Exhibit 10.26

 

MANAGEMENT AGREEMENT

 

THIS MANAGEMENT AGREEMENT (“Agreement”), made and entered into this 16th day of
June, 2004, by and among SOUTHWEST MISSOURI GAMING, LLC, a Missouri limited
liability company (the “Company”), ROBERT E. LOW, an individual (“Low”), and SW
MISSOURI, LLC, a Minnesota limited liability company (“Southwest”).

 

RECITALS

 

WHEREAS, the Company is in the business of developing and operating a riverboat
gaming facility and associated retail development located in the city of
Rockaway Beach, Missouri (the “Facility”);

 

WHEREAS, pursuant to the terms of the Company’s Operating Agreement dated of
even date herewith (the “Operating Agreement”), Low and Southwest own all of the
outstanding membership interests of the Company and, except as otherwise
provided in the Operating Agreement, are responsible for the management of the
Company and its business and associated operating matters;

 

WHEREAS, the Company and Low wish to enter into an agreement whereby Low will
provide management services to the Company in connection with the Facility;

 

WHEREAS, Southwest wishes to have the right to assume such management service
obligations from Low if the Management Agreement Criteria (as defined herein)
are not met and Low, in turn, wishes to have the right to re-assume such
management service obligations from Southwest if the Management Agreement
Criteria are subsequently not met; and

 

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements as set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties, intending to be legally bound, hereby agree as follows.

 

ARTICLE 1.
DEFINITIONS

 

As used in this Agreement, the following terms shall have the respective
meanings given to them below (whether in singular or plural form):

 

1.1                               “APPLICABLE LAW” MEANS ALL FEDERAL, STATE AND
LOCAL LAW HAVING AUTHORITY OVER THE FACILITY AND THE GAMING OPERATION,
INCLUDING, WITHOUT LIMITATION, THE GAMING COMMISSION.

 

1.2                               “AFFILIATE” MEANS, WITH REGARD TO ANY
SPECIFIED PERSON OR ORGANIZATION, ANY OTHER PERSON OR ORGANIZATION (AND ALL
NATURAL PERSONS RELATED BY BLOOD, ADOPTION OR MARRIAGE TO SUCH OTHER PERSON)
DIRECTLY OR INDIRECTLY CONTROLLING, CONTROLLED BY, OR UNDER DIRECT OR INDIRECT
COMMON CONTROL WITH, SUCH SPECIFIED PERSON.  THE TERM “CONTROL” (INCLUDING, WITH
CORRELATIVE MEANINGS, THE TERMS “CONTROLLING,” “CONTROLLED BY” AND “UNDER COMMON
CONTROL WITH”), AS APPLIED TO ANY PERSON, MEANS THE POSSESSION, DIRECTLY OR
INDIRECTLY, OF 20% OR MORE OF THE VOTING POWER (OR IN THE CASE OF A PERSON WHICH
IS NOT A CORPORATION, 20% OR MORE OF THE OWNERSHIP INTERESTS,

 

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BENEFICIAL OR OTHERWISE) OF SUCH PERSON OR ORGANIZATION OR THE POWER OTHERWISE
TO DIRECT OR CAUSE THE DIRECTION OF THE MANAGEMENT AND POLICIES OF THAT PERSON
OR ORGANIZATION, WHETHER THROUGH VOTING, BY CONTRACT OR OTHERWISE.  FOR THE
PURPOSES OF THIS DEFINITION, “VOTING POWER” OF ANY PERSON OR ORGANIZATION MEANS
THE TOTAL NUMBER OF VOTES WHICH MAY BE CAST BY THE HOLDERS OF THE TOTAL NUMBER
OF OUTSTANDING EQUITY INTERESTS OF ANY CLASS OR CLASSES OF SUCH PERSON OR
ORGANIZATION IN ANY ELECTION OF DIRECTORS OR MANAGERS OF SUCH PERSON OR
ORGANIZATION OR INDIVIDUALS SERVING ON A COMMITTEE OR BOARD SERVING A FUNCTION
COMPARABLE TO THAT SERVED BY A BOARD OF DIRECTORS OF A CORPORATION.  ALL
DIRECTORS AND EXECUTIVE OFFICERS OF A CORPORATION AND ALL DIRECTORS AND MEMBERS
OF A BOARD OR BOARD OF DIRECTORS OR SIMILAR COMMITTEE OF A PERSON OR
ORGANIZATION ORGANIZED AS A LIMITED LIABILITY COMPANY SHALL BE DEEMED TO BE
AFFILIATES OF SUCH PERSON OR ORGANIZATION.

 

1.3                               “BOARD” MEANS THE BOARD OF MANAGERS OF THE
COMPANY.

 

1.4                               “CALCULATION DATE” HAS THE MEANING GIVEN IN
SECTION 2.6 OF THIS AGREEMENT.

 

1.5                               “CODE” HAS THE MEANING GIVEN IN SECTION 4.4 OF
THIS AGREEMENT.

 

1.6                               “COMPANY” HAS THE MEANING GIVEN IN THE
RECITALS TO THIS AGREEMENT.

 

1.7                               “COMPETITIVE CASINOS” MEANS AMERISTAR KANSAS
CITY, AMERISTAR ST. CHARLES, ISLE OF CAPRI KANSAS CITY, ISLE OF CAPRI BOONVILLE,
ARGOSY AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.

 

1.8                               “COST OF FUNDS RATE” MEANS THE RATE OF
INTEREST EQUAL TO SOUTHWEST’S AVERAGE COST OF FUNDS FOR A GIVEN PERIOD.

 

1.9                               “CPA” SHALL MEAN AN ACCOUNTING FIRM OF
REGIONAL OR NATIONAL RECOGNITION SELECTED BY THE BOARD AND REASONABLY ACCEPTABLE
TO THE MEMBERS.

