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EXHIBIT 10.31
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "AGREEMENT") is made and entered into
this 31st day of March, 1998, by and between EQUIPMENT PURCHASING II L.L.C., a
Delaware limited liability company, as assignee of Xxxxxxxx XxXxxxx ("OWNER")
and MULTIMEDIA GAMES, INC., a Texas corporation ("MANAGER").
W I T N E S S E T H:
WHEREAS, Manager and Owner, as assignee, have entered into a certain
Equipment Purchase Agreement, dated of even date herewith (the "PURCHASE
AGREEMENT"), whereby Owner has purchased MegaMania electronic player stations
(collectively, the "EQUIPMENT" and individually, an "EPS");
WHEREAS, Owner is the assignee of a Management Agreement (the "ASSIGNED
AGREEMENT") between the Company and Xxxxxxxx XxXxxxx ("ASSIGNOR") pursuant to
which the Company agreed to manage the Equipment;
WHEREAS, Owner has assumed the rights and obligations of Assignor under
the Assigned Agreement and desires to enter into this Agreement with the Company
in order to amend and restate the Assigned Agreement solely to reflect Owner as
assignee) ; and
WHEREAS, Owner desires to have Manager manage, operate and maintain the
Equipment.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
ENGAGEMENT AND AUTHORIZATION
Section 1.01 Engagement as Manager. Owner hereby engages Manager to
manage the Equipment in accordance with the terms and conditions hereof. The
Equipment includes systems subject to lease/purchase agreements (the
"LEASE/PURCHASE EQUIPMENT") and systems subject to rental pool agreements (the
"RENTAL POOL EQUIPMENT"). Manager may engage such independent contractors as
Manager deems necessary to supplement and complement Manager's employees and
properly and adequately manage, operate and maintain the Equipment.
Section 1.02 Grant of Authority. Owner hereby grants to Manager the
power and authority to manage, operate, control and direct the Equipment of
Owner to the full extent of Owner's power and authority; provided that Manager
shall not have the power or authority to (i) perform any act that
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is expressly required to be performed by Owner; or (ii) grant by contract any
encumbrance, security interest or pledge in any of the Equipment (other than to
lessees of the Equipment).
Section 1.03 Employees; Independent Contractor.
(a) Manager shall be responsible for all of its employees and/or
independent contractors engaged by it. All matters pertaining to the employment,
supervision, compensation, promotion and discharge of Manager's employees and
others engaged by Manager for the management, operation and maintenance of the
Equipment are the responsibility of Manager, and Manager shall be liable to such
employees for their compensation (in whatever form or amount such compensation
may be). Manager shall fully comply with all applicable laws and regulations
having to do with worker's compensation, social security, unemployment,
insurance, hours of labor, wages, working conditions, and other
employer-employee related subjects in connection with the Equipment.
(b) This Agreement is entered into solely to provide for the
performance of the services set forth herein and to define the rights,
obligations and liabilities of the parties hereto. This Agreement, and any
document or understanding entered into in connection herewith, shall not be
deemed to create any other relationship between Manager and Owner other than as
expressly provided herein. It is understood that the relationship of Manager to
Owner shall be that of an independent contractor. Nothing contained herein or
inferable here from shall be deemed or construed to (1) make Manager the agent,
servant or employee of Owner, or (2) to create any partnership, joint venture,
or other association between Owner and Manager. Owner shall not be responsible
for any injury sustained by Manager of its employees or by third parties arising
out of the performance of this Agreement by Manager under Owner's workers'
compensation policy or otherwise, and the doctrine of "respondeat superior"
shall not apply between Owner and Manager.
Section 1.04 Compliance with Laws and Contracts. Manager shall be
responsible for management, operation and maintenance of the Equipment in
substantial compliance with all applicable federal, state and municipal laws,
ordinances and regulations. Manager shall promptly remedy, at Manager's expense,
any violation of any law, ordinance, rule, regulation, or order which comes to
its attention to the extent such remedy is within the control of Manager.
Manager further agrees to obtain any licenses and approvals required for the
operation of the Equipment.
ARTICLE II
TERM AND TERMINATION
Section 2.01 Term. This Agreement shall be effective upon the date of
execution (the "EFFECTIVE DATE") and shall continue and remain in full force and
effect until of the later of (i) three (3) years from the Effective Date or (ii)
until the Buyer has received as Compensation one hundred and forty percent
(140%) of the Purchase Price under the Equipment Purchase Agreement (the
"TERM"). In no event shall the Term exceed four (4) years from the Effective
Date. "COMPENSATION" as used in this section shall mean all amounts received by
Owner with respect to the Equipment, less any Management Fees paid to Manager
hereunder.
