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EXHIBIT 10.2
 

LOTTERY GAMING FACILITY MANAGEMENT CONTRACT
(Pursuant to the Kansas Expanded Lottery Act)

This LOTTERY GAMING FACILITY MANAGEMENT CONTRACT (“Agreement”) is for the
development, construction, and management of a Lottery Gaming Facility, the
business of which will be owned and operated by the Kansas Lottery, to be
located in the South Central Gaming Zone.
 
This Agreement is between the Kansas Lottery, which is acting on behalf of the
State of Kansas in accordance with the Kansas Expanded Lottery Act, K.S.A. 2008
Supp. 74-8733 through 74-8773, and Peninsula Gaming Partners, LLC, a Delaware
limited liability company  (“Manager”).
 
NOW THEREFORE, in consideration for the mutual promises and covenants between
the parties, it is agreed that:

1.          Certain Defined Terms. The capitalized terms listed below will have
the following meanings. Any other capitalized terms not specifically defined in
this Agreement will have the meanings attributed to them in the Kansas Lottery
Act, the Kansas Expanded Lottery Act, or the rules and regulations implementing
those Acts, as the case may be, and as amended from time to time.
 

 
a)
"Ancillary Lottery Gaming Facility Operations" means additional non-lottery
facility game products and services not owned and operated by the state which
may be included in the overall development associated with the Lottery Gaming
Facility.  Such operations may include, but are not limited to, restaurants,
hotels, motels, museums or entertainment facilities.

 
b)
“Application for Lottery Gaming Facility Manager” means the competitive proposal
and all attachments submitted to the Kansas Lottery by Manager under the Kansas
Expanded Lottery Act for the privilege of being designated the Lottery Gaming
Facility Manager in the South Central Gaming Zone.

 
c)
“Business Plan” means the document prepared by Manager and approved by the
Executive Director, at least annually, setting out the management activities
anticipated for the Lottery Gaming Facility as provided below in Paragraph 11
for an upcoming Fiscal Year or portion of Fiscal Year as the case may be.

 
d)
“Commencement Date” means the date specified in writing when the Executive
Director first determines Manager has satisfied all conditions required by this
Agreement so that Lottery Facility Games may be offered for play at the Lottery
Gaming Facility.

 
e)
“Commission” means the Kansas Lottery Commission.

 
f)
“Effective Date” means the date this Agreement is signed by all the parties and
all required approvals for the Agreement are obtained in accordance with the
Kansas Expanded Lottery Act and rules and regulations promulgated pursuant
thereto, subject to Section 9 of this Agreement.

 
 

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g)
“Electronic Gaming Machine” means any electronic, electromechanical, video or
computerized device, contrivance or machine authorized by the Kansas Lottery
which, upon insertion of cash, tokens, electronic cards or any consideration, is
available to play, operate or simulate the play of a game authorized by the
Kansas Lottery pursuant to the Kansas Expanded Lottery Act, including, but not
limited to, bingo, poker, roulette, blackjack, keno and slot machines, and which
may deliver or entitle the Player operating the machine to receive cash, tokens,
merchandise or credits that may be redeemed for cash, tokens, service or
merchandise. Electronic Gaming Machines may use bill validators and may be
single-position reel-type, single or multi-game video and single-position
multi-game video electronic game, including, but not limited to, poker,
blackjack and slot machines. Electronic Gaming Machines are one type of Lottery
Facility Games.

 
h)
“Executive Director” means the executive director of the Kansas Lottery.

 
i)
“Fiscal Year” means the accounting year established for the Lottery Gaming
Facility, which is specified here to be the twelve month period commencing
January 1 and ending on December 31 , and includes any partial (short) year.

 
j)
“Gray Machine” means any mechanical, electro-mechanical or electronic device,
available to the public for play that is capable of being used for gambling,
that is: (1) not authorized by the Kansas Lottery; (2) not linked to the lottery
central computer system as required by the Kansas Expanded Lottery Act; or (3)
capable of simulating a game played on an Electronic Gaming Machine or any
similar gambling game authorized pursuant to the Kansas Expanded Lottery Act.

 
k)
“Immediately” means as soon as reasonably practicable given the circumstances of
the incident but in no case more than 24 hours.

 
l)
“Kansas Expanded Lottery Act” means the provisions contained in K.S.A. 2008
Supp. 74-8733 et seq., and amendments thereto which may become effective during
this Agreement’s term.

 
m)
“Kansas Lottery” means the state agency created by the Kansas Lottery Act,
K.S.A. 74-8701, et seq., as amended, to operate a lottery or lotteries pursuant
to the Kansas Lottery Act or the Kansas Expanded Lottery Act.

 
n)
“Lottery Facility Games” means any Electronic Gaming Machines and any other
games authorized, as of January 1, 2007, to be conducted or operated at a tribal
gaming facility, as defined in K.S.A. 74-9802, and amendments thereto, located
within the State of Kansas’ boundaries and are owned and operated by the Kansas
Lottery.

 
o)
“Lottery Gaming Enterprise” means the entertainment enterprise and all
facilities and operations associated therewith, including a Lottery Gaming
Facility and Ancillary Lottery Gaming Facility Operations, as more fully set
forth in the Manager’s Application for Lottery Gaming Facility Manager.

 
p)
“Lottery Gaming Facility” means (i) that portion of the Lottery Gaming
Enterprise used for the purposes of operating, managing and maintaining Lottery
Facility Games, as more fully described in the Application for Lottery Gaming
Facility Manager filed by Manager with the Kansas Lottery and Exhibit C. or (ii)
a temporary facility for the purposes of operating, managing and maintaining
Lottery Facility Games as approved by the Executive Director.

 
 

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q)
“Lottery Gaming Facility Revenues” means the total revenues from the play of
Lottery Facility Games operated at the Lottery Gaming Facility after all related
Prizes are paid. This term does not include (i) money generated from Ancillary
Lottery Gaming Facility Operations (to which the Kansas Lottery has no financial
interest) even if the revenue is generated within the Lottery Gaming Facility or
(ii) Promotional Credit(s).

 
r)
“Player” means a person who: (1) takes part in a Lottery Facility Game by paying
consideration or using Promotional Credit for the chance of winning a Prize; and
(2) is lawfully eligible to play a Lottery Facility Game under the Kansas
Expanded Lottery Act or applicable rules and regulations.

 
s)
“Progressive Electronic Game” means a game played on one or more Electronic
Gaming Machines for which at least one payoff increases uniformly as the game is
played and the Prize is determined by application of a formula to the income of
independent, local, or interlinked Electronic Gaming Machines.

 
t)
“Promotional Credit” means any non-cashable credit, coupon or voucher redeemable
by a Player at a Lottery Gaming Facility for use in playing Lottery Facility
Games that is provided to a Player by Manager on a discretionary basis for
purposes of promoting the Lottery Gaming Facility in accordance with a
promotional program approved by the Executive Director.

 
u)
“Promotional Item” means any non-cash, complimentary service or discount
provided to a Player by Manager on a discretionary basis for purposes of
promoting the Lottery Gaming Facility in accordance with a promotional program
approved by the Executive Director.

 
v)
“Prize” means any money, cash, tokens, merchandise, or credits redeemable for
cash or play in a Lottery Facility Game that a Player may be entitled to as an
award for playing a Lottery Facility Game under the rules of that game. For any
Electronic Gaming Machines offering progressive winnings to a Player based on
the use of Electronic Gaming Machines in a Progressive Electronic Game, “Prize”
also includes a percentage of every wager played on a Progressive Electronic
Game that is contributed to a growing jackpot amount to a successful Player as
an award for playing an Electronic Gaming Machine under the rules of that
Progressive Electronic Game, but does not include the reset amount. “Prize” does
not include any administrative fees or other expenses associated with an
Electronic Gaming Machine’s acquisition, operation, maintenance or replacement
that are not payable to a winning Player.

 
 

2.           Date Agreement Becomes Binding. This Agreement will become
effective and binding on the Effective Date; except that the parties agree that
Paragraphs 2, 8, 20, 28, 30, 31, 54, 57, 58, 60, 66, 70, 71 and 72 will become
effective and binding on the parties immediately upon this Agreement’s approval
by the Commission.

 
 

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        3.          Term of Agreement. This Agreement will terminate fifteen
(15) years after the Commencement Date or by operation of law, unless this
Agreement is terminated earlier, renegotiated, or renewed, in accordance with
the terms set out below.

4.          Commencement Date Deadline. The Commencement Date will occur no
later than 13 months after the Effective Date. This deadline will be extended by
the number of days determined by the Executive Director that Manager is unable
to perform its responsibilities under this Agreement due to:

 
a)
Court order restricting the authority of the Commission or the Kansas Lottery to
own and operate Lottery Facility Games at the Lottery Gaming Facility under the
Kansas Expanded Lottery Act or under this Agreement, or enjoining Manager from
performing under this Agreement;

 
b)
Any force majeure cause as provided in Paragraph 63;

 
c)
Any other reason determined by the Executive Director in his sole discretion
that adversely impacted Manager’s ability to perform; or

 
d)
Any delay, not caused or enhanced by Manager, in Manager securing any and all
licenses, credentials, permits and approvals necessary to construct and operate
the lottery Gaming Enterprise, or any aspect thereof, provided that Manager
shall have made timely application for such permits and approvals, and shall
have diligently prosecuted the same.

5.          Renewal of Agreement.  Prior to the expiration of this Agreement but
not before completion of the minimum infrastructure investment and provided
Manager has maintained the Lottery Gaming Facility in accordance with the terms
of the Lottery Facility Management Contract, as certified by the Executive
Director, Manager or the Kansas Lottery may request to negotiate renewal of this
Agreement under K.S.A. 2008 Supp. 74-8734(h)(1) for the maximum extended term
allowed under the law. If prior to the expiration of this Agreement the parties
do not renew this Agreement as provided herein, the parties shall enter into
good faith negotiations for a new lottery gaming facility management contract
consistent with and on substantially the same terms as this Agreement, as
provided in  K.S.A. 2008 Supp. 74-8734(p). The parties shall negotiate in good
faith and in the event the parties are unable to agree the Kansas Lottery shall
proceed in accordance with any options available to it under the Kansas Expanded
Lottery Act, in existence at that time. Nothing in this Agreement is intended to
be interpreted to restrict or to be prejudicial to any right or remedy Manager
may have at law or equity to compel the Lottery to comply with the provisions of
this Section 5.
 
6.          Manager’s Representations and Warranties. Manager represents and
warrants to the Kansas Lottery as follows:

 
a)
Manager is a limited liability company in good standing under the laws of the
State of Kansas, and is duly qualified to do business as such in Kansas.

 
 

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b)
Manager has full power, authority, and legal right to perform and observe the
provisions in this Agreement, the requirements imposed by the Kansas Expanded
Lottery Act, the rules and regulations imposed by the Commission, and the rules
and regulations imposed by the Kansas Racing and Gaming Commission.

 
c)
Subject to the condition that all approvals required by the Kansas Expanded
Lottery Act are obtained, this Agreement constitutes a valid and binding
obligation on Manager that is fully enforceable in accordance with its terms,
and does not constitute a breach of, or default under, any other agreement to
which Manager is a party or any of its assets are bound or affected.

 
d)
During this Agreement’s term, Manager will, at its own expense, keep in full
force and affect its legal existence, rights and franchises required in order
for it to observe all of this Agreement’s terms and conditions. Upon receiving
any information or notice contrary to the representations contained in this
subsection during this Agreement’s term, Manager must immediately notify the
Executive Director in writing with full details regarding the same.

 
e)
Manager has acquired fee title or the ability to acquire fee title to the
premises on which the Lottery Gaming Facility will be located, free and clear of
any liens, encumbrances, covenants, charges, burdens or claims, except (i) those
which do not materially and adversely affect the use by Manager of the premises
as a Lottery Gaming Enterprise, and (ii) any secured liens directly related to
the Lottery Gaming Enterprise, which will be disclosed to the Executive Director
concurrently with Manager’s acquisition of the property or for which the
Executive Director’s prior approval has been obtained.

 
f)
The Lottery Gaming Enterprise and the operations thereof at all times will
conform in all material respects with all applicable material zoning, planning,
building, licensing, and environmental laws and regulations of governmental
authorities (federal, state, or local) having jurisdiction over the Lottery
Gaming Enterprise, including any amendments to such laws or regulations
occurring after this Agreement’s execution. Such laws include, but are not
limited to, the federal Money Laundering Control Act of 1986, the Bank Secrecy
Act of 1970, and the USA Patriot Act of 2001, and amendments thereto. The
Manager shall defend, indemnify and hold the Kansas Lottery and the State of
Kansas and all employees of the Kansas Lottery and the State of Kansas harmless
from any liability or expenses resulting from any failure by the Manager to
comply with the provisions of this subsection (f).

 
g)
There is no action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, public board or body pending or, to the
knowledge of the Manager, threatened against or affecting the Manager or its
principals, and in which an adverse result would in any way diminish or
adversely impact the Manager’s ability to fulfill its obligations under this
Lottery Gaming Facility Management Contract. No revenue bonds, state tax
abatement, local tax abatement, tax increment financing or similar financing
will be used to finance or will be applied to any part of Manager’s Lottery
Gaming Enterprise.

 
h)
The Lottery Gaming Enterprise will comply in all material respects with all
environmental laws and regulations, and, except in material compliance with
environmental laws and regulations agrees that to the best of its knowledge (1)
that no pollutants, contaminants, solid wastes, or toxic or hazardous substances
will be stored, treated, generated, disposed of, or allowed to exist at the
Lottery Gaming Facility or the location of any related Ancillary Lottery Gaming
Facility Operations, except in compliance with all applicable laws; (2) Manager
will take all reasonable and prudent steps to prevent an unlawful release of
hazardous substances onto the Lottery Gaming Facility or the location of any
related Ancillary Lottery Gaming Facility Operations or onto any other property;
(3) that no asbestos will be incorporated into or disposed of on the Lottery
Gaming Facility or the location of any related Ancillary Lottery Gaming Facility
Operations; (4) that no underground storage tanks will be located on the Lottery
Gaming Facility or the location of any related Ancillary Lottery Gaming Facility
Operations, except as approved by the Executive Director; and (5) that no
investigation, order, agreement, notice, demand or settlement with respect to
any of the above is threatened, anticipated, or in existence with respect to the
Lottery Gaming Facility or the location of any related Ancillary Lottery Gaming
Facility Operations. Upon receiving any information or notice contrary to the
representations contained in this subsection, Manager must promptly notify the
Executive Director in writing with full details regarding the same. Manager and
its principals have executed the Environmental Compliance Agreement attached as
Exhibit A. Manager shall defend, indemnify and hold the Kansas Lottery and the
State of Kansas harmless from any liability or expenses resulting from any
failure by Manager to comply with the provisions of this subsection (h).