 

1.10                        “EBITDA MARGIN” MEANS FOR THE DESIGNATED PERIOD, (1)
THE SUM OF AN ORGANIZATION’S (I) PRETAX EARNINGS FROM CONTINUING OPERATIONS,
(II) INTEREST EXPENSE AND (III) DEPRECIATION, DEPLETION, AND AMORTIZATION OF
TANGIBLE AND INTANGIBLE ASSETS (INCLUDING REAL PROPERTY LEASES AND ALL
CONTRACTUAL OBLIGATIONS TO THE CITY OF ROCKAWAY BEACH, MISSOURI AS THEY RELATE
TO THE COMPANY, AND ALL MANAGEMENT FEES, IF APPLICABLE), BEFORE (A) SPECIAL
EXTRAORDINARY GAINS, (B) MINORITY INTERESTS, AND (C) MISCELLANEOUS GAINS AND
LOSSES, (2) DIVIDED BY SUCH ORGANIZATION’S GROSS PROFITS FROM CASINO OPERATIONS,
IN EACH CASE COMPUTED AND CALCULATED IN ACCORDANCE WITH GAAP.

 

1.11                        “EFFECTIVE DATE” MEANS THE DATE THAT THE COMPANY
RECEIVES INITIAL LICENSING APPROVAL FROM THE GAMING COMMISSION.

 

1.12                        “FACILITY” HAS THE MEANING GIVEN TO SUCH TERM IN THE
RECITALS TO THIS AGREEMENT.

 

1.13                        “GAAP” MEANS GENERALLY ACCEPTED ACCOUNTING
PRINCIPALS, CONSISTENTLY APPLIED.

 

1.14                        “GAMING AUTHORITY” MEANS ANY GOVERNMENTAL GAMING
AUTHORITY HAVING JURISDICTION OVER THE COMPANY, THE MANAGER, A MEMBER OR ANY OF
THEIR AFFILIATES, INCLUDING, BUT

 

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NOT LIMITED TO, THE STATE GAMING AUTHORITIES FOR MISSOURI, MISSISSIPPI,
COLORADO, WEST VIRGINIA, PENNSYLVANIA, OHIO, NEVADA AND MINNESOTA AND THE
NATIONAL INDIAN GAMING COMMISSION.

 

1.15                        “GAMING COMMISSION” MEANS THE MISSOURI GAMING
COMMISSION AND ANY OTHER GAMING GOVERNING BODY THAT HAS AUTHORITY OVER THE
GAMING OPERATIONS.

 

1.16                        “GAMING OPERATIONS” MEANS (I) THE COMPANY’S GAMING
AND WAGERING ACTIVITIES AND (II) ALL COMMERCIAL ACTIVITIES CONDUCTED AT THE
FACILITY BY THE COMPANY, INCLUDING, WITHOUT LIMITATION, CONCESSION, RESTAURANT,
BAR, HOTEL, NIGHT CLUB AND RETAIL ACTIVITIES.

 

1.17                        “GROSS PROFITS” MEANS THE TOTAL REVENUE EARNED BY A
CASINO OPERATION (INCLUDING FROM NON-GAMING ACTIVITIES) LESS ANY AMOUNTS PAID
OUT FOR PLAYER WINNINGS OR USED TO PAY FOR PRIZES BY SUCH CASINO OPERATION AND
THE COSTS OF GOODS SOLD WITH RESPECT TO NON-GAMING ACTIVITIES, ALL AS DETERMINED
IN ACCORDANCE WITH GAAP.

 

1.18                        “LOW” HAS THE MEANING GIVEN IN THE RECITALS TO THIS
AGREEMENT.

 

1.19                        “MANAGEMENT AGREEMENT CRITERIA” MEANS THE OCCURRENCE
OF EITHER OF THE FOLLOWING EVENTS: (I) THE FAILURE OF THE COMPANY TO MAINTAIN AN
EBITDA MARGIN DURING THE PREVIOUS CALENDAR YEAR EQUAL TO AT LEAST 90% OF THE
AVERAGE EBITDA MARGIN OF ALL OF THE COMPETITOR CASINOS DURING THE SAME PERIOD,
DETERMINED COMMENCING AS OF THE FOURTH JANUARY 1 FOLLOWING THE OPERATION DATE
(AFTER THREE (3) FULL CALENDAR YEARS) AND TESTED EACH JANUARY 1 THEREAFTER, OR
(II) THE FAILURE OF THE COMPANY TO ACHIEVE NET INCOME (EXCLUDING ACTUAL AND MOCK
INTEREST ON THE COMPANY’S ACQUISITION DEBT) DURING THE PREVIOUS CALENDAR YEAR
TOTALING MORE THAN THE COMPANY’S DEBT SERVICES COSTS (OR MOCK DEBT SERVICE
COSTS) FOR 70% OF THE COMPANY’S GAMING OPERATION START-UP COSTS (BASED ON A
TWENTY (20) YEAR AMORTIZATION PERIOD AT THE COST OF FUNDS RATE), DETERMINED AS
OF THE SECOND JANUARY 1 FOLLOWING THE OPERATION DATE (AFTER ONE (1) FULL
CALENDAR YEAR) AND TESTED EACH JANUARY 1 THEREAFTER; PROVIDED, HOWEVER, THAT IN
THE CASE WHERE EITHER SOUTHWEST OR LOW EXERCISES ITS OPTION TO ASSUME ALL
RIGHTS, DUTIES AND RESPONSIBILITIES UNDER THIS AGREEMENT, THE MANAGEMENT
AGREEMENT CRITERIA SHALL BE DETERMINED WITH RESPECT TO THE EBITDA MARGIN
CALCULATION COMMENCING AS OF THE FOURTH JANUARY 1 FOLLOWING THE DATE WHEN
SOUTHWEST OR LOW, AS THE CASE MAY BE, OFFICIALLY COMMENCES ITS MANAGEMENT DUTIES
UNDER THIS AGREEMENT PURSUANT TO SUCH ASSUMPTION (AFTER THREE (3) FULL CALENDAR
YEARS), AND WITH RESPECT TO THE NET INCOME CALCULATION COMMENCING AS OF THE
SECOND JANUARY 1 FOLLOWING THE DATE WHEN SOUTHWEST OR LOW, AS THE CASE MAY BE,
OFFICIALLY COMMENCES ITS MANAGEMENT DUTIES UNDER THIS AGREEMENT PURSUANT TO SUCH
ASSUMPTION (AFTER ONE (1) FULL CALENDAR YEAR).

