OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement") is executed this 27th
day of November, 2002, by and among MAGNA ENTERTAINMENT CORP., a Delaware
corporation ("MEC"), XXXXXX LLC, a Maryland limited liability company ("Xxxxxx
LLC"), XXXXX LLC, a Maryland limited liability company ("Xxxxx LLC" and
collectively with Xxxxxx LLC, the "XxXxxxxxx LLCs"), XXXXXX X. XXXXXXXXX
("Xxxxxx") and XXXXX X. XXXXXXXXX ("Xxxxx").
PRELIMINARY STATEMENT
A. Laurel Racing Assoc., Inc. is a Maryland corporation
("LRAI") and Pimlico Racing Association, Inc. is a Maryland corporation
("PRAI"). Each of the XxXxxxxxx LLCs owns the respective number of shares of
capital stock of LRAI and PRAI set forth on SCHEDULE 3.3 hereof. These shares in
the aggregate (collectively, the "Remaining Shares") constitute all of the
issued and outstanding shares of capital stock of LRAI and PRAI owned by the
XxXxxxxxx LLCs that are not being sold pursuant to the Stock Purchase Agreement
among the parties hereto and certain other parties dated July 15, 2002 (the
"Stock Purchase Agreement").
B. The XxXxxxxxx LLCs desire to provide MEC with an option to
purchase the Remaining Shares and any and all additional shares of capital stock
of LRAI acquired by the XxXxxxxxx LLCs pursuant to that certain Xxxxxx LLC/Xxxxx
LLC Option Agreement by and among the XxXxxxxxx LLCs and MEC of even date
herewith (collectively, the "Option Shares"), and MEC desires to provide the
XxXxxxxxx LLCs with an option to sell the Option Shares to MEC, on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. RECITALS. The foregoing statements are hereby made a part of
this Agreement.
2. DEFINITIONS. The following terms shall have the following
meanings for purposes of this Agreement:
"CALL OPTION" has the meaning set forth in Section 4.1.
"CALL OPTION EXERCISE PRICE" means the aggregate exercise
price of the Call Option set forth in Section 4.4.
"CLOSING DATE" means the date(s) on which the Option Shares
are transferred to MEC, and the Put Option Exercise Price or Call Option
Exercise Price is paid to Xxxxxx LLC and/or Xxxxx LLC, as the case may
"ESCROW AGENT" means Mercantile-Safe Deposit and Trust
Company.
"ESCROW AGREEMENT" means the escrow agreement between MEC,
Xxxxxx LLC, Xxxxx LLC and the Escrow Agent executed simultaneously herewith in
the form attached hereto as EXHIBIT A.
"EXPIRATION DATE" means November 27, 2007.
"INDEMNIFIABLE LOSS" has the meaning set forth in the Stock
Purchase Agreement.
"INTEREST" means an amount equal to the six (6) month LIBOR
rate for each six-month period as determined by the Escrow Agent with reference
to The Wall Street Journal (Eastern Edition) or, if such rate cannot be
determined by reference to The Wall Street Journal (Eastern Edition), then by
reference to the telerate screen of Reuters' financial services for each 180-day
period, and compounded on a quarterly basis.
"ISSUER" means the Bank of Montreal.
"JAD EMPLOYMENT AGREEMENT" means that certain Employment
Agreement by and among Xxxxxx, MEC, LRAI, PRAI and LRALP of even date herewith.
"XXXXXX LLC CASH ESCROW FUNDS" has the meaning set forth in
Section 6.1.
"XXXXXX LLC EXERCISE NOTICE" has the meaning set forth in
Section 3.2.1.
"XXXXXX LLC INTEREST LETTER OF CREDIT" has the meaning set
forth in Section 7.
"XXXXXX LLC LETTER OF CREDIT" means the irrevocable standby
letter of credit in the amount of the Xxxxxx LLC Option Exercise Price as may be
adjusted from time to time pursuant to the terms and conditions hereof.
"XXXXXX LLC OPERATING AGREEMENT" has the meaning set forth in
the Stock Purchase Agreement.
"XXXXXX LLC OPTION EXERCISE PRICE" means the Put Option
Exercise Price or the Call Option Exercise Price allocated to Xxxxxx LLC on the
basis set forth on Schedule 3.3 and as may be adjusted from time to time
pursuant to the terms and conditions hereof.
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"XXXXXX LLC OPTION SHARES" means all (but not less than all)
of the Option Shares (as set forth on Schedule 3.3) owned by Xxxxxx LLC.
"XXXXXX LLC PAYMENT NOTICE" has the meaning set forth in
Section 3.3.1.
"XXXXXX LLC PUT OPTION" means the exclusive, irrevocable
option granted by MEC to Xxxxxx LLC pursuant to Section 3 hereof.
"XXXXXX LLC SETOFF NOTICE" has the meaning set forth in
Section 12.1.
"XXXXXX LLC TERMINATION NOTICE" has the meaning set forth in
Section 6.1.
"XXXXX LLC CASH ESCROW FUNDS" has the meaning set forth in
Section 6.2.
"XXXXX LLC EXERCISE NOTICE" has the meaning set forth in
Section 3.2.2.
"XXXXX LLC INTEREST LETTER OF CREDIT" has the meaning set
forth in Section 7.
"XXXXX LLC LETTER OF CREDIT" means the irrevocable standby
letter of credit in the amount of the Xxxxx LLC Option Exercise Price as may be
adjusted from time to time pursuant to the terms and conditions hereof.
"XXXXX LLC OPERATING AGREEMENT" has the meaning set forth in
the Stock Purchase Agreement.
"XXXXX LLC OPTION EXERCISE PRICE" means the Put Option
Exercise Price or the Call Option Exercise Price allocated to Xxxxx LLC on the
basis set forth on Schedule 3.3, and as may be adjusted from time to time
pursuant to the terms and conditions hereof.
"XXXXX LLC OPTION SHARES" means all (but not less than all) of
the Option Shares (as set forth on Schedule 3.3) owned by Xxxxx LLC and as may
be adjusted from time to time pursuant to the terms and conditions hereof.
"XXXXX LLC PAYMENT NOTICE" has the meaning set forth in
Section 3.3.2.
"XXXXX LLC PUT OPTION" means the exclusive, irrevocable option
granted by MEC to Xxxxx LLC pursuant to Section 3 hereof.
"XXXXX LLC SETOFF NOTICE" has the meaning set forth in Section
12.2.
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"XXXXX LLC TERMINATION NOTICE" has the meaning set forth in
Section 6.2.
"LETTERS OF CREDIT" means the Xxxxxx LLC Letter of Credit and
the Xxxxx LLC Letter of Credit, collectively.
"LIENS" means, with respect to the Option Shares, any
mortgage, claim, community property interest, option, right of first refusal,
pledge, lien, encumbrance, security interest or charge of any kind.
"LOSSES" has the meaning set forth in the Stock Purchase
Agreement.
"LRAI" has the meaning set forth in the Preliminary Statement.
"LRAI OPTION SHARES" means the shares of common stock of LRAI
owned by each of the XxXxxxxxx LLCs as set forth on Schedule 3.3.
"LRALP" means Laurel Racing Association Limited Partnership, a
Maryland limited partnership.
"MEC EXERCISE NOTICE" has the meaning set forth in Section
4.3.
"OPTION GRANT PAYMENT" means Eighteen Million Four Hundred
Twenty Three Thousand Eight Hundred Fifty Three and 93/100 Dollars
($18,423,853.93), the aggregate price payable by MEC to the XxXxxxxxx LLCs for
the issuance of the Call Option.
"OPTION SHARES" has the meaning set forth in the Preliminary
Statement.
"PARTIAL YEAR INTEREST" has the meaning set forth in Section 7
of this Agreement.
"PERSON" means an individual, corporation, association,
partnership, limited liability company, limited liability entity, trust,
unincorporated organization or any other organization or entity.