 
 

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i)
Manager will provide to the Executive Director a certificate or certificates of
insurance containing all of the insurance provision requirements provided in
this Agreement as follows: as respects the builder’s risk and liability
including worker’s compensation covering construction activities, prior to the
commencement of construction activities, and as respects all other insurance,
prior to the commencement of any operations presenting an insurable risk. Each
insurance policy obtained by Manager to comply with the insurance provision
requirements must provide that if the insurance is canceled for any reason
whatsoever, or the same is allowed to lapse or expire, or there be any reduction
in amount, or any material change is made in the coverage, such cancellation,
lapse, expiration, reduction or change shall not be effective as to the Kansas
Lottery or the State of Kansas until at least thirty (30) days after receipt by
the Executive Director of written notice by the insurer of such cancellation,
lapse, expiration, reduction or change.

 
j)
Manager will comply with all rules, regulations or policies imposed by the
Kansas Racing and Gaming Commission now or in the future for the oversight of
all operations at the Lottery Gaming Facility including, but not limited to:
oversight of internal controls; adherence to technical standards adopted by the
Kansas Racing and Gaming Commission; oversight of security; performance of
background investigations; determinations of qualifications and any required
certifications, credentialing or licensing of Manager’s officers, directors,
board members, employees, contractors and agents; auditing of Lottery Gaming
Facility Revenues; maintenance and integrity of all Lottery Facility Games
approved by the Executive Director for play at the Lottery Gaming Facility;
maintenance of facility exclusion lists; player tracking, rewards, clubs,
coupons or other incentive programs; oversight of progressive payout systems and
programs; oversight of unclaimed winnings; oversight of lost patron monies; or
responsible gaming. Manager understands and agrees that failure to adhere to the
Kansas Racing and Gaming Commission’s rules, regulations, or technical standards
may result in the imposition of fines, or other sanctions or penalties against
Manager. Upon receiving any information or notice claiming a violation of any
requirement of the Kansas Racing and Gaming Commission or any other governmental
entity with jurisdiction over gaming-related activities after the Effective
Date, Manager must immediately notify the Executive Director in writing with
full details regarding the same.

 
k)
Manager, at a minimum, meets and will continue to meet the following criteria:
(1) has sufficient access to financial resources to support the activities
required of it by this Agreement and the Kansas Expanded Lottery Act; (2) is
current in filing all applicable tax returns and in payment of all taxes,
interest and penalties owed to the state of Kansas and any taxing subdivisions
where the Manager is located in the state of Kansas, excluding items under
formal appeal pursuant to applicable statutes; and (3) Manager or its direct or
indirect principals, affiliates or officers and/or members have at least three
consecutive years’ experience in the management of gaming which would be class
III gaming, as defined in K.S.A. 46-2301, and amendments thereto, operated
pursuant to state or federal law.

 
 l)
Manager will comply with all applicable rules and regulations imposed now, or in
the future, by the Kansas Lottery.

 

                m)    
Except as may be authorized by applicable law and confirmed in writing by the
Executive Director, Manager will not own, lease, license, or control the rights
to: (1) any software, hardware, computer chip, EPROMS (erasable, programmable,
read-only memory), flash drives, CD-ROM or other computerized device required to
operate the games available for play on the Lottery Facility Games, (2) any
software, hardware, computer chip, EPROMS (erasable, programmable, read-only
memory), flash drives, CD-ROM or other computerized device containing
information regarding or affecting an Lottery Facility Game’s chance of winning,
awarding of Prizes, or setting the consideration paid by a Player, such as the
random number generator or payout tables; (3) any CPUs or other electronic
components involved in the operation and calculation or display of game play
(e.g., game controller electronics and components housing the game or system
firmware program storage media or EPROMS); or (4) any communication controller
electronics, and components housing the communication control program that is
used for communicating financial data, program information and security events
to the central computer authorized by the Executive Director for purposes of
security, real-time monitoring and auditing, as well as ticket validation and
any other system used that affects the integrity of the Lottery Facility Games
made available at the Lottery Gaming Facility.

 
 
 
 

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n)
Manager acknowledges and agrees the State of Kansas, acting through the
Commission and the Kansas Lottery, pursuant to their statutory authority, has
the sole right to own, lease and operate the Lottery Facility Games placed at
the Lottery Gaming Facility and has the full, complete and ultimate ownership
and operational control of the gaming operation of the Lottery Gaming Facility.
Manager further acknowledges and agrees the Kansas Lottery explicitly retains
the power to overrule any action of Manager affecting the gaming operation
without prior notice and the Kansas Lottery retains full control over all
decisions concerning Lottery Facility Games. No Gray Machines will be permitted
at the Lottery Gaming Facility.

 
 
o)
Manager, on behalf of the Kansas Lottery, will be responsible at all times for
processing payment of all Prizes and matters relating thereto, including the
withholding of income taxes and reporting of Prizes in accordance with all
applicable laws and regulations.

 
p)
Manager has a required resolution of endorsement from the City of Mulvane and/or
the Sumner County Board of County Commissioners, which is attached as Exhibit B.

 
q)
The undersigned is duly authorized to execute and deliver this Lottery Gaming
Facility Management Contract on behalf of Manager.

 
        7.            The Kansas Lottery’s Representations and Warranties. The
Kansas Lottery represents and warrants to Manager as follows:

 
a)
The Kansas Lottery is duly established under the Kansas Lottery Act and the
Kansas Expanded Lottery Act, and has the power to enter into the transactions
contemplated by this Lottery Gaming Facility Management Contract and to carry
out its obligations. Based upon the representations of Manager as to the
utilization of the Lottery Gaming Facility, the Kansas Lottery has the authority
to take the actions contemplated by applicable statute.

 
b)
The Executive Director is duly authorized to execute and deliver this Lottery
Gaming Facility Management Contract.

 
c)
Neither the execution and delivery of this Lottery Gaming Facility Management
Contract, the consummation of the transactions contemplated hereby, nor the
fulfillment of or compliance with the provisions of this Agreement will conflict
with or result in a breach of any of the terms, conditions or provisions of any
other contract to which the Commission or Kansas Lottery is a party or by which
either is bound, or will constitute default under any of the foregoing.

8.          Kansas Expanded Lottery Act Litigation. Manager acknowledges it
enters into this Agreement with the understanding that the Kansas Expanded
Lottery Act and/or the implementation of that Act by the Kansas Lottery or the
Commission, may come under review by courts of competent jurisdiction from time
to time during this Agreement’s term. Manager agrees it will proceed with its
responsibilities under this Agreement at its own risk as to the Kansas Expanded
Lottery Act’s validity, or the validity of the implementation of that Act by any
state agency, except that nothing in this section will be interpreted to
restrict, waive or delete any rights Manager may have to seek repayment of
Managers’ privilege fee if the Kansas Expanded Lottery Act were to be amended or
repealed by a legislative body or declared unconstitutional in a future
proceeding. At the time of the execution of this Agreement, anything contained
in this Agreement notwithstanding, Kansas Lottery hereby represents and
warrants, to the knowledge of Kansas Lottery, that there is no action, suit,
proceeding, at law or in equity, before or by any court, public board or body,
naming the Kansas Lottery as a party, arising out of or in connection with the
Kansas Expanded Lottery Act (including constitutionality and the applicant
contracting process.) In the event litigation is commenced , against Manager or
the Kansas Lottery, arising out of or in connection with the Kansas Expanded
Lottery Act (including constitutionality, implementation,  and the applicant
contracting process) related to this Agreement and requesting relief in the form
of an injunction or termination of this Agreement or the invalidation of the
Kansas Expanded Lottery Act, and the Plaintiff’s  constitutional claims are
successful through trial court rulings on motions for summary judgment, Manager
may suspend construction, if not yet complete, until receipt of an order, at the
trial level or on appeal, upholding the Kansas Expanded Lottery Act or its
implementation as applied to this Agreement.

9.         Required Approvals Prior to this Agreement Becoming Effective.
Subject to the terms of Paragraph 2, this Agreement will not become effective
until it is approved, as required by the Kansas Expanded Lottery Act, by all
three of the following public entities: (a) the Commission; (b) the Lottery
Gaming Facility Review Board; and (c) the Kansas Racing and Gaming Commission.
 
 
 

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10.      Conditions Precedent to Lottery Gaming Facility Opening. Prior to
permitting initial public access to the Lottery Gaming Facility, Manager must
(as and when applicable):

   a)             
Be in compliance with all statutory requirements imposed by the Kansas Expanded
Lottery Act, as amended, for placing Lottery Facility Games at the Lottery
Gaming Facility.

 
b)
Be in compliance with all rules and regulations, written policies, or written
standards imposed by the Kansas Lottery Commission for placing Lottery Facility
Games at the Lottery Gaming Facility.

 
c)
Be in compliance with all rules and regulations, licensing requirements, written
policies, or written standards imposed by the Kansas Racing and Gaming
Commission for placing Lottery Facility Games at the Lottery Gaming Facility.

 
d)
Have in an operational condition Manager’s portion of the central communication
system specified by the Executive Director for the purposes of security,
monitoring and auditing of Electronic Gaming Machines placed at the Lottery
Gaming Facility.

 
e)
Have current written approvals from the Executive Director for all Lottery
Gaming Facility activities as required by this Agreement.

 
f)
Be in compliance with all material local zoning requirements applicable to the
Lottery Gaming Facility.

 
g)
Have delivered to the Secretary of State, with a copy to Executive Director,
Manager’s irrevocable consent to the jurisdiction and courts of the State of
Kansas in accordance with K.S.A. 2008 Supp. 74-8755.

 
h)
Obtain and maintain all necessary governmental permits and
licenses/certifications when and as may be required by law in connection with
the operation of the Lottery Gaming Facility.

 
i)
Be in compliance with all other requirements in this Agreement as and when
applicable.

 
11.          Manager’s Business Plan. The Executive Director and Manager will
jointly develop a Business Plan, which will be based upon and not inconsistent
with Manager’s Application for Lottery Gaming Facility Manager, promptly after
the Effective Date. This Business Plan will provide in reasonable detail for the
Lottery Gaming Facility’s pre-opening activities in preparation for operation
after the Commencement Date, hours of operation with 24 hour operations seven
days a week being permitted by the Executive Director, advertising, marketing,
public relations, number and type of Lottery Facility Games to be available to
the public, process for selection of such games, Prizes, theoretical hold
percentages, budget, Promotional Credits and procedures for controlling and
accounting for the use of Promotional Credits, Promotional Items and procedures
for controlling and accounting for the use of Promotional Items, special events
or activities planned or anticipated by Manager during the period of time
covered by the Business Plan, and other management activities to be performed by
Manager consistent with the Kansas Expanded Lottery Act and applicable law that
either the Manager or the Executive Director wants to address in the Business
Plan. Once approved by the Executive Director, Manager will implement the
approved Business Plan in all material respects. The Executive Director, in
consultation with Manager, may amend the Business Plan from time to time to
promote the Lottery Gaming Facility’s competitive position in the market in
order to enhance, to the extent profitable to Manager, Lottery Gaming Facility
Revenues. At any time, Manager may propose to the Executive Director for his
approval any amendments to the Business Plan. The initial Business Plan will
include Manager’s proposed name for the Lottery Gaming Facility, which must be
approved by the Executive Director. Any subsequent change to the facility’s name
must be approved by the Executive Director. The Manager and Executive Director
will make a good faith effort to complete the initial Business Plan and Budget
by the Effective Date.

12.          Ancillary Lottery Gaming Facility Operations. At the same time that
Manager and the Executive Director develop a proposed Business Plan for the
Lottery Gaming Facility, Manager separately will provide the Executive Director
with Manager’s anticipated business plan and budget for all Ancillary Lottery
Gaming Facilities Operations that Manager anticipates developing in conjunction
with the Lottery Gaming Facility, such as restaurants, hotels, motels or
entertainment facilities. Manager agrees not to conduct any Ancillary Lottery
Gaming Facility Operations that the Executive Director determines would: (a)
result in an appearance that reflects adversely on the Kansas Lottery or the
Kansas Lottery Commission as the owner and operator of the Lottery Facility
Games; or (b) violate any regulatory standards or local zoning laws.
 
