<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1997.
REGISTRATION NO. 333-34471
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
HOLLYWOOD PARK, INC.
HOLLYWOOD PARK OPERATING COMPANY
AND OTHER REGISTRANTS
(SEE TABLE OF OTHER REGISTRANTS BELOW)
(EXACT NAME OF EACH REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION (STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION) OF INCORPORATION OR ORGANIZATION)
7999 7948
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE
NUMBER) (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
1050 SOUTH PRAIRIE AVENUE, INGLEWOOD, CALIFORNIA
90301 1050 SOUTH PRAIRIE AVENUE, INGLEWOOD, CALIFORNIA 90301
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUM-
BER, INCLUDING (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OF-
FICES) AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
---------------
G. MICHAEL FINNIGAN
PRESIDENT--SPORTS AND ENTERTAINMENT (HOLLYWOOD PARK, INC.), AND
EXECUTIVE VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER
HOLLYWOOD PARK, INC.
HOLLYWOOD PARK OPERATING COMPANY
1050 PRAIRIE AVENUE
INGLEWOOD, CALIFORNIA 90301
(310) 419-1500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
ALVIN G. SEGEL, ESQ.
ASHOK W. MUKHEY, ESQ.
IRELL & MANELLA LLP
1800 AVENUE OF THE STARS
LOS ANGELES, CALIFORNIA 90067
(310) 277-1010
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series B 9 1/2% Senior Subordinated
Notes due 2007...................... $125,000,000 100% $125,000,000 $37,879(2)
- -------------------------------------------------------------------------------------------------
Guaranties of Series B 9 1/2% Senior
Subordinated Notes due 2007......... $125,000,000 None(3) None(3) None(3)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457.
(2) Previously paid with August 27, 1997 filing.
(3) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee
is payable for the Guaranties.
---------------
THE REGISTRANTS HEREBY AMEND THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
OTHER REGISTRANTS
<TABLE>
<CAPTION>
I.R.S.
STATE OR OTHER JURISDICTION EMPLOYER
EXACT NAME OF REGISTRANT AS OF INCORPORATION IDENTIFICATION
SPECIFIED IN ITS CHARTER OR ORGANIZATION NUMBER
- --------------------------- --------------------------- --------------
<S> <C> <C>
Hollywood Park Fall Operating
Company............................ Delaware 95-4093972
Hollywood Park Food Services, Inc. . California 95-2844591
HP/Compton, Inc. ................... California 95-4545471
Crystal Park Hotel and Casino
Development Company, LLC........... California 95-4595453
Turf Paradise, Inc. ................ Arizona 86-0114029
HP Yakama, Inc. .................... Delaware 95-4636368
Boomtown, Inc. ..................... Delaware 94-3044204
Boomtown Hotel & Casino, Inc. ...... Nevada 88-0101849
Bayview Yacht Club, Inc. ........... Mississippi 64-0824102
Mississippi-I Gaming, L.P. ......... Mississippi 64-0828954
Louisiana Gaming Enterprises, Inc. . Louisiana 72-1229201
Louisiana-I Gaming, a Louisiana
Partnership in Commendam........... Louisiana 72-1238179
</TABLE>
<PAGE>
HOLLYWOOD PARK, INC.
HOLLYWOOD PARK OPERATING COMPANY
CROSS REFERENCE SHEET PURSUANT
TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION IN THE PROSPECTUS
---------------- --------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE
TRANSACTION
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus.... Cover of Registration Statement; Outside
Front Cover Page of Prospectus; Cross
Reference Sheet
2. Inside Front and Outside Back
Cover Pages of Prospectus... Available Information; Documents
Incorporated by Reference
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information....... Prospectus Summary; Risk Factors; Selected
Historical and Pro Forma Financial Data;
Unaudited Summary Pro Forma Financial Data
4. Terms of the Transaction..... Prospectus Summary; Risk Factors; The
Exchange Offer; Description of Notes;
Certain Federal Income Tax Considerations
5. Pro Forma Financial
Information.................. Prospectus Summary; Selected Historical and
Pro Forma Financial Information; Unaudited
Pro Forma Combined Consolidated Financial
Statements; Unaudited Summary Pro Forma
Financial Data
6. Material Contacts with the
Company Being Acquired...... Not Applicable
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters.......... Not Applicable
8. Interests of Named Experts
and Counsel.................. Not Applicable
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................. Not Applicable
B. INFORMATION ABOUT THE
REGISTRANT
10. Information with Respect to
S-3 Registrants.............. Available Information; Documents
Incorporated by Reference; Prospectus
Summary; Business; Selected Historical and
Pro Forma Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Unaudited Pro Forma Combined Consolidated
Financial Statements; Consolidated
Financial Statements
11. Incorporation of Certain
Information by Reference.... Documents Incorporated by Reference
12. Information with Respect to
S-2 or S-3 Registrants...... Not Applicable
</TABLE>
<PAGE>
HOLLYWOOD PARK, INC.
HOLLYWOOD PARK OPERATING COMPANY
CROSS REFERENCE SHEET PURSUANT
TO ITEM 501(B) OF REGULATION S-K--(CONTINUED)
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION IN THE PROSPECTUS
---------------- --------------------------
<C> <S> <C>
13. Incorporation of Certain Information
by Reference......................... Not Applicable
14. Information with Respect to
Registrants Other Than S-3 or S-2
Registrants.......................... Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3
Companies............................. Not Applicable
16. Information with Respect to S-2 or S-3
Companies............................ Not Applicable
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies...... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be
Solicited or in an Exchange Offer.... The Exchange Offer; Management
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER, +
+SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION +
+UNDER THE SECURITIES LAWS OF ANY SUCH STATE OR OTHER JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 30, 1997
PROSPECTUS
, 1997
OFFER FOR ALL OUTSTANDING SERIES A 9 1/2%
SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR
SERIES B 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF
HOLLYWOOD PARK, INC. AND HOLLYWOOD PARK OPERATING COMPANY, AS CO-OBLIGORS
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED.
Hollywood Park, Inc. ("Hollywood Park" or the "Company") and Hollywood Park
Operating Company, a wholly-owned subsidiary of Hollywood Park ("HPOC"), as co-
obligors (together, the "Issuers") hereby offer, upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange an
aggregate principal amount at maturity of up to $125,000,000 of Series B 9 1/2%
Senior Subordinated Notes Due 2007 (the "New Notes") of the Issuers, which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for a like principal amount of the issued and outstanding Series A 9
1/2% Senior Subordinated Notes Due 2007 (the "Old Notes" and, together with the
New Notes, the "Notes") of the Issuers from the holders (the "Holders")
thereof. The terms of the New Notes are identical in all material respects to
the Old Notes except (i) the offering and sale of the New Notes will have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and (ii) holders of New Notes generally will not be entitled to certain rights
of holders under a Registration Rights Agreement of the Company dated as of
August 1, 1997 (the "Registration Rights Agreement"). See "The Exchange Offer--
Purpose and Effect of Exchange Offer." The Old Notes have been, and the New
Notes will be, issued under the indenture (the "Indenture") dated as of August
1, 1997, among the Issuers, the Guarantors (as defined herein) and The Bank of
New York, as trustee (the "Trustee"). See "Description of Notes."
(Continued on next page)
-----------
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR NOTES PURSUANT TO THE EXCHANGE OFFER.
SEE "RISK FACTORS" ON PAGE 14 OF THIS PROSPECTUS FOR A DESCRIPTION OF CERTAIN
FACTORS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
NEITHER THE CALIFORNIA ATTORNEY GENERAL'S OFFICE, THE NEVADA GAMING
COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE MISSISSIPPI GAMING
COMMISSION, THE LOUISIANA GAMING CONTROL BOARD NOR ANY OTHER REGULATORY
AGENCY OF ANY OTHER STATE HAS PASSED UPON THE ADEQUACY OR ACCURACY OF
THIS PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED
HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-----------
<PAGE>
The New Notes will mature on August 1, 2007. The New Notes will bear
interest at a rate per annum equal to 9 1/2%, payable semiannually in arrears
on February 1 and August 1 of each year, commencing on February 1, 1998. The
Issuers will not be required to make any mandatory redemption or sinking fund
payment with respect to the New Notes prior to maturity. The New Notes will be
redeemable at the option of the Issuers, in whole or in part, on or after
August 1, 2002, at the redemption prices set forth herein, plus accrued and
unpaid interest and Liquidated Damages (as defined), if any, to the date of
redemption. In addition, during the first 36 months after the date of issuance
of the New Notes, the Issuers may redeem up to 25% of the aggregate principal
amount initially outstanding, at a redemption price equal to 109.5% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
redemption date, with the net cash proceeds of one or more public equity
offerings; provided, that at least 75% of the aggregate principal amount of
the Notes initially outstanding remain outstanding immediately after the
occurrence of such redemption. Upon a Change of Control (as defined and
including the occurrence of the Possible REIT Restructuring (as defined)), the
Issuers will be required to make an offer to repurchase all outstanding Notes
at 101% (or in the case of a REIT Change of Control (as defined), 102%) of the
aggregate principal amount thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. There can be no assurance that in the event of a
Change of Control the Company will have sufficient funds, or that it will
otherwise be permitted under the terms of the Senior Debt, to satisfy its
obligations with respect to any or all of the tendered Notes. See "Risk
Factors--Ability to Effect Repurchase of Notes upon a Change of Control."
The New Notes will be fully and unconditionally, jointly and severally,
guaranteed (the "Guaranties") on a senior subordinated basis by all of the
Company's other existing and certain future direct and indirect material
subsidiaries (collectively, the "Guarantors").
The New Notes and the Guaranties will be general unsecured obligations of
the Issuers and the Guarantors, respectively, subordinated in right of payment
to all existing and future Senior Debt (as defined) of the Issuers and the
Guarantors, respectively, including the Bank Credit Facility (as defined) and
effectively subordinated to all existing and future secured indebtedness of
the Issuers and the Guarantors. On a pro forma basis, as of June 30, 1997,
after giving effect to the issuance of the Old Notes, the application of the
proceeds therefrom and the acquisition of Boomtown, Inc., the Issuers and
their subsidiaries would have had approximately $11.7 million of Senior Debt
(including secured Indebtedness), plus accounts payable ranking pari passu to
the Notes of $13.2 million. In addition, if Sunflower Racing, Inc.'s plan of
reorganization is approved, the Company may guarantee up to $30.0 million of
debt to be incurred by Sunflower Racing, Inc., which guarantee would rank
senior to the New Notes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." The Indenture will permit the Company and its subsidiaries to
incur substantial additional indebtedness, including Senior Debt and secured
indebtedness, subject to certain limitations.
On August 6, 1997, the Issuers issued $125 million principal amount of Old
Notes. The Old Notes were issued pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. The New Notes are being offered
hereunder in order to satisfy certain obligations of the Issuers contained in
the Registration Rights Agreement. Based on interpretations by the staff of
the Securities and Exchange Commission (the "Commission"), as set forth in no-
action letters issued to third parties, the Issuers believe that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by Holders thereof (other than
any Holder which is an "affiliate" of either Issuer within the meaning of Rule
405 under the Securities Act), without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holder's business and such
Holder, other than broker-dealers, has no arrangement with any person to
engage in a distribution of such New Notes. However, the Commission has not
considered the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer. Each Holder, other than a
broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of such New Notes and has no arrangement or
understanding to participate in a distribution of New Notes. If any Holder is
an affiliate of either Issuer, or is engaged in or intends to engage in or has
any arrangement with any person to participate in the distribution of the New
Notes to be acquired
<PAGE>
pursuant to the Exchange Offer, or is a broker-dealer who purchased Old Notes
from the Issuers, such Holder (i) could not rely on the applicable
interpretations of the staff of the Commission, (ii) will not be permitted or
entitled to tender such Old Notes in the Exchange Offer, and (iii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. Any broker-dealer that acquired
Old Notes as a result of market making activities or other trading activities
(and not directly from the Issuers or Guarantors) and who resells New Notes
that were received by it pursuant to the Exchange Offer, and any broker or
dealer that participates in a distribution of such New Notes, may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of New Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Issuers have agreed, under certain
circumstances, that, for a period of up to 180 days after the Expiration Date
(as defined herein), it will make this Prospectus available to any broker-
dealer for use in connection with any such resale. See "Plan of Distribution."
The Issuers will not receive any proceeds from the Exchange Offer. The
Issuers will pay all the expenses incident to the Exchange Offer. Tenders of
Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date. There is no existing trading market for the New Notes,
and there can be no assurance regarding the future development of a market for
the New Notes. The Initial Purchasers (as defined herein) have advised the
Issuers that they currently intend to make a market in the New Notes. The
Initial Purchasers are not obligated to do so, however, and any market-making
with respect to the New Notes may be discontinued at any time without notice.
The Issuers do not intend to apply for listing or quotation of the New Notes
on any securities exchange or stock market. There can be no assurance that an
active market for the New Notes will develop. To the extent that an active
market for the New Notes does develop, the market value of the New Notes will
depend on market conditions (such as yields on alternative investments),
general economic conditions, the Issuers' financial condition, and other
factors. Such conditions might cause the New Notes, to the extent that they
are actively traded, to trade at a significant discount from face value. See
"Risk Factors--Lack of Public Market for the New Notes."
ANY NOTES NOT TENDERED AND ACCEPTED IN THE EXCHANGE OFFER WILL REMAIN
OUTSTANDING. TO THE EXTENT ANY NOTES ARE TENDERED AND ACCEPTED IN THE EXCHANGE
OFFER, A HOLDER'S ABILITY TO SELL OLD NOTES COULD BE ADVERSELY AFFECTED.
FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER, THE HOLDERS OF OLD NOTES WILL
CONTINUE TO BE SUBJECT TO THE EXISTING RESTRICTIONS UPON TRANSFER THEREOF AND
THE ISSUERS WILL HAVE FULFILLED CERTAIN OF THEIR OBLIGATIONS UNDER THE
REGISTRATION RIGHTS AGREEMENT. HOLDERS OF OLD NOTES WHO DO NOT TENDER THEIR
NOTES GENERALLY WILL NOT HAVE ANY FURTHER REGISTRATION RIGHTS UNDER THE
REGISTRATION RIGHTS AGREEMENT OR OTHERWISE. See "The Exchange Offer--
Consequences of Failure to Exchange."
The New Notes issued pursuant to this Exchange Offer generally will be
issued in the form of Global Notes (as defined herein), which will be
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Notes representing the New Notes will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
participants. See "Book-Entry; Delivery and Form."
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY EITHER ISSUER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY
<PAGE>
OTHER THAN THE NEW NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE NEW NOTES TO ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
UNTIL , 1997 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS
IN CONNECTION WITH SUCH TRANSACTION. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS.
<PAGE>
THIS PROSPECTUS (AS WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER
WRITTEN STATEMENTS MADE OR TO BE MADE BY THE COMPANY) CONTAINS CERTAIN
STATEMENTS WITH RESPECT TO, AMONG OTHER THINGS, THE FINANCIAL CONDITION,
RESULTS OF OPERATIONS, BUSINESS AND PROSPECTS OF THE COMPANY THAT ARE FORWARD-
LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND
SECTION 21E OF THE EXCHANGE ACT, INCLUDING STATEMENTS RELATING TO EXPANSION
OPPORTUNITIES, PRO FORMA COMBINED COMPANY FINANCIAL RESULTS, THE ABILITY TO
UTILIZE HOLLYWOOD PARK'S FINANCIAL RESOURCES TO IMPROVE THE FINANCIAL POSITION
OF ITS NEWLY ACQUIRED SUBSIDIARY, BOOMTOWN (AS DEFINED BELOW), STRATEGIC
SYNERGIES, COST SAVINGS RELATING TO THE ACQUISITION OF BOOMTOWN, CAPITAL
REQUIREMENTS AND THE POSSIBILITY OF REINSTITUTING A PAIRED-SHARE/REIT
STRUCTURE AND THE POTENTIAL BENEFITS TO BE DERIVED THEREFROM, AND SUCH
STATEMENTS ARE INTENDED TO BE COVERED BY THE SAFE HARBOR CREATED THEREBY (SEE
"PROSPECTUS SUMMARY--THE COMPANY," "--UNAUDITED SUMMARY PRO FORMA FINANCIAL
DATA," "BUSINESS," "SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING
DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS," AND "UNAUDITED PRO FORMA COMBINED CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS"). THESE FORWARD-LOOKING STATEMENTS CONCERN
MATTERS WHICH INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE
ACTUAL PERFORMANCE OF HOLLYWOOD PARK TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FAILURE TO COMPLETE OR SUCCESSFULLY OPERATE PLANNED EXPANSION, THE FAILURE TO
OBTAIN ADEQUATE FINANCING TO MEET HOLLYWOOD PARK'S STRATEGIC GOALS,
DIFFICULTIES IN COMPLETING INTEGRATION OF HOLLYWOOD PARK AND BOOMTOWN, FAILURE
TO OBTAIN OR RETAIN LICENCES OR REGULATORY APPROVALS AND THE OTHER FACTORS SET
FORTH UNDER "RISK FACTORS."
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, is required to file reports, proxy statements and other information
with the Commission. The Issuers have filed with the Commission a Registration
Statement on Form S-4 under the Securities Act for the registration of the New
Notes offered hereby (the "Registration Statement"). This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which
are contained in exhibits and schedules to the Registration Statement as
permitted by the rules and regulations of the Commission. For further
information with respect to the Issuers or the New Notes offered hereby,
reference is made to the Registration Statement, including the exhibits and
financial statement schedules thereto, which may be inspected without charge
at the public reference facility maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of which may be obtained from
the Commission at prescribed rates. Statements made in this Prospectus
concerning the contents of any document referred to herein are not necessarily
complete. With respect to each such document filed with the Commission as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
Such documents and other information filed by the Company can be inspected
and copied at the public reference facilities of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and the regional offices of the
Commission located at 7 World Trade Center, New York, New York 10048 and 500
West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of such
materials may be obtained from the Public Reference Section
i
<PAGE>
of the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at its public reference facilities in New York, New York and
Chicago, Illinois at prescribed rates. The Company makes its filings with the
Commission electronically. The Commission maintains a website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically, which information can be accessed at
http://www.sec.gov.
HPOC and the Guarantors are not currently subject to the informational
requirements of the Exchange Act; however, as a result of covenants in the
Indenture, HPOC currently files reports jointly with the Company pursuant to
the Exchange Act. As a result of the offering of the New Notes, HPOC and the
Guarantors will become subject to the informational requirements of the
Exchange Act. The Company will fulfill HPOC's and the Guarantors' obligations
with respect to such requirements by including information regarding HPOC and
the Guarantors in the periodic reports of the Company and by filing separate
periodic reports for Crystal Park Hotel and Casino Development Company, LLC
and for Mississippi-I Gaming, L.P. (since they are not wholly-owned by the
Company).
So long as the Company is subject to the periodic reporting requirements of
the Exchange Act, it is required to furnish the information required to be
filed with the Commission to the Trustee and the holders of the Old Notes and
the New Notes. The Issuers have agreed that, even if they are not required
under the Exchange Act to furnish such information to the Commission, they
will nonetheless continue to furnish information that would be required to be
furnished by the Issuers by Section 13 of the Exchange Act to the Trustee and
the holders of the Old Notes or New Notes as if they were subject to such
periodic reporting requirements.
In addition, the Issuers have agreed that, for so long as any of the Notes
remain outstanding, they will make available, upon request, to any seller of
such Notes the information specified in Rule 144(d)(4) under the Securities
Act, unless the Issuers are then subject to Section 13 or 15(d) of the
Exchange Act.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company (Commission file
number 0-10619) are incorporated herein by reference: the Company's
Registration Statement on Form S-4 (Reg. No. 333-12253), effective
September 20, 1996; its Annual Report on Form 10-K for the fiscal year ended
December 31, 1996; its Quarterly reports on Form 10-Q for the fiscal quarters
ended March 31, 1997 and June 30, 1997; its Current Reports on Form 8-K filed
July 15, 1997 and August 12, 1997; and the description of the Company's common
stock, $.10 par value per share (the "Common Stock") set forth in the
Company's Registration Statement on Form 8-A filed with the Commission on June
29, 1994.
All reports and definitive proxy or information statements filed by the
Company or its subsidiaries pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
Expiration Date (as defined) shall be deemed to be incorporated by reference
into this Prospectus from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
There will be provided without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, upon oral or written
request of any such person, a copy of all documents incorporated by reference
herein (excluding exhibits unless such exhibits are specifically incorporated
by reference herein). Requests for such documents should be directed to
Hollywood Park, Inc., Investor Relations, 1050 South Prairie Avenue,
Inglewood, California 90301 (telephone (310) 419-1610).
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Prospectus and the other
documents incorporated by reference herein. The New Notes are to be issued by
Hollywood Park, Inc. ("Hollywood Park" or the "Company") and its wholly-owned
subsidiary, Hollywood Park Operating Company ("HPOC"), as Issuers, and
unconditionally guaranteed by all of the Company's other direct and indirect
material subsidiaries. References herein to "Hollywood Park" or the "Company"
generally refer to the Company and all of its subsidiaries (including HPOC)
taken as a whole. This Prospectus does not contain separate financial
statements of HPOC or any other subsidiary.
THE COMPANY
Hollywood Park is a diversified gaming, sports and entertainment company
engaged in the ownership and operation of casinos (including card club casinos)
and pari-mutuel racing facilities, and the development of other related
opportunities. For the year ended December 31, 1996, on a pro forma basis
(giving effect to the recent acquisition of Boomtown, the disposition of
Boomtown Las Vegas (as defined) and the issuance of the Notes (collectively,
the "Transactions") as if the Transactions were consummated as of January 1,
1996), Hollywood Park had total revenues of approximately $336.6 million,
EBITDA(/1/) of approximately $2.7 million, Adjusted EBITDA (as defined) of
approximately $52.0 million and (after giving effect to the one time, non-cash
$11.4 million write off of Hollywood Park's investment in Sunflower Racing,
Inc. and the $36.6 million loss on the sale of Boomtown Las Vegas) a net loss
of approximately $37.5 million and a deficiency of earnings to fixed charges of
approximately $34.8 million. As a result of its strategic combination with
Boomtown, Hollywood Park is a company with diversified revenues, improved cash
flow and significant real estate acreage available for future development. On a
pro forma basis, as of June 30, 1997, the Company had total assets of
approximately $438.1 million and Net Debt (as defined) of approximately $89.4
million. See "Unaudited Summary Pro Forma Financial Information."
Hollywood Park owns and operates land-based, dockside and riverboat gaming
operations in Verdi, Nevada ("Boomtown Reno"), Biloxi, Mississippi ("Boomtown
Biloxi") and Harvey, Louisiana ("Boomtown New Orleans"), respectively.
Hollywood Park's Boomtown properties offer gaming and other entertainment
amenities primarily to middle income, value-oriented customers. Hollywood Park
believes its Boomtown properties distinguish themselves from other casinos by
their emphasis on the "old west" theme and their casual, friendly atmosphere.
Hollywood Park also owns two card club casinos in California, both located in
the Los Angeles metropolitan area, the Hollywood Park-Casino card club casino
(the "Hollywood Park-Casino"), operated by the Company on the premises of the
Hollywood Park Race Track (described below), and the Radisson Crystal Park
Hotel & Casino ("Crystal Park"), in which Hollywood Park holds a majority
interest and which is leased to an unaffiliated operator. The Hollywood Park-
Casino and Crystal Park offer a variety of card games, including Poker, Pai Gow
and California Blackjack. The Company's gaming properties have an aggregate of
3,269 slot machines and 379 table games. Hollywood Park is the only company
that currently owns and operates both California card club casinos and
traditional casinos in Nevada and other states.
Hollywood Park owns and operates the Hollywood Park Race Track, a premier
thoroughbred racing facility (and the site of the prestigious 1997 Breeders'
Cup championship racing series) located within three miles of the Los Angeles
International Airport, and the Turf Paradise Race Track ("Turf Paradise"), a
thoroughbred racing facility located in Phoenix, Arizona.
(1) EBITDA data, which is not a measure of financial performance under GAAP, is
presented because such data is used by certain investors to determine the
Company's ability to service or incur indebtedness. EBITDA and Adjusted
EBITDA are not calculated by the same means by all Companies and,
accordingly, are not necessarily appropriate measures for comparing
Companies' performance. Thus, neither EBITDA nor Adjusted EBITDA should be
considered in isolation from, or as a substitute for, net earnings (loss),
cash flows from operations or cash flow data prepared in accordance with
GAAP.
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Gaming Properties
Boomtown Reno. Boomtown Reno has been operating for over 30 years (and has
been operated by current Boomtown management since 1987) on 569 acres in Verdi,
Nevada (seven miles west of Reno, Nevada and two miles from the California
border) on Interstate 80, the major highway connecting Northern California and
Reno. Boomtown Reno caters to middle-income customers and markets itself as a
gaming and entertainment property complete with amenities for the entire
family. Boomtown Reno offers its guests a 40,000-square foot casino, including
1,320 slot machines and 44 table games and two Keno games. Boomtown Reno also
offers a 122-room hotel, a 35,000-square foot entertainment center featuring a
theater, an indoor miniature golf course, a restaurant and a ferris wheel, a
16-acre truck stop with approximately 200 parking spaces, a 203-space full-
service recreational vehicle park, a service station, a mini-mart and other
related amenities. The Company currently plans a $25 million expansion at
Boomtown Reno to renovate existing gaming space and to add approximately
200 hotel rooms, 13,000 square feet of additional gaming space (including 200
slot machines), a restaurant, an entertainment lounge, 10,000 square feet of
meeting space, additional parking and other amenities.
Boomtown New Orleans. Boomtown New Orleans commenced operations in August
1994 on a 50-acre site in Harvey, Louisiana, approximately ten miles from the
French Quarter of New Orleans. Gaming operations are conducted from a 250-foot
replica of a paddle-wheel riverboat, offering 911 slot machines and 55 table
games in a 30,000 square foot casino. The land-based facility adjacent to the
riverboat dock is composed of a western-themed, 88,000-square foot facility.
The first floor of the building opened December 1994 and offers patrons a
restaurant, a 20,000 square foot family entertainment center and a western
saloon/dancehall. The Company currently plans a $10 million expansion of the
Boomtown New Orleans facility to refurbish the existing gaming area and to
build out the second floor by adding meeting space, additional food and
beverage and other entertainment amenities. Boomtown New Orleans caters to the
approximately 300,000 local residents of the West Bank of the Mississippi River
near New Orleans.
Boomtown Biloxi. Boomtown Biloxi commenced operations in July 1994 and
occupies nineteen acres on Biloxi, Mississippi's historic Back Bay, one-half
mile from Interstate 110, the main highway connecting Interstate 10 and the
Gulf of Mexico. Boomtown's "old west" theme is the first of its kind in the
Gulf Coast area, and management believes the casual atmosphere and western
theme distinguish Boomtown Biloxi from competing casinos. The dockside property
consists of a land-based facility which houses all non-gaming activities and a
33,632-square foot casino constructed on a 400 x 110 foot barge permanently
moored to the land-based building. The property offers 1,038 slot machines, 35
table games and various restaurants and other non-gaming amenities. Hollywood
Park is considering, subject to further market analysis and the acquisition of
additional land, a possible expansion of Boomtown Biloxi to add hotel rooms
and/or to expand the undeveloped portion of the barge. Boomtown Biloxi caters
to the over 250,000 local residents of the Biloxi area and to the employees of
other casinos in the area.
Hollywood Park-Casino. The Hollywood Park-Casino, a California card club
casino, opened in July 1994 on the same premises as the Hollywood Park Race
Track. The casino offers 145 gaming tables in 30,000-square feet of gaming
space. By law, California card club casinos may neither bank card games nor
offer certain of the familiar games permitted in Nevada and other traditional
gaming jurisdictions. Instead, the Hollywood Park-Casino offers only certain
forms of card games, including Poker, Pai Gow and California Blackjack. Patrons
of the Hollywood Park-Casino pay a fee for seats at gaming tables or for each
hand played. Players bet solely against each other, and the Hollywood Park-
Casino does not participate in the wagers made or in the outcome of any of the
games played.
Crystal Park. Crystal Park, which is Southern California's first major
combined hotel and casino property, opened in late 1996 with 100 gaming tables
and 282 hotel rooms. Games offered are similar to those offered at the
Hollywood Park-Casino. The hotel operates under a Radisson Hotels
International, Inc. flag. Hollywood Park has an 89.8% interest in Crystal Park
Hotel and Casino Development Company, LLC ("Crystal Park LLC"), the entity that
owns the facility, with unaffiliated minority investors owning the balance of
the facility. In order
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to comply with California law, which does not allow publicly-traded companies
to operate card club casinos (other than on the same property as a race track,
such as the Hollywood Park-Casino), Crystal Park is operated by an unaffiliated
operator.
Racing Properties
Hollywood Park Race Track. The Hollywood Park Race Track is situated on
378 acres in the Los Angeles metropolitan area. Since 1938, the Hollywood Park
Race Track has been ranked among the country's most distinguished thoroughbred
racing facilities and, in 1997, will be hosting the Breeders' Cup championship
racing series for the third time. Hollywood Park conducts two live on-track
thoroughbred horse race meets annually, totalling approximately 100 race days
per year, and in 1996 had one of the nation's largest combined live and
simulcast single-track gross handles (approximately $1.1 billion). Hollywood
Park simulcasts its live races, directly or indirectly through
re-transmissions, to 861 locations in 40 states and four countries. Hollywood
Park also accepts the simulcast signal from live races conducted at other race
tracks around the world.
Turf Paradise. Turf Paradise, which has operated for over 40 years, was
acquired by Hollywood Park in August 1994 and is situated on approximately 275
acres in the northwest section of Phoenix, Arizona. Turf Paradise conducts a
live thoroughbred meet that starts in September and runs through May and also
offers limited quarter horse and Arabian horse racing during certain periods of
the year. Turf Paradise simulcasts its live races to 34 off-track sites in
Arizona and 34 out-of-state hubs, from which the signal is further disseminated
to sites in New York, New Jersey, Pennsylvania, Nevada and Canada, among
others.
Sunflower Racing. The Company also owns, through its subsidiary Sunflower
Racing Inc. ("Sunflower"), The Woodlands Racetrack in Kansas City, Kansas.
However, in 1996 Sunflower filed for reorganization under Chapter 11 of the
U.S. Bankruptcy Code. A plan of reorganization was recently filed with the
Bankruptcy Court. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Business Strategy
Hollywood Park's strategic plan is to grow its gaming, sports and
entertainment businesses by (i) expanding and increasing the utilization of its
existing properties, (ii) developing unimproved real estate at its existing
sites and developing projects at new sites, and (iii) making selected
acquisitions, principally in the gaming industry, to diversify its operations
and to achieve economies of scale.
. Expansion/Renovation of Existing Properties. The Company plans to expand and
renovate Boomtown Reno, Boomtown New Orleans and, possibly, Boomtown Biloxi,
by adding hotel rooms, gaming space, dining facilities, meeting space and
other amenities.
. Identified Development Opportunities. The Company is exploring the
development of some or all of the 150 undeveloped acres at the Hollywood
Park Race Track property and the 100 undeveloped acres at Turf Paradise
property through the addition of multi-use retail, entertainment and/or
sports venues. In addition, the Company is considering various alternative
development plans for some or all of the 503 undeveloped acres at its
Boomtown Reno site. The Company is also currently seeking a riverboat gaming
license for a hotel/casino on the Ohio River in Switzerland County, Indiana,
located approximately 35 miles south of Cincinnati, Ohio, as part of a joint
venture with a subsidiary of Hilton Gaming Corporation.
. Potential Strategic Acquisitions. Hollywood Park believes that significant
opportunities currently exist in the gaming industry as a result of
consolidation trends and the inability of certain gaming companies to expand
or maximize their opportunities due to capital constraints. Accordingly,
Hollywood Park seeks to capitalize on these opportunities to diversify its
operations geographically and achieve the benefits of economies of scale and
synergy. The Company is exploring acquisition opportunities in emerging
gaming markets (other than Las Vegas or Atlantic City) in which gaming has
already been legalized.
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RECENT DEVELOPMENTS
Hollywood Park-Boomtown Merger and Disposition of Boomtown Las Vegas
On June 30, 1997, pursuant to the Agreement and Plan of Merger dated as of
April 23, 1996 by and among the Company, HP Acquisition, Inc., a wholly-owned
subsidiary of the Company, and Boomtown, HP Acquisition, Inc. was merged with
and into Boomtown (the "Merger"). As a result of the Merger, Boomtown became a
wholly-owned subsidiary of the Company and each share of Boomtown common stock
was converted into the right to receive 0.625 of a share of Hollywood Park's
common stock. Approximately 5,363,000 shares of Hollywood Park's common stock
(excluding shares purchased from Edward P. Roski, Jr. as described below) were
issued in the Merger, representing approximately 22.5% of the total outstanding
shares of Hollywood Park's common stock, after giving effect to such issuance.
On July 1, 1997, Hollywood Park divested its entire interest in Boomtown's
hotel/casino property in Las Vegas, Nevada ("Boomtown Las Vegas"), to the
property's landowner and such landowner's affiliates (including Edward P.
Roski, Jr.) in exchange for cash, certain receivables, the termination of the
facility lease and the assumption by the landowner of certain liabilities and
operating leases (collectively, the "Blue Diamond Swap"). Hollywood Park
concurrently repurchased from Mr. Roski 446,491 shares of Hollywood Park's
common stock received by him in the Merger. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations--Boomtown--Disposition of Boomtown Las Vegas."
New Credit Facility
In connection with the Merger, the Company and a bank syndicate led by Bank
of America National Trust and Savings Association ("Bank of America NT&SA")
entered into a new bank credit facility (the "Bank Credit Facility") providing
for a reducing revolving line of credit of up to $225 million, maturing on June
30, 2002. However, the revolving line of credit commitment was permanently
reduced dollar-for-dollar by the $125 million aggregate principal amount of the
Old Notes issued by the Company. The Bank Credit Facility is secured by liens
on substantially all of the assets of the Company and its material
subsidiaries. At June 30, 1997, the interest rate under the Bank Credit
Facility was 7.44%. See "Description of Other Indebtedness--Bank Credit
Facility."
Improvements to Boomtown's Financial Condition
Concurrently with the closing of the Merger and the Blue Diamond Swap, the
Company supplied the funds necessary to enable Boomtown to repurchase and
retire an aggregate of approximately 99% of the $103.5 million aggregate
principal amount of Boomtown's 11.5% First Mortgage Notes due 2003 (the
"Boomtown Notes") at a purchase price of $1,085 per $1,000 in principal amount
(together with accrued interest thereon) pursuant to an offer to purchase the
Boomtown Notes, leaving an aggregate of approximately $1 million in principal
amount of Boomtown Notes outstanding. Holders who tendered their Boomtown Notes
consented to the elimination or modification of certain covenants and other
changes to the indenture governing the Boomtown Notes, all to permit the
consummation of the Merger and the Blue Diamond Swap and to provide greater
operational flexibility to Hollywood Park. In addition, Boomtown made an offer
to redeem the remaining Boomtown Notes at 101% of principal amount (plus
accrued interest) pursuant to a change of control offer provision in the
indenture governing the Boomtown Notes and approximately $100,000 in aggregate
principal amount of the remaining Boomtown Notes were tendered in response to
such offer.
On August 8, 1997, Hollywood Park purchased the remaining 7.5% of Boomtown
New Orleans which it did not already hold for approximately $5.7 million. On
August 4, 1997, Hollywood Park executed an agreement to repurchase the Boomtown
Biloxi barge currently leased from National Gaming Mississippi, Inc., a
subsidiary
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of Chartwell Leisure Inc. ("National Gaming") for approximately $5.25 million,
and made a down payment of $1.5 million with the balance due in three annual
installments of $1.25 million. National Gaming's participation in Boomtown
Biloxi's adjusted EBITDA (as defined in the lease agreement) and other related
agreements terminated upon consummation of the barge repurchase. The Company
also has an option to purchase the remaining 15% of Boomtown Biloxi which it
does not already hold for a nominal amount, and it has delivered a notice to
the minority holder of Boomtown Biloxi exercising this option with the exercise
price to be determined pursuant to a formula. If consummated, elimination of
these third party interests would allow the Company to benefit 100% from
operations, including any improvements, expansions or renovations at these
properties.
In addition, during 1996 and 1997, Boomtown restructured several operating
leases into capital leases through negotiated paydowns of the operating lease
residual balances, with a corresponding reduction in operating expenses.
Possible Restoration of Paired-Share/REIT Structure
In May 1997, the Company announced that it is exploring the possible
restoration of its former paired-share/REIT structure (the "Possible REIT
Restructuring"). No final decision has been made as to whether, or in what
manner, to implement the Possible REIT Restructuring. Further, the Company has
not yet solicited the necessary stockholder approval to implement the Possible
REIT Restructuring. There can be no assurance that the Company will elect to
proceed with the Possible REIT Restructuring or that, if implemented, its
expected benefits will be achieved. See "Business--Possible Restoration of
Paired-Share/REIT Structure."
The Company, subject to completing its evaluation, has begun taking the steps
necessary to reinstitute such a structure over the next several months, with
the objective of eventually reorganizing its assets and operations into a REIT
and an operating company. In connection therewith, the Company has submitted a
ruling request to the Internal Revenue Service on certain aspects of the
Possible REIT Restructuring and, unless the Company chooses to implement the
Possible REIT Restructuring before the Internal Revenue Service has made a
determination on that ruling request, the results of that ruling request may
have an impact on whether, and in what form, the Possible REIT Restructuring is
implemented. There are a number of alternative transaction structures for
effectuating the Possible REIT Restructuring, and the Company has not
determined which alternative, if any, it would use to implement the Possible
REIT Restructuring. However, under any such alternative, if the Company decides
to implement the paired-share/REIT structure, the Company would become the
REIT, Hollywood Park Operating Company ("HPOC") would become the operating
company, and the common stock of the Company and the common stock of HPOC would
be paired so that they would be transferable and tradeable only in combination
as units (with each unit consisting of one share of the Company's common stock
and one share of HPOC's common stock).
Redemption of Depositary Shares and Common Stock Repurchases
Effective August 28, 1997, the Company's 2,749,000 outstanding Depositary
Shares were converted into 2,291,492 shares of the Company's common stock,
thereby eliminating the annual preferred cash dividend payment of approximately
$1,925,000 for future periods.
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THE EXCHANGE OFFER
Securities Offered.......... $125 million aggregate principal amount of Series
B 9 1/2% Senior Subordinated Notes due August 1,
2007.
The Exchange Offer.......... $1,000 principal amount of the New Notes in
exchange for each $1,000 principal amount of Old
Notes. As of the date hereof, $125 million
aggregate principal amount of Old Notes are
outstanding. The Issuers will issue the New Notes
to Holders on or promptly after the Expiration
Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Issuers believe that New
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of either Issuer within the meaning
of Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such New Notes are acquired in the
ordinary course of such holder's business and
that such holder does not intend to participate
and has no arrangement or understanding with any
person to participate in the distribution of such
New Notes. Each broker-dealer that receives New
Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes. See "Plan of
Distribution."
Any Holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose
of participating, in a distribution of the New
Notes could not rely on the position of the staff
of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988),
Morgan Stanley & Co., Inc. (available June 5,
1991) or similar no-action letters and, in the
absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with the resale of the New Notes. Failure to
comply with such requirements in such instance
may result in such Holder incurring liability
under the Securities Act for which the Holder is
not indemnified by the Issuers.
Expiration Date............. 5:00 p.m., New York City time, on [ ], 1997,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended. In no event will the Expiration Date be
extended past [ ], 1998 (i.e, 90 days
following commencement of the Exchange Offer).
Interest on the New Notes
and the Old Notes........... The New Notes will bear interest from their date
of issuance. Interest will accrue on the Old
Notes that are tendered in exchange for the New
Notes through the issue date of the New Notes.
Holders
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of Old Notes that are accepted for exchange will
not receive interest on the Old Notes that is
accrued but unpaid at the time of exchange, but
such interest will be payable, together with
interest on the New Notes, on the first Interest
Payment Date after the Expiration Date.
Conditions to the Exchange
Offer....................... The Exchange Offer is subject to certain
customary conditions, which may be waived by the
Issuers. See "The Exchange Offer--Conditions."
Procedures for Tendering
Old Notes................... Each Holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver the Letter of
Transmittal, or such facsimile, together with the
Old Notes and any other required documentation to
the Exchange Agent at the address set forth in
the Letter of Transmittal. Persons holding Old
Notes through the Depository Trust Company
("DTC") and wishing to accept the Exchange Offer
must do so pursuant to the DTC's Automated Tender
Offer Program ("ATOP"), by which each tendering
participant will agree to be bound by the Letter
of Transmittal. By executing or agreeing to be
bound by the Letter of Transmittal, each Holder
will represent to the Issuers that, among other
things, the Holder or the person receiving such
New Notes, whether or not such person is the
Holder, is acquiring the New Notes in the
ordinary course of business and that neither the
Holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such New
Notes.
Special Procedures for
Beneficial Owners........... Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered Holder promptly and instruct such
registered Holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering its Old
Notes, either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed bond
power from the registered Holder. The transfer of
registered ownership may take considerable time.
Guaranteed Delivery
Procedures.................. Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
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<PAGE>
Withdrawal Rights........... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date pursuant to the procedures described under
"The Exchange Offer--Withdrawals of Tenders."
Acceptance of Old Notes and
Delivery of New Notes....... The Issuers will accept for exchange any and all
Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes
issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
Certain Federal Income Tax
Consequences................ The exchange of the New Notes for the Old Notes
pursuant to the Exchange Offer should not be
taxable to the Holders thereof for federal income
tax purposes. See "Certain Federal Income Tax
Consequences."
Effect on Holders of Old
Notes....................... As a result of the making of this Exchange Offer,
the Issuers will have fulfilled certain of their
obligations under the Registration Rights
Agreement, and Holders of Old Notes who do not
tender their Old Notes, except for limited
instances involving the initial purchasers of the
Old Notes (the "Initial Purchasers") and Holders
that are not eligible to participate in the
Exchange Offer, will not have any further
registration rights under the Registration Rights
Agreement or otherwise. See "The Exchange Offer--
Purposes and Effect of Exchange Offer." Such
Holders will continue to hold the untendered Old
Notes and will be entitled to all the rights and
subject to all the limitations applicable thereto
under the Indenture, except to the extent such
rights or limitations, by their terms, terminate
or cease to have further effectiveness as a
result of the Exchange Offer. All untendered Old
Notes will continue to be subject to certain
restrictions on transfer. Accordingly, if any
Old Notes are tendered and accepted in the
Exchange Offer, the trading market for the
untendered Old Notes could be adversely affected.
Exchange Agent.............. The Bank of New York.
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SUMMARY OF TERMS OF NEW NOTES
The form and terms of the New Notes are the same as the form and terms of the
Old Notes (which they replace) except that (i) the New Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof and (ii) the Holders of New Notes, except for
limited instances involving the Initial Purchasers and Holders that are not
eligible to participate in the Exchange Offer, will not be entitled to further
registration rights under the Registration Rights Agreement, which rights will
be satisfied when the Exchange Offer is consummated and will not be entitled to
any payments of liquidated damages for failure to satisfy such rights. The New
Notes will evidence the same debt as the Old Notes and will be entitled to the
benefits of the Indenture. See "Description of Notes."
Issuers..................... Hollywood Park, Inc. and Hollywood Park Operating
Company as co-obligors.
Maturity.................... August 1, 2007.
Interest Payment Dates...... February 1 and August 1 of each year, commencing
February 1, 1998 ("Interest Payment Dates").
Guaranties.................. The New Notes will be, and the Old Notes
remaining outstanding after the Exchange Offer
will continue to be, fully and unconditionally,
jointly and severally, guaranteed (the
"Guaranties") by any existing or future Material
Restricted Subsidiaries (as defined) of either
Issuer (the "Guarantors"). The issuance of
Guaranties by certain subsidiaries is subject to
the receipt of any required gaming approvals from
jurisdictions in which such subsidiaries operate.
Mandatory Redemption........ None.
Optional Redemption......... Except as set forth below, the Notes may not be
redeemed by the Issuers prior to August 1, 2002.
Thereafter, the Notes will be redeemable at any
time at the option of the Issuers, in whole or in
part, at the respective redemption prices set
forth herein, plus accrued and unpaid interest,
if any, to the date of redemption. In addition,
at any time during the first 36 months after the
date of issuance of the Notes, the Issuers may
redeem up to 25% of the initially outstanding
aggregate principal amount of Notes with the net
cash proceeds of one or more Public Equity
Offerings (as defined) at a price equal to 109.5%
of the principal amount plus accrued and unpaid
interest, if any, to the redemption date,
provided that at least 75% of the initially
outstanding aggregate principal amount of Notes
remains outstanding immediately after the
occurrence of such redemption. The Issuers have
the option, without regard to the foregoing
limitations, to redeem the Notes at any time to
prevent the loss or material impairment of a
gaming license or an application for a gaming
license at a price equal to the least of (i) the
principal amount thereof, (ii) the price at which
the beneficial owner acquired the New Notes
(together with accrued interest and liquidated
damages, if any) or (iii) such lesser amount as
may be required by any relevent gaming authority.
See "Business--Regulation and Licensing" and
"Description of Notes--Optional Redemption."
Ranking..................... The Notes are general unsecured obligations of
the Issuers, subordinated in right of payment to
all Senior Debt (as defined), and effectively
subordinated to all secured indebtedness, of the
Issuers, including the Bank Credit Facility. The
Guaranties are general
9
<PAGE>
unsecured obligations of the Guarantors,
subordinated in right of payment to all Senior
Debt, and effectively subordinated to all secured
indebtedness, of the Guarantors, including their
guaranties of the Bank Credit Facility. On a pro
forma basis, as of June 30, 1997, after giving
effect to the application of the net proceeds of
this Offering, and the consummation of the
Transactions, the Issuers and their subsidiaries
would collectively have had approximately
$10.6 million of Senior Debt.
Change of Control........... Upon the occurrence of a Change of Control
(including the Possible REIT Restructuring, as
defined), each holder of Notes may require the
Issuers to repurchase such holder's Notes at 101%
or, in the case of a REIT Change of Control (as
defined), 102%, of the principal amount thereof,
plus accrued and unpaid interest, if any, to the
date of repurchase. There can be no assurance
that in the event of a Change of Control the
Company will have sufficient funds, or that it
will otherwise be permitted under the terms of
the Senior Debt, to satisfy its obligations with
respect to any or all of the tendered Notes. See
"Description of Notes--Repurchase at the Option
of Holders--Change of Control."
Amendment of Covenants
Without Noteholder Consent
Upon Restoration of Paired-
Share/REIT Structure........ The Indenture provides that, in the event that
the Company elects to consummate the Possible
REIT Restructuring, the Company would be
permitted, without the consent of any holders of
Notes, to enter into a supplemental indenture
modifying the Indenture to permit the Company to
implement the Possible REIT Restructuring and to
make required rent and dividend payments, and
otherwise to operate within the paired-share/REIT
structure and, as determined by the Company, as
necessary to maintain the relative benefits and
restrictions of the Indenture thereafter, subject
to the repurchase offer requirements triggered by
a Change of Control, or, in the event of a
resulting decline in the rating of the Notes, a
REIT Change of Control, and provided that the
Issuers would comply with the covenant entitled
"Asset Sales" without giving effect to any
amendments thereto in the Possible REIT
Restructuring. See "Prospectus Summary--Recent
Developments--Possible Restoration of Paired-
Share/REIT Status" and "Description of Notes--
Repurchase at the Option of Holders--Change of
Control" and "--Amendment, Supplement and
Waiver."
Certain Covenants........... The Indenture contains certain covenants that,
among other things, limit the ability of the
Obligors and their Restricted Subsidiaries to
incur additional Indebtedness (as defined) beyond
specified limits (which may be substantial),
issue preferred stock, pay dividends or make
other distributions, repurchase Equity Interests
(as defined) or subordinated Indebtedness, create
certain liens, enter into certain transactions
with affiliates, sell assets, issue or sell
equity interests in their respective subsidiaries
or enter into certain mergers and consolidations.
In addition, under certain circumstances, the
Issuers will be required to offer to purchase
Notes at a price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of
purchase, with the proceeds of certain Asset
Sales (as defined).
10
<PAGE>
For a discussion of the terms of the Notes, see "Description of Notes." For a
discussion of certain factors that should be considered in connection with an
investment in the Notes, see "Risk Factors."
The following chart shows the Company's material direct subsidiaries, their
various operational holdings and the Company's ownership interest therein.
[CHART OF HOLLYWOOD PARK, INC.]
- -------
(1) Owns the Hollywood Park Race Track property and leases the property to
HPOC.
(2) The Company has delivered a notice exercising its option to purchase the
minority interest. See "Business--Gaming Operations--Boomtown Biloxi."
(3) Joint Venture with Hilton Gaming (Switzerland County) Corporation.
(4) Filed for reorganization under Ch. 11 of the Bankruptcy Code. See
"Business--Racing Operations."
11
<PAGE>
UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA
The following unaudited summary pro forma financial information has been
prepared by combining (i) the audited consolidated statements of operations of
Hollywood Park for the year ended December 31, 1996, with the unaudited
consolidated statements of operations of Boomtown, also for the year ended
December 31, 1996, and (ii) the unaudited consolidated statements of operations
of Hollywood Park and Boomtown for the six months ended June 30, 1997.
Historically, Boomtown reported results on a fiscal year end of September 30.
In addition, these pro forma financial statements are presented with Boomtown
Las Vegas results excluded, because this property was divested in connection
with the Merger. The information set forth below is based on, and should be
read in conjunction with, the historical consolidated financial statements and
the related notes thereto of Hollywood Park and Boomtown, and the Unaudited Pro
Forma Combined Consolidated Condensed Financial Statements presented elsewhere
herein. The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial
position that would have occurred if the Merger and the issuance of the Notes
had been consummated in an earlier period, nor is it necessarily indicative of
the future operating results or financial position.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues....................................... $336,583 $174,095
Operating expenses............................. 354,666 157,022
Operating income (loss)........................ (18,083) 17,073
Interest expense............................... 15,468 7,398
Income (loss) before extraordinary item........ (37,523) 5,304
Dividends on convertible preferred stock(a).... 1,925 962
Income (loss) before extraordinary item
attributable to (allocated to) common
shareholders.................................. (39,448) 4,342
OTHER DATA:
Depreciation and amortization.................. $ 20,818 $ 14,558
Ratio of earnings to fixed charges(b).......... -- (c) 2.07x
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
1997
-------------------
ACTUAL PRO FORMA
-------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 38,409 $ 46,012
Short-term investments..................................... 1,275 1,275
Total assets............................................... 426,098 438,139
Total debt (including current portion)..................... 122,618 136,686
Net debt(d)................................................ 82,934 89,399
Stockholders' equity....................................... 216,607 216,607
OTHER DATA:
Cash flows provided by (used in):
Operating activities....................................... $ 14,949 --
Investing activities....................................... 11,846 --
Financing activities....................................... (308) --
</TABLE>
(Footnotes appear on following page)
12
<PAGE>
- --------
The Company also considers relevant to Noteholders the following calculation
of earnings before interest, taxes, depreciation, amortization and non-
recurring expenses ("EBITDA"), and as adjusted ("Adjusted EBITDA"):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED JUNE
DECEMBER 31, 30,
1996 1997
------------ ----------
<S> <C> <C>
Operating income (loss).............................. $(18,083) $17,073
Add back:
Depreciation and amortization...................... 20,818 14,558
-------- -------
EBITDA........................................... 2,735 31,631
Hollywood Park/Boomtown merger costs............... 1,291 1,487
Write off of investment in a business.............. 11,412 0
Loss on sale of a business......................... 36,563 357
-------- -------
Adjusted EBITDA.................................. $ 52,001 $33,475
======== =======
</TABLE>
EBITDA data, which is not a measure of financial performance under GAAP, is
presented because such data is used by certain investors to determine the
Company's ability to service or incur indebtedness. EBITDA and Adjusted
EBITDA are not calculated by the same means by all Companies and,
accordingly, are not necessarily appropriate measures for comparing
Companies' performance. Thus, neither EBITDA nor Adjusted EBITDA should be
considered in isolation from, or as a substitute for, net earnings (loss),
cash flows from operations or cash flow data prepared in accordance with
GAAP.
(a) Effective August 28, 1997 the Company has caused conversion of all
convertible preferred stock, into an aggregate of 2,291,492 shares of
common stock, thereby eliminating this annual dividend going forward. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(b) In computing the ratio of earnings to fixed charges: (i) earnings have been
based on income from continuing operations before income taxes and fixed
charges (exclusive of capitalized interest), and (ii) fixed charges consist
of interest expense and amortization of debt discount and issuance costs
(including amounts capitalized), and the estimated interest portion of
rental expense.
(c) The Company's earnings were not sufficient to cover its fixed charge
requirement by $34.8 million for the year ended December 31, 1996. Included
in the calculation for the twelve months ended December 31, 1996 was the
one time, non-cash $11.4 million write-off of Hollywood Park's investment
in Sunflower. Also included in the calculation for the twelve months ended
December 31, 1996 was the $36.6 million one-time charge relating to the
disposition of Boomtown Las Vegas.
(d) Net Debt is total debt (including current portion) less all cash and cash
equivalents and short-term investments.
13
<PAGE>
RISK FACTORS
In addition to the other matters described in this Prospectus, the following
matters should be carefully considered by each Holder before accepting the
Exchange Offer, although certain matters set forth below are equally
applicable to the Old Notes.
THIS PROSPECTUS (AS WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER
WRITTEN STATEMENTS MADE OR TO BE MADE BY THE COMPANY) CONTAINS CERTAIN
STATEMENTS WITH RESPECT TO, AMONG OTHER THINGS, THE FINANCIAL CONDITION,
RESULTS OF OPERATIONS, BUSINESS AND PROSPECTS OF THE COMPANY THAT ARE FORWARD-
LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND
SECTION 21E OF THE EXCHANGE ACT, INCLUDING STATEMENTS RELATING TO EXPANSION
OPPORTUNITIES, PRO FORMA COMBINED COMPANY FINANCIAL RESULTS, THE ABILITY TO
UTILIZE HOLLYWOOD PARK'S FINANCIAL RESOURCES TO IMPROVE THE FINANCIAL POSITION
OF ITS NEWLY ACQUIRED SUBSIDIARY, BOOMTOWN, STRATEGIC SYNERGIES, COST SAVINGS
RELATING TO THE ACQUISITION OF BOOMTOWN, CAPITAL REQUIREMENTS AND THE
POSSIBILITY OF REINSTITUTING A PAIRED-SHARE/REIT STRUCTURE AND THE POTENTIAL
BENEFITS TO BE DERIVED THEREFROM, AND SUCH STATEMENTS ARE INTENDED TO BE
COVERED BY THE SAFE HARBOR CREATED THEREBY (SEE "PROSPECTUS SUMMARY--THE
COMPANY," "--UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA," "BUSINESS,"
"SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," AND "UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS"). THESE FORWARD-LOOKING STATEMENTS CONCERN MATTERS WHICH
INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL
PERFORMANCE OF HOLLYWOOD PARK TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY
SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FAILURE TO COMPLETE
OR SUCCESSFULLY OPERATE PLANNED EXPANSION, THE FAILURE TO OBTAIN ADEQUATE
FINANCING TO MEET HOLLYWOOD PARK'S STRATEGIC GOALS, DIFFICULTIES IN COMPLETING
INTEGRATION OF HOLLYWOOD PARK AND BOOMTOWN, FAILURE TO OBTAIN OR RETAIN
LICENSES OR REGULATORY APPROVALS AND THE OTHER FACTORS SET FORTH UNDER THIS
"RISK FACTORS" SECTION.
