any control over the gaming operation that would indicate a property
interest.

Conclusion

The Development Documents specifically exclude anyone but the
Band from managing the facility. Therefore, it is my opinion that they are not
individually or collectively a management contract requiring the approval of
the Chair. Additionally, the Development Documents do not prevent the
Band from maintaining the sole proprietary interest in the gaming operation.

If the Development Documents change in any material way or are
inconsistent with assumptions made herein, this opinion shall not apply. Further,
this opinion is limited to the Development Documents listed above. I understand
that additional loan and construction documents are contemplated by the
Development Agreement. This opinion does not include or extend to those or any
other agreements not submitted for review.

I anticipate that this letter will be the subject of Freedom of Information Act
(FOIA) requests. Since we believe that some of the information in this letter may fall
within FOIA exemption 4 (25 U.S.C. § 552(b)(4)), which applies to commercial or
financial information that is privileged or confidential, the release of which could
cause substantial harm, | ask that you provide me with your views regarding release
within ten days.

If you have any questions, please contact NIGC Staff Attorney Jennifer
Lawson at (202) 632-7003.

Sincerely,

Mf

Eric N. Shepard
General Counsel

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[sic] Facility, or any other entity related in any way thereto, after the
Commencement Date.” /d. § 8.2. Therefore, by its terms, the agreement does not
provide for the management of the gaming activity. Notwithstanding the
responsibilities detailed in the agreement, its terms prohibit Platform 10 from
engaging in management activities for the gaming operation. Specifically, the
agreement states:

[N]either the Developer nor any other lender shall engage in any of

the following: planning, organizing, directing, coordinating, or

controlling all or any portion of the Band’s gaming operations...

including, but not limited to

1. The training, supervision, direction, hiring, firing, retention,

compensation (including benefits) of any employee (whether

or not a management employee) or contractor;

Any employment policies or practices;

The hours or days of operation

Any accounting systems or procedures

Any advertising, promotions or other marketing activities;

The purchase, lease, or substitution of any gaming device or

related equipment or software, including player tracking

equipment;

7. The vendor, type, theme, percentage of pay-out, display or
placement of any gaming device or equipment;

8. Budgeting, allocating, or conditioning payments of the lender's
operating expenses... /d. § 1.2.1

aAswy

Furthermore, at each stage of the development and construction, the
Developer is responsible for making recommendations that are subject to
Band Council approval. See Id. §§ 3.1 - 3.6; 4.1; 5.1; and 7.1(x).

On their face, the Development Documents prohibit any entity other
than the Band from managing the gaming operation. Therefore, the
Development Documents are not management agreements and do not
require the approval of the Chair.

Finally, you asked for my opinion as to whether the Development
Documents violate IGRA’s requirement that the Band have the sole
proprietary interest in its gaming enterprise. The Development Agreement is
limited to just under seven years, a term comparable to many development,
financing, and management contracts in the industry. The Band represents
that the Developers Fee is a fair, reasonable, and adequate compensation for
the risks, obligations, and liabilities Developer has assumed and agreed to
perform under the agreement. /d. § 8.2. The remaining fees—Construction
Management, interest rate, and Guaranty fee—are each directly and
rationally tied to the total amount of the services being provided.
Additionally, on its face, the agreement does not provide Platform 10 with

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May 5, 2015

By U.S. mail and email

John M. Peebles
2020 L Street, Suite 250
Sacramento, CA 95811

Re: _ Review of financing documents for the Battle Mountain Band of the
Te-Moak Tribe

Dear Mr. Peebles

This letter responds to your December 2, 2015 request! on behalf of the
Battle Mountain Band of the Te-Moak Tribe of Western Shoshone (Band) for the
National Indian Gaming Commission’s Office of General Counsel to review a
development agreement between the Band and Platform 10 Development, LLC
(Developer). Specifically, you have asked for my opinion whether the documents
are management contracts requiring the NIGC Chair’s approval under the Indian
Gaming Regulatory Act. You also asked for my opinion whether the development
agreements violate IGRA’s requirement that the Tribe have the sole proprietary
interest in its gaming activity. After careful review, it is my opinion that the
agreements are not management contacts requiring the review and approval of the
Chair. It is also my opinion that they do not violate IGRA’s sole proprietary interest
requirement.

In my review, I considered the following submissions (Development
Documents) which are executed, but not yet effective:

e Development Agreement, revised and submitted to NIGC February 26, 2015
e Nonrecourse Promissory Note
e Resolution No. 14-BM-20

IGRA provides the NIGC with authority to review and approve gaming-
related contracts and collateral agreements to management contracts to the extent
that they implicate management. Catskill Dev., L.L.C. v. Park Place Entm't Corp.,547
F.3d 115, 130 (2d Cir. 2008) (“a collateral agreement is subject to agency approval
under 25 C.F.R. § 533.7 only if it ‘provides for management of all or part of a

' Supplemented by a revised Development Agreement on February 26, 2015.

