COOPERATIVE MARKETING AGREEMENT

12 Months Ended

Dec. 31, 2019

12. COOPERATIVE MARKETING AGREEMENT

On June 4, 2012, the Company entered into the CMA with the SMSC. The primary purpose of the CMA is to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, as amended, this is achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. Such payments have no direct impact on the Company’s consolidated financial statements or operations. Under the terms of the CMA, as amended, the SMSC paid the horsemen $7.3 million for purse enhancements for each of the years ended December 31, 2019 and 2018.

Under the CMA, SMSC also agreed to make “Marketing Payments” to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage, joint promotions, player benefits and events. Under the CMA, the SMSC paid the Company $1,620,000 for marketing purposes for each of the years ended December 31, 2019 and 2018.

The CMA was amended in January 2015, January 2016, January 2018, and March 2018 to adjust the payment amounts between the “Purse Enhancement Payments to Horsemen” and “Marketing Payments to Canterbury Park.” Under the CMA as most recently amended, the SMSC has agreed to make the following purse enhancement and marketing payments for 2020 through 2022:


	Purse Enhancement Payments to		Marketing Payments to Canterbury
Year	Horsemen (1)		Park
2020	$	7,380,000	$	1,620,000
2021		7,380,000		1,620,000
2022		7,380,000		1,620,000

(1) - Includes $100,000 each year payable to various horsemen associations

The amounts earned from the marketing payments are recorded as a component of other revenue and the related expenses are recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the year ended December 31, 2019, the Company recorded $1,114,000 in other revenue and incurred $888,000 in advertising and marketing expense and incurred $226,000 in depreciation related to the SMSC marketing funds. For the year ended December 31, 2018, the Company recorded $1,275,000 in other revenue and incurred $1,049,000 in advertising and marketing expense and $226,000 in depreciation related to the SMSC marketing funds.

Under the CMA, the Company agreed for the term of the CMA that it would not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.