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HomeMy WebLinkAboutREGENCY MALL- . AUGUSTA ENTERTAINMENT, LLC 3480 Wrightsboro Road Augusta, Georgia 30909 June 13, 2005 Augusta, Georgia 530 Greene Street City-County Building Attn: Mayor Augusta, GA 30911 Ladies and Gentlemen: This is a Letter of Intent from Augusta Entertainment, LLC ("Augusta Entertainment"), concerning a cooperative effort between it and August, Georgia, ("Augusta"), for the financing, development, construction and operation of a multipurpose entertainment complex (the "Complex") to be located at the Regency Mall site of approximately 85 acres at the intersection of Deans Bridge Road and Gordon Highway in Augusta, Georgia (the "Site"). 1. Size of Complex. The Complex will have approximately 10,000 seats for hockey, arena football and equestrian events and up to 15,000 seats for concerts, family shows and basketball. It will include luxury suites and various other forms of premium seating. 2. Ownership. Augusta will own the Complex and the Site. 3. Financing. Funds to construct the Complex will come: (a) $60,000,000 from a general obligation Bond of Augusta (the "General Obligation Bonds"); (b) $24,000,000 from revenue bonds issued by Augusta to be repaid from the hotel-motel tax and alcohol and beverage taxes collected by Augusta currently being used to fund operating deficits and pay the outstanding debt service on bonds issued by the Augusta-Richmond County Coliseum Authority (the "Excise Tax Bonds"); (c) if needed, $10,000,000 in revenue bonds to be paid out of the revenues generated by the operation of the Complex, the payment of which will be guaranteed by Augusta Entertainment (the "Revenue Bonds"). If any proceeds of the Revenue Bonds are not needed for construction of the Complex, they may be used to cover operating losses. 4. Division of profits. The net income of the Complex after the payment of debt service on the Revenue Bonds will be divided equally between Augusta and Augusta Entertainment. 5. Project Agreements and Ancillary Agreements. Before putting the financing in place, Augusta and Augusta Entertainment must negotiate and enter into a definitive Development and Construction Agreement covering the design, development and construction of the Complex, and a definitive Operating Agreement for the management and operation of the Complex upon its completion (the "Project Agreements"). Attached hereto as Exhibit A are a number of issues that need to be covered in the definitive Project Agreements as they are negotiated, and listing Ancillary Agreements that will be required. 6. Referendum. This Letter of Intent is subject to Augusta holding the referendum on the General Obligation Bonds on June 21, 2005 and the approval of the General Obligation Bonds in said referendum. If the referendum fails, this Letter of Intent shall be null and void. P:\DDB\Augusta Entertainment, LLC\Richmond Co. Arena Matter\Ltr to Augusta, GA 6-13-05.doc Page 1 of9 If this Letter of Intent is acceptable to you, please have it approved by the Board of Commissioners, execute a copy which is enclosed herewith and return it to Augusta Entertainment. Very truly yours, I!J /. Tho fmogomg Lo"'; of Intont ;, hereby appmvod and acooptod by Augn'ta, Goo'gia thi, ~ day of ~ ,2005. Augusta, Georgia ~ By ~1~6 Art"" ;;L'I,(J/~ ~ P:\DDB\Augusta Entertainment, LLC\Richmond Co. Arena Matter\Ltr to Augusta, GA 6-13-05.doc Page 2 of9 Exhibit A Section 1. Description of the Complex. The Complex will feature both fixed and retractable/moveable seating sections, as well as a moveable curtaining system allowing configurations for a variety of events, including hockey games, Complex football games, horse shows, rodeos, ice shows, tractor pulls, center, end-stage and half-house concerts and family entertainment shows. The Complex will also include a minimum of 20 luxury suites, other forms of premium seating (club, loge, special circle seats), a family section at all events, concession areas, other forms of food service ranging from portable stands to a full service club/restaurant, video and auxiliary scoreboards, message boards, high quality sound system and other amenities and features of a modem, first class sports and entertainment facility. The intent is to design, construct and operate a facility that will be both fan-friendly producing a rich experience for those who attend an event and efficient for those who produce or promote the event. The Complex is intended to allow the Greater Augusta Metropolitan area to be a more competitive and attractive destination and provide new sports and family entertainment opportunities for residents of Augusta and the Central Savannah River Area. Section 2. AU2:usta's Representation on the Board of AU2:usta Entertainment. To facilitate the exchange of information between the parties as well as to provide input and advice from Augusta, Augusta shall have the right, but not the obligation, to name up to four (4) members of the Augusta-Richmond County Commission to the Board of Directors of Augusta Entertainment. Such members shall include one Commissioner from each of the two commission super districts of Augusta (currently districts nine and ten), and two other Commissioner appointed by the Board of Commissioners, or, in the alternative, with the consent of Augusta Entertainment, name four members to the Board of Directors of Augusta Entertainment, each of whom must be the owner of a membership unit in Augusta Entertainment, LLC, in lieu of naming the specified office holders as provided herein. These members of the Board of Directors of Augusta Entertainment may be appointed immediately upon execution of the definitive Project Agreement by all parties or at any time thereafter. These four Directors appointed by the Board of Commissioners will serve three (3) year terms with some initial terms being shorter in order to