<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-12522
ALPHA HOSPITALITY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3714474
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
------------------------------------
12 EAST 49TH STREET, NEW YORK, NY 10017
(Address of principal executive offices)
------------------------------------
(212) 750-3500
(Issuer's telephone number)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15 (d) of the Securities Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: August 12, 1998.
Class
Common Stock, $0.01 par value 15,183,000 shares
- --------------------------------------------------------------------------------
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ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets June 30, 1998 and
December 31, 1997.......................................... 1
Consolidated Statements of Operations Six Months Ended
June 30, 1998 and 1997..................................... 2
Consolidated Statements of Operations Three Months Ended
June 30, 1998 and 1997..................................... 3
Consolidated Statements of Cash Flows Six Months Ended
June 30, 1998 and 1997..................................... 4-5
Notes to Consolidated Financial Statements .................... 6-11
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 12-15
PART II OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 16
Item 2. Changes in Securities.......................................... 16
Item 6. Exhibits and Reports on Form 8-K............................... 16
Signatures..................................................... 17
</TABLE>
All items which are not applicable or to which the answer is negative have been
omitted from this report.
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash, including restricted cash of $2,446 and $500 in
1998 and 1997, respectively......................................... $ 6,421 $ 2,211
Accounts receivable, less allowance for doubtful accounts
of $635 in 1997..................................................... 15
Prepaid insurance....................................................... 276
Other current assets.................................................... 366 264
Deferred tax asset...................................................... 6,375
Net assets held for sale................................................ 13,850
------------ ----------
Total current assets 6,787 22,991
PROPERTY AND EQUIPMENT, net.................................................. 4,983 5,010
INVESTMENT .................................................................. 7,616
DEPOSITS AND OTHER ASSETS.................................................... 1,913 1,992
------------ ----------
$ 21,299 $ 29,993
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Long-term debt, current maturity........................................ $ 1,000 $
Notes payable........................................................... 1,418
Accounts payable and accrued expenses................................... 1,398 5,599
Accrued payroll and related liabilities................................. 1,698 2,110
Due to affiliate, current maturity...................................... 3,730
------------ ----------
Total current liabilities........................................... 4,096 12,857
------------ ----------
LONG-TERM DEBT, less current maturity........................................ 2,000 7,800
------------ ----------
DUE TO AFFILIATE, less current maturity...................................... 503
------------ ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, 1,000 shares authorized:
Series B, $.01 par value, 821 issued................................ 8 8
Series C, $.01 par value, 135 issued................................ 1
Common stock, $.01 par value, 25,000 shares authorized, 15,183 and
14,406 issued in 1998 and 1997, respectively........................ 152 145
Common stock payable.................................................... 2,861 1,391
Capital in excess of par value.......................................... 72,374 61,259
Accumulated deficit..................................................... (60,193) (53,970)
------------ -----------
Total stockholders' equity.......................................... 15,203 8,833
------------ -----------
$ 21,299 $ 29,993
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
1
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1998 1997
---- ----
<S> <C> <C>
REVENUES:
Casino.................................................................. $ 4,923 $ 15,855
Food and beverage, retail and other..................................... 266 323
--------- ---------
Total revenues...................................................... 5,189 16,178
--------- ---------
COSTS AND EXPENSES:
Casino.................................................................. 1,901 5,876
Food and beverage, retail and other..................................... 91 280
Selling, general and administrative..................................... 3,758 8,474
Interest................................................................ 954 1,587
Depreciation and amortization........................................... 883 2,561
Pre-opening and development costs....................................... 130 607
--------- --------
Total costs and expenses............................................ 7,717 19,385
---------- --------
LOSS FROM OPERATIONS......................................................... (2,528) (3,207)
--------- --------
OTHER INCOME (LOSS):
Loss from equity investee............................................... (884)
Gain on sale of assets.................................................. 6,425
--------- --------
Total other income, net............................................. 5,541
--------- --------
INCOME (LOSS) BEFORE DEFERRED INCOME TAXES .................................. 3,013 (3,207)
DEFERRED INCOME TAXES........................................................ 6,375
--------- ----------
NET LOSS..................................................................... $ (3.362) $ (3,207)
========= ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING................................... 14,741 13,868
========= ==========
NET LOSS PER COMMON SHARE.................................................... $ (.23) $ (.23)
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
----------------------------
1998 1997
---- ----
<S> <C> <C>
REVENUES:
Casino.................................................................. $ $ 7,792
Food and beverage, retail and other..................................... 135 122
--------- --------
Total revenues...................................................... 135 7,914
--------- --------
COSTS AND EXPENSES:
Casino.................................................................. 2,926
Food and beverage, retail and other..................................... 135
Selling, general and administrative..................................... 780 4,238
Interest................................................................ 234 820
Depreciation and amortization........................................... 14 1,297
Pre-opening and development costs....................................... 67 316
--------- ---------
Total costs and expenses............................................ 1,095 9,732
--------- ---------
LOSS FROM OPERATIONS......................................................... (960) (1,818)
--------- ---------
OTHER INCOME (LOSS),
loss from equity investee............................................... (707)
--------- ---------
LOSS BEFORE DEFERRED INCOME TAXES ........................................... (1,667) (1,818)
DEFERRED INCOME TAXES........................................................
--------- ---------
NET LOSS..................................................................... $ (1,667) $ (1,818)
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING................................... 15,072 14,049
========== =========
NET LOSS PER COMMON SHARE.................................................... $ (.11) $ (.13)
========== =========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................ $ (3,362) $ (3,207)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.................................. 883 2,561
Deferred taxes................................................. 6,375
Equity loss.................................................... 884
Gain on sale of assets......................................... (6,425)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable................. 15 (7)
Decrease in prepaid insurance.............................. 276 353
(Increase) decrease in inventories......................... (19) 5
Increase in other current assets........................... (202) (152)
Decrease in accounts payable and accrued expenses......... (3,089) (1,498)
Decrease in accrued payroll and
related liabilities........................................ (57) (51)
---------- --------
NET CASH USED IN OPERATING ACTIVITIES........................................ (4,721) (1,996)
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets............................................ 11,800
Payments for hotel construction costs................................... (1,100)
Purchases of property and equipment..................................... (114)
Cash from hotel construction escrow..................................... 1,700
Payments for deposits and other assets.................................. (138) (315)
---------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES.......................... 12,262 (429)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to affiliate................................................... (3,299)
Advances from affiliate................................................. 1,714
Proceeds from sale of common stock...................................... 1,000
Payments on long-term debt.............................................. (32) (910)
---------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.......................... (3,331) 1,804
---------- --------
NET INCREASE (DECREASE) IN CASH.............................................. 4,210 (621)
CASH, beginning of period.................................................... 2,211 1,350
---------- --------
CASH, end of period.......................................................... $ 6,421 $ 729
========== ========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1998 1997
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION, cash paid for interest during
the period ........................................................... $ 73 $ 551
========== ==========
SUPPLEMENTAL SCHEDULES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Restructuring and conversion of Bryanston obligations:
Issuance of preferred stock......................................... $ 9,732
==========
Mortgage on the Jubilation gaming vessel............................ $ 3,000
==========
Extinguishment of debt including accrued interest of $3,101......... $ 12,732
==========
Non-cash consideration received in exchange for the sale of assets:
Investment in Buyer................................................. $ 8,500
==========
Assumption by Buyer of the net proceeds of pre-financing............ $ 17,900
==========
Assumption by Buyer of certain accounts payable, accrued expenses,
payroll liabilities and a capital lease obligation............. $ 2,000
==========
Decrease in amount due under redemption agreement,
including accrued interest of $155.................................. $ (1,584)
=========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
NOTE 1 - NATURE OF BUSINESS
Alpha Hospitality Corporation (the "Company"), incorporated in Delaware on
March 19, 1993, through its subsidiaries, owned and operated a gaming vessel and
constructed an adjacent hotel in Greenville, Mississippi. On March 2, 1998, the
Company sold these assets to Greenville Casino Partners, L.P. (Buyer) (see Note
3). Included in the consideration, the Company received a 25% partnership
interest in the Buyer, whose assets include an additional casino and hotel
located in Greenville, Mississippi. The Company, through its other subsidiaries,
is also pursuing additional gaming-related and other opportunities.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING
POLICIES
Financial Statements - The accompanying unaudited consolidated financial
statements of Alpha Hospitality Corporation and subsidiaries have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles.
All adjustments which are of a normal and recurring nature and, in the opinion
of management, necessary for a fair presentation have been included. The
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements as of December 31, 1997, included
in the 1997 Form 10-K.
Operations and Principles of Consolidation - The accompanying financial
statements include the accounts of the Company and all of its wholly-owned
subsidiaries. All intercompany transactions and balances have been eliminated in
consolidation.
Investment - The Company's 25% partnership interest in Buyer is being
accounted for under the equity method of accounting. Accordingly, the investment
is recorded at cost and adjusted by the Company's proportionate share of the
Buyer's undistributed earnings or losses.
Casino Revenue - Casino revenue is the net win from gaming activities,
which is the difference between gaming wagers less the amount paid out to
patrons.
Promotional Allowances - Promotional allowances primarily consist of food
and beverage furnished gratuitously to customers. Revenues do not include the
retail amount of food and beverage of $496 and $919 for the six months ended
June 30, 1998 and 1997, respectively, provided gratuitously to customers. The
cost of these items was $224 and $413 for the six months ended June 30, 1998 and
1997, respectively.
Interest Capitalization - Interest costs incurred during the construction
and development of the dockside casino, the hotel and related facilities were
capitalized as part of the cost of such assets.
Uses of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Impairment of Long-lived Assets- The Company periodically reviews the
carrying value of certain of its long-lived assets in relation to historical
results, as well as management's best estimate of future trends, events and
overall business climate. If such reviews indicate that the carrying value of
such assets may not be recoverable, the Company would then estimate the future
cash flows (undiscounted and without interest charges). If such future cash
flows are insufficient to recover the carrying amount of the assets, then
impairment is triggered and the carrying value of any impaired assets would then
be reduced to fair value.
Reclassifications - Certain amounts have been reclassified in 1997 to
conform to the 1998 presentation.
6
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<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
NOTE 3 - PROPERTY AND EQUIPMENT
Details of property and equipment at June 30, 1998 and December 31, 1997
are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- -------
<S> <C> <C>
Land and building................................................... $ $ 214
Boat, barge and improvements........................................ 5,267 24,337
Leasehold improvements.............................................. 82 14,240
Gaming equipment.................................................... 3,023 10,307
Furniture, fixtures and equipment................................... 1,835 7,259
Transportation equipment............................................ 760
Construction in progress............................................ 2,966
---------- -----------
10,207 60,083
Less accumulated depreciation and amortization...................... 5,224 22,444
---------- -----------
4,983 37,639
Less amounts included in net assets held for sale, including
accumulated depreciation and amortization of $17,331........... 32,629
---------- -----------
$ 4,983 $ 5,010
========== ===========
</TABLE>
In February 1998, Alpha Greenville Hotel, Inc. ("Greenville Hotel")
completed construction of its hotel at a total cost of approximately $4,000,
including capitalized interest and indirect labor and sundry costs.
On March 2, 1998, the Company sold substantially all of the assets of
Alpha Gulf Coast, Inc. ("Alpha Gulf" or "Gulf Coast") and Greenville Hotel,
including the casino barge, boarding barge, related gaming and other equipment,
furniture and improvement and related permits, licenses, leases and other
agreements to the Buyer. In exchange for such assets, the Company received from
the Buyer total consideration of approximately $40,200, including $11,800 in
cash, the assumption of approximately $2,000 of certain accounts payable,
accrued expenses, payroll liabilities and a capital lease obligation, a 25%
partnership interest in the Buyer, valued at $8,500 and the assumption by the
Buyer of the Company's obligations to repay the net proceeds from certain
financing (Pre-Closing Financing) of $17,900 (see Note 4). The Company
recognized a gain on the sale of $ 6,425.
In July 1998, the Company was notified that the Buyer was anticipating
the possible need for making a capital call of its partners, including the
Company, and that the Company might be asked to contribute up to an additional
$750 to Buyer. The Company has not yet determined whether, if such a capital
call is made by the Buyer, it will make the requested contribution. If the
Company declines, its interest in Buyer could be expected to be reduced from 25%
to approximately 16%.
Approximately $895 of the sale proceeds were escrowed for potential
repairs to the barge and surrounding property relative to storm damage occurring
prior to the sale. A $200 reserve for the estimate of potential repairs in
excess of insurance proceeds was recorded during the six months ended June 30,
1998, as a reduction to the gain on the sale.
7
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<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
NOTE 4 - LONG-TERM DEBT
Long-term debt at June 30, 1998 and December 31, 1997 is comprised of the
following:
<TABLE>
<CAPTION>
INTEREST
RATES 1998 1997
--------- -------- ------
<S> <C> <C> <C>
Mortgage note payable to Bryanston, collateralized by the Company's
idle gaming vessel with interest payable monthly and principal
payments not to exceed $1,000 per annum, with any unpaid
balance due at maturity in April 2005................................... 8% 3,000
Pre-closing financing (see Note 3), collateralized by Alpha Gulf's
property and equipment and certain related assets, net of an 30-day
uncollateralized, zero-coupon promissory note in the stated LIBOR
principal amount of approximately $4,900.......................... +6.15% $ 19,000
Note payable, Bryanston, principal and interest
due monthly through April 1, 1999................................. 10% 7,800
Capitalized lease obligations, payable monthly, expiring
in various years through 2001..................................... 10-14% 288
------- --------
3,000 27,088
Less:
Amount included in net assets held for sale....................... 19,288
Current portion................................................... 1,000
------- --------
$ 2,000 $ 7,800
======= ========
Aggregate future required principal payments are approximately as
follows:
YEARS ENDING JUNE 30:
1999.............................................................. $ 1,000
2000.............................................................. 1,000
2001.............................................................. 1,000
2002 and thereafter...............................................
-------
$ 3,000
=======
</TABLE>
In connection with and in anticipation of the Company's sale of
substantially all of the assets of Alpha Gulf and Greenville Hotel (see Note 3),
the Company obtained $17,900 of net proceeds from certain financing (Pre-Closing
Financing) on December 30, 1997, net of closing costs of $1,100 and loan
discounts of $4,900. The loan discounts represented an uncollateralized, zero-
coupon promissory note which the Company executed and delivered to the
pre-closing lender, in the stated principal amount of $4,900, representing
additional unfunded financing. Although no proceeds were received by the Company
in conjunction with such promissory note, under the terms of the sale, the Buyer
assumed such promissory note. Accordingly, upon consummation of such sale on
March 2, 1998, the Company was relieved of all Pre-Closing Financing
obligations.
8
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<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
NOTE 4 - LONG-TERM DEBT (CONTINUED)
On June 30, 1998, the Company restructured it obligations to Bryanston
Group, Inc. (Bryanston) by extinguishing its notes payable of $7,800, $1,399 and
$432 (See Note 6) plus accrued interest on the notes aggregating $3,101, in
exchange for the issuance of preferred stock (see Note 7) and a $3,000 mortgage
note on the Company's idle gaming vessel located in Lakeshore, Mississippi.
NOTE 5 - ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES
At June 30, 1998 and December 31, 1997, accounts payable and other
accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Construction............................................. $ $ 1,021
Accrued professional fees................................ 352 634
Accrued property taxes................................... 40 492
Accrued interest......................................... 2,219
Other.................................................... 1,006 3,422
------- -------
1,398 $ 7,788
Less amount included in net assets held for sale......... 2,189
------- -------
$ 1,398 $ 5,599
======= =======
</TABLE>
NOTE 6 - COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
Pursuant to the Company's restructuring of its obligations to Bryanston
(see Notes 4 and 7), the June 30, 1998 principal balance of $432 and accrued
interest of $507 under a $20,000 non-revolving promissory note with Bryanston,
was extinguished.
The Company, through its wholly owned subsidiary Alpha Monticello, Inc.
("AMI"), is party to a General Memorandum of Understanding (the "Memorandum")
with Catskill Development, LLC ("CDL", and with AMI, collectively, the
"Parties") dated December 1, 1995 which, among other things, provides for the
establishment of Mohawk Management, LLC, a New York limited liability company
("MML") for the purpose of entering into an agreement to manage a proposed
casino on land to be owned by the St. Regis Mohawk Indian Tribe (the "Mohawk
Tribe"). The Memorandum also sets forth the general terms for the funding and
management obligations of CDL and AMI respectively, with regard to MML. In
January 1996, MML was formed with each of CDL and AMI owning a 50% membership
interest in MML. On July 31, 1996, MML entered into a Gaming Facility Management
agreement with the Mohawk Tribe (the "Management Contract") for the management
of a casino to be built on the current site of Monticello Raceway in Monticello,
New York (the "Monticello Casino"). Among other things, the Management Contract
provides MML with the exclusive right to manage the Monticello Casino for seven
(7) years from its opening and to receive certain management fees for the
provision of such service. In accordance with Federal law, this agreement is
subject to final approval by the National Indian Gaming Commission. By its
terms, the Memorandum between CDL and AMI would terminate, if by December 31,
1998, all of the governmental approvals necessary for the construction and
operation of the Monticello Casino were not obtained by MML. The Management
Contract between MML and the Mohawk Tribe contains no such provision.
Additonally, the Memorandum is silent as to the effect of such expiration to
the continued existence of MML, the Parties respective 50% ownership therein and
the Management Contract. As of the date hereof all such approvals have not been
obtained, and there can be no assurance that they will be obtained on or before
December 31, 1998. For the six and three months ended June 30, 1998, the Company
incurred casino development costs of $100 and $43, respectively, which relates
to a general overhead allocation compared to $181 and $98 for the same periods
in 1997. As of June 30, 1998, and December 31, 1997, the Company has capitalized
$1,366 and $1,291, respectively, towards the design, architecture and other
costs of development plans for the casino.
9
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
NOTE 6 - COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS (CONTINUED)
The Company was obligated under a tideland lease which provided for a
mooring site for the Company's idle gaming vessel in Lakeshore, Mississippi.
Pursuant to a lease termination and mutual release agreement, the State of
Mississippi terminated the lease for a settlement of $86. Under the terms of the
agreement, the Company has until June 30, 1998 to remove any structures or
equipment remaining on this site. On July 27, 1998 the removal date was extended
through August 31, 1998 for a fee of $1 per week.
The Company is obligated under a wharfage agreement whereby the Company's
idle gaming vessel may continue to be moored at its Lakeshore, Mississippi
location for a monthly wharfage fee of approximately $8. The wharfage fee for
the six months ended June 30, 1998 was $46.
The Company is obligated under an employment contract with its Chairman and
Chief Executive Officer. Under this agreement, the Company will accrue deferred
compensation of $250 per year. The agreement is automatically renewable for
successive twelve month periods, unless either party shall advise the other on
ninety days written notice of his or its intention not to extend the term of the
employment. In the event of termination of employment, the terminated officer
will be retained to provide consulting services for two years at $175 per annum.
Included in restricted cash at June 30, 1998, is $1,250 pledged as
collateral on behalf of the Chairman and Chief Executive Officer of the Company.
Although not currently anticipated, any drawing upon such cash will be recorded
as a reduction in the balance of deferred compensation payable to the Chairman
and Chief Executive Officer. As of June 30, 1998, deferred compensation payable
to the Chairman and Chief Executive Officer is approximately $1,154. As of
August 12, 1998, no such drawings have occurred.
In January 1996, Alpha Gulf was named as a defendant in an action brought
in the Circuit Court of Hinds County, Mississippi (Amos v. Alpha Gulf Coast,
Inc.; Batiste v. Alpha Gulf Coast, Inc.; Ducre V. Alpha Gulf Coast, Inc.;
Johnston v. Alpha Gulf Coast, Inc.; Rainey v. Alpha Gulf Coast, Inc.). Based on
the theory of "liquor liability" for the service of alcohol to a customer,
plaintiffs alleged that on January 16, 1995, a vehicle operated by Mr. Amos
collided with a vehicle negligently operated by Mr. Rainey, an individual that
was allegedly served alcoholic beverages by Alpha Gulf. Plaintiffs alleged that
they suffered personal injuries and seek compensatory damages aggregating
$17,100 and punitive damages aggregating $37,500. The ultimate outcome of this
litigation cannot presently be determined. Accordingly, no provision for
liability to the Company, that may result upon adjudication, has been made in
the accompanying consolidated financial statements. The Company believes that
the risk referred to in this paragraph is adequately covered by insurance.
On March 2, 1998, the Company entered into a supervisory hotel management
agreement with the Buyer (see Note 3) for a term of ten years whereby the
Company will receive $100 per annum for management services, payable monthly.
Supervisory management fees earned for the period March 2, 1998 through June 30,
1998 amount to $33.
Included in restricted cash at June 30, 1998, is $431 in a litigation
escrow established at the December 1997 Pre-Closing Financing to be utilized
towards the resolution of certain contingent litigation. In anticipation of the
ultimate resolution of those issues, the balance sheet as of June 30, 1998
includes accruals approximating $95.
On May 12, 1998, subject to stockholder approval, the Company approved
compensation to each of the three outside directors of $6 per annum plus the
option to purchase 25 shares of the Company's common stock at the current market
price. Additional options to purchase 15 shares of the Company's common stock
will be granted to the respective outside directors for each committee served
upon.
The Company is a party to various other legal actions which arise in the
normal course of business. In the opinion of the Company's management, the
resolution of these other matters will not have a material adverse effect on the
financial position, results of operations or cash flows of the Company.
10
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
NOTE 7 - STOCKHOLDERS' EQUITY
The change in stockholders' equity during the six months ended June 30,
1998, includes the net loss of $3,362 and the issuance on June 30, 1998 of 135
shares of preferred stock, series C, in settlement of $9,732 of net obligations
(see note 4). The preferred stock series C, has voting rights of twenty-four
votes per preferred share, is convertible to twenty-four shares of common stock
and carries a dividend of $5.65 per share. In addition, the terms of the
preferred shares include a provision allowing the Company the option of calling
the preferred shares based upon the occurrence of certain capital events which
realize a profit in excess of $5,000.
The Company's cumulative preferred stock, series B, has voting rights
of eight (8) votes per preferred share, is convertible to eight shares of common
stock for each share of preferred stock and carries a dividend of $2.90 per
share, payable quarterly, which increases to $3.77 per share if the cash
dividend is not paid within 30 days of the end of each quarter. In the event the
dividend is not paid at the end of the Company's fiscal year (December 31), the
dividend will be payable in common stock. On December 17, 1997, the Company
declared a 1996 dividend of $1,391, payable in 777 shares of the Company's
common stock which were issued in April 1998. On May 12, 1998, the Company
declared a 1997 dividend of $2,861, payable in 1,071 shares of the Company's
common stock. As of August 12, 1998, dividends in arrears on the cumulative
preferred, series B, stock amounted to $1,548.