 
 

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13.           Lottery Gaming Facility Construction. Manager will diligently
construct at its own expense the Lottery Gaming Facility substantially in
accordance with Manager’s Application for Lottery Gaming Facility Manager,
Exhibit C to this Agreement, and the plans and specifications. Prior to
beginning construction, the Executive Director must approve the final plans and
specifications for the Lottery Gaming Facility (or in lieu thereof such other
construction-related documents acceptable to the Executive Director that are
suitable for this purpose) to ensure construction will conform with the
Manager’s Application for Lottery Gaming Facility Manager, Exhibit C to this
Agreement, and Manager’s representation to the Kansas Lottery Commission,
Lottery Gaming Facility Review Board, the Kansas Racing and Gaming Commission,
or the governing body of the city or county where the Lottery Gaming Facility is
to be located, provided however, that Manager cannot be held in breach of this
paragraph for any oral statements, representations or obligations without being
first presented with a copy of the actual recording and/or verified court
reporter transcript of the Manager’s actual statement(s) alleged to create such
representation and/or obligations. With the approval of the Executive Director,
Manager retains the option, but is not obligated, to construct a temporary
Lottery Gaming Facility under the terms of this Agreement and the Kansas
Expanded Lottery Act.  Subject to Exhibit C, all construction of the temporary
Lottery Gaming Facility must be completed and the Lottery Facility Games ready
for play by the public within that facility no later than 13 months after the
Effective Date and the Lottery Gaming Facility must be completed and ready for
play no later than 24 months after the Effective Date, unless a time extension
is approved by the Executive Director. The schedule setting out Manager’s
anticipated benchmarks for construction completion is attached as Exhibit C. For
each month between the Effective Date and the Commencement Date, Manager will
report no less than monthly as directed by the Executive Director on Manager’s
progress toward completing construction, implementing the Business Plan, and
opening the Lottery Gaming Facility to the public. No material alterations to
the scope and design of the plan for the Lottery Gaming Facility increasing or
decreasing the total costs by more than four percent (4%) of the total cost
provided for in Manager’s Application for Lottery Gaming Facility Manager may be
made without the Executive Director’s written approval unless such change
materially affects the floor plan, surveillance, or security for the Lottery
Gaming Facility in which case the Executive Director’s approval is required for
any material change regardless of the dollar amount. The Executive Director will
promptly notify Manager of his approval or rejection of any proposed change.
Manager will not need to obtain the Executive Director’s approval for
expenditures covered by the Manager’s contingency budget.

14.          Construction Related to Ancillary Lottery Gaming Facilities
Operations. Manager, at its sole cost and expense,  must diligently construct
the buildings and related improvements for its Ancillary Lottery Gaming Facility
Operations substantially in accordance with Manager’s Application for Lottery
Gaming Facility Manager, Exhibit C, and Manager’s representations to the Kansas
Lottery Commission, Lottery Gaming Facility Review Board, the Kansas Racing and
Gaming Commission, or the governing body of the city or county where the Lottery
Gaming Facility is to be located, provided however, that Manager cannot be held
in breach of this paragraph for any oral statements, representations or
obligations without being first presented with a copy of the actual recording
and/or verified court reporter transcript of the Manager’s actual statement(s)
alleged to create such representation and/or obligations. In addition to any
other remedy available to the Executive Director under this Agreement, solely
with respect to this Paragraph 14, Manager’s failure to substantially perform
its Ancillary Lottery Gaming Facility Operations obligations according to
objectively verifiable standards (for example, if the plans provide for the
building of a restaurant and the restaurant is not built) and, provided such
failure cannot be disputed in good faith, will authorize the Executive Director
to withhold payment of Manager’s compensation for which it would otherwise be
entitled under Paragraph 26, less such amounts necessary for Manager to meet all
cash operating payments, obligations and liabilities payable pursuant to the
Budget and debt service payments payable to third-party lenders, after the date
that is forty-five (45) days following the Executive Director’s written notice
to Manager of such failure until the breach is cured. If the Executive Director
withholds Manager’s compensation as provided in this paragraph, he will deposit
the applicable funds in an interest bearing account, which account (to the
extent of Manager’s interest therein) can be pledged to lender subject to
Executive Director’s rights therein, until the Executive Director determines the
breach is cured, at which time the compensation and interest held by the
Executive Director will be promptly returned to Manager.  Provided, however, if
within 180 days of the date each amount is withheld as provided herein, Manager
has not cured such default or has commenced a cure for such default but is not
prosecuting the same to completion, the Kansas Lottery shall be entitled to
retain each amount and interest so withheld.
 
15.          Manager’s Construction-Related Responsibilities. Manager will be
responsible for the management, construction, and all aspects of
construction-related activities concerning the Lottery Gaming Facility and the
buildings and related improvements for its Ancillary Lottery Gaming Facility
Operations. These responsibilities include, but are not necessarily limited to,
the following:

 
a)
The direction of all construction activities;

 
b)
The direction and coordination of the performance of the architect, the other
consultants and contractors;

 
c)
Causing all construction activities to be carried out in a good and workmanlike
manner, all in substantial compliance with the Manager’s Application for Lottery
Gaming Facility Manager;

 
d)
Preparing the Lottery Gaming Facility to accommodate the central communication
system as required by the Executive Director in accordance with the vendor
contract for that central communication system, including installation of all
specified power and communication services;

 
e)
Correcting or remedying or causing to be corrected or remedied, any violations
of applicable law;

 
f)
Arranging for the preparation of all working drawings and specifications;

 
 
g)
Preparing or arranging for the preparation of all construction contracts and
arranging for the preparation and execution of all other related documentation
required in accordance with the development obligations undertaken by Manager;

 
 

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h)
Securing financing, if necessary, including mortgage liens on the real property
and improvements and liens on personal property, for the construction of the
Lottery Gaming Facility or the building and improvements related to the
Ancillary Gaming Facility Operations, including completing the necessary
documentation therefor;

 
i)
Maintaining appropriate cost-accounting records in accordance with generally
accepted accounting principles;

 
j)
Obtaining all necessary government approvals, consents, permits, and
licenses/certifications;

 
k)
Providing legal support related to the development and construction
responsibilities undertaken by Manager; and

 
l)
Ensuring all required insurance is maintained in force.

 
m)
Provide information to any representative of the Kansas Lottery relating to
costs and/or completion of work, including information related to Manager’s
compliance with its minimum investment in infrastructure requirements, budgets
are adhered to in accordance with this Agreement and that Manager’s application
and representations described in paragraphs 13 and 14 are being met, including
periodic site inspections.  An independent representative may be hired by the
Kansas Lottery to verify such investment. Manager shall reimburse the Kansas
Lottery for all expenses reasonably incurred for or by such representative in
the sum not to exceed $7,500.00 per month.

16.          Exclusive Use of Lottery Gaming Facility. The Lottery Gaming
Facility will be used exclusively for the playing of Lottery Facility Games
owned and operated by the Kansas Lottery, and the ancillary management
activities approved by the Executive Director, which may include, but are not
limited to, beverage service, food service, entertainment, retail, promotional,
and ATM facilities. Manager may not permit any other business activities within
the Lottery Gaming Facility without the prior written consent of the Executive
Director.

17.           Approval of Manager’s Floor Plan. Prior to opening the Lottery
Gaming Facility, Manager must submit its proposed floor plan to the Executive
Director for approval. This floor plan must show the location of all Lottery
Facility Games, count rooms, cages and other equipment and facilities to be
contained within the Lottery Gaming Facility. No material change affecting
surveillance or security, or any other material aspect of operations may be made
to the approved floor plan without the Executive Director’s prior written
approval. Manager must perform its duties in accordance with the floor plan
approved by the Executive Director, except to the extent necessary for Manager
to implement pre-approved changes to the plan. The Executive Director, after
consultation with Manager, will determine the location within the floor plan for
each game, or type of game, to be offered to the public at the Lottery Gaming
Facility. The Manager may, in cooperation with the Executive Director, locate or
relocate Electronic Gaming Machines within the boundaries/areas initially
designated for Electronic Gaming Machines to enhance Lottery Gaming Facility
Revenues and profits after providing notice to the Executive Director.  The
Executive Director shall review any proposed change to the Floor Plan for
location of Lottery Games and shall render a decision within 3 business days.

18.           Approval of Manager’s Surveillance Plan. Prior to opening the
Lottery Gaming Facility, Manager must submit its proposed surveillance plan to
the Executive Director for approval. This surveillance plan at a minimum must
contain all items required by applicable rule and regulation. No material change
to the approved surveillance plan may be made without the Executive Director’s
prior written approval. Manager must perform its duties in accordance with the
surveillance plan approved by the Executive Director, except to the extent
necessary for Manager to implement pre-approved changes to the plan.
 
19.          Approval of Manager’s Security Plan. Prior to opening the Lottery
Gaming Facility, Manager must submit its proposed policies and procedures
relating to security to the Executive Director for approval. This security plan
at a minimum must contain all items required by applicable rule and regulation.
No material change to the approved security plan may be made without the
Executive Director’s prior written approval. Manager must perform its duties in
accordance with the security plan approved by the Executive Director, except to
the extent necessary for Manager to implement pre-approved changes to the plan.
 
20.          Privilege Fee Payment. No later than thirty (30) days after the
Commission approves this Agreement, Manager must pay to the state treasurer of
the State of Kansas a privilege fee of $25 million. This payment to the state
treasurer will be deposited into the state treasury and credited to the Lottery
Gaming Facility Manager Fund, which is a temporary fund created pursuant to the
Kansas Expanded Lottery Act. Notwithstanding any other provision in this
Agreement, if Manager fails to pay this privilege fee within 30 days after the
Commission’s approval, this Agreement will be void and Manager will forfeit any
rights it may have to be a Lottery Gaming Facility Manager under the Kansas
Expanded Lottery Act. Once all required approvals for this Agreement are
obtained in accordance with the Kansas Expanded Lottery Act, the Manager’s
privilege fee will be transferred from the Lottery Gaming Facility Manager Fund
to the Expanded Lottery Act Revenues Fund as provided by law. If (a) the
required approvals for this Agreement are not obtained in accordance with the
Kansas Expanded Lottery Act or (b) if Manager withdraws its application to be
Lottery Gaming Facility Manager in the South Central Gaming Zone prior to
approval of the Kansas Racing and Gaming Commission, the Executive Director will
promptly direct the state treasurer to refund, without interest, Manager’s
privilege fee payment. Nothing in this Agreement will be interpreted to restrict
or to be prejudicial to any right or remedy Manager may have at law or equity
(i) to compel the Executive Director to make any direction to the state
treasurer as provided in this paragraph 20, (ii) if the state treasurer fails to
comply with such direction, to compel the state treasurer to refund Manager’s
privilege fee, or (iii) to exercise any other right Manager may have under this
Agreement or at law or equity to a refund of the privilege fee.

 
 

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21.           Lottery Facility Game Ownership. The Manager must purchase or
lease, on behalf of the State of Kansas, for the Kansas Lottery all Lottery
Facility Games, including all necessary equipment such as approved tables, felt,
dice, cards, chips, layouts, or intellectual property rights as determined by
the Executive Director. Manager has no authority under this Agreement to own,
purchase or lease any Lottery Facility Games, except on behalf of the State of
Kansas and through the Kansas Lottery. Notwithstanding the foregoing or anything
to the contrary in this Agreement, the Manager shall be entitled to all
depreciation or amortization deductions related to the Lottery Facility Games.
The Executive Director, in consultation with Manager, will select the Lottery
Facility Games to be offered for play at the Lottery Gaming Facility and
determine the Prizes to be awarded for the play of such games. The Executive
Director will determine and approve all rules of play and gaming policies that
are applicable to the play of all Lottery Facility Games offered at the Lottery
Gaming Facility. Subject to the prior approval of the Executive Director,
Manager may purchase, lease, sell, transfer and trade-in the Lottery Facility
Games at the Lottery Gaming Facility on behalf of the State of Kansas.
Notwithstanding the foregoing, Manager may grant a security interest in all
Lottery Facility Games arising in connection with the financing and/or lease of
same. So long as Manager complies with its duties to the Kansas Lottery under
this Agreement and the Kansas Expanded Lottery Act, the Kansas Lottery agrees
that the Manager may manage the Lottery Gaming Facility and its investment in
the Lottery Gaming Facility in a manner that maximizes its profitability.

22.           Control Software Licensing and Ownership. The Kansas Lottery will
be the licensee, owner and possessor of the right to use all control software
and logic chips required to operate the games available on the Lottery Facility
Games at the Lottery Gaming Facility. This includes: (a) any software, hardware,
computer chip, EPROMS (erasable, programmable, read-only memory), flash drives,
CD-ROM or other computerized device required to operate the games available for
play on the Lottery Facility Games, (b) any software, hardware, computer chip,
EPROMS (erasable, programmable, read-only memory), flash drives, CD-ROM or other
computerized device containing information regarding or affecting a Lottery
Facility Game’s chance of winning, awarding of prizes, or setting the
consideration paid by a Player, such as the random number generator or payout
tables; (c) CPUs and other electronic components involved in the operation and
calculation or display of game play (e.g., game controller electronics and
components housing the game or system firmware program storage media or EPROMS);
or (d) communication controller electronics, and components housing the
communication control program that is used for communicating financial data,
program information and security events to the central computer authorized by
the Executive Director for purposes of security, real-time monitoring and
auditing, as well as ticket validation and any other system used that affects
the integrity of the Lottery Facility Games made available to Players at the
Lottery Gaming Facility. Manager will transfer to the Kansas Lottery any rights
obtained by Manager to use all control software and logic chips required to
operate the games available on the Lottery Facility Games available to Players
at the Lottery Gaming Facility. The Executive Director must approve all
agreements concerning software licensing and ownership affecting the Lottery
Facility Games made available to Players at the Lottery Gaming Facility in a
timely manner.
 
