Final Execution Copy
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this "Agreement"), dated as of December 31, 2004
(the "Effective Date"), is entered into by and between Dolphin Direct Equity
Partners, LP, a Delaware limited partnership ("Dolphin"), Race Car Simulation
Corp., a New York corporation affiliated with Dolphin (the "Company"), and
Interactive Motorsports and Entertainment Corporation, an Indiana corporation
(together with its subsidiaries, the "Manager").
WHEREAS, the Company desires to receive certain management services from
the Manager;
WHEREAS, the Manager desires to provide such services to the Company
pursuant to the terms of this Agreement;
WHEREAS, the compensation arrangements set forth in this Agreement are
designed to compensate the Manager for providing such services to the Company;
and
WHEREAS, the Company and the Manager are entering into an Asset Purchase
Agreement of even date herewith (the "Asset Purchase Agreement").
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set
forth, the parties hereto agree as follows:
1. Services.
(a) The Company hereby retains the Manager to, and the Manager hereby
agrees to be retained to (i) accept and perform, on behalf of the Company, each
and all of the Company's obligations of any kind (other than the obligation to
leave Simulators in place) under all Leases whether now existing or entered into
after the date hereof, (ii) if any Simulators are not, at any time, being
utilized to generate revenue for the Company, place such Simulators into service
under Leases with operators prior to placing any of its own or any competing
racecar simulators into any such arrangements; provided, however, that the
Company may reject any such arrangement in its sole discretion, and thereafter
the Manager may place its own or any competing racecar simulators into such
arrangement if the terms thereof are no more favorable to the Manager than the
rejected terms would have been to the Company, (iii) use its best efforts to
market and negotiate competitive terms for the placement of Simulators, and bear
all costs of relocation and refurbishment of such Simulators, (iv) in every
manner maintain, protect and enhance the value of all Simulators and all Leases,
and perform the Company's and the Manager's obligations under all Leases, with
the highest standard of care and with the highest commitment of financial,
personnel, marketing, time and other resources as Manager applies with respect
to its own racecar simulators and leases or other revenue sharing arrangements;
(v) otherwise advise the Company with respect to the utilization of all
Simulators, and perform such additional services relating thereto, as reasonably
requested by the Company from time to time, in every case diligently, promptly
and at the Manager's sole expense; and (vi) maintain, on terms no less favorable
to the Company and to the operators under the Leases than the existing
arrangement, the ability of the Company and to the operators under the Leases to
utilize the marks subject of the license agreement by and among National
Association for Stock Car Racing, Inc. and PL, effective as of June 1, 2001, as
the same may be amended from time to time.
(b) If the Manager is unable to place any of the Company's Simulators into
service pursuant to Section 1(a) within sixty (60) days of such Simulator being
taken out of service, the Company may elect to exchange any such Simulator for a
simulator of the Company's choosing owned by the Manager that has been placed
into a revenue-generating arrangement with a third party within the six (6)
month period immediately preceding the date that the Company's Simulator was
taken out of service. The Manager will assign to the Company its rights under
any operating lease or revenue sharing agreement to which any such exchanged
Simulator is subject, and such arrangement will be considered a Lease under this
Agreement.
2. Additional Funding; Issuance of Warrants.
(a) If (i) the Manager and Dolphin mutually agree that Dolphin will
contribute additional funds to the Company or (ii) Dolphin or the Company
receives any claim, invoice or other notice from a third party alleging or
otherwise indicating that Dolphin or the Company is required to make any payment
or take any action, and Dolphin reasonably believes that the Company requires
additional funding in order to make such payment, take such action or defend
itself in connection with such claim, invoice or notice, Dolphin (X) in the case
of clause (i) above, shall and (Y) in the case of clause (ii) above, may
contribute such funds (in debt, equity or any combination thereof at its sole
discretion), to such extent, from time to time and up to $2 million in the
aggregate. As conditions precedent to Dolphin's obligation to make any such
contribution contemplated by clause (i) above, the Manager shall (i) issue to
Dolphin a warrant pursuant to Section 2(b) and (ii) have fully performed all
obligations to be performed by it under the Transaction Documents.
(b) In the event of any additional funding of the Company pursuant to
Section 2(a), Manager shall issue to Dolphin a warrant simultaneously with
Dolphin's funding of each such contribution in form and substance as set forth
on Exhibit A hereto, to purchase a number of shares of common stock of the
Manager, par value $0.0001 per share, equal to 2.5 shares for each $1 of equity
or principal amount of debt of such contribution. Any contribution made by
Dolphin to the Company prior to the issuance by Manager of such warrant shall
not be deemed a waiver of Manager's obligation to issue such warrant.
3. Term. The term of this Agreement shall commence as of the Effective Date
and shall continue until terminated by mutual agreement of the parties.
