Exhibit 10.1
MANAGEMENT SERVICES
AGREEMENT
by and between
MONTICELLO RACEWAY MANAGEMENT,
INC.
and
SPORTSYSTEMS GAMING MANAGEMENT AT
MONTICELLO, LLC
dated as of June 10,
2009
TABLE OF CONTENTS
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ARTICLE I :
DEFINITIONS
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4
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1.01
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Definitions
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4
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1.02
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References and
Interpretations
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12
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ARTICLE II :
EXCLUSIVE MANAGEMENT SERVICE RIGHTS
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12
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2.01
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Exclusivity
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12
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2.02
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Reserved Rights
and Responsibilities of MRMI
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13
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ARTICLE III :
RESPONSIBILITIES OF THE MANAGER AFTER THE COMMENCEMENT
DATE
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13
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3.01
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Duties of the
Manager
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13
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3.02
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Specific
Responsibilities of the Manager
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13
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3.03
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No Liability
for Certain Violations
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15
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3.04
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Operating
Budgets
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16
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3.05
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Defective
Conditions
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18
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ARTICLE IV :
RETAINED RIGHTS, AUTHORITY AND RESPONSIBILITIES OF MRMI
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18
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4.01
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Retained Rights
of MRMI
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18
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4.02
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Authority and
Responsibilities of MRMI
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18
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ARTICLE V :
ACCOUNTING AND CASH MANAGEMENT
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21
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5.01
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Bank
Accounts
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21
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5.02
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Collection and
Disbursement of Funds
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21
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5.03
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Financial
Statements
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22
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5.04
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Books of
Account
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22
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ARTICLE VI :
MANAGEMENT FEES AND REIMBURSEMENT OF EXPENSES
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23
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6.01
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Management
Fees
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23
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6.02
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Payment of Base
Management Fee
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24
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6.03
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Annual Payment
of the Incentive Fee, and Reconciliation of the Base Management
Fee
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24
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6.04
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Reimbursement
of Expenses
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25
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6.05
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Renegotiation
of the Management Fee
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25
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ARTICLE VII :
INSURANCE
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25
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7.01
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Insurance
Coverage
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25
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7.02
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Responsibility
to Maintain Insurance
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26
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7.03
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General
Requirements
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26
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7.04
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Policies and
Endorsements
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26
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ARTICLE VIII :
TRADE NAMES, CONFIDENTIAL INFORMATION, AND
NON-SOLICITATION
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28
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8.01
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Business
Name
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28
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8.02
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Trade Names,
Trademarks and Service Marks
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28
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8.03
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Confidential
Information
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28
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8.04
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Restriction on
Employee Solicitation
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29
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ARTICLE IX :
REPRESENTATIVES OF THE PARTIES
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29
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9.01
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Designation of
Representatives
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29
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ARTICLE X :
TERM OF AGREEMENT
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29
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10.01
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Term of the
Agreement
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29
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10.02
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Termination by
MRMI Without Cause
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29
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10.03
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Termination by
MRMI for Cause
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30
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10.04
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Termination by
the Manager for Cause
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31
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10.05
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Effect of
Termination of this Agreement, and Consequences of a
Default
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31
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10.06
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Extraordinary
Events
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32
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ARTICLE XI :
SALE OF THE GAMING BUSINESS
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32
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11.01
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Sale of the
Gaming Business
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32
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11.02
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Consequences in
the Event of a Sale
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33
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ARTICLE XII :
ARBITRATION AND ENFORCEMENT
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33
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12.01
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Arbitration
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33
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12.02
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Judicial
Enforcement of Arbitration
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33
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12.03
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Tria1 by Jury;
Venue
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33
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12.04
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Recovery of
Fees and Costs
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34
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12.05
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Period of
Limitations
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34
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ARTICLE XIII :
WARRANTIES, REPRESENTATIONS AND ADDITIONAL COVENANTS OF THE
PARTIES
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34
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13.01
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Representations
and Warranties of MRMI
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34
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13.02
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Representations
and Warranties of the Manager
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36
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13.03
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Additional
Affirmative Covenants of the Parties
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37
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ARTICLE XIV :
INDEMNIFICATION
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38
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14.01
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Indemnification
of the Manager
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38
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14.02
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Indemnification
of MRMI
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39
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14.03
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Indemnified
Parties
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39
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14.04
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Survival
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39
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ARTICLE XV :
MISCELLANEOUS PROVISIONS
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39
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15.01
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Manager as
Independent Contractor and Agent for MRMI
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39
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15.02
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Preparation of
Agreement
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39
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15.03
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Costs and
Expenses
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40
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15.04
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Survival
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40
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15.05
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Entire
Agreement, No Collateral Representations
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40
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15.06
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No Oral
Modification or Waiver
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40
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15.07
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Remedies
Cumulative
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40
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15.08
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Severability
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40
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15.09
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No Third Party
Beneficiaries
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41
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15.10
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No Reliance on
Prior Representations
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41
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15.11
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Headings
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41
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15.12
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Applicable
Law
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41
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15.13
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Notices
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41
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15.14
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Assignment and
Delegation; Successors and Assigns
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42
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15.15
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Calculating
Time Periods
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43
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15.16
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Counterparts
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43
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15.17
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Electronically
Transmitted Documents
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43
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MANAGEMENT SERVICES
AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is made as of June 10,
2009, by and between MONTICELLO RACEWAY MANAGEMENT, INC. , a
New York corporation having its principal office and place of
business located at 204 State Route 17B, Monticello, New York 12701
(“MRMI”); and SPORTSYSTEMS GAMING MANAGEMENT AT
MONTICELLO, LLC , a New York limited liability company having
its principal office and place of business located at 40 Fountain
Plaza, Buffalo, New York 14202 (the
“Manager”).