23.           Daily Electronic Payment of Lottery Gaming Facility Revenues.
Manager must pay all Lottery Gaming Facility Revenues daily to the Executive
Director as provided by applicable regulation. Manager will make this payment
electronically in accordance with the Executive Director’s written instructions,
which will conform to necessary banking practices. These instructions may be
changed from time to time in the Executive Director’s sole discretion with
reasonable notice to Manager. The Executive Director, in consultation with
Manager, will develop a process so that Manager may audit and reconcile Lottery
Gaming Facility Revenues after the daily payments are made. Notwithstanding any
other provision in this Agreement, Manager’s failure to make a daily electronic
payment of Lottery Gaming Facility Revenues as required by this Agreement will
be deemed an event of default unless the payment cannot be achieved due to the
unavailability of bank services, force majeure events, or malfunctions in the
central communications system not within Manager’s control in which case the
payment must be made on the first succeeding day that such services are
available or such events or malfunctions cease. If Manager fails to comply with
this paragraph, the Executive Director may, but is not required to,  immediately
terminate this Agreement if Manager does not cure its failure within 24 hours of
receiving written notice of Manager’s failure to comply, provided that Manager’s
failure to make the required daily payment is not intentional.
 
24.           Payment Obligation is Unconditional. Manager’s obligation to make
the daily payments of all Lottery Gaming Facility Revenues required above is a
general obligation of Manager and is absolute and unconditional irrespective of
any defense or any rights of setoff, recoupment, or counterclaim Manager may
otherwise have against the Commission, the Kansas Lottery, or any agency of the
State of Kansas. Manager agrees it will not suspend, discontinue or abate any
daily payment required above for any cause whatsoever including, without
limiting the generality of the foregoing, failure of consideration, destruction
of or damage to the Lottery Gaming Facility, commercial frustration of purpose,
any change in the tax or other laws, any administrative rulings of or
administrative actions by the State of Kansas or any political subdivision
thereof, or any failure by any agency or entity acting on behalf of the State of
Kansas to perform and observe any agreement, whether expressed or implied, or
any duty, liability or obligation arising out of or in connection with this
Lottery Gaming Facility Management Contract, or otherwise. Subject to the
foregoing provisions, nothing contained in this paragraph shall be construed to
release the Kansas Lottery from the performance of any of the agreements on its
part contained in this Lottery Gaming Facility Management Contract or to affect
Manager’s right to seek reimbursement or damages from the Kansas Lottery as
provided in this Agreement. Manager must not grant, authorize or permit any
interest in the Lottery Gaming Facility Revenues that are to be remitted daily
to the State to be given to anyone.

25.          Setoff Right Against Manager. Any amounts owed to Manager under
this Agreement are subject to set off by the state, municipalities, or certain
others in accordance with K.S.A. 75-6201, et seq., and amendments thereto.

 
 

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        26.          Total Compensation Paid to Lottery Gaming Facility Manager.
As its sole compensation for the management services for the Lottery Gaming
Facility as set out in this Agreement, Manager will be paid the following
percentages of the Lottery Gaming Facility Revenues generated at the Lottery
Gaming Facility calculated with respect to the then current Fiscal Year, as
follows: (a) 73% of all Lottery Gaming Facility Revenues up to $180 million; (b)
71% on all Lottery Gaming Facility Revenues  above $180 million up to $220
million; and (c) 69% on all Lottery Gaming Facility Revenues above $220 million.

The Executive Director shall cause this payment to Manager on no less than a
monthly basis, in arrears, in immediately available funds by electronic transfer
into a bank account specified by Manager, which account may be changed from time
to time in Manager’s sole discretion upon reasonable written notice to the
Kansas Lottery, based on the previous period’s Lottery Gaming Facility
Revenues.  Before paying the Manager, the Executive Director may first deduct
Manager’s share of Kansas Lottery expenses and share of Kansas Racing and Gaming
Commission expenses incurred for oversight and regulation as provided in
Paragraph 28 below, or the Manager may be billed for those expenses as the
Executive Director may direct. Manager may pledge, encumber or grant any
interest in the compensation to be paid Manager, subject to the deductions and
setoffs provided for in this Agreement and subject further to the Executive
Director’s authority under Paragraph 14.
 
        27.          Payments to Problem Gaming and Addictions Grant Fund and
Local Governments. Manager acknowledges and agrees the Executive Director will
cause two percent (2%) of Lottery Gaming Facility Revenues to be paid to the
problem gaming and addictions grant fund established by K.S.A. 2008 Supp.
79-4805, and amendments thereto. Manager further acknowledges and agrees the
Executive Director will cause three percent (3%) of the Lottery Gaming Facility
Revenues to be paid to the city and/or counties in compliance with K.S.A. 2008
Supp.74-8734(h)(16), and amendments thereto.  It is hereby acknowledged and
agreed that such payments shall not be paid from the compensation payable to
Manager pursuant to paragraph 26.

28.          Manager’s Payments for Kansas Lottery’s Expenses and Kansas Racing
and Gaming Commission’s Costs for Oversight and Regulation. Manager must pay the
expenses of the Kansas Lottery and the Kansas Racing and Gaming Commission, as
follows:

a)  
Manager’s share of the Kansas Lottery’s expenses directly attributable to
Manager and the Kansas Lottery’s proportionate share of other expenses incurred
for the implementation and operation of the Kansas Expanded Lottery Act and this
Agreement will be paid in accordance with this sub-paragraph (a). Expenses
incurred by the Kansas Lottery will be billed directly to Manager by the Kansas
Lottery within thirty (30) days of the Commission’s approval of this Agreement
and must be paid by Manager within thirty (30) days of billing. Thereafter, and
prior to the Commencement Date, the Executive Director will bill Manager
periodically for the Kansas Lottery’s expenses and Manager will pay such
expenses within thirty (30) days of billing. After the Commencement Date, the
Executive Director may deduct Manager’s share of Kansas Lottery expenses before
making Manager’s  compensation payment10 days after providing a statement of
such expenses as provided above in Paragraph 26. Manager’s share of Kansas
Lottery expenses will be calculated by taking the costs incurred by the Kansas
Lottery that are directly attributed to Manager and Manager’s Lottery Gaming
Facility, and adding to that amount the Kansas Lottery’s common expenses
attributable to all racetrack and lottery gaming facility managers as a result
of the Kansas Lottery’s activities pursuant to the Kansas Expanded Lottery Act,
which common expenses will be divided equally among all managers.

b)  
All costs incurred by the Kansas Racing and Gaming Commission for its oversight
and regulation of Manager and the Lottery Gaming Facility in accordance with the
requirements for calculating and paying such costs as determined by the
executive director of the Kansas Racing and Gaming Commission. Manager
acknowledges and agrees this obligation includes the requirement that Manager
pay it’s pro rata share of the anticipated expenses of the Lottery Gaming
Facility Review Board, which will be billed to Manager after the Kansas Lottery
Commission’s approval of this Agreement. If Manager fails to pay these expenses
when due, this Agreement may be void, and Manager may forfeit any rights it may
have to be a Lottery Gaming Facility Manager under the Kansas Expanded Lottery
Act ten (10) days after receiving written notice from the Kansas Racing and
Gaming Commission of Manager’s failure to timely pay. Manager further
acknowledges that the executive director of the Kansas Racing and Gaming
Commission may assess each manager, whose agreement is approved by the Lottery
Gaming Facility Review Board, a proportionate share of all costs incurred by the
Kansas Racing and Gaming Commission since 2007 Senate Bill 66 became effective
on April 19, 2007, that are attributable to that agency’s responsibilities under
the Kansas Expanded Lottery Act.

c)  
Manager’s share of the expenses incurred for the central computer system, which
share will be based proportionately on Lottery Gaming Facility Revenues
generated by the Electronic Gaming Machines placed at Manager’s Lottery Gaming
Facility in comparison to the revenues generated by the Kansas Lottery at
Racetrack Gaming Facilities and Lottery Gaming Facilities that are part of the
central computer system.

 
 

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        29.         Manager’s Maintenance Responsibilities. Manager must:

 
a)
Keep the Lottery Gaming Facility and all property and improvements associated
with its Ancillary Lottery Gaming Facility Operations in good repair and in a
reasonably safe condition;

 
b)
Make all necessary repairs and replacements to the Lottery Gaming Facility,
including maintaining in an operational condition Manager’s portion of the
central communication system as required by the Executive Director in accordance
with the vendor contract for that central communication system, and all property
and improvements associated with its Ancillary Lottery Gaming Facility
Operations (whether ordinary or extraordinary, structural or nonstructural,
foreseen or unforeseen);

 
 

 
c)
Maintain the Lottery Gaming Facility and all property and improvements
associated with its Ancillary Lottery Gaming Facility Operations in first class
condition, ordinary wear and tear excepted, including, without limitation,
interior and exterior cleaning, painting and decorating, replacement of lighting
fixtures, wall coverings, floors and floor coverings, furnishings, plumbing,
electrical, HVAC and any structural or mechanical repairs and any other
maintenance or replacement requirements that may be commercially reasonable.

 
        30.         Prohibitions Applicable to the State. The Kansas Lottery,
acting on behalf of the State of Kansas, agrees by entering into this Agreement
that:

 
a)
Neither the Kansas Lottery nor the State of Kansas will enter into a management
contract for, more than four (4) lottery gaming facilities or similar facilities
in the four gaming zones outlined in the Kansas Expanded Lottery Act with one
Lottery Gaming Facility in each gaming zone;

 
b)
Neither the Kansas Lottery nor the State of Kansas will designate additional
areas of the state where operation of Lottery Gaming Facilities or similar
gaming facilities will be authorized, other than those set out in the Kansas
Expanded Lottery Act; or

 
c)
Neither the Kansas Lottery nor the State of Kansas will operate an aggregate of
more than 2,800 Electronic Gaming Machines at all pari-mutuel licensee
locations.

31.           State Payment for Breach. Manager will be entitled, as its sole
monetary remedy, to payment in an amount equal to the actual privilege fee paid
by Manager, plus interest on such amount, compounded annually at the rate of ten
percent (10%), if the State of Kansas violates any provision in Paragraph 30
above during the term of this Agreement. The parties acknowledge and agree that
nothing in this paragraph will be interpreted to prevent or limit any rights
Manager may have to seek specific performance or other equitable relief against
the Kansas Lottery or the State of Kansas to enforce the prohibitions contained
in Paragraph 30. Nothing in this paragraph will be deemed a waiver of the
immunities and protections reserved to the State of Kansas under the Eleventh
Amendment to the Constitution of the United States.
 
        32.           Executive Director’s On-Site Personnel. The Executive
Director may appoint one or more persons to oversee on-site the Lottery Facility
Games at the Lottery Gaming Facility and Manager’s performance under this
Agreement. Such person(s) will report to the Executive Director, and have such
authority as the Executive Director in writing may determine. Such person(s)
will oversee operations, observe gaming activities, enforce gaming rules and
policies, resolve disputes between Manager and Players, and perform such other
tasks as directed by the Executive Director. All determinations made by such
persons will be subject to review by the Executive Director, provided that
Manager may act and rely upon written and verbal determinations made by the
Executive Director’s on-site personnel until Manager receives written notice
from the Executive Director amending or reversing any such determination.
 
33.           Deactivation and Possession of Lottery Facility Games. Upon order
of the Executive Director, any or all Lottery Facility Games located at the
Lottery Gaming Facility will be subject to immediate deactivation and/or
cessation of operation. At any time, the Executive Director will be entitled to
physically secure or take possession of any or all Lottery Facility Games and
any related equipment necessary to play such games.
 
 
 

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34.           Insurance Required. At the time provided in Paragraph 6(i) above,
and at all times thereafter, including without limitation during any period of
construction of the Lottery Gaming Facility, Manager must maintain or cause to
be maintained insurance against such risks and for such amounts as are
customarily insured against by businesses of like size and type paying, as the
same become due and payable, all premiums in respect thereto, including, but not
necessarily limited to:

   a)             
Insurance against loss or damage by fire, lightning, and other casualties, with
a uniform standard extended coverage endorsement, such insurance to be in an
amount not less than the full replacement value of the Lottery Gaming Facility,
exclusive of excavations and foundations, as determined by a recognized
appraiser or insurer selected by Manager or an amount not less than the maximum
foreseeable loss, as determined by a property insurance carrier provided the
policy provides a replacement cost endorsement up to the limit of the policy
with customary and reasonable deductibles approved by the Executive Director; or
as an alternative to the foregoing, Manager may insure the Lottery Gaming
Facility under a blanket insurance policy or policies covering not only the
Lottery Gaming Facility but other properties as well, provided a periodic
appraisal is performed at intervals determined by the Executive Director and
provided to the Executive Director.

 
b)
Workers' compensation insurance, disability benefits insurance, and each other
form of insurance which Manager is required by law to provide, covering loss
resulting from injury, sickness, disability or death of Manager’s employees who
are located at or assigned to the Lottery Gaming Facility.

 
c)
Commercial General Liability Insurance against loss or losses from liabilities
imposed by law or assumed in any written contract and arising from personal
injury and death or damage to the property of others caused by any accident or
occurrence, with limits of not less than $10,000,000 per accident or occurrence
on account of personal injury, including death resulting there from, and
$10,000,000 per accident or occurrence on account of damage to the property of
others , excluding liability imposed upon Manager by any applicable worker's
compensation law. These liability limits may be satisfied by any combination of
primary and excess liability policies. The primary general liability insurance
may have a self-insured retention and the excess liability policy may have a
commercially-reasonable deductible, as determined by the Executive Director.
These liability insurance requirements may be satisfied by blanket policies in
the aggregate amount of not less than $10,000,000.

 
d)
Business interruption insurance against the perils enumerated in subparagraph
(a) and in amounts determined by the Executive Director to be appropriate and
commercially reasonable to protect both the Kansas Lottery’s and Manager’s
financial interests in the revenue produced by the Lottery Gaming Facility.

 
e)
Employer’s practices liability coverage providing customary coverage for alleged
violations of local, state or federal civil rights laws or ordinances, or
employment discrimination laws.

 
f)
Employee Dishonesty Combination Crime coverage in amount sufficient to cover all
employees employed by Manager who are, or may be, responsible for handling any
Lottery Gaming Facility Revenues or other monies belonging to the Kansas Lottery
that come under the Manager’s custody or control.

