey conditions, use of the Subject Assets for the
Purchaser’s intended use, the condition of the Subject Assets, past or present
use, development, investment potential, tax ramifications or consequences,
compliance with any Applicable Laws, present or future zoning, the presence or
absence of Hazardous Substances, the availability of utilities, habitability,
merchantability, fitness or suitability for any purpose, or any other matter
with respect to the Subject Assets, all of which are (without derogating from
any indemnities provided by the Vendor herein or in any Closing Documents),
except as otherwise expressly provided in this Agreement or in any Closing
Documents provided by the Vendor to the Purchaser at Closing, hereby expressly
disclaimed by the Vendor. The provisions of this Section shall survive Closing
and the delivery of the Deed or any expiration or termination of this Agreement
without limitation as to time.

11.2                                                                        Obligations
as Covenants

Each agreement and obligation of each party hereto in
this Agreement, even though not expressed as a covenant, shall be considered
for all purposes to be a covenant.

11.3                                                                        Tender

Any tender of documents or money may be made upon the
party being tendered or upon its solicitors and money may be tendered by
certified cheque or bank draft drawn on or from one of the five largest
Schedule I Canadian chartered banks or a first class bank of the United States
of America, or by wire transfer.  All
cheques to be tendered shall be drawn upon one of the five largest Schedule I
Canadian chartered banks, measured by reference to authorized capital.

 28
 

11.4                                                                        Relationship
of the Parties

Nothing in this Agreement shall be construed so as to
make the Purchaser a partner of the Vendor and nothing in this Agreement shall
be construed so as to make the Purchaser an owner of the Lands for any purpose
until the Closing Date.

11.5                                                                        Amendment
of Agreement

No supplement, modification or waiver of this
Agreement, or any provision thereof, shall be binding unless executed in
writing by both parties hereto.

11.6                                                                        Notices

Any notice, request, consent, acceptance, waiver or
other communication required or permitted to be given under this Agreement (the
“Notice”) shall be in writing and
shall be given by delivery or telecopy addressed or sent as set out below:

(a)                                  in
the case of the Purchaser addressed to it at:

c/o MI Developments Inc.

455 Magna Drive

Aurora, Ontario, Canada  L4G 7A9

Attention:              General Counsel

Fax:                         905-726-2095

with a copy to:

Davies Ward
Phillips & Vineberg LLP

Suite 4400, 1 First Canadian Place

100 King Street West

Toronto, Ontario, Canada  M5X 1B1

Attention:              Kent F. Beattie

Fax:                         416-863-0871

(b)                                 and
in the case of the Vendor addressed to it at:

c/o Magna
Entertainment Corp.

337 Magna Drive

Aurora, Ontario, Canada  L4G 7K1

Attention:              Blake S. Tohana

Fax:                         905-726-2585

 29
 

Any Notice which is delivered or is sent by telecopy
in accordance with the foregoing shall be deemed to have been validly and
effectively given and received on the date it is delivered or sent, unless it
is delivered or sent after 5:00 p.m. on any given day or on a day which is not
a Business Day, in which case it shall be deemed to have been validly and
effectively given and received on the Business Day next following the day it
was delivered or sent, provided that in the case of a Notice sent by telecopy
it shall not be deemed to have been sent unless there has been confirmation of
transmission. By giving to the other party at least three Business Days’ prior
Notice, either party may, at any time and from time to time, change its address
for delivery or communication for the purposes of this Section 11.6.

11.7                                                                        Lawyers
as Agents

Notices, approvals, waivers and other documents
permitted, required or contemplated by this Agreement may be given or delivered
by the parties or by their respective solicitors on their behalf.

11.8                                                                        Confidentiality

The parties agree that this Agreement and the
transaction of purchase and sale referred to herein, and any information
provided by either party to the other with respect to this transaction, or the
Lands, shall be kept strictly confidential and no public announcements will be
made in respect thereof without the prior consent of the other party, provided
that the parties may give such information on a confidential basis to their
advisors and consultants and as may be required by Applicable Laws.  Notwithstanding any other provision of this
Agreement, if the Transaction is completed, no party shall have any further
rights, obligations or liability under this Section 11.8, regardless of whether
any such rights, obligations or liability relate to the period prior to or
after the Closing.

11.9                                                                        No
Solicitation

The Vendor agrees that
during the term of this Agreement the Vendor will not solicit a possible sale
of all or any part of the Lands with any other party.

11.10                                                                 Further
Assurances

Each of the parties
hereto shall, at its own cost, from time to time hereafter and upon any
reasonable request of the other, execute and deliver, make or cause to be made
all such further acts, deeds, assurances and things as may be required or
necessary to more effectually implement and carry out the true intent and
meaning of this Agreement.

11.11                                                                 Entire
Agreement

This Agreement
constitutes the entire agreement between the parties hereto pertaining to the
agreement of purchase and sale of the Lands provided for herein and supersedes
all prior agreements, understandings, negotiations and discussions, whether
oral or written, with respect thereto, and there are no other warranties or
representations and no other agreements between the parties hereto in
connection with the agreement of purchase and sale provided for herein except
as specifically set forth in this Agreement.

 30
 

11.12                                                                 Waiver

No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision (whether or
not similar) nor shall any waiver constitute a continuing waiver unless
otherwise expressed or provided.

11.13                                                                 Survival
after Termination

Notwithstanding the termination of this Agreement or
this Agreement becoming of no further force or effect whatsoever for any
reason, the provisions of Sections 2.4 and 4.3, shall continue to be
applicable.

11.14                                                                 Survival

This Agreement shall survive the Closing of the
Transaction and shall remain in full force and effect thereafter in accordance
with its terms.

11.15                                                                 Assignment

Neither the Vendor nor
the Purchaser shall assign its rights and/or obligations hereunder (or agree to
do so) without the prior written consent of the other party, which consent may
be withheld by such party in its sole and absolute discretion.