"PRAI" has the meaning set forth in the Preliminary Statement.
"PRAI OPTION SHARES" means the shares of common stock of PRAI
owned by each of the XxXxxxxxx LLCs as set forth on Schedule 3.3.
"PUT OPTION" means the Xxxxxx LLC Put Option and the Xxxxx LLC
Put Option, collectively.
"PUT OPTION EXERCISE PRICE" means the aggregate exercise price
of the Put Option set forth in Section 3.3.
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"REMAINING SHARES" has the meaning set forth in the
Preliminary Statement.
"SELLERS" has the meaning set forth in the Stock Purchase
Agreement.
"STOCKHOLDERS' AGREEMENT" means the Stockholders' Agreement
between the parties and Maryland Racing, Inc., a Delaware corporation of even
date herewith.
"STOCK PURCHASE AGREEMENT" has the meaning set forth in the
Preliminary Statement.
3. PUT OPTION.
3.1 Each of the XxXxxxxxx LLCs hereby purchases and acquires
from MEC, and MEC hereby grants to each of the XxXxxxxxx LLCs, the Put Option to
sell all of its Option Shares to MEC pursuant to the terms and conditions of
this Agreement.
3.2 If MEC has not exercised its Call Option pursuant to
Section 4 below, then the following provisions of this Section 3.2 shall apply:
3.2.1 Provided that Xxxxx LLC has previously
exercised or simultaneously exercises the Xxxxx LLC Put Option, Xxxxxx LLC
may exercise the Xxxxxx LLC Put Option with respect to all of the Xxxxxx LLC
Option Shares, on a one-time basis, at any time prior to the Expiration Date,
by giving written notice thereof to Xxxxx LLC (if the Xxxxx LLC Put Option
has not previously been exercised), MEC, the Escrow Agent and the Issuer (the
"Xxxxxx LLC Exercise Notice") which Xxxxxx LLC Exercise Notice shall include
(a) a calculation of the then current Xxxxxx LLC Option Exercise Price and
(b) an acknowledgement that upon receipt of the Xxxxxx LLC Option Exercise
Price (as calculated by Xxxxxx LLC) it will have relinquished all claims of
ownership in and to the Xxxxxx LLC Option Shares, and with regard to the
notice sent to the Issuer, shall include the Xxxxxx LLC Letter of Credit and
all Xxxxxx LLC Interest Letters of Credit. In the event, only, that either
(a) Xxxxxx has resigned for "Good Reason" in accordance with Section 5.5 of
the JAD Employment Agreement, (b) Joseph's employment under the JAD Employment
Agreement is terminated by Employer (as defined therein) without "Good Cause"
(as defined therein), or (c) the fourth (4th) annual anniversary date of this
Agreement has passed, then upon the occurrence of any such event, if Xxxxx
LLC has not previously exercised the Xxxxx LLC Put Option with respect to the
Xxxxx LLC Option Shares and Xxxxxx LLC exercises the Xxxxxx LLC Put Option,
Xxxxx LLC shall simultaneously exercise (and shall automatically be deemed to
have exercised) the Xxxxx LLC Put Option with respect to all of the Xxxxx LLC
Option Shares, and the Xxxxxx LLC Exercise Notice also shall include a
calculation of the then current Xxxxx LLC Option Exercise Price and an
acknowledgement, upon which Xxxxx LLC agrees that MEC shall be entitled to
rely, that upon receipt of the Xxxxx LLC Option Exercise Price (as calculated
by Xxxxxx LLC), it
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will have relinquished all claims of ownership in and to the Xxxxx LLC Option
Shares, and with regard to the notice sent to the Issuer, shall include the
Xxxxx LLC Letter of Credit and all Xxxxx LLC Interest Letters of Credit and
shall be deemed notice of the exercise by Xxxxx LLC of the Xxxxx LLC Put Option.
3.2.2 Provided that the Xxxxx LLC Put Option has not
been exercised pursuant to Section 3.2.1 above, Xxxxx LLC shall be entitled,
in its sole and absolute discretion, to exercise the Xxxxx LLC Put Option
with respect to all of the Xxxxx LLC Option Shares, on a one-time basis, at
any time prior to the Expiration Date. Provided that the exercise of the
Xxxxx LLC Put Option is not simultaneous with the exercise of the Xxxxxx LLC
Put Option, Xxxxx LLC shall exercise the Xxxxx LLC Put Option by giving
written notice thereof to Xxxxxx LLC, MEC, the Escrow Agent and the Issuer
(the "Xxxxx LLC Exercise Notice"). The Xxxxx LLC Exercise Notice shall
include (a) a calculation of the then current Xxxxx LLC Option Exercise Price
and (b) an acknowledgement that upon receipt of the Xxxxx LLC Option Exercise
Price (as calculated by Xxxxx LLC) it will have relinquished all claims of
ownership in and to the Xxxxx LLC Option Shares, and with regard to the
notice sent to the Issuer, shall include the Xxxxx LLC Letter of Credit and
all Xxxxx LLC Interest Letters of Credit.
3.3 The Put Option Exercise Price shall be equal to Eighteen
Million Three Hundred Twelve Thousand Six Hundred Fifty Dollars ($18,312,650.00)
PLUS Interest thereon. The Put Option Exercise Price shall be allocated between
the PRAI Option Shares and the LRAI Option Shares and between Xxxxxx LLC and
Xxxxx LLC on the basis set forth on Schedule 3.3. The Xxxxxx LLC Option Exercise
Price shall be reduced by the amount of any claims of offset validly asserted by
MEC against Xxxxxx LLC in accordance with Section 12.1 hereof. The Xxxxx LLC
Option Exercise Price shall be reduced by the amount of any claims of offset
validly asserted by MEC against Xxxxx LLC in accordance with Section 12.2
hereof.
3.3.1 (i) Immediately upon receipt of notice in
accordance with Section 3.2.1, it is acknowledged that the Issuer shall pay (by
wire transfer of immediately available funds) the full amounts of the Xxxxxx LLC
Letter of Credit and the Xxxxxx LLC Interest Letters of Credit to the account(s)
designated in the Xxxxxx LLC Letter of Credit and the Xxxxxx LLC Interest
Letters of Credit. Within ten (10) days of receipt of notice in accordance with
Section 3.2.1, if the Xxxxxx LLC Exercise Notice falls on a day other than an
annual anniversary date of this Agreement, the Partial Year Interest allocable
to Xxxxxx LLC shall be payable by MEC by wire transfer of immediately available
funds to the account(s) designated in the Xxxxxx LLC Letter of Credit.
(ii) On the later to occur of (y) five (5)
days after receipt of the Xxxxxx LLC Option Exercise Price (as calculated by
Xxxxxx LLC) and (z) ten (10) days following receipt of the Xxxxxx LLC Option
Exercise Notice, the Escrow Agent shall release (i) the Xxxxxx LLC Option
Exercise Price to Xxxxxx LLC by wire transfer of immediately available funds to
an account(s) designated by Xxxxxx LLC, and
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(ii) the stock certificates evidencing the Option Shares owned by Xxxxxx LLC to
MEC and Xxxxxx LLC shall relinquish all claims of ownership therein.
3.3.2 (i) Immediately upon receipt of notice in
accordance with Section 3.2.1 or 3.2.2, it is acknowledged that the Issuer shall
pay (by wire transfer of immediately available funds) the full amounts of the
Xxxxx LLC Letter of Credit and the Xxxxx LLC Interest Letters of Credit to the
account(s) designated in the Xxxxx LLC Letter of Credit and the Xxxxx LLC
Interest Letters of Credit; provided, however, if the receipt of notice is in
accordance with Section 3.2.1 and Xxxxx LLC fails to submit the Xxxxx LLC Letter
of Credit and the Xxxxx LLC Interest Letters of Credit to the Issuer within ten
(10) days of the date of such notice, MEC may pay the Xxxxx LLC Option Exercise
Price (as set forth in the Xxxxxx LLC Option Exercise Notice) by wire transfer
of immediately available funds to the account designated in the Xxxxx LLC Letter
of Credit and the Xxxxx LLC Interest Letters of Credit, and upon the Escrow
Agent's receipt of such payment the Xxxxx LLC Letter of Credit and the Xxxxx LLC
Interest Letters of Credit shall be automatically cancelled. Within ten (10)
days of receipt of notice in accordance with Section 3.2.1 or 3.2.2, if the
Xxxxx LLC Exercise Notice falls on a day other than an annual anniversary date
of this Agreement, the Partial Year Interest allocable to Xxxxx LLC shall be
payable by MEC by wire transfer of immediately available funds to the account(s)
designated in the Xxxxx LLC Letter of Credit.