NOTE 8 - DEFERRED INCOME TAXES
The deferred income taxes of $6,375 represents the utilization of the
Company's net operating loss carryforwards to offset the estimated taxable gain
on sale of assets.
Deferred income taxes does not bear a normal relationship to income
before deferred income taxes because the estimated tax gain exceeds the
estimated financial statement gain due to the differences between the financial
statement and tax bases of Alpha Gulf's assets.
NOTE 9 -SUMMARIZED FINANCIAL INFORMATION
The following is summarized financial information of Greenville Casino
Partners, L.P. for the period March 2, 1998 through June 30, 1998:
<TABLE>
<S> <C>
Net Revenues........................................... $ 16,670
Costs and expenses..................................... 18,119
--------
Gross margin........................................... (1,449)
Interest expense, net.................................. 2,087
--------
Net loss.......................................... $ (3,536)
========
</TABLE>
11
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (IN THOUSANDS) (CONTINUED)
The following discussion of the historical consolidated financial
condition and results of the operations of the Company should be read in
conjunction with the Consolidated Financial Statements and the Notes to such
financial statements included elsewhere in this Form 10-Q. This Form 10-Q
contains forward-looking statements which involves risks and uncertainties
primarily relative to the speculative nature of the Company's proposed casino
development project and the potential future acquisition of a new business
operation which has not yet been identified. The Company's actual results may
differ significantly from the results discussed in these forward-looking
statements.
RESULTS OF OPERATIONS
CASINO OPERATIONS
On March 2, 1998, the Company sold substantially all of the assets of
Alpha Gulf and Greenville Hotel, including the casino barge, boarding barge,
related gaming and other equipment, furniture and improvement and related
permits, licenses, leases and other agreements to Greenville Casino Partners,
L.P. (Buyer). In exchange for such assets, the Company received from the Buyer
total consideration of $40,200, including approximately $11,800 in cash, the
assumption of approximately $2,000 of certain accounts payable, accrued
expenses, payroll liabilities and a capital lease obligation, a 25% partnership
interest in the Buyer and the assumption of the Company's obligations to repay
the net proceeds from the December 1997 Pre-Closing Financing of $17,900.
Alpha Gulf (the Company's primary operating subsidiary)
The following table sets forth the statements of operations for Alpha
Gulf before intercompany charges, deferred income tax and gain on sale of assets
for the six and three months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------ --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Casino.................................$ 4,923 $ 15,855 $ $ 7,792
Food, beverage and other............... 107 319 13 118
---------- ---------- ----------- ---------
Total revenues..................... 5,030 16,174 13 7,910
---------- ---------- ----------- ---------
Operating expenses:
Casino................................. 1,901 5,876 2,926
Food, beverage and other............... 91 280 135
Selling, general and administrative.... 2,810 8,047 200 4,176
---------- --------- ---------- --------
Total operating expenses........... 4,802 14,203 200 7,237
---------- --------- ---------- --------
Income (loss) from operations............... 228 1,971 (187) 673
---------- --------- ---------- --------
Other expenses:
Loss from equity investee.............. 884 707
Interest............................... 797 1,010 187 522
Depreciation and amortization.......... 873 2,552 9 1,288
----------- --------- ---------- ---------
Total other expenses............... 2,554 3,562 903 1,810
---------- --------- ---------- ---------
Loss before intercompany charges, deferred
income taxes and gain on sale of assets.....$ (2,326) $ (1,591) $ (1,090) $ (1,137)
========== ========= ========== =========
</TABLE>
12
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (IN THOUSANDS) (CONTINUED)
SIX AND THREE MONTHS ENDED JUNE 30, 1998:
Casino, food and beverage revenues and expenses represent activity from
Alpha Gulf's operation of its Bayou Caddy's Jubilee Casino through the date of
its sale on March 2, 1998. Accordingly, the 1998 revenues and operating expenses
are less than 1997.
Included in the consideration received in exchange for the sale of the
Bayou Caddy's Jubilee Casino, Alpha Gulf received a 25% partnership interest in
the Buyer whose primary assets include: the Las Vegas Casino, the Bayou Caddy's
Jubilee Casino, the Key West Inn and the Greenville Inn and Suites. The combined
complement of gaming devices is 37 table games and 1,427 slots which represents
67.4% of the devices in the Greenville market. The two hotels offer 56 rooms and
41 rooms and suites, respectively. For the period March 2, 1998, through June
30, 1998, and the three months ended June 30, 1998, the Company's proportionate
share of the Buyer's undistributed losses amounted to $884 and $707,
respectively.
In July 1998, the Company was notified that the Buyer was anticipating the
possible need for making a capital call of its partners, including the Company,
and that the Company might be asked to contribute up to an additional $750 to
Buyer. The Company has not yet determined whether, if such a capital call is
made by the Buyer, it will make the requested contribution. If the Company
declines, its interest in Buyer could be expected to be reduced from 25% to
approximately 16%.
Selling, general and administrative expenses for the six and three months
ended June 30, 1998 consist of payroll and related expenses of approximately
$1,096 and $136, respectively, marketing and advertising of approximately $930
and $0, occupancy costs of approximately $395 and $17, respectively, and other
operating expenses of $389 and $47, respectively.
Interest expense for the six months ended June 30, 1998 was primarily
attributable to the Pre-Closing Financing, a note payable to Bryanston and a
capital lease. The Pre-Closing Financing and the capital lease were extinguished
in March 1998 with the proceeds from the March 2, 1998 sale of substantially all
of the assets of Alpha Gulf and Greenville Hotel. Accordingly, the interest
expense for the three months ended June 30, 1998, is solely attributable to the
note payable to Bryanston.
OTHER OPERATIONS:
In connection with the sale of the hotel on March 2, 1998, the Company
entered into a supervisory management agreement with the Buyer for a term of ten
(10) years whereby the Company will receive $100 per annum for management
services. Supervisory management fees earned for the period March 2, 1998
through June 30, 1998 and the three months ended June 30, 1998, amounted to
approximately $33 and $25, respectively.
The Company, through a separate subsidiary, also owns a casino (the
Jubilation Casino) located in Lakeshore, Mississippi, which has been closed
since July 1996. The Company does not currently have plans to re-open or operate
the Jubilation Casino. The continuing costs incurred during the six and three
month periods ending June 30, 1998 were $288 and $123 , respectively, for
continuing administration and insurance, compared to $385 and $251 for the same
periods in 1997.
FUTURE OPERATIONS - GENERAL:
The Company, through its wholly owned subsidiary Alpha Monticello, Inc.
("AMI"), is party to a General Memorandum of Understanding (the "Memorandum")
with Catskill Development, LLC ("CDL") dated December 1, 1995 which, among other
things, provides for the establishment of Mohawk Management, LLC, a New York
limited liability company ("MML") for the purpose of entering into an agreement
to manage a proposed casino on land to be owned by the St Regis Mohawk Indian
Tribe (the "Mohawk Tribe"). The Memorandum also sets forth the general terms for
the funding and management obligations of CDL and AMI respectively, with regard
to MML. In January 1996, MML was formed with each of CDL and AMI owning a 50%
membership interest in MML. On July 31, 1996, MML entered into a Gaming Facility
Management agreement with the Mohawk Tribe (the "Management Contract") for the
management of a casino to be built on the current site of Monticello Raceway in
Monticello, New York (the "Monticello Casino"). Among other things, the
Management Contract provides MML with the exclusive
13
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (IN THOUSANDS) (CONTINUED)
FUTURE OPERATIONS - GENERAL (CONTINUED)
right to manage the Monticello Casino for seven (7) years from its opening and
to receive certain management fees for the provision of such service. In
accordance with Federal law, this agreement is subject to final approval by the
National Indian Gaming Commission. By its terms, the Memorandum between CDL and
AMI would terminate, if by December 31, 1998, all of the governmental approvals
necessary for the construction and operation of the Monticello Casino were not
obtained by MML. The Management Contract between MML and the Mohawk Tribe
contains no such provision. Additonally, the Memorandum is silent as to the
effect of such expiration to the continued existence of MML, the Parties
respective 50% ownership therein and the Management Contract. As of the date
hereof all such approvals have not been obtained, and there can be no assurance
that they will be obtained on or before December 31, 1998. For the six and three
months ended June 30, 1998, the Company incurred casino development costs of
$100 and $43, respectively, which relates to a general overhead allocation
compared to $181 and $98 for the same periods in 1997. As of June 30, 1998, and
December 31, 1997, the Company has capitalized $1,366 and $1,291, respectively,
towards the design, architecture and other costs of development plans for the
casino.
Additionally, proposals or prospects for new casinos or other gaming
activities may be presented to the Company, or the Company may otherwise become
aware of such opportunities (any such new casino or other gaming activities
being hereinafter sometimes referred to as "New Gaming Opportunities"). The
Company will continue to investigate and evaluate New Gaming Opportunities and,
subject to available resources, may choose to pursue and develop one or more New
Gaming Opportunities if the same is deemed to be in the best interest of the
Company and its stockholders. However, there can be no assurance that any New
Gaming Opportunity will be presented to, or otherwise come to the attention of ,
the Company, that the Company will elect to pursue or develop any New Gaming
Opportunity or that any New Gaming Opportunity that the Company may elect to
pursue or develop will actually come to fruition or, even if brought to
fruition, will be profitable.
Except to the extent the Company may pursue the Proposed Gaming Development
of any New Gaming Opportunity, as a result of the sale, the Company has been
effectively transformed to serve as a holding company and a vehicle to effect
acquisitions, whether by merger, exchange of capital stock, acquisition of
assets or other similar business combination (a "Business Combination") with an
operating business (an "Acquired Business"). To the extent the Company's
financial and other resources are not devoted to, or reserved for, the
development of the Proposed Gaming Development and/or any New Gaming
Opportunity, the business objective of the Company will be to effect a Business
Combination with an Acquired Business that the Company believes has significant
growth potential. The Company intends to seek to utilize available cash, equity,
debt or a combination thereof in effecting a Business Combination. While the
Company may, under certain circumstances, explore possible Business Combinations
with more than one prospective Acquired Business, in all likelihood, until other
financing provides additional funds, or its stature matures, the Company may be
able to effect only a single Business Combination in accordance with its
business objective, although there can be no assurance that any such transaction
will be effected.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1998, the Company had net cash used in
operating activities of $4,721. The uses were the result of a net loss of $3,362
plus noncash items o$1,717 and a net decrease in working capital of $3,076. The
noncash items were $883 of depreciation and amortization, the Company's
proportionate share of undistributed losses of an equity investee of $884, a
gain on sale of assets of $6,425 and $6,375 of deferred taxes. The decrease in
working capital consisted primarily of a decrease in prepaid insurance and other
current assets of $276 , a decrease in accounts payable and other accrued
expenses of $ 3,089, an increase in other current assets of $202 and a decrease
in payroll and related liabilities of $57.
Cash provided by investing activities of $12,262 consisted of proceeds from
the sale of assets of $11,800, cash from the hotel construction escrow of
$1,100, hotel construction costs of $1,700 and payments for deposits and other
assets of $138.
Cash used in financing activities of $3,331 was attributable to $3,299 in
net payments under the $20,000 non-revolving promissory note with Bryanston and
$32 of payments on long-term debt.
14
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (IN THOUSANDS) (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Although the Company is subject to continuing litigation, the ultimate outcome
of which cannot presently be determined at this time, management believes any
additional liabilities that may result from these cases will not be in an amount
that will materially increase the liabilities of the Company as presented in the
attached financial statements.
YEAR 2000 COMPLIANCE
The Company does not anticipate making significant expenditures in
connection with Year 2000 and believes the Year 2000 will not have a material
adverse effect on the Company's operations.
15
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 on file with the Securities and Exchange Commission.
There have been no other material developments during such period to any
existing legal proceeding.
ITEM 2. CHANGES IN SECURITIES
On June 20, 1998, the Company issued 135 shares of preferred stock series
C. The preferred stock series C has voting rights of twenty-four votes per
preferred share, is convertible to twenty-four shares of common stock and
carries a dividend of $5.65 per share. The Company is authorized to issue 1,000
shares of the preferred stock series C.
ITEM 6. EXHIBITS AND REPORTS ON 8-K
(a) 10.1 General Memorandum of Understanding dated December 1, 1995
10.2 Gaming Facility Management Agreement
16
<PAGE>
<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on behalf by the undersigned, thereunto duly
authorized.
Dated: August 12, 1998
/s/ STANLEY S. TOLLMAN
________________________
Stanley S. Tollman
Chairman and CEO
Dated: August 12, 1998
/s/ ROBERT STEENHUISEN
________________________
Robert Steenhuisen
Chief Accounting Officer
17
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as............................... 'SS'
<PAGE>
<PAGE>
GENERAL MEMORANDUM OF UNDERSTANDING
ALPHA ST. REGIS, INC., a Delaware corporation qualified to do business
in New York ("ASR") and CATSKILL DEVELOPMENT, L.L.C., a New York limited
liability company ("Catskill") have entered into this Memorandum of
Understanding this 1st day of December, 1995, for purposes of preliminarily
setting forth their agreement to jointly create a New York limited liability
company to be known as Mohawk Management, LLC, or other mutually acceptable name
(hereinafter referred to as "Casino") to manage and operate a gaming casino on
behalf of the Mohawk Indian Nation to be located on a portion of certain real
property located just outside of Monticello, Sullivan County, New York, on which
a harness racing facility is located known as "Monticello Raceway". Catskill,
anticipates purchasing Monticello Raceway no later than June 3, 1996.
After the execution of this Memorandum of Understanding, ASR and
Catskill will jointly form Casino and in good faith negotiate the terms and
conditions of the operating Agreement of Casino which terms and conditions will
not be inconsistent with this General Memorandum of Understanding. Catskill and
ASR will each own an undivided fifty percent (50%) membership interest in
Casino. Casino will have one class of member and two members, ASR and Catskill.
The affirmative vote of ASR and Catskill will be required for the execution or
extension of any Casino Management Contract with the St. Regis Mohawk Tribe for
a casino to be located at Monticello Raceway. Thereafter, ASR will manage and
operate the casino on behalf of Casino in accordance with the Casino Management
Contract and all applicable laws. ASR will perform or cause to be performed all
obligations required under any contracts Casino obtains and will prepare all
operating budgets and create and maintain all required financial, operating, and
accounting records. Casino will utilize accountants agreed to by both ASR and
Catskill.
ASR has a relationship with the St. Regis Mohawk Tribe ("Tribe"). The
Tribe is interested in owning and operating a casino at Monticello Raceway. Both
ASR and Catskill will negotiate with the Tribe for a multi-year Casino
Management Contract, which will provide for a management fee to Casino, and
advise the Tribe in obtaining necessary regulatory approvals from the Bureau of
Indian Affairs, National Indian Gaming Commission, and other agencies of the
Department of Interior and the State of New York ("Regulatory Approval") to
permit the Tribe to own and operate a casino at Monticello Raceway. Negotiations
with the Tribe are underway but not final, and Regulatory Approval has not been
obtained for the operation of a casino at Monticello Raceway. If Casino
successfully negotiates a Casino Management Contract with the Tribe, and the
Tribe obtains Regulatory Approval, Catskill will negotiate in good faith an
agreement to convey any necessary real property required for the proposed casino
to the United States Government to be held in trust for
<PAGE>
<PAGE>
the Tribe's use for Class II and Class III gaming. It is presently anticipated
that this conveyance will be of approximately ten to twenty acres, in the
aggregate, adjoining the existing raceway facilities. The size of the parcel and
the terms of any such conveyance shall conform to the reasonable requirements of
the United States Department of the Interior and its agencies and shall be for
consideration and on terms and conditions reasonably satisfactory to Catskill.
Both Catskill and ASR will advise the Tribe in obtaining financing for
the construction of the proposed casino, and financing necessary for the
purchase or lease of furnishings and equipment for the casino as well as
financing required for pre-opening activities and working capital. Any Casino
Management Contract reached with the Tribe for the management of a casino at
Monticello Raceway by either of the parties or their related or affiliated
business organizations will be with Casino.
It is acknowledged hereby that ASR will be required to provide
management, supervisory, support and all other services (the "Service") in the
performance of Casino's obligations under any casino Management Contract. It is
further acknowledged hereby that ASR will be entitled to be paid a reasonable
fee for performing the Service, but no greater than is customarily paid in the
gaming industry for the same or similar services. It is the intent of the
parties hereto, to recover the costs of the Service directly from the gross
revenue of the casino operations as a cost of operation on the basis of a
service fee, not to exceed two percent (2%) of the gross win (the "Service
Fee"). Catskill may cause Casino to request proposals for the performance of the
Service from first class casino operators (such as Harrahs). In the event any
such operator submits a proposal to perform the Service for a price more
favorable to Casino than provided herein and ASR does not elect to perform the
Service for the price proposed within thirty (30) days of receipt of the
proposal, Catskill may cause Casino to contract with any such qualified operator
to perform the Service at a price and on terms and conditions satisfactory to
Catskill and ASR. Assuming ASR provides the Service: either (a) the Service Fee
will be deducted and paid from gross casino revenues and will not be deducted as
part of the management fee received by Casino under the Casino Management
Contract, or (b) in the event the Service Fee is not paid from gross revenue,
through no fault of ASR, then ASR will be paid ten percent (10%) of the fee
received under the Casino Management Contract (but in no event will such amount
be greater than either two percent (2%) of the gross win or the proposal amount
ASR elected to receive, whichever is less) for its performance of the service.
For example, if the fee received under the casino Management Contract is thirty
percent (30%), the Service Fee shall be three percent (3%), but such amount will
not be greater than either two percent (2%) of the gross win or the proposal
amount ASR elected to receive, whichever is less.
2
<PAGE>
<PAGE>
The planning and development of all facilities at Monticello Raceway,
including the casino, will be Catskill's responsibility and shall be
accomplished under a contract between Catskill and Monticello Raceway
Development Company,, L.L.C. ("MRD"). Catskill shall cause MRD to enter into an
agreement with ASR on terms and conditions consistent with gaming industry
standards and negotiated in good faith whereby ASR shall provide technical
services for the planning and programing of the casino set-up and operations to
MRD at a fee that is consistent with technical service fees charged for similar
services in the gaming industry. Such fee shall only be earned in the event a
casino at Monticello Raceway for the Tribe receives Regulatory Approval by
December 31, 1998. Any technical service fees earned by ASR for performing the
technical services pursuant to any said agreement with MRD, will be paid by MRD
in connection with the development of the casino and related facilities and in
accordance with an approved development budget and payment schedule as provided
in the contract between Catskill and MRD; provided, however, no such payments
will be made unless said payments are made to MRD. The technical services fees
earned, but not paid, hereunder will accrue interest at one percent (1%) per
month until paid. In the event ASR and MRD are unable to agree upon the terms,
conditions or technical service fees to be charged, MRD and ASR shall submit to
binding arbitration on these issues for determination of reasonable terms,
conditions and fees consistent with gaming industry standards.
ASR and Catskill will develop a mutually acceptable budget for the soft
costs related to the start-up of Casino and the preliminary planning and other
activities related to establishing the Tribe's Casino at Monticello Raceway
("Soft Cost Budget"). Once the Soft Cost Budget has been established and
mutually approved, ASR and Catskill agree to fund a maximum amount of operating
capital not to exceed $2,117,803.00 on a pro rata basis for Casino. ASR has
previously funded $19,789.00 and Catskill has previously funded $19,789.00 of
the required operating capital leaving a balance of $1,078,225.00 to be funded
on a pro rata basis. Upon execution of this Memorandum of Understanding and
approval of the Soft Cost Budget, ASR and Catskill shall fund thirty-three
percent (33%) of the balance set forth above. After funding thirty-three percent
(33%) of the balance or after any subsequent funding of a portion of the then
remaining balance, no further funding will be required unless and until Catskill
has furnished ASR an accounting for amounts previously funded and has notified
ASR of amounts funded under the Soft Cost Budget. All funds will be administered
by Catskill and will be expended in a manner consistent with approved budgets.
Any additional capital required by casino in excess of the amount set forth
above will be obtained from mutually acceptable outside financing sources on
terms satisfactory to both ASR and Catskill. Any modifications to any budget or
increases in the amount of operating capital to be funded will require the
written approval of both ASR and Catskill.
Profits derived from the Casino Management Contract will be split on an
equal basis, fifty percent (50%) each between ASR and Catskill,
3
<PAGE>
<PAGE>
after deduction of the ministerial and accounting expenses incurred by Casino,
Service Fees, any expenses approved by ASR and Catskill and advanced by ASR or
Catskill which are not reimbursed under the terms of any Casino Management
Agreement, and any non-recovered costs and expenses incurred by either Catskill
or ASR or their affiliates in connection with the ownership or the operation of
the casino, provided both Catskill and ASR approve such costs, as well as any
payments to any third parties assisting ASR, Catskill, or Casino with respect to
the proposed casino operations at Monticello Raceway, provided such payment(s)
are mutually approved by both ASR and Catskill.
This Memorandum is for the exclusive use and benefit of ASR and
Catskill and: (a) is not intended to, nor does it, create any rights in any
third-party not signatory to it; (b) is not a contract for the conveyance of
real property; and (c) is not intended to, nor does it, create any right, title
or interest of any nature in or to real property. Neither ASR nor Catskill shall
assign this Memorandum to any other person or entity without the written consent
of the other, which consent will not be unreasonably withheld.
After execution of this Memorandum, Casino will be formed incorporating
the foregoing substantive provisions into its Operating Agreement. Both parties
will use their best efforts to negotiate a Casino Management Contract with the
Tribe, obtain Regulatory Approval for casino operations at Monticello Raceway
from all governmental authorities involved, and use their best efforts to make
casino operations at Monticello Raceway in behalf of the Tribe a reality. Any
disputes which may hereafter arise by virtue of the execution of this instrument
with regard to this instrument or to the terms and conditions of the Operating
Agreement of Mohawk Management LLC, which operating Agreement will not be
inconsistent with this General Memorandum of Understanding, shall be resolved
through arbitration by the American Arbitration Association in New York City,
New York, using AAA Rules of Arbitration.