11.16                                                                 Successors
and Assigns

All of the covenants and agreements in this Agreement
shall be binding upon the parties hereto and their respective successors and
assigns and shall enure to the benefit of and be enforceable by the parties
hereto and their respective successors and their permitted assigns pursuant to
the terms and conditions of this Agreement.

11.17                                                                 Counterparts

This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original hereof,
and all of which shall constitute a single agreement effective as of the date
hereof.  Any delivery of an executed copy
of this Agreement by way of telecopy shall constitute delivery hereof, provided
that any party delivering by way of telecopy shall, as soon as reasonably
practicable, deliver an originally executed counterpart of this Agreement to
the other parties.

 31

IN WITNESS WHEREOF the parties have executed this Agreement as of the
day and year first above written.

 

	
  

  	
  20005 DELAWARE INC.

  
	
   

  	
   

  
	
   

  	
  by

  	
  /s/ John Simonetti

  	
   

  
	
   

  	
   

  	
    Name: John
  Simonetti

  
	
   

  	
   

  	
    Title:  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Richard J. Crofts

  	
   c/s

  
	
   

  	
   

  	
    Name: Richard
  J. Crofts

  
	
   

  	
   

  	
    Title:   Executive Vice-President,
               Corporate Development,
               General Counsel and Secretary

  
	
   

  	
  I/We have authority to bind the Corporation.

  
					

 

	
  

  	
  SLRD THOROUGHBRED TRAINING CENTER, INC.

  
	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Blake Tohana

  	
   

  
	
   

  	
   

  	
    Name: Blake
  Tohana

  
	
   

  	
   

  	
    Title:   Executive Vice President and Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/
  William G. Ford

  	
   c/s

  
	
   

  	
   

  	
    Name: William
  G. Ford

  
	
   

  	
   

  	
    Title:   Secretary

  
	
   

  	
  I/We have authority to bind the Corporation.

  

 

SCHEDULE
A

LEGAL
DESCRIPTION OF THE LANDS

SAN LUIS
REY DOWNS

5772 CAMINO DEL REY

BONSALL, CALIFORNIA

PARCEL 1:

All that portion of the Northwest Quarter of the
Northeast Quarter of Section 28, Township 10 South, Range 3 West, San
Bernardino Meridian, in the County of San Diego, State of California, according
to the Official Plat thereof, lying Northerly of the centerline of Road Survey
No. 106, as described in Deeds to the County of San Diego, recorded May 14,
1897 in Book 257, Page 284, April 3, 1897 in Book 257, Page 286 and June 11,
1897 in Book 263, Page 109, all of Deeds.

Excepting therefrom that portion of the above
described Parcel of Land described as follows:

Beginning at the point of intersection of the
centerline of said Road Survey No. 106, with the East line of said Northwest
Quarter of the Northeast Quarter, said point of intersection being also a point
in the arc of a 150.00 foot radius curve, concave Southerly in said centerline,
a radial of which bears North 09°39’55” East to said point of intersection;
thence Westerly along said centerline and along said curve, through a central
angle of 12°17’15” a distance of 32.17 feet to the Point of Tangency; thence
South 87°31’40” West, 218.27 feet; thence continuing along said centerline,
North 87°31’40” West, 80.12 feet to an intersection with a line drawn parallel
with and 330.00 feet Westerly at right angles from the East line of said
Northwest Quarter of the Northeast Quarter; thence along said parallel line,
North 01°00’40” East, 1183.34 feet to the North line of said Northwest Quarter
of the Northeast Quarter; thence along said North line, South 89°51’20” East,
330.04 feet to the Northeast corner of said Northwest Quarter of the Northeast
Quarter; thence along the East line of said Northwest Quarter of the Northeast
Quarter, South 01°00’40” West, 1177.95 feet to the Point of Beginning.

PARCEL 2:

All that portion of the South Half of the Southwest
Quarter of Section 21; with that portion of the North Half of the Northwest
Quarter of Section 28, Township 10 South, Range 3 West, San Bernardino Base and
Meridian, in the County of San Diego, State of California, according to United
States Government Survey thereof and more particularly as shown on Record
Survey Map No. 6957, on file in the Office of the Recorder of said San Diego
County, described as a whole as follows:

Beginning at the North Quarter corner of said Section
28; thence South 0°37’43” West along the North and South centerline of said
Section, 1040.60 feet to a point in the centerline of Camino Del Rey (formerly
Moosa Canyon Road) as shown on said Record of Survey Map No. 6957; thence
Northwesterly along said centerline as shown on said Map as follows: North
77°10’45” West 509.80 feet; North 68°15’50” West 812.41 feet; North 60°20’40”
West 60.70 feet to an intersection with the North and South centerline of the
Northwest Quarter of said Section 28;

thence leaving the centerline of Camino Del Rey, North
0°41’37” East along said North and South centerline, 601.62 feet to the
Northeast corner of the Northwest Quarter of the Northwest Quarter of said
Section; thence North 89°46’40” West along the North line thereof, 962.03 feet
to an intersection with the aforementioned centerline of Camino Del Rey; thence
North 56°55’04” West along said center line, 264.82 feet; thence leaving said
centerline, North 79°09’26” East 890.24 feet; thence South 75°57’15” East
891.88 feet; thence North 69°41’10” East 305.95 feet; thence North 43°11’20”
East 403.14 feet; thence North 9°20’10” West 361.48 feet; thence North
15°55’10” East 189.03 feet; thence North 78°17’30” East 218.69 feet to a point
in the East line of the said South Half of the Southwest Quarter of said
Section 21, said point being South 0°54’20” West 236.23 feet from the Northeast
corner of said South Half; thence South 0°54’20” West along said East line,
1087.48 feet to the Point of Beginning.

