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MANAGEMENT AGREEMENT

Management Facility Services Agreement

MANAGEMENT AGREEMENT | Document Parties: LAKES ENTERTAINMENT INC | LAKES PAWNEE MANAGEMENT, LLC | Pawnee Tribal Development Corporation You are currently viewing:
This Management Facility Services Agreement involves

LAKES ENTERTAINMENT INC | LAKES PAWNEE MANAGEMENT, LLC | Pawnee Tribal Development Corporation

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Title: MANAGEMENT AGREEMENT
Governing Law: Oklahoma     Date: 12/2/2005
Industry: Casinos and Gaming     Law Firm: Hamilton Quigley Twait Foley PLC;Maslon, Edelman, Borman Brand, LLP     Sector: Services

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                                                                   Exhibit 10.91

 

                              MANAGEMENT AGREEMENT

 

                              FOR A GAMING FACILITY

                                       AND

                           RELATED ANCILLARY FACILITIES

 

                                     BETWEEN

 

                     PAWNEE TRADING POST GAMING CORPORATION,

                        A WHOLLY-OWNED SUBSIDIARY OF THE

                     PAWNEE TRIBAL DEVELOPMENT CORPORATION,

                        A GOVERNMENTAL SUBDIVISION OF THE

                           PAWNEE NATION OF OKLAHOMA,

                          A FEDERALLY RECOGNIZED TRIBE

 

                                       AND

 

                          LAKES PAWNEE MANAGEMENT, LLC

                      A MINNESOTA LIMITED LIABILITY COMPANY

 

                             DATED: JANUARY 12, 2005

 

 

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     THIS MANAGEMENT AGREEMENT, is made and entered into this 12th day of

January, 2005 by and between Pawnee Trading Post Gaming Corporation ("Pawnee"),

a wholly-owned subsidiary of the Pawnee Tribal Development Corporation ("Pawnee

TDC"), each created under the Constitution of and a governmental subdivision of

the Pawnee Nation of Oklahoma ("Pawnee Nation"), a federally recognized Indian

tribe, located in the State of Oklahoma, with business offices located at 871

Little D. Drive, Building 68, P.O. Box 280, Pawnee, OK 74058, and Lakes Pawnee

Management, LLC, a Minnesota limited liability company (hereinafter referred to

as "Lakes"), whose business office is located at 130 Cheshire Lane, Minnetonka,

Minnesota 55305.

 

                                    RECITALS

 

     A. The Pawnee Nation is a federally recognized Indian tribe eligible for

the special programs and services provided by the United States to Indian

tribes, and is recognized as possessing and exercising powers of

self-government. As a tribally-chartered corporation and governmental

subdivision, Pawnee TDC is vested with the sovereign immunity of the tribe, and

has been established to control and manage the economic affairs of the Pawnee

Nation. Pawnee TDC has established Pawnee, a wholly-owned subsidiary of Pawnee

TDC and tribally-chartered corporation, as the legal entity which will own and

operate certain gaming projects which are to be developed by Pawnee TDC on

behalf of the Pawnee Nation.

 

     B. The United States government holds lands in the State of Oklahoma in

trust for the benefit of the Pawnee Nation over which the Pawnee Nation

possesses sovereign governmental powers and the Pawnee Nation holds or intends

to acquire interests in lands which constitute "Indian lands" upon which the

Pawnee nation may legally conduct gaming under applicable federal law.

 

     C. In compliance with the Indian Gaming Regulatory Act of 1988, P.L.

100-497, 25 U.S.C. Section 2701 et seq. as it may from time to time be amended,

the governing body of the Pawnee Nation has enacted a tribal ordinance

regulating the operation of gaming activities conducted on Pawnee Nation "Indian

lands" (hereinafter referred to as the "Gaming Ordinance"), creating the Pawnee

Nation Gaming Commission, and authorizing Class II and Class III gaming on its

"Indian lands" subject to the provisions of the Gaming Ordinance and a

Tribal-State Compact or gaming procedures issued by the Secretary of the U.S.

Department of the Interior.

 

     D. The Pawnee Nation is committed to using any gaming activities to provide

employment and improve the social, economic, education, and health needs of its

members; to increase the revenues of the tribe; and to enhance the Pawnee

Nation's economic self-sufficiency and self-determination. The Pawnee gaming

projects are expected to generate substantial revenues for the Pawnee TDC, and

therefore significantly improve the social, economic and health conditions of

present and future tribal members, while strengthening the Pawnee Nation's

overall economic self-sufficiency and self-determination.

 

 

                                        -2-

 

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     E. Pawnee presently lacks the resources to operate a gaming operation on

its own and desires to retain the services of a management company, with

knowledge and experience in the gaming industry, to manage and operate certain

of its gaming operations and related resort facilities.

 

     F. Lakes has represented to Pawnee that it has the managerial capacity to

commence operation of the Project's Gaming Facility and Ancillary Facilities (as

defined herein); and Pawnee has selected Lakes, and Lakes agrees, to provide the

management expertise necessary to the conducting of successful tribal gaming

operations at the Project's Gaming Facility and the successful operation of its

Ancillary Facilities.

 

     G. This Management Agreement shall become effective when all the necessary

approvals listed in Section 2.19 are received (the "Effective Date") and shall

continue for a term as described in Section 2.19, unless otherwise provided in

this Management Agreement.

 

     H. This Management Agreement is entered into pursuant to the Indian Gaming

Regulatory Act of 1988, P.L. 100-497, 25 U.S.C. Section 2701 et seq. as that

statute may be amended. All gaming conducted at the Gaming Facility (as defined

herein) will at all times comply with the IGRA, applicable tribal law and the

Tribal-State Compact or gaming procedures issued by the Secretary, if any.

 

     J. Any dispute regarding this Management Agreement between the parties or

any other Transaction Documents is to be subject to the dispute resolution and

governing law provisions contained herein, as well as the Resolution of Limited

Waiver attached hereto.

