Document:

Exhibit 10.2

 

EXECUTION COPY

 

 

 

PURCHASE AGREEMENT

 

 

BY AND AMONG

 

MAGNA ENTERTAINMENT CORP.

GULFSTREAM PARK RACING ASSOCIATION, INC.

GPRA COMMERCIAL ENTERPRISES, INC.

GPRA THOROUGHBRED TRAINING CENTER, INC.

MEC LAND HOLDINGS (CALIFORNIA) INC.
  MEC MARYLAND INVESTMENTS, INC.

MEC TEXAS RACING, INC.

PACIFIC RACING ASSOCIATION

RACETRACK HOLDINGS, INC.

30000 MARYLAND INVESTMENTS LLC

XPRESSBET, INC.

AS SELLERS

 

- and -

 

MI DEVELOPMENTS INC.

 

Dated as of March 5, 2009

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
  Section 1.1.

  	
  Recitals

  	
  1

  
	
  Section 1.2.

  	
  Definitions

  	
  1

  
	
  Section 1.3.

  	
  Other Terms

  	
  11

  
	
  Section 1.4.

  	
  Headings

  	
  12

  
	
  Section 1.5.

  	
  Interpretation

  	
  12

  
	
  Section 1.6.

  	
  Time

  	
  12

  
	
  Section 1.7.

  	
  Joint Ventures

  	
  12

  
	
  ARTICLE II

  	
  AGREEMENT OF PURCHASE AND SALE

  	
  13

  
	
  Section 2.1.

  	
  Purchase and Sale

  	
  13

  
	
  Section 2.2.

  	
  Condition of Conveyance

  	
  13

  
	
  Section 2.3.

  	
  Deposit

  	
  13

  
	
  Section 2.4.

  	
  Payment of Purchase Price

  	
  14

  
	
  Section 2.5.

  	
  Purchase Price Adjustment

  	
  14

  
	
  Section 2.6.

  	
  Tax Refunds

  	
  15

  
	
  Section 2.7.

  	
  Assumption of Liabilities

  	
  16

  
	
  Section 2.8.

  	
  Tax Reorganization

  	
  16

  
	
  Section 2.9.

  	
  Chapter 11 Cases

  	
  17

  
	
  ARTICLE III

  	
  COURT APPROVAL

  	
  17

  
	
  Section 3.1.

  	
  Condition Precedent

  	
  17

  
	
  Section 3.2.

  	
  Sale to Third Party

  	
  17

  
	
  Section 3.3.

  	
  Allocation of Purchase Price

  	
  18

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES

  	
  18

  
	
  Section 4.1.

  	
  Representations and Warranties of the
  Sellers

  	
  18

  
	
  Section 4.2.

  	
  No Other Representations or Warranties

  	
  29

  
	
  Section 4.3.

  	
  Representations and Warranties of MID

  	
  29

  
	
  Section 4.4.

  	
  Survival

  	
  29

  
	
  ARTICLE V

  	
  COVENANTS

  	
  29

  
	
  Section 5.1.

  	
  Covenants of the Sellers

  	
  29

  
	
  Section 5.2.

  	
  Covenants of MID and the Purchaser

  	
  34

  
	
  Section 5.3.

  	
  Joint Obligations

  	
  34

  
	
  Section 5.4.

  	
  Approvals of the Purchaser

  	
  34

  
				

 

i

 

	
  Section 5.5.

  	
  Notice of Default

  	
  34

  
	
  Section 5.6.

  	
  Approvals

  	
  35

  
	
  Section 5.7.

  	
  Risk of Condemnation and Eminent Domain

  	
  35

  
	
  Section 5.8.

  	
  Damage Before Closing

  	
  35

  
	
  ARTICLE VI

  	
  TITLE

  	
  36

  
	
  Section 6.1.

  	
  Search of Title

  	
  36

  
	
  ARTICLE VII

  	
  CONDITIONS TO CLOSING

  	
  37

  
	
  Section 7.1.

  	
  Conditions for the Purchaser

  	
  37

  
	
  Section 7.2.

  	
  Conditions for the Sellers

  	
  39

  
	
  ARTICLE VIII

  	
  CLOSING

  	
  39

  
	
  Section 8.1.

  	
  Closing Arrangements

  	
  39

  
	
  Section 8.2.

  	
  Sellers’ Deliveries

  	
  40

  
	
  Section 8.3.

  	
  Purchaser’s Deliveries

  	
  42

  
	
  Section 8.4.

  	
  Separate Tax Parcel

  	
  42

  
	
  Section 8.5.

  	
  Tax Matters

  	
  42

  
	
  ARTICLE IX

  	
  TERMINATION OF AGREEMENT

  	
  44

  
	
  Section 9.1.

  	
  Termination of Agreement By Either Party

  	
  44

  
	
  Section 9.2.

  	
  Termination of Agreement By the Sellers

  	
  44

  
	
  Section 9.3.

  	
  Termination of Agreement by MID

  	
  44

  
	
  Section 9.4.

  	
  Effect of Termination

  	
  44

  
	
  ARTICLE X

  	
  MISCELLANEOUS

  	
  44

  
	
  Section 10.1.

  	
  As-Is/Where-Is Transaction

  	
  44

  
	
  Section
  10.2.

  	
  No Recording

  	
  45

  
	
  Section
  10.3.

  	
  Obligations as Covenants

  	
  45

  
	
  Section
  10.4.

  	
  Tender

  	
  45

  
	
  Section
  10.5.

  	
  Relationship of the Parties

  	
  45

  
	
  Section
  10.6.

  	
  Amendment of Agreement

  	
  45

  
	
  Section
  10.7.

  	
  Notices

  	
  45

  
	
  Section
  10.8.

  	
  Specific Performance

  	
  47

  
	
  Section
  10.9.

  	
  Fees and Expenses

  	
  47

  
	
  Section
  10.10.

  	
  Governing Law; Jurisdiction; Service of
  Process

  	
  47

  
	
  Section
  10.11.

  	
  Further Assurances

  	
  47

  
	
  Section
  10.12.

  	
  Entire Agreement

  	
  47

  
	
  Section
  10.13.

  	
  Waiver

  	
  48

  
				

 

ii

 

	
  Section
  10.14.

  	
  Survival

  	
  48

  
	
  Section
  10.15.

  	
  Assignment

  	
  48

  
	
  Section
  10.16.

  	
  Successors and Assigns

  	
  48

  
	
  Section
  10.17.

  	
  Counterparts

  	
  48

  

 

iii

 

PURCHASE
AGREEMENT

 

PURCHASE
AGREEMENT (the “Agreement”), dated as of March 5,
2009, by and among Magna Entertainment Corp. (“MEC”),
a Delaware corporation, Gulfstream Park Racing Association, Inc. (“GPRA”), a Florida corporation, GPRA
Commercial Enterprises, Inc. (“GPRA Commercial”),
a Florida corporation, GPRA Thoroughbred Training Center, Inc., a Delaware
corporation (“GPRA Thoroughbred”), MEC Land
Holdings (California) Inc., a California corporation, MEC Maryland Investments, Inc.,
a Delaware corporation, MEC Texas Racing, Inc., a Delaware corporation,
Pacific Racing Association, a California corporation, Racetrack Holdings, Inc.,
a Delaware corporation, 30000 Maryland Investments LLC, a Delaware limited
liability company, as and XpressBet, Inc., a Delaware corporation, as
Sellers (collectively, the “Sellers”),
and MI Developments Inc., an Ontario corporation (“MID”).

 

RECITALS:

 

A.            Sellers currently, among other things, (1) conduct
thoroughbred racing and pari mutuel and
simulcast wagering at, among other facilities, Santa Anita Park (“Santa Anita”), Gulfstream Park (“Gulfstream”), Golden Gate Fields (“Golden Gate”), Lone Star Park (“Lone Star” and collectively with
Santa Anita, Gulfstream and Golden Gate, the “Racetracks”),
(2) own undeveloped real property, (3) own interests in the Forest
City JV, and (4) own and operate certain facilities, media and technology
assets relating to the thoroughbred racing and gaming industry at the
Racetracks and elsewhere.

 

B.            MEC, the direct or indirect parent of each of the other
Sellers, and certain of MEC’s subsidiaries and affiliates, intend to commence
cases (the “Chapter 11 Cases”) under
chapter 11 of title 11 of the United States Code (the “Bankruptcy
Code”) by filing voluntary petitions for relief with the United
States Bankruptcy Court for the District of Delaware (the “Bankruptcy
Court”).

 

C.            Sellers desire to sell assets and
equity interests on the terms and conditions contained in this Agreement,
including obtaining confirmation of a chapter 11 plan and an order of the
Bankruptcy Court pursuant to section 363 of the Bankruptcy Code authorizing the
Transaction.

 

D.            MID desires that the Purchaser
purchase certain assets and equity interests on the terms and subject to the
conditions contained in this Agreement.

 

NOW
THEREFORE, in consideration of the mutual covenants and agreements contained in
this Agreement, the parties hereto covenant and agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1.           Recitals.  The recitals set forth
above are incorporated by reference and are expressly made part of this Agreement.

 

Section 1.2.           Definitions.  The
following definitions shall apply to and constitute part of this Agreement and
all Exhibits and Schedules attached hereto:

 

 

“Adjustment” shall mean the Purchase
Price adjustment required pursuant to Section 2.5.

 

“Affiliate”
shall mean a person or entity that directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
the person or entity specified.  For
purposes of this definition, “control” shall mean (a) a fifty percent
(50%) or more common equity ownership or (b) the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

 

“AmTote”  shall
mean AmTote International, Inc., a Delaware corporation, and a provider of
totalisator services to the pari mutuel
industry, including a variety of wagering interfaces and connectivity products
for racetracks, off-track betting operators, and account-wagering providers,
foreign and domestic.

 

“AmTote Canada”  shall mean AmTote Canada, Inc., an Ontario corporation,
and a provider of totalisator services to the pari mutuel
industry, including a variety of wagering interfaces and connectivity products
for racetracks. off-track betting operators, and account-wagering providers,
foreign and domestic.

 

“AmTote Canada Stock” shall mean the issued
and outstanding common stock of AmTote Canada.

 

“Applicable Laws” shall mean all
domestic or foreign statutes, laws, by-laws, regulations, rules, ordinances and
orders of governmental or other public authorities having jurisdiction.

 

“Assignment and
Assumption of Contracts” shall mean an assignment by each Seller and assumption by the
Purchaser of such Seller’s right, title and interest in and to the Existing
Contracts, such agreement substantially in the form attached hereto as Exhibit A.

 

“Assignment and
Assumption of Leases” shall mean an assignment by each Seller and assumption by the Purchaser
of such Seller’s right, title and interest in and to the Existing Leases, such
agreement substantially in the form attached hereto as Exhibit B.

 

“Assignment of Realty Taxes” shall mean the assignment
agreement contemplated in Section 2.6 pursuant to which each Seller shall
assign to the Purchaser, to the extent permitted by Applicable Law, any
realty tax appeals and/or reassessments that relate to the Lands (and any other
lands purchased directly by the Purchaser pursuant to Section 2.9 or an
Alternative Transaction as contemplated by Section 2.8) for any Tax period
(or portion thereof) prior to the Closing Date, such agreement substantially in
the form attached hereto as Exhibit C.

 

“Assumed
Liabilities” shall mean those liabilities of the Sellers as set
forth on Exhibit D.

 

“Bankruptcy Rules”
shall mean the Federal Rules of Bankruptcy Procedure.

 

 “Bill of Sale” shall mean a bill of sale for
the Chattels.

 

2

 

“Business Day” shall mean any day other
than a Saturday, Sunday or other day on which commercial banks in New York
City, New York, or Toronto, Ontario are authorized or obligated to close under
Applicable Laws.

 

 “Chattels”
means the equipment, inventory, supplies and other chattels, in each case, if
any, located on or about the Lands, which are owned by the Sellers and used
exclusively in the maintenance, repair and operation of the Lands.

 

 “Claims”  shall mean claims, suits, proceedings, liabilities,
obligations, losses, damages, penalties, judgments, costs, expenses, fines,
disbursements, reasonable legal fees and disbursements, including in respect of
investigation, interest, demands and actions of any nature or any kind
whatsoever.

 

“Closing” shall mean the consummation of
the Transaction in accordance with the terms set forth in Article VIII.

 

“Closing Date” shall mean the first
(1st) Business Day following satisfaction or waiver of all the conditions
set forth in Article VII, or such other date as the Sellers and MID shall
mutually agree upon in writing.

 

 “Closing
Documents” shall mean any agreements, instruments and other
deliveries to be delivered at the Closing pursuant to Sections 8.2 and
8.3.

 

“Confirmation Order” shall mean the
order of the Bankruptcy Court confirming the Plan in accordance with
section 1129 of the Bankruptcy Code.

 

“Contracts” shall mean any contracts and
agreements entered into by any Seller, Purchased Company or Joint Venture, or
by which any of them is bound with respect to the Lands or otherwise material
to such Seller, Purchased Company or Joint Venture, including all contracts and
agreements in respect of the severance, development, construction, management,
leasing, maintenance or operation of the Lands.

 

“Control” shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and “Controlling”
and “Controlled” shall have meanings
correlative thereto.

 

“Deed” shall mean a deed in customary
form for conveying title to real property in the respective jurisdictions in
which the Lands being acquired directly are located.

 

“Deposit” shall mean the pledge of MID
Indebtedness to be provided as a down payment of the Purchase Price and as
security for the performance of MID’s obligations hereunder.

 

“Development Rights” shall mean,
collectively, the development rights and transferable density rights, which are
associated with and/or attributable to the Lands and in which any of the
Sellers has an interest.

 

“Due Diligence” shall mean such investigations,
inspections, reviews, tests and audits relating to the Purchased Assets
(including title to the Purchased Assets and compliance with 

 

3

 

Applicable Laws) as the
Purchaser deems reasonably necessary or desirable in its sole and absolute
discretion.

 

 “Encumbrances” shall mean all mortgages, pledges, charges,
liens, debentures, trust deeds, claims, assignments by way of security or otherwise,
security interests, any matter capable of registration against title, option or
similar right, conditional sales contracts or other title retention agreements
or similar interests or instruments charging, or creating a security interest
in the Purchased Assets or any part thereof or interest therein, and any
agreements, leases, licenses, occupancy agreements, options, easements, rights
of way, restrictions, zoning regulations, executions or other encumbrances
(including notices or other registrations in respect of any of the foregoing)
affecting title to the Purchased Assets or any part thereof or interest
therein.

 

“Environmental
Laws” shall mean all applicable federal, state, municipal and local
laws, statutes, regulations and other legal requirements, including all
applicable orders, directives and decisions rendered by any ministry,  department or administrative or regulatory
agency relating to the protection of the environment, occupational health and
safety as it relates to the exposure to Hazardous Substances 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 Liability” means any
Losses arising from, under, or in connection with any of the following: (i) any
environmental matter or condition (including the presence, use, generation,
manufacture, disposal or transport of Hazardous Substances, on-site or off-site
contamination, noise, odor, or the regulation of any chemical substance or
product as it relates to the environment); (ii) responsibility, financial
or otherwise, pursuant to Environmental Laws for clean-up costs or corrective
action, including any clean-up, removal, containment or other remediation or
response actions required by Environmental Laws (whether or not such actions
have been required or requested by any Governmental Authority or any other
Person) and for any natural resource damages; or (iii) any other compliance,
corrective, remedial or other measure or cost required or lawfully imposed
pursuant to Environmental Laws.

 

“Environmental Permits” shall mean all
licenses, permits, approvals, consents, certificates, registrations and other
authorizations issued pursuant to Environmental Laws in respect of the Lands;

 

“Environmental Reports” shall mean the
reports relating to environmental matters in respect of the Lands (including
compliance of the Lands with Environmental Laws) which could reasonably be
considered to contain a material fact pertaining to Hazardous Substances or
Hazardous Activities in, on, under or related to the Lands, compliance by the
Sellers with Environmental Laws or any actual or potential Environmental
Liability of the Sellers with respect to the Lands, to the extent in the
possession or control of the Sellers.

 

“ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as amended.

 

“Estimated  Working
Capital” shall mean the Working Capital, expressed as a positive or
negative number, as the case may be, as set forth on the Statement of Closing
Adjustments.

 

4

 

“Existing Contracts”  shall
mean all Contracts, as amended, renewed or otherwise varied to the date of this
Agreement, all of which are listed on Exhibit E.

 

“Existing Leases” shall mean all Leases,
as amended, renewed or otherwise varied to the date of this Agreement, all of
which are listed on Exhibit F.

 

“Final Order” means an order or
judgment:  (i) as to which the time
to appeal, petition for certiorari or move for review or rehearing has expired
and as to which no appeal, petition for certiorari or other proceeding for
review or rehearing has been filed or sought or (ii) if an appeal, writ of
certiorari, reargument or rehearing has been filed or sought, the order or
judgment has been affirmed by the highest court to which such order or judgment
was appealed or certiorari has been denied, or reargument or rehearing shall
have been denied or resulted in no modification of such order or judgment, and
the time to take any further appeal or to seek certiorari or further reargument
or rehearing has expired; provided, that the theoretical possibility that a
motion under Rule 59 or Rule 60 of the Federal Rules of Civil
Procedure, or any analogous rule under the Bankruptcy Rules, may be filed
with respect to such order or judgment shall not prevent such order or judgment
from being considered a Final Order.

 

 “Forest City JV” shall mean Village at
Gulfstream Park, the joint venture formed by GPRA Commercial and Forest City
Enterprises, Inc. to develop lands adjacent to Gulfstream.

 

“Forest City JV
Interest” shall mean the fifty percent (50%) interest in Forest City
JV owned by GPRA Commercial.

 

“GAAP” shall mean United States generally accepted
accounting principles in effect from time to time.

 

“Golden Gate Fields Property” shall mean
certain real property located in Berkley, California, consisting of
approximately one hundred and sixty-four (164) acres and more specifically
described on Exhibit G-1 hereto.

 

 “Governmental
Authority” shall mean any domestic, foreign or local government,
quasi-governmental authority, regulatory authority, government department,
agency, commission, board, arbital or other tribunal or court having jurisdiction
or power of any nature over the Purchased Assets.

 

“Governmental Plan” shall mean a “governmental
plan” as defined in Section 3(32) of ERISA.

 

“Gulfstream Indebtedness” shall mean the indebtedness
and the obligations of MEC and certain of its Subsidiaries and Affiliates
arising from or relating to that certain Third Amended and Restated Gulfstream
Park Loan Agreement, made as of December 22, 2006 between GPRA, MID
Islandi SF, acting through its Zug branch, and certain guarantors as specified
therein, as the same has been and may be amended or restated from time to time.

 

“Gulfstream Property” shall mean certain
real property located in Hallandale, Broward County, Florida, and Aventura,
Dade County, Florida, consisting of approximately 285 acres and more specifically
described on Exhibit G-2 hereto.

 

5

 

“Hazardous Activity” includes the
distribution, generation, handling, importing, management, manufacturing,
processing, production, refinement, release, storage, transfer, transportation,
treatment or use (including any withdrawal or other use of contaminated
groundwater) of Hazardous Substances in, on, under, about and from the Lands or
any part thereof and any other act, business or operation that poses a material
risk of harm to Persons or property on or about the Lands.

 

“Hazardous Substances” shall mean any
pollutants, contaminants, deleterious substances, toxic or hazardous wastes,
petroleum or petroleum products, asbestos, PCBs, flammable materials and radioactive
materials as defined or characterized as such in Environmental Laws.

 

 “Hearing” shall
mean the hearing to be held by the Bankruptcy Court to consider the Sale Motion
and the approval of the Transaction.

 

“HRTV” shall mean HRTV, LLC, a Delaware limited liability
company, an operator of a television network dedicated to providing programming
and content relating to horse racing and the horse racing industry.

 

“HSR” shall mean the Hart-Scott Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.

 

“Intellectual Property Rights” means all
trade or brand names, business names, trade-marks (including logos), trade-mark
registrations and applications, service marks, service mark registrations and
applications, copyrights, copyright registrations and applications, issued
patents and pending applications and other patent rights, industrial design
registrations, pending applications and other industrial design rights, trade
secrets, proprietary information and know-how, equipment and parts lists and
descriptions, instruction manuals, inventions, inventors’ notes, research data,
blue prints, drawings and designs, formulae, processes, technology and other
intellectual property, together with all rights under licenses, registered user
agreements, technology transfer agreements and other agreements or instruments
relating to any of the foregoing.

 

 “Interim Order”
shall mean the order of the Bankruptcy Court authorizing and establishing the
bidding procedures and the submission of competing offers for the Purchased
Assets, in whole or in part, in accordance with the terms and provisions of Section 3.1.

