Exhibit 10.3

 

WRITTEN CONSENT FOR RENEWAL OF LOTTERY GAMING FACILITY MANAGEMENT CONTRACT

(Pursuant to the Kansas Expanded Lottery Act)

 

This WRITTEN CONSENT FOR RENEWAL OF THE LOTTERY GAMING FACILITY MANAGEMENT
CONTRACT (“Written Consent”) is entered into by and among the Kansas Lottery on
behalf of the State of Kansas (“State” or “Lottery”) and the Manager as defined
under that certain Lottery Gaming Facility Management Contract executed by
Butler National Service Corporation (“BNSC”) on or about May 28, 2008, and
assumed by BHCMC, LLC (“BHCMC”) pursuant to a certain Assumption and Adoption
Agreement dated April 30, 2009 (“2008 Management Contract”).

 

WHEREAS, pursuant to applicable provisions of the 2008 Management Contract and
the Kansas Expanded Lottery Act (“KELA”), the Parties have engaged in extensive
discussions intended to reach an agreement to renew the 2008 Management Contract
for an additional 15-year term upon expiration of its initial term (“Agreement”)
under the following terms; and

 

WHEREAS, the Parties expressly intend to bind themselves and each other to the
terms under which the renewal is to be effective and the Agreement shall be
fully binding and enforceable.

 

NOW THEREFORE, for good and valuable consideration, including the mutual
covenants and promises contained in this Written Consent, the receipt and
sufficiency of which is acknowledged and agreed to by the undersigned Parties,
the Parties agree as follows:

 

1.     BHCMC and BNSC (hereinafter referred to as “Manager”) have completed
nearly ten (10) years of performance under the 2008 Management Contract in
compliance with the KELA and have shown good cause to renew the 2008 Management
Contract, said renewal term to commence upon completion of the initial term of
the 2008 Management Contract. The Parties further agree that upon successful
completion of its initial 15-year term, without the Manager being in default,
the Agreement will immediately commence an additional 15-year term, from
December 15, 2024 through December 14, 2039.

 

2.     The Agreement executed by the Parties will have an Effective Date of
December 15, 2019 and Commencement Date of December 15, 2024.

 

3.     Paragraph 5 of the Agreement shall be deleted in its entirety and noted
“Paragraph Intentionally Deleted.”

 

4.     Paragraph 10 of the Agreement shall be amended by deleting subparagraphs
e, f, g, h and i.

 

5.     Paragraph 13 of the Agreement, for the renewal term shall be deleted in
its entirety and amended to read as follows:

 

“13.     Lottery Gaming Enterprise Maintenance/Investment. In each Fiscal Year
during the term of this Agreement the Manager shall spend not less than
one-million dollars ($1,000,000.00) for capital improvements/investments related
to the Lottery Gaming Enterprise to include facilities, IT needs, operation
upgrades, Lottery Facility Games and upgrades, new systems and/or acquisition of
new technologies, or other similar expenses approved by the Executive Director.
If in any one year, Manager spends more than $1,000,000.00 as provided above,
the amounts in excess of such sums spent by Manager shall be credited toward the
required $1,000,000.00 expenditure for any subsequent year(s), to assure
compliance with this paragraph. The maximum required expenditure is a total of
$15,000,000 over the 15-year Agreement term.

 

6.     Paragraph 20, Privilege Fee Payment, shall be deleted in its entirety and
noted “Paragraph Intentionally Deleted.”

 

7.     Paragraph 26 of the Agreement, for the renewal term, shall be deleted in
its entirety and amended to read as follows:

 

“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 71% of the Lottery Gaming Facility
Revenues generated at the Lottery Gaming Facility.

 

The Executive Director will direct this payment to Manager on a monthly basis on
the fifth (5th) day of each month, if possible, but no later than the tenth
(10th) day of the month (or on a more frequent basis as may be agreed to between
the Executive Director and the Manager), in arrears, based on the previous
month’s Lottery Gaming Facility Revenues after first deducting lottery system
computer expenses. 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. Manager may pledge, encumber or grant to its lender an
interest in management services compensation under this Paragraph 26 and any
other sums payable to the Manager hereunder. Upon request of Manager, the
Executive Director will acknowledge and approve such pledge, encumbrance or
grant, agree to make all such payments directly to its lender (or as otherwise
directed by its lender) and agree and confirm to its lender such matters as are
customary for financing of facilities of this type.”

 

8.     Paragraph 30 of the Agreement, for the renewal term shall be deleted in
its entirety and amended to read as follows:

 

“30.     Prohibitions Applicable to the State. The Kansas Lottery, acting on
behalf the State of Kansas, agrees by entering into this Agreement that, until
July 1, 2032:

 

 

(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.

 

The parties agree and acknowledge that the foregoing prohibitions, by Kansas
statute, currently expire July 1, 2032 and from that date forward will be of no
further force and effect even though the term of this Agreement extends beyond
that date. The parties agree to amend the Contract in conformance to any
amendment extending the term of these prohibitions under K.S.A. 74-8734(h)(19),
or otherwise, which becomes the law of the State of Kansas, during the term of
this Agreement.

 

9.     Paragraph 78(a) of the Agreement shall be amended to read as follows:

 

a)

The Kansas Lottery acknowledges that Manager may grant a security interest in,
and/or grant a mortgage encumbering, the portion of the Lottery Gaming
Enterprise owned by Manager, Lottery Facility Games, and any bank accounts of
Manager referenced in this Paragraph 78 but excluding the electronic payment
account referenced in Paragraph 23. The parties acknowledge the State of Kansas
is the owner of the Lottery Facility Games.

 

10.     The following language shall be added to the Agreement as Paragraph 79:

 

“79.      Contribution to Civic, Charitable or Educational Organizations.
Manager shall make a minimum annual contribution of one-half percent (1/2%) of
the Lottery Gaming Facility gross revenues, after deducting expenses paid to the
KRGC and the Kansas Lottery to civic, charitable and/or educational
organizations.

 

11.     The following language shall be added to the Agreement as Paragraph 80:

 

“80.     No Third Party Beneficiaries. In no event shall any person or entity
that is not a party to this Agreement be an expressed, implied, or intended
third party beneficiary of this Contract, except Ford County, City of Dodge
City, the problem gaming and addictions grant fund as specifically provided in
Paragraph 27.

 

12.     The following language shall be added to the Agreement as Paragraph 81:

 

“81.     No Oral or Written Representations. No oral or written representations
have been made other than, or in addition to, those stated in this Contract.
Neither Party is relying on any oral or written statements made by the other
Party or any other representative of the other Party in entering into this
Agreement.”

 

13. The Parties agree that the Agreement will include additional modifications
not expressly set forth herein for the purpose of clarifying the rights and
responsibilities of the parties, and updating terms that have become unnecessary
for a developed and operating lottery gaming facility.

 

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

 

THE KANSAS LOTTERY

 

 

By:                                    

 Stephen Durrell, Executive Director

 

MANAGER

 

BUTLER NATIONAL SERVICE CORPORATION

 

 

By:                                    

Clark D, Stewart, President and Chief Executive Officer

 

 

BHCMC, LLC

 

 

By:                                    

Clark D. Stewart, President and Chief Executive Officer