This agreement and any Operating Agreement of Casino shall terminate
and be of no further force or effect if, for any reason whatsoever:(a) the
purchase of the real property known as Monticello Raceway does not close, or,
(b) all necessary Regulatory Approval (federal, state and local) for a Mohawk
Indian Casino to operate at Monticello Raceway shall not have been obtained by
December 31, 1998. Time is of the essence of this Agreement. Any waiver of any
condition contained herein shall only be effective if said waiver is in writing
and is signed by Catskill and ASR.
IN WITNESS WHEREOF, authorized representatives of the parties hereto
have executed this Memorandum of Understanding as of the date first above
written and Catskill, through the execution of this Memorandum by its Voting
Members, has approved this agreement and has
4
<PAGE>
<PAGE>
instructed its Officers to treat it as an agreement entered into in accordance
with 3.4(b) of Catskill's Operating Agreement.
ALPHA ST. REGIS, INC. CATSKILL DEVELOPMENT, L.L.C.
By its Voting Members and
President
By:/s/Sanford Freedman By:/s/Robert A. Berman
______________________________ ________________________________
Its: Vice President Robert A. Berman, President
WATERMARK INVESTMENTS LIMITED
Voting Member
By: /s/ Robert A. Berman
________________________________
Robert A. Berman
AMERICAS TOWER PARTNERS
Voting Member
By:/s/
________________________________
Managing Director
BRYANSTON GROUP, INC.
Voting Member
By:/s/ Sanford Freedman
________________________________
Executive Vice President
MONTICELLO REALTY L.L.C.
Voting Member
By: MANHATTAN DEVELOPMENT CORP.
By:
________________________________
5
<PAGE>
<PAGE>
GAMING FACILITY MANAGEMENT
AGREEMENT
AMONG
THE ST. REGIS MOHAWK TRIBE,
ST. REGIS MOHAWK GAMING AUTHORITY,
AND
MOHAWK MANAGEMENT, LLC
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1. Recitals and Conditions Precedent 1
2. Definitions 2
Authority 2
Authority's Representatives 2
Bureau of Indian Affairs 2
Cash Maintenance Account 2
Class II Gaming 2
Class III Gaming 2
Collateral Agreement 2
Compact 3
Depository Account 3
Developer 3
Development and Construction Agreement 3
Development Business Board 3
Effective Date 3
Financing Agreements 3
Furniture, Trade Fixtures, and Equipment 3
Gaming 3
Gaming Authority Charter 3
Gaming Enterprise 3
Gaming Enterprise Personnel Policies 4
Gaming Facility 4
General Manager 4
Generally Accepted Accounting Principles 4
Gross Gaming Revenue Win 4
Gross Revenues 4
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<C> <S> <C>
IGRA 5
Indebtedness 5
Independent Financial Advisor 5
Indian 5
Interest and Excess Cash Flow Account 5
Land Purchase Agreement 5
Legal Requirements 5
Management Board 5
Management Business Board 5
Manager's Representative 5
Member of the Tribal Government 5
Memorandum of Understanding 5
Minimum Balance 6
Minimum Priority Payment 6
National Indian Gaming Commission 6
Net Revenues 6
Non-Casino Facility 6
Operating Expenses 6
Person 7
Phase I 7
Phase I Commencement Date 7
Phase II 7
Phase II Commencement Date 7
Project Costs 7
Promotional Allowances 7
Property 8
Relative 8
</TABLE>
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<TABLE>
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Senior Secured Note Indenture 8
Senior Secured Notes 8
Shared Facilities Agreement 8
Trade Fixtures 8
Tribal Gaming Ordinance 8
Tribe 8
Trustee 8
3. Covenants 9
3.1 Engagement of Manager 9
3.2 Term 9
3.3 Establishment and Operation of
Management Business Board 9
3.4 Manager's Compliance With Law: Licenses 10
3.5 Tribe's Amendments to Tribal Gaming Ordinance 10
3.6 Management Fee 10
4. Business and Affairs in Connection with 11
Gaming Enterprise
4.1 Manager's Authority and Responsibility 11
4.1.1 Selection of General Manager 11
4.1.2 Removal of General Manager 11
4.1.3 Interim General Manager 11
4.2 Duties of the Manager 12
4.2.1 Management 12
4.2.2 Compliance 12
4.2.3 Required Filings 14
4.2.4 Contracts in Authority's Name and 14
at Arm's Length
4.2.5 Financing 14
4.2.6 Operating Capital 15
</TABLE>
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4.2.7 Compliance With Material Agreements 15
4.3 Security and Surveillance 15
4.4 Damage, Condemnation or Impossibility 15
of the Gaming Enterprise
4.4.1 Recommencement of Operations 16
4.4.2 Repair or Replacement 16
4.4.3 Other Business Purposes 17
4.4.4 Cessation Of Gaming 17
4.4.5 Tolling Of the Agreement 17
4.5 Alcoholic Beverages and Tobacco Sales 17
4.6 Employees 17
4.6.1 Manager's Responsibility 17
4.6.2 Authority's Employees 18
4.6.3 Authority's Inspector(s) 18
4.6.4 Indian Employment Preference 18
and Training
4.6.5 Removal of Employees 18
4.7 Marketing and Advertising 19
4.8 Pre-Opening 19
4.9 Operating Budgets 20
4.10 Capital Budgets 22
4.11 Capital Replacements 22
4.12 Contracting 23
4.13 Determination of Qualifications and Compensation 23
4.14 Litigation 23
4.15 Employee Background Investigations 24
4.16 Gaming Enterprise Personnel Policies 24
4.17 No Manager Wages or Salaries 24
</TABLE>
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4.18 Internal Control Systems 25
4.19 Bank Accounts 25
4.20 Daily Deposits to Depository Account 26
4.21 Disbursement Account 26
4.22 No Cash Disbursements 26
4.23 Petty Cash Fund 26
4.24 Transfers Between Accounts 26
4.25 Insurance 27
4.25.1 27
4.25.2 27
4.25.3 27
4.25.4 27
4.25.5 27
4.25.6 28
4.25.7 28
4.25.8 28
4.25.9 Waiver of Subrogation 29
4.26 Accounting and Books of Account 29
4.26.1 Statements and Audits 29
4.26.2 Books of Account 29
4.26.3 Accounting Standards 30
4.26.4 Depreciation Schedules 30
5. Liens 30
6. Management Fee, Reimbursement and Disbursement, 31
Financing Guarantee, Funding and Buy Out Option
6.1 Authorization for Payment of Management 31
Fee by Manager
6.2 Disbursements 31
</TABLE>
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6.3 Adjustment to Bank Account 31
6.4 Payment of Fees and Authority Disbursement 31
6.4.1 Subordination Provisions 33
6.5 Operative Dates 35
6.6 Payment of Net Revenues 35
6.7 Total Recoupment for Development Costs 35
7. General Provisions 35
7.1 Notice 35
7.2 Authorization 36
7.3 Relationship 37
7.4 Manager's Contractual Authority 37
7.5 Further Actions 37
7.5.1 Fire and Safety 37
7.5.2 Taxes 37
7.5.3 Governing Law 36
7.5.4 National Environmental Policy Act 38
7.6 Defense 38
7.7 Indemnity 38
7.8 Waivers 39
7.9 Captions 39
7.10 Severability 39
7.11 Interest 39
7.12 Reimbursement 39
7.13 Third Party Beneficiary 40
7.14 Brokerage 40
7.15 Survival of Covenants 40
7.16 Estoppel Certificate 40
</TABLE>
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7.17 Periods of Time 40
7.18 Preparation of Agreement 40
7.19 Exhibits 40
7.20 Non-Assignability 41
7.21 Confidential Information 41
7.22 Patron Dispute Resolution 42
7.23 Modification 42
8. Warranties 42
8.1 Preservation of Agreement 42
8.2 Non-Interference in Tribal Affairs 42
8.3 Prohibition of Payments to Members of 42
Tribal Government or Authority
8.4 Prohibition of Hiring Members of 43
Tribal's Government or Authority
8.5 Prohibition of Financial Interest 43
in Gaming Enterprises
8.6 Tribal Taxes 43
9. Grounds for Termination 44
9.1 Voluntary Termination and Termination for cause 44
9.2 Voluntary Termination 44
9.3 Termination for Cause 44
9.3.1 By Either Party 44
9.3.2 By the Authority 44
9.3.3 Rights Upon Termination 45
9.3.4 No Election of Remedies 45
9.4 Involuntary Termination Due to Changes 46
in Legal Requirements
9.5 Manager's Right to Terminate Agreement 46
9.6 Consequences of Termination for Manager's Breach 46
</TABLE>
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9.7 Consequences of Termination for Authority's Breach 47
10. Conclusion of the Management Term 47
10.1 Transition 47
10.2 Undistributed Net Revenues 47
11. Consents and approvals 48
11.1 Authority 48
11.2 Manager 48
12. Disclosures 48
12.1 Partners and Affiliates 48
12.2 Criminal and Credit Investigation 48
12.3 Disclosure Amendments 49
12.4 Breach of Manager Warranties and Agreements 49
13. Recordation 49
14. Authority to Execute 49
15. No Present Lien, Lease or Joint Venture 49
16. Dispute Resolution 50
16.1 Consent to Suit 50
16.1.1 Arbitration 50
16.1.2 Choice of Law 51
16.1.3 Place of Hearing 51
16.1.4 Confidentiality 51
16.2 Limitation of Actions 51
16.2.1 Damages 51
16.2.2 Consents and Approvals 51
16.2.3 Injunctive Relief and Specific Performance 52
16.2.4 Action to Compel Arbitration 52
16.2.5 Action to Preserve the Status Quo 52
During Disputes
</TABLE>
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16.3 Limitation of Liability 52
17. Time is of the Essence 52
18. Authority's Assets 52
19. Notice Provision 52
20. Performance During Disputes 52
21. Marks 53
21.1 Authority's Marks 53
21.2. Manager's Marks 54
22. Execution in Counterpart Originals 55
23. Gaming Enterprise Name 55
24. Intent to Negotiate New Agreement 55
25. Entire Agreement 55
26. Government Savings Clause 55
27. Reasonableness 56
</TABLE>
EXHIBITS
A. Legal Description of the Property
B. List of Members of Mohawk Management, L.L.C.
C. Policies and Procedures for Resolution of Disputes Between Manager and
Customers
D. Policies and Procedures for Personnel Disputes
E. List of Tribal Holidays
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<PAGE>
GAMING FACILITY
MANAGEMENT AGREEMENT
THIS GAMING FACILITY MANAGEMENT AGREEMENT has been entered into July 31,
1996, by and among the ST. REGIS MOHAWK GAMING AUTHORITY (the "Authority"), and
its permitted successors and assigns, MOHAWK MANAGEMENT, L.L.C., a New York
limited liability company, ("the Manager"), and its permitted successors and
assigns, and the ST. REGIS MOHAWK TRIBE (the "Tribe") for the limited purposes
stated in sections 3.5 and 4.2.2 and Articles 8 and 16.
1. Recitals and Conditions Precedent.
WHEREAS, the Tribe is an Indian Tribe which possesses governmental power
over its tribal lands and is acknowledged as such by the United States; and
WHEREAS, the United States Congress enacted the Indian Gaming Regulatory
Act ("IGRA") to promote tribal economic development, tribal self-sufficiency,
and strong tribal governments; and
WHEREAS, the Tribe has entered into a Class III gaming compact with the
State of New York, and that compact was approved by the United States Secretary
of the Interior on December 4, 1993, to govern the conduct of Class III gaming
on tribal lands; and
WHEREAS, it is the objective of the Tribe to extend its tribal gaming
operations to provide employment, for its members and improve the social,
economic, educational, and health services for its members and the community;
and
WHEREAS, Catskill Development, L.L.C., proposes to convey legal title to
approximately 30 acres of land in Monticello, New York to the United States of
America in trust for the St. Regis Mohawk Tribe; and
WHEREAS, the Sullivan County community surrounding such land is very
positive about and strongly supportive of the Tribe's plan to develop such land
and to conduct gaming upon such land; and
WHEREAS, the Tribe has established the Authority, an instrumentality of
the Tribe, to which the Tribe has assigned its authority over the development
and conduct of gaming on the land in Monticello, New York, to be conveyed to the
United States in trust for the Tribe, including the authority to enter into
agreements for the financing, development and construction, and operation of a
casino on such land; and
WHEREAS, the development of the Gaming Enterprise require a significant
capital investment; and
WHEREAS, the Authority seeks technical and financial expertise to manage
the Gaming Enterprise and is desirous of employing a firm with the appropriate
management and business expertise to manage the Gaming Enterprise; and
WHEREAS, Manager meets the Authority's standard in terms of expertise,
experience and ability to assist the Authority in obtaining financing to
construct and develop the Gaming Enterprise and thereafter to manage, operate,
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and maintain the Gaming Enterprise as well as instructing the Authority and
others in the operation of a first-class gaming facility;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
1.5 This Agreement is entered into pursuant to the Indian Gaming
Regulatory Act of 1988, PL 100-497, 25 U.S.C. 2701, et seq, (herein after
"IGRA").
2. DEFINITIONS. As they are used in this Agreement, the terms listed below shall
have the meaning assigned to them in this Section:
"AUTHORITY" shall mean the St. Regis Mohawk Gaming Authority.
"AUTHORITY'S REPRESENTATIVES" shall mean the persons designated by the
Authority to sit on the Management Business Board. The Authority's
Representatives shall serve as the liaisons between the Authority and the
Manager during the term of this Agreement.
"BUREAU OF INDIAN AFFAIRS" or "B.I.A." is the Bureau of Indian Affairs of
the Department of the Interior of the United States of America.
"CASH MAINTENANCE ACCOUNT" means the cash collateral account required to
be established by the Senior Secured Note Indenture.
"CLASS II GAMING" shall mean Class II Gaming as defined in IGRA.
"CLASS III GAMING" shall mean Class III Gaming as defined in IGRA.
"COLLATERAL AGREEMENT" shall mean other agreements between the parties as
defined by 25 C.F.R 'SS'502.5.
"COMPACT" shall mean the tribal-state Compact, and any amendments or
modifications thereto, entered into between the Tribe and the State of New York
pursuant to IGRA, or such other Compact as may be substituted therefor.
"DEPOSITORY ACCOUNT" shall mean that certain depository account
established by Manager for the benefit of the Authority pursuant to Section 4.20
hereof.
"DEVELOPER" shall mean Monticello Raceway Development Company, L.L.C.
"DEVELOPMENT AND CONSTRUCTION AGREEMENT" shall mean that certain
Development and Construction Agreement of even date, by and among Developer, the
Authority, and the Tribe for the limited purposes, set forth therein, providing
the terms under which Developer will develop the Gaming Facility, including
without limitation, design, construction and furnishing and equipping same.
"DEVELOPMENT BUSINESS BOARD" is the committee of that name created by
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the Development and Construction Agreement.
"EFFECTIVE DATE" shall mean the date on which written approval of this
Agreement is granted by the Chairman of the NIGC. The parties agree to cooperate
and to use their best efforts to satisfy the above condition at the earliest
possible date.
"FINANCING AGREEMENTS" shall mean the Senior Secured Note Indenture, the
Senior Secured Notes, and any other related or collateral agreement and the
exhibits and schedules thereto by which funds are advanced to the Authority the
proceeds of which are to be used exclusively to purchase the Property, develop,
design, construct, furnish, equip and provide start-up and working capital for
the Gaming Enterprise and to make certain renovations, improvements or
alterations to the Non-Casino Facility.
"FURNITURE, TRADE FIXTURES, AND EQUIPMENT" shall mean all furniture, trade
fixtures and equipment required or used in the operation of the Gaming
Enterprise in accordance with the plans and specifications of the Gaming
Facility.
"GAMING" shall mean any and all activities defined as Class II or Class
III Gaming under IGRA or authorized under the Compact.
"GAMING AUTHORITY CHARTER" shall mean the Charter establishing the
Authority as enacted by Resolution No. 96-22 of the Tribal Council of the
Tribe.
"GAMING ENTERPRISE" is any commercial enterprise of the Authority
authorized by the IGRA and/or the Compact and operated and managed by Manager on
the Property in accordance with the terms and conditions of this Agreement to
engage in Gaming; and any other lawful commercial activity related to Gaming
allowed in the Gaming Facility including, but not limited to, Automatic Teller
Machines, and, subject to any limitations contained in the Memorandum of
Understanding, the sale for individual consumption of food, beverages, tobacco,
gifts and souvenirs, but excluding any franchised or licensed vendors paying a
fee to the Gaming Enterprise. It is acknowledged and agreed to by the parties
hereto that "Gaming Enterprise" shall exclude any wagering activities related to
the outcome of any racetrack or racing contest conducted off the Property. The
Gaming Enterprise includes any building or accommodation used for Gaming on the
Property and related on-site retail sales on the Property. The Authority shall
have the sole proprietary interest in and responsibility for the conduct of all
Gaming conducted by the Gaming Enterprise, subject to the rights and
responsibilities of the Manager under this Agreement.
"GAMING ENTERPRISE PERSONNEL POLICIES" shall mean the policies and
procedures established pursuant to section 4.16 herein.
"GAMING FACILITY" shall mean the buildings, improvements, and fixtures,
now or hereafter located on the Property within which the Gaming Enterprise will
be housed.
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"GENERAL MANAGER" shall mean the individual employed by the Manager to
direct the operation of the Gaming Facility.
"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.
"GROSS GAMING REVENUE WIN" or "WIN" shall mean the net win from Gaming
activities which is the difference between Gaming wins and losses before
deducting costs and expenses, determined in accordance with GAAP consistently
applied.
"GROSS REVENUES" shall mean all revenues of any nature derived directly or
indirectly from the Gaming Enterprise including, without limitation, gross
gaming win, interest, distributions, or dividends earned on bank accounts and
investments, food and beverage sales and other rental or other receipts from
lessees, sublessees, licensees and concessionaires (but not the gross receipts
of such lessees, sublessees, licensees or concessionaires), and revenue recorded
for Promotional Allowances, determined in accordance with GAAP consistently
applied.
"IGRA" shall mean the Indian Gaming Regulatory Act of 1988, PL 100-497,
25 U.S.C. 2701 et seq. as it may, from time to time, be amended.
"INDEBTEDNESS" shall have the meaning as set forth in the Senior Secured
Note Indenture.
"INDEPENDENT FINANCIAL ADVISOR" shall mean an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
judgment of the Management Business Board, (i) qualified to perform the task for
which it has been engaged and (ii) disinterested and independent with respect to
the Authority and the Manager.
"INDIAN" shall mean any member of a federally recognized Indian Tribe or
of a Mohawk Tribe recognized by the government of Canada, and certified as such
by the Authority to the Manager.
"INTEREST AND EXCESS CASH FLOW ACCOUNT" shall have the meaning as set
forth in the Senior Secured Note Indenture.
"LAND PURCHASE AGREEMENT" shall mean that certain Land Purchase Agreement,
dated of even date herewith between Catskill Development, L.L.C. and the
Authority, by which Catskill Development, L.L.C. shall convey the Property to
the United States to be held in trust for the benefit of the Tribe.
"LEGAL REQUIREMENTS" shall mean singularly and collectively, the Compact,
IGRA, the Memorandum of Understanding, all applicable laws, rules and
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regulations of the Tribe, including, without limitation, the Tribal Gaming
Ordinance, and all other applicable federal and New York laws.
"MANAGEMENT BOARD" is the Management Board of the Authority.
"MANAGEMENT BUSINESS BOARD" is the committee created by section 3.3 of
this Agreement.
"MANAGER'S REPRESENTATIVE" shall mean the persons designated by the
Manager to sit on the Management Business Board. The Manager's Representatives
shall serve as the liaisons between the Manager and the Authority during the
term of the Agreement.
"MEMBER OF THE TRIBAL GOVERNMENT" shall mean any member of the Tribal
Council of the Tribe, or of the Management Board of the Authority, and any
Tribal court official with jurisdiction on the Property or over the Gaming
Enterprise.
"MEMORANDUM OF UNDERSTANDING" shall mean the Memorandum of Understanding
by and between the Sullivan County Casino Gaming Advisory Board (the Sullivan
County Boards) and the Tribe, dated April 29, 1996, the Addendum thereto dated
May 23, 1996, and any agreements implementing such Memorandum of Understanding
and Addendum between the Tribe and/or Authority and the Sullivan County Board
and/or local governing bodies.
"MINIMUM BALANCE" shall mean that sum of money agreed to by the Management
Business Board to be maintained in the Gaming Enterprise bank account(s) to
serve as working capital for Gaming Facility operations. The Minimum Balance may
be adjusted by the Management Business Board at any time and from time to time
in accordance with reasonable and prudent business practices.
"MINIMUM PRIORITY PAYMENT" shall mean the amount to be paid to the
Authority as provided in Section 6.4 (First) of this Agreement.
"NATIONAL INDIAN GAMING COMMISSION" or "NIGC" is the commission
established pursuant to 25 U.S.C. 'SS' 2704.
"NET REVENUES shall mean Gross Revenues of the Gaming Enterprise from all
sources, less all related Operating Expenses, excluding the Management Fee, and
less the retail value of Promotional Allowances and less the following revenues
actually received by the Gaming Enterprise and included in Gross Revenues: (i)
any gratuities or service charges added to a customer's bill; (ii) any credits
or refunds made to customers, guests or patrons; (iii) any sums and credits
received by the Gaming Enterprise for lost or damaged merchandise; (iv) any
sales, excise, gross receipt, admission, entertainment, tourist or other taxes
or charges (or assessments equivalent thereto, or payments made in lieu thereof)
which are received from patrons and passed on to a governmental or
quasi-governmental entity; (v) any proceeds from the sale or other disposition
of furnishings and equipment or other capital assets; (vi) any fire and extended
coverage insurance proceeds other than for business
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interruption; (vii) any condemnation awards other than for temporary
condemnation; and (viii) any proceeds of financing or refinancing, all as
determined in accordance with GAAP consistently applied and 25 U.S.C. 'SS' 2703
(9).
"NON-CASINO FACILITY" shall mean all buildings, fixtures and improvements
located on land adjacent to the Property owned by Catskill Development, L.L.C.,
or any of its affiliates, and used in connection with any parimutuel wagering
activities and other similar activities related, directly or indirectly, to the
Monticello Racetrack and any ancillary activities thereto.