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Section 2.02 Termination. This Agreement may be canceled and terminated
at any time by Owner or Manager (the "TERMINATING PARTY") under any of the
following circumstances:
(a) upon three (3) days prior written notice for any breach or default
in the payment of any amounts due the Terminating Party pursuant to this
Agreement;
(b) upon thirty (30) days prior written notice for any other breach or
default of any covenant or condition by the non-Terminating Party; or
(c) upon the sale of all of the Equipment by the Owner, subject,
however, to a right of first refusal of Manager.
Section 2.03 Effect of Termination.
(a) Upon termination of this Agreement by Owner as the Terminating
Party and at the end of the Term, Owner's obligation to pay Manager's
compensation shall cease immediately, and except as provided herein, the parties
shall have no further rights or obligations to the other. Manager agrees that
upon Owner's request, it shall deliver to Owner all records, books, accounts,
and other files.
(b) Upon termination of the Agreement by Manager as the Terminating
Party, all obligations of Manager hereunder shall cease and Manager shall have
all rights of a non-defaulting party at law or in equity.
(c) Notwithstanding the foregoing, the termination of this Agreement
shall not affect the rights of the terminating party with respect to any damages
at law or in equity it may have suffered as a result of any breach of the
Agreement, nor shall it affect the rights of Owner with respect to liability or
claims accrued, or arising out of events occurring, prior to the date of
termination.
ARTICLE III
MANAGER'S DUTIES
Section 3.01 General. Manager shall manage, operate and maintain the
Equipment on behalf of Owner in accordance with the provisions of this
Agreement.
Section 3.02 Gaming Procedures and Gaming Accounting Procedures.
Manager shall be responsible for proposing, establishing and modifying from time
to time (a) the "GAME PROCEDURES," hereby defined as the technical, financial
and other plans, arrangements, systems, rules and procedures defining and used
in the operation and use of the Equipment and the playing of the MegaMania and
Flash Cash games and (b) the "GAME ACCOUNTING PROCEDURES" which are defined as
specific written procedures to be followed regarding the handling of revenues
derived from use of the Equipment. Manager shall communicate, negotiate and
coordinate with each third party which may have leased or contracted to use the
Equipment, regarding the implementation of the Gaming Procedures and the Game
Accounting Procedures.
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Section 3.03 Use/Lease Contracts; Re-leasing.
(a) Manager is responsible for supervising and administering the
leasing of the Equipment to the Indian tribes as specified in EXHIBIT 3.03
hereto, or to such other tribes as may from time to time lease or use the
Equipment (each a "TRIBE") and agrees to perform whatever service may be
required in connection with the negotiation of renewals, extensions,
modifications or cancellations thereof, subject to Owner's final approval. In
the event a lease of the Equipment with a Tribe is terminated, Manager shall use
its best efforts to enter into another lease/purchase or rental pool agreement
for the use of the Equipment at the earliest possible date, after making all
necessary modifications to insure the marketability of the Equipment, and
provided that Owner has approved the terms and conditions pursuant to which the
Equipment is to be leased or used. Manager shall use its best efforts in good
faith to not enter into any future lease/purchase agreements if such agreements
result in more than fifty-percent (50%) of the Equipment being subject to
lease/purchase agreements.
(b) Manager agrees that it will not place other MegaMania electronic
player stations at a bingo facility that has returned the Equipment (a
"RETURNING FACILITY") to Manager or Owner unless the Equipment has subsequently
been leased to another party upon terms and conditions equally or more favorable
to Owner than the terms and conditions of the agreement with the Returning
Facility. Manager shall use its best efforts to ensure that the Equipment is
leased or in use at all times during the Term of this Agreement. Owner agrees to
pay a fee of Ten Dollars ($10.00) per electronic player station for the cost and
expense of re-leasing the Equipment (the "RE-LEASING FEE").
(c) If the Manager resituates Equipment subject to a rental pool
agreement, such Equipment shall be subject to the Rental Pool Agreement entered
into between Owner and Manager dated even date herewith.
Section 3.04 Collection of Rents or Other Income. Manager shall
collect, identify and remit to Owner its Owner Percentage (as defined in the
Rental Pool Agreement between the parties of even date herewith attached hereto
as EXHIBIT 3.04 (the "RENTAL POOL AGREEMENT")). All monies so collected shall be
delivered to Owner within thirty (30) business days of collection by Manager.
Manager shall use due diligence to promptly collect and remit to Owner all
proceeds received from Tribes with respect to the purchase of Equipment
(including the interest component thereof).
