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Sample Business ContractsHome: Sample Business Contracts:
MANAGEMENT AGREEMENT
BETWEEN THE
SHINGLE SPRINGS BAND OF MIWOK INDIANS
AND
KEAN ARGOVITZ RESORTS - SHINGLE SPRINGS,
LLC
DATED, AS OF JUNE 11, 1999
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TABLE OF CONTENTS
MANAGEMENT AGREEMENT ......................................................1
1. RECITALS .............................................................1
2. DEFINITIONS ..........................................................2
Affiliate ............................................................2
Bank Accounts ........................................................2
BIA ..................................................................2
Business .............................................................2
Capital Budget .......................................................2
Capital Replacement(s) ...............................................2
Capital Replacement Reserve ..........................................2
Centralized Services .................................................2
Class III Gaming .....................................................2
Collateral Agreements ................................................2
Commencement Date ....................................................2
Compact ..............................................................2
Compensation .........................................................3
Completion Date ......................................................3
Constitution .........................................................3
Development Agreement ................................................3
Depository Account ...................................................4
Disbursement Account .................................................4
Effective Date .......................................................4
Emergency Condition ..................................................5
Employees ............................................................5
Enterprise ...........................................................5
Enterprise Bank Accounts .............................................5
Enterprise Employee ..................................................5
Enterprise Employee Policies .........................................5
Facility .............................................................5
Facility Bank ........................................................5
Fiscal Year ..........................................................5
Furnishings and Equipment ............................................5
Gaming ...............................................................6
General Manager ......................................................6
Generally Accepted Accounting Principles .............................6
GAAP .................................................................6
Gross Gaming Revenue (Win) ...........................................6
Gross Revenues .......................................................6
IGRA .................................................................6
Interim Promissory Note ..............................................6
Internal Control Systems .............................................7
SHINGLE SPRINGS Gaming Ordinance .....................................7
SHINGLE SPRINGS Regulatory Authority .................................7
SHINGLE SPRINGS Resolutions ..........................................7
KAR ..................................................................7
Key Employees ........................................................7
Legal Requirements ...................................................7
Loan Agreement .......................................................7
Management Agreement .................................................7
Management Fee .......................................................7
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Managing Officer....................................................... 7
Material Breach........................................................ 7
Member of SHINGLE SPRINGS Government................................... 8
Minimum Balance........................................................ 8
Minimum Guaranteed Monthly Payment..................................... 8
Monthly Distribution Payment........................................... 8
National Indian Gaming Commission (NIGC)............................... 8
Net Revenues........................................................... 8
Net Revenues (gaming).................................................. 8
Net Revenues (other)................................................... 9
Note................................................................... 9
Off-Site Employees..................................................... 9
Operating Budget and Annual Plan....................................... 10
Operating Equipment.................................................... 10
Operating Expenses..................................................... 10
Operating Supplies..................................................... 11
Plans and Specifications............................................... 11
Pre-Opening Budget..................................................... 11
Pre-Opening Expenses................................................... 11
Promotional Allowances................................................. 11
Property............................................................... 11
Relative............................................................... 12
Security and Reimbursement Agreement................................... 12
State.................................................................. 12
System Marks........................................................... 12
System Fees............................................................ 12
Temporary Gaming Facility.............................................. 12
Term................................................................... 12
3. COVENANTS.............................................................. 12
3.1 Engagement of KAR................................................. 12
3.2 Term.............................................................. 12
3.3 Status of Property................................................ 13
3.4 KAR Compliance with Law; Licenses................................. 13
3.5 Amendments to SHINGLE SPRINGS Gaming Ordinance.................... 14
3.6 Compliance with Compact........................................... 14
3.7 Fire and Safety................................................... 14
3.8 Compliance with the National Environment Policy Act............... 14
3.9 Satisfaction of Effective Date Requirements....................... 14
3.10 Commence Date..................................................... 15
4. BUSINESS AND AFFAIRS IN CONNECTION WITH ENTERPRISE..................... 15
4.1 KAR's Authority and Responsibility................................ 15
4.2 Duties of KAR..................................................... 15
4.2.1 Physical Duties............................................. 15
4.2.2 Compliance.................................................. 15
4.2.3 Required Filings............................................ 15
4.2.4 Contracts in SHINGLE SPRING's Name and at Arm's Length...... 15
4.2.5 Enterprise Operating Standards.............................. 16
4.3 Security.......................................................... 16
4.4 Damage, Condemnation or Impossibility of the Enterprise........... 16
4.4.1 Recommencement of Operations................................ 16
4.4.2 Repair or Replacement....................................... 16
4.4.3 Other Business Purposes..................................... 17
4.4.4 Termination of Gaming....................................... 17
4.4.5 Tolling of the Agreement.................................... 17
4.5 Alcoholic Beverages and Tobacco Sales............................. 18
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4.6 Employees............................................................ 18
4.6.1 KAR's Responsibility............................................. 18
4.6.2 Enterprise Employee Policies..................................... 18
4.6.3 Key Employees.................................................... 18
4.6.4 Off-Site Employees............................................... 19
4.6.5 No KAR Wages or Salaries......................................... 19
4.6.6 SHINGLE SPRINGS Regulatory Authority (Costs)..................... 19
4.6.7 Employee Background Checks....................................... 19
4.6.8 Indian Preference, Recruiting and Training....................... 20
4.6.9 Goals and Remedies............................................... 21
4.6.10 Removal of Employees............................................ 21
4.7 Optional Services.................................................... 21
4.8 Pre-Opening.......................................................... 21
4.9 Operating Budget and Annual Plan..................................... 22
4.9.1 Adjustments to Operating Budget and Annual Plan.................. 23
4.10 Capital Budgets..................................................... 24
4.11 Capital Replacements................................................ 24
4.12 Capital Replacement Reserve......................................... 25
4.13 Periodic Contributions to Capital Replacement Reserve............... 25
4.14 Use and Allocation of Capital Replacement Reserve................... 26
4.16 Internal Control Systems............................................ 26
4.17 Banking and Bank Accounts........................................... 26
4.17.1 Bank Accounts................................................... 26
4.17.2 Daily Deposits to Depository Account............................ 27
4.17.3 Disbursement Account............................................ 27
4.17.4 No Cash Disbursements........................................... 27
4.17.5 Transfers Between Accounts...................................... 27
4.18 Insurance........................................................... 27
4.19 Accounting and Books of Account..................................... 27
4.19.1 Statements...................................................... 28
4.19.2 Books of Accounts............................................... 28
4.19.3 Accounting Standards............................................ 28
4.19.4 Annual Audit.................................................... 28
4.20 Retail Shops and Concessions........................................ 29
5. LIENS................................................................... 29
5.1 Exceptions........................................................... 29
6. MANAGEMENT FEE, REIMBURSEMENTS, DISBURSEMENTS, AND OTHER PAYMENTS BY
KAR..................................................................... 30
6.1 Management Fee....................................................... 30
6.2 Disbursements........................................................ 30
6.3 Adjustment to Bank Account........................................... 30
6.4 Payment of Fees and SHINGLE SPRINGS Disbursement..................... 30
6.5 Minimum Guaranteed Monthly Payment................................... 31
6.6 Payment of Net Revenues.............................................. 31
7. TRADE NAMES, TRADE MARKS AND SERVICE MARKS.............................. 31
7.1 Enterprise Name...................................................... 31
7.2 System Marks......................................................... 31
7.3 Litigation Involving System Marks.................................... 32
8. TAXES................................................................... 32
8.1 State and Local Taxes................................................ 33
8.2 SHINGLE SPRINGS Taxes................................................ 33
8.2.1 Termination by KAR............................................... 33
8.3 Compliance with Internal Revenue Code................................ 33
9. GENERAL PROVISIONS...................................................... 33
9.1 Sites of the Contracts............................................... 33
9.2 Notice............................................................... 34
9.3 Authority to Execute and Perform Agreement........................... 34
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9.4 Relationship..........................................................34
9.5 KAR's Contractual Authority...........................................34
9.6 Further Actions.......................................................35
9.7 Defense...............................................................35
9.8 Waivers...............................................................35
9.9 Captions..............................................................35
9.10 Severability.........................................................36
9.11 Interest.............................................................36
9.12 Recoupment and Reimbursement.........................................36
9.13 Travel and Out-of-Pocket Expenses....................................36
9.14 Third Party Beneficiary..............................................36
9.15 Brokerage............................................................36
9.16 Survival of Covenants................................................37
9.17 Estoppel Certificate.................................................37
9.18 Periods of Time......................................................37
9.19 Exhibits.............................................................37
9.20 Successors, Assigns, and Subcontracting..............................37
9.21 Time is of the Essence...............................................38
9.22 Patron Dispute Resolution............................................38
9.23 Modification.........................................................38
10. WARRANTIES...............................................................38
10.1 Non-Interference in SHINGLE SPRINGS Affairs..........................38
10.2 Prohibition of Payments to Members of SHINGLE SPRINGS Government.....38
10.3 Prohibition of Hiring Members of SHINGLE SPRINGS Government..........39
10.4 Prohibition of Financial Interest in Enterprise......................39
10.5 Definitions..........................................................39
10.6 SHINGLE SPRINGS......................................................39
11. GROUNDS FOR TERMINATION..................................................39
11.1 Voluntary Termination and Termination for Cause......................39
11.2 Voluntary Termination................................................39
11.3 Termination for Cause................................................39
11.4 Involuntary Termination Due to Changes in Legal Requirements.........41
11.5 KAR's right to Terminate Agreement...................................41
11.6 SHINGLE SPRINGS's Right to Terminate Agreement.......................42
11.7 Consequences of KAR's Breach.........................................42
11.8 Consequences of SHINGLE SPRINGS's Breach.............................43
11.9 Notice and Opportunity to Cure.......................................43
12. CONCLUSION OF THE MANAGEMENT TERM........................................44
12.1 Transition...........................................................44
12.2 Undistributed Net Revenues...........................................44
13. CONSENTS AND APPROVALS...................................................44
13.1 SHINGLE SPRINGS......................................................44
13.2 KAR..................................................................44
14. DISCLOSURES..............................................................44
14.1 Shareholders and Directors...........................................44
14.2 Warranties...........................................................45
14.3 Criminal and Credit Investigation....................................45
14.4 Disclosure Amendments................................................46
14.5 Breach of KAR's Warranties and Agreements............................46
15. RECORDATION..............................................................46
16. NO PRESENT LIEN, LEASE OR JOINT VENTURE..................................46
17. DISPUTE RESOLUTION.......................................................46
17.1 General...............................................................47
17.2 Arbitration...........................................................47
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17.2.1 Initiation of Arbitration and Selection of Arbitrators.......47
(i) Choice of Law................................................48
(ii) Place of Hearing.............................................48
(iii) Confidentiality..............................................48
17.3 Limited Waiver of Sovereign Immunity.................................48
(i) Time Period..................................................48
(ii) Limitations of Actions.......................................48
(a) Damages..................................................48
(b) Consents and Approvals...................................49
(c) Injunctive Relieve and Specific Performance..............49
(d) Action to Compel Arbitration.............................49
(e) Service of Process.......................................49
(f) Enforcement..............................................49
(g) Limitation Upon Enforcement..............................49
17.4 Performance During Disputes..........................................50
18. CONFIDENTIAL AND PROPRIETARY INFORMATION................................50
18.1 Confidential Information.............................................50
19. ENTIRE AGREEMENT........................................................51
20. GOVERNMENT SAVINGS CLAUSE...............................................51
21. PREPARATION OF AGREEMENT................................................51
22. STANDARD OF REASONABLENESS..............................................51
23. EXECUTION...............................................................51
EXHIBIT A: DISPUTE RESOLUTION BETWEEN KAR AND ENTERPRISES EMPLOYEES ........52
EXHIBIT B: KEY EMPLOYEE JOB CATEGORIES......................................53
EXHIBIT C: ENTERPRISE INVESTMENT POLICY.....................................54
STATEMENT OF INVESTMENT POLICY FOR THE SHINGLE SPRINGS GAMING ENTERPRISE(...55
I. INVESTMENT OBJECTIVES..................................................55
II. INVESTMENT RESPONSIBILITY..............................................55
III. INVESTMENT GUIDELINES..................................................55
IV. INVESTMENT REVIEW......................................................55
EXHIBIT "A" OF EXHIBIT C: PERMITTED INVESTMENTS.............................56
EXHIBIT D: SHINGLE SPRINGS IRREVOCABLE BANKING INSTRUCTIONS.................58
EXHIBIT E: SHINGLE SPRINGS INSURANCE REQUIREMENTS...........................60
1.01 COVERAGE...............................................................60
1.01.1 Required Insurance................................................60
1.01.2 Responsibility to Maintain........................................62
1.01.3 Changes in Coverage...............................................62
1.01.4 Requirements......................................................62
1.02 POLICIES AND ENDORSEMENTS..............................................62
1.02.1 Policies..........................................................62
1.02.2 Endorsement.......................................................63
1.02.3 Additional Insured................................................63
1.03 WAIVER OF LIABILITY - FIRE & CASUALTY INSURANCE........................63
EXHIBIT F: KAR'S OFFICERS AND DIRECTORS.....................................65
EXHIBIT G: KAR'S SHAREHOLDERS...............................................66
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MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT has been entered into as of June 11, 1999, by and
between the SHINGLE SPRINGS BAND OF MIWOK INDIANS ("SHINGLE SPRINGS"), and KEAN
ARGOVITZ RESORTS-SHINGLE SPRINGS, L.L.C., a Nevada limited liability company
("KAR"), for the operation of a gaming facility in the State of California.