 

1.20                        “MANAGEMENT FEE” MEANS THE AMOUNT EQUAL TO (I) 5% OF
THE COMPANY’S ANNUAL NET INCOME UP TO $20,000,000, (II) 10% OF THE COMPANY’S
ANNUAL NET INCOME IN EXCESS OF $20,000,000 BUT LESS THAN $35,000,000, (III) 15%
OF THE COMPANY’S ANNUAL NET INCOME IN EXCESS OF $35,000,000 BUT LESS THAN
$50,000,000 AND (IV) 17.5% OF THE COMPANY’S ANNUAL NET INCOME IN EXCESS OF
$50,000,000.

 

1.21                        “MANAGER” MEANS THE PERSON RESPONSIBLE FOR, AND
EMPOWERED WITH THE NECESSARY AUTHORITY FOR, CARRYING OUT THE DUTIES AND
RESPONSIBILITIES OF MANAGER AS SET FORTH HEREIN IN CONNECTION WITH THE GAMING
OPERATIONS AT THE FACILITY.  THE MANAGER SHALL INITIALLY BE LOW,

 

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SUBJECT TO ASSUMPTION RIGHTS GRANTED TO SOUTHWEST, AND THEREAFTER TO LOW,
PURSUANT TO SECTION 6.2 OF THIS AGREEMENT.

 

1.22                        “MEMBER REPRESENTATIVE” SHALL MEAN THE
REPRESENTATIVE DESIGNATED BY ANY MEMBER WHO IS NOT THE ACTING MANAGER UNDER THIS
AGREEMENT.

 

1.23                        “MEMBERS” MEAN, COLLECTIVELY, LOW AND SOUTHWEST.

 

1.24                        “NET INCOME” MEANS THE COMPANY’S NET INCOME FROM THE
GAMING OPERATIONS AT THE FACILITY PRIOR TO THE PAYMENT OF ANY MANAGEMENT FEE BUT
AFTER TAKING INTO ACCOUNT DEDUCTIONS FOR DEPRECIATION, INTEREST, EXPENSES
(INCLUDING AMOUNTS PAID OUT AS, OR PAID FOR, PRIZES, BUT NOT INCLUDING START-UP
EXPENSES INCURRED BY THE COMPANY PRIOR TO THE OPERATION DATE) AND SALARIES, ALL
AS DETERMINED IN ACCORDANCE WITH GAAP.

 

1.25                        “OPERATING AGREEMENT” HAS THE MEANING GIVEN IN THE
RECITALS TO THIS AGREEMENT.

 

1.26                        “OPERATING EXPENSE” HAS THE MEANING GIVEN IN
SECTION 2.3 OF THIS AGREEMENT.

 

1.27                        “OPERATION DATE” MEANS THE FIRST DATE THAT THE
FACILITY IS OPEN FOR OPERATION TO THE GENERAL PUBLIC.

 

1.28                        “SOUTHWEST” HAS THE MEANING GIVEN IN THE RECITALS TO
THIS AGREEMENT.

 

1.29                        “UNSUITABLE PERSON” MEANS ANY PERSON OR ORGANIZATION
WHO IS NOT LICENSABLE BY ANY GAMING AUTHORITY HAVING JURISDICTION OVER THE
COMPANY, THE GAMING OPERATION, THE FACILITY, THE MANAGER OR THE BUSINESS
OPERATIONS OF SUCH PERSON OR ORGANIZATION (OR ITS AFFILIATE) AT THE TIME OF ANY
SUCH DETERMINATION.

 

ARTICLE 2.
THE MANAGER

 

2.1                               GENERAL RESPONSIBILITIES OF THE MANAGER.  THE
COMPANY HEREBY RETAINS AND ENGAGES THE MANAGER COMMENCING AS OF THE EFFECTIVE
DATE.  THE MANAGER’S RESPONSIBILITIES SHALL INCLUDE, BUT ARE NOT LIMITED TO, THE
FOLLOWING:

 

(A)                                  SUPERVISING AND MANAGING ALL ACTIVITIES
NECESSARY FOR THE CONDUCT OF THE GAMING OPERATIONS AT THE FACILITY;

 

(B)                                 PLANNING, CONSTRUCTING, EQUIPPING,
MAINTAINING AND IMPROVING THE FACILITY;

 

(C)                                  ESTABLISHING THE OPERATING DAYS AND HOURS
AT THE FACILITY;

 

(D)                                 HIRING, FIRING, TRAINING AND PROMOTING
EMPLOYEES AT THE FACILITY, INCLUDING OVERSEEING THE HIRING PROCESS FOR THE
INITIAL EMPLOYEES OF THE FACILITY AND THE TRAINING AND QUALIFYING OF SUCH
INITIAL EMPLOYEES;

 

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(E)                                  MANAGING ALL MARKETING AND PROMOTION
ACTIVITIES IN CONNECTION WITH THE FACILITY, INCLUDING START-UP PROMOTIONS;

 

(F)                                    ORGANIZING THE FUNDING OF AN INITIAL
HOUSE BANK SUFFICIENT TO BEGIN OPERATION AND SAFELY COVER ALL INITIAL WAGERS AND
PAYOUTS IN CONNECTION WITH THE GAMING OPERATIONS;

 

(G)                                 ESTABLISHING AND MANAGING FOOD, BEVERAGE AND
RETAIL SERVICES IN CONNECTION WITH THE FACILITY, INCLUDING PROCURING LIQUOR
LICENSES AND MAINTAINING SUCH LIQUOR LICENSES;

 