 

     NOW, THEREFORE, in consideration of the hereinafter mutual promises and

covenants, and for other good and valuable consideration as set forth herein,

the receipt and sufficiency of which are expressly acknowledged, Pawnee and

Lakes agree as follows:

 

                                    ARTICLE 1

                                   DEFINITIONS

 

     As they are used in this Management Agreement, the terms listed below shall

have the meaning assigned to them in this Article:

 

 

                                       -3-

 

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     "Affiliate" means, with respect to any specified Person, any other Person

that directly or indirectly, through one or more intermediaries, controls, is

controlled by, or is under common control with the specified Person. For the

purposes of this definition, "control" (including the terms controlling,

controlled by, or under common control with) means the possession, direct or

indirect, or the power to direct or cause the direction of the management and

policies of a person, whether through the ownership of voting securities,

partnership or member interests, by contract or otherwise.

 

     "Ancillary Facilities" means any hotel, convention center, food and

beverage outlets, retail outlets, and any other enterprise designed to promote,

support, or enhance the Project's Gaming Facility; provided, however, unless the

parties otherwise agree, the term "Ancillary Facilities" shall not include any

of the Pawnee Tribe's existing enterprises consisting of fuel and retail sales

made at the existing U.S. Hwy 412 & State Hwy 18 "Travel Plaza" currently

operated by the Pawnee TDC.

 

     "BIA" means the Bureau of Indian Affairs, established within the United

States Department of Interior.

 

     "Class II Gaming" means games as defined in 25 U.S.C. Section 2703(7)(A),

as such law may be amended and as defined by the National Indian Gaming

Commission in 25 C.F.R. Section 502.3 and amendments thereto, but only to the

extent such games are authorized by tribal ordinance and licensed by the Gaming

Commission.

 

     "Class III Gaming" means all gaming that is not Class I or Class II Gaming

as defined in the IGRA, including, but not limited to, the forms of gaming

listed as Class III games by the National Indian Gaming Commission in 25 C.F.R.

Section 502.4 and amendments thereto, but only to the extent such gaming is

allowed by a Tribal-State Compact or gaming procedures issued by the Secretary,

tribal ordinance, and licensed by the Gaming Commission.

 

     "Commencement Date" means the first day that Lakes is legally able to

commence management of the Class II and/or Class III gaming operations conducted

at the Project's Gaming Facility under all Legal Requirements.

 

     "Costs of Gaming Operation" means the total of all expenses for the

operation of the Class II and/or Class III Gaming activities conducted at the

Project's Gaming Facility pursuant to Generally Accepted Accounting Principles

("GAAP"), including but not limited to the following: (1) fees imposed upon the

Gaming Facility by the National Indian Gaming Commission based upon its gross

receipts from Class II and/or Class III Gaming activities; (2) any contributions

and license/regulatory fee reimbursements payable to the State pursuant to a

Tribal-State Compact; (3) the amount, if any, required by a Tribal-State Compact

to fund or support programs for the treatment and assistance of compulsive

gamblers and for the prevention of compulsive gambling; (4) license or other

fees for background investigations upon "key employees" and "primary management

officials" as defined in 25 C.F.R. Section 502.14 and Section 502.19; (5)

depreciation and amortization applicable to the Gaming Facility based upon an

assumed thirty (30) years life

 

 

                                       -4-

 

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consistent with GAAP, and depreciation and amortization of all other assets

(including without limitation all capital replacements and improvements, and

fixtures, furnishings and equipment) located therein in accordance with GAAP;

(6) costs of administration, recruiting, hiring, firing and training employees

working in or for the Gaming Facility's Class II and/or Class III Gaming

activities; (7) compensation and benefits to Gaming Facility employees; (8)

reasonable and customary regulatory fees imposed on the Gaming Facility by the

Gaming Commission (which amounts shall be subject to the provisions of Section

5.1 contained herein), (9) management fees to be paid Lakes under Section 5.5(b)

hereof; and (10) total gaming-related costs, fees and expenses, including,

without limitation: materials, supplies, inventory, utilities, repairs and

maintenance (excluding capital replacements, the costs of which shall be

amortized as hereinabove provided), insurance and bonding, marketing,

advertising, annual audits, accounting, legal or other professional and

consulting services, security or guard services, and such other costs, expenses

or fees necessarily, customarily and reasonably incurred in the operation of the

Class II and/or Class III Gaming activities conducted at the Gaming Facility,

and reasonable and necessary travel expenses incurred subsequent to the

Commencement Date for officers and employees of Lakes and authorized

representatives of Pawnee in connection with the Gaming Facility's operations;

provided, however, that "Costs of Gaming Operation" shall specifically not

include any license fees or costs of Lakes or its employees in connection with

licensing with either the NIGC or Gaming Commission.

 

     "Costs of Ancillary Operations" means all expenses and costs pursuant to

Generally Accepted Accounting Principles incurred in operating the Project's

Ancillary Facilities in which neither Class II Gaming nor Class III Gaming is

conducted, including, without limitation: (1) depreciation and amortization

applicable to such non-gaming facilities based upon an assumed thirty (30) years

life consistent with GAAP, and depreciation and amortization of all other assets

(including without limitation all capital replacements and improvements, and

fixtures, furnishings and equipment) located therein in accordance with GAAP;

(2) all employment costs relating to non-gaming employees working in or for such

commercial business facilities; (3) management fees to be paid Lakes under

Section 5.5(b) hereof; (4) non-gaming supplies and materials, insurance and

other non-gaming costs reasonably and customarily incurred in operation of the

Ancillary Facilities in which neither Class II nor Class III Gaming may be

conducted.

 

     "Dominion Account" shall have the meaning described in Section 2.8(a)

herein.

 

     "Dominion Account Agreement" shall mean the Dominion Account Agreement to

be executed by Pawnee in favor of the Lakes in a form to be agreed to by Pawnee

and Lakes together with all amendments, substitutions and renewals thereof.

 

     "Effective Date" means the effective date of this Management Agreement as

determined pursuant to Section 2.19 herein.

 

     "Fiscal Year" means the accounting year used for the operation of the

Project as agreed upon by Lakes and Pawnee.