1. RECITALS.
1.1 SHINGLE SPRINGS is a federally recognized Indian Tribe.
1.2 The United States holds land in trust for the benefit of SHINGLE
SPRINGS, (the "Property") on selection of KAR as the intended operator of
the Facility.
1.3 SHINGLE SPRINGS possesses sovereign powers over the SHINGLE SPRING's
existing property held in trust by the United States pursuant to SHINGLE
SPRING's recognized powers of self-government.
1.4 SHINGLE SPRINGS desires to use the Facility to improve the economic
conditions of its members, to enable it to serve the social, economic,
educational and health needs of SHINGLE SPRINGS, to increase the revenues
of SHINGLE SPRINGS and to enhance SHINGLE SPRING's economic
self-sufficiency and self-determination.
1.5 SHINGLE SPRINGS wishes to establish an Enterprise, as hereinafter
defined, to conduct Class II and Class III Gaming as hereinafter defined on
the Property. This Agreement sets forth the manner in which the Enterprise
will be managed.
1.6 KAR has agreed to certain terms and has represented to SHINGLE SPRINGS
that it has capabilities to provide professional management, funds and
financing necessary to develop and construct the Facility, as defined
herein, and to commence the operation of the Enterprise.
1.7 SHINGLE SPRINGS is seeking technical experience and expertise for the
operation of the Enterprise and instruction for members of SHINGLE SPRINGS
in the operation of the Enterprise. KAR is willing, and has represented to
SHINGLE SPRINGS that it is able, to provide such expertise and instruction.
1.8 SHINGLE SPRINGS desires to grant KAR the exclusive right and
obligation to develop, manage, operate and maintain the Enterprise as
described in this Agreement and to train SHINGLE SPRINGS members and KAR
wishes to perform these functions exclusively for SHINGLE SPRINGS.
1.9 This Agreement is entered into pursuant to the Indian Gaming
Regulatory Act of
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1988, PL 100-497, 25 U.S.C. 2701 et seq. ("IGRA") as that statue may be
amended. All gaming conducted at the Facility will at all times comply
with the IGRA, applicable law and the SHINGLE SPRINGS-state compact entered
into pursuant to the terms of IGRA.
2. DEFINITIONS. As they are used in this Agreement, the terms listed below
shall have the meaning assigned to them in this Section:
"AFFILIATE" means as to KAR any corporation, partnership, limited liability
company, joint venture, trust, department or agency or individual
controlled by, under common control with, or which controls, directly or
indirectly KAR.
"BANK ACCOUNTS" shall mean those bank accounts described in Section 4.17.
"BIA" shall mean the Bureau of Indian Affairs of the Department of the
Interior of the United States of America.
"BUSINESS" shall have the same meaning as the term "Enterprise."
"CAPITAL BUDGET" shall mean the capital budget described in Section 4.10.
"CAPITAL REPLACEMENT(S)" shall mean any alteration or rebuilding or
renovation of the Facility, and any replacement of Furnishings and
Equipment, the cost of which is capitalized and depreciated, rather than
being expensed, applying generally accepted accounting principles.
"CAPITAL REPLACEMENT RESERVE" shall mean the reserve described in Section
4.12.
"CENTRALIZED SERVICES" shall mean those services related to the
development, construction and management of the Enterprise which are
approved by the Tribal Council and which may be purchased from or
provided by KAR or its Affiliates in Houston, Texas or at locations other
than the Facility.
"CLASS II GAMING" shall mean Class II Gaming as defined in the IGRA.
"CLASS III GAMING" shall mean Class III Gaming as defined in the IGRA.
"COLLATERAL AGREEMENTS" shall mean any agreements defined to be collateral
agreements by the phrase found at 25 U.S.C. Section 2711 (a)(3) and
regulations promulgated pursuant thereto.
"COMMENCEMENT DATE" shall mean the first date that the Facility is
complete, open to the public and that Gaming is conducted in the Facility
pursuant to the terms of this Agreement.
"COMPACT" shall mean SHINGLE SPRINGS-State Compact which SHINGLE
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SPRINGS intends to negotiate and execute with the State regarding Class III
Gaming, if and when executed between SHINGLE SPRINGS and the State and approved
pursuant to the IGRA; as the same may, from time to time, be amended, or such
other compact that may be substituted therefor.
"COMPENSATION" shall mean the direct salaries and wages paid to, or accrued for
the benefit of, any employee, including incentive compensation, together with
all fringe benefits payable to or accrued for the benefit of such executive or
other employee, including employer's contribution under F.I.C.A., unemployment
compensation or other employment taxes, pension fund contributions, workers'
compensation, group life, accident and health insurance premiums and costs, and
profit sharing, severance, retirement, disability, housing relocation, housing
and other similar benefits.
"COMPLETION DATE" shall mean the date upon which KAR receives:
(i) an architect's certificate from the Architect identified in the
Development Agreement or Architect of Record as having responsibility
for the design, supervision and responsibility for the construction,
equipping and furnishing of the Facility, certifying that the Facility
has been fully constructed substantially in accordance with the Plans
and Specifications;
(ii) certification from KAR (or the division, department or designee
of KAR having responsibility to assure compliance with any
operational standards) stating that the Facility, as completed, is
in substantial compliance with any such standards;
(iii) a permanent or temporary certificate of occupancy, if required,
from any government authority or authorities pursuant to whose
jurisdiction the Facility is to be constructed, permitted the use
and operation of all portion of the Facility in accordance with this
Agreement; and
(iv) certificates of such professional designers, inspectors or
consultants or opinions of counsel, as KAR may determine to be
appropriate, verifying construction and furnishing of the Facility in
compliance with all Legal Requirements.
"CONSTITUTION" shall mean the Constitution of SHINGLE SPRINGS Band of Miwok
Indians.
"DEVELOPMENT AGREEMENT" shall mean that certain agreement, of even date
herewith, by and between KAR and SHINGLE SPRINGS, providing the terms under
which KAR and SHINGLE SPRINGS will work exclusively together to develop certain
SHINGLE SPRINGS Commercial and Gaming Development and KAR will advance certain
3
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specified loans to SHINGLE SPRINGS and will cause to be financed and develop
the Facility, including without limitation, design, construction, furnishing
and equipping same.
"DEPOSITORY ACCOUNT" shall mean the bank account described in Section 4.17.2.
"DISBURSEMENT ACCOUNT" shall mean the bank account described in Section 4.17.3.
"EFFECTIVE DATE" shall mean the date five days following the date on which all
of the following listed conditions are satisfied:
(i) written approval, as required by law, of this Agreement and the
Development Agreement, is granted by the Chairperson of the NIGC;
(ii) written approval, as required by law, of the Loan Agreement, the
Security and Reimbursement Agreement, the Note, and the Interim Promissory
Note is granted by the Chairperson of the NIGC and/or the BIA, if required;
(iii) written approval, as required by law, of a SHINGLE SPRINGS Gaming
Ordinance and of any other ordinances adopted by SHINGLE SPRINGS relative
to any of the documents referenced in this Agreement is granted by the
Chairperson of the NIGC or the BIA;
(iv) written confirmation that SHINGLE SPRINGS, the State (to the
extent required by the Compact), and the NIGC have approved background
investigations of KAR;
(v) KAR has received a certified copy of SHINGLE SPRINGS Gaming
Ordinance and SHINGLE SPRINGS Resolutions adopted by SHINGLE SPRINGS in
accordance with SHINGLE SPRINGS's governing documents authorizing the
execution of the Management Agreement, Loan Agreement, Note, Interim
Promissory Note, Security and Reimbursement Agreement, and the Development
Agreement;
(vi) KAR has satisfied itself as to the proper ownership and control of
the Property and its suitability for construction and operation of the
Facility, and that all of the Legal Requirements and other requirements for
lawful conduct and operation of the Enterprise in accordance with this
Agreement have been met and satisfied;
(vii) for purposes of Class III gaming, the Compact has been signed by
the Secretary of Interior and published in the Federal Register as
provided in 25 U.S.C. Section 2710(d)(8)(D);
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(viii) the satisfactory completion of all necessary and applicable
feasibility studies required for the development, construction and
operation of the Enterprise;
(ix) receipt by KAR of all applicable licenses for or related to
development, construction or management of the Enterprise; and
(x) receipt by KAR of SHINGLE SPRING's written approval of the Plans and
Specifications for the Facility.
"EMERGENCY CONDITION" shall have the meaning set forth in Section 4.12.
"EMPLOYEES" shall mean those employees working for the Enterprise who are not
KAR Employees.
"ENTERPRISE" shall mean the enterprise of SHINGLE SPRINGS created to engage in
Class II and Class III Gaming at the Facility, and which shall include any
other lawful commercial activity allowed in the Facility including, but not
limited to the operation of a hotel, RV Park, retail stores, restaurants,
entertainment facilities, or the sale of food, beverages, alcohol, tobacco,
gifts and souvenirs.
"ENTERPRISE BANK ACCOUNTS" shall mean those accounts described in Section
4.17.1.
"ENTERPRISE EMPLOYEE" shall mean all KAR Employees and SHINGLE SPRINGS
Employees who are assigned to work at the Facility.
"ENTERPRISE EMPLOYEE POLICIES" shall mean those employee policies described in
Section 4.6.2.
"FACILITY" shall mean all buildings, structures, and improvements located on
the Property and comprising part of the Enterprise and all fixtures, Furnishing
and Equipment attached to, forming a part of, or necessary for the operation of
the Enterprise.
"FACILITY BANK" shall mean the amount of cash, chips, tokens and plaques that
KAR from time to time determines necessary to have at the Facility daily to meet
its cash needs.
"FISCAL YEAR" shall mean the fiscal year of KAR.
"FURNISHINGS AND EQUIPMENT" shall mean all fixtures, furnishings and equipment
(excepting "Operating Equipment" as hereinafter defined) required for the
operation of the Enterprise in accordance with the standards set forth in this
Agreement, including, without limitation:
(i) cashier, money sorting and money counting equipment,
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surveillance and communication equipment, and security equipment;
(ii) slot machines, video games of chance, table games, keno equipment
and other gaming equipment;
(iii) office furnishings and equipment;
(iv) specialized equipment necessary for the operation of any portion of
the Enterprise for accessory purposes, including equipment for kitchens,
laundries, dry cleaning, cocktail lounges, restaurants, public rooms,
commercial and parking spaces, and recreational facilities; and
(v) all other furnishings and equipment hereafter located and installed
in or about the Facility which are used in the operation of the Enterprise
in accordance with the standards set forth in this Agreement.
"GAMING" shall mean any and all activities defined in the IGRA as Class II and
Class III Gaming.
"GENERAL MANAGER" shall mean the person employed by the Enterprise to direct
the operation of the Enterprise.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" shall mean those
principles defined by the Financial Accounting Standards Board.