(H)                                 ESTABLISHING, MAINTAINING AND MANAGING
APPROPRIATE SECURITY PERSONNEL, SYSTEMS AND PROTOCOLS WITH RESPECT TO THE GAMING
OPERATIONS AT THE FACILITY, ITS CUSTOMERS AND EMPLOYEES AND THE HANDLING OF
MONIES RELATED THERETO;

 

(I)                                     ESTABLISHING AND ADMINISTERING
EMPLOYMENT PRACTICES AT THE FACILITY, INCLUDING, THE DEVELOPMENT AND ENFORCEMENT
OF PERSONNEL POLICIES AND PROCEDURES, WHICH SHALL CONFORM TO GENERALLY ACCEPTED
PERSONNEL POLICIES AND PROCEDURES OF THE GAMING INDUSTRY;

 

(J)                                     DEVELOPING AND ADMINISTERING A
LOAN/GRANT PROGRAM THAT WILL ENCOURAGE THE REFURBISHMENT OF HOTELS LOCATED IN
THE VICINITY OF ROCKAWAY BEACH, MISSOURI AND MANAGING AND OPERATING ANY HOTELS
THAT ARE ACQUIRED OR OPERATED BY THE COMPANY;

 

(K)                                  OBTAINING AND MAINTAINING INSURANCE
COVERAGE AT THE FACILITY, INCLUDING LIABILITY AND PROPERTY DAMAGE COVERAGE;

 

(L)                                     MAINTAINING ALL BOOKS AND RECORDS
NECESSARY FOR THE GAMING OPERATIONS AT THE FACILITY;

 

(M)                               PROVIDING THE COMPANY WITH ALL INFORMATION
NECESSARY FOR THE COMPANY TO COMPLY WITH ALL APPLICABLE LAW GOVERNING THE GAMING
OPERATIONS AT THE FACILITY;

 

(N)                                 DEVELOPING AND LEASING TO THIRD PARTY
TENANTS RETAIL SPACE IN CONNECTION WITH THE FACILITY IN SUCH QUANTITIES AS
AGREED TO BY THE COMPANY AND THE CITY OF ROCKAWAY BEACH, MISSOURI;

 

(O)                                 MAINTAINING WORKING RELATIONSHIPS WITH THE
CITY OF ROCKAWAY BEACH, MISSOURI AND THE OTHER COMMUNITIES SURROUNDING THE
FACILITY, INCLUDING COMPLYING WITH THE DEVELOPMENT AGREEMENT AND CORRESPONDING
GROUND LEASE ASSOCIATED WITH THE FACILITY AND THE GAMING OPERATIONS;

 

(P)                                 IMPLEMENTING AND ADMINISTERING THE WHITE
RIVE COMMUNITIES ASSOCIATION ON BEHALF OF THE COMPANY, THE FACILITY AND THE
GAMING OPERATIONS AND IN CONCERT WITH THE CITY OF ROCKAWAY BEACH, MISSOURI;

 

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(Q)                                 ESTABLISHING AND MAINTAINING PARKING AREAS
REQUIRED FOR THE EMPLOYEES OF THE GAMING OPERATIONS AND THE FACILITY, AND, TO
THE EXTENT NECESSARY, ESTABLISHING AND MAINTAINING ADEQUATE TRANSPORTATION TO
SUCH PARKING;

 

(R)                                    DEVELOPING AND MAINTAINING CUSTOMER AND
GUEST TRANSPORTATION SERVICES, INCLUDING INTERFACING WITH TOUR BUS OPERATORS
SERVING THE BRANSON, MISSOURI AREA AND DEVELOPING AND MAINTAINING WATER AND LAND
SHUTTLE SERVICES BETWEEN THE FACILITY AND THE CITY OF BRANSON, MISSOURI; AND

 

(S)                                  THOSE DUTIES SPECIFIED BY THE COMPANY FROM
TIME TO TIME.

 

2.2                               CONSTRUCTING AND EQUIPPING THE FACILITY. 
FOLLOWING THE EFFECTIVE DATE, THE COMPANY, THROUGH THE BOARD AND WITH THE
DIRECTION AND ASSISTANCE OF THE MEMBERS, SHALL UNDERTAKE ALL STEPS NECESSARY TO
DESIGN, CONSTRUCT AND EQUIP THE FACILITY.  THE MANAGER SHALL SUBMIT ALL
CONSTRUCTION AND EQUIPMENT PLANS TO THE BOARD AND THE GAMING COMMISSION FOR
FINAL APPROVAL BEFORE IMPLEMENTATION.  ANY CONTRACTS PERTAINING TO THE DESIGN,
CONSTRUCTION OR EQUIPMENT OF THE FACILITY SHALL ALSO REQUIRE THE FINAL APPROVAL
OF THE BOARD.

 

2.3                               REIMBURSEMENT OF COSTS.  ANY AND ALL
REASONABLE COSTS INCURRED BY THE MANAGER IN FULFILLING ITS RESPONSIBILITIES
PURSUANT TO THIS AGREEMENT SHALL BE REIMBURSED BY THE COMPANY TO THE MANAGER
(THE “OPERATING EXPENSES”).  THE MANAGER SHALL SUBMIT ITS OPERATING EXPENSES TO
THE COMPANY FOR REIMBURSEMENT IN ACCORDANCE WITH THE PROCEDURES COMMUNICATED TO
THE MANAGER BY THE COMPANY FROM TIME TO TIME.

 

2.4                               COMPLIANCE WITH APPLICABLE LAW.  THE MANAGER
SHALL PERFORM ALL OF ITS RESPONSIBILITIES PURSUANT TO THIS AGREEMENT IN
ACCORDANCE WITH APPLICABLE LAW.

 

2.5                               QUARTERLY MEETING.  THE MANAGER SHALL BE
AVAILABLE FOR A MEETING AT THE FACILITY WITH THE COMPANY AND THE MEMBER
REPRESENTATIVE AT LEAST EVERY THREE (3) MONTHS DURING THE TERM HEREOF TO DISCUSS
ALL MATTERS RELEVANT TO THE GAMING OPERATION.