RECITALS
A. MRMI
is licensed pursuant to the New York Racing, Pari-Mutuel Wagering
and Breeding Law (the “Racing Law”) to conduct a
harness racing business, and MRMI owns a harness racing facility in
Monticello, New York (the “Racetrack”), consisting of,
among other things, a racing oval, exercise tracks,
grandstand/clubhouse buildings, pari-mutuel betting equipment,
barns, grounds, food service equipment, and other facilities and
improvements.
B. In
addition to the live racing conducted at the Racetrack, MRMI also
uses the Racetrack for conducting the business of simulcasting
races to and from other racetracks and off-track betting facilities
in the manner authorized by the Racing Law, and MRMI operates a
food service business at the Racetrack in which MRMI serves meals,
snacks and beverages to its customers.
C. In
its capacity as the licensed owner and operator of a harness
racetrack, MRMI is authorized pursuant to Section 1617-a of the New
York Tax Law to obtain a license from the Division of the Lottery,
New York State Department of Taxation and Finance (the “NYS
Lottery”) for the conduct of a video lottery machine gaming
business at the Racetrack. The ability of MRMI to
operate video lottery machines was conditioned on the prior
approval and authorization of such operations by the County of
Sullivan, State of New York, and such approval and authorization
was granted by the County of Sullivan without qualification,
limitation or restriction.
D. MRMI
desires to engage the services of a manager experienced in video
lottery gaming operations, food service, and related hospitality
businesses in order to ensure that such business activities will be
operated in a manner designed to increase their revenues and
customer appeal.
E. The
Manager’s personnel have extensive experience and expertise
in the management of video gaming operations, food service
facilities, and related hospitality businesses, and the Manager is
well qualified to provide the benefit of such experience and
expertise to MRMI.
F. MRMI
has selected the Manager to provide MRMI with management and
consulting services in connection with the video gaming, food
service, and related hospitality businesses conducted by MRMI at
the Racetrack upon the terms and conditions set forth in this
Agreement.
NOW,
THEREFORE, in view of the foregoing Recitals and in consideration
of the mutual promises and covenants contained herein, the parties
agree as
follows:
ARTICLE I
DEFINITIONS
1.01
Definitions . The following capitalized terms and
phrases used in this Agreement shall, unless the context otherwise
requires, have the meanings specified in this Article I:
1.01.1 Affiliate(s)
. With respect to any entity, an “Affiliate”
is a natural person or firm, corporation, partnership, association,
trust, limited liability company or other entity which directly or
indirectly Controls, is Controlled by, or is under common Control
with, the subject entity. The term “Control” means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a person or entity,
whether through the ownership of voting securities, by contract or
otherwise.
1.01.2 Agreement
. The “Agreement” means this Management
Services Agreement and any modifications or extensions thereto,
together with all of the schedules and exhibits to this Management
Services Agreement.
1.01.3 Annual Statements
. The “Annual Statements” means the audited
financial statements of the Gaming Business, the Hospitality
Business and the Racing Business as determined by MRMI’s
independent accountants after the close of each Operating Year
pursuant to Section 5.03 of this Agreement.
1.01.4 Bank Accounts
. References to the “Bank Accounts” mean the
bank accounts established by MRMI pursuant to Section 5.01 of this
Agreement for the deposit of the receipts derived from the Gaming
Business, the Hospitality Business and the Racing Business, and
from which bank accounts money will be disbursed to pay
Expenses.
1.01.5 Base Management Fee
. The “Base Management Fee” refers to the
annual amount equal to three quarters of one percent (0.75%) of
MRMI’s Gross Gaming Revenue payable to the Manager for its
services hereunder pursuant to the provisions of Section 6.01.1 of
this Agreement.
1.01.6 Commencement Date
. The “Commencement Date”
means the date of execution and delivery of this
Agreement, as noted in the first paragraph above. The
“Commencement Date” will be the date on which the
Manager assumes its responsibilities under this
Agreement.
1.01.7 Common Areas
. The “Common Areas” are all portions of the
Racetrack to be made available by MRMI to the Manager on a
non-exclusive basis for use in connection with the operation of the
Gaming Business and the Hospitality Business, such areas to
include, without limitation, driveways, entrances and exits,
restrooms, elevators and escalators, service corridors, alleys,
sign frontage and parking areas.
1.01.8 Default or Event of
Default . A “Default” or an “Event
of Default” is any occurrence that, with the giving of
notice, the passage of time, or both, gives rise to the right by
either party to terminate its obligations of further performance
under this Agreement in the manner described in Section 10.03 or
Section 10.04 of this Agreement.
1.01.9 Earnings Before Interest,
Taxes, Depreciation and Amortization . The “Earnings
Before Interest, Taxes, Depreciation and Amortization”
generally refers to the Gross Revenues of the Gaming Business, the
Hospitality Business and the Racing Business less amounts paid or
accrued for the Expenses of those businesses. For
purposes of this Agreement, MRMI and the Manager agree that
“Earnings Before Interest, Taxes, Depreciation and
Amortization” will be determined in the manner generally set
forth in the pro forma income statement attached hereto as Exhibit
E and made a part hereof. The Manager’s Base
Management Fee shall be deducted from Gross Revenues as an Expense
in computing “Earnings Before Interest, Taxes, Depreciation
and Amortization”, and none of the revenues or expenses of
the Excluded Businesses will be taken into account in the
computation of such amount.