"GROSS GAMING REVENUE (WIN)" shall mean the net win from gaming activities
which is the difference between Gaming wins and losses before deducting costs
and expenses.
"GROSS REVENUES" shall mean all revenues of any nature derived directly or
indirectly from the Enterprise including, without limitation, Gross Gaming
Revenue (Win), food and beverage sales and other rental or other receipts from
lessees, subleases, licensees and concessionaires (but not the gross receipts of
such lessees, subleases, licensees or concessionaires, provided that such
lessees, subleases, and licensees and concessionaires are not subsidiaries or
Affiliates of KAR), and revenue recorded for Promotional Allowances.
"IGRA" shall mean the Indian Gaming Regulatory Act of 1988, PL 100-497, 25
U.S.C. Section 2701 et seq. as same may, from time to time, be amended.
"INTERIM PROMISSORY NOTE" shall have the meaning described for one or more
promissory notes to be executed by SHINGLE SPRINGS in favor of KAR pursuant to
the Development Agreement and Management Agreement which shall include but not
be limited to signing advance, tribal consultant advances, monthly advances,
equity advances, land advances and any other funds advanced to or on behalf of
Shingle Springs.
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"INTERNAL CONTROL SYSTEMS" shall mean the systems described in Section 4.16.
"SHINGLE SPRINGS GAMING ORDINANCE" shall mean the ordinance and any amendments
thereto to be enacted by SHINGLE SPRINGS, which authorizes and regulates
Class II and Class III Gaming on Indian lands subject to the governmental power
of SHINGLE SPRINGS.
"SHINGLE SPRINGS REGULATORY AUTHORITY" shall mean SHINGLE SPRINGS body created
pursuant to SHINGLE SPRINGS Gaming Ordinance to regulate the Class II and
Class III Gaming of SHINGLE SPRINGS in accordance with the Compact, the IGRA
and the SHINGLE SPRINGS Gaming Ordinance.
"SHINGLE SPRINGS RESOLUTIONS" shall have the meaning described in Section 3.9.
"KAR" shall mean Kean Argovitz Resorts-Shingle Springs, LLC and its affiliates.
"KEY EMPLOYEES" shall mean those employees of KAR who are working at the
Facility.
"LEGAL REQUIREMENTS" shall mean any and all present and future judicial,
administrative, and tribal rulings or decisions, and any and all present and
future federal, state, local, and tribal laws, ordinances, rules, regulations,
permits, licenses and certificates, in any way applicable to SHINGLE SPRINGS,
KAR, the Property, the Facility, and the Enterprise, including without
limitation, the IGRA, the Compact, and SHINGLE SPRINGS Gaming Ordinance.
"LENDER" shall mean the financial institution agreed upon by the parties to
provide the funding necessary to design, construct, and equip the Facility, and
provide start-up capital for the Enterprise.
"LOAN AGREEMENT" shall mean the loan agreement in a principal amount of up to
ONE HUNDRED MILLION DOLLARS ($100,000,000.00), to be entered into between
SHINGLE SPRINGS and KAR or one of its Affiliates, or between SHINGLE SPRINGS
and the Lender, the proceeds of which are to be used exclusively for the
development, design, construction, furnishing and equipping of the Facility
and/or providing start-up and working capital for the Enterprise.
"MANAGEMENT AGREEMENT" shall mean this Agreement and may be referred to herein
as the "Agreement" or "Management Agreement."
"MANAGEMENT FEE" shall mean the management fee described in Section 6.1.
"MANAGING OFFICER" shall mean such person who KAR designates to serve as a
liaison between KAR and SHINGLE SPRINGS.
"MANAGING BREACH" shall mean such material breach as described in Section 10.
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"MEMBER OF SHINGLE SPRINGS GOVERNMENT" shall have the meaning described in
Section 10.5.
"MINIMUM BALANCE" shall mean the amount described in Section 6.2, but not
defined.
"MINIMUM MONTHLY PRIORITY PAYMENT" shall mean that payment due SHINGLE SPRINGS
each month commencing in the month after the Commencement Date occurs in
accordance with 25 U.S.C. 2711 (b)(3) and Section 6.5 hereof.
"MONTHLY DISTRIBUTION PAYMENT" shall have the meaning set forth in Section 6.4
"NATIONAL INDIAN GAMING COMMISSION ("NIGC")" shall mean the commission
established pursuant to 25 U.S.C. Section 2704.
"NET REVENUES" shall mean the sum of "Net Revenues (gaming)" and "Net Revenues
(other)."
"NET REVENUES (GAMING)" shall mean Gross Gaming Revenue (Win), of the
Enterprise from Class II and Class III gaming less all gaming related Operating
Expenses, excluding the Management Fee, and less the retail value of any
promotional Allowances, and less the following revenues actually received by the
Enterprise and included in Gross Revenues:
(i) any gratuities or service charges added to a customer's bill;
(ii) any credits or refunds made to customers, guests or patrons;
(iii) any sums and credits received by the Enterprise for lost or
damaged merchandise;
(iv) any sales taxes, excise taxes, gross receipt taxes, admission
taxes, entertainment taxes, tourist taxes or charges received from patrons
and paid to a governmental or quasi governmental entity;
(v) any proceeds from the sale or other disposition of furnishings and
equipment or other capital assets;
(vi) any fire and extended coverage insurance proceeds other than for
business interruption;
(vii) any condemnation awards other than for temporary condemnation;
(viii) any proceeds of financing or refinancing; and
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(ix) any interest on bank accounts(s).
It is intended that this provision be consistent with 25 U.S.C. Section 2703
(9).
"NET REVENUES (OTHER)" shall mean all Gross Revenues of the Enterprise from all
other sources in support of Class II and Class III gaming not included in "Net
Revenues" (gaming), such as food and beverage, entertainment, and retail, less
all Operating Expenses, excluding the Management Fee and less the retail value
of Promotional Allowances, if any, and less the following revenues actually
received by the Enterprise and included in Gross Revenues:
(i) any gratuities or service charges added to a customer's bill;
(ii) any credits or refunds made to customers, guests or patrons;
(iii) any sums and credits received by the Enterprise for lost or damaged
merchandise;
(iv) any sales taxes, excise taxes, gross receipt taxes, admission taxes,
entertainment taxes, tourist taxes or charges received from patrons and
passed on to a governmental or quasi governmental entity;
(V) any proceeds from the sale or other disposition of furnishings and
equipment or other capital assets;
(vi) any fire and extended coverage insurance proceeds other than for
business interruption;
(vii) any condemnation awards other than for temporary condemnation;
(viii) any proceeds of financing or refinancing; and
(ix) any interest on bank accounts(s).
It is intended that this provision be consistent with 25 U.S.C. Section 2703
(9).
"NOTE" shall mean the promissory note to be executed by SHINGLE SPRINGS
pursuant to the Loan Agreement, which shall evidence a loan to SHINGLE SPRINGS,
in an amount up to ONE HUNDRED MILLION DOLLARS ($100,000,000.00), from either
the Lender or KAR.
"OFF-SITE EMPLOYEES" shall mean such employees of KAR or KAR's Affiliates who
are not located at the Facility but who are used by KAR to provide services to
the Enterprise as described in Section 4.6.4 and 4.7.
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"OPERATING BUDGET AND ANNUAL PLAN" shall mean the operating budget and plan
described in Section 4.9.
"OPERATING EQUIPMENT" shall mean all equipment required for the operation of a
casino, including accessory gaming table equipment, chinaware, glassware,
linens, silverware, utensils, uniforms, and all other similar items.
"OPERATING EXPENSES" shall mean all expenses of the operation of the
Enterprise, pursuant to GAAP, including but not limited to the following:
(i) the payment of (i) salaries, wages, and benefit programs for
Enterprise Employees; (ii) salaries, wages, and benefit
programs for Off-Site Employees to the extent approved by
the Tribal Council; and (iii) the cost of Centralized
Services to the extent approved by the Tribal Council.
(ii) Operating Supplies for the Enterprise;
(iii) utilities;
(iv) repairs and maintenance of the Facility (excluding Capital
Replacements);
(v) interest on the Note;
(vi) interest on installment contract purchases or other interest
charges on debt approved by the Tribal Council;
(vii) insurance and bonding;
(viii) advertising and marketing, including busing and
transportation of patrons to the Facility;
(ix) accounting, legal and other professional fees;
(x) security costs;
(xi) reasonable travel expenses for officers and employees of the
Enterprise, KAR or its Affiliates, to inspect and oversee
the Enterprise, subject to the budget agreed upon by the
Tribal Council;
(xii) lease payments for Furnishings and Equipment and Operating
Equipment to the extent approved by the Tribal Council;
(xiii) trash removal;
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(xiv) cost of goods sold;
(xv) other expenses designated as Operating Expenses in accordance
with the accounting standards as referred to in Section 4.19.3;
(xvi) expenses specifically designated as Operating Expenses in this
Agreement;
(xvii) depreciation and amortization of the Facility based on an
assumed thirty (30) year life, and depreciation and amortization of
all other assets in accordance with GAAP;
(xviii) recruiting and training expenses;
(xix) fees due to the NIGC under the IGRA;
(xx) any required payments to the State or local governments made
by or on behalf of the Enterprise or SHINGLE SPRINGS pursuant to the
Compact or another related agreement;
(xxi) any budgeted charitable contributions by the Enterprise which
are approved by the Tribal Council; and
(xxii) Pre-Opening Expenses shall be capitalized and treated as an
expense during the first year after opening.
"OPERATING SUPPLIES" shall mean food and beverages (alcoholic and nonalcoholic)
and other consumable items used in the operation of a casino, such as playing
cards, tokens, chips, plaques, dice, fuel, soap, cleaning materials, matches,
paper goods, stationery and all other similar items.
"PLANS AND SPECIFICATIONS" shall mean the final Plans and Specifications
approved for the Facility as described in the Development Agreement.
"PRE-OPENING BUDGET" shall have the meaning described in Section 4.8.
"PRE-OPENING EXPENSES" shall have the meaning described in Section 4.8.
"PROMOTIONAL ALLOWANCES" shall mean the retail value of complimentary food,
beverages, merchandise, and tokens for gaming, provided to patrons as
promotional items.
"PROPERTY" shall mean any parcel of land in California identified and mutually
acknowledged in a writing executed by SHINGLE SPRINGS and KAR as suitable for
development of the Facility and operation of the Enterprise which meets the
requirements
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of United States of America in trust for SHINGLE SPRINGS for gaming
purposes as required by the IGRA.
"RELATIVE" shall have the meaning described in Section 10.5.
"SECURITY AND REIMBURSEMENT AGREEMENT" shall mean that agreement to be
entered into between KAR and SHINGLE SPRINGS which shall set out the
security interest of KAR and reimbursement obligation of SHINGLE
SPRINGS relating to the Loan and the Interim Promissory Note.
"STATE" shall refer to the State of California.
"SYSTEM MARKS" shall mean the marks of KAR described in Section 7.2
"SYSTEM FEES" shall mean those fees from time to time established for
KAR Services, as described in Section 4.7.1.
"TEMPORARY GAMING FACILITY" shall mean a Class II and Class III Gaming
facility which, if deemed feasible by KAR and SHINGLE SPRINGS in the
manner described in this and the Development Agreement may be
constructed on an accelerated basis concurrently with the construction
of the permanent Gaming Facility with a goal of opening within the
first 90 to 120 days after the Effective Date. If the parties agree
that it is economically feasible, said facility may also offer Class II
gaming.
"TERM" shall mean the term of this Agreement as described in
Section 3.2.
"TRIBAL LANDS" means all lands presently and in the future held in
trust for SHINGLE SPRINGS and all lands within the confines of the
Shingle Springs Band of Miwok Indians Rancheria and to such lands as
may thereafter be added thereto.
3. COVENANTS. In consideration of the mutual covenants contained in this
Agreement, the parties agree and covenant as follows:
3.1 ENGAGEMENT OF KAR. SINGLE SPRINGS invited KAR to submit a written
proposal and SHINGLE SPRINGS after due consideration hereby retains and
engages KAR as the exclusive Manager of the Enterprise pursuant to the
terms and conditions of this Agreement, and KAR hereby accepts such
retention and engagement, subject to receipt of all necessary
regulatory written approvals.