 

2.6                               MANAGEMENT FEE.  IN CONSIDERATION OF THE
PERFORMANCE OF THE DUTIES AND OBLIGATIONS ASSUMED BY THE MANAGER HEREUNDER, THE
COMPANY AGREES THAT THE MANAGER SHALL RECEIVE COMPENSATION EQUAL TO THE
MANAGEMENT FEE, WHICH SHALL BE PAID TO THE MANAGER ON A MONTHLY BASIS COMMENCING
AFTER THE OPERATION DATE.  THE MANAGEMENT FEE SHALL BE CALCULATED MONTHLY
BEGINNING AS OF THE LAST DAY OF THE FIRST COMPLETE CALENDAR MONTH THAT OCCURS
AFTER THE OPERATION DATE (“CALCULATION DATE”) AND SHALL BE RECONCILED ANNUALLY. 
SUCH ANNUAL RECONCILIATION SHALL BE REVIEWED AND CONFIRMED BY THE CPA.  ALL
PAYMENTS TO THE MANAGER OF THE MANAGEMENT FEE SHALL BE DEPOSITED AS INSTRUCTED
IN WRITING TO THE COMPANY BY THE MANAGER FROM TIME TO TIME WITHIN THIRTY (30)
DAYS FOLLOWING EACH CALCULATION DATE.

 

2.7                               TERM OF THE AGREEMENT.  THE TERM OF THIS
AGREEMENT SHALL COMMENCE ON THE EFFECTIVE DATE AND SHALL CONTINUE UNTIL
TERMINATED PURSUANT TO SECTION 6.1 OF THIS AGREEMENT.

 

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ARTICLE 3.
EMPLOYEES AND OPERATIONS

 

3.1                               PERSONNEL.  ALL EMPLOYEES OF THE FACILITY
SHALL BE COMPANY EMPLOYEES ASSIGNED TO THE FACILITY UNDER THE AUTHORITY AND
SUPERVISION OF THE MANAGER, AND SHALL NOT BE EMPLOYEES OF THE MANAGER.  ALL
RESPONSIBILITY FOR EMPLOYMENT DECISIONS, INCLUDING, BUT NOT LIMITED TO, THE
HIRING, FIRING, PROMOTION, TRANSFER, COMPENSATION AND DISCIPLINE OF SAID
EMPLOYEES SHALL, HOWEVER, BE THE SOLE RESPONSIBILITY OF THE MANAGER, WHO SHALL
MAKE SUCH DECISIONS IN ACCORDANCE WITH THE RULES, REGULATIONS, POLICIES AND
PROCEDURES AND PRUDENT EMPLOYMENT PRACTICES ESTABLISHED BY THE MANAGER AND
REASONABLY APPROVED BY THE COMPANY FOR USE IN THE OPERATION OF THE FACILITY.

 

3.2                               SECURITY CLEARANCE AND BACKGROUND REVIEWS. 
THE MANAGER SHALL CONDUCT SUCH ADEQUATE BACKGROUND REVIEW AS IS NECESSARY AND
APPROPRIATE TO THE POSITION TO BE FILLED AND THE RESPONSIBILITIES OF SUCH
POSITION WITHIN THE FACILITY.  ANY SUCH REVIEW SHALL BE SUFFICIENT TO MEET THE
REQUIREMENTS OF APPLICABLE LAW.

 

3.3                               LIMITED APPOINTMENT OF THE MANAGER AS AGENT OF
THE COMPANY.  THE MANAGER IS HEREBY APPOINTED, DELEGATED, EMPLOYED AND
AUTHORIZED TO ACT ON BEHALF OF THE COMPANY AS THE COMPANY’S AGENT IN CARRYING
OUT A VARIETY OF DUTIES NECESSARY TO THE PROPER AND EFFICIENT MANAGEMENT AND
OPERATION OF THE GAMING OPERATIONS ON BEHALF OF THE COMPANY AS FOLLOWS:

 

(A)                                  OPERATION OF GENERAL BUSINESS AND BUSINESS
AFFAIRS.  THE MANAGER SHALL MANAGE THE DAY-TO-DAY OPERATION OF THE FACILITY,
INCLUDING, BUT NOT LIMITED TO, THE GENERAL BUSINESS AND BUSINESS AFFAIRS IN
CONNECTION WITH THE OPERATION, EQUIPPING, MANAGEMENT AND MAINTENANCE OF THE
FACILITY.  IN CARRYING OUT THESE DUTIES AND RESPONSIBILITIES, THE MANAGER
PROMISES AND AGREES TO COMPLY WITH THE LETTER AND SPIRIT OF THIS AGREEMENT, ITS 
TERMS AND CONDITIONS.

 

(B)                                 MANAGEMENT AND CONTROL.  THE MANAGER SHALL
HAVE THE EXCLUSIVE AUTHORITY OVER, AND RIGHT TO CONTROL OF, THE DAY-TO-DAY
MANAGEMENT AND CONTROL OF THE GAMING OPERATION, ITS EMPLOYEES, CUSTOMERS,
REVENUES AND ANY AND ALL PROPERTY AND ASSETS ASSIGNED, LOCATED OR OTHERWISE USED
AT OR FOR THE FACILITY.  SUCH AUTHORITY SHALL INCLUDE ALL DECISIONS REGARDING
GAMES PLAYED AND THE RULES OF PLAY FOR SUCH GAMES, THE ODDS OR PAYOUTS OF SUCH
GAMES, AND THE PROFIT MARGINS TO BE USED IN THE SALE OF ANY GOODS OR SERVICES TO
BE SOLD ON THE PREMISES, ALL IN COMPLIANCE WITH APPLICABLE LAW AND INDUSTRY
STANDARDS.  THE CONTROL EXERCISED BY THE COMPANY OVER THE FACILITY AND THE
GAMING OPERATION SHALL BE EXERCISED THROUGH THE TERMS OF THIS AGREEMENT.