LEVERAGE AND DEBT SERVICE
The Company incurred borrowings of $112.0 million under the Bank Credit
Facility (guaranteed by the Guarantors, and secured by all assets of the
Company, HPOC and the Guarantors) primarily in connection with the repurchase
of approximately $103 million in aggregate principal amount of the Boomtown
Notes. This $112 million balance was repaid in full from the proceeds of the
sale of the Old Notes. The Bank Credit Facility provides for a reducing
revolving credit facility in the maximum principal amount of $100 million (of
which approximately $78 million is currently available under certain covenant
limitations). There will be no cash proceeds to the Company from the exchanges
pursuant to the Exchange Offer. See "Description of Other Indebtedness--Bank
Credit Facility."
The consequences of such leverage include, but are not limited to, the
following: (i) Hollywood Park will have significantly increased cash
requirements for debt service; (ii) the financial covenants and other
restrictions contained in the Bank Credit Facility and the Indenture will
require Hollywood Park to meet certain financial tests and will limit, among
other things, its ability to borrow additional funds or to dispose of assets;
(iii) Hollywood Park will be subject to operating restrictions under covenants
contained in the Indenture and in the Bank Credit Facility and the failure or
inability of Hollywood Park to comply with any of its financial or other
covenants may give the lenders the right to accelerate the indebtedness of
Hollywood Park thereunder and enforce other remedies against Hollywood Park;
(iv) the indebtedness under the Bank Credit Facility will, and indebtedness
incurred under future credit facilities may, become due prior to the time the
principal obligations under the Notes become due, with the commitment reducing
quarterly commencing September 30, 1999; and (v) because Hollywood Park's
obligations under the Bank Credit Facility will and indebtedness incurred
under future credit facilities may, bear interest at a floating rate,
Hollywood Park will be adversely affected by any increase in prevailing rates.
The Bank Credit Facility allows for interest rate swap agreements, or other
interest rate protection agreements with respect to the Bank Credit Facility,
up to a maximum notional amount of $125,000,000. The Company does not
currently utilize such financial instruments, but may take advantage of such
agreements in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Unaudited Pro Forma
Combined Condensed Financial Statements."
14
<PAGE>
On a pro forma basis, as of June 30, 1997, after giving effect to the
Transactions, the Notes were contractually and, in some cases, also
effectively subordinated to approximately $11.7 million of Senior Debt and
rank pari passu with approximately $13.2 million of accounts payable. In
addition, the Company may guarantee certain debts of Sunflower in a face
amount up to $30 million pursuant to a proposed plan of reorganization filed
by Sunflower with the U.S. Bankruptcy Court. On a pro forma basis, as of June
30, 1997 the ratio of indebtedness to total capital was approximately 38%. In
addition, the Company may utilize the Bank Credit Facility to fund planned
expansion projects, which are currently budgeted to cost approximately $35
million in the aggregate (up to $95 million if a license is received for the
Indiana Project). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
POTENTIAL INABILITY TO REPAY DEBT
Hollywood Park believes that, based on current levels of operations and
anticipated growth, its cash flow from operations, together with other sources
of liquidity, will be adequate to make required payments of principal and
interest on its debt (including the Notes), to finance anticipated capital
expenditures and to fund working capital requirements. However, the Issuers'
ability to make principal and interest payments on the Notes and to repay the
Notes at maturity (and the Guarantors' ability to make any payments under
their Guaranties) will be dependent on Hollywood Park's future operating
performance, which is itself dependent on a number of factors, many of which
are out of Hollywood Park's control, including prevailing economic conditions
and financial, business, regulatory and other factors affecting Hollywood
Park's business and operations, and may be dependent on the availability of
borrowings under the Bank Credit Facility or any refinancing thereof. There
can be no assurance that Hollywood Park's business will continue to generate
cash flow at or above anticipated levels. For the year ended December 31,
1996, pro forma fixed charges exceeded pro forma earnings by $34.6 million. If
Hollywood Park is unable to generate sufficient cash flow or is unable to
refinance or extend outstanding borrowings, it may have to adopt one or more
alternatives, such as reducing or delaying planned expansion and capital
expenditures, selling assets, restructuring debt or obtaining additional
equity or debt financing. There can be no assurance that any of these
financing strategies could be effected on satisfactory terms, if at all, or
that effecting such strategies would yield sufficient proceeds to service or
repay the Notes. In addition, certain states' laws contain restrictions on the
ability of companies engaged in the gaming business to undertake certain
financing transactions. Such restrictions may prevent Hollywood Park from
obtaining necessary capital. See "--Governmental Regulation," "Capitalization"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
POSSIBLE RESTORATION OF PAIRED-SHARE/REIT STATUS
The Company is considering the Possible REIT Restructuring. If the Company
elects to proceed with the Possible REIT Restructuring, the Indenture will
permit the Issuers and the Guarantors to enter into a supplemental indenture,
without obtaining the consents of any holders of the Notes, to modify the
Indenture as necessary to permit the consummation of the Possible REIT
Restructuring (including covenant amendments to permit allocation of assets
and liabilities among the REIT and the operating company), and the operation
of the REIT and the Company as a paired-share/REIT thereafter (including the
payment of rent and required dividends). After giving effect to the Possible
REIT Restructuring, the Company would become a REIT and confine its activities
primarily to ownership and leasing of some or all of Hollywood Park's real
estate holdings, and HPOC, together with certain of HPOC's other direct and
indirect subsidiaries, would be engaged primarily in the active conduct of
gaming, sports, entertainment and related business activities. The REIT would
lease all or a portion of its real estate to HPOC and its affiliates for use
in their business activities. The lease rentals would be determined on a fair
market value basis. See "Description of Notes--Amendment, Supplement and
Waiver" and "Business--Possible Restoration of REIT/Paired-Share Structure;
Potential REIT Properties."
Generally, the REIT would be required to distribute as dividends to its
stockholders 95% of its taxable income (other than net capital gains), and
such amounts distributed would not be subject to federal income tax at the
corporate level. While this would enable Hollywood Park to take advantage of
the favorable tax treatment accorded to such a structure, the REIT could
suffer certain disadvantages by reason of its required distributions
15
<PAGE>
and resultant inability to retain earnings or build its capital base. While
the Issuers do not intend to effect the Possible REIT Restructuring unless
they believe that it will be in the best interest of the Issuers, there can be
no assurance that the required distributions from the REIT will not limit
growth or impair the Issuers' or the Guarantors' ability to make planned
acquisitions or capital expenditures, or satisfy their debt service
obligations, including the debt service obligations arising under the Notes.
SUBORDINATION AND RANKING
The Old Notes and the related Guaranties are, and the New Notes and the
related Guaranties will be, subordinated in priority and right of payment to
all Senior Debt (as defined) of the Issuers and the Guarantors and effectively
subordinated to all secured indebtedness of the Issuers and the Guarantors,
including their respective obligations under the Bank Credit Facility.
Further, the Bank Credit Facility is secured by substantially all of the
assets of the Company and its material subsidiaries, which security interest
is subordinated in priority (as to the assets of Boomtown and its
subsidiaries) to the liens held by holders of the remaining Boomtown Notes
(approximately $1 million in principal amount). The Old Notes and the related
Guaranties rank, and the New Notes and the related Guaranties will rank, pari
passu with the general unsecured obligations of the Issuers and the
Guarantors, respectively, and with any future senior subordinated
indebtedness. The Indenture permits the Issuers and the Guarantors to incur
substantial additional indebtedness, including Senior Debt and secured
indebtedness. Any holders of Senior Debt of either Issuer or any Guarantor are
entitled to payment of debt service on their indebtedness prior to the holders
of the Notes. Holders of secured indebtedness are entitled to payments or
distributions derived from the assets comprising their collateral or proceeds
thereof before any such amounts would become available to satisfy the
obligations of the Issuers and the Guarantors to holders of the Notes. In
addition, holders of any future senior subordinated indebtedness and general
unsecured obligations of the Issuers and the Guarantors would generally share
pro rata in the remaining assets of the Issuers and the Guarantors with the
holders of the Notes after repayment of all Senior Debt and repayment to
secured creditors from their collateral. See "Description of Notes--Certain
Covenants."
In the event of any bankruptcy, liquidation, dissolution, reorganization or
other winding up of either Issuer or any Guarantor, the assets of such entity
and its subsidiaries would be available to pay obligations on the Notes only
after all Senior Debt has been paid in full and holders of the Notes would
participate ratably with all holders of subordinated unsecured indebtedness of
such Issuer or Guarantor that was deemed to be of the same class as the Notes,
based upon the respective amounts owed to each holder or creditor, in the
remaining assets of such entity after payment of, or provision to, all senior
and secured indebtedness. In any of the foregoing events, there can be no
assurance that there would be sufficient assets to pay amounts due on the
Notes. In addition, if a default other than a payment default existed in
respect of the Bank Credit Facility or other Senior Debt (including any such
default arising under the cross-default provisions of the Bank Credit Facility
by reason of a default under the Notes), no payments of principal or interest
would be permitted on the Notes for a specified period. See "Description of
Notes--Subordination."
In the event that either Issuer were unable to generate sufficient cash flow
or otherwise to obtain sufficient funds to meet required payments of
principal, premium, if any, and interest on its indebtedness, including the
Notes, such Issuer could be in default under the terms of the agreements
governing such indebtedness, including the Indenture. In the event of such
default, the holders of such indebtedness could elect to declare all of the
funds borrowed thereunder to be due and payable together with accrued and
unpaid interest. If such an acceleration were effected and such Issuer did not
have sufficient funds to pay the accelerated indebtedness, the holders of such
indebtedness could initiate foreclosure or other enforcement action against
such Issuer. Any such circumstances would materially adversely affect such
Issuer's ability to pay principal, premium, if any, and interest on the Notes
and the market value of the Notes.
CHALLENGE OF INTEGRATING OPERATIONS AND MANAGING GROWTH
The integration of Hollywood Park's and Boomtown's operations following the
recent acquisition of Boomtown will continue to require the dedication of
management resources which may temporarily detract from
16
<PAGE>
attention to the day-to-day business of the Company. Also, the continuing
process of combining the two organizations may cause an interruption of, or a
loss of momentum in, the activities of either or both of the companies'
businesses, which could have a material adverse effect on the revenues and
operating results of the Company. Thus, there can be no assurance that the
Company will be able to manage the combined operations effectively or realize
any of the anticipated benefits of the Merger, including synergies of
operations or efficiencies from the elimination of duplicative functions.
In addition, because the Company plans to pursue expansion opportunities
aggressively, it faces significant challenges not only in managing and
integrating the combined operations but also in managing its expansion
projects and any other gaming operations that it might acquire in the future.
Management of such new projects will require increased managerial resources,
and Hollywood Park intends to continue its efforts to enhance its gaming
management team. However, there can be no assurance that it will be successful
in doing so. Failure to manage its growth effectively could materially
adversely affect Hollywood Park's operating results.
RISKS OF EXPANSION
Hollywood Park's strategic plan involves significant future expansion,
including the expansion of Boomtown Reno, Boomtown New Orleans and, possibly,
Boomtown Biloxi and other gaming projects as well as the continuing
diversification of its gaming, sports and entertainment businesses and the
development of certain unimproved acreage including at the Hollywood Park Race
Track property. There can be no assurance, however, that any currently
contemplated or future expansion projects of the Company will ever be
completed or, if completed, will be successful. Moreover, numerous factors,
including regulatory or financial constraints, could intervene and lead to a
decision not to proceed with all or a portion of the Company's expansion
projects or to otherwise alter or delay its current expansion plans. See
"Business--Business Strategy."
In the event any proposed expansion project proceeds, such project will be
subject to numerous risks any of which could require substantial changes to
proposed plans or otherwise alter the time frames or budgets currently
contemplated. Such risks include the ability to secure all required permits,
resolution of potential land use issues, as well as risks typically associated
with any construction project, including possible shortages of materials or
skilled labor, engineering or environmental problems, work stoppages, weather
interference and unanticipated cost overruns. The Company's Boomtown
subsidiary has experienced disruptions of its operations, cost overruns and
delays during its past construction projects, and there can be no assurance
that Hollywood Park will not experience similar disruptions in the future.
The ability to expand to additional gaming jurisdictions will depend upon a
number of factors, including but not limited to: (i) securing required state
and local licenses, permits and approvals, which in some jurisdictions may be
limited in number, and in certain cases may require legislative relief from
existing laws; (ii) identification and availability of suitable locations and
negotiation of an acceptable purchase, lease, joint venture or other terms;
(iii) political factors, such as the California Senate Bill 100 ("SB-100")
moratorium on new card club ordinances (see "Business--Regulation and
Licensing--Gaming Operations--California"); (iv) availability of necessary
financing for the project; and (v) the risks typically associated with any new
construction project described above. In addition, while the gaming industry
has recently experienced rapid growth, there can be no assurance that gaming
will continue to be a growth industry resulting in opportunities for
expansion. Hollywood Park expects to continue to incur significant costs in
connection with the pursuit of expansion opportunities, and may, in certain
circumstances, be required to write off substantial expenditures made in
connection with proposed ventures that do not materialize.
In addition, the Company's currently planned expansion projects are budgeted
to cost approximately $25 million (for Boomtown Reno), $10 million (for
Boomtown New Orleans) and $60 million (for the proposed Indiana Project, if
approved by regulators), respectively. Some or all of these amounts will be
funded by the Bank Credit Facility, thereby increasing the amount of Senior
Debt to which the Notes are subordinated. Further, additional Senior Debt may
be incurred to finance other potential expansion projects. See "Business--
Business Strategy."
17
<PAGE>
COMPETITION
Hollywood Park faces significant competition in each of the jurisdictions in
which it has established gaming operations, and such competition is expected
to intensify as new gaming operations enter its markets and existing
competitors expand their operations. The Company's Boomtown properties compete
directly with other casinos in Nevada, Mississippi and Louisiana. To a lesser
extent, Hollywood Park also competes for customers with other casino operators
in North American markets, including casinos located on Indian reservations,
and other forms of gaming such as lotteries. Several of Hollywood Park's
competitors have substantially greater name recognition and marketing
resources as well as access to lower-cost sources of financing. In many cases,
these competitors have significantly greater capital which may afford them a
greater opportunity to obtain gaming licenses in jurisdictions which limit the
number of licenses. Moreover, consolidation of companies in the gaming
industry, such as Hilton Hotels Corporation's acquisition of Bally
Entertainment Corporation, and its proposed acquisition of ITT Corporation,
could increase the concentration of large gaming companies in Louisiana and
Mississippi and other emerging gaming markets and thus may result in Hollywood
Park's competitors having even greater resources, name recognition and
licensing prospects than such competitors currently enjoy. In Mississippi,
competing casino operations have expanded rapidly and, as a result, the Gulf
Coast market is experiencing significant dilution in gaming win per position,
and a number of casinos in the Gulf Coast market have failed. Further,
additional rival casinos are being planned, including a $500 million, 1,800
room hotel and casino in Biloxi by Mirage Resorts, a $150 million, 1,050 room
hotel and riverboat casino in Biloxi by Imperial Palace and, in nearby Bay St.
Louis, a $300 million, 1,500 room hotel and casino by Circus Circus. While the
Company believes it has been able to effectively compete in this market to
date, there is no assurance that increasing competition will not adversely
affect Hollywood Park's gaming operations in the future. Hollywood Park
believes that increased legalized gaming in other states, particularly in
areas close to its existing gaming properties, could adversely affect its
operations without necessarily being offset by increased revenues in
jurisdictions in which Hollywood Park operates. The Hollywood Park-Casino
faces competition from card club casinos in neighboring cities, including two
card club casinos of similar size to the Hollywood Park-Casino located within
12 miles of the Hollywood Park-Casino, from card club casinos and other forms
of gaming located on Indian reservations, and from full-fledged casinos
operating in Nevada. Many card club casinos in the Los Angeles area have a
significant geographical advantage over the Hollywood Park-Casino, due in
large part to their closer proximity to large Asian-American populations who
comprise a large percentage of card club casino patrons.
There is intense competition for gaming development opportunities in
jurisdictions that have recently legalized gaming, as most jurisdictions
strictly limit the number of gaming licenses granted, and therefore only a
small number of gaming facilities can be developed in any such jurisdiction.
There can be no assurance that Hollywood Park will be able to compete
effectively in the acquisition of new gaming licenses in the future. Failure
to do so could negatively affect the growth potential of Hollywood Park.
Hollywood Park's racing operations have been adversely impacted by the
proliferation of additional thoroughbred racing opportunities (including
simulcasting and off-track wagering) and the proliferation of other gaming
establishments. Hollywood Park believes that such establishments have had a
material impact on the operating results and growth prospects of its racing
operations.
DEPENDENCE ON BOOMTOWN NEW ORLEANS RIVERBOAT CASINO
Presently, Hollywood Park's operating results are highly dependent on the
earnings generated by the Boomtown New Orleans riverboat. On a pro forma
basis, for the year ended December 31, 1996 and the six months ended June 30,
1997, the Company's allocable share of the EBITDA generated by Boomtown
New Orleans represented approximately 37% and 34%, respectively, of the pro
forma Adjusted EBITDA for the Company as a whole. Loss from service or damage
to the Louisiana riverboat for any reason, increased competition, or any
adverse change in the gaming market or regulatory environment in Louisiana,
could have a material adverse effect on Hollywood Park's business and results
of operations.
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LOSS OF RIVERBOAT OR DOCKSIDE FACILITY FROM SERVICE
Hollywood Park's riverboat casino at Boomtown New Orleans and its dockside
casino at Boomtown Biloxi, as well as any additional riverboats that might be
developed or acquired in the future, are subject to risks in addition to those
associated with land-based casinos, including loss of service due to casualty,
mechanical failure, extended or extraordinary maintenance, flood, hurricane or
other severe weather conditions. In addition, U.S. Coast Guard regulations
require a hull inspection at a U.S. Coast Guard-approved dry docking facility
for all cruising riverboats at five year intervals, which inspection is
scheduled for Boomtown New Orleans in 1999. The loss of a riverboat casino or
a dockside casino from service for any period of time would adversely affect
Hollywood Park's results of operations.
QUARTERLY AND ANNUAL FLUCTUATIONS IN OPERATING RESULTS
Hollywood Park experiences significant fluctuations in its quarterly and
annual operating results, due to seasonality and other factors. Historically,
a substantial majority of the income from operations before non-recurring
items of the Boomtown subsidiaries has been generated in the quarters ending
June 30 and September 30, with the summer months being the strongest period.
The Company's racing subsidiaries have historically generated approximately
50% of their revenues but over 70% of their income from operations before non-
recurring items (but including depreciation and amortization) during these
same months. Conversely, the winter months, which primarily covers the quarter
ending March 31, are Boomtown Reno's and Boomtown Biloxi's slowest periods and
have historically resulted, and may in the future result, in losses for such
quarter. Similarly, because the Hollywood Park Race Track conducts no live
meets during such period, the Company's operating results from racing have
historically been lower during that same period.
DEPENDENCE ON CERTAIN MAJOR THOROUGHFARES
Future quarterly or annual operating results may also be adversely impacted
by traffic flow on major thoroughfares leading to the operations of the
Company's Boomtown properties. For example, Boomtown Reno is highly dependent
on the traffic flow on Interstate 80, as customers stopping at Boomtown Reno
from Interstate 80 represent a substantial majority of its customer base. If
traffic on Interstate 80 is significantly reduced for an extended period, as a
result of inclement weather or otherwise, or the off-ramps providing access to
Boomtown Reno are impaired for an extended period due to poor weather
conditions, road modifications and repairs or other factors, Boomtown Reno's
results of operations will be adversely affected. In the Winters of 1994/1995
and 1996/1997, severe storms, together with road repairs to Interstate 80 on
the corridor between California and Reno, resulted in road closures or
substantially reduced traffic flow on Interstate 80 for extended periods. Such
road closures and repairs had an adverse effect on the related quarters' and
years' results of operations.
ABILITY TO EFFECT REPURCHASE OF THE NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined herein and including
the Possible REIT Restructuring), the Issuers will be required to make an
offer to repurchase the Notes at a price equal to 101% or, in the case of a
REIT Change of Control (as defined herein), 102% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase.
Change of Control may also result in an event of default under the Bank Credit
Facility and may result in an event of default under other future indebtedness
of the Issuers or the Guarantors. An event of default under the Bank Credit
Facility or other future Senior Debt could trigger the subordination
provisions of the Notes, which could prohibit the Issuers from repurchasing
the Notes or could require payment in full of such Senior Debt before
repurchase of the Notes. There can be no assurance that in the event of a
Change of Control the Company will have sufficient funds, or that it will
otherwise be permitted under the terms of the Senior Debt, to satisfy its
obligations with respect to any or all of the tendered Notes. See "--
Subordination and Ranking."
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GOVERNMENTAL REGULATION
Gaming and racing operations are subject to extensive federal, state and
local regulations. The states and localities in which Hollywood Park and its
subsidiaries have gaming and racing operations or proposed gaming projects
typically require various licenses, permits and approvals to be held by the
parent entity and the operating entity, as well as by certain officers,
directors, key employees and securityholders. The licensing process is time
consuming, costly and has no assurance of success.
Typically, gaming authorities, including those in Nevada, California,
Louisiana and Mississippi have discretionary authority, with or without cause,
to require a holder of a security such as the Notes or the New Notes to file
an application, to be investigated and to be found suitable as an owner, debt
holder or landlord of a gaming establishment. While individual holders of
securities such as the Notes or the New Notes are generally not required to be
investigated and found suitable, gaming authorities retain the discretion to
initiate such investigations for any reason, including but not limited to, a
default, or where the holder of the debt instrument seeks to exercise a
material or significant influence over the gaming operations of the entity in
question or to elect one or more members of its Board of Directors. Any holder
required to apply for licensing, qualification or a finding of suitability
must pay all investigative fees and costs of the gaming authorities in
connection with such an investigation. In addition, if any gaming authority
requires a holder or beneficial owner of the Notes or the New Notes to be
licensed, qualified or found suitable under any applicable gaming law and such
holder or beneficial owner fails timely to apply for and receive the required
license, qualification or a finding of suitability, such holder must
immediately dispose of his Notes or the Issuers shall have the option to
redeem all of such holder's Notes at the lesser of (i) the aggregate principal
amount of such Notes, and (ii) such holder's cost thereof, which in either
case may be less than the then market value of the Notes. See "Description of
Notes--Optional Redemption."
To date, Hollywood Park and its subsidiaries have obtained all governmental
licenses, registrations, findings of suitability, permits and approvals
necessary for the operation of their gaming and racing facilities. However,
there can be no assurance that any new licenses, registrations, findings of
suitability, permits or approvals that will be required for any new facility
or for any continued expansion of an existing facility will be given or that
existing licenses, permits or approvals will not be revoked or fail to be
renewed. Presently, Hollywood Park and the operator of Crystal Park have
received only provisional licenses to operate the Hollywood Park-Casino and
the Crystal Park facility, respectively. In each case, permanent registrations
will not be granted until the California Department of Justice completes its
review of the applications of the corporate applicants and their respective
officers and directors. No assurance can be given that permanent licenses will
be obtained. In addition, state gaming authorities often also require state
approval of future gaming operations outside the applicable state, and there
can be no assurance that future approvals will be obtained.
The regulatory environment in any particular jurisdiction may change in the
future and any such change may have a material adverse effect on the combined
company's results of operations. For example, the State of Louisiana adopted a
statute pursuant to which voter referendums on the continuation of gaming were
held locally where gaming operations are conducted and which, had the
continuation of gaming been rejected by the voters, might have resulted in the
termination of Boomtown New Orleans' operations at the end of the current
license term in 1999. The parish in which Boomtown New Orleans operates voted
to continue gaming, but there can be no assurance that similar referendums
might not produce unfavorable results in the future. In addition, the
California law which permits a public company such as Hollywood Park to
operate a card club casino if it owns a race track located on the same
premises expires on January 1, 1999 unless, prior to that time, the California
legislature enacts comprehensive gaming regulations that amend or extend the
expiration date. There can be no assurance that such legislation will be
adopted by such date or that the legislature will extend the deadline. If
there is no legislative relief prior to January 1, 1999, it is expected that
Hollywood Park would again lease the Hollywood Park-Casino to a third party
operator, which could substantially reduce Hollywood Park's return from the
Hollywood Park-Casino. In addition, unless and until California enacts
legislation permitting the operation generally of card club casinos by public
companies, Hollywood Park's involvement in other card club casino projects
(such as Crystal Park) will be similarly limited to a landlord relationship,
the returns from which could be substantially less than if Hollywood Park
operated such facilities directly.
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On August 3, 1996, President Clinton signed a bill creating a nine-member
National Gambling Impact Study Commission to study the economic and social
impact of gaming and report its findings to Congress and the President within
two years after the first meeting of the commission. The commission could
recommend changes in state or federal gaming policies. The President, House
Speaker and Senate Majority Leader have each selected three of the
commissions's members. Additional federal regulation of the gaming industry
could occur as a result of investigations or hearings by the committee, which
could have a material adverse effect on Hollywood Park.
ENVIRONMENTAL REGULATION; POTENTIAL ENVIRONMENT ISSUES
Hollywood Park is subject to a variety of federal, state and local
governmental regulations relating to the use, storage, discharge, emission and
disposal of hazardous materials. Hollywood Park believes that it is presently
in material compliance with applicable environmental laws. However, failure to
comply with such laws could result in the imposition of severe penalties or
restrictions on Hollywood Park's operations by government agencies or courts
of law. Hollywood Park currently does not have environmental impairment
liability insurance, and a material fine or penalty or a severe restriction
would adversely affect Hollywood Park's results of operations. Although to the
Company's knowledge there have not been any local, state or federal inquiries
or investigations material to the Company relating to environmental regulation
of the Company's or its subsidiaries' properties, there can be no assurance
that such an inquiry or investigation will not be undertaken in the future,
which could result in substantial remedial or other obligations being imposed
on the Company or its subsidiaries.
FRAUDULENT CONVEYANCE AND PREFERENTIAL TRANSFER ISSUES
If either Issuer or any Guarantor received less than reasonably equivalent
value in exchange for its issuance of the Old Notes or, as the case may be,
its Guaranty or the incurrence of liabilities pursuant thereto, the Notes or
such Guaranty, or any payments made in respect thereof, could be avoided under
federal or applicable state fraudulent transfer law, regardless of whether
either Issuer or any Guarantor was subject to any bankruptcy or insolvency
proceedings. In particular, to the extent that any Guarantor becomes liable
for any obligations of the Issuers in excess of the value actually received by
the Guarantor, the relevant Guaranty could be subject to avoidance as a
fraudulent transfer if, at the time of, or as a result of, either the issuance
of such Guaranty or any payment thereunder, (i) the Guarantor was or became
insolvent, (ii) the Guarantor had unreasonably small capital to conduct its
business as then conducted or contemplated to be conducted or (iii) the
Guarantor was unable or was rendered unable, to meet its probable liabilities
as they matured and became due and payable. If any Guaranty is avoided, the
holders could lose the benefit of the Guaranty, and the holders could also be
required to return to the Guarantor or its estate the amount of any payment or
other property received in respect of the Notes.
The Indenture provides that certain future subsidiaries of the Issuers will
be required to guarantee the Notes. If certain bankruptcy or insolvency
proceedings are initiated by or against the new subsidiaries within 90 days
(or, possibly, one year) after any such guaranty, grant or assignment, or if
any Guarantor incurs obligations under its Guaranty in anticipation of
insolvency, all or a portion of the affected Guaranty could be avoided as a
preferential transfer under federal bankruptcy or applicable state law. In
addition, a court could require holders to return all payments made under any
such Guaranty within such 90 day period (or, possibly, one year) as
preferential transfers.
The Issuers believe that they received equivalent value at the time they
incurred the indebtedness represented by the Old Notes. In addition, the
Issuers do not believe that the Issuers and the Guarantors, as a result of the
issuance of the Old Notes, (i) were or will be insolvent or rendered insolvent
under the foregoing standards, (ii) were or will be engaged in a business or
transaction for which their remaining assets constitute unreasonably small
capital or (iii) intended or intends to incur, or believes that they incurred
or will incur, debts beyond their ability to pay such debts as they mature.
These beliefs are based on the Issuers' and the Guarantors' operating history,
net worth and management's analysis of internal cash flow projections and
estimated values of assets and liabilities of such entity at the time of the
issuance of the Old Notes. There can be no assurance, however, that a court
passing on these issues would make the same determination.
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DEPENDENCE OF ISSUERS ON GUARANTORS FOR REPAYMENT OF NOTES; SURETYSHIP
DEFENSES
Although the Issuers hold assets and conduct business, a substantial portion
of the revenues available for payment of debt service in respect of the Notes
is expected to be generated through direct and indirect subsidiaries of the
Issuers. The Issuers' cash flow and, consequently, their ability to service
debt, including the Notes, will depend in substantial part upon the cash flow
of the Issuers' subsidiaries and the payment of funds by those subsidiaries to
the Issuers in the form of loans, dividends or otherwise. Although the Old
Notes are, and the New Notes will be, guaranteed by the Guarantors, the
Guarantors are separate and distinct legal entities, are subject to the
provisions of the Bank Credit Facility which contains, and may in the future
become parties to other financing arrangements (including senior debt
financings) which may contain, limitations on the ability of the Guarantors to
make payments in respect of the Guaranties, particularly upon the occurrence
of any default or the insolvency of either Issuer or any Guarantor.
In addition, the laws of most jurisdictions provide suretyship defenses to
guarantors, which may limit the Guarantors' legal obligations to make payments
under their Guaranties.
LACK OF PUBLIC MARKET FOR THE NEW NOTES
The Old Notes are currently owned by a relatively small number of beneficial
owners. The Old Notes have not been registered under the Securities Act or any
state securities laws and, unless so registered and to the extent not
exchanged for the New Notes, may not be offered or sold except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
The New Notes will constitute a new issue of securities for which there is
currently no active trading market. If the New Notes are traded after their
initial issuance, they may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for similar
securities and other factors including general economic conditions and the
financial condition of the Issuers. Although the New Notes will generally be
permitted to be resold or otherwise transferred by nonaffiliates of the
Issuers without compliance with the registration and prospectus delivery
requirements of the Securities Act, the Issuers do not intend to apply for a
listing or quotation of the New Notes on any securities exchange or stock
market. The Initial Purchasers have informed the Issuers that they currently
intend to make a market in the New Notes. However, the Initial Purchasers are
not obligated to do so, and any such market making may be discontinued at any
time without notice. In addition, such market-making activity will be subject
to the limits imposed under the Exchange Act. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes,
or, in the case of non-tendering Holders of Old Notes, the trading market for
the Old Notes following the Exchange Offer. If no trading market develops or
is maintained, Holders of New Notes may experience difficulty in reselling New
Notes or may be unable to sell them.
The liquidity of, and trading market for, the Old Notes or the New Notes
also may be adversely affected by general declines in the market for similar
securities. Such a decline may adversely affect such liquidity and trading
markets independent of the financial performance of, and prospects for, the
Issuers.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless (i) to a person who the seller reasonably
believes is a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A, in a transaction meeting the requirements of Rule
144 under the Securities Act, outside the United States to a foreign person in
a transaction meeting the requirements of Rule 904 under the Securities Act or
in accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if either Issuer so
requests), (ii) to either Issuer or
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(iii) pursuant to an effective registration statement, and, in each case, in
accordance with any applicable securities laws of any State of the United
States or any other applicable jurisdiction. See "Risk Factors--Restrictions
on Transfer." The Issuers do not currently anticipate that they will register
the Old Notes under the Securities Act. Based on interpretations by the staff
of the Commission, as set forth in no-action letters issued to third parties,
the Issuers believe that New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by Holders thereof (other than any such Holder which is an
"affiliate" of either Issuer within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such Holder's business and such Holder,
other than broker-dealers, has no arrangement with any person to participate
in the distribution of such New Notes. However, the Commission has not
considered the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer.
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<PAGE>
USE OF PROCEEDS
Neither Issuer will receive any cash proceeds from the Exchange Offer. In
consideration for issuing the New Notes in exchange for Old Notes as described
in this Prospectus, the Issuers will receive Old Notes in like principal
amount. The Old Notes surrendered in exchange for the New Notes will be
retired and cancelled. The net proceeds received by the Company from the sale
of the Old Notes were used to repay approximately $112.0 million of borrowings
under the Bank Credit Facility. The remaining proceeds from the sale of Old
Notes have been, and are expected to continue to be, used for working capital
and other general corporate purposes, including eliminating certain financial
interests of third parties in Boomtown's operations and funding Hollywood
Park's expansion and growth strategy.
THE EXCHANGE OFFER
The following discussion sets forth or summarizes the material terms of the
Exchange Offer, including those set forth in the Letter of Transmittal
distributed with this Prospectus. This summary is qualified in its entirety by
reference to the full text of the documents underlying the Exchange Offer
(including the Indenture and the Registration Rights Agreement), copies of
which are filed as exhibits to the Registration Statement on Form S-4 of which
this Prospectus is a part and to the Issuers' quarterly report on Form 10-Q
filed with the Commission on August 14, 1997, and are incorporated herein by
reference.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Issuers to the Initial Purchasers on August
6, 1997, and were subsequently resold to qualified institutional buyers
pursuant to Rule 144A under the Securities Act, to institutional investors
that are accredited investors in a manner exempt from registration under the
Securities Act and pursuant to offers and sales that occurred outside the
United States within the meaning of Regulation S under the Securities Act. In
connection with the offering of the Old Notes, the Issuers entered into the
Registration Rights Agreement, which requires, among other things, that
promptly following the Issue Date the Issuer and the Guarantors (i) file with
the Commission a registration statement under the Securities Act with respect
to an issue of new notes of the Issuers identical in all material respects
(other than transfer restrictions, registration rights and the requirement,
under certain circumstances, to pay liquidated damages) to the Old Notes
(which obligation has been satisfied by the filing of the Registration
Statement of which this Prospectus is a part), (ii) use their best efforts to
cause such registration statement to become effective under the Securities Act
and (iii) upon the effectiveness of that registration statement, offer to the
Holders of the Notes the opportunity to exchange their Old Notes for a like
principal amount of New Notes, which would be issued without a restrictive
legend and may be reoffered and resold by the Holder without restrictions or
limitations under the Securities Act (other than any such Holder that is an
"affiliate" of either Issuer within the meaning of Rule 405 under the
Securities Act).
Any Old Notes tendered and exchanged in the Exchange Offer will reduce the
aggregate principal amount of Old Notes outstanding. Following the
consummation of the Exchange Offer, Holders of the Old Notes who did not
tender their Old Notes generally will not have any further registration rights
under the Registration Rights Agreement, and such Old Notes will continue to
be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for such Old Notes could be adversely affected. The Old Notes are
currently eligible for sale pursuant to Rule 144A through the PORTAL System of
the National Association of Securities Dealers, Inc. Because the Issuers
anticipate that most Holders of Old Notes will elect to exchange such Old
Notes for New Notes due to the absence of restrictions on the resale of New
Notes under the Securities Act, the Issuers anticipate that the liquidity of
the market for any Old Notes remaining after the consummation of the Exchange
Offer may be substantially limited.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
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City time on the Expiration Date. The Issuers will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of
outstanding Old Notes accepted in the Exchange Offer. Holders may tender some
or all of their Old Notes pursuant to the Exchange Offer. However, Old Notes
may be tendered only in integral multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer
thereof and (ii) the holders of the New Notes generally will not be entitled
to certain rights under the Registration Rights Agreement or with respect to
liquidated damages, which rights generally will terminate upon consummation of
the Exchange Offer. The New Notes will evidence the same debt as the Old Notes
and will be entitled to the benefits of the Indenture.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law or the Indenture in connection with the
Exchange Offer. The Issuers intend to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder, including Rule 14e-1.
The Issuers shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
for the purpose of receiving the New Notes from the Issuers.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be
returned, without expense, to the tendering Holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Issuers will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
[ ], 1997, unless the Issuers, in their sole discretion, extend the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended. In no event will the Expiration
Date be extended past [ ], 1998 (i.e., 90 days following commencement of
the Exchange Offer).
To extend the Exchange Offer, the Issuers will notify the Exchange Agent of
any extension by oral or written notice, followed by a public announcement
thereof no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
The Issuers reserve the right, in their reasonable judgment, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by a
public announcement thereof. If the Exchange Offer is amended in a manner
determined by the Issuers to constitute a material change, the Issuers will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered Holders, and, depending upon the significance
of the amendment and the manner of disclosure to the registered Holders, the
Issuers will extend the Exchange Offer for a period of five to ten business
days if the Exchange Offer would otherwise expire during such five to ten
business day period.
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INTEREST ON NEW NOTES
The New Notes will bear interest from their date of issuance. Interest will
accrue on the Old Notes that are tendered in exchange for the New Notes
through the issue date of the New Notes. Holders of Old Notes that are
accepted for exchange will not receive interest that is accrued but unpaid on
the Old Notes at the time of exchange, but such interest will be payable,
together with interest on the New Notes, on the first Interest Payment Date
after the Expiration Date. Interest on the New Notes will be payable semi-
annually on each February 1 and August 1, commencing on February 1, 1998.
PROCEDURES FOR TENDERING
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a Holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent so as to be
received by the Exchange Agent at the address set forth below prior to 5:00
p.m., New York City time, on the Expiration Date. Delivery of the Old Notes
may be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the
Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each Holder will make to the Issuers
the representation set forth below in the second paragraph under the heading
"--Resale of New Notes."
The tender by a Holder and the acceptance thereof by the Issuers will
constitute an agreement between such Holder and the Issuers in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE ISSUERS. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf.
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
Holder as such registered Holder's name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
26
<PAGE>
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuers,
evidence satisfactory to the Issuers of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Issuers in their sole discretion, which
determination will be final and binding. The Issuers reserve the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Issuers' acceptance of which would, in the opinion of counsel for the
Issuers, be unlawful. The Issuers also reserve the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The
Issuers' interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Issuer shall determine. Although the Issuers intend to notify Holders of
defects or irregularities with respect to tenders of Old Notes, none of the
Issuers, the Exchange Agent or any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived
will be returned by the Exchange Agent to the tendering Holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
Tender of Old Notes Held Through DTC
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for ATOP, the DTC automated Tender Offer Program. Accordingly, DTC
participants may, in lieu of physically completing and signing the applicable
Letter of Transmittal and delivering it to the Exchange Agent, electronically
transmit their acceptance of the Exchange Offer by causing DTC to transfer Old
Notes to the Exchange Agent in accordance with DTC's ATOP procedures for
transfer. DTC will then send an Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which
states that DTC has received an expressed acknowledgement from a participant
in DTC that is tendering Old Notes which are the subject of such Book Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the applicable Letter of Transmittal (or, in the case of an Agent's
Message relating to guaranteed delivery, that such participant has received
and agrees to be bound by the applicable Notice of Guaranteed Delivery), and
that the Issuers may enforce such agreement against such participant.
Book Entry Delivery Procedures
Within two business days after the date hereof, the Exchange Agent will
establish accounts with the respect to the Securities at DTC, the Midwest
Securities Transfer Company ("MSTC") and the Philadelphia Depositary Trust
Company ("Philadep") (each a "Book-Entry Transfer Facility" and, collectively,
the "Book-Entry Transfer Facilities") for purposes of the Exchange Offer. Any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities systems may make book-entry delivery of the Old Notes by causing
DTC, MSTC or Philadep to transfer such Old Notes into the Exchange Agent's
account at such Book-Entry Transfer Facility in accordance with such Book-
Entry Transfer Facility's procedures for such transfer. Timely book-entry
delivery of Securities pursuant to the Offers, however, requires receipt of a
Book-Entry Confirmation prior to the Expiration Date. In addition, although
delivery of Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at a Book-Entry Transfer Facility, the Letter of
Transmittal (or a manually signed facsimile thereof), together with any
required signature guarantees and any other required documents, or an Agent's
Message in connection with a book-entry transfer, must, in any case, be
delivered or transmitted to and received by the Exchange Agent at its address
set forth on the back cover page of this Prospectus prior to the Expiration
Date to receive New Notes for tendered Old Notes, or the guaranteed delivery
procedure described
27
<PAGE>
below must be complied with. Tender will not be deemed made until such
documents are received by the Exchange Agent. Delivery of documents to a Book-
Entry Transfer Facility does not constitute delivery to the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof), together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at DTC) and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at DTC) and
all other documents required by the Letter of Transmittal, are received by
the Exchange Agent within three New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at the address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case
of notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited), (iii) be signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such
Old Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee register
the transfer of such Old Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time or receipt) of such notices
will be determined by the Issuers, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes which have been tendered but which are not accepted
for exchange will be returned to the Holder thereof without cost to such
Holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
28
<PAGE>
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or to exchange New Notes for any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) in the opinion of counsel to the Issuers or Guarantors, the Exchange
Offer or any part thereof contemplated herein violates any applicable law
or interpretation of the staff of the Commission;
(b) any action or proceeding shall have been instituted or threatened in
any court or by any governmental agency which might materially impair the
ability of the Issuers to proceed with the Exchange Offer or any material
adverse development shall have occurred in any existing action or
proceeding with respect to either Issuer or the Issuers and the Guarantors
taken as a whole;
(c) any governmental approval has not been obtained, which approval the
Issuers shall deem necessary for the consummation of the Exchange Offer as
contemplated hereby;
(d) any cessation of trading on Nasdaq or any exchange, or any banking
moratorium, shall have occurred, as a result of which the Issuers are
unable to proceed with the Exchange Offer; or
(e) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Issuers, threatened for that purpose.
If the Issuers determine in their reasonable judgment that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering Holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration
of the Exchange Offer, subject, however, to the rights of Holders to withdraw
such Old Notes (see "--Withdrawals of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Issuers will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered Holders, and, depending upon the significance of
the waiver and the manner of disclosure to the registered Holders, the Issuers
will extend the Exchange Offer for a period of 5 to 10 business days if the
Exchange Offer would otherwise expire during such 5 to 10 business-day period.
EXCHANGE AGENT
The Bank of New York will act as Exchange Agent for the Exchange Offer with
respect to the Old Notes.
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal for the Old Notes and requests
for copies of Notice of Guaranteed Delivery should be directed to the Exchange
Agent, addressed as follows:
BY OVERNIGHT COURIER:
BY HAND: The Bank of New York 101 Barclay
The Bank of New York 101 Barclay Street--(7 East) Reorganization
Street--(7 East) Reorganization Section Corporate Trust Services
Section Corporate Trust Services WindowNew York, New York
WindowNew York, New York 10286Attention: Arwen Gibbons
10286Attention: Arwen Gibbons
BY FACSIMILE:
BY MAIL: (212) 815-6339
The Bank of New York 101 Barclay
Street--(7 East)Reorganization
SectionNew York, New York
10286Attention: Arwen Gibbons
CONFIRM BY TELEPHONE:
(212) 815-5920
29
<PAGE>
FEES AND EXPENSES
The expenses of soliciting Old Notes for exchange will be borne by the
Issuers. The principal solicitation is being made by mail by the Exchange
Agent who will be paid a reasonable and customary fee for its solicitation
services. However, additional solicitation may be made by telephone, facsimile
or in person by officers and regular employees of the Issuers and their
affiliates and by persons so engaged by the Exchange Agent.
The Issuers will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket expenses
in connection therewith and pay other registration expenses, including fees
and expenses of the Trustee, filing fees, blue sky fees and printing and
distribution expenses.
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of the Old Notes pursuant to the Exchange Offer. If, however, certificates
representing the New Notes or the Old Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be issued in the
name of, any person other than the registered Holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax
is imposed for any reason other than the exchange of the Old Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered Holder or any other person) will be payable by the
tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the aggregate principal amount of the Old Notes, as reflected in the
Issuers' accounting records on the date of exchange. Accordingly, no gain or
loss for accounting purposes will be recognized in connection with the
Exchange Offer. The expenses of the Exchange Offer will be amortized over the
term of the New Notes.
RESALE OF NEW NOTES
Based on an interpretation by the staff of the Commission set forth in no-
action letters issued to third parties, the Issuers believe that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any holder of such New Notes
(other than any such holder which is an "affiliate" of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder does not intend to participate, and has no
arrangement or understanding with any person to participate, in the
distribution of such New Notes. Any Holder who tenders in the Exchange Offer
with the intention to participate, or for the purpose of participating, in a
distribution of the New Notes, or any broker-dealer who purchased Old Notes
from the Company, may not rely on the position of the staff of the Commission
enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) and
Morgan Stanley & Co., Incorporated (available June 5, 1991), or similar no-
action letters, but rather must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. In addition, any such resale transaction should be covered by an
effective registration statement containing the selling security holders'
information required by Item 507 of Regulation S-K of the Securities Act. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, may be a statutory
underwriter and must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
By tendering in the Exchange Offer, each Holder will represent to the
Issuers that, among other things, (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the registered
Holder, (ii) neither the Holder nor any such other person has an arrangement
or understanding with any person to participate in the distribution of such
New Notes and (iii) the Holder and such other person acknowledge that if they
participate in the Exchange Offer for the purpose of distributing the New
Notes (a) they must, in the absence of an exemption therefrom, comply with the
registration and prospectus delivery requirements of the Securities Act in
connection
30
<PAGE>
with any resale of the New Notes and cannot rely on the no-action letters
referenced above and (b) failure to comply with such requirements in such
instance could result in such Holder or such other person incurring liability
under the Securities Act for which such Holder or such other person is not
indemnified by the Issuers. Further, by tendering in the Exchange Offer, each
Holder and such other person that may be deemed an "affiliate" (as defined
under Rule 405 of the Securities Act) of either Issuer will represent to the
Issuers that such Holder and such other person understand and acknowledge that
the New Notes may not be offered for resale, resold or otherwise transferred
by that Holder or such other person without registration under the Securities
Act or an exemption therefrom.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of the making of this Exchange Offer, the Issuers will have
fulfilled certain of their obligations under the Registration Rights
Agreement, and Holders of Old Notes who do not tender their Notes, except for
certain instances involving the Initial Purchasers or Holders who are not
eligible to participate in the Exchange Offer, will not have any further
registration rights under the Registration Rights Agreement or otherwise or
rights to receive liquidated damages for failure to register. If an Initial
Purchaser or any Holder of Old Notes notifies the Company prior to the 20th
day following consummation of Exchange Offer that (A) it is prohibited by law
or Commission policy from participating in the Exchange Offer or (B) that it
may not resell the New Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer registration statement is not appropriate or available for such
resales or (C) that it is a broker-dealer and owns Old Notes acquired directly
from the Company or an affiliate of the Company, the Company is required to
file with the Commission a shelf registration statement to cover resales of
the Old Notes by the holders thereof who satisfy certain conditions relating
to the provision of information in connection with such shelf registration
statement. Accordingly, any Holder of Old Notes that does not exchange that
Holder's Old Notes for New Notes will continue to hold the untendered Old
Notes and will be entitled to all the rights and subject to all the
limitations applicable thereto under the Indenture, except to the extent that
such rights or limitations, by their terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to a person who the seller reasonably believes is a qualified
institutional buyer in a transaction meeting the requirements of Rule 144A, in
a transaction meeting the requirements of Rule 144 under the Securities Act,
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act or in accordance with
another exemption from the registration requirements of the Securities Act
(and based upon an opinion of counsel if either Issuer so requests), (ii) to
either Issuer or (iii) pursuant to an effective registration statement, and,
in each case, in accordance with any applicable securities laws of any State
of the United States or any other applicable jurisdiction. See "Risk Factors--
Restrictions on Transfer."
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decision on what
action to take.
The Issuers may in the future seek to acquire untendered Old Notes in open
market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuers have no present plans to acquire any Old
Notes that are not tendered in the Exchange Offer or to file a registration
statement to permit resales of any untendered Old Notes.
31
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following sets forth a summary of the material federal income tax
consequences expected to result to holders from the Exchange Offer and from
the purchase, ownership and disposition of the New Notes. The following
summary is based upon current provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), applicable Treasury regulations, judicial authority
and administrative rulings and practice. Holders should note that this summary
is not binding on the Internal Revenue Service (the "Service") and there can
be no assurance that the Service will take a similar view with respect to the
tax consequences described below. No ruling has been or will be requested by
the Issuers from the Service on any tax matters relating to the Exchange Offer
or the New Notes. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may or
may not be retroactive and could affect the tax consequences to holders.
The tax treatment of a holder of the New Notes may vary depending upon such
holder's particular situation. Certain holders (including insurance companies,
tax- exempt organizations, financial institutions or broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. EACH HOLDER OF
OLD NOTES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES OF PURCHASING, HOLDING, EXCHANGING AND DISPOSING OF THE NEW
NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL OR
FOREIGN TAX LAWS.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The exchange of the New Notes for the Old Notes pursuant to the Exchange
Offer will not be taxable to the Holders thereof for federal income tax
purposes. An exchanging Holder will continue such Holder's holding period and
basis in the New Notes as if no exchange had occurred.
ORIGINAL ISSUE DISCOUNT AND STATED INTEREST
The New Notes will be issued without original issue discount. Stated
interest on the Old and New Notes will be includable in the holder's income
under such holder's method of accounting.
BOND PREMIUM ON THE NEW NOTES
If the New Notes are purchased, or if the Old Notes were purchased, for an
amount in excess of the amount payable at the maturity date (or a call date,
if appropriate) of the New Notes, such excess will be deductible by the holder
of the New Notes as amortizable bond premium over the term of the New Notes
(taking into account earlier call dates, as appropriate), under a yield-to-
maturity formula, only if an election by the holder under Section 171 of the
Code is made or is already in effect. An election under Section 171 is
available only if the New Notes are held as capital assets. This election is
revocable only with the consent of the Service and applies to all obligations
owned or subsequently acquired by the holder. To the extent the excess is
deducted as amortizable bond premium, the holder's adjusted tax basis in the
New Notes will be reduced. Except as may otherwise be provided in Treasury
regulations, under the Code the amortizable bond premium will be treated as an
offset to interest income on the New Notes rather than as a separate deduction
item.
MARKET DISCOUNT ON THE NEW NOTES
Holders of the New Notes should be aware that a disposition of the New Notes
may be affected by the market discount provisions of Sections 1276-1278 of the
Code. These rules generally provide that if a holder acquired the Old Notes or
acquires the New Notes (other than in an original issue, which may not include
the issuance of the New Notes pursuant to the Exchange Offer) at a market
discount which equals or exceeds 1/4 of 1% of the stated redemption price of
the New Notes at maturity multiplied by the number of remaining complete
32
<PAGE>
years to maturity and thereafter recognizes gain upon a disposition (or makes
a gift) of the New Notes, the lesser of (i) such gain (or appreciation, in the
case of a gift) or (ii) the portion of the market discount which accrued while
the Old Notes or New Notes were held by such holder will be treated as
ordinary income at the time of the disposition (or gift). For these purposes,
market discount means the excess (if any) of the stated redemption price at
maturity over the basis of such Old Notes or New Notes immediately after their
acquisition by the holder. A holder of the New Notes may elect to include any
market discount (whether accrued under the Old Notes or the New Notes) in
income currently rather than upon disposition of the New Notes. This election
once made applies to all market discount obligations acquired on or after the
first taxable year to which the election applies, and may not be revoked
without the consent of the Service.
A holder of any New Note who acquired the Old Note or New Note at a market
discount generally will be required to defer the deduction of a portion of the
interest on any indebtedness incurred or maintained to purchase or carry such
Old Note or New Note until the market discount is recognized upon a subsequent
disposition of such New Note. Such a deferral is not required, however, if the
holder elects to include accrued market discount in income currently.
REDEMPTION OR SALE OF THE NEW NOTES
Generally, any redemption or sale of the New Notes by a holder would result
in taxable gain or loss equal to the difference between the amount of cash and
the fair market value of property received (except to the extent that such
cash or property received is attributable to accrued, but previously untaxed,
interest) and the holder's tax basis in the New Notes. The tax basis of a
holder of the New Notes will generally be equal to the price paid for such New
Notes or the Old Notes exchanged therefor, plus any accrued market discount on
the New Notes (and the Old Notes exchanged therefor) included in the holder's
income prior to sale or redemption of the New Notes, or reduced by any
amortizable bond premium applied against the holder's income prior to sale or
redemption of the New Notes. Such gain or loss generally would be long-term
capital gain or loss if the holding period exceeded one year and the holder
holds the New Notes as capital assets, (with the applicable tax rates for an
individual taxpayer generally depending, under the Taxpayer Relief Act of
1997, on whether or not the taxpayer's holding period exceeds eighteen
months), except to the extent such gain constitutes accrued market discount.
BACKUP WITHHOLDING
A holder of the New Notes may be subject to backup withholding at a rate of
31% with respect to interest paid or accrued on, and gross proceeds of a sale
of, the New Notes unless (i) such holder is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact or
(ii) provides a correct taxpayer identification number, certifies as to no
loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A holder of the New
Notes who does not provide the Company with such holder's correct taxpayer
identification number may be subject to penalties imposed by the Service.
The Issuers will report to the holders of the New Notes and to the Service
the amount of any "reportable payments" and any amount withheld with respect
to the Old Notes and New Notes during the calendar year.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS
GENERAL IN NATURE AND IS THEREFORE NOT INTENDED AS TAX ADVICE FOR EACH
PARTICULAR NOTEHOLDER. ACCORDINGLY, EACH HOLDER OF THE OLD NOTES SHOULD
CONSULT SUCH HOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO
SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NEW NOTES
INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS.
33
<PAGE>
CAPITALIZATION
The following table sets forth the pro forma, unaudited cash and cash
equivalents, debt and capitalization of Hollywood Park as of June 30, 1997,
after giving effect to the sale of the Notes and the application of the net
proceeds therefrom. This table should be read in conjunction with "Unaudited
Pro Forma Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Hollywood Park's and
Boomtown's consolidated financial statements and notes thereto, all included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
------------------------
ACTUAL PRO FORMA(1)(2)
-------- ---------------
(IN THOUSANDS,
UNAUDITED)
<S> <C> <C>
Cash and cash equivalents............................. $ 38,409 $ 46,012
======== ========
Current maturities of long term debt and capital lease
obligations.......................................... $ 6,222 $ 6,222
Long term debt:
Senior Subordinated Notes due 2007.................. 0 125,000
Boomtown Notes...................................... 114,879 505
Other............................................... 1,517 4,959
-------- --------
Total long term debt, including current
maturities........................................ 122,618 136,686
Total stockholders' equity........................ 216,607 216,607
-------- --------
Total capitalization.............................. $339,225 $353,293
======== ========
</TABLE>
- --------
(1) Represents pro forma unaudited amounts after giving effect to the sale of
the Notes and the application of the net proceeds therefrom.
