Manfusos to move on track ownership 'Roulette' spin to decide control of Pimlico/Laurel


Bob and Tom Manfuso, minority partners in the ownership of '' Pimlico and Laurel race courses, are ready to trigger a "Russian roulette" clause in a stockholders agreement that could lead them to either take over or sell their interests in the two tracks.

In a letter dated Sept. 1 and received by the Maryland Racing Commission on Sept. 3, the Manfuso brothers formally notified the board that they "intend to invoke a buy/sell" provision in a stockholders agreement "on or about Oct. 1."

Under the provision, also known as a "Russian roulette" clause, the Manfusos can set a price and offer to sell their stock to majority owner Joe De Francis and his other partners, Karin De Francis Van Dyke and Martin Jacobs. The De Francis group can either match that price and buy out the Manfusos, or it can sell its shares to the Manfusos at the price set by the Manfusos.

Van Dyke is De Francis' sister and Jacobs is executive vice president and chief counsel for Pimlico/Laurel.

It is the latest volley in a war concerning operations at the tracks that has gone on between the two factions for nearly four years.

The stockholders agreement was drawn up by the two parties in 1989, shortly after De Francis took over operation of the tracks from his late father, Frank De Francis.

It was conceived by Joe De Francis to keep peace between the two sides after he assumed control. Instead, it was just the beginning of intense bickering and legal wrangling between the partners.

On Oct. 1 of this year, either side can set a figure on what it thinks its shares are worth and offer them for sale to the corporation. The corporation can buy them at that price. If the corporation says no, then the shares become available to the triggering party at the price it has prescribed. The whole process can take as long as 120 days.

In the letter to the commission, the Manfusos said they intend to buy the tracks with their personal funds and then restructure the current bank debt, which amounts to $41 million.

The Manfusos said that if they assume control of the tracks, they will not draw salaries and could save Pimlico/Laurel about $1 million in immediate operating expenses. De Francis took similar action last spring and no longer draws his annual salary of approximately $720,000.

In the letter, the Manfusos said they wanted to know if the commission will approve them as majority owners if they assume control of the tracks after the buy/sell provision is invoked.

The commission discussed the letter in executive session at its regular monthly meeting last Wednesday at Timonium Race Course, but took no action.

"We want to wait and see what materializes and then we will take the appropriate steps," said commission chairman John McDaniel.

De Francis said yesterday: "Essentially the letter means nothing. They say they intend to trigger the buy/sell, but I could say that I intend the swim the English Channel and then change my mind the next morning."

De Francis added: "There are lot of outstanding legal issues involved that go beyond the simple buy/sell arrangement. It is a very complicated situation. But we both have a common interest in settling these disputes. That common incentive is a successful application by the Maryland Jockey Club to build a track in Virginia. It is in everyone's interest to come together and resolve these issues. If the Israelis and Palestinians can make peace, I don't see why the De Francises and Manfusos can't, too."

Neither Manfuso brother could be reached for comment. Their attorney, Andrew Graham, declined to comment on the letter to the racing commission. He said the Manfusos already had declared their intention to trigger the buy/sell agreement in a legal disposition last May.

De Francis had challenged the validity of the stockholders agreement and the Russian roulette clause. But on Aug. 9, Judge Ellen Hollander of the Circuit Court of Baltimore City ruled that the Russian roulette clause is in effect and can be triggered on Oct. 1.

De Francis can appeal Hollander's decision, but has not said whether or not he will.

De Francis, his sister and Jacobs own 53 percent of Pimlico's stock and 25 percent of Laurel's. The Manfusos own 47 percent of the equity in Pimlico, 25 percent of Laurel. The Guida Group, comprised of several New Jersey-based investors, owns the other 50 percent of Laurel. Lou Guida, the head of the group, was a longtime friend of Frank De Francis.

When Frank De Francis bought the tracks in partnership with the Manfusos in the mid-1980s, they paid $30.5 million for Pimlico and $16 million for Laurel, borrowing $41 million that is still listed as debt.


Joe De Francis and the Manfuso brothers have been vying for control of Pimlico and Laurel since Frank De Francis, Joe's father, died in August 1989. In October of that year, the two sides signed a 30-page stockholders agreement that includes a "Russian roulette" clause. Here's how it works:

* One side can offer to sell its stock to the other after Oct. 1, 1993. The triggering side sets the price.

* The other side must then either match that price and buy out zTC the partners who have triggered the clause, or sell its shares to those partners at the designated price.

* It's known as "Russian roulette" because the side that triggers the clause in an attempt to take over the tracks also risks losing its share, or is compelled to buy at the price it sets. If the price is reasonable, the opposing partners could jump at the chance to match it. On the other hand, if the price is inflated and the $H opposing partners decline to match it, the side that triggers the clause likely ends up paying more than the tracks are worth.

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