(ii) On the later to occur of (y) five (5)
days after receipt of the Xxxxx LLC Option Exercise Price (whether from the
Issuer or MEC and as calculated by Xxxxxx LLC, if notice was provided pursuant
to Section 3.2.1, or as calculated by Xxxxx LLC, if notice was provided pursuant
to Section 3.2.2) and (z) ten (10) days following receipt of notice in
accordance with Section 3.2.1 or 3.2.2, the Escrow Agent shall release (i) the
Xxxxx LLC Option Exercise Price to Xxxxx LLC by wire transfer of immediately
available funds to an account(s) designated by Xxxxx LLC, and (ii) the stock
certificates evidencing the Option Shares owned by Xxxxx LLC to MEC and Xxxxx
LLC shall relinquish all claims of ownership therein.
3.4 Any dispute or objection by MEC regarding the calculation
or release of the Xxxxxx LLC Option Exercise Price or regarding the Xxxxxx LLC
Option Exercise Notice (relating to the Xxxxxx LLC Put Option and/or the Xxxxx
LLC Put Option) shall be resolved pursuant to the provisions of the Escrow
Agreement. Any dispute or objection by MEC regarding the calculation or release
of the Xxxxx LLC Option Exercise Price or regarding the Xxxxx LLC Option
Exercise Notice shall be resolved pursuant to the provisions of the Escrow
Agreement.
4. CALL OPTION.
4.1 MEC hereby purchases and acquires from each of the
XxXxxxxxx LLCs, and each of the XxXxxxxxx LLCs hereby grants to MEC (and any
wholly-owned subsidiary of MEC designated by MEC in writing), an exclusive,
irrevocable option (the "Call Option") to acquire all of the Option Shares from
the XxXxxxxxx LLCs pursuant to the terms and conditions of this Agreement.
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4.2 Simultaneously with the execution of this Agreement, MEC
shall pay the Option Grant Payment by wire transfer of immediately available
funds to the account(s) designated by each of the XxXxxxxxx LLCs in Section
14.10. The Option Grant Payment shall be allocable between the PRAI Option
Shares and the LRAI Option Shares and between Xxxxxx LLC and Xxxxx LLC on the
basis set forth on Schedule 3.3.
4.3 Provided that the Xxxxxx LLC Put Option and/or the Xxxxx
LLC Put Option has not been exercised pursuant to Section 3 above, MEC may
exercise the Call Option with respect to all (but not less than all) of the
Option Shares not previously purchased by MEC pursuant to Section 3 above, on a
one-time basis, at any time beginning on the fourth (4th) annual anniversary
date of this Agreement and ending on the Expiration Date, by giving written
notice thereof (which notice shall include a calculation of the then current
Xxxxxx LLC Option Exercise Price and/or the then current Xxxxx LLC Option
Exercise Price, as applicable, and if provided on a day other than an annual
anniversary date of this Agreement, shall include evidence of a wire transfer of
immediately available funds to the account(s) designated in the Xxxxxx LLC
Letter of Credit and/or the Xxxxx LLC Letter of Credit, as applicable, of the
Partial Year Interest allocable to Xxxxxx LLC and/or Xxxxx LLC, as applicable),
to the XxXxxxxxx LLCs (or solely to Xxxxxx LLC if Xxxxx LLC has previously
exercised the Xxxxx LLC Put Option or if notice is being provided pursuant to
subsection (ii) of this Section 4.3), the Escrow Agent and the Issuer (the "MEC
Exercise Notice"); PROVIDED, HOWEVER, that (i) if Xxxxxx is terminated for "Good
Cause" as defined in the JAD Employment Agreement, and such "Good Cause"
determination is either undisputed by Xxxxxx or a court of competent
jurisdiction has rendered a final, non-appealable judgment that "Good Cause"
exists, MEC may immediately exercise the Call Option with respect to all (but
not less than all) of the Option Shares, regardless of whether such termination
occurs prior to the fourth (4th) annual anniversary date of this Agreement, by
giving the MEC Exercise Notice, or (ii) if Xxxxxx resigns from his employment
under the JAD Employment Agreement without "Good Reason," and such resignation
without "Good Reason" is either undisputed by Xxxxxx or a court of competent
jurisdiction has rendered a final, non-appealable judgment that no "Good Reason"
exists, MEC may immediately exercise the Call Option with respect to all of the
Xxxxxx LLC Option Shares (but not the Xxxxx LLC Option Shares), regardless of
whether such resignation occurs prior to the fourth (4th) annual anniversary
date of this Agreement, by giving the MEC Exercise Notice, or (iii) if (y) Xxxxx
resigns from her employment under that certain Employment Agreement by and among
Xxxxx, MEC, LRAI, PRAI and LRALP of even date herewith without "Good Reason,"
and such resignation without "Good Reason" is either undisputed by Xxxxx or a
court of competent jurisdiction has rendered a final, non-appealable judgment
that no "Good Reason" exists and (z) the JAD Employment Agreement has been
terminated (either by Xxxxxx or Employer (as defined in the JAD Employment
Agreement)) for any reason or is subsequently terminated (either by Xxxxxx or
Employer) for any reason, MEC may immediately exercise the Call Option with
respect to all of the Xxxxx LLC Option Shares, regardless of whether such
resignation occurs prior to the fourth (4th) annual anniversary date of this
Agreement, by giving the MEC Exercise Notice.
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4.4 The Call Option Exercise Price shall be equal to Eighteen
Million Three Hundred Twelve Thousand Six Hundred Fifty Dollars ($18,312,650.00)
PLUS Interest thereon. The Call Option Exercise Price shall be allocated between
the PRAI Option Shares and the LRAI Option Shares and between Xxxxxx LLC and
Xxxxx LLC on the basis set forth on Schedule 3.3. The Xxxxxx LLC Option Exercise
Price shall be reduced by the amount of any claims of offset validly asserted by
MEC against Xxxxxx LLC in accordance with Section 12.1 hereof. The Xxxxx LLC
Option Exercise Price shall be reduced by the amount of any claims of offset
validly asserted by MEC against Xxxxx LLC in accordance with Section 12.2
hereof.
4.4.1 (i) Within ten (10) days after receipt of
the MEC Exercise Notice with respect to the Option Shares owned by Xxxxxx LLC in
accordance with Section 4.3, Xxxxxx LLC shall submit the Xxxxxx LLC Letter of
Credit and all Xxxxxx LLC Interest Letters of Credit to the Issuer, and it is
acknowledged that the Issuer shall immediately pay (by wire transfer of
immediately available funds) the full amounts of the Xxxxxx LLC Letter of Credit
and the Xxxxxx LLC Interest Letters of Credit to the account(s) designated in
the Xxxxxx LLC Letter of Credit and the Xxxxxx LLC Interest Letters of Credit;
PROVIDED, HOWEVER, if Xxxxxx LLC fails to submit the Xxxxxx LLC Letter of Credit
and the Xxxxxx LLC Interest Letters of Credit to the Issuer within ten (10) days
after receipt of the MEC Exercise Notice, MEC may pay the Xxxxxx LLC Option
Exercise Price (as calculated by MEC) by wire transfer of immediately available
funds to the account(s) designated in the Xxxxxx LLC Letter of Credit and upon
the Escrow Agent's receipt of such payment, the Xxxxxx LLC Letter of Credit and
the Xxxxxx LLC Interest Letters of Credit shall be automatically cancelled.