(2) The Bank Credit Facility permits maximum aggregate borrowings of
approximately $100 million, approximately $78 million of which is
currently available under certain covenant limitations.
34
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected historical financial data of Hollywood Park and
Boomtown has been derived from their respective historical financial
statements and should be read in conjunction with such consolidated financial
statements and the notes thereto included elsewhere herein. The Hollywood Park
and Boomtown unaudited historical financial statement data as of and for the
six months ended June 30, 1997 and 1996 has been prepared on the same basis as
the historical information derived from the audited financial statements and,
in the opinion of management, contains all adjustments, consisting only of
normal recurring accruals, necessary for the fair presentation of the results
of operations for such periods and financial position as of such dates.
Historically, Boomtown has reported operating results on a fiscal year end of
September 30. For comparison purposes, Boomtown's unaudited operating results
have been presented on a December 31 year end for 1995 and 1996, and have been
prepared on the same basis as the historical information derived from the
audited financial statements and, in the opinion of management, contains all
adjustments, consisting only of normal recurring accruals, necessary for the
fair presentation of the results of operations for such periods.
The selected unaudited pro forma combined consolidated condensed financial
data is derived from the unaudited pro forma combined consolidated condensed
financial statements, appearing elsewhere herein, which give effect to the
Merger as a purchase and the Blue Diamond Swap, shown also as adjusted to
reflect the issuance of the Notes and the application of the proceeds
therefrom, and should be read in conjunction with such pro forma statements
and the notes thereto. For comparison purposes, the pro forma combined
consolidated statements of operations are presented for both Hollywood Park
and Boomtown with a year end of December 31.
Certain amounts from the Hollywood Park and Boomtown Selected Historical
Financial Data have been reclassified to conform with the selected
presentation hereto.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred had the Merger and the issuance of the Notes been
consummated in an earlier period, nor is it necessarily indicative of future
operating results or financial position.
35
<PAGE>
HOLLYWOOD PARK, INC.
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
REVENUES:
Gaming................. $ 0 $ 0 $ 11,745 $ 26,656 $ 50,717 $ 24,803 $ 26,847
Racing................. 66,983 63,850 78,719 79,862 71,308 38,353 35,868
Food and beverage...... 10,957 10,908 20,540 19,783 13,947 7,637 6,860
Other.................. 3,004 4,227 6,320 4,271 7,253 3,487 3,564
------- -------- -------- -------- -------- -------- --------
80,944 78,985 117,324 130,572 143,225 74,280 73,139
EXPENSES:
Gaming................. 0 0 0 5,291 27,249 14,489 15,161
Racing................. 21,097 20,860 23,393 30,960 30,167 15,996 15,409
Food and beverage...... 8,922 9,400 21,852 24,749 19,573 9,082 8,819
Administrative and
other................. 33,480 32,538 51,151 48,647 43,962 22,688 19,970
Depreciation and
amortization.......... 5,899 6,402 9,563 11,384 10,695 5,400 5,780
Non-recurring
expenses.............. 0 850 2,964 6,088 11,412 11,412 0
------- -------- -------- -------- -------- -------- --------
69,398 70,050 108,923 127,119 143,058 79,067 65,139
------- -------- -------- -------- -------- -------- --------
Operating income (loss). 11,546 8,935 8,401 3,453 167 (4,787) 8,000
Interest expense....... 4,883 1,517 3,061 3,922 942 898 129
------- -------- -------- -------- -------- -------- --------
Income (loss) before mi-
nority interests and
income taxes........... 6,663 7,418 5,340 (469) (775) (5,685) 7,871
Minority interest...... 0 0 0 0 15 0 63
------- -------- -------- -------- -------- -------- --------
Income (loss) before in-
come taxes and extraor-
dinary item............ 6,663 7,418 5,340 (469) (790) (5,685) 7,808
Income tax expense..... 3,135 1,025 1,568 693 3,459 2,444 3,100
------- -------- -------- -------- -------- -------- --------
Income (loss) before ex-
traordinary item....... 3,528 6,393 3,772 (1,162) (4,249) (8,129) 4,708
Extraordinary item--Uti-
lization of
tax benefits from net
operating loss
carryforwards.......... 1,894 0 0 0 0 0 0
------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ 5,422 $ 6,393 $ 3,772 $ (1,162) $ (4,249) $ (8,129) $ 4,708
======= ======== ======== ======== ======== ======== ========
Dividend requirements on
convertible preferred
stock.................. $ 0 $ 1,718 $ 1,925 $ 1,925 $ 1,925 $ 962 $ 962
Net income (loss) at-
tributable to (allo-
cated to) common share-
holders................ $ 5,422 $ 4,675 $ 1,847 $ (3,087) $ (6,174) $ (9,091) $ 3,746
PER COMMON SHARE:
Income (loss) before
extraordinary item.... $ 0.27 $ 0.30 $ 0.10 $ (0.17) $ (0.33) $ (0.49) $ 0.20
Net income (loss)--
primary............... $ 0.41 $ 0.30 $ 0.10 $ (0.17) $ (0.33) $ (0.49) $ 0.20
Net income (loss)--
fully diluted......... $ 0.41 $ 0.30 $ 0.10 $ (0.17) $ (0.33) $ (0.49) $ 0.20
Cash dividends......... $ 0.04 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Number of common
shares--primary........ 13,084 15,418 18,224 18,399 18,505 18,613 18,366
Number of common
shares--fully diluted.. 13,084 17,465 20,516 20,691 20,797 20,904 20,657
OTHER DATA:
Cash flows provided by
(used in):
Operating activities... $11,262 $ 13,280 $ (7,287) $ 20,291 $ 13,137 $ 15,504 $ 14,949
Investing activities... (5,250) (32,677) (7,331) (31,322) (19,893) (6,118) 11,846
Financing activities... (4,416) 74,391 (8,877) (3,685) (3,728) (962) (308)
Capital expenditures... 5,319 12,902 27,584 25,150 23,786 9,132 3,927
Ratio of earnings to
fixed charges (a)...... 2.36x 5.89x 2.74x -- (b) -- (b) -- (b) 21.56x
BALANCE SHEET DATA: (C)
Total assets........... $90,219 $176,424 $246,573 $283,303 $205,886 $223,801 $426,098
Other liabilities...... 34,494 21,876 36,518 101,928 47,444 66,897 93,095
Long term obligations.. 45,538 348 42,800 15,629 282 256 116,396
Stockholders' equity... 10,187 154,200 167,255 165,746 158,160 156,648 216,607
- -------
The Company also considers relevant to Noteholders the following calculation of
EBITDA and Adjusted EBITDA:
Operating income
(loss) as presented
above................ $11,546 $ 8,935 $ 8,401 $ 3,453 $ 167 $ (4,787) $ 8,000
Add back depreciation
and amortization..... 5,899 6,402 9,563 11,384 10,695 5,400 5,780
------- -------- -------- -------- -------- -------- --------
EBITDA............... 17,445 15,337 17,964 14,837 10,862 613 13,780
Add back casino pre-
opening and training
expenses............. 0 850 2,337 0 0 0 0
Add back Turf Paradise
acquisition costs.... 0 0 627 0 0 0 0
Add back lawsuit set-
tlement.............. 0 0 0 6,088 0 0 0
Add back write off of
investment in a busi-
ness................. 0 0 0 0 11,412 11,412 0
------- -------- -------- -------- -------- -------- --------
Adjusted EBITDA...... $17,445 $ 16,187 $ 20,928 $ 20,925 $ 22,274 $ 12,025 $ 13,780
======= ======== ======== ======== ======== ======== ========
</TABLE>
EBITDA data, which is not a measure of financial performance under GAAP, is
presented because such data is used by certain investors to determine the
Company's ability to service or incur indebtedness. EBITDA and Adjusted
EBITDA are not calculated by the same means by all Companies and,
accordingly, are not necessarily appropriate measures for comparing
Companies' performance. Thus, neither EBITDA nor Adjusted EBITDA should be
considered in isolation from, or as a substitute for, net earnings (loss),
cash flows from operations or cash flow data prepared in accordance with
GAAP.
(a) In computing the ratio of earnings to fixed charges: (i) earnings have
been based on income from continuing operations before income taxes and
fixed charges (exclusive of capitalized interest), and (ii) fixed charges
consist of interest expense and amortization of debt discount and issuance
costs (including amounts capitalized), and the estimated interest portion
of rental expense.
(b) Hollywood Park's earnings were not sufficient to cover its fixed charge
requirements by $1.1 million and $2.2 million for the years ended
December 31, 1995 and 1996, respectively, and by $8.8 million for the
fixed charge requirements for the six months ended June 30, 1996.
(c) Balance sheet data as of June 30, 1997, includes the accounts of Boomtown.
36
<PAGE>
BOOMTOWN, INC.
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
YEARS ENDED SEPTEMBER 30, (UNAUDITED)
------------------------------------------------------ ---------------------
1992 1993 1994 1995 1996 1996 1997
------- -------- --------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DA-
TA:
REVENUES:
Gaming.................... $42,009 $ 42,416 $ 76,326 $189,306 $188,368 $139,350 $144,353
Food and beverage......... 3,785 3,877 7,973 15,613 16,314 12,293 13,036
Hotel, truck stop and oth-
er....................... 10,059 12,780 21,700 29,929 35,553 24,882 24,070
------- -------- --------- -------- -------- -------- --------
55,853 59,073 105,999 234,848 240,235 176,525 181,459
------- -------- --------- -------- -------- -------- --------
EXPENSES:
Gaming.................... 20,677 21,732 38,753 98,637 102,634 76,206 83,118
Food and beverage......... 3,170 3,349 8,179 17,639 19,213 14,569 17,159
General and administrative
and other................ 18,750 21,133 41,019 97,822 91,977 66,189 60,355
Depreciation and amortiza-
tion..................... 3,528 3,839 5,891 10,422 10,618 8,135 11,636
Compensation stock appre-
ciation rights and stock
options.................. 2,229 0 0 0 0 0 0
Pre-opening expenses...... 0 0 15,787 0 0 0 0
Loss on marketable securi-
ties..................... 0 0 1,691 0 0 0 0
Hollywood Park/Boomtown
merger costs............. 0 0 0 0 301 712 1,610
Loss on sale of a busi-
ness..................... 0 0 0 0 36,563 36,563 1,271
------- -------- --------- -------- -------- -------- --------
48,354 50,053 111,320 224,520 261,306 202,374 175,149
------- -------- --------- -------- -------- -------- --------
Operating income (loss).... 7,499 9,020 (5,321) 10,328 (21,071) (25,849) 6,310
Interest expense.......... 3,369 1,033 5,632 13,434 13,838 10,362 10,439
------- -------- --------- -------- -------- -------- --------
Income (loss) before minor-
ity interests and income
taxes..................... 4,130 7,987 (10,953) (3,106) (34,909) (36,211) (4,129)
Minority interest......... 0 0 (351) (1,105) (645) (878) 96
------- -------- --------- -------- -------- -------- --------
Income (loss) before income
taxes and extraordinary
item...................... 4,130 7,987 (10,602) (2,001) (34,264) (35,333) (4,225)
Income tax expense (bene-
fit)...................... 1,669 3,035 (2,779) 876 794 (50) (2,103)
------- -------- --------- -------- -------- -------- --------
Income (loss) before ex-
traordinary item.......... 2,461 4,952 (7,823) (2,877) (35,058) (35,283) (2,122)
Extraordinary item (a)..... 0 (370) 229 0 0 0 8,420
------- -------- --------- -------- -------- -------- --------
Net income (loss).......... $ 2,461 $ 4,582 $ (8,052) $ (2,877) $(35,058) $(35,283) $(10,542)
======= ======== ========= ======== ======== ======== ========
Dividend requirements on
preferred stock........... $ 200 $ 50 $ 0 $ 0 $ 0 $ 0 $ 0
Net income (loss) attribut-
able to (allocated to)
common shareholders....... $ 2,261 $ 4,532 $ (8,052) $ (2,877) $(35,058) $(35,283) $(10,542)
======= ======== ========= ======== ======== ======== ========
PER COMMON SHARE:
Income (loss) before ex-
traordinary item......... $ (0.61) $ 0.65 $ (0.90) $ (0.31) $ (3.79) $ (3.82) $ (0.21)
Net income (loss)......... $ (0.61) $ 0.60 $ (0.93) $ (0.31) $ (3.79) $ (3.82) $ (1.07)
Number of common shares.... 3,708 7,503 8,690 9,228 9,248 9,243 9,830
OTHER DATA:
Ratio of earnings to fixed
charges (b)............... 2.18x 7.86x -- (c) -- (c) -- (c) -- (c) -- (c)
CASH FLOWS PROVIDED BY
(USED IN):
Operating activities...... $ 6,850 $ 6,565 $ (182) $ 9,940 $ 13,851 $ 10,195 $ 12,195
Investing activities...... (6,279) (42,505) (106,154) (6,794) (5,548) (6,779) (9,918)
Financing activities...... (1,216) 48,508 100,133 6,238 (5,977) (2,605) (5,167)
Capital expenditures...... 6,322 23,849 114,729 15,146 5,679 7,168 9,718
BALANCE SHEET DATA:
Total assets.............. $55,916 $108,616 $ 238,467 $239,198 $205,988 $204,186 $ -- (d)
Other liabilities......... 10,632 7,581 25,309 27,405 31,871 29,351 --
Long term obligations..... 31,973 0 105,140 106,547 103,729 104,732 --
Stockholders' equity...... 13,311 101,035 108,018 105,246 70,388 70,103 --
- -------
The Company also considers relevant to Noteholders the following calculation
of EBITDA and Adjusted EBITDA:
Operating income (loss)
as presented above...... $ 7,499 $ 9,020 $ (5,321) $ 10,328 $(21,071) $(25,849) $ 6,310
Add back depreciation and
amortization............ 3,528 3,839 5,891 10,422 10,618 8,135 11,636
------- -------- --------- -------- -------- -------- --------
EBITDA.................. 11,027 12,859 570 20,750 (10,453) (17,714) 17,946
Add back compensation
stock appreciation
rights and stock
options................. 2,229 0 0 0 0 0 0
Add back pre-opening
expenses................ 0 0 15,787 0 0 0 0
Add back loss on
marketable securities... 0 0 1,691 0 0 0 0
Add back Hollywood
Park/Boomtown merger
costs................... 0 0 0 0 301 712 1,610
Add back loss on sale of
a business.............. 0 0 0 0 36,563 36,563 1,271
------- -------- --------- -------- -------- -------- --------
Adjusted EBITDA......... $13,256 $ 12,859 $ 18,048 $ 20,750 $ 26,411 $ 19,561 $ 20,827
======= ======== ========= ======== ======== ======== ========
</TABLE>
(a) Write off of unamortized loan fees associated with the early repayment of
a $15 million senior note, net of tax effect of approximately $226,000 and
$140,000, for the years ended September 30, 1993 and 1994, respectively.
Tender and consent costs associated with early extinguishment of First
Mortgage Notes for the year ended September 30, 1996 and the nine months
ended June 30, 1997, net of tax effect of approximately $5.9 million for
the nine months ended June 30, 1997.
(b) In computing the ratio of earnings to fixed charges: (i) earnings have
been based on income from continuing operations before income taxes and
fixed charges (exclusive of capitalized interest), and (ii) fixed charges
consist of interest expense and amortization of debt discount and issuance
costs (including amounts capitalized), and the estimated interest portion
of rental expense.
(c) Boomtown's earnings were not sufficient to cover the fixed charge
requirements by $16.5 million, $2.7 million and $34.3 million for the
years ended September 30, 1994, 1995 and 1996, respectively, and $35.3
million and $4.2 million for the nine months ended June 30, 1996 and June
30, 1997, respectively.
(d) As of June 30, 1997, the accounts of Boomtown were consolidated with
Hollywood Park's.
37
<PAGE>
HOLLYWOOD PARK, INC.
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA AND
RATIOS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C>
REVENUES:
Gaming............................................... $208,699 $110,196
Racing............................................... 71,308 35,868
Food and beverage.................................... 22,737 11,781
Hotel, truck stop and other.......................... 33,839 16,250
-------- --------
336,583 174,095
-------- --------
EXPENSES:
Gaming............................................... 116,969 58,047
Racing............................................... 30,167 15,409
Food and beverage.................................... 29,728 15,402
Administrative and other............................. 107,718 51,762
Depreciation and amortization........................ 20,818 14,558
Non-recurring expenses............................... 49,266 1,844
-------- --------
354,666 157,022
-------- --------
Operating income (loss)............................... (18,083) 17,073
Interest expense..................................... 15,468 7,398
-------- --------
Income (loss) before minority interests and income
taxes................................................ (33,551) 9,675
Minority interest (benefit).......................... (149) 63
-------- --------
Income (loss) before income taxes and extraordinary
item................................................. (33,402) 9,612
Income tax expense................................... 4,121 4,308
-------- --------
Income (loss) before extraordinary item............... $(37,523) $ 5,304
======== ========
Dividend requirements on convertible preferred stock.. $ 1,925 $ 962
Income (loss) before extraordinary item attributable
to (allocated to) common shareholders................ $(39,448) $ 4,342
======== ========
PER COMMON SHARE:
Income (loss) before extraordinary item--primary..... $ (1.65) $ 0.18
Income (loss) before extraordinary item--fully di-
luted............................................... $ (1.65) $ 0.18
Cash dividends....................................... $ 0.00 $ 0.00
Number of common shares--primary...................... 23,868 23,794
Number of common shares--fully diluted................ 26,160 26,085
OTHER DATA:
Ratio of earnings to fixed charges (a)................ -- (b) 2.07x
<CAPTION>
AS OF
JUNE 30,
1997
----------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets......................................... $438,139
Other liabilities.................................... 88,038
Minority interests................................... 3,030
Long term obligations................................ 130,464
Stockholders' equity................................. 216,607
- -------
The Company also considers relevant to Noteholders the following pro forma
calculation of EBITDA and
Adjusted EBITDA:
Operating income (loss) as presented above.......... $(18,083) $ 17,073
Add back depreciation and amortization.............. 20,818 14,558
-------- --------
EBITDA............................................. 2,735 31,631
Add back Hollywood Park/Boomtown Merger costs....... 1,291 1,487
Add back write off of investment in a business...... 11,412 0
Add back loss on sale of a business................. 36,563 357
-------- --------
Adjusted EBITDA.................................... $ 52,001 $ 33,475
======== ========
</TABLE>
(a) In computing the ratio of earnings to fixed charges: (i) earnings have
been based on income from continuing operations before income taxes and
fixed charges (exclusive of capitalized interest), and (ii) fixed charges
consist of interest expense and amortization of debt discount and issuance
cots (including amounts capitalized), and the estimated interest portion
of rental expense.
(b) Hollywood Park's earnings were not sufficient to cover its pro forma fixed
charge requirement by $34.8 million for the year ended December 31, 1996.
Included in the calculation for the year ended December 31, 1996 was the
one time, non-cash $11.4 million write off of Hollywood Park's investment
in Sunflower Racing, Inc. Also included in the calculation for the year
ended December 31, 1996 was the $36.6 million loss on sale of Boomtown Las
Vegas.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, Hollywood Park's and Boomtown's financial
statements, including the notes thereto, and the other financial information
appearing elsewhere in this Prospectus, as well as the discussion under "Risk
Factors." The discussion herein reflects the historical operations of
Hollywood Park and Boomtown which, prior to the Merger, had been operated
separately by Hollywood Park and Boomtown, respectively. See "Prospectus
Summary--Recent Developments."
OVERVIEW
Historically, Hollywood Park's primary business was the operation of
thoroughbred racing facilities. Hollywood Park is the successor to the
Hollywood Park Turf Club, which was originally organized in 1938 and
incorporated in 1981 under the name Hollywood Park Realty Enterprises, Inc.
The Company's principal business was owning and operating the Hollywood Park
Race Track, located in the Los Angeles metropolitan area, one of the premier
thoroughbred racing facilities in the United States.
Since 1991, Hollywood Park has continuously diversified itself from an owner
and operator of a single horse racing property into a multi-jurisdictional
gaming, sports and entertainment company. Hollywood Park has implemented this
strategic plan through internal development of properties and a series of
selective acquisitions with a particular focus on middle-market operations
which could benefit from improved management and the access to Hollywood
Park's financial resources.
Since 1991, Hollywood Park's strategic plan has been to maximize the revenue
and cash flow of its core businesses through expansion and increased
utilization of those properties, to continue to diversify its gaming
operations, to broaden the scope of its activities to include other sports and
entertainment attractions and to maximize the revenue of its horse racing
business through selective acquisitions and, as opportunities arise, through
continued expansion and technological improvements in off-track wagering. In
late 1993 and early 1994, Hollywood Park attempted to take advantage of the
trend toward legalizing gaming in new jurisdictions by acquiring race tracks
in jurisdictions where expanded gaming legislation appeared reasonably likely.
In 1994, Hollywood Park acquired Turf Paradise, a thoroughbred racing facility
located in Phoenix, Arizona, and Sunflower, a greyhound and thoroughbred
racing facility located in Kansas City, Kansas. In Arizona, Native American
casinos have opened, at least one in close proximity to Turf Paradise, and
off-track wagering is permitted in bars. However, to date, the Arizona
legislature has not authorized expanded forms of gaming at race tracks. In
Kansas, though several legislative proposals to expand gaming were made, none
has been enacted, and competition from riverboat gaming in nearby Missouri has
resulted in Sunflower filing for reorganization under Chapter 11 of the
Bankruptcy Code. Hollywood Park's racing operations (including racing related
concessions) generated approximately $84.1 million in revenues for the year
ended December 31, 1996.
Following the acquisitions of Turf Paradise and Sunflower, Hollywood Park
has focused its expansion efforts on California card club casinos and other
casino operations, as well as on expanding its pari-mutuel operations at its
existing facilities. Since 1994, Hollywood Park has opened two California card
club casino facilities. The Hollywood Park-Casino, which opened in July 1994
and is located on the premises of the Hollywood Park Race Track, has a total
of 145 gaming tables which offer Poker, Pai Gow and California Blackjack.
Hollywood Park assumed operational control over the Hollywood Park-Casino
effective November 1995, following an amendment to California law to permit
any publicly-traded pari-mutuel racing association to operate card club
casinos on its race track premises. Until that time, the Hollywood Park-Casino
was operated under a lease arrangement by an unaffiliated operator with
Hollywood Park receiving a fixed lease payment. In late 1996, the Crystal Park
Hotel & Casino, located in the Los Angeles metropolitan area, opened with 100
table games and 282 hotel rooms. Crystal Park offers the same games as the
Hollywood Park-Casino. Hollywood Park has an 89.8% interest in the facility
and, since Crystal Park is not on any race track premises, Crystal Park LLC
entered into a five-year lease with an unaffiliated party to operate the card
club casino. The lease provides for monthly payments of approximately $200,000
for the first six months, $350,000 for the months 7 through 12
39
<PAGE>
and $759,000 for months 13 through 60. The current operator, Compton
Entertainment, Inc. ("CEI"), is having difficulty making the initial payments
and has asked that the $759,000 figure be renegotiated; however, the Company
has actions for unlawful detainer pending against CEI. Further, CEI's license
has been recently revoked, and the Company believes that CEI is attempting to
have it reinstated, Thus, the Company may have to attempt to replace CEI with
a new tenant. As of September 30, 1997, CEI owed Crystal Park LLC $600,000, of
which $200,000 is covered by a rent security deposit Crystal Park LLC received
from CEI in October 1996, and of which $350,000 was not recorded as revenues
but instead was fully allowed for with a $350,000 valuation allowance. See
"Business--Gaming Operations--Crystal Park."
Hollywood Park significantly expanded its gaming operations when it
completed its strategic combination with Boomtown on June 30, 1997. Hollywood
Park now owns and operates, through its subsidiaries, land-based, dockside and
riverboat gaming operations in or near Reno, Nevada, New Orleans, Louisiana
and Biloxi, Mississippi, respectively. The Boomtown properties offer full
casino gaming, hotel accommodations (at Boomtown Reno), and other
entertainment amenities to primarily middle income, value-oriented customers.
On July 1, 1997, Boomtown and its subsidiaries divested their interests in
Boomtown Las Vegas, Nevada, which had consistently performed below projections
and generated significant losses. Together with its California card club
casino operations, as of June 30, 1997, the Company's casino operations
consist of 3,269 slot machines, 379 table games and 404 hotel rooms at its
gaming properties. Hollywood Park is the only company that currently owns and
operates casinos in Nevada and other states and card club casinos in
California. Hollywood Park's efforts to expand its gaming operations are now
focused on expanding its existing core gaming facilities and on new
opportunities in jurisdictions (other than Las Vegas and Atlantic City) in
which gaming has already been legalized.
In connection with the Merger, Hollywood Park supplied Boomtown with the
funds necessary to repurchase approximately $103 million in aggregate
principal amount of the Boomtown Notes. In addition, Hollywood Park intends to
utilize its financial resources to reduce or repurchase the financial
interests of third parties in Boomtown's operations, such as the repurchase of
minority interests in Boomtown New Orleans and National Gaming's participation
in the EBITDA of Boomtown Biloxi and the restructuring of certain Boomtown
equipment operating leases into capital leases. See "Prospectus Summary--
Recent Developments-- Improvements to Boomtown's Financial Condition" and
"Description of Other Indebtedness--Boomtown Notes."
During 1996 and 1997, Boomtown restructured several operating leases into
capital leases through negotiated payments on the operating lease residual
purchase options, with a corresponding reduction in operating expenses.
For a discussion of Hollywood Park's efforts to continue this strategic
expansion of its gaming, sports and entertainment business, see "Business."
As of December 31, 1996, the Company had repurchased and retired (with the
last purchase being made on November 13, 1996) 222,300 common shares, at a
cost of approximately $1,962,000 pursuant to a previously announced intention
to repurchase and retire up to 2,000,000 shares of its common stock on the
open market or in negotiated transactions.
RESULTS OF OPERATIONS
The following discussion relates to historical results of operations for the
Company (excluding Boomtown) and for Boomtown separately. The Company's
revenues consist primarily of pari-mutuel wagering revenues and gaming
revenues from Hollywood Park-Casino table games, and operator lease payments
for Crystal Park and (for applicable periods) the Hollywood Park-Casino. In
fiscal 1996, pari-mutuel wagering and casino table game operations contributed
approximately 37.6% and 35.1%, respectively, of the Company's total revenues.
Boomtown's revenues consist primarily of gaming revenues from slot and video
poker machines ("slot machines"), table games and keno as well as non-gaming
revenues generated from the properties' family
40
<PAGE>
entertainment centers, food and beverage sales, hotel room sales (at Boomtown
Reno and Las Vegas) and from recreational vehicle parks. Gaming operations
have historically contributed a significant portion of Boomtown's total
revenues and substantially all of its income from operations. In fiscal 1996,
gaming operations contributed approximately 80% of Boomtown's total revenues,
and gaming revenues from slot machines provided approximately 80% of
Boomtown's gaming revenues. Boomtown's non-gaming operations are designed
primarily to enhance the gaming operations and contribute a relatively small
percentage of Boomtown's income from operations after deducting promotional
allowances and operating costs.
Boomtown's historical financial data includes results of operations at
Boomtown Las Vegas, which has since been divested pursuant to the Blue Diamond
Swap. See "--Boomtown--Disposition of Boomtown Las Vegas." Boomtown Las Vegas
consistently generated losses and reduced the overall profitability of
Boomtown for the periods described herein.
Hollywood Park
Six Months Ended June 30, 1997 Compared to the Six Months Ended June 30,
1996
As of April 1, 1996, Sunflower's results of operations were no longer
consolidated with Hollywood Park's results; therefore, the results of
operations for the six months ended June 30, 1997, are exclusive of
Sunflower's results of operations and the financial results for the six months
ended June 30, 1996, included Sunflower's results of operations through March
31, 1996. Included in the results of operations for the six months ended
June 30, 1996, was the $11,412,000 one time, non-cash write off of Hollywood
Park's investment in Sunflower. On May 2, 1996, the Kansas Legislature
adjourned without passing legislation that would have allowed additional
gaming at Sunflower so that Sunflower could compete with Missouri riverboat
gaming. On May 17, 1996, Sunflower filed for reorganization under Chapter 11
of the Bankruptcy Code. Management is currently evaluating all options
available to Sunflower, and expects to continue to operate Sunflower at least
until a confirmation hearing scheduled for December 18, 1997.
Total revenues for the six months ended June 30, 1997, decreased by
$1,141,000, or 1.5%, as compared to the six months ended June 30, 1996, due
primarily to the inclusion of $1,782,000 of Sunflower revenues in 1996 with no
corresponding revenues in the 1997 results. Gaming revenues increased by
$2,044,000, or 8.2%, primarily due to $1,500,000 of Crystal Park lease rent
revenue during the six months ended June 30, 1997, with no corresponding
revenue during the six months ended June 30, 1996. Crystal Park opened on
October 25, 1996, under a triple net lease between Crystal Park LLC and CEI
(the lessee/operator of Crystal Park). Racing revenues decreased by
$2,485,000, or 6.5%, with $977,000 of the difference due primarily to on-track
attendance declines and one fewer live race day at Hollywood Park, and the
inclusion of $1,317,000 of racing revenues attributable to Sunflower in 1996
and no corresponding revenues in 1997. Food and beverage revenues declined by
$777,000, or 10.2%, due primarily to the inclusion of Sunflower revenues in
1996, and no corresponding revenues in 1997.
Total operating expenses decreased by $2,896,000, or 4.7%, primarily due to
the inclusion of $1,703,000 of Sunflower expenses in 1996 with no
corresponding expenses in 1997. Gaming expenses increased by $672,000, or
4.6%, due primarily to increased marketing expenses related to tournament
play. Racing expenses decreased by $587,000, or 3.7%, due primarily to fewer
live race days in 1997 as compared to 1996. The cost of food and beverage
sales for the six months ended June 30, 1997 and 1996, did not materially
change, and exceeded the revenues generated by food and beverage sales by
$1,959,000 or 28.6%, and $1,445,000 or 18.9%, respectively. Included in the
cost of food and beverage sales (commencing with the July 1, 1994, opening of
the Hollywood Park-Casino) were the costs associated with providing
complimentary meals to card players, as is the customary practice in the local
card club market, thus generating costs in excess of food and beverage
revenues. Administrative expenses decreased by $3,058,000, or 14.2%, due
primarily to decreased expansion disbursements of approximately $551,000 in
1997, and the inclusion of Sunflower's expenses of approximately $1,030,000 in
1996 with no corresponding expenses in 1997, with the balance of the savings
attributable to cost containment programs implemented at all properties.
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Depreciation and amortization increased by $380,000, or 7.0%, primarily due
to depreciation and amortization associated with Crystal Park of approximately
$802,000 recorded in 1997 with no corresponding expense in 1996, offset by the
inclusion of Sunflower's depreciation and amortization expenses of
approximately $536,000 in 1996 and not in 1997. Interest expense decreased by
$769,000, or 85.6%, due to the inclusion of Sunflower's interest expense in
1996 and no corresponding expense in 1997.
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
The results of operations for the year ended December 31, 1996, included the
results of Hollywood Park operating all aspects of the Hollywood Park-Casino,
including the Casino gaming floors. Hollywood Park acquired the Hollywood
Park-Casino gaming floor business from Pacific Casino Management ("PCM") on
November 17, 1995; therefore, the results of operations for the year ended
December 31, 1995, do not include the operating results of the Hollywood Park-
Casino gaming floor business prior to November 17, 1995, but rather are
reflective of the lease arrangement then in place. The results of operations
for the year ended December 31, 1996, included Sunflower's results of
operations for the three months ended March 31, 1996, only. As of March 31,
1996, Sunflower's results of operations were no longer consolidated with
Hollywood Park's due to Sunflower's May 17, 1996, filing for reorganization
under Chapter 11 of the Bankruptcy Code. Sunflower's results of operations are
consolidated in the financial statements for the year ended December 31, 1995.
Total revenues increased by $12,653,000, or 9.7%, for the year ended
December 31, 1996, as compared to the year ended December 31,1995, primarily
due to Hollywood Park-Casino gaming revenues. Gaming revenues of $50,272,000
were generated from the Hollywood Park-Casino gaming activities, which
Hollywood Park acquired from PCM on November 17, 1995. During the year ended
December 31, 1995, Hollywood Park recorded $20,624,000 of lease revenues,
$6,032,000 of gaming revenues (covering the period November 17, 1995, through
December 31, 1995), and concession sales to PCM of approximately $2,773,000,
or total 1995 Hollywood Park-Casino gaming and lease related revenues of
$29,429,000. On October 25, 1996, Crystal Park opened under a triple net lease
between Hollywood Park and CEI (the operator of Crystal Park). Monthly lease
rent is fixed at $200,000 per month for months one through six; $350,000 per
month for months seven through twelve, and approximately $759,000 per month
for the remaining 48 months of the lease. Racing revenues decreased by
$5,728,000, or 7.4%, primarily due to the exclusion of Sunflower's racing
revenues for the nine months ended December 31, 1996. Food and Beverage sales
decreased by $5,836,000, or 29.5%, with approximately $2,773,000 of the
difference attributable to the inclusion of sales to PCM in 1995 with no
corresponding sales in 1996, with approximately $2,414,000 of the difference
due to the inclusion of a full year of food and beverage sales recorded for
Sunflower in 1995 and just three months of Sunflower sales recorded in 1996,
with the balance of the difference primarily due to on-track attendance
declines at Hollywood Park.
Total operating expenses increased by $15,939,000, or 12.5%, for the year
ended December 31, 1996, compared to the year ended December 31, 1995,
primarily due to the inclusion of $27,249,000 of Hollywood Park-Casino gaming
floor expenses (with corresponding gaming floor expenses of $4,919,000 in
1995) which more than offset a $7,476,000 reduction in expenses arising from
the exclusion in 1996 of Sunflower's expenses. Food and Beverage expense
decreased by $5,589,000, or 22.2%, with $2,089,000 of the savings attributable
to the exclusion of Sunflower's expenses subsequent to the first quarter of
1996, and with the balance of the savings primarily attributable to cost
savings programs implemented at the Hollywood Park-Casino. Administrative
expenses decreased by $5,315,000, or 11.3%, due to the inclusion of a full
year of Sunflower expenses in 1995 and just three months of corresponding
costs recorded in 1996.
Included in the 1996 results of operations was the $11,412,000 one time,
non-cash write off of Hollywood Park's investment in Sunflower. On May 2,
1996, the Kansas Legislature adjourned without passing legislation that would
have allowed additional gaming at Sunflower, and thereby, allowing Sunflower
to compete with Missouri riverboat gaming. On May 17, 1996, Sunflower filed
for reorganization under Chapter 11 of the Bankruptcy Code. Management is
currently evaluating all options available to Sunflower, and expects to
continue to operate Sunflower at least until a confirmation hearing scheduled
for December 18, 1997.
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Included in the 1995 results of operations was $6,088,000 of expenses (with
no corresponding expenses in 1996) related to the settlement of certain claims
in connection with a shareholder class action and related shareholder
derivative suit, as more fully described in the Company's 1996 Annual Report
on Form 10-K.
Depreciation and amortization expenses decreased by $689,000, or 6.1%,
primarily due to the exclusion of Sunflower's expenses for the nine months
ended December 31, 1996, netted against the amortization of the goodwill
associated with the November 17, 1995, acquisition of PCM. Interest expense
decreased by $2,980,000, or 76.0%, due to the exclusion of Sunflower's
interest expense for the nine months ended December 31, 1996.
Income tax expense increased by $2,766,000, due primarily to the
establishment of certain tax reserves.
Year Ended December 31, 1995 Compared to the Year Ended December 31, 1994
The 1995 consolidated financial statements include the results of operations
at Hollywood Park, the Hollywood Park-Casino, Sunflower, and Turf Paradise.
From July 1, 1994 until November 17, 1995, the Hollywood Park-Casino was
operated under a lease by an unaffiliated operator who operated the gaming
floor business and Hollywood Park operated all other activities. After a
change in California law permitting Hollywood Park to operate the casino
directly, the gaming floor business was acquired from the operator as of
November 17, 1995, accounted for under the purchase method of accounting. The
1995 Hollywood Park-Casino operating results included ten and a half months of
operations under the lease, and one and a half months under Hollywood Park's
direct ownership and control. The 1994 operating results include the six
months of Hollywood Park-Casino activities under the lease arrangement.
Sunflower was acquired as of March 31, 1994, in a transaction accounted for
under the purchase method of accounting, and therefore the 1994 statement of
operations does not include Sunflower's first quarter results. Turf Paradise
was acquired as of August 11, 1994, accounted for under the pooling of
interests method of accounting. Accordingly, the 1994 results have been
restated to include the operating results of Turf Paradise for the full year.
Total revenues increased by $13,248,000, or 11.3%, during 1995, as compared
to the year ended December 31, 1994. Included in 1995 Gaming revenues was
$20,624,000 of Hollywood Park-Casino fixed lease rent revenue (of which the
operator paid $12,000,000 in 1995 plus $4,377,000 for food and beverage and
interest on accrued and unpaid rent) and $6,032,000 of gaming floor revenue,
compared to $11,745,000 of Hollywood Park-Casino fixed lease rent revenue in
1994 (covering six months of casino operations). Racing revenues decreased by
$1,683,000, or 2.1%, as a result of a $3,151,000 decline in racing revenues at
Sunflower due to intense competition from nearby Missouri riverboat gaming,
which more than offset simulcast racing revenue increases at both Hollywood
Park and Turf Paradise. Food and beverage revenues decreased by $757,000, or
3.7%. Food and beverage sales at Sunflower declined in 1995 by $1,343,000, as
compared to 1994, also as a result of competition from Missouri riverboat
gaming. Such Sunflower food and beverage revenues declines were offset by
increased Hollywood Park-Casino revenues, due to the casino being open for all
of 1995 (as opposed to only six months in 1994). Other income increased by
$777,000, or 12.3%, principally because (i) other non-casino income increased
by $940,000, or 15.0%, and (ii) revenue declines of $769,000 at Hollywood Park
due to the cancellation of the Forum Parking Agreement were offset by a full
year of Hollywood Park-Casino gift shop and health club sales in 1995 (as
opposed to only six months of such sales in 1994). A new Forum Parking
Agreement was executed on October 24, 1995, covering the one year from October
1, 1995.
Total operating expenses, inclusive of $31,938,000 of Hollywood Park-Casino
operating expenses (representing a month and a half of gaming floor operations
and twelve months of other Hollywood Park-Casino operations, for which there
were no gaming floor expenses and just six months of comparable other
Hollywood Park-Casino operations activity in 1994), increased by $18,196,000,
or 16.7%, during the year ended December 31, 1995, as compared to the year
ended December 31, 1994. Gaming expenses of $4,919,000 were recorded in 1995,
due to the November 17, 1995, acquisition of the Hollywood Park-Casino gaming
floor business from PCM. Racing expenses decreased by $824,000, or 2.7%,
primarily due to five fewer live race days at Hollywood Park in 1995 as
compared to 1994. Food and beverage expenses increased by $3,310,000, or
15.1%, primarily due to a full year of Hollywood Park-Casino food and beverage
services in 1995 (as compared to only
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six months of such activity in 1994). Administrative expenses increased by
$3,294,000, or 7.8%, primarily due to expansion costs incurred in connection
with card club casino initiative campaigns, which were defeated in September
and November, as well as costs for other expansion endeavors such as a
proposed stadium and other card club casinos. All costs associated with
expansion projects are expensed during the evaluation stages.
As previously reported, on February 26, 1996, the District Court approved
the settlement of the Class Actions and entered a judgment dismissing them in
their entirety. On April 3, 1996, the State Court entered an order approving
the settlement of the Derivative Action. Hollywood Park also separately
settled all purported claims against Hollywood Park and its officers and
directors by the former controlling stockholder of Turf Paradise in connection
with Hollywood Park's acquisition of Turf Paradise. After giving effect to the
amounts to be received by Hollywood Park in settlement of the Derivative
Action and from its insurance carrier, Hollywood Park's net settlement payment
in the Class Actions, the Derivative Action and in resolving the claims of the
former controlling stockholder of Turf Paradise, was approximately $6,100,000
(inclusive of all related costs and expenses), which was expensed in the
fourth quarter of 1995.
The 1994 Hollywood Park-Casino pre-opening and training costs of $2,337,000
were primarily related to wages paid during the on-the-job training of staff
hired to open the Hollywood Park-Casino on July 1, 1994. There were no similar
costs in 1995. The Turf Paradise acquisition costs were a result of the August
11, 1994, acquisition of Turf Paradise by Hollywood Park; there were no
similar costs in 1995.
Depreciation and amortization increased by $1,821,000, or 19.0%, for the
year ended December 31, 1995, as compared to the year ended December 31, 1994.
The increase was mainly due to Hollywood Park-Casino operations, and costs
associated with the first quarter of 1995 at Sunflower with no corresponding
amount in 1994. Interest expense increased by $860,000, or 28.1%, principally
due to an additional three months of Sunflower interest expense in the 1995
results. Sunflower's 1994 results are exclusive of the first quarter.
Income tax expense decreased by $875,000, due primarily to the decrease in
pre-tax income in the year ended December 31, 1995 as compared to the year
ended December 31, 1994.
Boomtown
Disposition of Boomtown Las Vegas
On July 1, 1997, Boomtown and its subsidiaries exchanged substantially all
of their interest in Boomtown Las Vegas (including substantially all of the
operating assets and the notes receivable of approximately $27.3 million from
the landowner/lessor of the Boomtown Las Vegas property, IVAC, a California
general partnership of which Edward P. Roski, Jr. ("Roski"), a former Boomtown
director, is a general partner) with Majestic Resorts, LLC ("Majestic") for
two notes aggregating approximately $8.5 million in principal amount issued by
IVAC, cash, assumption by Majestic (guaranteed by Roski) of the note and lease
obligations of Boomtown Las Vegas, and relief from the real estate lease
obligations of Boomtown Las Vegas payable to IVAC (such transactions being
collectively referred to as the "Blue Diamond Swap"). Boomtown Las Vegas was
divested by Boomtown because it had generated significant operating losses
since it opened, and had reduced the overall profitability of Boomtown. As a
result of the Blue Diamond Swap, IVAC was relieved of the obligation to repay
Boomtown the aforementioned loans of $27.3 million. In addition, concurrently
with the consummation of the Blue Diamond Swap, Hollywood Park purchased
446,491 shares of Hollywood Park common stock received by Roski in the Merger
for a purchase price of approximately $3.5 million, paid in the form of a
Hollywood Park promissory note.
Nine Months Ended June 30, 1997 Compared to Nine Months Ended June 30, 1996
For the nine months ended June 30, 1997, total revenues increased by $4.9
million, or 2.8%, as compared total revenues for the nine months ended June
30, 1996. Gaming revenues increased by $5.0 million, or 3.6%, primarily a
result of increase in gaming revenues at Boomtown Biloxi. Boomtown Biloxi has
been able to increase market share in the Gulf Coast region due to enhanced
marketing and player promotions. The increase
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in gaming revenues during the nine months ended June 30, 1997, was offset by a
13.9% decrease in gaming revenues at Boomtown Reno, primarily due to severe
winter weather conditions. During the three months ended December 31, 1996,
the Pacific Northwest, including Reno and northern California, experienced
unusually intense weather conditions, thereby reducing the traffic flow on
Interstate 80, upon which Boomtown Reno depends on as a primary source of
gaming patrons. Food and beverage sales increased by $1.3 million, or 11.3%,
due primarily to quality improvements and marketing programs.
Total operating expenses for the nine months ended June 30, 1997, decreased
by $27.6 million, or 13.6%, as compared to the nine months ended June 30,
1996. Included in the expenses for the nine months ended June 30, 1996, was
the one time $36.6 million loss incurred on the sale of Boomtown's Las Vegas
property. Upon the closing of the sale of the Las Vegas property, Boomtown
incurred an additional $1.2 million of expenses that were reflected in the
results of operations for the nine months ended June 30, 1997. The one time
charge of $14.2 million related to Boomtown's consent and tender of its First
Mortgage Notes was treated as an extraordinary loss for the nine months ended
June 30, 1997. There was no comparable charge for the nine months ended
June 30, 1996. Boomtown recorded non-recurring costs of $1.6 million related
to the Merger during the nine months ended June 30, 1997, compared to $0.7
million of Merger costs during the corresponding period in 1996.
Operating expenses, adjusted for the various one time/non-recurring charges
discussed above, for the nine months ended June 30, 1997, increased by $6.8
million, or 4.1%, as compared to similarly adjusted operating expenses for the
nine months ended June 30, 1996. Marketing expenses increased by $2.5 million,
or 15.1%, primarily related to enhanced marketing efforts at Boomtown Biloxi.
Administrative expenses increased by $1.1 million, or 2.6%, primarily due to
increased employee heath insurance costs, and increased security staff at
Boomtown New Orleans, as required under Louisiana gaming regulations.
Depreciation and amortization expenses increased by $3.5 million, or 43.0%,
primarily due to reductions in the estimated useful lives of existing assets,
and due to the restructuring of several operating leases to capital leases
during the nine months ended June 30, 1997.
Fiscal Year 1996 Compared to Fiscal Year 1995
Net loss for the fiscal year ended September 30, 1996, was $35.1 million
compared to a net loss of $2.9 million for the fiscal year ended September 30,
1995. Included in the results of operations for the fiscal year ended
September 30, 1996, was a one time non-cash charge of $36.6 million related to
the Blue Diamond Swap (as described previously). There was no corresponding
expense in the results of operations for the fiscal year ended September 30,
1995.
During the fiscal year ended September 30, 1996 total revenues were $236.0
million compared to $231.8 million in the prior year. Gaming revenues were
$188.4 million in 1996 as compared to $189.3 million in 1995. Gains in gaming
revenues at Boomtown Reno and Boomtown Biloxi during 1996 were offset by
decreases in gaming revenues at Boomtown New Orleans and Boomtown Las Vegas
(which was divested in the Blue Diamond Swap). Gaming revenues primarily
consist of revenues from slot machines, table games and Keno. Boomtown Reno's
gaming revenues grew 5.2% over the prior year primarily as a result of
increased casino patronage due to higher traffic volume on Interstate 80, on
which Boomtown Reno is heavily dependent for customers. Boomtown Biloxi's
gaming revenues have improved due to expansion of the gaming market in the
Gulf Coast region combined with increased marketing and promotional efforts.
Boomtown Biloxi's gaming revenues increased by 10.0% over the prior year.
Boomtown New Orleans' gaming revenues were negatively affected by additional
cruising of its riverboat casino as mandated by law. Gaming revenues at
Boomtown Las Vegas continued to be less than expected and lower than the prior
year resulting from increased competition with other casino operators for the
local customer market.
Non-gaming revenues primarily consist of revenues generated from food and
beverage, hotel, recreational vehicle park, family entertainment center,
truckstop, service station, mini-mart and other. Non-gaming revenues for the
years ended September 30, 1996 and 1995 were $47.7 million and $42.5 million,
respectively. Increases in non-gaming revenues were recorded at all four of
the Boomtown properties, with the majority of the
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consolidated improvement due to higher fuel sales at the Boomtown Reno
truckstop as well as the expansion of the cabaret show at Boomtown New
Orleans.
The consolidated gaming margin was 57.4% for fiscal 1996, compared to 58.2%
in the prior year. The decline is primarily a result of a change in the
calculation of gaming taxes at Boomtown New Orleans resulting in the taxes
being reclassified and charged as a gaming expense in the current year. During
the prior year, the taxes were calculated based on a flat charge per admission
and recorded as general and administrative expenses. Additionally, Boomtown's
consolidated gaming margin was negatively affected by additional gaming leases
entered into in April 1995 resulting in higher gaming equipment lease expense
during the period. This decline in the consolidated gaming margin was offset
by improvements from Boomtown Biloxi resulting from the discontinuance of the
property's FunFlight program in October 1995.
Marketing, general and administrative expenses primarily consist of
advertising and promotional costs, salaries and wages and related benefits,
non-gaming taxes and licenses, professional fees and other overhead expenses.
Marketing expenses were $22.4 million for the year ended September 30, 1996, a
14.3% increase over the prior year's expense of $19.6 million. Marketing
expenses consist of costs associated with printed advertising, outdoor signs,
media advertising, promotional events, Boomtown's bus tour and FunFlight
programs and other marketing and administrative expenses. The increase in
marketing expenses during fiscal 1996 resulted from additional advertising at
Boomtown Biloxi and Boomtown Las Vegas in order to promote the Boomtown brand
and compete for the local customer market in those areas. Higher promotional
events and player's club redemption costs at all Boomtown casinos also
contributed to the increase.
General and administrative ("G&A") expenses were $70.6 million for the year
ended September 30, 1996, a 6.2% decline from the $75.3 million recorded
during the prior year. G&A expenses were less at Boomtown Las Vegas and
Boomtown New Orleans, offset by higher expenses at Boomtown Biloxi. The
reduction at Boomtown New Orleans primarily resulted from a reclassification
of gaming taxes from G&A to gaming operating expenses during the current year.
Lower expenses at Boomtown Las Vegas resulted from a reduction of costs in
most overhead departments due to cost control efforts. The increase in
Boomtown Biloxi's G&A expenses was attributable to higher property rent as
well as building and grounds maintenance costs associated with the aging of
the building and barge. Boomtown continues to concentrate on aggressive cost
reduction programs for all of its properties.
During the year ended September 30, 1996 Boomtown incurred charges of
approximately $1.1 million related to the Merger, as well as $500,000
associated with its license application in the state of Indiana.
Depreciation and amortization expense rose 1.9% to $10.6 million for the
year ended September 30, 1996, a result of ordinary course capital
improvements and additions and the restructuring of certain operating leases
to capital leases at Boomtown Biloxi and Boomtown New Orleans, thereby
capitalizing the equipment and depreciating the costs over the remaining
estimated useful lives.
During the year ended September 30, 1996, Boomtown took a non-cash charge of
$36.6 million related to the Blue Diamond Swap. The charge included the write-
off of Boomtown's investment in lease of $12.7 million, an $18.9 million
write-down of the related party notes receivable to $8.5 million, and the
write-off of the remaining net assets less the liabilities assumed by Roski of
$5.0 million (approximate value at June 30, 1996). The after-tax loss amounted
to $35.7 million, or $3.86 per share.
The recorded provision for income taxes for the year ended September 30,
1996, does not reflect the anticipated benefit from the write-off associated
with the Blue Diamond Swap. The write-off of the $12.7 million investment in
lease is not deductible for income tax purposes. In addition, the remaining
income tax benefit arising from the Blue Diamond Swap has been offset by a
valuation allowance because of the uncertainty regarding the future
realization of the related deferred tax asset.
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Fiscal Year 1995 Compared to Fiscal Year 1994
Gaming revenues as a percent of total revenues increased from 73.8% to 81.7%
from fiscal 1994 to fiscal 1995. This was due to the opening of the three new
gaming properties, particularly Boomtown Biloxi and Boomtown New Orleans.
Boomtown Biloxi's and Boomtown New Orleans' gaming revenues provide
approximately 90% and 97% of each partnership's total revenues, respectively.
Gaming revenues increased 148% or $113 million, primarily due to the opening
of the three new gaming properties in the third and fourth quarters of fiscal
1994. Boomtown Reno's gaming revenue decreased 3%, from $43.8 million to $42.6
million due to severe winter weather conditions in the first two fiscal
quarters. The new properties, Boomtown Las Vegas, Boomtown Biloxi and Boomtown
New Orleans, contributed $32.9 million, $41.7 million and $72.2 million,
respectively, to casino revenues.
Non-gaming revenues increased $15.5 million from $27.0 million to $42.5
million. The increases were primarily related to the opening of the new gaming
properties. Boomtown Biloxi contributed an increase of $1.9 million and $1.6
million from its food and beverage operation and its family entertainment
center, respectively in addition to other income of $223,000; Boomtown New
Orleans contributed increases of $789,000 and $548,000 from its family
entertainment center, its food and beverage operation and the cabaret,
respectively, in addition to other income of $374,000; and Boomtown Las Vegas
contributed increases of $4.9 million, $2.2 million and $1.2 million from its
food and beverage, hotel operations and recreational vehicle park,
respectively, in addition to other income of $581,000. Boomtown Reno's non-
gaming revenues increased by $717,000 of which $314,000 was due to the opening
of a steakhouse in May 1994. The remainder of the increases at Boomtown Reno
were related to the family entertainment center, hotel, recreational vehicle
park, and entry fees for gaming and golf tournaments.
Gaming expenses increased $47.8 million or 153% from fiscal 1994 to fiscal
1995 and as a percent of revenues from 30.2% to 34.1%. Gaming expenses as a
percent of total revenues were 29.6%, 31.9%, 41.9% and 34.5% at Boomtown Reno,
Boomtown Las Vegas, Boomtown Biloxi, and Boomtown New Orleans, respectively.
Except for Boomtown Biloxi, the variance is due primarily to the difference in
gaming tax rates. Boomtown Biloxi's variance is primarily due to the addition
of the FunFlight program in fiscal 1995 which had operating expenses of $3.1
million and revenues of $1.4 million. In addition, an increase of $5.4 million
was related to gaming equipment lease expenses due to the sale and leaseback
of certain furniture, fixtures and equipment at the various properties that
occurred during the end of the 1994 fiscal year and at the beginning of the
1995 fiscal year.
Non-gaming operating expenses consist of costs incurred for food and
beverage, hotel, recreational vehicle park, family entertainment center,
truckstop, service station, mini-mart and other. Non-gaming operating expenses
increased $10.7 million. The increases were primarily related to the opening
of the three new gaming properties in fiscal 1994.
Marketing, general and administrative expenses increased from $33.3 million
in fiscal 1994 to $94.9 million in fiscal 1995, an increase of $61.6 million.
This increase was primarily due to the opening of the three new gaming
properties ($59.9 million) in fiscal 1994. The remainder of the increase is
due to the addition of the player's slot club and promotions related to bus
tour programs at Boomtown Reno.
Discontinued projects primarily consists of write-offs and accruals for
development costs associated with Boomtown's research and pursuit into various
gaming jurisdictions for the purpose of applying for gaming licenses.
Significant write-offs in the third quarter included development costs related
to the following projects; Lawrenceburg, Indiana (approximately $4.3 million),
the state of Missouri ($727,000), the state of Iowa ($335,000) and other
miscellaneous projects ($220,000). In addition, Boomtown terminated a merger
and related agreements with National Gaming Corporation, Inc. in April 1995.