 

 

                                       -5-

 

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     "Furnishings and Equipment" shall mean all furniture, furnishings and

equipment required for the operation of the Project in accordance with the

standards set forth in this Management Agreement, including, without limitation:

 

          (i) cashier, money sorting and money counting equipment, surveillance

     and communication equipment, and security equipment;

 

           (ii) slot machines, video games of chance, table games, keno equipment

     and other gaming equipment;

 

          (iii) office furnishings and equipment;

 

          (iv) specialized equipment necessary for the operation of any portion

     of the Project for accessory purposes, including equipment for kitchens,

     laundries, dry cleaning, cocktail lounges, restaurants, public rooms,

     commercial and parking spaces, and recreational facilities;

 

          (v) hotel equipment, furniture and furnishings (to the extent a hotel

     is included in the Project); and

 

          (vi) all other furnishings and equipment now or hereafter located and

     installed in or about the Project Facilities which are used in the

     operation of the Project in accordance with the standards set forth in this

     Management Agreement.

 

     "Gaming Commission" means the Pawnee Nation Gaming Commission established,

or to be established, by the Gaming Ordinance, as amended (which ordinance must

be approved by the NIGC), with authority to license and regulate gaming

activities on "Indian lands" upon which the Pawnee Nation conducts gaming

activities under IGRA and which is a subordinate governmental entity of the

Pawnee Nation and is entitled to all sovereign governmental immunity of the

tribe.

 

     "Gaming Facility" means all buildings, structures and improvements,

together with all furniture, fixtures and equipment and personal property

(whether tangible or intangible) to be used in connection with the operation of

Class II Gaming and/or Class III Gaming activities on the Gaming Facility Site,

each whether now existing or hereafter construed or acquired.

 

     "Gaming Facility Site" shall mean the lands to be used as the site for

constructing the Gaming Facility described on attached EXHIBIT A, including the

land upon which the Project's Class II and/or Class III Gaming activities are

conducted (which is land upon which Class II and/or Class III Gaming may legally

be conducted under IGRA and the Tribal-State Compact).

 

     "Gaming Ordinance" means the tribal ordinance enacted by the governing body

of the Pawnee Nation and approved by the NIGC in compliance with the Indian

Gaming Regulatory Act of 1988, P.L. 100-497, 25 U.S.C. Section 2701 et seq. as

it may from time to time be amended, regulating the operation of gaming

activities conducted on Pawnee Nation "Indian lands",

 

 

                                       -6-

 

<PAGE>

 

creating the Pawnee Nation Gaming Commission, and authorizing Class II and Class

III gaming on its "Indian lands" subject to the provisions of the Gaming

Ordinance and a Tribal-State Compact or gaming procedures issued by the

Secretary of the U.S. Department of the Interior.

 

     "Generally Accepted Accounting Principles" or "GAAP" means generally

accepted accounting principles set forth in the opinions and pronouncements of

the Accounting Principles Board of the American Institute of Certified Public

Accountants and statements and pronouncements of the Financial Accounting

Standards Board or in such other statements by such other entity as have been

approved by a significant segment of the accounting profession.

 

     "Governmental Authorities" means the United States, the BIA, the State, the

Pawnee Nation and any governmental court, agency, department, commission, board,

bureau or instrumentality of the foregoing (including the NIGC), but only to the

extent it has legal jurisdiction over Class II Gaming and/or Class III Gaming at

the Gaming Facility, the operation of the Project Facilities, or Pawnee's or

Lakes' obligations under this Management Agreement or any Transaction Document.

 

     "Gross Gaming Revenues" means the Project's total revenue from Class II

and/or Class III Gaming activities (excluding any insurance proceeds received

other than business interruption insurance proceeds and insurance proceeds

received to reimburse the Project for any claims included, or to be included, as

Costs of Gaming Operations).

 

     "Gross Ancillary Revenues" means the Project's total receipts from the sale

or rental of food, beverages, souvenirs, hotel facilities, equipment and all

other goods and services supplied for non-Class II and/or non-Class III Gaming

activities at the Ancillary Facilities that are incidental to the operation of

the Project (excluding any insurance proceeds received other than business

interruption insurance proceeds and insurance proceeds received to reimburse the

Enterprise for any claims included, or to be included, as Costs of Ancillary

Operations).

 

     "Gross Total Revenues" means the total of Gross Gaming Revenues and Gross

Ancillary Revenues of the Project.

 

     "IGRA" means the Indian Gaming Regulatory Act of 1988, P.L. 100-497, 25

U.S.C. Sections 2701, et seq., as it may be amended from time to time, and all

regulations of the NIGC promulgated thereunder.

 

     "Indemnity Agreement" shall mean the Indemnity Agreement between Pawnee and

Lakes described in Section 7.5 in the form agreed to by the parties, together

with all amendments, substitutions and renewals thereof.

 

     "Legal Requirements" means any and all present and future judicial,

administrative, and federal, state, local or tribal rulings or decisions, and

any and all present and future federal, state, local and tribal laws,

ordinances, rules, regulations, permits, licenses and certificates, in any way

applicable to Pawnee, Lakes, the Gaming Facility Site, the Project Facilities,

and the Project,

 

 

                                       -7-

 

<PAGE>

 

including without limitation, IGRA, the Tribal-State Compact, and the Gaming

Ordinance.

 

     "Limited Recourse" means that all liabilities or obligations of Pawnee

related to this Management Agreement, the Operating Note, any Transaction

Documents, the Project Facilities, or the Project contemplated by this

Management Agreement, and any related awards, judgments or decrees, shall be

payable solely out of the undistributed and future Net Total Revenues of the

Project, and shall be a limited recourse obligation of Pawnee, with no recourse

to any of Pawnee's assets other than such undistributed and future Net Total

Revenues of the Project (except as to: (i) a security interest in the

Furnishings and Equipment, (ii) the security interest in the Gross Total

Revenues pursuant to the Dominion Account Agreement, (iii) as to any mortgages

or deeds of trust on fee lands upon which the Project is located, and (iv) as

permitted under Section 10.3(d) herein and by Paragraph 5(c) of the Resolution

of Limited Waiver attached hereto as Exhibit B). In no event, except as

permitted under Section 10.3(d) herein and by Paragraph 5(c) of the Resolution

of Limited Waiver attached hereto as Exhibit B), shall Lakes have recourse to

(a) the physical property of the Project Facilities (other than Furnishings and

Equipment and to any mortgages or deeds of trust on fee lands upon which the

Project is located subject to the security interest securing the Operating

Note), (b) Net Total Revenue distributions already received by Pawnee from the

Project and made to the Pawnee TDC in accordance with this Management Agreement

and/or the Dominion Account Agreement, (c) assets of the Pawnee TDC purchased

with such Net Total Revenue distributions, or (d) any other asset of the Pawnee

TDC or Pawnee Nation (other than such undistributed and future Net Total

Revenues of the Project, the security interest in the Furnishings and Equipment

and any mortgages or deeds of trust on fee lands upon which the Project is

located).