35.           Additional Provisions Regarding Insurance. In addition to the
above, Manager must ensure that:
 
 
a)
All insurance required in Paragraph 34 above names the Commission, the Kansas
Lottery, and the State of Kansas as named insureds, or additional named
insureds. All insurance will be procured and maintained in financially sound and
generally recognized responsible insurance companies selected by the Manager,
but authorized to write such insurance in Kansas. Such insurance may be written
with deductible or self-insured retentions approved by the Executive Director in
amounts comparable to those on similar policies carried by other companies
engaged in the gaming industry for facilities similar in size, character and
other respects to the Lottery Gaming Facility. All policies evidencing such
insurance must provide for (1) payment of the losses of the Commission, the
Kansas Lottery, the State of Kansas, and the Manager as their respective
interest may appear, and (2) at least thirty (30) days written notice of the
cancellation thereof to the Executive Director and the Manager. Policies
referred to in this subparagraph (a) must include both the Kansas Lottery and
the Manager as loss payees as their interest may appear.

 
b)
All certificates of insurance from the insurers that such insurance is in force
and effect, must be deposited with the Executive Director on or before the
Effective Date, except as provided in paragraph 6(i) above. Prior to expiration
of the policy evidenced by said certificates, Manager must furnish the Executive
Director with evidence that the policy has been renewed or replaced or is no
longer required by this Agreement. Copies of the actual insurance policies will
be provided to the Executive Director promptly at his request.

 
c)
Within one hundred twenty (120) days after the end of each Fiscal Year, the
Manager must file with the Executive Director a certificate executed by the
Manager to the effect that the insurance it maintains with respect to the
Lottery Gaming Facility complies with this Agreement and that duplicate copies
of all policies or certificates were filed with the Executive Director and are
in full force and effect.

 
 

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36.           Kansas Lottery’s Right to Pay Insurance, Taxes, or Other Charges.
If Manager fails (a) to pay any tax, assessment or other governmental charge
required to be paid and not being formally contested by Manager in an
appropriate forum with jurisdiction to hear such contests, or (b) to maintain
any insurance required to be maintained, the Executive Director, in his
discretion, and following written notice to Manager, may authorize the Kansas
Lottery to make payment of such tax, assessment, or other governmental charge or
the premium for such insurance. Manager will reimburse the Kansas Lottery for
any amount so paid together with interest thereon from the date of payment at
twelve percent (12%) per annum. The Kansas Lottery may set off such payments
from any money otherwise due Manager.
 
37.           Lottery Gaming Facility Damage, Destruction or Condemnation. If
the Lottery Gaming Facility is damaged, destroyed or condemned (in whole or in
part) at any time during the term of this Agreement, Manager must promptly
replace, repair, rebuild, or restore the Lottery Gaming Facility to
substantially the same condition and value as an operating entity as existed
prior to such damage or destruction, to the extent insurance proceeds are
available to cover such costs, with such changes, alterations and modifications
as may be desired by Manager and approved by the Executive Director, and may use
insurance or condemnation proceeds for all such purposes. If the Lottery Gaming
Facility is damaged to an extent that it must be closed for business and Manager
elects to rebuild the Lottery Gaming Facility at any point during the term of
this Agreement, the term of this Agreement will be tolled until such time
repairs and reconstruction of the Lottery Gaming Facility are sufficiently
completed so as to allow Lottery Facility Games to be offered for play as
determined by the Executive Director. The Kansas Lottery agrees to remit any
insurance proceeds it receives as a result of the damage or destruction of the
Lottery Gaming Facility or Lottery Facility Games (unless those proceeds are to
cover the Kansas Lottery’s losses under Sections 23 or 26 of this Agreement) to
the Manager for the specific replacement, repair, rebuilding or restoration loss
for which the Kansas Lottery received any insurance proceeds. Notwithstanding
the foregoing, Manager’s obligations to repair or replace the Lottery Gaming
Facility or any Ancillary Lottery Gaming Facility Operations shall be limited to
the extent of insurance proceeds made available as a result of such damage,
casualty or accident. Manager will have no obligation to rebuild the Lottery
Gaming Facility if such damage, destruction, or condemnation impacts at least
33% of the Lottery Gaming Facility and occurs within five years prior to the end
of this Agreement’s term. Manager shall have one hundred-twenty (120) days from
the damage or destruction to elect to rebuild. If Manager so elects not to
rebuild the Lottery Gaming Facility within the last five years remaining on the
term of this Agreement, the term of this Agreement as defined under Section 3 of
this Agreement will immediately end and the Kansas Lottery shall have the
ability to exercise any rights available to it under the terms of the Kansas
Expanded Lottery Act.
 
38.           Advertising, Marketing, and Promotion. Manager must use its
commercially reasonable efforts to advertise, market, and promote the Lottery
Gaming Facility in order to attract the public to the facility and reasonably
enhance to the extent profitable to Manager Lottery Gaming Facility Revenues.
Manager must comply with all applicable regulatory requirements imposed for such
materials and activities. All advertising, marketing and promotion materials
employed by Manager must be approved by the Executive Director prior to their
first use. The Executive Director shall review all such materials within two (2)
business days. Manager agrees that such materials may be disapproved if the
Executive Director determines in his sole discretion that such materials would
reasonably be expected to offend a substantial number of people (for reasons
other than objections to lotteries or gaming activities generally), or violate
any regulatory standards applicable to such materials. In addition, Manager must
make available to the public the odds of winning any prize or prizes for games
played on all Lottery Facility Games offered at the Lottery Gaming Facility to
the extent possible given the nature of such games and subject to the Executive
Director’s approval. Advertising, marketing and promotion materials shall
include information regarding problem gambling as directed by the Executive
Director. Subject to the approval of the Executive Director, Manager may also
include the Lottery Gaming Facility in marketing programs which benefit other
properties of Manager and its affiliates.
 
39.           Players’ Club. The Executive Director may institute a Player’s
club or similar incentive or promotional program applicable to some or all
Racetrack Gaming Facilities or Lottery Gaming Facilities owned and operated by
the Kansas Lottery. If the Executive Director institutes a Player’s club, the
Executive Director agrees that: (a) Manager will have no direct or indirect
responsibility to fund such a program or otherwise have any financial liability
for such program; (b) Manager will not be required to provide the Executive
Director with any customer data under Manager’s control for purposes of a
Player’s club instituted by the Executive Director; (c) the Executive Director
will not institute an incentive or awards programs in such Player’s club that is
applicable to another Racetrack Gaming Facility or Lottery Gaming Facility
without also making it available to Manager for use at the Lottery Gaming
Facility; and, (d) the Executive Director shall reimburse Manager for any direct
costs or indirect costs documented to and preapproved by the Executive Director
incurred by Manager or the Lottery Gaming Enterprise as a result of the
implementation, operation or maintenance of such Player’s club or program. As to
subparagraph (b), Manager acknowledges that nothing in subparagraph (b) will be
read to restrict the Executive Director’s access to any customer data for
regulatory, security, responsible gaming oversight, or auditing purposes; and
the Executive Director agrees customer data provided by Manager will not be used
for any Player’s club or similar incentive or promotion program instituted by
the Executive Director. Nothing in this paragraph will be read to prevent
Manager from instituting its own Player’s club or similar incentive or
promotional program at the Lottery Gaming Facility provided that such club or
program is authorized by the Executive Director. The Executive Director agrees
Manager has the right to establish a Player’s club that awards to Players
credits based on their play at the Lottery Gaming Facility, provided that such
awards programs are approved by the Executive Director.
 
40.           Players’ Tracking System. The Executive Director may institute a
Players’ tracking system applicable to some or all Racetrack Gaming Facilities
or Lottery Gaming Facilities owned and operated by the Kansas Lottery. Manager
will administer such program at the Lottery Gaming Facility as the Executive
Director may provide. Nothing in this paragraph will be read to prevent Manager
from instituting its own Player’s tracking system at the Lottery Gaming Facility
provided that such system is authorized by the Executive Director. The Executive
Director shall consult with Manager in developing a Player’s tracking system in
an effort to avoid materially impairing any similar system being implemented by
Manager.  Notwithstanding, Manager shall have no financial responsibility for
any of the costs and expenses associated with the implementation and operation
of a Player’s tracking system by the Executive Director.
 
 
 

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41.           Use of Trademarks, Service Marks, Trade Names and Proprietary
Information. Manager is authorized to employ any of the Kansas Lottery’s
trademarks, trade names, and service marks in any advertising, marketing or
promotion for the Lottery Gaming Facility or the Lottery Facility Games placed
therein, subject to the Executive Director’s right to approve such advertising,
marketing or promotion. Manager acknowledges it has no other right regarding the
Kansas Lottery’s trademarks, service marks, and trade names. Manager will not be
required to pay any royalty or other fee for this usage. In addition, the
Executive Director may require Manager to place Kansas Lottery’s trademarks,
trade names, or service marks at locations within the Lottery Gaming Facility as
designated by the Executive Director in order to identify the games and gaming
equipment as being owned and operated by the Kansas Lottery on behalf of the
State of Kansas.
 
The Kansas Lottery is authorized to employ any of Manager’s trademarks, trade
names, and service marks in any advertising, marketing or promotion for the
Lottery Gaming Facility or the Lottery Facility Games placed therein, subject to
the Manager’s right to approve such advertising, marketing or promotion. The
Kansas Lottery acknowledges it has no other right regarding the Manager’s
trademarks, service marks, and trade names. The Kansas Lottery will not be
required to pay any royalty or other fee for this usage.
 
To the extent the Kansas Lottery obtains or has access to any Proprietary
Information or Trade Secrets as defined in K.S.A. 60-3320 (4)(i)(ii)
("Information") of Manager or its affiliates, the Kansas Lottery agrees: (a) to
maintain the confidentiality of such Information; (b) not to use such
Information for any purpose other than as permitted under this Agreement; and
(c) upon the termination of this Agreement, upon written request from
Manager,  to return same to Manager (including all copies thereof), including,
but not limited to, documents, notes, memoranda, lists, computer programs and
any summaries of such Information in the Kansas Lottery’s possession or control,
but excluding any Information which the Kansas Lottery may retain pursuant to
the express terms of this Agreement and that immediately upon termination of
this Agreement the Kansas Lottery shall cease using all Information.
 
To the extent the Manager obtains or has access to any Proprietary Information
or Trade Secrets as defined in K.S.A. 60-3320 (4)(i)(ii) ("Information") of the
Kansas Lottery, the Manager or its affiliates agree: (a) to maintain the
confidentiality of such Information; (b) not to use such Information for any
purpose other than as permitted under this Agreement; and (c) upon the
termination of this Agreement, upon written request from Kansas Lottery, to
return same to the Kansas Lottery (including all copies thereof), including but
not limited to documents, notes, memoranda, lists, computer programs and any
summaries of such Information in the Manager’s possession or control, but
excluding any Information which the Manager may retain pursuant to the express
terms of this Agreement and that immediately upon termination of this Agreement
the Manager shall cease using all Information.
 
Throughout the term, Manager or one of its affiliates may host and retain a
database relating to customer’s activities at the Lottery Gaming Facility,
including all customer information gathered in connection with any casino player
loyalty program card or successor player or guest rewards program, and Manager
or one of its affiliates shall own and be entitled to use any and all of the
customer or other information gathered by Manager or its affiliates in
connection with this Agreement or such programs.  The Kansas Lottery shall have
access to such information for the purposes of security, auditing, or
enforcement.
 
Subject to the requirements of the Kansas Expanded Lottery Act and with
Executive Director approval, Manager may purchase, lease, license, or otherwise
obtain and have installed and maintained, either through Manager and its
affiliates or Manager’s designated suppliers, any computer and other systems
that Manager determines to be necessary for management of the Lottery Gaming
Facility in accordance with the approved Budget and Business Plans; provided
that such systems may not adversely affect the Kansas Lottery’s central computer
system or affect a Lottery Facility Game’s elements of chance, consideration or
prize.
 
42.           Personnel. Manager will provide, supervise, direct the work of,
discharge, and determine the compensation and other benefits of all personnel
necessary to provide for the play of Lottery Facility Games at the Lottery
Gaming Facility, except as otherwise noted in this Agreement, based upon a
staffing plan in accordance with industry standards approved by the Executive
Director. Such personnel will not be considered employees of the Kansas Lottery
or any other agency or department of the State of Kansas. Manager may determine
the compensation to be paid to all of its personnel working at the Lottery
Gaming Facility provided that such compensation is substantially within the
budget for personnel compensation approved by the Executive Director. Manager
must ensure its personnel meet all applicable regulatory requirements imposed by
the Commission or the Kansas Racing and Gaming Commission. Manager will not
discriminate against any employee or applicant for employment because of race,
creed, color, sex, age, or national origin nor violate any applicable law,
regulation or local ordinance governing employer obligations.
 