 

“IRC” shall mean the Internal Revenue Code of 1986, as
amended.

 

“IRS” shall mean the Internal Revenue Service of the United
States.

 

 “Land Development Code” means any law,
enactment, statute, code, ordinance, rule, regulation, judgment, decree, writ,
injunction, franchise, permit, certificate, license, authorization, agreement,
or other direction or requirement of any Governmental Authority now existing or
hereafter enacted, adopted, promulgated, entered, or issued affecting the
Lands, including the Aventura Land Development Regulations, and any other
requirement, condition or obligation imposed by any development applications in
respect of the Lands.

 

6

 

“Lands”  shall
mean the fee simple interest in the Golden Gate Fields Property, the Gulfstream
Property and the Palm Meadows Property, together with any and all improvements
located on or in the Lands and any and all Development Rights, easements,
tenements, rights-of-way and other rights and interests appurtenant thereto and
any and all improvements located therein.

 

“Leases”  shall mean any agreements to lease, leases,
renewals of leases and other rights (including licenses) granted by or on
behalf of the Sellers or their respective 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.

 

“Licenses” shall mean any and all pari mutuel
or other horse racing or gaming related licenses.

 

“Lone Star
Interests” shall mean the partnership interests of MEC Lone
Star, LP.

 

“Losses” shall mean in respect of any
matter, all losses, damages, liabilities, diminution in value, deficiencies,
costs and expenses
(including all reasonable legal and other professional fees and disbursements,
goods and services taxes, sales taxes or other similar taxes, interest,
penalties and amounts paid in settlement) arising directly or indirectly.

 

“Meadows Note”
shall mean that certain promissory note, dated November 14, 2006, executed
by PA Meadows, LLC in favor of MEC, in the original principal amount of Twenty
Five Million Dollars ($25,000,000.00).

 

“MID DIP Loan”
shall mean the indebtedness and the obligations of MEC and certain of MEC’s
Subsidiaries and Affiliates arising from or relating to that certain Agreement,
dated as of March 5, 2009, between MEC, certain of its subsidiaries and
MID Islandi SF, acting through its Zug branch.

 

“MID Indebtedness”
shall mean the indebtedness and the obligations of MEC and certain of its
Subsidiaries and Affiliates arising from or relating to that certain (a) 2008
Loan Agreement, dated December 1, 2008, between MEC, MID Islandi SF,
acting
through its Zug branch, and certain guarantors as specified therein, as the
same has been and may be amended or restated from time to time,  (b) Bridge Loan Agreement, dated as of September 12,
2007, between MEC, MID Islandi SF, acting through its Zug branch, and certain
guarantors as specified therein, as the same has been and may be amended or
restated from time to time, (c) the Gulfstream Indebtedness, and (d) loan
agreement made as of July 22, 2005, between Remington Park, Inc., MID
Islandi SF,  acting through its Zug
branch, and certain guarantors as specified therein, as the same has been and
may be amended or restated from time to time.

 

“Multiemployer
Plan” shall mean a “multiemployer plan” as defined in Section 3(37)
of ERISA

 

“Multi-Employer
Health Plan” shall mean a “multiple employer welfare benefit
arrangement” as defined in Section 3(40)(A) of ERISA.

 

“Notice” shall mean any notice, request, consent,
acceptance, waiver or other communication required or permitted to be given
pursuant to this Agreement.

 

7

 

“Ordinary Course of Business” shall mean the operation and
conduct of the affairs of an enterprise in the ordinary course of its business,
consistent with past practice and the businesses in which the respective Sellers
operate.

 

 “Palm Meadows
Property” shall mean certain real property located in Palm Beach
County, Florida, consisting of approximately 324 acres, and more
specifically described on Exhibit G-3 hereto.

 

 “Permits”
shall mean, to the extent assignable, all the right, title, benefit and
interest of any Seller 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.

 

“Permitted Encumbrances” shall
mean:  (i) the Existing Leases; (ii) liens
for current real estate taxes or other similar governmental impositions which
are not yet due and payable; (iii) to the extent they do not materially
affect the insurability, marketability or the present use of the Lands, (a) discrepancies,
conflicts in boundary lines, shortage in area, encroachments and any other
state of facts shown on any survey provided to the Purchaser or updated survey
obtained by the Purchaser and (b) those matters set forth on Schedule A on
any title report with respect to the Lands; (iv) rights of Tenants under
Existing Leases; (v) to the extent they do not materially affect the
insurability, marketability or the present use of the Lands, laws, regulations,
resolutions or ordinances, including building, zoning and environmental
protection, as to the use, occupancy, subdivision, development, conversion or
redevelopment of the Lands imposed by any Governmental Authority; (vi) any
and all mortgages and liens upon and security interests in any of the Lands
that are senior in priority to any mortgages and liens upon and security
interests in such Lands held by MID or its Subsidiaries and Affiliates; (vii) any
unrecorded and recorded encumbrances, liens, agreements and other instruments
affecting the Lands which have been accepted by the Purchaser by notice in
writing to the Sellers on or before the Closing Date; and (viii) all other
matters which would not materially adversely affect the use or the development
of the Lands.

 

 “Person”
shall mean an individual, partnership, limited liability company, 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.

 

“Plan”
shall mean the chapter 11 plan, in form and substance reasonably satisfactory
to the Purchaser, which shall be confirmed by the Bankruptcy Court in
accordance with section 1129 of the Bankruptcy Code.

 

“Plan Effective
Date” shall mean the date upon which all the conditions to
effectiveness of the Plan shall have been satisfied or waived and the
Transaction shall have been substantially consummated.

 

“Purchase Price” shall mean One Hundred Seventy Nine Million
Seven Hundred Ninety Five Thousand Dollars ($179,795,000) subject to the
adjustment provided for in Section 2.5.

 

8

 

“Purchased Assets” shall mean, collectively, the assets, the
stock of the Purchased Companies and the Forest City JV Interest to be
purchased by the Purchaser and set forth in detail in Section 2.1.

 

“Purchased
Companies”
shall mean Pacific Racing Association, GPRA, GPRA Thoroughbred, MEC Lone Star,
LP, AmTote, AmTote Canada, Xpressbet and MEC Land Holdings (California) Inc.

 

“Purchaser” shall mean, collectively, MID or, at the
sole option and discretion of MID, any one or more Subsidiaries or Affiliates
of MID, as MID shall designate in writing prior to the Closing Date.

 

“Purchaser’s
Solicitors”
shall mean Davies Ward Phillips & Vineberg LLP, Suite 4400, 1
First Canadian Place, 100 King Street West, Toronto, Ontario and Sidley Austin
LLP, 787 Seventh Avenue, New York, NY, or such other firms of solicitors or lawyers acting for the Purchaser
and notice of which is provided to the Sellers in accordance with the
provisions of Section 10.7.

 

“Reorganized AmTote Stock”  shall mean the common stock of AmTote to be issued on the
Plan Effective Date.

 

 “Reorganized Golden Gate Fields Stock” shall
mean the common stock of Pacific Racing Association to be issued on the Plan
Effective Date.

 

“Reorganized GPRA
Thoroughbred Stock” shall mean the common stock of GPRA Thoroughbred
Training Center, Inc. to be issued on the Plan Effective Date.

 

“Reorganized
Gulfstream Stock” shall mean the common stock of GPRA to be issued
on the Plan Effective Date.

 

“Reorganized Land
Holdings Stock” shall mean the common stock of MEC Land Holdings
(California) Inc. to be issued on the Plan Effective Date.

 

 “Representations “ shall mean the representations, warranties
and certifications made or to be made pursuant to this Agreement and all
agreements, documents and instruments entered into in connection herewith.

 

“Requisitions
Notice” shall
mean the notice which may be sent by the Purchaser, no later than ten (10) Business
Days prior to the commencement of the Hearing in accordance with the provisions
of Section 6.1.

 

“Sale Motion” shall mean the motion to be filed by MEC and
the Sellers with the Bankruptcy Court seeking an order, pursuant to section 363
of the Bankruptcy Code, authorizing the sale of the Purchased Assets to the
Purchaser, free and clear of all Encumbrances, other than Permitted
Encumbrances.

 

“Sale Order” shall mean the order of the Bankruptcy Court authorizing,
among other things, the sale of the Purchased Assets to the Purchaser pursuant
to this Agreement and the consummation of the Transaction.

 

9

 

“Statement of Closing Adjustments” shall
mean the Statement of Closing Adjustments to be made as of the Closing Date and
delivered by the Sellers on or prior to the second (2nd) Business Day prior to
the Closing, together with detailed calculations used by the Sellers with
respect thereto.

 

“Subsidiary”
shall mean, with respect to any Person, any corporation, partnership,
association or other business entity (a) of which securities or other
ownership interests representing more than fifty percent (50%) of the equity or
more than fifty percent (50%) of the ordinary voting power to elect a majority
of the board of directors or the equivalent thereof of such corporation,
company, association or other business entity or more than fifty percent (50%)
of the general partnership interests are, at the time any determination is
being made, directly or indirectly, owned, Controlled or held by such Person
and one or more subsidiaries of such Person, or (b) that is, at the time
any determination is being made, otherwise Controlled, by such Person or by one
or more other subsidiaries of such Person.

 

“Tax”
or “Taxes” shall mean (i) any
federal, state, local or foreign net income, gross income, gross receipts,
windfall profit, severance, property, production, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or add on minimum, ad
valorem, value added, transfer, stamp, or environmental tax (including taxes
under Section 59A of the IRC), escheat payments or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever (together with any and all interest, penalties and additions to tax
imposed with respect thereto) imposed on or with respect to any of the Sellers,
the Purchased Companies or the Joint Ventures by any taxing authority and (ii) liability
in respect of any items described in clause (i) as a result of liability
as a transferee, as a result of being a member of a consolidated, combined,
affiliated or unitary group, or as a result of any obligation under any Tax
sharing or Tax indemnity contract or arrangement.

 

“Tax Refund”
shall mean the Sellers’
rights, title and benefits to existing realty appeals and reassessments that
relate to the Lands (and any other lands purchased directly by the Purchaser
pursuant to Section 2.9 or an Alternative Transaction as contemplated by Section 2.8)
and all refunds, rebates, credits, reassessments, readjustments and payments
from time to time resulting therefrom.

 

“Tax  Return” or “Tax  Returns”
shall mean all material returns, declarations of estimated tax payments,
reports, estimates, information returns and statements, including any related
or supporting information with respect to any of the foregoing, filed or to be
filed with any taxing authority in connection with the determination,
assessment, collection or administration of any Taxes.

 

 “Tenants”  shall
mean all Persons having a
right to possess or occupy the Lands or any part thereof now or hereafter
pursuant to an Existing Lease.

 

“Termination Date” shall mean the date on which this
Agreement is terminated in accordance with the provisions of Article IX.

 

“TrackNet Media”
shall mean TrackNet Media Group, LLC, a distributor of the Racetracks’ horse
racing content through media outlets to other racetracks, off track betting 

 

10

 

facilities, casinos and advance deposit wagering
companies, and purchaser of horse racing content from third parties for
redistribution.

 

“Transfer  Taxes”
means any transfer, documentary, sales, use, stamp, registration and other such
taxes, any conveyance fees, any recording charges and any other similar fees
and charges (including penalties and interest in respect thereof).

 

“Time of Closing”
shall mean 10:00 a.m. on the Closing Date.

 

“Transaction” shall mean the transactions contemplated
herein, including the purchase and sale of the Purchased Assets provided for in
this Agreement.

 

“Village at Gulfstream” shall mean The Village at Gulfstream
Park, LLC, a Delaware limited liability company.

 

“Voluntary Liens” shall mean liens and other Encumbrances
(other than Permitted Encumbrances) which each of the respective Sellers has
knowingly and intentionally placed (or suffered or allowed to be placed) on the
Lands, including (x) notices of lis pendens or
mechanics’ liens resulting from such Seller’s failure to pay any obligation of
the Sellers, and (y) all mortgages, deeds of trust, assignments of leases,
financing statements and other instruments securing debt, including any
existing mortgages.

 

“Working
Capital” shall mean Current Assets minus Current Liabilities.  The terms “Current Assets” and “Current
Liabilities” mean the sum of the current assets and current liabilities,
respectively, of the Purchased Companies, calculated in accordance with United
States generally accepted accounting principles (“GAAP”);
provided, however, that Current Assets shall
exclude receivables from Affiliates of MEC, other than trade receivables.

 

“Xpressbet” shall mean Xpressbet, Inc.,
a wholly-owned subsidiary of MEC and operator of an account wagering business permitting
customers to place wages by telephone and over the internet at over one hundred
(100) racetracks in North America, Dubai, Germany and the United Kingdom.

 

“Xpressbet Stock” shall mean the issued and outstanding
common stock of Xpressbet.

 

Section 1.3.           Other Terms.  Other terms may be defined
elsewhere in this Agreement and, unless otherwise indicated, shall have such
meaning throughout this Agreement. As used in this Agreement, any reference to
any federal, state, local, or foreign law, including any applicable law, will
be deemed also to refer to such law as amended and all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
words “include”, “includes”, and “including”
will be deemed to be followed by “without limitation”.
Pronouns in masculine, feminine, or neuter genders will be construed to include
any other gender, and words in the singular form will be construed to include
the plural and vice versa, unless the context otherwise requires. The words “this Agreement”, “herein”, “hereof”,
“hereby”, “hereunder”,
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited.  References in this agreement to Articles,
Sections, Schedules or Exhibits are to Articles or Sections of, Schedules or
Exhibits to, this Agreement, except to the extent otherwise specified herein.

 

11

 

Section 1.4.           Headings.  The headings of the
sections, paragraphs and subsections of this Agreement are inserted for
convenience only and are not part of this Agreement and do not in any way limit
or modify the terms or provisions of this Agreement and shall not affect the
interpretation hereof.

 

Section 1.5.           Interpretation.  The Parties have
participated jointly in the negotiation and drafting of this Agreement.  If an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof will arise favoring
or disfavoring any party hereto because of the authorship of any provision of
this Agreement.

 

Section 1.6.           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. 
Whenever action must be taken (including the giving of notice, the
delivery of documents or the funding of money) under this Agreement, prior to
the expiration of, by no later than or on a particular date, unless otherwise
expressly provided in this Agreement, such action must be completed by 5:00 p.m.
on such date.  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.

 

Section 1.7.           Forest City JV.  Notwithstanding any other
provisions hereof, the representations and warranties given hereunder with
respect to the Forest City JV are given by the Sellers only to the  knowledge of the Sellers and without inquiry
of the management or employees of the Forest City JV, except for the
representations and warranties given respecting the Sellers’ direct or indirect
ownership and other rights and obligations in respect of the Forest City
JV.  Covenants given by the Sellers shall
not extend to the Forest City JV; provided however, that, if an issue relating
to the Forest City JV arises, which issue would be the subject matter of any of
the covenants contained in this Agreement but for the fact that the covenants
do not extend to the Forest City JV, subject to any pre-existing agreement, the
Sellers shall use commercially reasonable efforts to comply with such covenant
and shall vote its voting interests in the Forest City JV in respect of such
issue consistent with complying with the relevant covenant as though such
covenant did extend to the Forest City JV. The Sellers shall also exercise any
other proper influence in the Forest City JV in a manner consistent with
complying with the relevant covenant as though such covenant did extend to the
Forest City JV, subject to any Applicable Laws, applicable fiduciary duties or
contractual obligations (other than under this Agreement).

 

12

 

ARTICLE II

AGREEMENT OF PURCHASE AND SALE

 

Section 2.1.           Purchase and Sale.  Each Seller hereby agrees
to sell, transfer, assign, set over and convey to the Purchaser, and the
Purchaser hereby agrees to purchase, acquire and assume from each of the
Sellers, upon the terms and subject to the conditions of this Agreement, all
right, title and interest of such Seller of any nature whatsoever, in the
following Purchased Assets:

 

(a)           AmTote.  The Reorganized AmTote Stock and the AmTote
Canada Stock;

 

(b)           Forest City JV.  The Forest City JV Interest;

 

(c)           Lone Star.  The Lone Star Interests;

 

(d)           Meadows.  The Meadows Note;

 

(e)           GPRA Thoroughbred.  The Reorganized GPRA Thoroughbred Stock;

 

(f)            Golden Gate Fields.  The Reorganized Golden Gate Fields Stock;

 

(g)           Gulfstream.  The Reorganized Gulfstream Stock;

 

(h)           Land Holdings.  The Reorganized Land Holdings Stock; and

 

(i)            Xpressbet.  The Xpressbet Stock.

 

Section 2.2.           Condition of Conveyance.  The Purchased Assets shall
be sold, conveyed, assigned, transferred and delivered by the Sellers to the
Purchaser by appropriate instruments of transfer, bills of sale, endorsements,
assignments and Deeds, all in form and substance reasonably satisfactory to Purchaser,
and free and clear of any and all Encumbrances of any and every kind, nature
and description, other than Permitted Encumbrances; provided, however,
that, to the extent that any of the Purchased Assets consist of leasehold
interests in property owned by others, Purchaser hereby acknowledges and agrees
that each such Purchased Asset shall be sold, conveyed, assigned, transferred
and delivered hereunder subject to all the rights and interests of the owner of
the leased property and to any security interest, lien or encumbrance which has
been granted by such owner, in each case prior to the date of this Agreement.

 

Section 2.3.           Deposit.  MID hereby pledges to the
Sellers as a Deposit for the satisfaction of its obligations hereunder,
including payment of the Purchase Price in accordance with the provisions of Section 2.4,
Seventeen Million Nine Hundred Seventy-Nine Thousand Five Hundred Dollars
($17,979,500) of outstanding Gulfstream Indebtedness, representing ten percent
(10%) of the Purchase Price.  In the
event that this Agreement is terminated (a) by the Sellers in accordance
with the provisions of Section 9.1(a) due to MID’s breach of the
covenants set forth in Article VI, including MID’s failure to consummate
the Transaction upon satisfaction or waiver of all conditions precedent
thereto, the Deposit shall be deemed to be liquidated 

 

13

 

damages for
MID’s breach hereof and the MID Indebtedness shall be deemed to have been
permanently reduced in the amount of the Deposit, (b) (i) by the
Sellers or MID pursuant to Section 9.1(b) or automatically pursuant
to the proviso thereto or (ii) by MID 
in accordance with the provisions of Section 9.1(a) due to the
Sellers’ breach of the covenants set forth in Article V or (iii) by
MID in accordance with the provisions of Section 9.3, the Deposit shall
immediately be returned to MID and the pledge of MID Indebtedness shall
immediately be released, and (c) by either Party for any reason other than
the other Party’s breach of the covenants set forth in Article VI, the
Deposit shall immediately be returned to MID and the pledge of MID Indebtedness
shall be released.

 

Section 2.4.           Payment of Purchase Price.  At the Closing, the
Purchase Price shall be satisfied by (a) application of One Hundred
Thirty-Five Million Six Hundred Twenty-Nine Thousand Dollars ($135,629,000) of
MID Indebtedness (the “Debt Portion”
of the Purchase Price) adjusted as provided in Section 2.5(a) and (b) payment
of the balance of the Purchase Price by the Purchaser to the Sellers, by
certified or bank cashier’s check or by wire transfer of immediately available
funds, all as adjusted pursuant to the terms and provisions of  Section 2.5.  In the event that the aggregate amount of any
third-party secured indebtedness which is secured by the Purchased Companies or
their assets is reduced by payment or otherwise (the “Reduction
Amount”), the amount referred to in clause (b) above shall be
reduced by the Reduction Amount and the amount referred to in clause (a) above
shall be increased by the Reduction Amount.

 

Section 2.5.           Purchase Price Adjustment.

 

(a)           The Debt Portion of the Purchase
Price to be paid at the Closing shall be adjusted and increased or decreased,
on a dollar-for-dollar basis, in an amount equal to the  Estimated Working Capital.  In connection therewith, the Sellers shall
prepare and deliver to MID at least two (2) Business Days prior to Closing
the Statement of Closing Adjustments. 
The Sellers shall give to MID access to the Sellers’ working papers and
supporting materials in order to confirm the Statement of Closing Adjustments.

 

(b)           Within 30 days after the Closing
Date, MID shall prepare and deliver to MEC a statement (the “MID Statement”) setting forth the Working Capital as of the
close of business on the Closing Date (the “Closing Date
Working Capital”).