(ii) On the later to occur of (y) five (5)
days after receipt of the Xxxxxx LLC Option Exercise Price (whether from the
Issuer or MEC and as calculated by MEC) and (z) ten (10) days following receipt
of the MEC Exercise Notice, the Escrow Agent shall release (i) the Xxxxxx LLC
Option Exercise Price to Xxxxxx LLC by wire transfer of immediately available
funds to an account(s) designated by Xxxxxx LLC, and (ii) the stock certificates
evidencing the Option Shares owned by Xxxxxx LLC to MEC and Xxxxxx LLC shall
relinquish all claims of ownership therein.
4.4.2 (i) Within ten (10) days after receipt of
the MEC Exercise Notice with respect to the Option Shares owned by Xxxxx LLC in
accordance with Section 4.3, Xxxxx LLC shall submit the Xxxxx LLC Letter of
Credit and all Xxxxx LLC Interest Letters of Credit to the Issuer, and it is
acknowledged that the Issuer shall immediately pay (by wire transfer of
immediately available funds) the full amounts of the Xxxxx LLC Letter of Credit
and the Xxxxx LLC Interest Letters of Credit to the account(s) designated in the
Xxxxx LLC Letter of Credit and the Xxxxx LLC Interest Letters of Credit;
PROVIDED, HOWEVER, if Xxxxx LLC fails to submit the Xxxxx LLC Letter of Credit
and the Xxxxx LLC Interest Letters of Credit to the Issuer within ten (10) days
after receipt of the MEC Exercise Notice, MEC may pay the Xxxxx LLC Option
Exercise Price (as calculated by MEC) by wire transfer of immediately available
funds to the account(s) designated in the Xxxxx LLC Letter of Credit and upon
the Escrow Agent's receipt of such
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payment, the Xxxxx LLC Letter of Credit and the Xxxxx LLC Interest Letters of
Credit shall be automatically cancelled.
(ii) On the later to occur of (y) five (5)
days after receipt of the Xxxxx LLC Option Exercise Price (whether from the
Issuer or MEC and as calculated by MEC) or (z) ten (10) days following receipt
of the MEC Exercise Notice, the Escrow Agent shall release (i) the Xxxxx LLC
Option Exercise Price to Xxxxx LLC by wire transfer of immediately available
funds to an account(s) designated by Xxxxx LLC, and (ii) the stock certificates
evidencing the Option Shares owned by Xxxxx LLC to MEC and Xxxxx LLC shall
relinquish all claims of ownership therein.
4.5 Any dispute or objection by Xxxxxx LLC regarding the
calculation of the Xxxxxx LLC Exercise Price, the release of the Xxxxxx LLC
Option Shares or the MEC Exercise Notice shall be resolved pursuant to the
provisions of the Escrow Agreement. Any dispute or objection by Xxxxx LLC
regarding the calculation of the Xxxxx LLC Exercise Price, the release of the
Xxxxx LLC Option Shares or the MEC Exercise Notice shall be resolved pursuant to
the provisions of the Escrow Agreement.
5. DELIVERY OF LETTERS OF CREDIT AND ESCROW OF OPTION SHARES.
Simultaneously with the execution of this Agreement, (i) MEC shall deliver the
Xxxxxx LLC Letter of Credit to Xxxxxx LLC and the Xxxxx LLC Letter of Credit to
Xxxxx LLC, which Letters of Credit shall be held by each of the XxXxxxxxx LLCs,
respectively, pending exercise of the Put Option or Call Option, or expiration
of the Put Option or the Call Option, and (ii) the XxXxxxxxx LLCs shall deliver
to the Escrow Agent the stock certificates evidencing the Option Shares duly
endorsed for transfer, to be held by the Escrow Agent pending exercise of the
Put Option or the Call Option, or expiration of the Put Option or the Call
Option. MEC agrees to arrange for separate cash collateral to be provided to the
Issuer with respect to both the Xxxxxx LLC Letter of Credit and the Xxxxx LLC
Letter of Credit, in the full amount of each such letter of credit, from the
date of issuance of each such letter of credit until at least December 27, 2002.
6. DRAW ON LETTERS OF CREDIT DUE TO TERMINATION NOTICE.
6.1 It shall be a condition of the Xxxxxx LLC Letter of Credit
and each Xxxxxx LLC Interest Letter of Credit that each such letter of credit
(at the option of the Issuer) may not be renewed by the Issuer on October 9,
2003 or each annual expiration date thereafter (provided that no such future
expiration date shall be later than November 27, 2007) upon twenty (20) business
days prior written notice (the "Xxxxxx LLC Non-Renewal Notice"). Upon receipt by
Xxxxxx LLC of any such Xxxxxx LLC Non-Renewal Notice, Xxxxxx LLC may immediately
seek payment from the Issuer of the full amount of the Xxxxxx LLC Letter of
Credit and Xxxxxx LLC Interest Letters of Credit, as applicable, which payment
shall be made by wire transfer of immediately available funds to the account(s)
designated in the Xxxxxx LLC Letter of Credit and the Xxxxxx LLC Interest
Letters of Credit. In the event that the Xxxxxx LLC Letter of Credit or any
Xxxxxx LLC Interest Letter of Credit is terminated and the Issuer wires the
payment of the full amount of the Xxxxxx LLC Letter of Credit and the Xxxxxx LLC
Interest Letters of
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Credit to the Escrow Agent, then neither Xxxxxx nor the Xxxxxx LLC shall have
any obligation to exercise the Xxxxxx LLC Option, nor shall MEC have any right
to exercise the MEC Call Option other than as otherwise provided herein, and the
Escrow Agent shall hold such funds (the "Xxxxxx LLC Cash Escrow Funds") in
escrow in accordance with the provisions of the Escrow Agreement pending receipt
of the Xxxxxx LLC Option Exercise Notice, or the MEC Exercise Notice, as the
case may be. Upon receipt of the Xxxxxx LLC Option Exercise Notice, or the MEC
Exercise Notice, as the case may be, the Escrow Agent shall deal with such
Xxxxxx LLC Cash Escrow Funds in accordance with Section 5 of the Escrow
Agreement as if such Xxxxxx LLC Cash Flow Escrow Funds had been wired to the
Escrow Agent by the Issuer following receipt by the Escrow Agent of the Xxxxxx
LLC Option Exercise Notice, or the MEC Exercise Notice, as the case may be.
Pending receipt of the Xxxxxx LLC Option Exercise Notice, or the MEC Exercise
Notice, as the case may be, the Escrow Agent shall deposit the Xxxxxx LLC Cash
Escrow Funds in an interest-bearing account, with the interest earned thereon to
be paid on the Expiration Date to the party entitled to the Xxxxxx LLC Cash
Escrow Funds (which interest if payable to Xxxxxx LLC shall be taken into
account in determining the amounts deposited with the Escrow Agent when
calculating the amount available to satisfy the Xxxxxx LLC Option Exercise
Price). If the Escrow Agent does not receive a Xxxxxx LLC Option Exercise Notice
or an MEC Exercise Notice prior to the Expiration Date, the Escrow Agent shall
pay the Xxxxxx LLC Cash Escrow Funds to MEC and the provisions of Section 5(e)
of the Escrow Agreement shall be applicable to the Stock Certificates evidencing
the Xxxxxx LLC Option Shares.