43.           Personnel Training. Manager will provide and direct employee
recruitment, instructional programs, incentives, and on-the-job training
necessary to ensure a first class facility for the playing of Lottery Facility
Games by the public. Such trainings and other programs for personnel are subject
to the Executive Director’s approval, but may be conducted on or off site, on
the job, or by instructors at or from educational training facilities.
 
44.           Key Employees. Manager agrees the personnel, or positions, as well
as any independent contractors designated in Exhibit D, are considered Key
Employees, whose ability to participate in the operation or management of the
Lottery Gaming Facility are subject to the Executive Director’s approval within
his sole discretion; provided, however, that nothing in this paragraph will
restrict the right of either the Kansas Lottery or the Kansas Racing and Gaming
Commission to take action regarding the license/certification held by any of
Manager’s employees in accordance with applicable statutes or rules and
regulations promulgated pursuant to law. The Executive Director may amend the
Key Employees list at any time for any reason. Any notice of disapproval of a
Key Employee or the amendment of the Key Employee list shall be in writing.  Any
Key Employee disapproved or deleted from the Key Employee list shall have a
right to file a written request for reconsideration to the Executive Director,
within thirty (30) days.
 
 
 

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45.           Books and Records; Financial Statements. Manager must maintain an
accurate accounting system in connection with its management of the Lottery
Gaming Facility. The books and records will be kept in accordance with generally
accepted accounting principles maintained in accordance with current industry
standards for similar gaming businesses. The books and records shall be
maintained at all times either at the Lottery Gaming Facility or at such other
locations as may be specified by regulation. The Executive Director, or his
designees, shall have the right and privilege of examining these books and
records at any time. In addition, the Executive Director may at any time obtain
and pay for an audit performed by an independent certified public accountant. If
this audit reveals a discrepancy greater than $10,000 in Lottery Gaming Facility
Revenues or a cumulative discrepancy greater than $100,000 on any other line
items previously reported to the Executive Director from the books and records
provided by Manager, the audit’s cost will be reimbursed by Manager as a set off
from the compensation to be paid Manager pursuant to Paragraph 25 above. On or
before the 20th day following the close of each month, Manager must furnish the
Executive Director with a reasonably detailed operating statement for the
Lottery Gaming Facility for that period, including year-to-date results.
 
46.           Records Retention and Access. Manager must maintain all books and
records regarding the Lottery Gaming Facility for a minimum period of five (5)
years, or such other longer period as may be imposed by regulation or statute.
Manager must permit access to such books and records as is legally required by
law, regulation, or this Agreement, including giving access to the Post Auditor
for the Kansas Legislature, the Executive Director or his designee, authorized
representatives for the Kansas Racing and Gaming Commission, or any authorized
representative of the United States government.
 
47.           Budget and Business Plans for Each Fiscal Year. No later than
forty-five (45) days prior to the commencement of each Fiscal Year, Manager must
submit to the Executive Director a budget (the “Budget”) and a proposed Business
Plan for the Lottery Gaming Facility for such Fiscal Year, containing reasonably
detailed revenue and expense projections and providing projections for all
material expenditures that Manager anticipates to be made, as well as all
anticipated material capital expenditures and material expenditures for
replacements. The Budget will accompany and be compatible with Manager’s
proposed Business Plan for the upcoming Fiscal Year. The Budget is intended as,
and will represent only, an estimate of the projected revenues and expenditures
for the Fiscal Year based upon assumptions believed by Manager to be reasonable
at the time of preparation. The Budget and proposed Business Plan for each
upcoming Fiscal Year will be subject to the Executive Director’s approval and/or
amendment. Thereafter, Manager will use reasonable efforts to achieve the
budgetary goals reflected in the Budget, but the parties both recognize the
Budget cannot be relied upon as an assurance of actual results for such Fiscal
Year. Manager must promptly notify the Executive Director of any need to depart
in any material way from the Budget if, in Manager’s judgment, adherence to the
Budget is impractical or if such departure is necessary or desirable for the
Lottery Gaming Facility’s efficient or profitable operation. Any such  material
deviations from the Budget are subject to the Executive Director’s approval.
Until such time as a Budget or Business Plan is approved for any fiscal year,
Manager may operate in substantial accordance with the previous fiscal year’s
Budget or Business Plan as approved by the Executive Director. Notwithstanding
the foregoing, if the Executive Director objects to any portion of a proposed
Budget, Executive Director shall advise Manager of such objection (and deliver
to Manager a reasonably detailed description of such objections, the
“Disapproved Items”) and Manager and the Executive Director shall in good faith
discuss and resolve the objection. If the Executive Director objects, the
Manager shall promptly revise the Budget to address the Disapproved Items and
shall resubmit the same to Executive Director until Executive Director approves
such Disapproved Items. In addition, if any Disapproved Item is required to be
paid pursuant to applicable federal, state or local law, rule, regulation, order
or statute or by any governmental authority with jurisdiction with respect
thereto, the cost and expense of which were approved pursuant to previous
Budgets, then Manager shall be permitted to pay the same. Until such time that
Executive Director approves such Disapproved Items, the most recently approved
Budget shall apply other than with respect to the Disapproved Items with respect
to which the previously approved Budget shall apply.
 
             48.           Bank Accounts.  Manager shall establish or facilitate
the establishment of the bank accounts listed below:
 
a)     
a special bank account in the name of the Kansas Lottery at a Kansas bank
approved by the Executive Director and the Pooled Money Investment Board of the
State of Kansas, with the Kansas Lottery being the only party authorized to draw
from this account.  This bank account will be used by Manager solely to deposit
daily receipts of Lottery Gaming Facility Revenues, from which account the
Lottery will cause an electronic sweep or otherwise transfer of funds pursuant
to Paragraph 23 of this Agreement.  Manager will have no right to grant any
security interest to anyone regarding these funds or this account.
 

b)     
one account in Manager’s name at a bank in a jurisdiction of Manager’s choosing
for the purposes of receiving its compensation payment from the Kansas Lottery
pursuant to Paragraph 26.  The Executive Director will cause Manager’s portion
of the Lottery Gaming Facility Revenues to be electronically deposited into this
account monthly;

 

 
c)
one or more accounts into which amounts sufficient to cover all operating
expenses and other costs of the Lottery Gaming Facility shall be deposited from
time to time by Manager (by transfer of funds from the account in Paragraph
48(b) above or otherwise); and

 
d)
such other accounts as Manager deems necessary or desirable.

 
 
 
 

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  49.         Events of Default. Each of the following will constitute an event
of default by Manager:

 
a)
Manager’s failure to pay any amount owed the Kansas Lottery in the manner
provided for in this Agreement, subject to Manager’s right to cure as provided
in Paragraph 23, if the Kansas Lottery decides in its sole discretion to give
notice of such default to Manager and, other than with respect to Paragraph 23,
if Manager fails to cure such nonpayment within seven (7) days after the date on
which such notice was received,

 
b)
The filing of a voluntary assignment in bankruptcy or insolvency or a petition
for reorganization under any bankruptcy law by Manager;

 
c)
The consent to an involuntary petition in bankruptcy by Manager;

 
d)
Entry of an order, judgment or decree by any court of competent jurisdiction, on
application of a creditor, adjudicating Manager a bankrupt or insolvent or
approving a petition seeking reorganization or appointing a receiver, trustee or
liquidator of all or a substantial part of Manager’s assets, if such order,
judgment or decree continues unstayed and in effect for a period of 120
consecutive days; or

 
e)
Manager’s material failure to perform, keep or fulfill any other covenant,
undertakings, obligations or conditions set out in this Agreement for a period
of thirty (30) days after written notice of said failure from the Executive
Director (unless a shorter period of time is specified in this Agreement);
provided, however, that if the default is not susceptible of being cured within
this thirty (30) day period and the defaulting party with due diligence takes
and continues action to cure, then no event of default will be deemed to have
occurred until the failure to take or to continue to take such action; or

 
f)
Withdrawal of any approval granted, loss or suspension of any
license/certification issued to Manager by the Kansas Racing and Gaming
Commission or any other regulatory entity with jurisdiction over Manager’s
activities unless such withdrawal, suspension or loss is being contested by
Manager in the appropriate forum with jurisdiction over the agency action at
issue.

50.           Remedies on Default. If an event of default occurs as provided in
Paragraph 49 above, the Executive Director may, without prejudice to any other
legal or equitable remedy which he may have, give Manager notice of the Kansas
Lottery’s intention to terminate this Agreement after the expiration of
forty-five (45) days from the date of such notice and upon the expiration of
such period, unless another cure period is expressly provided for, this
Agreement will be deemed terminated; provided, however, that nothing in this
paragraph, or in this Agreement, will be construed to restrict the Executive
Director’s authority to: (a) immediately cease operation of any or all Lottery
Facility Games at the Lottery Gaming Facility for any reason; or (b) physically
secure or take possession of any or all Lottery Facility Games and any related
equipment necessary to play such games. Manager acknowledges and agrees that
once this Agreement is terminated, the Kansas Lottery thereafter will be free to
enter into a management contract with a new manager for another Lottery Gaming
Facility in the Kansas gaming zone without penalty to the Kansas Lottery or
further recourse by Manager. During the forty-five (45) day period between
Manager’s receipt of notice of termination from the Executive Director and such
termination becoming effective, the Executive Director shall cooperate in good
faith with Manager in any effort undertaken by Manager to locate a third party
to acquire the Lottery Gaming Enterprise and assume the obligations of Manager
hereunder; provided, however, the Manager expressly acknowledges and agrees that
any third party must comply with all statutory and licensure requirements and be
able to perform all such obligations hereunder. Notwithstanding the foregoing,
Manager further acknowledges that its failure to make any daily electronic
payment of Lottery Gaming Facility Revenues as required by Paragraph 23 will
authorize the Executive Director in his sole discretion to immediately terminate
this Agreement.
 
51.           Remedies Cumulative. No remedy conferred upon or reserved to the
Kansas Lottery in this Agreement is intended to be exclusive of any other
available remedy, but each and every such remedy will be cumulative and in
addition to every other remedy given under this Agreement or now or hereafter
existing at law or in equity. No delay or omission to exercise any right or
power accruing upon any default will impair any such right or power or will be
construed to be a waiver, but any such right and power may be exercised from
time to time and as often as may be deemed expedient in favor of the Kansas
Lottery.
 
 
 

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52.           Surrender Upon Termination. At the Executive Director’s request,
Manager agrees that at the expiration or earlier termination of this Agreement,
Manager will deliver to the Executive Director, or his designee, all books,
records, accounting documents, computerized files, contracts, leases,
licenses/certifications, permits or other governmental authorizations, files,
supplies, keys, locks safe combinations, insurance policies not maintained as
part of Manager’s blanket policies, warranty contracts and cards, operating
instructions and other information, warranties and guaranties concerning all
equipment relating to the Lottery Facility Games, as well as any maintenance or
preventive maintenance programs, schedules and logs, records, inventories of
personal property and equipment purchased on behalf of the Kansas Lottery or the
State of Kansas, and all other information regarding the Lottery Facility Games,
and all accounts and sums held or maintained by Manager on behalf of the Kansas
Lottery. Notwithstanding the foregoing, Manager shall be entitled to retain
copies of all documents, records, books, files and other materials delivered to
the Executive Director. Manager will have a reasonable period of time, not to
exceed forty-five (45) days from the termination date, to complete all
accounting functions with respect to the Lottery Gaming Facility. Manager must
cooperate with the Executive Director in changing any bank accounts maintained
for the Kansas Lottery’s benefit. Manager must take all actions reasonably
necessary to facilitate the orderly transition or termination of the management
of the business of the Lottery Gaming Facility and must perform all reporting
and accounting functions required by this Agreement for the period from the date
of the last report or accounting to the termination date. If, at the termination
of this Agreement, there are any Lottery Facility Games that were purchased by
Manager on behalf of the Kansas Lottery with ownership transferred to the Kansas
Lottery, then the Executive Director will transfer ownership of such games to
Manager or Manager’s designee, if such transfer is lawful; but if such transfer
is not lawful, then the Executive Director will refund to Manager the residual
value received by the Executive Director in a sale of such game to an eligible
buyer. The Kansas Lottery will also vacate the physical space where the Lottery
Gaming Facility was located within forty-five (45) days of this Agreement’s
termination.
 
53.           Agreement to Pay Attorneys’ Fees and Expenses. If Manager defaults
under any provision of this Agreement and the Kansas Lottery should employ
attorneys or incur other expenses for the collection of amounts payable or to
enforce performance or observance of Manager’s obligations under this Agreement,
Manager must pay, on demand, the reasonable fees of such attorneys and such
other expenses incurred by the Kansas Lottery, if the Kansas Lottery is the
prevailing party.
 