 

(c)           During the 10-day period following
MEC’s receipt of the MID Statement, MEC and its independent auditors shall be
permitted to review the working papers of MID relating to the MID
Statement.  The MID Statement shall
become final and binding upon the parties on the 30th day following delivery
thereof, unless MEC gives written notice of its disagreement with the MID
Statement (a “Notice of Disagreement”) to MID
before such date.  Any Notice of
Disagreement shall (i) specify in reasonable detail the nature of any
disagreement so asserted and (ii) only include disagreements based on
mathematical errors or based on the Closing Date Working Capital not being
calculated in accordance with this Section 2.5.  If a Notice of Disagreement is received by
MID in a timely manner, then the MID Statement (as revised in accordance with
this sentence) shall become final and binding upon MID and MEC on the earlier
of (A) the date MID and MEC resolve in writing any differences they have
with respect to the matters specified in the Notice of Disagreement or (B) the
date any disputed matters are finally resolved in writing by the Accounting
Firm.  During the 30-day period following
the delivery of a Notice of Disagreement, MID and MEC shall seek in good faith
to 

 

14

 

resolve in
writing any differences that they may have with respect to the matters
specified in the Notice of Disagreement. 
During such period MID and its auditors shall have access to the working
papers of MEC prepared in connection with the Notice of Disagreement.  At the end of such 30-day period, MEC and MID
shall submit to an independent accounting firm (the “Accounting
Firm”) for arbitration any and all matters that remain in dispute
and which were properly included in the Notice of Disagreement.  The Accounting Firm shall Ernst &
Young LLP or, if such firm is unable or unwilling to act, such other such
nationally recognized independent public accounting firm as shall be agreed
upon by the parties hereto in writing. 
MID and MEC shall jointly request that the Accounting Firm render a
decision resolving the matters submitted to the Accounting Firm within 30 days
after such submission.  Judgment may be
entered upon the determination of the Accounting Firm in any court having
jurisdiction over the party against which such determination is to be
enforced.  The cost of any arbitration
(including the fees and expenses of the Accounting Firm and reasonable attorney
fees and expenses of the parties) pursuant to this Section 2.5 shall be
borne by MID and MEC in inverse proportion as they may prevail on matters
resolved by the Accounting Firm, which proportionate allocations shall also be
determined by the Accounting Firm at the time the determination of the
Accounting Firm is rendered on the merits of the matters submitted.

 

(d)           Immediately upon the MID Statement
becoming final and binding, the Debt Portion of the Purchase Price shall either
(a) be increased by the amount by which the Closing Date Working Capital
exceeds the Estimated Working Capital or (b) be decreased by the amount by
which Closing Date Working Capital is less than the Estimated Working
Capital.  MEC and MID shall take all
actions necessary to cause the amount of MID Indebtedness to be adjusted to
reflect the adjustment provided for in this Section 2.5.

 

Section 2.6.           Tax
Refunds. 
On Closing, the Sellers shall assign to the Purchaser all Tax Refunds,
if any, together with a direction to the municipality to pay any Tax Refund to
the Purchaser and, if any appeal or reassessment is pending, the authorization
and appointment of the Purchaser to continue such pending appeal or
reassessment, such assignment to be substantially in the form attached hereto
as Exhibit C; provided, however, that:

 

(a)           any Tax Refund in respect
of the period (or portion thereof) ending on the day preceding the Closing Date
shall remain the property of the respective Seller;

 

(b)           the Sellers shall make any
payments in respect of realty or business taxes for the period (or portion
thereof) ending on the day preceding the Closing Date arising from such
reassessments or appeals to the applicable Governmental Authorities;

 

(c)           any Tax Refund for the
taxation period that includes the Closing Date (after deduction of
out-of-pocket expenses in conducting any such appeal or reassessment, including
any commissions payable to agents or consultants) shall be readjusted as of the
Closing Date after the conclusion of any assessment appeal;

 

(d)           to the extent that the
Purchaser receives payment of any Tax Refund in respect of the period (or
portion thereof) ending on the day preceding the Closing Date, the Purchaser
shall hold such Tax Refund in trust for the Sellers and shall, promptly after
receipt thereof, pay to the Sellers the amount of any such Tax Refund after
deducting a pro rata portion 

 

15

 

of all
reasonable costs and expenses incurred by the Purchaser in connection with such
appeal or reassessment; and

 

(e)           if, after Closing, the Purchaser
wishes to discontinue any realty tax appeal or reassessment in respect of
realty taxes paid or payable for the Lands (and any other lands purchased directly by
the Purchaser pursuant to Section 2.9 or an Alternative Transaction as
contemplated by Section 2.8) during the period (or
portion thereof) ending on the day preceding the Closing Date, the Purchaser
shall give notice to the Sellers and if requested by the Sellers, the Purchaser
shall re-assign to the Sellers all the Purchaser’s right, title and benefit to
such appeals and reassessments with a direction to the municipality to pay any
resulting Tax Refund to the Sellers, and the Purchaser shall cease to have any
right in the Tax Refund.

 

Notwithstanding any other
provision in this Agreement to the contrary, in the event the Sellers pursue
any realty tax appeals and/or reassessments in respect of the Lands (and any other lands purchased directly by
the Purchaser pursuant to Section 2.9 or an Alternative Transaction as
contemplated by Section 2.8) on or after the Closing Date, any Tax
Refund received by the Sellers in connection with such appeals and/or
reassessments that relate to the period (or portion thereof) ending on the day
preceding the Closing Date shall be for the account of the Sellers.  To the extent the Sellers receive any Tax
Refund in connection with such appeals and/or reassessments that relate to the
period (or portion thereof) from and after the Closing Date, the Sellers shall hold
such Tax Refund in trust for the Purchaser and shall promptly after receipt
thereof pay to the Purchaser the amount of such Tax Refund, after deducting a
pro rata portion of all reasonable costs and expenses incurred by the Sellers
in connection with such appeal or reassessment. 
In the case of any taxation period that includes the Closing Date, the
realty taxes and refunds thereof attributable to the Lands (and any other lands purchased directly by
the Purchaser pursuant to Section 2.9 or an Alternative Transaction as
contemplated by Section 2.8) shall be allocated between the period
ending on the day preceding the Closing Date and the period from and after the
Closing Date on a per diem basis.

 

Section 2.7.           Assumption of Liabilities.  Notwithstanding any
provision contained in this Agreement to the contrary, on the Closing Date,
Purchaser shall assume certain obligations and liabilities of the Sellers, to
the extent but only to the extent as set forth on Exhibit D hereto, as and
when such Assumed Liabilities shall become due and payable pursuant to the
terms of the documents pursuant to which such Assumed Liabilities were created,
including, to the extent set forth on Exhibit D, the payment of all
amounts necessary to cure any monetary defaults in respect of such Assumed
Liabilities.  Without in any way limiting
the foregoing, on the Closing Date, in accordance with the terms and conditions
of the Sale Order, the Sellers shall be relieved of any liability with respect
to such Assumed Liabilities.

 

Section 2.8.           Tax Reorganization.  In the event that the
Purchaser concludes that it is necessary or desirable to proceed with another
form of transaction whereby the Purchaser would effectively acquire all of the
Purchased Assets and/or the assets of the Purchased Companies (including the
direct purchase by the Purchaser of certain lands and/or assets from the
Purchased Companies or their subsidiaries or the conversion of any Purchased
Company into a limited liability company by merger or otherwise) on economic terms
having consequences to the Sellers which are equivalent to or better than those
contemplated by this Agreement (an “Alternative Transaction”),
the Sellers agree to complete such Alternative Transaction in the same manner
as the Transaction, to amend such provisions of this Agreement as are necessary
to achieve such 

 

16

 

results and
shall otherwise fulfill its covenants contained in this Agreement in respect of
such Alternative Transaction.  The Sellers shall
cooperate with the Purchaser in its consideration of any possible Alternative
Transaction to the extent reasonably requested, including by providing the
Purchaser with reasonable access to information, records, documents, properties
and personnel after reasonable prior notice and during normal business hours.

 

Section 2.9.           Alternative Asset Purchase.  Upon written notice
delivered by the Purchaser to the Sellers not later than 30 days prior to the
Closing Date, the Purchaser may elect in its sole discretion to purchase the
respective assets of MEC Lone Star, LP and its Subsidiaries, Xpressbet and its
Subsidiaries and AmTote Canada and its Subsidiaries, if any, in lieu of
purchasing the Lone Star Interests, the Xpressbet Stock and the AmTote Canada
Stock, respectively, and in connection with such purchase, the Purchaser shall
not assume any of the liabilities of such entities other than liabilities
pursuant to contracts assigned to the Purchaser as part of such purchase.  Upon such election, the parties shall
promptly negotiate in good faith an amendment to this Agreement giving effect
to the foregoing, without modifying any of the other provisions of this
Agreement, including the Purchase Price and the representations and warranties.

 

ARTICLE III

COURT APPROVAL

 

Section 3.1.           Conditions Precedent.  In addition to the
conditions set forth in Article VII, it shall be a condition precedent to
the obligations of each of the parties to this Agreement that (i) the
Bankruptcy Court shall have entered the Sale Order, after notice and a hearing
as defined in section 102(1) of the Bankruptcy Code, approving the terms
and conditions of this Agreement and authorizing the Sellers to perform all
acts necessary to consummate the Transaction and (ii) the Bankruptcy Court
shall have entered the Confirmation Order, which order shall have become a
Final Order.  Without in any way limiting
the foregoing, as soon as practicable following the date hereof, but in no
event later than March 9, 2009, the Sellers shall file the Sale Motion
with the Bankruptcy Court, which motion shall request, among other things, (a) entry
of the Sale Order and (b) entry of the Interim Order providing for, among
other relief, the implementation of bidding procedures in connection with the
solicitation and submission of higher and better offers for the Purchased
Assets, in whole or in part.  The Sellers
shall, no later than 60 days from the date hereof, prepare and file with the
Bankruptcy Court: (A) a Disclosure Statement with respect to the Plan (the
“Disclosure Statement”) and (B) the Plan. 
The Plan, any and all exhibits and attachments to the Plan, the
Disclosure Statement and the Orders approving the same (including the
Confirmation Order), to the extent any of the foregoing impact the transactions
contemplated herein, shall be reasonably acceptable in form and substance to
MID and shall provide for the discharge of all contingent liabilities of the
Purchased Companies.

 

Section 3.2.           Allocation of Purchase Price.  Within sixty (60) Business
Days after the Closing Date, the Purchaser shall provide the Sellers with a
schedule (the “Allocation Schedule”)
setting forth the Purchaser’s allocation of the Purchase Price among the
Purchased Assets.  The Allocation
Schedule shall be reasonable and shall be prepared in accordance with Section 1060
of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder and any applicable provision of state, local or foreign
law.  Such allocation shall be deemed
final unless MEC has notified the Purchaser in writing of any disagreement with
the Allocation Schedule within thirty (30) Business Days after submission 

 

17

 

thereof
by the Purchaser.   If the allocation is
deemed final or the Purchaser and MEC reach such agreement, the Purchaser, MEC
and the Sellers shall execute and file all Tax Returns in a manner consistent
with the allocation determined pursuant to this Section 3.2.  In the event that the parties hereto do not
agree to a purchase price allocation in accordance with this Section 3.2,
then the Sellers and the Purchaser shall refer the disagreement to the
Accounting Firm.  The Accounting Firm
shall resolve any disagreement within 30 days and the Sellers and the Purchaser
agree the decision of the Accounting Firm shall be conclusive and binding on
both the Sellers and the Purchaser.  The
fees of the Accounting Firm shall be borne by the Sellers and the Purchaser in
inverse proportion as they may prevail on the disagreement resolved by the
Accounting Firm, which proportionate allocations shall also be determined by
the Accounting Firm at the time the determination of the Accounting Firm is
rendered.  The Purchaser, MEC and the
Sellers shall execute and file all Tax Returns and other related documents in a manner consistent
with the Accounting Firm’s determination.

 

Section 3.3.           Sale to Third Party.  In the event that one or
more sales of any of the Purchased Assets to any entity or entities, other than
the Purchaser, is consummated and this Agreement is terminated, Sellers shall,
subject to entry of the Interim Order by the Bankruptcy Court, promptly pay to
MID cash in an amount equal to its reasonable and documented external fees and
expenses incurred in connection with the negotiation and documentation of this
Agreement and efforts undertaken by MID to evaluate and consummate the
Transaction during the period from the date hereof up to and including the
Termination Date.  In the event that the
Sellers shall reasonably disagree with the amount requested by MID with respect
to such fees and expenses, the Sellers shall file an application with the
Bankruptcy Court to determine the reasonableness thereof.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

Section 4.1.           Representations and Warranties of
the Sellers.  Except as disclosed on the attached
Disclosure Schedule, each of the Sellers, jointly but not severally, hereby
represents and warrants to and in favor of the Purchaser, as follows:

 

(a)           The Sellers are duly formed and
subsisting under the respective laws of their states of formation, are properly
qualified to do business in such states, and have the corporate power,
authority, right and capacity to own the Purchased Assets, including the Lands,
and to enter into, execute and deliver this Agreement and, subject to the entry
of the Sale Order and the Confirmation Order, to carry out the Transaction in
the manner contemplated by this Agreement.

 

(b)           The Transaction has been duly and
validly authorized by all requisite corporate or other proceedings of each of
the Sellers, the Purchased Companies and the Forest City JV, and subject to the
entry of the Sale Order and the Confirmation Order, upon execution and delivery
by the Sellers and the Purchaser, this Agreement and all other documents and
agreements to be delivered by the Sellers pursuant to this Agreement shall
constitute legal, valid and binding obligations of the Sellers.

 

(c)           Each of the Purchased Companies and
the Forest City JV is duly formed and subsisting under the respective laws of
the state of its formation, is properly qualified to do 

 

18

 

business in
such state, and has the corporate power or other authority, right and capacity
to own, operate and/or lease the properties and assets now owned, operated
and/or leased by it, and to carry on its business in all respects as currently
conducted by it.

 

(d)           Neither the execution of this
Agreement nor its performance by the Sellers will result in a breach of any
term or provision, or constitute a default under, or conflict with or cause the
acceleration of any obligation of the Sellers, the Purchased Companies, or the
Forest City JV under the constituent documents or by-laws of the Sellers, the
Purchased Companies or the Forest City JV, or any indenture, mortgage, deed of
trust or any other agreement to which any of them is a party, or by which any
of them is bound, and, other than the Sale Order and the Confirmation Order and
any applicable approvals of any Governmental Authority, no consent, approval or
other documentation is necessary to enable the Sellers to complete the
Transaction pursuant to this Agreement in compliance with all existing
obligations, Permits or Licenses of the Sellers, the Purchased Companies and
the Forest City JV, and in compliance with all Applicable Laws, Permitted
Encumbrances and any other obligations or agreements which affect the Purchased
Assets, the Purchased Companies and the Forest City JV.

 

(e)           To the knowledge of any of the
Sellers, neither the execution of this Agreement nor its performance by any of
the Sellers will result in a breach of any term or provision or constitute a
default under, or conflict with or cause the acceleration of any obligation of
any of the Sellers under, any indenture, mortgage, deed of trust or any other
material agreement to which MEC or any Subsidiary of MEC is a party, or by
which MEC or any Subsidiary of MEC is bound and no consent, approval or other
documentation, other than the Sale Order and the Confirmation Order and any applicable
approvals of any Governmental Authority, is necessary to enable the Sellers to
complete the Transaction pursuant to this Agreement in compliance with all
existing obligations of MEC or any Subsidiary of MEC.

 

(f)            There are no actions, suits, proceedings,
claims, investigations, applications or complaints (whether or not purportedly
on behalf of any of the Sellers) pending or, to the Sellers’ knowledge,
threatened against or affecting any of the Sellers, the Purchased Companies or
the Forest City JV, which in any way relate to or involve or could adversely
affect the Purchased Assets, the Purchased Companies or the Forest City JV, or
the occupancy or use of the Lands by the Sellers, the Purchased Companies, the
Joint Ventures 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 Purchased Assets or any part of the Purchased Assets, any
material assets of the Purchased Companies and the Forest City JV, the value of
the Purchased Assets or the conveyance of any of the Purchased Assets to the
Purchaser.

 

(g)           Except with respect to the Forest
City JV, other than the Purchaser, no Person has any written or oral
agreement or option, or any right or privilege capable of becoming an agreement
or option, for the purchase or acquisition of all or any of the Purchased
Assets or the assets of the Purchased Companies and the Joint Ventures; other
than the Sale Order and the Confirmation Order, the Sellers have obtained all
consents necessary to the sale of the Purchased Assets to the Purchaser and
none of the Sellers is a party to or bound by any written or oral agreement
pursuant to which any further consents or approvals are required in connection
therewith or pursuant to which the Sellers are or would be required to share
the proceeds of the Transaction contemplated herein with any other Person.

 

19

 

(h)                                 The relevant Seller, or the relevant Purchased Company, owns and has
sole legal and beneficial title to all of the Purchased Assets (subject to the
Permitted Encumbrances), and the relevant Seller, or the relevant Purchased
Company has legal, valid and marketable fee simple title to, and the exclusive
right to possess, use and occupy the Lands subject to any applicable Existing
Leases.  The Sellers have the full right,
power and authority to sell the Purchased Assets to the Purchaser as
contemplated by this Agreement.

 

(i)                                     The property and assets of each Purchased Company and the Forest
City JV (other than the Lands) are owned beneficially by it as the beneficial
owner thereof with good and marketable title thereto, free and clean of all
Encumbrances other than Permitted Encumbrances. 
Each Purchased Company possesses the tangible and intangible assets
necessary to conduct the business of such Purchased Company as currently
conducted.

 

(j)                                     Exhibit H hereto sets forth the capitalization of each of the
Purchased Companies and the Forest City JV. 
All of the outstanding shares of capital stock, interests of the
Purchased Companies and the interest in the Forest City JV, in each case which
comprise a part of the Purchased Assets are validly issued, fully paid and
non-assessable (or with respect to the Reorganized AmTote Stock, Reorganized
Golden Gate Fields Stock, Reorganized GPRA Thoroughbred Stock, Reorganized
Gulfstream Stock and Reorganized Land Holdings Stock, will be validly issued,
fully paid and non-assessable) and are not subject to, nor were they issued in
violation of, any preemptive rights, and, except as set forth in Exhibit H
hereto, such shares or interests are or will be, as the case may be, owned by
the Sellers, free and clear of any Encumbrance (other than Permitted
Encumbrances) with respect thereto. 
Except as described above, as of the date hereof, there are not, and at
the Closing there will not be, any capital stock or other equity interests in
the Purchased Companies or the Forest City JV issued or outstanding or any
subscriptions, options, warrants, calls, rights, convertible securities or
other agreements or commitments of any character obligating any Purchased
Company or the Forest City JV to issue, transfer or sell any of its capital stock
or other equity interests, or any agreements, arrangements, or understandings
granting any Person any rights in any Purchased Company or the Forest City JV
similar to capital stock or other equity interests.

 

(k)                                  Neither the Sellers nor the relevant Purchased Company, has any
knowledge of, nor have the Sellers (or the relevant Purchased Company) received
notice of, any claim for adverse possession to the Lands or other claims
adverse to the title of the Sellers (or the relevant Purchased Company) in the
Lands (other than any Claim that is cleared to the satisfaction of the
Purchaser on or before the Closing as provided herein).

 

(l)                                     To the knowledge of the Sellers, no consent by any Governmental
Authority, including any horse racing board or other regulatory or licensing
body, is required in connection with the Purchaser’s acquisition of the
Purchased Assets and where applicable, the cessation of the Sellers’ operations
on the Lands, nor will the Purchaser be required to become licensed by, or
otherwise submit to the regulatory regime of, any horse racing board or other
regulatory or licensing body by virtue of the Purchaser’s acquisition of the
Purchased Assets (so long as the Purchaser or the applicable Purchased Company
does not operate a race track or other gaming venue on the Lands).

 

(m)                               To the knowledge of the Sellers, neither the Sellers nor the
Purchased Companies have made any commitments to any Person relating to the
Lands that would impose 

 

20

 

an obligation
on the Purchaser to make contributions of money or land, or to install or
maintain any improvements thereon.

 

(n)                                 The Lands and the current use thereof are in material compliance
with all Applicable Laws affecting the Lands and their use, and the Purchased
Companies and the Forest City JV are in material compliance with all Applicable
Laws affecting the Lands and their use and the business of the Purchased
Companies and the Forest City JV; no notice of violation of any Applicable
Laws, or of any covenant, condition, restriction or easement affecting the
Lands or its use or occupancy, has been received by the Sellers or the relevant
Purchased Company or the Forest City JV from any Governmental Authority having
jurisdiction over the Lands or any of them or from any other Person entitled to
enforce the same.  Each Purchased Company
and the Forest City JV holds all licenses, permits, approvals, consents,
certificates, registrations and similar authorizations (whether governmental,
regulatory or otherwise) (a “Company License”)
necessary to carry on the business as currently conducted by it or to own or
lease any of the property or assets utilized by it as such property or assets
are currently owned, leased or utilized. 
Each Company License and Permit is valid, subsisting and in good
standing and the applicable Seller, Purchased Company or the Forest City JV is
not in default or breach of such Company License or Permit and, to the
knowledge of the Sellers (or the relevant Purchased Company), no proceeding is
pending or threatened to revoke or limit any Company License or Permit and
there is no circumstance that may reasonably result in such a revocation or
limitation.

