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 through 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 $6.2 million and $5.8 million for purse enhancements for the years ended December 31, 2015 and 2014, respectively.

Under the CMA, as amended, 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 $944,000 and $660,000 for marketing purposes for the years ended December 31, 2015 and 2014, respectively.

Effective January 2015, the CMA was amended to adjust the payment amounts between the “Purse Enhancement Payments to Horsemen” and “Marketing Payments to Canterbury Park.” Effective January 2016, the CMA was amended under the “Second Amendment” agreement to adjust the payment amounts between the “Purse Enhancement Payments to Horsemen” and “Marketing Payments to Canterbury Park.” SMSC has currently agreed to make the following purse enhancement and marketing payments for 2016 through 2022:


Year	Purse Enhancement Payments to Horsemen		1	Marketing Payments to Canterbury Park
2016	$	6,788,100		$	1,197,900
2017		7,466,910			1,317,690
2018		7,650,000			1,350,000
2019		7,650,000			1,350,000
2020		7,650,000			1,350,000
2021		7,650,000			1,350,000
2022		7,650,000			1,350,000


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 consolidated statements of operations. For the year ended December 31, 2015, the Company recorded $926,000 in other revenue and incurred $700,000 in advertising and marketing expense and $226,000 in depreciation related to the SMSC marketing payment. For the year ended December 31, 2014, the Company recorded $825,000 in other revenue and incurred $608,000 in advertising and marketing expense and $217,000 in depreciation related to the SMSC marketing payment. The excess of amounts received over revenue earned is reflected as deferred revenue which is included in accounts payable on the consolidated balance sheets.

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.

As part of the CMA, and pursuant to a related SAR Agreement dated June 14, 2012, the Company issued stock appreciation rights to the SMSC. For the year ended December 31, 2015, the Company recognized $142,000 of expense related to these stock appreciation rights, of which $142,000 was recorded as an offset to other revenue. For the year ended December 31, 2014, the Company recognized $32,000 of expense related to these stock appreciation rights, of which $32,000 was recorded as an offset to other revenue.

On July 30, 2015, the Company sold the land and buildings related to the Shakopee Valley RV Park located in Shakopee, Minnesota to SMSC for $100,000 plus the cancellation of the vested and unvested SARs. The sale resulted in a $347,000 gain on the Consolidated Statements of Operations –Gain on disposal of assets.