4. Compensation.
(a) As sole consideration for the services to be rendered by the Manager
hereunder, and commencing with the first (if any) full month at the beginning of
which (i) the Aggregate Investment Amount equals zero ($0.00) and (ii) Dolphin
does not reasonably believe that the Company will require additional funding in
order to meet its obligations under the Leases or any other legal obligations,
the Manager shall accrue a monthly fee (the "Management Fee") equal to the
excess of (X) 75% of the aggregate cash payments actually received by the
Company under the Leases, computed without taking into consideration the fees
payable under this Section 4, as determined by the Company's regular auditors,
or in the absence thereof, by the Company, with respect to each full month over
(Y) (1) $3,000 (2) without duplication, all amounts that the Company has been
required to refund or otherwise pay under or in connection with the Leases, all
amounts owing to the Company or Dolphin under the Transaction Documents and all
operating and administrative expenses of the Company, including any and all
legal expenses of the Company and Dolphin incurred in connection with any such
refund, payment or expenses (in each case to the extent not already deducted
from a prior payment of the Management Fee or otherwise reimbursed or paid by
the Manager). The Management Fee shall be payable quarterly in arrears, and
shall be payable with respect to full months only without pro-ration for any
shorter period.
(b) If for any reason the Company is unable to pay any or all of the
amounts otherwise owed to the Manager pursuant to this Agreement, the Company
shall make such payments as soon as the Company is able to do so, together with
interest thereon at the rate of 1.5% of the unpaid amount per month.
5. Relationship of the Parties. The Manager is providing services hereunder
as an independent contractor, retaining control and responsibility for its
operations and personnel. Nothing in this Agreement shall be deemed to
constitute the parties hereto joint venturers, partners or participants in an
unincorporated business or other separate entity, nor in any manner create any
employer-employee relationship between the Company on the one hand, and the
Manager or any of the Manager's employees on the other hand.
6. Control. The activities of the Company shall at all times be subject to
the control and direction of its manager. The Company reserves the right to make
all decisions with regard to any matter upon which the Manager has rendered its
services hereunder.
7. Indemnification. (a) The Manager shall reimburse, defend, indemnify and
hold the Company and its affiliates, members, partners, managers, officers,
employees and agents, harmless from and against any damage, loss, liability,
deficiency, diminution in value, action, suit, claim, proceeding, investigation,
audit, demand, assessment, fine, judgment, cost and other expense (including,
without limitation, reasonable legal fees and expenses) arising out of, related
to or in connection with any act or omission of, or on behalf of, the Manager in
carrying out its duties hereunder to the extent resulting in whole or in part
from the Manager's failure to perform its duties under Section 1, including by
breach of any of the Manager's obligations to the operators under the Leases.
Without limiting the generality of the foregoing, the Manager acknowledges that
the Company is relying entirely on the Manager to protect all relationships with
operators and lessees under the Leases, and the Manager acknowledges that
indemnification shall be due hereunder to the extent that the Company
experiences a loss or diminution in value of any Lease. (b) The Company shall
reimburse, defend, indemnify and hold the Manager and its affiliates, members,
partners, managers, officers, employees and agents, harmless from and against
any damage, loss, liability, deficiency, diminution in value, action, suit,
claim, proceeding, investigation, audit, demand, assessment, fine, judgment,
cost and other expense (including, without limitation, reasonable legal fees and
expenses) arising out of, related to or in connection with the Company's failure
to leave the Simulators in place under the Leases.
8. Assignment; Successors and Assigns. This Agreement and the rights,
duties and obligations of the Manager hereunder may not be assigned or delegated
by the Manager without the prior written consent of the Company. All covenants,
promises and agreements by or on behalf of the parties contained in this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, legal representatives, successors and
permitted assigns.
9. Amendments. No amendment, supplement or waiver of any provision of this
Agreement shall be effective unless the same shall be in writing and signed by
the Manager and the Company (in the case of an amendment or supplement) or by
the waiving party (in the case of a waiver).
10. Applicable Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York, without giving
effect to principles of conflicts of law or choice of law that would compel the
application of the substantive laws of any other jurisdiction.
11. Section Headings. The headings of each section are contained herein for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
12. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto with regard to the subject matter hereof and supersedes and
replaces all prior agreements, understandings and representations, oral or
written, with regard to such matters.
13. Severability. If any provision of this Agreement or application thereof
under any circumstances is adjudicated to be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect any other
provision or application of this Agreement which can be given effect without the
invalid or unenforceable provision or application and shall not invalidate or
render unenforceable such provision or application in any other jurisdiction. If
any provision is held void, invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances.
14. Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, and both of which together shall constitute one and
the same document. Any counterpart may be executed by facsimile signature and
such facsimile signature shall be deemed an original.
15. Defined Terms. Capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Asset Purchase Agreement.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first above written.
DOLPHIN DIRECT EQUITY PARTNERS, LP
By: Dolphin Advisors, LLC,
its Managing General Partner
/s/ Xxxxx X. Xxxxx
By: ---------------------------------------
Name: Xxxxx X. Xxxxx
Title: President, Dolphin Management, Inc.,
Managing Member
RACE CAR SIMULATION CORP.
/s/ Xxxxx X. Xxxxx
By: -------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
INTERACTIVE MOTORSPORTS AND
ENTERTAINMENT CORPORATION
/s/ Xxxxxxx X. Xxxxxxxxx
By: ---------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