Section 3.05 Repair and Maintenance; Risk of Loss. Manager shall attend
to the making and supervision of all ordinary and extraordinary repairs and
alterations to the Equipment such that the Equipment is at all times in good
working order, repair and appearance, normal wear, tear or depreciation
excepted. Manager shall furnish any and all parts, mechanisms and devices to
keep the Equipment in good mechanical working order and shall install and
license to Owner, any and all software upgrades developed by or for Manger
related to the MegaMania game, at no cost to Owner. All risk of loss or damage
to the Equipment shall be borne by Owner, subject to Article V hereof.
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Section 3.06 Marketing. Manager shall conduct such market analyses and
research and place such paid advertisements and promotions as Manager, in its
sole discretion, deems necessary or advisable in order to promote use of the
Equipment.
Section 3.07 Insurance. Manager shall, at its sole expense, maintain in
effect at all times during the Term, insurance coverages with limits reasonably
acceptable to Owner, with insurers licensed to do business in the State of
Oklahoma acceptable to Owner, and under forms of policies satisfactory to Owner.
None of the requirements contained herein as to types, limits or Owner's
approval of insurance coverage to be maintained by Manager are intended to and
shall not in any manner limit, qualify or quantify the liabilities and
obligations assumed by Manager under the Agreement or otherwise provided by law.
The types of coverage shall, at a minimum, include Property and Casualty
Insurance to cover risk of loss or damage to the Equipment, Workers'
Compensation, Employers' Liability, Commercial General Liability, Comprehensive
Automobile Liability and Umbrella Excess Liability Insurance. Owner shall be
named as additional insurer on all such policies.
Section 3.08 Gaming Insurance; Protection. As part of Manager's
Management Fee, Manager shall provide reasonably commercially available errors
and omissions insurance coverage or other protection suitable to Owner against
the possibility of duplication of prize liabilities due to the malfunction of
the Equipment and/or the personnel provided by Manager and its subcontractor to
operate and manage the Equipment. Further, Manager shall guaranty, and be solely
responsible for, the payment of prizes won while using the Equipment by letters
of credit, performance bonds, escrowed funds, insurance and/or other guarantees.
Section 3.09 Forms; Payment of Taxes. Manager shall keep the Equipment
free and clear of all levies, liens and encumbrances. Manager shall, on behalf
of Owner, prepare, execute and file punctually when due all forms, reports and
returns required by law relating to the use of the Equipment, including any
sales or use tax returns and income tax returns. In addition, as part of
Manager's Management Fee, Manager shall pay punctually when due any sales, use,
employment or other taxes relating to the use of the Equipment.
Section 3.10 Financial Reporting, Record Keeping and Accounting.
(a) All financial reporting, record keeping, and accounting with
respect to the Equipment and the leasing, management, operation, repair and
maintenance thereof, as well as all collections of revenues and expenditures
relating thereto, shall be the responsibility of Manager and shall be adequately
maintained at all times. Such books and records shall be owned by Owner and
shall be kept in all material respects in accordance with the standards of the
industry. Manager will not disclose to any party other than Owner the contents
of such books and records, except as may be required by law. Manager shall also
take reasonable steps to ensure that neither Manager nor any of Manager's
employees or independent contractors at any time discloses or otherwise makes
use of in any manner, whether during or after the Term, any information
regarding the Owner's business or affairs without the prior written consent of
Owner. This obligation shall survive the termination of this Agreement. All
books and records relating to the Equipment shall be delivered to Owner or
Owner's designated representative immediately upon request of Owner.
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(b) Owner, its accountants, attorneys, and agents, may, subject to the
lease of the Equipment with a Tribe or any agreement with a third party, examine
or inspect the Equipment and any books and records relating to the Equipment for
any purpose which Owner, in its sole discretion, deems necessary or advisable.
Such inspection shall occur with as little disruption to the Tribe's or
Manager's business as possible. Owner also reserves the right to perform
additional audits relating to the Manager's activities.
ARTICLE IV
MANAGEMENT FEE AND REIMBURSEMENTS
Section 4.01 Management Fee.
(a) Lease/Purchase Equipment - Manager shall receive as consideration
and remuneration for managing and operating the Lease/Purchase Equipment a fee
equal to Fifteen Dollars ($15.00) per electronic player station, per month.
(b) Rental Pool Equipment - Manager shall receive as consideration and
remuneration for managing and operating the Rental Pool Equipment a base fee
equal to twelve percent (12%) of the Owner's Percentage, as that term is used in
the Rental Pool Agreement. The Manager shall also receive as additional
consideration certain monthly, non-cumulative bonuses as determined by the
schedule below:
Owner's Percentage
(Per unit in Rental Pool) Bonus Amount
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Under $65 for a one month period No Bonus
$65.01 to $85.00 9% of Owner's Percentage
$85.01 to $105.00 21.5% of Owner's Percentage
$105.01 to $125.00 31% of Owner's Percentage
$125.01 to $145.00 38% of Owner's Percentage
Over $145.00 45.5% of Owner's Percentage
(c) Owner hereby grants Manager the right to withhold the fees
described in paragraphs (a) and (b) (collectively, the "MANAGEMENT FEE") and the
Re-Leasing Fee from Manager's payment to Owner of the Owner's Percentage.