"OPERATING EXPENSES" shall mean expenses of the operation of the Gaming
Enterprise determined in accordance with GAAP, consistently applied. Operating
Expenses shall include, without limitation: (i) all accrued interest expense
(whether or not distributed and whether or not deposited including deposits into
the Interest and Excess Cash Flow Account as that term is defined in the Senior
Secured Note Indenture) with respect to interest on the Senior Secured Notes;
(ii) depreciation and amortization expense; (iii) any bond premium incurred
pursuant to the Senior Secured Note Indenture; (iv) payments required pursuant
to the Memorandum of Understanding; and (v) payments required pursuant to any
agreement with the State of New York.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PHASE I" shall mean the initial period of operation of the Gaming
Enterprise, utilizing existing facilities with minimal structural adaptation.
The parties anticipate Phase I to last two years, pending completion of
development and construction of the permanent Gaming Facility.
"PHASE I COMMENCEMENT DATE" shall mean the first date that the Gaming
Enterprise is open to the public and Gaming is being conducted at the Property
on a temporary interim basis.
"PHASE II" shall mean the operation of the Gaming Enterprise in the fully
completed Gaming Facility; the parties intend for this phase to run from the
Phase II Commencement Date through the term of the Agreement.
"PHASE II COMMENCEMENT DATE" shall mean the first date that the Gaming
Facility is fully Completed (as that term is defined in the Senior Secured Note
Indenture), open to the public and that Gaming is being conducted in the Gaming
Facility on a non-temporary basis, pursuant to the terms of this Agreement. The
Manager shall memorialize the Phase II Commencement Date in a writing signed by
the Manager and the Authority and delivered to the NIGC and to the BIA Area
Director, Eastern Area Office.
"PROJECT COSTS" means the sum of: (i) all so-called "hard" and "soft"
costs incurred in developing, designing, constructing, equipping and
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furnishing the Gaming Facility, and making certain renovations, improvements or
alterations to the Non-Casino Facility, including, without limitation, any costs
related to land acquisition, professional services, pre-opening costs, and
initial operating capital for the Gaming Enterprise; (ii) all start up and
operating costs of the Gaming Authority until the Phase I Commencement Date; and
(iii) all financing fees and expenses, additional start-up fees in connection
with Phase II, interest payments and any scheduled principal payments, prior to
the Phase II Commencement Date; provided that all Project Costs shall be
allocated in accordance with GAAP, consistently applied.
"PROMOTIONAL ALLOWANCES" shall mean the retail value of any
transportation, complimentary accommodations at local hotels, food, beverages,
merchandise, chips, tokens, shows, or services provided to patrons for
promotional purposes.
"PROPERTY" shall mean the parcel of land described in Exhibit A, or such
other parcel, approved by the Authority, and Catskill Development, L.L.C., to be
held by the United States of America in trust for the Tribe and upon which the
Gaming Enterprise is to be conducted.
"RELATIVE" shall mean an individual residing in the same household and who
is related as a spouse, father, mother, sister, brother, son or daughter of the
other person.
"SENIOR SECURED NOTE INDENTURE" means that certain Indenture by and among
the Authority, the Tribe, and the Trustee, pursuant to which the Senior Secured
Notes are issued.
"SENIOR SECURED NOTES" means the Authority's Series A Senior Secured Notes
and Series B Senior Secured Notes, if any, issued by the Authority pursuant to
the Senior Secured Note Indenture.
"SHARED FACILITIES AGREEMENT" shall mean that certain Shared Facilities
Agreement by and between the Authority and Catskill Development, L.L.C. with
respect to the maintenance, repair and operation of the Gaming Facility and the
Non-Casino Facility.
"TRADE FIXTURES" shall mean those fixtures or equipment attached to the
building in which the Gaming Enterprise shall be conducted, which are used to
conduct, support or facilitate the conduct of Gaming, and including, but not
limited to: gaming machines, gaming tables, gaming equipment cabinets, coin,
cash and chip counting machines, computers, computer monitors and related
equipment, cash registers, safes, surveillance equipment, television cameras,
monitors and recorders, audio and musical instruments, equipment and speakers,
and stoves, ovens, cabinets, refrigerators, freezers, and other kitchen
equipment. Decorative fixtures, railings, lights, flooring, plumbing fixtures,
sinks, toilets, and all other real property fixtures are not Trade Fixtures and
shall not be subject to any lien or encumbrance.
"TRIBAL GAMING ORDINANCE" shall mean the St. Regis Mohawk Tribal Gaming
Ordinance adopted by Resolution No. 93-102 of the Tribal Council of the Tribe
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and any amendments, supplements or modifications thereto, and all related or
implementing ordinances, which are enacted by the Tribe or the Authority to
authorize and regulate Gaming on the Property pursuant to IGRA.
"TRIBE" shall mean the St. Regis Mohawk Tribe, a federally recognized
Indian tribe.
"TRUSTEE" means the trustee, designated under the Senior Secured Note
Indenture.
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3. COVENANTS. In consideration of the mutual covenants contained in this
Agreement, the parties agree and covenant as follows:
3.1 ENGAGEMENT OF MANAGER. The Authority hereby retains and engages
Manager as its agent for the purposes of carrying out its duties under this
Agreement including managing the Gaming Enterprise and training employees of the
Gaming Enterprise in the management of the Gaming Enterprise. Subject to the
terms of this Agreement, the foregoing is intended to grant Manager the
exclusive right to manage the Gaming Enterprise during the Term. Nothing
contained herein grants or is intended to grant Manager a titled interest to the
Gaming Facility or to the Gaming Enterprise. The Manager hereby accepts such
retention and engagement and promises to use its reasonable best efforts to
promote and manage the Gaming Enterprise and to train the Authority and others
as aforesaid.
3.2 TERM. This Agreement shall become effective on the Effective Date. The
term ("Term") of this Agreement shall begin on the Phase I Commencement Date and
continue for a period of seven (7) years, unless sooner terminated by either
party in accordance with the provisions of this Agreement, provided that the
Term shall not include either (a) the interim, if any, between Phase I and Phase
II operation of the Gaming Enterprise, during which no gaming shall be conducted
on the Property, or (b) any period of cessation of Gaming on the Property during
which the Term is tolled pursuant to Section 4.4.5 of this Agreement.
3.3 ESTABLISHMENT AND OPERATION OF MANAGEMENT, BUSINESS BOARD. The
Management Business Board is a committee which shall consist of four
representatives, two of whom are appointed by the Authority and two of whom are
appointed by the Manager. The Manager shall designate as its representatives to
the Management Business Board the same persons who represent the Developer on
the Development Business Board established by the Development and Construction
Agreement. The Authority shall designate as its representatives to the
Management Business Board the same persons who represent it on the Development
Business Board. Either party may change its representatives to the Management
Business Board at any time, provided that this Section 3.3 is complied with, and
that notice is provided pursuant to Section 7. The Authority and the Manager may
designate a proxy to act on behalf of a named representative to act in the
absence of such representative to the Management Business Board, provided that
such designation be in writing by, in the case of the Authority, its Chairman,
or in the case of the Manager, its managing director, and that notice of such
designation be provided pursuant to section 7.1 of this Agreement. Such proxy
shall have the full authority to act, vote or consent on behalf of such
representative. Except as otherwise expressly provided in this Agreement, in
order to be effective, any action of the Management Business Board must be the
result of agreement by at least three members of the Management Business Board
or designees. The parties hereby agree to ensure that their respect, i.e.,
representatives to the Management Business Board shall cooperate fully and shall
try to reach agreement or compromise on all matters before the Management
Business Board. In the event such agreement cannot be reached, the appropriate
action shall be determined in the manner provided in Article XVI.
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3.4 MANAGER'S COMPLIANCE WITH LAW; LICENSES. The Manager covenants that it
will at all times comply in all material respects with all Legal Requirements,
including the Tribal Gaming Ordinance, the IGRA, the Compact, applicable New
York statutes, applicable Federal law, and any licenses issued under any of the
foregoing. The Manager, Manager's executive officers, and all other persons
required by applicable law shall be licensed to operate the Gaming Enterprise
pursuant to the Tribal Gaming Ordinance. The Authority shall not unreasonably
withhold, withdraw, qualify or condition such licenses, provided however, that
the Authority may assess license fees reflecting reasonable regulatory costs
incurred by the Authority solely in connection with the Gaming Enterprise.
3.5 TRIBE'S AMENDMENTS TO TRIBAL GAMING ORDINANCE. The Tribe and the
Authority covenant that any amendments made to the Tribal Gaming Ordinance will
be a legitimate effort to ensure that Gaming is conducted in a manner that
adequately protects the environment, the public health and safety, or the
integrity of the Gaming Enterprise. The Tribe and the Authority further covenant
that any amendments to the Tribal Gaming Ordinance will comply with the
foregoing standard. Except as required by State or federal law, the Tribe and
the Authority will not adopt any amendments to the Tribal Gaming Ordinance that
would (a) materially increase Manager's obligations hereunder; (b) result in a
material reduction in the amount of the Management Fee payable to Manager absent
such amendment to the Tribal Gaming Ordinance; or (c) have any other material
adverse effect on the Manager's rights under this Agreement, the Financing
Agreements, the Developer's rights under the Development and Construction
Agreement, or any other document executed by the parties related thereto,
provided that nothing herein shall prevent the Authority from assessing license
fees reflecting reasonable regulatory costs incurred by the Authority. The
Authority shall give Manager notice and a copy of the full text of any proposed
amendment to the Tribal Gaming Ordinance at least 14 days before any such
amendment will go into effect, but failure to give such notice shall not affect
the validity or enforceability of such amendment.
3.6 MANAGEMENT FEE. The Authority agrees to pay the Manager a fee (the
"Management Fee") equal to 35% of Net Revenues. Such fee shall be paid pursuant
to Section 6 of this Agreement.
The Management Fee shall be calculated as described in this Section 3.6
and shall be paid monthly as provided by Section 6.1 of this Agreement.
4. BUSINESS AND AFFAIRS IN ENTERPRISE.
4.1 MANAGER'S AUTHORITY AND RESPONSIBILITY. All business and affairs in
connection with the day-to-day operation, management and maintenance of the
Gaming Enterprise and the Gaming Facility, including the establishment of
operating days and hours, shall be the exclusive responsibility of the Manager.
The Manager shall select a General Manager on or before a date which is at least
sixty (60) days prior to the commencement of operation of Phase I. The General
Manager shall be an employee of the Gaming Enterprise. The Manager is hereby
granted all power and authority which is necessary or appropriate to act,
through the General Manager, in order to fulfill its
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responsibilities under this Agreement. Manager agrees to employ prudent and
commercially reasonable management practices, including competitive selection of
goods and services where appropriate.
4.1.1 SELECTION OF GENERAL MANAGER. The General Manager shall be
proposed by the Manager, and his appointment shall be subject to approval by the
Management Business Board, provided that such approval must be by unanimous vote
of the four members of the Management Business Board. The Manager shall exercise
its reasonable best efforts to promptly propose the General Manager, including
any replacement General Manager, and to obtain Management Business Board
approval.
4.1.2 REMOVAL OF GENERAL MANAGER. The General Manager may be
removed, with or without Cause (hereafter defined), by an affirmative vote of
three members of the Management Business Board. In addition, the General Manager
shall be removed if Cause exists for his removal and the Authority's
Representatives request his removal in writing, specifying such Cause, provided
that, "Cause" for the purposes of this Section shall be limited to the
following: (a) the General Manager shall have been convicted or indicted for any
federal or state felony involving moral turpitude or any federal or state gaming
offense; (b) the removal of the General Manager is required by the NIGC or its
Chairman in order to avoid termination of this Agreement; or (c) the General
Manager has knowingly and willfully provided materially important false or
misleading statements or information to the NIGC or the Authority.
4.1.3 INTERIM GENERAL MANAGER. In the event that the General
Manager's position is vacant, until such time as the Management Business Board
approves a General Manager, the Manager may appoint an interim General Manager.
4.2 DUTIES OF THE MANAGER. In managing, operating, maintaining and
repairing the Gaming Enterprise and the Gaming Facility, the Manager's duties
shall include, without limitation, the following:
4.2.1
MANAGEMENT. The Manager shall use prudent and commercially reasonable
measures for the orderly administration, management, and operation of the
Gaming Enterprise and the Gaming Facility.
4.2.2
COMPLIANCE. The Manager shall comply in all material respects with all
present and future statutes, regulations and ordinances of the Tribe and the
Authority.
Except with the consent of the Management Business Board or as required
by federal or state law, the Tribe shall not and the Authority shall not, and
shall not permit any of their respective representatives, political subunits or
councils, agencies or instrumentalities, to, directly or indirectly, (i)
increase or impose any tax, levy, or other monetary payment or reimbursement
obligation on the Gaming Enterprise (except for licensing fees and the
reasonable costs and expenses of investigations for tribal gaming licenses as
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permitted in this Agreement) or on any patrons of the Gaming Enterprise, or on
any activity at the Gaming Enterprise (gaming or otherwise) , other than any
payments due under any agreement in effect on the Effective Date or any such
payments that are not materially adverse to the economic interests of the
Manager; (ii) amend the terms of the Financing Agreements in any material manner
that would be materially adverse to the economic interests of the Manager; (iii)
take any other action, enter into any agreement or enact any ordinance, law,
rule or regulation that would, directly or indirectly, have a material adverse
economic effect on the Manager's rights hereunder, materially reduce the
Management Fee otherwise payable hereunder or materially increase the Manager's
obligations hereunder; or (iv) violate the Indian Civil Rights Act (25 U.S.C. SS
1301-1303). Prior to any changes in the Tribe's or the Authority's land use or
zoning regulations or ordinances applicable to the Property during the Term of
this Agreement, the Manager and the Tribe and/or the Authority shall jointly
determine whether the Property shall be exempt from such changes. In addition,
except as specifically provided in this Agreement, the Tribe shall not, and
shall not permit the Authority or any of the Tribe's representatives, political
subunits or councils, agencies, instrumentalities to, directly or indirectly,
impose, levy, tax or otherwise make any charge on the Management Fee, unless
such levy, tax, or charge is reimbursed in full.
If the Tribe takes action to comply with federal or state law that would
otherwise violate the foregoing paragraph, the Tribe will give notice to the
Manager of such action and, to the extent practicable, the Tribe shall give the
Manager at least 30 days prior written notice of any such action.
The Tribe will not permit or incur any consensual liability of the Tribe
(or of any other instrumentality or subunit of the Tribe) that is a legal
obligation of the Authority (except if payable solely from the Authority's
distribution of Net Revenues), or for which the Authority's assets (other than
the Authority's distribution of Net Revenues) may be bound, other than a
liability that the Authority is permitted or not prohibited from incurring on
its own behalf under this Agreement. Without the consent of the Management
Business Board, neither the Authority nor the Manager shall incur any liability
that is not consistent with the annual budget or incur any material indebtedness
which shall directly or indirectly become an Operating Expense, except nothing
herein shall limit the power of the Tribe to assess the licensing fees permitted
under this Agreement.
The Tribe will not, pursuant to or within the meaning of any bankruptcy
law, appoint or consent to the appointment of a custodian of the Authority or
for all or substantially all of the property of the Authority that has the
effect of staying, repudiating, or terminating this contract, or removing the
Manager.
The Tribe agrees that it will not enact any bankruptcy law or similar law
for the relief of debtors that would impair, limit, restrict, delay, or
otherwise materially adversely affect any of the rights and remedies of the
Manager provided in this Agreement.
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The Tribe agrees that it will not, and will not permit the Authority or
any of the Tribe's representatives, political subunits, agencies,
instrumentalities or councils to, exercise any power of eminent domain over the
Property (other than any such exercise that would not materially adversely
affect the economic rights and benefits of the Manager).
The Tribe agrees that the Authority shall have sole and exclusive
jurisdiction to operate any Gaming enterprise on behalf of the Tribe or any
political subunit thereof on the Property.
Nothing in this Section shall limit or restrict the sovereign right of the
Tribe to enact laws, regulations or ordinances that do not affect the Gaming
Enterprise or the rights and benefits of the Manager hereunder or otherwise in a
manner that does not violate this Section.
4.2.3
REQUIRED FILINGS. The Manager 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 Compact.
4.2.4
CONTRACTS IN AUTHORITY'S NAME AND AT ARM'S LENGTH. Contracts for the
operation of the Gaming Enterprise shall be negotiated by the Manager and shall
be entered into on behalf of and in the name of the Authority and signed by the
General Manager. The General Manager may enter into such contracts without the
approval of the Management Business Board if the expenditure under such contract
is provided for in the annual budget approved by the Management Business Board
and is not with a party affiliated with the Manager or its members, officers, or
directors. Contracts requiring the expenditure in any fiscal year in excess of
$25,000 the expenditure of which is not provided for in the annual budget shall
require the approval of the Management Business Board. No contracts for the
supply of goods or services to the Gaming Enterprise shall be entered into with
parties affiliated with the Manager or its members, managers, officers or
directors (an "Affiliate Transaction") unless (a) such Affiliate Transaction is
on terms that are no less favorable than those that would have been obtained in
a comparable transaction with an unrelated Person, (b) the Manager delivers to
the Authority (i) with respect to any Affiliate Transaction involving aggregate
payments in excess of $2 million, a resolution adopted by the disinterested
member of the Manager approving such Affiliate Transaction and set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (a) above and (ii) with respect to any Affiliate Transaction involving
aggregate payments in excess of $5 million, a written opinion as to the fairness
to the Authority from a financial point of view issued by an Independent
Financial Advisor with assets in excess of $1 billion or from a nationally
recognized accounting firm, a so-called "big six" accounting firm, and (c) such
Affiliate Transaction is approved by the Management Business Board. Prior
approval by the Management Business Board of a contract referred to above, shall
not be required where the contract is entered into to remedy an immediate threat
or
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danger to persons or property or to the Gaming Enterprise or the conduct of
Gaming thereon, provided that the Manager shall promptly thereafter notify all
members of the Management Business Board of the nature of the danger or threat
and of the contract so executed.
4.2.3
FINANCING. The Manager or its affiliates shall assist the Authority in
obtaining financing for the Enterprise, including but not limited to financing
for the construction and equipping of the Gaming Facility and any additions to
or replacement thereof. Any fees associated with this effort which might
otherwise be paid by the lender to Manager shall be applied to reduce the
principal amount of such financing. This provision shall not apply to the
Management Fee payable hereunder or to the Development Fee payable pursuant to
the Development and Construction Agreement.
4.2.6
OPERATING CAPITAL. All necessary initial capital for the Gaming
Enterprise shall be procured by the Authority through proceeds of the
Financing Agreements.
4.2.7
COMPLIANCE WITH MATERIAL AGREEMENTS. Further, the Manager shall use its
reasonable efforts to assist the Authority to comply with the Authority's
obligations under all material agreements, including, without limitation, the
Financing Agreements, the Land Lease, and the Shared Facilities Agreement;
provided, however, that the Manager shall not be liable for any of the
Authority's obligations under any such agreements.
4.3 SECURITY AND SURVEILLANCE. The Manager shall supervise appropriate
security and surveillance for the operation of the Gaming Facility. All aspects
of Gaming Facility security and surveillance shall be managed and administered
by the Manager on behalf of the Authority. Any security officer shall be bonded
and insured, either individually or under blanket policies, in an amount
commensurate with his or her enforcement duties and obligations. The cost of any
charge for fire, ambulance or other emergency public safety services will be an
Operating Expense. The members of the Management Business Board and authorized
officials of the Authority of which the Manager has been given notice pursuant
to this Agreement shall have full 24 hour access to the entire Gaming Facility,
including the surveillance room, and to all surveillance tapes and records. All
surveillance and security records of any kind, including tapes, computer records
and written files, shall be maintained at the Gaming Facility. All costs and
expenses incurred in providing appropriate security, surveillance services and
related ancillary services for the Gaming Facility shall constitute an Operating
Expense. Subject to the provisions of the Compact, nothing herein shall limit
the law enforcement authority of the Tribe on the Property.
4.4 DAMAGE, CONDEMNATION OR IMPOSSIBILITY OF THE GAMING ENTERPRISE. If,
during the term of this Agreement, the Gaming Facility is damaged or destroyed
by fire, war, or other casualty, or by an Act of God, or is taken by
condemnation or sold under the threat of condemnation, or if Gaming on the
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Property is prohibited as a result of a decision of a court of competent
jurisdiction or by operation of any applicable federal legislation, or if,
through no fault of the Manager, the Authority unilaterally and without cause
prohibits the Manager from performing its obligations under this Agreement, or
if the conduct of Gaming pursuant to this Agreement becomes commercially
impracticable in the view of the Management Business Board, subject to the
Financing Agreements, the Manager shall have the following options:
4.4.1
RECOMMENCEMENT OF OPERATIONS. The Manager shall have the option in its
sole discretion to continue its interest in this Agreement and to commence or
recommence the operation of Gaming at the Gaming Facility if, at some point
during the Term of this Agreement, such commencement or recommencement shall be
legally and commercially feasible in the sole judgment of the Manager.
4.4.2
REPAIR OR REPLACEMENT. If the Gaming Facility is damaged, destroyed or
condemned so that Gaming can no longer be conducted at the Gaming Facility,
subject to the terms of the Financing Agreements, the insurance or condemnation
proceeds shall, at the option of the Management Business Board, be utilized to
restore or replace the Gaming Facility and to reopen the Gaming Enterprise, and
the Manager may within 60 days after the casualty, choose to reconstruct the
Gaming Facility to a condition at least comparable to that before the casualty
occurred. If the Management Business Board elects to reconstruct the Gaming
Facility and if the insurance proceeds or condemnation awards are insufficient
to reconstruct the Gaming Facility to such condition, the Manager may, in its
sole discretion, supply or arrange such additional funds as are necessary to
reconstruct the Gaming Facility to such condition and such funds shall, with the
prior consent of the Authority and the B.I.A. or NIGC, as appropriate,
constitute obligations of the Authority. The principal amount of any such
borrowing shall be repayable by the Authority from its share of the Net Revenues
of the Gaming Enterprise upon such terms as may be agreed upon by the Authority
and the Manager. The interest and other charges (if any) of any such borrowing
shall be payable from the Gross Revenues of the Gaming Enterprise as an
Operating Expense; provided, however, that the aggregate of any such borrowing
(exclusive of interest) together with all other indebtedness for Project Costs
shall not exceed FOUR HUNDRED MILLION DOLLARS ($400,000,000). If the insurance
proceeds are not used to repair the Gaming Facility, the Authority shall have
the sole right to adjust and settle any and all claims for such insurance
proceeds or condemnation awards, and such proceeds or award shall be applied
first to the amounts due under the Financing Agreements (including principal,
interest and premium, if any); second, any other Indebtedness of the Authority
and Operating Expenses; third, any undistributed Net Revenues pursuant to
Section 6 of this Agreement; and fourth, any surplus shall be paid over to the
Authority. Proceeds of property hazard insurance remaining after all financing
obligations are repaid shall belong to the Authority. Proceeds of business
interruption insurance shall be included in the Gross Revenues of the Gaming
Enterprise.