3.2 TERM. The term of this Agreement shall begin on the date this
Agreement, the Development Agreement and the Interim Promissory Note
and Security and Reimbursement Agreement are approved by the
Chairperson of the NIGC, and/or the BIA, if required, and continue for
a period of five (5) years after the Commencement Date. However, this
five (5) year term shall not be construed to include the period of time
any Temporary Facility may be open. Provided further that the five (5)
year term of this
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Agreement may be extended for an additional two (2) year period at the option of
the KAR in the event KAR completes any of the following: (A) is successful in
providing additional land to SHINGLE SPRINGS in excess of Four Million Two
Hundred Thousand Dollars ($4,200,000), (B) develops a gaming facility and resort
with a cost in excess of One Hundred Million Dollars $100,000,000.00, or (C)
completes the projects described in the Development Agreement to wit:
- 120,000 square feet of building space.
- 3,000 compacted gaming devices and 40 table games (assuming allowed by
Compact).
- Parking garage and flat parking totaling 1,500 spaces.
- Specialty restaurant.
- Food buffet restaurant.
- 24 hour coffee shop.
- Snack bar.
- Retail area.
- Multi-purpose entertainment, bingo, and convention facility.
- Meeting rooms.
- Child care facility.
- Video arcade facility.
- Administrative offices.
- Regulatory authority offices.
- 300 Room hotel with indoor pool & fitness facility.
- RV Park.
- Convenience Store/Gas Station.
The parties understand that market, compact or other governmental
conditions may change and it may be necessary to expand or decrease the scope
of the project before construction is commenced.
3.3 STATUS OF PROPERTY. SHINGLE SPRINGS represents that it will, in accordance
with the terms of the Development Agreement, before the Effective Date and
throughout the Term, and will maintain Property as land held in trust by the
United States of America for the benefit of SHINGLE SPRINGS, eligible as a
location upon which Class II and III Gaming can occur. SHINGLE SPRINGS
covenants, during the term hereof that KAR shall and may peaceably have complete
access to and presence in the Facility in accordance with the terms of this
Agreement, free from molestation, eviction and disturbance by SHINGLE SPRINGS
or by any other person or entity. SHINGLE SPRINGS shall, at SHINGLE SPRINGS
expense, undertake and prosecute all actions, judicial or otherwise, required
to assure such access and presence by KAR.
3.4 KAR COMPLIANCE WITH LAW; LICENSES. KAR covenants that it will at all times
comply with all Legal Requirements, including SHINGLE SPRINGS Gaming Ordinance,
the IGRA, the Compact, California statutes, to the extent applicable, and any
licenses issued under any of the foregoing. SHINGLE SPRINGS shall not
unreasonably
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withhold, delay, withdraw, qualify or condition such licenses as SHINGLE
SPRINGS is authorized to grant.
3.5 AMENDMENTS TO SHINGLE SPRINGS GAMING ORDINANCE. SHINGLE SPRINGS covenants
that any amendments made to SHINGLE SPRINGS Gaming Ordinance will be a
legitimate effort to ensure that Gaming is conducted in a manner that adequately
protects the environment, the public health and safety, and the integrity of the
Enterprise.
Any amendments to SHINGLE SPRING'S Gaming Ordinance which materially and
adversely affects the rights of KAR pursuant to this Agreement which are not in
compliance with this covenant or applicable federal law shall be void ad initio
as to their application to KAR.
3.6 COMPLIANCE WITH COMPACT. The parties shall at all times comply with the
provisions of the Compact.
3.7 FIRE AND SAFETY. KAR shall ensure that the Facility shall be constructed
and maintained in compliance with the Compact or at the option of KAR and
SHINGLE SPRINGS, as mutually agreed, with all fire and safety statutes,
ordinances, and regulations which would be applicable if the Facility were
located outside of the jurisdiction of SHINGLE SPRINGS although those
requirements would not otherwise apply within that jurisdiction. Nothing in
this Section shall grant any jurisdiction to the State of California or any
political subdivision thereof over the Property or the Facility, KAR and
SHINGLE SPRINGS shall be jointly responsible for arranging fire protection and
police services for the Facility.
3.8 COMPLIANCE WITH THE NATIONAL ENVIRONMENT POLICY ACT. With the assistance of
KAR SHINGLE SPRINGS shall supply the NIGC with all information necessary for
the NIGC to comply with the National Environmental Protection Act and the
regulations of the NIGC issued pursuant to the National Environmental Policy Act
(NEPA).
3.9 SATISFACTION OF EFFECTIVE DATE REQUIREMENTS. KAR and SHINGLE SPRINGS each
agree to cooperate and to use their best efforts to satisfy all of the
conditions of the Effective Date at the earliest possible date. SHINGLE SPRINGS
shall adopt a resolution (the "SHINGLE SPRINGS Resolution") reciting that is the
governing law of SHINGLE SPRINGS that the Management Agreement, Loan Agreement,
Note, Interim Promissory Note, Security and Reimbursement Agreement, Development
and the exhibited documents attached thereto are the legal and binding
obligations of SHINGLE SPRINGS, valid and enforceable in accordance with their
terms. KAR agrees to memorialize the satisfaction of each of the following
requirements as well as the Effective Date in writings signed by KAR and
delivered to SHINGLE SPRINGS and to the Chairperson of the NIGC: (i) KAR has
satisfied itself as to the proper ownership and control of the Property and its
suitability for construction and operation of the Facility, and that all of the
Legal Requirements and other requirements for lawful conduct and
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operation of the Enterprise in accordance with this Agreement have been met
and satisfied; and (ii) the satisfactory completion of all necessary and
applicable feasibility studies required for the development, construction
and operation of the Enterprise.
3.10 COMMENCE DATE. KAR shall memorialize the Commencement Date in writing
signed by KAR and delivered to SHINGLE SPRINGS and to the Chairperson of
the NIGC.
4. BUSINESS AND AFFAIRS IN CONNECTION WITH ENTERPRISE.
4.1 KAR's AUTHORITY AND RESPONSIBILITY. KAR shall conduct and direct all
business and affairs in connection with the day to day operation,
management and maintenance of the Enterprise and the Facility, including
the establishment of operating days and hours. KAR is hereby granted the
necessary power and authority to act, through KAR, in order to fulfill all
of its responsibilities under this Agreement. Nothing herein grants or is
intended to grant KAR a titled interest to the Facility or to the
Enterprise. KAR hereby accepts such retention and engagement. SHINGLE
SPRINGS shall have the sole proprietary interest in and ultimate
responsibility for the conduct of all Gaming conducted by the Enterprise,
subject to the rights and responsibilities of KAR under the Agreement.
4.2 DUTIES OF KAR. Under this Agreement, KAR's duties shall include,
without limitation, the following:
4.2.1 PHYSICAL DUTIES. KAR shall use reasonable measures for the
orderly physical administration, management, and operation of the
Enterprise and the Facility, including without limitation cleaning,
painting, decorating, plumbing, carpeting, grounds care and such other
maintenance and repair work as is reasonably necessary.
4.2.2 COMPLIANCE. KAR shall comply with all duly enacted statutes,
regulations and ordinances of SHINGLE SPRINGS.
4.2.3 REQUIRED FILINGS. KAR shall comply with all applicable
provisions of the Internal Revenue Code including, but not limited to,
the prompt filing of any cash transaction reports and the reports that
may be required by the Internal Revenue Service of the United States
or under the Compact.
4.2.4 CONTRACTS IN SHINGLE SPRINGS'S NAME AND AT ARM'S LENGTH.
Contracts for the operations of the Enterprise shall be entered into
in the name of SHINGLE SPRINGS, doing business as the Enterprise, and
signed by the General Manager. Any combination of contract requiring
an expenditure in any year in excess of $500,000 over the budget shall
be approved by the Tribal Council. No contracts of any amount, for the
supply of goods or services to the Enterprise shall be entered into
with an Affiliate of KAR unless that affiliation is disclosed to and
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approved by the Tribal Council, and the contract terms are no less
favorable for the Enterprise than could be obtained from a nonaffiliated
contractor. Notwithstanding anything to the contrary contained herein,
contracts for the supply of any goods or services paid for entirely by KAR
may be provided by an Affiliate of the KAR, provided that payments on such
contracts shall not constitute Operating Expenses and shall be the sole
responsibility of KAR and the Tribal Council shall be notified of any such
contracts. Nothing contained in this Section 4.2.4 shall be deemed to be
or constitute a waiver of SHINGLE SPRINGS's sovereign immunity. The General
Manger shall not have the authority to waive Shingle Springs sovereign
immunity.
4.2.5 ENTERPRISE OPERATING STANDARDS. KAR shall operate the Enterprise in
a proper, efficient and competitive manner in accordance with operating
standards which are consistent with the operating standards of the casino
resort industry.
4.3 SECURITY. KAR shall provide for appropriate security of the operation of
the Enterprise. All aspects of the Facility security shall be the
responsibility of KAR. Any security officer shall be bonded and insured in an
amount commensurate with his or her enforcement duties and obligations. The
cost of any charge for security and increased public safety services will be an
Operating Expense. All resources of the surveillance department shall be fully
accessible to the Shingle Springs Gaming Commission at all times. The
Commission shall have the authority to require that department to cooperate in
all investigations, to turn over any and all video and audio recordings, to
turn over any operations logs, and any other documentation kept in the normal
course of business by that department, and to visually monitor any facet of the
gaming operations.
4.4 DAMAGE, CONDEMNATION OR IMPOSSIBILITY OF THE ENTERPRISE. If, during the
term of this Agreement, the Facility is damaged or destroyed by fire, war, or
other casualty, or by an Act of God, or is taken by condemnation or sold under
the threat of condemnation, or if Gaming on the Property is prohibited as a
result of a decision of a court of competent jurisdiction or by operation of any
applicable legislation, KAR shall have the following options:
4.4.1 RECOMMENCEMENT OF OPERATIONS. If Gaming on the Property is
prohibited by Legal Requirements, KAR shall have the option to continue its
interest in this Agreement and to commence or recommence the operation of
Gaming at the Facility if, at some point during the Term of this Agreement,
such commencement or recommencement shall be legally and commercially
feasible in the sole judgement of KAR.
4.4.2 REPAIR OR REPLACEMENT. If the Facility is damaged, destroyed or
condemned so that Gaming can no longer be conducted at the Facility, the
Facility shall be reconstructed if the insurance or condemnation proceeds
are sufficient to restore or replace the Facility to a condition at least
comparable to that before the casualty occurred. If KAR elects to
reconstruct the Facility and if the insurance
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proceeds or condemnation awards are insufficient to reconstruct the Facility to
such condition, KAR may, in its sole discretion, advance such additional funds
as are necessary to reconstruct the Facility to such condition and such fund
shall, with the prior consent of SHINGLE SPRINGS and the BIA or NIGC, as
appropriate, constitute a loan to SHINGLE SPRINGS, secured by the revenues from
the Enterprise and repayable upon such terms as may be agreed upon by SHINGLE
SPRINGS and KAR. SHINGLE SPRINGS may also elect to advance funds or borrow funds
from a third party to reconstruct the Facility and such funds shall constitute a
loan to the Enterprise repayable as an operating expense upon such terms as may
be agreed upon by SHINGLE SPRINGS and KAR. The loan provided for herein shall
not be subject to the ceiling set forth in the Development Agreement. If the
insurance proceeds are not sufficient and are not used to repair the Facility,
SHINGLE SPRINGS and KAR shall jointly adjust and settle any and all claims for
such insurance proceeds or condemnation awards, and such proceeds or award shall
be applied first, to the amounts due under the Note or Security and
Reimbursement Agreement (including principal and interest); second, any other
loans; third, any undistributed Net Revenues pursuant to Section 6 of this
Agreement, and fourth, any surplus shall be distributed to SHINGLE SPRINGS.
4.4.3 OTHER BUSINESS PURPOSES. KAR shall have the option to use the
Facility for other purposes provided the Tribal Council has approved such
purposes (which written approval shall not be unreasonably withheld). For any
purpose other than Gaming, KAR shall obtain all written approvals necessary
under applicable law.