set up a staggered expiration of terms. Said individuals will serve with the same rights and responsibilities, including the right to vote, as other members of the Board of Directors of Augusta Entertainment. In addition, with respect to the three community seats on the Board of Directors, Augusta Entertainment will submit four candidates to fill these positions to the Board of Commissioners which will then select from said four candidates the three to fill these positions. Each of these Directors will serve three year terms with all three terms expiring at the same time. In the event that the number of members of the Board of Directors is increased, the number of Directors appointed from the Board of Commissioners shall remain proportionately the same and the number of Directors appointed by the Board of Commissioners from candidates nominated by Augusta Entertainment shall also remain proportionately the same. P:\DDB\Augusta Entertainment, LLC\Richmond Co. Arena Matter\Ltr to Augusta, GA 6-13-05.doc Page 3 of9 Section 3. Site Investi2:ation and Acquisition. Augusta will investigate the suitability of the Site for the construction of the Complex which investigation shall include, but not be limited to, taking soil samples and test borings to determine underground conditions and performing the necessary and appropriate environmental testing. If such investigation determines that the Site is suitable and satisfactory as a location for the Complex and that it can be constructed thereon without encountering any undesirable condition that would drive up the cost of the Project, beyond budgets agreed upon by the parties then Augusta will acquire the Site using all means available to it to do so in the most cost-effective manner possible. Section 4. Defeasance of AU2:usta-Richmond County Coliseum Authoritv Obli2:ations. Augusta shall make the necessary arrangements to defease Augusta's intergovernmental agreement obligations which secure the outstanding bond indebtedness for the Civic Center issued by the Augusta-Richmond County Coliseum Authority (the "Authority"). After the defeasance of such intergovernmental agreement obligations and for the term of the Excise Tax Bonds or the Operating Agreement, whichever is longer, Augusta shall pledge that portion of proceeds from Hotel/Motel taxes and Beer/Alcohol taxes currently being provided to the Authority to the Trustee for payment of debt service on the Excise Tax Bonds and capital maintenance and improvements of the Complex as provided in the Operating Agreement and trust indenture(s). Notwithstanding the previous sentence, Augusta may continue to provide to the Authority Excise Tax revenues to continue operation of the Bell Auditorium, at a level not to exceed monies required to fund the operating deficit of the Bell Auditorium in 2002. Section 5. Sources of Payment of Revenue Bonds. Augusta's liability for payment of the Revenue Bonds will be limited to the revenues of the Complex pledged to the payment of the Revenue Bonds. The revenues that will support the payment of the Revenue Bonds will consist of Complex revenues, as follows: (A) Seat fees, assessed on the sale of tickets for the Complex. Fees shall be assessed on general admission and premium seat tickets and license fees. (B) Gross Revenues from the operation of the Complex including those derived from the Ancillary Agreements hereinafter referred to. Gross Revenues shall specifically include premium seat license fees, naming, pouring, advertising and other commercial rights and additional forms of multi-year contractual Complex revenues. Augusta Entertainment will subordinate any incentive management fees, payable to it to the payment of operating expenses and the payment of debt service on the Revenue Bonds Section 6. AU2:usta's Ri2:ht to Inspect and Audit. Augusta Entertainment will guarantee the payment of the Revenue Bonds. Augusta will have the right to inspect and audit the operations of the Complex by Augusta Entertainment and all subcontractors subordinate to it, including ScheerGrame Sports Development, LLC. as well as the financial statements and records of Augusta Entertainment. P:\DDB\Augusta Entertainment, LLC\Richmond Co. Arena Matter\Ltr to Augusta, GA 6-13-05.doc Page 4 of9 Section 7. Proiect A2:reements. The following Project Agreements will be negotiated, drafted and must be executed on or before, and as a condition to, the consummation of the sale of the General Obligation Bonds, the Excise Tax Bonds and the Revenue Bonds (the "Bonds"): (A) Development and Construction Agreement. The Development and Construction Agreement will set forth the development and construction arrangements between Augusta Entertainment and Augusta. Prior to execution of this agreement certain preliminary studies shall be completed including the financing plan, site plans, preliminary design and construction estimates. Prior to the issuance of the Bonds, pre-development agreement costs (which shall not include the costs set out in Section 3 hereof) shall be borne equally by Augusta and Augusta Entertainment not to exceed a maximum of $2,500,000.00. All predevelopment cost estimates will be identified promptly by the parties. Should predevelopment costs exceed the maximum, the overage shall be the responsibility of Augusta Entertainment. Pre-development costs shall be reimbursable to each party from the proceeds of the Bonds when issued. A Trustee shall control the disbursement of monies for design and construction. Augusta Entertainment will be responsible for the design and construction of the Complex. Augusta Entertainment will obtain a fully bonded guaranteed maximum price contract from Turner Construction for the construction of the Complex. The Trustee shall deposit proceeds of the Bonds in designated accounts pursuant to one or more trust indentures for disbursement. Augusta Entertainment will