1.01.10 Equipment
. The “Equipment” refers to all furniture,
furnishings, fixtures, wall-mounted art, and other machines and
equipment situated in the Gaming Center, the Hospitality Facilities
and the Racing Facilities, or used in connection with the operation
of the Gaming Business, the Hospitality Business and the Racing
Business. Included within the definition of
“Equipment” are: (i) all equipment relating to the
operation of the Video Lottery Machines; (ii) all computer and
communications equipment and software required for the conduct of
the Gaming Business, the Hospitality Business and the Racing
Business; (iii) fixtures, systems, apparatus and other personal
property used in, or held in storage for use in connection with the
operation of, the Gaming Business, the Hospitality Business and the
Racing Business; (iv) money counting equipment, safes, automatic
teller machines, and cash dispensing machines; (v) all equipment
used for storing inventories of food and beverage products and for
preparing, cooking, serving, receiving, holding, selling, and
vending food and beverage items; (vi) ware washing equipment; (vii)
all display cabinets, counters, wrap stands and shelving for retail
merchandise outlets; (viii) all inventory control, register and
point of sale equipment; (ix) all security and surveillance
equipment; (x) personal computers and computer servers; (xi)
telephones and telecommunications equipment; (xii) lifts, loaders
and transports; (xiii) bar and beverage equipment, refrigeration
equipment, coolers and walk-ins; (xiv) all smallwares, utensils,
crockery, glassware, dishware and cutlery; and (xv) all furniture,
furnishings and decorations, office furniture and equipment and all
other fixed assets located in the Gaming Center, the Hospitality
Facilities and the Racing Facilities, from time to time, such as
signage, graphics and menu boards.
1.01.11 Excluded
Businesses. The “Excluded Businesses” refers
to (i) any commercial activities conducted by MRMI at the Racetrack
related to the revenues and expenses associated with any Indian
casino, any business activities related to, or operated in
support of or conjunction with, any Indian casino, and any
agreements related thereto, (ii) any payments made or received by
MRMI relating to periods prior to the Commencement Date, and (iii)
any payments received by MRMI from Concord Associates, L.P. or its
affiliates.
1.01.12 Expenses
. Any reference to “Expenses” means the
following costs and expenses incurred after the Commencement Date
in connection with the management and operation of the Gaming
Business, the Hospitality Business and the Racing Business, or
associated with the maintenance of the Gaming Center, the
Hospitality Facilities and the Racing Facilities:
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The total
payroll costs of the employees of MRMI who work in the Gaming
Business, the Hospitality Business and the Racing
Business;
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General and
administrative expenses of the Gaming Business, the Hospitality
Business and the Racing Business, general facility cleaning,
laundry and trash removal expenses, employee hiring and training
expenses, the cost of marketing and promoting the Gaming Center
(net of any statutory marketing allowances recognized by MRMI),
costs associated with the operation and maintenance of automatic
teller machines and cash dispensing machines throughout the
Racetrack, routine repairs and maintenance (but not the replacement
of capital items), and the cost of all utility services (including
heat, telephone, air conditioning, light, power, water and sewage
treatment and disposal) utilized by the Gaming Business, the
Hospitality Business and the Racing Business and the services of
cleaning and removing snow from parking lots, driveways and
walkways from the Common Areas;
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The cost of
food and beverage items, gaming supplies, food service supplies,
cleaning supplies, stationery, uniforms, fuel and other consumable
items used or sold in connection with the Gaming Business, the
Hospitality Business and the Racing Business;
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The cost of
acquiring or leasing the Equipment, and the cost of replacing the
Equipment when damaged beyond repair or rendered obsolete (but not
the cost of replacing capital items);
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The amount of
any accounts receivable with respect to the Gaming Business, the
Hospitality Business and the Racing Business that are deemed
uncollectible, or in the alternative, a reasonable reserve for
doubtful accounts receivable established by mutual agreement of
MRMI and the Manager in the preparation of the annual Operating
Budgets;
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The fees and
expenses of independent accountants, independent legal counsel, and
other independent professional advisors;
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The fees and
expenses of independent technical, operational and other
consultants, experts, and advisors for specified services in
connection with non-routine work required by the Gaming Business,
the Hospitality Business and the Racing Business to the extent
included in the Operating Budget or otherwise approved by MRMI and
the Manager;
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The handling
and service charges imposed by third parties in connection with the
purchase of goods;
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The amount of
out-of-pocket costs and other disbursements incurred by the Manager
which are reimbursed by MRMI pursuant to Section 6.04 of this
Agreement;
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The costs and
expenses of operating computer systems and communication lines used
by the Gaming Business, the Hospitality Business and the Racing
Business;
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Insurance
premium expenses and deductibles associated with the insurance
coverages described in Section 7.01 of this Agreement;
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Any taxes,
duties, levies, assessments, fees or other charges of any nature
that are imposed on, or assessed against, the Gaming Business, the
Hospitality Business, the Racing Business, the Gaming Center, the
Hospitality Facilities, the Racing Facilities or the Equipment, or
are otherwise related to any of the agreements between MRMI and the
Manager or to the management, operation or promotion of the Gaming
Business, the Hospitality Business and the Racing Business
(including without limitation, any statutory assessments payable by
MRMI to the State of New York or standardbred racing industry
stakeholders pursuant to the Gaming Law or the Racing Law);
provided however, that excluded from treatment as an Expense will
be any income or similar tax imposed on the Manager or
MRMI, including any gain or loss incurred by MRMI from the
sale of the Racetrack or any part thereof, or the
Equipment and the related tax imposed as a result of such
sale;
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The costs and
expenses of obtaining and maintaining operating licenses, permits,
authorizations and approvals required for the conduct of the Gaming
Business, the Hospitality Business or the Racing
Business;
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Such other
costs and expenses as are specifically provided for elsewhere in
this Agreement or in any approved annual Operating Budget, or are
otherwise approved by MRMI and the Manager as being reasonably
necessary for the management and operation of the Gaming Business,
the Hospitality Business or the Racing Business, or the maintenance
of the Gaming Center, the Hospitality Facilities or the Racing
Facilities; and
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Solely for
purposes of computing Earnings Before Interest, Taxes, Depreciation
and Amortization and the resulting Incentive Fee, the Base
Management Fee paid or payable for the period in question shall be
considered an Expense.