4.4.4 TERMINATION OF GAMING. KAR shall have the option at any time within a
sixty (60) day period following the cessation of Gaming on the Property to
notify SHINGLE SPRINGS in writing that it is terminating operations under this
Agreement, in which case KAR shall retain any rights KAR may have to
undistributed Net Revenues pursuant to Section 6 prior to the date of
termination of this Agreement and rights to repayments of amounts owed to it.
If KAR does not elect to terminate this Agreement, it may take whatever action
may be necessary to reduce expenses during such termination of Gaming.
4.4.5 TOLLING OF THE AGREEMENT. If, after a period of cessation of Gaming
on the Property, the recommencement of Gaming is possible, and if KAR has not
terminated this Agreement under the provisions of Section 4.4.4, the period of
such cessation shall not be deemed to have been part of the term of this
Agreement and the date of expiration of the term of this Agreement shall be
extended by the number of days of such cessation. Any reasonable payments
agreed upon by the Tribal Council or made to any third party to eliminate
rights acquired in the Property, the Facility or the Business during the period
of cessation or to eliminate or cure the problems which caused the cessation of
Gaming shall constitute Operating Expenses of the Business.
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4.5 ALCOHOLIC BEVERAGES AND TOBACCO SALES. During the term of this Agreement
alcoholic beverages may be served at the Facility if permissible in accordance
with applicable law. The parties acknowledge that no enabling SHINGLE SPRINGS
legislation for the sale of alcoholic beverages is now in force, and that such
legislation would be necessary in order to serve alcoholic beverages at the
Facility. If such legislation is subsequently enacted, and if other requisite
written approvals are obtained, SHINGLE SPRINGS and a KAR may mutually agree to
include service of such beverages within the Enterprise. Tobacco may be sold at
the Facility subject to and in accordance with SHINGLE SPRINGS's licensing
requirements, if any.
4.6 EMPLOYEES.
4.6.1 KAR'S RESPONSIBILITY. Except as limited by Section 4.6.3 or other
specific provisions of this Agreement, the KAR shall have, subject to the
terms of this Agreement, the exclusive responsibility and authority to
direct the selection, control and discharge of all employees performing
regular services for the Enterprise in connection with maintenance,
operation, and management of the Enterprise and the Facility and any
activity upon the Property; and the sole responsibility for determining
whether a prospective employee is qualified and the appropriate level of
compensation to be paid, subject to the requirement of Section 4.6.7.
4.6.2 ENTERPRISE EMPLOYEE POLICIES. KAR shall prepare a draft of personnel
policies and procedures (the "Enterprise Employee Policies"), including a
job classification system with salary levels and scales, which policies and
procedures shall be subject to written approval by the Tribal Council. The
Enterprise Employee Policies shall include a grievance procedure in order
to establish fair and uniform standards for the employees of SHINGLE
SPRINGS engaged in the Enterprise, which will include procedures for the
resolution of disputes between the KAR and the Enterprises as set forth in
Exhibit A attached hereto. Any revisions to the Enterprise Employee
Policies shall not be effective unless they are approved in the same manner
as the original Enterprise Employee Policies. All such actions shall comply
with applicable SHINGLE SPRINGS law.
4.6.3 KEY EMPLOYEES. The selection of the General Manager following the
recommendation by KAR shall be subject to the written approval of the
SHINGLE SPRINGS Tribal Council or its authorized designee and approval
shall not be unreasonably withheld. KAR and SHINGLE SPRINGS expect that
initially, in addition to this person, there will be a core group of
employees working for the Enterprise, filling the positions set forth at
Exhibit B (collectively, the "Key Employees"). The salaries and benefits of
these Key Employees shall be subject to written approval by the Tribal
Council and shall be an Operating Expense of the Enterprise. Nothing
contained herein is intended to limit KAR's right to reasonably consolidate
or eliminate any of these positions, or, subject to
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Section 4.6.9 and subject to the written approval of the Tribal Council, to
increase the number of Key Employees.
4.6.4 OFF-SITE EMPLOYEES. Subject to written approval of the Tribal Council,
KAR shall also have the right to use employees of KAR and KAR's Affiliates not
located at the Facility to provide services to the Enterprise ("Off-Site
Employees"). All expenses, costs (including, but not limited to, salaries and
benefits, but excluding pension, retirement, severance or similar benefits),
which are related to such Off-Site Employees shall be subject to the Operating
Budget approved by the Tribal Council, and shall be treated as Pre-Opening
Expenses or Operating Expenses as appropriate.
4.6.5 NO KAR WAGES OR SALARIES. Except as otherwise provided with respect to
Key Employees described in Section 4.6.3 and Off-Site Employees described in
Section 4.6.4, neither KAR nor KAR's Affiliates nor any of their officers,
directors, shareholders, or employees shall be compensated by wages from or
contract payments by the Enterprise for their efforts or for any work which
they perform under this Agreement, other than loan repayments, reimbursement
pursuant to the Security and Reimbursement Agreement and the Management Fee to
be paid to KAR under Section 6.1. Nothing in this subsection shall restrict the
ability of an employee of the Enterprise to purchase or hold stock in KAR, or
KAR's Affiliates where (i) such stock is publicly held, and (ii) such employee
acquires, on a cumulative basis, less than five percent (5%) of the outstanding
stock in the corporation.
4.6.6 SHINGLE SPRINGS REGULATORY AUTHORITY (COSTS). The funding of the
operation of SHINGLE SPRINGS Regulatory Authority shall, prior to the
Commencement Date, be a start up expense of the Enterprise and thereafter shall
be an Operating Expense. The budget for the SHINGLE SPRINGS Regulatory
Authority shall be in an amount which reasonably reflects the cost of operating
of this Agency up to a maximum cost of one quarter of one percent (0.25%) of
Gross Gaming Revenue, but in no event shall this payment be less than $200,000
if Class III gaming is operated. Subject to the minimum and maximum amount
described above, payments of 25% of the SHINGLE SPRINGS Regulatory Authority's
annual approved budget shall be payable to SHINGLE SPRINGS bank account
specified by the Tribal Council in a notice to KAR pursuant to the Notices
Section of this Agreement on January 21st, April 21st, July 21st and October
21st of each calendar year. Such payments shall not be combined with any other
payments to SHINGLE SPRINGS and said regulatory expense shall be an operating
expense.
4.6.7 EMPLOYEE BACKGROUND CHECKS. A background investigation shall be
consistent with the IGRA, the Compact and the Minimum Internal Controls
conducted by the SHINGLE SPRINGS Regulatory Authority in compliance with all
Legal Requirements, to the extent applicable, on each applicant for
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employment as soon as reasonably practicable.
No individual whose prior activities, criminal record, if any, or reputation,
habits and association are known to pose a threat to the public interest, the
effective regulation of Gaming, or to the gaming licenses of KAR or any or its
Affiliates, or to create or enhance the dangers of unsuitable, unfair or
illegal practices and methods and activities in the conduct of Gaming, shall
knowingly be employed by KAR.
The background investigation procedures employed by the SHINGLE SPRINGS
Regulatory Authority shall be formulated in consultation with KAR and shall
satisfy all regulatory requirements independently applicable to KAR. Any cost
associated with obtaining such background investigations shall constitute an
Operating Expense, provided, however, the costs of background investigations
relating to KAR, its Affiliates and the shareholders, officers and directors of
KAR or its Affiliates shall be borne solely by KAR, and shall not be treated as
part of the Loan or as Operating Expenses of the Enterprise.
4.6.8 INDIAN PREFERENCE, RECRUITING AND TRAINING. KAR shall, during the term
of this Agreement, to the extent permitted by applicable law, including but not
limited to the Indian Civil Rights Act, 25 U.S.C. Section 1301 et. seq., give
preference in recruiting, training and employment to qualified Indians who
reside on or near the lands within the confines of the Shingle Springs Rancheria
and to such land as may hereafter be added thereto as provided in the
Constitution of SHINGLE SPRINGS in all job categories of the Enterprise. KAR
shall:
(i) conduct job fairs and skills assessment meetings for SHINGLE SPRINGS
members;
(ii) in consultation with and subject to the written approval of SHINGLE
SPRINGS, develop a management training program. This program shall be
structured to provide appropriate training for those participating to
assume full managerial control at the conclusion of the Term of this
Agreement; and
(iii) train and hire, to the maximum extent permitted by law, members of
the local communities where the Facility is located. Final determination
of the qualifications of all persons for employment shall be made by KAR,
subject to any licensing requirements of SHINGLE SPRINGS Regulatory
Authority.
(v) Within two hundred seventy (270) days of the Commencement Date, KAR
shall develop and present to SHINGLE SPRINGS for its written approval, a
training plan designed to progressively reduce the number of KAR Employees,
so that, by the end of the Term of the
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Agreement, all Enterprise Employees will be SHINGLE SPRINGS
Employees.
4.6.9 GOALS AND REMEDIES. All hiring for the Enterprise shall be done
by KAR, based on the hiring policies established by the parties in
consultation with each other.
4.6.10 REMOVAL OF EMPLOYEES. KAR will act in accordance with the
Enterprise Employee Policies with respect to the discharge, demotion
or discipline of any Enterprise Employee.
4.6.11 INDIAN PREFERENCE CONTRACTING. KAR shall during the term of
this Agreement, to the extent permitted by applicable law, including
but not limited to the Indian Civil Rights Act, 25 U.S.C. 1301 et. Seq.,
give preference in contracting for goods and services for the Enterprise
to qualified Indians who reside on or near the lands within the confines
of the Shingle Springs Rancheria and to such land as may hereafter be
added thereto as provided in the Constitution of Shingle Springs. Qualified
shall mean a person who is able to provide the same quality services and
has demonstrated skills and abilities to perform the tasks to be undertaken
in an acceptable manner, as non-Indian competitors at competitive prices,
and shall be able to meet the bonding requirements of KAR and the
Enterprise.
4.7 OPTIONAL SERVICES. SHINGLE SPRINGS acknowledges that KAR and KAR's
Affiliates may provide services in addition to those which are encompassed by
this Agreement. SHINGLE SPRINGS agrees to consider in good faith any
bids/proposals presented to it by KAR or any of KAR's Affiliates to provide any
such additional services to the Enterprise, it being understood, however, that
this Section shall in no event be construed to require SHINGLE SPRINGS to
accept any such bid/proposal.
4.8 PRE-OPENING. Six (6) months prior to the scheduled Commencement Date, KAR
shall commence implementation of a pre-opening program which shall include all
activities necessary to financially and operationally prepare the Facility for
opening. To implement the pre-opening program, KAR shall prepare a
comprehensive pre-opening budget which shall be submitted to the Tribal Council
for their written approval no later than seven (7) months prior to the
scheduled Commencement Date ("Pre-Opening Budget"). The Pre-Opening Budget sets
forth expenses which KAR anticipates to be necessary or desirable in order to
prepare the Facility for the Commencement, including without limitation, cash
for disbursements, Furnishings and Equipment, initial Operating Equipment and
Operating Supplies, hiring, training, relocation and temporary lodging of
employees, advertising and promotion, office overhead and office space (whether
on or off the Property), and travel and business entertainment (including
opening celebrations and ceremonies) ("Pre-Opening Expenses"). SHINGLE SPRINGS
recognizes that the Pre-Opening Budget has been prepared well in advance of
Commencement and is intended only to be a reasonable estimate, subject to
variation due to a number of factors,
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some of which will be outside of KAR's control (e.g. the time of completion,
inflationary factors and varying conditions for the goods and services
required). SHINGLE SPRINGS agrees that the Pre-Opening Budget may be modified
from time to time, subject to written approval of SHINGLE SPRINGS in accordance
with the procedure established by Article 4.9 of this Agreement for adjustments
to the Operating Budget and Annual Plan.