4.4.3
OTHER BUSINESS PURPOSES. The Manager shall allow the Gaming Facility to
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be used for other purposes reasonably incidental to Gaming, provided the
Management Business Board has approved such purposes, which approval shall not
be unreasonably withheld, and the Management Business Board shall approve such
purposes as set forth in the subdivision application previously submitted to the
Village of Monticello. For any purpose other than Gaming, the Manager and the
Management Business Board shall obtain all approvals necessary pursuant to the
Financing Agreements and under applicable law. Neither the Authority nor the
Manager shall conduct any wagering activities on the Property related to the
outcome of any racetrack or racing contest.
4.4.4
CESSATION OF GAMING. The Manager may, at any time following the cessation
of Gaining on the Property, notify the Authority in writing that it is
terminating this Agreement, in which case the Manager shall retain any rights to
undistributed Net Revenues pursuant to Section 6 of this Agreement, and any
rights pursuant to Section 16 of this Agreement. if Manager does not elect to
terminate this Agreement, it may take whatever action may be necessary to reduce
expenses during such cessation of Gaming on the Property.
4.4.5
TOLLING OF THE AGREEMENT. If, after a period of cessation of Gaming on
the Property, the recommencement of Gaming is possible, and if the Manager has
not terminated this Agreement under the provisions of Section 4.4.4, the period
of such cessation shall not be deemed to have been part of the Term of the
Agreement and the date of expiration of the Term of the Agreement shall be
extended by the number of days of such period of cessation, provided that in no
event shall this Agreement be extended pursuant to this provision for more than
Five (5) years.
4.5 ALCOHOLIC BEVERAGES AND TOBACCO SALES. Alcoholic beverages may be
served for individual consumption at the Gaming Facility if permissible subject
to and in accordance with the Compact, the Authority's licensing requirements,
other applicable law and the Memorandum of Understanding.
Tobacco may be sold for individual consumption at the Gaming Facility
subject to and in accordance with the Authority's licensing requirements, other
applicable law, and the Memorandum of Understanding.
4.6 EMPLOYEES.
4.6.1
MANAGER'S RESPONSIBILITY. Manager shall have, subject to the terms of this
Agreement, the exclusive responsibility and authority to direct the selection,
hiring, retention, training, control and discharge of all employees performing
regular services for the Gaming Enterprise in connection with the maintenance,
operation, and management of the Gaming Enterprise and the Gaming Facility.
4.6.2
AUTHORITY'S EMPLOYEES. All employees of the Gaming Enterprise will be
employees of the Authority.
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4.6.3
AUTHORITY'S INSPECTOR(S). The Authority shall select a reasonable number
of Authority's Inspector(s) ("Authority's Inspectors"), who shall be employed by
the Authority and shall have the full access to inspect all aspects of the
Gaming Enterprise, including the daily operations of the Gaming Enterprise, and
to verify daily Gross Revenues and all income of the Gaming Enterprise, at any
time without notice, in a manner which does not hamper or impede the normal
course of business. The Authority shall give notice to the Manager of the
selection of the Authority's Inspectors in accordance with this Agreement. The
General Manager or his or her designee may accompany the Authority's
Inspector(s) upon any inspection. The salary and benefits, if any, of the
Authority's Inspector(s) and other terms of employment shall be paid by the
Authority from the license fees assessed against the Gaming Enterprise pursuant
to Section 3.4 hereof. The Authority's Inspector(s) shall report directly to the
Authority.
4.6.4
INDIAN EMPLOYMENT PREFERENCE AND TRAINING. In order to maximize benefits
of the Gaming Enterprise to the Tribe, the Manager shall, during the term of
this Agreement, give preference in recruiting, training and employment first to
qualified members of the Tribe, and secondly to other qualified Indians. The
Manager shall provide training programs for Tribal members. Such training
programs shall be available to assist Tribal members in obtaining necessary
skills and qualifications relating to all job categories. Notwithstanding
anything to the contrary contained in this Agreement, all costs and expenses of
any training programs administered or supervised by the Manager shall constitute
Operating Expenses of the Gaming Enterprise.
The Manager shall use its reasonable best efforts to recruit and train
Tribal members, including without limitation: providing job fairs for members of
the Tribe and clearly specifying in all job advertisements the preference for
Tribal members.
4.6.5
REMOVAL OF EMPLOYEES. The General Manager will act in accordance with the
Gaming Enterprise Personnel Policies with respect to the discharge, demotion or
discipline of any Enterprise employee. The Manager shall promptly notify the
Authority's Representatives of any such discharge, demotion or discipline. Only
the Authority shall have the right to remove the Authority's Inspector(s),
subject to any contractual rights of such persons, and the Authority shall
promptly notify the Manager of any such removal.
4.7
MARKETING AND ADVERTISING. The Manager shall have responsibility to
advertise and promote the Gaming Enterprise in accordance with a marketing plan
approved by the Management Business Board and subject to the Budget. Manager may
participate in sales and promotional campaigns and activities involving
Promotional Allowances. Manager, in marketing and advertising the Gaming
Facility, and subject to Sections 4.2.4 and 4.6.3, shall have the right to use
marketing, transportation, advertising and other employees and services of
Manager, its partners, parent and affiliated companies not located at the Gaming
Facility.
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4.8
PRE-OPENING. (a) No later than sixty (60) days prior to the Phase I
Commencement Date, Manager shall commence implementation of a pre-opening
program for Phase I which shall include all activities necessary to
operationally prepare the Gaming Facility for the conduct of Gaming on a limited
interim basis until the Gaming Facility is fully Operating. To implement such
pre-opening program, manager shall prepare a comprehensive pre-opening Phase I
budget which shall be submitted to the Management Business Board for its
approval within sixty (60) days after the Effective Date ("Pre- Opening
Budget"). All costs and expenses of the pre-opening program shall be paid from a
special bank account(s) opened by manager in the name of, and on behalf of, the
Authority upon which only Manager shall be authorized to draw ("Pre-Opening
Phase I Bank Account(s)"). After all pre-opening expenses for Phase I have been
paid, the balance in the Pre-Opening Phase I Bank Account(s) shall be
transferred to the Depository Account and the Pre-Opening Phase I Bank
Account(s) closed.
Beginning on the Effective Date of this Agreement, and ending on the Phase
I Commencement Date, the Manager shall make a monthly administrative payment of
$25,000 to the Authority. Such payments shall be due on the monthly anniversary
of the Effective Date, and shall be credited against the distributions to be
made to the Authority out of Net Revenues under Section 6.4 of this Agreement,
provided that such payments shall not reduce any Minimum Monthly Priority
Payment due the Authority under Section 6.4 of this Agreement.
(b) No later than six (6) months prior to the Phase II Commencement Date,
Manager shall commence implementation of a pre-opening program for Phase II (the
"Phase II Pre-Opening Program"), which shall include all activities necessary to
operationally prepare the Game Facility to be Fully Operating (as defined in the
Senior Secured Note Indenture) on the Phase II Commencement Date. To implement
the Phase II Pre-Opening Program, Manager shall prepare a comprehensive
pre-opening budget for Phase II which budget shall be submitted to the
Management Business Board for its approval at least 180 days prior to the Phase
11 Commencement Date (the "Phase 11 Pre-Opening Budget"). All costs and expenses
of the Phase II Pre-Opening Program shall be paid from a special bank account(s)
opened by the Manager in the name of, and on behalf of the Authority, upon which
only the Manager shall be authorized to draw (the "Phase II Pre-Opening Bank
Account'). After all Phase II Pre-Opening Program expenses have been paid, the
balance of the Phase II Pre-Opening Bank Account(s) shall be transferred to the
Depository Account and the Phase II Pre-Opening Bank Account(s) shall be
thereafter closed.
4.9 OPERATING BUDGETS. Manager shall, 60 days prior to the Phase I
Commencement Date, submit to the Management Business Board, for its approval, a
detailed proposed budget, including compensation for all key employees and
projected contracts with third party vendors and consultants, for the remainder
of the then current fiscal year ("Budget"). Thereafter, Manager shall, not less
than sixty (60) days prior to the commencement of each full or partial fiscal
year, submit to the Management Business Board, for its approval, a proposed
Budget for the ensuing full or partial fiscal year, as
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the case may be.
The Management Business Board's approval of the Budget shall not be
unreasonably withheld or delayed. Manager or the General Manager shall meet with
the Management Business Board to discuss the proposed Budget and the Management
Business Board's approval shall be deemed given unless a specific written
objection thereto was delivered to Manager within thirty (30) days after Manager
or the General Manager and the Management Business Board have met to discuss the
proposed Budget. If the Management Business Board for any reason declines to
meet with Manager or the General Manager to discuss a proposed Budget, it shall
be deemed to have given its consent unless a specific written objection is
delivered by it or the objecting representatives, as applicable, to Manager
within thirty (30) days after the date the proposed Budget is submitted to the
Management Business Board. The Management Business Board or the objecting
representatives, as applicable, shall review the Budget on a line-by-line basis.
To be effective, any notice which disapproves a proposed Budget must contain
specific objections in reasonable detail to individual line items.
If the initial proposed Budget contains disputed budget item(s), the
Manager's Representatives and the Authority's Representatives shall cooperate
with each other in good faith to resolve the disputed or objectionable proposed
item(s). In the event the Manager's Representatives and the Authority's
Representatives are not able to reach agreement concerning any disputed or
objectionable item(s) within a period of thirty (30) days after the date the
Management Business Board receives a copy of such proposed Budget from the
Manager, either party shall be entitled to submit the dispute to arbitration in
accordance with Section 16 of this Agreement. If the Manager's Representatives
and the Authority's Representatives are unable to resolve the disputed or
objectionable item(s) prior to the commencement of the applicable fiscal year,
the undisputed portions of the proposed Budget shall be deemed to be adopted and
approved and the corresponding line item(s) contained in the Budget for the
preceding fiscal year (or in the proposed Budget if there is no Budget for the
preceding fiscal year) shall be adjusted as set forth herein and shall be
substituted in lieu of the disputed item(s) in the proposed Budget. Those line
items which are in dispute shall be determined by increasing the preceding
fiscal year's actual expense (pro-rated over a full year, in the event the
Gaming Enterprise was not in operation during the entire preceding fiscal year)
for the corresponding line items by an amount determined by Manager which does
not exceed the Consumer Price Index for All Urban Consumers published by the
Bureau of Labor Statistics of the United States Department of Labor, U.S. City
Average, all items (1982-1984=100) for the fiscal year prior to the fiscal year
with respect to which the adjustment to the line item(s) is being calculated or
any successor or replacement index thereto. The resulting Budget obtained in
accordance with this paragraph shall be deemed to be the Budget in effect until
such time as Manager's Representatives and the Authority's Representatives have
resolved the items objected to or in dispute.
Manager may, after notice to the Management Business Board, revise the
Budget from time-to-time, as necessary, to reflect any unpredicted significant
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changes, variables or events or to include significant, additional,
unanticipated items of expense. Manager may, after notice to the Management
Business Board reallocate part or all of the amount budgeted with respect to any
line item to another line item and to make such other modifications to expenses
under the Budget as Manager deems necessary, provided that: (i) the individual
or cumulative modifications of the Budget (a) shall not exceed ten percent (10%)
of the approved Budget during Phase I and the first twelve (12) month period
beginning after the Phase II Commencement Date; or (b) with respect to any
period thereafter, shall not exceed five percent (5%) of the approved Budget,
and (ii) do not otherwise conflict with the terms of this Agreement. Budget
adjustments which exceed the restrictions set forth in the preceding sentence
shall require the approval of the Management Business Board. Budget adjustments
which otherwise vary from the terms of this Agreement shall require the written
approval of the Management Business Board. In addition, in the event actual
Gross Revenues for any fiscal period are greater than those provided for in the
Budget, the amounts approved in the Budget for Operating @ enses for any fiscal
month may be increased by the Manager to an amount that bears the same
relationship (ratio) to the amounts budgeted for such items as actual Gross
Revenue for such fiscal month bears to the projected Gross Revenue for such
fiscal month. The Authority acknowledges that the Budget is intended only to be
a reasonable estimate of the Gaming Enterprise revenue and expenses for the
ensuing fiscal year. Manager shall not be deemed to have made any guarantee,
warranty or representation whatsoever in connection with the Budget.
4.10 CAPITAL BUDGETS. Manager shall, not less than sixty (60) days prior
to the Phase 11 Commencement Date and the commencement of each fiscal year
thereafter, submit to the Management Business Board a recommended "Capital
Budget" for the ensuing full or partial fiscal year, as the case may be, for
furnishings, equipment, and ordinary capital replacement items ("Capital
Replacements") as shall be required to operate the Gaming Enterprise in
accordance with sound business practices. The Management Business Board and
Manager shall meet to discuss the proposed Capital Budget, and the Management
Business Board or the objecting representatives, as applicable, shall be
required to make specific written objections to a proposed Capital Budget in the
same manner and within the same time periods specified in Section 4.9 with
respect to a Budget. The Management Business Board shall not unreasonably
withhold or delay its consent to any proposed Capital Budget. Unless the
Management Business Board and Manager otherwise agree, Manager shall be
responsible for the design and installation of Capital Replacements, subject to
the Management Business Board's approval and right to inspect.
To be effective, any notice which disapproves a proposed Capital Budget
must contain specific objections in reasonable detail to individual line items.
If the initial proposed Capital Budget contains disputed budget item(s), the
Management Business Board and Manager agree to cooperate with each other in good
faith to resolve the disputed or objectionable proposed item(s). If unable to
reach agreement concerning any disputed or objectionable item(s) within thirty
(30) days after the date the Management Business Board or the objecting
representatives, as applicable, provides written notice of its objection to
Manager, either party shall be entitled to
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submit the dispute to arbitration in accordance with Section 16 of this
Agreement. If the Management Business Board and Manager are unable to resolve
the disputed or objectionable item(s) prior to the commencement of the
applicable fiscal year, the undisputed portions of the proposed Capital Budget
shall be deemed to be adopted and approved.
4.11 CAPITAL REPLACEMENTS. The Authority shall effect and expend such
amounts for any Capital Replacements as shall be required, in the course of the
operation of the Gaming Enterprise, to maintain the Gaming Enterprise in
compliance with any Legal Requirements and to comply with the Management
Business Board's recommended programs for renovation, modernization and
improvement intended to keep the Gaming Enterprise competitive in its market,
maintain first class standards for the Enterprise, or to correct any condition
of an emergency nature, including without limitation, maintenance, replacements
or repairs which are required to be effected by the Authority, which require
immediate action to preserve and protect the Gaming Facility, assure its
continued operation, and/or protect the comfort, health, safety and/or welfare
of the Gaming Facility's guests or employees. Manager is authorized, upon
consultation with the Management Business Board, to take all steps and to make
all expenditures from the Disbursement Account, described at Section 4.21, as it
deems necessary to repair and correct any such condition, regardless whether
such provisions have been made in the Budget for any such expenditures, and the
cost thereof may be advanced by Manager and reimbursed from future revenues.
Design and installation of Capital Replacements shall be effected in a time
period and subject to such conditions as the Management Business Board may
establish to minimize interference with or disruption of ongoing operations.
4.12 CONTRACTING. In entering into contracts for the supply of goods and
services for the Gaming Enterprise, the Manager shall give preference first to
qualified members of the Tribe, and qualified business entities certified by the
Authority or the Tribe to be controlled by members of the Tribe, and second to
other qualified Indians and qualified business entities certified by the
Authority to be controlled by Indians; provided that this preference shall not
apply where the contract is entered into to remedy an immediate threat or danger
to the Gaming Enterprise or the conduct of Gaming thereon.
"Qualified" shall mean an individual or a business entity, who or which is
able to provide services at competitive prices, has demonstrated skills and
abilities to perform the tasks to be undertaken in an acceptable manner, in the
Manager's reasonable opinion, and can meet the reasonable bonding requirements
of the Manager. The Manager shall provide written notice to the Authority in
advance of all such contracting, subcontracting and construction opportunities
in excess of $25,000 (TWENTY-FIVE THOUSAND DOLLARS).
4.13 DETERMINATION OF QULIFICATIONS AND COMPENSATION. Subject to Sections
4.6.1, 4.15 and 4.16, Manager shall have the sole responsibility for determining
whether a prospective employee is qualified and the appropriate level of
compensation to be paid thereto.
4.14 LITIGATION. If the Tribe, the Authority, the Manager, the
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Management Business Board or any employee of the Tribe, the Authority, or
Manager at the Gaming Facility or of the Gaming Enterprise is sued by any person
not a party to this Agreement, or is alleged by any person not a party to this
Agreement, to have engaged in unlawful or discriminatory acts within the scope
of their employment in connection with the operation of the Gaming Enterprise,
the Authority or the Manager, as appropriate, shall defend such action. Any cost
of such litigation shall constitute an Operating Expense, or, if incurred prior
to the Phase I Commencement Date, shall be a Phase I preopening Operating
Expense. Nothing in this Section shall be construed to waive or limit the
Tribels or the Authority's sovereign immunity.
4.15 EMPLOYEE BACKGROUND INVESTIGATIONS. The Authority shall be
responsible for conducting a background investigation 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 pose a threat to
the public interest, the effective regulation of Gaming, or to the gaming
licenses of the Manager or any of its affiliates, or create or enhance the
dangers of unsuitable, unfair or illegal practices and methods and activities in
the conduct of Gaming, shall be employed by the Manager or the Authority. The
background investigation procedures shall be formulated in consultation with the
Manager and shall satisfy all regulatory requirements independently applicable
to the Manager. Any cost associated with obtaining such background
investigations shall constitute an Operating Expense, provided, however, the
costs of background investigations relating to shareholders, officers, directors
or key employees of the Manager or of the Authority shall not constitute an
Operating Expense and the costs thereof shall be borne by the applicable party.
The Manager and the Authority shall provide all information required by the NIGC
with respect to background investigations as required by the IGRA.
4.16 GAMING ENTERPRISE PERSONNEL POLICIES. The Manager shall establish
Gaming Enterprise Personnel Policies in accordance with the Budget, which Gaming
Enterprise Personnel Policies which shall include (a) a job classification
system with salary levels and scales; (b) provisions for an employee-funded
defined contribution retirement program, to the extent permitted by law, and (c)
a grievance procedure which seeks to establish fair and uniform standards for
the employees of the Gaming Enterprise. The grievance procedures attached hereto
as Exhibit C shall be incorporated into such Enterprise Personnel Policies. Any
revisions to the Enterprise Personnel Policies shall not be effective unless
they are approved by the Management Business Board. All such actions shall
comply with applicable law of the Tribe. The Gaming Enterprise Personnel
Policies shall also require employees to comply with all rules, regulations and
other applicable laws of the New York State Racing Authorities and other
applicable entities.
4.17 NO MANAGER WAGES OR SALARIES. Neither the Manager nor any of its
officers, directors or shareholders or any employees, shall be compensated by
wages from or contract payments by the Gaming Enterprise for their efforts or
for any work which they perform under this Agreement, other than payments
pursuant to the Financing Agreements, reimbursement pursuant to the Financing
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Agreements and the Management Fee paid to Manager under Section 6.4. Nothing in
this subsection shall restrict the ability of an employee of the Gaming
Enterprise to purchase or hold stock in the Manager, its parents, subsidiaries
or affiliates where (i) such stock is publicly held, and (ii) such employee
acquires, on a cumulative basis, less than ten percent of the outstand;.ng stock
in the corporation.
4.18 INTERNAL CONTROL SYSTEMS. The Manager shall install systems for
monitoring of all funds, which systems shall be submitted to the Management
Business Board for approval in advance of implementation, which approval shall
not be unreasonably withheld. The Authority shall retain the right to review all
internal control systems and any material changes instituted to the internal
control systems of the Gaming Enterprise. The Authority shall have the right to
retain an independent auditor to review the adequacy of the internal control
systems prior to the Phase I Commencement Date. The cost of such review shall
constitute a start-up expense. Any significant changes in such systems after
commencement of operation of the Gaming Facility also shall be subject to review
and approval by the Authority. The Authority and the Manager shall have the
right and duty to maintain and police its internal control systems in order to
prevent any loss of proceeds from the Gaming Enterprise. The Authority shall
have the right to inspect and oversee the systems and to have the Authority's
Inspector present to oversee all cash counting and machine or game credit
verification procedures at all times. The Manager shall install a closed circuit
television system to be used for monitoring the cash counting rooms and the cage
area. The Authority's Inspector shall have full access to the closed circuit
television system for use in monitoring the cash handling activities of the
Gaming Enterprise.
4.19 BANK ACCOUNTS. The Management Business Board shall select a State or
Federally chartered bank or banks located in the State of New York for the
deposit and maintenance of funds and shall establish such bank accounts as the
Manager deems appropriate and necessary in the course of business and as
consistent with this Agreement. All such bank accounts established shall comply
with any applicable requirements of the Financing Agreements with respect to the
granting of a security interest therein. The Manager shall give notice of any
such accounts to the Trustee and shall take such other action as the Trustee may
require to evidence the establishment of the security interest in accordance
with the terms of the Senior Secured Note Indenture.
4.20 DAILY DEPOSITS TO DEPOSITORY ACCOUNT. Subject to Section 4.23 of this
Agreement, the Manager shall establish for the benefit of the Tribe in the
Tribels name a depository bank account ("Depository Account") in accordance with
Section 4.19 above. The Manager shall collect all Gross Revenues and deposit the
related cash less any Bank Roll Amount (hereafter defined) into the Depository
Account at least once during each business day. on a daily basis, the General
Manager shall determine in its discretion based on prudent commercial practices
and the experience of the General Manager in light of the amount of Gaming
conducted in the Gaming Facility in the past, the amount of cash ("Bank Roll
Amount") necessary to be maintained on-site at the Gaming Facility for the
day-to-day operation of the Gaming Enterprise.
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The Bank Roll Amount shall be calculated based on all cash or coins located on
the premises including, without limitation, all cash or monies in the counting
room, cages and any other temporary holding facility in the Gaming Facility for
cash or other monies. Notwithstanding anything to the contrary contained in this
paragraph, the Bank Roll Amount on any given day shall not exceed FOUR MILLION
DOLLARS ($4,000,000) without the prior written consent of the Management
Business Board. All money received by the Gaming Enterprise on each day that it
is open must be counted at the close of operations for that day or at least once
during each 24-hour period. The parties hereto agree to obtain a bonded
transportation service to effect the safe transportation of the daily receipts
to the bank, if such service is available at a reasonable cost, which expense
shall constitute an Operating Expense.