 

(o)                                 To the knowledge of the Sellers (or the relevant Purchased Company),
there is no existing or proposed plan, study, investigation, inquiry or effort
by any Governmental Authority or any other Person (including with respect to
any changes in building or zoning regulations) which in any way affects or
would affect the present or future use of the Lands, its future development
potential or the current zoning of the Lands, and there is no existing,
proposed or contemplated plan to modify any street or highway or any existing,
proposed or contemplated eminent domain proceedings that would affect the Lands
in any material respect, and neither the Sellers nor any prior owner of the
Lands, and to the knowledge of the Sellers, neither MEC nor any Subsidiary of
MEC, has executed, or caused to be executed, any agreement with, or for the
benefit of any Governmental Authority with respect to the Lands or any portion
thereof restricting the use, development or occupancy of the Lands or which
would otherwise affect the Lands in any material respect following Closing.

 

(p)                                 To the knowledge of the Sellers (or the relevant Purchased Company),
no defect or condition of the Lands or the soil or geology of the Lands exists
which impairs the current use or future development potential of the Lands.

 

(q)                                 With the exception of the Permitted Encumbrances and obligations
which may arise under the Existing Leases, on the Closing Date, there will be
no Encumbrances on the title to the Purchased Assets or any part thereof.

 

(r)                                    The Sellers have, or the relevant Purchased Company has, diligently
made all payments to be made and otherwise observed and performed or caused to
be observed or performed all covenants and obligations to be observed or
performed by the Sellers (or the relevant Purchased Company) under the Existing
Contracts and the Existing Leases in each case in all material respects.

 

21

 

(s)                                  (i) the Existing Leases disclosed to the Purchaser pursuant to Exhibit F
hereto are the only Leases relating to or affecting the Lands as of the date
hereof, the Sellers (or the relevant Purchased Company) has not otherwise
leased, subleased or otherwise granted to any Person the right to use or occupy
the Lands or any portion thereof, and at Closing there shall not be any Leases
affecting the Lands other than the Existing Leases, and such Existing Leases
constitute, in each case, the entire agreement between the Sellers and the
Tenants with respect to the lease or occupancy of space on or within the Lands;
(ii) each of the Existing Leases is in full force and effect and, to the
Sellers’(or the relevant Purchased Company’s) knowledge, constitutes a legal,
valid and binding obligation of the Tenant thereunder enforceable as against
the Tenant in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors’ rights generally and by general principles of equity; (iii) neither
the Sellers, the relevant Purchased Company, nor, to the knowledge of the
Sellers, any Tenant is in material default in the performance of any of its
covenants, conditions or obligations under any of the Existing Leases and, at
the Time of Closing, there shall not exist a default or an 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
Sellers or the relevant Purchased Company under any of the Existing Leases; (iv) none
of the Sellers nor any of the relevant Purchased Companies has waived or omitted
to take any action in respect of any material rights under any of the Existing
Leases, and neither the Sellers or the relevant Purchased Companies, nor, to
the knowledge of the Sellers, except for any default resulting from the
insolvency of such Seller or Purchased Company, any Tenant is claiming any
default on the part of the other under any of the Existing Leases or taking any
action purportedly based upon any such default; (v) there are no
agreements, commitments, undertakings or understandings (whether oral or
written) between the Sellers and the Tenant (or the relevant Purchased Company
and the Tenant) with respect to any of the Existing Leases except as disclosed
to the Purchaser pursuant to Exhibit F hereto; and (vi) as of the
date of this Agreement, none of the Sellers and none of the Purchased Companies
has received any written request from any Tenant to assign the Existing Leases,
other than as disclosed in writing to the Purchaser pursuant to Section 5.1.

 

(t)                                    (i) the Existing Contracts disclosed to the Purchaser pursuant
to Exhibit E hereto are the only Contracts relating to or affecting the
Lands or otherwise material to the applicable Seller, Purchased Company or the
Forest City JV, and at Closing there shall not be any Contracts affecting the
Lands or otherwise material to the applicable Seller, Purchased Company or the
Forest City JV, other than the Existing Contracts; (ii) none of the
Sellers, Purchased Companies or the Forest City JV is a party to, and neither
the Sellers, Purchased Companies or the Forest City JV nor any of the Purchased
Assets is or on Closing will be bound or affected by, any Contracts (whether
oral or written) except the Existing Contracts; (iii) except for any
default resulting from the insolvency of such Seller or Purchased Company, none
of the Sellers, Purchased Companies or the Forest City JV has either given or
received notice of any default, and neither the Sellers, the Purchased
Companies or the Forest City JV nor, to the knowledge of the Sellers, any other
party thereto is in material default under any of the Existing Contracts and,
at the Time of Closing, there shall not exist any default or 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
Sellers (or the relevant Purchased Company or the Forest City JV) under any of
the Existing Contracts (including the Permitted Encumbrances); and (iv) each
of the Existing Contracts (including the Permitted Encumbrances) 

 

22

 

is in full
force and effect as to the Sellers (or the relevant Purchased Company or the
Forest City JV), unamended by oral or written agreement except as disclosed to
the Purchaser pursuant to Exhibit E hereto, and each Seller (or the
relevant Purchased Company or the Forest City JV) is entitled to the full
benefit and advantage of each of the Existing Contracts to which it is a party
in accordance with the terms thereof.

 

(u)                                 The documents and information delivered or made available to the
Purchaser pursuant to Section 5.1 constitute all of the material
documentation with respect to the Purchased Assets within the Sellers’
possession or control and at Closing, there shall not exist:

 

(i)                                     any information or documentation relating to the Purchased Assets
which was not disclosed or made available by the Sellers, as applicable, to the
Purchaser as required by Section 5.1; or

 

(ii)                                  any incompleteness of the information or documentation provided to
the Purchaser pursuant to Section 5.1 with respect to the subject matter
of such information or documentation; or

 

(iii)                               any inaccuracy in any of the information or documentation provided
to the Purchaser pursuant to Section 5.1,

 

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 Purchased
Assets.

 

(v)                                 To the knowledge of the Sellers, each of the Lands constitutes a
properly subdivided, legally existing parcel of land that may be legally
conveyed to the Purchaser at Closing in accordance with the Land Development
Code, without any further approval by any Governmental Authority, other than
recordation of the Deed.

 

(w)                               To the knowledge of the Sellers, Exhibits G-1, G-2 and G-3 describe
the Lands as they exist today, and there have been no material alterations or
additions to any of the Lands since the date of the applicable survey which
would have materially affected the outline or setbacks of same, nor have there
been any buildings erected on the Lands therein.

 

(x)                                   There is direct access to, and egress from, the Lands from adjacent
public roadways or streets abutting the Lands and, to the knowledge of the
Sellers (or the relevant Purchased Company), there is no fact or condition
which may result in interference with or termination of such access.

 

(y)                                 To the knowledge of the Sellers, there are no unrecorded agreements
in respect of access to the Lands, or encroachments by any buildings,
structures, improvements or appurtenances on the Lands onto abutting lands, or
encroachments onto the Lands by buildings, structures, improvements or
appurtenances owned by the owners of any abutting lands.

 

(z)                                   All covenants, conditions, restrictions, easements and similar
matters affecting the Lands have been complied with in all material respects,
and all Permits of Governmental Authorities having jurisdiction necessary in
connection with the current use and operation of the Lands have been obtained
and are in good standing in all material respects.

 

23

 

(aa)                            The Sellers and the relevant Purchased Companies have operated the
Lands, and, until Closing, will operate the Lands, in the ordinary course in
accordance with industry standard practices as would a prudent owner of
comparable properties and has carried out all routine day to day repairs and
maintenance in respect thereof.

 

(bb)                          Except for Permitted Encumbrances, there is nothing owing in respect
of the Lands to any local corporation or to any other corporation or commission
owning or operating a public utility and there are no local improvement charges
or special levies due and outstanding against the Lands nor have the Sellers
(or the relevant Purchased Company) received any notice of proposed local
improvement charges or special levies; all realty, business and other taxes
with respect to the Lands which are due or exigible have been paid in full,
except to the extent that they are to be adjusted at Closing, and there are no
currently outstanding reassessments or questions which have been issued or, to
the Sellers’ knowledge, raised by any taxing authority with respect to any such
taxes.

 

(cc)                            All utilities required for the current operation of the Lands
connect or are available for connection into the Lands through adjoining public
highways or, if they pass through adjoining private land, do so in accordance
with valid and enforceable recorded easements and are sufficient for the
current operation of the Lands.

 

(dd)                          To the knowledge of the Sellers, the Sellers are the valid, lien
free owner of the Development Rights, which are all of the transferable
development rights that have been allocated to the Sellers or the Lands.  To the knowledge of the Sellers, the Sellers
have the power, ability and legal entitlement to convey and transfer the
Development Rights in accordance with the Land Development Code and any other
Applicable Laws.  To the knowledge of the
Sellers, the assignment of Development Rights more particularly described in Section 8.2(n) is
sufficient to fully convey and transfer all of the Sellers’ right, title and
interest in and to the Development Rights to the Purchaser and no other
documentation is necessary for the Sellers to satisfy its obligations pursuant
to Section 8.2(n) of this Agreement.

 

(ee)                            To the knowledge of the Sellers, the Sellers have not taken any
action that would reasonably be expected to serve as an impediment to the
Purchaser proceeding with the redevelopment of the Lands in accordance with the
Permits and the Land Development Code.

 

(ff)                                None of the Sellers is 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 U.S. Internal Revenue Code of 1986, as amended,
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.

 

(gg)                          The Sellers and each Person owning an interest (directly or
indirectly) in the Sellers is not:  (i) identified
on the “Specially Designated Nationals or Blocked Persons List” maintained by
the Office of Foreign Purchased Assets Control, Department of 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 with whom a United States person is 

 

24

 

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 Sellers 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.

 

(hh)                          Any fee due to any broker or agent retained by the Sellers in
respect of this Agreement or the Transaction shall be paid by the Sellers.

 

(ii)                                  To the knowledge of the Sellers, the Lands and use thereof have
been, are in material compliance with, Environmental Laws, except as
specifically disclosed in Environmental Reports delivered to the Purchaser
pursuant to Section 5.1.

 

(jj)                                  To the knowledge of the Sellers, the Sellers have delivered to the
Purchaser true and complete copies of any and all reports, studies, analyses,
evaluations, assessments or monitoring data which could reasonably be
considered to contain a material fact pertaining to Hazardous Substances or
Hazardous Activities in, on, under or related to the Lands, compliance by the
Sellers with Environmental Laws or any actual or potential Environmental
Liability of the Sellers with respect to the Lands.  Except as have been or will be made available
to the Purchaser pursuant to Section 5.1, to the knowledge of the Sellers,
there are no environmental reports, studies, audits, analyses, evaluations,
assessments or monitoring data relating to the Lands (including, without
limiting the generality of the foregoing, any Phase I, II or III
environmental assessment reports) undertaken by the Sellers or any other Person
of which the Sellers have knowledge which are in the possession or control of
the Sellers and, to the knowledge of the Sellers, except as specifically
disclosed in Environmental Reports delivered to the Purchaser pursuant to Section 5.1,
no underground storage tanks are or have been located on the Lands.

 

(kk)                            Except as specifically disclosed in Environmental Reports delivered
to the Purchaser pursuant to Section 5.1: 
(i) neither the Sellers nor the Purchased Companies have 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 have the Sellers, the Purchased Companies, or (to the knowledge of the
Sellers) any previous owner of the Lands settled any allegation of such
non-compliance prior to prosecution, which in each case or in the aggregate
would reasonably be expected to give rise to future material liability; (ii) there
are no notices, orders or directives relating to environmental matters received
by the Sellers requiring, or notifying any of the Sellers of any actual or
potential violation or failure to comply with any Environmental Laws, 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 or any adjacent
real property, or of any actual or potential obligation to undertake or bear
the cost of any Environmental Liability, including with respect to any
Hazardous Activity in respect of the Lands, which in each case or in the
aggregate would reasonably be expected to give rise to future material
liability; and (iii) neither the Sellers nor (to the knowledge of the
Sellers) any tenant of the Lands, past or present, has caused or knowingly permitted,
nor has there been, any release, emission, spill or 

 

25

 

discharge in
any manner whatsoever, of any Hazardous Substance on, in, from or in connection
with the Lands, nor, to the knowledge of the Sellers, around 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 material liability.

 

(ll)                                  Neither the Sellers nor the relevant Purchased Company have used, or
knowingly permitted to be used, the Lands to generate, manufacture, process,
distribute, use, treat, store, dispose of, transport or handle any Hazardous
Substance in a manner that would reasonably be expected to result in the owner
or occupant of the Lands incurring any material Environmental Liabilities.

 

(mm)                      Neither the Sellers nor the relevant Purchased Company have received
any written notice of any, and, to the knowledge of the Sellers, there is no
threatened or pending eminent domain, condemnation or rezoning proceedings with
respect to the Lands or any part of the Lands.

 

(nn)                          Each Purchased Company and the Forest City JV has good, valid and
marketable title to, or the right to use, all of its Intellectual Property
Rights.  To the knowledge of Sellers, all
current and former employees of any of the Purchased Companies and the Forest
City JV have assigned to the Purchased Company or the Forest City JV at which
they work or worked, as the case may be, all Intellectual Property Rights that
such employees have created while in the scope of their employment with such
Purchased Company or the Forest City JV, including copyrights in works made for
hire and patents, except where failure to assign such Intellectual Property
Rights would not reasonably be expected to materially impair the ability of
such Purchased Company or the Forest City JV to continue to obtain free of
charge the benefits of such Intellectual Property Rights.  Exhibit I lists each registered
Intellectual Property Right owned by each of the Purchased Companies and the
Forest City JV and each material contract, license and agreement with respect
to Intellectual Property Rights pursuant to which any of the Purchased
Companies and the Forest City JV have granted any Person the right to
reproduce, distribute, market or exploit Intellectual Property Rights.  There is no action, pending, or to the
Sellers’ knowledge, threatened that challenges the validity of ownership or use
of any Intellectual Property Rights of the Purchased Companies and the Forest
City JV.  To Sellers’ knowledge, no third
party’s operations or products infringe on the Intellectual Property Rights in
any material respect.  To Sellers’
knowledge, the Purchased Companies’ and the Forest City JV’s operations and
products do not infringe in any material respect on the intellectual property
rights of any other Person.  Neither the
Sellers nor any of the Purchased Companies or the Forest City JV have received
during the preceding two (2) years any written claim of infringement with
respect to any Intellectual Property Rights used by the Purchased Companies or
the Forest City JV.

 

(oo)                          Exhibit J hereto sets forth a complete list of all material
insurance policies with respect to which any of the Purchased Companies or the
Forest City JV are a party, a named insured or otherwise the beneficiary of
coverage.

 

(pp)                          All material benefit and compensation plans, contracts, policies or
arrangements sponsored, maintained by, contributed to by or required to be
contributed to by any of the Purchased Companies for the benefit of any current
or former employees of the Purchased 

 

26

 

Companies,
including, but not limited to, “employee benefit plans”
within the meaning of Section 3(3) of ERISA, and deferred
compensation, stock option, stock purchase, stock appreciation rights, stock
based, incentive and bonus plans but excluding, in each case, collective
bargaining agreements and plan, contracts, policies or arrangements mandated by
Applicable Laws (the “Benefit Plans”)
are listed on Exhibit K.  Each
Benefit Plan which has received a favorable determination or opinion letter
from the Internal Revenue Service National Office, including any master or
prototype plan, has been separately identified to the extent available.

 

(qq)                          True and complete copies of the following documents with respect to
each of the Benefit Plans (other than any Multiemployer Plan, Multi-Employer
Health Plan or Governmental Plan) have been made available to Purchaser by the
Sellers to the extent applicable: (i) any plans and related trust or
funding agreements and all amendments thereto, (ii) the most recent annual
report, (iii) the most recent summary plan descriptions, (iv) and the
most recent actuarial valuation reports and financial statements.

 

(rr)                                To the knowledge of the Sellers, all Benefit Plans of the Purchased
Companies covering any current or former employees of the Purchased Companies
located in the United States, other than Multiemployer Plans, Multi-Employer
Health Plans or Governmental Plans, are in substantial compliance with ERISA,
the IRC and other applicable laws.

 

(ss)                            All Benefit Plans of the Purchased Companies which are subject to
ERISA (an “ERISA Plan”) that are “employee
pension benefit plans” within the meaning of Section 3(2) of ERISA (a
“Pension Plan”) and that are intended to
be qualified under Section 401(a) of the IRC, have received a
favorable determination letter from the IRS covering all tax law changes or has
applied to the IRS for such favorable determination letter within the
applicable remedial amendment period under Section 401(b) of the IRC,
and, to the knowledge of the Sellers, there does not exist any circumstance
likely to result in the loss of the qualification of any Pension Plan under Section 401(a) of
the IRC.

 

(tt)                                To the knowledge of the Sellers, the Purchased Companies have not
engaged in a transaction with respect to any ERISA Plan that, assuming the
taxable period of such transaction expired as of the date hereof, could subject
the Purchased Companies to a tax or penalty imposed by either Section 4975
of the IRC or Section 502(i) of ERISA in an amount which would be
material.

 

(uu)                          None of the Purchased Companies have incurred or, to the knowledge
of the Sellers, reasonably expects to incur a material tax or penalty imposed
by Section 4980 of the IRC or Section 502 of ERISA.

 

(vv)                          To the knowledge of the Sellers, except as set forth on Exhibit K,
no Benefit Plan of the Purchased Companies, other than any Multiemployer Plan,
is subject to Section 412 of the IRC or Title IV of ERISA.

 

(ww)                      As of the date hereof, there is no material pending or, to the
knowledge of Seller, threatened, litigation relating to the Benefit Plans which
are not Multiemployer Plans, Multi-Employer Health Plans or Governmental
Plans.  To the knowledge of the Sellers,
as of the date hereof, there is no material pending or threatened litigation
relating to any Benefit Plan which is a Multiemployer Plan, Multi-Employer
Health Plan or Governmental Plan.

 

27

 

(xx)          Except as set forth on Exhibit K,
the Purchased Companies do not have any material obligations for retiree health
and life benefits under any Benefit Plan excluding any Benefit Plan which is a
Multiemployer Plan, Multi-Employer Health Plan or Governmental Plan.

 

(yy)                          The Purchased Companies have complied in all material respects with
the requirements of Section 4980B of the IRC and Title I,
Subtitle B, part 6 of ERISA.

 

(zz)                              The Purchased Companies have not withdrawn or partially withdrawn
from any Multiemployer Plan with respect to which there is any outstanding
material liability as of the date of this Agreement.  The Purchased Companies have not received notice
from any Multiemployer Plan that it is in reorganization or is insolvent, that
increased contributions may be required to avoid a reduction in plan benefits
or the imposition of any excise Tax, or that such plan intends to terminate or
has terminated.

 

(aaa)                      There has been no amendment to, announcement by the Purchased
Companies relating to, or change in employee participation or coverage under,
any Benefit Plan excluding any Benefit Plan which is a Multiemployer Plan,
Multi-Employer Health Plan or Governmental Plan, which would increase
materially the expense of maintaining such plan above the level of the expense
incurred therefor for the most recent fiscal year.  Neither the execution of this Agreement, nor
the consummation of the Transaction will (i) entitle any employees of the
Purchased Companies located in the United States to severance pay or any
increase in severance pay upon any termination of employment after the date
hereof under any Benefit Plan, excluding any Benefit Plan which is a Multiemployer
Plan, Multi-Employer Health Plan or Governmental Plan, (ii) accelerate the
time of payment or vesting or result in any payment or funding (through a
grantor trust or otherwise) of compensation or benefits under, increase the
amount payable or result in any other material obligation pursuant to, any of
the Benefit Plans, excluding any Benefit Plan which is a Multiemployer Plan,
Multi-Employer Health Plan or Governmental Plan, or (iii)  result in
payments under any of the Benefit Plans which would not be deductible under Section 280G
of the IRC.

 

(bbb)                   Each of the applicable Purchased Companies holds a license to
conduct live horse racing with pari mutuel wagering at the respective
Racetracks and, to the extent applicable, has received permission to lease and
operate the OTB Facilities.