4.9 OPERATING BUDGET AND ANNUAL PLAN. KAR shall, prior to the scheduled
Commencement Date, submit to the Tribal Council, for its written approval, a
proposed Operating Budget and Annual Plan for the remainder of the current
Fiscal Year. Thereafter, KAR shall, not less than sixty (60) days prior to the
commencement of each full or partial Fiscal Year, submit to the Tribal Council,
for its written approval, a proposed Operating Budget and Annual Plan for the
ensuing full or partial Fiscal Year, as the case may be. The Operating Budget
and Annual Plan shall include a projected income statement, balance sheet, and
projection of cash flow for the Enterprise, with detailed justifications
explaining the assumptions used therein and included with the Operating Budget
and Annual Plan be a schedule of repairs and maintenance (other than Capital
Replacements), a business and marketing plan for the Fiscal Year, and the
Minimum Balance which must remain in the Bank Account and the Facility Bank as
of the end of each month during the Fiscal Year to assure sufficient monies for
working capital purposes, the Facility Bank and other expenditures authorized
under the Operating Budget and Annual Plan.
The Operating Budget and Annual Plan for the Enterprise will be comprised of
the following:
(a) a statement of the estimated income and expenses for the coming
Fiscal Year, including estimates as to Gross Revenues and Operating
Expenses for such Fiscal Year, such operating budget to reflect the
estimated results of the operation during each Fiscal Month of the
subject Fiscal Year;
(b) either as part of the statement of the estimated income and expenses
referred to in the preceding clause (a), or separately, budgets (and
timetables and requirements of KAR) for:
(i) repairs and maintenance;
(ii) Capital Replacements;
(iii) Operating Equipment;
(iv) advertising and business promotion programs for the Casino;
and
(v) the estimated cost of Promotional Allowances; and
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(c) a business and marketing plan for the subject Fiscal Year.
The Tribal Council's written approval of the Operating Budget and Annual Plan
shall not be unreasonably withheld or delayed. KAR shall meet with the Tribal
Council to discuss the proposed Operating Budget and Annual plan and the Tribal
Council's written approval shall be deemed given unless a specific written
objection thereto is delivered by the Tribal Council to KAR within fifteen
(15) days after KAR and the Tribal Council have met to discuss the proposed
Operating Budget and Annual Plan. If the Tribal Council for any reason decline
to meet with KAR to discuss a proposed Operating Budget and Annual Plan, the
Tribal Council shall be deemed to have consented unless a specific written
objection is delivered to KAR within fifteen (15) days after the date the
proposed Operating Budget and Annual Plan is submitted to the Tribal Council.
The Tribal Council shall review the Operating Budget and Annual Plan on a
line-by-line basis: To be effective, any notice which disapproves a proposed
Operating Budget and Annual Plan must contain specific objections in reasonable
detail to individual line items.
If the initial proposed Operating Budget and Annual Plan contains
disputed budget item(s), the Tribal Council and the KAR agree to
cooperate with each other in good faith to resolve the disputed or
objectionable proposed item(s). In the event the Tribal Council and the
KAR are not able to reach mutual agreement concerning any disputed or
objectionable item(s) within twenty one (21) days after the date SHINGLE
SPRINGS representatives on the Tribal Council provides written notice of
its objection to KAR, either party shall be entitled to submit the
dispute to arbitration in accordance with Section 17.1. If the Tribal
Council and KAR are unable to resolve the disputed or objectionable
item(s) prior to the commencement of the applicable fiscal year, the
undisputed portions of the proposed Operating Budget and Annual Plan
shall be deemed to be adopted and approved and the corresponding line
item(s) contained in the Operating Budget and Annual Plan for the
preceding fiscal year shall be adjusted as set forth herein and shall be
substituted in lieu of the disputed item(s) in the proposed Operating
Budget and Annual Plan. Those line items which are in dispute shall be
determined by increasing the preceding fiscal year's actual expense for
the corresponding line items by an amount determined by KAR which does
not exceed the Consumer Price Index for All Urban Consumers published by
the Bureau of Labor Statistics of the United States Department of Labor,
U.S. City Average, all items (1982-1984=100) for the fiscal year prior to
the fiscal year with respect to which the adjustment to the line item(s)
is being calculated or any successor or replacement index thereto. The
resulting Operating Budget be deemed to be the Operating Budget and
annual Plan in effect until such time as KAR and the Tribal Council have
resolved the items objected to by the Tribal Council.
4.9.1 ADJUSTMENTS TO OPERATING BUDGET AND ANNUAL PLAN. KAR may, after notice
to and written approval by the Tribal Council, revise the Operating Budget and
annual Plan from time to time, as necessary, to reflect any unpredicted
significant changes, variables
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or events or additional, unanticipated items of expense. KAR may, after notice
to the Tribal Council, reallocate part of all of the amount budgeted with
respect to any line item to another line item and to make such other
modifications to the Operating Budget and Annual Plan as KAR deems necessary,
provided that the total adjustments to the Operating Budget and Annual Plan
shall not exceed one hundred ten percent (110%) of the aggregate approved
Operating Budget and Annual Plan without written approval of the Tribal Council.
KAR shall submit a revision of the Operating Budget and Annual Plan to the
Tribal Council for review on a quarterly basis. In addition, in the event actual
Gross Revenues for any fiscal period are greater than those provided for in the
Operating Budget and annual Plan, the amounts approved in the Operating Budget
and Annual Plan for guest services, food and beverage, telephone, utilities,
marketing and the repair and maintenance of the Facility for any fiscal month
shall be automatically deemed to be increased to an amount that bears the same
relationship (ratio) to the amount budgeted for such items as actual Gross
Revenue for such fiscal month. SHINGLE SPRINGS acknowledges that the Operating
Budget and Annual Plan is intended only to be a reasonable estimate of the
Enterprise's revenues and expenses for the ensuing Fiscal Year. KAR shall not be
deemed to have made any guarantee concerning projected results contained in the
Operating Budget and Annual Plan.
4.10 CAPITAL BUDGETS. KAR shall, not more than sixty (60) days or less than
thirty (30) days prior to the Commencement of each fiscal year, or partial
fiscal year, submit to the Tribal Council a recommended "Capital Budget"
describing the present value, estimated useful life and estimated replacement
costs for the ensuing full or partial year, as the case may be, for the
Property, Furnishings, Equipment, and ordinary Capital Replacement items, all of
which are defined to be any items, the cost of which is capitalized and
depreciated, rather than expensed, using GAAP ("Capital Replacements") as shall
be required to operate the Enterprise in accordance with sound business
practices. Capital Replacements in the Capital Budget in an aggregate sum equal
to or less than the sum of the Capital Replacement Reserve for the fiscal Year
shall be recommended by KAR and approved by the Tribal Council; and any amounts
in excess of the Capital Replacement Reserve for the Fiscal Year shall be
subject to written approval of the Tribal Council. The Tribal Council, and KAR
shall meet to discuss the proposed Capital Budget and the Tribal Council shall
be required to make specific written objections to a proposed Capital Budget in
the same manner and within the same time periods specified in Section 4.9 with
respect to an Operating Budget and Annual Plan. The Tribal Council shall not
unreasonably withhold or delay its consent. KAR shall be responsible for the
design and installation of Capital Replacements, subject to the Tribal
Council's written approval, and inspection, which approval shall not be
unreasonably withheld.
4.11 CAPITAL REPLACEMENTS. SHINGLE SPRINGS shall effect and expend such amounts
for any Capital Replacements as shall be required, in the course of the
operation of the Enterprise, to maintain, at a minimum, the Enterprise in
compliance with any Legal Requirements and to comply with KAR's recommended
programs for renovation, modernization and improvement intended to keep the
Enterprise competitive in its market, or to correct any condition of an
emergency nature, including without limitation,
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maintenance, replacements or repairs which are required to be effected by
SHINGLE SPRINGS, which in KAR's sole discretion requires immediate action to
preserve and protect the comfort, health, safety and/or welfare of the
Facility's guests or employees (an "Emergency Condition"); provided, however,
that SHINGLE SPRINGS shall be under no obligation to fund Capital Replacements
in aggregate amount greater than its periodic required contributions to the
Capital Replacement Reserve described in Section 4.12. KAR is authorized to
take all steps and to make all expenditures from the Disbursement Account,
described at Section 4.17.3 (in the case of non-capitalized repairs and
maintenance), or Capital Replacement Reserve, described in Section 4.12, (in
the case of expenditures for Capital Replacements) as it deems necessary to
repair and correct any Emergency Condition, regardless whether such provisions
have been made in the Capital Budget or the Operating Budget and Annual Plan
for any such expenditures; or the cost thereof may be advanced by KAR and
reimbursed from future revenues. Design and installation of Capital
Replacements shall be effected in a time period and subject to such conditions
as the KAR may establish to minimize interference with or disruption of ongoing
operations.
4.12 CAPITAL REPLACEMENT RESERVE. KAR shall establish a Capital Replacement
Reserve on the books of account of the Enterprise, and the cash contributions
required by Section 4.13 shall be deposited by the KAR into an account (the
"Capital Replacement Reserve") established in SHINGLE SPRINGS's name at a bank
designated by the Tribal Council. All amounts in the Capital Replacement Reserve
shall be invested in interest bearing investments in accordance with the
Enterprise Investment Policy set forth in Exhibit C to this Agreement to the
extent that availability of funds, when required, is not thereby impaired.
Interest earned on amounts deposited in the Capital Replacement Reserve shall be
credited to the Capital Replacement Reserve and shall be available for payment
of expenditures for Capital Replacements to the Facility. KAR shall draw on the
Capital Replacement Reserve for Capital Replacements to purchase those items
included in the "Capital Budget" approved by the Tribal Council or such
emergency additions of replacements as shall be required to keep the Enterprise
in compliance with legal requirements or such emergency additions or
replacements necessary to protect the comfort, health, safety or welfare of the
Facility's guests or employees.
4.13 PERIODIC CONTRIBUTIONS TO CAPITAL REPLACEMENT RESERVE. Deposits into
the Capital Replacement Reserve Equivalent to an annual rate of 1% (one
percent) of Gross Revenues during the first two years of the Term of this
Agreement after the Commencement Date and equivalent to an annual rate of 2%
(two percent) of Gross Revenues during the remainder of the Term, and shall be
made monthly. The cash amounts required to be so deposited shall be calculated
and deposited into the Capital Replacement Reserve, in arrears, no later than
the twenty-first (21st) day of the month immediately following the month with
respect to which a deposit is made. If any adjustments of Gross Revenues is
made as a result of an audit or for other accounting reasons, a corresponding
adjustment in the Capital Replacement Reserve deposit shall be made. In
addition, all proceeds from the sale of capital items no longer needed for the
operation of the Enterprise, and the proceeds of any insurance received in
reimbursement
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for any items previously paid for from the Capital Replacement Reserve, shall
be deposited into the Capital Replacement Reserve upon receipt, and said
Capital Replacement Reserve shall be an operating expense.
4.14 USE AND ALLOCATION OF CAPITAL REPLACEMENT RESERVE. Any expenditures for
Capital Replacements which have been budgeted and previously approved may be
paid from the Capital Replacement Reserve without further written approval from
SHINGLE SPRINGS. Any amounts remaining in the Capital Replacement Reserve at the
close of any year shall be carried forward and retained in the Capital
Replacement Reserve until fully used. If amounts in the Capital Replacement
Reserve at the end of any year plus the anticipated contributions to the Capital
Replacement Reserve for the next ensuing year are not sufficient to pay for
Capital Replacements authorized by the Capital Budget for such ensuing year,
then additional funds, in the amount of the projected deficiency, may be
advanced by the KAR and reimbursed by the Enterprise from future revenues.
4.15 INTERNAL CONTROL SYSTEMS. KAR shall install systems for monitoring of
all funds (the "Internal Control Systems"), which systems shall comply with all
Legal Requirements included in SHINGLE SPRING's Minimum Internal Controls, and
shall be submitted to SHINGLE SPRINGS Regulatory Authority for written approval
in advance of implementation, which written approval shall not be unreasonably
withheld. SHINGLE SPRINGS shall retain the right to review all Internal Control
Systems and any changes instituted to the Internal Control Systems of the
Enterprise. SHINGLE SPRINGS shall have the right to retain an auditor to review
the adequacy of the Internal Control Systems prior to the Commencement Date.