guarantee the construction costs and the completion date of the Complex which shall be defined as substantial completion and the issuance of a Certificate of Occupancy. Augusta Entertainment will subcontract program management for the construction to ScheerGame Sports Development, LLC. Augusta Entertainment as development manager will enter into a design/build contract with the team of Turner Construction Sports Group ("Turner Construction") and HOK Sport+Venue+Event to execute the design of the Complex and to provide construction management services for the Complex. Augusta will appoint Heery, Inc. as its owner's representative during design and construction of this project. Augusta shall also have the right to review and approve the design, which approval shall not be umeasonably withheld. Without restricting or limiting competitive bidding or increasing the cost of the work, Augusta Entertainment agrees that it will use its best efforts to encourage the participation of minority businesses in the design, construction and operation of the Complex with a goal of having a minimum of 35% minority and female participation in all phases of this project. Such requirement will extend to the team of Scheer game, Turner Construction and HOK Sport+Venue+Event working for Augusta Entertainment. In addition, the above parties will use their best efforts to engage at least 50% participation in all phases of this contract by local P:\DDB\Augusta Entertainment, LLC\Richmond Co. Arena Matter\Ltr to Augusta, GA 6-13-05.doc Page 5 of9 ..) businesses including trades, engineers and others that may be needed to complete this project. (B) Operating Agreement. The Operating Agreement will set forth the contractual arrangements between Augusta Entertainment and Augusta for management of the operation of the Complex as well as the standards by which Augusta Entertainment's performance during the term of the Operating Agreement will be measured. The term of this agreement shall be 25 years commencing upon substantial completion of the Complex. Subject to the terms of the Operating Agreement, Augusta Entertainment shall have the responsibility, control and discretion over the operation, direction, management and supervision of the Complex for the term of the Operating Agreement. The Operating Agreement will include provisions for Augusta Entertainment to be paid fixed and incentive fees for its management services, and will set forth the manner in which Augusta and Augusta Entertainment will divide the net proceeds from the operation of the Complex. Under the Operating Agreement, Augusta Entertainment will be responsible for the following: Financial Matters (i) Payment out of Complex revenues and, if necessary, excise taxes not expended for debt service payments on the Excise Tax Bonds all operating expenses of the Complex, including the cost of maintenance and Augusta Entertainment base management fees and any operational taxes applicable thereto. (ii) Payment of all net operating revenues to the Trustee for disbursement under the trust indenture(s), which shall provide for payments as follows: (a) Payment of Revenue Bond debt service; (b) Payment of incentive management fees; (c) Payment of agreed upon amounts into a Renewal and Replacement Fund; (d) Payment of net income of the Complex, after all of the previous payments, and any accruals thereon, equally to Augusta, Augusta Entertainment and the Revenue Bond holders for partial prepayment of the Revenue Bonds until that debt is retired and thereafter equally to Augusta and Augusta Entertainment, all of this being subject to approval of tax counsel. (iii) Preparation and submission to Augusta of an annual operating budget and report, projecting the estimated revenues and expenses of the Complex during the next Fiscal Year. P:\DDB\Augusta Entertainment, LLC\Richmond Co. Arena Matter\Ltr to Augusta, GA 6-13-05.doc Page 6 of9 (iv) Preparation and submission to Augusta of an annual capital improvements budget and report, projecting the estimated needs and costs of capital improvements, repairs, replacements and/or expenditures required by and for the Complex. (v) Provision of audited financial statements to meet requirements of Trustee, Augusta and regulatory agencies. (vi) If the operations of the Complex result in a negative cash flow Augusta Entertainment shall be deemed to be in default under the Operating Agreement and may be terminated under the provisions thereof. Augusta Entertainment may cure such default by funding the deficit in full within sixty (60) days following written notice from Augusta of such default. For purposes of this provision, "cash flow" shall include all of the income produced from the Complex plus the hotel/motel taxes and beer/alcohol taxes pledged to the Trustee pursuant to Section 4 hereof for use in connection with the Complex minus all expenses for the operation of the Complex except depreciation, amortization of debt, interest expense, incentive management fees and income taxes. Administrative Matters (vii) Employing, paying and supervlSlng all personnel Augusta Entertainment determines are necessary to operate the Complex (viii) Maintaining the Complex in good, clean order and repair. (ix) Planning and supervising all advertising, public relations and other promotional programs for the Complex. (x) Arranging for and booking Complex events, subject to guidelines as to the types of events which may be booked, which guidelines shall be approved by Augusta, provided, that approval will not be umeasonably be withheld. (xi) Entering into leases of retail, office and other space in the Complex, licenses and other agreements pertaining to the use and operation of the Complex it deems appropriate. (xii) Taking such action as necessary to enforce any agreements entered into by Augusta Entertainment and any third party which relates to the