 

     "Lakes" means Lakes Pawnee Management, LLC, a Minnesota limited liability

company with its business office located at 130 Cheshire Lane, Minnetonka,

Minnesota 55305.

 

     "Management Agreement" shall mean this Management Agreement for a Gaming

Facility and Related Ancillary Facilities between the parties that deals with

the management of the Project and its operations, as the same may be amended or

modified from time to time, subject to all Legal Requirements.

 

     "Material Breach" shall have the meaning described in Section 6.1 herein.

 

     "Minimum Guaranteed Monthly Payments" means the minimum monthly amount

payable to Pawnee, which amount shall be determined pursuant to Section 5.3

hereof.

 

     "National Indian Gaming Commission" or "NIGC" means the commission

established pursuant to the IGRA.

 

     "Net Gaming Revenues" means Gross Gaming Revenues less (1) amounts paid out

as, or paid for, prizes; and (2) Costs of Gaming Operation (excluding management

compensation as set forth in Section 5.5 (b) herein).

 

 

                                       -8-

 

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     "Net Ancillary Revenues" means Gross Ancillary Revenues less Costs of

Ancillary Operations.

 

     "Net Total Revenues" means the sum of Net Gaming Revenues plus Net

Ancillary Revenues.

 

     "NIGC Approval" means written approval by the NIGC Chairman of this

Management Agreement.

 

     "Notes and Security Provisions" shall have the meaning set forth in Section

6.4(b) hereof.

 

     "Operating Note" means the promissory note evidencing the Minimum

Guaranteed Payment Advances under Section 5.3(b) herein and the Working Capital

Advances under Section 5.7 herein made by Lakes, substantially in a form to be

agreed to by Pawnee and Lakes, together with all amendments, substitutions and

renewals thereof.

 

     "Person" means any entity, whether an individual, trustee, corporation,

general partnership, limited partnership, limited liability company, limited

liability partnership, joint stock company, trust, estate, unincorporated

organization, business association, Indian tribe, commission, instrumentality,

firm, joint venture, Governmental Authority, or otherwise.

 

     "Project" means the business enterprise of Pawnee created to engage in

Class II and/or Class III Gaming at the Gaming Facility located at the Gaming

Facility Site, and which shall include any other lawful commercial activity

conducted in the Ancillary Facilities including, but not limited to any of the

following, operating and managing office space, kids arcade, child care

facility, hotel with swimming pool and golf course, restaurant, RV park, retail

stores, entertainment facilities, or the sale of fuel, food, beverages, alcohol,

tobacco, gifts, and souvenirs, and any other amenities which the parties

mutually agree should be included as part of the Project.

 

     "Project Accounts" shall have the meaning described in Section 2.8 herein.

 

     "Project Facilities" means the permanent buildings, structures and

improvements used by the Project for its gaming and ancillary operations,

together with all furniture, fixtures and equipment and personal property

(whether tangible or intangible) to be used in connection with the operations,

each whether now existing or hereafter constructed or acquired.

 

     "Replacement" shall have the meaning described in Section 6.4(c) herein.

 

     "Resolution of Limited Waiver" refers to the limited waiver of sovereign

immunity to be adopted by Pawnee in the form attached hereto as EXHIBIT B and

evidencing all approvals required pursuant to Pawnee's governing documents and

applicable law (it being understood and agreed that Pawnee shall take such

further actions to ratify, adopt and enforce the attached form of Resolution of

Limited Waiver as shall be required by law or regulation due to future changes

in

 

 

                                       -9-

 

<PAGE>

 

its own legal or governing status to fully preserve its stated intent).

 

     "Scope of Project Description Sheet" shall mean the Scope of Project

Description Sheet dated January 12, 2005, which substantially describes the

scope of the Project currently contemplated by Pawnee and Lakes.

 

     "Secretary" means the Secretary of the Interior of the United States, or

her appropriately designated representative/agent.

 

     "Security Agreement" shall mean the Security Agreement to be executed by

Pawnee in favor of Lakes in a form to be agreed to by Pawnee and Lakes, together

with all amendments, substitutions and renewals thereof.

 

     "State" means the State of Oklahoma wherein the Gaming Site is located.

 

     "Transaction Documents" shall have the meaning described in Section 9.12(b)

herein.

 

     "Tribal Agreement" shall mean the agreement between the Pawnee Nation and

Pawnee TDC and Lakes or its affiliates described in Section 9.12(i).

 

     "Tribal-State Compact" means an agreement which may be entered into between

the Pawnee Nation and the State concerning Class III Gaming and any amendments

or other modifications thereto, which agreement must be approved by the

Secretary and published in the Federal Register.

 

     "UCC Financing Statements" means UCC-1 financing statements naming Pawnee

as debtor and naming Lakes or any third party lenders providing funding to the

Project as a secured party, in the form approved by the parties.

 

     "Working Capital Advances" shall have the meaning described in Section 5.7

herein.

 

                                    ARTICLE 2

                           AUTHORITY AND DUTY OF LAKES

 

     2.1 Appointment as Agent. Subject to the terms and conditions of this

Management Agreement, Pawnee hereby appoints Lakes to act as the exclusive agent

for Pawnee for all matters related to the management of the operations of the

Project Facilities and the Project during the term of this Management Agreement.

Lakes' agency responsibilities shall include, among other things, maintenance

and improvement of the Project Facilities, management and operation of the

Project's Class II and/or Class III Gaming activities within the Gaming

Facility, and all other revenue producing activities that are conducted by the

Project in the Ancillary Facilities, such as the sale of food and beverages.