The cost of such review shall be a Pre-Opening Expense. Any changes in such
systems after the Commencement Date also shall be subject to review and written
approval by SHINGLE SPRINGS Regulatory Authority SHINGLE SPRINGS Regulatory
Authority and KAR shall have the right and duty to maintain and police the
Internal Control Systems in order to prevent any loss of proceeds from the
Enterprise. SHINGLE SPRINGS Regulatory Authority shall have the right to
inspect and oversee the Internal Control System at all times. KAR shall install
a closed circuit television system to be used for monitoring the cash handling
activities of the Enterprise sufficient to meet all Legal Requirements.
4.16 BANKING AND BANK ACCOUNTS.
4.16.1 BANK ACCOUNTS. The Tribal Council shall select, and the Tribal
Council shall approve, a bank or banks for the deposit and maintenance of
funds and shall establish in such bank or banks accounts as KAR deems
appropriate and necessary in the course of business and as consistent with
this Agreement ("Enterprise Bank Accounts"). Establishment of any
Enterprise Bank Account shall be subject to the written approval of the
Tribal Council. The sum of money agreed to by the Tribal Council to be
maintained in the Enterprise Bank Account(s) to serve as working capital
for Enterprise operations, shall include all sums needed for the Facility
Bank, and all sums needed to accrue for payment of expenses not paid on a
monthly basis (the "Minimum Balance"). Attached hereto
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as Exhibit D is the form of Irrevocable Banking Instructions to be executed
by SHINGLE SPRINGS with regard to each Enterprise Bank Account and to be in
effect during the Term of this Agreement.
4.16.2 DAILY DEPOSITS TO DEPOSITORY ACCOUNT. KAR shall establish for the
benefit of SHINGLE SPRINGS in the Enterprise's name a Depository Account.
KAR shall collect all gross revenues and other proceeds connected with or
arising from the operation of the Enterprise, the sale of all products,
food and beverage, and all other activities of the Enterprise and deposit
the related cash daily into the Depository Account at least once during
each 24-hour period. All money received by the Enterprise on each day that
it is open must be counted at the close of operations for that day or at
least once during each 24-hour period. KAR agrees to obtain a bonded
transportation service to effect the safe transportation of the daily
receipts to SHINGLE SPRINGS, which expenses shall constitute an Operating
Expense.
4.16.3 DISBURSEMENT ACCOUNT. KAR shall establish for the benefit of
SHINGLE SPRINGS in the Enterprise's name a Disbursement Account. KAR shall,
constitute with and pursuant to the approved annual Operating Budget and
Annual Plan, have responsibility and authority for making all payments for
Operating Expenses, debt service, management fees, and disbursements to
SHINGLE SPRINGS from the Disbursement Account.
4.16.4 NO CASH DISBURSEMENTS. KAR shall not make any cash disbursements
from the Enterprise Bank Accounts except for the payment of cash prizes of
$7,000 or less; and except for such cash disbursements, any and all
additional cash prizes and all payments or disbursements by the KAR shall
be made by check or wire transfer drawn against an Enterprise Bank Account.
4.16.5 TRANSFERS BETWEEN ACCOUNTS. KAR has the authority to transfer
funds from and between the Enterprise Bank Accounts to the Disbursement
Account in order to pay Operating Expenses and to pay debt service pursuant
to the Loan Agreement and Note, the Security and Reimbursement Agreement,
the Development Agreement, to invest funds in accordance with the
Enterprise Investment Policy and to pay the fees payable to KAR pursuant to
this Agreement.
4.17 INSURANCE. KAR, on behalf of SHINGLE SPRINGS, shall have the
responsibility to arrange for, obtain and maintain, or cause it agents to
maintain, with responsible insurance carriers licensed to do business in the
State of California, insurance satisfactory to KAR and the Tribal Council
covering the Facility and the operations of the Enterprise, naming SHINGLE
SPRINGS, the Enterprise, KAR, and KAR's Affiliates as insured parties, in at
least the amounts which are set forth in Exhibit E.
4.18 ACCOUNTING AND BOOKS OF ACCOUNT.
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4.18.1 STATEMENTS. KAR shall prepare and provide to the Tribal Council on a
monthly, quarterly, and annual basis, operating statements. The operating
statements shall comply with all Legal Requirements and shall include an income
statement, statement of cash flows, and balance sheet for the Enterprise. Such
statements shall include Operating Budget and Annual Plan and Capital Budget
projections as comparative statements, and which, after the first full year of
operation, will include comparative statements from the comparable period for
the prior year of all revenues, and all other amounts collected and received,
and all deductions and disbursements made therefrom in connection with the
Enterprise.
4.18.2 BOOKS OF ACCOUNT. KAR shall maintain full and accurate books of
account at an office in the Facility and at such other location as may be
determined by KAR. SHINGLE SPRINGS shall have access to the daily operations of
the Enterprise and shall have the unlimited right to inspect, examine, and copy
all such books and supporting business records. Such rights may be exercised
through SHINGLE SPRINGS Regulatory Agency or through an agent, employee,
attorney, or independent accountant acting on behalf of the Tribal Council or
SHINGLE SPRINGS's Gaming Regulatory Agency.
4.18.3 ACCOUNTING STANDARDS. KAR shall maintain the books and records
reflecting the operations of the Enterprise in accordance with the accounting
practices of KAR in conformity with Generally Accepted Accounting Principles
consistently applied and shall adopt and follow the fiscal accounting periods
utilized by KAR in its normal course of business (i.e., a month, quarter and
year prepared in accordance with the Enterprise Fiscal Year). The accounting
systems and procedures shall comply with Legal Requirements and, at a minimum:
(i) include an adequate system of internal accounting controls;
(ii) permit the preparation of financial statements in accordance
with generally accepted accounting principles;
(iii) be susceptible to audit;
(iv) permit the calculation and payment of the Management Fee
described in Section 6; and
(v) provide for the allocation of operating expenses or overhead
expenses among SHINGLE SPRINGS, the Enterprise, and any
other user of shared facilities and services.
4.18.4 ANNUAL AUDIT. An independent certified public accounting firm
selected by SHINGLE SPRING's Gaming Regulatory Agency and Tribal Council and
KAR shall perform an annual audit of the books and records of the Enterprise and
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of all contracts for supplies, services or concessions reflecting
Operating Expenses. SHINGLE SPRINGS's Gaming Regulatory Agency and
Tribal Council, the BIA and the NIGC shall also have the right to
perform special audits of the Enterprise on any aspect of the
Enterprise at any time without restriction. The costs incurred for such
audits shall constitute an Operating Expense. Such audits shall be
provided by SHINGLE SPRINGS to all applicable federal and state
agencies, as required by law, and may be used by KAR for reporting
purposes under federal and state securities laws, if required.
4.19 RETAIL SHOPS AND CONCESSIONS. With respect to the operation of the
shops and concessions located within the Facility the Tribal Council shall
approve in advance in writing the specific type or types of shops or
concessions proposed by KAR to be authorized for inclusion in the Facility,
which approval shall not be unreasonably withheld.
5. LIENS. Subject to the exceptions hereinafter stated in Section 5.1, SHINGLE
SPRINGS specifically warrants and represents to KAR that during the term of
this Agreement SHINGLE SPRINGS shall not act in any way whatsoever, either
directly or indirectly, to cause any one to become an encumbrance or lienholder
of the Property or the Facility, other than KAR or Lender, or to allow any one
to obtain any interest in this Agreement without the prior written consent of
KAR, and, where applicable, consent from the United States. KAR specifically
warrants and represents to SHINGLE SPRINGS that during the term of this
Agreement, KAR shall not act in any way, directly or indirectly, to cause any
one to become an encumbrance or lienholder of the Property or the Facility, or
to obtain any interest in this Agreement without prior consent of SHINGLE
SPRINGS, and, where applicable, the United States. SHINGLE SPRINGS and KAR
shall keep the Facility and Property free and clear of all enforceable
mechanics' and other enforceable liens resulting from the construction of the
Facility and all other enforceable liens which may attach to the Facility or
the Property, which shall at all times remain the property of the United States
in trust for SHINGLE SPRINGS. If any such lien is claimed or filed, it shall be
the duty of SHINGLE SPRINGS to discharge or take the legal action to contest
the claim or the lien within thirty (30) days after having been given written
notice of such claim, either by payment to the claimant, by the posting of a
bond and the payment into the court of the amount necessary to relieve and
discharge or stay such claim, or in any other manner which will result in the
discharge or stay of such claim, and KAR is authorized to act in behalf of
SHINGLE SPRINGS to discharge any liens if SHINGLE SPRINGS fails to take
appropriate action towards that goal within that 30 day period. It is
understood that this shall not apply to the Tribe's portion of the Net Revenues
after transferred to SHINGLE SPRINGS.
5.1 EXCEPTIONS. SHINGLE SPRINGS shall have the right to grant security
interests in Enterprise revenues subordinated to the interests of the KAR
pursuant to the Security and Reimbursement Agreement, as well as priority
security interests in any Facility assets other than personal property
purchased with the proceeds of the Loan, but only if such security interests
are granted to secure loans made to and for the benefit of the Enterprise,
and KAR has been offered a prior opportunity to make such loans on similar
financial terms.
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6. MANAGEMENT FEE, REIMBURSEMENTS, DISBURSEMENTS, AND OTHER PAYMENTS BY KAR.
6.1 MANAGEMENT FEE. Subject to the provisions of Section 6.4, on or before
the twenty-first (21st) day of each month after the first calendar month of
operation, KAR is authorized by SHINGLE SPRINGS to pay itself from the
Enterprise SHINGLE SPRINGS Account(s) a fee equal to thirty percent (30%)
of Net Revenues for the prior calendar month.
6.2 DISBURSEMENTS. As and when received by KAR, Gross Revenues shall be
deposited in the Depository Account created pursuant to Section 4.16.2 of
this Agreement. There shall, in turn, be disbursed by KAR, on a monthly
basis, for and on behalf of SHINGLE SPRINGS, funds from the Enterprise Bank
Account(s) to pay, to the extent available, Operating Expenses and required
deposits into the Capital Replacement Reserve for Capital Replacements.
KAR will reserve funds in the Enterprise in amounts equal to the Minimum
Balance, and KAR may increase the Minimum Balance, in KAR's sole
discretion, at anytime during the first year following the Commencement
Date to reflect unanticipated working capital needs revealed by actual
Enterprise operations. Additionally, KAR may advance any monies needed to
cover any operating cash shortfall and shall be allowed to be reimbursed
same in accordance with Section 9.12.
6.3 ADJUSTMENT TO BANK ACCOUNT. After the disbursements pursuant to
Section 6.2, and establishment of any additional reserves for future
disbursements as KAR deems necessary and as are approved by the Tribal
Council, taking into account anticipated cash flow and Operating Costs of
the Enterprise, any excess funds remaining in the Enterprise Bank
Account(s) over the Minimum Balance, the Capital Replacement Reserve, and
such additional reserves approved by the Tribal Council, shall be
disbursed monthly in accordance with Section 6.4.
6.4 PAYMENT OF FEES AND SHINGLE SPRINGS DISBURSEMENT. Within twenty-one
(21) days after the end of each calendar month of operations, KAR shall
calculate Gross Revenues, Operating Expenses, and Net Revenues of the
Enterprise for the previous month's operations and the year's operations to
date. Such Net Revenues shall be disbursed from the Enterprise Bank
Account(s) to the extent available to pay the scheduled items to the extent
due any payable and earned in the following order of priority:
(i) the Minimum Monthly Priority Payment described in Section 6.5;
(ii) Current principal and any other payments due on the Loan (and if
payments are due quarterly, a reserve equal to one third of the
scheduled quarterly payment shall be deposited in a designated
Enterprise Bank Account for such payment, and may be invested in
accordance with the Enterprise Investment
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Policies pending payment);
(iii) Capital Replacement Reserve contributions as described in
Section 4.13;
(iv) payments due on the Interim Promissory Note and the
reimbursement of amounts advanced by KAR; and
(v) Management Fee
All remaining Net Revenues less minimum monthly priority payments to
SHINGLE SPRINGS shall be distributed to SHINGLE SPRINGS at the same time
("Monthly Distribution Payment") the Management Fee is paid.