PARCEL 3:

All that portion of the East 1⁄2 of Section 20, and that
portion of Section 121; and that portion of the North 1⁄2 of the Northwest
Quarter of Section 28, all in Township 10 South, Range 3 West, San Bernardino
Base and Meridian, in the County of San Diego, State of California, according
to Official Plat thereof, and more particularly as shown on Record of Survey
Map No. 6957, on file in the Office of the County Recorder of San Diego County,
described as a whole as follows:

Beginning at the North Quarter corner of said Section
28; thence South 0°37’43” West along the North and South center line of said
Section, 1040.60 feet to a point in the center line of Camino Del Rey (formerly
Moosa Canyon Road) as shown on said Record of Survey Map No. 6957; thence
Northwesterly along said center line as shown on said Map as follows: North
77°10’45” West, 509.80 feet; North 68°15’50” West, 812.41 feet; North 60°20’40”
West, 60.70 feet to an intersection with the North and South center line of the
Northwest Quarter of said Section 28; thence leaving the center line of Camino
Del Rey North 0°41’37” East along said North and South center line, 601.62 feet
to the Northeast corner of the Northwest Quarter of the Northwest Quarter of
said Section; thence North 89°46’40” West along the North line thereof, 962.03
feet to an intersection with the aforementioned center line of Camino Del Rey;
thence along said center line as follows: North 56°55’04” West along said
center line, 264.82 feet, to a tangent 1000 foot radius curve, concave
Northeasterly; Northwesterly along said curve through an angle of 19°59’09” a
distance of 348.75 feet; tangent to said curve North 36°55’55” West, 649.67 feet
to the beginning of a tangent curve concave Southwesterly and having a radius
of 1000.01 feet; Northwesterly along the arc of said curve through a central
angle of 13°08’ an arc distance of 229.18 feet; tangent to said curve North
50°03’55” West, 506.20 feet to the beginning of a tangent curve concave
Southwesterly and having a radius of 1000.00 feet; Northwesterly along the arc
of said curve through a central angle of 3°55’05” an arc distance of 68.36
feet; tangent to said curve North 53°59’ West, 197.21 feet to the beginning of
a tangent curve concave Southerly and having a radius of 1000.03 feet;
Northwesterly, Westerly and Southwesterly along the arc of said curve through a
central angel of 64°39’10” an arc distance of 1128.22 feet to a point, a radial
line to said point bears North 28°38’10” West; thence leaving said center line,
Northerly along the center line of Lilac Road as traveled, as shown on said
Record of Survey Map No. 6957, 56.46 feet to the Northerly line of said Camino
Del Rey being the Southerly boundary of the land described in Parcel 2 in Deed
to David A. Thomas, et ux, recorded July 15, 1971 as Document No. 153740 of
Official Records; thence in an Easterly direction along the Northerly line of
said Camino Del Rey to the most Westerly corner of San Luis Rey Downs
Townhouses Unit No. 1,

 2
 

according to Map thereof No. 6468, filed in the Office
of County Recorder of San Diego County; thence along the Southwesterly boundary
of said Unit No. 1, Southeasterly along the arc of a 1052.03 foot radius curve
153.55 feet to an angle point; thence along the boundary of said Map No. 6468
in a general Northerly and Northeasterly direction to and along the
Southeasterly boundary of Camino Del Cielo as shown on said Map to the most
Northwesterly corner of Lot 1 of said Map No. 6468; thence in a general
Southerly and Southeasterly direction along the Westerly and Southwesterly
boundary of said Lot 1 to the most Southerly corner of said Lot 1; thence along
the Southeasterly boundary of said Lot 1 North 73°51’00” East, 146.29 feet to
an angle point; and North 27°16’23” East, 47.43 feet to an angle point being
the Northwest corner of the Southeast Quarter of the Southwest Quarter of said
Section 21; thence South 89°47’15” East, 1311.27 feet to the Northeast corner
of said Southeast Quarter of the Southwest Quarter; thence along the East line
of said Southwest Quarter of Section 21 South 0°54’20” West, 1323.71 feet to
the Point of Beginning.

Excepting therefrom all that portion described as
follows:

All that portion of the South Half of the Southwest
Quarter of Section 21; with that portion of the North Half of the Northwest
Quarter of Section 28, both Township 10 South, Range 3 West, San Bernardino
Base and Meridian, in the County of San Diego, State of California, according
to United States Government Survey thereof, and more particularly as shown on
Record of Survey 6957, on file in the Office of the Recorder of Said San Diego
County, described as a whole as follows:

Beginning at the North Quarter corner of said Section
28; thence South 0°37’43” West along the North and South center line of said
Section, 1040.60 feet to a point in the center line of Camino Del Rey (formerly
Moosa Canyon Road) as shown on said Record of Survey Map No. 6957; thence
Northwesterly along said center line as shown on said Map as follows: North
77°10’45” West 509.80 feet; North 68°15’50” West 812.41 feet; North 60°20’40”
West 60.70 feet to an intersection with the North and South center line of the
Northwest Quarter of said Section 28; thence leaving the center line of Camino
Del Rey, North 0°41’37” East along said North and South center line, 601.62
feet to the Northeast corner of the Northwest Quarter of the Northwest Quarter
of said Section; thence North 89°46’40” West along the North line thereof,
962.03 feet to an intersection with the aforementioned center line of Camino
Del Rey; thence North 56°55’04” West along said center line, 264.82 feet;
thence leaving said center line, North 79°09’26” East 890.24 feet; thence South
75°57’15” East 891.88 feet; thence North 69°41’10” East 305.95 feet; thence
North 43°11’20” East 403.14 feet; thence North 9°20’10” West 361.48 feet;
thence North 15°55’10” East 189.03 feet; thence North 78°17’30” East 218.69
feet to a point in the East line of the said South Half of the Southwest
Quarter of said Section 21, said point being South 0°54’20” West 236.23 feet
from the Northeast corner of said South Half; thence South 0°54’20” West along
said East line, 1087.48 feet to the Point of Beginning.

Assessor’s Parcel No: 127-460-01, 03, 04, 05, 06, 07,
12 & 13, 126-060-57, 59, 61 & 64 &127-010-49.

 3

SCHEDULE
B

LIST
OF EXISTING CONTRACTS

None, except for short-term licenses to use the Lands
for stalling and training, cancellable on short notice (all in the form of the
Standard Form Stall Application and Conditions of License to Stable and Train
Horses documents provided by the Vendor to the Purchaser prior to the Closing
Date).