Lakes accepts such appointment as Pawnee's exclusive agent for the term of this

Management Agreement. Subject to the provisions of this

 

 

                                      -10-

 

<PAGE>

 

Management Agreement and specifically the restrictions in this Article 2 and the

budget provisions in Article 5 hereof, Lakes shall have, and Pawnee does hereby

grant to Lakes, the power and authority as agent for Pawnee, to exercise the

rights of Pawnee under and to execute, modify, or amend any contracts associated

with the operations of the Project Facilities and Project (excluding this

Management Agreement or compacts or other agreements with the State or any other

governmental agency, which shall remain the sole and exclusive authority of the

Pawnee Nation), including, without limitation, purchase orders, equipment and

retail leases, contracts for services, including utilities, and maintenance and

repair services, relating to the operation of the Project Facilities and the

Project except for real estate agreements and contracts (excluding retail

leases); provided, however, that in no event shall Lakes execute any contracts

or agreements which require payments exceeding $250,000 in the aggregate, or

which have a term exceeding one (1) year. The duties and authorities of Lakes

shall be subject in all events to receipt of all necessary licenses, consents or

approvals from the Gaming Commission.

 

     2.2 Limitations. Lakes shall have no authority to waive or impair Pawnee's

sovereign immunity. Except as stated herein, Lakes shall have no authority as

Pawnee's agent under this Management Agreement without the prior written

approval of Pawnee (not to be unreasonably withheld): (a) to incur costs which

are materially in excess of the expenditures to be agreed upon in the operating

budget or the capital expenditure budget to be developed pursuant to Section 5.1

hereof; (b) to sell, encumber or otherwise dispose of any personal property or

equipment located in the Project Facilities, except for inventory sold in the

regular course of business and other items which must be replaced due to age,

obsolescence, or wear and tear; (c) to purchase any goods or services from Lakes

or any of Lakes' affiliated companies as a Costs of Gaming Operations or Costs

of Ancillary Operations unless such arrangement is specifically approved in

writing by Pawnee. Except as specifically authorized in this Article 2, Lakes

shall not hold itself out to any third party as the agent or representative of

Pawnee.

 

     2.3 Lakes' Authority and Responsibility.

 

           (a) Lakes, through the Project's general manager, shall conduct and

direct all business and affairs in connection with the day-to-day operation,

management and maintenance of the Project and the Project Facilities, including

the establishment of operating days and hours. It is the parties' intention that

the Project Facilities be open 24 hours daily, seven days a week. Lakes is

hereby granted the necessary power and authority to act, through the Project's

general manager, in order to fulfill all of its responsibilities under this

Management Agreement. Nothing herein grants or is intended to grant Lakes a

titled interest to the Project Facilities or to the Project. Lakes hereby

accepts such retention and engagement. Pawnee shall have the sole proprietary

interest in and ultimate responsibility for the conduct of all Class II and/or

Class III Gaming conducted by the Project, subject to the rights and

responsibilities of Lakes under this Management Agreement.

 

          (b) In managing, operating, maintaining and repairing the Project and

the Project Facilities under this Management Agreement, Lakes' duties, through

the Project's general manager, shall include, without limitation, the following:

(i) Lakes shall use reasonable measures

 

 

                                       -11-

 

<PAGE>

 

for the orderly physical administration, management, and operation of the

Project and the Project Facilities, including without limitation cleaning,

painting, decorating, plumbing, carpeting, grounds care and such other

maintenance and repair work as is reasonably necessary; (ii) Lakes shall comply

with all duly enacted statutes, regulations and ordinances of the Pawnee Nation;

and (iii) Lakes shall comply with all applicable provisions of the Internal

Revenue Code including, but not limited to, the prompt filing of any cash

transaction reports and W-2G reports that may be required by the Internal

Revenue Service of the United States or under the Tribal-State Compact.

 

     2.4 Compliance with Laws.

 

          (a) Lakes, through the Project's general manager, shall assist Pawnee

in compliance with all terms and conditions of the Tribal-State Compact, the

Gaming Ordinance, IGRA and any gaming regulations (collectively, the "Governing

Laws"), the violation of which would materially impair the conduct of gaming

permitted to be conducted under IGRA by the Project. Without limiting the

foregoing, Lakes shall also supply the NIGC with all information necessary to

comply with the National Environmental Policy Act, as it may be amended from

time to time, and comply with NIGC's regulations relating thereto. Lakes shall

ensure compliance with requirements concerning the reporting and withholding of

taxes with respect to the winnings from gaming operations pursuant to this

Management Agreement. Pawnee agrees to cooperate with Lakes and aid Lakes in

ensuring compliance with the foregoing laws, regulations and requirements. In

managing and operating the Project Facilities and the Project, Lakes shall

comply with all laws, rules, regulations, ordinances, compacts and all other

agreements affecting the same, including without limitation the Governing Laws.

 

          (b) The parties shall use their best efforts to obtain all necessary

approvals of Governmental Authorities of this Management Agreement.

 

     2.5 Security. Lakes shall provide for appropriate security for the

operation of the Project Facilities. All aspects of Project Facilities security

shall be the responsibility of Lakes. Upon agreement of Pawnee and Lakes, any

security officer may be bonded and insured in an amount commensurate with his or

her enforcement duties and obligations. The cost of any charge for security and

increased public safety services will be a Costs of Gaming Operations or Costs

of Ancillary Operations, as appropriate.

 

     2.6 Accounting, Financial Records, and Audits.

 

          (a) Lakes, through the Project's general manager, shall maintain full

and accurate records and books of account for operations of gaming activities

and related ancillary operations managed by Lakes. Such records shall be

maintained at Lakes' office located within the Project Facilities and shall be

made available for immediate inspection and verification at all times.

Inspection or verification by the Governmental Authorities shall be coordinated

through the Gaming Commission.