As a result, Boomtown wrote-off $450,000 of accumulated expenses related to
the transaction.
Depreciation and amortization expense increased $4.5 million or 77% but
decreased as a percent of revenues. The increase primarily reflects a full
years depreciation on the new assets purchased and constructed
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for Boomtown Las Vegas, Boomtown Biloxi and Boomtown New Orleans during fiscal
1994. The decrease as a percent of total revenues is due to the sale and
leaseback of certain furniture, fixtures and gaming equipment at the end of
the second quarter totalling approximately $5.2 million.
Income from operations improved from a loss from operations of $6.3 million
in fiscal 1994 to income from operations of $7.2 million in fiscal 1995, for
the reasons set forth above.
Interest expense, net of capitalized interest increased by $7.8 million.
This was due to a decrease in capitalized interest of $5.2 million offset by
an increase in interest expense of $2.6 million. Capitalized interest was
significantly higher in the prior fiscal year due to the construction of
Boomtown Biloxi, Boomtown Las Vegas and Boomtown New Orleans. Interest expense
is higher for fiscal 1995 compared to fiscal 1994 primarily due to the
additions of $3.1 million of long-term debt during the end of the fourth
quarter of fiscal 1994 and additions of $5.9 million in the second quarter of
fiscal 1995. The weighted average long-term debt outstanding and the related
interest rate for the year ended September 30, 1995 was $111.9 million and
11.7%, respectively, as compared to $109.1 million and 12.7%, respectively,
for the year ended September 30, 1994. Loss on marketable securities was $1.7
million in fiscal 1994 due to a decline in the market value of investments in
two short-term government bond funds purchased for approximately $50.0
million.
The minority partners' share of operations of the consolidated partnership
of Mississippi-I Gaming, L.P. and Louisiana-I Gaming, L.P. are reported as
"minority interest." The $1.1 million of loss related to minority interests in
fiscal 1995 is comprised of $2.0 million loss related to Mississippi-I Gaming,
L.P. offset by $.9 million of income related to Louisiana-I Gaming, L.P. The
$352,000 of minority interest in fiscal 1994 is related primarily to the
minority interest in Mississippi-I Gaming, L.P.
Boomtown has a state income tax provision of $1.1 million related to net
income generated from Boomtown New Orleans and a federal income tax benefit of
approximately $300,000 during fiscal 1995. Boomtown's federal income tax
benefit (effective rate of 15%) is lower than the federal statutory rate due
to amortization of goodwill and an increase in nondeductible items as a result
of a change in deductibility of meals and entertainment from 80% to 50%. At
September 30, 1995, Boomtown had deferred tax assets and deferred tax
liabilities of approximately $7.1 million and $8.2 million respectively. The
Company believes that the future benefits from the deferred tax assets will be
realized in full.
As a result of the factors discussed above, the net loss decreased $5.2
million from a loss of $8.1 million in fiscal 1994 to a loss of $2.9 million
in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Hollywood Park's principal source of liquidity as of June 30, 1997, was cash
and cash equivalents of $38,409,000. Cash and cash equivalents increased by
$26,487,000 during the six months ended June 30, 1997. Cash provided by
operations for the six months ended June 30, 1997, contributed $14,949,000 to
the increase in cash and cash equivalents. Cash provided by investing
activities contributed $11,846,000 to the increase, with the majority
($12,264,000) being provided by the cash acquired in the merger with Boomtown
on June 30, 1997. Other sources of cash from investing activities included
proceeds from short term investments of $5,428,000, while uses of cash
included normal capital expenditures of $3,927,000, and the purchase of short
term investments for $1,937,000. Cash used by financing activities was
$308,000, representing dividend payments to preferred stockholders of
$962,000, offset by cash received from the exercise of common stock options of
$654,000.
During the nine months ended June 30, 1997, Boomtown's cash and cash
equivalents decreased by $2,890,000. Cash flow from operations contributed
$12,195,000, while cash used in investing activities was $9,918,000
($9,718,000 of which was used for additions to property, plant and equipment)
and cash used in financing activities was $5,167,000 (for the repayment of
long-term debt).
48
<PAGE>
During the six months ended June 30, 1996, Hollywood Park's cash and cash
equivalents increased by $8,424,000. The increase in cash is attributed to
cash provided by operations of $15,504,000, reduced by cash used in investing
activities of $6,118,000 (primarily additions to property, plant and
equipment) and cash used in financing activities of $962,000 (dividend
payments to preferred stockholders).
During the nine-months ended June 30, 1996, Boomtown's cash and cash
equivalents increased by $812,000. Cash provided from operations of
$10,195,000 was reduced by investing activities of $6,779,000 (primarily for
additions to property, plant and equipment) and financing activities of
$2,605,000 (primarily due to the prepayment of a property lease).
Hollywood Park. On June 30, 1997, Hollywood Park and a bank syndicate led by
Bank of America finalized a reducing revolving credit facility (the "Bank
Credit Facility") allowing for drawings up to $225,000,000. On August 7, 1997,
the Bank Credit Facility was reduced by $125 million (the aggregate principal
amount of the Old Notes issued) to approximately $100 million, of which
approximately $78 million is currently available under certain covenant
limitations. The Bank Credit Facility is secured by substantially all of the
assets of Hollywood Park and its significant subsidiaries, and imposes certain
customary affirmative and negative covenants.
The Bank Credit Facility has been amended twice. The first amendment, among
other things, reduced the availability of the facility until the Bank Credit
Facility was approved by the Louisiana Gaming Control Board. The Company
received this approval on July 10, 1997. The second amendment, among other
things, allowed the co-issuance of the Notes by HPOC with the Company.
Debt service requirements on the Bank Credit Facility consist of current
interest payments on outstanding indebtedness through September 30, 1999. As
of September 30, 1999, and on the last day of each third calendar month
thereafter, through June 30, 2001, the Bank Credit Facility will decrease by
7.5% of the commitment in effect on September 30, 1999. As of September 30,
2001, and on the last day of each third calendar month thereafter, the Bank
Credit Facility will decrease by 10% of the commitment in effect on September
30, 1999. Any principal amounts outstanding in excess of the Bank Credit
Facility commitment, as so reduced, will be payable on such quarterly
reduction dates.
The Bank Credit Facility provides for a letter of credit sub-facility of
$10,000,000, of which $2,035,000 was outstanding as of August 15, 1997 for the
benefit of Hollywood Park's California self insured workers' compensation
program. The facility also provides for a swing sub-facility of up to
$10,000,000.
Borrowings under the Bank Credit Facility bear interest at an annual rate
determined, at the election of the Company, by reference to the "Eurodollar
Rate" (for interest periods of 1, 2, 3 or 6 months) or the "Reference Rate",
as such terms are respectively defined in the Bank Credit Facility, plus
margins which vary depending upon Hollywood Park's ratio of funded debt to
earnings before interest, taxes deprecation and amortization ("EBITDA"). The
margins start at 1.25% for Eurodollar loans and at 0.25% for Base Rate loans,
at funded debt to EBITDA ratio of less than 1.50%. Thereafter, the margins for
each type of loan increase by 25 basis points for each increase in the ratio
of funded debt to EBITDA of 50 basis points or more, up to 2.625% for
Eurodollar loans and 1.625% for Base Rate loans. However, if the ratio of
senior funded debt to EBITDA exceeds 2.50, the applicable margins will
increase to 3.25% for Eurodollar loans, and 2.25% for Bass Rate loans.
Thereafter, the margins would increase by 25 basis points for each increase in
the ratio of senior funded debt to EBITDA of 50 basis points or more, up to a
maximum of 4.25% for Eurodollar loans and 3.25% for Base Rate loans. The
applicable margins as of June 30, 1997, were 1.75% with respect to the
Eurodollar Rate based interest rate and 0.75% with respect to the Base Rate
interest rate. The Bank Credit Facility allows for interest rate swap
agreements, or other interest rate protection agreements with respect to the
Bank Credit Facility, up to a maximum notional amount of $125,000,000. The
Company does not currently utilize such financial instruments, but may take
advantage of such agreements in the future.
49
<PAGE>
Hollywood Park pays a quarterly commitment fee for the average daily amount
of unused portions of the Bank Credit Facility. The commitment fee is also
dependent upon the Company's ratio of funded debt to EBITDA. The commitment
fee for the Bank Credit Facility starts at 31.25 basis points when the ratio
is less than 1.00, and increases by 6.25 basis points for each increase in the
ratio of 0.50, up to a maximum of 50 basis points. For the quarter beginning
July 1, 1997, this fee is 43.75 basis points.
On July 3, 1997, Hollywood Park borrowed $112,000,000 from the Bank Credit
Facility to fund Boomtown's offer to purchase its First Mortgage Notes, and
repaid this amount on August 7, 1997, with a portion of the proceeds from the
issuance of the Notes. The balance of the proceeds are expected to be used
primarily for working capital and other general corporate purposes.
On July 1, 1997, in connection with the Blue Diamond Swap, Hollywood Park
issued an unsecured promissory note of approximately $3,465,000 to purchase
the Hollywood Park common stock issuable to Roski in the Merger. The
promissory note bears interest equal to the Bank of America reference rate
plus 1.0%. Interest is payable quarterly with five annual principal payments
of approximately $693,000 commencing July 1, 1998.
During the six months ended June 30, 1997, the Company paid dividends of
$962,000 on its convertible preferred stock, representing $70.00 per share, or
$0.70 per depositary share. On July 1, 1997, the Company declared the regular
quarterly preferred stock dividend of $481,000, payable on August 15, 1997.
Effective August 28, 1997, the Company's 2,749,900 outstanding Depositary
Shares were converted into an aggregate of 2,291,492 shares of its common
stock, thereby eliminating for future periods the annual preferred cash
dividend payment of approximately $1,925,000.
As of June 30, 1997, the Company had invested $1,275,000 in corporate bonds,
with Moody's ratings of B3 to BA3, and Standard and Poors ratings of B to BB-,
though some of the bonds are not rated by either agency. Investments in
corporate bonds carry a greater amount of principal risk than other
investments made by the Company, and yield a corresponding higher return. The
corporate bond investment as of June 30, 1997, had a weighted average maturity
of 1.2 years, and because the Company reasonably expects to liquidate these
investments in its normal operating cycle, the investments are classified as
short term, are held as available for sale, and recorded in the accompanying
financial statements at their fair value, as determined by the quoted market
price.
Boomtown. In November 1993, Boomtown sold $103,500,000 of Boomtown Notes. On
July 3, 1997, pursuant to a tender offer, Boomtown repurchased and retired
approximately $102,142,000 in principal amount of the Boomtown Notes, at a
purchase price of $1,085 per $1,000 in principal amount, along with accrued
interest thereon.
As a result of the Merger, Boomtown, as required under the indenture
governing the Boomtown Notes, initiated a change in control purchase offer at
a price of $1,010 for each $1,000 for the remaining approximately $1,358,000
aggregate principal amount of Boomtown Notes outstanding. This change in
control purchase offer was completed on August 12, 1997, and only
approximately $100,000 in principal amount of the remaining Boomtown Notes
were tendered.
On August 4, 1997, Hollywood Park executed a purchase agreement pursuant to
which one of the Hollywood Park entities repurchased the barge and the
building shell at Boomtown Biloxi for at total cost of $5,250,000. A payment
of $1,500,000 was made on August 4, 1997, with the balance payable in three
equal annual installments of $1,250,000.
As of August 8, 1997, Boomtown New Orleans is wholly owned by the Company.
Previously, Boomtown New Orleans was owned and operated by the Louisiana
Partnership, of which 92.5% was owned by Hollywood Park with the remaining
7.5% owned by Skrmetta. On November 18, 1996, Boomtown entered into an
agreement with Skrmetta under which it would pay approximately $5,700,000 in
return for Skrmetta's interest in the Louisiana Partnership. Under the terms
of the agreement, Boomtown made a down payment of $500,000, and the Company
paid the remaining approximately $5,200,000 on August 8, 1997.
50
<PAGE>
As of June 30, 1997, Boomtown had four outstanding notes payable totaling
approximately $2,704,000. Two of the notes, which total $223,000, are secured
by furniture, fixtures and equipment, bear interest at 11.5% and mature in
September 1997. One note, in the amount of $2,294,000, was secured by the
Boomtown New Orleans riverboat, bore interest at 13.0% and was set to mature
in January 1999. On August 7, 1997, Boomtown elected to pre-pay this note and
incurred a 1.0% penalty. The remaining note, in the amount of $189,000, is
secured by gaming equipment, bears interest at 12.25% and matures December
1997. In addition to the notes payable, Boomtown also has capital lease
obligations for equipment with a total balance of approximately $3,994.000.
In connection with the Blue Diamond Swap, Boomtown took back two notes
receivable from IVAC, the former lessor of the Las Vegas property, totaling
approximately $8,465,000. The first note receivable is for $5,000,000, bearing
interest at Bank of America's reference rate plus 1.5% per year, with annual
principal receipts of $1,000,000 plus accrued interest commencing on July 1,
1998. The second note is for approximately $3,465,000, bearing interest at
Bank of America's reference rate plus 0.5% per year, with the principal and
accrued interest payable, in full, on July 1, 2000.
Sunflower. On March 24, 1994, an Amended and Restated Credit and Security
Agreement (the "Sunflower Senior Credit") was executed between Sunflower and
five banks in connection with the Company's acquisition of Sunflower. As of
June 30, 1997, the outstanding balance of the Sunflower Senior Credit was
$28,667,000. The Sunflower Senior Credit is non-recourse to Hollywood Park.
On May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the
Bankruptcy Code. The Cash Collateral Agreement suspended any interest or
principal payments on the Sunflower Senior Credit until August 12, 1997. The
Bankruptcy Court has issued an order extending the Cash Collateral Agreement
until the Court holds its confirmation hearing scheduled to occur on December
18, 1997. The extension is subject to an obligation of Sunflower to make
certain payments to Wyandotte County, the creditors group and the third party
operator of the Woodlands Race Track.
On July 15, 1997, Sunflower presented to the Bankruptcy Court a plan of
reorganization (the "Plan") which provides for the sale of Sunflower's
property to the Wyandotte Indians of Oklahoma (the "Wyandotte Indians"). Under
the Plan, the land would be held by the United States Government in trust for
the Wyandotte Indians, and a casino would be built on the property. Upon
completion of the casino, Hollywood Park and a partner (North American Sports
Management) would operate the facility in return for 30% of the profits. The
Company would guarantee certain bank debt of Sunflower of up to $28,667,000 to
allow the property to be released as collateral and then transferred to the
Wyandotte Indians. The Company's guaranty would not go into effect unless, and
until, all material regulatory approvals have been obtained for operation of
the casino, and approval has been obtained under the Bank Credit Facility, as
well.
In 1995, under a promissory note executed in December 1994, between
Hollywood Park and Sunflower, Hollywood Park advanced $2,500,000 to Sunflower
to make certain payments due on the Sunflower Senior Credit. The amounts
borrowed under the promissory note, along with accrued interest, are
subordinate to the Sunflower Senior Credit. Although the Company will continue
to pursue payment of the promissory note, for financial reporting purposes the
outstanding balance of the promissory note was written off as of March 31,
1996.
Capital Commitments; Expansion Costs. The Company had no material capital
commitments as of September 30, 1997. However, in addition to the financing
needs discussed above, Hollywood Park has other potential capital needs with
respect to Boomtown Reno and Boomtown New Orleans. The Company expects to
spend approximately $25,000,000 on an expansion and renovation of Boomtown
Reno, including additional hotel rooms, expanded gaming space and additional
entertainment and other amenities. The Company also expects to spend
approximately $10,000,000 on an expansion and upgrade of Boomtown New Orleans,
including refurbishment of the existing gaming area and a building out of the
second floor of the land-based facility. The Boomtown Reno expansion is
expected to be completed by the end of 1998, while the Boomtown New Orleans
expansion is expected to be completed by mid-1998. Longer term capital needs
may include such projects as
51
<PAGE>
development of the excess land at Hollywood Park and/or Turf Paradise, and, if
awarded, the Indiana riverboat project.
General. Hollywood Park is continually evaluating future growth
opportunities in the gaming, sports and entertainment industries. The Company
expects that funding for growth opportunities, payment of interest on the
Notes, payments on notes payable and capital expenditure needs will come from
existing cash balances, cash generated from operating activities and
borrowings from the credit facilities. In the opinion of management, these
resources will be sufficient to meet the Company's anticipated cash
requirements for the foreseeable future and in any event for at least the next
twelve months.
52
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
The following unaudited pro forma combined consolidated condensed statements
of operations have been prepared by combining the audited consolidated
statements of operations of Hollywood Park for the year ended December 31,
1996, with the unaudited consolidated statements of operations of Boomtown,
also for the year ended December 31, 1996, and by combining the unaudited
statements of operations of the Company and Boomtown for the six months ended
June 30, 1997. Historically, Boomtown reported results on a fiscal year end of
September 30. The acquisition of Boomtown was accounted for using the purchase
method of accounting for business combinations. The following unaudited pro
forma combined consolidated condensed balance sheet as of June 30, 1997
includes the accounts of both Hollywood Park and Boomtown. These pro forma
financial statements should be read in conjunction with the accompanying
notes.
The following unaudited pro forma combined consolidated condensed financial
statements are also presented with Boomtown Las Vegas' results excluded,
because this property was divested in connection with the Merger. Finally,
unaudited pro forma combined consolidated financial statements are then
presented giving effect to the issuance of the Notes and the application of
the proceeds therefrom.
The pro forma information is presented for illustrative purposes only, and
is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger and the issuance of the Notes had been
consummated in an earlier period, nor is it necessarily indicative of the
future operating results or financial position.
These pro forma financial statements are based on, and should be read in
conjunction with, the historical consolidated financial statements and the
related notes thereto of Hollywood Park and Boomtown.
53
<PAGE>
HOLLYWOOD PARK, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
TO PRO FORMA
HOLLYWOOD ELIMINATE ADJUSTED PRO FORMA
PARK, BOOMTOWN, BOOMTOWN BOOMTOWN, PRO FORMA COMBINED
INC. INC. LAS VEGAS INC. ADJUSTMENTS CONSOLIDATED
--------- --------- ----------- --------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming................. $ 50,717 $188,942 $(30,960) $157,982 $ 0 $ 208,699
Racing................. 71,308 0 0 0 0 71,308
Food and beverage...... 13,947 16,677 (7,887) 8,790 0 22,737
Hotel and recreational
vehicle park.......... 0 7,427 (5,744) 1,683 0 1,683
Truck stop and service
station............... 0 14,859 (159) 14,700 0 14,700
Other income........... 7,253 13,413 (3,210) 10,203 0 17,456
-------- -------- -------- -------- -------- ---------
143,225 241,318 (47,960) 193,358 0 336,583
-------- -------- -------- -------- -------- ---------
Expenses:
Gaming................. 27,249 111,364 (21,644) 89,720 0 116,969
Racing................. 30,167 0 0 0 0 30,167
Food and beverage...... 19,573 20,015 (9,860) 10,155 0 29,728
Hotel and recreational
vehicle park.......... 0 3,110 (2,471) 639 0 639
Truck stop and service
station............... 0 13,462 (83) 13,379 0 13,379
Administrative......... 41,477 63,021 (17,272) 45,749 0 87,226
Other.................. 2,485 4,132 (143) 3,989 0 6,474
Depreciation and
amortization.......... 10,695 10,880 (956) 9,924 (312)(a) 20,818
-- -- -- -- 444 (b) --
-- -- -- -- 67 (c) --
Hollywood Park/Boomtown
Merger costs.......... 0 1,291 0 1,291 0 1,291
Write off of investment
in a business......... 11,412 0 0 0 0 11,412
Loss on sale of
business.............. 0 36,563 0 36,563 0 36,563
-------- -------- -------- -------- -------- ---------
143,058 263,838 (52,429) 211,409 199 354,666
-------- -------- -------- -------- -------- ---------
Operating income
(loss)................. 167 (22,520) 4,469 (18,051) (199) (18,083)
Interest expense ...... 942 13,988 (299) 13,689 (216)(d) 15,468
-- -- -- -- 329 (e) --
-- -- -- -- (11,843)(f) --
-- -- -- -- 692 (g) --
-- -- -- -- 11,875 (h) --
-------- -------- -------- -------- -------- ---------
Income (loss) before
minority interests and
income taxes........... (775) (36,508) 4,768 (31,740) (1,036) (33,551)
Minority interest ..... 15 (164) 0 (164) 0 (149)
-------- -------- -------- -------- -------- ---------
Income (loss) before
income taxes........... (790) (36,344) 4,768 (31,576) (1,036) (33,402)
Income tax expense
(benefit)............. 3,459 (320) 1,370 1,050 (388)(i) 4,121
-------- -------- -------- -------- -------- ---------
Income (loss) before
extraordinary item..... $ (4,249) $(36,024) $ 3,398 $(32,626) $ (648) $ (37,523)
======== ======== ======== ======== ======== =========
Dividend requirement on
convertible preferred
stock.................. $ 1,925
Loss before
extraordinary item
allocated to common
shareholders........... $ (39,448)
=========
Per common share:
Loss before
extraordinary item--
primary............... $ (1.65)
Loss before
extraordinary item--
fully diluted......... $ (1.65)
Number of common
shares-primary........ 23,868
Number of common
shares-fully diluted.. 26,160
</TABLE>
54
<PAGE>
HOLLYWOOD PARK, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
TO PRO FORMA
HOLLYWOOD ELIMINATE ADJUSTED PRO FORMA
PARK, BOOMTOWN, BOOMTOWN BOOMTOWN, PRO FORMA COMBINED
INC. INC. LAS VEGAS INC. ADJUSTMENTS CONSOLIDATED
--------- --------- ----------- --------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming................. $26,847 $ 98,787 $(15,438) $ 83,349 $ 0 $110,196
Racing................. 35,868 0 0 0 0 35,868
Food and beverage...... 6,860 9,028 (4,107) 4,921 0 11,781
Hotel and recreational
vehicle park.......... 0 3,768 (2,973) 795 0 795
Truck stop and service
station............... 0 6,646 (76) 6,570 0 6,570
Other income........... 3,564 5,737 (416) 5,321 0 8,885
------- -------- -------- -------- ------- --------
73,139 123,966 (23,010) 100,956 0 174,095
------- -------- -------- -------- ------- --------
Expenses:
Gaming................. 15,161 54,804 (11,918) 42,886 0 58,047
Racing................. 15,409 0 0 0 0 15,409
Food and beverage...... 8,819 11,698 (5,115) 6,583 0 15,402
Hotel and recreational
vehicle park.......... 0 1,714 (1,380) 334 0 334
Truck stop and service
station............... 0 6,093 (47) 6,046 0 6,046
Administrative......... 18,531 30,678 (7,082) 23,596 0 42,127
Other.................. 1,439 1,882 (66) 1,816 0 3,255
Depreciation and
amortization.......... 5,780 8,820 (298) 8,522 222 (b) 14,558
-- -- -- -- 34 (c) --
Hollywood Park/Boomtown
Merger costs.......... 0 1,487 0 1,487 0 1,487
Write off of investment
in a business......... 0 0 0 0 0 0
Loss on sale of
business.............. 0 1,271 (914) 357 0 357
------- -------- -------- -------- ------- --------
65,139 118,447 (26,820) 91,627 256 157,022
------- -------- -------- -------- ------- --------
Operating income (loss). 8,000 5,519 3,810 9,329 (256) 17,073
Interest expense....... 129 6,951 (101) 6,850 (108)(d) 7,398
-- -- -- -- 165 (e) --
-- -- -- -- (5,922)(f) --
-- -- -- -- 346 (g) --
-- -- -- -- 5,938 (h) --
------- -------- -------- -------- ------- --------
Income (loss) before
minority interests and
income taxes........... 7,871 (1,432) 3,911 2,479 (675) 9,675
Minority interest...... 63 0 0 0 0 63
------- -------- -------- -------- ------- --------
Income (loss) before
income taxes........... 7,808 (1,432) 3,911 2,479 (675) 9,612
Income tax expense
(benefit)............. 3,100 (587) 2,051 1,464 (256)(i) 4,308
------- -------- -------- -------- ------- --------
Income (loss) before
extraordinary item..... $ 4,708 $ (845) $ 1,860 $ 1,015 $ (419) $ 5,304
======= ======== ======== ======== ======= ========
Dividend requirement on
convertible preferred
stock.................. $ 962
Income before
extraordinary item
available to common
shareholders........... $ 4,342
========
Per common share:
Loss before
extraordinary item--
primary............... $ 0.18
Loss before
extraordinary item--
fully diluted......... $ 0.18
Number of common
shares--primary....... 23,794
Number of common
shares--fully diluted. 26,085
</TABLE>
55
<PAGE>
HOLLYWOOD PARK, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED
BALANCE SHEET
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
HOLLYWOOD PRO FORMA
PARK, PRO FORMA COMBINED
INC. ADJUSTMENTS CONSOLIDATED
--------- ----------- ------------
(IN THOUSANDS)
ASSETS
------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents.............. $ 38,409 $(112,959)(a) $ 46,012
-- 120,562 (b) --
Restricted cash........................ 11,096 0 11,096
Short term investments................. 1,275 0 1,275
Other receivables...................... 10,625 0 10,625
Deferred tax assets.................... 6,587 0 6,587
Prepaid expenses and other assets...... 21,726 4,438 (b) 26,164
-------- --------- --------
Total current assets.................. 89,718 12,041 101,759
Notes receivable......................... 9,464 0 9,464
Property, plant and equipment, net....... 277,084 0 277,084
Goodwill, net............................ 32,685 0 32,685
Other assets............................. 17,147 0 17,147
-------- --------- --------
$426,098 $ 12,041 $438,139
======== ========= ========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
<S> <C> <C> <C>
Current Liabilities:
Accounts payable....................... $ 13,163 $ 0 $ 13,163
Accrued liabilities.................... 61,269 (2,027)(a) 59,242
Current portion of notes payable....... 6,222 0 6,222
-------- --------- --------
Total current liabilities............. 80,654 (2,027) 78,627
Notes payable............................ 116,396 (110,932)(a) 130,464
-- 125,000 (b) --
Deferred tax liabilities................. 9,411 0 9,411
-------- --------- --------
Total liabilities..................... 206,461 12,041 218,502
Minority interest........................ 3,030 0 3,030
Stockholders' equity:
Capital stock--
Preferred.............................. 28 0 28
Common................................. 2,380 0 2,380
Capital in excess of par............... 221,222 0 221,222
Retained earnings (accumulated
deficit).............................. (7,023) 0 (7,023)
-------- --------- --------
Total stockholders' equity............ 216,607 0 216,607
-------- --------- --------
$426,098 $ 12,041 $438,139
======== ========= ========
</TABLE>
56
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
ASSUMPTIONS. The unaudited pro forma combined consolidated condensed
statements of operations for the year ended December 31, 1996, and for the six
months ended June 30, 1997, are presented as if the Boomtown acquisition, and
the divestiture of Boomtown Las Vegas had taken place on January 1, 1996 and
1997, respectively. The unaudited pro forma combined consolidated condensed
statements of operations have been prepared by combining the audited
consolidated statements of operations of the Company for the year ended
December 31, 1996, with the unaudited consolidated statements of operations of
Boomtown for the year ended December 31, 1996, and for the six months ended
June 30, 1997 for both the Company and Boomtown. (Historically, Boomtown
reported results on a fiscal year end of September 30.)
PRO FORMA ADJUSTMENTS. The unaudited pro forma combined consolidated
condensed statements of operations have been prepared on the basis that the
acquisition was consummated as set forth in the Notes to the Unaudited Pro
Forma Combined Consolidated Condensed Balance Sheet included herein.
The following adjustments have been made to the unaudited pro forma combined
consolidated condensed statements of operations:
(a) To eliminate the amortization of the issuance costs associated with
the Boomtown Notes.
(b) To record the amortization of the issuance costs associated with the
Notes.
(c) To record the amortization of the excess purchase price over net
assets acquired. Total estimated excess purchase price of approximately
$2.7 million will be amortized over 40 years on a straight line basis.
(d) To eliminate the amortization of the discount associated with the
Boomtown Notes.
(e) To record the interest expense associated with the promissory note
from the Company to the lessor of Boomtown Las Vegas as required by the
agreement to divest this property.
(f) To eliminate the interest expense associated with the Boomtown Notes.
(g) To amortize the up-front loan fees associated with the Bank Credit
Facility.
(h) To record the interest expense associated with the Notes at 9.5%.
(i) To record the estimated 40% tax benefit associated with the pro forma
expenses, after adding back the amortization of goodwill (see (c)) which is
not deductible for income tax purposes.
EXTRAORDINARY ITEM. The accompanying pro forma statements of operations
exclude an extraordinary loss of approximately $14.2 million (approximately
$8.4 million, net of tax effect) recorded by Boomtown in the period ended June
30, 1997, related to the tender and consent costs (approximately $9.0 million)
and the write-off of deferred financing costs (approximately $5.2 million)
associated with the early extinguishment of the Boomtown Notes.
RECLASSIFICATIONS. Certain reclassifications have been made to the Company's
and Boomtown's historical consolidated statements of operations to conform to
the pro forma combined consolidated condensed statements of operations.
PRO FORMA PER SHARE DATA. The pro forma per share amounts, as presented in
the unaudited pro forma combined consolidated condensed statements of
operations, were based on the weighted average number of shares outstanding
during the period, inclusive of the effect, when dilutive, of the exercise of
stock options. Included were approximately 5.4 million shares of Company
common stock issued in the Merger (after giving effect to the retirement of
the approximately 446,000 shares of Company common stock that were issued in
the Merger but then repurchased by the Company from the lessor of Boomtown's
Las Vegas property concurrently with the disposition of that property).
COMBINATION COSTS. The Company recorded costs of approximately $5.6 million
related to the Merger. These costs were incorporated into the price of the
acquisition under the purchase method of accounting for a business
combination. Costs incurred by Boomtown were expensed as incurred.
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HOLLYWOOD PARK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED
BALANCE SHEET
ASSUMPTIONS. The Merger was accounted for under the purchase method of
accounting for a business combination. The total purchase price was based on
the issuance of approximately 5,809,000 shares of Company common stock at a
price of $9.8125 per share.
PRO FORMA ADJUSTMENTS. The following adjustments have been made to the
unaudited pro forma combined consolidated condensed balance sheet:
(a) To record the redemption of approximately 99% of the $103.5 million
aggregate principal amount of the Boomtown Notes at 108.5%, including the
payment of two months of accrued interest, and the write-up to 101% of the
remaining approximately $1 million aggregate principal amount of the
Boomtown Notes.
(b) To record the issuance of the Notes, issued at face value, with
issuance costs of approximately $4.4 million, to be amortized on a straight
line basis over ten years.
EXTRAORDINARY ITEM. The historical "Hollywood Park, Inc." column on the
accompanying pro forma balance sheet reflects the write-off of the deferred
financing costs (approximately $5.2 million) associated with the Boomtown
Notes, which was recorded by Boomtown in the period ended June 30, 1997, and
it reflects a corresponding reduction to retained earnings.
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BUSINESS
GENERAL
Hollywood Park is a diversified gaming, sports and entertainment company
engaged in the ownership and operation of casinos (including card club
casinos) and pari-mutuel racing facilities, and the development of related
opportunities.
Hollywood Park owns and operates land-based, dockside and riverboat gaming
operations in Verdi, Nevada, Biloxi, Mississippi and Harvey, Louisiana.
Hollywood Park also owns two card club casinos in California, the Hollywood
Park-Casino, operated by Hollywood Park on the premises of the Hollywood Park
Race Track, and Crystal Park, located in the Los Angeles metropolitan area, in
which Hollywood Park holds a majority interest and which is leased by
Hollywood Park to an unaffiliated operator. The Hollywood Park-Casino and
Crystal Park offer a variety of card games, including Poker, Pai Gow, and
California Blackjack. Hollywood Park's gaming properties have an aggregate of
3,269 slot machines and 379 table games. Hollywood Park is the only company
that currently owns and operates both California card club casinos and
traditional casinos in Nevada and other states.
Hollywood Park also owns and, through HPOC, operates the Hollywood Park Race
Track, a premier thoroughbred racing facility and the site of the prestigious
1997 Breeders' Cup, located on a 378-acre parcel in the Los Angeles,
California metropolitan area within three miles of the Los Angeles
International Airport, and the Turf Paradise Race Track, a thoroughbred racing
facility located in Phoenix, Arizona, and, through its subsidiary Sunflower,
operates The Woodlands Race Track, a greyhound and thoroughbred racing
facility located in Kansas City, Kansas. Sunflower is a debtor in possession
under Chapter 11 of the U.S. Bankruptcy Code.
As a result of its recent strategic combination with Boomtown, Hollywood
Park is a company with diversified revenues as well as improved cash flow and
significant real estate assets available for future development. For the year
ended December 31, 1996, on a pro forma basis giving effect to the
Transactions, Hollywood Park had total revenues of approximately $336.6
million, EBITDA of approximately $2.7 million, Adjusted EBITDA of
approximately $52.0 million and (after giving effect to the one time, non-cash
$11.4 million write off of Hollywood Park's investment in Sunflower Racing,
Inc. and the $36.6 million loss on the sale of Boomtown Las Vegas) a net loss
of approximately $37.5 million and a deficiency of earnings to fixed charges
of approximately $34.8 million. In addition, on a pro forma basis, as of June
30, 1997, Hollywood Park had total assets (book value) of approximately $438.1
million (including the land on which the Hollywood Park Race Track sits, a
majority of which was acquired in the 1930s which the Company believes has a
fair market value of approximately $200 million) and had Net Debt of
approximately $89.4 million. See "Prospectus Summary--Summary Historical and
Pro Forma Financial and Operating Data."
HISTORY
Since 1991, Hollywood Park has transformed itself from an operator of a
single horse racing property into a multi-jurisdictional gaming, sports and
entertainment property operator. Hollywood Park has implemented its strategic
plan through internal development of properties and a series of selective
acquisitions, with a particular focus on middle-market gaming operations which
could, in Hollywood Park's opinion, benefit from improved management and the
access to Hollywood Park's financial resources.
Hollywood Park and its predecessors have operated the Hollywood Park Race
Track since 1938. In late 1993 and early 1994, Hollywood Park attempted to
take advantage of the trend toward legalizing gaming in new jurisdictions by
acquiring race tracks in jurisdictions where expanded gaming legislation
appeared reasonably likely. In 1994, Hollywood Park acquired Turf Paradise in
Phoenix, Arizona and Sunflower (the operator of The Woodlands Race Track) in
Kansas City, Kansas. However, in both Arizona and Kansas, the respective
legislatures have not authorized expanded forms of gaming at race tracks.
Following the acquisitions of Turf Paradise and Sunflower, Hollywood Park
focused its expansion efforts on California card club casinos and other casino
operations, as well as on expanding its pari-mutuel operations
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at its existing facilities. In mid-1994, Hollywood Park opened the Hollywood
Park-Casino on the premises of the Hollywood Park Race Track. Crystal Park, in
which Hollywood Park holds an 89.8% interest, but which is operated by an
unaffiliated party, opened in late 1996 in the metropolitan Los Angeles area.
On June 30, 1997, the Company completed its strategic combination with
Boomtown, pursuant to which Boomtown became a wholly-owned subsidiary of
Hollywood Park.
The Company was incorporated in Delaware in 1981 and is the successor to the
Hollywood Park Turf Club, which was organized in 1938. HPOC was incorporated
in Delaware in 1981. The mailing address of the Issuers' principal executive
offices is 1050 South Prairie Avenue, Inglewood, California 90301, and their
telephone number is (310) 419-1500.
BUSINESS STRATEGY
Hollywood Park's strategic plan is to grow its gaming, sports and
entertainment businesses by (i) expanding its existing properties, (ii)
developing unimproved real estate at its existing sites and developing
projects at new sites, and (iii) making selected acquisitions, principally in
the gaming industry, to diversify its operations and to achieve economies of
scale.
Expansion of Existing Properties
Hollywood Park's strategic plan for the existing properties is to continue
to expand its operations at these sites by adding more hotel rooms, gaming
floor space, restaurants, meeting and retail space and other amenities.
Hollywood Park generally seeks, through its expansions at these properties, to
add attractions intended to increase customer traffic (and therefore enhance
gaming revenues) and to refurbish and enhance the amenities available at
Boomtown Reno and Boomtown New Orleans.
Specifically, Hollywood Park's current expansion plans at its existing
properties include the following:
. The Company expects to spend approximately $25 million on an expansion
and renovation of Boomtown Reno to add approximately 200 hotel rooms, to
expand gaming space by 13,000 square feet (including 200 slot machines),
to add an entertainment lounge, 10,000 square feet of meeting space,
additional parking and other amenities, as well as to refurbish an
existing restaurant. In addition, the Company intends to renovate the
existing casino space. Hollywood Park believes that this expansion is
necessary in order to alleviate capacity constraints caused by the small
number of existing hotel rooms, which have consistently had
approximately 100% occupancy throughout the summer and year round on
weekends and holidays. Additionally, this expansion is expected to make
Boomtown Reno more attractive to small groups and conventions. The
Company has decided to spread this expansion work over 18 months to
minimize construction disruption and anticipates that such expansion
will be completed by the end of 1998.
. The Company expects to spend approximately $10 million on an expansion
and upgrade of the Boomtown New Orleans land-based facility to refurbish
the existing gaming area and to build out the second floor by adding
meeting space, additional food and beverage and other entertainment
amenities. The Company anticipates that such expansion will be completed
by mid-1998.
. The Company is considering, subject to further market analysis and the
acquisition of additional land, a possible expansion of Boomtown Biloxi
to add hotel rooms and/or to expand the undeveloped portion of the
barge.
Potential New Development Opportunities
Hollywood Park is considering several potential new development
opportunities relating to its existing undeveloped real estate as well as
projects at new sites.
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Additional Uses of Hollywood Park Property. Hollywood Park is exploring the
development of its 378-acre Hollywood Park Race Track property and its 275-
acre Turf Paradise Race Track property, and continues to have discussions with
developers regarding proposed retail, entertainment and other projects for
both of these properties. The Hollywood Park Race Track property has 150
undeveloped acres, and Turf Paradise has 100 undeveloped acres on which
Hollywood Park seeks to develop such multi-use retail, entertainment and/or
sports venues. Hollywood Park has not entered into any definitive agreements
concerning any of these projects, and the ultimate uses have not yet been
determined. Any decisions to begin these projects would be dependent upon,
among other things, the execution of definitive agreements, the availability
of project financing with acceptable terms, and the attainment of the
necessary permits and certifications, for which there can be no assurance.
Indiana Project. In December 1995, Boomtown (through a wholly-owned
subsidiary), Hilton Gaming (Switzerland County) Corporation ("Hilton
Switzerland") and a local minority investor, formed a joint venture which
currently has a pending application for the only remaining riverboat gaming
license to be awarded for operations on the Ohio River in Indiana. As amended,
the application is for a license in Switzerland County, Indiana which is
located approximately 35 miles south of Cincinnati, Ohio. If a license is
received, the parties plan to construct a facility which would include a
cruising riverboat with 38,000 square feet of casino space and supporting
land-based facilities that will incorporate a "western river-town" themed
entertainment complex with up to 300 hotel rooms, a 700 seat multi-purpose
special events room, several restaurants and significant retail space (the
"Indiana Project"). The joint venture further owns options to lease and
purchase real property in Switzerland County where Hollywood Park plans to
construct land-based facilities. Hollywood Park currently anticipates that the
aggregate cost of the facility, if constructed, would be approximately $120
million, of which Hollywood Park's share would be 50%, or approximately $60
million.
Pursuant to the terms of the joint venture agreement, Hollywood Park and
Hilton Switzerland each own 48.5% of the joint venture entity, with the
remaining interests held by a non-voting local minority partner. So long as
Hilton Switzerland and Hollywood Park hold their original percentages, they
will share management control of the project. In the event the parties no
longer hold their original percentages, the party with the larger interest
will have management control of the project subject to certain minority
protections. There can be no assurance that the joint venture entity will
receive the necessary license and other governmental approvals and
environmental permits to proceed with the Indiana Project.
California Card Club Casino Venues. Hollywood Park continues to seek to
identify and to capitalize on opportunities to own properties within
California on which card club casinos have or may be authorized; however,
unless existing California law is amended, a public company such as Hollywood
Park may only operate a card club casino on the grounds of a race track that
it owns. Hollywood Park may also seek to add additional tables at its existing
card club casinos if business conditions justify such an expansion.
Potential Selected Acquisitions
Hollywood Park believes that significant opportunities currently exist in
the gaming industry as a result of consolidation trends and the inability of
certain gaming companies to expand or maximize their opportunities due to
capital constraints. Accordingly, Hollywood Park seeks to capitalize on these
opportunities to geographically diversify its operations and achieve the
benefits of economies of scale and synergy. The Company is exploring
acquisition opportunities in emerging gaming markets (other than Las Vegas or
Atlantic City) in which gaming has already been legalized. The Company
believes that this represents its greatest opportunity to expand its gaming
operations significantly over the next several years.
GAMING OPERATIONS
Hollywood Park's gaming establishments consist of Boomtown's western-themed
casinos acquired in the Merger located in or near Reno, Nevada, New Orleans,
Louisiana and Biloxi, Mississippi, as well as the two card club casinos
located in the metropolitan Los Angeles, California area. Properties operated
by Hollywood
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Park's Boomtown subsidiary offer gaming, hotel accommodations (at Boomtown
Reno), and other entertainment amenities to primarily middle income, value-
oriented customers. Hollywood Park believes its Boomtown properties
distinguish themselves from other casinos by their emphasis on the "old west"
and their casual, friendly atmosphere. At all of the Boomtown properties,
Hollywood Park reinforces this theme throughout the customers' visit with the
use of western memorabilia in its interior decor, country/western music and
the western dress of its employees. Hollywood Park believes this western theme
and relaxed environment provide for customer loyalty and a high rate of repeat
business.
Boomtown Reno
Boomtown Reno has been operating for over 30 years (and has been operated by
current Boomtown management since 1987) on 569 acres in Verdi, Nevada (seven
miles west of Reno, Nevada and two miles from the California border) on
Interstate 80, the major highway connecting Northern California and Reno.
Hollywood Park believes Boomtown Reno has established a loyal customer base
primarily drawn from Interstate 80 traffic. Boomtown Reno caters to middle-
income customers and markets itself as a gaming and entertainment property
complete with amenities for the entire family.
Boomtown Reno offers its guests a 40,000-square foot casino, including 1,320
slot machines and 44 table games and two Keno games. Boomtown Reno also offers
a 122-room hotel, a 35,000-square foot entertainment center featuring a
theater, an indoor miniature golf course, a restaurant and a ferris wheel, a
16-acre truck stop with approximately 200 parking spaces, a 203-space full-
service recreational vehicle park, a service station, a mini-mart and other
related amenities.
Reno's primary visitor attraction is gaming. The greater Reno area accounts
for substantially all casino gaming which occurs in Washoe County, Nevada.
Reno continues to promote itself as a major entertainment destination center
and remains among the four largest gaming regions in the United States behind
Las Vegas, Atlantic City and the Mississippi Gulf Coast. Reno is a popular
resort area which attracts tourists from throughout the country by offering
gaming as well as numerous other summer and winter recreational activities.
Reno is located approximately 50 miles from Lake Tahoe, another popular
recreational area. The continued popularity of Reno is evidenced in the
increase in the number of visitors traveling to Reno. According to the
Reno/Lake Tahoe Convention and Visitors Authority, over 5.2 million tourists
visited Washoe County in 1996. Casino gaming has grown steadily in the greater
Reno area over the past decade and, in 1996, gaming revenues totaled $743
million.
The following sets forth certain data with respect to Boomtown Reno's hotel
operations:
BOOMTOWN RENO
<TABLE>
<CAPTION>
AVERAGE
OCCUPANCY AVERAGE DAILY AVERAGE REVENUE
YEAR BUILT PLANNED IMPROVEMENTS RATE RATE PER ROOM
---------- -------------------- --------- ------------- ---------------
<C> <S> <C> <C> <C>
1968 A $25 million 200 Room 66% $38 $34
Hotel Expansion and
Casino Remodel is
underway with completion
expected by the end of
1998.
</TABLE>
Boomtown Biloxi
Boomtown Biloxi commenced operations in July 1994 and occupies nineteen
acres on Biloxi, Mississippi's historic Back Bay, one-half mile from
Interstate 110, the main highway connecting Interstate 10 and the Gulf of
Mexico. Boomtown's "old west" theme is the first of its kind in the Gulf Coast
area, and management believes the casual atmosphere and western theme
distinguishes Boomtown Biloxi from competing casinos. The dockside property
consists of a land-based facility which houses all non-gaming activities and a
33,632-square foot casino constructed on a 400 x 110 foot barge permanently
moored to the land-based building. The casino offers 1,038 slot machines, 35
table games and various restaurants and other non-gaming amenities.
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Boomtown Biloxi is operated by a Mississippi limited partnership (the
"Mississippi Partnership"), of which 85% is owned and controlled by Hollywood
Park and 15% is owned by Eric Skrmetta ("Skrmetta"). The Mississippi
Partnership leases the Boomtown Biloxi site under a 99 year lease from
Skrmetta's father. Both Hollywood Park and Skrmetta have an option,
exercisable over the four-year period commencing July 1997, to exchange
Skrmetta's interest in the Mississippi Partnership for, at Skrmetta's option,
cash and/or shares of Hollywood Park common stock with an aggregate value
equal to the value of Skrmetta's 15% interest in the Mississippi Partnership,
with such value determined by a formula set forth in the relevant partnership
agreements. The Company has delivered a notice to Skrmetta to exercise this
option. Certain approvals of the Mississippi Gaming Commission may be required
in order to complete the transaction.
The Boomtown Biloxi barge and building shell were owned by National Gaming
Mississippi, Inc., a subsidiary of Chartwell Leisure, Inc. ("National
Gaming"). Boomtown Biloxi leased the assets from National Gaming under a 25-
year lease with a 25-year renewal option. National Gaming received 16% of the
adjusted earnings before interest, taxes, depreciation, and amortization
("EBITDA"), as defined in the related contract. National Gaming also provided
marketing services to Boomtown Biloxi. On August 4, 1997, the Company executed
an agreement pursuant to which one of the Hollywood Park entities repurchased
the barge for approximately $5.25 million, payable through a down payment of
approximately $1.5 million made on August 4, 1997, and the balance in three
annual installments of $1.25 million. The EBITDA participation and other
related agreements terminated upon repurchase of the barge.
As of June 30, 1997, dockside gaming was permissible in nine of the 14
eligible counties in the State of Mississippi, and gaming operations had
commenced in seven of these counties. The law permits unlimited stakes gaming
on permanently moored vessels on a 24-hour basis. The Mississippi Gulf Coast
has a long tradition as a vacation destination. Biloxi is within a one and
one-half hour drive from New Orleans and a one hour drive from Mobile,
Alabama. Boomtown Biloxi caters to the over 250,000 local residents of the
Biloxi area and to the employees of other casinos in the area. In addition,
the Gulf Coast area draws an estimated two million visitors annually,
primarily from Louisiana, Mississippi, Alabama, Florida and Georgia.
Boomtown New Orleans
Boomtown New Orleans commenced operations in August 1994 on a 50-acre site
in Harvey, Louisiana, approximately ten miles from the French Quarter of New
Orleans. Gaming operations are conducted from a 250-foot replica of a paddle-
wheel riverboat, offering 911 slot machines and 55 table games (including
blackjack ("21"), craps, poker, roulette, pai gow poker, let it ride and
caribbean stud) in a 30,000 square foot casino. The land-based facility
adjacent to the riverboat dock is composed of a western-themed, 88,000-square
foot facility. The first floor of the building opened December 1994 and offers
patrons a restaurant, a 20,000 square foot family entertainment center and a
western saloon/dancehall.
Boomtown New Orleans is currently owned and operated by a Louisiana limited
partnership (the "Louisiana Partnership"), 100% of which is owned by Hollywood
Park. On August 8, 1997, the Company made the final payment to Skrmetta
relating to the purchase of Skrmetta's 7.5% interest in the Louisiana
Partnership. The purchase price was approximately $5.7 million, $500,000 of
which had already been paid by Boomtown.
Boomtown New Orleans operates in the greater New Orleans gaming market, in
which riverboat gaming was legalized in 1991. Twenty-four hour unlimited
stakes gaming is permitted on the riverboats. Fourteen riverboats operate in
the state of Louisiana, four of which are currently operational in the New
Orleans area (including the Company's riverboat). The New Orleans metropolitan
area has a local resident population of over 1.3 million people and attracts
over 9 million tourists annually. The "West Bank," which is located in
Jefferson Parish, and is the site of Boomtown New Orleans, has approximately
300,000 local residents. A large majority of the Boomtown New Orleans
customers are local residents of the West Bank. Studies have indicated that,
in general, these customers are loyal to the West Bank and do not like to
travel into the downtown New Orleans urban area.
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The Hollywood Park-Casino
The Hollywood Park-Casino opened in July 1994 on the same premises as the
Hollywood Park Race Track and offers a total of 145 table games in 30,000-
square feet of gaming space. By law, California card club casinos may neither
bank card games nor offer certain of the familiar games permitted in Nevada
and other traditional gaming jurisdictions. Instead, the Hollywood Park-Casino
offers only certain forms of card games, including Poker, Pai Gow and
California Blackjack. Patrons of the Hollywood Park-Casino pay a fee for seats
at gaming tables or for each hand played. Players bet solely against each
other, and the Hollywood Park-Casino does not participate in the wagers made
or in the outcome of any of the games played. Per hour collection rates per
table for conventional poker are approximately $75 for low limit and $240 for
high limit, and for the California games, $140 for low limit and $500 for high
limit.
Until October 1995, when California law was amended to permit publicly-
traded pari-mutuel racing associations to operate card club casinos on race
track premises, the Hollywood Park-Casino was operated under a lease
arrangement by an unaffiliated operator with Hollywood Park receiving a fixed
lease payment for the facility. Hollywood Park assumed operational control
over the Hollywood Park-Casino effective November 1995.
There are a number of card club casinos in the greater Los Angeles area,
including two card clubs of similar size to the Hollywood Park-Casino located
within 12 miles of Hollywood Park. Certain clubs have a geographical advantage
over the Hollywood Park-Casino in that they are in closer proximity to large
American-Asian populations who comprise a large percentage of card club casino
patrons. However, the Hollywood Park-Casino has been able to attract a
significant portion of the Southern California High-End Poker market ($15 to
$30 limit and above). In 1996, the Hollywood Park-Casino's expanded tournament
schedule attracted some of poker's most famous championship players, while the
introduction of new user-friendly games, such as L.A. Blackjack, and new
promotions helped to expand the Hollywood Park-Casino's player base. The
Hollywood Park-Casino is the only non-Indian facility in California that
offers pari-mutuel wagering complete with bet runners, which allows card
players to place pari-mutuel wagers without interruption of their games,
including wagering on simulcast racing from the Royal Hong Kong Jockey Club.
The Casino also sponsors special entertainment events, including live concerts
and championship Thai Kick Boxing.
Other California municipalities may, in the future, propose ballot
initiatives similar to the card club initiative passed in Inglewood,
California which, if approved by voters, could lead to the establishment of
additional card clubs in direct competition with the Hollywood Park-Casino.
Currently, under California Senate Bill 100, as of January 1, 1996, there is a
three-year moratorium on public votes or referendums to approve the enactment
of any city ordinance to allow additional card clubs, and prohibits the
amendment of any existing ordinances.
Crystal Park
Crystal Park, which is Southern California's first major combined hotel and
casino property, features 100 table games (but with the ability to
substantially increase that number) and 282 hotel rooms. The hotel was built
and opened in 1985 and was refurbished by the Company in 1995, and reopened in
1996. The casino first opened in 1996. Games offered are similar to those
offered at the Hollywood Park-Casino. The hotel operates under a Radisson
Hotels International, Inc. ("Radisson") flag, under a 20 year license
agreement between Hollywood Park and Radisson. Hollywood Park can terminate
the Radisson license agreement, at no cost, at the end of the third, fifth or
tenth year.
Hollywood Park has an 89.8% interest in Crystal Park Hotel and Casino
Development Company, LLC (the "Crystal Park LLC"), the entity that owns the
facility, and certain minority investors own the remaining 10.2% of the
facility. In order to comply with California law, which does not allow
publicly traded companies such as Hollywood Park to operate a card club casino
(other than on the same property as a race track, such as the Hollywood Park-
Casino), Crystal Park entered into a five year triple-net lease (the "Lease")
with Compton Entertainment, Inc. ("CEI"), an unaffiliated operator. The Lease
provides for a monthly rent of approximately $200,000 for the first six
months, $350,000 for the months 7 through 12 and $759,000 for months 13
through 60. Thus, Hollywood Park does not participate in any gaming revenues
or hotel revenues from Crystal Park.
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On July 21, 1997, Crystal Park LLC filed an action for unlawful detainer
against CEI, due to CEI's failure to pay the June 1997 rent and to make
required additional rent payments. Crystal Park LLC contends that the Lease
terminated prior to the July 21, 1997 filing and that CEI is currently
occupying Crystal Park as a holdover tenant only, with no rights under the
Lease. CEI denies these contentions. On September 12, 1997, Crystal Park LLC
and CEI entered into an agreement which outlined occupancy payments to be made
by CEI in exchange for a continuance of the trial in the action for unlawful
detainer. CEI failed to make the final payment due under the agreement. On
October 24, 1997, Crystal Park LLC filed an action for unlawful detainer
against CEI, due to CEI's failure to pay the July 1997 rent.
On October 11, 1997, the California Attorney General revoked CEI's
conditional gaming registration, and the City of Compton revoked CEI's city
gaming license. Crystal Park LLC believes that CEI is attempting to have its
California conditional gaming registration and City of Compton gaming license
reinstated. On October 27, 1997, Crystal Park LLC filed an action for unlawful
detainer against CEI due to the license revocation.
Crystal Park LLC is presently negotiating a new lease with California Casino
Management, Inc., a California corporation ("CCM"), owned by Mr. Leo Chu,
which would take effect in the event that CEI is unable to continue as
operator/lessee of Crystal Park. Mr. Chu presently has a gaming registration
application pending with the California Attorney General to operate Crystal
Park. Mr. Chu currently holds a gaming registration to operate a small card
club in Northern California. Mr. Chu will also require a gaming license from
the City of Compton. It is expected that CCM would assume operations of
Crystal Park no later than December 1, 1997. However, there can be no
assurance that CCM will receive the necessary City of Compton and State of
California licenses to operate Crystal Park or that Crystal Park will be able
to locate a replacement operator/lessee who will be granted the required
licenses.
Hollywood Park has an option for five years to purchase the operator's
gaming license and intends to do so if the operator remains in place until
that time and if California law is changed to allow publicly traded companies
to operate card club casinos. If, at the end of the option, Hollywood Park is
not able to operate the card club casino, the operator can either negotiate a
new lease or acquire the card club casino site at its then fair market value.
