Interim Authorization

(1) Contractual Transfers. Whenever any person contracts to transfer a Racing Meeting License or an ownership interest in a Racing Meeting Licensee, as defined in 205 CMR 15.01: Authority and Definitions, or its parent, holding or intermediary company, or any property relating to a racing operation, under circumstances which require that the transferee obtain licensure or be found qualified pursuant to 205 CMR 15.04: Suitability of New and Existing Licensees, and Qualifiers and/or M.G.L. c. 128A, the contract shall not specify a closing or settlement date which is earlier than 121 days after the submission of a completed transfer application. Said application shall consist of: (a) For the transferee, the survey described at 205 CMR 15.02(1)(a)1.; For the transferee and each new qualifier, the materials described at 205 CMR 15.02(1)(a)2. and 3., as appropriate; (c) For the transferee and each new qualifier, any attestation forms required by the Bureau; (d) For the transferee, the materials described at 205 CMR 15.02(1)(c) through (e), as appropriate (e) Application for Racing License Transfer form as provided by the Commission; (f) A fully executed trust agreement in accordance with 205 CMR 17.03(6) which shall be subject to Commission approval. Any contract provision which specifies a closing or settlement date sooner than 121 days after submission of the transfer application shall be void for all purposes. (2) Transfers of Publicly Traded Securities. Whenever any Person, as a result of a transfer of publicly traded securities of a Racing Meeting Licensee or its parent, holding or intermediary company, is required to be qualified under 205 CMR 15.04(5): Persons Required to Be Qualified, the Person including all related qualifiers shall, within 30 days after a Schedule 13D or 13G is filed with the U.S. Securities and Exchange Commission, or after the Bureau notifies the Person that qualification is required, or within such additional time as the Bureau may for good cause allow, file a completed transfer application as described in 205 CMR 17.03(1). No extension of the time for filing a completed transfer application shall be granted unless the Person submits a written acknowledgement recognizing the jurisdiction of the commission and the obligations imposed by M.G.L c. 128A and 205 CMR. If a proposed transferee, including all related qualifiers, fails to timely file a complete transfer application, such failure shall constitute a per se negative finding of suitability to continue to act as a security holder, and the Commission shall take appropriate action including requiring divestiture by the transferee or redemption of the securities by the transferor. (3) If a prospective transferee files a complete transfer application in a timely manner the Commission may then request the bureau to produce an interim authorization report. Within 30 days after the bureau’s submission to the Commission of the interim authorization report the Commission shall hold a hearing in accordance with 205 CMR 101.01(2)(d) and render a decision on the interim authorization of the proposed transferee. If interim authorization is approved for a transfer governed by 205 CMR 17.03(1) then the closing or settlement may occur, and the prospective transferee may hold the securities or interests subject to the provisions of 205 CMR 17.03(4) until a final determination of suitability is made by the commission. If interim authorization is approved for a transfer governed by 205 CMR 17.03(2) then the prospective transferee may continue to hold the securities or interests subject to the provisions of 205 CMR 17.03(4) until a final determination of suitability is made by the Commission. (4) If, the Commission does not request the bureau to produce an interim authorization report, or, after a hearing, the Commission denies interim authorization, there shall be no closing or settlement of a contract to transfer an interest governed by 205 CMR 17.03(1) until the Commission makes a final determination on the suitability of the transferee in accordance with 205 CMR 15.04(1): Durable Suitability Determinations. If the Commission denies interim authorization for a proposed transfer subject to 205 CMR 17.03(2), all securities and interests subject to the transfer shall be promptly transferred into the trust. If the commission grants interim authorization for any transfer, it may at any time thereafter order all securities and interests subject to the transfer transferred into the trust if it finds reasonable cause to believe that the proposed transferee may be found unsuitable. If a prospective transferee fails or refuses to timely transfer securities and interests into the trust upon direction from the Commission said transferee shall be issued a negative determination of suitability. (5) After determining that a person is required to be qualified in accordance with 205 CMR 15.04(5): Persons Required to Be Qualified, the Bureau shall commence an investigation into the suitability of the transferee, which may be limited to the information required in accordance with 205 CMR 15.04(2)(b). If the Commission so requests pursuant to 205 CMR 17.03(3), the Bureau shall produce and forward to the Commission an interim authorization report no later than 90 days after the date that a complete transfer application is submitted by the proposed transferee, or such later date as the Commission may allow. Following a hearing, the commission may approve interim authorization if it finds that: (a) The transferee has submitted a complete transfer application; The transferee has submitted a fully executed trust agreement in accordance with 205 CMR 17.03(6); (c) The trustee or trustees required under 205 CMR 17.03(6) have satisfied the qualification criteria applicable to qualifiers; (d) There is no preliminary evidence to disqualify the transferee