4.21 DISBURSEMENT ACCOUNT. The Manager shall establish for the benefit of
the Authority in the Authority's name a disbursement bank account in accordance
with Section 4.19 hereof (the "Disbursement Account"). The Manager shall,
consistent with and pursuant to the approved Budget, have responsibility and
authority for making all required payments for Operating Expenses, debt service,
management fees, disbursements to the Authority, and other disbursements
permitted by this Agreement from the Disbursement Account.
4.22 NO CASH DISBURSEMENTS. The Manager shall not make any cash
disbursements from the bank accounts except for the payment of cash prizes and
expenditures from the Petty Cash Fund described in Section 4.23; any and all
payments or disbursements by the Manager shall be made by check or wire transfer
drawn against a bank account.
4.23 PETTY CASH FUND. Manager shall establish and maintain for the benefit
of and in the name of the Authority a petty cash fund ("Petty Cash Fund") in the
amount of $10,000, or such other amount as may be set by the management Business
Board. The amounts of such fund shall be established by the Management Business
Board in conjunction with the establishment of the Budget, as an Operating
Expense, or more often as approved by the Management Business Board. The Petty
Cash Fund shall be used for miscellaneous small expenditures of the Gaming
Enterprise, and shall be maintained at the Gaming Facility.
4.24 TRANSFERS BETWEEN ACCOUNTS. The Manager has the authority to transfer
funds from the Depository Account to the Disbursement Account in order to pay
Operating Expenses and to pay debt service pursuant to the Financing Agreements,
Development and Construction Agreement and the fees payable to Manager pursuant
to this Agreement.
4.25 INSURANCE. The Manager, on behalf of the Authority, shall maintain,
or cause its agents to maintain, with responsible insurance carriers (each an
"Insurance Company") licensed to do business in the State of New York, insurance
reasonably satisfactory to the Authority covering the Gaming Facility and the
operations of the Gaming Enterprise, naming the Authority, and the Manager as
insured parties, as follows:
4.25.1 During the course of any new construction or remodeling,
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builder's risk insurance on an "all risk, basis (including collapse) on a
non-reporting form for full replacement value covering the interest of the
Authority in all work incorporated in the Gaming Facility, all materials
and equipment on or about the Gaming Facility and any new construction or
remodeling of the Gaming Facility. All materials and equipment in any
off-site storage location intended for permanent use in the Gaming
Facility, or incident to the construction thereof, shall be insured on an
"all risk, basis as soon as the same have been acquired by the Authority.
4.25.2 Commercial general liability insurance on behalf of the Tribe,
the Authority, and the Manager in an amount not less than Fifty Million
($50,000,000) Dollars per occurrence and One Hundred Million
($100,000,000) Dollars in the aggregate for all activities on, about or in
connection with the Gaming Facility. The commercial general liability
insurance shall include premises liability, contractor's protective
liability on the operations of all subcontractors, completed operations
and blanket contractual liability. The automobile liability insurance
shall cover owned, non-owned and hired vehicles.
4.25.3 On or before the Phase II Commencement Date, "all risk"
insurance on the Gaming Facility against loss by fire, lightening,
extended coverage perils, collapse, water damage, vandalism, malicious
mischief and all other risks and contingencies, subject only to such
exceptions as the Authority and the Manager may approve in an amount equal
to the actual replacement costs thereof, without deduction for physical
depreciation, with coverage for demolition and increased costs of
construction, and providing coverage in an "agreed amounts or without
provision for coinsurance.
4.25.4 Worker's Compensation and Employer's Liability Insurance
subject to the statutory limits of the State of New York in respect of any
work or other operations on, about or in connection with the Gaming
Facility.
4.25.5 From and after the Phase I Commencement Date, (a) "Dram Shop"
or "Liquor Law Liability insurance on behalf of the Tribe, the Authority,
and the Manager against all claims or liability arising directly or
indirectly to any persons or property on account of the sale or dispensing
of beer, wine or other alcoholic beverages on the Gaming Facility
including, without limitation, coverage for loss of means of support in an
amount not less than Ten Million ($10,000,000) Dollars per occurrence; (b)
fidelity bond coverage with respect to those employees of the Gaming
Enterprise specifically designated in writing by the Management Business
Board; (c) business interruption (including loss of rents) insurance
covering not less than 12 months of loss; and (d) special theft insurance
coverage; all in such amounts as determined by the Manager as commercially
prudent taking into consideration the coverages maintained by owners of
casino facilities comparable to the Gaming Facility.
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4.25.6 Such other or differing insurance with respect to the Gaming
Facility and in such amounts as the Management Business Board from
time-to-time may reasonably request against such other insurable hazards
which at the time are commonly insured against in respect of property
similar to the Gaming Facility.
4.25.7 The insurance policies required under Sections 4.25.1, 4.25.3
and 4.25.5 above shall have a standard noncontributory endorsement naming
Manager as an additional loss payee, to the extent of any insurable
interest. The insurance required under Section 4.25.2 above shall name the
Manager as an additional named insured. All insurance required hereunder
shall contain a provision requiring at least 30 days' prior written notice
to the Manager and the Authority before any cancellation, material changes
or reduction shall be effective. Appropriate deductibles, approved by the
Management Business Board, shall be included for all types of insurance
required under this Section 4.25. The Manager may effect any insurance
coverage required by this Agreement under blanket insurance policies,
provided that the Authority shall be furnished satisfactory evidence that
the protection afforded the Authority and the Manager under such blanket
insurance policy is not less than that which would have been afforded
under separate policies relating only to the Gaming Facility.
4.25.8 The insurance policies acquired under this Section 4.25 shall
include a provision which prohibits any Insurance Company from invoking
the Tribe's or the Authority's sovereign immunity as a defense to any
action within the limits of the policy. All such insurance policies shall
be issued by carriers having an A.M. Best & Company, Inc. rating of A or
higher and a financial size category of not less than XII, or if such
carrier is not rated by A.M. Best & Company, Inc., having the financial
stability and size deemed appropriate as certified by a reputable
insurance broker.
4.25.9 WAIVER OF SUBROGATION. Each of the Authority and the Manager,
shall, to the extent such insurance endorsement is available, obtain for
the benefit of the other a waiver of any right of subrogation which the
fire and extended coverage insurer may acquire against the other by virtue
of the payment of any such loss covered by such insurance. The foregoing
waiver shall be operative only so long as the same shall not preclude the
other from obtaining insurance, and shall have no effect to the extent
that it diminishes, reduces, or impairs the liability of any insurer or
the scope of any coverage under any policy applicable to the Property.
4.26 ACCOUNTING AND BOOKS OF ACCOUNT.
4.26.1 STATEMENTS AND BOOKS OF ACCOUNT. The Manager shall prepare
and provide to the Authority on a monthly, quarterly, and annual basis,
operating statements which after the full year of operation will include
comparative statements of all revenues, and all other amounts collected
and received, and all deductions and disbursements made
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therefrom in connection with the Gaming Enterprise. A nationally
recognized independent certified public accounting firm with casino
industry experience selected by the Authority, shall perform an annual
audit of the books and records of the Gaming Enterprise. The Management
Business Board shall have full access to the audit work papers and all
instructions to and reports from the auditor. The Authority, the B.I.A.
and the NIGC shall also have the right to perform special audits of the
Gaming Enterprise on any aspect of the Gaming Enterprise at any time
without restriction. The costs incurred for such audits and reports shall
constitute an Operating Expense. Such audits shall be provided by the
Authority to all applicable federal and state agencies, as required by
law, and may be used by the Manager for reporting purposes under federal,
foreign, and state securities and gaming laws, if required.
4.26.2 BOOKS OF ACCOUNT. The Manager shall maintain full and
accurate books of account at an office in the Gaming Facility and at such
other locations as may be determined by the Manager, with the prior
written consent of the Management Business Board, which consent shall not
be unreasonably withheld. The Management Business Board and the
Authority's Inspectors shall have access to the daily operations of the
Gaming Enterprise and shall have the unlimited right to inspect, examine,
and copy all such books and supporting business records, provided that any
such inspection shall be conducted in a manner to minimize interference
with normal day-to-day operations of the Gaming Enterprise. Such rights
may be exercised through a designated agent, employee, attorney, or
independent accountant acting on behalf of the Management Business Board,
provided that any such designation be in writing signed by the members of
the Management Business Board, and that notice of such designation be
provided to the Manager. Nothing contained herein is intended to restrict
Manager's right to utilize centralized accounting at an off-site location
for the Gaming Enterprise, provided that the Management Business Board or
the Authority shall have full 24-hour access to such accounting, and all
related books and records at or from the Gaming Facility.
4.26.3 ACCOUNTING STANDARDS. Manager shall maintain the books and
records reflecting the operations of the Gaming Enterprise in accordance
with the accounting practices of Manager in conformity with GAAP, and
shall adopt and follow fiscal accounting periods as set by the Management
Business Board. The Gaming Facility accounting records reflecting
detailed day-to-day transactions of the Gaming Facility's operations shall
be kept pursuant to Section 4.26.2 of this Agreement. The accounting
systems and procedures shall, at a minimum (i) include an adequate system
of internal accounting controls; (ii) permit the preparation of financial
statements in accordance with GAAP; (iii) be susceptible to audit; (iv)
allow the Gaming Enterprise, the Authority, and the NIGC, to calculate the
annual fee payable under 25 C.F.R. 'SS' 514.1; (v) permit the calculation
and payment of the Management Fee described in Section 3.7A; and (vi)
provide for the allocation of operating Expenses or overhead expenses
among the Authority, the Gaming Facility, and any other user of shared
facilities and services.
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4.26.4 DEPRECIATION SCHEDULES. Depreciation schedules for all assets
of the Enterprise shall be determined by the Management Business Board in
accordance with GAAP, consistently applied. The Gaming Facility shall be
depreciated over a 40 year life.
5. LIENS. The Authority specifically warrants and represents to the Manager that
during the term of this Agreement the Authority shall not act in any way
whatsoever, either directly or indirectly, to cause any party to become an
encumbrancer or lienholder of the Property or the Gaming Facility, other than
Manager or the lender(s) under the Financing Agreements, or to allow any party
to obtain any interest in this Agreement without the prior written consent of
the Manager, and, where applicable, consent from the United States. The Manager
specifically warrants and represents to the Authority that during the term of
this Agreement the Manager shall not act in any way, directly or indirectly, to
cause any party to hold a valid encumbrance or lien of the Property or the
Gaming Facility, or to obtain any interest in this Agreement without the prior
written consent of the Authority, and, where applicable, the United States. The
Authority and the Manager, on behalf of the Authority, shall keep the Gaming
Facility and Property free and clear of all valid mechanics and other liens
resulting from the construction of the Gaming Facility and all other liens which
may attach to the Gaming Facility or the Property, which shall at all times
remain the property of the United States in trust for the Tribe. Manager shall
have the right to contest any such liens on behalf of the Authority.
Notwithstanding the foregoing, security interests in personal property and
the Authority's leasehold interest in the Property may be granted with the
consent of the Authority and, when necessary, the B.I.A., United States
Department of Interior or the NIGC as appropriate.
6. MANAGEMENT FEE. REIMBURSEMENT AND DISBURSEMENT,
FINANCING GUARANTEE, FUNDING AND BUY OUT OPTION.
6.1 AUTHORIZATION FOR PAYMENT OF MANAGEMENT FEE BY MANAGER. Subject to the
provisions of Sections 6.4 on or before the twenty-fifth (25th) day of each
fiscal month after the first full month of operation, Manager is authorized by
the Authority to pay itself from the Bank Account(s) a fee calculated as
provided by Section 3.6 of this Agreement.
6.2 DISBURSEMENTS. As and when received by Manager, Gross Revenues shall
be deposited in the Depository Account created pursuant to Section 4.20 of this
Agreement. There shall, in turn, be disbursed by Manager, on a monthly basis,
for and on behalf of the Authority, funds from the Disbursement Account to pay
to the extent available Operating Expenses.
Manager will reserve funds (in excess of the Minimum Balance), on an
annualized basis, in the Disbursement Account each fiscal month for payment of
any Operating Expenses or any of the above items which Manager has a duty to pay
that are not paid on a monthly basis (e.g., insurance premiums, etc.).
6.3 ADJUSTMENT TO BANK ACCOUNT. After the disbursements pursuant to
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Section 6, and establishment of any reserves for future disbursements as the
Manager deems necessary, taking into account anticipated cash flow and Operating
Costs at the Gaming Facility, any excess funds remaining in the Disbursement
Account over the Minimum Balance (and such reserves) shall be disbursed monthly
in accordance with Section 6.4.
6.4 PAYMENT OF FEES AND AUTHORITY DISBURSEMENT. Within 25 days after the
end of each calendar month of operations, the Manager shall calculate and report
to the Authority the Gross Revenues, operating Expenses, and Net Revenues of the
Gaming Enterprise for the previous month's operations and the year's operations
to date. Such Net Revenues, less any amount reasonably needed to maintain the
Petty Cash Fund as previously agreed upon by the Management Business Board and
any amounts required to fund the Bank Roll Amount, shall be disbursed from the
Bank Account(s) to the extent available to pay the scheduled items to the extent
due and payable and earned in the following order of priority:
First Minimum Priority Payment shall have first priority and shall
be paid monthly in the amount of ONE HUNDRED THOUSAND DOLLARS
AND 00/100 ($100,000) during Phase I and until the Phase II
Commencement Date, and TWO HUNDRED FIFTY THOUSAND DOLLARS AND
00/100 ($250,000.00) during Phase II. Minimum Priority
Payments shall be charged against the Authority's distribution
of Net Revenues and, where there is insufficient Net Revenues
in a given month, Manager shall advance the funds necessary to
compensate for the deficiency and shall be reimbursed by the
Authority in the next succeeding month or months in accordance
with the schedule of disbursements set forth in this Article
6.4, as recoupment payments. Minimum Priority Payments shall
be made for any month during which Gaming is conducted,
including those months when Gaming is conducted for only a
part of a month. No Minimum Priority Payment shall be owed for
any month during which Gaming is suspended or terminated at
the Gaming Facility for a full month pursuant to Section 4.4.
The obligation shall cease to accrue upon termination of this
Agreement for any reason.
Second Current principal, and any other payments including sinking
funds or any required deposit to the Cash Maintenance Account
and in the Interest and Excess Cash Flow Account (exclusive of
interest, which shall be paid as an Operating Expense) due on
or pursuant to the Senior Secured Notes (including pursuant to
any required offer to purchase) or the Senior Secured Note
Indenture.
Third Recoupment payments to Manager for funds advanced to the
Authority for Minimum Priority Payments made for any prior
period, and reimbursement of other amounts advanced by the
Manager pursuant to Section 7.12. (These funds shall be
charged, with interest at a rate equal to the prime rate
published from time to time in the Wall Street Journal plus
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one percent, against the Authority's share of Net Revenues).
Fourth Management Fee, subject to the restrictions on the
distributions of the Management Fee in the Senior Secured Note
Indenture.
All remaining Net Revenues and cash from any prior period shall be
distributed to the Authority subject to the restrictions on distributions to the
Authority in the Senior Secured Note Indenture. The priority of payments from
available funds which is described in this Section 6.4 does not control the
calculation of the &mount of each of these obligations. The calculation of the
amounts of these obligations shall be as otherwise provided by this Agreement.
The Manager and the Authority agree that they will disburse all Net
Revenues and pay all Operating Expenses in accordance with the terms of this
Section 6.4.
6.4.1 SUBORDINATION PROVISIONS. Notwithstanding anything to the contrary
contained in this Agreement, the following paragraphs shall apply during any
period when any amounts are due and outstanding under the Senior Secured Notes
and/or Senior Secured Note Indenture:
(a) By the execution of this Agreement, the Manager hereby acknowledges
and agrees that the Management Fee and any other amounts owed by the
Authority to Manager under this Agreement shall be subordinated in
right of payment to the prior payment in full of all the obligations
of the Authority which are then due and payable under the Senior
Secured Note Indenture and the Senior Secured Notes, and that such
subordination is for the benefit of the holders of the Senior
Secured Notes.
(b) Upon any distribution to any creditors of the assets of the Gaming
Enterprise in a liquidation or dissolution of the Gaming Enterprise
or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding of the Gaming Enterprise or its property, or any
assignment for the benefit of creditors or any marshalling of the
assets and liabilities of the Gaming Enterprise, (i) the holders of
the Senior Secured Notes shall be entitled to receive payment in
full of all obligations (as defined in the Senior Secured Note
Indenture) in respect of the Senior Secured Notes, including,
without limitation, any principal, interest, penalties, premiums or
other amounts due and payable under the Senior Secured Notes
(*Amounts Owed to Senior Secured Noteholders) before any payment of
any accrued and unpaid Management Fees, recoupment payments or any
other distributions permitted under this Agreement to the Manager
('Management Distributions) and before any payment or other
distributions to the Authority pursuant to this Agreement; and (ii)
any distributions to the Manager and the Authority that it would be
entitled to under this Agreement but for this paragraph
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shall be made to the holders of the Senior Secured Notes. Any
distribution paid under clause (ii) shall not be deemed to be a
payment in satisfaction or discharge of any obligation to pay
Management Distributions to the Manager under this Agreement.
(c) The Manager hereby agrees that it shall not make or receive any
Management Distributions (i) if a default in the payment of any
Amounts Owed to Senior Secured Noteholders occurs and is continuing
beyond any applicable grace period provided for in the Senior
Secured Note Indenture until all Amounts owed to Senior Secured
Noteholders have been paid in full; or (ii) if a default, other than
a payment default, under the Senior Secured Note Indenture occurs
and is continuing and is of such a nature that the Trustee, or the
holders of the Senior Secured Notes is permitted to accelerate the
principal, premium, if any, and interest due under the Senior
Secured Notes, until such default is cured. The Authority covenants
that it shall provide written notice to the Manager upon the
occurrence of any default described in this paragraph.
(d) In the event that the Manager receives any payment or distribution
from the Authority at a time when the Manager has actual knowledge
that such payment or distribution is in violation of the terms and
provisions of this Section 6.4.1, such payment or distribution shall
be held by the Manager, in trust for the benefit of, and shall be
paid forthwith over and delivered, upon written request, to the
Trustee on behalf of the holders of the Senior Secured Notes to be
applied in accordance with the applicable provisions of the Senior
Secured Note Indenture.
(e) This Section 6.4.1 defines the relative rights of the Manager and
the holders of the Senior Secured Notes. Nothing in this Section
6.4.1 shall (i) impair, as between the Authority and the Manager,
the right of the Manager to receive any Management Distributions;
(ii) affect the relative rights of the Manager and creditors of the
Authority other than their rights in relation to the holders of the
Senior Secured Notes; or (iii) prevent the Manager from exercising
its available remedies upon a breach of the Authority's obligations
under this Agreement, subject to the rights of the holders of the
Senior Secured Notes to receive distributions and payments otherwise
payable to the Manager.
(f) No right of any holder of the Senior Secured Notes to enforce the
subordination of the Management Fee and any other amounts owed to
the Manager under this Agreement shall be impaired by any act or
failure to act by the Trustee, any holder of the Senior Secured
Notes, the Authority, or the Manager in compliance with the terms of
this Section 6.4.1.
(g) The provisions of this Section 6.4.1 shall not be amended or odified
without the written consent of the Trustee, on behalf of
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the holders of the Senior Secured Notes.
The Manager agrees that if the Trustee under the Senior Secured Note
Indenture forecloses upon, or accepts a deed in lieu of foreclosure of, the
Leasehold Mortgage (as defined in the Senior Secured Note Indenture) that
Manager shall have no interest in the leasehold estate thereunder or any rights
or remedies against the Trustee (so long as the Trustee pays any Management
Distributions payable to Manager under this Agreement and permitted to be paid
under this Section 6.4.1) or the Senior Secured Noteholders for the loss of its
management interests hereunder, and Manager shall vacate and not remain on the
Premises, so long as Gaming is not conducted on the Premises.
6.5 OPERATIVE DATES. For purposes of this Section 6, the first year of
operations shall begin on the Phase I Commencement Date and continue until the
first day of the month following the first anniversary of the Phase I
Commencement Date, and each subsequent year of operations shall be the 12-month
period following the end of the previous year. Notwithstanding the foregoing,
subject to Sections 3.2 and 4.4.5, the term of this Agreement shall extend up to
and through but not beyond seven (7) years after the Phase I Commencement Date.
6.6 PAYMENT OF NET REVENUES. The Manager is authorized to transfer
funds from the bank accounts of the Gaming Enterprise to the bank accounts of
the Manager and the Authority in order to distribute Net Revenues and any other
amounts due under this Section 6. The Net Revenues paid to the Authority
pursuant to this Section 6 shall be payable to the official of the Authority or
to the bank account specified by the Authority's Representative pursuant to
Section 7.
6.7 TOTAL RECOUPMENT FOR DEVELOPMENT COSTS. The total amount of
recoupment for development costs (exclusive of interest) including the aggregate
principal amount of borrowings by the Authority for Project Costs shall under no
circumstances exceed $400,000,000 (FOUR HUNDRED MILLION DOLLARS).
7. GENERAL PROVISIONS.
7.1 NOTICE. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given to the
applicable party (i) on the date of hand delivery, with signed receipt, (ii) on
the business daimmediately following transmittal to Federal Express or
othenationally recognized overnight commercial courier, with signed receipt, or
(iii) five (5) days after deposit in the United States mail, postage prepaid, in
any case addressed to the address of the applicable party set forth below, or
such other address as such party may hereafter specify by notice to the other.
The parties also designate the following persons as agents for receipt of
service of process:
If to the Authority: Chairman
St. Regis Mohawk Gaming Authority
St. Regis Mohawk Reservation
Community Building
Route 37, Box SA
Hogansburg, New York 13655
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with a copy to: Hans Walker, Jr.
Hobbs, Straus, Dean & Walker 1819 H St., N.W.
Suite 800
Washington, DC 20006
If to Manager: Mohawk Management, L.L.C.
c/o Catskill Development, L.L.C.
c/o Monticello Raceway
P.O. Box 5013
Monticello, New York 12701-5193
with a copy to Sanford Freedman, Esq.
Suite 1616
630 Fifth Avenue
New York, New York 10111
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with a copy to: James 1. Hisiger, Esq.