design, construction, operation, maintenance or use of the Complex. In the event that Augusta Entertainment fails to take such action, then, upon thirty (30) days written notice to Augusta Entertainment, Augusta shall have the right to take such action, at Augusta P:\DDB\Augusta Entertainment, LLC\Richmond Co. Arena Matter\Ltr to Augusta, GA 6-13-05.doc Page 7 of9 Entertainment's cost and expense, to enforce such agreements. Augusta Entertainment and Augusta shall meet on an annual basis to schedule dates for governmental and/or non-profit sponsored events, such as high school graduations, arts events, etc., not to exceed twenty (20) dates per year. Fees charged for those twenty (20) events shall cover only direct, out-of-pocket operations expenses of the Complex and/or Augusta Entertainment. The Operating Agreement will contain proVIsIOns providing for the Trustee to have the power to replace Augusta Entertainment as manager in the event of a default under the Revenue Bonds or the breach of any other provisions of the Operating Agreement. In addition, Augusta Entertainment will make its best efforts within its needs for qualified personnel to hire for work at the Complex employees of the Augusta Civic Center who may be displaced as a result of the construction of the Complex. Section 7. Ancillary A2:reements. The following Ancillary Agreements will be negotiated, drafted and executed at the appropriate time: (A) Hockey Agreement. Augusta Entertainment will enter into an agreement to cause the Augusta Lynx to play all of its home games in the Complex and will set out the rights to certain game day revenues as well as its obligations with respect to certain game day expenses. (B) Horse Show Agreements. Augusta Entertainment will enter into an agreement with the National Barrel Horse Association to hold its World Championship in the Complex and an agreement with the Atlantic Coast Cutting Horse Association, Inc. to hold the Augusta Futurity in the Complex. These agreements will obligate each contracting entity to hold its competition in the Complex for a term coterminous with the maturity of the Revenue Bonds. These agreements will also define the rights of each organization to certain event day revenues and its obligations with respect to certain event day expenses. (C) Premium Seat Licensing Agreements. These agreements will set forth the contractual arrangements for Augusta Entertainment to license individual suites, club seats, loges or other specially designated seating areas in the Complex to individuals or companies, and will stipulate the form of the license agreements to be employed in such connection. (D) Advertising and Commercial Rights Agreements. These agreements will set forth the arrangements between Augusta and Augusta Entertainment to sell advertising, naming, pouring, signage and other commercial rights in the Complex. These arrangements may cover both permanent and temporary advertising. Augusta will explicitly authorize Augusta Entertainment to seek to license the name of the Complex to a private person or corporation subject to approval of Augusta, which consent will not be umeasonably withheld P:\DDB\Augusta Entertainment, LLC\Richmond Co. Arena Matter\Ltr to Augusta, GA 6-13-05.doc Page 8 of9 (E) Concession Agreement. This agreement will set forth the understandings between Augusta Entertainment and concessionaires to install kitchen, fixed stand, portable and restaurant cooking, warming and service equipment and operate the food, beverage and merchandising activities at the Complex, including any restaurant and lounge. (F) Additional Lease or Use Agreements. Other tenants, such as retail users, restaurants or other compatible commercial interests may enter into lease or use agreements for space within the Complex or on the Site. (G) Parking Agreement. To the extent not addressed in either the Operating Agreement or any Use Agreement with a long-term tenant, this Agreement will set forth the rights and obligations of Augusta Entertainment with respect to the operation of on-site parking for the Complex. Augusta will grant Augusta Entertainment the right to operate the parking facilities on the Site and receive revenue, said revenues to be considered a portion of the operating revenues of the Complex, and to enter into agreements with owners of off-site parking areas to lease or operate such facilities during Complex events, if required. It is not currently anticipated that offsite parking will be required for Complex events. (H) Financing Agreements. These agreements will provide for the issuance and sale ofthe Bonds and the rights and responsibilities ofthe various parties thereto. (I) Additional Sports Franchises. If Augusta Entertainment shall acquire any other sports franchisees) which is based in Augusta, Georgia and for which it would be appropriate to have the franchisees) play its home games in the Complex, then in such event, Augusta Entertainment shall cause such sports franchisees) to play its home games at the Complex. P:\DDB\Augusta Entertainment, LLC\Richmond Co. Arena Matter\Ltr to Augusta, GA 6-13-05.doc Page 9 of9 Office of The Administrator Frederick L. Russell, Administrator Room 801 - Municipal Building 530 Greene Street - AUGUSTA, GA. 30911 (706) 821-2400~ FAX (706) 821-2819 www.augustaga.gov T ameka Allen, Interim Deputy Administrator Robert Leverett, Interim Deputy Administrator An w. 1;''1 ,..,~ '. R r,~.' k"". ' . H- t" r\ ,:,), ':;, IT;;: 11...} MEMORANDUM I ~UGU~~~:D", ~,:005 I ~>vr<="""'.-=~"-~"._" TO: The Honorable Bob Young, Mayor The Honorable Marion Williams, Mayor Pro T em Members of the Augusta-Richmond County Commission FROM: Frederick L. Russell, Administrato SUBJECT: General Obligation Bond Proj DATE: May 3,1005 After my presentation regarding the general obligation bond project, 1 was approached by Augusta Entertainment LLC regarding the sports arena/multipurpose entertainment center. They expressed their continued desire to participate in a public/private partnership regarding this project. After several discussions, in which 1 emphasized the concerns 1 had heard expressed by the Commission in last year's talks, Augusta Entertainment LLC presented the attached letter of intent. 