6.2 It shall be a condition of the Xxxxx LLC Letter of Credit
and each Xxxxx LLC Interest Letter of Credit that each such letter of credit (at
the option of the Issuer) may not be renewed by the Issuer on October 9, 2003 or
each annual expiration date thereafter (provided that no such future expiration
date shall be later than November 27, 2007) upon twenty (20) business days prior
written notice (the "Xxxxx LLC Non-Renewal Notice"). Upon receipt by Xxxxx LLC
of any such Xxxxx Non-Renewal Notice, Xxxxx LLC may immediately seek payment
from the Issuer of the full amount of the Xxxxx LLC Letter of Credit and Xxxxx
LLC Interest Letters of Credit, as applicable, which payment shall be made by
wire transfer of immediately available funds to the account(s) designated in the
Xxxxx LLC Letter of Credit and the Xxxxx LLC Interest Letters of Credit. In the
event that the Xxxxx LLC Letter of Credit or any Xxxxx LLC Interest Letter of
Credit is terminated and the Issuer wires the payment of the full amount of the
Xxxxx LLC Letter of Credit and the Xxxxx LLC Interest Letters of Credit to the
Escrow Agent, then neither Xxxxx nor the Xxxxx LLC shall have any obligation to
exercise the Xxxxx LLC Option, nor shall MEC have any right to exercise the MEC
Call Option other than as otherwise provided herein, and the Escrow Agent shall
hold such funds (the "Xxxxx LLC Cash Escrow Funds") in escrow in accordance with
the provisions of the Escrow Agreement pending receipt of the Xxxxx LLC Option
Exercise Notice, or the MEC Exercise Notice, as the case may be. Upon receipt of
the Xxxxx LLC Option Exercise Notice, or the MEC Exercise Notice, as the case
may be, the Escrow Agent shall deal with such Xxxxx LLC Cash Escrow Funds in
accordance with Section 5 of the Escrow Agreement as if such Xxxxx LLC Cash Flow
Escrow Funds had been wired to the Escrow Agent by the Issuer following receipt
by the Escrow Agent of the Xxxxx LLC
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Option Exercise Notice, or the MEC Exercise Notice, as the case may be. Pending
receipt of the Xxxxx LLC Option Exercise Notice, or the MEC Exercise Notice, as
the case may be, the Escrow Agent shall deposit the Xxxxx LLC Cash Escrow Funds
in an interest-bearing account, with the interest earned thereon to be paid on
the Expiration Date to the party entitled to the Xxxxx LLC Cash Escrow Funds
(which interest if payable to Xxxxx LLC shall be taken into account in
determining the amounts deposited with the Escrow Agent when calculating the
amount available to satisfy the Xxxxx LLC Option Exercise Price). If the Escrow
Agent does not receive a Xxxxx LLC Option Exercise Notice or an MEC Exercise
Notice prior to the Expiration Date, the Escrow Agent shall pay the Xxxxx LLC
Cash Escrow Funds to MEC and the provisions of Section 5(e) of the Escrow
Agreement shall be applicable to the Stock Certificates evidencing the Xxxxx LLC
Option Shares.
7. INTEREST. The Xxxxxx LLC Option Exercise Price shall accrue
Interest from the date hereof until the exercise of the Xxxxxx LLC Put Option or
the Call Option with respect to the Option Shares owned by Xxxxxx LLC. The Xxxxx
LLC Option Exercise Price shall accrue Interest from the date hereof until the
exercise of the Xxxxx LLC Put Option or the Call Option with respect to the
Option Shares owned by Xxxxx LLC. On each annual anniversary date of this
Agreement, MEC shall cause the Issuer to issue and deliver an additional letter
of credit to each of Xxxxxx LLC (each a "Xxxxxx LLC Interest Letter of Credit")
and Xxxxx LLC (each a "Xxxxx LLC Interest Letter of Credit") in the amount of
the Interest accrued during the prior year on the then current Xxxxxx LLC Option
Exercise Price and/or the then current Xxxxx LLC Option Exercise Price, as
applicable. If the exercise of the Put Option or Call Option, falls on a day
other than the annual anniversary date of this Agreement, Interest for such
partial year shall be calculated (the "Partial Year Interest") and the Interest
paid to Xxxxxx LLC and/or Xxxxx LLC upon exercise of the Put Option or the Call
Option shall include such Partial Year Interest as provided herein.
8. EXPIRATION DATE. If, on the Expiration Date, MEC has not
exercised the Call Option and Xxxxxx LLC and/or Xxxxx LLC has not exercised its
Put Option, the Letters of Credit shall automatically expire, be deemed
cancelled and shall be returned to MEC, and any stock certificates evidencing
Option Shares in escrow shall be returned to the XxXxxxxxx LLCs in accordance
with the terms of the Escrow Agreement.
9. REPRESENTATION AND WARRANTIES.
9.1 The parties acknowledge and agree that MEC is entering
into this Agreement, and MEC is purchasing the Call Option and granting the
Xxxxxx LLC Put Option and the Xxxxx LLC Put Option, in reliance on the
representations and warranties set forth below:
9.1.1 Xxxxxx LLC represents and warrants to MEC that
as of the date hereof and as of the Closing Date:
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(i) Xxxxxx LLC is the sole owner of record,
and Xxxxxx X. XxXxxxxxx is the sole beneficial owner, of the Xxxxxx LLC Option
Shares listed on Schedule 3.3, free and clear of any and all Liens (other than
the Call Option);
(ii) Xxxxxx LLC is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Maryland, and has all requisite power and authority to enter into
and comply with its obligations under this Agreement;
(iii) the execution and delivery of this
Agreement and the performance by Xxxxxx LLC of its obligations under this
Agreement, have been duly and validly authorized by Xxxxxx LLC, and when
executed and delivered by Xxxxxx LLC, this Agreement shall constitute the valid
and binding obligation of Xxxxxx LLC, enforceable against Xxxxxx LLC in
accordance with the terms of this Agreement, subject to applicable bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting the
rights of creditors generally, and to the exercise of a court's equitable
powers;
(iv) the execution and delivery of this
Agreement and the performance by Xxxxxx LLC of its obligations under this
Agreement, do not and will not conflict with, violate or result in a breach of
the terms, conditions or provisions of, constitute a default under, or give to
any other Person any right of termination or acceleration under, any law, order,
rule, ordinance, regulation, judgment, injunction, order, decree, contract,
license, permit or instrument to which Xxxxxx LLC is a party, or result in the
creation or imposition of any Lien (other than the Call Option) upon or with
respect to the Option Shares owned by Xxxxxx LLC; and
(v) all consents necessary to consummate
the transactions contained herein, with respect to the Option Shares owned by
Xxxxxx LLC have been obtained from governmental agencies or authorities.
9.1.2 Xxxxx LLC represents and warrants to MEC that
as of the date hereof and as of the Closing Date:
(i) Xxxxx LLC is the sole owner of record,
and Xxxxx, her spouse and/or her children are the sole beneficial owner(s), of
the Xxxxx LLC Option Shares listed on Schedule 3.3, free and clear of any and
all Liens (other than the Call Option);
(ii) Xxxxx LLC is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Maryland, and has all requisite power and authority to enter into
and comply with its obligations under this Agreement;
(iii) the execution and delivery of this
Agreement and the performance by Xxxxx LLC of its obligations under this
Agreement, have been duly
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and validly authorized by Xxxxx LLC, and when executed and delivered by Xxxxx
LLC, this Agreement shall constitute the valid and binding obligation of Xxxxx
LLC, enforceable against Xxxxx LLC in accordance with the terms of this
Agreement, subject to applicable bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting the rights of creditors
generally, and to the exercise of a court's equitable powers;
(iv) the execution and delivery of this
Agreement and the performance by Xxxxx LLC of its obligations under this
Agreement, do not and will not conflict with, violate or result in a breach of
the terms, conditions or provisions of, constitute a default under, or give to
any other Person any right of termination or acceleration under, any law, order,
rule, ordinance, regulation, judgment, injunction, order, decree, contract,
license, permit or instrument to which Xxxxx LLC is a party, or result in the
creation or imposition of any Lien (other than the Call Option) upon or with
respect to the Option Shares owned by Xxxxx LLC; and
(v) all consents necessary to consummate
the transactions contained herein, with respect to the Option Shares owned by
Xxxxx LLC have been obtained from governmental agencies or authorities.