If there is a change in California law, allowing Hollywood Park to operate
card club casinos at sites other than its race track property, Hollywood Park
and the minority investors would operate the card club casino in partnership
with the former operator, with Hollywood Park and such minority investors
owning 67% of the business. See "--Regulation and Licensing."
RACING OPERATIONS
Hollywood Park's strategy for its racing operations is to continue to
enhance revenues at its existing facilities through marketing improvements
and, as opportunities arise, through continued expansion and technological
improvements in off-track wagering. Hollywood Park has recently revised and
improved its marketing efforts to include a focus on a younger target
audience, particularly those under thirty years old, through special
promotions, give-aways and holding races on days and at hours appealing to
this group (such as Hollywood Park's "Friday Night Racing" program). Hollywood
Park believes that these efforts will develop a new source of long-term racing
patrons to supplement and, eventually, replace the existing racing customer
base, the average age of which has increased steadily over recent decades. In
addition, since 1994, Hollywood Park has increased its direct and indirect
off-track simulcast transmission sites for all of its race tracks from 240
to 929.
The total pari-mutuel handle at Hollywood Park's racing properties for live
(on-track and off-track) and simulcast racing was approximately $1.3 billion
in 1996, an increase of approximately 6% from approximately $1.2 billion for
the year ended December 31, 1995. Total pari-mutuel commissions were
approximately $53.8million in 1996, an increase of approximately 1% from
approximately $53.3 million in 1995.
Hollywood Park Race Track
The Hollywood Park Race Track is located on 378 acres (of which
approximately 150 acres are undeveloped) in the Los Angeles metropolitan area,
which has a population base of approximately 14 million.
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Since 1938, the Hollywood Park Race Track has been ranked among the country's
most distinguished thoroughbred racing facilities and in 1997 will be hosting
the Breeders' Cup championship racing series for the third time. Hollywood
Park, through HPOC, conducts two live on-track thoroughbred horse race meets
per year, totalling approximately 95 to 100 race days per year and has one of
the nation's largest combined live and simulcast single-track gross handles
(approximately $1.1 billion). Race dates must be applied for on an annual
basis from the California Horse Racing Board. Live races run Wednesday through
Sunday, usually with nine live races a day. Hollywood Park also sends the
signal of its live races off-track to other locations including fairgrounds,
other race tracks, hotels and casinos. In total, Hollywood Park simulcasts its
live races, directly or indirectly through retransmissions, to 861 locations
in 40 states and four countries. Hollywood Park also accepts the simulcast
signal from live races conducted at other race tracks, including Southern and
Northern California tracks, which has helped to mitigate the seasonality of
Hollywood Park's horse racing business by allowing for year round operations.
Although Hollywood Park has seen a shift from wagers placed on its live races,
both on-track and off-track, to wagers placed on Northern California simulcast
races running on the same days as live racing at Hollywood Park, for which
Hollywood Park receives a lower commission rate, the net effect of expanded
simulcasting upon wagering commissions to date has been positive. Given
Hollywood Park's limited operating experience simulcasting Northern California
races on live race days, there can be no assurance that this effect will
continue to be positive.
Wagering on live racing is pari-mutuel, meaning that patrons bet against
each other in a pool rather than against the operator of the facility or with
pre-set odds. Hollywood Park derives revenues from a share of the pari-mutuel
handle at rates fixed by the State of California, admission fees and
concession sales. The approximate pari-mutuel commission rates are as follows:
Pari-mutuel commission rates on live Hollywood Park races range from 6.4% of
wagers placed at Hollywood Park to 1.25% of wagers placed off-track on
Hollywood Park races simulcast out-of-state. Pari-mutuel commission rates on
wagers placed on races simulcast at Hollywood Park range from 5.6% for
Northern California races to 2.0% for races conducted at other sites.
Turf Paradise
Turf Paradise, organized in 1954 and acquired by Hollywood Park in 1994, is
situated on approximately 275 acres in the northwest section of Phoenix,
Arizona, approximately 100 of which acres are undeveloped. Turf Paradise
conducts one live thoroughbred meet that starts in September and runs through
May and also offers limited quarter horse and Arabian horse racing during
certain periods of the year. Live racing is primarily conducted Friday through
Tuesday, with live races sent to 34 off-track sites in Arizona and 34 out-of-
state hubs, from which the signal is further disseminated to sites in New
York, New Jersey, Pennsylvania, Nevada and Canada, among others. On Wednesday
and Thursday and during the off-season, Turf Paradise generally operates as a
simulcast facility.
At Turf Paradise, the state of Arizona fixes the pari-mutuel commissions on
wagers for on-track racing and off-track racing within the state as follows:
between 7.5% and 11.5% for on-track wagers depending on the total amount of
the handle and whether the wager is for win, place or show or two- or three-
or-more-horse pools, and between 9% and 17% for off-track wagers depending on
the same factors.
Sunflower
Hollywood Park acquired Sunflower, which owns The Woodlands greyhound and
horse racing track on 393 acres located in Kansas City, Kansas, in March,
1994. Sunflower conducts live greyhound and horse racing and accepts
simulcasts of both. Live greyhound racing runs almost continuously year round
and horse racing is generally conducted in the fall.
Sunflower was acquired with the expectation that the Kansas Legislature
would legalize slot machines or other forms of gaming in Kansas generally, or
at Sunflower specifically, which would have allowed Sunflower to compete more
effectively with riverboat gaming operations in Missouri. However, the Kansas
Legislature has not taken such action, and Sunflower's operating results
dramatically worsened following legalization of gaming in nearby
jurisdictions. As a result, Hollywood Park recorded a non-cash write off of
its approximately
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$11.4 million investment in Sunflower in the quarter ended March 31, 1996 and,
on May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the
Bankruptcy Code. Sunflower continues to operate the facility as debtor in
possession. Currently, the credit facility under which Sunflower is in default
is non-recourse to Hollywood Park, and, as of March 31, 1996, Hollywood Park's
consolidated financial statements no longer include the assets, liabilities or
operating results of Sunflower; however, the proposed plan of reorganization
provides for a limited guaranty by the Company upon receipt of various gaming
approvals. Sunflower filed its plan of reorganization with the bankruptcy
court on July 15, 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
POSSIBLE RESTORATION OF REIT/PAIRED-SHARE STRUCTURE; POTENTIAL REIT PROPERTIES
From 1982 to 1991, the Company was operated as a REIT known as Hollywood
Park Realty Enterprises, Inc. ("HPRE"), and its stock was paired with, or
stapled to, that of HPOC. HPRE was primarily an owner and lessor of real
property. HPOC was primarily engaged in the active conduct of operations and,
in connection with conducting those operations, leased a significant amount of
real property from HPRE. Generally, a REIT is required to distribute as
dividends to its stockholders 95% of its taxable income (other than net
capital gains), and such amounts distributed are not subject to federal income
tax at the corporate level. Effective as of January 1, 1992, as part of a
corporate reorganization, HPRE and HPOC ceased operating in a paired-
share/REIT structure, HPOC became a wholly-owned subsidiary of HPRE, and HPRE
was renamed "Hollywood Park, Inc."
The Company ceased operating in a paired-share structure and terminated its
REIT status in 1992 because, in light of the Company's then financial
condition and operating results and the market perception of paired-share
companies at the time, the paired-share structure hindered the Company's
efforts to reduce its debt (totalling approximately $63 million at December
31, 1991) and grow its business. In the several years prior to 1992, the
Company had experienced losses and had considerable debt. The requirement
imposed by the Internal Revenue Code that a REIT distribute 95% of its taxable
income as dividends effectively prevented the Company from reinvesting
whatever income it generated in its business and reducing its outstanding
debt. Moreover, because the Company's then existing asset base produced little
taxable income, the stockholders were not realizing meaningful tax benefits
from the Company's REIT status. The Company also believed that, in that time
frame, the market lacked an understanding of REIT vehicles and therefore was
not valuing paired-share REITs highly. In fact, the market appeared to
discount the value of paired-share entities, which made it difficult for the
Company to raise equity capital.
Since that time circumstances have changed dramatically, both with respect
to the Company's asset base and financial condition as well as with respect to
the market's perception and understanding of paired-share entities. As a
result, the Company now believes that the Company's financial position and
market conditions will allow shareholders to realize the full value of the
paired-share structure. Since 1992, the Company has raised substantial capital
through equity offerings of both common and preferred stock. This capital has
allowed the company to engage in significant acquisitions and to repay its
outstanding debt. This process has transformed Hollywood Park into a company
with relatively low debt (other than the Notes which were used principally to
refinance the Boomtown debt) and strong cash flow. Further, the Company's
Board has taken note of the substantial premiums the paired-share structure
has attracted in the last twelve months in relation to pure operating
companies. Consequently, the Company's Board, with the advice of its financial
advisors, has determined that the restoration of the paired-share structure
may be an appropriate way to seek to maximize shareholder value. Among other
things, such a restoration is expected to: (i) allow the Company and its
stockholders to realize the value inherent in the paired-share structure; (ii)
afford the companies greater flexibility in structuring financing arrangements
and in raising capital which can be utilized to expand its existing business
and to make acquisitions in order to maximize utilization of the paired-share
status; and (iii) increase the dividends paid to stockholders on the portion
of its revenues generated as leasehold rents by the REIT from its paired
operating company. However, there can be no assurance that any of the
foregoing benefits will be achieved.
For the foregoing reasons, in May 1997, the Company announced that it is
exploring the Possible REIT Restructuring. Any decision to proceed with the
Possible REIT Restructuring will depend on a variety of factors,
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including tax consequences and receipt of board, stockholder, regulatory and
other required approvals. There can be no assurance that the Company will
elect to proceed with the Possible REIT Restructuring, or that the Possible
REIT Restructuring or its expected benefits will be achieved.
The Company, subject to completing its evaluation, has begun taking the
steps necessary to reinstitute such a structure over the next few months, with
the objective of eventually reorganizing its assets and operations into a REIT
and an operating company. In connection therewith, the Company has submitted a
ruling request to the Internal Revenue Service on certain aspects of the
Possible REIT Restructuring and, unless the Company chooses to implement the
Possible REIT Restructuring before the Internal Revenue Service has made a
determination on that ruling request, the results of that ruling request may
have an impact on whether, and in what form, the Possible REIT Restructuring
is implemented. There are a number of alternative transactions for
effectuating the Possible REIT Restructuring, and the Company has not
determined which alternative, if any, it would use to implement the Possible
REIT Restructuring. However, under any such alternative, the Company would
become the REIT, HPOC would become the operating company, and the common stock
of the Company and the common stock of HPOC would be paired so that they would
be transferable and tradeable only in combination as units (with each unit
consisting of one share of the Company's common stock and one share of HPOC's
common stock).
Although no final decision has been made about whether to implement the
Possible REIT Restructuring, and, if so, under what alternative, if the
Possible REIT Restructuring is implemented, then the Company, as the REIT,
would be expected to be primarily an owner and lessor of real property and to
lease a portion of that real property to HPOC and its subsidiaries. As the
operating company, HPOC, along with its subsidiaries, would be expected to be
engaged primarily in the active conduct of gaming, sports, and entertainment
operations and to conduct such operations, at least in part, on real property
leased from the Company. The Company has determined that, in the event it
effects the Possible REIT Restructuring, the 378-acre parcel on which are
located the Hollywood Park Race Track and the Hollywood Park-Casino would
become part of the REIT, and a substantial portion of that parcel would be
leased to HPOC and its subsidiaries for their use in conducting such racing
and casino operations. Hollywood Park currently has other significant real
property holdings, including the real property associated with the operations
of the Turf Paradise Race Track and the three Boomtown casinos. Although it is
possible that some or all of those other holdings would become part of the
REIT (with a lease from the REIT to HPOC or its subsidiaries of some or all of
such holdings), the Company has not yet determined whether any of such other
holdings would become part of the REIT or would become part of the operating
company. The amount of rent that would be paid to the Company by HPOC and its
subsidiaries under any of the leases described above would be determined on a
fair market value basis. Certain approvals of Gaming Authorities may be
required in order to effect the Possible REIT Restructuring.
The Indenture governing the Notes permits the Issuers, without the consent
of the holders of the Notes, to amend the Indenture covenants to implement the
Possible REIT Restructuring and to make required rent and dividend payments,
to modify the financial covenants to accommodate the allocation of assets and
liabilities between the Company and HPOC resulting from the Possible REIT
Restructuring and otherwise to operate within the paired share/REIT structure
thereafter, subject to the obligation of the Issuers to offer to repurchase
the Notes upon the occurrence of a Change of Control (as defined). See
"Description of Notes--Redemption at the Option of the Holders--Change of
Control".
The Old Notes are, and the New Notes will be, co-issued by the Company and
HPOC, each of which are, and will be, absolutely and unconditionally obligated
for the payment of the Notes. The Company and HPOC have entered into an
agreement that, as between the Company and HPOC, HPOC would be primarily
responsible for the payments on the Notes. However, such agreement in no way
limits the obligations of the Company under the Notes, and each Issuer would
continue to be a co-obligor following implementation of the Possible REIT
Restructuring.
The Company believes that the amendment of the Indenture covenants in
connection with any Possible REIT Restructuring should be nontaxable for
federal income tax purposes for those holders who do not accept the Company's
offer to repurchase the Notes in connection with such restructuring. If the
restructuring and
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amendments were treated as causing a "significant modification" of the Notes,
then they would be treated as a deemed exchange of the Notes for new notes.
Such a modification would either be a taxable event causing the recognition of
gain or loss and the possible creation of original issue discount or bond
premium, or a nontaxable recapitalization. However, the Company believes,
based on current expectations, that the restructuring and amendments would not
be treated as such a significant modification under current federal income tax
law. Accordingly, the Company expects that the amendment would not be taxable
for holders. Since that determination depends on the facts and circumstances
at the time of the modification, the Company will include in the Change of
Control offer to holders a summary of the anticipated federal income tax
consequences of the actual modification to the holders of the Notes.
PROPERTIES
The following describes Hollywood Park's principal real estate Properties.
Hollywood Park owns approximately 378 acres in Inglewood, California, which
is located in the heart of the Los Angeles metropolitan area. The property
houses the 60,000 square foot Hollywood Park-Casino, the Hollywood Park Race
Track and the executive offices of Hollywood Park. The Hollywood Park Race
Track, Hollywood Park-Casino and required parking covers approximately 228
acres, leaving approximately 150 acres available for immediate development.
Hollywood Park believes that the current fair market value of the Inglewood
property is approximately $200 million.
Crystal Park LLC (89.8% owned by Hollywood Park) owns approximately six
acres, upon which sits a parking structure, and owns the ground floor of
Crystal Park, which houses the approximately 40,000 square feet of gaming
floor space.
Turf Paradise owns approximately 275 acres in the northwest section of
Phoenix, Arizona, 100 of which are undeveloped. Sunflower owns approximately
393 acres in Kansas City, Kansas, but is currently involved in ongoing
reorganization proceedings under Chapter 11 of the U.S. Bankruptcy Code.
Boomtown Reno sits on 569 acres of land in Verdi, Nevada. Boomtown also owns
all of the improvements and facilities on this property, including the casino,
hotel, fun center, truck stop and recreational vehicle park. Current
operations are located on approximately 61 acres. Of the remaining acreage,
approximately 60 acres are zoned commercial and 444 acres are noncommercial.
Boomtown Reno also owns the related water rights. In addition, Boomtown Reno
maintains and operates its own sewage treatment facility at the site.
During November 1993, the Mississippi Partnership entered into a 99-year
lease for an 8.9 acre site in Biloxi, Mississippi. This land is being used to
operate the land-based amenities and parking for its dockside casino at
Boomtown Biloxi. The Mississippi Partnership has also entered into several
leases from 10 to 25 years for additional land being used for additional
parking. Upon commencement of operations on July 18, 1994, the Mississippi
Partnership sold its casino barge and building to Hospitality Franchise
Systems, Inc. ("HFS") and immediately leased them back for 25 years for a
rental amount based on adjusted earnings before interest, taxes, depreciation
and amortization, as defined in the relevant contract. The purchase price paid
by HFS consisted of approximately $8.6 million in cash, plus a contingent
payment of approximately $2.4 million, the contingent portion to be disbursed
solely to finance construction of a hotel, which never commenced. HFS
subsequently transferred the contract to National Gaming Corporation, Inc.
(recently renamed National Gaming Mississippi, Inc.). On August 4, 1997, the
Company executed an agreement to repurchase the barge for approximately
$5.25 million. All land-based facilities, including restaurants, bars, fun
center, and entertainment facility, are owned by Boomtown Biloxi. Boomtown
Biloxi also leases submerged tidelands at the casino site from the State of
Mississippi. The term of the lease is ten years with a five-year option to
renew. Annual rent is set forth in the lease.
Boomtown New Orleans owns approximately 50 acres located in Jefferson
Parish, 10 miles from downtown New Orleans, Louisiana. This property is used
for land-based amenities related to the riverboat casino at
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Boomtown New Orleans. Boomtown New Orleans owns all improvements to and
facilities on this property, including the riverboat restaurants, bars, fun
center and entertainment facility.
REGULATION AND LICENSING
Gaming Operations
Nevada. The ownership and operation of casino gaming facilities in Nevada
are subject to: (i) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, "Nevada Act"); and (ii) various local
regulations. The Company's gaming operations are subject to the licensing and
regulatory control of the Nevada Gaming Commission ("Nevada Commission"), the
Nevada State Gaming Control Board ("Nevada Board") and Washoe County. The
Nevada Commission, the Nevada Board, and Washoe County are collectively
referred to as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) providing a source of state and
local revenues through taxation and licensing fees. Changes in such laws,
regulations and procedures could have an adverse effect on Boomtown's gaming
operations.
Boomtown Hotel and Casino, Inc. (the "Gaming Subsidiary"), which operates
Boomtown Reno and two other gaming operations with slot machines only, is
required to be licensed by the Nevada Gaming Authorities. The gaming licenses
require the periodic payment of fees and taxes and are not transferable. The
Company is currently registered by the Nevada Commission as publicly traded
corporation (a "Registered Corporation") and has been found suitable to own
the stock of Boomtown which is registered as an intermediary company
("Intermediary Company"). Boomtown has been found suitable to own the stock of
the Gaming Subsidiary, which is a corporate licensee (a "Corporate Licensee")
under the terms of the Nevada Act. As a Registered Corporation, the Company is
required periodically to submit detailed financial and operating reports to
the Nevada Commission and furnish any other information which the Nevada
Commission may require. No person may become a stockholder of, or holder of an
interest of, or receive any percentage of profits from an Intermediary Company
or a Corporate Licensee without first obtaining licenses and approvals from
the Nevada Gaming Authorities. The Company, Boomtown and the Gaming Subsidiary
have obtained from the Nevada Gaming Authorities the various registrations,
findings of suitability, approvals, permits and licenses required in order to
engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company, Boomtown
or the Gaming Subsidiary in order to determine whether such individual is
suitable or should be licensed as a business associate of a gaming licensee.
Officers, directors and certain key employees of the Company, Boomtown and the
Gaming Subsidiary must file applications with the Nevada Gaming Authorities
and may be required to be licensed or found suitable by the Nevada Gaming
Authorities. Officers, directors and key employees of the Company and Boomtown
who are actively and directly involved in gaming activities of the Gaming
Subsidiary may be required to be licensed or found suitable by the Nevada
Gaming Authorities. The Nevada Gaming Authorities may deny an application for
licensing for any cause which they deem reasonable. A finding of suitability
is comparable to licensing, and both require submission of detailed personal
and financial information followed by a thorough investigation. The applicant
for licensing or a finding of suitability must pay all the costs of the
investigation. Changes in licensed positions must be reported to the Nevada
Gaming Authorities and in addition to their authority to deny an application
for a finding of suitability or licensure, the Nevada Gaming Authorities have
jurisdiction to disapprove a change in any person's corporate position or job
title.
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If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, Boomtown or the Gaming Subsidiary, the
companies involved would have to sever all relationships with such person. In
addition, the Nevada Commission may require the Company, Boomtown or the
Gaming Subsidiary to terminate the employment of any person who refuses to
file appropriate applications. Determinations of suitability or of questions
pertaining to licensing are not subject to judicial review in Nevada.
The Company and the Gaming Subsidiary are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
by the Gaming Subsidiary must be reported to or approved by the Nevada
Commission.
If it were determined that the Nevada Act was violated by the Gaming
Subsidiary, the gaming licenses it holds could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Company, Boomtown and the Gaming
Subsidiary and the persons involved could be subject to substantial fines for
each separate violation of the Nevada Act at the discretion of the Nevada
Commission. Further, a supervisor could be appointed by the Nevada Commission
to operate Boomtown Reno and, under certain circumstances, earnings generated
during the supervisor's appointment (except for reasonable rental value of the
casino) could be forfeited to the State of Nevada. Limitation, conditioning or
suspension of the gaming licenses of the Gaming Subsidiary or the appointment
of a supervisor could (and revocation of any gaming license would) materially
adversely affect the Company's gaming operations.
Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be
investigated, and have his suitability as a beneficial holder of the Company's
voting securities determined if the Nevada Commission has reason to believe
that such ownership would otherwise be inconsistent with the declared policies
of the state of Nevada. The applicant must pay all costs of investigation
incurred by the Nevada Gaming Authorities in conducting any such
investigation.
The Nevada Act requires any person who acquires more than 5% of a Registered
Corporation's voting securities to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of more than 10% of
a Registered Corporation's voting securities apply to the Nevada Commission
for a finding of suitability within thirty days after the Chairman of the
Nevada Board mails the written notice requiring such filing. Under certain
circumstances, an "institutional investor," as defined in the Nevada Act,
which acquires more than 10%, but not more than 15%, of a Registered
Corporation's voting securities may apply to the Nevada Commission for a
waiver of such finding of suitability if such institutional investor holds the
voting securities for investment purposes only. An institutional investor
shall not be deemed to hold voting securities for investment purposes unless
the voting securities were acquired and are held in the ordinary course of
business as an institutional investor and not for the purpose of causing,
directly or indirectly, the election of a majority of the members of the board
of directors of the Registered Corporation, any change in the Registered
Corporation's corporate charter, bylaws, management, policies or operations of
the Registered Corporation, or any of its gaming affiliates, or any other
action which the Nevada Commission finds to be inconsistent with holding the
Registered Corporation's voting securities for investment purposes only.
Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters
voted on by stockholders; (ii) making financial and other inquiries of
management of the type normally made by securities analysts for informational
purposes and not to cause a change in its management, policies or operations;
and (iii) such other activities as the Nevada Commission may determine to be
consistent with such investment intent. If the beneficial holder of voting
securities who must be found suitable is a corporation, partnership or trust,
it must submit detailed business and financial information including a list of
beneficial owners. The applicant is required to pay all costs of
investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after request,
fails to identify the
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beneficial owner. Any stockholder found unsuitable and who holds, directly or
indirectly, any beneficial ownership of the common stock beyond such period of
time as may be prescribed by the Nevada Commission may be guilty of a criminal
offense. The Company is subject to disciplinary action if, after it receives
notice that a person is unsuitable to be a stockholder or to have any other
relationship with the Company, Boomtown or the Gaming Subsidiary, the Company
(i) pays that person any dividend or interest upon voting securities of the
Company, (ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person, (iii) pays
remuneration in any form to that person for services rendered or otherwise, or
(iv) fails to pursue all lawful efforts to require such unsuitable person to
relinquish his voting securities including, if necessary, the immediate
purchase of said voting securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the holder of any debt
security (such as the Notes or the New Notes) of a Registered Corporation to
file applications, be investigated and be found suitable to own the debt
security of a Registered Corporation. If the Nevada Commission determines that
a person is unsuitable to own such security, then pursuant to the Nevada Act,
the Registered Corporation can be sanctioned, including the loss of its
approvals, if without the prior approval of the Nevada Commission, it (i) pays
to the unsuitable person any dividend, interest, or any distribution
whatsoever; (ii) recognizes any voting right by such unsuitable person in
connection with such securities; (iii) pays the unsuitable person remuneration
in any form; or (iv) makes any payment to the unsuitable person by way of
principal, redemption, conversion, exchange, liquidation, or similar
transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any
securities are held in trust by an agent or by a nominee, the record holder
may be required to disclose the identity of the beneficial owner to the Nevada
Gaming Authorities. A failure to make such disclosure may be grounds for
finding the record holder unsuitable. The Company is also required to render
maximum assistance in determining the identity of the beneficial owner. The
Nevada Commission has the power to require that the Company's stock
certificates bear a legend indicating that the securities are subject to the
Nevada Act. However, to date the Nevada Commission has not imposed such a
requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. The Exchange Offer will constitute a public offering (as defined in
the Nevada Act) and will require the prior approval of the Nevada Commission
upon the recommendation of the Nevada Board. In addition, (i) a Corporate
Licensee may not guarantee a security issued by a Registered Corporation
pursuant to a public offering without the prior approval of the Nevada
Commission; and (ii) restrictions upon the transfer of an equity security
issued by a Corporate Licensee or an Intermediary Company, and agreements not
to encumber such securities (collectively, "Stock Restrictions") are
ineffective without the prior approval of the Nevada Commission. The Stock
Restrictions in respect of the Notes require the prior approval of the Nevada
Commission to be effective. In connection with the approval of the Exchange
Offer, the Guaranties of the Gaming Subsidiary and Boomtown and the Stock
Restrictions will also require the prior approval of the Nevada Commission.
However, there can be no assurances that such approval will be granted.
Furthermore, any such approval, if granted, does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment merits of the
securities offered. Any representation to the contrary is unlawful.
Changes in control of a Registered Corporation through merger,
consolidation, stock or asset acquisitions, management or consulting
agreements, or any act or conduct by a person whereby he obtains control, may
not occur without the prior approval of the Nevada Commission. Entities
seeking to acquire control of a Registered Corporation must satisfy the Nevada
Board and Nevada Commission in a variety of stringent standards prior to
assuming control of such Registered Corporation. The Nevada Commission may
also require controlling stockholders, officers, directors and other persons
having a material relationship or involvement with the entity proposing to
acquire control to be investigated and licensed as part of the approval
process relating to the transaction.
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The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada corporate gaming licensees, and Registered Corporations that
are affiliated with those operations, may be injurious to stable and
productive corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects of these
business practices upon Nevada's gaming industry and to further Nevada's
policy to: (i) assure the financial stability of corporate gaming licensees
and their affiliates; (ii) preserve the beneficial aspects of conducting
business in the corporate form; and (iii) promote a neutral environment for
the orderly governance of corporate affairs. Approvals are, in certain
circumstances, required from the Nevada Commission before the Registered
Corporation can make exceptional repurchases of voting securities above the
current market price thereof and before a corporate acquisition opposed by
management can be consummated. The Nevada Act also requires prior approval of
a plan of recapitalization proposed by the Registered Corporation's Board of
Directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purposes of acquiring control of the
Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the state of Nevada and to Washoe
County, in which the Gaming Subsidiary's operations are conducted. Depending
upon the particular fee or tax involved, these fees and taxes are payable
either monthly, quarterly or annually and are based upon either: (i) a
percentage of the gross revenues received; (ii) the number of gaming devices
operated; or (iii) the number of table games operated. A casino entertainment
tax is also paid by casino operations where entertainment is furnished in
connection with the selling of food or refreshments or the selling of any
merchandise.
Any person who is licensed, required to be licensed, registered, required to
be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside
of Nevada, is required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the expenses of
investigation by the Nevada Board of such Licensee's participation in such
foreign gaming. The revolving fund is subject to increase or decrease in the
discretion of the Nevada Commission. Thereafter, Licensees are required to
comply with certain reporting requirements imposed by the Nevada Act.
Licensees are also subject to disciplinary action by the Nevada Commission if
they knowingly violate any laws of the foreign jurisdiction pertaining to the
foreign gaming operation, fail to conduct the foreign gaming operation in
accordance with the standards of honesty and integrity required of Nevada
gaming operations, engage in activities that are harmful to the state of
Nevada or its ability to collect gaming taxes and fees, or employ a person in
the foreign operation who has been denied a license or finding of suitability
in Nevada on the ground of personal unsuitability.
Mississippi. The ownership and operation of casino facilities in Mississippi
are subject to extensive state and local regulation. Regulation is primarily
effected through the licensing and regulatory control of the Mississippi
Gaming Commission and the Mississippi State Tax Commission (the "Mississippi
Gaming Authorities").
The Mississippi Gaming Control Act (the "Mississippi Act"), which legalized
dockside casino gaming in Mississippi, is similar to the Nevada Gaming Control
Act. The Mississippi Gaming Commission has adopted regulations which are also
similar in many respects to the Nevada gaming regulations.
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Gaming Commission seek to: (i) prevent unsavory or unsuitable
persons from having any direct or indirect involvement with gaming at any time
or in any capacity; (ii) establish and maintain responsible accounting
practices and procedures; (iii) maintain effective control over the financial
practices of licensees, including establishing minimum procedures for internal
fiscal affairs and safeguarding of assets and revenues, providing reliable
record keeping and making periodic reports to the Mississippi Gaming
Commission; (iv) prevent cheating and fraudulent practices; (v) provide a
source of state and local revenues through taxation and licensing fees; and
(vi) ensure that gaming licensees, to the extent practicable, employ
Mississippi residents. The regulations are subject to amendment and
interpretation by the Mississippi Gaming Commission. Changes in Mississippi
laws or regulations could have an adverse effect on the Company and the
Company's Biloxi, Mississippi gaming operations.
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The Mississippi Act provides for legalized dockside gaming at the discretion
of the 14 counties that either border the Gulf Coast or the Mississippi River,
but only if the voters in such counties have not voted to prohibit gaming in
that county. As of August 1, 1997, dockside gaming was permissible in nine of
the fourteen eligible counties in the State and gaming operations had
commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren and Washington
counties. Under Mississippi law, gaming vessels must be located on the
Mississippi River or on navigable waters in eligible counties along the
Mississippi River or in the waters lying south of the counties along the
Mississippi Gulf Coast. The law permits unlimited stakes gaming on permanently
moored vessels on a 24-hour basis and does not restrict the percentage of
space which may be utilized for gaming. The Mississippi Act permits
substantially all traditional casino games and gaming devices and, on
August 11, 1997, a Mississippi lower court ruled that the Mississippi Act also
permits race books on the premises of licensed casinos. The Mississippi Gaming
Commission has not yet determined whether it will appeal that decision.
The Company and any subsidiary of the Company (or partnership in which the
subsidiary is a partner) that operates a casino in Mississippi (a "Mississippi
Gaming Subsidiary"), is subject to the licensing and regulatory control of the
Mississippi Gaming Authorities. Hollywood Park is currently registered with
the Mississippi Gaming Commission as a publicly traded corporation and has
been found suitable to own the stock of Boomtown, which is currently
registered with the Mississippi Gaming Commission as an intermediary company.
Boomtown has been found suitable to own the limited partnership interests of
Mississippi-I Gaming, L.P., the operator of Boomtown Biloxi and a licensee of
the Mississippi Gaming Commission, and to own the stock of the corporate
general partner of the partnership. Hollywood Park is required periodically to
submit detailed financial and operating reports to the Mississippi Gaming
Commission and furnish any other information which the Mississippi Gaming
Commission may require. If the Company is unable to continue to satisfy the
registration requirements of the Mississippi Act, the Company and its
Mississippi Gaming Subsidiaries cannot own or operate gaming facilities in
Mississippi. Each Mississippi Gaming Subsidiary must obtain gaming licenses
from the Mississippi Gaming Commission to operate casinos in Mississippi. A
gaming license is issued by the Mississippi Gaming Commission subject to
certain conditions, including continued compliance with all applicable state
laws and regulations and physical inspection of the casinos prior to opening.
There are no limitations on the number of gaming licenses which may be issued
in Mississippi.
Gaming licenses are not transferable, are initially issued for a two-year
period and must be renewed periodically thereafter. Boomtown Biloxi's gaming
license was renewed in 1996 for a two-year period expiring June 20, 1998. No
person may become a shareholder of or receive any percentage of profits from
an intermediary company or a gaming licensee subsidiary of a holding company
without first obtaining licenses and approvals from the Mississippi Gaming
Commission. The Company has obtained such approvals in connection with the
licensing of Boomtown Biloxi and the registration of Hollywood Park as a
publicly-traded holding company.
Certain officers and employees of Hollywood Park and the officers, directors
and certain key employees of the Company's Mississippi Gaming Subsidiary must
be found suitable or be investigated by the Mississippi Gaming Commission. The
Company believes that findings of suitability with respect to such persons
associated with Boomtown Biloxi have been applied for or obtained. However,
the Mississippi Gaming Commission in its discretion may require additional
persons to file applications for suitability. Employees associated with gaming
must obtain work permits that are subject to immediate suspension under
certain circumstances. In addition, any person having a material relationship
or involvement with the Company may be required to be found suitable or
licensed, in which case those persons must pay the costs and fees associated
with such investigation. The Mississippi Gaming Commission may deny an
application for a license for any cause that it deems reasonable. Changes in
licensed positions must be reported to the Mississippi Gaming Commission. In
addition to its authority to deny an application for a license, the
Mississippi Gaming Commission has jurisdiction to disapprove a change in any
person's corporate position or job title, which changes must be reported to
the Mississippi Gaming Commission. The Mississippi Gaming Commission has the
power to require any Mississippi Gaming Subsidiary and the Company to suspend
or dismiss officers, directors and other key employees or sever relationships
with other persons who refuse to file appropriate applications or whom the
authorities find unsuitable to act in such capacities.
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At any time, the Mississippi Gaming Commission has the power to investigate
and require the finding of suitability of any record or beneficial shareholder
of the Company. Mississippi law requires any person who acquires more than 5%
of the common stock of a registered publicly-traded holding company to report
the acquisition to the Mississippi Gaming Commission, and such person may be
required to be found suitable. Also, any person who becomes a beneficial owner
of more than 10% of a registered publicly-traded holding company's common
stock, as reported to the Securities and Exchange Commission, must apply for a
finding of suitability by the Mississippi Gaming Commission and must pay the
costs and fees that the Mississippi Gaming Commission incurs in conducting the
investigation. The Mississippi Gaming Commission has generally exercised its
discretion to require a finding of suitability of any beneficial owner of more
than 5% of a registered publicly-traded holding company's common stock.
However, the Mississippi Gaming Commission has adopted a policy that could
permit certain institutional investors to beneficially own up to 10% of a
public company's stock without a finding of suitability. If a shareholder who
must be found suitable is a corporation, partnership or trust, it must submit
detailed business and financial information, including a list of beneficial
owners.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi Gaming
Commission may be found unsuitable. The same restrictions apply to a record
owner, if the record owner, after request, fails to identify the beneficial
owner. Any person found unsuitable and who holds, directly or indirectly, any
beneficial ownership of the securities of the Company beyond such time as the
Mississippi Gaming Commission prescribes, may be guilty of a misdemeanor. The
Company is subject to disciplinary action if, after receiving notice that a
person is unsuitable to be a shareholder or to have any other relationship
with the Company or its Mississippi Gaming Subsidiaries, the Company: (i) pays
the unsuitable person any dividend or other distribution upon the voting
securities of the Company; (ii) recognizes the exercise, directly or
indirectly, of any voting rights conferred by securities of the Company held
by the unsuitable person; (iii) pays the unsuitable person any remuneration in
any form for services rendered or otherwise, except in certain limited and
specific circumstances; or (iv) fails to pursue all lawful efforts to require
the unsuitable person to divest himself of the securities, including, if
necessary, the immediate purchase of the securities for cash at a fair market
value.
The Company may be required to disclose to the Mississippi Gaming Commission
upon request the identities of the holders of any of the Company's debt
securities. In addition, the Mississippi Gaming Commission under the
Mississippi Act may, in its discretion, (i) require holders of securities of
registered corporations, including debt securities such as the Notes, to file
applications, (ii) investigate such holders, and (iii) require such holders to
be found suitable to own such securities or receive distributions thereon. If
the Mississippi Gaming Commission determines that a person is unsuitable to
own such security, then the issuer may be sanctioned, including the loss of
its approvals, if without the prior approval of the Mississippi Gaming
Commission, it (i) pays to unsuitable person any dividend, interest, or any
distribution whatsoever; (ii) recognizes any voting right by such unsuitable
person in connection with such securities; (iii) pays the unsuitable person
remuneration in any form; or (iv) makes any payment to the unsuitable person
by way of principal, redemption, conversion, exchange, liquidation, or similar
transaction. Although the Mississippi Gaming Commission generally does not
require the individual holders of obligations such as the Notes to be
investigated and found suitable, the Mississippi Gaming Commission retains the
discretion to do so for any reason, including but not limited to a default, or
where the holder of the debt instrument exercises a material influence over
the gaming operations of the entity in question. Any holder of debt securities
required to apply for a finding of suitability must pay all investigative fees
and costs of the Mississippi Gaming Commission in connection with such an
investigation.
The Mississippi Gaming Subsidiary must maintain a current stock ledger in
its principal office in Mississippi and the Company must maintain a current
list of stockholders in the principal offices of the Mississippi Gaming
Subsidiary which must reflect the record ownership of each outstanding share
of any class of equity security issued by Hollywood Park. The stockholder list
may thereafter be maintained by adding reports regarding the ownership of such
securities that it receives from Hollywood Park's transfer agent. The ledger
and stockholder lists must be available for inspection by the Mississippi
Gaming Commission at any time. If any securities of Hollywood Park are held in
trust by an agent or by a nominee, the record holder may be required to
disclose the
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identity of the beneficial owner to the Mississippi Gaming Commission. A
failure to make such disclosure may be grounds for finding the record holder
unsuitable. Hollywood Park must also render maximum assistance in determining
the identity of the beneficial owners.
The Mississippi Act requires that the certificates representing securities
of a publicly-traded corporation (as defined in the Mississippi Act) bear a
legend to the general effect that such securities are subject to the
Mississippi Act and the regulations of the Mississippi Gaming Commission. The
Mississippi Gaming Commission has the power to impose additional restrictions
on the holders of the Company's securities at any time. The Company has
received a waiver from this legend requirement from the Mississippi Gaming
Commission.
Substantially all loans, leases, sales of securities and similar financing
transactions by a Mississippi Gaming Subsidiary must be reported to or
approved by the Mississippi Gaming Commission. A Mississippi Gaming Subsidiary
may not make an issuance or a public offering of its securities. Similarly,
the equity interests of the Mississippi Gaming Subsidiary may not be pledged
without the prior approval of the Mississippi Gaming Commission. The Company
may not make an issuance or public offering of its securities without the
prior approval of the Mississippi Gaming Commission if any part of the
proceeds of the offering is to be used to finance the construction,
acquisition or operation of gaming facilities in Mississippi or to retire or
extend obligations incurred for one or more such purposes. Such approval, if
given, does not constitute a recommendation or approval of the investment
merits of the securities subject to the offering. Any representation to the
contrary is unlawful. The Company has received such approvals as are necessary
to engage in the Exchange Offering.
Under the regulations of the Mississippi Gaming Commission, the Mississippi
Gaming Subsidiary may not guarantee a security issued by an affiliated company
pursuant to a public offering, or pledge its assets to secure payment or
performance of the obligations evidenced by the security issued by the
affiliated company, without the prior approval of the Mississippi Gaming
Commission. The guarantee of the Mississippi Gaming Subsidiary with respect to
the New Notes has received the prior approval of the Mississippi Gaming
Commission. The pledge of the stock of a Mississippi Gaming Subsidiary and the
foreclosure of such a pledge is ineffective without the prior approval of the
Mississippi Gaming Commission. Moreover, restrictions on the transfer of an
equity security issued by a Mississippi Gaming Subsidiary and agreements not
to encumber such securities (the "Stock Restrictions") are ineffective without
the prior approval of the Mississippi Gaming Commission. The Stock
Restrictions with respect to the New Notes have also received the prior
approval of the Mississippi Gaming Commission.
Change in control of the Company through merger, consolidation, acquisition
of assets, management or consulting agreements or any form of takeover, and
certain recapitalizations and stock purchases by Hollywood Park, cannot occur
without the prior approval of the Mississippi Gaming Commission. Entities
seeking to acquire control of a registered corporation must satisfy the
Mississippi Gaming Commission in a variety of stringent standards prior to
assuming control of such registered corporation. The Mississippi Gaming
Commission may also require controlling stockholders, officers, directors and
other persons having a material relationship or involvement with the entity
proposing to acquire control, to be investigated and licensed as part of the
approval process relating to the transaction.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi and
corporations whose stock is publicly traded that are affiliated with those
licensees, may be injurious to stable and productive corporate gaming. The
Mississippi Gaming Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Mississippi's gaming industry and to further Mississippi's policy to: (i)
assure the financial stability of corporate gaming operators and their
affiliates; (ii) preserve the beneficial aspects of conducting business in the
corporate form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs. Approvals are, in certain circumstances,
required from the Mississippi Gaming Commission before the Company may make
exceptional repurchases of voting securities above the current market price of
its common stock (commonly called
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"greenmail") or before a corporate acquisition opposed by management may be
consummated. Mississippi's gaming regulations will also require prior approval
by the Mississippi Gaming Commission if the Company adopts a plan of
recapitalization proposed by its Board of Directors opposing a tender offer
made directly to the shareholders for the purpose of acquiring control of the
Company.
Neither the Company nor any subsidiary may engage in gaming activities in
Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Gaming Commission. The Mississippi Gaming
Authorities may require determinations that, among other things, there are
means for the Mississippi Gaming Authorities to have access to information
concerning the out-of-state gaming operations of the Company and its
affiliates. The Mississippi Gaming Commission must approve any future gaming
operations of the Company outside Mississippi. The Mississippi Gaming
Commission has approved the Company's operations in Nevada, California and
Louisiana but must approve the Company's operations in any other
jurisdictions.
If the Mississippi Gaming Commission decides that a Mississippi Gaming
Subsidiary violated a gaming law or regulation, the Mississippi Gaming
Commission could limit, condition, suspend or revoke the license of the
Mississippi Gaming Subsidiary, subject to compliance with certain statutory
and regulatory procedures. In addition, a Mississippi Gaming Subsidiary, the
Company and the persons involved could be subject to substantial fines for
each separate violation. Because of such a violation, the Mississippi Gaming
Commission could seek to appoint a supervisor to operate the casino
facilities. Limitation, conditioning or suspension of any gaming license or
the appointment of a supervisor could (and revocation of any gaming license
would) materially adversely affect the Company and the Mississippi Gaming
Subsidiary's gaming operations and the Company's results of operations.
License fees and taxes, computed in various ways depending on the type of
gaming involved, are payable to the State of Mississippi and to the counties
and cities in which a Mississippi Gaming Subsidiary's respective operations
will be conducted. Depending upon the particular fee or tax involved, these
fees and taxes are payable either monthly, quarterly or annually and are based
upon (i) a percentage of the gross gaming revenues received by the casino
operation, (ii) the number of slot machines operated by the casino or (iii)
the number of table games operated by the casino. The license fee payable to
the State of Mississippi is based upon "gaming receipts" (generally defined as
gross receipts less pay outs to customers as winnings) and equals 4% of gaming
receipts of $50,000 or less per month, 6% of gaming receipts over $50,000 and
less than $134,000 per month, and 8% of gaming receipts over $134,000. The
foregoing license fees are allowed as a credit against the licensee's
Mississippi income tax liability for the year paid.
In October 1994, the Mississippi Gaming Commission adopted two new
regulations. Under the first regulation, as condition of licensure or license
renewal, casino vessels on the Mississippi Gulf Coast that are not self-
propelled must be moored to withstand a Category 4 hurricane with 155 mile-
per-hour winds and 15-foot tidal surge. Boomtown Biloxi believes that it
currently meets this requirement. The second regulation requires as a
condition of licensure or license renewal that a gaming establishment's plan
include a 500-car parking facility in close proximity to the casino complex
and infrastructure facilities, the expenditures for which will amount to at
least 25% of the casino cost. Such facilities shall include any of the
following: a 250-room hotel of at least a two-star rating as defined by the
current edition of the Mobil Travel Guide, a theme park, golf courses,
marinas, tennis complex, entertainment facilities, or any other such facility
as approved by the Mississippi Gaming Commission as infrastructure. Parking
facilities, roads, sewage and water systems, or facilities normally provided
by cities and/or counties are excluded. The Mississippi Gaming Commission may
in its discretion reduce the number of rooms required, where it is shown to
the Commission's satisfaction that sufficient rooms are available to
accommodate the anticipated visitor load. The Company believes that Boomtown
Biloxi currently meets such requirements and was relicensed by the Mississippi
Gaming Commission effective June 20, 1996 for an additional two-year period.
In addition, Boomtown Biloxi is planning to construct and operate a hotel to
satisfy this requirement; however, there can be no assurance that it will be
successful in completing such a hotel or that it would be able to obtain a
waiver from such requirement. It is probable that the Mississippi Gaming
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Commission will require further development on the casino site including hotel
rooms and additional parking prior to Boomtown Biloxi being relicensed in June
1998.
The sale of food or alcoholic beverages at the Boomtown Biloxi property is
subject to licensing, control and regulation by the applicable state and local
authorities. The agencies involved have full power to limit, condition,
suspend or revoke any such license, and any such disciplinary action could
(and revocation would) have a material adverse effect upon the operations of
the affected casino or casinos. Certain officers and managers of the Company
and Boomtown Biloxi must be investigated by the Alcoholic Beverage Control
Division of the State Tax Commission (the "ABC") in connection with Boomtown
Biloxi's liquor permits. Changes in licensed positions must be approved by the
ABC.
Louisiana. The ownership and operation of a riverboat gaming vessel is
subject to the Louisiana Riverboat Economic Development and Gaming Control Act
(the "Louisiana Act"). As of May 1, 1996, gaming activities are regulated by
the Louisiana Gaming Control Board (the "Board"). The Board is responsible for
issuing the gaming license and enforcing the laws, rules and regulations
relative to riverboat gaming activities. The Board is empowered to issue up to
15 licenses to conduct gaming activities on a riverboat of new construction in
accordance with applicable law. However, no more than six licenses may be
granted to riverboats operating from any one parish.
The laws and regulations of Louisiana seek to (i) prevent unsavory or
unsuitable persons from having any direct or indirect involvement with gaming
at any time or in any capacity; (ii) establish and maintain responsible
accounting practices and procedures; (iii) maintain effective control over the
financial practices of licensees, including establishing procedures for
reliable record keeping and making periodic reports to the Board; (iv) prevent
cheating and fraudulent practices; (v) provide a source of state and local
revenues through fees; and (vi) ensure that gaming licensees, to the extent
practicable, employ and contract with Louisiana residents, women and
minorities.
The Louisiana Act specifies certain restrictions and conditions relating to
the operation of riverboat gaming, including but not limited to the following:
(i) gaming is not permitted while a riverboat is docked, other than for forty-
five minutes between excursions, unless dangerous weather or water conditions
exist; (ii) each round trip riverboat cruise may not be less than three nor
more than eight hours in duration, subject to specified exceptions; (iii)
agents of the Board are permitted on board at any time during gaming
operations; (iv) gaming devices, equipment and supplies may be purchased or
leased from permitted suppliers; (v) gaming may only take place in the
designated river or waterway; (vi) gaming equipment may not be possessed,
maintained, or exhibited by any person on a riverboat except in the
specifically designated gaming area, or a secure area used for inspection,
repair, or storage of such equipment; (vii) wagers may be received only from a
person present on a licensed riverboat; (viii) persons under 21 are not
permitted in designated gaming areas; (ix) except for slot machine play,
wagers may be made only with tokens, chips, or electronic cards purchased from
the licensee aboard a riverboat, (x) licensees may only use docking facilities
and routes for which they are licensed and may only board and discharge
passengers at the riverboat's licensed berth; (xi) licensees must have
adequate protection and indemnity insurance; (xii) licensees must have all
necessary federal and state licenses, certificates and other regulatory
approvals prior to operating a riverboat and (xiii) gaming may only be
conducted in accordance with the terms of the license and the rules and
regulations adopted by the Board.
No person may receive any percentage of the profits from Boomtown New
Orleans without first being found suitable. In March 1994, Boomtown New
Orleans, its officers, key personnel, partners and persons holding a 5% or
greater interest in the partnership were found suitable by the predecessor to
the Board. A gaming license is deemed to be a privilege under Louisiana law
and as such may be denied, revoked, suspended, conditioned or limited at any
time by the Board. In issuing a license, the Board must find that the
applicant is a person of good character, honesty and integrity and the
applicant is a person whose prior activities, criminal record, if any,
reputation, habits and associations do not pose a threat to the public
interest of the State of Louisiana or to the effective regulation and control
of gaming, or create or enhance the dangers of unsuitable, unfair or illegal
practices, methods, and activities in the conduct of gaming or the carrying on
of business and financial
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arrangements in connection therewith. The Board will not grant any licenses
unless it finds that: (i) the applicant is capable of conducting gaming
operations, which means that the applicant can demonstrate the capability,
either through training, education, business experience, or a combination of
the above to operate a gaming casino; (ii) the proposed financing of the
riverboat and the gaming operations is adequate for the nature of the proposed
operation and from a source suitable and acceptable to the Board; (iii) the
applicant demonstrates a proven ability to operate a vessel of comparable
size, capacity and complexity to a riverboat in its application for a license;
(v) the applicant designates the docking facilities to be used by the
riverboat; (vi) the applicant shows adequate financial ability to construct
and maintain a riverboat; (vii) the applicant has a good faith plan to
recruit, train and upgrade minorities in all employment classifications; and
(viii) the applicant is of good moral character.
The Board may not award a license to any applicant who fails to provide
information and documentation to reveal any fact material to qualifications or
who supplies information which is untrue or misleading as to a material fact
pertaining to the qualification criteria; who has been convicted of or pled
NOLO CONTENDERE to an offense punishable by imprisonment of more than one
year; who is currently being prosecuted for or regarding whom charges are
pending in any jurisdiction of an offense punishable by more than one year
imprisonment; if any holder of 5% or more in the profits and losses of the
applicant has been convicted of or pled guilty or NOLO CONTENDERE to an
offense which at the time of conviction is punishable as a felony.
The transfer of a license is prohibited. The sale, assignment, transfer,
pledge, or disposition of securities which represent 5% or more of the total
outstanding shares issued by a holder of a license is subject to prior Board
approval. A security issued by a holder of a license must generally disclose
these restrictions.
Section 2501 of the regulations enacted by the Riverboat Gaming Division of
the Louisiana State Police (the investigative and enforcement entity under the
Louisiana regulatory scheme) pursuant to the Louisiana Act (the "Regulations")
requires prior written approval of the Board of all persons involved in the
sale, purchase, assignment, lease, grant or foreclosure of a security
interest, hypothecation, transfer, conveyance or acquisition of an ownership
interest (other than in a corporation) or economic interest of five percent
(5%) or more in any licensee.
Section 2523 of the Regulations requires notification to and prior approval
from the Board of the (a) application for, receipt, acceptance or modification
of a loan, or the (b) use of any cash, property, credit, loan or line of
credit, or the (c) guarantee or granting of other forms of security for a loan
by a licensee or person acting on a licensee's behalf. Exceptions to prior
written approval apply to any transaction for less than $2,500,000 in which
all of the lending institutions are federally regulated, or if the transaction
involves publicly registered debt and securities sold pursuant to a firm
underwriting agreement.
The failure of a licensee to comply with the requirements set forth above
may result in the suspension or revocation of that licensee's gaming license.
Additionally, if the Board finds that the individual owner or holder of a
security of a corporate license or intermediary company or any person with an
economic interest in a licensee is not qualified under the Louisiana Act, the
Board may require, under penalty of suspension or revocation of the license,
that the person not (a) receive dividends or interest on securities of the
corporation, (b) exercise directly or indirectly a right conferred by
securities of the corporation, (c) receive remuneration or economic benefit
from the licensee, or (d) continue in an ownership or economic interest in the
licensee.
A licensee must periodically report the following information to the Board,
which is not confidential and is to be available for public inspection; the
licensee's net gaming proceeds from all authorized games; the amount of net
gaming proceeds tax paid; and all quarterly and annual financial statements
presenting historical data that are submitted to the Board, including annual
financial statements that have been audited by an independent certified public
accountant.
The Board has adopted rules governing the method for approval of the area of
operations, the rules and odds of authorized games and devices permitted, and
prescribing grounds and procedures for the revocation, limitation or
suspension of licenses and permits.
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On April 19, 1996, the Louisiana legislature adopted legislation requiring
statewide local elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit licensed riverboat gaming, licensed video poker
gaming, and licensed land-based gaming in Orleans Parish. The applicable local
election took place on November 5, 1996, and approximately two thirds of the
voters in the parish of Boomtown New Orleans voted to continue licensed
riverboat and video poker gaming. However, it is noteworthy that the current
legislation does not provide for any moratorium on future local elections on
gaming. Thus, although the Company does not anticipate another election in the
near future, there can be no assurance that a new election will not be called
to discontinue gaming within the parish.
California. Operation of California card club casinos such as the Hollywood
Park-Casino and Crystal Park is governed by the California Gaming Registration
Act (the "CGRA") and is subject to the oversight of the California Attorney
General (the "Attorney General"). Under the CGRA, a California card club
casino may only offer certain forms of card games, including Poker, Pai Gow,
and California Blackjack. A card club casino may not offer many of the card
games and other games of chance permitted in Nevada and other jurisdictions
where Boomtown conducts business.
Although the California Attorney General takes the position that, under the
CGRA, only individuals, partnerships or privately-held companies (as opposed
to publicly-traded companies such as Hollywood Park) are eligible to operate
card club casinos, the 1995 enactment of California Senate Bill 100 ("SB-100")
also permits a publicly-owned racing association to own and operate a card
club casino if it also owns and operates a race track on the same premises.
The provisions of SB-100 expire on January 1, 1999, unless the California
legislature enacts a comprehensive scheme for the regulation of gaming under
the jurisdiction of a gaming control commission. There can be no assurance
that such legislation will be adopted by such date or that the legislature
will extend the deadline. See "Risk Factors--Governmental Regulation." SB-100
also imposes a moratorium through 1998 on public votes or referendums to
approve the enactment of any city ordinance allowing additional card club
casinos in California.
Pursuant to the CGRA, the operator of a card club casino, and its officers,
directors and certain stockholders are required to be registered by the
Attorney General and licensed by the municipality in which it is located. In
September 1995, the Attorney General granted Hollywood Park a provisional
registration under SB-100 to operate the Hollywood Park-Casino which was
renewed on September 1, 1996. A permanent registration will not be granted
until the California Department of Justice completes its review of the
applications of Hollywood Park and its corporate officers and directors. The
Attorney General has broad discretion to deny a gaming registration and may
impose reasonably necessary conditions upon the granting of a gaming
registration. Grounds for denial include felony convictions, criminal acts,
convictions involving dishonesty, illegal gambling activities, and false
statements on a gaming application. Such grounds also generally include having
a financial interest in a business or organization that engages in gaming
activities that are illegal under California law; however, this provision
contains an exception for publicly-traded racing associations such as
Hollywood Park. In addition, the Attorney General possesses broad authority to
suspend or revoke a gaming registration on any of the foregoing grounds, as
well as for violation of any federal, state or local gambling law, failure to
take reasonable steps to prevent dishonest acts or illegal activities on the
premises of the card club casino, failure to cooperate with the Attorney
General in its oversight of the card club casino and failure to comply with
any condition of the registration.