111is proposal addressed the Commission's concerns and in fact concedes to the Commission's wishes in each area including the size of the facility, the make-up of the board and financing, 1t is my recommendation that the Commission consider this proposal in a special called meeting on 111ursday, May 5th at 3:30PM or another appropriate time. Attachment "'\.iI Letter of Intent , 2005 Augusta, Georgia 530 Greene Street City-County Building Attn: Mayor Augusta, GA 30911 Ladies and Gentlemen: This is a Letter of Intent from Augusta Entertainment, LLC ("Augusta Entertainment"), concerning a cooperative effort between it and August, Georgia,-("Augusta"), for the financing, development, construction and operation of a multipurpose entertainment complex (the "Complex") to be located at the Regency Mall site of approximately 85 acres at the intersection of Deans Bridge Road and Gordon Highway in Augusta, Georgia (the "Site"). 1. Size of Complex. The Complex will have approximately 1 0,000 seats for hockey, Complex football and equestrian events and up to 15,000 seats for concerts, family shows and basketball. It will include luxury suites and various other forms of premium seating. 2. Ownership. Augusta will own the Complex and the Site. 3. Financing. Funds to construct the Complex will come: (a) $60,000,000 from a general obligation Bond of Augusta (the "General Obligation Bonds"); (b) $24,000,000 from revenue bonds issued by Augusta to be repaid from the hotel-motel tax and alcohol and beverage taxes collected by Augusta currently being used to fund operating deficits and pay the outstanding debt service on bonds issued by the Augusta-Richmond County Coliseum Authority (the "Excise Tax Bonds"); (c) if needed, $10,000,000 in revenue bonds to be paid out of the revenues generated by the operation of the Complex, the payment of which will be guaranteed by Augusta Entertainment (the "Revenue Bonds"). If any proceeds of the Revenue Bonds are not needed for construction of the Complex, they may be used to cover operating losses. 4. Division of profits. The net income of the Complex after the payment of debt service on the Revenue Bonds will be divided equally between Augusta and Augusta Entertainment. 5. Project Agreements and Ancillary Agreements. Before putting the financing in place, Augusta and Augusta Entertainment must negotiate and enter into a definitive Development and Construction Agreement covering the design, development and construction of the Complex, and a definitive Operating Agreement for the management and operation of the Complex upon its completion (the "Project Agreements"). Attached hereto as Exhibit A are a number of issues that need to be covered in the definitive Project Agreements as they are negotiated, and listing Ancillary Agreements that will be required. 6. Referendum. This Letter of Intent is subject to Augusta holding the referendum on the General Obligation Bonds on June 21, 2005 and the approval of the General Obligation Bonds in said referendum. If the referendum fails, this Letter of Intent shall be null in void. C:\Documents and Settings\cphilips\Local Settings\Temporary Internet Files\OLK4\Ltr to Augusta GA 4.26.05.doc Page 1 of9 If this Letter of Intent is acceptable to you, please have it approved by the Board of Commissioners, execute a copy which is enclosed herewith and return it to Augusta Entertainment. Very truly yours, Augusta Enteltainment, LLC By: Its Manager The foregoing Letter of Intent is hereby approved and accepted by Augusta, Georgia this _ day of ,2005. Augusta, Georgia By: Its Mayor Attest: Its Clerk C:\Documenls and Seltings\cphilips\Local Settings\Temporary Internet Files\OLK4\Ltr to Augusta GA 4-26-05.doc Page 2 of9 Exhibit A Section 1. Description of the Complex. The Complex will feature both fixed and retractable/moveable seating sections, as well as a moveable curtaining system allowing configurations for a variety of events, including hockey games, Complex football games, horse shows, rodeos, ice shows, tractor pulls, center, end-stage and half-house concerts and family entertainment shows. The Complex will also include a minimum of 20 luxury suites, other forms of premium seating (club, loge, special circle seats), a family section at all events, concession areas, other forms of food service ranging from portable stands to a full service club/restaurant, video and auxiliary scoreboards, message boards, high quality sound system and other amenities and features of a modem, first class sports and entertainment facility. The intent is to design, construct and operate a facility that will be both fan-friendly producing a rich experience for those who attend an event and efficient for those who produce or promote the event. The Complex is intended to allow the Greater Augusta Metropolitan area to be a more competitive and attractive destination and provide new sports and family entertainment opportunities for residents of Augusta and the Central Savannah River Area. Section 2. AU2:usta's Representation on the Board of AU2:usta Entertainment. To facilitate the exchange of information between the parties as well as to provide input and advice from Augusta, Augusta shall have the right, but not the obligation, to name up to four (4) members of the Augusta-Richmond County Commission to the Board of Directors of Augusta Entertainment. Such members shall include one Commissioner from each of the two commission super districts of Augusta (currently districts nine and ten), and two other Commissioner appointed by the Board of