54.          Manager’s Indemnification Responsibilities. In addition to any
other indemnification obligations provided in this Agreement or by law, Manager
agrees to do the following to the fullest extent allowed by law:
 
a)       
To hold and save harmless the State of Kansas, Commission, Commission members,
the Executive Director, the Kansas Lottery, Kansas Lottery staff, Kansas Racing
and Gaming Commission, Kansas Racing and Gaming Commission members, the Kansas
Racing and Gaming Commission’s executive director, and Kansas Racing and Gaming
Commission staff (each an “Indemnified Party”) from liability for injury to
persons or damages to property by reason of Manager’s activities in carrying out
the provisions of, or any way connected with this Agreement.

b)       
To hold and save harmless any Indemnified Party upon demand for any money or
other property which they are required to pay out for any reasons whatsoever,
whether the payment is for a budgeted expense or any other charges or debts
incurred or assumed by Manager, or any other party, or judgments, settlement or
expenses in defense of any claim, civil action, proceeding, charge, or
prosecution made, instituted or maintained against Manager or an Indemnified
Party jointly or severally, affecting or because of the condition or use of the
Lottery Gaming Facility, or acts or failure to act by Manager or Manager’s
agents, or arising out of or based upon any law, regulation, requirement,
contract or award related to the hours of employment, working conditions, wages
and/or compensation of employees or former employees at the Lottery Gaming
Facility, or any other cause in connection with the Lottery Gaming Facility’s
management or Manager’s activities related to any Ancillary Lottery Gaming
Facility Operations. This entire Paragraph 54 does not include any action
against the Indemnified Parties or their staff regarding the constitutionality
of the Kansas Expanded Lottery Act or misconduct by an Indemnified Party that is
found to be negligent, willful or malicious.

c)       
To hold and save harmless any Indemnified Party from liability for any claim
arising as a result of the selection of Manager under the Kansas Expanded
Lottery Act to manage the Lottery Gaming Facility in the South Central Zone, the
denial of some other potential manager in making that selection, the process
used in making the selection, or the process used in applying to become a
Lottery Gaming Facility Manager under the Kansas Expanded Lottery Act.

d)       
To hold and save harmless any Indemnified Party from liability for any violation
or breach of this Agreement by Manager, its employees, or agents.

e)       
To hold and save harmless any Indemnified Party from liability for any claims
alleging negligent acts or omissions by Manager, its officers, employees,
agents, board members, contractors, subcontractors or agents in the performance
of this Agreement.

f)       
To hold and save harmless any Indemnified Party from liability for any claims
alleging violations of any intellectual property right for any intellectual
property supplied by Manager under this Agreement, including but not limited to,
infringement of patents, trademarks, trade dress, trade secrets, or copyrights
arising from Manager’s performance under this Agreement.

 
 

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Manager’s duties under this paragraph will survive the termination or expiration
of this Agreement. To the extent Manager is responsible to defend any
Indemnified Party as required under this Agreement, Manager agrees to defend
(with counsel approved by the Executive Director), at Manager’s sole expense,
any Indemnified Party, and to pay on demand all costs and expenses related to
such defense regarding any indemnification right provided for in this paragraph.
The Kansas Lottery shall cooperate in any such defense and will promptly provide
notice to Manager of any potential liability arising under this Paragraph
54.  Manager’s obligations under this paragraph may be satisfied in whole, or in
part, by insurance purchased at Manager’s expense, provided that Manager will be
responsible for any indemnified liabilities in excess of insurance limits.
Notwithstanding any provision to the contrary in this Agreement, Manager shall
in no event be liable under any indemnification obligation provided in this
Agreement to the extent such liability arises out of or is related to the
negligent, willful or malicious conduct of any Indemnified Party or resulting
from actions taken by Manager at the specific direction of the Executive
Director, or any other Indemnified Party that is specifically authorized under
the Kansas Expanded Lottery Act or regulation promulgated thereunder to direct
the actions of Manager. The provisions of this paragraph in no way eliminate or
cancel the insurance protection and rights granted to the Kansas Lottery, the
Commission, the State of Kansas and their agents and employees as set forth in
Paragraphs 34 and 35 of this Agreement.
 
55.           Compliance with Orders, Ordinances, Etc. Throughout this
Agreement’s term, Manager will promptly comply in all material respects with all
statutes, codes, laws, acts, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, permits, licenses/certifications,
authorizations, directions and requirements of all federal, state, county,
municipal and other governments, departments, commissions, boards, companies or
associations insuring the premises, courts, authorities, officials and officers,
foreseen or unforeseen, ordinary or extraordinary, which now or at any time
hereafter may be applicable to the Lottery Gaming Facility or any part thereof,
or to any use, manner of use or condition of the Lottery Gaming Facility or any
part thereof. Notwithstanding these requirements, Manager may in good faith
contest the validity of the applicability of any requirement of the nature
referred to in this paragraph. In such event, Manager may fail to comply with
the requirement or requirements so contested during the period of such contest
and any appeal therefrom, so long as such non-compliance is permitted by law.
Manager will give notice to the Executive Director of any such non-compliance.
 
56.           Discharge of Liens and Encumbrances. Manager shall not permit or
create or suffer to be permitted or created any lien upon the Lottery Gaming
Facility Revenues or the Lottery Gaming Facility, or any part thereof, by reason
of any labor, services or materials rendered or supplied or claimed to be
rendered or supplied with respect to the Lottery Gaming Facility or any part
thereof, except any liens expressly approved in writing by the Executive
Director. Notwithstanding these requirements, Manager may in good faith contest
any such lien. In such event, Manager, upon prior written notice to the
Executive Director, may permit the items so contested to remain undischarged and
unsatisfied during the period of such contest and any appeal, unless the
Executive Director requires Manager to promptly secure payment of all such
unpaid items by filing the requisite bond, in form and substance satisfactory to
the Executive Director, thereby causing a lien to be removed. Manager agrees
this Agreement is not to be considered property, and will not permit this
Agreement to be attached, garnished, or executed upon by any creditor for any
reason, but such attachment, garnishment or execution shall not be grounds for
default if Manager promptly contests and obtains vacation of such writs or
secures a bond that causes the lien thereof to be removed. This Agreement is not
transferable in bankruptcy without the Executive Director’s approval, provided
that the Manager’s trustee, if Manager is insolvent or bankrupt, may continue to
operate the Lottery Gaming Facility pursuant to this Agreement under order of
the appropriate court for no longer than one year after the bankruptcy or
insolvency of Manager.
 
57.           Assignment. This Agreement may not be assigned in whole or in part
without the Executive Director’s express written consent, which may be granted
or withheld in his sole and absolute discretion, except that the parties
recognize that consistent with the Manager’s original Application, the entire
interest in this Agreement and the rights, duties and obligations herein shall
be assigned to a wholly owned affiliate of the Applicant, the Kansas Star
Casino, LLC provided such entity receives all required approvals. Additionally,
this Agreement may be assigned in whole or in part to any Lender as provided in
paragraph 78 hereto subject to Lender’s compliance with all statutory
requirements, regulatory procedures, (including those related to suitability),
and Executive Director approval.
 
58.           Notices. All notices and other communications provided for under
this Agreement, or any applicable statute or regulation, must be in writing and
sent via (a) U.S. Mail, certified mail, return receipt requested, (b) recognized
national overnight courier (e.g. FedEx, UPS, DHL, etc.), (c) hand delivery or
(d) fax, if followed by notice under (a) or (b) at the addresses set forth
below, or at such other address as such party may specify by written notice to
the other parties hereto:
 
If to the Executive Director:                                                Ed
Van Petten
Kansas Lottery
128 N. Kansas Avenue
Topeka, KS 66603-3638
Telephone: 785-296-5703
Facsimile: 785-296-5722
 
If to Manager:                                                                 
James Adams
Vice President - Legal Affairs
Peninsula Gaming, LLC
600 Star Brewery Dr., Suite 110
Dubuque, IA 52001
Office: (563) 690-4975
 
James.Adams@peninsulagaming.com
 
 
 

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With a copy to
 
John C. Frieden
Frieden, Unrein, Forbes & Biggs LLP
555 S Kansas Avenue, Suite 303
P O Box 639
Topeka, KS 66601-0639
TEL  785.354-1100
FAX 785.354.1113
jfrieden@fufblaw.com
 
 
 
Notice will be deemed given three days after mailing, if by certified mail,
return receipt requested, the next business day after delivery to an overnight
delivery service for next business day delivery, or on the date sent by fax if
confirmation of receipt is obtained and retained and provided that notice under
(a) or (b) above is sent the same day.
 
         59.           Amendments. Except as otherwise provided in this
paragraph, no amendment, waiver, or consent as to any provision in this
Agreement will be effective unless it is in writing and agreed to by the
Executive Director and Manager, and each such waiver or consent will be
effective only in the specific instance and for the specific purpose for which
given. In addition, and notwithstanding any other provision in this Agreement,
Manager acknowledges and agrees the Executive Director may overrule any action
by Manager affecting operations within the Lottery Gaming Facility without prior
notice to Manager, and that the Kansas Lottery maintains at all times full
control over all decisions concerning the Lottery Facility Games placed at the
Lottery Gaming Facility. This Agreement will also be modified, in whole or in
part, in order to comply with future statutory enactments or judicial
interpretations of applicable law by a court of competent jurisdiction. This
Agreement is subject to modification, in whole or in part, or cancellation, as
deemed necessary by the Executive Director to comply with any future statutory
enactments, subsequent regulatory changes, or judicial interpretations of
applicable law by a court of competent jurisdiction occurring after this
Agreement’s execution, without additional consideration being exchanged between
the parties. The parties agree nothing in this paragraph will be read to limit
the remedies provided to Manager in Paragraphs 31 or 65. In addition, the
parties will consider in good faith any proposals made to amend this Agreement
during its term, to the extent, if any, they are authorized by law.
 
Notwithstanding, any provision to the contrary, it is understood, acknowledged
and agreed to by the parties hereto that amendments to the KELA after the date
of execution of this Agreement shall not impair either party’s legal
entitlements or remedies that would have been available at law or equity before
the date of any such amendment.
 
60.           No Recourse; Special Obligation.
 
(a)  
The Kansas Lottery’s obligations and agreements contained herein and any other
instrument or document executed in connection with this Agreement, and any other
instrument or document supplemental thereto or hereto, are deemed the
obligations and agreements of the Kansas Lottery, and not of any member,
officer, contractor (other than Manager), or employee of the Commission or
Kansas Lottery in his or her individual capacity, and such individuals will not
be liable personally hereon or thereon or be subject to any personal liability
based upon or in respect hereof or thereof or of any transaction contemplated
hereby or thereby.

 
(b)  
The Manager’s obligations and agreements contained herein and any other
instrument or document executed in connection with this Agreement and any other
instrument or document supplemental thereto or hereto, are deemed the
obligations and agreements of Manager, and not of any direct or indirect equity
owner, member, partner, officer, director, contractor, or employee of Manager in
his or its individual capacity, and such entities and individuals will not be
liable personally hereon or thereon or be subject to any personal liability
based upon or in respect hereof or thereof or of any transaction contemplated
herby or thereby, with the exception of agreements, documents or instruments
that are signed by any person or entity in his or its individual capacity, such
as an individual disclosure form.

 
61.           Severability. If any provision in this Agreement is determined to
be invalid or unenforceable by any court with competent jurisdiction, such
holding will not invalidate or render unenforceable any other provision, and the
parties may renegotiate this Agreement to conform to any such court holding.
 
 
 

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62.           Binding Effect. This Agreement will inure to the benefit of, and
will be binding upon, the State of Kansas, the Kansas Lottery, Manager, and
their respective successors and assigns.
 
63.           Force Majeure. With respect to any obligation to be performed by a
party during this Agreement’s term, no party will be liable for failure to
perform when prevented by any force majeure cause beyond the reasonable control
of such party such as an act of God, weather, strike, lockout, breakdown,
accident, order or regulation of or by any governmental authority, delay in
obtaining any approval required by any governmental authority (and such delay is
not caused by Manager), failure of supply or inability, by the exercise of
reasonable diligence, to obtain supplies, parts or employees necessary to
perform such obligation, or war or other emergency. The time within which such
obligation must be performed will be extended for a period of time equivalent to
the delay from such cause. But failure to perform by Manager’s subcontractors or
agents will not be considered a force majeure unless such subcontractor or
supplier is prevented from timely performance by a force majeure as described
above. This paragraph will not apply to any financial difficulties of Manager,
or any parent, subsidiary, or affiliated or associated company of Manager, but
will apply to orders from any authorized governmental authority or court orders
preventing Manager’s ability to perform. The provisions of this paragraph 63
notwithstanding, the parties agree the litigation components of the force
majeure definition do not apply to Manager’s obligations to pay the privilege
fee as required by Paragraph 20 above or to Manager’s obligations to pay the
expenses of the Kansas Lottery or the Kansas Racing and Gaming Commission as
required by Paragraph 28, except, in each case, if such litigation components
restrict, prohibit or disallow Manager from making such payments (or any portion
thereof), in which case Manager shall be permitted to comply with such
litigation components and such compliance shall not be, nor shall it be deemed
to be, an event of default hereunder.
 
64.           Emergency Closings. If at any time during this Agreement’s term it
becomes necessary in the Executive Director’s or Manager’s reasonable opinion to
cease operations at the Lottery Gaming Facility in order to protect the facility
or the health, safety and welfare of guests or employees for reasons of force
majeure such as, but not limited to, acts of war, insurrection, civil strife and
commotion, labor unrest, environmental risks or other casualty, then the Lottery
Gaming Facility may be closed and cease operation of all or part of the
facility. If this occurs based on Manager’s determination, Manager must
immediately notify the Executive Director, who will then determine when the
Lottery Gaming Facility is reopened without jeopardy to the facility, its guests
or employees.