Latham & Watkins
885 Third Avenue
New York, New York 10022
or to such other different addresses as the Manager or the Authority may specify
in writing using the notice procedure called for in this Section 7.
7.2 AUTHORIZATION. The Authority and Manager represent and warrant to
each other that each has full power and authority to execute this Agreement and
to be bound by and perform the terms hereof. Each party shall furnish evidence
of such authority to the other, which shall be attached as Exhibits to this
Agreement.
7.3 RELATIONSHIP. Manager and the Authority shall not be construed as
joint venturers or partners of each other by reason of this Agreement and
neither shall have the power to bind or obligate the other except as set forth
in this Agreement.
7.4 MANAGER'S CONTRACTUAL AUTHORITY. Subject to Section 4.2.4, Manager
is authorized to make, enter into and perform in the name of and for the account
of the Authority any contracts in furtherance of its obligations under this
Agreement, including, without limitation, promotional or cross marketing
agreements with any third party which are intended to enhance Gaming revenues.
7.5 FURTHER ACTIONS. The Authority and Manager agree to execute all
contracts, agreements and documents and to take all actions necessary to comply
with the provisions of this Agreement and the intent hereof. The parties further
agree that:
7.5.1 FIRE AND SAFETY. The Gaming Facility shall be constructed
and maintained in substantial compliance with such fire and safety
statutes, New York Building Code and related regulations which would be
applicable if the Gaming Facility were located outside of the
jurisdiction of the Authority although those requirements would not
otherwise apply within that jurisdiction. To the extent that the
Authority adopts fire, safety, or building code requirements which are
more stringent than those otherwise applicable pursuant to the Compact,
the Gaming Facility shall comply with such law. Nothing in this Section
shall grant any jurisdiction (including but not limited to jurisdiction
regardingzoning or land use) to the State of New York or any political
subdivision thereof over the Property or the Gaming Facility. Fire
protection services for the Gaming Facility will be provided by the
Authority, or third parties pursuant to agreement with the Authority.
7.5.2 TAXES. If any government attempts to impose any possessory
interest tax upon any party to this Agreement or upon the Gaming
Enterprise, the Gaming Facility or the Property, the Management
Business Board, in the name of the appropriate party or parties in
interest, may, upon unanimous vote, resist such attempt through legal
action. The costs of such action and the compensation of legal counsel
shall be an Operating Expense of the Gaming Enterprise. Any such tax or
required payment shall constitute an Operating Expense of the Gaming
Enterprise. This Section shall in no manner be construed to imply that
any party to this Agreement or the Gaming Enterprise
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is liable for any such tax. This Section 7.5.2 shall not be construed
to apply to any lawfully imposed tax, including but not limited to
federal or state income taxes, which may be imposed upon Manager's
share of the Net Revenues.
7.5.3 GOVERNING LAW. The rights and obligations of the parties
and the interpretation and performance of this agreement shall be
governed by the law of the State of New York. All gaming covered by
this Agreement will be conducted in accordance with the Compact, IGRA,
and the Tribal Gaming ordinance.
7.5.4 NATIONAL ENVIRONMENTAL POLICY ACT. The Authority shall
supply the NIGC or the B.I.A., as appropriate, with all information
necessary for the NIGC or the B.I.A. to comply with the National
Environmental Policy Act ("NEPAI), and any applicable regulations
thereunder. The cost of any such compliance shall constitute an
Operating Expense.
7.6 DEFENSE. Except for disputes between the Authority and Manager,
Manager shall bring, defend, or settle any claim or legal action brought against
Manager or the Authority, individually, jointly or severally in connection with
the operation of the Gaming Enterprise. Subject to the approval of the
Management Business Board, Manager shall retain and supervise legal counsel,
accountants and such other professionals, consultants and specialists as Manager
deems appropriate to defend and/or settle any such claim or cause of action. Any
action which poses a substantial risk to the normal operation of the Gaming
Facility shall be supervised by the Management Business Board with notice to and
appropriate consultation with the Authority. All liabilities, costs, and
expenses, including attorneys' fees and disbursements, incurred in defense or
settlement of any such claim or legal action which are not covered by insurance
shall be an Operating Expense. Nothing contained in this Section 7.6 is a grant
to the Manager of the right to waive the Tribe's or the Authority's sovereign
immunity.
7.7 INDEMNITY. Manager shall indemnify and save the Authority harmless
from and against all loss, cost, liability and expense, including, but not
limited to, reasonable counsel fees and disbursements that may be occasioned by
any acts constituting theft, fraud, willful misconduct or gross negligence on
the part of Manager in the performance of its duties under this Agreement.
Except for MaLnager's theft, fraud, willful misconduct or gross negligence, the
Authority shall indemnify, defend and hold harmless Manager from any loss, cost,
liability and expense, including, but not limited to, reasonable counsel fees
and disbursements relating to the Gaming Enterprise or Gaming Facility that
results from the Manager's performance of its obligations under this Agreement.
The payment of all such obligations of the Authority shall constitute Operating
Expenses. The indemnifications and terms set forth in this section shall survive
the expiration or earlier termination of this Agreement.
7.8 WAIVERS. No failure or delay by Manager or the Authority to insist
upon the strict performance of any covenant, agreement, term or condition of
this Agreement, or to exercise any right or remedy consequent upon the breach
thereof, shall constitute a waiver of any such breach or any subsequent breach
of such covenant, agreement, term or condition. No covenant, agreement, term, or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument. No waiver of any breach shall affect or
alter this Agreement, but each and every covenant,
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agreement, term and condition of this Agreement shall continue in full force and
effect with respect to any other then existing or subsequent breach thereof.
7.9 CAPTIONS. The captions for each Section are intended for
convenience only.
7.10 SEVERABILITY. If any of the terms and provisions hereof shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any of the other terms or provisions hereof. if, however, any material
part of a party's rights under this Agreement shall be declared invalid or
unenforceable (specifically including Manager's right to receive its Management
Fees), the party whose rights have been declared invalid or unenforceable shall
have the option to terminate this Agreement upon thirty (30) days written notice
to the other party, without liability on the part of the terminating party.
7.11 INTEREST. Any amount payable to Manager or the Authority by the
other, including without limitation, unpaid interest, which has not been paid
when due shall accrue interest at same rate as the Senior Secured Notes, but in
no event shall such interest exceed the cost of such funds. Any funds advanced
by the Manager for the minimum monthly guaranteed payment will be repaid from
the Authority's share of future Net Revenues with interest as provided in
Section 6.4.
7.12 REIMBURSEMENT. With the approval of the Management Business Board,
Manager may, according to the terms of this Agreement or at its option, advance
funds or contribute property, on behalf of the Authority, to satisfy obligations
of the Authority in connection with the Gaming Facility and this Agreement.
Manager shall keep appropriate records to document all reimbursable expenses
paid by Manager, which records shall be made available for inspection by the
Authority or its agents upon request. The Authority agrees to reimburse Manager
with interest from future Net Revenues for money paid or property contributed by
Manager to satisfy obligations of the Authority in connection with the Gaming
Enterprise and this Agreement. Interest shall be calculated at the rate and in
the manner set forth in Section 7.11 from the date the Authority was obligated
to remit the funds or contribute the property for the satisfaction of such
obligation to the date reimbursement is nade; all such interest shall constitute
an operating expense pursuant to GAAP. The Manager's sole source of such
reimbursement shall be from undistributed and future Net Revenues.
7.13 THIRD PARTY BENEFICIARY. Except with respect to the rights of the
Trustee and the holders of the Senior Secured Notes under Sections 4.2 and 6.4,
this Agreement is exclusively for the benefit of the parties hereto and it may
not be enforced by any party other than the parties to this Agreement and
notwithstanding the provisions of Section 7.12, shall not give rise to liability
to any third party other than the authorized successors and assigns of the
parties hereto.
7.14 BROKERAGE. Manager and the Authority each hereby agrees to
indemnify and hold the other harmless from and against any and all claims, loss,
liability, damage or expenses (including reasonable attorneys' fees) suffered or
incurred by the other party as a result of a claim brought by a person or entity
engaged or claiming to be engaged as a finder, broker or agent by the
indemnifying party. This provision shall survive the expiration or earlier
termination of this Agreement.
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7.15 SURVIVAL OF COVENANTS. Any covenant, term or provision of this
Agreement which, in order to be effective, must survive the expiration or
earlier termination of this Agreement, shall survive any such expiration or
earlier termination.
7.16 ESTOPPEL CERTIFICATE. Manager and the Authority agree to promptly
furnish to the other party, from time to time upon request, an estoppel
certificate in such reasonable form as the requesting party may request stating
whether there have been any defaults under this Agreement known to the party
furnishing the estoppel certificate and such other information relating to the
Gaming Enterprise as may be reasonably requested.
7.17 PERIODS OF TIME. Whenever any determination is to be made or
action is to be taken on a date specified in this Agreement, if such date shall
fall on a Saturday, Sunday, legal holiday under the laws of the State of New
York, or legal holiday of the Tribe (a list of which is set forth on Exhibit E
attached hereto), then in such event said date shall be extended to the next day
which is not a Saturday, Sunday or legal holiday.
7.18 PREPARATION OF AGREEMENT. This Agreement shall not be construed
more strongly against either party regardless of who is responsible for its
preparation.
7.19 EXHIBITS. All exhibits attached hereto are incorporated herein by
reference and made a part hereof as if fully rewritten or reproduced herein.
7.20 NON-ASSIGNABILITY. This Agreement shall not be assigned by either
party, nor shall subcontracts be entered into between Manager and a third party
wherein the third party will have any responsibility for gaming or access to the
proceeds of the gaming operation, without the prior written consent of the other
party, which consent shall not be unreasonably withheld. No assignment of a
controlling interest in Manager shall be made without the prior written consent
of the Authority. No assignment involving responsibility for Gaming shall be
valid until approved by the Chairman of the NIGC. If an assignment is so
approved, this Agreement shall inure to the benefit of and be binding on the
assignee.
Notwithstanding anything to the contrary contained in this Agreement,
Manager may assign its rights or interests in this Agreement without the consent
of the Authority, provided that all of the following conditions are satisfied:
(a) Manager is not in "material breach" of any of its obligations
under this Agreement as such term is defined Section 9.1 hereof.
(b) The proposed assignee ("Proposed Assignee") shall be a reputable
entity or person of good character with sufficient financial net
worth reasonably satisfactory to the Authority in light of the
obligations assumed hereunder as evidenced by financial
statements and other information reasonably requested by
the Authority.
(c) Proposed Assignee shall have sufficient experience and business
expertise in managing a first class gaming facility or other
similar facility in the reasonable judgment of the Authority, and
the Authority shall be provided with evidence thereof as
reasonably requested by the Authority.
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(d) Proposed Assignee shall execute and deliver to the Authority an
assumption agreement in form and substance reasonably acceptable
to the Authority, evidencing the Proposed Assignee's agreement to
abide and be bound by the terms of this Agreement.
(e) The NIGC has approved the proposed assignment of this Agreement
to the Proposed Assignee.
7.21 CONFIDENTIAL INFORMATION. Each party agrees that any information
received concerning the other party during the performance of this Agreement,
regarding a parties' organization, financial matters, marketing plans, or other
information of a proprietary nature, will be treated in a confidential manner
and will not be disclosed to any other persons, firms or organizations, provided
that the foregoing shall not apply to information that is (a) publicly
available, (b) obtained by a party from third parties without restrictions on
disclosure, or (c) required to be disclosed by order of a court of competent
jurisdiction or other applicable governmental entity. In an action under Article
XVI of this Agreement for actual or threatened breach of the provisions of this
Section, the party bringing the action will be deemed to have no adequate remedy
at LAW and will be entitled to immediate and injunctive and other equitable
relief, without bond and without the necessity of showing actual money damages.
This provision shall survive the expiration or earlier termination of this
Agreement.
7.22 PATRON DISPUTE RESOLUTION. Manager shall attempt to resolve all
Patron disputes pursuant to the Policies and Procedures set forth in Exhibit D.
7.23 MODIFICATION. Any change to or modification of this Agreement must
be in writing signed by the Manager and the Authority and shall be effective
only upon approval by the Chairman of the NIGC, the date of signature of the
parties notwithstanding.
8. WARRANTIES.
8.1 PRESERVATION OF AGREEMENT. The Manager, the Tribe, and the
Authority each warrant and represent that they shall not act in any way
whatsoever, directly or indirectly, to cause this Agreement to be amended,
modified, canceled, or terminated, except pursuant to Section 7.23 and Article
9. The Manager, the Tribe, and the Authority warrant and represent that they
shall take all actions necessary to ensure that this Agreement shall remain in
full force and effect at all times.
8.2 NON-INTERFERENCE IN TRIBAL AFFAIRS. The Manager agrees not to
unduly interfere in or attempt to influence the internal affairs or government
decisions of the Tribe or the Authority by offering cash incentives, by making
written or oral threats to the personal or financial status of any person, or by
any other action, except for actions in the normal course of business of the
Manager that only affect the activities of the Gaming Enterprise. For the
purposes of this Section 8.2, if any such undue interference in Tribal affairs
is alleged by the Tribe or the Authority, the provisions of Section 9.3 shall
apply.
8.3 PROHIBITION OF PAYMENTS TO MEMBERS OF TRIBAL GOVERNMENT OR
AUTHORITY. Manager represents and warrants that no payments or gifts of services
or other things of value have been or will be made to any member, official,
Relative of a member or
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official, or employee of the Tribal government or of the Management Board or the
regulatory arm of the Authority for the purpose of obtaining any special
privilege, gain, advantage or consideration. The foregoing shall not prohibit
seasonal gifts, birthday gifts, and gifts for other special occasions, provided
that each such gift is for nominal value not to exceed $100 (ONE HUNDRED)
dollars, and the aggregate value of such gifts in any one calendar year shall
not exceed $500 (FIVE HUNDRED) dollars. The Authority shall provide to the
Manager from time to time a list of all members, officials, Relatives of each
member and official, and employees of the Tribal government, the Management
Board and any regulatory arm of the Authority, and the Manager shall be entitled
to rely upon such list for purposes of this Section.
8.4 PROHIBITION OF HIRING MEMBERS OF TRIBAL GOVERNMENT OR AUTHORITY. No
member, official, or employee of the Tribal Government or of the Management
Board or regulatory arm of the Authority may be employed at the Gaming
Enterprise without a written waiver of this Section 8.4 by the Authority, as
appropriate, and, where required by applicable law, the Area Director, Eastern
Area Office, B.I.A. or the NIGC or other appropriate federal official. The
Authority shall provide to the Manager from time to time a list of all members,
officials, Relatives of each member and official, and employees of the Tribal
government, the Management Board and any regulatory arm of the Authority, and
the Manager shall be entitled to rely upon such list for purposes of this
Section.
8.5 PROHIBITION OF FINANCIAL INTEREST IN GAMING ENTERPRISE. No member
or Relative of a member of the Tribal government, or of the Management Board or
the regulatory arm of the Authority shall have a direct or indirect financial
interest in the Gaming Enterprise greater than the interest of any other member
of the Tribe; provided, however, nothing in this subsection shall restrict the
ability of a Tribal member to purchase or hold stock in the Manager, its
partners, parents, subsidiaries or affiliates where (i) such stock is publicly
held, and (ii) the Tribal member acquires less than (10%) ten percent of the
outstanding stock in the corporation, provided that if a Tribal member shall
acquire more than (10%) ten percent such person shall comply with all applicable
law, including, without limitation, the Compact.
8.6 Tribal Taxes. The Authority and the Tribe warrant and agree that
neither they nor any agent, agency, affiliate or representative of the Authority
or the Tribe will impose any taxes, fees, assessments, or other charges of any
nature whatsoever on payments of any kind to Manager or to any lender furnishing
financing for the Gaming Facility or for the Gaming Enterprise, or on the Gaming
Enterprise, the Gaming Facility, the revenues therefrom or on the Management Fee
as described in Section 6.4 of this Agreement; provided, however, the Authority
or the Tribe, as appropriate, may assess against the Gaming Enterprise license
fees reflecting reasonable regulatory costs incurred by the Authority or the
Tribe. The Authority and the Tribe further warrant and agree that neither they
nor any agent, agency, affiliate or representative will impose any taxes,
fees, assessments or other charges of any nature whatsoever on the salaries or
benefits, or dividends or distributions paid to, any of the Manager's partners,
members, stockholders, officers, directors, or employees or affiliates, or any
of the employees of the Gaming Enterprise. If any such tax, fee, assessment or
other charge is in fact levied, imposed, or collected, the Authority or the
Tribe warrants and agrees that it shall reimburse Manager or the affected
partners, members, stockholders, officers, directors, employees or affiliates
for the full value, and dollar for dollar of such tax, fee, assessment or other
charge. Except as otherwise provided herein, if
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any taxes, fees or assessments are levied by the Authority or the Tribe, such
taxes and assessments shall constitute Operating Expenses of the Gaming
Enterprises.
9. GROUNDS FOR TERMINATION.
9.1 VOLUNTARY TERMINATION AND TERMINATION FOR CAUSE. This Agreement may
be terminated pursuant to the provisions of Sections 4.4.4, 9.2, 9.3, 9.4, 9.5,
and 12.5.
9.2 VOLUNTARV TERMINATION. This Agreement may be terminated upon the
mutual written consent and approval of the parties.
9.3 TERMINATION FOR CAUSE.
9.3.1 BY EITHER PARTY. Either party may terminate this Agreement if the
other party commits or allows to be committed any material default of this
Agreement. Neither party may terminate this Agreement on grounds of material
default unless it has provided written notice to the other party of such
default, and the defaulting party thereafter fails to cure or take steps to
substantially cure the default within sixty (60) days following receipt of such
notice. If during the period specified in such notice the defaulting party is
actively proceeding in good faith to cure such default, the cure period shall be
extended for a reasonable period. During the period specified in such notice,
either party may submit the matter to arbitration under the dispute resolution
procedures of this Agreement. The period to cure such default shall be tolled
during the pendency of such arbitration proceeding. The discontinuance or
correction of a default shall constitute a cure thereof.
9.3.2 BY THE AUTHORITY. The Authority may also terminate this Agreement
where (a) the Manager, or a manager, member, director, or officer of the
Manager, has been convicted or indicted for any federal or state felony
involving moral turpitude or any federal or state gaming offense, provided,
however, that the Authority may not terminate this Agreement based on the
conviction of a member, director, or officer where the Manager terminates such
individual (or such individual withdraws or resigns, as applicable) within ten
days after receiving notice of the conviction or indictment from the Authority;
(b) the removal of the Manager is required by the NIGC or its Chairman,
provided, however, that the Authority shall not so terminate this Agreement and
the Manager may contest such requirement of the NIGC or its Chairman so long as
such contest is in good faith and shall not prevent the Authority from
conducting Gaming at the Gaming Facility; or (c) the Manager, through a manager,
member, director, or officer of the Manager, has knowingly and willfully
provided materially important false or misleading statements or information to
the Authority, provided, however, that the Authority may not terminate this
Agreement based on such statements or information provided by a manager, member,
director, or officer of Manager or a member of Manager, where the Manager
terminates such individual (or such individual withdraws or resigns, as
applicable) within 30 days after the later of (i) the Manager receives written
notice from the Authority of such statements or information or (ii) if Manager
contests in good faith such statements or information by filing for a proceeding
in arbitration in accordance with Section 16.1.1 within such 30 days and
terminates such individual (or such individual withdraws or resigns as
applicable) within 30 days after the decision of such arbitrator in favor of the
Authority. For purposes of this Section 9.3.2 'materially important false or
misleading statements' means a false or misleading statement that is of such
importance and materiality to the operation of the Gaming Enterprise so as to
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merit termination in the view of a reasonably prudent commercial business
person.
9.3.3 RIGHTS UPON TERMINATION. In the event of any termination for
cause, regardless of fault, the parties shall retain all money previously paid
to them pursuant to Section 6 of this Agreement; and the Authority shall retain
title to all Gaming Enterprise and Gaming Facility fixtures, improvements,
supplies, equipment, funds and accounts, and subject to the rights of the
Manager subject to offset, to any accrued and unpaid Net Revenues due under
Section 6 of this Agreement. Subject to any adjudicated offsets, the Manager
shall continue to have the right to repayment of unpaid principal and interest
and other amounts due under any other agreements.
9.3.4 NO ELECTION OF REMEDIES. Subject to Section 16, an election to
pursue damages or to pursue specific performance of this Agreement or other
equitable remedies while this Agreement remains in effect pursuant to the
provisions of Section 9.6 or 9.7 shall not preclude the injured party from
providing notice of termination pursuant to this Section 9.3. Neither shall
termination preclude a suit for damages.
9.4 INVOLUNTARY TERMINATION DUE TO CHANGES IN LOCAL REQUIREMENTS. It is
the understanding and intention of the parties that the establishment and
operation of the Gaming Enterprise conforms to and complies with all Legal
Requirements. If during the term of this Agreement, the Gaming Enterprise, any
material aspect of Gaming or any material aspect of the Compact is rendered
unlawful by an Act of Congress, or is determined to be unlawful under federal
law by the final judgment of a federal or state court of competent jurisdiction,
the obligations of the parties hereto shall cease, and this Agreement shall be
of no further force and effect; provided that (i) the Manager shall have the
rights in Section 4.4 of this Agreement; (ii) the Manager and the Authority
shall retain all money previously paid to them pursuant to Section 6 of this
Agreement; (iii) funds of the Gaming Enterprise in any account shall be paid and
distributed as provided in Section 6 of this Agreement; (iv) any money lent by
or guaranteed by the Manager or its affiliates to the Authority shall be repaid
to the Manager to the extent provided in Section 16.2.1; and (v) the Authority
shall retain its interest in the lease and title to all Gaming Enterprise
furnishing, fixtures, supplies and equipment, subject to the rights of the
Manager under the Financing Agreements and subject to any requirements of
financing arrangements.
9.5 MANAGER'S RIGHT TO TERMINATE AGREEMENT. Manager may terminate this
Agreement by written notice effective upon receipt by the Authority if:
(i) Any Tribal, State or Federal authority whose approval is
required fails to approve this Agreement or otherwise objects to the
performance by Manager of any obligation imposed on it under this
Agreement.
(ii) Manager has been notified by any regulatory agency that the
performance by it of any material obligation imposed by this Agreement
will jeopardize the retention of any license, or approvals granted
thereunder, held by Manager or any of its affiliates in any other
jurisdiction, and the Authority refuses to allow the Manager to
immediately rectify any such complaint.