SCHEDULE C

LIST
OF EXISTING LEASES

1.                                       Occupancy
Agreement dated November 7, 1999 between SLRD Thoroughbred Training Center,
Inc. and San Luis Rey Downs Enterprises LLC, as amended April 5, 2002;

2.                                       Lease
Agreement dated April 1, 2003 between SLRD Thoroughbred Training Center, Inc.
and Trackside Feed, Inc., as amended July 11, 2005 (barns);

3.                                       Lease
Agreement dated April 1, 2003 between SLRD Thoroughbred Training Center, Inc.
and Trackside Feed, Inc., as amended July 11, 2005 (feed store);

4.                                       SLRD
Thoroughbred Training Center, Inc. easement granted to San Diego Gas and
Electric Company, recorded December 6, 2006 DOC # 2006-0864740; and

5.                                       Standard
Form Stall Application and Conditions of License to Stable and Train horses.Exhibit
10.1

GLOBALSCAPE, INC.

2006 NON-EMPLOYEE DIRECTORS LONG-TERM
EQUITY INCENTIVE PLAN

 1

GLOBALSCAPE, INC.

2006 NON-EMPLOYEE DIRECTORS LONG-TERM
EQUITY INCENTIVE PLAN

TABLE OF CONTENTS

	
  PART I

  	
   

  	
   

  	
   

  	
   

  
	
  PURPOSE, ADMINISTRATION AND RESERVATION OF
  SHARES

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
   

  	
  Purpose of this Plan

  	
   

  	
  3

  
	
  SECTION 2.

  	
   

  	
  Definitions

  	
   

  	
  3

  
	
  SECTION 3.

  	
   

  	
  Administration of this Plan

  	
   

  	
  5

  
	
  SECTION 4.

  	
   

  	
  Shares Subject to this Plan

  	
   

  	
  6

  
	
  SECTION 5.

  	
   

  	
  Adjustments to Shares Subject to this Plan

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PART II

  	
   

  	
   

  	
   

  	
   

  
	
  TERMS APPLICABLE TO ALL AWARDS

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
   

  	
  General Eligibility; Maximum Annual Participant
  Award and Formula Awards

  	
   

  	
  7

  
	
  SECTION 7.

  	
   

  	
  Procedure for Exercise of Awards; Rights as a
  Stockholder

  	
   

  	
  8

  
	
  SECTION 8.

  	
   

  	
  Expiration of Awards

  	
   

  	
  8

  
	
  SECTION 9.

  	
   

  	
  Effect of Change of Control

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PART III

  	
   

  	
   

  	
   

  	
   

  
	
  SPECIFIC TERMS APPLICABLE TO OPTIONS AND STOCK
  AWARDS

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
   

  	
  Grant, Terms and Conditions of Options

  	
   

  	
  9

  
	
  SECTION 11.

  	
   

  	
  Grant, Terms and Conditions of Stock Awards

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PART IV

  	
   

  	
   

  	
   

  	
   

  
	
  TERM OF PLAN AND STOCKHOLDER APPROVAL

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
   

  	
  Term of Plan

  	
   

  	
  10

  
	
  SECTION 13.

  	
   

  	
  Amendment and Termination of this Plan

  	
   

  	
  10

  
	
  SECTION 14.

  	
   

  	
  Stockholder Approval

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PART V

  	
   

  	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 15.

  	
   

  	
  Unfunded Plan

  	
   

  	
  10

  
	
  SECTION 16.

  	
   

  	
  Representations and Legends

  	
   

  	
  10

  
	
  SECTION 17.

  	
   

  	
  Assignment of Benefits

  	
   

  	
  11

  
	
  SECTION 18.

  	
   

  	
  Governing Laws

  	
   

  	
  11

  
	
  SECTION 19.

  	
   

  	
  Application of Funds

  	
   

  	
  11

  
	
  SECTION 20.

  	
   

  	
  Right of Removal

  	
   

  	
  11

  

 

 2

GLOBALSCAPE, INC.

2006 Non-Employee Directors Long-Term
Equity Incentive Plan

PART
I

PURPOSE,
ADMINISTRATION AND RESERVATION OF SHARES

SECTION 1.         Purpose of this Plan.  The purposes of this
Plan are (a) to attract and retain members of the Board of Directors, and (b)
to promote the growth and success of the Company’s business, (i) by aligning
the long-term interests of the Company’s Directors with those of the Company’s
stockholders by providing an opportunity to acquire an interest in the Company
and (ii) by providing both rewards for exceptional performance and long term
incentives for future contributions to the success of the Company and its
Subsidiaries.

This Plan permits
the grant of Nonqualified Stock Options or Restricted Stock, at the discretion
of the Committee and as reflected in the terms of the Award Agreement.  Each Award will be subject to conditions
specified in this Plan.

SECTION 2.         Definitions.  As used herein, the following
definitions shall apply:

(a)           “Active Status”  shall mean that the Director has
not been removed from the Board for cause by the Company’s stockholders as
provided in the Company’s Certificate of Incorporation, as amended, and Bylaws,
as amended.

(b)           “AMEX” shall
mean the American Stock Exchange.

(c)           “Award”  shall mean any award or benefits
granted under this Plan, including Options and Restricted Stock.

(d)           “Award Agreement”  shall mean a written or electronic
agreement between the Company and the Participant setting forth the terms of
the Award.

(e)           “Beneficial Ownership”  shall have the meaning set forth
in Rule 13d-3 promulgated under the Exchange Act.

(f)            “Board”  shall mean the Company’s Board of
Directors.