from licensure in accordance with M.G.L. c. 128A, §§ 2, 3i, 5C, M.G.L. c. 128C or 205 CMR 15.04: Suitability of New and Existing Licensees, and Qualifiers, nor is there any other reason known at the time whya positive determination of suitability may not ultimatelybe achieved; (e) The transfer would not violate 205 CMR 17.02(3) or (4); (f) It is in the best interests of the Commonwealth for the Racing Meeting Operation to continue to operate pursuant to interim authorization; and (g) If the transfer will result in a change of control, the transferee has agreed in writing in accordance with 205 CMR 17.04 to comply with all of the transferor's existing license obligations or has otherwise petitioned the Commission for modification or elimination of one or more of those obligations. If the Commission approves interim authorization, during the period of interim authorization, the Bureau shall continue its suitability investigation as may be necessary for a determination of the suitability of the person granted interim authorization. Within nine months after the interim authorization decision, which period may be extended by the Commission, the Commission shall hold a hearing and render a determination on the suitability of the applicant in accordance with 205 CMR 15.04(1): Durable Suitability Determinations. If the Commission denies interim authorization, or no interim authorization is requested, the Commission and Bureau shall proceed with the qualification process pursuant to 205 CMR 117.00: Phase 1 Determination of Financial Stability and shall complete the process within thirteen months of the submittal of a completed Racing License Transfer application, which 13 month period may be further extended by the Commission. (6) Trust Agreements. A trust agreement required to be submitted with a transfer application in accordance with 205 CMR 17.03(1) and (2) shall be fully executed upon submission and contain, at a minimum, the following: (a) A provision for the transfer and conveyance to the trustee of all of the transferee's proposed present and future right, title and interest in the racing meeting licensee, or its parent, holding or intermediary company, including all voting rights in securities upon the occurrence of an event described in 205 CMR 17.03(4) or if otherwise directed to do so by the Bureau in its discretion, pending a final suitability determination by the Commission. (b) A provision consistent with the provisions of 205 CMR 17.03 for the distribution of any trust res upon a positive determination of suitability, negative determination of suitability, or at the direction of the Commission in accordance with 205 CMR 17.03(8). (c) A provision identifying the trustee(s) and requiring the trustee to timely submit the materials described in 205 CMR 15.02(1)(a), as applicable, in order to be found qualified by the Commission in accordance with 205 CMR 15.04(1): Durable Suitability Determinations. (d) A provision identifying the compensation for the service, costs and expenses of the trustee(s), which shall be made subject to the approval of the Commission. (e) A mechanism by which the trustee may effectuate divestiture or redemption of securities, or a like process, in the event of a negative determination of suitability being issued to the transferee. (f) Any additional provisions the Commission deems necessary and desirable. (7) The trustee of the trust shall exercise all rights incident to the ownership of the property subject to the trust, and shall be vested with all powers, authority and duties necessary to the unencumbered exercise of such right, and the transferee shall have no right to participate in the earnings of the Racing meeting Licensee or receive any return on its investment or debt security holdings during the time the securities or interest are in the trust. Earnings may, however, accrue to or into the trust. (8) The trust agreement shall remain operative until the Commission issues the transferee a positive determination of suitability in accordance with 205 CMR 15.04(1)(e) (and in the event the interest has been placed into the trust, the trustee distributes the trust res) or the Commission issues the transferee a negative finding of suitability and the trust res is disposed of in accordance with 205 CMR 17.03(9). The trust shall otherwise only be revocable prior to a determination of suitability being issued upon Commission approval at the request of the settlor. In the event of such a request the Commission may direct the trustee to dispose of the trust res in accordance with 205 CMR 17.03(9). If the Commission issues a negative determination of suitability in accordance with 205 CMR 15.04(1)(e)1., a contract for the transfer of interests shall thereby be terminated for all purposes without liability on the part of the transferor. In the event of such negative determination, where the subject interests have been transferred into a trust in accordance with 205 CMR 17.03(4), the trustee shall endeavor and be authorized to attempt to sell, assign, convey or otherwise dispose of all trust res in accordance with the means established in accordance with 205 CMR 17.03(6)(e) or as otherwise directed by the commission. Any subsequent transferee must be appropriately licensed or qualified in accordance with 205 CMR 17.00. The disposition of trust res by the trustee shall be completed within 120 days of the denial of qualification, or within such additional time as the Commission may for good cause allow. The proceeds of such disposition shall be distributed to the unsuitable transferee only in an amount not to exceed the lower of the actual cost of the assets to such unsuitable transferee, or the value of such assets calculated as if the investment had been made on the date the assets were transferred into the trust, and any excess remaining proceeds shall be paid to the Commission.