9.2 The parties acknowledge and agree that each of the
XxXxxxxxx LLCs is entering into this Agreement, and is acquiring its respective
Put Option from MEC and granting the Call Option to MEC, in reliance on the
representations and warranties set forth below:
9.2.1 MEC represents and warrants to each of the
XxXxxxxxx LLCs that as of the date hereof and as of the
Closing Date:
(i) the execution and delivery of this
Agreement and the performance by MEC of its obligations under this Agreement,
have been duly and validly authorized by MEC, and when executed and delivered by
MEC, this Agreement shall constitute the valid and binding obligation of MEC,
enforceable against MEC in accordance with the terms of this Agreement, subject
to applicable bankruptcy, insolvency, moratorium, reorganization and other
similar laws affecting the rights of creditors generally, and to the exercise of
a court's equitable powers;
(ii) the execution and delivery of this
Agreement and the performance by MEC of its obligations under this Agreement, do
not and will not conflict with, violate or result in a breach of the terms,
conditions or provisions of, constitute a default under, or give to any other
Person any right of termination or acceleration under, any law, order, rule,
ordinance, regulation, judgment, injunction, order, decree, contract, license,
permit or instrument to which MEC is a party; and
(iii) it is aware that the Call Option is
not and that the Option Shares are not registered under the Securities Act of
1933, as amended (the "Securities Act"), or under any state securities laws. MEC
is purchasing the Call Option
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solely for investment, with no present intention to distribute any of the Option
Shares to any Person within the meaning of Section 2(11) of the Securities Act.
At the time the Call Option or Put Option is exercised, MEC will be purchasing
the Option Shares solely for investment, with no then present intention to
distribute any of the Option Shares to any Person within the meaning of Section
2(11) of the Securities Act. MEC shall not sell or otherwise dispose of the Call
Option or of any of the Option Shares except in compliance with the registration
requirements or exemption provisions under the Securities Act, and the rules and
regulations promulgated thereunder, and any other applicable federal or state
securities laws.
10. COVENANTS WITH RESPECT TO THE OPTION SHARES.
10.1 Except as permitted by the Stockholders' Agreement, the
Xxxxxx LLC Operating Agreement, the Xxxxx LLC Operating Agreement and except as
expressly provided in this Agreement: (a) The Option Shares shall continue to be
legally owned solely and exclusively by the XxXxxxxxx LLCs and beneficially
owned solely by their respective members, and MEC shall not have any beneficial
interest or rights in the Option Shares while held by the Escrow Agent; and (b)
The XxXxxxxxx LLCs shall not sell, assign, gift, transfer or otherwise create a
Lien on any of the Option Shares prior to the exercise of the Put Option or the
Call Option.
10.2 Notwithstanding the deposit of the Option Shares with the
Escrow Agent, (i) Xxxxxx LLC shall be entitled to exercise all voting rights,
and to receive all dividends and distributions, with respect to the Xxxxxx LLC
Option Shares, until the exercise of the Xxxxxx LLC Put Option or the Call
Option and (ii) Xxxxx LLC shall be entitled to exercise all voting rights, and
to receive all dividends and distributions, with respect to the Xxxxx LLC Option
Shares until the exercise of the Xxxxx LLC Put Option or the Call Option.
11. CONDITIONS TO EXERCISE OF PUT OPTION OR CALL OPTION. The
respective obligations of either of the XxXxxxxxx LLCs on the one hand, or MEC
on the other hand, to effect the purchase and sale of the Option Shares upon
exercise of either the Put Option or the Call Option pursuant to the terms
hereof, shall be subject to the following conditions:
11.1 COMPLIANCE WITH AGREEMENT. Each party shall have
performed or complied with each of its covenants and other obligations under
this Agreement which are to be performed or complied with by it at or prior to
the Closing Date.
11.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by each party in this Agreement shall be true and correct in all
material respects as of the date of this Agreement, and as of the Closing Date,
as though said representations and warranties had been made on the Closing Date.
11.3 NO LITIGATION. On the Closing Date, there shall be no
order or decree of any governmental authority or court of competent jurisdiction
that is in effect
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that restrains or prohibits the consummation of the transactions contemplated by
this Agreement.
11.4 OPINIONS. On or prior to the Closing Date with respect to
the Xxxxxx LLC Option Shares, Xxxxxx LLC shall cause to be delivered to MEC a
legal opinion of counsel to Xxxxxx LLC opining that upon transfer of the stock
certificates evidencing the Xxxxxx LLC Option Shares to MEC, MEC will acquire
record and beneficial ownership of such shares free of any adverse claims. On or
prior to the Closing Date with respect to the Xxxxx LLC Option Shares, Xxxxx LLC
shall cause to be delivered to MEC a legal opinion of counsel to Xxxxx LLC
opining that upon transfer of the stock certificates evidencing the Xxxxx LLC
Option Shares to MEC, MEC will acquire record and beneficial ownership of such
shares free of any adverse claims.
Notwithstanding the foregoing, MEC may waive any of the foregoing conditions in
its sole and absolute discretion, PROVIDED, THAT, if such waiver is a waiver of
a breach by MEC of any of the foregoing, MEC shall only be permitted to waive
such breach if MEC indemnifies and holds harmless Xxxxxx LLC and Xxxxx LLC from
any and all Losses which either of them may sustain by reason of such breach.
12. OFFSET RIGHTS.
12.1 Until the Xxxxxx LLC Put Option is exercised or MEC
exercises the Call Option with respect to the Xxxxxx LLC Option Shares, MEC may
reduce or setoff any Indemnifiable Loss payable by Xxxxxx LLC pursuant to
Section 10 of the Stock Purchase Agreement against the Xxxxxx LLC Option
Exercise Price. If Xxxxxx LLC is responsible for any Indemnifiable Loss pursuant
to Section 10 of the Stock Purchase Agreement, Xxxxxx LLC acknowledges and
agrees that it shall, jointly and immediately, with MEC, submit to Issuer (with
a copy to the Escrow Agent) a setoff notice setting forth the amount of the
Indemnifiable Loss payable by Xxxxxx LLC under the Stock Purchase Agreement and
thus subject to setoff hereunder (the "Xxxxxx LLC Setoff Notice") PROVIDED,
THAT, if Xxxxxx LLC fails to join with MEC in submitting such notice within five
(5) days after the determination of an Indemnifiable Loss, MEC shall be
permitted to submit the Xxxxxx LLC Setoff Notice solely (with a copy of such
notice to Xxxxxx LLC). Upon receipt by Issuer of the Xxxxxx LLC Setoff Notice,
if provided jointly by MEC and Xxxxxx LLC, otherwise ten (10) days after receipt
of the Xxxxxx LLC Setoff Notice (provided that Xxxxxx LLC has not submitted any
objection to the Xxxxxx LLC Setoff Notice submitted by MEC), the Xxxxxx LLC
Option Exercise Price shall immediately and automatically be reduced by the
amount set forth in the Xxxxxx LLC Setoff Notice and the Issuer shall
immediately recall (and Xxxxxx LLC shall deliver to Issuer) and cancel the then
current Xxxxxx LLC Letter of Credit and re-issue the Xxxxxx LLC Letter of Credit
in an amount equal to the then current Xxxxxx LLC Option Exercise Price (as
reduced by the amount set forth in the Xxxxxx LLC Setoff Notice).