NEW MAILING ADDRESS: NIGC/DEPARTMENT OF THE INTERIOR 1849 C Street NW, Mail Stop # 1621 Washington, DC 20240 Tel: 202.632.7003 Fox: 202.632.7066

REGIONAL OFFICES Portland, OR; Sacramento, CA; Phoenix, AZ; St. Paul, MN; Tulsa OK; Oklahoma City, OK
WWW.NIGC.GOV.


gaming operation.””); Machal Inc. v. Jena Band of Choctaw Indians, 387 F. Supp. 2d
659, 666 (W.D. La. 2005) (“collateral agreements are subject to approval by the
NIGC, but only if that agreement ‘relate[s] to the gaming activity”). Accord, Jena
Band of Choctaw Indians v. Tri-Millenium Corp., 387 F. Supp. 2d 671, 678 (W.D. La.
2005); U.S. ex rel. The Saint Regis Mohawk Tribe v. President R.C.--St. Regis Mgmt.
Co., 451 F.3d 44, 48 (2d Cir. 2006), as corrected (June 27, 2006).

Management Contracts

The NIGC has defined the term management contract as “any contract,
subcontract, or collateral agreement between an Indian tribe and a contractor or
between a contractor and a subcontractor if such contract or agreement provides
for the management of all or part of a gaming operation.” 25 C.F.R. § 502.15.
Collateral agreement is defined as “any contract, whether or not in writing, that is
related either directly or indirectly, to a management contract, or to any rights,
duties or obligations created between a tribe (or any of its members, entities,
organizations) and a management contractor or subcontractor (or any person or
entity related to a management contractor or subcontractor).” 25 C.F.R. § 502.5.

Management Activity

Though NIGC regulations do not define management, the term has its
ordinary meaning. Management encompasses activities such as planning,
organizing, directing, coordinating, and controlling. NIGC Bulletin No. 94-5:
“Approved Management Contracts v. Consulting Agreements (Unapproved
Management Contracts are Void).” Accordingly, the definition of primary
management official is “any person who has the authority to set up working policy
for the gaming operation.” 25 C.F.R. § 502.19(b)(2). Further, management
employees are “those who formulate and effectuate management policies by
expressing and making operative the decision of their employer.” N.L.R.B. v. Bell
Aerospace Co., 416 U.S. 267, 288 (1974). Whether particular employees are
“managerial” is not controlled by an employee’s job title. Waldo v. M.S.P.B.,19 F. 3d
1395 (Fed. Cir. 1994), Rather, the question must be answered in terms of the
employee’s actual job responsibilities, authority and relationship to management.
Id. at 1399. In essence, an employee can qualify as management if the employee
actually has authority to take discretionary actions - a de jure manager - or
recommends discretionary actions that are implemented by others possessing
actual authority to control employer policy - a de facto manager. Id. at 1399 citing
N.L.R.B. v. Yeshiva, 444 U.S. 672, 683 (1980).

If a contract requires the performance of any management activity with
respect to all or part of a gaming operation, the contract is a management contract
within the meaning of 25 U.S.C. § 2711 and requires the NIGC Chairman’s approval.
Management contracts not approved by the Chairman are void. 25 C.F.R. § 533.7;
Wells Fargo Bank, Nat. Ass'n v. Lake of the Torches Econ. Dev. Corp., 658 F.3d 684,
688 (7th Cir. 2011).

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Sole Proprietary Interest

Among IGRA’s requirements is that “the Indian tribe will have the sole
proprietary interest an responsibility for the conduct of any gaming activity.” 25
U.S.C. § 2710(b)(2)(A); see also 25 C.F.R. § 522.4(b)(1). Proprietary interest is not
defined in the IGRA or the NIGC’s implemeneting regulations. However, it is defined
in Black’s Law Dictionary, 10‘ Edition (2014), as “the interest held by a property
owner together with all appurtenant rights .. .” Owner is defined as “belonging to;
accessory or incident to...” [d. Appurtenant is defined as “belonging to; accessory or
incident to...” Id. When determining whether a proprietary interest in the gaming
operation has vested with a third party, NIGC examines three criteria: (1) the term
of the relationship; (2) the amount of revenue paid to the third party; and (3) the
right of control provided to the third party over the gaming activity. City of Duluth v.
Nat'l Indian Gaming Comm'n, No. 1:13-CV-246, at 11, fn 8 (D.D.C. March 31, 2015).

Analysis

The Development Agreement requires Platform 10 to assist the Band in the
development, financing, design, construction, equipping, and furnishing of a gaming
facility.2, As compensation for these services, Platform 10 will receive the following
fees:

e Developers Fee equal to 12% of Net Win? (Development Agreement §
8.2), payable monthly for 83 months from the date gaming
commences (Id. § 6.1)4;

e Construction Management fee equal to 4% total construction cost of
the project (Id. § 8.1);

e Guaranty fee equal to 0.5% the total amount of the guaranty
(applicable only if Lender requires Platform 10 to guaranty the loan)
(Id. § 7.1(v)); and

e Interest on the Interim Loan equal to the Bank of America Prime Rate
plus 2.5% (ld. § 2.1).

Although the Development Agreement extends 83 months past the date
gaming commences at the facility, it confines Platform 10’s responsibilities to the
development and construction phase of the project. “The Band further expressly
acknowledges and agrees that Developer has absolutely no obligation whatsoever to
provide any goods or services to or in connection with the Band or the Gaming the

? A fuel distribution facility and convenience store are also contemplated by this agreement with specific
terms to be detailed in future agreements.

3 Net Win is defined as amount wagered less prizes paid, amount charged for progressive
jackpots, and gaming machine leases.

* Platform 10 has agreed to subordinate its Developers Fee to a $20,000 Monthly Tribal
Distribution Payment. Id. § 8.2.

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