Hollywood Park's operations at the Hollywood Park-Casino are also regulated
by a City of Inglewood ordinance (the "Inglewood Ordinance"). The Inglewood
Ordinance provides for a single card club casino located on the premises of
the Hollywood Park Race Track and requires Hollywood Park, as the operator of
the Hollywood Park-Casino, to be licensed by the City of Inglewood and to
obtain a card club operations certificate. The Inglewood City Council has
approved Hollywood Park's application for a gaming license and on August 21,
1996 Hollywood Park was granted the required card club operations certificate.
Hollywood Park's city gaming license and operations certificate are valid for
five years unless revoked, suspended or surrendered, and are renewable
annually thereafter.
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In addition to Hollywood Park, the Inglewood Ordinance also requires all
employees, each beneficial owner of at least 10% of the outstanding Hollywood
Park common stock, and certain key employees of Hollywood Park to have either
a permit or a valid registration from the City of Inglewood. The license to
operate the card club casino may be suspended or revoked if such a stockholder
or employee fails to obtain a permit. Without the prior consent of the City of
Inglewood, a 10% stockholder may not transfer or sell its Hollywood Park
shares to any person who is, or by reason of such transaction would become, a
10% stockholder. These licensing requirements and transfer restrictions apply
to all 10% stockholders of Hollywood Park, and no waiver from such
requirements or restrictions are provided for institutional or other investors
who purchase for investment purposes only.
The City of Compton has granted the operator of Crystal Park all municipal
gaming licenses necessary for operation of Crystal Park, and the operator had
been operating under a conditional registration from the California Department
of Justice. However, the Attorney General recently revoked this license, and
CEI is attempting to have it reinstated. See "Business--Gaming Operations--
Crystal Park."
Racing Operations
California. The California Horse Racing Board ("CHRB") has jurisdiction and
supervision over all horse race meets in the State of California. Licenses
granted by the CHRB must be obtained annually by Hollywood Park in order to
conduct both the Spring/Summer and Autumn race meets. The CHRB has the
authority, when granting any license, to vary the number of weeks allocated to
any applicant and the time of year in which such allocation falls. The CHRB
may, at its discretion, refuse to issue a license to a race track operator
such as Hollywood Park that has a financial interest in another licensed race
track operation or in the conduct of horse racing meets by any other person at
any other race track in California. Although no future assurance can be given,
Hollywood Park has applied for and received a license to conduct thoroughbred
horse race meets every year since 1938, except for 1942 and 1943 due to
wartime activities.
Arizona. The Arizona Racing Commission ("ARC") has jurisdiction and
supervision over all racing activities in the State of Arizona. The ARC issues
live racing permits that are valid for three years, and off-track permits are
granted on a year to year basis. In 1994, Turf Paradise received a live racing
permit from the ARC, which will remain in force through the 1996/1997 race
year. The permit specifies that live racing may be conducted between the first
week of September through the third week of May and that, so long as there is
live racing at Turf Paradise at least five days a week, Turf Paradise may have
simulcast wagering on days when there is no live racing.
Kansas. The Kansas Racing Commission ("KRC") has jurisdiction and
supervision over all racing activity in the State of Kansas. The KRC has
granted Sunflower a license to own and manage the Woodlands facility; however,
the license to conduct races for all race days until the year 2014 has been
granted to TRAK East, an unaffiliated non-profit entity. Sunflower in turn
provides management services to TRAK East. Sunflower has an agreement with
TRAK East to provide the physical race tracks along with management and
consulting services for twenty-five years, with options to renew for one or
more successive five year terms.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company
Each of the executive officers of the Company holds office at the pleasure
of the Board of Directors of the Company. The current directors and executive
officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
R.D. Hubbard............. 62 Chairman of the Board, Chief Executive Officer and
member of the Office of the Chairman
Harry Ornest............. 74 Vice Chairman of the Board
Richard Goeglein......... 63 Director
Peter L. Harris.......... 53 Director
J.R. Johnson............. 77 Director
Robert T. Manfuso........ 59 Director
Timothy J. Parrott....... 50 Director and Member of the Office of the Chairman
for administration of Boomtown
Lynn P. Reitnouer........ 64 Director
Herman Sarkowsky......... 72 Director
Warren B. Williamson..... 69 Director
Delbert W. Yocam......... 52 Director
Donald M. Robbins........ 49 President of Hollywood Park, Inc., President of
Racing and Secretary
G. Michael Finnigan...... 49 President, Sports and Entertainment, Executive
Vice President, Treasurer, Chief Financial Officer
and Member of the Office of the Chairman
</TABLE>
Mr. Hubbard has been a Director of the Company since 1990; Chairman of the
Board and Chief Executive Officer of the Company since September 1991 and
member of the Office of the Chairman since June 1997; Chairman of the Board
and Chief Executive Officer of Hollywood Park Operating Company since February
1991; President of Hollywood Park Operating Company from February to July
1991; Chairman, AFG Industries, Inc. and its parent company, Clarity Holdings
Corp. (glass manufacturing) and director of AFG Industries, Inc.'s
subsidiaries, from 1978 to July 1993; Chairman of the Board (and 60%
stockholder until March 1994) of Sunflower (The Woodlands Race Tracks--
greyhound racing and horse racing) from 1988 to March 1994; President,
Director, and owner of Ruidoso Downs Racing, Inc. (horse racing) since 1988;
Chairman of the Board, Chief Executive Officer and sole stockholder, Multnomah
Kennel Club, Inc. (greyhound racing) since December 1991; Owner and breeder of
numerous thoroughbreds and quarter horses since 1962. Sunflower, a wholly-
owned subsidiary of the Company, filed for reorganization under Chapter 11 of
the U.S. Bankruptcy Code on May 17, 1996.
Mr. Ornest has been a Director of the Company since 1991; Vice Chairman of
the Board of the Company since September 1991; Director, Hollywood Park
Operating Company since 1988; Vice Chairman of the Board, Hollywood Park
Operating Company since February 1991; Owner and Chairman, Toronto Argonauts
Football Club (Canadian Football League club) from 1988 to May 1991; Owner,
St. Louis Blues (National Hockey League club) 1983 to 1987, Owner, St. Louis
Arena, 1983 to 1987; Owner and Founder, Vancouver Canadians (Pacific Coast
Baseball League club), 1977 to 1981; Hollywood Park stockholder, 1962 to
present.
Mr. Goeglein has served as a Director of the Company since June 1997;
President of Aladdin Gaming LLC since January 1997; Director of Boomtown, Inc.
from October 1992 to June 1997; Director of AST Research, Inc. since May 1987;
Director of Platinum Software Corp. since October 1994; President and
principal shareholder of Gaming Associates, Inc. since 1990; President and
Chief Operating Officer of Holiday Corporation (parent corporation of Holiday
Inns and Harrah's Hotels and Casinos) from 1984 to 1987; private investor
since 1987.
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<PAGE>
Mr. Harris has served as a Director of the Company since June 1997; Director
of Boomtown, Inc. from April 1994 to June 1997; Director of Onsale Inc. since
1996; Director of National Wonders Inc. since 1996; Director of Pacific
Sunwear of California, Inc. since 1994; President and Chief Executive Officer
of Expressly Portraits, Inc. (a retail chain of portrait photography studios)
since August 1995; Reorganization Administrator of American Fashion Jewels (a
retail company) and then as Chief Executive Officer of Accolade, Inc. (a video
and personal computer games company) from 1993 to 1995; President and Chief
Executive Officer of F.A.O. Schwarz from 1985 to 1992.
Mr. Johnson has been a Director of the Company since 1991; Director,
Hollywood Park Operating Company from February 1991 to January 1992; Chairman,
President and Chief Executive Officer, NEWMAR (marine electronics
manufacturing) since 1980; Trustee, Westminster College.
Mr. Manfuso has been a Director of the Company since 1991; Director,
Hollywood Park Operating Company from February 1991 to January 1992; Co-
Chairman of the Board, Laurel Racing Association (horse race track management)
from 1984 to February 1994; Vice Chairman of the Board, The Maryland Jockey
Club (horse racing) from 1986 to February 1994; Executive Vice President,
Laurel Racing Association from 1984 to May 1990; Executive Vice President, The
Maryland Jockey Club from 1986 to June 1990; Director, Maryland Horse Breeders
Association from 1984 to 1992 and since 1993; Member, Executive Committee,
Maryland Million since 1991.
Mr. Parrott has served as a Director of the Company and member of the Office
of the Chairman since June 1997; Chairman of the Board and Chief Executive
Officer of Boomtown, Inc. since September 1992; President and Treasurer of
Boomtown, Inc. from June 1987 to September 1992; Director of Boomtown, Inc.
since 1987; Chairman of the Board and Chief Executive Officer of Boomtown
Hotel & Casino, Inc. since May 1988; Chief Executive Officer of Parrott
Investment Company (a family-held investment company with agricultural
interests in California) since April 1995; Director of The Chronicle
Publishing Company since April 1995.
Mr. Reitnouer has been a Director of the Company since 1991; Director,
Hollywood Park Operating Company from September 1991 to January 1992; Partner,
Crowell Weedon & Co. (stock brokerage) since 1969; Director of COHR, Inc.,
since 1986 and former Chairman of the Board of COHR, Inc.; Director, President
and Regent, Forest Lawn Memorial Parks Association since 1975; Trustee,
University of California Santa Barbara Foundation since 1992.
Mr. Sarkowsky has been a Director of the Company since 1991; Director,
Hollywood Park Operating Company from February 1991 to January 1992; Owner,
Sarkowsky Investment Corporation and SPF Holding, Inc. (real estate
development and investments) since 1980; Director, The Sarkowsky Foundation
(charitable foundation) since 1982; thoroughbred horse breeder and owner since
1959; Director, Synetics, Inc. (porous plastic manufacturing); Director,
Seafirst Corporation (banking); Director, Eagle Hardware & Garden, since 1990.
Mr. Williamson has been a Director of the Company since 1991; Vice President
and Secretary of the Company from September 1991 to August 1996; Chairman of
the Board and Chief Executive Officer of the Company from 1989 to September
1991; Director, Hollywood Park Operating Company since 1985; Vice President
and Secretary, Hollywood Park Operating Company from February 1991 to August
1996; Secretary and Treasurer, Hollywood Park Operating Company from 1985 to
November 1990; Chairman and Chief Executive Officer, Chandis Securities Co.
(holding company) since 1985; Director, Times Mirror Company; Trustee,
Hospital of the Good Samaritan; Trustee, California Thoroughbred Breeders
Foundation; Trustee, Claremont McKenna College; Chairman Emeritus, Art Center
College of Design; Breeder and racer of thoroughbreds since 1970.
Mr. Yocam has served as a Director of the Company since June 1997; Director
of Boomtown, Inc. from December 1995 to June 1997; Chairman and Chief
Executive Officer of Borland International since December 1996; Director of
Adobe Systems, Inc., since February 1991; Director of Oracle Corporation since
March 1992;
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<PAGE>
Independent consultant from November 1994 to December 1996; President, Chief
Operating Officer and a Director of Tektronix, Inc from September 1992 to
November 1994; Independent consultant from November 1989 to September 1992.
Mr. Robbins has been the Company's President of Racing since February 1994;
President of the Company since September 1991; Secretary of the Company since
1996 (formerly Assistant Secretary since September 1991); General Manager of
Hollywood Park Operating Company from 1986 to February 1994; Executive Vice
President of Hollywood Park Operating Company since 1988, and President and
Secretary of Hollywood Park Operating Company since July 1991.
Mr. Finnigan has been the Company's President, Sports and Entertainment,
since January 1996 and a member of the Office of the Chairman since June 1997;
President, Gaming and Entertainment, from February 1994 to January 1996;
Executive Vice President and Chief Financial Officer of the Company and of
Hollywood Park Operating Company since March 1989; and Treasurer of the
Company and of Hollywood Park Operating Company since March 1992; Chairman of
the Board of Southern California Special Olympics since 1996; Chairman of the
Board of Centinela Hospital since 1996; and Director of the Shoemaker
Foundation since 1993. Mr. Finnigan also serves as Secretary and Treasurer of
Sunflower Racing, Inc., a wholly-owned subsidiary of Hollywood Park, which
filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code on May
17, 1996.
In addition, upon the consummation of the strategic combination with
Boomtown, the Company established an Office of the Chairman comprised of
Hollywood Park's Chief Executive Officer, Hollywood Park's President of Sports
and Entertainment and the Chief Executive Officer of Boomtown. The Office of
the Chairman provides advice to the Chief Executive Officer of Hollywood Park
on such matters as he may request and undertakes such other responsibilities
as he may delegate to the Office of the Chairman from time to time.
HPOC
Each of the executive officers of HPOC holds office at the pleasure of the
Board of Directors of HPOC. The current directors and executive officers of
HPOC are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
R.D. Hubbard............ 62 Chairman of the Board and Chief Executive Officer
Harry Ornest............ 74 Vice Chairman of the Board
Warren B. Williamson.... 68 Director
Donald M. Robbins....... 49 President and Secretary
G. Michael Finnigan..... 49 Executive Vice President, Treasurer and Chief Financial Officer
</TABLE>
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the name, address (address is provided for
persons listed as beneficial owners of 5% or more of the Common Stock) and
number of shares and percent of the outstanding Hollywood Park Common Stock
beneficially owned as of August 29, 1997, by each person known to the Board of
Directors of Hollywood Park to be the beneficial owner of 5% or more of the
outstanding shares of Hollywood Park Common Stock, each Director, each Named
Officer and all current Directors and Executive Officers as a group.
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(a) OUTSTANDING(b)
- ------------------------------------ ------------ --------------
<S> <C> <C>
R.D. Hubbard....................................... 2,648,174(c) 10.1%
Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Legg Mason, Inc. .................................. 2,474,450(d) 9.5%
111 South Calvert Street
Baltimore, Maryland 21202
State of Wisconsin Investment Board................ 2,323,875(e) 8.9%
P.O. Box 7842
Madison, Wisconsin 53707
Harry Ornest....................................... 620,925(f) 2.4%
Timothy J. Parrott................................. 502,652(g) 1.9%
J.R. Johnson....................................... 372,760(h) 1.4%
Warren B. Williamson............................... 151,917(i) *
Lynn P. Reitnouer.................................. 54,000(j) *
Robert T. Manfuso.................................. 32,333(k) *
Herman Sarkowsky................................... 24,938(l) *
Richard J. Goeglein................................ 6,937(m) *
Peter L. Harris.................................... 4,875(n) *
Delbert W. Yocam................................... 3,250(o) *
G. Michael Finnigan................................ 53,748(p) *
Donald M. Robbins.................................. 40,672(q) *
Current Directors and Executive
Officers as a group (13 persons).................. 4,517,181(r) 17.0%
</TABLE>
- --------
* Less than one percent (1%) of the outstanding common shares.
(a) Reflects the conversion of each of Hollywood Park's outstanding Depositary
Shares into 0.8333 shares of Hollywood Park Common Stock effective August
28, 1997.
(b) Assumes exercise of stock options beneficially owned by the named
individual or entity into shares of Hollywood Park Common Stock. Based on
26,085,219 shares outstanding as of August 29, 1997.
(c) Includes 28,333 shares of Hollywood Park Common Stock which Mr. Hubbard
has the right to acquire upon the exercise of options which are
exercisable within 60 days of August 29, 1997.
(d) Includes 562,500 shares of Hollywood Park Common Stock received by Legg
Mason Special Investment Trust, Inc. (an affiliate of Legg Mason, Inc.) in
connection with the Boomtown Merger. The Company has assumed that Legg
Mason, Inc. is a beneficial owner of such shares. Based upon information
provided by the stockholder in Schedule 13G filed with the Commission on
February 10, 1997 and upon information received from Legg Mason Special
Investment Trust, Inc. as of August 1996.
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<PAGE>
(e) Based upon information provided by the stockholder in Schedules 13G filed
with the Commission on February 1, 1997 and February 14, 1997. The
Schedule 13G filed February 1, 1997 related to beneficial ownership of
shares of Hollywood Park Common Stock of Boomtown, Inc. prior to the
Boomtown Merger.
(f) Includes 70,000 shares of Hollywood Park Common Stock held by The Ornest
Family Foundation, for which Mr. Ornest and his wife Ruth Ornest act as
trustees. (Mr. Ornest disclaims any pecuniary interest in these shares.)
In addition, as trustees of the Harry and Ruth Ornest Trust, Mr. Ornest
and his wife share the power to vote 60% of the interest in the Ornest
Family Partnership (the "Partnership"), which in turn has the power to
dispose of the 536,300 shares of Hollywood Park Common Stock held in the
name of the Partnership. Also includes 4,000 shares of Hollywood Park
Common Stock which Mr. Ornest has the right to acquire upon the exercise
of options which are exercisable within 60 days of August 29, 1997.
(g) Includes 288,277 shares of Hollywood Park Common Stock which Mr. Parrott
has the right to acquire pursuant to options assumed by the Company in
connection with the Boomtown Merger which are exercisable within sixty
days of August 29, 1997.
(h) Includes 4,000 shares of Hollywood Park Common Stock which Mr. Johnson has
the right to acquire upon the exercise of options which are exercisable
within 60 days of August 29, 1997.
(i) Includes 4,000 shares of Hollywood Park Common Stock which Mr. Williamson
has the right to acquire upon the exercise of options which are
exercisable within 60 days of August 29, 1997.
(j) Includes 4,000 shares of Hollywood Park Common Stock which Mr. Reitnouer
has the right to acquire upon the exercise of options which are
exercisable within 60 days of August 29, 1997.
(k) Includes 4,000 shares of Hollywood Park Common Stock which Mr. Manfuso has
the right to acquire upon the exercise of options which are exercisable
within 60 days of August 29, 1997.
(l) Includes 4,000 shares of Hollywood Park Common Stock which Mr. Sarkowsky
has the right to acquire upon the exercise of options which are
exercisable within 60 days of August 29, 1997.
(m) Includes 5,687 shares of Hollywood Park Common Stock which Mr. Goeglein
has the right to acquire pursuant to options assumed by the Company in
connection with the Boomtown Merger which are exercisable within sixty
days of August 29, 1997.
(n) Includes 4,875 shares of Hollywood Park Common Stock which Mr. Harris has
the right to acquire pursuant to options assumed by the Company in
connection with the Boomtown Merger which are exercisable within sixty
days of August 29, 1997.
(o) Includes 3,250 shares of Hollywood Park Common Stock which Mr. Yocam has
the right to acquire pursuant to options assumed by the Company in
connection with the Boomtown Merger which are exercisable within sixty
days of August 29, 1997.
(p) Includes 38,334 shares of Hollywood Park Common Stock which Mr. Finnigan
has the right to acquire pursuant to options which are exercisable within
sixty days of August 29, 1997.
(q) Includes 38,334 shares of Hollywood Park Common Stock which Mr. Robbins
has the right to acquire pursuant to options which are exercisable within
sixty days of August 29, 1997.
(r) Includes 431,090 shares of Hollywood Park Common Stock of which the
Directors and Executive Officers may be deemed to have beneficial
ownership following the exercise of options to purchase Hollywood Park
Common Stock which are exercisable within sixty days of August 29, 1997.
Excluding such shares, the Directors and Executive Officers of Hollywood
Park have beneficial ownership of 4,086,091 shares of Hollywood Park
Common Stock, which represents 15.7% of the shares of Hollywood Park
Common Stock outstanding as of August 29, 1997.
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<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
The following is a summary of the material terms of the Bank Credit Facility
and the Boomtown Notes.
BANK CREDIT FACILITY
In connection with the acquisition of Boomtown, the Company entered into a
Reducing Revolving Loan Agreement (the "Bank Credit Facility") with a
syndicate of banks (the "Banks") for whom Bank of America NT&SA acts as
Managing Agent. The Bank Credit Facility provides the Company with a revolving
line of credit of up to approximately $100 million, maturing on June 30, 2002.
However, upon the occurrence of a Change of Control, as defined in the Bank
Credit Facility, the lenders have the right to terminate the Bank Credit
Facility. The Bank Credit Facility provides for a letter of credit sub-
facility of $10 million and a swing line sub-facility provided by the Managing
Agent of up to $10 million.
The commitment under the revolving line of credit has been reduced dollar-
for-dollar by the aggregate principal amount of the Old Notes issued by the
Issuers. Further, commencing September 30, 1999 (the "Initial Reduction
Date"), and on the last day of each third calendar month thereafter, the
amount available for borrowing under the line of credit will decrease by 7.5%
of the commitment in effect on the Initial Reduction Date. Commencing on
September 30, 2001, and on the last day of each third calendar month
thereafter, the amount available for borrowing under the line of credit will
decrease by 10.0% of the commitment in effect on the Initial Reduction Date.
Borrowings under the facility bear interest at an annual rate determined, at
the election of the Company, by reference to the "Eurodollar Rate" (for
interest periods of 1, 2, 3 or 6 months) or the "Reference Rate", as such
terms are respectively defined in the Bank Credit Facility, plus margins which
vary depending on the Company's ratio of funded debt to EBITDA. The margins
start at 1.250% for LIBOR loans, and at 0.250% for Base Rate loans, in
instances where the Company's funded debt to EBITDA ratio is less than 1.50.
Thereafter, the margins for each type of loan increases by 25 basis points for
each increase in the ratio of funded debt to EBITDA of 50 basis points or
more, up to 2.625% for LIBOR loans and 1.625% for Base Rate loans. However, if
the ratio of senior funded debt to EBITDA exceeds 2.50, the applicable margins
would increase to 3.25% for LIBOR loans, and 2.25% for Base Rate loans.
Thereafter, the margins would increase by 25 basis points for each increase in
the ratio of senior funded debt to EBITDA of 50 basis points or more, up to a
maximum of 4.25% for LIBOR loans and 3.25% for Base Rate loans.
The commitment fee for the facility also varies based on the ratio of funded
debt to EBITDA, starting from 31.25 basis points when the ratio is less than
1.00, and increasing by 6.25 basis points for each increase in the ratio of
0.50, up to a maximum of 50 basis points. Based on this limitation, the amount
available under the Bank Credit Facility, after giving effect to this
Offering, is expected to be approximately $74.7 million.
The Bank Credit Facility is secured by a first lien on substantially all of
the assets of the Company and its significant subsidiaries, except for
specified permitted liens incurred in connection with, or existing at the time
of, acquisition of property or subsidiaries, including, in the case of
Boomtown and its subsidiaries, the prior lien securing the Boomtown Notes.
In addition, the Bank Credit Facility imposes various customary affirmative
covenants on the Issuers and the Guarantors, including, among others,
reporting covenants, covenants to maintain insurance, comply with laws,
maintain properties and other customary covenants for a financing of this
nature.
The Bank Credit Facility imposes various negative covenants on the Issuers
and the Guarantors including, without limitation, (i) restrictions on the
payment of subordinated obligations, (ii) disposition of property,
(iii) mergers, (iv) hostile acquisitions, (v) payment of dividends and other
distributions, (vi) change in the nature of the Company's business, (vii)
restrictions on the incurrence of additional indebtedness including issuances
of guaranties, (viii) restrictions on capital expenditures and operating
leases, (ix) restrictions on investments, (x) restrictions on transactions
with affiliates, (xi) restrictions on liens and negative pledges, (xii)
interest coverage ratio, and funded debt to EBITDA ratio, and (xiii)
restrictions on amendments and modifications of subordinated indebtedness.
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<PAGE>
Events of default under the loan agreement include, among other things: (i)
failure to make payments when due, (ii) breach of representations or
warranties in the loan agreement, (iii) certain events of insolvency,
(iv) failure to pay other indebtedness for borrowed money for debts of $5.0
million or more, or other breach or default under any such indebtedness
allowing the holder or lender thereunder to accelerate the maturity thereof,
or require same to be redeemed or repurchased, or an offer therefor to be
made, (v) any event occurs which gives the holder/lender under a subordinated
obligation the right to accelerate the maturity thereof, (vi) final judgement
in an amount in excess of $1.0 million which has not been stayed or satisfied
within 30 days of the entry thereof, (vii) revocation of the licenses
affecting gaming operations accounting for 5% or more of consolidated gross
revenues.
BOOMTOWN NOTES
In November 1993, Boomtown issued and sold an aggregate of $103.5 million
principal amount of 11.5% First Mortgage Notes due November 1, 2003 (the
"Boomtown Notes") and warrants to purchase shares of Boomtown common stock.
The Boomtown Notes and Boomtown warrants were sold in units in a private
placement to certain qualified institutional buyers (as defined in Rule 144A
under the Securities Act) and institutional "accredited investors" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and pursuant to
sales occurring outside of the United States within the meaning of Regulation
S. Substantially all of such originally issued Boomtown Notes were exchanged
for new Boomtown Notes of like principal amount registered with the
Commission, which are substantially identical to the original Boomtown Notes.
In July 1997, in connection with the Merger and the Blue Diamond Swap,
Boomtown repurchased and retired an aggregate of approximately $103 million in
principal amount of the Boomtown Notes at a purchase price of $1,085 per
$1,000 in principal amount (together with accrued interest thereon) pursuant
to a tender offer (the "Boomtown Note Tender Offer"). Hollywood Park made a
loan to Boomtown of the funds necessary for Boomtown to repurchase such
tendered Boomtown Notes. Those funds were drawn under the Bank Credit
Facility. Therefore, there remains outstanding an aggregate of approximately
$1 million in principal amount of the Boomtown Notes. Holders who tendered
their Boomtown Notes consented to certain amendments to the indenture
governing the Boomtown Notes including the elimination of many of the
restrictive covenants, including the covenants restricting incurrences of
indebtedness and liens and limiting investments, dividends, equity repurchases
and other restricted payments. In general, the Boomtown Notes are subject to
redemption at Boomtown's option on or after November 1, 1998 at redemption
prices (expressed as a percentage of the principal amount thereof) commencing
at 104.25% in 1998 and declining ratably to 100.00% in 2001 and thereafter of
their principal amount, plus accrued and unpaid interest thereon to the
redemption date. The remaining Boomtown Notes are secured by substantially all
of Boomtown's assets and are guaranteed on a secured basis by each of Boomtown
Hotel & Casino, Inc., Louisiana-I Gaming, a Louisiana Partnership in
commendam, (the "Louisiana Partnership"), Louisiana Gaming Enterprises, Inc.
(the general partner of the Louisiana Partnership), the Mississippi
Partnership, and Bayview Yacht Club, Inc. (the general partner of the
Mississippi Partnership), all of which are subsidiaries of Boomtown.
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<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Old Notes were issued and the New Notes will be issued pursuant to an
Indenture (the "Indenture") among the Issuers, the Guarantors and the Bank of
New York, as trustee (the "Trustee"). The Old Notes are, and the New Notes
will be, guaranteed pursuant to joint and several full and unconditional
guaranties by each of the existing and future Material Restricted Subsidiaries
of the Issuers, initially all of the Issuers' Subsidiaries except HP Casino,
Inc., Sunflower Racing, Inc., SR Food & Beverage Company (a subsidiary of
Sunflower Racing, Inc.), and the following subsidiaries of Boomtown, Inc.:
Boomtown Missouri, Inc., Boomtown Council Bluffs, Inc., Boomtown Iowa, L.C.,
Old River Enterprises, Blue Diamond Hotel and Casino, Inc. and its subsidiary
Blue Diamond Disposition Corporation, Boomtown Indiana, Inc., Boomtown
Hoosier, Inc., Boomtown Riverboat, Inc., Pinnacle Gaming Development Corp.,
and Switzerland County Development Corporation. As co-obligors, each of the
Company and HPOC are, and will be, fully and unconditionally obligated for the
payment of the Old Notes and New Notes, respectively. The Company and HPOC
have entered into an agreement that, as between the Company and HPOC, HPOC
would be primarily responsible for the payments on the Notes. However, such
agreement in no way limits the obligations of the Company under the Notes. The
terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(the "TIA"). The Notes are subject to all such terms, and holders of Notes are
referred to the Indenture and the TIA for a statement thereof.
The following is a summary of the material provisions of the Indenture, does
not purport to be complete and is qualified in its entirety by reference to
the Indenture, including the definitions therein of certain terms used below.
Copies of the Indenture and Registration Rights Agreement are available as set
forth below under "--Additional Information." The definitions of certain terms
used in the following summary are set forth below under "--Certain
Definitions." For purposes of this summary, the term "Company" refers only to
Hollywood Park, Inc. and not to any of its Subsidiaries or Affiliates.
The Guaranty of the New Notes by the entity which owns and operates Boomtown
Reno and will require consent of the Gaming Authorities in Nevada.
The Old Notes and the related Guaranties are, and the New Notes and the
related Guaranties will be, senior subordinated obligations of the Issuers and
the Guarantors, respectively, and rank and will rank junior in right of
payment to all existing and future Senior Debt and senior in right of payment
to all existing and future subordinated indebtedness of the Obligors. The Old
Notes and the related Guaranties are, and the New Notes and the related
Guaranties will be, effectively subordinated to all secured Indebtedness of
the Obligors. As of June 30, 1997, on an as-adjusted basis after giving effect
to the issuance of the Old Notes and the application of the proceeds
therefrom, the Obligors would have had approximately $136.7 million of total
Indebtedness, $11.7 million of which would have constituted Senior Debt
(including secured Indebtedness), plus an aggregate of approximately $13.2
million of accounts payable ranking pari passu to the Notes. The Indenture
will permit the Obligors to incur substantial additional indebtedness,
including Senior Debt and secured indebtedness, in the future. See "--Certain
Covenants", "Risk Factors--Subordination and Ranking" and "--Dependence of
Issuers on Guarantors for Repayment of Notes; Suretyship Defenses."
As of the Issue Date, all of the Issuers' Material Subsidiaries were
Restricted Subsidiaries and Guarantors. The Issuers are able to designate
current or future Subsidiaries of the Issuers as Restricted Subsidiaries or as
Unrestricted Subsidiaries. Unrestricted Subsidiaries are not subject to the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $125 million and will
mature on August 1, 2007. The Notes bear interest at the rate of 9.5% per
annum, payable in cash semi-annually in arrears on February 1 and August 1 of
each year, commencing February 1, 1998, to holders of record on the
immediately preceding January 15 and July 15. Interest on the Notes accrues
from the most recent date to which interest has been paid
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or, if no interest has been paid, from the Issue Date. The New Notes will bear
interest from their date of issuance.
Interest will accrue on the Old Notes that are tendered in exchange for the
New Notes through the issue date of the New Notes. Holders of Old Notes that
are accepted for exchange will not receive interest that is accrued but unpaid
on the Old Notes at the time of exchange, but such interest will be payable,
together with interest on the New Notes, on the first Interest Payment Date
after the Expiration Date. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months. Principal, premium, if any, and
interest and Liquidated Damages, if any, on the Notes are payable at the
office or agency of the Issuers maintained for such purpose within the City
and State of New York or, at the option of the Issuers, payment of interest
and Liquidated Damages, if any, may be made by check mailed to the holders of
the Notes at their respective addresses set forth in the register of holders
of Notes; provided that all payments with respect to Global Notes, and any
definitive Notes any holder of which has given wire transfer instructions to
the Issuers, will be required to be made by wire transfer of immediately
available funds to the accounts specified by such holder. Until otherwise
designated by the Issuers, the Issuers' office or agency in New York will be
the office of the Trustee maintained for such purpose. The Old Notes were, and
the New Notes will be, issued in denominations of $1,000 and integral
multiples thereof.
OPTIONAL REDEMPTION
The Issuers do not have the option to redeem the Notes prior to August 1,
2002. Thereafter, the Issuers have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of the principal amount thereof)
set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on August 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002.............................................................. 104.750%
2003.............................................................. 102.375
2004.............................................................. 101.188
2005 and thereafter............................................... 100.000%
</TABLE>
Notwithstanding the foregoing, (a) the Issuers may, during the first 36
months after the Issue Date, redeem up to 25% of the initially outstanding
aggregate principal amount of Notes with the net cash proceeds of one or more
Public Equity Offerings of common stock of the Company at a redemption price
in cash of 109.50% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date;
provided that at least 75% of the initially outstanding aggregate principal
amount of Notes remains outstanding immediately after the occurrence of such
redemption; and provided, further, that notice of any such redemption shall be
given by the Issuers to the holders and the Trustee within 15 days after the
consummation of any such Public Equity Offering and such redemption shall
occur within 60 days of the date of such notice and (b) if any Gaming
Authority requires that a holder or beneficial owner of Notes must be
licensed, qualified or found suitable under any applicable gaming law and such
holder or beneficial owner (i) fails to apply for a license, qualification or
a finding of suitability within 30 days (or such shorter period as may be
required by the applicable Gaming Authority) after being requested to do so by
the Gaming Authority or (ii) is denied such license or qualification or not
found suitable, the Issuers shall have the right, at their option, (A) to
require any such holder or beneficial owner to dispose of its Notes within 30
days (or such earlier date as may be required by the applicable Gaming
Authority) of receipt of such notice or finding by such Gaming Authority or
(B) to call for the redemption of the Notes of such holder or beneficial owner
at a redemption price equal to the least of (1) the principal amount thereof,
(2) the price at which such holder or beneficial owner acquired the Notes, in
either case, together with accrued interest and Liquidated Damages, if any, to
the earlier of the date of redemption or the date of the denial of license or
qualification or of the finding of unsuitability by such Gaming Authority or
(3) such other lesser amount as may be required by any Gaming Authority. The
Issuers shall notify the Trustee in writing of any such redemption as soon as
practicable. The holder or beneficial owner applying for license,
qualification or a finding of suitability must pay all costs of the licensure
or investigation for such qualification or finding of suitability.
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SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, the Trustee
will select the Notes to be redeemed among the holders of Notes in compliance
with the requirements of the principal national securities exchange, if any,
on which the Notes are listed, or, if the Notes are not so listed, on a pro
rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate; provided that no Notes of $1,000 or less shall
be redeemed in part. Notices of redemption shall be mailed by first class mail
at least 30 but not more than 60 days before the redemption date to each
holder of Notes to be redeemed at its registered address. Notices of
redemption may not be conditional. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the
holder thereof upon cancellation of the original Note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
Except as described below under "Repurchase at the Option of Holders," the
Issuers are not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
SUBORDINATION
The payment of principal, Liquidated Damages, if any, and interest on the
Notes and the related Guaranties are, and on the New Notes and the related
Guaranties will be, subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Debt, whether
outstanding on the Issue Date or thereafter created, Incurred, assumed or
guaranteed.
Upon any distribution to creditors of any Obligor in a liquidation or
dissolution of such Obligor or in a proceeding under Bankruptcy Law relating
to such Obligor or its property, in an assignment for the benefit of creditors
or any marshaling of such Obligor's assets and liabilities, (i) the holders of
Senior Debt will be entitled to receive payment in full of all Obligations in
respect of such Senior Debt (including Accrued Bankruptcy Interest) and to
have all outstanding Letter of Credit Obligations and applicable Hedging
Obligations fully cash collateralized before the Trustee or the holders shall
be entitled to receive any payment or distribution of Obligations in respect
of the Notes (except that the Trustee or the holders may receive payments and
other distributions made from the defeasance trust described under "Legal
Defeasance and Covenant Defeasance" and Permitted Junior Securities) and (ii)
until all Obligations with respect to Senior Debt (as provided in clause
(i) above) are paid in full and all outstanding Letter of Credit Obligations
and applicable Hedging Obligations are fully cash collateralized, any
distribution to which the Trustee or the holders would be entitled but for
this provision, including any such distribution that is payable or deliverable
by reason of the payment of any other Indebtedness of such Obligor being
subordinated to the payment of the Notes, shall be made to holders of Senior
Debt or their representatives, ratably in accordance with the respective
amounts of the principal of such Senior Debt, interest (including, without
limitation, Accrued Bankruptcy Interest) thereon and all other Obligations
with respect thereto (except that holders may receive payments and other
distributions made from the defeasance trust described under "Legal Defeasance
and Covenant Defeasance" and Permitted Junior Securities), as their respective
interests may appear.
The Obligors will also be restrained from making any payment or distribution
to the Trustee or any holder in respect of Obligations arising under or in
connection with the Notes, and from acquiring from the Trustee or any holder
any Notes for cash or property (other than payments and other distributions
made from any defeasance trust described under "Legal Defeasance and Covenant
Defeasance" and Permitted Junior Securities), until all principal and other
Obligations arising under or in connection with the Senior Debt have been paid
in full or fully cash-collateralized, if not yet due if (a) a default in the
payment of any Obligations with respect to Designated Senior Debt occurs and
is continuing (including any default in payment upon the maturity of any
Designated Senior Debt by lapse of time, acceleration or otherwise), or any
judicial proceeding is pending to
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determine whether any such default has occurred or (b) any other default
occurs and is continuing with respect to Designated Senior Debt that permits
holders of the Designated Senior Debt as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the affected Obligors or the holders of any
Designated Senior Debt. Payments on the Notes may and shall be resumed (i) in
the case of a payment default, upon the date on which such default is cured or
waived and (ii) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received by the Trustee,
unless the maturity of any Designated Senior Debt has been accelerated. No new
period of payment blockage predicated on a nonpayment default may be commenced
unless and until 360 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to
the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been waived for a period of not less
than 180 days.
Notwithstanding the foregoing, the Issuers will be permitted to repurchase,
redeem, repay or prepay any or all of the Notes to the extent required to do
so by any Gaming Authority having authority over any Obligor.
The Indenture provides that the Trustee or any holder that has received any
payment or distribution in violation of the foregoing provisions will be
required to hold the same without commingling and deliver the same, in the
form received, together with any necessary endorsements, to the holders of
Senior Debt or their representatives. The Indenture further requires that each
affected Obligor promptly notify holders of Senior Debt if payment of the
Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, holders of Notes may recover less ratably than
creditors of the affected Obligors who are holders of Senior Debt. See "Risk
Factors--Subordination and Ranking" and "--Dependence of Issuers on Guarantors
for Repayment of Notes; Suretyship Defenses."
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Issuers to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
cash (the "Change of Control Payment") equal to 101% of the aggregate
principal amount of Notes or, in the case of a REIT Change of Control, 102%,
in each case, plus accrued and unpaid interest thereon, if any, to the date of
repurchase. Within 30 days following any Change of Control, the Issuers will
mail a notice to the Trustee and each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier
than 30 days nor later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Issuers will comply with all
applicable laws, including, without limitation, Section 14(e) of the Exchange
Act and the rules thereunder and all applicable federal and state securities
laws, and will include all instructions and materials necessary to enable
holders to tender their Notes.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted, together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Issuers. The Paying Agent will promptly mail to each holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered by such holder, if any; provided that each such new Note
will be in a principal amount of $1,000 or an integral multiple thereof. The
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Issuers will publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date. The
Indenture will provide that, prior to complying with the provisions of this
covenant, but in any event within 90 days following a Change of Control, the
Issuers will either (a) repay all outstanding obligations with respect to
Senior Debt, (b) obtain the requisite consents, if any, from the holders of
Senior Debt to permit the repurchase of the Notes required by this covenant or
(c) deliver to the Trustee an Officer's Certificate to the effect that no
action of the kind described in clause (a) or (b) is necessary.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the holders of the Notes to require that the
Issuers repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Bank Credit Facility contains, and any future Credit Facilities or other
agreements relating to Indebtedness to which the Issuers become a party may
contain, restrictions on the ability of the Issuers to purchase any Notes, and
also may provide that certain change of control events with respect to the
Issuers would constitute a default thereunder. In the event a Change of
Control occurs at a time when the Issuers are prohibited from purchasing
Notes, the Issuers could seek the consents of their lenders to the purchase of
Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Issuers do not obtain all such requisite consents or repay
such borrowings, the Issuers will remain prohibited from purchasing Notes. In
such case, the Issuers' failure to purchase tendered Notes would constitute an
Event of Default under the Indenture. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the holders of
Notes. Thus, there can be no assurance that in the event of a Change of
Control the Company will have sufficient funds, or that it will be permitted
under the terms of the Bank Credit Facility, to satisfy its obligations with
respect to any or all of the tendered Notes.
The Issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Issuers and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Issuers and their Restricted Subsidiaries taken as a
whole. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of Notes to require
the Issuers to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of either
Issuer or the Issuers and their Restricted Subsidiaries, taken as a whole, to
another Person or group may be uncertain.
The presence of the Company's Note repurchase obligation in the event of a
Change of Control may deter potential bidders from attempting to acquire the
Company, whether by merger, tender offer or otherwise. Such deterrence may
have an adverse effect on the market price for the Company's securities,
particularly its common stock, which would presumably reflect the market's
perception of the likelihood of any takeover attempt at a premium to the
market price.
ASSET SALES
The Indenture provides that no Obligor will, directly or indirectly,
consummate or enter into a binding commitment to consummate an Asset Sale
unless (a) such Obligor, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value of the assets
sold or of which other disposition is made (as determined reasonably and in
good faith by the Board of such Obligor) and (b) at least 75% of the
consideration received by such Obligor from such Asset Sale will be cash or
Cash Equivalents and will be received at the time of the consummation of any
such Asset Sale; provided, however, that the amount of (x) any
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liabilities as shown on the Obligors' most recent balance sheet (or in the
notes thereto) (other than (i) Indebtedness subordinate in right of payment to
the Notes, (ii) contingent liabilities, (iii) liabilities or Indebtedness to
Affiliates of the Issuers and (iv) Non-Recourse Indebtedness) that are assumed
by the transferee of any such assets and (y) to the extent of the cash
received, any notes or other obligations received by the Issuers or any such
Restricted Subsidiary from such transferee that are converted by such Obligor
into cash within 60 days of receipt, will be deemed to be cash for purposes of
this provision.
Notwithstanding the foregoing, an Obligor will be permitted to consummate an
Asset Sale without complying with the foregoing provisions if (i) such Obligor
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or other property sold, issued or otherwise
disposed of (as evidenced by a resolution of the Board of such Obligor) as set
forth in an officers' certificate delivered to the Trustee, (ii) the
transaction constitutes a "like-kind exchange" of the type contemplated by
Section 1031 of the Internal Revenue Code and (iii) the consideration for such
Asset Sale constitutes Productive Assets; provided that any non-cash
consideration not constituting Productive Assets received by such Obligor in
connection with such Asset Sale that is converted into or sold or otherwise
disposed of for cash or Cash Equivalents at any time within 360 days after
such Asset Sale and any Productive Assets constituting cash or Cash
Equivalents received by such Obligor in connection with such Asset Sale shall
constitute Net Cash Proceeds subject to the provisions set forth above.
Upon the consummation of an Asset Sale, the Issuers or the affected Obligor
will be required to apply all Net Cash Proceeds that are received from such
Asset Sale within 360 days of the receipt thereof either (A) to reinvest (or
enter into a binding commitment to invest, if such investment is effected
within 360 days after the date of such commitment) in Productive Assets or in
Asset Acquisitions permitted by the Indenture, or (B) to permanently prepay or
repay Indebtedness of any Obligor other than Indebtedness that is subordinate
in right of payment to the Notes. Pending the final application of any such
Net Cash Proceeds, the Obligors may temporarily reduce revolving Indebtedness
or otherwise invest such Net Cash Proceeds in any manner not prohibited by the
Indenture. On the 361st day after an Asset Sale or such earlier date, if any,
as the Board of each Issuer or the affected Obligor determines not to apply
the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (A)
or (B) of the preceding sentence (each a "Net Proceeds Offer Trigger Date"),
such aggregate amount of Net Cash Proceeds which have not been applied on or
before such Net Proceeds Offer Trigger Date as permitted in clauses (A) or (B)
of the preceding sentence (each a "Net Proceeds Offer Amount"), will be
applied by the Issuers to make an offer to purchase (the "Net Proceeds Offer")
on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more
than 60 days following the applicable Net Proceeds Offer Trigger Date, from
all holders on a pro rata basis, Notes in an amount equal to the Net Proceeds
Offer Amount at a price in cash equal to 100% of the aggregate principal
amount of Notes, in each case, plus accrued and unpaid interest, if any,
thereon on the Net Proceeds Offer Payment Date; provided that if at any time
within 360 days after an Asset Sale any non-cash consideration received by the
Issuers or the affected Obligor in connection with such Asset Sale is
converted into or sold or otherwise disposed of for cash, then such conversion
or disposition will be deemed to constitute an Asset Sale hereunder and the
Net Cash Proceeds thereof will be applied in accordance with this covenant. To
the extent that the aggregate principal amount of Notes tendered pursuant to
the Net Proceeds Offer is less than the Net Proceeds Offer Amount, the
Obligors may use any remaining proceeds of such Asset Sales for general
corporate purposes (but subject to the other terms of the Indenture). Upon
completion of a Net Proceeds Offer, the Net Proceeds Offer Amount relating to
such Net Proceeds Offer will be deemed to be zero for purposes of any
subsequent Asset Sale. In the event that a Restricted Subsidiary consummates
an Asset Sale, only that portion of the Net Cash Proceeds therefrom (including
any Net Cash Proceeds received upon the sale or other disposition of any non-
cash proceeds received in connection with an Asset Sale) that are distributed
to any Obligor will be required to be applied by the Obligors in accordance
with the provisions of this paragraph.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$10 million the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time
as such Net Proceeds Offer Amount plus the aggregate amount of all Net
Proceeds Offer Amounts
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arising subsequent to the Issue Date of the Notes from all Asset Sales by the
Obligors in respect of which a Net Proceeds Offer has not been made aggregate
at least $10 million at which time the affected Obligor will apply all Net
Cash Proceeds constituting all Net Proceeds Offer Amounts that have been so
deferred to make a Net Proceeds Offer (each date on which the aggregate of all
such deferred Net Proceeds Offer Amounts is equal to $10 million or more will
be deemed to be a Net Proceeds Offer Trigger Date). In connection with any
Asset Sale with respect to assets having a book value in excess of $10 million
or as to which it is expected that the aggregate consideration therefor be
received by the affected Obligor will exceed $10 million in value, such Asset
Sale will be approved, prior to the consummation thereof, by the Board of the
applicable Obligor.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that no Obligor will, directly or indirectly, (i)
declare or pay any dividend or make any other payment or distribution (other
than dividends or distributions payable solely in Qualified Capital Stock of
the Company or dividends or distributions payable to an Obligor) in respect of
any Obligor's Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving such Obligor) or to the
direct or indirect holders of such Obligor's Equity Interests in their
capacity as such, (ii) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, any payment in connection with any
merger or consolidation involving an Obligor) Equity Interests of any Obligor
or of any direct or indirect parent or Affiliate of any Obligor (other than
any such Equity Interests owned by any Obligor), (iii) make any payment on or
with respect to, or purchase, defease, redeem, prepay, decrease or otherwise
acquire or retire for value any Indebtedness that is subordinate in right of
payment to the Notes, except a payment at Stated Maturity, or (iv) make any
Investment (other than Permitted Investments) (each of the foregoing
prohibited actions set forth in clauses (i), (ii), (iii) and (iv) being
referred to as a "Restricted Payment"), if at the time of such proposed
Restricted Payment or immediately after giving effect thereto, (A) a Default
or an Event of Default has occurred and is continuing or would result
therefrom, or (B) the Company is not, or would not be, able to Incur at least
$1.00 of additional Indebtedness under the Consolidated Coverage Ratio test
described in the second paragraph of the covenant described below under the
caption "Incurrence of Indebtedness and Issuance of Preferred Stock" or (C)
the aggregate amount of Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue Date (the amount expended for
such purposes, if other than in cash, being the fair market value of such
property as determined reasonably and in good faith by the Board of the
applicable Obligor) exceeds or would exceed the sum, without duplication, of:
(1) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the
Obligors during the period (treating such period as a single accounting
period) beginning on the Issue Date and ending on the last day of the most
recent fiscal quarter of the Company ending immediately prior to the date
of the making of such Restricted Payment for which internal financial
statements are available ending not more than 135 days prior to the date of
determination, plus
(2) 100% of the aggregate net cash proceeds received by the Company from
any Person (other than from a Subsidiary of the Issuers) from the issuance
and sale of Qualified Capital Stock of the Company or the conversion of
debt securities or Convertible Preferred Stock into Qualified Capital Stock
(to the extent that proceeds of the issuance of such Qualified Capital
Stock would be includable in this clause upon initial issuance for cash)
subsequent to the Issue Date and on or prior to the date of the making of
such Restricted Payment (excluding any Qualified Capital Stock of the
Company the purchase price of which has been financed directly or
indirectly using funds (A) borrowed from any Obligor, unless and until and
to the extent such borrowing is repaid, or (B) contributed, extended,
guaranteed or advanced by any Obligor (including, without limitation, in
respect of any employee stock ownership or benefit plan)), plus
(3) 100% of the aggregate cash received by the Company subsequent to the
Issue Date and on or prior to the date of the making of such Restricted
Payment upon the exercise of options or warrants (whether issued prior to
or after the Issue Date) to purchase Qualified Capital Stock of the
Company, plus
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(4) to the extent that any Restricted Investment that was made after the
Issue Date is sold for cash or Cash Equivalents or otherwise liquidated or
repaid for cash or Cash Equivalents, or any dividends, distributions,
principal repayments, or returns of capital are received by any Obligor in
respect of any Restricted Investment, valued, in each such case, the lesser
of (A) the cash or marked-to-market value of Cash Equivalents received with
respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment, plus
(5) 50% of the aggregate dividends and distributions received by any
Obligor from an Unrestricted Subsidiary, to the extent not already included
in the calculation of Consolidated Net Income.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph will not prohibit:
(a) the payment of any dividend or the making of any distribution within
60 days after the date of declaration of such dividend or distribution if
the making thereof would have been permitted on the date of declaration;
provided such dividend will be deemed to have been made as of its date of
declaration or the giving of such notice for purposes of this clause (a);
(b) the redemption, repurchase, retirement or other acquisition of
Capital Stock of the Company or warrants, rights or options to acquire
Capital Stock of the Company either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or warrants, rights or options to
acquire Qualified Capital Stock of the Company, or (ii) through the
application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of shares of Qualified Capital
Stock of the Company or warrants, rights or options to acquire Qualified
Capital Stock of the Company; provided that no Default or Event of Default
shall have occurred and be continuing at the time of such Restricted
Payment or would result therefrom;
(c) the redemption, repurchase, retirement, defeasance or other
acquisition of Indebtedness of any Obligor that is subordinate or junior in
right of payment to the Notes or the Guaranties either (i) solely in
exchange for shares of Qualified Capital Stock of the Company or for
Permitted Refinancing Indebtedness, or (ii) through the application of the
net proceeds of a substantially concurrent sale for cash (other than to an
Obligor) of (A) shares of Qualified Capital Stock of the Company or
warrants, rights or options to acquire Qualified Capital Stock of the
Company or (B) Permitted Refinancing Indebtedness; provided that no Default
or Event of Default shall have occurred and be continuing at the time of
such Restricted Payment pursuant to this clause (c) and would not result
therefrom;
(d) repurchases by the Company of its common stock; provided that the
aggregate amount expended for all such common stock repurchases by the
Company shall not exceed $10 million on a cumulative basis commencing on
the Issue Date; and provided, further, that no Default or Event of Default
shall have occurred and be continuing at the time of such Restricted
Payment or would result therefrom;
(e) (i) scheduled dividends payable in respect of the Convertible
Preferred Stock not to exceed $2 million in the aggregate in any fiscal
year; provided, that no Event of Default shall have occurred and be
continuing at the time of such Restricted Payment or would result
therefrom; and (ii) redemption of all of the outstanding Convertible
Preferred Stock by means of conversion into shares of the Company's common
stock plus payment of accrued and unpaid dividends;
(f) redemptions, repurchases or repayments to the extent required by any
Gaming Authority having jurisdiction over any Obligor or deemed necessary
by the Board of either Issuer in order to avoid the suspension, revocation
or denial of a gaming license by any Gaming Authority;
(g) Investments in the Indiana Joint Venture Project, not to exceed $70
million in the aggregate;
(h) other Restricted Payments not to exceed $20 million in the aggregate
at any time; provided no Default or Event of Default then exists or would
result therefrom;
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(i) repurchases by the Company of its common stock, options, warrants or
other securities exercisable or convertible into such common stock from
employees and directors of the Company or any of its respective
Subsidiaries upon death, disability or termination of employment or
directorship of such employees or directors;
(j) the payment of any amounts in respect of Equity Interests by any
Restricted Subsidiary organized as a partnership or a limited liability
company or other pass-through entity, to the extent of capital
contributions made to such Restricted Subsidiary (other than capital
contributions made to such Restricted Subsidiary by the Obligors);
provided, that no Default or Event of Default has occurred and is
continuing at the time of such Restricted Payment or would result
therefrom;
(k) the payment of any amounts in respect of Equity Interests by any
Restricted Subsidiary organized as a partnership or a limited liability
company or other pass-through entity, (i) to the extent required by
applicable law or (ii) to the extent necessary for holders thereof to pay
taxes with respect to the net income of such Restricted Subsidiary, the
payment of which amounts under this clause (ii) is required by the terms of
the relevant partnership agreement, limited liability company operating
agreement or other governing document; provided, that except in the case of
clause (i) no Default or Event of Default has occurred and is continuing at
the time of such Restricted Payment or would result therefrom;
(l) the payment of dividends or other distributions on minority interests
in Equity Interests of Restricted Subsidiaries pursuant to requirements
under partnership agreements or organizational or membership agreements of
other pass-through entities as in effect on the Issue Date; provided such
distributions are made pro rata with the distributions paid
contemporaneously to an Obligor or its Affiliates holding an interest in
such Equity Interests; provided, further, that no Default or Event of
Default has occurred and is continuing at the time of such Restricted
Payment or would result therefrom;
(m) Investments in Unrestricted Subsidiaries, joint ventures,
partnerships or limited liability companies consisting of conveyances of
substantially undeveloped real estate in a number of acres which, after
giving effect to any such conveyance, would not exceed in the aggregate for
all such conveyances after the Issue Date, 50% of the sum of (A) the acres
of undeveloped real estate held by the Obligors on such date plus (B) the
acres of undeveloped real estate previously so conveyed by the Obligors
after the Issue Date; provided, that no Default or Event of Default has
occurred and is continuing at the time of such Restricted Payment or would
result therefrom; or
(n) Investments, not to exceed $10 million in the aggregate at any time
outstanding, in any combination of (i) readily marketable equity securities
and (ii) assets of the kinds described in the definition of "Cash
Equivalents"; provided, that for the purposes of this clause (n), such
Investments may be made without regard to the rating requirements or the
maturity limitations set forth in such definition.