 

(ccc)                      All material Tax Returns required to be filed by or with respect to
the Purchased Companies, the Purchased Assets or, to the knowledge of the
Sellers, the Forest City JV have been timely filed (taking into account valid
extensions of the time for filing) and all such Tax Returns are true, complete
and accurate in all material respects. 
The Sellers, the Purchased Companies and, to the knowledge of the
Sellers, the Forest City JV have timely paid, or caused to be paid, all
material Taxes shown as due on such Tax Returns.  There are no examinations or other
administrative or court proceedings relating to material Taxes in progress or
pending, and there is no existing, pending or threatened in writing claim,
proposal or assessment against any Purchased Company or, to the knowledge of
the Sellers, the Forest City JV for material Taxes.

 

28

 

Section 4.2.                                Representations and Warranties of MID.  MID represents and warrants
to and in favor of the Sellers, as follows:

 

(a)                                  MID is a corporation duly existing under the laws of the Province of
Ontario and has the corporate power, authority, right and capacity to enter
into this Agreement and to carry out the Transaction in the manner contemplated
by this Agreement.

 

(b)                                 The Transaction has been duly and validly authorized by all
requisite corporate proceedings; upon execution and delivery by the Sellers and
MID, this Agreement and all other documents and agreements to be delivered by
the Purchaser pursuant to this Agreement shall constitute legal, valid and
binding obligations of MID and the Purchaser; and

 

(c)                                  MID has not engaged or become liable to any broker in respect of
this Agreement or the Transaction.

 

Section 4.3.                                Survival.  The representations contained in this
Agreement or in any Closing Documents shall not survive the Closing.   Notwithstanding anything contained in this
Agreement to the contrary, all of the representations, shall be subject to the
following conditions and limitation: in the event that, prior to the Closing,
MID or the Purchaser gains current actual knowledge of a fact or circumstance
which, by its nature and plainly on its face, indicates that a representations
is, was, or will become untrue or inaccurate, then MID or the Purchaser shall
not have the right to bring any lawsuit or other legal action against the
Sellers, nor pursue any other remedies against the Sellers, as a result of the
breach of the representations caused thereby, but MID or the Purchaser’s sole
right shall be to terminate this Agreement and not to proceed with the
Transaction, in which event there shall be no liability on the part of the
Sellers for breaches of representations of which the Purchaser had current
actual knowledge prior to the Closing. For greater certainty and
notwithstanding the foregoing, the parties hereto acknowledge and agree that
the mere delivery by the Sellers 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 representations is, was or has become untrue or inaccurate.

 

Section 4.4.                                Non-Waiver.  The Sellers agree 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 or covenants of the
Sellers contained in this Agreement or any of the damages and costs owing by
the Sellers to the Purchaser as a result of any breach of such Representations
or covenants.

 

ARTICLE V

COVENANTS

 

Section 5.1.                                Covenants of the Sellers.  From and after the date hereof, the Sellers
covenant and agree as follows:

 

(a)                                  The Sellers shall promptly deliver or make available to MID the
following in respect of the Purchased Assets:

 

29

 

(1)                                  copies of all Existing Leases, copies of all notices, consents or
approvals received or sent by or on behalf of the Sellers in respect of the
Existing Leases, and a copy of each notice of default, if any, received or sent
by or on behalf of the Sellers in respect of any Existing Lease if the default
referred to in such notice remains outstanding;

 

(2)                                  copies of all Existing Contracts and each notice of default, if any,
received or sent by or on behalf of the Sellers in respect of any Existing
Contract if the default referred to in such notice remains outstanding;

 

(3)                                  the most current survey of the Lands, if any, in the Sellers’
possession, which shows the Lands, as currently constituted (or an updated
survey, prepared by a surveyor licensed in the State of Florida, if so
requested by the Purchaser), together with all title reports, deeds and title
insurance policies, if any, in respect of the Lands;

 

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

 

(5)                                  copies of all realty tax assessments, notices and tax bills relating
to the Lands in the possession or control of the Sellers and copies of any
notices of any outstanding realty tax appeals, material(s) filed in
support thereof and correspondence relating thereto;

 

(6)                                  a list of outstanding work orders, notices, directives, regulatory
ordinances and letters of non-compliance issued by any Governmental Authority
or any other Person affecting the Lands or the Purchased Assets, if any, and a
copy of each of them of which the Sellers has received written notice and any
correspondence relating thereto;

 

(7)                                  a list of all outstanding litigation, arbitration, mediation or
other proceedings affecting or relating to the Lands to which and of the
Sellers 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 Sellers has received written
notice, together with any material correspondence relating thereto;

 

(8)                                  copies of all financial statements, minute books, share registers,
plans, reports, licenses, orders, permits, books of account, accounting
records, constituent documents and all other documents, information and data
relating to the Purchased Companies and the Purchased Assets;

 

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

 

(10)                            all Environmental Reports;

 

(11)                            copies of any geotechnical reports pertaining to the Lands and each
report, audit or study of the soil conditions of the Lands, or any part
thereof, prepared by a Person other than the Sellers or their manager which is
in the possession or control of the Sellers;

 

30

 

(12)                            copies of each report, audit or study relating to the physical
condition of the Lands (including, but not limited to, flood plain mapping), or
any part thereof, prepared by a Person other than the Sellers or their
respective managers which is in the possession or control of the Sellers
(including, without limitation, any such document prepared for any purchaser or
prospective purchaser which is in the possession or control of the Sellers);

 

(13)                            copies of all architectural studies and agreements, engineering
studies and agreements, development studies and 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 Sellers’ possession or control;

 

(14)                            if requested by the Purchaser, authorizations enabling the Purchaser’s
Solicitors to obtain information from Governmental Authorities concerning the Lands (at
the Purchaser’s sole cost and expense);

 

(15)                            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 Sellers to the Purchaser at Closing without any
further approval or consent by any Person or Governmental Authority;

 

(16)                            evidence, reasonably satisfactory to the Purchaser, that the Sellers
is currently the valid, lien free owner of the Development Rights and has the
ability and legal entitlement to convey and transfer the Development Rights to
the Purchaser at Closing in accordance with the Lands Developments Code and any
other Applicable Laws, together with such written information, correspondence
and documentation relating to the Development Rights in the possession or
control of the Sellers; and

 

(17)                            such other written information, correspondence and documentation
relating to the Purchased Assets that is in the possession or control of the
Sellers and which the Purchaser has requested, acting reasonably.

 

(b)                                 As used in this Section 5.1, the term “control of the Sellers”
shall mean, in addition to the Sellers, materials in the possession or control
of MEC, current legal counsel to the Sellers or MEC, or any consultants,
advisors or other third party professionals currently commissioned, retained or
instructed by the Sellers or MEC.

 

(c)                                  Any lists, documentation or other information provided by the
Sellers pursuant to this Section 5.1 shall be amended or supplemented, as
necessary from time to time, until 5:00 p.m. on the Business Day
immediately preceding the Closing; provided, however, that no such supplement
or amendment shall have any effect for the purpose of determining the
satisfaction of the conditions set forth in Section 7.1.  In addition, if any of the Sellers becomes
aware of a failure to provide any document or other information that it is required
to provide in accordance with this Section 5.1 at any time prior to the
Closing, it shall forthwith advise the Purchaser in writing of such failure and
deliver such information to the Purchaser.

 

31

 

(d)                                 The Purchaser acknowledges and agrees that it has not, for purposes
of entering into this Agreement or consummating the Transaction, relied on any
representations or warranties or other statement or omission of Sellers or any
of its directors, officers, employees, agents, stockholders, affiliates,
consultants, counsel, accountants, or other representatives, other than the
representations and warranties contained in this Agreement (including the
Exhibits and Schedules hereto).

 

(e)                                  The Sellers make no representation or warranty with respect to any
estimates, projections, forecasts, plans or budgets referred to in this Section 5.1,
except that they have been prepared in the ordinary course of business.

 

(f)                                    Between the date hereof and the Closing Date, the Seller shall, and
shall cause the Purchased Companies to, operate their business in the Ordinary
Course of Business and shall not, except as required or expressly permitted
pursuant to the terms hereof or as MID shall consent in writing or as may be
approved by order of the Bankruptcy Court, enter into any material transaction,
other than in the Ordinary Course of Business.

 

(g)                                 The Sellers 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 Sellers under the
Existing Contracts and the Existing Leases.

 

(h)                                 The Sellers shall not (i) create or permit to exist any
Encumbrance (other than Permitted Encumbrances) against or affecting the
Purchased Assets 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.

 

(i)                                     In the event the Purchaser seeks to amend any zoning by-laws, site
plans or development agreements or take any other action affecting the Lands in
order to facilitate the future development of the Lands, provided, that any such
amendments or actions do not become effective prior to Closing, the Sellers
shall, upon the reasonable request of the Purchaser, fully and promptly
co-operate with the Purchaser in connection with any such amendments or
actions. In furtherance thereof, the Sellers 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 or facilitate such amendments or actions, and the Purchaser
shall be responsible for the costs of the Sellers in connection therewith.

 

(j)                                     The Sellers shall not, prior to the Closing, take any action, nor
permit any action to be taken, which might interfere with the Purchaser’s
rezoning and/or redevelopment of the Lands or materially decrease the value of
the Purchased Assets.

 

(k)                                  Until Closing, the Sellers will maintain insurance policies in full
force and effect and in good standing insuring the Purchased Assets against
loss or damage by all insurable hazards or risks on a full replacement cost
basis.

 

(l)                                     Until Closing, the Sellers shall not take any action, nor permit any
action to be taken, which could reasonably be expected to adversely affect in
any manner whatsoever the current zoning of the Lands, the present or future
use of the Lands or the future development 

 

32

 

or occupancy
potential of the Lands, any of the Development Rights attributed to or
associated with the Lands or the environmental, physical and/or geotechnical
condition of the Lands.

 

(m)                               The Sellers shall file the Sale Motion on or prior to March 9,
2009 and seek entry of the Sale Order and the Interim Order.

 

(n)                                 Neither MEC nor any of the Sellers shall make an election to
reattribute all or any portion of a Purchased Company’s tax attributes pursuant
to Treasury Regulation Section 1.1502-36(d)(6) or any similar
election without the prior written consent of Purchaser.

 

(o)                                 To the extent required by applicable law, the Sellers shall make the
filing or filings as may be required by HSR.

 

(p)                                 Without the prior written
consent of the Purchaser (which consent shall not be unreasonably withheld,
conditioned or delayed), the Sellers shall not, to the extent it may affect or
relate to the Sellers, make or change any Tax election, change any annual Tax
accounting period, adopt or change any method of Tax accounting, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim or
assessment, surrender any right to claim a Tax refund, offset or other
reduction in Tax liability, consent to any extension or waiver of the
limitations period applicable to any Tax claim or assessment or take or omit to
take any other action, except as required by law, if any such action or
omission would have the effect of increasing the Tax liability or reducing any
Tax asset of any of the Purchased Companies.

 

(q)                                 The Sellers shall negotiate in good faith to enter into agreements
with the Purchaser prior to the Closing Date, that provides that the Purchaser
will provide content from races at Gulfstream Park, Golden Gate Fields and Lone
Star Park at Grand Prairie to HRTV, TrackNet Media and/or such other entity as
directed by the Sellers on terms similar to those currently in effect (the “HRTV/TrackNet Agreements”);

 

(r)                                    The Sellers shall negotiate in good faith to enter into an agreement
with the Purchaser prior to the Closing Date, that provides that (i) the
Santa Anita Park, Remington Park, Laurel Park, Pimlico Race Course and Portland
Meadows will carry the signal for simulcast purposes from races at Gulfstream
Park, Thistledown, Golden Gate Fields and Lone Star Park at Grand Prairie and (ii) Gulfstream
Park, Golden Gate Fields and Lone Star Park at Grand Prairie will carry the
signal for simulcast purposes from races at Santa Anita Park, Remington Park,
Laurel Park, Pimlico Race Course, Thistledown and Portland Meadows on terms
similar to those currently in effect (the “Reciprocal Simulcast
Agreement”);

 

(s)                                  The Sellers shall negotiate in good faith to enter into an agreement
with the Purchaser prior to the Closing Date, that provides that, if the
Sellers elect, AmTote shall provide services to Santa Anita Park, Remington
Park, Laurel Park, Pimlico Race Course, Thistledown and Portland Meadows on
terms similar to those currently in effect (the “Amtote
Agreement”).

 

(t)                                    The Sellers shall negotiate in good faith to enter into an agreement
with the Purchaser prior to the Closing Date, that provides that, for a period
of three years, Santa Anita Park, Remington Park, Laurel Park, Pimlico Race
Course and Portland Meadows will 

 

33

 

provide a
signal for simulcast purposes from their races to Xpressbet (the “Xpressbet Agreement”).

 

Section 5.2.                                Covenants of MID and the Purchaser.  (a) 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 the date hereof, which satisfaction is hereby evidenced
by the execution and delivery of this Agreement by the Purchaser.

 

(b)                                 The Purchaser shall negotiate in good faith to enter into the
HRTV/TrackNet Agreements with the Seller prior to the Closing Date;

 

(c)                                  The Purchaser shall negotiate in good faith to enter into the
Reciprocal Simulcast Agreement with the Sellers prior to the Closing Date;

 

(d)                                 The Purchaser shall negotiate in good faith to enter into the Amtote
Agreement with the Sellers prior to the Closing Date.

 

(e)                                  The Purchaser shall negotiate in good faith to enter into the
Xpressbet Agreement with the Sellers prior to the Closing Date.

 

(f)                                    To the extent required by applicable law, MID and the Purchaser
shall make the filing or filings as may be required by HSR.

 

Section 5.3.                                Joint Obligations.  The parties shall proceed diligently and in
good faith to attempt to settle, on or before the Closing Date or such earlier
date as may be expressly set forth herein, the contents of all Closing Documents
to be executed and delivered by the Sellers and the Purchaser; provided,
however, that, in the case of any Closing Documents to be executed and
delivered in the forms attached hereto as Exhibits, such forms shall not be
subject to further negotiations and the Sellers and the Purchaser shall provide
all details and/or information necessary to complete such documents, subject to
the other’s approval of the accuracy of such details and information, such
approval not to be unreasonably withheld.

 

Section 5.4.                                Approvals of the Purchaser.  While this Agreement is in effect, the
Sellers agree not to amend, cancel or accept a surrender or forfeiture of any
Existing Leases or Existing Contracts without the prior written approval of the
Purchaser, which approval may arbitrarily and unreasonably be withheld, and
shall not enter into any Lease or Contract without the prior written approval
of the Purchaser, which may arbitrarily and unreasonably be withheld; provided,
however, that the Sellers may enter into any such Contract in order to
make emergency repairs or to comply with Applicable Law without prior notice
to, or approval of, the Purchaser; and, provided, further, that
the Sellers provide the Purchaser with written notice thereof, together with a
copy of any such Contract, promptly thereafter; and, provided, further,
that the Sellers shall provide the Purchaser with a complete copy of any
document which creates, amends, cancels, surrenders or forfeits any Existing
Lease or Existing Contract within one (1) Business Day after it is entered
into by the parties thereto.

 

Section 5.5.                                Notice of Default.  The Sellers shall, within three (3) Business
Days of receipt thereof, provide to the Purchaser: (i) a copy of any
notices that any of the Sellers receives 

 

34

 

in respect of
the Existing Leases and/or Existing Contracts (if any) alleging default on the
part of any Seller or requesting any Seller to perform any obligation
thereunder and any notice alleging default under the Existing Leases, or any
Existing Contract that it sends to another Person, in either case after the
date of this Agreement; (ii) a copy of any work orders, state or federal
environmental orders or deficiency notices of any nature issued by any
Governmental Authorities having jurisdiction relating to the Purchased
Companies or the Lands; and (iii) a copy of any notice from a Tenant
received after the date of this Agreement by any Seller 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.

 

Section 5.6.                                Approvals.  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.

 

Section 5.7.                                Risk of Condemnation and Eminent Domain.  The Sellers shall promptly
notify the Purchaser in writing 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 Purchased Assets or the assets thereof, including 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 Sellers.  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 Sellers within ten (10) Business Days after receipt
from the Sellers 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 Sellers 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 this Agreement shall
automatically terminate, be null and void and of no further force and effect
whatsoever and the Purchaser and Sellers shall be released from all obligations
under this Agreement (except those which are expressly stated to survive any
termination of this Agreement).

 

If the notice of the
proposed condemnation and/or exercise of eminent domain is received by the
Sellers at such time that there would be insufficient time for the Purchaser to
make its election hereunder, the Closing Date shall be postponed to a date
which is five (5) Business Days after the earlier of the date such
election is made or the period for making such election has expired, or if such
date is not a Business Day, then the next Business Day thereafter.

 

Section 5.8.                                Damage Before Closing.  The
interest of the Sellers in and to the Purchased Assets shall be at the risk of
the Sellers until Closing.  The Sellers
shall insure the Purchased Assets and the assets thereof until the Closing as
they currently insure the Purchased Assets and the assets thereof.  If loss or damage to the Purchased Assets
occurs, then the Sellers shall promptly deliver a written notice to the
Purchaser specifying the nature and extent of the loss or damage and estimating
the cost of repair (the “Notice of Loss”)
and:

 

35

 

(a)                                  if the cost of repair or restoration, in the opinion of the Sellers’ arm’s length
independent professional architect or engineer, will exceed an amount equal to
fifteen percent (15%) of the Purchase Price (such damage being referred to
herein as “Substantial Damage”), then the
Purchaser may by written notice to the Sellers within ten (10) Business
Days following the delivery of the Notice of Loss elect to terminate this
Agreement, in which event this Agreement shall automatically terminate, be null
and void and of no further force and effect whatsoever, the Purchaser and
Sellers shall be released from all obligations under this Agreement (except
those which are expressly stated to survive any termination of this Agreement);
and

 

(b)                                 if such loss or damage is not Substantial
Damage, or is Substantial Damage but the Purchaser has not elected to exercise
its termination right with respect to this Agreement pursuant to Section 5.8(a),
then neither party shall have any right to terminate this Agreement by virtue
thereof, the Sellers shall pay any insurance deductibles in respect of such
loss or damage (and shall pay to the Purchaser an amount equal to the amount,
if any, by which the cost of repairs or restoration of such loss or damage
exceeds the amount of property insurance proceeds payable to the Purchaser as
hereinafter contemplated), the Purchaser shall be entitled to all proceeds of
property insurance in respect of such loss or damage (except that portion, if
any, required to reimburse the Sellers for repair or restoration work it has
done prior to Closing and insurance for loss of income prior to Closing, all of
which shall be paid to the Sellers), and the parties shall complete the
Transaction.

 

If the damage or
destruction occurs at such time that there is insufficient time for the
Purchaser to make its election hereunder, the Closing Date shall be postponed
to a date which is five (5) Business Days after the earlier of the date
such election is made or the period for making such election has expired, or if
such date is not a Business Day, then the next Business Day thereafter.

 

ARTICLE VI

TITLE

 

Section 6.1.                                Search of Title.  The Purchaser shall be allowed until 5:00 p.m.
on the Business Day five (5) Business Days prior to the commencement of
the Hearing, 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 Sellers its
objections to the title to the Lands and such matters.  In the event that 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, the Purchaser shall deliver a Requisition Notice listing any and all
such objections in reasonable detail on or before 5:00 p.m. on the
Business Day two (2) Business Days prior to the commencement
of the Hearing.  If any such objections are, by their nature,
curable, but cannot be satisfied or corrected prior to Closing, then the Sellers
shall deliver an undertaking to cure, at its own expense, all such deficiencies
forthwith after Closing. In the event any such objections are, by their nature,
uncurable, the Purchaser shall have the right to waive such objections and
close (without offsetting the Purchase Price) or to terminate this Agreement,
in which event this Agreement shall terminate, be null and void and of no
further force and effect whatsoever, and the Purchaser and Sellers shall be
released from all obligations under this Agreement (except those which are
expressly stated to survive any termination of this Agreement).

 

36

 

Except for any valid
objection so made pursuant to a Requisition Notice, and except for any
objection going to the root of title, the Purchaser shall be conclusively
deemed to have irrevocably accepted the Sellers’ title to the Lands and
satisfied itself with respect to the other matters referred to in this Section 6.1.

 

Notwithstanding the foregoing or anything to the contrary
contained in this Agreement, the Sellers shall, on or prior to the Closing Date
pay, discharge or remove of record or cause to be paid, discharged or removed
of record (or delivered documents to effect the foregoing, in escrow, pursuant
to Section 8.2) at the Sellers’ sole cost and expense all of the following
items (and the Purchaser shall have no obligation to notify the Sellers or
object to same in the Requisitions Notice or otherwise):  (i) Voluntary Liens; and (ii) other
liens encumbering the Lands (including, judgments, federal, state and municipal
tax liens) (other than open real estate taxes, water and sewer charges that are
subject to adjustment in accordance with Section 2.6 hereof and other than
Permitted Encumbrances).