12.2 Until the Xxxxx LLC Put Option is exercised or MEC
exercises the Call Option with respect to the Xxxxx LLC Option Shares, MEC may
reduce or setoff any Indemnifiable Loss payable by Xxxxx LLC pursuant to Section
10 of the Stock Purchase
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Agreement against the Xxxxx LLC Option Exercise Price. If Xxxxx LLC is
responsible for any Indemnifiable Loss pursuant to Section 10 of the Stock
Purchase Agreement, Xxxxx LLC acknowledges and agrees that it shall, jointly and
immediately, with MEC, submit to Issuer (with a copy to the Escrow Agent) a
setoff notice setting forth the amount of the Indemnifiable Loss payable by
Xxxxx LLC under the Stock Purchase Agreement and thus subject to setoff
hereunder (the "Xxxxx LLC Setoff Notice") PROVIDED, THAT, if Xxxxx LLC fails to
join with MEC in submitting such notice within five (5) days after the
determination of an Indemnifiable Loss, MEC shall be permitted to submit the
Xxxxx LLC Setoff Notice solely (with a copy of such notice to Xxxxx LLC). Upon
receipt by Issuer of the Xxxxx LLC Setoff Notice, if provided jointly by Xxxxx
LLC and MEC, otherwise ten (10) days after receipt of the Xxxxx LLC Setoff
Notice (provided that Xxxxx LLC has not submitted any objection to the Xxxxx LLC
Setoff Notice submitted by MEC), the Xxxxx LLC Option Exercise Price shall
immediately and automatically be reduced by the amount set forth in the Xxxxx
LLC Setoff Notice and the Issuer shall immediately recall (and Xxxxx LLC shall
deliver to Issuer) and cancel the then current Xxxxx LLC Letter of Credit and
re-issue the Xxxxx LLC Letter of Credit in an amount equal to the then current
Xxxxx LLC Option Exercise Price (as reduced by the amount set forth in the Xxxxx
LLC Setoff Notice).
12.3 If Xxxxxx LLC submits an objection to a Xxxxxx LLC Setoff
Notice submitted by MEC, the Issuer shall not reduce or recall the Xxxxxx LLC
Letter of Credit and the Xxxxxx LLC Option Exercise Price unless and until a
court of competent jurisdiction has rendered a final, non-appealable judgment
regarding such objection or Xxxxxx LLC and MEC jointly submit a Xxxxxx LLC
Setoff Notice. If Xxxxx LLC submits an objection to a Xxxxx LLC Setoff Notice
submitted by MEC, the Issuer shall not reduce or recall the Xxxxx LLC Letter of
Credit and the Xxxxx LLC Option Exercise Price unless and until a court of
competent jurisdiction has rendered a final, non-appealable judgment regarding
such objection or Xxxxx LLC and MEC jointly submit a Xxxxx LLC Setoff Notice.
12.4 The Xxxxxx LLC Option Exercise Price shall be reduced on
a dollar for dollar basis by the amount (if any) of any cash payments or other
agreed upon consideration agreed to and received by Xxxxxx LLC as a result of
agreed upon Marylanders receiving an equity interest in PRAI and/or LRAI
pursuant to the provisions of Section 7 of the Stockholders' Agreement. At such
time as Xxxxxx LLC receives any such cash payments or other agreed upon
consideration, Xxxxxx LLC and MEC shall so notify the Issuer and the Issuer
shall immediately recall (and Xxxxxx LLC shall deliver to Issuer) and cancel the
then current Xxxxxx LLC Letter of Credit and re-issue the Xxxxxx LLC Letter of
Credit in an amount equal to the then current Xxxxxx LLC Option Exercise Price
(as reduced by the amount of any cash payments or other agreed upon
consideration received by Xxxxxx LLC). The Xxxxx LLC Option Exercise Price shall
be reduced on a dollar by dollar basis by the amount (if any) of any cash
payments or other agreed upon consideration agreed to and received by Xxxxx LLC
as a result of agreed upon Marylanders receiving an equity interest in PRAI
and/or LRAI pursuant to the provisions of Section 7 of the Stockholders'
Agreement. At such time as Xxxxx LLC receives any such cash payments or other
agreed upon consideration, Xxxxx LLC and MEC shall so
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notify the Issuer and the Issuer shall immediately recall (and Xxxxx LLC shall
deliver to Issuer) and cancel the then current Xxxxx LLC Letter of Credit and
re-issue the Xxxxx LLC Letter of Credit in an amount equal to the then current
Xxxxx LLC Option Exercise Price (as reduced by the amount of any cash payments
or other agreed upon consideration received by Xxxxx LLC).
13. COVENANTS OF XXXXXX AND XXXXX. For so long as Xxxxxx is the
Manager of Xxxxxx LLC, he shall cause Xxxxxx LLC to satisfy its obligations
hereunder, PROVIDED, THAT, if Xxxxxx LLC fails to perform any of its obligations
while Xxxxxx is the Manager, Xxxxxx shall be personally liable for such failure.
For so long as Xxxxx is the Manager of Xxxxx LLC, she shall cause Xxxxx LLC to
satisfy its obligations hereunder, PROVIDED, THAT, if Xxxxx LLC fails to perform
any of its obligations while Xxxxx is the Manager, Xxxxx shall be personally
liable for such failure.
14. CHANGE OF ACCOUNT OR ACCOUNT INFORMATION. If, and to the
extent, Xxxxxx LLC and/or Xxxxx LLC desire to change the account or any account
information related to the account designated in the Xxxxxx LLC Letter of Credit
and/or the Xxxxx LLC Letter of Credit (or any Interest Letters of Credit) to
provide for a new escrow agent or a change in the information relating to the
escrow agent, MEC hereby agrees that it shall promptly consider such request,
acting reasonably.
15. MISCELLANEOUS.
15.1 TERMINATION. This Agreement shall terminate upon the
occurrence of any of the following:
(a) as to all parties, upon mutual written agreement
of the XxXxxxxxx LLCs and MEC;
(b) as to either Xxxxxx LLC or Xxxxx LLC, as the case
may be, upon exercise and consummation of the transactions contemplated by this
Agreement or expiration of the Put Option or the Call Option with respect to the
Option Shares owned by such party;
(c) as to MEC, upon exercise and consummation of the
transactions contemplated by this Agreement or expiration of the Put Option and
Call Option with respect to all of the Option Shares.
15.2 ENTIRE AGREEMENT. This Agreement, the Stock Purchase
Agreement, the Escrow Agreement and the Stockholders' Agreement constitute the
entire agreement between the parties pertaining to the subject matter of this
Agreement and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions of the parties, whether oral or
written. All Schedules and Exhibits attached to this Agreement shall be deemed
part of this Agreement and incorporated herein, where applicable, as if fully
set forth herein. No amendment, supplement, modification or
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termination of this Agreement shall be binding unless executed in writing by all
parties hereto.
15.3 WAIVER OF COMPLIANCE. A waiver of any of the provisions
of this Agreement shall not constitute and shall not be deemed a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided in writing.
Except as otherwise provided in this Agreement, any failure of any of the
parties to comply with any obligation, representation, warranty, covenant,
agreement or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting such
waiver. Wherever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
15.3.
15.4 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, each of the parties hereto shall pay the fees and expenses of its
respective legal counsel, accountants, investment bankers and other experts,
agents and representatives incident to the negotiation and preparation of this
Agreement, the consummation of the transactions contemplated by this Agreement,
and in connection with any disputes between the parties arising out of the
transactions contemplated by this Agreement.
15.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. No party shall have
the right to assign any of its rights or obligations hereunder without the prior
written consent of the other parties; PROVIDED, HOWEVER, that MEC shall have the
right to assign its rights hereunder without the consent of the XxXxxxxxx LLCs,
but no such assignment shall relieve MEC of its obligations hereunder. The term
"successors" shall include without limitation, all successors by way of (i)
consolidation, (ii) merger or similar reorganization, (iii) share exchange, or
(iv) sale of all or substantially all of the assets of a party.
15.6 NO THIRD PARTY BENEFICIARIES. Nothing contained in this
Agreement shall be deemed to confer any rights or benefits upon any third
parties.
15.7 SEVERABILITY. If any term or provision of this Agreement
or the application thereof to any Person or circumstances is or to any extent
shall become invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to Persons or circumstances other than
those held invalid or unenforceable under the laws now or hereafter in effect in
the jurisdiction governing this Agreement, shall not be affected thereby, and
each term and provision shall be held valid and enforceable to the greatest
possible extent.