 

(C)                                  COLLECTION, DEPOSIT AND DISBURSEMENT OF
REVENUES.  AS COMPANY’S AGENT, THE MANAGER SHALL COLLECT, RECEIVE AND ACCOUNT
FOR, ON BEHALF OF THE COMPANY, ALL REVENUES GENERATED AND RESULTING FROM THE
OPERATION OF THE FACILITY.  SUCH REVENUES SHALL BE DEPOSITED INTO AN ACCOUNT OR
ACCOUNTS OF THE GAMING OPERATIONS WITH SUCH BANK OR BANKS AS THE MANAGER MAY
CHOOSE, WITH THE APPROVAL OF THE BOARD, WITH THE SOLE SIGNATORIES TO BE THE
MANAGER OR THE MANAGER’S DULY AUTHORIZED REPRESENTATIVES DESIGNATED FOR THOSE
PURPOSES AND THE MEMBER REPRESENTATIVE.  THE MANAGER IS HEREBY

 

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AUTHORIZED TO MAKE ALL SUCH DISBURSEMENTS AND EXPENDITURES AS ARE NECESSARY FROM
SAID ACCOUNT IN ORDER TO FUND ALL GAMING OPERATIONS.

 

ARTICLE 4.
ACCOUNTING AND FINANCIAL REPORTING

 

4.1                               ACCOUNTING.  THE MANAGER SHALL PROVIDE FOR THE
ESTABLISHMENT AND MAINTENANCE OF SATISFACTORY ACCOUNTING SYSTEMS AND PROCEDURES
THAT SHALL, AT A MINIMUM:  (A) INCLUDE AN ADEQUATE SYSTEM OF INTERNAL ACCOUNTING
CONTROLS; (B) PERMIT THE PREPARATION OF FINANCIAL STATEMENTS IN ACCORDANCE WITH
GAAP; (C) BE SUSCEPTIBLE TO AUDIT; AND (D) PERMIT THE COMPANY AND THE MANAGER TO
ACCURATELY CALCULATE THE MANAGEMENT FEE.

 

4.2                               FINANCIAL RECORDS AND STATEMENTS.  THE MANAGER
SHALL MAINTAIN AT THE FACILITY FULL AND ACCURATE BOOKS AND RECORDS PERTAINING TO
THE GAMING OPERATIONS AND THE FACILITY AND SHALL PROVIDE FULL AND IMMEDIATE
ACCESS OF SUCH BOOKS AND RECORDS TO THE COMPANY AND THE MEMBER REPRESENTATIVE. 
SUCH BOOKS SHALL BE KEPT IN COMPLIANCE WITH GAAP AND PURSUANT TO THE
REQUIREMENTS OF APPLICABLE LAW.  THE MANAGER SHALL PREPARE AND PROVIDE TO THE
COMPANY WITH A DAILY REVENUE FLASH REPORT AND COMPARATIVE MONTHLY, QUARTERLY AND
ANNUAL FINANCIAL STATEMENTS SHOWING ALL SALES, REVENUES AND ALL OTHER AMOUNTS
COLLECTED AND RECEIVED, AND ALL DEDUCTIONS AND DISBURSEMENTS MADE THEREFROM IN
CONNECTION WITH THE GAMING OPERATION AND IN CONFORMANCE WITH THE BUDGET APPROVED
BY THE BOARD.  THE CPA SHALL PERFORM AN ANNUAL AUDIT OF THE GAMING OPERATION AND
OF ALL MAJOR CONTRACTS FOR SUPPLIES, SERVICES OR CONCESSIONS REFLECTED IN THE
OPERATING EXPENSES AND SUCH ANNUAL AUDITED FINANCING STATEMENTS SHALL BE
DELIVERED TO THE COMPANY AS SOON AS AVAILABLE, BUT IN NO EVENT MORE THAN NINETY
(90) DAYS AFTER THE END OF EACH CALENDAR YEAR OF THE COMPANY.

 

4.3                               FINANCIAL REPORTING.  THE MANAGER SHALL
PROVIDE SEPARATE ACCOUNTABILITY AND FINANCIAL REPORTING FOR ALL NON-GAMING
PROFIT CENTERS EXISTING WITHIN THE FACILITY OR AS MAY BE OTHERWISE RELATED TO
THE FACILITY, SUCH AS RESTAURANTS, HOTELS OR OTHERWISE.

 

4.4                               TAX WITHHOLDINGS ON WINNINGS.  THE MANAGER
SHALL BE RESPONSIBLE FOR REPORTING AND WITHHOLDING TAXES WITH RESPECT TO THE
WINNINGS FROM GAMING OR WAGERING OPERATIONS AS MAY BE  REQUIRED BY THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) AND FOR COMPLIANCE WITH ALL OTHER
LAWFUL REQUIREMENTS IMPOSED BY THE CODE.

 

ARTICLE 5.
DUTY TO DEFEND, NOTICE OF CLAIMS, INDEMNIFICATION

 

5.1                               DEFENSE OF CLAIMS.  IT SHALL BE THE DUTY OF
THE MANAGER TO DEFEND ANY AND ALL CLAIMS AND ACTIONS BROUGHT AGAINST THE
COMPANY, THE MANAGER AND THE FACILITY, WITH ALL COSTS OF DEFENSE, INCLUDING BUT
NOT LIMITED TO, ATTORNEYS’ FEES, NECESSARY AND REASONABLE EXPENSES OF THE
LITIGATION, AND EXPERT WITNESS FEES TO BE CONSIDERED OPERATING EXPENSES.  SUCH
CLAIMS AND ACTIONS SHALL NOT BE LIMITED BY THE NATURE OR THE AMOUNT OF SUCH
CLAIMS UNLESS OTHERWISE SPECIFICALLY STATED HEREIN, BUT SHALL INCLUDE ONLY SUCH
CLAIMS AND ACTIONS AS ARE BROUGHT RELATIVE TO THE DUTIES AND OBLIGATIONS OF THE
MANAGER UNDER THIS AGREEMENT AND ANY AND ALL ACTIVITIES OF THE MANAGER IN THE
PERFORMANCE OF ITS OBLIGATIONS HEREUNDER.