(g)           “Change of Control”  shall mean the first day that any
one or more of the following conditions shall have been satisfied:

(i)            the
sale, transfer, or assignment to, or other acquisition by any other entity or
entities, of all or substantially all of the Company’s assets and business in
one or a series of related transactions;

(ii)           a
third person, including a “group” as determined in accordance with Section
13(d) or 14(d) of the Exchange Act, obtains the Beneficial Ownership of Common
Stock having thirty percent (30%) or more of the then total number of votes
that may be cast for the election of members of the Board; or

(iii)          a
cash tender or exchange offer, merger, consolidation, reorganization or other
business combination, sale of assets or contested election, or any combination
of the foregoing transactions (each a “Transaction”) in connection with the
Company, as a result of which the persons who are then members of the Board
before the Transaction shall cease to constitute a majority of the Board of the
Company or any successor to the Company after the Transaction.

 3
 

(h)           “Code”  shall mean the Internal Revenue
Code of 1986, as amended.

(i)            “Committee”  shall mean the Compensation
Committee appointed by the Board.

(j)            “Common Stock”  shall mean the common stock of the
Company, par value $0.001 per share.

(k)           “Company”  shall mean GlobalSCAPE, Inc. a
Delaware corporation, and any successor thereto.

(l)            “Director”  shall mean a member of the Board
and, except with respect to the ability to vote on any issues before the Board
or the delegation of authority from the Board, shall also be deemed to include
advisory directors.

(m)          “Effective Date” shall mean the date
on which the Company’s stockholders have approved this Plan.

(n)           “Exchange Act”  shall mean the Securities Exchange
Act of 1934, as amended.

(o)           “Fair Market Value”
shall mean the closing price per share of the Common Stock on the AMEX as to
the date specified (or the previous trading day if the date specified is a day
on which no trading occurred), or if AMEX is not or shall cease to be the
principal exchange or quotation system upon which the shares of Common Stock
are listed or quoted, then such exchange or quotation system upon which the
Company elects to list or quote its shares of Common Stock.

(p)           “FLSA”  shall mean the Fair Labor
Standards Act of 1938, as amended.

(q)           “Independent Director”  shall mean a Director who: (i)
meets the independence requirements of the AMEX, or if the AMEX is not or shall
cease to be the principal exchange or quotation system upon which the shares of
Common Stock are listed or quoted, then such exchange or quotation system upon
which the Company elects to list or quote its shares of Common Stock; (ii)
qualifies as an “outside director” under Section 162(m) of the Code; (iii)
qualifies as a “non-employee director” under Rule 16b-3 promulgated under the
Exchange Act; and (iv) satisfies independence criteria under any other
applicable laws or regulations relating to the issuance of Shares to
Non-Employee Directors.

(r)            “Maximum Annual Participant Award”  shall have the meaning set forth
in Section 6(b).

(s)           “Misconduct”  shall mean the removal from the
Board for cause.

(t)            “Nominating and Corporate Governance
Committee”  shall
mean the Nominating and Corporate Governance Committee appointed by the Board.

(u)           “Non-Employee Director”  shall mean a Director who is not a
common law employee of the Company or any Subsidiary of the Company.

(v)           “Option”  shall mean a stock option granted
pursuant to Section 10 of this Plan.

(w)          “Optionee”
shall mean a Participant who has been granted an Option.

(x)            “Participant”  shall mean any Non-Employee
Director granted an Award.

(y)           “Plan”  shall mean this GlobalSCAPE, Inc.
2006 Non-Employee Directors Long-Term Equity Incentive Plan, including any
amendments thereto.

 4
 

(z)            “Reprice”  shall mean the adjustment or
amendment of the exercise price of Options or previously awarded whether
through amendment, cancellation, replacement of grants or any other means.

(aa)         “Restricted Stock”  shall mean a grant of Shares
pursuant to Section 11 of this Plan.

(bb)         “Retirement”  shall mean ceasing to be a Director pursuant to
election by the Company’s stockholders or by voluntary resignation with the
approval of the Board’s chair after having served continuously on the Board for
at least six years.

(cc)         “SEC”  shall
mean the Securities and Exchange Commission.

(dd)         “Share”  shall
mean one share of Common Stock, as adjusted in accordance with Section 5 of
this Plan.

(ee)         “Subcommittee” shall have the
meaning set forth in Section 3(d).

(ff)           “Subsidiary”  shall mean a “subsidiary
corporation,” whether now or hereafter existing, as defined in Section 424(f)
of the Code, a limited liability company, partnership or other entity in which
the Company controls fifty percent (50%) or more of the voting power or equity
interests, or an entity with respect to which the Company possesses the power,
directly or indirectly, to direct or cause the direction of the management and
policies of that entity, whether through the Company’s ownership of voting
securities, by contract or otherwise.

SECTION 3.           Administration of this Plan.

(a)           Authority.  This
Plan shall be administered by the Committee. 
The Committee shall have full and exclusive power to administer this
Plan on behalf of the Board, subject to such terms and conditions as the
Committee may prescribe.  Notwithstanding
anything herein to the contrary, the Committee’s power to administer this Plan,
and actions the Committee takes under this Plan, shall be limited by the
provisions set forth in the Committee’s charter, as such charter may be amended
from time to time, and the further limitation that certain actions may be
subject to review and approval by either the full Board or a panel consisting
of all of the Independent Directors of the Company.

(b)           Powers
of the Committee.  Subject to the other provisions of this Plan,
the Committee shall have the authority, in its discretion:

(i)            to
determine the Participants, to whom Awards, if any, will be granted hereunder;

(ii)           to
grant Options and Restricted Stock to Participants and to determine the terms
and conditions of such Awards, including the determination of the Fair Market
Value of the Shares, the number of Shares to be represented by each Award and
the vesting schedule, the exercise price, the timing of such Awards, and to
modify or amend each Award, with the consent of the Participant when required;

(iii)          to
construe and interpret this Plan and the Awards granted hereunder;

(iv)          to
prescribe, amend, and rescind rules and regulations relating to this Plan,
including the form of Award Agreement, and manner of acceptance of an Award,
such as correcting a defect or supplying any omission, or reconciling any
inconsistency so that this Plan or any Award Agreement complies with applicable
law, regulations and listing requirements and to avoid unanticipated
consequences deemed by the Committee to be inconsistent with the purposes of
this Plan or any Award Agreement;

(v)           to
accelerate or defer (with the consent of the Participant) the exercise or
vested date of any Award;

 5
 

(vi)          to
authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of an Award previously granted by the
Committee; and

(vii)         to
make all other determinations deemed necessary or advisable for the
administration of this Plan;

provided, that,  no
consent of a Participant is necessary under clauses (i) or (v) if a
modification, amendment, acceleration, or deferral, in the reasonable judgment
of the Committee confers a benefit on the Participant or is made pursuant to an
adjustment in accordance with Section 5.