In determining the aggregate amount of Restricted Payments made subsequent
to the Issue Date, Restricted Payments made pursuant to clauses (a), (b), (c),
(d), (e), (g) and (h) of this paragraph shall, in each case, be excluded from
such calculation; provided, that any amounts expended or liabilities incurred
in respect of fees, premiums or similar payments in connection therewith shall
be included in such calculation.
No later than the date of making any Restricted Payment, the Issuers shall
deliver to the Trustee officers' certificates stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed (upon which the
Trustee may conclusively rely without any investigation whatsoever), which
calculations may be based upon the Issuers' latest available internal
quarterly financial statements.
The Board of either Issuer may designate any of its Restricted Subsidiaries
to be Unrestricted Subsidiaries if such designation would not cause a Default.
For purposes of making such determination, all outstanding Investments by the
Obligors (except to the extent repaid in cash or in kind) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed
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to constitute Investments in an amount equal to the greatest of (x) the net
book value of such Investments at the time of such designation, (y) the fair
market value of such Investments at the time of such designation and (z) the
original fair market value of such Investments at the time they were made.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Issuers will not, directly or indirectly,
(i) Incur any Indebtedness or issue any Disqualified Capital Stock, other than
Permitted Indebtedness, or (ii) cause or permit any of their Subsidiaries to
Incur any Indebtedness or issue any Disqualified Capital Stock or preferred
stock, in each case, other than Permitted Indebtedness.
Notwithstanding the foregoing limitations, either Issuer may issue
Disqualified Capital Stock, and any Obligor may Incur Indebtedness (including,
without limitation, Acquired Debt) or issue preferred stock, if (i) no Default
or Event of Default shall have occurred and be continuing on the date of the
proposed Incurrence or issuance or would result as a consequence of such
proposed Incurrence or issuance and (ii) immediately after giving pro forma
effect to such proposed Incurrence or issuance and the receipt and application
of the net proceeds therefrom, the Issuers' Consolidated Coverage Ratio would
not be less, for any period of four fiscal quarters ending during the
applicable period specified in the table below, than the ratio specified
opposite such period:
<TABLE>
<CAPTION>
PERIOD RATIO
------ ---------
<S> <C>
Issue Date-December 31, 1998................................... 2.00:1.00
January 1, 1999-December 31, 1999.............................. 2.25:1.00
January 1, 2000 and thereafter................................. 2.50:1.00
</TABLE>
Any Indebtedness of any Person existing at the time it becomes a Restricted
Subsidiary (whether by merger, consolidation, acquisition of capital stock or
otherwise) shall be deemed to be Incurred as of the date such Person becomes a
Restricted Subsidiary.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Indebtedness described in clauses (i) through (xi) of such
definition or is entitled to be Incurred pursuant to the second paragraph of
this covenant, the Issuers will, in their sole discretion, classify such item
of Indebtedness in any manner that complies with this covenant and such item
of Indebtedness will be treated as having been Incurred pursuant to only one
of such clauses or pursuant to the second paragraph hereof. The Issuers may
reclassify such Indebtedness from time to time in their sole discretion.
Accrual of interest and the accretion of principal amount will not be deemed
to be an Incurrence of Indebtedness for purposes of this covenant.
LIENS
The Indenture provides that no Obligor will, directly or indirectly, create,
Incur or assume any Lien, except a Permitted Lien, securing Indebtedness that
is pari passu with or subordinate in right of payment to the Notes or the
Guaranties, on or with respect to any of its property or assets including any
shares of stock or Indebtedness of any Restricted Subsidiary, whether owned on
the Issue Date or thereafter acquired, or any income, profits or proceeds
therefrom, unless (x) in the case of any Lien securing Indebtedness that is
pari passu in right of payment with the Notes or the Guaranties, the Notes or
the Guaranties are secured by a Lien on such property, assets or proceeds that
is senior in priority to or pari passu with such Lien and (y) in the case of
any Lien securing Indebtedness that is subordinate in right of payment to the
Notes or the Guaranties, the Notes or the Guaranties are secured by a Lien on
such property, assets or proceeds that is senior in priority to such Lien.
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DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture provides that no Obligor will, directly or indirectly, create
or otherwise cause or permit or suffer to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock, (b) make
loans or advances to or pay any Indebtedness or other obligations owed to any
Obligor or to any Restricted Subsidiary or (c) transfer any of its property or
assets to any Obligor or to any Restricted Subsidiary (each such encumbrance
or restriction in clause (a), (b) or (c), a "Payment Restriction"), except for
such encumbrances or restrictions existing under or by reason of: (1)
applicable law; (2) the Indenture; (3) customary non-assignment provisions of
any purchase money financing contract or lease of any Restricted Subsidiary
entered into in the ordinary course of business of such Restricted Subsidiary;
(4) any instrument governing Acquired Debt Incurred in connection with an
acquisition by any Obligor in accordance with the Indenture as the same was in
effect on the date of such Incurrence; provided that such encumbrance or
restriction is not, and will not be, applicable to any Person, or the
properties or assets of any Person, other than the Person and its Subsidiaries
or the property or assets, including directly-related assets, such as
accessions and proceeds so acquired or leased; (5) any restriction or
encumbrance contained in contracts for the sale of assets to be consummated in
accordance with the Indenture solely in respect of the assets to be sold
pursuant to such contract; (6) any restrictions of the nature described in
clause (c) above with respect to the transfer of assets secured by a Lien that
was permitted by the Indenture to be Incurred; (7) any encumbrance or
restriction contained in Permitted Refinancing Indebtedness; provided that the
provisions relating to such encumbrance or restriction contained in any such
Permitted Refinancing Indebtedness are no less favorable to the holders of the
Notes in any material respect in the good faith judgment of the Board of
either Issuer than the provisions relating to such encumbrance or restriction
contained in the Indebtedness being refinanced, or (8) Indebtedness or
Investments existing on the Issue Date, as in effect on the Issue Date.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that no Obligor may, in a single transaction or a
series of related transactions, consolidate or merge with or into any Person,
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of such Obligor's properties or assets whether as an
entirety or substantially as an entirety to any Person or adopt a Plan of
Liquidation unless:
(i) either (1) in the case of a consolidation or merger, such Obligor
shall be the surviving or continuing corporation or (2) the Person (if
other than such Obligor) formed by such consolidation or into which such
Obligor is merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition of the properties and
assets of such Obligor and of such Obligor's Subsidiaries substantially as
an entirety, or in the case of a Plan of Liquidation, the Person to which
assets of such Obligor and such Obligor's Subsidiaries have been
transferred (x) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form
and substance satisfactory to the Trustee), executed and delivered to the
Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the Notes and, if applicable, the Guaranties
and the performance of every covenant of the Notes, the Indenture and the
Registration Rights Agreement on the part of such Obligor to be performed
or observed;
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect
to any Indebtedness and Acquired Debt Incurred or anticipated to be
Incurred in connection with or in respect of such transaction), (1) the
Obligors, including any such other Person becoming an Obligor through the
operation of clause (i)(2) above would have a Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated
Net Worth of such Obligor immediately preceding the transaction; and (2)(A)
the Obligors, including any such other Person becoming an Obligor through
the operation of clause (i)(2) above could Incur at least $1.00 of
Indebtedness (other than Permitted Indebtedness) pursuant to the
Consolidated Coverage Ratio test described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock" or (B) any
other Person which would, as a result of the applicable transaction,
properly classify such Obligor as a consolidated subsidiary in accordance
with GAAP, satisfied the conditions set forth in clause (i)(2)(x) above and
either (x) also
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satisfied the condition set forth in clause (i)(2)(y) above and caused each
acquired Issuer to become a Guarantor or (y) became a Guarantor, and, in
either such case, after giving effect to such assumption of the Notes or
Incurrence of Obligations under the Guaranty, such assuming or guarantying
Person would be able to Incur at least $1.00 of Indebtedness pursuant to
the Consolidated Coverage Ratio test described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock";
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Debt Incurred or anticipated to be Incurred and any Lien granted
in connection with or in respect of the transaction) no Default and no
Event of Default shall have occurred or be continuing; and
(iv) such Obligor or such other Person shall have delivered to the
Trustee (A) an officers' certificate and an opinion of counsel, each
stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance, other disposition or Plan of Liquidation and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture, comply with the applicable provisions of the
Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied and (B) a certificate from the
Company's independent certified public accountants stating that such
Obligor has made the calculations required by clause (ii) above in
accordance with the terms of the Indenture and the Notes after the
consummation of such transaction.
Notwithstanding clause (ii)(2) above, (A) any Restricted Subsidiary may
consolidate with, or merge with or into, or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its assets to
either Issuer or to a Wholly Owned Restricted Subsidiary of such Obligor (and
an Issuer may effect such a transaction with the other Issuer) and (B) any
Obligor may consolidate with or merge with or into any Person that has
conducted no business and Incurred no Indebtedness or other liabilities if
such transaction is solely for the purpose of effecting a change in the state
of incorporation of such Obligor. Notwithstanding any other provision of this
covenant, the Issuers may effect the Possible REIT Restructuring if the
respective Boards of the Issuers determine, in good faith and in the exercise
of their reasonable business judgment that it is in the best interest of each
of the Issuers to do so.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Subsidiaries of
either Issuer, the Capital Stock of which constitutes all or substantially all
of the properties and assets of such Issuer, shall be deemed to be the
transfer of all or substantially all of the properties and assets of such
Issuer.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that no Obligor will make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is, considered
in light of any series of related transactions of which it comprises a part,
on terms that are fair and reasonable and no less favorable to such Obligor
than those that might reasonably have been obtained at such time in a
comparable transaction or series of related transactions on an arms-length
basis from a Person that is not such an Affiliate; (ii) with respect to any
Affiliate Transaction involving aggregate consideration of $3 million or more,
a majority of the disinterested members of the Board of the relevant Issuer
(and of any other affected Obligor, where applicable) shall, prior to the
consummation of any portion of such Affiliate Transaction, have reasonably and
in good faith determined, as evidenced by a resolution of its Board, that such
Affiliate Transaction meets the requirements of the foregoing clause; and
(iii) with respect to any Affiliate Transaction involving value of $10 million
or more, the Board of the applicable Obligor shall have received prior to the
consummation of any portion of such Affiliate Transaction, a written opinion
from an independent investment banking, accounting or appraisal firm of
recognized national standing that such Affiliate Transaction is on terms that
are fair to such Obligor from a financial point of view. The foregoing
restrictions will not apply to (1) reasonable fees and
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compensation (including any such compensation in the form of Equity Interests
not derived from Disqualified Capital Stock, together with loans and advances,
the proceeds of which are used to acquire such Equity Interests) paid to, and
indemnity provided on behalf of, officers, directors, employees or consultants
of the Obligors as determined in good faith by the Board or senior management,
(2) any transaction solely between or among Obligors to the extent any such
transaction is otherwise in compliance with, or not prohibited by, the
Indenture or (3) any Restricted Payment permitted by the terms of the covenant
described above under the heading "--Restricted Payments."
NO SUBORDINATED DEBT SENIOR TO THE NOTES OR GUARANTIES
The Indenture provides that no Obligor will Incur any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes or the Guaranties.
AMENDMENTS TO SUBORDINATION PROVISIONS
The Indenture provides that, without the consent of the holders of 66 2/3%
of the principal amount of the outstanding Notes, the Obligors will not amend,
modify or alter the terms of any indebtedness subordinated to the Notes or the
Guaranties in any way that will (i) increase the rate of or change the time
for payment of interest on any indebtedness subordinated to the Notes, (ii)
increase the principal of, advance the final maturity date of or shorten the
Weighted Average Life to Maturity of any such subordinated indebtedness, (iii)
alter the redemption provisions or the price or terms at which any Obligor is
required to offer to purchase such subordinated indebtedness or (iv) amend the
subordination provisions of any documents, instruments or agreements governing
any such subordinated indebtedness, except to the extent that any of the
foregoing would be required to permit any Obligor to make a Restricted Payment
permitted by the covenant described above under the heading "--Restricted
Payments."
LINES OF BUSINESS
The Indenture provides that the Obligors will not engage in any lines of
business other than the Core Businesses.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Issuers will furnish to the holders of
Notes (i) all quarterly and annual financial information that would be
required to be contained in a filing or filings by the Issuers with the
Commission on Forms 10-Q and 10-K if the Issuers were required to file such
forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Issuers' certified independent
accountants and (ii) all current reports that would be required to be filed by
the Issuers with the Commission on Form 8-K if the Issuers were required to
file such reports. In addition, whether or not required by the rules and
regulations of the Commission, the Issuers will file a copy of all such
information and reports with the Commission for public availability (unless
the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, the Issuers have agreed that, for so long as any Notes remain
outstanding, they will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act. The Indenture
permits the Issuers to deliver the consolidated reports or financial
information of the Company to comply with the foregoing requirements.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes or the Guaranties
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(whether or not prohibited by the subordination provisions of the Indenture);
(ii) default in payment of the principal of or premium, if any, on the Notes
or the Guaranties when due and payable, at maturity, upon acceleration,
redemption or otherwise (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by any Obligor for 45 days after
written notice to comply with any of its other agreements in the Indenture,
the Notes or the Guaranties; (iv) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by any Obligor (or the payment
of which is guaranteed by any Obligor) whether such Indebtedness or guarantee
now exists, or is created after the Issue Date, which default (a) is caused by
a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$10 million or more; (v) failure by any Obligor to pay final judgments
aggregating in excess of $10 million, net of any applicable insurance, the
carrier or underwriter with respect to which has acknowledged liability in
writing, which judgments are not paid, discharged or stayed for a period of 60
days; and (vi) certain events of bankruptcy or insolvency with respect to any
Obligor.
If an Event of Default (other than an Event of Default with respect to
certain events of bankruptcy, insolvency or reorganization) occurs and is
continuing, then and in every such case, the Trustee or the holders of not
less than 25% in aggregate principal amount of the then outstanding Notes may
declare the principal amount, together with any accrued and unpaid interest,
premium and Liquidated Damages on all the Notes and Guaranties then
outstanding to be due and payable, by a notice in writing to the Issuers (and
to the Trustee, if given by holders) specifying the Event of Default and that
it is a "notice of acceleration" and on the fifth Business Day after delivery
of such notice the principal amount, in either case, together with any accrued
and unpaid interest, premium and Liquidated Damages on all the Notes or the
Guaranties then outstanding will become immediately due and payable,
notwithstanding anything contained in the Indenture, the Notes or the
Guaranties to the contrary. Upon the occurrence of specified Events of Default
relating to bankruptcy, insolvency or reorganization, or cross-acceleration to
other indebtedness the principal amount, together with any accrued and unpaid
interest, premium and Liquidated Damages, will immediately and automatically
become due and payable, without the necessity of notice or any other action by
any Person. Holders of the Notes may not enforce the Indenture, the Notes or
the Guaranties except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of any Obligor with
the intention of avoiding payment of the premium that the Issuers would have
had to pay if the Issuers then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
August 1, 2002 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Issuers with the intention of avoiding the
prohibition on redemption of the Notes prior to August 1, 2002, then the
additional premium specified in the Indenture shall also become immediately
due and payable to the extent permitted by law upon the acceleration of the
Notes and Guaranties.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of principal of, premium and Liquidated Damages, if any, or interest
on the Notes or the Guaranties.
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The Issuers will be required to deliver to the Trustee annually statements
regarding compliance with the Indenture, and the Issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, agent, manager,
partner, member, incorporator or stockholder of any Obligor, in such capacity,
will have any liability for any obligations of any Obligor under the Notes,
the Indenture or the Guaranties or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each holder of Notes by
accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes and the
Guaranties. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a
waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Obligors may, at their option and at any
time, elect to have all of their obligations discharged with respect to the
outstanding Notes ("Legal Defeasance") except for (i) the rights of holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages on such Notes when such payments
are due from the trust referred to below, (ii) the Issuers' obligations with
respect to the Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an
office or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and
the Issuers' obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Issuers may, at their option and
at any time, elect to have their obligations released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described above under the
heading "Events of Default and Remedies" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in U.S. dollars, noncallable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Issuers must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Issuers shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Issuers have received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the Issue Date, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Issuers shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default
or Event of Default resulting from the borrowing of funds to be applied to
such deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the
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period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than
the Indenture) to which any Obligor is a party or by which any Obligor is
bound; (vi) the Issuers must have delivered to the Trustee an opinion of
counsel to the effect that, as of the date of such opinion, assuming that no
holder of any Notes would be considered an insider of any Obligor under
applicable Bankruptcy Law, after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable Bankruptcy Law;
(vii) each Issuer must deliver to the Trustee an officers' certificate stating
that the deposit was not made by such Issuer with the intent of preferring the
holders of Notes over the other creditors of such Issuer with the intent of
defeating, hindering, delaying or defrauding creditors of such Issuer or
others; and (viii) each Issuer must deliver to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any Note
selected for redemption. Also, the Issuers are not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed. The registered holder of a Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder) (i) reduce the
principal amount of Notes whose holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of interest on any Note, (iv) waive a
Default or Event of Default in the payment of principal of or premium, if any,
or interest on the Notes (except a rescission of acceleration of the Notes by
the holders of at least a majority in aggregate principal amount of the Notes
and a waiver of the payment default that resulted from such acceleration), (v)
make any Note payable in money other than that stated in the Notes, (vi) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of holders of Notes to receive payments of principal of
or premium, if any, or interest on the Notes, (vii) waive a redemption payment
with respect to any Note (other than a payment required by one of the
conditions described above under the caption "--Repurchase at the Option of
Holders") , (viii) release any Guarantor from its obligations under any
Guaranty, or (ix) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without notice to or the consent of any
holder of Notes, the Obligors and the Trustee may amend or supplement the
Indenture or the Notes (y) to provide for the Possible REIT Restructuring and
such related modifications to the Indenture and the Notes as may be necessary
to permit the implementation of, and the continuing operations of HPOC and the
REIT after giving effect to, the Possible REIT Restructuring, including the
making of operating lease payments by HPOC to the Company, the distribution by
the Company of such amounts as may be required by the Internal Revenue Code
and the regulations promulgated thereunder to maintain REIT status, which
would include 95% of its taxable income (excluding net capital gains) under
current law, and any other modifications to the covenants that may be
necessary to comply with the
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applicable provisions of the Internal Revenue Code and the regulations
promulgated thereunder, or may be necessary, in the good faith determination
of the respective Boards of the Issuers as evidenced by Board resolutions, to
provide for the same relative benefits and restrictions as existed under the
Indenture prior to the Possible REIT Restructuring or (z) to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption
of the Obligors' obligations to holders of Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such holder, to provide for the issuance of
registered notes in exchange for the Notes pursuant to the Registration Rights
Agreement or to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the TIA. Notwithstanding
any provision of clause (y) above to the contrary, no transaction described
therein may be effected except in compliance with the "Asset Sale" covenant in
effect on the Issue Date or as amended in accordance with the terms of the
Indenture (excluding amendment pursuant to such clause (y)).
In addition, any amendment to the provisions of the article of the Indenture
which governs subordination will require the consent of the holders of at
least 66 2/3% in aggregate principal amount of the Notes then outstanding, if
such amendment would adversely affect the rights of holders of Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of either Issuer, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. However, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any holder of Notes, unless such holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Hollywood Park,
Inc., 1050 South Prairie Avenue, Inglewood CA 90301, Attn: Assistant
Treasurer.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Accrued Bankruptcy Interest" means, with respect to any Senior Debt, all
interest accruing thereon after the filing of a petition or commencement of
any other proceeding by or against any Obligor under any Bankruptcy Law, in
accordance with and at the rate (including any rate applicable upon any
default or event of default, to the extent lawful) specified in the documents
evidencing or governing such Indebtedness or Hedging Obligations, whether or
not the claim for such interest is allowed as a claim after such filing in any
proceeding under such Bankruptcy Law.
"Acquired Debt" means, with respect to any specified Person, Indebtedness of
another Person and any of such other Person's Subsidiaries existing at the
time such other Person becomes a Subsidiary of such Person or at the time it
merges or consolidates with such Person or any of such Person's Subsidiaries
or is assumed by
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such Person or any Subsidiary of such Person in connection with the
acquisition of assets from such other Person and in each case not Incurred by
such Person or any Subsidiary of such Person or such other Person in
connection with, or in anticipation or contemplation of, such other Person
becoming a Subsidiary of such Person or such acquisition, merger or
consolidation.
"Affiliate" means, when used with reference to any Person, (i) any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, the referent Person or such other Person, as the
case may be, or (ii) any directors, officer or partner of such Person or any
Person specified in clause (i) above. For the purposes of this definition, the
term "control" when used with respect to any specified Person means the power
to direct or cause the direction of management or policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "affiliated," "controlling," and
"controlled" have meanings correlative of the foregoing. None of the Initial
Purchasers nor any of their respective Affiliates shall be deemed to be an
Affiliate of any Obligor or of any of their respective Affiliates. No Wholly
Owned Restricted Subsidiary of either Issuer shall be deemed to be an
Affiliate of any Obligor.
"Asset Acquisition" means (i) an Investment by any Obligor in any other
Person pursuant to which such Person shall become an Obligor or a Wholly Owned
Restricted Subsidiary of an Obligor or shall be merged into, or with any
Obligor or Wholly Owned Restricted Subsidiary of an Obligor or (ii) the
acquisition by any Obligor of assets of any Person comprising a division or
line of business of such Person or all or substantially all of the assets of
such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other disposition (for purposes of this
definition, each a "disposition") by any Obligor (including, without
limitation, pursuant to any sale and leaseback transaction or any merger or
consolidation of any Restricted Subsidiary of either Issuer with or into
another Person (other than another Obligor) whereby such Restricted Subsidiary
shall cease to be a Restricted Subsidiary of either Issuer) to any Person of
(i) any property or assets of any Obligor to the extent that any such
disposition is not in the ordinary course of business of such Obligor or (ii)
any Capital Stock of any Restricted Subsidiary, other than (1) any disposition
to either Issuer, (2) any disposition to any Obligor or Wholly Owned
Restricted Subsidiary, (3) any disposition that constitutes a Restricted
Payment or a Permitted Investment that is made in accordance with the covenant
described above under the caption "--Restricted Payments", (4) any transaction
or series of related transactions resulting in net cash proceeds to such
Obligor of less than $1 million, (5) any transaction that is consummated in
accordance with the covenant described above under the caption "--Merger,
Consolidation or Sale of Assets," (6) the sale or discount, in each case
without recourse (direct or indirect), of accounts receivable arising in the
ordinary course of business of either Issuer or such Restricted Subsidiary, as
the case may be, but only in connection with the compromise or collection
thereof, (7) any pledge, assignment by way of collateral security, grant of
security interest, hypothecation or mortgage, permitted by the Indenture or
any foreclosure, judicial or other sale, public or private, by the pledgee,
assignee, mortgagee or other secured party of the subject assets, (8) a
disposition of assets constituting a Permitted Investment or
(9) distributions, recapitalizations or reclassifications of Equity Interests
(other than Disqualified Capital Stock) of HPOC or the Company in connection
with the Possible REIT Restructuring.
"Bank Credit Facility" means the Credit Facility provided to the Company
pursuant to the Reducing Revolving Loan Agreement, dated as of March 27, 1997,
by and among the Company, the financial institutions from time to time named
therein (the "Banks"), Bank of Scotland, Bankers Trust Company and Societe
General, as Co-Agents for the Banks, and Bank of America NT&SA, as Managing
Agent, as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time by the same or different
institutional lenders.
"Bankruptcy Law" means the United States Bankruptcy Code and any other
bankruptcy, insolvency, receivership, reorganization, moratorium or similar
law providing relief to debtors, in each case, as from time to time amended
and applicable to the relevant case.
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"Board" means the Board of Directors or similar governing entity of an
Obligor, the members of which are elected by the holders of Capital Stock of
such Obligor or, if applicable, a duly-appointed committee of such Board of
Directors or similar governing body, having jurisdiction over the subject
matter at issue.
"Boomtown Notes" means the 11 1/2% First Mortgage Notes due 2003 issued by
Boomtown and remaining outstanding after Boomtown's offer to repurchase and
repurchase of such notes pursuant to an Offer to Purchase and Consent
Solicitation Statement dated March 28, 1997, as amended.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, rights, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of common stock and preferred stock of such Person, and (ii) with
respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the discounted
rental stream payable by such Person that is required to be classified and
accounted for as a capital lease obligation under GAAP and, for purposes of
this definition, the amount of such obligation at any date shall be the
capitalized amount of such obligation at such date, determined in accordance
with GAAP. The final maturity of any such obligation shall be the date of the
last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
penalty.
"Cash Equivalents" means (i) Government Securities; (ii) certificates of
deposit, eurodollar time deposits and bankers acceptances maturing within 12
months from the date of acquisition thereof by any Obligor and issued by any
commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia or any U.S. branch of foreign
bank having, at the date of acquisition of the applicable Cash Equivalent,
(A) combined capital and surplus of not less than $500 million and (B) a
commercial paper rating of at least A-1 from S&P or at least P-1 from Moody's;
(iii) repurchase obligations with a term of not more than seven days after the
date of acquisition thereof by any Obligor for underlying securities of the
types described in clauses (i), (ii) and (vi) hereof, entered into with any
financial institution meeting the qualifications specified in clause (ii)
above; (iv) commercial paper having a rating of at least P-1 from Moody's or a
rating of at least A-1 from S&P on the date of acquisition thereof by any
Obligor; (v) debt obligations of any corporation maturing within 12 months
after the date of acquisition thereof by any Obligor, having a rating of at
least P-1 or aaa from Moody's or A-1 or AAA from S&P on the date of such
acquisition; and (vi) mutual funds and money market accounts investing at
least 90% of the funds under management in instruments of the types described
in clauses (i) through (v) above and, in each case, maturing within the period
specified above for such instrument after the date of acquisition thereof by
any Obligor.
"Change of Control" means the occurrence of any of the following: (i) the
Possible REIT Restructuring, (ii) the sale, lease, transfer, conveyance or
other disposition (other than by way of merger or consolidation), in one
transaction or a series of related transactions, of all or substantially all
of the assets of either Issuer, or the Issuers and their Restricted
Subsidiaries taken as a whole, to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act) (as defined below), (iii) the adoption,
or, if applicable, the approval of any requisite percentage of either Issuer's
stockholders of a plan relating to the liquidation or dissolution of such
Issuer, (iv) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than a Principal, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire,
whether such right is currently exercisable or is exercisable only upon the
occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of either Issuer (measured by voting power rather than
number of shares), or (v) during any consecutive two-year period, individuals
who at the beginning of such period constituted the Board of either Issuer
(together with any new directors whose election to such Board or whose
nomination for election by the stockholders of such Issuer was approved by a
vote of a majority of the directors of such Issuer then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board
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of such Issuer then in office. Except as otherwise expressly provided, the
term "Change of Control" includes a REIT Change of Control.
"Consolidated Coverage Ratio" means, with respect to any Person on any date
of determination, the ratio of (a) Consolidated EBITDA for the period of four
fiscal quarters most recently ended prior to such date for which internal
financial reports are available, ended not more than 135 days prior to such
date to (b) (i) Consolidated Interest Expense during such period plus (ii)
dividends on or in respect of any Capital Stock of any such Person paid in
cash during such period; provided that the Consolidated Coverage Ratio shall
be calculated giving pro forma effect, as of the beginning of the applicable
period, to any acquisition, Incurrence or redemption of Indebtedness
(including the Notes), issuance or redemption of Disqualified Capital Stock,
acquisition, Asset Sale, purchases of assets that were previously leased,
redemption of Convertible Preferred Stock or re-designation of a Restricted
Subsidiary as an Unrestricted Subsidiary, at any time during or subsequent to
such period, but on or prior to the date on which such calculation is made. In
making such computation, Consolidated Interest Expense (i) attributable to any
Indebtedness bearing a floating interest rate shall be computed on a pro forma
basis as if the rate in effect on the date of computation had been the
applicable rate for the entire period, or (ii) attributable to interest on any
Indebtedness under a revolving Credit Facility shall be computed on a pro
forma basis based upon the average daily balance of such Indebtedness
outstanding during the applicable period.
"Consolidated EBITDA" means, with respect to any Person for any period, the
sum (without duplication) of (i) the Consolidated Net Income of such Person
for such period, plus (ii) to the extent that any of the following shall have
been taken into account in determining such Consolidated Net Income, and
without duplication, (A) all income taxes of such Person and its Restricted
Subsidiaries paid or accrued in accordance with GAAP for such period (other
than income taxes attributable to extraordinary, unusual or nonrecurring gains
or losses or taxes attributable to sales or dispositions of assets outside the
ordinary course of business), (B) the Consolidated Interest Expense of such
Person for such period, (C) the amortization expense (including the
amortization of deferred financing charges) and depreciation expense for such
Person and its Restricted Subsidiaries for such period and (D) other non-cash
items (other than non-cash interest) of such Person or any of its Restricted
Subsidiaries (including any non-cash compensation expense attributable to
stock option or other equity compensation arrangements), other than any non-
cash item for such period that requires the accrual of or a reserve for cash
charges for any future period and other than any non-cash charge for such
period constituting an extraordinary item of loss, less (iii)(A) all non-cash
items of such Person or any of its Restricted Subsidiaries increasing such
Consolidated Net Income for such period and (B) all cash payments during such
period relating to non-cash items that were added back in determining
Consolidated EBITDA in any prior period.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount, non-
cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capitalized Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and
(ii) the consolidated interest of such Person and its Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Support Obligation or Lien is
called upon) and (iv) the product of (a) all dividend payments on any series
of preferred stock of such Person or any of its Restricted Subsidiaries, times
(b) a fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom (i) net
after-tax gains and
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losses from all sales or dispositions of assets outside of the ordinary course
of business and (ii) net after-tax extraordinary or non-recurring gains or
losses, (iii) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Restricted
Subsidiary of such Person or is merged or consolidated with or into such
Person or any Restricted Subsidiary, (iv) the cumulative effect of a change in
accounting principles, (v) any net income of any other Person if such other
Person is not a Restricted Subsidiary and is accounted for by the equity
method of accounting, except that such Person's equity in the net income of
any such other Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
other Person during such period to such Person or a Restricted Subsidiary as a
dividend or other distribution, (subject, in case of a dividend or other
distribution to a Restricted Subsidiary, to the limitation that such amount so
paid to a Restricted Subsidiary shall be excluded to the extent that such
amount could not at that time be paid to either Issuer due to the restrictions
set forth in clause (vi) below (regardless of any waiver of such conditions)),
(vi) any net income of any Restricted Subsidiary if such Restricted Subsidiary
is subject to restrictions, directly or indirectly, by contract, operation of
law, pursuant to its charter or otherwise on the payment of dividends or the
making of distributions by such Restricted Subsidiary to such Person except
that (A) such Person's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net Income
up to the aggregate amount of cash that could have been paid or distributed
during such period to such Person as a dividend or other distribution
(provided that such ability is not due to a waiver of such restriction) and
(B) such Person's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income
regardless of any such restriction, (vii) any restoration to income of any
contingency reserve, except to the extent that provision for such reserve was
made out of Consolidated Net Income accrued at any time following the Issue
Date, (viii) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during such period
whether or not such operations were classified as discontinued), (ix) in the
case of a successor to such Person by consolidation or merger or as a
transferee of such Person's assets, any net income or loss of the successor
corporation prior to such consolidation, merger or transfer of assets and (x)
the net income (but not loss) of any Unrestricted Subsidiary, whether or not
distributed to any Obligor.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date, plus (ii) the
respective amounts reported on such Person's consolidated balance sheet as of
such date with respect to any series of preferred stock (other than
Disqualified Capital Stock) that by its terms is not entitled to the payment
of dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by such Person upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the Issue Date in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person, (y) all investments as of
such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Convertible Preferred Stock" means the Company's $70.00 Convertible
Preferred Stock, par value $1.00 per share, and the depositary shares relating
thereto.
"Core Businesses" means the gaming, card club, racing, sports,
entertainment, lodging, restaurant, riverboat operations, real estate
development and all other businesses and activities necessary for or
reasonably related or incident thereto, including without limitation related
acquisition, construction, development or operation of related truck stop,
transportation, retail and other facilities designed to enhance any of the
foregoing.
"Credit Facilities" means, with respect to any Obligor, one or more debt
facilities or commercial paper facilities with any combination of banks, other
institutional lenders and other Persons extending financial accommodations or
holding corporate debt obligations in the ordinary course of their business,
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such receivables)
or letters of credit, in
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each case, as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time by the same or different
institutional lenders.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means any Indebtedness under the Bank Credit
Facility (which is outstanding or which the lenders thereunder have a
commitment to extend) and, if applicable, any other Senior Debt permitted
under the Indenture, the principal amount (committed or outstanding) of which
is $25 million or more and that has been designated by either Issuer as
"Designated Senior Debt."
"Disqualified Capital Stock" means any Capital Stock, other than the
Convertible Preferred Stock, which by its terms (or by the terms of any
security into which it is, by its terms, convertible or for which it is, by
its terms, exchangeable at the option of the holder thereof), or upon the
happening of any specified event, is required to be redeemed or is redeemable
(at the option of the holder thereof) at any time prior to the earlier of the
repayment of all Notes or the stated maturity of the Notes or is exchangeable
at the option of the holder thereof for Indebtedness at any time prior to the
earlier of the repayment of all Notes or the stated maturity of the Notes.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Default" means the occurrence of any of the events described under
the caption "--Events of Default and Remedies", after giving effect to any
applicable grace periods or notice requirements.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Gaming Approval" means any governmental approval relating to any gaming
business or enterprise.
"Gaming Authority" means any governmental authority with regulatory
oversight of, authority to regulate or jurisdiction over any gaming businesses
or enterprises, including the State Gaming Control Board of Nevada, the Washoe
County, Nevada, or the Nevada, Mississippi or Louisiana Gaming Commission with
regulatory oversight of, authority to regulate or jurisdiction over any gaming
operation (or proposed gaming operation) owned, managed or operated by any
Obligor.
"Gaming Laws" means all applicable provisions of all (i) constitutions,
treaties, statutes, laws, rules, regulations and ordinances of any Gaming
Authority, (ii) Gaming Approvals and (iii) orders, decisions, judgments,
awards and decrees of any Gaming Authority.
"Global Note" means a permanent global note in registered form deposited
with the Trustee, as a custodian for The Depositary Trust Company or any other
designated depositary.
"Government Securities" means marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency or instrumentality thereof and backed by the full faith and credit of
the United States, in each case maturing within 12 months from the date of
acquisition thereof by any Obligor.
"Guarantor" means any existing or future Material Restricted Subsidiaries of
either Issuer, which has guaranteed the obligations of the Issuers arising
under or in connection with the Notes, as required by the Indenture.
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"Guaranty" means a guaranty by a Guarantor of the Obligations of the Issuers
arising under or in connection with the Notes.
"Hedging Obligations" means all obligations of the Obligors arising under or
in connection with any rate or basis swap, forward contract, commodity swap or
option, equity or equity index swap or option, bond, note or bill option,
interest rate option, foreign currency exchange transaction, cross currency
rate swap, currency option, cap, collar or floor transaction, swap option,
synthetic trust product, synthetic lease or any similar transaction or
agreement.
"Incur" means, with respect to any Indebtedness of any Person or any Lien,
to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or Lien
or the recording, as required pursuant to GAAP or otherwise, of any such
Indebtedness on the balance sheet of such Person (and "Incurrence,"
"Incurred," "Incurrable" and "Incurring" shall have meanings correlative to
the foregoing).
"Indebtedness" means with respect to any Person, without duplication,
whether contingent or otherwise, (i) any obligations for money borrowed, (ii)
any obligation evidenced by bonds, debentures, notes, or other similar
instruments, (iii) obligations in respect of letters of credit or other
similar instruments, (iv) any obligations to pay the deferred purchase price
of property or services, including Capitalized Lease Obligations, (v) the
maximum fixed redemption or repurchase price of Disqualified Capital Stock,
(vi) Indebtedness of other Persons of the types described in clauses (i)
through (v) above, secured by a Lien on the assets of such Person or its
Restricted Subsidiaries, valued, in such cases where the recourse thereof is
limited to such assets, at the lesser of the principal amount of such
Indebtedness or the fair market value of the subject assets, (vii)
indebtedness of other Persons of the types described in clauses (i) through
(v) above, guaranteed by such Person or any of its Restricted Subsidiaries and
(viii) the net obligations of such Person under Hedging Obligations; provided
that the amount of any Indebtedness at any date shall be calculated as the
outstanding balance of all unconditional obligations and the maximum liability
supported by any contingent obligations at such date. Notwithstanding the
foregoing, "Indebtedness" shall not be construed to include trade payables,
credit on open account, accrued liabilities, provisional credit, daylight
overdrafts or similar items.
"Indiana Joint Venture Project" means the possible development of a
riverboat casino facility in Switzerland County, Indiana.
"Interest Swap Obligations" means the net obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap, collar or floor transaction or
other interest rate Hedging Obligation.
"Investment" by any Person means any direct or indirect (i) loan, advance or
other extension of credit or capital contribution (valued at the fair market
value thereof as of the date of contribution or transfer) (by means of
transfers of cash or other property or services for the account or use of
other Persons, or otherwise); (ii) purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by any other Person (whether by merger, consolidation, amalgamation or
otherwise and whether or not purchased directly from the issuer of such
securities or evidences of Indebtedness); (iii) guarantee or assumption of any
Indebtedness or any other obligation of any other Person (except for an
assumption of Indebtedness for which the assuming Person receives
consideration at the time of such assumption in the form of property or assets
with a fair market value at least equal to the principal amount of the
Indebtedness assumed); (iv) the acquisition, by purchase or otherwise, of all
or substantially all of the business or assets or other beneficial ownership
of any Person; and (v) all other items that would be classified as investments
(including, without limitation, purchases of assets outside the ordinary
course of business) on a balance sheet of such Person prepared in accordance
with GAAP. Notwithstanding the foregoing, the purchase or acquisition of any
securities, Indebtedness or Productive Assets of any other Person solely with
Qualified Capital Stock shall not be deemed to be an Investment. The term
"Investments" shall also exclude extensions of trade credit and advances to
customers and suppliers to the extent made in the ordinary course of business
on ordinary business terms. The
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amount of any non-cash Investment shall be the fair market value of such
Investment, as determined conclusively in good faith by management of affected
Obligor unless the fair market value of such Investment exceeds $5 million, in
which case the fair market value shall be determined conclusively in good
faith by the Board of such Obligor at the time such Investment is made. The
amount of any Investment shall not be adjusted for increases or decreases in
value, or write-ups, write-downs or write-offs subsequent to the date such
Investment is made with respect to such Investment.
"Issue Date" means August 7, 1997.
"Letter of Credit Obligations" means Obligations of an Obligor arising under
or in connection with letters of credit.
"Lien" means, with respect to any assets, any mortgage, lien, pledge,
charge, security interest or other similar encumbrance (including without
limitation, any conditional sale or other title retention agreement or lease
in the nature thereof, any option or other agreement to sell, and any filing
of or agreement to give, any security interest).
"Material Restricted Subsidiary" means any Subsidiary which is both a
Material Subsidiary and a Restricted Subsidiary.
"Material Subsidiary" means, at any date of determination, any Subsidiary of
either Issuer which, together with its Subsidiaries (i) had assets which as of
the date of the Issuers' most recent quarterly consolidated balance sheet,
constituted 5% or more of the Issuers' total assets on a consolidated basis as
of such date, as determined in accordance with GAAP, (ii) had Consolidated
EBITDA for the 12-month period ending on the date of the Issuers' most recent
quarterly consolidated statement of income which constituted 5% or more of the
Issuers' Consolidated EBITDA (calculated for this purpose without giving
effect to clause (vi) of the definition of Consolidated Net Income) for such
period or (iii) would constitute a Significant Subsidiary.
"Moody's" means Moody's Investors Services, Inc., and its successors.
"Net Cash Proceeds" means with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
received by any Obligor from such Asset Sale, net of (i) reasonable out-of-
pocket expenses, fees and other direct costs relating to such Asset Sale
(including, without limitation, brokerage, legal, accounting and investment
banking fees and sales commissions), (ii) taxes paid or payable after taking
into account any reduction in tax liability due to available tax credits or
deductions and any tax sharing arrangements, (iii) repayment of Indebtedness
(other than any intercompany Indebtedness) that is required by the terms
thereof to be repaid or pledged as cash collateral, or the holders of which
otherwise have a contractual claim that is legally superior to any claim of
the holders (including a restriction on transfer) to the proceeds of the
subject assets, in connection with such Asset Sale, and (iv) appropriate
amounts to be provided by any applicable Obligor, as a reserve, in accordance
with GAAP, against any liabilities associated with such Asset Sale and
retained by limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale and any reserve
for adjustment to the sale price received in such Asset Sale for so long as
such reserve is held.
"Non-Recourse Indebtedness" means Indebtedness of an Unrestricted Subsidiary
(i) as to which none of the Obligors (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender; (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other
than the Notes being offered hereby) of any Obligor to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity and (iii) as to which the lenders have
been notified in writing that they will not have any recourse to the stock or
assets of any Obligor.
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"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities, whether
absolute or contingent, payable under the documentation governing any
Indebtedness.
"Obligor" means either Issuer or any Guarantor.
"Paying Agent" means the Person so designated by the Issuers in accordance
with the Indenture, initially the Trustee.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness of the Obligors outstanding on the Issue Date and
reflected in the financial statements set forth in this Prospectus as in
effect on the Issue Date as reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(ii) Indebtedness Incurred by the Issuers under the Notes and by the
Guarantors under the Guaranties;
(iii) Indebtedness Incurred by any Obligor pursuant to the Boomtown Notes
and the Bank Credit Facility; provided that the aggregate principal amount
of Indebtedness of the Obligors outstanding thereunder as of any date of
Incurrence shall not exceed $100 million, to be reduced dollar-for-dollar
by the amount of any increase to the face amount of Support Obligations
permitted to be Incurred pursuant to clause (xi) of this definition;
(iv) Indebtedness of either Issuer to any Obligor or of any Guarantor to
any other Obligor for so long as such Indebtedness is held by either Issuer
or by another Obligor; provided that (A) any Indebtedness of either Issuer
to any other Obligor is unsecured and evidenced by an intercompany
promissory note that is subordinated, pursuant to a written agreement, to
such Issuer's obligations under the Indenture and the Notes and the
Registration Rights Agreement, and (B) if as of any date any Person other
than either Issuer or a Guarantor owns or holds any such Indebtedness or
holds a Lien in respect of such Indebtedness, such date shall be deemed to
be an Incurrence of Indebtedness not constituting Permitted Indebtedness
under this clause (iv) by the issuer of such Indebtedness;
(v) Indebtedness of a Restricted Subsidiary to either Issuer for so long
as such Indebtedness is held by an Obligor; provided that if as of any date
any Person other than an Obligor acquires any such Indebtedness or holds a
Lien in respect of such Indebtedness, such acquisition shall be deemed to
be an Incurrence of Indebtedness not constituting Permitted Indebtedness
under this clause (v) by the issuer of such Indebtedness;
(vi) Permitted Refinancing Indebtedness;
(vii) the Incurrence by Unrestricted Subsidiaries of Non-Recourse
Indebtedness; provided that, if any such Indebtedness ceases to be Non-
Recourse Indebtedness of an Unrestricted Subsidiary, such event shall be
deemed to constitute an Incurrence of Indebtedness that is not permitted by
this clause (vii);
(viii) Indebtedness Incurred by any Obligor solely to finance the
construction or acquisition or improvement of, or consisting of Capitalized
Leased Obligations Incurred to acquire rights of use in, capital assets
useful in such Obligor's business and, in any such case, Incurred prior to
or within 180 days after the construction, acquisition, improvement or
leasing of the subject assets, not to exceed in aggregate principal amount
outstanding at any time, (A) $15 million per Obligor or (B) $100 million in
the aggregate for all of the Obligors, and additional Indebtedness of the
kind described in this clause (viii) with respect to which no Obligor is
directly or indirectly liable, and which is expressly made non-recourse to
the Obligors and all of their assets, except the asset so financed;
(ix) Interest Swap Obligations entered into not as speculative
Investments but as hedging transactions designed to protect the Obligors
against fluctuations in interest rates in connection with Indebtedness
otherwise permitted hereunder;
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(x) Indebtedness of any Obligor arising in respect of performance bonds
and completion guaranties (to the extent that the Incurrence thereof does
not result in the Incurrence of any obligation for the payment of borrowed
money of others), in the ordinary course of business, in amounts and for
the purposes customary in such Obligor's industry for businesses comparable
to those of such Obligor; provided, that such Indebtedness shall be
Incurred solely in connection with the development, construction,
improvement or enhancement of assets useful in such Obligor's business and;
(xi) other Indebtedness consisting of Support Obligations not exceeding
$25 million in aggregate principal amount at any time, which may be
increased by the Issuers in their discretion, subject to availability
under, and a corresponding reduction to, the principal amount of
Indebtedness permitted to be Incurred under the Bank Credit Facility
pursuant to clause (iii) of this definition.
"Permitted Investments" means, without duplication, each of the following:
(i) Investments in cash (including deposit accounts with major commercial
banks) and Cash Equivalents;
(ii) Investments by the Obligors in any Obligor or any Person that is or
will become upon giving effect to such Investment, or as a result of which
such Person is merged, consolidated or liquidated into, or conveys
substantially of all its assets to, an Obligor or a Wholly Owned Restricted
Subsidiary; provided that for purposes of calculating at any date the
aggregate amount of Investments made since the Issue Date pursuant to the
covenant described above under the caption "--Restricted Payments," such
Investment shall be a Permitted Investment only so long as any Subsidiary
in which any such Investment has been made continues to be an Obligor or a
Wholly Owned Restricted Subsidiary;
(iii) Investments existing on the Issue Date, each such Investment to be
(A) in an amount less than $1 million, (B) listed on a schedule to the
Indenture or (C) an existing Investment by any one or combination of HPI
and its consolidated subsidiaries in any other such Person;
(iv) accounts receivable created or acquired in the ordinary course of
business of any Obligor on ordinary business terms;
(v) Investments arising from transactions by the Obligors with trade
creditors or customers in the ordinary course of business (including any
such Investment received pursuant to any plan of reorganization or similar
arrangement pursuant to the bankruptcy or insolvency of such trade
creditors or customers or otherwise in settlement of a claim);
(vi) Investments made as the result of non-cash consideration received
from an Asset Sale that was made pursuant to and in compliance with the
covenant described above under the caption "--Assets Sales"; and
(vii) Investments consisting of advances to officers, directors and
employees of the Obligors for travel, entertainment, relocation, purchases
of Capital Stock of an Obligor permitted by the Indenture and analogous
ordinary business purposes.
"Permitted Junior Securities" means Equity Interests in the Obligors or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to
a greater extent than, the Notes and the Guaranties are subordinated to Senior
Debt pursuant to the Indenture.
"Permitted Liens" means (i) Liens in favor of either Issuer or Liens on the
assets of any Guarantor so long as such Liens are held by another Obligor;
(ii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with any Obligor; provided that such Liens were not
Incurred in anticipation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with
such Obligor; (iii) Liens on property existing at the time of acquisition
thereof by any Obligor; provided that such Liens were not Incurred in
anticipation of such acquisition; (iv) Liens Incurred to secure Indebtedness
permitted by clause (viii) of the definition of Permitted Indebtedness,
attaching to or encumbering
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only the subject assets and directly related property such as proceeds and
products thereof and accessions and replacements thereto; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens created by "notice" or "precautionary" filings in
connection with operating leases or other transactions pursuant to which no
Indebtedness is Incurred by any Obligor; (vii) Liens existing on the Issue
Date; (viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded; provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) Liens on shares of
any equity security or any warrant or operation to purchase an equity security
or any security which is convertible into an equity security issued by any
Obligor that holds, directly or indirectly through a holding company or
otherwise, a license under any Gaming Law of the State of Nevada; provided
that this clause (ix) shall apply only so long as the Gaming Laws of the State
of Nevada provide that the creation of any restriction on the disposition of
any of such securities shall not be effective and, if such Gaming Laws at any
time cease to so provide, then this clause (ix) shall be of no further effect;
(x) Liens on securities constituting "margin stock" within the meaning of
Regulation G, T, U or X promulgated by the Board of Governors of the Federal
Reserve System, to the extent that the Investment by any Obligor in such
margin stock is permitted by the Indenture and (xi) other Liens arising by
operation of law or in the ordinary course of business, securing obligations
not constituting Indebtedness and not past due.
"Permitted Refinancing Indebtedness" means any Indebtedness of any Obligor
issued in exchange for, or the net proceeds of which are used to repay,
redeem, extend, refinance, renew, replace, defease or refund other Permitted
Indebtedness of such Obligor arising under clauses (i), (viii), (x) or (xi) of
the definition of "Permitted Indebtedness" or Indebtedness Incurred under the
Consolidated Coverage Ratio test in the covenant described above under the
heading "--Incurrence of Indebtedness and Issuance of Preferred Stock" (any
such Indebtedness, "Existing Indebtedness"); provided that: (i) the principal
amount of such Permitted Refinancing Indebtedness does not exceed the
principal amount of such Existing Indebtedness (plus the amount of prepayment
penalties, premiums and expenses incurred or paid in connection therewith),
except to the extent that the Incurrence of such excess is otherwise permitted
by the Indenture; (ii) if such Indebtedness is subordinated to, or pari passu
in right of payment with, the Notes, such Permitted Refinancing Indebtedness
has a final maturity date on or later than the final maturity date of, and has
a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, such Existing Indebtedness, (iii) if such
Existing Indebtedness is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness has a final maturity date on or later than
the final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable to the holders of Notes as those
contained in the documentation governing the Indebtedness being repaid,
redeemed, extended, refinanced, renewed, replaced, defeased or refunded and
(iv) such Permitted Refinancing Indebtedness shall be Indebtedness solely of
the Obligors originally obligated thereunder, unless otherwise permitted by
the Indenture.
"Plan of Liquidation" means, with respect to any Person, a plan (including
by operation of law) that provides for, contemplates or the effectuation of
which is preceded or accomplished by (whether or not substantially
contemporaneously) (i) the sale, lease, conveyance, of all or substantially
all of the assets of such Person otherwise than as an entirety or
substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance, or other disposition and
all or substantially all of the remaining assets of such Person to holders of
Capital Stock of such Person.
"Principals" means (a) R.D. Hubbard, (b) any spouse, parent or child of such
Principal or (c) any trust, corporation, partnership or other Person, the
beneficiaries, stockholders, partners, owners or other Persons holding an 80%
or more controlling interest in which are Persons described in clause (a) or
(b) of this definition.
"Productive Assets" means assets (including assets owned directly or
indirectly through Capital Stock of a Restricted Subsidiary) of a kind used or
usable in the businesses of the Obligors as they are conducted on the date of
the Asset Sale.
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"Public Equity Offering" means a public equity offering, underwritten by a
nationally recognized underwriter pursuant to an effective registration
statement under the Securities Act of Qualified Capital Stock.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Rating Agencies" means (i) S&P, (ii) Moody's or (iii) a nationally
recognized securities rating agency or agencies, as the case may be, selected
by the Issuers, which may be substituted for S&P or Moody's or both.
"Rating Category" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C
and D (or equivalent successor categories); and (iii) the equivalent of any
such category of S&P or Moody's used by another Rating Agency. In determining
whether the rating of the Notes has decreased by one or more gradations,
gradations within Rating Categories (+ and - for S&P, 1, 2 and 3 for Moody's;
or the equivalent gradations for another Rating Agency) shall be taken into
account (e.g., with respect to S&P, a decline in a rating from BB+ to BB, as
well as from BB to BB-, will constitute a decrease of one gradation).
"Rating Decline" means (i) if the Notes are rated, immediately prior to the
announcement of the REIT Restructuring, as investment grade instruments by
both Rating Agencies, a subsequent decline in rating to a rating below
investment grade by at least one Rating Agency, (ii) if the Notes are rated,
immediately prior to the announcement of the REIT Restructuring, as investment
grade instruments by either Rating Agency, a subsequent decline in the rating
of the Notes by both Rating Agencies to a rating below investment grade or
(iii) if the Notes are rated, immediately prior to the announcement of the
REIT Restructuring, as below investment grade instruments by both Rating
Agencies, a subsequent decline in the rating of the Notes by either or both of
the Rating Agencies by one or more gradations (including gradations within
Rating Categories as well as between Rating Categories).
"REIT" means, a real estate investment trust into which the Company may be
reorganized in the Possible REIT Restructuring.
"REIT Change of Control" means the occurrence of both (i) the Possible REIT
Restructuring and (ii) a Rating Decline within 30 days after giving effect to
the Possible REIT Restructuring.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary. If no referent Person is
specified, "Restricted Subsidiary" means a Subsidiary of either Issuer.
"S&P" means Standard & Poors Rating Group, a division of The McGraw-Hill
Industries, Inc., and its successors.
"Senior Debt" means (i) all Indebtedness outstanding under Credit Facilities
and all Hedging Obligations with respect thereto, (ii) any other Indebtedness
permitted to be Incurred by the Issuers under the terms of the Indenture,
unless the instrument under which such Indebtedness is Incurred expressly
provides that it is on a parity with or subordinated in right of payment to
the Notes and (iii) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include (v) any liability for federal, state, local or other taxes owed or
owing by either Issuer, (w) any Indebtedness of any Obligor to any of its
Restricted Subsidiaries or other Affiliates, (x) any trade payables, (y) any
Indebtedness that is incurred in violation of the Indenture and (z)
Indebtedness which, when Incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to any
Obligor.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Exchange Act, as such Regulation is in effect on the date
hereof.
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"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary," with respect to any Person, means (i) any corporation or
comparably organized entity, a majority of whose voting stock (defined as any
class of capital stock having voting power under ordinary circumstances to
elect a majority of the Board of such Person) is owned, directly or
indirectly, by any one or more of the Obligors and (ii) any other Person
(other than a corporation) in which any one or more of the Obligors, directly
or indirectly, has at least a majority ownership interest entitled to vote in
the election of directors, managers or trustees thereof or in which such
Obligor is the managing general partner.