Section 4.02 Costs and Expenses. Other than the Re-Leasing Fee, Manager
shall be responsible for all costs, expenses and fees incurred in rendering
services in connection with the Equipment, including, but not limited to, the
cost of maintenance, insurance, compensation of
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Manager's employees, license fees, taxes, legal fees associated with any
contracts related and any other cost or expense necessary to manage, operate or
maintain the Equipment, such costs and expenses to be included as part of the
Management Fee and Re-Leasing Fee paid by Owner pursuant to this Agreement.
ARTICLE V
INDEMNIFICATION
Manager hereby agrees to and does indemnify and hold Owner, its
members, officers, managers, employees and agents, harmless from and against any
and all costs and expenses, losses, liabilities, damages, causes of action,
claims and demands whatsoever, howsoever arising, including but not limited to
those arising out of, concerning, or affecting the services provided by Manager
under this Agreement. Such costs and expenses shall include, but shall not be
limited to, costs and expenses, losses, liabilities, damages, causes of action,
claims and demands, arising out of bodily injury, personal injury, or demands
for property damage, or any other violation of rights of others, warranties or
other undertakings or duties of Manager, together with reimbursement to Owner
for reasonable attorneys' fees and expenses.
ARTICLE VI
GENERAL PROVISIONS
Section 6.01 Survival of Representations, Warranties and Agreements.
The representations, warranties, covenants and agreements made in this Agreement
or in any certificate or instrument delivered in connection herewith shall be in
full force and effect notwithstanding any investigation made by or disclosure
made to any party hereto, whether before or after the date hereof, shall survive
Closing and shall continue to be applicable and binding thereafter.
Section 6.02 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma without reference
to the choice of law principles thereof.
Section 6.03 Entire Agreement. This Agreement, including any exhibits
and schedules hereto, contains the entire agreement and understanding between
the parties hereto, and supersedes any and all prior agreements, arrangements
and understandings, relating to the subject matter hereof. There are no written
or oral agreements, understandings, representations or warranties between the
parties other than those set forth or referred to in this Agreement. No
supplement, amendment, alteration, modification or waiver of this Agreement
shall be binding unless consented to in writing by Owner and Manager.
Section 6.04 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given when delivered
personally or when sent by facsimile or on the third day after being mailed by
registered or certified mail, postage prepaid, addressed as follows:
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To Manager: Multimedia Games, Inc.
0000 X. Xxxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Contract Administration
To Owner: Xxxxxxxx XxXxxxx
000 Xxxxxx Xxxx
Xxxx Xxxxx, XX 00000
Any party may change its address for receiving notices by giving
written notice of such change to the other party in accordance with this Section
6.04.
Section 6.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, this Agreement may not be assigned by
either party without the written consent of the other, which consent shall not
be unreasonably withheld.
Section 6.06 Parties In Interest. Nothing in this Agreement shall
entitle any party other than Buyer or Seller to any claim, cause of action,
remedy or right of any kind.
Section 6.07 Waiver. No waiver of any term, provision or condition of
this Agreement shall be effective unless in writing, signed by the party against
which such waiver is sought to be enforced, and no such waiver shall be deemed
to be or construed as a further or continuing waiver of any such term, provision
or condition or as a waiver of any other term, provision or condition of this
Agreement, unless specifically so stated in such written waiver.
Section 6.08 Severability. If any term, covenant or condition of this
Agreement or the application thereof to any person or circumstance (other than a
term, covenant, condition or application which affects the essence of this
Agreement) shall, to any extent, be invalid or unenforceable, the remainder of
this Agreement, or the application of such term, covenant or condition to those
persons or circumstances other than those as to which it has been held invalid
or unenforceable, shall not be affected thereby, and each term, covenant and
condition of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
Section 6.09 Assigned Agreement. This Agreement amends and restates the
Assigned Agreement which, as so amended, remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized representatives on the day
first above written.
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EQUIPMENT PURCHASING II L.L.C.
By: Rio Grande Management Corp.
By:
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Name: Xxxxxxx Xxxx
Its: President
MULTIMEDIA GAMES, INC.
By:
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Name: Xxxxxx Xxxxxx
Its: Chief Executive Officer