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Any costs and
expense associated with (i) MRMI’s corporate headquarters or
home office, (ii) the Excluded Businesses (including without
limitation, any expenses associated with the negotiation, design,
development, construction, furnishing or operation of any Indian
casino), (iii) the purchase of or accrual for capital items, and
(iv) any depreciation or amortization of capital items incurred by
the Gaming Business, the Hospitality Business and the Racing
Business, shall not be included within the definition of
“Expenses” for purposes of this Agreement.
1.01.13 Extraordinary Event
. An “Extraordinary Event” is any condition
of force majeure that prevents the performance by a party of its
obligations (other than obligations for the payment of a sum of
money) set forth in this Agreement, for reasons beyond the
reasonable control of such party. Any of the following
events, regardless of where it occurs or its duration, is an
“Extraordinary Event”: (i) acts of nature without the
interference of any human agency (including hurricanes, typhoons,
tornados, cyclones, other severe storms, winds, lightning, floods,
earthquakes, volcanic eruptions, fires, explosions, disease, or
epidemics); (ii) fires and explosions caused wholly or in part by
human agency; (iii) acts of war, attack, invasion, or other acts of
hostility by foreign enemies; (iv) civil war, rebellion,
revolution, insurrection or usurpation of sovereign power; (v)
riots or other civil commotion; (vi) terrorism (including
hijacking, sabotage, bombing, murder, assault and kidnapping);
(vii) strikes or similar labor disturbances; (viii) lack of
availability of critical materials or supplies; (ix) action or
inaction of governmental authorities having jurisdiction over the
Gaming Business, the Hospitality Business or the Racing Business;
and (x) any other events beyond the reasonable control of MRMI or
the Manager.
1.01.14 Gaming Business
. Any reference to the “Gaming Business”
means (i) the business of operating the Video Lottery Machines and
any other gaming devices, and the conduct of gaming or gambling
operations of any type; (ii) any and all other business activities
conducted in or associated with the Gaming Center; and (iii) the
rental or leasing of space or licensing of other commercial
activities within the Gaming Center. However, the
“Gaming Business” does not include any of the business
activities within the definition of the “Excluded
Businesses”.
1.01.15 Gaming Center
. The “Gaming Center” means that portion of
the Racetrack which now or hereafter houses the Video Lottery
Machines, the areas at the Racetrack to be used for the conduct of
the Gaming Business, and all gaming-related Equipment, provided,
however, that the Gaming Center shall not include facilities used
in connection with the operations of an Indian casino located at
the Racetrack. A layout overview of the Gaming Center is
set forth on Exhibit B attached hereto and made a part
hereof.
1.01.16 Gaming Law
. The “Gaming Law” means those provisions of
the New York Tax Law (including without limitation, Sections 1612
and 1617-a of the New York Tax Law) which authorize and regulate
the operation of video lottery machines at pari-mutuel racetracks
located in the State of New York, the regulations adopted by the
NYS Lottery with respect thereto, and any modification, amendment
or replacement thereof.
1.01.17 Gross Gaming Revenue
. The phrase “Gross Gaming Revenue” means
the total amount realized from the operation of the Video Lottery
Machines after the payment of, or accrual or provision for, all
winnings and prizes paid to patrons of the Gaming
Business.
1.01.18
Gross Revenues . The phrase “Gross
Revenues” refers to the gross amount of all revenues and
receipts of every kind (whether from cash or credit transactions),
determined on an accrual basis, derived by MRMI from goods sold,
services performed or other commercial activities conducted in
connection with the Gaming Business (including without limitation,
the Gross Gaming Revenue derived from the Gaming Business), the
Hospitality Business and the Racing Business, together with any
proceeds from business interruption insurance or other “loss
of income” insurance. However, Gross Revenues
shall not include: (i) tips, service charges, or gratuities
received by employees of the Gaming Business, the Hospitality
Business or the Racing Business; (ii) proceeds from the sale of the
Racetrack, any portion thereof, or the Equipment; (iii) proceeds
under property loss, casualty or general liability insurance
policies (other than the business interruption insurance to the
extent such proceeds relate to the Gaming Business, the Hospitality
Business and the Racing Business); (iv) the gross receipts realized
by subtenants and licensees; (v) excise, sales, or use taxes or
similar charges collected directly from patrons or included as part
of the sales price of any goods or services; (vi) revenues
collected from entertainment or special events that are paid
directly to the performer or promoter; (vii) any capital
awards received from New York State by MRMI pursuant to the Gaming
Law; or (viii) revenues from any Excluded Business as defined in
Section 1.01.11 hereof (which for the avoidance of doubt includes
any revenues received by MRMI which relate to periods prior to the
Commencement Date and any revenues received from Concord
Associates, L.P. or its affiliates).
1.01.19 Hospitality Business
. The “Hospitality Business” includes the
following commercial activities conducted at the Gaming Center, the
Hospitality Facilities, the Racing Facilities and throughout the
Racetrack: (i) the sale of food, beverages and other refreshments
from fixed concession stands, restaurants, bars, booths, kiosks,
mobile stands, vending machines, and any other areas in which
concession items are sold; (ii) catering services and the sale of
food, beverages and other refreshments on a group basis where one
invoice is tendered for the services rendered; (iii) the sale of
food and beverage items at any special events conducted at the
Racetrack, unless such concession rights have been granted by MRMI
to the organizer or promoter of a special event on an exclusive
basis; (iv) the sale of retail merchandise to patrons of the Gaming
Center, the Hospitality Facilities, the Racing Facilities and the
Racetrack; (v) the provision of valet parking services to patrons
of the Gaming Center, the Hospitality Facilities, the Racing
Facilities and the Racetrack; (v) the operation of automatic teller
machines and cash dispensing machines throughout the Racetrack; and
(vi) the rental of space at the Racetrack to third party vendors,
service providers and concessionaires selected by the Manager with
the prior consent of MRMI. However, the
“Hospitality Business” does not include any of the
commercial activities within the definition of the “Excluded
Businesses”.