 

          (b) Prior to the Commencement Date, and subject to the approval of

Pawnee

 

 

                                      -12-

 

<PAGE>

 

and the Gaming Commission, which approvals shall not be unreasonably withheld

and which shall occur prior to the Commencement Date, Lakes, through the

Project's general manager, shall establish and maintain such approved accounting

systems and procedures that shall: (i) include procedures for internal

accounting controls; (ii) permit the preparation of financial statements in

accordance with GAAP ; (iii) be susceptible to audit; (iv) allow the Project,

Pawnee and NIGC to calculate the annual fee under 25 CFR Section 514.1; (v)

permit the calculation of Lakes' compensation under Section 5.5(b) herein; and

(vi) provide for the allocation of operating expenses or overhead expenses among

Pawnee, the Project and Lakes, or any other user of shared facilities or

services. Supporting records and the agreed upon accounting system shall be

sufficiently detailed to permit the calculation and payment of Lakes'

compensation hereunder and to permit the performance of any fee or contribution

computations required under IGRA, a Tribal-State Compact and other applicable

laws or regulations.

 

          (c) Net Gaming Revenues, Net Ancillary Revenues, and Net Total

Revenues will be calculated by Lakes, through the Project's general manager, for

purposes of distribution monthly in accordance with Section 5.5 and copies of

such calculations shall be promptly supplied to Pawnee as required by Section

5.4 herein.

 

          (d) All records shall be maintained so as to permit the preparation of

financial statements in accordance with generally accepted accounting principles

consistently applied and in accordance with procedures to be mutually agreed

upon by the parties. Lakes, through the Project's general manager, shall, as a

Costs of Gaming Operations, furnish to Pawnee and the Gaming Commission, monthly

financial reports in accordance with Section 5.4 herein. Such reports shall

provide reasonable detail as requested by Pawnee and the Gaming Commission with

respect to revenues and expenses of each profit center of the Project. In

addition, all gaming operations conducted within the Gaming Facility shall be

subject to special outside annual audits, which the Gaming Commission may cause

to be conducted, and all contracts or subcontracts for supplies, services or

concessions for a contract amount in excess of $25,000 annually relating to

gaming activities within the Gaming Facility shall be subject to audits, which

audits the Gaming Commission may cause to conducted by an independent certified

public accountant from a Big Five accounting firm with more than five (5) years

experience in audits of gaming enterprise operations selected and approved by

the Gaming Commission. The cost of such audits and audit reports (including the

annual audit under Section 5.6 herein) shall constitute Costs of Gaming

Operation. The Lakes shall make any reports or presentations to Pawnee officials

as are requested.

 

     2.7. Cash Monitoring. Lakes, through the Project's general manager, will

promulgate, and all parties and their respective employees, agents, and

representatives will obey operational policies consistent with the Gaming

Ordinance respecting the handling of cash, security systems, and access to cash

cage, counting rooms, and other places where cash is kept and handled. Pawnee

and the Gaming Commission and its authorized representatives shall have the

right to monitor and investigate systems for cash management implemented by

Lakes and to verify daily Gross Gaming Revenues, Gross Ancillary Revenues, and

Gross Total Revenues.

 

 

                                      -13-

 

<PAGE>

 

     2.8 Bank Accounts, Reserve Funds and Permitted Investments.

 

          (a) On or prior to the Commencement Date, Pawnee and Lakes shall

execute the Dominion Account Agreement and create the Dominion Account

("Dominion Account") described therein. Gross Gaming Revenues and Gross

Ancillary Revenues shall be deposited daily into the Dominion Account, which

shall be subject to the lien of the Dominion Account Agreement and established

at a commercial bank, of Pawnee's choice, organized under the laws of the United

States of America or any state thereof provided such bank is a member of the

Federal Deposit Insurance Corporation and has combined capital, undivided

profits and surplus of at least $500,000,000. Lakes shall also establish other

segregated bank accounts with the approval of Pawnee for the operation of the

Project (the "Project Accounts"), which accounts must indicate the custodial

nature of the accounts. The signatures of authorized representatives of Lakes

shall be the only signatures required to make withdrawals (by check or

otherwise) from such accounts for single withdrawals of less than $250,000,

provided that the monies withdrawn by Lakes are to be used only for the purposes

set forth herein and provided further that if the amount of any single

withdrawal exceeds $250,000 (excluding payout and prizes and transfers to any

designated payroll accounts, taxes, and purchases of cash for day-to-day

operational purposes, or Lakes' compensation under Section 5.5 herein), then the

signature of Pawnee's designated representative will also be required.

 

           (b) Lakes agrees that subject to the terms of Sections 5.3(b) and

6.4(b) hereof, Lakes shall make or permit timely transfers from the Dominion

Account to the Project Accounts of all funds needed to pay (i) Costs of Gaming

Operations; (ii) Costs of Ancillary Operations; (iii) required debt service on

the Project Facilities, as well as any other third party loans to which Lakes

has consented in writing pursuant to the terms of this Management Agreement or

other agreement; (iv) the Minimum Guaranteed Monthly Payment; (v) Minimum

Guaranty Payment Advances; and (vi) disbursements required pursuant to Section

5.5 hereof. Upon the termination of this Management Agreement and so long as:

(a) any amounts remain owing to Lakes hereunder or with respect to any related

Transaction Document, and (b) the Project shall continue in operation pursuant

to the terms of Section 6.4 hereof, then Lakes shall continue to permit

transfers from the Dominion Account to the Project Accounts for payment of the

amounts described above, but shall specifically exclude any Costs of Gaming

Operations or Costs of Ancillary Operations otherwise payable to Pawnee or any

of its Affiliates with the exception of reasonable gaming license fees and any

costs or expense associated with the provision of reasonable supplies and/or

services provided by Pawnee to the Project.

 

          (c) Surplus funds deposited in the Dominion Account and the Project

Accounts may be invested by Lakes in the following permitted investments: (i) a

money market mutual fund registered under the Investment Company Act of 1940

that invests exclusively in (1) marketable direct obligations issued or

unconditionally guaranteed by the United State Government or issued by an agency

thereof and backed by the full faith and credit of the United States, (2)

commercial paper having, at the time of acquisition, a rating of A-1 or P-1 or

better from either Standard & Poor's Corporation or Moody's Investors Service,

Inc., respectively; or (ii) other investments as may be directed by Lakes with

the prior written consent of Pawnee.