   65.         Manager’s Right to Cease Management Activities. Manager may cease
management of the Lottery Gaming Facility and terminate this Agreement with no
less than six months advance written notice if:

 
a)
K.S.A. 2008 Supp. 74-8734(h)(1) or other applicable statute or regulation is
amended to reduce the term of this Agreement;

 
b)
Either K.S.A. 2008 Supp. 74-8734(h)(12) or (13) or other applicable statute or
regulation are amended to increase the minimum percentages stated in K.S.A. 2008
Supp. 74-8734(h)(12) or (13) above the amounts provided for in this Agreement;
 

 
c)
K.S.A. 2008 Supp. 74-8734 (h)(16) or other applicable statute or regulation is
amended to increase above the aggregate the minimum percentages stated in K.S.A.
2008 Supp. 74-8734(h)(16) above the amounts provided for in this Agreement;
 

 
d)
The Kansas Lottery fails to effect payment of Manager’s compensation as due
under this Agreement and not otherwise in dispute, provided such failure of
payment is not cured within ten (10) business days of notice by Manager to the
Executive Director;

 
e)
K.S.A. 2008 Supp. 74-8739 is amended to no longer permit the sale or service of
alcoholic beverages at the Lottery Gaming Facility or Ancillary Lottery Gaming
Facility Operations;

 
f)
The Kansas Expanded Lottery Act is amended to preclude the Kansas Lottery from
owning and operating table games at the Lottery Gaming Facility; or the Kansas
Lottery, the Kansas Racing and Gaming Commission, or the State of Kansas
otherwise (i) preclude the Kansas Lottery from owning and operating the Lottery
Facility Games permitted as of the date of this Manager’s Application for
Lottery Gaming Facility Manager, or (ii) reduces the number of Lottery Facility
Games contemplated for all phases of the project by this Manager’s Application
for Lottery Gaming Facility Manager.

 
g)
A court of competent jurisdiction, after all appropriate appeals are exhausted,
invalidates paragraph 30 above or the corresponding provisions of the Kansas
Expanded Lottery Act;

 
 

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h)
The Lottery Gaming Facility operates at a financial loss to Manager at the net
income level (as defined by GAAP and verified by an independent audit by an
auditor approved by the Executive Director) during any rolling twelve (12) month
period; and Manager gives the Executive Director at least 90-days’ advance
written notice of Manager’s intent to cease management activities within
forty-five (45) days after the end of said period;
 

 
i)
The Executive Director exercises his right under Paragraph 33 or the Kansas
Expanded Lottery Act to physically secure, deactive or cease operation of such a
substantial number of Lottery Facility Games that the Lottery Gaming Facility is
no longer commercially viable.

 

 
j)
The Kansas Lottery or Kansas Racing and Gaming Commission prevents the Lottery
Gaming Facility from operating 24 hours a day, 7 days a week, except as may be
ordered by the Kansas Lottery or the Kansas Racing and Gaming Commission as a
sanction within the legal exercise of their respective regulatory authority or
by the Kansas Lottery under its contract or statutory authority; or

 

 
k)
In the event the central computer system is implemented in a manner materially
adverse to the competitive position of the Lottery Gaming Facility in the market
or the Manager's ability to maximize Lottery Gaming Facility Revenues;

 
 

The parties agree that in addition to, or in lieu of, Manager’s right to cease
management activities under this paragraph, Manager will have available to it
any legal or equitable remedy against the State of Kansas, including any
impairment of the obligations of this contract prohibited by Article I, Section
10, Clause 1 of the Constitution of the United States of America, if any of the
circumstances stated above in sub-paragraphs (a), (b), (c), (d), (e) or (f)
occur. Nothing in this paragraph will be deemed a waiver of the immunities and
protections reserved to the State of Kansas under the Eleventh Amendment to the
Constitution of the United States.
 
66.           Manager’s Ability to Withdraw Application. Manager may withdraw
its application to be a Lottery Gaming Facility Manager at any time prior to its
approval by the Kansas Racing and Gaming Commission. Notice of Manager’s
withdrawal must be given in writing to the Executive Director. If at the time of
Manager’s withdrawal, Manager has paid a privilege fee to the state treasurer
and credited to the Lottery Gaming Facility Manager Fund, the Executive Director
will promptly notify the state treasurer of Manager’s withdrawal and direct the
state treasurer to refund Manager’s privilege payment without interest. Manager
acknowledges and agrees that if it withdraws its application pursuant to this
paragraph, this Agreement will be void (with the exceptions of Sections 8,
28,(except that with respect to Section 28, Manager shall only be liable for any
obligations which accrued prior to the date of its withdrawal), 54, 58, 60, 70,
71 and 72) and it will not be permitted to re-apply as a Lottery Gaming Facility
Manager in the South Central Gaming Zone unless the application process is
reopened. Manager will not be permitted any refund for payments made by Manager
to reimburse the Kansas Lottery or the Kansas Racing and Gaming Commission’s
expenses as required by this Agreement.
 
67.           Financing Commitment for Construction and Additional Commitments
and Incentives (if any).

a)  
In accordance with K.S.A. 2008 Supp. 74-8734(h)(9), Manager attaches as Exhibit
E its financing commitment for construction of the Lottery Gaming Facility and
ancillary facilities.

b)  
Manager is committing $1.5 million annually to the families of Sumner County,
through the creation of the Kansas All-Star Scholars Fund “Ad Astra.”   To
support education in the region, all students in grades K-12 would be given a
$100 educational reward card to be used at area merchants to purchase
back-to-school supplies. These cards would be distributed at the time of
enrollment each August. Certain restrictions would apply to the use of the card.
Those and other operational questions would be addressed by a local non-profit
board established to oversee the program.  Further, all graduating high school
seniors in Sumner County and Mulvane would be given a $1,000 scholarship to be
used toward their post-secondary endeavors.  A non-profit board, the Kansas
All-Stars Scholars “Ad Astra” Board, would be appointed to oversee the
administration of the program. This blue-ribbon panel would be comprised of
local business leaders, K-12 education leaders and recognized leaders from the
state’s higher education community. Its membership (5 members) would be
appointed by state and local officials and serve set terms.  The balance of
funds remaining each year after funding the Kansas All-Star Scholars Fund “Ad
Astra” will be contributed to Sumner County’s general fund.

68.           Executive Director’s Approval. When it is provided in this
Agreement that the Manager will submit a budget, plan or other issue for the
Executive Director’s approval, the Executive Director will respond within 10
business days of the Kansas Lottery,  provided that any request from Manager in
which the Executive Director fails to respond in that time will be deemed
denied. The Executive Director will not exercise his discretionary authority
provided to him in this Agreement in an unreasonable, arbitrary or capricious
manner.
 
 
 

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69.           Central Computer System. Manager acknowledges and agrees that all
Electronic Gaming Machines at the Lottery Gaming Facility will be directly
linked to a central computer at a location determined by the Executive Director
for purposes of security, monitoring, auditing, and providing other available
program information to the Kansas Lottery. The Executive Director will have sole
authority to determine the functions and operational capacities to be performed
through this central computer system by Manager, as well as the services
provided by the vendor engaged by the Executive Director to provide the central
computer system. In addition to all other functions to be performed by the
central computer system, the Executive Director expressly reserves the authority
to determine if this central computer system will be used to validate or redeem
tickets issued by an Electronic Gaming Machine commonly referred to as
“Ticket-in Ticket Out.”
 
70.           Counterparts. This Agreement may be executed in counterparts, each
of which will be an original and all of which will constitute one and the same
instrument.
 
71.           Applicable Law. This Agreement will be governed, construed, and
enforced in accordance with Kansas law for contracts to be wholly performed
within the state.
 
72.           Jurisdiction and Venue. Any action by or between the parties
challenging the constitutionality of, or arising out of, any provision of the
Kansas Expanded Lottery Act, this Agreement, or any rule or regulation
promulgated pursuant to the Kansas Expanded Lottery Act must be brought in the
district court of Shawnee County, Kansas, unless a dispute is first subject to
proceedings under the Kansas Administrative Procedure Act.
 
73.           Headings Not Controlling; Construction; Survival. Each paragraph
heading is prepared for convenience only and is not to control, affect the
meaning, or be taken as an interpretation for any provision in this Agreement.
Use of the word “including” in this Agreement does not mean including in a
restrictive sense, but rather means in the sense of providing a non-exclusive
illustration, as if the words “including without limitation” were included in
the text. The terms and provisions of Paragraphs 2,8,20, 31, 48, 52, 54, 58, 60,
65, 71, 72, 73, 74 and 78 shall survive the termination of this Agreement.
 
74.           No Joint Venture Created. Manager and the Kansas Lottery agree and
acknowledge that by entering into this Agreement they are not entering into a
joint venture.
 
75.           Covenant for Continued Disclosure. Within 30 days after the close
of the Fiscal Year, Manager must update all exhibits to this Agreement as
designated by the Executive Director. Upon the Executive Director’s written
request, Manager will provide such other information regarding the financial or
legal undertakings of Manager, the Lottery Gaming Facility, or the Ancillary
Lottery Gaming Facility Operations.
 
76.           No Endorsement Made. By executing this Agreement the Kansas
Lottery, the Kansas Racing and Gaming Commission, and the State of Kansas have
not considered or endorsed the marketability of Manager’s securities or
marketability of any securities of Manager’s affiliates.
 
77.           Contractual Attachment. It is further agreed that the provisions
found in the Contractual Provisions Attachment (Form DA-146a), and is attached
as Exhibit F, are incorporated in this Agreement as though set out in full.
 
    78.           Lender Protection.    The Kansas Lottery expressly recognizes
the need for Manager to obtain favorable financing terms and the need for any
third party lender (Lender) associated with the development of the Lottery
Gaming Enterprise to protect its investment. Therefore, in connection with any
financing from a Lender during the term of this Agreement or in connection with
the construction of the Lottery Gaming Enterprise, the following provisions will
apply:
 
 
a.
The Kansas Lottery acknowledges that Manager may grant a security interest in,
and/or grant a mortgage encumbering, the Lottery Gaming Enterprise, Lottery
Facility Games, and any bank accounts of Manager referenced in Paragraph 48 but
excluding any Collection Accounts

 
 
 
 

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b.
Upon a bankruptcy of Manager, or if the Kansas Lottery elects to terminate this
Agreement for any other reason, it shall notify Lender, and Lender may request
that the  Kansas Lottery promptly enter into a new management agreement on
substantially the same terms as this Agreement (New Management Agreement) with a
new, Third Party Manager.  Kansas Lottery need not consider such a request,
however, unless a Lender has first:  (i) cured all reasonably curable defaults
to the extent required hereunder;  (ii) reimbursed Kansas Lottery’s costs and
expenses (including reasonable attorneys’ fees and expenses) to terminate this
Agreement, recover the Lottery Gaming Facility, and enter into the New
Management Agreement; and (iii) ensured that any new Third Party Manager and/or
the New Management Agreement are in compliance with any and all statutory
requirements, approvals or consents , and any regulatory procedures, including
those related to suitability. The Kansas Lottery agrees to co-operate with a
Lender in good faith to find a new acceptable Third Party Manager upon any such
termination of Manager.

 
 
 
c.
The Kansas Lottery agrees to notify Lender of any material amendments made under
Section 59 of this Agreement.

 
 
 
d.
Manager agrees to notify the Lottery of any Lender’s contact information and
keep it current with the Lottery at all times. Manager’s failure to keep a
Lender’s contact information current will nullify the Kansas Lottery’s duty of
notice under (a), (b) or (c) of this Section.

 
 
 
e.
The rights of Lender hereunder shall inure to the benefit of a Lender’s
affiliate, assignee, designee, nominee, subsidiary, or others designated by
Lender.

 
 
 
f.
The Kansas Lottery agrees to provide any standard business consents, estoppels
or similar instruments reasonably requested by Manager or Lender in connection
with any such financing of the Lottery Gaming Enterprise or Lottery Facility
Games.

 
 

[Remainder of Page Intentionally Left Blank]

 
 

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    IN WITNESS WHEREOF, the Executive Director, on behalf of the Kansas Lottery,
and Manager have caused this Agreement to be executed in their respective names,
all as of the date first above written.

  THE KANSAS LOTTERY          
 
By:
/s/ Ed Van Petten    Dated:  10-19-10     Name:  Ed Van Petten, Executive
Director                  

 
 

 
PENINSULA GAMING PARTNERS, LLC
a Delaware limited liability company
         
 
By:
/s/ M. Brent Stevens    Dated:  9-8-10    
Name:  M. Brent Stevens
Title:    Chief Executive Officer
                 

 
 

 
 

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EXHIBIT SCHEDULE

EXHIBIT A – Environmental Compliance and Indemnification Agreement

EXHIBIT B – County Endorsement

EXHIBIT C –Expected Construction Sequence

EXHIBIT D –Key Employees

EXHIBIT E– Financing Commitment Description

EXHIBIT F – DA-146a

 
 

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ASSIGNMENT AND ASSUMPTION AGREEMENT
 
WHERE AS, Peninsula Gaming Partners, LLC (“PGP”), is a party to that certain
Lottery Gaming Facility Management Contract for the South Central Gaming Zone,
by and between PGP and the State of Kansas, dated October 19, 2010 (the
“Management Contract”);
 
WHEREAS, PGP has established an indirect, wholly-owned operating subsidiary,
Kansas Star Casino, LLC (“KSC”), to act as manager pursuant to the terms of the
Management Contract; and
 
WHEREAS, PGP desires to assign the Management Contract to KSC and KSC desires to
assume all liabilities thereunder.
 
NOW THEREFORE, in exchange for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged:
 
Pursuant to the provisions of Section 57 of the Management Contract, PGP hereby
assigns all of PGP’s right, title and interest in, and all obligations and
liabilities under the Management Contract to KSC, and KSC hereby assumes all of
PGP’s right, title and interest in, and all obligations and liabilities under,
the Management Contract.
 
IN WITNESS WHEREOF, this Assignment and Assumption Agreement has been duly
executed by the undersigned, and is effective as of January 31, 2011.
 

ASSIGNOR: PENINSULA GAMING PARTNERS, LLC          
 
By:
/s/ NatalieSchramm       Name:  Natalie Schramm       Title:    Chief Financial
Officer          

 
 

ASSIGNEE: KANSAS STAR CASINO, LLC          
 
By:
/s/ NatalieSchramm       Name:  Natalie Schramm       Title:    Chief Financial
Officer          

 
 
 

 
 

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