 

ARTICLE VII

CONDITIONS TO CLOSING

 

Section 7.1.                                Conditions for the Purchaser.  Notwithstanding any other provision of this
Agreement to the contrary, the obligation of MID and the Purchaser to complete
the Transaction shall be subject to the satisfaction of the following
conditions, as determined by MID in its sole and absolute discretion:

 

(a)                                  All the terms, covenants and conditions of this Agreement to be complied
with or performed or satisfied by the Sellers shall have been complied with or
performed or satisfied in all material respects, including all deliveries
required to be made pursuant to Article VIII hereof; provided, however,
that, in the case of any term, covenant and/or condition qualified by
materiality pursuant to the terms of this Agreement, such term, covenant and/or
condition shall have been complied with or performed in all respects.

(b)                                 The representations and warranties of the Sellers set forth in Section 4.1
hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing; provided, however, that, in
the case of any representation and/or warranty qualified by materiality
pursuant to the provisions of Section 4.1 hereof, such representation
and/or warranty shall be true and correct in all respects as of the date of
this Agreement and as of the Closing.

 

(c)                                  There shall be no actions, suits, proceedings, claims,
investigations, applications or complaints (whether or not purportedly on
behalf of the Sellers) pending or threatened in writing against or affecting
the Sellers which in any way relates to or involves or could materially and
adversely affect the Purchased Assets or the occupancy or use of the Lands by
the Sellers 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 Purchased Assets or any part of the Purchased Assets, the
value of the Purchased Assets or the conveyance of any of the Purchased Assets
to the Purchaser.

 

(d)                                 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 

 

37

 

dismissed,
quashed or permanently stayed without any further right of appeal or right to
seek leave to appeal.

 

(e)                                  From and after the date hereof, the Sellers
shall have caused (1) the Purchased Assets to be operated in material
compliance with all Applicable Laws, including, without limitation, all
Environmental Laws, and the Sellers shall not have taken, nor shall the Sellers
have permitted to be taken, any action in respect of the Purchased Assets that
would render the Purchased Assets or any part thereof in material
non-compliance with Applicable Laws, including without limitation, all
Environmental Laws, and (2) day-to-day routine repairs and maintenance to
be conducted on the Purchased Assets in accordance with industry-standard
property management practices as would a prudent owner of comparable property.

 

(f)                                    From and after the date hereof, no change, effect, event, occurrence, circumstance, or
state of facts that separately or taken together with any other change, effect,
event, occurrence, circumstance or state of facts shall
have occurred, including, without limitation, in respect of any zoning,
by-laws, site plans or development agreements affecting the Lands, which could
reasonably be expected to adversely affect in any manner whatsoever the current
zoning of the Lands, the present or future use of the Lands or the future
development or occupancy potential of the Lands, any of the Development Rights
attributed to or associated with the Lands, the environmental, physical and/or geotechnical condition of the Lands.

 

(g)                                 The Sale Order shall have been entered by the Bankruptcy Court in
form and substance reasonably satisfactory to MID.

 

(h)                                 The Plan Effective Date shall have occurred as of the Closing Date.

 

(i)                                     All government and regulatory approvals, waiting or suspensory
periods, waivers, permits, consents, reviews, investigations, orders, rulings,
decisions, statements of no objection and exemptions (including approvals in
connection with Licenses as a result of their transfer or the change of control
of the Purchased Companies), which the Purchaser shall have determined, acting
reasonably, are necessary or desirable to complete the Transaction shall have
been obtained or concluded or, in the case of waiting or suspensory periods,
expired or been terminated, each on terms and conditions satisfactory to the
Purchaser acting reasonably.

 

(j)                                     All applicable time periods under HSR, as such time periods may be
modified by the Bankruptcy Code, shall have expired and no action, suit or
proceeding relating HSR shall have been instituted and remain pending before a
court or other governmental body by any governmental agency or public authority
to restrain, prohibit or otherwise challenge the Transaction, nor shall any
governmental agency have notified any party hereto that consummation of such
transactions would or might violate such law.

 

(k)                                  The parties shall have entered into the HRTV/TrackNet Agreements,
Reciprocal Simulcast Agreement, Amtote Agreement and the Xpressbet Agreement,
in each case in form and substance satisfactory to the Purchaser.

 

The conditions set forth
in this Section 7.1 are for the sole benefit of the Purchaser, and may be
waived in whole or in part by the Purchaser by notice to the Sellers in writing
without prejudice 

 

38

 

to the Purchaser’s rights
under this Agreement or at law, if any, in the event of the non-fulfillment of
any other condition or conditions.

 

Section 7.2.                                Conditions for the Sellers.  The obligation of the Sellers to complete the
Transaction shall be subject to the satisfaction of the following conditions:

 

(a)                                  All the terms, covenants and conditions of this Agreement to be
complied with or performed or satisfied by the Purchaser shall have been
complied with or performed or satisfied in all material respects, including all
deliveries required to be made pursuant to Article VIII hereof; provided,
however, that, in the case of any term, covenant and/or condition qualified
by materiality pursuant to the terms of this Agreement, such term, covenant
and/or condition shall have been complied with or performed in all respects;

 

(b)                                 The representations and warranties of the Purchaser set out in Section 4.3
hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing; provided, however, that, in
the case of any representation and/or warranty qualified by materiality
pursuant to the provisions of Section 4.3, such representation and/or
warranty shall be true and correct in all respects as of the date of this
Agreement and as of the Closing.

 

(c)                                  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 such leave to appeal.

 

(d)                                 The Plan Effective Date shall have occurred as of the Closing Date.

 

(e)                                  The
Sale Order shall have been entered by the Bankruptcy Court.

 

(f)                                    The parties shall have entered into the HRTV/TrackNet Agreements,
Reciprocal Simulcast Agreement, Amtote Agreement and the Xpressbet Agreement,
in each case in form and substance satisfactory to the Seller.

 

(g)                                 All applicable time periods under HSR, as such time periods may be
modified by the Bankruptcy Code, shall have expired and no action, suit or
proceeding relating HSR shall have been instituted and remain pending before a
court or other governmental body by any governmental agency or public authority
to restrain, prohibit or otherwise challenge the Transaction, nor shall any
governmental agency have notified any party hereto that consummation of such
transactions would or might violate such law.

 

The conditions set forth
in this Section 7.2 are for the sole benefit of the Sellers, and may be
waived in whole or in part by the Sellers by notice to the Purchaser in writing
without prejudice to the Sellers’ rights under this Agreement or at law, if
any, in the event of non-fulfillment of any other condition or conditions.

 

ARTICLE VIII

CLOSING

 

Section 8.1.                                Closing Arrangements.  Upon all conditions precedent to the
Purchaser’s and the Sellers’ obligation to close the transactions as set forth
in this Agreement having been 

 

39

 

satisfied and
fulfilled, or waived, as the case may be, the Closing shall take place on the
Closing Date, at 10:00 a.m., local time, at the offices of Osler, Hoskin &
Harcourt LLP, 100 King Street West, 1 First Canadian Place, Suite 6100,
Toronto, Ontario or at such other time or place as may be mutually agreed to by
the parties.

 

Section 8.2.                                Sellers’ Deliveries.  On or before the Closing Date, the Sellers
shall deliver or cause to be delivered the following items and documents to the
Purchaser, with each such document to be effective as of the Closing:

 

(a)                                  a certificate executed on behalf of each of the Sellers representing
and certifying that the conditions set forth in Section 7.1 have been
fulfilled;

 

(b)                                 evidence that the Sellers have obtained the approval of the Board of
Directors of MEC in respect of the Transaction;

 

(c)                                  evidence reasonably satisfactory to the Purchaser that the Sellers
and the Purchased Companies have repaid all third-party secured indebtedness;

 

(d)                                 evidence reasonably satisfactory to the Purchaser (which may include
a Title Policy 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 Sellers to the Purchaser at Closing without any
further approval by any Governmental Authority;

 

(e)                                  evidence reasonably satisfactory to the Purchaser (which may include
a Title Policy reasonably satisfactory to the Purchaser) that the Sellers are
currently the valid, lien free owners of the Development Rights, if any, and
have the ability and legal entitlement to convey and transfer the Development
Rights to the Purchaser in accordance with the Land Development Codes and any
other Applicable Laws, and on Closing, the Sellers shall convey and transfer
the Development Rights to the Purchaser;

 

(f)                                    the Statement of Adjustments;

 

(g)                                 any applicable Deed in favor of the Purchaser, duly executed by the
Sellers;

 

(h)                                 certificates representing all of the issued and outstanding shares
of the Reorganized AmTote Stock, the AmTote Canada Stock, the Reorganized
Golden Gate Fields Stock, the Reorganized GPRA Thoroughbred Stock, the
Reorganized Land Holdings Stock, the Reorganized Gulfstream Stock and the
Xpressbet Stock, along with appropriate instruments of transfer duly endorsed
in blank, respectively;

 

(i)                                     an
assignment of the Lone Star Interests;

 

(j)                                     an assignment of the Forest City JV Interest;

 

(k)                                  an
assignment of the Meadows Note;

 

(l)                                     a Bill of Sale;

 

40

 

(m)                               an
assignment of the Development Rights and Permits in favor of the Purchaser,
duly executed by the Sellers, which shall be sufficient to remise, release and quit-claim to the Purchaser
all right, title, interest, claim and demand which the Sellers have in and to
all of the Development Rights and Permits attributable to the Lands, and to irrevocably transfer such Development
Rights and Permits to the Purchaser
to be used by the Purchaser in its sole and absolute discretion,
together with any other additional documents or instruments required to effect,
record or consummate such transfer of the Development Rights and Permits;

 

(n)                                 the Assignment and Assumption of Contracts, duly executed by the
Sellers;

 

(o)                                 the Assignment and Assumption of Leases, duly executed by the
applicable Sellers;

 

(p)                                 the Assignment of Realty Tax Appeals, duly executed by the Sellers;

 

(q)                                 a certificate of non-foreign status of each Seller pursuant to Section 1445
of the IRC and Section 1.1445-2(b) of the Treasury Regulations
promulgated thereunder;

 

(r)                                    termination notices in respect of those Contracts and/or Leases
which have been requested by the Purchaser prior to the date hereof, which
Contracts and/or Leases shall be terminated pursuant to their respective terms;

 

(s)                                  such notices as the Purchaser may reasonably require be given to the
Tenants under the Existing Leases and other parties to the assigned Existing
Contracts of their assignment to the Purchaser, together with directions
relating to the payment of rent under such Existing Leases, and payment of
other amounts under the assigned Existing Contracts, all executed by the
Sellers in such form as the Purchaser may reasonably require;

 

(t)                                    a direction of the Sellers as to the payment of the Purchase Price,
including wire transfer instructions, and the name of the payee (if other than
the Sellers);

 

(u)                                 good and valid discharges or releases in recordable form of all
Encumbrances that can be discharged through the payment of money, other than
Permitted Encumbrances (all of which discharges shall be produced to the
Purchaser’s Solicitors for their review and approval);

 

(v)                                 a certificate of good standing of each of the Sellers and the
Purchased Companies;

 

(w)                               all agreements (including all assumptions), notices and other
documents required to be executed and delivered by the Sellers pursuant to the
terms of the Existing Leases, the Existing Contracts and the Permitted
Encumbrances and all consents and approvals from, and notifications to, any
other Persons required thereunder or otherwise with an interest in the
Purchased Assets in connection with this Transaction;

 

(x)                                   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 Sellers, including all title documents and
accounting and payment records; and

 

41

 

(y)                                 resignations of each director of the Purchased Companies and each
nominee of the Sellers to the management committee of the Forest City JV;

 

(z)                                   a certified copy of the Confirmation Order, which shall be a Final
Order;

 

(aa)                            all other conveyances and other documents which are required and
which the Purchaser has reasonably requested on or before the Closing Date to
give effect to this Transaction, including the proper transfer, assignment and
conveyance of the Purchased Assets by the Sellers to the Purchaser, free and
clear of all Encumbrances except the Permitted Encumbrances.

 

Section 8.3.                                Purchaser’s Deliveries.  On or before the Closing Date, the Purchaser
shall deliver or cause to be delivered the following items and documents to the
Sellers, with each such document to be effective as of the Time of Closing:

 

(a)                                  a certificate executed on behalf of the Purchaser representing and
certifying that the conditions set forth in Section 7.2 have been
fulfilled;

 

(b)                                 the Assignment and Assumption of Contracts, duly executed by the
Purchaser;

 

(c)                                  the Assignment and Assumption of Leases, duly executed by the
Purchaser;

 

(d)                                 the Assignment of Realty Tax Appeals, duly executed by the
Purchaser;

 

(e)                                  the Purchase Price; and

 

(f)                                    all other documents which the Sellers have reasonably requested to
give effect to this Transaction.

 

Section 8.4.                                Separate Tax Parcel.  In the event that, as of 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
check payable to the taxing authority for its pro rata share of realty taxes in
respect of the Lands (and any other lands purchased directly by the Purchaser
pursuant to Section 2.9 or an Alternative Transaction as contemplated by Section 2.8)
accruing on and after  the Closing Date
to the Sellers within ten (10) Business Days of the receipt of an invoice
from the Sellers for such amount.  The
Sellers undertake to forward such check, along with their 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
at the Sellers’ sole cost and expense.

 

Section 8.5.                                Tax Matters.  (a) On the Closing Date, and solely to
the extent not exempt in accordance with section 1146 of the Bankruptcy Code,
the Purchaser shall have the responsibility of payment of all state and local
Transfer Taxes, if any, including those payable in connection with the
recording of the Deeds, occasioned by the conveyance of the Lands and the
Purchased Assets from the Sellers to the Purchaser, as well as any notary fees
incurred in connection therein, and all costs associated with the assignment of the Development Rights
in 

 

42

 

favor of the Purchaser and the recording of such transfer; provided
that the parties shall reasonably cooperate in availing themselves of any
available exemptions from any collection of (or otherwise reduce) any such
Transfer Taxes, including a request (as part of the Sale Order) that the
Sellers’ sale of the Purchased Assets be exempted from Transfer Taxes pursuant
to Section 1146 of the Bankruptcy Code.

 

(b)                                 Any deferred taxes, roll-back taxes and/or realty taxes (including
local improvement charges and assessments) owing or accrued in respect of the
Lands (and any other lands purchased directly by the Purchaser pursuant to Section 2.9
or an Alternative Transaction as contemplated by Section 2.8) that would
have been due (taking into account any and all permitted extensions for
payments without incurring penalties for delinquent payments) by the Sellers
prior to the Closing Date shall be paid by the Sellers on or prior to the
Closing Date.  The Sellers agree to
promptly forward to the Purchaser any realty tax statements for the Lands (and
any other lands purchased directly by the Purchaser pursuant to Section 2.9
or an Alternative Transaction as contemplated by Section 2.8) received by
the Sellers after Closing for the period including and following the Closing
Date.  All Taxes referred to in this Section 8.5(b) and
any other unpaid ad valorem taxes due and payable
within the relevant current taxation period of the Closing shall be prorated on
a per diem basis between the Sellers and the Purchaser as of the day preceding
the Closing Date.

 

(c)                                  The Purchaser shall be responsible for costs and expenses associated
with the recordings of the Deeds.

 

(d)                                 The Sellers acknowledge that Purchaser may make an election under Section 338(h)(10) of
the IRC, to the extent permitted by law, and any corresponding or similar
elections under state, local or foreign law with respect to any of the
Purchased Companies.  At the request of
Purchaser, Sellers shall join with Purchaser in making such elections and
Sellers shall execute (and cause to be executed) and deliver to Purchaser such
documents and forms as are required to complete properly such elections within
30 days of the Purchaser’s request.

 

(e)                                  All Tax Returns required to be filed by the Sellers or any of their
Affiliates on or after the Closing Date with respect to the Purchased Companies
(excluding Tax Returns required to be filed by any Purchased Company) with
respect to any taxable
period (or portions thereof) ending on or before the close of business on the
Closing Date will be prepared in accordance with past
practice and will be true, complete and accurate in all material respects.

 

(f)                                    The Sellers shall cooperate, and shall cause its Affiliates to
cooperate, with Purchaser in preparing and filing all Tax returns with respect
to the Purchased Assets to the extent reasonably requested, including by
providing Purchaser with reasonable access to information, records, documents,
properties and personnel.

 

(g)                                 The Sellers shall cause the provisions of any Tax sharing agreement
between (i) any Seller, on one hand, and (ii) any Purchased Company,
on the other, to be terminated on or before the Closing Date.  After the Closing Date, no party shall have
any rights or obligations under any such Tax sharing agreement.

 

(h)                                 The parties acknowledge that, for federal income Tax purposes, the
taxable year of the Purchased Companies will end as of the close of the Closing
Date.  With 

 

43

 

respect to all
other Taxes, the Sellers and the Purchaser will, unless prohibited by
applicable law, take such actions as may be required to close the taxable
period of the Purchased Companies as of the close of the Closing Date.

 

ARTICLE IX

TERMINATION OF AGREEMENT

 

Section 9.1.                                Termination of Agreement By Either Party.  This Agreement may be
terminated by the Sellers or by MID, in their or its sole option and discretion,
in the event that (a) MID or any Seller, as the case may be, breaches the
covenants set forth in Article V hereof or (b) the Sale Order and
Confirmation Order are not entered by the Bankruptcy Court on or prior to August 30,
2009; provided, however, that, in the event that the Sale Motion
is denied by the Bankruptcy Court, unless otherwise agreed to by MID and the
Sellers, the Agreement shall terminate automatically without any further notice
or action by any person.

 

Section 9.2.                                Termination of Agreement By the Sellers.  Notwithstanding the
provisions of Section 9.1 hereof, this Agreement may be terminated by the
Sellers, in their sole and absolute discretion, (1) in the event that the
boards of directors of the Sellers and MEC determine, in good faith, after
consultation with their legal and financial advisors, that one or more
competing offers for the Purchased Assets, in whole or in part, (i) would
provide greater benefits to the Sellers, from a financial point of view, as
compared to the Transaction (including any alternative proposal offered by MID
in response thereto) and (ii) is reasonably capable of being completed; or
(2) if the condition set forth in Section 7.2(b) is not
reasonably capable of being satisfied.

 

Section 9.3.                                Termination of Agreement by MID.  Notwithstanding the provisions of Section 9.1,
this Agreement may be terminated by MID, in its sole and absolute discretion, (1) as
contemplated by Section 5.8, (2) if the condition set forth in Section 7.1(b) is
not reasonably capable of being satisfied or (3) in the event that (a) the
Bankruptcy Court enters an order authorizing the sale of the Purchased Assets,
in whole or in any part, to an entity or entities other than the Purchaser or (b) the
Sellers consummate the sale of the Purchased Assets, in whole or in any part,
to an entity or entities other than the Purchaser.

 

Section 9.4.                                Effect of Termination.  Except as otherwise provided herein
(including Section 10.8), in the event of termination of this Agreement,
this Agreement (other than the terms and provisions set forth in Section 2.3
and Section 3.3 hereof, which shall survive such termination) shall become
null and void and be deemed of no force and effect, with no liability on the
part of any party hereto (or of any of its directors, officers, employees,
consultants, contractors, agents, legal and financial advisors or other
representatives), and no party hereto shall have any obligations to any other
party hereto arising out of this Agreement. 
Upon termination, this Agreement shall not be an admission by any party
hereto, and no party hereto shall seek to admit it into evidence against any
other party hereto.

 

ARTICLE X

MISCELLANEOUS

 

Section 10.1.                         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 

 

44

 

the Sellers to
the Purchaser at Closing, and without derogating from any indemnities provided
by the Sellers herein or in any Closing Documents, the Sellers make no
representation, warranty or covenant, express, implied or statutory, of any
kind whatsoever with respect to the Purchased Assets, including, without
limitation, representation, warranty or covenant as to title, survey conditions,
use of the Purchased Assets for the Purchaser’s intended use, the condition of
the Purchased 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 Purchased
Assets, all of which are (without derogating from any indemnities provided by
the Sellers herein or in any Closing Documents), except as otherwise expressly
provided in this Agreement or in any Closing Documents provided by the Sellers
to the Purchaser at Closing, hereby expressly disclaimed by the Sellers. The
provisions of this Section 9.1 shall survive Closing and the delivery of
the Deed or any expiration or termination of this Agreement without limitation
as to time.