(iii) Manager, after seven days prior notice to the Authority,
has reason to believe that the performance by it or the Authority of
any material obligation imposed under this Agreement may reasonably be
expected to result in
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the breach of any applicable Tribal, State or Federal law.
9.6 Consequences of Termination for Manager's Breach. In the event of
the termination of this Agreement by the Authority for cause under Section 9.3,
the Manager shall not, prospectively from the date of termination, except as
provided in Section 9.3, have the right to its Management Fee from the Gaming
Enterprise, but such termination shall not affect the Manager's rights
relating to reimbursement under this Agreement or any other agreements entered
pursuant hereto. Manager shall indemnify and hold the Tribe and the Authority
harmless against all liabilities of any nature whatsoever relating to the Gaming
Enterprise, but only insofar as these liabilities result from acts within the
control of the Manager or its agents. Any Net Revenues accruing through the date
of termination shall be distributed in accordance with Section 6 of this
Agreement. Nothing in this section shall preclude any claim by the Authority
against Manager for damages or equitable remedies caused by a breach of this
Agreement. Further, nothing in this section shall preclude any claim by the
Manager against the Authority for damages or equitable remedies caused by a
wrongful termination of this Agreement.
9.7 CONSEQUENCES OF TERMINATION FOR AUTHORITY'S BREACH. In the event of
termination of this Agreement by the Manager for cause under Section 9.3, the
Manager shall not be required to perform any further services under this
Agreement and the Authority shall indemnify and hold the Manager harmless
against all liabilities of any nature whatsoever relating to the Gaming
Enterprise, but only insofar as these liabilities result from acts within the
control of the Authority or its agents. Any Net Revenues accruing through the
date of termination shall be distributed in accordance with Section 6 of this
Agreement. Nothing in this section shall preclude any claim by Manager against
the Authority for damages or equitable remedies cause by a breach of this
Agreement. Further, nothing in this section shall preclude any claim by the
Authority against the Manager for damages or equitable remedies caused by
wrongful termination of this Agreement.
10. CONCLUSION OF THE MANAGEMENT TERM. Upon the conclusion of the term
of the Management Agreement, or the termination of this Agreement under other of
its provisions, in addition to other rights under this Agreement, the Manager
shall have the following rights:
10.1 TRANSITION. If termination occurs at any time other than upon the
conclusion of the Term, Manager shall be entitled to a reasonable period of not
more than thirty (30) days (such time as may be necessary to bring the
accounting period to the close of a calendar month) to transition management of
the Gaming Enterprise to the Authority or its designee. Manager and the
Authority shall cooperate to effect an orderly transition.
10.2 UNDISTRIBUTED NET REVENUES. If the Gaming Enterprise has accrued
Net Revenues which have not been distributed under Section 6 of this Agreement,
such Net Revenues shall be distributed according to Section 6.4 of this
Agreement.
11. CONSENTS AND APPROVALS.
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11.1 AUTHORITY. Where approval or consent or other action of the
Authority, or any agent or political subdivision of the Authority is required,
such approval shall mean the written approval of the Management Board of the
Authority evidenced by a duly enacted resolution thereof, or such other person
or entity designated by resolution of such board. Any such approval, consent or
action shall not be unreasonably withheld, delayed, or conditioned.
11.2 MANAGER. Where approval or consent or other action of the Manager
is required, such approval shall mean the written approval of the Manager's
Representatives. Except as otherwise expressly provided herein, any such
approval, consent or other action shall not be unreasonably withheld, delayed,
or conditioned.
12. DISCLOSURES.
12.1 PARTNERS AND AFFILIATES. The Manager warrants that on the date of
this Agreement a complete list of its members and officers is attached as
Exhibit B.
12.2 CRIMINAL AND CREDIT INVESTIGATION. The Manager agrees that all of
its members and officers involved in the Gaming Enterprise shall:
(i) consent to background investigations to be conducted by the
Authority, the State of New York, the Federal Bureau of Investigation
(the "FBI") or any other law enforcement authority or regulatory
authority having jurisdiction, if requested by the Authority and to the
extent required by the IGRA and the Compact,
(ii) be subject to licensing requirements in accordance with the
law of the Authority,
(iii) consent to a background, criminal and credit investigation
to be conducted by the NIGC or B.I.A.,
(iv ) consent to a financial and credit investigation to be
conducted by a credit reporting or investigation agency at the request
of the Authority,
(v) cooperate fully with such investigations,
(vi) disclose any information requested by the Authority which
would facilitate in the background and financial investigation, and
(vii) pay the cost and expenses of investigation required by 25
CFR Part 537 for licensing of any person.
Any materially false or deceptive disclosures or failure to
cooperate fully with such investigations by an employee of the, Manager
or an employee of the Authority shall result in the immediate dismissal
of such employee. The results of any such investigation may be
disclosed by the Authority to federal officials as required by law.
The Authority may assess reasonable costs and expenses of
investigation for licensing of any person required by the Tribal Gaming
Ordinance.
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12.3 DISCLOSURE AMENDMENTS. The Manager shall, no later than 30 days
prior to any proposed change in financial interest in the Manager, provide the
Authority with all information required by 25 CFR 537.1, provided however, that
if Manager exercises due diligence pursuant to this Section 12.4, any reasonable
or unavoidable delay in the delivery of such information shall not be or be
deemed to be a material breach of this Agreement. The Authority shall submit the
information required by 25 CFR SS 533 and 537 to the NIGC.
12.4 BREACH OF MANAGER WARRANTIES AND AGREEMENTS. If a matter is
discovered which was not disclosed by any background check conducted by the FBI
as part of the B.I.A. or other federal approval of this Agreement, and which
would cause the subject not to be licensable, or which would cause the denial or
revocation of any gaming license needed to operate the Gaming Facility, then the
Manager shall have 30 days after notice from the Authority to terminate the
interest of the offending person or entity and, if such termination takes place,
this Agreement shall remain in full force and effect. The Manager shall have 30
days after notice from the Authority to cure a failure to update changes in
financial position or additional gaming related activities prior to termination.
13. RECORDATION. At the option of the Manager or the Authority, any security
agreement related to the Financing. Agreements may be recorded in alny public
records. Where such recordation is desired in the public records of the B.I.A.,
the Authority will accomplish such recordation upon the request of the Manager.
No such recordation shall waive the Authority's sovereign immunity.
14. AUTHORITV TO EXECUTE. Each party warrants to the other that it has full
authority to execute this Agreement and perform its obligations hereunder.
15. NO PRESENT LIEN. LEASE OR JOINT VENTURE. The parties agree and expressly
warrant that neither the Management Agreement nor any exhibit thereto is a
mortgage or lease and, consequently, does not convey any present interest
whatsoever in the Gaming Facility or the Property, nor any proprietary interest
in the Gaming Enterprise itself. The parties further agree and acknowledge that
it is not their intent, and that this Agreement shall not be construed, to
create a joint venture between the Authority and the Manager.
16. DISPUTE RESOLUTION.
16.1 CONSENT TO SUIT. Subject to Section 20 the Tribe and the Authority
expressly waive sovereign immunity for the purpose of permitting or compelling
arbitration as provided in this Section, and to be sued in any court of
competent jurisdiction by the Manager for the purpose of compelling arbitration
or enforcing any arbitration award or judgment arising out of this Agreement,
the Financing Agreements, any Collateral Agreements or other obligations between
the parties, or of the Tribal Gaming Ordinance, or any rules, actions, or
decisions of the Authority pursuant thereto, or the issuance, non-issuance,
condition, suspension, denial or revocation of any license. Without in any way
limiting the generality of the foregoing, the Tribe and the Authority expressly
authorize any governmental authorities who have the right and duty under
applicable law to take any action authorized or ordered by any court, to take
such action, including without limitation, entering the Property and
repossessing any furniture and
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equipment subject to a security interest or otherwise giving effect to any such
judgment entered. In no instance shall any enforcement of any kind whatsoever be
allowed against any assets of the Tribe or the Authority other than the limited
assets of the Authority specified in Section 16.2.1.
16.1.1 ARBITRATION. All disputes, controversies or claims arising out
of or relating to this Management Agreement, or the termination or purported
termination thereof, or of the Tribal Gaming Ordinance, or the Gaming Authority
Charter or any rules, actions, or decisions of the Gaming Authority pursuant
thereto, or the issuance, nonissuance, condition, suspension, denial or
revocation of any license required thereunder, shall be settled by binding
arbitration in accordance with the Expedited Procedure provisions (Rules 53
through 57 in the current edition) of the commercial arbitration rules of the
American Arbitration Association. Arbitration shall occur before a single
arbitrator, or any greater number of arbitrators ("Arbitrator(s)") if agreed to
by the parties to the arbitration ("Parties"). The Arbitrator(s) shall possess
relevant expertise and shall be selected by agreement of the Parties. If the
Parties are unable to agree on the selection of the Arbitrator(s), the
Arbitrator(s) shall be selected by the American Arbitration Association. The
Arbitrator(s) shall render a decision promptly after the submission of the
dispute and shall apply the standards of a reasonable, prudent business person.
The arbitrator(s) shall have no authority to award punitive damages. Unless the
Parties mutually agree otherwise, binding arbitration shall be sole remedy as to
all disputes arising out of this Agreement, except for disputes requiring
injunctive or declaratory relief, which shall be pursued as provided in Sections
16.1 and 16.2.
16.1.2 CHOICE OF LAW. In determining any matter the Arbitrator(s) shall
apply the terms of this Agreement, without adding to, modifying or changing the
terms in any respect, and shall apply New York law and applicable federal and
tribal law. New York law shall govern the interpretation and construction of
this Agreement.
16.1.3 PLACE OF HEARING. All arbitration hearings shall be held at a
place designated by the Arbitrator(s) in New York County, New York.
16.1.4 CONFIDENTIALITY. The Parties and the Arbitrator(s) shall
maintain strict confidentiality with respect to the arbitration, subject to the
requirements of applicable law, including the federal securities laws and
Section 7.21 of this Agreement.
16.2 LIMITATION OF ACTIONS. The waiver of immunity from suit in this
Article XVI is specifically limited to the following actions and judicial
remedies:
16.2.1 DAMAGES. The enforcement of an award of money damages by
arbitration; provided that the Arbitrator(s) and/or the court shall have no
authority or jurisdiction to order execution against any assets or revenues of
the Tribe and may execute only as to the Authority against (i) undistributed or
future Net Revenues of the Gaming Enterprise; or (ii) if it has been
specifically found by an arbitrator that, by exercise of regulatory authority
pursuant to the
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Tribal Gaming Ordinance or otherwise, or any rules, actions, or decisions of the
Gaming Authority pursuant thereto, or the issuance, non-issuance, condition,
suspension, denial or revocation of any license, the Authority has prejudiced
the Manager's rights under this Agreement or accompanying agreements, or has in
any material way caused the lack of business success of the Gaming Enterprise,
the future Net Revenues of any other gaming operations conducted by the
Authority, or any other entity of the Authority, on this Property. In no
instance shall any enforcement of any kind whatsoever be allowed against any
assets of the Tribe or the Authority other than the limited assets of the
Authority specified in this Section 16.2.1.
16.2.2 CONSENTS AND APPROVALS. The enforcement of a determination by
the Arbitrator(s) that the Authority's consent or approval has been unreasonably
withheld contrary to the terms of this Agreement.
16.2.3 INJUNCTIVE RELIEF AND SPECIFIC PERFORMANCE. The enforcement of a
determination by an arbitrator that prohibits the Tribe or the Authority from
taking any action that would prevent the Manager from operating the Gaming
Enterprise pursuant to the terms of this Agreement, or that requires the Tribe
or the Authority to specifically perform any obligation under this Agreement
(other than an obligation to pay money which is provided for in Section 16.2.1).
16.2.4 ACTION TO COMPEL ARBITRATION. An action to compel arbitration
pursuant to this Section 16.
16.2.5 ACTION TO PRESERVE THE STATUS QUO DURING DISIPUTES. An action to
preserve the status quo during disputes pursuant to Section 20.
16.3 LIMITATION OF LIABILITY. Neither the Tribe nor any officer,
officeholder, employee, agent, representative or member of the Tribe or the
Authority, as such, shall have any personal liability for obligations of the
Authority under this Agreement or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Further, no member, nor any
officer, office holder, employee, agent, representative, or member of any member
of Manager shall have any personal liability for the obligations of the Manager
under this Agreement or for any claim based on, in respect of, or by reason of,
such obligations or their creation.
17. TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
18. AUTHORITY'S ASSETS. Except as otherwise expressly provided in this
Agreement, nothing in this Agreement shall obligate or authorize the payment or
encumbrance of any funds or assets of the Tribe, or the Authority. The only
assets subject to payment or encumbrance shall be the revenues and assets of the
Gaming Enterprise (excluding the Gaming Facility and the Property on which it is
located) held by the Gaming Authority.
19. NOTICE PROVISION. The Authority will give the Manager notice of any alleged
violation of the Tribal Gaming ordinance and thirty (30) days opportunity to
cure before the Authority may take any action based on such alleged violation.
If
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during such period the Manager is actively proceeding to cure the violation, the
period shall be extended for a reasonable time. At least (14) fourteen days
before any final action upon any proposed amendments to the Tribal Gaming
Ordinance, the Authority will give Manager written notice of the complete text
of any such amendments.
20. PERFORMANCE DURING DISPUTES. It is mutually agreed that during any kind of
controversy, claim, disagreement or dispute, including a dispute as to the
validity of this Agreement, the issuance, non-issuance, condition, suspension,
denial or revocation of any license, or the Manager's ability to perform its
duties and collect its Management Fee, Manager shall remain in possession of the
Gaming Facility as Manager; and the Authority and Manager shall continue their
performance of the provisions of this Agreement and its exhibits. Manager shall
be entitled to injunctive relief from a civil court or other competent authority
to maintain possession in the event of a threatened eviction during any dispute,
controversy, claim or disagreement arising out of this Agreement.
21. MARKS. Prior to the Commencement Date and from time to time during the Term
hereof, Manager agrees to erect and install, in accordance with applicable local
codes and regulations, all signs Manager deems necessary in, on or about the
Gaming Facility, including, but not limited to, signs bearing the Manager's and
the Authority's Marks. The use of any such Marks shall require the prior
approval of the Authority. The costs of purchasing, leasing, transporting,
constructing, maintaining, and installing the required signs and systems shall
be part of the start-up costs and Operating Expenses, as the case may be.
21.1 AUTHORITY'S MARKS. The Manager agrees to recognize the exclusive
right of ownership of Authority to all Authority's service marks, trademarks,
copyrights, trade names, patents or other similar rights or registrations, now
or hereafter held or applied for in connection therewith; these marks shall
include all marks which are unique to and developed for the Gaming Facility
(collectively, the "Authority's Marks"). The Manager hereby disclaims any right
or interest therein, regardless of any legal protection afforded thereto. The
Manager acknowledges that all of Authority's Marks might not be used in
connection with the Gaming Enterprise, and the Authority shall have sole
discretion to determine which Authority's Marks shall be so used. The Manager
shall not use the Authority's name, or any variation thereof, directly or
indirectly, in connection with (a) a private placement or public sale of
securities or other comparable means of financing or (b) press releases and
other public communications, without the prior written approval of the
Authority.
The Authority and Manager hereby agree that in the event the Authority
and/or Manager is (are) the subject of any litigation or action brought by any
party seeking to restrain the use, for or with respect to the Gaming Enterprise,
by the Authority and/or Manager of any Authority's Mark used by Manager for or
in connection with the Gaming Enterprise, any such litigation or action shall be
defended entirely at the expense of Authority, notwithstanding that Authority
may not be named as a party thereto. In the event the Manager desires to bring
suit against any user of any Authority's Mark, seeking to restrain such user
from using any Authority's Mark, then such suit shall be brought only with the
consent of Authority and at the expense of the Authority notwithstanding
that
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such user may be a prior or subsequent user. In all cases the conduct of any
suit whether brought by the Authority and/or Manager or instituted against the
Authority and/or Manager shall be under the absolute control of the Authority
notwithstanding that Authority may not be a party to such suit. The Manager, at
its sole cost, shall have the right to engage its own legal counsel and the
Manager's own counsel shall have the right to non-controlling participation in
any such litigation. The Manager shall have the right at any time during the
course of such litigation to withdraw from participation therein.
21.2 MANAGER'S MARKS The Authority agrees to recognize the exclusive
right of ownership of Manager to all. Manager's service marks, trademarks,
copyrights, trade names, patents or other similar rights or registrations now or
hereafter held or applied for in connection therewith (collectively, the
"Manager's Marks"), provided that Manager shall claim no ownership of any marks
including the names "Mohawk" or "St. Regis." The Authority hereby disclaims any
right or interest in Manager's Marks, regardless of any legal protection
afforded thereto. The Authority acknowledges that all of Manager's Marks might
not be used in connection with the Gaming Enterprise, and Manager shall have
sole discretion to determine which Manager's Marks shall be so used. The
Authority covenants that in the event of termination, cancellation or expiration
of this Agreement, whether as a result of a default by Manager or otherwise, the
Authority shall not hold itself out as, or continue operation of the Gaming
Enterprise as Manager's casino nor will it utilize any of Manager's Marks or any
variant thereof in the operation of its Gaming Facility. The Authority agrees
that Manager or its representative may, at any reasonable time thereafter, enter
the Gaming Facility for the sole purpose of removing all signs, furnishings,
printed material, emblems, slogans or other distinguishing characteristics which
are now or hereafter may be connected or identified with Manager's or which
carry any Manager's Mark. Such removal shall be accomplished in a manner which
leaves the premises in a condition suitable for appropriate commercial use. The
Authority shall not use the Manager's name, or any variation thereof, directly
or indirectly, in connection with (a) a private placement or public sale of
securities or other comparable means of financing or (b) press releases and
other public communications, without the prior written approval of Manager.
The Authority and Manager hereby agree that in the event the Authority
and/or Manager is (are) the subject of any litigation or action brought by a
party seeking to restrain the use, for or with respect to the Gaming Enterprise,
by the Authority and/or Manager of any Manager's Mark used by Manager for or in
connection with the Gaming Enterprise, any such litigation or action shall be
defended entirely at the expense of Manager, notwithstanding that Manager may
not be named as a party thereto. In the event the Authority desires to bring
suit against any user of any Manager's Mark, seeking to restrain such user from
using any Manager's Mark, then such suit shall be brought only with the consent
of Manager and at the expense of the Authority notwithstanding that such user
may be a prior or subsequent user. In all cases the conduct of any suit whether
brought by the Authority and/or Manager or instituted against the Authority
and/or Manager shall be under the absolute control of the Manager
notwithstanding that Manager may not be a party to such suit. The Authority, at
its sole cost, shall have the right to engage its own legal counsel and the
Authority's own counsel shall have the right to non-controlling participation in
any such
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<PAGE>
litigation. The Authority shall have the right at any time during the course of
such litigation to withdraw from participation therein.
22. EXECUTION IN COUNTERPART ORIGINALS. This Agreement is being executed in four
counterparts, two to be retained by each party. Each of the four originals is
equally valid. This Agreement shall be deemed "executed" and shall be binding
upon both parties when properly executed and approved by the Chairman of the
NIGC.
23. GAMING ENTERPRISE NAME. The Gaming Enterprise shall be operated under such
name as the parties may agree.
24. INTENT TO NEGOTIATE NEW AGREEMENT. On or before thirty (30) days after the
end of the sixth (6th) year of this Agreement, the Authority shall give Manager
notice of its intent regarding its willingness to enter into negotiations for a
new Management Agreement to be effective upon the conclusion of this Agreement.
25. ENTIRE AGREEMENT. This Agreement, including the Schedules and Exhibits
referred to herein, any collateral documents, and any documents executed by the
parties simultaneously herewith, constitutes the entire understanding and
agreement of the parties hereto and supersedes all other prior agreements and
understandings, written or oral, between the parties.
26. GOVERNMENT SAVINGS CLAUSE. Each of the parties agrees to execute, deliver
and, if necessary, record any and all additional instruments, certifications,
amendments, modifications and other documents as may be required by the United
States Department of the Interior, B.I.A., the NIGC, the office of the Field
Solicitor, or any applicable statute, rule or regulation in order to effectuate,
complete, perfect, continue or preserve the respective rights, obligations,
liens and interests of the parties hereto to the fullest extent permitted by
law; provided, that any such additional instrument, certification, amendment,
modification or other document shall not materially change the respective
rights, remedies or obligations of the Authority or the Manager under this
Agreement or any other agreement or document related hereto, without the consent
of the affected party.
27. REASONABLENESS. Whenever the consent or approval of any partyunder this
Agreement is required, such consent or approval shallnot be unreasonably
withheld, unless specifically provided otherwise. Further, whenever any
provision of this Agreement requires the exercise of "reasonable" consent,
judgment, efforts, best efforts, or "commercially prudent" efforts the standard
for such reasonableness or commercial prudence shall be conduct consistent with
the actions of a prudent commercial business person or prudent commercial owner
of a gaming facility substantially similar to the Gaming Facility.
Remainder of this page is intentionally blank. Signatures appear on the
following pages.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
ST. REGIS MOHAWK MOHAWK MANAGEMENT, L.L.C.
GAMING AUTHORITY
By_________________________ By_______________________
ST, REGIS MOHAWK TRIBE (solely
with respect to its rights and obligations
under Sections 3.5 and 4.2.2 and
Articles 8 and 16 of this Agreement)
By__________________________
CERTIFICATION: This is to hereby certify that the above was duly executed by
officers of the St. Regis Mohawk Gaming Authority and the St. Regis Mohawk
Tribal Council pursuant to the authority vested therein.
_____________________________ _______________________
Carol T. Herne, Tribal Clerk Date
50
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from
Alpha Hospitality Corporation Form 10-Q for the quarter ended
June 30, 1998 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,421
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,787
<PP&E> 10,207
<DEPRECIATION> 5,224
<TOTAL-ASSETS> 21,299
<CURRENT-LIABILITIES> 4,096
<BONDS> 2,000
0
9
<COMMON> 152
<OTHER-SE> 15,042
<TOTAL-LIABILITY-AND-EQUITY> 21,299
<SALES> 0
<TOTAL-REVENUES> 5,189
<CGS> 0
<TOTAL-COSTS> 5,750
<OTHER-EXPENSES> 1,013<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 954
<INCOME-PRETAX> 3,013
<INCOME-TAX> 6,375
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,362)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> 0
<FN>
<F1>Amount includes depreciation and amortization of $883 and pre-opening
and development costs of $130.
</FN>
</TABLE>