 

 

                                      -14-

 

<PAGE>

 

     2.9 Enforcement of Rights.

 

          (a) During the term of this Management Agreement, except as otherwise

provided in Section 2.9 (b) herein, Pawnee and Lakes shall mutually agree with

respect to the handling of the defense, prosecution or settlement of civil

disputes with third parties relating to gaming and other management activities

conducted or contracts executed by Lakes, as agent for Pawnee. The parties will

assist and cooperate with each other with respect to such third-party claims and

disputes. All uninsured liabilities incurred or expenses incurred by Pawnee and

Lakes or any of the employees, officers or directors of any party in defending

such claims by third parties or prosecuting claims against third parties shall

be considered either Costs of Gaming Operation or Costs of Ancillary Operations,

depending upon the circumstances and nature of the claim, except with respect to

claims and liabilities resulting from criminal misconduct, which shall be

governed by Article 7 herein.

 

          (b) All claims brought against Pawnee or Lakes or any of the

employees, officers or directors of any party arising out of or relating to

gaming or other ancillary operations conducted pursuant to this Management

Agreement that may be settled and released for a total settlement amount of less

than $100,000 may be paid and settled by Lakes on behalf of Pawnee and/or Lakes

in accordance with Lakes' good faith business judgment.

 

     2.10 Fire and Safety Services. Lakes, through the Project's general

manager, shall be responsible for obtaining adequate coverage for fire and

safety services and may, in its discretion, have such services provided on a

contractual basis by the local fire and police departments. The costs of any

fire and safety protection services shall be appropriately allocated between

Costs of Gaming Operation and Costs of Ancillary Operations, and, if provided by

a department of the Pawnee Nation, shall not exceed the actual cost of providing

such services.

 

     2.11 Timely Payment of Costs of Gaming Operations and Costs of Ancillary

Operations. Lakes shall be responsible for paying Costs of Gaming Operation and

Costs of Ancillary Operations on behalf of the Project from the bank account(s)

established pursuant to Section 2.8 herein so as to avoid any late-payment

penalties, except those incurred as a result of good faith payment disputes) to

the extent funds of the Project are available; provided, however, that payment

of all such costs (and taxes or similar payments arising from Project

operations) shall be solely the legal responsibility of the Project.

 

     2.12 Acquisition of Gaming and Other Equipment.

 

          (a) All gaming equipment shall be acquired by Lakes, as agent for

Pawnee, on behalf of the Project from Gaming Commission licensed distributors

and manufacturers.

 

          (b) All acquisitions of new equipment after the public opening of the

Project Facilities shall be purchased by Lakes as agent for Pawnee on behalf of

the Project on a cash on delivery basis, unless otherwise agreed by Pawnee.

 

 

                                      -15-

 

<PAGE>

 

     2.13 Hours of Operation. Unless otherwise agreed by the parties, the

Project Facilities shall be operated seven days per week and twenty-four hours

per day, subject to any restrictions in the IGRA, the Gaming Ordinance and a

Tribal-State Compact.

 

     2.14 Access to Operations. Lakes, through the Project's general manager,

shall provide immediate access by appropriate officials of the Gaming Commission

and Pawnee's designated representative to the gaming operation, including all

books and records in addition to those listed in the access requirements set

forth in Sections 2.6 and 2.7 herein.

 

     2.15 Increased Public Safety Services. The parties agree that increased

actual costs of law enforcement and police protection services required as a

result of Class II and/or Class III Gaming in the Gaming Facility shall be paid

as Costs of Gaming Operation.

 

     2.16 Advertising. Lakes, through the Project's general manager, shall

contract for and place advertising, subject to prior approval of the general

concepts of the advertising by Pawnee. Advertising costs will be included in the

operating budgets prepared in accordance with Article 5 herein.

 

     2.17 Certain Meetings. The parties agree that, to facilitate oversight of

the activities conducted pursuant to this Management Agreement and to maintain

communication generally between the individuals who will be involved in

supervising those activities, Pawnee or its designated representative and the

Lakes' principal individuals will meet at least monthly to review operations of

the Project Facilities and any current issues pertaining thereto.

 

     2.18 Maintenance. Lakes, through the Project's general manager, will cause

the Project Facilities to be repaired and maintained and operated in a clean,

good and orderly condition. Repairs and maintenance will be paid as Costs of

Gaming Operation if related to the gaming operations of the Project, or as Costs

of Ancillary Operation if related to the other ancillary operations of the

Project.

 

     2.19 Term. Notwithstanding the date of signature of the parties hereto,

this Management Agreement shall become effective automatically (without need of

amendment, ratification or other action of the parties) upon written approval of

the Gaming Ordinance and this Management Agreement by the Chairman of the

National Indian Gaming Commission. The Commencement Date shall be the first day

upon which Lakes may legally manage the Gaming Facility's gaming operations

under IGRA. Unless sooner terminated as provided herein, this Management

Agreement shall, subject to Legal Requirements, continue for a term of five (5)

years from the Commencement Date, provided however that the Notes and Security

Provisions, including without limitation, each of (a) the Security Agreement,

Dominion Account Agreement, Indemnity Agreement and the UCC Financing

Statements, and (b) sections 2.8 and Article 7 hereof shall each survive and

remain effective until terminated under Article 6 hereof and the amounts owing

to Lakes or its Affiliate by Pawnee under this Management Agreement and related

Transaction Documents have been paid in full. In the event that the Gaming

Facility IS EXPANDED

 

 

                                      -16-

 

<PAGE>

 

BEYOND ITS CURRENT CAPACITY, then the term shall be seven (7) years subject to

Legal Requirements.

 

     2.20 Pawnee Representatives. Pawnee hereby acknowledges and agrees that to

the extent any authorization, consent or other approval of the Pawnee is

required under this Management Agreement or any related Transaction Documents

and Pawnee shall provide to Lakes a resolution naming any individual or

individuals authorized to represent Pawnee for purposes or for the purpose of

the operation and performance of this Management Agreement and related

Transaction Documents, then Lakes shall be entitled to rely on all decisions,

authorizations, consents, and approvals provided by such individual or

individuals, as applicable, until such time as Pawnee shall deliver to Lakes an

additional resolution revoking or otherwise modifying such authority.