Commissioners, or, in the alternative, with the consent of Augusta Entertainment, name four members to the Board of Directors of Augusta Entertainment, each of whom must be the owner of a membership unit in Augusta Entertainment, LLC, in lieu of naming the specified office holders as provided herein. These members of the Board of Directors of Augusta Entertainment may be appointed immediately upon execution of the definitive Project Agreement by all parties or at any time thereafter. These four Directors appointed by the Board of Commissioners will serve three (3) year terms with some initial terms being shorter in order to set up a staggered expiration of terms. Said individuals will serve with the same rights and responsibilities, including the right to vote, as other members of the Board of Directors of Augusta Entertainment. In addition, with respect to the three community seats on the Board of Directors, Augusta Entertainment will submit four candidates to fill these positions to the Board of Commissioners which will then select from said four candidates the three to fill these positions. Each of these Directors will serve three year terms with all three terms expiring at the same time. In the event that the number of members of the Board of Directors is increased, the number of Directors appointed from the Board of Commissioners shall remain proportionately the same and the number of Directors appointed by the Board of Commissioners from candidates nominated by Augusta Entertainment shall also remain proportionately the same. C:\Documents and Settings\cphilips\Local Settings\Temporary Internet Files\OLK4\Ltr to Augusta GA 4-26-05.doc Page 3 of9 Section 3. Site Investi2:ation and Acquisition. Augusta will investigate the suitability of the Site for the construction of the Complex which investigation shall include, but not be limited to, taking soil samples and test borings to determine underground conditions and performing the necessary and appropriate environmental testing. If such investigation determines that the Site is suitable and satisfactory as a location for the Complex and that it can be constructed thereon without encountering any undesirable condition that would drive lip the cost of the Project, beyond budgets agreed upon by the parties then Augusta will acquire the Site. using all means available to it to do so in the most cost-effective manner possible. Section 4. Defeasance of AU2:usta-Richmond County Coliseum Authority Obli2:ations. Augusta shall make the necessary arrangements to defease Augusta's intergovernmental agreement obligations which secure the outstanding bond indebtedness for the Civic Center issued by the Augusta-Richmond County Coliseum Authority (the "Authority"). After the defeasance of such intergovernmental agreement obligations and for the term of the Excise Tax Bonds or the Operating Agreement, whichever is longer, Augusta shall pledge that portion of proceeds from Hotel/Motel taxes and Beer/Alcohol taxes currently being provided to the Authority to the Trustee for payment of debt service on the Excise Tax Bonds and capital maintenance and improvements of the Complex as provided in the Operating Agreement and trust indenture(s). Notwithstanding the previous sentence, Augusta may continue to provide to the Authority Excise Tax revenues to continue operation of the Bell Auditorium, at a level not to exceed monies required to fund the operating deficit of the Bell Auditorium in 2002. Section 5. Sources ofPavment of Revenue Bonds. Augusta's liability for payment of the Revenue Bonds will be limited to the revenues of the Complex pledged to the payment of the Revenue Bonds. The revenues that will support the payment of the Revenue Bonds will consist of Complex revenues, as follows: (A) Seat fees, assessed on the sale of tickets for the Complex. Fees shall be assessed on general admission and premium seat tickets and license fees. (B) Gross Revenues from the operation of the Complex including those derived from the Ancillary Agreements hereinafter referred to. Gross Revenues shall specifically include premium seat license fees, naming, pouring, advertising and other commercial rights and additional forms of multi-year contractual Complex revenues. Augusta Entertainment will subordinate any incentive management fees, payable to it to the payment of operating expenses and the payment of debt service on the Revenue Bonds Section 6. Augusta's Ri2:ht to Inspect and Audit. Augusta Entertainment will guarantee the payment of the Revenue Bonds. Augusta will have the right to inspect and audit the operations of the Complex by Augusta Entertainment and all subcontractors subordinate to it, including ScheerGrame Sports Development, LLC. as well as the financial statements and records of Augusta Entertainment. C:\DoclIments and Settings\cphilips\Local Settings\Temporary Internet Files\OLK4\Ltr to Augusta GA 4-26-05.doc Page 4 of9 Section 7. Project A2:reements. The following Project Agreements will be negotiated, drafted and must be executed on or before, and as a condition to, the consummation of the sale of the General Obligation Bonds, the Excise Tax Bonds and the Revenue Bonds (the "Bonds"): (A) Development and Construction Agreement. The Development and Construction Agreement will set forth the development and construction arrangements between Augusta Entertainment and Augusta. Prior to execution of this agreement certain preliminary studies shall be completed including the financing plan, site plans, preliminary design and construction estimates. Prior to the issuance of the Bonds, pre-development agreement costs (which shall not include the costs set out in Section 3 hereof) shall be borne equally by Augusta and Augusta Entertainment not to exceed a maximum of $2,500,000.00. All predevelopment cost estimates will be identified promptly by the parties. Should pre development