15.8 REMEDIES. Each party acknowledges and agrees that if any
other party breaches any of the provisions of this Agreement, the non-breaching
party (or
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parties) may suffer immediate and irreparable harm for which monetary damages
alone will not be a sufficient remedy, and that, in addition to all other
remedies that the non-breaching party (or parties) may have, the non-breaching
party (or parties) shall be entitled to seek injunctive relief, specific
performance or any other form of equitable relief to remedy a breach or
threatened breach of this Agreement by the breaching party and to enforce the
provisions of this Agreement, and the breaching party hereby waives any and all
defenses it may have on the grounds of lack of jurisdiction or competence of a
court to grant such an injunction or other equitable relief, PROVIDED, HOWEVER,
that Xxxxxx LLC waives any right to withhold the Xxxxxx LLC Option Shares on any
equitable grounds if MEC pays it the full Xxxxxx LLC Option Exercise Price and
Xxxxx LLC waives any right to withhold the Xxxxx LLC Option Shares on any
equitable grounds if MEC pays it the full Xxxxx LLC Option Exercise Price. The
existence of this right shall not preclude or otherwise limit the applicability
or exercise of any other rights and remedies which the parties may have at law
or in equity.
15.9 APPLICABLE LAW; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Maryland, without regard to principles of conflicts of laws. Any suit involving
any dispute or matter arising under this Agreement may only be brought in the
Circuit Court for Baltimore County, Maryland. Each of the parties hereto
consents and agrees to the exercise of personal jurisdiction by such courts with
respect to such proceedings, and waives any objection to venue laid therein. All
expenses associated with any dispute or matter arising under this Agreement
shall be borne by the non-prevailing party to the dispute to the extent that it
does not prevail, including, but not limited to, the cost and expenses of
experts, evidence and legal counsel. The determination of the extent to which a
party does not prevail shall be made by the applicable court.
15.10 NOTICE. All notices and communications pursuant to this
Agreement shall be in writing and shall be deemed properly given and effective
when received if (i) personally delivered, or (ii) sent by a national delivery
service providing evidence of delivery and with a confirming notice sent by
facsimile, to the following:
If to Xxxxxx LLC, to:
Xxxxxx LLC
c/o Xxxxxx X. Xxxxxxx
Xxxxxx Xxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. XxXxxxxxx
Facsimile: (000) 000-0000
Account Information:
Mercantile Safe Deposit & Trust Company
ABA #000000000
Credit Account #0000000 titled MSD&T Escrow Agent,
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XxXxxxxxx/MEC Stock Escrow
Confirm to Xxx Xxxxxxx 000-000-0000
with a copy to:
Xxxxxx X. XxXxxxxxx
250 South President Street
Apartment 1009
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
and
Venable, Baetjer and Xxxxxx, LLP
Xxx Xxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
and
Xxxxxx Xxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Xxxxx LLC, to:
Xxxxx LLC
c/o Xxxxxxx X. Xxxxxxx
Xxxxxxx Xxxx & Guinot
00 X. Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx X. XxXxxxxxx
Facsimile: (000) 000-0000
Account Information:
Mercantile Safe Deposit & Trust Company
ABA #000000000
Credit Account #0000000 titled MSD&T Escrow Agent,
XxXxxxxxx/MEC Stock Escrow
Confirm to Xxx Xxxxxxx 000-000-0000
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with a copy to:
Xxxxx X. XxXxxxxxx
Maryland Jockey Club
Hayward and Xxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
and
Xxxxxxx Xxxx & Guinot
00 X. Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Xxxxxx, to
Xxxxxx X. XxXxxxxxx
250 South President Street
Apartment 1009
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Xxxxx, to
Xxxxx X. XxXxxxxxx
Maryland Jockey Club
Hayward and Xxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
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with a copy to :
Xxxxxxx Xxxx & Guinot
00 X. Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to MEC, to:
Magna Entertainment Corp.
000 Xxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: President and CEO
Facsimile: (000) 000-0000
with a copy to:
Magna Entertainment Corp.
000 Xxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
and
O'Melveny & Xxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxxxx X. XxXxxx, Esq.
Facsimile: (000) 000-0000
If to the Escrow Agent, to:
Mercantile-Safe Deposit and Trust Company
0 Xxxxxxx Xxxxx, Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxx X. Xxxxxxx, Senior Vice President
Facsimile: (000) 000-0000
or to such other address as a party provides (in accordance herewith) to the
other parties hereto from time to time.
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15.11 CONSTRUCTION. The parties and their respective legal
counsel actively participated in the negotiation and drafting of this Agreement,
and in the event of any ambiguity or mistake herein, or any dispute among the
parties with respect to the provisions hereto, no provision of this Agreement
shall be construed unfavorably against any of the parties on the ground that it
or its counsel was the drafter thereof.
15.12 HEADINGS. The headings in this Agreement are for
reference purposes and shall not affect the meaning or interpretation of this
Agreement.
15.13 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by exchange of facsimile signatures provided that original signatures
are exchanged promptly thereafter.
15.14 TIME OF ESSENCE. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
15.15 TERMS. Common nouns and pronouns shall be deemed to
refer to the masculine, feminine, neuter, singular and plural, as the identity
of the Person may in the context require.
(SIGNATURES ON FOLLOWING PAGE)
-24-
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, or caused this Agreement to be executed by their duly authorized
officers, as of the date first written above.
WITNESS: MAGNA ENTERTAINMENT CORP.
________________________________ By:__________________________(SEAL)
Name:
Title:
________________________________ By:__________________________(SEAL)
Name:
Title:
XXXXXX LLC
________________________________ _____________________________(SEAL)
Xxxxxx X. XxXxxxxxx
Manager
XXXXX LLC
________________________________ _____________________________(SEAL)
Xxxxx X. XxXxxxxxx
Manager
________________________________ _____________________________(SEAL)
Xxxxxx X. XxXxxxxxx
________________________________ _____________________________(SEAL)
Xxxxx X. XxXxxxxxx
SCHEDULE 3.3
SUMMARY OF XXXXXXXXX LLCS OWNERSHIP INTERESTS AND ALLOCATION OF PAYMENTS
--------------------------------------------------------------------------------------------------------------
Percentage
Relative Share of
Percentage Option Grant
PIMLICO RACING Number of Shares Owned Ownership Interest Payment and
ASSOCIATION, INC. Total Number of Shares Constituting Option Based on Number of Exercise
(PRAI) of Capital Stock Owned Shares Option Shares Owned Price
--------------------------------------------------------------------------------------------------------------
Class A Class B Class A Class B
--------------------------------------------------------------------------------------------------------------
Xxxxxx LLC 490 1886.3971 490 1886.3971 23.7640% 38.3921%
--------------------------------------------------------------------------------------------------------------
Xxxxx LLC 0 2523.6029 0 2523.6029 25.2360% 40.7703%
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Relative
Percentage Percentage
Ownership Share of
Interest Based Option Grant
Number of Shares Owned on Number of Payment and
LAUREL RACING ASSOC., Total Number of Shares Constituting Option Option Shares Exercise
INC. (LRAI) of Capital Stock Owned Shares Owned Price
--------------------------------------------------------------------------------------------------------------
Class A Class B Class A Class B
--------------------------------------------------------------------------------------------------------------
Xxxxxx LLC 345.8824 1166.6181 345.8824 1166.6181 20.1667% 8.2615%
--------------------------------------------------------------------------------------------------------------
Xxxxx LLC 0 1649.9995 0 1649.9995 22.0000% 12.5761%
--------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------
Percentage Share of Option Grant Payment and
Exercise Price
------------------------------------------------------------------------------
PRAI Option Shares 79.1624%
------------------------------------------------------------------------------
LRAI Option Shares 20.8376%
------------------------------------------------------------------------------
EXHIBIT A
ESCROW AGREEMENT