1.01.20 Hospitality
Facilities . The phrase “Hospitality
Facilities” refers to all areas within the Racetrack to be
occupied and used in connection with the conduct of the Hospitality
Business. The Hospitality Facilities include, but are
not limited to, (i) commissary and food and beverage service and
storage areas; (ii) food and beverage wash areas; (iii) vending and
pantry areas; (iv) kitchens, food preparation and food and beverage
cleaning areas; (v) change rooms for concession and retail sales
personnel; (vi) concession stands, condiment stands, booths, bars,
public and service bars and grills; (vii) restaurant areas and
dining rooms; (viii) retail sales locations and gift shops; and
(ix) concession and retail sales offices, money counting rooms and
record-keeping rooms dedicated for use by the
Manager. Layout overviews of the Hospitality Facilities
are set forth on Exhibit D attached hereto and made a part
hereof. Those areas of the Racetrack to be served by
mobile stands will also be considered part of the Hospitality
Facilities, although the precise location of the mobile stands will
be determined from time to time by MRMI after consultation with the
Manager. For the sake of clarity, the Hospitality Facilities shall
not include facilities used in connection with an Indian casino
located at the Racetrack.
1.01.21 Incentive Fee
. The “Incentive Fee” is the percentage of
Earnings Before Interest, Taxes, Depreciation and Amortization
(after deduction of the Manager’s Base Management Fee)
realized by MRMI from the conduct of the Gaming Business, the
Racing Business and the Hospitality Business that is payable to the
Manager pursuant to the provisions of Section 6.01.2 of this
Agreement.
1.01.22 Legal Requirements . The
“Legal Requirements” are all public laws, statutes,
ordinances, judgments, orders, rules, regulations, permits,
licenses, authorizations, directions and requirements of all
governments and governmental authorities, which now or hereafter
may be applicable to the Gaming Business, the Hospitality Business,
the Racing Business, the Gaming Center, the Hospitality Facilities,
the Racing Facilities and the operation thereof, including those
legal requirements relating to zoning, building, public safety,
environment and health, or employee benefits.
1.01.23 Management Fees
. Reference to the “Management Fees” means
the Base Management Fee and the Incentive Fee referred to in
Section 6.01 of this Agreement.
1.01.24 Manager
. The “Manager” is Sportsystems Gaming
Management at Monticello, LLC, a New York limited liability
company, and its successors and assigns.
1.01.25 Monthly Statements
. The “Monthly Statements” are the
statements of income and expense to be prepared by MRMI on a
monthly basis pursuant to Section 5.03 hereof, and which will
reflect the results of operation of the Gaming Business, the
Hospitality Business and the Racing Business.
1.01.26 MRMI . Any
reference to “MRMI” means Monticello Raceway
Management, Inc., a New York corporation, and its successors and
assigns.
1.01.27 NYS Lottery
. References to the “NYS Lottery” mean the
Division of the Lottery, New York State Department of Taxation and
Finance.
1.01.28 NYS Racing and Wagering
Board . References to the “NYS Racing and
Wagering Board” mean the New York State Racing and Wagering
Board.
1.01.29 Operating Budget
. The “Operating Budget” refers to the
budget of income and expense for the Gaming Business, the
Hospitality Business and the Racing Business to be prepared by MRMI
on an annual basis, as more particularly described in Section 3.04
of this Agreement.
1.01.30 Operating Year
. An “Operating Year” generally refers to
each fiscal year of operation of the Gaming Business, the
Hospitality Business and the Racing Business. The first
Operating Year will begin on the Commencement Date and will
continue until the close of business on December 31,
2009. Thereafter, each Operating Year will commence on
the next succeeding January 1 and will continue for a period of
twelve months thereafter, except that the final Operating Year will
continue through and end on the date that is the third (3rd)
anniversary of the Commencement Date (unless this Agreement is
terminated earlier in the manner provided herein).
1.01.31 Racetrack . The
“Racetrack” is the standardbred horse harness racetrack
property, together with all buildings, structures, fixtures and
improvements associated therewith, located on the 232 acres of real
property owned by MRMI and located at 204 Route
17B, Monticello, New York. The Racetrack is
more particularly identified on Exhibit A attached hereto and made
a part hereof.
1.01.32 Racing Business . Any
reference to the “Racing Business” means (i) the
business of holding live race meetings and the export simulcasting
of the MRMI racing program to other locations; (ii) the importation
of simulcast racing signals from thoroughbred and standardbred
racetracks owned by parties other than MRMI; (iii) the conduct of
pari-mutuel wagering operations with respect to live and simulcast
horse races; (iv) the business of processing compost and selling
manure, fertilizer and other organic products; (v) ticket sales,
admission charges, revenue shares from sales of tee shirts and
promotional items, and rentals associated with special events
conducted at the Racetrack; (vi) any payments made to MRMI by the
Monticello Harness Horsemen’s Association or any similar
association of horse owners; (vii) fees from stall rentals; (viii)
fees relating to shop rental for the buildings currently used as a
blacksmith shop and tack shop; (ix) fees relating to equine
activities and events (including without limitation, horse shows
and polo matches); and (x) all other business activities conducted
in or associated with the Racing Facilities. However,
the “Racing Business” does not include any of the
business activities within the definition of the “Excluded
Businesses”.
1.01.33 Racing Facilities .
The “Racing Facilities” means that portion of the
Racetrack which now or hereafter is used to conduct the Racing
Business and all racing related Equipment. A layout overview
of the Racing Center is set forth on Exhibit C attached hereto and
made a part hereof. For the sake of clarity, the Racing
Facilities shall not include facilities used in connection with an
Indian casino located at the Racetrack.
1.01.34 Racing Law . Any
reference to the “Racing Law” means the New York State
Racing, Pari-Mutuel Wagering and Breeding Law, and any
modification, amendment or replacement thereof.