costs exceed the maximum, the overage shall be the responsibility of Augusta Entertainment. Pre-development costs shall be reimbursable to each party from the proceeds of the Bonds when issued. A Trustee shall control the disbursement of monies for design and construction. Augusta Entertainment will be responsible for the design and construction of the Complex. Augusta Entertainment will obtain a fully bonded guaranteed maximum price contract from Turner Construction for the construction of the Complex. The Trustee shall deposit proceeds of the Bonds in designated accounts pursuant to one or more trust indentures for disbursement. Augusta Entertainment will guarantee the construction costs and the completion date of the Complex which shall be defined as substantial completion and the issuance of a Certificate of Occupancy. Augusta Entertainment will subcontract program management for the construction to ScheerGame Sports Development, LLC. Augusta Entertainment as development manager will enter into a design/build contract with the team of Turner Construction Sports Group ("Turner Construction") and HOK Sport+Venue+Event to execute the design of the Complex and to provide construction management services for the Complex. Augusta will appoint Heery, Inc. as its owner's representative during design and construction of this project. Augusta shall also have the right to review and approve the design, which approval shall not be unreasonably withheld. Without' restricting or limiting competitive bidding or increasing the cost of the work, Augusta Entertainment agrees that it will use its best efforts to encourage the participation of minority businesses in the design, construction and operation of the Complex with a goal of having a minimum of 35% minority and female participation in all phases of this project. Such requirement will extend to the team of Scheergame, Turner Construction and HOK SporH V enue+Event working for Augusta Entertainment. In addition, the above parties will use their best efforts to engage at least 50% participation in all phases of this contract by local C:\Documents and Settings\cphilips\Local Settings\Temporary Internet Files\OLK4\Ltr to Augusta GA 4-26-05.doc Page 5 of9 . businesses including trades, engineers and others that may be needed to complete this proj ect. (B) Operating Agreement.. The Operating Agreement will set forth the contractual arrangements between Augusta Entertainment and Augusta for management of the operation of the Complex as well as the standards by which Augusta Entertainment's performance during the term of the Operating Agreement will be measured. The term of this agreement shall be 25 years commencing upon substantial completion of the Complex. Subject to the terms of the Operating Agreement, Augusta Entertainment shall have the responsibility, control and discretion over the operation, direction, management and supervision of the Complex for the term of the Operating Agreement. The Operating Agreement will include provisions for Augusta Entertainment to be paid fixed and incentive fees for its management services, and will set forth the manner in which Augusta. and Augusta Entertainment will divide the net proceeds from the operation of the Complex. Under the Operating Agreement, Augusta Entertainment will be responsible for the following: Financial Matters (i) Payment out of Complex revenues and, if necessary, excise taxes not expended for debt service payments on the Excise Tax Bonds all operating expenses of the Complex, including the cost of maintenance and Augusta Entertainment base management fees and any operational taxes applicable thereto. (ii) Payment of all net operating revenues to the Trustee for disbursement under the trust indenture(s), which shall provide for payments as follows: (a) Payment of Revenue Bond debt service; (b) Payment of incentive management fees; (c) Payment of agreed upon amounts into a Renewal and Replacement Fund; (d) Payment of net income of the Complex, after all of the previous payments, and any accruals thereon, equally to Augusta, Augusta Entertainment and the Revenue Bond holders. for partial prepayment of the Revenue Bonds until that debt is retired and thereafter equally to Augusta and Augusta Entertainment, all of this being subject to approval of tax counsel. (iii) Preparation and submission to Augusta of an annual operating budget and report, projecting the estimated revenues and expenses of the Complex during the next Fiscal Year. C:IDocuments and Settingslcphilips\Local Settings\Temporary Internet Files\OLK4\Ltr to Augusta GA 4-26-05.doc Page 6 of9 (iv) Preparation and submission to Augusta of an mmual capital improvements budget and report, projecting the estimated needs and costs of capital improvements, repairs, replacements and/or expenditures required by and for the Complex. (v) Provision of audited financial statements to meet requirements of Trustee, Augusta and regulatory agencies. (vi) If the operations of the Complex result in a negative cash flow Augusta Entertainment shall be deemed to be in default under the Operating Agreement and may be terminated under the provisions thereof. Augusta Entertainment may cure such default by funding the deficit in full within sixty (60) days following written notice from Augusta of such default. For purposes of this provision, "cash flow" shall include all of the income produced from the Complex plus the hotel/motel taxes and beer/alcohol taxes pledged to the Trustee pursuant to Section 4 hereof for use in connection with the Complex minus all expenses for the operation of the Complex except depreciation, amortization of debt, interest expense; incentive management fees and income taxes. Administrative Matters (vii) Employing, paying and supervIsmg all personnel Augusta Entertainment determines are necessary to operate the Complex (viii) Maintaining