6.5 MINIMUM MONTHLY PRIORITY PAYMENT. Commencing on the tenth (10th)
day of the first month following the Commencement Date (unless and to the
extent that the Commencement Date is delayed as a result of the action
or negligence of SHINGLE SPRINGS) remainder of the term of this Agreement
and until SHINGLE SPRINGS has received pursuant to this Agreement a
cumulative amount of SIX MILLION DOLLARS ($6,000,000.00) during each
twelve month period commencing on the date of the first distribution
hereunder following the Commencement Date, FIVE HUNDRED THOUSAND DOLLARS
($500,000.00) per month to SHINGLE SPRINGS which shall be charged
against SHINGLE SPRING'S share of net profits. The payments under this
Section 6.5 shall be the Minimum Monthly Priority Payments and such
payments shall be prorated for any partial month on the basis of the
number of days in such month. No Minimum Monthly Priority Payment shall be
owed for any months during which Class III gaming is suspended or
terminated at the Facility regardless of the reason or cause for such
suspension or termination or if there is a change in any law which has
material adverse effect on the operation of the Enterprise. If Net Profits
are inadequate to make the Minimum Monthly Priority Payments, KAR shall
advance the required amount and shall be reimbursed from future Net
Profits payable to SHINGLE SPRINGS.
6.6 PAYMENT OF NET REVENUES. The Net Revenues paid to SHINGLE SPRINGS
pursuant to this section 6 shall be payable to SHINGLE SPRINGS bank
account specified by the Council in a notice to KAR pursuant to
Section 9.2.
7. TRADE NAMES, TRADE MARKS AND SERVICE MARKS.
7.1 ENTERPRISE NAME. The exact name of the Enterprise shall be
approved in writing by SHINGLE SPRINGS, which approval shall not be
unreasonably withheld.
7.2 SYSTEM MARKS. Prior to the Commencement Date and from time to time
during the Term hereof, Manager agrees to erect and install, in accordance
with local codes and regulations, all signs KAR deem necessary in, on or
about the Facility, including, but not limited to, signs bearing the
System Marks as part of the Enterprise Name. The costs of purchasing,
leasing, transporting, constructing, maintaining and
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installing the required signs and systems shall be part of the start-up
costs. KAR shall obtain the written approval from SHINGLE SPRINGS for
any use of any System Mark prior to installation and use by the
Enterprise.
SHINGLE SPRINGS agrees to recognize the exclusive right of ownership of
KAR to all KAR's trademarks, copyrights, trade names, and patents, now
or hereafter held or applied for in connection therewith (collectively,
the "System Marks"). SHINGLE SPRINGS hereby disclaims any right or
interest therein, regardless of any legal protection afforded thereto.
SHINGLE SPRINGS acknowledges that all of the System Marks might not be
used in connection with the Enterprise, and KAR and SHINGLE SPRINGS
shall determine which circumstance shall be so used. SHINGLE SPRINGS
covenants that in the event of termination, cancellation or expiration
of this Agreement, whether as a result of default by KAR or otherwise,
SHINGLE SPRINGS shall not hold itself out as, or continue operation of
the Enterprise as a KAR casino nor will it utilize any of the System
Marks of any variant thereof in the name or operation of the
Enterprise. SHINGLE SPRINGS agrees that KAR or their respective
representative may, at any time thereafter, enter the Facility and may
remove all signs, furnishings, printed material, emblems, slogans or
other distinguishing characteristics which are not or hereafter may be
connected or identified with KAR or which carry any KAR Mark. SHINGLE
SPRINGS shall not use any of the KAR corporate names, or any variation
thereof, directly or indirectly. (a) in connection with a private
placement or public sale of securities or other comparable means of
financing or (b) press releases and other public communications,
without the prior written approval of KAR (or any successor owner of
the KAR trademarks and service marks), which consent shall not be
unreasonably withheld.
7.3 LITIGATION INVOLVING SYSTEM MARKS. SHINGLE SPRINGS and KAR
agree that, in the event SHINGLE SPRINGS and/or KAR is or are the
subject of any litigation or action brought by any party seeking to
restrain the use by SHINGLE SPRINGS or KAR, or either of them, of any
System Mark used by KAR for or on or in connection with the Facility or
Enterprise, any such litigation or action shall be defended entirely by
and at the expense of KAR, notwithstanding that KAR may not be named as
a party thereto. SHINGLE SPRINGS shall not have the right to bring suit
against any user of the System Marks. In all cases, the conduct of any
suit, whether brought by KAR or instituted against SHINGLE SPRINGS
and/or KAR shall be under the absolute control of counsel to be
nominated and retained by KAR, notwithstanding that KAR may not be a
party to such suit. KAR agrees and covenants to defend and hold SHINGLE
SPRINGS harmless from and to indemnify SHINGLE SPRINGS against any
judgments or awards of any court or administrative agency or competent
jurisdiction, whether such awards be in the form of damages, costs or
otherwise, imposed against SHINGLE SPRINGS and arising from the use by
KAR of any System Marks or similar rights or registrations for or on or
in connection with the Facility or Enterprise in accordance with the
terms of this Agreement.
8. TAXES.
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8.1 STATE AND LOCAL TAXES. If the State or any local government attempts
to impose any excise, use or transactional tax upon any party to this
Agreement or upon the Enterprise, the Facility or the Property, the Tribal
Council may, in the name of the appropriate party or parties in interest,
may, upon unanimous vote, resist such attempt through legal action. The
costs of such action and the compensation of legal counsel shall be an
Operating Expense of the Enterprise. This Section shall in no manner be
construed to imply that any party to this Agreement or the Enterprise is
liable for any such tax.
8.2 SHINGLE SPRINGS TAXES. SHINGLE SPRINGS agrees that neither it nor any
agent, agency, affiliate or representative of SHINGLE SPRINGS will impose
any taxes, fees, assessments, or other charges of any nature whatsoever on
payment of any debt service to KAR of any of its Affiliates or to any
lender furnishing financing for the Facility or for the Enterprise, or on
the Enterprise, the Facility, the revenues therefrom or on the Management
Fee as described in Section 6.1 of this Agreement; provided, however,
SHINGLE SPRINGS may assess license fees reflecting reasonable regulatory
costs incurred by SHINGLE SPRINGS Regulatory Agency as provided for in
Section 4.6.6. SHINGLE SPRINGS further agrees that neither it nor any
agent, agency, affiliate or representative will impose any taxes, fees,
assessments or other charges of any nature whatsoever on the salaries or
benefits, or dividends paid to, any of KAR's members, officers, directors
or employees, or other Affiliates or any of the employees of the
Enterprise; or any provider of goods, materials, or services to the
Enterprise. KAR retains the right, subject to Section 11 of this Agreement,
to terminate this Agreement, the Development Agreement and all accompanying
agreements if it reasonably determines that any statute, law, ordinance or
regulation of SHINGLE SPRINGS renders operation of the Enterprise
uncompetitive.
8.2.1 TERMINATION BY KAR. Should KAR terminate the Agreement
pursuant to this Section, KAR shall retain the right to repayment of:
(a) money lent to SHINGLE SPRINGS by KAR's or KAR's Affiliates and
money lent to SHINGLE SPRINGS and guaranteed by the KAR and/or KAR's
Affiliates to the extent KAR and/or KAR's Affiliates are required to
pay pursuant to such guarantee; (b) reimbursement of any monies which
may become due and payable under the terms of the Interim Promissory
Note, and the Security and Reimbursement Agreement. Except as
otherwise provided herein, if any taxes, fees or assessments are
levied by SHINGLE SPRINGS, such taxes and assessments shall constitute
Operating Expenses of the Enterprise.
8.3 COMPLIANCE WITH INTERNAL REVENUE CODE. KAR shall comply with all
applicable provisions of the Internal Revenue Code.
9. GENERAL PROVISIONS.
9.1 SITES OF THE CONTRACTS. This Agreement, as well as all contracts
entered into
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between SHINGLE SPRINGS and any person or any entity providing services to the
Enterprise, shall be deemed entered into in the State of California, and shall
be subject to all Legal Requirements of SHINGLE SPRINGS and federal law.
9.2 NOTICE. Any notice required to be given pursuant to this Agreement shall
be delivered to the appropriate party by Federal Express or by Certified Mail
Return Receipt Requested, addressed as follows:
If to SHINGLE SPRINGS: Jim Adams, Chairperson
Shingle Springs Bank of Miwok Indians
P.O. Box 1340
Shingle Springs, CA 95682
Copies to: Phillip E. Thompson
Thompson Associates
2307 Thornknoll Drive
Suite 100
Fort Washington, MD 20744
If to KAR: Kean Argovitz Resorts - Shingle Springs, LLC
11999 Katy Frwy., Suite 322
Houston, TX 77079
Attn.: Kevin M. Kean
Copies to: Kean Argovitz Resorts - Shingle Springs, LLC
11999 Katy Frwy., Suite 322
Houston, TX 77079
Attn.: Dr. Jerry A. Argovitz
and to different address(es) as KAR or SHINGLE SPRINGS may specify in writing
using the notice procedure called for in this Section 9.2. Any such notice shall
be deemed given two days following deposit in the United States mail or upon
actual delivery, whichever first occurs.
9.3 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. SHINGLE SPRINGS and KAR
represent and warrant to each other that they each have full power and authority
to execute this Agreement and to be bound by and perform the terms hereof. On
request, each party shall furnish the other evidence of such authority.
9.4 RELATIONSHIP. KAR and SHINGLE SPRINGS shall not be construed as joint
ventures or partners of each other by reason of this Agreement and neither shall
have the power to bind or obligate the other except as set forth in this
Agreement.
9.5 KAR'S CONTRACTUAL AUTHORITY. KAR is authorized, subject to the Tribal
Council review, which is not to be unreasonably withheld, to make, enter into
and
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perform in the name of and for the account of SHINGLE SPRINGS, doing business
as the Enterprise, such contracts deemed necessary by KAR to perform its
obligations under this Agreement, provided such contracts comply with the terms
and conditions of this Agreement provided such contracts do not obligate the
Enterprise to pay sums not approved in the Operating Budget and Annual Plan or
the Capital Budget.
9.6 FURTHER ACTIONS. SHINGLE SPRINGS and KAR agree to execute all
contracts, agreements and documents and to take all actions necessary to
comply with the provisions of this Agreement and the intent hereof.
9.7 DEFENSE. Except for disputes between SHINGLE SPRINGS and KAR, and
claims relating to SHINGLE SPRING's status as a Federally recognized Indian
Tribe, KAR shall bring and/or defend and/or settle any claim or legal action
brought against KAR, the Enterprise or SHINGLE SPRINGS, individually, jointly or
severally, or any Enterprise Employee, in connection with the operation of the
Enterprise. KAR shall recommend and subject to SHINGLE SPRING's written approval
of legal counsel, which approval shall not be unreasonably withheld, KAR shall
retain and supervise legal counsel, accountants and such other professionals,
consultants and specialists as KAR deems appropriate to defend any such claim or
cause of action provided that the Tribal Council retains the right to suspend
any such negotiations if it reasonably concludes, based on the advice of its
legal council that such negotiations or settlements is endangering the legal
rights and long term welfare of SHINGLE SPRINGS. All liabilities, costs, and
expenses, including reasonable attorneys' fees and disbursements incurred in
defending and/or settling any such claim or legal action which are not covered
by insurance shall be an Operating Expense, or, if incurred prior to the
Commencement Date, shall be a Start-up Expense except for any fees, settlements
or other costs pertaining to actions, claims, or settlements involving
agreements or contracts with SHINGLE SPRINGS that were initiated prior to the
execution of this Agreement. Nothing contained herein is a grant to KAR of the
right to waive SHINGLE SPRINGS's or the Enterprise's sovereign immunity. That
right is strictly reserved to SHINGLE SPRINGS. Any settlement of a third party
claim or cause of action shall require written approval of the Tribal Council.
Nothing in this paragraph shall prohibit or prevent SHINGLE SPRINGS from
retaining and supervising legal counsel of its choice.
9.8 WAIVERS. No failure or delay by KAR or SHINGLE SPRINGS to insist upon
the strict performance of any covenant, agreement, term or condition of this
Agreement, or to exercise any right or remedy consequent upon the breach
thereof, shall constitute a waiver of any such breach or any subsequent
agreement, term, or condition of this Agreement and no breach thereof shall be
waived, |