 

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5.2                               NOTICE.  THE MANAGER SHALL BE RESPONSIBLE FOR
GIVING PROMPT NOTICE TO THE COMPANY OF ANY AND ALL CLAIMS OR ACTIONS BROUGHT
AGAINST THE MANAGER, THE FACILITY OR ANY PERSONS ACTING ON BEHALF OF ANY OF THE
ABOVE, WHERE SUCH CLAIM OR ACTION IS RELATED TO THE COMPANY, THE GAMING
OPERATIONS OR THE FACILITY.  CLAIMS AND ACTIONS, FOR THE PURPOSES OF THIS
AGREEMENT, SHALL INCLUDE ADMINISTRATIVE, CIVIL OR CRIMINAL ACTIONS BROUGHT IN
ANY FORUM OR JURISDICTION.

 

5.3                               LEGAL FEES.  THE MANAGER SHALL BE RESPONSIBLE
FOR ANY AND ALL COSTS OF LEGAL REPRESENTATION OBTAINED BY THE MANAGER FOR
PURPOSES OTHER THAN CARRYING OUT ITS DUTIES AND RESPONSIBILITIES UNDER THIS
AGREEMENT, AND NO SUCH OTHER EXPENSES OR COSTS SHALL BE PAID AS AN OPERATING
EXPENSE.

 

5.4                               INDEMNIFICATION.  THE MANAGER SHALL BE
ENTITLED TO INDEMNIFICATION FROM THE COMPANY FOR ALL LIABILITIES INCURRED AND
CLAIMS MADE AS A RESULT OF THE MANAGER’S GOOD FAITH PERFORMANCE OF DUTIES UNDER
THIS AGREEMENT.  THE MANAGER SHALL ALLOW THE COMPANY TO ASSUME FULL CONTROL OF
THE DEFENSE OF ANY MATTER FOR WHICH THE COMPANY MAY BE RESPONSIBLE AND SHALL
COOPERATE WITH THE COMPANY IN THE DEFENSE OF SUCH CLAIM; PROVIDED, HOWEVER, THAT
THE COMPANY SHALL NOT ADMIT FAULT ON THE PART OF THE MANAGER OR ENTER INTO A
SETTLEMENT HAVING AN ADVERSE FINANCIAL IMPACT ON THE MANAGER WITHOUT THE
MANAGER’S PRIOR WRITTEN CONSENT.  THE COMPANY SHALL HAVE NO OBLIGATION TO
INDEMNIFY UNLESS THESE CONDITIONS ARE MET, AND SPECIFICALLY SHALL NOT BE
REQUIRED TO INDEMNIFY FOR ANY CLAIM OR SUIT WHICH IS SETTLED WITHOUT THE
COMPANY’S PRIOR WRITTEN APPROVAL.

 

ARTICLE 6.
TERMINATION AND MEMBER ASSUMPTION RIGHTS

 

6.1                               TERMINATION.  THIS AGREEMENT MAY BE TERMINATED
IN ACCORDANCE WITH THE FOLLOWING PROVISIONS:

 

(A)                                  UPON THE WRITTEN CONSENT OF BOTH THE
COMPANY AND THE MANAGER;

 

(B)                                 IF EITHER PARTY DEFAULTS IN THE OBSERVANCE
OR PERFORMANCE OF ANY MATERIAL TERM OR PROVISION OF THIS AGREEMENT, AND FAILS TO
REMEDY SUCH DEFAULT OR NONPERFORMANCE WITHIN SIXTY (60) DAYS OF RECEIVING
WRITTEN NOTICE OF SAME, THE OTHER PARTY HAS THE RIGHT TO TERMINATE THIS
AGREEMENT FOR CAUSE IMMEDIATELY THEREAFTER;

 

(C)                                  THE COMPANY MAY TERMINATE THIS AGREEMENT
IMMEDIATELY IF THE MANAGER IS DETERMINED TO BE AN UNSUITABLE PERSON; OR

 

(D)                                 EITHER PARTY, AT ITS ELECTION, MAY DECLARE
THE OTHER PARTY TO BE IN DEFAULT UNDER THIS AGREEMENT AND, WITHOUT PREJUDICE TO
ANY OF ITS RIGHTS HEREUNDER, MAY FORTHWITH TERMINATE THIS AGREEMENT EFFECTIVE
UPON WRITTEN NOTICE TO THE OTHER PARTY IN THE EVENT THE OTHER PARTY: (I) MAKES A
GENERAL ASSIGNMENT FOR THE BENEFIT OF CREDITORS; (II) HAS A RECEIVER OF ALL OR
SUBSTANTIALLY ALL OF ITS ASSETS APPOINTED; (III) FILES A PETITION FOR
REORGANIZATION OR OTHER ARRANGEMENT OR IN BANKRUPTCY UNDER THE U.S. BANKRUPTCY
LAWS; OR (IV) BECOMES OR IS DECLARED INSOLVENT.

 

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6.2                               RIGHTS OF MEMBERS TO ASSUME DUTIES OF THE
MANAGER.  DURING THE PERIOD WHEN LOW IS THE MANAGER HEREUNDER, SOUTHWEST SHALL
HAVE THE OPTION TO ASSUME LOW’S RIGHTS, DUTIES AND RESPONSIBILITIES AS THE
MANAGER UNDER THIS AGREEMENT IF THE MANAGEMENT AGREEMENT CRITERIA ARE NOT MET. 
DURING ANY PERIOD WHEN SOUTHWEST IS THE MANAGER HEREUNDER, LOW SHALL HAVE THE
OPTION TO ASSUME SOUTHWEST’S RIGHTS, DUTIES AND RESPONSIBILITIES AS THE MANAGER
UNDER THIS AGREEMENT IF THE MANAGEMENT AGREEMENT CRITERIA ARE NOT MET.

