Track buyout clause ruled valid Manfusos could dump De Francis

August 10, 1993|By Ross Peddicord | Ross Peddicord,Staff Writer

Less than two months before an Oct. 1 deadline, a Baltimore City Circuit Court judge ruled yesterday that a disputed "Russian roulette" clause in a stockholders agreement between the estranged partners of Pimlico and Laurel race courses is valid.

The decision could pave the way for Bob and Tom Manfuso, partners in Laurel/Pimlico, to buy out current track operator Joe De Francis and his family and Martin Jacobs, the track's executive vice president and chief counsel. Or the Manfusos could sell their shares to De Francis and Jacobs.

In her written order yesterday, Judge Ellen Hollander said that the court "declares that the 'Russian roulette' buy-sell provision is enforceable."

The partners have been struggling for control of the two tracks since Frank De Francis died in August 1989. In October of that year, the two sides signed a 30-page stockholders agreement.

According to that agreement, one side can offer its shares for sale at any price it wants after Oct. 1, 1993. The other side either must buy at that price or sell its shares. This is known as a "Russian roulette" provision, because the side that triggers the measure in an attempt to take over risks losing its share.

During testimony in the current proceeding, the Manfusos filed an affidavit saying that they "presently intend" to exercise their rights under the buy-sell provision on Oct. 1. The Manfusos could not be reached for comment last night, but their attorney, Andrew Jay Graham, said, "I'm pleased with the judge's decision, as are my clients, and we'll see where we go from here."

But Jim Gray, De Francis' attorney, said yesterday that the Manfusos "didn't say they 'unequivocally intend' to exercise the buy-sell option. By saying 'presently' they could change their minds tomorrow."

Gray said that he didn't know "what, if anything" will happen on Oct. 1. He said that if the judge's decision yesterday is appealable, "we will appeal it. We're analyzing our options now. From the practical point of view, I would say nothing is going to change in the management or control of the tracks."

The Manfusos first filed suit on April 29, 1992, in Baltimore City Circuit Court alleging that De Francis used profits from the tracks to finance a racing venture in Texas and that he used corporate credit cards for personal expenses.

De Francis said that once the Manfusos sued him, they breached the stockholders agreement, including the provision allowing the buyout. De Francis' counter-suit, stating that position, is not scheduled to be heard until March 1994.

Hollander dismissed most of the Manfusos' charges in June 1992.

"Two claims, very narrow issues, remain," Gray said. They relate to the involvement of Jacobs and vice president Jim Mango in the Lone Star Jockey Club, one of four groups attempting to secure a license to build a track in Dallas.

Under the terms of the 1989 stockholders agreement, the Manfusos each received a termination payment of $1.25 million -- representing their original investments in Pimlico -- upon retirement and are receiving severance payments of $125,000 a year through next month. De Francis said those severance payments are going into an escrow account until his counter-suit is resolved.

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