 

Section 10.2.                         No Recording.  The Sellers acknowledge and agree that they
shall not record, or cause to be recorded, this Agreement, or any part thereof,
or any instrument, agreement or other document evidencing this Agreement,
against title to the Lands (or any part thereof) unless so instructed by the
Purchaser, provided the Purchaser shall pay all costs and expenses in
connection therewith.

 

Section 10.3.                         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.

 

Section 10.4.                         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 check 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
checks to be tendered shall be drawn upon one of the five largest Schedule I
Canadian chartered banks, measured by reference to authorized capital.

 

Section 10.5.                         Relationship of the Parties.  Nothing in this Agreement shall be construed
so as to make the Purchaser a partner of the Sellers 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.

 

Section 10.6.                         Amendment of Agreement.  This Agreement may not be supplemented,
modified or amended except by a written agreement executed by each Party to be
affected by such supplement, modification or amendment.

 

Section 10.7.                         Notices.  Any Notice shall be in writing and shall be
deemed to have been duly given or made when personally delivered or when mailed
by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows, or to such other addresses as may be furnished hereafter
by notice, in writing, to the other Party on at least three (3) Business
Days’ prior notice, to the following Parties:

 

(a)                                  If
to the Purchaser, to:

 

45

 

MI Developments Inc.

455 Magna Drive

Aurora, Ontario, Canada  L4G 7A9

Attention:                 General Counsel

Telecopy:                   (905) 726-2095

 

with
a copy given in like manner to:

 

Davies Ward Phillips & Vineberg LLP

100 King Street West

Suite 4400

Toronto, Canada M5X 1B8

Attention:                 Vincent A. Mercier

Telecopy:                   (416) 863-0871

 

                                                -and-

 

Sidley Austin
LLP

787 Seventh Avenue

New York, New York  10019

Attention:                 Lee Attanasio

Telecopy:                   (212) 839-5599

 

(b)                                 If to
the Sellers, to:

 

Magna Entertainment Corp.

337 Magna Drive

Aurora, Ontario, Canada 
L4G 7K1

Attention:                 Senior Legal Counsel
 Telecopy:                   (905)
726-2585

 

with
a copy given in like manner to:

 

Osler, Hoskin & Harcourt LLP

100 King Street West

1 First Canadian Place

Suite 6100

Toronto, Ontario  M5X 1B8

Attention:                 Jean M. Fraser

Telecopy:                   (416) 862-6666

 

                                                -and-

 

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York  10153

Attention:                 Brian S. Rosen, Esq.

Telecopy:                   (212) 310-8007

 

Any Notice which is delivered or is sent by
telecopy 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 

 

46

 

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.

 

Section 10.8.                         Specific Performance.  It is understood and agreed by the Parties
that money damages would not be a sufficient remedy for any breach of this
Agreement by any Party and each non-breaching Party should be entitled to
specific performance and injunctive or other equitable relief as a remedy of
such a breach.

 

Section 10.9.                         Fees and Expenses.  If any party hereto brings an action against
any other party hereto based upon a breach by the other party hereto of its
obligations under this Agreement, the prevailing party shall be entitled to all
reasonable expenses incurred, including reasonable attorneys’ fees and
expenses.    Subject to Section 3.3,
the parties agree that all costs and expenses of the parties relating to the
Transaction shall be paid by the party incurring such expenses.

 

Section 10.10.                  Governing Law; Jurisdiction; Service of Process.  This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without giving effect to any principles of conflicts of law.  By its execution and delivery of this
Agreement, each of the parties hereto irrevocably and unconditionally agrees
for itself that any legal action, suit or proceeding between any of the
Sellers, on the one hand, and the Purchaser, on the other hand, with respect to
any matter under or arising out of or in connection with this Agreement or for
recognition or enforcement of any judgment rendered in any such action, suit or
proceeding, shall be brought in the Bankruptcy Court (or if prior to the commencement
of the Chapter 11 Cases, the courts of the State of New York) for that purpose
only, and, by execution and delivery of this Agreement, each hereby irrevocably
accepts and submits itself to the jurisdiction of such court, generally and
unconditionally, with respect to any such action, suit or proceeding.  In the event any such action, suit or
proceeding is commenced, the parties hereby agree and consent that service of
process may be made, and personal jurisdiction over any party hereto in any such
action, suit or proceeding may be obtained, by service of a copy of the
summons, complaint and other pleadings required to commence such action, suit
or proceeding upon the party at the address of such party set forth in Section 10.7
hereof, unless another address has been designated by such party in a notice
given to the other parties in accordance with the provisions of Section 10.7
hereof.

 

Section 10.11.                  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.

 

Section 10.12.                  Entire Agreement.  This Agreement constitutes the full and
entire agreement between the parties hereto pertaining to the Transaction and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, with respect thereto made by any Party, and there are
no other warranties or representations and no other agreements between the
parties hereto in connection with the Transaction except as specifically set
forth in this Agreement.

 

47

 

Section 10.13.                  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. 
All waivers hereunder must be in writing to be effective.

 

Section 10.14.                  Survival.  To the extent provided herein, this Agreement
and the representations, warranties and covenants set forth herein shall
survive the Closing of the Transaction and shall remain in full force and
effect thereafter.

 

Section 10.15.                  Assignment.  Neither the Sellers nor the Purchaser shall
assign their respective 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.

 

Section 10.16.                  Successors and Assigns.  All of the covenants and agreements set forth
in this Agreement are intended to bind and inure to the benefit of the parties
hereto and their respective successors and permitted assigns and be enforceable
by the parties hereto and their respective successors and their permitted
assigns pursuant to the terms and conditions of this Agreement.

 

Section 10.17.                  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.

 

48

 

IN WITNESS WHEREOF, the
Parties hereto have caused this Agreement to be executed as of the day and year
first above written.

 

 

	
   

  	
  MI DEVELOPMENTS INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  MAGNA ENTERTAINMENT CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GULFSTREAM PARK RACING 

  ASSOCIATION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

	
   

  	
  GPRA COMMERCIAL ENTERPRISES, 

  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GPRA THOROUGHBRED TRAINING 

  CENTER, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MEC LAND HOLDINGS (CALIFORNIA) 

  INC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

2

 

	
   

  	
  MEC MARYLAND INVESTMENTS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEC TEXAS RACING, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PACIFIC RACING ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

3

 

	
   

  	
  RACETRACK HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  XPRESSBET, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  30000 MARYLAND INVESTMENTS LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

4

 

EXHIBIT
A

 

FORM OF
ASSIGNMENT AND ASSUMPTION OF CONTRACTS

 

ASSIGNMENT
AND ASSUMPTION OF CONTRACTS, dated as of July ___, 2009.

 

B E T W E E N:

 

[NAME OF
SELLERS],
 (the “Sellers”),

 

OF THE FIRST PART,

 

- and -

 

[NAME OF
PURCHASER],
 (the “Purchaser”),

 

OF THE SECOND PART.

 

WHEREAS
pursuant to that certain Purchase Agreement, dated as of March 5,
2009, between the Sellers, as
sellers, and the Purchaser, as purchaser (the “Purchase Agreement”), the Sellers agreed to sell and the
Purchaser agreed to purchase, among other things, the property legally
described in Schedule A hereto (the “Property”);

 

AND
WHEREAS pursuant to the Purchase Agreement, the Sellers has agreed that the
Assigned Contracts (as defined below) shall be assigned to the Purchaser;

 

NOW
THEREFORE for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1.                                   Definitions:  Capitalized terms used and not defined herein
shall have the respective meanings ascribed to them in the Purchase
Agreement.  The terms defined herein
shall have, for all purposes of this Agreement, the following meanings, unless
the context expressly or by necessary implication otherwise requires:

 

(a)                                  “Agreement” means this
Assignment and Assumption of Contracts;

 

(b)                                 “Assigned  Contracts” means those contracts and
agreements entered into by the Sellers or by which the Sellers is bound in
respect of the severance, development, construction, management, leasing,
maintenance or operation of the Lands, which Assigned Contracts are listed on
the attached Schedule B, together with all security, guarantees and indemnities
relating thereto ; and

 

 

(c)                                  “Assigned  Interest” means all of the Seller’s right,
title and interest in and to the Assigned Contracts and all rights, benefits
and advantages whatsoever to be derived therefrom from and after the date
hereof.

 

ARTICLE
II

ASSIGNMENT

 

Section 
2.1                                Assignment by the Sellers: 
The Sellers hereby absolutely grants, transfers,
assigns and sets over, as of the date of this Agreement, the Assigned Interest
unto the Purchaser. The parties agree that if the assignment of any Assigned
Contract is prohibited at law or requires the consent of any other party or
parties and such consent has not or cannot be obtained, the Sellers shall hold
the Assigned Interest in such Assigned Contract in trust for the benefit of the
Purchaser and shall take all actions with respect thereto as the Purchaser may
direct for the Purchaser’s account and benefit.

 

Section 
2.2                                Acceptance by the Purchaser: 
The Purchaser hereby accepts the assignment of
the Assigned Interest as of the date of this Agreement.

 

ARTICLE
III

ASSUMPTION AND INDEMNITY

 

Section 
3.1                                Agreement by the Purchaser:  The Purchaser hereby agrees
to be bound by, assume, comply with and be responsible for all of the
obligations, covenants and liabilities of the Sellers accruing and arising from
and after the date of this Agreement under or in respect of the Assigned
Contracts.  Without limiting the
generality of the foregoing, the Purchaser covenants and agrees with the
Sellers:

 

(a)                                  to pay all amounts payable by the Sellers under and in respect of
the Assigned Contracts relating to the period from and including the date of
this Agreement; and

 

(b)                                 to indemnify and save harmless the Sellers and its partners,
shareholders, officers, directors, employees and agents, from and against any
and all liabilities, damages, costs, expenses, causes of action, suits, claims,
demands and judgments arising from or in connection with a breach by the
Purchaser, its shareholders, directors, officers, employees, agents or those
for whom it is responsible at law, from and after the date of this Agreement,
of any of the covenants and obligations of the Sellers under or in respect of
the Assigned Contracts.

 

Section 
3.2                                Agreement by the Sellers:  The Sellers hereby agrees to be bound by and
be responsible for all of the obligations, covenants and liabilities of the
Sellers accruing and arising prior to the date of this Agreement under or in
respect of the Assigned Contracts. 
Without limiting the generality of the foregoing, the Sellers covenants
and agrees with the Purchaser:

 

(a)                                  to pay all amounts payable, or deemed to be payable, by the Sellers
under and in respect of the Assigned Contracts relating to the period prior to
the date of this Agreement; and

 

 

(b)                                 to indemnify and save harmless the Purchaser and its shareholders,
directors, officers, employees and agents, from and against any and all
liabilities, damages, costs, expenses, causes of action, suits, claims, demands
and judgments arising from or in connection with the Assigned Contracts,
including, without limitation, any breach by the Sellers, its shareholders,
directors, officers, employees, agents or those for whom it is in law
responsible, prior to the date of this Agreement, of any of the covenants and
obligations of the Sellers under or in respect of the Assigned Contracts and
any failure by the Sellers to pay any monies due, owing or accruing by the
Sellers under or in connection with the Assigned Contracts for the period prior
to the date hereof.

 

ARTICLE
IV

MISCELLANEOUS

 

Section 
4.1                                Governing Law:  This Agreement shall be
governed by and construed in accordance with the laws of the State of n and
the applicable laws of the United States of America.

 

Section 
4.2                                Further Assurances: 
Each of the parties shall execute and deliver
all such further documents and do such other things as the other party may
reasonably request to give full effect to this Agreement.

 

Section 
4.3                                Successors and Assigns:  All of the covenants and agreements in this
Agreement shall be binding upon the parties hereto and their respective
successors and permitted assigns and shall inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns.

 

IN WITNESS WHEREOF the
parties have executed this Agreement.

 

	
   

  	
  [NAME OF
  SELLERS]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [NAME OF
  PURCHASER]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

Schedule A to Exhibit A

 

Legal Description of the
Lands

 

 

EXHIBIT
B

 

FORM OF ASSIGNMENT AND ASSUMPTION OF
LEASES

 

ASSIGNMENT
AND ASSUMPTION OF LEASES, dated as of July ___, 2009.

 

B E T W E E N:

 

[NAME OF
SELLERS]  
 (the “Sellers”),

 

OF THE FIRST PART,

 

- and -

 

[NAME OF
PURCHASER]

(the “Purchaser”),

 

OF THE SECOND PART.

 

WHEREAS pursuant to that
certain Purchase Agreement (Purchased Assets), dated as of March 5, 2009,
between the Sellers, as sellers, and the Purchaser, as purchaser (the “Purchase Agreement”), the Sellers agreed to
sell and the Purchaser agreed to purchase, among other things, the property legally described in Schedule A
hereto (the “Property”);

 

AND WHEREAS pursuant to
the Purchase Agreement, the Sellers has agreed that the Assigned Leases (as
defined below) shall be assigned to the Purchaser;

 

NOW THEREFORE for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

 

ARTICLE
I

DEFINITIONS

 

Section 
1.1                                Definitions:  Capitalized terms used and
not defined herein shall have the respective meanings ascribed to them in the
Purchase Agreement.  The terms defined
herein shall have, for all purposes of this Agreement, the following meanings,
unless the context expressly or by necessary implication otherwise requires:

 

(a)                                  “Agreement” means this Assignment and Assumption of Leases, including the
schedules attached hereto;

 

(b)                                 “Assigned
Interest” means all of the Seller’s right,
title and interest in and to the Assigned Leases and all rights, benefits and
advantages whatsoever to be derived therefrom from and after the date hereof;
and

 

 

(c)                                  “Assigned
Leases” means all agreements to lease,
leases, renewals of leases, subtenancy agreements and other rights (including
licences) granted by or on behalf of the Sellers or its predecessors in title
as owner of the Property which entitle any Person to possess or occupy any
space within the Property, which Assigned Leases are listed on the attached
Schedule B, together with all security, guarantees and indemnities relating
thereto.

 

ARTICLE
II

ASSIGNMENT

 

Section 
2.1                                Assignment by the Sellers:  The Sellers hereby
absolutely grants, transfers, assigns and sets over, as of the date of this
Agreement and to the extent such Assigned Leases are assignable at law, the
Assigned Interest unto the Purchaser. 
The parties agree that if the assignment of any Assigned Lease is
prohibited at law or requires the consent of any other party or parties and
such consent has not or cannot be obtained, the Sellers shall hold the Assigned
Interest in such Assigned Lease in trust for the benefit of the Purchaser and
shall take all actions with respect thereto as the Purchaser may direct for the
Purchaser’s account and benefit.

 

Section 
2.2                                Acceptance by the Purchaser:  The Purchaser hereby
accepts the assignment of the Assigned Interest as of the date of this
Agreement.

 

ARTICLE
III

ASSUMPTION AND INDEMNITY

 

Section 
3.1                                Agreement by the Purchaser:  The Purchaser hereby agrees
to be bound by, assume, comply with and be responsible for all of the
obligations, covenants and liabilities of the Sellers accruing and arising from
and after the date of this Agreement under or in respect of the Assigned
Leases.  Without limiting the generality
of the foregoing, the Purchaser covenants and agrees with the Sellers:

 

(a)                                  to pay all amounts payable by the Sellers under and in respect of
the Assigned Leases relating to the period from and including the date of this
Agreement; and

 

(b)                                 to indemnify and save harmless the Sellers, its partners,
shareholders, officers, directors, employees and agents, from and against any
and all liabilities, damages, costs, expenses, causes of action, suits, claims,
demands and judgments arising from or in connection with a breach by the
Purchaser, its shareholders, directors, officers, employees, agents or those
for whom it is responsible at law, from and after the date of this Agreement,
of any of the covenants and obligations of the Sellers under or in respect of
the Assigned Leases.

 

Section 
3.2                                Agreement by the Sellers:  The Sellers hereby agrees to be bound by and
be responsible for all of the obligations, covenants and liabilities of the
Sellers accruing and arising prior to the date of this Agreement under or in
respect of the Assigned Leases.  Without
limiting the generality of the foregoing, the Sellers covenants and agrees with
the Purchaser:

 

(a)                                  to pay all amounts payable by the Sellers under and in respect of
the Assigned Leases relating to the period prior to the date of this Agreement;
and

 

 

(b)                                 to indemnify and save harmless the Purchaser and its shareholders,
directors, officers, employees and agents, from and against any and all
liabilities, damages, costs, expenses, causes of action, suits, claims, demands
and judgments arising from or in connection with a breach by the Sellers, its
partners, employees or agents, prior to the date of this Agreement, of any of
the covenants and obligations of the Sellers under or in respect of the
Assigned Leases.

 

ARTICLE
IV

MISCELLANEOUS

 

Section 
4.1                                Governing Law:  This Agreement shall be
governed by and construed in accordance with the laws of the State of n and
the applicable laws of the United States of America.

 

Section 
4.2                                Further Assurances:  Each of the parties shall
execute and deliver all such further documents and do such other things as the other
party may reasonably request to give full effect to this Agreement.

 

Section 
4.3                                Successors and Assigns:  All of the covenants and
agreements in this Agreement shall be binding upon the parties hereto and their
respective successors and permitted assigns and shall inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
permitted assigns.

 

[BALANCE
OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF the
parties have executed this Agreement.

 

 

	
   

  	
  [NAME OF
  SELLERS]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [NAME OF
  PURCHASER]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

Schedule A to Exhibit B

 

Legal Description of the
Lands

 

 

Schedule B to Exhibit B

 

Leases

 

 

EXHIBIT
C

 

FORM OF ASSIGNMENT OF REALTY TAX APPEALS

 

ASSIGNMENT OF REALTY TAX APPEALS

 

MEMORANDUM
OF AGREEMENT dated as of July ____, 2009.

 

B E T W E E N:

 

[NAME OF
SELLERS]  
 (the “Sellers”),

 

OF THE FIRST PART,

 

- and -

 

[NAME OF
PURCHASER]

(the “Purchaser”),

 

OF THE SECOND PART.

 

WHEREAS pursuant to that
certain Purchase Agreement, dated as of March 5, 2009, between the
Sellers, as sellers, and the Purchaser, as purchaser (the “Purchase Agreement”), the Sellers agreed to
sell and the Purchaser agreed to purchase, among other things, the property legally described in Schedule A
hereto (the “Property”);

 

AND WHEREAS pursuant to
the Purchase Agreement, the Sellers has agreed that the Appeals (as defined
below) shall be assigned to the Purchaser;

 

NOW THEREFORE for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

 

ARTICLE
I

DEFINITIONS

 

Section 
1.1                                Definitions:  Capitalized terms used and
not defined herein shall have the respective meanings ascribed to them in the
Purchase Agreement.  The terms defined
herein shall have, for all purposes of this Agreement, the following meanings,
unless the context expressly or by necessary implication otherwise requires:

 

(a)                                  “Agreement” means this Assignment of Realty Tax Appeals, including the
schedules attached hereto; and

 

 

(b)                                 “Appeals” means any realty tax appeals and/or reassessments that relate to
the Property for the period (or portion thereof) prior to the Closing.

 

ARTICLE
II

ASSIGNMENT

 

Section 
2.1                                Assignment by the Sellers:  To the extent permitted by
Applicable Law, the Sellers hereby absolutely grants, transfers, assigns and
sets over, as of the date of this Agreement, the Appeals unto the Purchaser and
the Purchaser shall be entitled to continue the Appeals and shall be entitled
to receive all payments therefrom from and after Closing.  To the extent permitted by Applicable Law,
the Sellers shall direct the relevant taxing authority to pay any refund or
reassessment of the Appeals to the Purchaser, and if any Appeal is pending, the
Sellers hereby authorizes and appoints the Purchaser, to the extent permitted
by Applicable Law, to continue such pending Appeal.

 

Section 
2.2                                Acceptance by the Purchaser:  The Purchaser hereby
accepts the assignment of the Appeals as of the date of this Agreement.

 

ARTICLE
III

MISCELLANEOUS

 

Section 
3.1                                Governing Law:  This Agreement shall be
governed by and construed in accordance with the laws of the State of n
and the applicable laws of the United States of America.

 

Section 
3.2                                Further Assurances:  Each of the parties shall
execute and deliver all such further documents and do such other things as the
other party may reasonably request to give full effect to this Agreement.

 

Section 
3.3                                Successors and Assigns:  All of the covenants and
agreements in this Agreement shall be binding upon the parties hereto and their
respective successors and permitted assigns and shall inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
permitted assigns.

 

 

IN WITNESS WHEREOF the
parties have executed this Agreement.