1.01.35 Termination Payment
. Reference to the “Termination Payment”
means the lump sum amount payable by MRMI to the Manager in
the event that the Manager terminates this Agreement as a result of
an Event of Default by MRMI pursuant to Section 10.04 of this
Agreement. The “Termination Payment” will be
calculated in the following manner.
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The parties
will mutually determine the amount of the future monthly payments
to which the Manager is entitled, which will be equal to the
average monthly Management Fees earned by the Manager during the
twelve (12) month period of time preceding the effective date of
termination of this Agreement (or such lesser number of months in
the event that the effective date of termination occurs within the
first twelve months of the Commencement Date).
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On or before
the effective date of termination of this Agreement, MRMI will pay
to the Manager a Termination Payment equal to the sum of the
present values (using a seven percent (7%) discount rate) of each
of the monthly payments determined above for the period from the
effective date of termination through the third (3rd) anniversary
of the Commencement Date.
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1.01.36 Video Lottery Machines
. The “Video Lottery Machines” are the
gaming machines, terminals or devices, and any associated
equipment, authorized by the Gaming Law for operation at the
Racetrack, together with any upgrades, modifications and
replacements to such machines, terminals, devices and associated
equipment.
1.02
References and Interpretations . References to
this Agreement shall include the exhibits attached hereto and all
amendments or renewals thereof. Unless expressly stated
to the contrary, reference in this Agreement to any article or
section includes all subsections thereof. Any exhibit
referenced in this Agreement shall be construed to be incorporated
in this Agreement by such reference. All references to
dollars mean the lawful currency of the United States of
America. Any reference to statutes or laws will include
all amendments, modifications, or replacements of the specific
sections and provisions concerned. The words
“herein,” “hereof,”
“hereunder,” “hereinafter” and words of
similar import refer to this Agreement as a whole and not to any
particular article, section or subsection hereof. The
terms “include” and “including” shall each
be construed as if followed by the phrase “without being
limited to.” This Agreement will be interpreted
without interpreting any provision in favor of or against either
party by reason of the drafting of the provision.
ARTICLE II
EXCLUSIVE MANAGEMENT SERVICE
RIGHTS
2.01
Exclusivity . During the term of this Agreement,
the Manager will have the exclusive right to provide management
services in connection with the operation of the Gaming
Business and the Hospitality Business. MRMI agrees
to provide the employees and agents of the Manager and its
Affilates with reasonable access to the Gaming Center, the
Hospitality Facilities, and the Common Areas during the term of
this Agreement so that the Manager can perform its duties described
herein. MRMI will not engage in the Gaming Business or
the Hospitality Business at the Racetrack except in accordance with
the terms of this Agreement, and MRMI will not lease, license or
permit the use of any part of the Racetrack to anyone other than
the Manager for the operation of the Gaming Business or the
Hospitality Business.
2.02
Reserved Rights and Responsibilities of MRMI
. Notwithstanding the provisions of Section 2.01 above,
MRMI and the Manager acknowledge and agree that (i) MRMI shall
retain the exclusive right and responsibility to supervise and
manage the Racing Business, although the Manager may from time to
time suggest best practices in the pari-mutuel racing industry for
consideration by MRMI based on the racing business experience of
the Manager’s affiliated companies, and (ii) MRMI shall
likewise retain all rights with respect to the Excluded Businesses,
and all revenues and expenses associated with the Excluded
Businesses will accrue solely to MRMI.
ARTICLE III
RESPONSIBILITIES OF THE
MANAGER
AFTER THE COMMENCEMENT
DATE
3.01
Duties of the Manager . MRMI hereby grants to the
Manager the sole and exclusive right to assist and advise MRMI in
the management of the day-to-day operations of the Gaming
Business and the Hospitality Business during the term of this
Agreement. Except as otherwise specified in this
Agreement, MRMI grants to the Manager the full scope of authority
necessary to perform its obligations under this
Agreement. In connection therewith, the Manager shall
have the authority and responsibility, subject to the provisions of
this Agreement and the rules and regulations of the NYS Lottery, to
assist and advise MRMI with respect to (i) determination of the
operating policy, standards of operation, quality of service,
maintenance and physical appearance of the Gaming Center and
the Hospitality Facilities, and any other matters affecting the
operation and management of the Gaming Business and the
Hospitality Business; (ii) supervision and direction of all phases
of advertising, marketing and promotion for the Gaming
Business and the Hospitality Business, consistent with the
advertising and marketing expenditures set forth in the current
annual Operating Budget; and (iii) implementation of all programs
contemplated by the Operating Budgets hereafter described in
Section 3.04. The performance of all activities by the
Manager pursuant to this Agreement shall be on behalf of MRMI and
for its exclusive account and benefit. MRMI agrees to cooperate
reasonably with the Manager so that the Manager is able to carry
out its duties hereunder, including without limitation, any
assistance from MRMI that the Manager might need in connection with
the obtaining of all licenses, permits and approvals required for
the operation of the Gaming Business and the Hospitality
Business. The Manager agrees to cooperate reasonably
with MRMI so that the recommendations of the Manager in exercising
the authority described above are consistent with the current
annual Operating Budget, and are also consistent with practices in
gaming facilities reasonably comparable to the Gaming
Center.