the Complex in good, clean order and repair. (ix) Planning and supervising all advertising, public relations and other promotional programs for the Complex. (x) Arranging for and booking Complex events, subject to guidelines as to the types of events which may be booked, which guidelines shall be approved by Augusta, provided, that approval will not be umeasonably be withheld. (xi) Entering into leases of retail, office and other space in the Complex, licenses and other agreements pertaining to the use and operation of the Complex it deems appropriate. (xii) Taking such action as necessary to enforce any agreements entered into by Augusta Entertainment and any third party which relates to the design, construction, operation, maintenance or use of the Complex. In the event that Augusta Entertainment fails to take such action, then, upon thirty (30) days written notice to Augusta Entertainment, Augusta shall have the right to take such action, at Augusta C:\Documents and Settings\cphilips\Local Settings\Temporary Internet Files\OLK4\Ltr to Augusta GA 4-26-05.doc Page 7 of9 Entertainment's cost and expense, to enforce such agreements. Augusta Entertaimnent and Augusta shall meet on an mlliual basis to schedule dates for govermnental and/or non-profit sponsored events, such as high school graduations, arts events, etc., not to exceed twenty (20) dates per year. Fees charged for those twenty (20) events shall cover only direct, out-of-pocket operations expenses of the Complex and/or Augusta Entertainment. The Operating Agreement will contain proVIsIOns providing for the Trustee to have the power to replace Augusta Entertainment as manager in the event of a default under the Revenue Bonds or the breach of any other provisions of the Operating Agreement. In addition, Augusta Entertainment will make its best efforts within its needs for qualified personnel to hire for work at the Complex employees of the Augusta Civic Center who may be displaced as a result of the construction of the Complex. Section 7. Ancillary A2:reements. The following Ancillary Agreements will be negotiated, drafted and executed at the appropriate time: (A) Hockey Agreement. Augusta Entertainment will enter into an agreement to cause the Augusta Lynx to play all of its home games in the Complex and will set out the rights to certain game day revenues as well as its obligations with respect to certain game day expenses. (B) Horse Show Agreements. Augusta Entertainment will enter into an agreement with the National Barrel Horse Association to hold its World Championship in the Complex and an agreement with the Atlantic Coast Cutting Horse Association, Inc. to hold the Augusta Futurity in the Complex. These agreements will obligate each contracting entity to hold its competition in the Complex for a term coterminous with the maturity of the Revenue Bonds. These agreements will also define the rights of each organization to certain event day revenues and its obligations with respect to certain event day expenses. (C) Premium Seat Licensing Agreements. These agreements will set forth the contractual arrangements for Augusta Entertainment to license individual suites, club seats, loges or other specially designated seating areas in the Complex to individuals or companies, and will stipulate the form of the license agreements to be employed in such connection. CD) Advertising and Commercial Rights Agreements. These agreements will set forth the arrangements between Augusta and Augusta Entertainment to sell advertising, naming, pouring, signage and other commercial rights in the Complex. These arrangements may cover both permanent and temporary advertising. Augusta will explicitly authorize Augusta Entertainment to seek to license the name of the Complex to a private person or corporation subject to approval of Augusta, which consent will not be unreasonably withheld C:\Documents and Settings\cphilips\Local Settings\Temporary Internet Files\OLK4\Ltr to Augusta GA 4-26-05.doc Page 80f9 (E) Concession Agreement. This. agreement will set forth the understandings between Augusta Entertainment and concessionaires to install kitchen, fixed stand, portable and restaurant cooking, warming and service equipment and operate the food, beverage and merchandising activities at the Complex, including any restaurant and lounge. (F) Additional Lease or Use Agreements. Other tenants, such as retail users, restaurants or other compatible commercial interests may enter into lease or use agreements for space within the Complex or on the Site. (G) Parking Agreement. To the extent not addressed in either the Operating Agreement or any Use Agreement with a long-term tenant, this Agreement will set forth the rights and obligations of Augusta Entertainment with respect to the operation of on-site parking for the Complex. Augusta will grant Augusta Entertainment the right to operate the parking facilities on the Site and receive revenue, said revenues to be considered a portion of the operating revenues of the Complex, and to enter into agreements with owners of off-site parking areas to lease or operate such facilities during Complex events, if required. It is not currently anticipated that offsite parking will be required for Complex events. (H) Financing Agreements. These agreements will provide for the issuance and sale of the Bonds and the rights and responsibilities of the various parties thereto. (1) Additional Sports Franchises. If Augusta Entertainment shall acquire any other sports franchisees) which is based in Augusta, Georgia and for which it would be appropriate to have the franchisees) play its home games in the Complex, then in such event, Augusta Entertainment shall cause such sports franchisees) to play its home games at the Complex. C:\Documents and Settings\cphilips\Local SettingslTemporary Internet Files\OLK4\Ltr to Augusta GA 4-26-05.doc Page 9 of9