 

	
   

  	
  [NAME OF
  SELLERS]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [NAME OF
  PURCHASER]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

 

Schedule A to Exhibit C

 

Legal Description of the
Lands

 

 

EXHIBIT D

ASSUMED LIABILITIES

 

 

EXHIBIT E

LIST OF EXISTING CONTRACTS

 

 

EXHIBIT F

LIST OF EXISTING LEASES

 

 

EXHIBIT G

DESCRIPTION OF LANDS

 

 

EXHIBIT H

CAPITALIZATION

 

 

EXHIBIT I

INTELLECTUAL PROPERTY

 

 

EXHIBIT J

INSURANCE

 

 

EXHIBIT K

BENEFITSExhibit 10.1

 

Execution Copy

 

FORBEARANCE
AGREEMENT

 

THIS FORBEARANCE AGREEMENT (the “Agreement”) is made as of this 20th day
of March, 2009 (the “Effective Date”), between OTTER TAIL AG ENTERPRISES, LLC,
a Minnesota limited liability company (“Borrower”) and AGSTAR FINANCIAL
SERVICES, PCA, a United States instrumentality (“Lender”).

 

RECITALS

 

A.                                    The Borrower is indebted to Lender under the
following promissory notes (collectively, the “Notes”):

 

(i)                           A Construction and Term Note dated March 28,
2007 in the original principal amount of $35,000,000.00 (“Note One”);

 

(ii)                        An Amended and Restated Term Revolving Note
dated June 23, 2008 in the original principal amount of $6,000,000.00 (“Note
Two”);

 

(iii)                     An Amended and Restated Revolving Line of
Credit Note dated June 23, 2008 in the original principal amount of
$6,000,000.00 (“Note Three”), Note Three matures and is due and payable in full
on March 30, 2009.

 

B.                                    The Borrower’s
obligations to the Lender are further evidenced by an Amended and Restated
Master Loan Agreement dated as of June 23, 2008; a First Supplement to the
Master Loan Agreement (Construction and Term Loan) dated as of March 28, 2007
(the “First Supplement”); an Amended and Restated Second Supplement to the
Master Loan Agreement (Term Revolving Loan) dated as of June 23, 2008 (the “Second
Supplement”); and a Second Amended and Restated Third Supplement to the Master
Loan Agreement (Revolving Line of Credit Loan) dated as of June 23, 2008 (the “Third
Supplement”) between Borrower and Lender (collectively, the “Loan Agreement”).

 

C.                                    The loans evidenced
by the Notes and the Loan Agreement (the “Loans”) were made by Lender to
Borrower for the purpose of constructing and operating an ethanol production facility
in or near Fergus Falls, Minnesota (the “Project”).

 

D.                                    As collateral for
the Notes, the Borrower has granted to Lender (among other things):

 

(i)                           a
Mortgage, Security Agreement and Assignment of Rents and Leases dated March 28,
2007 and recorded in the Office of the County Recorder of Otter Tail County on March
30, 2007, as Instrument No. 1016602 and as amended and restated by that certain
Amended and Restated Mortgage, Security Agreement and Assignment of Rents and
Leases dated June 23, 2008, and recorded in the Office of the County Recorder
of Otter Tail County on June 27, 2008, as Instrument No. 1041045 (collectively,
the 

 

 

“Mortgage”) under which Lender has a lien in certain real property in
Otter Tail County, Minnesota, as further described in the Mortgage (the “Real
Property”);

 

(ii)                        security
interests in all of the assets of the Borrower, including without limitation,
inventory, chattel paper, accounts, equipment, general intangibles, deposit
accounts, and commodity accounts, (collectively, the “Collateral”) pursuant to
the provisions of a Security Agreement dated March 28, 2007 (the “Security
Agreement”); and

 

(iii)                    collateral
assignments of all material contracts related to the Project, including,
without limitation, construction agreements, ethanol and distillers grains
marketing agreements; and grain procurement contracts (collectively, the “Assignments”).

 

E.                                      The Loan Agreement, the Notes, the Mortgage,
the Security Agreement, the Assignments and all other documents evidencing the
obligations of the Borrower under the Loans are referred to in this Agreement
as the “Loan Documents.”

 

F.                                      The Loans were part of a series of finance
arrangements the Borrower entered into to finance the Project, and as a result,
Lender entered into an Intercreditor Agreement dated as of March 28, 2007,
which is currently represented by an Amended and Restated Intercreditor
Agreement dated as of June 4, 2008, between Lender and other of Borrower’s
financing sources (the “ICA”).

 

G.                                    The Borrower has failed to (i) make the
payments due on February 1, 2009 and March 1, 2009, and (ii) maintain an
adequate borrowing base to support the advances under Note Three. As a result
of the Borrower’s defaults, Lender has the option to declare the Notes
fully and immediately due and payable without defense or right of setoff.

 

H.                                    As
a result of these defaults, the Borrower has requested that the Lender forbear
from i) declaring the Notes fully and immediately due and payable, ii) from
exercising its enforcement and collection rights, and iii) from undertaking or
allowing certain matters pursuant to the ICA and allow the Borrower an
opportunity to restructure the indebtedness owed Lender.

 

I.                                         In
consideration of the facts set forth in these Recitals, which the parties agree
are true and correct, and in consideration for entering into this Agreement,
the Lender is willing to grant such forbearance upon the terms and conditions
set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the parties hereto agree as follows:

 

1.                                      Acknowledgment
of Default.   The Borrower
acknowledges due execution and delivery of the Loan Agreement, Notes, Mortgage
and Security Agreement and acknowledges that the same are valid and enforceable
by the Lender against the Borrower in accordance with their terms.  The Borrower acknowledges that it is in
default under the Loan Documents

 

 

2

 

2.                                      Acknowledgment
of Debt.  The Borrower
acknowledges that, as a result of the defaults of the Borrower, Lender has the
option to declare that the indebtedness evidenced by the Notes is, absent the
provision of this Agreement, due and payable without any claims, defenses,
counterclaims, offsets, and/or cross-complaints, or demands of any kind or nature
whatsoever.  The Borrower further
acknowledges that the principal balance and accrued and unpaid interest owed on
each of the Notes as of March 13, 2009, is as follows:

 

	
  Note

  	
   

  	
  Outstanding

  Principal Balance

  as of March 13,

  2009

  	
   

  	
  Accrued Interest

  as of March 13,

  2009

  	
   

  	
  Late Charges as

  of March 13, 2009

  	
   

  	
  Total

  Principal,

  Interest, and

  Late Charges

  as of March

  13, 2009

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Note

  	
   

  	
  $

  	
  28,806,137.30

  	
   

  	
  $

  	
  217,135.25

  	
   

  	
  $

  	
  64,069.08

  	
   

  	
  $

  	
  29,087,341.63

  	
   

  
	
  Term Revolving Note

  	
   

  	
  $

  	
  6,000,000.00

  	
   

  	
  $

  	
  45,421.52

  	
   

  	
  $

  	
  13,150.40

  	
   

  	
  $

  	
  6,058,571.92

  	
   

  
	
  Revolving Line of Credit Note

  	
   

  	
  $

  	
  6,000,000.00

  	
   

  	
  $

  	
  45,421.53

  	
   

  	
  $

  	
  13,150.40

  	
   

  	
  $

  	
  6,058,571.93

  	
   

  
	
  TOTAL

  	
   

  	
  $

  	
  40,806,137.30

  	
   

  	
  $

  	
  307,978.30

  	
   

  	
  $

  	
  90,369.88

  	
   

  	
  $

  	
  41,204,485.48

  	
   

  

 

In addition to said principal and interest balances, the Lender has
incurred, and will continue to incur, costs and legal expenses as a result of
the Borrower’s defaults under the Loan Documents which amounts are, in
accordance with the terms of the Loan Documents, due and payable by the
Borrower.

 

3.                                      Forbearance
Period.  Beginning on February 1, 2009, and
ending on the earlier of an Event of Default (as defined below) or April 30,
2009 (the “Forbearance Period”), provided that the Conditions Precedent set
forth below have first been satisfied and Borrower complies with the terms of
this Agreement, the Lender agrees (i) it will not declare a default under the
Loan Documents or enforce any remedies available to it under the Loan Documents
or applicable law on account of the Borrower’s defaults; (ii) it will not consent
to the undertaking of any Remedial Action by NMF, the County, or the Trustee
(as such terms are defined in the ICA), nor will Lender provide any notice of
default and/or acceleration pursuant to Section 4 or Section 7.1 of the ICA; (iii)
that the Borrowing Base shall be deemed to have been increased to the lesser of
$6,000,000 or the sum of 100% of the Borrower’s Eligible Accounts Receivable
and 100% of Borrower’s Eligible Inventory; (iv) that the passing of the
maturity date of Note Three without payment in full on such date shall not be
an Event of Default during the Forbearance Period;  and (v) failure to comply with the financial
covenants set forth in Sections 5.01(d), (e), (f) and (g) of the Loan Agreement
will be excused.  Notwithstanding any of
the terms of this Agreement, Lender may provide Borrower with a distressed loan
notice pursuant to regulations of the Farm Credit Administration (the “Distressed
Loan Notice”).

 

4.                                      Conditions
Precedent.  As conditions
precedent to the Lender’s and forbearance, as set forth in the preceding
paragraph, the following agreements, documents, and other items

 

3

 

shall have
been executed and/or delivered to the Lender, and the following events shall
have occurred:

 

a.                                       Execution and
Delivery of Agreement.  The Borrower
shall have executed and delivered to the Lender this Agreement and any other
documents and agreements ancillary or incident hereto.

 

b.                                      Other
Documentation.  The Borrower shall
have obtained and delivered to the Lender any and all further documentation
reasonably requested by the Lender.

 

c.                                       Title Insurer
Approval.  This Forbearance Agreement
has been reviewed by First Minnesota Title and Abstract, LLC and Lawyers Title
Insurance Corporation and AgStar has received approval of the forbearance and
assurances of the continued full effectiveness of the lenders title insurance
coverage extended to Lender thereunder.

 

5.                                      Payment of Interest, Late Fees and Principal During
Forbearance Period.  Interest shall continue to accrue on the
unpaid principal balance of the Notes at the rates provided in the Loan
Documents.  All unpaid principal, accrued
interest (including, as applicable, interest at the Default Rate specified in
the Loan Documents), late fees, and all costs and expenses incurred by Lender
in connection with the Loans, including, without limitation, reasonable
attorneys’ fees, shall be deferred but shall otherwise be paid in full on or
before May 1, 2009.   Interest at the
Default Rate shall be deferred until the end of the Forbearance Period,
provided that if the Borrower satisfies all of the obligations of this
Agreement in compliance with this Agreement, the Lender agrees to reduce the
interest rate retroactive February 1, 2009, to the rate that would otherwise
have been in effect on the Loans from time to time but for the application of
the Default Rate.

 

6.                                      Other Obligations During Forbearance Period. 
During, and with respect to the obligation set forth in paragraph c,
below, during and after the Forbearance Period, the Borrower shall:

 

a.                                       Deliver the Borrowing Base Certificate
required by Section 14 of the Third Supplement within 10 days after the end of
each calendar month;

 

b.                                      Deliver all reports required by Sections
5.01(c)(ii) and (vii) of the Loan Agreement within 20 days after the end of
each calendar month; and

 

c.                                       Use its best efforts to complete its pending
equity offering on or before May 31, 2009, or such other date as mutually
agreed upon by the Borrower and the Lender, upon review of the Borrower’s
bi-weekly report to Lender on such offering and such other documents and
reports as requested by the Lender regarding the same.

 

7.                                      Management
Review.  Lender shall, in its
sole discretion but at the sole expense of Borrower, retain an independent
management and operations consultant to conduct a complete review of Borrower’s
risk management, marketing, operations and financial systems and

 

4

 

procedures.  The Borrower shall
be permitted an opportunity to provide Lender with suggestions as to the scope
of operations review, and have the opportunity to provide feedback on
consultants proposed to be engaged; provided that Lender shall retain the sole
discretion to direct the scope of review and select the consultant(s).  Such consultant shall provide Lender with a
written report summarizing its findings and recommendations on or before April 15,
2009.   Borrower shall cooperate and
assist any such consultant selected by Lender, including, but not limited to
permitting access to its facilities and
offices and to the books, records and reports related to the operation of the
Borrower’s business, wherever located.

 

8.                                      Other
Terms.

 

(a)                        Management of Business.  The
Borrower acknowledges that it is the obligation of Borrower, acting through its
duly authorized representatives, to manage the ongoing business of the Borrower
and that Lender has not participated in or directed any of the management of
the Borrower.

 

(b)                       Inspection.  The Borrower agrees that Lender
and/or its agents, employees and representatives may conduct such on-site
inspections regarding the Project as they may, in its sole discretion, deem
appropriate, subject to the Borrower’s ordinary and usual practices concerning
confidentiality and trade secrets.

 

(c)                        Disclosure to Other Lenders.  The
Borrower hereby authorizes and agrees Lender may disclose the terms of this
Agreement, as well as the Distressed Loan Notice, to MMCDC New Markets Fund II,
LLC, U.S. Bank, National Association and Otter Tail County.

 

9.                                      Events
of Default.  For purposes of this
Agreement, “Event of Default” means (a) any Events of Default under the Loan
Documents first occurring after the Effective Date, or at any prior date but
regarding which the Lender did not have actual knowledge (excluding Events of
Default relating to the matters for which forbearance is provided hereunder),
or (b) the occurrence of any one or more of the following:

 

(a)                                  Payment
Defaults.  Borrower shall fail to
pay, when due, any amounts required to be paid hereunder, including any amounts
owed on the expiration of the Forbearance Period.

 

(b)                                 Nonmonetary
Defaults. Borrower shall fail to observe or perform any covenant,
condition, or agreement to be observed or performed by them under this
Agreement for a period of five (5) days after written notice, specifying such
default and requesting that it be remedied.

 

(c)                                  Bankruptcy.  Any party to this Agreement shall file a
petition in bankruptcy or for reorganization or for an arrangement pursuant to
any present or future state or federal bankruptcy law or under any similar
federal or state law, or shall have an order for relief pursuant to 11 U.S.C. §
303 entered in any such proceeding brought by any other creditor, or shall make
a general assignment for the benefit of their creditors.

 

5

 

(d)                                 Creditor
Proceedings.  The commencement of
foreclosure or other proceeding to obtain possession of the Real Property
and/or the Collateral, whether by judicial proceeding, self help, repossession,
garnishment, execution or any other method, by any creditor of the Borrower.

 

(e)                                  Protective
Advance.  The Lender makes a
protective advance under this Agreement or the Loan Documents.

 

10.                               Remedies.  Upon the occurrence of an Event of Default (i)
the entire unpaid balance of the Loans, including all unpaid principal, accrued
interest, default charges and costs and expenses incurred by Lender in
connection with the Loans, including attorney fees shall be immediately due and
payable by Borrower, (ii) the Forbearance Period shall, at the option of
Lender, terminate and Lender may, in its sole discretion, and without further
demand or notice to Borrower, protect and enforce all of its legal, contractual
and equitable rights and remedies under the Loan Documents or this Agreement, (iii)
the Lender may apply all amounts that Borrower has on deposit with the Lender,
including, without limitation, all escrowed funds, to the payment of the
outstanding principal balance, accrued interest, default charges, and the costs
and expenses of collection, including attorneys’ fees, in such order as Lender
may deem appropriate, and (iv) the Lender may seek, and Borrower shall not
object to, the appointment of a receiver for the Real Property and the Collateral.  Each and every power or remedy herein
specifically given shall be in addition to every other power or remedy,
existing or implied, given now or hereafter existing at law or in equity, and
each and every power and remedy herein specifically given or otherwise so
existing may be exercised from time to time and as often and in such order as
may be deemed expedient by Lender, and the exercise or the beginning of the
exercise of one power or remedy shall not be deemed a waiver of the right to
exercise at the same time or thereafter any other power or remedy. No delay or
omission of Lender in the exercise of any right or power accruing hereunder
shall impair any such right or power or be construed to be a waiver of any
default or acquiescence therein.

 

11.                               Waiver
and Release.  To the extent any
claims or defenses may exist, Borrower, on behalf of themselves and their
respective successors and assigns, hereby forever and irrevocably release
Lender and its officers, representatives, agents, attorneys, employees,
predecessors, successors, and assigns, from any and all such claims and
defenses, whether known or unknown arising out of any acts or omissions
occurring prior to the date of this Agreement (including without limitation,
those relating to late fees currently outstanding or previously paid), provided
that Borrower does not waive any rights afforded it hereunder.

 

12.                               Effect
of Agreement.  Except as
expressly provided in this Agreement, the Loan Agreement, the Notes, the
Mortgage and the Security Agreement remain in full force and effect in
accordance with their respective terms, and this Agreement shall not be
construed to: (i) impair the validity, perfection or priority of any security
interest or lien securing the Loans; (ii) waive or impair any rights, powers or
remedies of the Lender under the Loan Agreement, the Notes, the Mortgage or the
Security Agreement; or (iii) constitute an agreement by the Lender or require
it to extend the Forbearance Period, or grant additional forbearance periods.

 

6

 

13.                               Representations
and Warranties.  The Borrower
represents and warrants to AgStar and Lender as follows:

 

13.1         Borrower.  The Borrower is a limited liability company
duly organized and validly existing and in good standing under the laws of the
State of Minnesota and is qualified to do business in all jurisdictions in
which the nature of its business makes such qualification necessary and where
failure to so qualify would have a Material Adverse Effect on its respective
financial condition or operations.  The
Borrower has the power and authority to own and operate its assets and to carry
on its business and to execute, deliver, and perform its obligations under the
Loan Documents and this Agreement.

 

13.2         Execution.  The execution, delivery and performance by
the Borrower of the this Agreement is within the Borrower’s powers, has been
duly authorized by all necessary action, does not contravene:  (i) the articles of organization or operating
agreements of the Borrower; or (ii) any law or any contractual restriction
binding on or affecting the Borrower, and does not result in or require the
creation of any lien, security interest or other charge or encumbrance (other
than pursuant to the terms of the Loan Documents) upon or with respect to any
of its respective properties.

 

13.3         Enforceability.  This Agreement is, and each of the Loan
Document to which the Borrower is a party are, or when delivered will be,
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting the enforcement of creditor’s rights generally and by general
principles of equity.

 

13.4         Litigation.  Except as specifically disclosed in writing
to the Lender, there is no pending or threatened action or proceeding affecting
the Borrower or any of the transactions contemplated hereby before any court,
governmental agency or arbitrator, which may materially adversely affect the
financial condition or operations of the Borrower.  As of the date of this Agreement, there are
no outstanding judgments against the Borrower.

 

14.                               Miscellaneous.

 

14.1         Recitals
Incorporated.  The Recitals set forth
at the beginning of this Agreement are deemed incorporated herein, and the
parties hereto represent they are true, accurate and correct.

 

14.2         Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of
Minnesota.

 

14.3         Severability.  If any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, such provision shall be severable
from the remainder of such agreement and the validity, legality and
enforceability of the remaining provisions shall not be adversely affected or
impaired thereby and shall remain in full force and effect.

 

7

 

14.4         Counterparts.  This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties.

 

14.5         Entire
Agreement.  This Agreement and the
Loan Documents set forth the entire agreement between the parties pertaining to
the transactions contemplated by this Agreement.  This Agreement may be amended or modified
only by a written instrument signed by the party against which enforcement is
sought.

 

14.6         Revival.  If the incurring of any debt or any payments
of money or transfers of property made to the Lender by or on behalf of the
Borrower contemplated by this Agreement or the Loan Documents (collectively,
the “Transfer”) should for any reason subsequently be declared to be “voidable”
or “avoidable” within the meaning of any state or federal law relating to
creditor’s rights, including , without limitation, as fraudulent transfers,
preferences or otherwise voidable or recoverable payments of money or transfers
of property, in whole or in part, for any reason under the Bankruptcy Code or
any other federal or state law, and Lender is required to repay or restore any
Transfer, or the amount of any portion thereof, or upon the advice of its
counsel is advised to do so, then, as to any such amount repaid or restored
(including reasonable costs, expenses and attorneys’ fees of the Lender related
thereto), the liability of the Borrower shall automatically be revived,
reinstated and restored and shall exist as though such Transfer had never been
made.

 

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed and delivered as of the date and year first above written.

 

 

	
  AGSTAR
  FINANCIAL SERVICES, PCA,

  	
   

  	
  OTTER TAIL AG ENTERPRISES, LLC,

  
	
  a United States instrumentality,

  	
   

  	
  a Minnesota limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By 

  	
  /s/ Ron Monson

  	
   

  	
  By 

  	
  /s/ Anthony Hicks

  
	
   

  	
  Ron Monson

  	
   

  	
   

  	
  Anthony Hicks

  
	
   

  	
  Its: Vice President

  	
   

  	
   

  	
  Its: Chief Executive
  Officer

  

 

8

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