 

6.3                               RESIGNATION RIGHTS OF THE MANAGER.  THE
MANAGER MAY, AT ITS ELECTION, RESIGN FROM ITS DUTIES AND RESPONSIBILITIES AS
MANAGER UNDER THIS AGREEMENT UPON AT LEAST ONE HUNDRED EIGHTY (180) DAYS PRIOR
WRITTEN NOTICE TO THE COMPANY AND THE MEMBERS.  THE MEMBER WHO IS NOT THE ACTING
MANAGER UNDER THIS AGREEMENT SHALL HAVE THE RIGHT, BUT NOT THE OBLIGATION, TO
ASSUME THE RIGHTS, DUTIES AND RESPONSIBILITIES OF THE MANAGER UNDER THIS
AGREEMENT, WHICH RIGHT SHALL BE EXERCISABLE WITHIN THIRTY (30) DAYS FOLLOWING
SUCH MEMBER’S RECEIPT OF NOTICE OF THE MANAGER’S RESIGNATION PURSUANT TO THIS
SECTION.

 

6.4                               PROCEDURES UPON AN ASSUMPTION.  UPON THE
ASSUMPTION OF THE RIGHTS, DUTIES AND OBLIGATIONS OF THE MANAGER BY THE
NON-MANAGER MEMBER, THE ACTING MANAGER SHALL COOPERATE WITH THE ASSUMING MANAGER
TO INSURE A SMOOTH TRANSITION OF THE MANAGER POSITION IN ACCORDANCE WITH THE
TERMS OF THIS AGREEMENT.  SUCH COOPERATION SHALL INCLUDE, BUT NOT BE LIMITED TO,
THE ACTING MANAGER (I) MAKING ITSELF AVAILABLE FOR MEETINGS AT THE FACILITY WITH
THE ASSUMING MANAGER, (II) APPRISING THE ASSUMING MANAGER OF ALL MATTERS
RELEVANT TO THE GAMING OPERATION AND (III) PROVIDING SUCH ADDITIONAL INFORMATION
AND PERFORMING ALL OTHER ACTIONS REASONABLY REQUESTED BY THE ASSUMING MANAGER.

 

ARTICLE 7.
MISCELLANEOUS

 

7.1                               BINDING EFFECT.  THE BENEFITS AND OBLIGATIONS
OF THIS AGREEMENT SHALL INURE TO AND BE BINDING UPON THE PARTIES HERETO, THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS, PROVIDED THAT NEITHER PARTY MAY ASSIGN OR
SUBLEASE THEIR INTEREST IN THIS AGREEMENT WITHOUT PRIOR WRITTEN APPROVAL OF THE
OTHER PARTY.  ANY ASSIGNMENT OR SUBLEASE UNDER THIS AGREEMENT SHALL BE SUBJECT
TO APPROVAL BY THE GAMING COMMISSION.

 

7.2                               ENTIRE AGREEMENT.  THIS AGREEMENT AND THE
OPERATING AGREEMENT REPRESENT THE ENTIRE AGREEMENT BETWEEN THE COMPANY AND
MANAGER WITH RESPECT TO THE MANAGEMENT OF THE FACILITY AND THE GAMING
OPERATIONS, AND SUPERSEDE ALL OTHER PREVIOUS AGREEMENTS, WHETHER WRITTEN OR
ORAL.

 

7.3                               NOTICES.  ANY NOTICE REQUIRED TO BE GIVEN
PURSUANT TO THIS AGREEMENT SHALL BE DELIVERED BY CERTIFIED MAIL ADDRESSED:

 

to Company at:

 

Southwest Missouri Gaming, LLC

2740 N. Mayfair

Springfield, Missouri 65803

 

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to Low at:

 

Robert E. Low

2740 N. Mayfair

Springfield, MO 65803

 

to Southwest at:

 

SW Missouri, LLC

c/o Southwest Casino & Hotel Corp.

2001 Killebrew Drive, Suite 306

Minneapolis, Minnesota 55425

 

7.4                               NO PARTNERSHIP.  NOTHING IN THIS AGREEMENT IS
INTENDED TO CREATE OR CONSTITUTE THE PARTIES AS PARTNERS TOGETHER, OR ONE TO THE
OTHER, AND IT IS EXPRESSLY AGREED THAT THIS BUSINESS RELATIONSHIP SHALL NOT BE A
PARTNERSHIP.

 

7.5                               GOVERNING LAW.  THIS AGREEMENT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MISSOURI. 
VENUE FOR ANY DISPUTES SHALL BE IN GREENE COUNTY, MISSOURI.

 

7.6                               AMENDMENTS.  THIS AGREEMENT MAY NOT BE
AMENDED, MODIFIED, ALTERED OR SUPPLEMENTED WITHOUT THE PRIOR WRITTEN CONSENT OF
THE PARTIES HERETO.

 

7.7                               SEVERABILITY.  IF ANY PROVISION OF THIS
AGREEMENT OR THE APPLICATION THEREOF TO ANY PERSON OR CIRCUMSTANCE SHALL BE
INVALID OR UNENFORCEABLE TO ANY EXTENT, THE REMAINDER OF THIS AGREEMENT AND THE
APPLICATION OF SUCH PROVISIONS TO OTHER PERSONS OR CIRCUMSTANCES SHALL NOT BE
AFFECTED THEREBY AND SHALL BE ENFORCED TO THE GREATEST EXTENT PERMITTED BY LAW.

 

7.8                               COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED
IN SEVERAL COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF
WHICH SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.

 

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement effective on the
date first set forth above.

 

 

 

SOUTHWEST MISSOURI GAMING, LLC,

 

a Missouri limited liability company

 

 

 

 

By:

/s/Thomas E. Fox

 

Name:

/s/Thomas E. Fox

 

Its:

Manager

 

 

 

 

 

 

 

/s/ Robert E. Low

 

 

Robert E. Low

 

 

 

 

 

 

 

SW MISSOURI, LLC,

 

a Minnesota limited liability company

 

 

 

 

By:

/s/ James B. Druck

 

Name:

/s/ James B. Druck

 

Its:

Manager

 

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