(c)           Effect
of Committee’s Decision.  All
decisions, determinations, and interpretations of the Committee shall be final
and binding on all Participants, the Company (including its Subsidiaries), any
stockholder and all other persons.

(d)           Delegation.  Consistent with the
Committee’s charter, as such charter may be amended from time to time, the
Committee may delegate its authority and duties under this Plan to one or more
separate committees consisting of members of the Committee or other Directors
who are Independent Directors (any such committee a “Subcommittee”), and such
actions shall be treated for all purposes as if taken by the Committee;
provided that the grant of Awards shall be made in accordance with parameters
established by the Committee.  Any action
by any such Subcommittee within the scope of such delegation shall be deemed
for all purposes to have been taken by the Committee.

SECTION 4.           Shares Subject to this Plan.

(a)           Reservation
of Shares.  The
shares of Common Stock reserved under this Plan shall be 500,000 shares of
Common Stock.  If an Award expires, is
forfeited or becomes unexercisable for any reason without having been exercised
in full, the undelivered Shares which were subject thereto shall, unless this
Plan shall have been terminated, become available for future Awards under this
Plan.  Without limiting the foregoing,
unless this Plan shall have been terminated, Shares underlying an Award that
has been exercised, either in part or in full, including any Shares that would
otherwise be issued to a Participant that are used to satisfy any withholding
tax obligations that arise with respect to any Award, shall become available
for future Awards under this Plan except to the extent Shares were issued in
settlement of the Award.  The Shares may
be authorized but unissued, or reacquired shares of Common Stock.  The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of this Plan.

(b)           Time
of Granting Awards.  The
date of grant of an Award shall, for all purposes, be the date on which the
Company completes the corporate action relating to the grant of such Award and
all conditions to the grant have been satisfied, provided that conditions to
the exercise of an Award shall not defer the date of grant.  Notice of a grant shall be given to each
Participant to whom an Award is so granted within a reasonable time after the
determination has been made.

(c)           Securities
Law Compliance.  Shares
shall not be issued pursuant to the exercise of an Award unless the exercise of
such Award and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated under either such Acts, and the requirements of any stock exchange
or quotation system upon which the Shares may then be listed or quoted, and
shall be further subject to the approval of counsel for the Company with
respect to such compliance.

(d)           Substitutions
and Assumptions.  The
Board or the Committee shall have the right to substitute or assume Awards in
connection with mergers, reorganizations, separations, or other transactions to
which Section 424(a) of the Code applies, provided such substitutions and
assumptions are permitted by Section 424 of the Code and the regulations
promulgated thereunder.  The number of
Shares reserved pursuant to Section 4(a) may be increased by the corresponding
number of Awards assumed and, in the case of a substitution, by the net
increase in the number of Shares subject to Awards before and after the
substitution.

 6
 

SECTION 5.           Adjustments to Shares Subject to
this Plan.

(a)           Adjustments.  If the outstanding shares of Common Stock
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities or property of the Company or of another corporation
(whether by reason of merger, consolidation, recapitalization,
reclassification, split up, combination of shares or otherwise), or if the
number of such shares of Common Stock shall be increased by a stock dividend or
stock split, there shall be substituted for or added to each share of Common
Stock theretofore reserved for the purposes of this Plan, whether or not such
shares are at the time subject to outstanding Awards, the number and kind of
shares of stock or other securities or property into which each outstanding
share of Common Stock shall be so changed or for which it shall be so
exchanged, or to which each such share shall be entitled, as the case may
be.  Outstanding Awards shall also be
considered to be appropriately amended as to price and other terms as may be
necessary or appropriate to reflect the foregoing events.  If there shall be any other change in the
number or kind of the outstanding shares of Common Stock, or of any stock or
other securities or property into which such Common Stock shall have been
changed, or for which it shall have been exchanged, and if the Committee shall
in its sole discretion determine that such change equitably requires an
adjustment in the number or kind or price of the shares then reserved for the
purposes of this Plan, or in any Award theretofore granted or which may be
granted under this Plan, then such adjustment shall be made by the Committee
and shall be effective and binding for all purposes of the Plan.  In making any such substitution or adjustment
pursuant to this Section 5, fractional shares may be ignored.

(b)           Amendments.  The Committee shall have the power, in the
event of any merger or consolidation of the Company with or into any other
corporation, or the merger or consolidation of any other corporation with or
into the Company, to amend all outstanding Awards to permit the exercise
thereof in whole or in part at anytime, or from time to time, prior to the
effective date of any such merger or consolidation and to terminate each such
Award as of such effective date.

(c)           No Other Adjustment.  Except as expressly provided herein, no
issuance by the Company of shares of any class, or securities convertible into
shares of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares subject to an Award.

PART
II

TERMS
APPLICABLE TO ALL AWARDS

SECTION 6.           General Eligibility; Maximum
Annual Participant Award and Formula Awards.

(a)           Awards.  Awards may be granted only
to Participants who are Non-Employee Directors.

(b)           Maximum
Annual Participant Award.  The
aggregate number of Shares with respect to which an Award or Awards may be
granted to any one Participant in any one taxable year of the Company (the “Maximum
Annual Participant Award”) shall not exceed 20,000 shares of Common Stock
(subject to adjustment as set forth in Section 5(a)) pursuant to the Awards to
be granted pursuant to Section 6(c).