3.02
Specific Responsibilities of the Manager . From
and after the Commencement Date, the Manager will use its
reasonable best efforts to assist MRMI in the performance of its
management and supervisory duties with respect to the Gaming
Business and the Hospitality Business, including the following
specific duties:
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To assist in
supervision of the employees of MRMI engaged in the collection and
deposit of all Gross Revenues received from operation of the Gaming
Business and the Hospitality Business, with cash
deposits to be made to such Bank Accounts as are designated by
MRMI;
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To assist in
overseeing the employees of MRMI, or third party vendors and
service providers, in connection with the general administration,
management and operation of the Gaming Business and the Hospitality
Business, including without limitation, providing for (i) water,
heat, light and other utility services; (ii) recurring services
such as trash removal, pest extermination, decorating, gardening,
laundry, telephone service, snow removal and any other customary
and commercially reasonable contracts or services; (iii) purchases
contemplated by this Agreement using reasonable best efforts to
obtain provisions in such contracts and purchases which are
beneficial to the operation of the Gaming Business and the
Hospitality Business (it being understood that the Manager will
provide MRMI with the benefit of discounts available to the Manager
under national purchasing contracts where possible); (iv) marketing
and promotional programs or services; (v) personnel services; (vi)
accounting, bookkeeping and cash management services, and (vii)
security services;
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To advise and
assist MRMI in the negotiation or termination of contracts, the
recovery of possession of property, and to otherwise assist in
enforcing all the rights of MRMI with respect to any contract or
dispute related to the Gaming Business and the Hospitality
Business, and in connection with the prosecution by MRMI of legal
actions against third parties or the determination of when to
settle, compromise and/or release any such actions or
suits;
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To assist in
supervision of the employees of MRMI responsible for maintaining
the Gaming Center and the Hospitality Facilities in a good state of
repair and condition, and to assist in ensuring that ordinary
repairs, alterations and improvements to the Gaming Center and the
Hospitality Facilities are made, including advising MRMI of the
necessity and estimated cost of such maintenance and
repairs;
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To recommend
and assist in overseeing the placement, replacement and
substitution of the Equipment and other furnishings located in the
Gaming Center and the Hospitality Facilities as the same are
damaged, destroyed or become obsolete, or as is otherwise necessary
to the successful operation of the Gaming Business and the
Hospitality Business;
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To assist MRMI
in obtaining and maintaining all licenses, permits, authorizations
and approvals required for the conduct of the Gaming Business or
the Hospitality Business;
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To assist in
supervision of the employees of MRMI responsible for remitting to
the NYS Lottery all amounts realized from the conduct of the Video
Lottery Machine operations of the Gaming Business, to the extent
required by law;
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To promptly
notify MRMI of any personal injury, property damage or other claim
occurring on, or claimed by any party with respect to, the Gaming
Center or the Hospitality Facilities, and to promptly forward to
MRMI any summons, subpoena or other legal document served upon the
Manager relating to actual or alleged potential liability of MRMI
or the Manager (whether or not in connection with the Gaming Center
or the Hospitality Facilities, or the operation of the Gaming
Business or the Hospitality Business);
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To assist MRMI
in making all reasonable efforts to prevent violations of, and
otherwise comply with, the provisions of any Legal Requirements
applicable to the use and occupancy of the Gaming Center and the
Hospitality Facilities, or the conduct of the Gaming Business and
the Hospitality Business;
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To assist in
the supervision of the employees of MRMI in their performance of
all financial reporting functions with respect to the Gaming
Business and the Hospitality Business and in their maintaining of
the licenses, permits, authorizations, approvals and insurance
coverages required for such businesses or as contemplated by this
Agreement;
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To assist MRMI
as reasonably requested with the preparation of information to be
included in any regulatory reports or filings pertaining to the
Gaming Business or the Hospitality Business; and
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To assist MRMI
in making arrangements for appropriate security for the operation
of the Gaming Business and the Hospitality Business.
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In addition to the foregoing, the Manager may
from time to advance monies to MRMI for mutually agreed upon
capital projects identified by the Manager which clearly provide a
substantial return on investment and which are projected to be
repaid within an agreed upon timeframe.
3.03
No Liability for Certain Violations . The Manager
assumes no liability whatsoever for any acts or omissions of MRMI
or any previous owners of the Racetrack. Except as
otherwise provided for herein, the Manager assumes no liability for
violations currently existing at the Racetrack with respect to
applicable Legal Requirements, including without limitation, Legal
Requirements relating to health, taxes or the environment or
hereafter with respect to any environmental laws or regulations,
and MRMI agrees to indemnify, defend and hold the Manager harmless
from and against any and all claims, fines, costs, fees and
expenses arising in respect thereof. The Manager shall
promptly notify MRMI in writing of any such violation discovered by
the Manager, but the failure to so notify shall not be a waiver of
the Manager’s rights pursuant to this Section
3.03. Notwithstanding the foregoing, the Manager shall
be responsible for all violations of applicable Legal Requirements
as a direct result of any act or omission by the Manager or others
acting under or through the Manager, and the Manager shall
indemnify and hold MRMI harmless from and against any and all
claims, fines, costs, fees and expenses arising in respect to any
of such matters for which the Manager is responsible.
3.04
Operating Budgets . MRMI will prepare an
Operating Budget covering the prospective operations of the Gaming
Business, the Hospitality Business and the Racing Business for each
Operating Year, for review and approval by the Manager in
accordance with the provisions of this Section 3.04.
3.04.1 Preparation of the
Budgets . MRMI will submit to the Manager, not less than
forty-five (45) days in advance of each Operating Year (except for
the first Operating Year which will be submitted to the Manager
within forty-five (45) days following the Commencement Date), a
forecast composed of an estimate of profit and loss by month, an
estimated cash flow projection by month, and a forecast of the
operations of the Gaming Business, the Hospitality Business and the
Racing Business by department (collectively the “Operating
Budget”).
3.04.2 Review of the Budgets
. In connection with its annual submission of the
Operating Budget, representatives of MRMI will meet with
representatives of the Manager to have an in-depth discussion
thereof, including a comparison of such budgets with the previous
year’s performance of the Gaming Business, the Hospitality
Business and the Racing Business, a discussion of marketing
strategies, identification of potential markets, and the proposed
expenditures contained in the Operating Budget.