 

     2.21 Gaming Facility Site. Pawnee and Lakes mutually agreed that the site

to be used for constructing the Gaming Facility ("Gaming Facility Site") shall

be those lands described on attached EXHIBIT A, (which is land upon which Class

II and/or Class III Gaming may legally be conducted under IGRA and the

Tribal-State Compact).

 

     2.22 Scope of Project. The scope of the Project subject to this Management

Agreement shall be subject to the mutual approval of the parties. It is

contemplated the scope of the Project will be substantially as described on the

Scope of Project Description Sheet dated January 12, 2005, subject to such

changes as may be necessary or appropriate taking into account competitive

conditions, financing and other circumstances. The parties understand that

market, Tribal-State Compact, governmental or other conditions may change and it

may be necessary to expand or decrease the scope of the Project.

 

     2.23 Non-Encumbering Assets. Pawnee agrees not to encumber any of the

assets of the Project Facilities or the Project without the written consent of

Lakes, which consent will not be unreasonably withheld; except that Pawnee shall

have the right without the consent of Lakes to grant security interests in the

Project's revenues which are subordinate to Lakes' interests under this

Management Agreement and all related Transaction Documents pursuant to a

subordination agreement in form and substance acceptable to Lakes. Pawnee agrees

to enter into a limited, transactional waiver of sovereign immunity and consent

to jurisdiction and arbitration as to Lakes in connection with this Management

Agreement and any related Transaction Documents, as provided in the Resolution

of Limited Waiver.

 

                                    ARTICLE 3

                                PERSONNEL MATTERS

 

     3.1 Employees. All employees involved with operation of the Gaming

Facility's Class II and/or Class III Gaming activities and related ancillary

activities throughout the Project Facilities subject to management by Lakes

under this Management Agreement shall be employees of Pawnee. Subject to the

applicable requirements in the Tribal-State Compact, the employment relationship

shall be governed by Pawnee Nation substantive law and any applicable federal

law, subject to the Pawnee Nation's reasonable Indian preference policies, and

all matters will be subject to dispute

 

 

                                      -17-

 

<PAGE>

 

resolution procedures in the manner described in this Management Agreement.

Lakes, on behalf of the Project, shall be solely responsible for the hiring,

training, promoting, and firing of all such employees except for the general

manager as agreed to by Pawnee and Lakes, whose employment, advancement and

termination shall be subject to approval of Pawnee, such approval not to be

unreasonably withheld. Lakes shall develop a policy and procedure in conjunction

with Pawnee, to implement an executive development program for employees who are

members of the Pawnee Nation whereby members will be prepared through training

and education to assume key management positions within the gaming and ancillary

operations of the Project. All salaries, wages, employee insurance, worker

compensation premiums, employment taxes, government exactions of any kind

related to employment, benefits, and overhead related to the hiring,

supervising, and discharge of employees, will be Costs of Gaming Operations or

Costs of Ancillary Operations, as appropriate.

 

     3.2 Project Employee Policies. Lakes, through the Project's general

manager, shall prepare a draft of personnel policies and procedures (the

"Project Employee Policies"), including a job classification system with salary

levels and scales, which policies and procedures shall be subject to approval by

Pawnee. The Project Employee Policies shall include a grievance procedure in

order to establish fair and uniform standards for the Project employees, which

will include procedures for the resolution of disputes between the Project and

Project employees. At a minimum, the Project Employee Policies shall provide for

an employee grievance process which provides the following:

 

     A written "Board of Review" process will be created by the Project's

     general manager to provide Project employees with a procedure for bringing

     work related issues to the attention of Project management so they may be

     promptly and permanently resolved in a fair and equitable manner. The Board

     of Review process will be available to all Project employees except: (1)

     employees at the director level and above, and (2) employees discharged for

     actions involving violations of tribal gaming regulations or law, or

     federal, state, or local law. Project employees will be eligible to use the

     Board of Review process if they have: (a) completed thirty (30) work

     shifts, and progressed through the chain of command in their home

     department in the Project, (b) brought the work related issue to the

     attention of the Project's human resources department, and (c) completed a

     Board of Review hearing request form within the allotted time frame. The

     Project's human resources department shall be responsible for selecting

     hearing panel members as outlined in written procedures to be adopted. The

     Board of Review will be empowered to make the full range of decisions

     available and appropriate (i.e. providing back pay and an apology to the

     employee, or upholding the employee's discharge). The Board of Review's

     decision on the work related issue will final and binding, and there will

     be no appeal beyond the Board of Review.

 

Lakes, through the Project's general manager, shall be responsible for

administering the Project Employee Policies. Any material revisions to the

Project Employee Policies shall not be effective unless they are approved by

Pawnee. All such actions shall comply with applicable tribal law, subject to the

applicable requirements in a Tribal-State Compact.

 

 

                                      -18-

 

<PAGE>

 

     3.3 Employee Background Checks. A background investigation shall be

conducted by the Gaming Commission in compliance with all Legal Requirements, to

the extent applicable, on each applicant for employment as soon as reasonably

practicable. No individual whose prior activities, criminal record, if any, or

reputation, habits and associations are known to pose a threat to the public

interest, the effective regulation of Class II and/or Class III Gaming, or to

the gaming licenses of Lakes or the Project, or to create or enhance the dangers

of unsuitable, unfair, or illegal practices and methods and activities in the

conduct of Project gaming activities, shall knowingly be employed by the Project

or Pawnee. The background investigation procedures employed by the Gaming

Commission shall be formulated in consultation with Lakes and shall satisfy all

regulatory requirements independently applicable to Lakes; provided, however,

that this provision shall not be deemed to limit or impair the exclusive

authority of the Gaming Commission pursuant to the Gaming Ordinance or the

exercise of its discretion thereunder. Any cost associated with obtaining such

background investigations shall constitute Costs of Gaming Operation.

 

     3.4 Pawnee Nation and Indian Preference. Lakes, through the Project's

general manager, shall adhere in regard to recruitment, employment, reduction in

force, promotion, training and related employment actions to a publicly

announced po


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