(c)           Formula Awards.  Each year at the conclusion of the Company’s
annual stockholders meeting for that year, each Non-Employee Director at such
time, shall be granted Awards of 20,000 shares of Common Stock (subject to
adjustment as set forth in Section 5(a)), unless the Committee shall decide
otherwise prior to such meeting.  The
Awards granted pursuant to this Section 6(c) are intended to compensate each
Non-Employee Director for that Non-Employee Director’s participation in Board
and Committee meetings during the Company’s previous calendar year.  Any Non-Employee Director who leaves the
Board (including ceasing to be an advisory Director) prior to the date of the
Company’s annual stockholders meeting shall not be entitled to any Awards under
this Section 6(c) and no newly elected Non-Employee Director shall be entitled
to any Awards under this Section 6(c).

 7
 

SECTION 7.           Procedure for Exercise of Awards;
Rights as a Stockholder.

(a)           Procedure.  An Award shall be exercised
when written, electronic or verbal notice of exercise has been given to the
Company, or the brokerage firm or firms approved by the Company to facilitate
exercises and sales under this Plan, in accordance with the terms of the Award
by the person entitled to exercise the Award and full payment for the Shares
with respect to which the Award is exercised has been received by the Company
or the brokerage firm or firms, as applicable. 
The notification to the brokerage firm shall be made in accordance with
procedures of such brokerage firm approved by the Company.  Full payment may, as authorized by the
Committee, consist of any consideration and method of payment allowable under
Section 7(b) of this Plan.  The Company
shall issue (or cause to be issued) such share certificate promptly upon
exercise of the Award.  No adjustment
will be made for a dividend or other right for which the record date is prior
to the date the share certificate is issued, except as provided in Section 5 of
this Plan.

(b)           Method
of Payment.  The
consideration to be paid for any Shares to be issued upon exercise or other
required settlement of an Award, including the method of payment, shall be
determined by the Committee at the time of settlement and which forms may
include (without limitation): (i) with respect to an Option, a request that the
Company or the designated brokerage firm conduct a cashless exercise of the
Option; (ii) cash; and (iii) tender of shares of Common Stock owned by the
Participant in accordance with rules established by the Committee from time to
time.  Shares used to pay the exercise
price shall be valued at their Fair Market Value on the exercise date.  Payment of the aggregate exercise price by
means of tendering previously-owned shares of Common Stock shall not be
permitted when the same may, in the reasonable opinion of the Company, cause
the Company to record a loss or expense as a result thereof.

(c)           Withholding
Obligations.  To the extent
required by applicable federal, state, local or foreign law, the Committee may
and/or a Participant shall make arrangements satisfactory to the Company for
the satisfaction of any withholding tax obligations that arise with respect to
any Option or  Restricted Stock or any
sale of Shares.  The Company shall not be
required to issue Shares or to recognize the disposition of such Shares until
such obligations are satisfied.  These
obligations may be satisfied by having the Company withhold a portion of the
Shares that otherwise would be issued to a Participant under such Award or by
tendering Shares previously acquired by the Participant in accordance with
rules established by the Committee from time to time.

(d)           Stockholder
Rights.  Except
as otherwise provided in this Plan, until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the share certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Shares subject to the Award, notwithstanding the exercise
of the Award.

(e)           Non-Transferability
of Awards.  An
Award may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in exchange for consideration, except that an Award may be
transferred by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Participant, only by the Participant;
unless the Committee permits further transferability, on a general or specific
basis, in which case the Committee may impose conditions and limitations on any
permitted transferability.

SECTION 8.           Expiration of Awards.

(a)           Expiration,
Termination or Forfeiture of Awards. 
Unless otherwise provided in the applicable Award
Agreement or any severance agreement, vested Awards granted under this Plan
shall expire, terminate, or otherwise be forfeited as follows:

(i)            three
(3) months after the date the Company delivers a notice of termination of a
Participant’s Active Status, other than in circumstances covered by (ii), (iii)
or (iv) below;

(ii)           immediately
upon termination of a Participant’s Active Status for Misconduct;

(iii)          twelve
(12) months after the date of the death of a Participant whose Active Status
terminated as a result of his or her death; and

 8
 

(iv)          thirty-six
(36) months after the date on which the Participant ceased performing services
as a result of Retirement.

(b)           Extension
of Term.  Notwithstanding
subsection (a) above, the Committee shall have the authority to extend the
expiration date of any outstanding Option in circumstances in which it deems
such action to be appropriate (provided that no such extension shall extend the
term of an Option beyond the date on which the Option would have expired if no
termination of the Participant’s Active Status had occurred).

SECTION 9.           Effect of Change of Control.  Notwithstanding any
other provision in this Plan to the contrary, the following provisions shall
apply unless otherwise provided in the most recently executed agreement between
the Participant and the Company, or specifically prohibited under applicable
laws, or by the rules and regulations of any applicable governmental agencies
or national securities exchanges or quotation systems.

(a)           Acceleration.  Awards of a Participant
shall be Accelerated (as defined in Section 9(b)) upon the occurrence of a
Change of Control.

(b)           Definition.  For purposes of this
Section 9, Awards of a Participant being “Accelerated” means, with respect to
such Participant:

(i)            any
and all Options shall become fully vested and immediately exercisable, and shall
remain exercisable throughout their entire term; and

(ii)           any
restriction periods and restrictions imposed on Restricted Stock shall lapse.

PART
III

SPECIFIC
TERMS APPLICABLE TO OPTIONS AND STOCK AWARDS

SECTION 10.         Grant, Terms and Conditions of
Options.

(a)           Term
of Options.  The
term of Options shall be at the discretion of the Committee.

(b)           Option
Exercise Prices.  The
per Share exercise price under an Option shall be no less than one hundred
percent (100%) of the Fair Market Value per Share on the date of grant.  In no event shall the Board or the Committee
be permitted to Reprice an Option after the date of grant without stockholder
approval.