3.04.3 Approval of the
Budgets . The Operating Budget shall be subject to
the approval of the Manager, it being contemplated that each such
Operating Budget shall be agreed upon by the parties within thirty
(30) days after the submission of the same by MRMI to the
Manager. If the Manager shall fail to approve any
Operating Budget within thirty (30) days after its receipt from
MRMI, and if the Manager fails to submit written objections to the
Operating Budget to MRMI within such thirty (30) day period of
time, then the Manager shall be deemed to have approved the
same. In case of a dispute with regard to any Operating
Budget, pending the resolution of such dispute MRMI shall be
entitled to continue to fund the Gaming Business, the Hospitality
Business and the Racing Business in accordance with the standards
set forth herein and shall be entitled to make expenditures which
are contemplated by and consistent with the Operating Budget
proposed by MRMI for such Operating Year; provided however, that,
the maximum approved amount of such expenditures shall be equal to
(a) the aggregate of all items set forth in the Operating Budget
which are not disputed by the Manager, plus (b) with respect to all
items in the Operating Budget which are disputed or objected to by
the Manager, the amount allocated to such item(s) in the Operating
Budget for the immediately preceding Operating Year increased by
five percent (5%). The Manager shall act reasonably and
exercise prudent business judgment in approving or disapproving
each portion of the Operating Budget, and will act in a manner that
shall permit the continued functioning and operation of the Gaming
Business, the Hospitality Business . and the Racing
Business.
3.04.4 Performance under the
Operating Budget . MRMI agrees to conduct the Gaming
Business, the Hospitality Business and the Racing Business in
accordance with the Operatings Budgets jointly approved by MRMI and
the Manager in the manner described in Section 3.04.3
above. The Manager will use commercially reasonable
efforts to assist MRMI in achieving the results set forth in the
Operating Budget with respect to any Operating Year; provided
however, that MRMI acknowledges each Operating Budget is a
composition of estimates and, therefore, the Manager cannot
guarantee or warrant that the actual operation of the Gaming
Business, the Hospitality Business and the Racing Business for any
Operating Year will be as set forth in the Operating Budget for
such Operating Year. During each Operating Year, the
Manager will also use commercially reasonable efforts to assist
MRMI in the operation of the Gaming Business and the
Hospitality Business within the approved Operating Budget (subject,
in the case of any disputed items, to the provisions of Section
3.04.3). Notwithstanding the foregoing, MRMI understands
and agrees as follows:
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Certain
expenses provided for in the Operating Budget for any Operating
Year will vary based on the number of patrons served by the Gaming
Business, the Hospitality Business and the Racing Business, and
accordingly, to the extent that patronage of the Gaming Center, the
Hospitality Facilities and the Racing Facilities for any Operating
Year exceeds the patronage projected in the approved Operating
Budget for such Operating Year, such approved Operating Budget
shall be deemed to include corresponding increases in such variable
expenses.
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The amount of
certain Expenses such as real estate taxes, utilities, insurance
premiums, license and permit fees, and charges assessed by
professional advisers or provided for in contracts and leases
entered into by MRMI pursuant to this Agreement are not within the
ability of the Manager to control. All of such
uncontrollable Expenses shall be paid without regard to the
estimated amounts provided with respect thereto in the approved
Operating Budget for any Operating Year.
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If any
expenditures are required on an emergency basis to avoid damage to
the Gaming Center, the Hospitality Facilities and the Racing
Facilities or injury to persons or property, MRMI may direct the
payment of such amounts as may reasonably be required to avoid or
mitigate such damage or injury, even if the amounts of such
expenditures are not specified in, or are not within the amounts
provided for in, the approved Operating Budget for the Operating
Year in question. MRMI will notify the Manager as
promptly as reasonably possible of the making any such
expenditures.
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If any
expenditures are required to comply with any Legal Requirements or
to cure or prevent any violation thereof, MRMI may direct the
payment of such amounts as may be necessary to comply with such
Legal Requirements or to remove or prevent the violation thereof
even if the amounts of such expenditures are not specified in, or
are not within the amounts provided for in, the approved Operating
Budget for the Operating Year in question.
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The Manager
shall have the right from time to time during each Operating Year
to propose modifications to the approved Operating Budget then in
effect based on actual operations during the elapsed portion of the
Operating Year in question. Any such modification will
be based on the judgment of the Manager as to what will transpire
during the remainder of such Operating Year, and such modifications
shall be subject to the approval of MRMI.
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3.05
Defective Conditions . If the design or
construction of the Gaming Center and the Hospitality Facilities is
defective, and the defective condition causes material damage or
disruption to the Gaming Business or the Hospitality Business,
poses a risk of injury to people or property, materially interferes
with the ability of the Manager to assist MRMI with respect to
supervision of the operation of the Gaming Business and the
Hospitality Business, or is not in compliance with one or more
Legal Requirements, the Manager will notify MRMI of such
circumstance and MRMI shall as expeditiously as possible remedy
such defect. The obligation of MRMI to proceed
expeditiously to correct such condition shall apply regardless of
whether or when insurance proceeds may be available to cover the
necessary expenditures. Any amounts expended by MRMI in
effecting the remedy of any such defect shall not be treated as
Expenses for purposes of this Agreement.
ARTICLE IV
RETAINED RIGHTS, AUTHORITY
AND
RESPONSIBILITIES OF
MRMI
4.01
Retained Rights of MRMI . All legal and equitable
interest in the Racetrack, the Gaming Center, the Hospitality
Facilities, the Racing Facilities and the improvements made thereto
from time to time shall belong exclusively to
MRMI. Subject to the obligation of MRMI to pay the
Management Fees described in Section 6.01 of this Agreement, MRMI
retains the exclusive right to receive and retain all of the Gross
Revenues of the Gaming Business, the Hospitality Business and the
Racing Business, subject to the obligation on the part of MRMI to
pay the Expenses.
4.02
Authority and Responsibilities of MRMI
. MRMI expressly retains the following authority and
responsibilities with respect to the conduct of the Gaming
Business, the Hospitality Business and the Racing
Business:
4.02.1 Collection of Gross
Revenues . MRMI will collect all of the Gross
Revenues realized from the conduct of the Gaming Business, the
Hospitality Busi
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