(c)           Vesting.  Options granted pursuant to this
section 10 shall vest pursuant to the periods, terms and conditions determined
by the Committee in its sole discretion. 
To the extent Options vest and become exercisable in increments,
such Options shall cease vesting as of the termination of such Optionee’s
Active Status for reasons other than Retirement or death, in each of which
cases such Options shall immediately vest in full.

(d)           Exercise.  Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Committee at the time of grant, and as are permissible under
the terms of this Plan.  An Option may
not be exercised for a fraction of a Share.

SECTION 11.         Grant, Terms and Conditions of Stock
Awards.

(a)           Designation.  Restricted Stock may be
granted either alone, in addition to, or in tandem with other Awards granted
under this Plan.  After the Committee
determines that it will offer Restricted Stock, it will advise the Participant
in writing or electronically, by means of an Award Agreement, of the terms,
conditions and restrictions, including vesting, if any, related to the offer,
including the number of Shares that the Participant shall be entitled to
receive or purchase, the price to be paid, if any, and, if applicable, the time
within which the Participant must accept the offer.  The offer shall be accepted by execution of
an Award Agreement or as otherwise directed by the Committee.  The term of each award of Restricted Stock
shall be at the discretion of the Committee.

 9
 

(b)           Vesting.    The Committee shall determine the time or
times within which an Award of shares of Restricted Stock may be subject to
forfeiture, the vesting schedule and the rights to acceleration thereof, and
all other terms and conditions of the Award. 
Subject to the applicable provisions of the Award Agreement and this
Section 11, upon termination of a Participant’s Active Status for any reason,
all Restricted Stock subject to the Award Agreement may vest or be forfeited in
accordance with the terms and conditions established by the Committee as
specified in the Award Agreement.

PART
IV

TERM
OF PLAN AND STOCKHOLDER APPROVAL

SECTION 12.         Term of Plan.  This Plan shall
become effective as of the Effective Date. 
It shall continue in effect until the tenth anniversary of the Effective
Date or until terminated under Section 14 of this Plan or extended by an
amendment approved by the stockholders of the Company pursuant to Section
14(a).

SECTION 13.         Amendment and Termination of this
Plan.

(a)           Amendment
and Termination.  The
Board or the Committee may amend or terminate this Plan from time to time in such
respects as the Board may deem advisable (including, but not limited, to
amendments which the Board deems appropriate to enhance the Company’s ability
to claim deductions related to stock option exercises); provided, that to the
extent required by the Code or the rules of the AMEX, such other exchange upon
which the Company’s Common Stock is either quoted or traded, or the SEC,
stockholder approval shall be required for any material amendment of this
Plan.  Subject to the foregoing, it is
specifically intended that the Board or Committee may amend this Plan without
stockholder approval to comply with legal, regulatory and listing requirements
and to avoid unanticipated consequences deemed by the Committee to be
inconsistent with the purpose of this Plan or any Award Agreement.

(b)           Effect
of Amendment or Termination.  Any
amendment or termination of this Plan shall not affect Awards already granted
and such Awards shall remain in full force and effect as if this Plan had not
been amended or terminated, unless mutually agreed otherwise between the
Participant and the Committee, which agreement must be in writing and signed by
the Participant and the Company.

SECTION 14.         Stockholder Approval.  The effectiveness of
this Plan is subject to approval by the stockholders of the Company.

PART
V

MISCELLANEOUS

SECTION 15.         Unfunded Plan.  The adoption of this Plan and any setting
aside of amounts by the Company with which to discharge its obligations
hereunder shall not be deemed to create a trust.  The benefits provided under this Plan shall
be a general, unsecured obligation of the Company payable solely from the
general assets of the Company, and neither a Participant nor the Participant’s
beneficiaries or estate shall have any interest in any assets of the Company by
virtue of this Plan.  Nothing in this
Section 15 shall be construed to prevent the Company from implementing or
setting aside funds in a grantor trust subject to the claims of the Company’s
creditors.  Legal and equitable title to
any funds set aside, other than any grantor trust subject to the claims of the
Company’s creditors, shall remain in the Company and any funds so set aside
shall remain subject to the general creditors of the Company, present and
future.  Any liability of the Company to
any Participant with respect to an Award shall be based solely upon contractual
obligations created by this Plan and the Award Agreements.

SECTION 16.         Representations and Legends.  The Committee may require each person
purchasing shares pursuant to an Award under this Plan to represent to and
agree with the Company in writing that the purchaser is acquiring the shares
without a view to distribution thereof. 
In addition to any legend required by this Plan, the certificate for such
shares may include any legend which the Committee deems appropriate to reflect
a restriction on transfer.

 10
 

All certificates for shares of Common Stock
delivered under this Plan shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the SEC, any stock exchange upon which
the Common Stock is listed, applicable federal or state securities laws, and
any applicable corporate law, and the Committee may cause the legend or legends
to be put on any such certificates to make appropriate reference to such
restriction.

SECTION 17.         Assignment of Benefits.  No Award or other benefits payable under this
Plan shall, except as otherwise provided under this Plan or as specifically
provided by law, be subject in any manner to anticipation, alienation,
attachment, sale, transfer, assignment, pledge, encumbrance or charge.  Any attempt to anticipate, alienate, attach,
sell, transfer, assign, pledge, encumber or charge, any such benefit shall be
void, and any such benefit shall not in any manner be subject to the debts,
contracts, liabilities, engagements or torts of any person who shall be
entitled to such benefit, nor shall such benefit be subject to attachment or
legal process for or against that person.

SECTION 18.         Governing Laws.  This Plan and actions taken in connection
herewith shall be governed, construed and enforced in accordance with the laws
of the State of Delaware.

SECTION 19.         Application of Funds.  The proceeds received by the Company from the
sale of shares of Common Stock pursuant to Awards granted under this Plan will
be used for general corporate purposes.

SECTION 20.         Right of Removal.  Nothing in this Plan or in any Award or Award
Agreement shall confer upon any Non-Employee Director or any other individual
the right to continue as a Director of the Company, or affect any right the
Company or the Company’s stockholders may have to remove the Non-Employee
Director as a Director at any time for any reason.

 11

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