"Support Obligation" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided that the term "Support Obligation" shall not include (a) endorsements
for collection or deposit in the ordinary course of business, or (b)
commitments to make Permitted Investments in Obligors or their Restricted
Subsidiaries.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the
Board of either Issuer as its Unrestricted Subsidiary pursuant to a Board
resolution; but only to the extent that such Subsidiary (a) has no
Indebtedness other than Non-Recourse Indebtedness, (b) is not party to any
agreement, contract, arrangement or understanding with any Obligor unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to such Obligor than those that might be obtained at the time
from Persons who are not Affiliates of such Obligor, (c) is a Person with
respect to which none of the Obligors has any direct or indirect obligation
(x) to subscribe for additional equity interests or (y) to maintain or
preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results, (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of any
Obligor, and (e) has at least one director on its Board who is not a director
or executive officer of any Obligor and has at least one executive officer who
is not a director or executive officer of any Obligor. Any such designation by
the Board of either Issuer shall be evidenced to the Trustee by filing with
the Trustee a certified copy of the Board resolution giving effect to such
designation and an officers' certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under "--Restricted Payments." If at any time any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be Incurred by a Restricted Subsidiary as of such time (and, if such
Indebtedness is not permitted to be Incurred as of such date under the
covenant described above under "--Incurrence of Indebtedness and Issuance of
Preferred Stock," such Issuers shall be in default of such covenant). The
Board of either Issuer may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed
to be an Incurrence of Indebtedness by a Restricted Subsidiary of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under the
covenant described above under the heading "--Incurrence of Indebtedness and
Issuance of Preferred Stock," calculated on a pro forma basis as if such
designation had occurred at the beginning of the reference period, and (ii) no
Default or Event of Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
such Person.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the then outstanding
aggregate principal amount of such Indebtedness into (ii) the total of the
products obtained by multiplying (A) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment or
principal, including payment at final maturity, in respect thereof, by (B) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" means any Wholly Owned Subsidiary of
either Issuer that is a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person
of which all the outstanding voting securities (other than directors'
qualifying shares) which normally have the right to vote in the election of
directors are owned by such Person or any wholly owned Subsidiary of such
Person.
118
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. Each broker-dealer that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Issuers have agreed that under certain circumstances, for
a period of up to 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Issuers and the Guarantors will not receive any proceeds from any sale
of New Notes by broker-dealers. New Notes received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale,
at prices related to such prevailing market prices or negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such New Notes. Any
broker-dealer that acquired Old Notes as a result of market making activities
or other trading activities (and not directly from the Issuers or Guarantors)
and who resells New Notes that were received by it pursuant to the Exchange
Offer, and any broker or dealer that participates in a distribution of such
New Notes, may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
119
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form without interest coupons.
Old Notes sold in reliance on Rule 144A will be represented by one or more
permanent global Notes in definitive, fully registered form without interest
coupons (each a "Restricted Global Note," and together with the Regulation S
Global Note, the "Global Notes") and will be deposited with the relevant
Trustee as custodian for, and registered in the name of, a nominee of DTC.
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or Persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Qualified institutional buyers
may hold their interests in a Restricted Global Note directly through DTC if
they are participants in such system, or indirectly through organizations
which are participants in such system.
Investors may hold their interests in a Regulation S Global Note directly
through Cedel or Euroclear, if they are participants in such systems, or
indirectly through organizations that are participants in such system.
Investors may also hold such interests through organizations other than Cedel
or Euroclear that are participants in the DTC system. Cedel and Euroclear will
hold interests in the Regulation S Global Notes on behalf of their
participants through DTC.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or Holder represented by such Global Note for all purposes under
the Indenture and the Notes. No beneficial owner of an interest in a Global
Note will be able to transfer that interest except in accordance with DTC's
applicable procedures, in addition to those provided for under the Indenture
and, if applicable, those of Euroclear and Cedel.
Payments of the principal of, and interest on, a Global Note will be made to
DTC or its nominee, as the case may be, as the registered owner thereof. None
of the Issuers, the Trustee nor any Paying Agent will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Issuers expect that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records
of DTC or its nominee. The Issuers also expect that payments by participants
to owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in, accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Cedel will be effected in the ordinary
way in accordance with their respective rules and operating procedures.
The Issuers expect that DTC will take any action permitted to be taken by a
holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in a Global Note is credited and only in respect of such portion
of the aggregate principal amount of Notes as to which such participant or
participants has or have given such direction. However, if there is an Event
of Default under the Notes, DTC will exchange the applicable Global Note for
Certificated Notes, which it will distribute to its participants and which may
be legended as set forth under the heading "Notice to Investors."
120
<PAGE>
The Issuers understand that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical
movement of certificates and certain other organizations. Indirect access to
the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interests in a Global Note
among participants of DTC, Euroclear and Cedel, they are under no obligation
to perform or continue to perform such procedures, and such procedures may be
discontinued at any time. None of the Issuers, the Trustee nor any Paying
Agent will have any responsibility for the performance by DTC, Euroclear or
Cedel or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Certificated Notes. If DTC is at any time unwilling or unable to continue as
a depositary for the Global Notes and a successor depositary is not appointed
by the Company within 90 days, the Issuers will issue Certificated Notes, in
exchange for the Global Notes. Holders of an interest in a Restricted Global
Note may receive Certificated Notes, which may bear the legend referred to
under "Notice to Investors," in accordance with the DTC's rules and procedures
in addition to those provided for under the Indenture.
EXPERTS
The consolidated financial statements of Hollywood Park as of December 31,
1996 and 1995, and for each of the three years in the period ended December
31, 1996, included in this Prospectus, to the extent and for the periods
indicated in their report have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report to opinion with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
The financial statements of Crystal Park Hotel and Casino Development
Company, LLC as of December 31, 1996, and for the period from July 18, 1996
(date of inception) to December 31, 1996, included in this Prospectus, to the
extent and for the periods indicated in their report have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report to opinion with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in giving said reports.
The consolidated financial statements of Boomtown, Inc. as of September 30,
1995 and 1996, and for each of the three years in the period ended September
30, 1996, appearing in this Prospectus and Registration Statement, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
The legality of the New Notes offered hereby, and the Guaranties thereof,
will be passed upon for the Issuers and the Guarantors by Irell & Manella LLP.
121
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HOLLYWOOD PARK, INC.
Report of Arthur Andersen LLP, Independent Public Accountants............ F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Operations.................................... F-4
Consolidated Statements of Changes in Stockholders' Equity............... F-5
Consolidated Statements of Cash Flows.................................... F-6
Notes to Consolidated Financial Statements............................... F-7
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
Report of Arthur Andersen LLP, Independent Public Accountants............ F-39
Balance Sheets........................................................... F-40
Statements of Operations................................................. F-41
Statements of Members' Equity............................................ F-42
Statements of Cash Flows................................................. F-43
Notes to Financial Statements............................................ F-44
BOOMTOWN, INC.
Report of Ernst & Young LLP, Independent Auditors........................ F-48
Consolidated Balance Sheets.............................................. F-49
Consolidated Statements of Operations.................................... F-50
Consolidated Statements of Stockholders' Equity.......................... F-51
Consolidated Statements of Cash Flows.................................... F-52
Notes to Consolidated Financial Statements............................... F-53
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders of
Hollywood Park, Inc.:
We have audited the accompanying consolidated balance sheets of Hollywood
Park, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of
December 31, 1996, and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hollywood Park, Inc. and
subsidiaries as of December 31, 1996, and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Los Angeles, California
February 18, 1997
F-2
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------ AS OF
1996 1995 JUNE 30, 1997(a)
-------- -------- ----------------
(UNAUDITED)
ASSETS
------ (IN THOUSANDS)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents..................... $ 11,922 $ 22,406 $ 38,409
Restricted cash............................... 4,486 3,126 11,096
Short term investments........................ 4,766 6,447 1,275
Other receivables, net of allowance for
doubtful accounts of $780,000 (unaudited) in
1997, $1,089,000 in 1996, and $1,841,000 in
1995......................................... 7,110 8,147 10,625
Prepaid expenses and other assets............. 6,215 3,888 21,686
Deferred tax assets........................... 6,422 4,888 6,587
Current portion of notes receivable........... 38 34 40
-------- -------- --------
Total current assets..................... 40,959 48,936 89,718
Notes receivable............................... 819 857 9,464
Property, plant and equipment, net............. 130,835 174,717 277,084
Goodwill and lease with TRAK East, net......... 20,370 28,024 32,685
Long term gaming assets........................ 0 19,063 0
Other assets................................... 12,903 11,706 17,147
-------- -------- --------
$205,886 $283,303 $426,098
======== ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current Liabilities:
Accounts payable.............................. $ 10,043 $ 12,518 $ 13,163
Accrued lawsuit settlement.................... 2,750 5,232 2,750
Accrued liabilities........................... 9,733 13,762 35,499
Accrued compensation.......................... 4,198 3,295 4,803
Gaming liabilities............................ 2,499 3,998 2,545
Racing liabilities............................ 6,106 3,836 15,672
Current portion of notes payable.............. 35 32,310 6,222
-------- -------- --------
Total current liabilities................ 35,364 74,951 80,654
Notes payable.................................. 282 15,629 116,396
Gaming liabilities............................. 0 16,894 0
Deferred tax liabilities....................... 9,065 10,083 9,411
-------- -------- --------
Total liabilities........................ 44,711 117,557 206,461
Minority interests............................. 3,015 0 3,030
Stockholders' Equity
Capital stock--
Preferred--$1.00 par value, authorized
250,000 shares; 27,499 issued and out-
standing.................................. 28 28 28
Common--$.10 par value authorized
40,000,000 shares; 23,793,636 (unaudited)
issued and outstanding in 1997, 18,332,016
in 1996 and 18,504,798 in 1995............ 1,833 1,850 2,380
Capital in excess of par value............... 167,074 168,479 221,222
Accumulated deficit.......................... (10,775) (4,611) (7,023)
-------- -------- --------
Total stockholders' equity............... 158,160 165,746 216,607
-------- -------- --------
$205,886 $283,303 $426,098
======== ======== ========
</TABLE>
- --------
(a) Includes the consolidated accounts of Boomtown.
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------- ---------------
1996 1995 1994 1997 1996
---------- ---------- ---------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES:
Gaming................... $ 50,717 $ 26,656 $ 11,745 $26,847 $24,803
Racing................... 71,308 77,036 78,719 35,868 38,353
Food and beverage........ 13,947 19,783 20,540 6,860 7,637
Other income............. 7,253 7,097 6,320 3,564 3,487
---------- ---------- ---------- ------- -------
143,225 130,572 117,324 73,139 74,280
---------- ---------- ---------- ------- -------
EXPENSES:
Gaming................... 27,249 4,919 0 15,161 14,489
Racing................... 30,167 29,574 30,398 15,409 15,996
Food and beverage........ 19,573 25,162 21,851 8,819 9,082
Administrative........... 41,477 46,792 42,026 18,531 21,589
Other.................... 2,485 3,200 2,121 1,439 1,099
Depreciation and
amortization............ 10,695 11,384 9,563 5,780 5,400
Write off of investment
in Sunflower............ 11,412 0 0 0 11,412
Lawsuit settlement....... 0 6,088 0 0 0
Casino pre-opening and
training expenses....... 0 0 2,337 0 0
Turf Paradise acquisition
costs................... 0 0 627 0 0
---------- ---------- ---------- ------- -------
143,058 127,119 108,923 65,139 79,067
---------- ---------- ---------- ------- -------
Operating income (loss).... 167 3,453 8,401 8,000 (4,787)
Interest expense......... 942 3,922 3,061 129 898
---------- ---------- ---------- ------- -------
Income (loss) before
minority interest and
taxes..................... (775) (469) 5,340 7,871 (5,685)
Minority interest........ 15 0 0 63 0
Income tax expense....... 3,459 693 1,568 3,100 2,444
---------- ---------- ---------- ------- -------
Net income (loss).......... $ (4,249) $ (1,162) $ 3,772 $ 4,708 $(8,129)
========== ========== ========== ======= =======
Dividend requirements on
convertible preferred
stock..................... $ 1,925 $ 1,925 $ 1,925 $ 962 $ 962
Net income (loss) available
to (allocated to) common
shareholders.............. $ (6,174) $ (3,087) $ 1,847 $ 3,746 $(9,091)
========== ========== ========== ======= =======
Per common share:
Net income (loss)--
primary................. $ (0.33) $ (0.17) $ 0.10 $ 0.20 $ (0.49)
Net income (loss)--fully
diluted................. $ (0.33) $ (0.17) $ 0.10 $ 0.20 $ (0.49)
Number of shares--primary.. 18,505 18,399 18,224 18,366 18,613
Number of shares--fully
diluted................... 20,797 20,691 20,516 20,657 20,904
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 AND
THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
CAPITAL IN TOTAL
PREFERRED COMMON EXCESS OF ACCUMULATED STOCKHOLDERS'
STOCK STOCK PAR VALUE DEFICIT EQUITY
--------- ------ -------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT YEAR END
1993................... $28 $1,772 $155,725 $ (3,325) $154,200
Net income............ 0 0 0 3,772 3,772
Net income--Turf
Paradise six months
ended December 31,
1993................. 0 0 0 198 198
Issuance of common
stock to acquire--
Sunflower Racing,
Inc.................. 0 59 11,099 0 11,158
Issuance of contingent
shares related to
Sunflower Racing,
Inc. acquisition..... 0 6 (6) 0 0
Net changes related to
Turf Paradise equity. 0 0 74 (222) (148)
Preferred stock
dividends--$70.00 per
share................ 0 0 0 (1,925) (1,925)
--- ------ -------- -------- --------
BALANCE AT YEAR END
1994................... 28 1,837 166,892 (1,502) 167,255
Net loss.............. 0 0 0 (1,162) (1,162)
Issuance of common
stock to acquire--
Pacific Casino
Management, Inc...... 0 13 1,587 0 1,600
Investment in bonds--
unrealized holding
loss................. 0 0 0 (22) (22)
Preferred stock
dividends--$70.00 per
share................ 0 0 0 (1,925) (1,925)
--- ------ -------- -------- --------
BALANCE AT YEAR END
1995................... 28 1,850 168,479 (4,611) 165,746
Net loss.............. 0 0 0 (4,249) (4,249)
Issuance of common
stock to acquire--
Pacific Casino
Management, Inc...... 0 5 535 0 540
Repurchase and
retirement of common
stock................ 0 (22) (1,940) 0 (1,962)
Investment in bonds--
unrealized holding
gain................. 0 0 0 10 10
Preferred stock
dividends--$70.00 per
share................ 0 0 0 (1,925) (1,925)
--- ------ -------- -------- --------
BALANCE AT YEAR END
1996................... 28 1,833 167,074 (10,775) 158,160
Net income............ 0 0 0 4,708 4,708
Issuance of common
stock to acquire--
Pacific Casino
Management, Inc...... 0 3 497 0 500
Issuance of common
stock to acquire--
Boomtown, Inc. ...... 0 581 56,423 0 57,004
Common stock options
exercised............ 0 8 648 0 656
Repurchase and
retirement of common
stock................ 0 (45) (3,420) 0 (3,465)
Investment in bonds--
unrealized holding
gain................. 0 0 0 8 8
Preferred stock
dividends--$35.00 per
share................ 0 0 0 (964) (964)
--- ------ -------- -------- --------
BALANCE AT JUNE 30, 1997
(UNAUDITED)............ $28 $2,380 $221,222 $ (7,023) $216,607
=== ====== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------------------- -----------------
1996 1995 1994 1997 1996
-------- -------- -------- ------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)............. $ (4,249) $ (1,162) $ 3,772 $ 4,708 $ (8,129)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization................ 10,027 10,857 10,064 5,780 4,901
Minority interests........... 15 0 0 15 0
Changes in accounts due to
deconsolidation of subsidiary
in bankruptcy:
Property, plant and
equipment................... 58,380 0 0 0 58,380
Secured notes payable........ (28,918) 0 0 0 (28,904)
Unsecured notes payable...... (15,323) 0 0 0 (15,373)
Goodwill and lease with TRAK
East........................ 6,908 0 0 0 6,908
(Gain) loss on sale or
disposal of property, plant
and equipment................ (2) 64 55 (24) (5)
Unrealized gain (loss) on
short term bond investing.... 10 0 0 8 (7)
Changes in assets and
liabilities, net of effects
of the purchase of a
business:
Increase in restricted cash.. (1,360) (2,427) (490) (6,610) (7,028)
Increase in casino lease and
related interest
receivable, net............. 0 (9,204) (11,745) 0 0
Decrease (increase) in other
receivables, net............ 1,037 77 (5,022) (1,520) (759)
(Increase) decrease in
prepaid expenses and other
assets...................... (3,524) (304) (5,488) (1,287) 3,689
(Increase) decrease in
deferred tax assets......... (1,534) (349) (3,207) (165) 2,684
(Decrease) increase in
accounts payable............ (2,475) 5,685 (1,596) 387 629
(Decrease) increase in
accrued lawsuit settlement.. (2,482) 5,232 0 0 (2,482)
(Decrease) increase in
accrued gaming liabilities.. (1,499) 3,998 0 46 (1,207)
(Decrease) increase in
accrued liabilities......... (3,489) 6,437 1,612 3,464 (4,262)
(Decrease) increase in
accrued compensation........ 903 (761) 1,559 605 346
Increase in racing
liabilities................. 2,270 1,404 1,026 9,566 11,436
(Decrease) increase in
deferred tax liabilities.... (1,018) 744 2,173 (24) (5,313)
-------- -------- -------- ------- --------
Net cash provided by (used
in) operating activities.. 13,677 20,291 (7,287) 14,949 15,504
-------- -------- -------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property, plant
and equipment............... (23,786) (25,150) (27,584) (3,927) (9,132)
Receipts from sale of
property, plant and
equipment................... 9 98 75 0 6
Principal collected on notes
receivable.................. 34 31 31 18 16
Purchase of short term
investments................. (16,888) (35,875) (96,822) (1,937) (11,154)
Proceeds from short term
investments................. 18,569 29,428 116,625 5,428 13,548
Long term gaming assets...... 2,169 (2,169) 0 0 598
Cash acquired in the
purchase of a business, net
of transaction and other
costs....................... 0 715 344 12,264 0
-------- -------- -------- ------- --------
Net cash (used in) provided
by investing activities... (19,893) (32,922) (7,331) 11,846 (6,118)
-------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from unsecured
notes payable............... 0 1,681 1,850 0 0
Proceeds from secured notes
payable..................... 0 3,358 2,300 0 0
Payment of unsecured notes
payable..................... (23) (3,813) (5,019) 0 0
Payment of secured notes
payable..................... (3,358) (1,333) (5,998) 0 0
Payments under capital lease
obligations................. 0 (53) (135) 0 0
Payments from minority
interest partners........... 3,000 0 0 0 0
Common stock repurchase and
retirement.................. (1,962) 0 0 0 0
Turf Paradise equity
transactions................ 0 0 50 0 0
Common stock options
exercised................... 0 0 0 654 0
Dividends paid to preferred
stockholders................ (1,925) (1,925) (1,925) (962) (962)
-------- -------- -------- ------- --------
Net cash provided by (used
for) financing activities. (4,268) (2,085) (8,877) (308) (962)
-------- -------- -------- ------- --------
Increase (decrease) in cash
equivalents.................. (10,484) (14,716) (23,495) 26,487 8,424
Cash and cash equivalents at
the beginning of the period.. 22,406 37,122 60,617 11,922 22,406
-------- -------- -------- ------- --------
Cash and cash equivalents at
the end of the period........ $ 11,922 $ 22,406 $ 37,122 $38,409 $ 30,830
======== ======== ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION The consolidated financial statements for the year ended
December 31, 1996, included the accounts of Hollywood Park, Inc. (the
"Company" or "Hollywood Park") and its wholly owned subsidiaries: Hollywood
Park Operating Company (which has two wholly owned subsidiaries, Hollywood
Park Food Services, Inc. and Hollywood Park Fall Operating Company), Sunflower
Racing, Inc. ("Sunflower") (which has one wholly owned subsidiary, SR Food and
Beverage, Inc.), Turf Paradise, Inc. ("Turf Paradise"), and HP/Compton, Inc.,
which owned 88% of Crystal Park Hotel and Casino Development Company LLC, as
of December 31, 1996, and presently owns 89.8% ("Crystal Park LLC"), which
built and presently leases the Crystal Park Hotel and Casino ("Crystal Park"),
to an unaffiliated third party. As of June 30, 1997, the Company owns and
operates a casino and hotel in Verdi, Nevada ("Boomtown Reno"), a riverboat
casino in Harvey, Louisiana ("Boomtown New Orleans"), and a dockside casino in
Biloxi, Mississippi ("Boomtown, Biloxi"). Sunflower was acquired on March 23,
1994, and was accounted for under the purchase method of accounting. Turf
Paradise was acquired on August 11, 1994, and was accounted for under the
pooling of interests method of accounting. Crystal Park began operations on
October 25, 1996. The Hollywood Park-Casino is a division of Hollywood Park,
Inc.
On May 2, 1996, the Kansas Legislature adjourned without passing legislation
that would have allowed additional gaming at Sunflower, thereby permitting
Sunflower to more effectively compete with Missouri riverboat gaming. As a
result of the outcome of the Kansas Legislative session, Hollywood Park wrote
off its approximately $11,412,000 investment in Sunflower. There was no cash
involved with the write off of this investment. On May 17, 1996, Sunflower
filed for reorganization under Chapter 11 of the Bankruptcy Code. Sunflower is
operating during the reorganization, but Sunflower's operating results from
April 1, 1996, forward were not consolidated with Hollywood Park's operating
results.
The consolidated statements for the six months ended June 30, 1997 and 1996,
are unaudited, however, in the opinion of management they reflect all normal
and recurring adjustments that are necessary to present a fair statement of
the financial results for the interim periods. It should be understood that
accounting measurements at the interim dates inherently involve greater
reliance on estimates than at year end. The interim racing results of
operations are not indicative of the results for the full year due to the
seasonality of the horse racing business.
ACQUISITION OF BOOMTOWN, INC. (UNAUDITED) On June 30, 1997, pursuant to the
Agreement and Plan of Merger dated as of April 23, 1996, by and among
Hollywood Park, HP Acquisition, Inc., a wholly owned subsidiary of the
Company, and Boomtown, HP Acquisition, Inc. was merged with and into Boomtown
(the "Merger"). As a result of the Merger, Boomtown became a wholly owned
subsidiary of the Company and each share of Boomtown common stock was
converted into the right to receive 0.625 of a share of Hollywood Park's
common stock. Approximately 5,362,850 shares of Hollywood Park common stock,
valued at $9.8125, (excluding shares repurchased from Edward P. Roski, Jr.
("Roski") and subsequently retired, as described below) were issued in the
Merger.
The Merger was accounted for under the purchase method of accounting for a
business combination, and thus the consolidated balance sheet of Boomtown as
of June 30, 1997, is consolidated with Hollywood Park's, though Boomtown's
consolidated statement of operations is not consolidated with Hollywood
Park's. The purchase price of the Merger was allocated to the identifiable
assets acquired and liabilities assumed based on their estimated fair values
at the date of acquisition. Based on financial analyses prepared by the
Company which considered the impact of general economic, financial and market
conditions on the assets acquired and liabilities assumed, the Company
determined that the estimated fair values approximated their carrying amounts.
The Merger generated approximately $2,683,000 of excess acquisition cost over
the recorded value of the net assets acquired, all of which was allocated to
goodwill, to be amortized over 40 years. The amortization of the goodwill is
not deductible for income tax purposes.
The Company acquired three of the four Boomtown properties, Boomtown Reno,
Boomtown New Orleans, and Boomtown Biloxi. Boomtown's Las Vegas property was
divested following the Merger on July 1, 1997.
F-7
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Boomtown's Las Vegas property was divested because it had generated
significant operating losses since it opened, thus reducing the overall
profitability of Boomtown. Boomtown and its subsidiaries exchanged
substantially all of their interest in the Las Vegas property, including
substantially all of the operating assets and notes receivable of
approximately $27,300,000 from the landowner/lessor of the Las Vegas property,
IVAC, a California general partnership of which Roski, a former Boomtown
director, is a general partner, for, among other things, two unsecured notes
receivable totaling approximately $8,465,000, cash, assumption of certain
liabilities and release from certain lease obligations. The first note
receivable is for $5,000,000, bearing interest at Bank of America National
Trust and Savings Association's ("Bank of America") reference rate plus 1.5%
per year, with annual principal receipts of $1,000,000 plus accrued interest
commencing on July 1, 1998. The second note is for approximately $3,465,000,
bearing interest at Bank of America's reference rate plus 0.5% per year, with
the principal and accrued interest payable to the Company, in full, on July 1,
2000. In addition, concurrently with the divestiture of the Las Vegas
property, Hollywood Park purchased and retired 446,491 shares of Hollywood
Park common stock received by Roski in the Merger for a price of approximately
$3,465,000, payable in the form of a Hollywood Park promissory note. The
promissory note bears interest at Bank of America's reference rate plus 1.0%.
Interest is payable quarterly and annual principal payments in five equal
installments of approximately $693,000 are due commencing July 1, 1998.
Boomtown Reno is situated on 569 acres (though current operations presently
utilize approximately 61 acres) in Verdi Nevada, two miles from the California
border and seven miles west of downtown Reno, on Interstate 80, the major
highway connecting northern California and Nevada. Boomtown Reno draws a
significant portion of its customers from Interstate 80 traffic. Boomtown Reno
offers a 40,000-square foot casino, with 1,320 slot machines and 44 table
games, a 122-room hotel, a 35,000-square foot family entertainment center, a
16-acre truck stop, a full-service recreational vehicle park, a newly
renovated service station and mini-mart, and other related amenities.
Boomtown New Orleans opened in August 1994 on a 50 acre site in Harvey,
Louisiana, approximately ten miles form the French Quarter of New Orleans.
Gaming operations are conducted from a 250-foot replica of a paddle-wheel
riverboat, offering 911 slot machines and 55 table games in a 30,000-square
foot casino. The land-based facility includes a 20,000-square foot family
entertainment center, a western saloon and dance hall, with restaurant and
buffet services.
As of August 8, 1997, Boomtown New Orleans is wholly owned by the Company.
Previously, Boomtown New Orleans was owned and operated by a Louisiana limited
partnership (the "Louisiana Partnership"), of which 92.5% was owned by
Hollywood Park with the remaining 7.5% owned by Eric Skrmetta ("Skrmetta"). On
November 18, 1996, Boomtown entered into an agreement with Skrmetta under
which it would pay approximately $5,670,000 in return for Skrmetta's interest
in the Louisiana Partnership. Under the terms of the agreement, Boomtown made
a down payment of $500,000, and the Company paid the remaining $5,170,000 on
August 8, 1997.
Boomtown Biloxi opened in July 1994 and occupies 19 acres on Biloxi,
Mississippi's historic Back Bay. The dockside property consists of a land-
based facility which houses all non-gaming amenities including a 20,000-square
foot family entertainment center, food and beverage facilities and a western
themed dance hall and cabaret. Gaming operations are conducted on a 40,000-
square foot barge, which is permanently moored to the land-based facility. The
casino covers 33,632-square feet, offering 1,038 slot machines, 35 table games
and related amenities.
Boomtown Biloxi is operated by a Mississippi limited partnership (the
"Mississippi Partnership"), of which 85% is owned and controlled by Hollywood
Park, with the remaining 15% owned by Skrmetta. Both Hollywood Park and
Skrmetta have an option, exercisable over a four year period beginning July
1997, to exchange Skrmetta's interest in the Mississippi Partnership, at
Skrmetta's option, for either cash and/or shares of Hollywood Park common
stock with an aggregate value equal to the value of Skrmetta's 15% interest in
the
F-8
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Mississippi Partnership, with such value determined by a formula set forth in
the relevant partnership agreements. On August 13, 1997, Hollywood Park
notified Skrmetta of the Company's intention to exercise this option and
acquire Skrmetta's 15% interest in the Mississippi Partnership.
The Boomtown Biloxi barge and building shell were owned by National Gaming
Mississippi, Inc., a subsidiary of Chartwell Leisure, Inc. ("National
Gaming"). Boomtown Biloxi leased these assets from National Gaming under a 25-
year lease with a 25-year renewal option, and also received marketing services
from National Gaming. National Gaming received 16% of the adjusted earnings
before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), as
defined in the relevant contract. On August 4, 1997, Hollywood Park executed
an agreement pursuant to which one of the Hollywood Park entities repurchased
the assets for $5,250,000, payable through a down payment of approximately
$1,500,000, with the balance paid in three equal annual installments of
$1,250,000. The Adjusted EBITDA participation and other related agreements
were terminated upon repurchase of the assets.
PRO FORMA RESULTS OF OPERATIONS The following pro forma results of
operations were prepared under the assumption that the acquisition of Boomtown
had occurred at the beginning of the period presented. The historical results
of operations of Boomtown (excluding the results of operations of Boomtown's
Las Vegas property, which was divested in connection with the Merger) were
combined with Hollywood Park's. Pro forma adjustments were made for the
following: interest income earned on the excess net proceeds from the issuance
of $125,000,000 of 9.5% Hollywood Park Senior Subordinated Notes (the "Notes")
elimination of the amortization of the issuance costs associated with
Boomtown's First Mortgage Notes; amortization of the issuance costs of the
Notes; amortization of the excess purchase price over net assets acquired in
the Merger; elimination of the amortization of the discount associated with
the Boomtown First Mortgage Notes; interest expense associated with the
promissory notes from Hollywood Park to the former lessor of Boomtown's Las
Vegas property; elimination of the interest expense associated with the
Boomtown First Mortgage Notes; amortization of the up-front loan fees
associated with the Company's Bank Credit Facility; interest expense
associated with the Notes at 9.5%; and the estimated 40% tax benefit
associated with the pro forma adjustments.
HOLLYWOOD PARK, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
TWELVE MONTHS
FOR THE SIX MONTHS ENDED ENDED
JUNE 30, DECEMBER 31,
------------------------- -------------
1997 1996 1996
------------ ------------ -------------
<S> <C> <C> <C>
Revenues:
Gaming.............................. $110,196,000 $103,412,000 $208,699,000
Racing.............................. 35,868,000 38,353,000 71,308,000
Other............................... 28,179,000 29,960,000 56,871,000
------------ ------------ ------------
174,243,000 171,725,000 336,878,000
------------ ------------ ------------
Operating income (loss) (a)........... 17,221,000 (29,607,000) (17,788,000)
Income (loss) before extraordinary
item................................. $ 5,393,000 $(40,693,000) $(37,346,000)
============ ============ ============
Dividend requirements on convertible
preferred stock...................... $ 962,000 $ 962,000 $ 1,925,000
Income (loss) before extraordinary
item available to (allocated to)
common shareholders.................. $ 4,431,000 $(41,655,000) $(39,271,000)
============ ============ ============
Per common share:
Income (loss) before extraordinary
item--primary...................... $ 0.19 $ (1.74) $ (1.65)
Income (loss) before extraordinary
item--fully diluted................ $ 0.19 $ (1.74) $ (1.65)
</TABLE>
- --------
(a) The 1996 operating loss included the non-recurring write off of Hollywood
Park's investment in Sunflower of $11,412,000, and the non-recurring loss
on Boomtown's sale of its Las Vegas property of $36,562,000.
F-9
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ACQUISITION OF PACIFIC CASINO MANAGEMENT, INC. The Hollywood Park-Casino was
opened in July 1994 under a third party leasing arrangement with Pacific
Casino Management, Inc. ("PCM"). In 1994, under the California Gaming
Registration Act, it was the position of the California Attorney General that
as a publicly traded company, Hollywood Park was not eligible to register as
an operator of a card club, but could lease the site to a registered operator
unaffiliated with the Company. On August 3, 1995, Senate Bill ("SB") 100 was
enacted into law. SB 100 does the following: (i) allows for a publicly traded
racing association, or a subsidiary thereof, (hereafter the "Racing
Association") to operate a gaming club on the premises of its race track;
(ii) requires the officers, directors and shareholders of 5.0% or more of a
Racing Association (excluding institutional investors) to be licensed by the
Attorney General; (iii) provisionally licenses a Racing Association and its
officers, directors, and 5.0% shareholders to operate a gaming club on the
premises of its race track pending licenses pursuant to sub-paragraph (ii)
above; (iv) allows a Racing Association and its officers, directors and 5.0%
shareholders to have an interest in gaming activities located outside
California that are not legal in California. The provisions of SB 100 are
repealed effective January 1, 1999, unless prior thereto the California
legislature enacts a comprehensive scheme for the regulation of gaming under
the jurisdiction of a gaming control commission. The Company supports SB 900,
currently pending in the California Legislature, which would remove the sunset
clause from SB 100 and, among other things, would allow the Company to operate
the Hollywood Park-Casino beyond December 31, 1998. It is too early in the
legislative session to comment on the prospects of SB 900.
Pursuant to the authority provided by SB 100, on November 17, 1995,
Hollywood Park acquired substantially all of the assets, property and business
of PCM, and assumed substantially all of PCM's liabilities. Prior to the
acquisition, under a lease with the Company, PCM operated the gaming floor
activities of the Hollywood Park-Casino.
The purchase price of PCM's net assets was an aggregate $2,640,000, payable
in shares of Hollywood Park common stock, in three installments: (i) shares of
Hollywood Park common stock, having a value of $1,600,000, or 136,008 common
shares, issued on November 17, 1995, (ii) shares of Hollywood Park common
stock, having a value of $540,000, or 48,674 common shares, issued on November
19, 1996 and (iii) shares of Hollywood Park common stock, having a value of
$500,000, or 33,417 common shares, issued on February 10, 1997.
Virtually all of the approximately $21,568,000 of excess acquisition cost
over the recorded value of the net assets acquired from PCM was allocated to
goodwill and will be amortized over 40 years. The amortization of the goodwill
is not deductible for income tax purposes.
ACQUISITION OF SUNFLOWER On May 17, 1996, Sunflower filed for reorganization
under Chapter 11 of the Bankruptcy Code, due to the Kansas Legislature's
failure to pass legislation that would have allowed additional forms of gaming
at Sunflower, and thereby allowing Sunflower to more effectively compete with
Missouri riverboat gaming. On March 31, 1996, Hollywood Park wrote off its
approximately $11,412,000 investment in Sunflower. There was no cash involved
with the write off of this investment.
On March 23, 1994, the Company finalized the transaction to acquire
Sunflower, a greyhound and thoroughbred racing facility located in Kansas
City, Kansas. Sunflower, operating as the Woodlands, became a wholly owned
subsidiary of Hollywood Park, with the transaction accounted for under the
purchase method of accounting. The acquisition price was $15,000,000 paid for
with 591,715 shares of Hollywood Park common stock, with a then market price
of $25.35 per share. For financial reporting purposes, the transaction was
valued at $19.00 per Hollywood Park common share, based on the size of the
block of shares issued in the acquisition relative to the then current trading
volume. Immediately following the acquisition, the Company contributed
$5,000,000 in cash to Sunflower to repay a portion of the subordinated debt
Sunflower owed to Mr. Hubbard, in return for more favorable terms on the
balance of the subordinated debt. Of the approximately $6,625,000 of restated
excess acquisition cost over recorded value of the net assets acquired,
$1,153,000 was allocated to the
F-10
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
racing facility lease and management agreement Sunflower has with The Racing
Association of Kansas East ("TRAK East") and was to be amortized over the
remaining lease period of 20 years, with the balance of $5,472,000 allocated
to goodwill, to be amortized over 40 years. The amortization of the goodwill
was not deductible for income tax purposes.
An additional 55,574 shares of Hollywood Park common stock were issued to
Mr. Richard Boushka, a former Sunflower shareholder, as required by the
agreement of merger, because the market price of Hollywood Park common stock
180 days after closing was more than 10% less than the market price on the
closing date of the acquisition. The agreement of merger provided that under
certain circumstances the former Sunflower shareholders were entitled to
receive additional shares of Hollywood Park common stock. As of March 23,
1995, the former Sunflower shareholders transferred their rights to such
additional consideration to Hollywood Park for nominal consideration and have
no further entitlements to additional consideration.
ACQUISITION OF TURF PARADISE On August 11, 1994, the shareholders of Turf
Paradise approved the Agreement of Merger, entered into on March 30, 1994, by
Hollywood Park and Turf Paradise and as amended on May 27, 1994, pursuant to
which Turf Paradise became a wholly owned subsidiary of Hollywood Park. Turf
Paradise owns and operates a thoroughbred race track in Phoenix, Arizona. The
transaction was accounted for under the pooling of interests method of
accounting, with approximately $627,000 of merger related costs incurred in
total and expensed by both the Company and Turf Paradise. In connection with
the merger, the Company issued a total of 1,498,016 shares of Hollywood Park
common stock, valued as of the date of issuance at approximately $33,800,000.
Each share of Turf Paradise common stock was valued at $13.00 and was
converted to approximately 0.577 shares of Hollywood Park common stock, which
had a then fair market value of $22.53 based on the weighted average of all
trades on the NASDAQ National Market System for the twenty trading days up to
and including August 10, 1994.
As required under the pooling of interests method of accounting, the
consolidated financial statements for the periods prior to the acquisition
have been restated to include the accounts and results of operations of Turf
Paradise. The consolidated financial statements for the year 1994 include the
results of operations for the twelve months ended December 31, 1994, for both
Hollywood Park and Turf Paradise.
Separate results of the combined entities are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------------
HOLLYWOOD TURF
PARK PARADISE COMBINED
------------ ----------- ------------
<S> <C> <C> <C>
Total revenues......................... $100,010,000 $17,313,000 $117,323,000
Total expenses......................... 97,563,000 15,988,000 113,551,000
------------ ----------- ------------
Net income........................... $ 2,447,000 $ 1,325,000 $ 3,772,000
============ =========== ============
</TABLE>
PRO FORMA RESULTS OF OPERATIONS The following pro forma results of
operations was prepared under the assumption that the acquisition of PCM and
Sunflower had occurred at the beginning of the period shown. The historical
results of operations for PCM, Sunflower and Turf Paradise were combined with
the Company's results and pro forma adjustments related to the PCM acquisition
were made for the following: lease rent revenue due to Hollywood Park from PCM
and concession sales made to PCM; lease rent expense recorded by PCM; other
operating expenses including consulting fees, legal and audit services and
other miscellaneous duplicate expenses; amortization of the excess purchase
price allocated to goodwill; interest expense on the unpaid lease rent; and
income taxes. Adjustments related to the Sunflower acquisition were made for
the following: amortization of the excess purchase price allocated to the
lease with TRAK East and to goodwill; interest expense reduction related to
the reduction in both the principal and interest on Sunflower's subordinated
debt; the termination of the management agreement Sunflower had with a former
shareholder and the wages and payroll taxes paid to a former Sunflower
shareholder; director's fees and income taxes.
F-11
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The pro forma earnings per share reflect the 218,099 common shares actually
issued to the former PCM shareholders, as of February 10, 1997. The pro forma
earnings per share also reflect the 647,289 shares issued to the former
Sunflower shareholders.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
(UNAUDITED)
<S> <C>
Revenues...................................................... $149,892,000
Operating income.............................................. 15,841,000
Net loss.................................................... $ (1,866,000)
============
Dividend requirements on convertible preferred stock.......... $ 1,925,000
Net loss allocated to common shareholders..................... $ (3,791,000)
Per common share:
Net loss--primary........................................... $ (0.20)
Net loss--fully diluted..................................... $ (0.20)
</TABLE>
RESTRICTED CASH Restricted cash as of June 30, 1997 and December 31, 1996,
was for amounts due to horsemen for purses, stakes and awards. Restricted cash
as of December 31, 1995, included approximately $2,482,000 related to the
Class Actions lawsuit settlement (see Note 18 Commitments and Contingencies)
and approximately $644,000 related to amounts due to horsemen for purses,
stakes and awards.
RACING REVENUES AND EXPENSES The Company records pari-mutuel revenues,
admissions, food and beverage and other racing income associated with
thoroughbred horse racing on a daily basis, except for season admissions which
are recorded ratably over the racing season. Expenses associated with
thoroughbred horse racing revenues are charged against income in those periods
in which the thoroughbred horse racing revenues are recognized. Other expenses
are recognized as they actually occur throughout the year.
GAMING-CASINO REVENUE AND PROMOTIONAL ALLOWANCES Gaming-Casino gaming
revenues consisted of fees collected from patrons on a per seat or per hand
basis. Revenues in the accompanying statements of operations exclude the
retail value of food and beverage provided to card players on a complimentary
basis. The estimated cost of providing these promotional allowances was
$1,316,000 for the year ended December 31, 1996. There were no comparable
costs for the year ended December 31, 1995. The estimated costs of providing
these promotional allowances during the three and six months ended June 30,
1997, was $339,000 and $665,000, respectively, and was $888,000 and $1,668,000
for the three and six months ended June 30, 1996, respectively.
ALLOWANCE FOR DOUBTFUL ACCOUNTS With the November 17, 1995, acquisition of
PCM the Company assumed the gaming accounts receivable, and associated
allowance for doubtful account balances that were on PCM's balance sheet.
CAPITALIZED INTEREST No capitalized interest was recorded during the years
ended December 31, 1996, 1995 and 1994, nor for the six months ended June 30,
1997 and 1996, because the Company had no outstanding debt, other than
Sunflower's debt which was non-recourse to the Company, and Sunflower did not
make any capital improvements during the periods covered.
ESTIMATES Financial statements prepared in accordance with generally
accepted accounting principles require the use of management estimates,
including estimates used to evaluate the recoverability of property, plant and
equipment, to determine the fair value of financial instruments, to account
for the valuation allowance for deferred tax assets, and to determine
litigation related obligations.
F-12
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are depreciated
on the straight line method over their estimated useful lives as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Land improvements................ 3 to 25
Buildings........................ 5 to 40
Equipment........................ 3 to 10
</TABLE>
Maintenance and repairs were charged to operations of facilities;
betterments were capitalized. The cost of property sold or otherwise disposed
of and the accumulated depreciation were eliminated from both the property and
accumulated depreciation accounts with any gain or loss recorded in the
expense accounts.
Property, plant and equipment is carried on the Company's balance sheets at
depreciated cost. Whenever there are recognized events or changes in
circumstances that affect the carrying amount of the property, plant and
equipment, management reviews the assets for possible impairment. In
accordance with current accounting standards, management uses estimated
expected future net cash flows to measure the recoverability of property,
plant and equipment. The estimation of expected future net cash flows is
inherently uncertain and relies to a considerable extent on assumptions
regarding current and future economic and market conditions, and the
availability of capital. If, in future periods, there are changes in the
estimates or assumptions incorporated into the impairment review analysis, the
changes could result in an adjustment to the carrying amount of the property,
plant and equipment.
INCOME TAXES The Company accounts for income taxes under Statement of
Financial Accounting Standards ("SFAS") 109, Accounting for Income Taxes,
whereby deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS 109,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that included the enactment date.
PRE-OPENING EXPENSES The Company expensed pre-opening costs associated with
the Hollywood Park-Casino, which opened on July 1, 1994, as incurred. These
costs included, project salaries, hiring costs and other pre-opening services.
POOLING OF INTERESTS EXPENSES Hollywood Park's costs of $414,000 incurred in
connection with the acquisition of Turf Paradise, and Turf Paradise's
acquisition costs of $213,000, were expensed as incurred.
EARNINGS PER SHARE Primary earnings per share were computed by dividing
income (loss) attributable to (allocated to) common shareholders (net income
(loss) less preferred stock dividend requirements) by the weighted average
number of common shares outstanding during the period. Fully diluted per share
amounts were similarly computed, but include the effect, when dilutive, of the
conversion of the convertible preferred shares and the exercise of stock
options.
CASH FLOWS Cash and cash equivalents consisted of certificates of deposit
and short term investments with remaining maturities of 90 days or less.
STOCK REPURCHASE On July 22, 1996, the Company announced its intention to
repurchase, and to retire up to 2,000,000 shares of its common stock on the
open market or in negotiated transactions. As of December 31, 1996, the
Company had repurchased and retired (with the last purchase being made on
November 13, 1996) 222,300 common shares, at a cost of approximately
$1,962,000.
RECLASSIFICATIONS Certain reclassifications have been made to the 1996, 1995
and 1994 balances to be consistent with the 1997 financial statement
presentation.
F-13
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
-------- ---------- ----------
<S> <C> <C> <C>
Cash paid during the year for:
Interest................................... $299,000 $2,098,000 $1,513,000
Income taxes............................... 40,000 143,000 2,524,000
-------- ---------- ----------
$339,000 $2,241,000 $4,037,000
======== ========== ==========
</TABLE>
NOTE 3--SHORT TERM INVESTMENTS
Short term investments as of December 31, 1996 and 1995, and June 30, 1997
consisted of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
--------------------- JUNE 30,
1996 1995 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Corporate bonds............................ $4,766,000 $4,504,000 $1,275,000
Flexible deposit program................... 0 1,000,000 0
U.S. agency securities..................... 0 906,000 0
Accrued interest........................... 0 37,000 0
---------- ---------- ----------
Total.................................... $4,766,000 $6,447,000 $1,275,000
========== ========== ==========
</TABLE>
As of December 31, 1996 and June 30, 1997, short term investments consisted
of corporate bonds with Moody's ratings of Ba2 to B3, and Standard and Poors
rating of BB+ to B-, though some of the bonds are not rated by either agency.
Investments in corporate bonds carry a greater amount of principal risk than
other investments made by the Company, and yield a corresponding higher
return. The corporate bond investment as of December 31, 1996, had a weighted
average maturity of 1.5 years, and because the Company reasonably expects to
liquidate these investments in its normal operating cycle the investments are
classified as short term, are held as available for sale, and recorded in the
accompanying financial statements at their fair value, as determined by the
quoted market price.
For the year ended December 31, 1996, proceeds from the sale or redemption
of corporate bond investments were approximately $8,429,000, all of which was
reinvested, and gross realized gains and gross realized losses were $28,000
and $39,000, respectively. For the year ended December 31, 1995, proceeds from
the sale or redemption of corporate bond investments were approximately
$7,806,000, all of which was reinvested, and gross realized gains and gross
realized losses were $34,000 and $3,000, respectively. The net unrealized
holding gains (losses), were $10,000 and ($22,000), for the year ended
December 31, 1996, and 1995, respectively.
For the six months ended June 30, 1997, proceeds form the sale or redemption
of corporate bond investments were approximately $5,428,000, and gross
realized gains and gross realized losses were $2,000 and $82,000,
respectively. The net unrealized holding gain for the six months ended June
30, 1997, was approximately $8,000.
The Flexible deposit program was a discretionary investment plan with
Bankers Trust that provided capital preservation when held to maturity, plus
income at a targeted rate; therefore, this investment was held to maturity.
The Flexible deposit program investment was not rated.
The investments in U.S. agency securities included U.S. Treasury Bills with
each U.S. agency security rated AAA by both Moodys and Standard and Poors.
F-14
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company classified the Flexible deposit program and the U.S. agency
securities as held to maturity, and as such, the investments were recorded in
the accompanying financial statements at amortized costs, which, based on the
short term nature of the investments and their relative liquidity,
approximates fair value.
NOTE 4--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held at December 31, 1996, 1995 and June 30,
1997 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, AS OF
------------------------- JUNE 30,
1996 1995 1997 (a)
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Land and land improvements........... $ 32,215,000 $ 42,490,000 $ 49,471,000
Buildings............................ 150,935,000 175,960,000 259,298,000
Equipment............................ 31,531,000 36,003,000 74,566,000
Vessel............................... 0 0 18,925,000
Construction in progress............. 128,000 8,394,000 5,548,000
------------ ------------ ------------
214,809,000 262,847,000 407,808,000
Less accumulated depreciation........ 83,974,000 88,130,000 130,724,000
------------ ------------ ------------
$130,835,000 $174,717,000 $277,084,000
============ ============ ============
</TABLE>
- --------
(a) Includes property, plant and equipement related to Boomtown.
NOTE 5--SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of December 31, 1996, 1995 and June 30, 1997 consisted of
the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
-------------------- JUNE 30,
1996 1995 (a) 1997 (b)
-------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Secured notes payable..................... $ 0 $28,667,000 $114,879,000
Unsecured notes payable................... 317,000 15,914,000 3,745,000
Secured note payable--Texaco.............. 0 3,358,000 0
Capital lease obligations................. 0 0 3,994,000
-------- ----------- ------------
317,000 47,939,000 122,618,000
Less current maturities................... 35,000 32,310,000 6,222,000
-------- ----------- ------------
$282,000 $15,629,000 $116,396,000
======== =========== ============
</TABLE>
- --------
(a) The secured and unsecured notes payable as of December 31, 1995, related
to Sunflower and were non-recourse to Hollywood Park.
(b) Includes notes payable related to Boomtown.
HOLLYWOOD PARK (unaudited) On June 30, 1997, Hollywood Park and a bank
syndicate lead by Bank of America closed the reducing revolving credit
facility (the "Bank Credit Facility") for up to $225,000,000. On August 7,
1997, the Bank Credit Facility was reduced to approximately $104,500,000 by
the net cash proceeds received from the issuance of the Hollywood Park Senior
Subordinated Notes (the "Notes") (as described below). The Bank Credit
Facility is secured by substantially all of the assets of Hollywood Park and
its significant subsidiaries, and imposes certain customary affirmative and
negative covenants.
F-15
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Bank Credit Facility has been amended twice. First, among other matters,
to reduce the availability of the facility until the Bank Credit Facility was
approved by the Louisiana Gaming Control Board. The Company received this
approval on July 10, 1997. Second, among other matters, to allow the co-
issuance of the Notes by HPOC with Hollywood Park.
Debt service requirements on the Bank Credit Facility consist of current
interest payments on outstanding indebtedness through September 30, 1999. As
of September 30, 1999, and on the last day of each third calendar month
thereafter, through June 30, 2001, the Bank Credit Facility will decrease by
7.5% of the commitment in effect on September 30, 1999. As of September 30,
2001, and on the last day of each third calendar month thereafter, the Bank
Credit Facility will decrease by 10% of the commitment in effect on September
30, 1999. Any principal amounts outstanding in excess of the Bank Credit
Facility commitment, as so reduced, will be payable on such quarterly
reduction dates.
The Bank Credit Facility provides for a letter of credit sub-facility of
$10,000,000, of which $2,035,000 is currently outstanding for the benefit of
Hollywood Park's California self insured workers' compensation program. The
facility also provides for a swing sub-facility of up to $10,000,000.
Borrowings under the Bank Credit Facility bear interest at an annual rate
determined, at the election of the Company, by reference to the "Eurodollar
Rate" (for interest periods of 1, 2, 3 or 6 months) or the "Reference Rate",
as such terms are respectively defined in the Bank Credit Facility, plus
margins which vary depending upon Hollywood Park's ratio of funded debt to
earnings before interest, taxes, deprecation and amortization ("EBITDA"). The
margins start at 1.25% for Eurodollar loans and at 0.25% for Base Rate loans,
at funded debt to EBITDA ratio of less than 1.50%. Thereafter, the margins for
each type of loan increases by 25 basis points for each increase in the ratio
of funded debt to EBITDA of 50 basis points or more, up to 2.625% for
Eurodollar loans and 1.625% for Base Rate loans. However, if the ratio of
senior funded debt to EBITDA exceeds 2.50, the applicable margins will
increase to 3.25% for Eurodollar loans, and 2.25% for Base Rate loans.
Thereafter, the margins would increase by 25 basis points for each increase in
the ratio of senior funded debt to EBITDA of 50 basis points or more, up to a
maximum of 4.25% for Eurodollar loans and 3.25% for Base Rate loans. The
applicable margins as of June 30, 1997, were 1.75% with respect to the
Eurodollar Rate based interest rate and 0.75% with respect to the Base Rate
interest rate.
Hollywood Park pays a quarterly commitment fee for the average daily amount
of unused portions of the Bank Credit Facility. The commitment fee is also
dependent upon the Company's ratio of funded debt to EBITDA. The commitment
fee for the Bank Credit Facility starts at 31.25 basis points when the ratio
is less than 1.00, and increases by 6.25 basis points for each increase in the
ratio of 0.50, up to a maximum of 50 basis points. For the quarter beginning
July 1, 1997, this fee is 43.75 basis points.
On July 3, 1997, Hollywood Park borrowed $112,000,000 from the Bank Credit
Facility to fund Boomtown's offer to purchase its First Mortgage Notes, and
repaid this amount on August 7, 1997, with a portion of the proceeds from the
August 6, 1997, issuance of $125,000,000 of 9.5% Senior Subordinated Notes due
2007. The Notes were co-issued by Hollywood Park and HPOC (the "Obligors").
The balance of the proceeds from the issuance are expected to be used
primarily for expansion projects.
Interest on the Notes is payable semi-annually, on February 1st and August
1st. The Notes will be redeemable at the option of the Company, in whole or in
part, on or after August 1, 2002, at a premium to face amount, plus accrued
interest, with the premium to the face amount decreasing on each subsequent
anniversary date. The Notes are unsecured obligations of Hollywood Park and
HPOC, guaranteed by all other material restricted subsidiaries of either
Hollywood Park or HPOC.
The indenture governing the Notes contains certain covenants that, among
other things, limit the ability of the Obligors and their restricted
subsidiaries to incur additional indebtness and issue preferred stock, pay
F-16
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
dividends or make other distributions, repurchase equity interests or
subordinated indebtness, create certain liens, enter into certain transactions
with affiliates, sell assets, issue or sell equity interests in their
respective subsidiaries or enter into certain mergers and consolidations.
On July 1, 1997, in connection with the divestiture of Boomtown's Las Vegas
property, Hollywood Park issued an unsecured promissory note of approximately
$3,465,000. The promissory note bears interest equal to the Bank of America
reference rate plus 1.0%. Interest is payable quarterly with five annual
principal payments of approximately $693,000 commencing July 1, 1998.
During the six months ended June 30, 1997, the Company paid dividends of
$962,000 on its convertible preferred stock, representing $70.00 per share, or
$0.70 per depositary share. On July 1, 1997, the Company declared the regular
quarterly preferred stock dividend of $481,000, payable on August 15, 1997.
Effective August 28, 1997, the Company exercised its option to covert all
2,749,900 of its outstanding depositary shares into approximately 2,291,492
shares of its common stock; thereby; eliminating the annual preferred cash
dividend payment of approximately $1,925,000.
Prior to execution of the Bank Credit Facility, Hollywood Park maintained a
$75,000,000 unsecured loan facility with Bank of America (the "Business Loan
Agreement"). The Business Loan Agreement consisted of a $60,000,000 line of
credit (the "Line of Credit") and a $15,000,000 revolver (the "Revolver"). The
Business Loan Agreement was amended five times to, among other matters, extend
the date for drawing down the Line of Credit and for using the Revolver to
June 30, 1997, to amend the quick asset to current liability ratio covenant,
and to adjust the tangible net worth covenant.
During the year ended December 31, 1996, the Company did not borrow any
funds under the Business Loan Agreement, except for the May 1, 1996, issuance
of a standby letter of credit of $2,617,000, as security for the Company's
workers' compensation self-insurance program.
Texaco Secured Note Payable On September 3, 1996, Hollywood Park paid the
secured non-interest bearing promissory note of $3,358,000, related to the
October 27, 1995, purchase of 37.33 acres of land adjacent to the Inglewood
property.
Gold Cup Contest The Company's Gold Cup note payable resulted from the
$1,000,000 Gold Cup Contest on July 20, 1986. The prize money is payable to
the winner in 20 annual installments of $50,000, beginning August 1, 1986. The
remaining liability of $317,000, at December 31, 1996.
BOOMTOWN (UNAUDITED) In November 1993, Boomtown sold $103,500,000 of 11.5%
First Mortgage Notes due November 1, 2003 (the "First Mortgage Notes"). On
July 3, 1997, Boomtown repurchased and retired approximately $102,142,000 in
principal amount of the First Mortgage Notes, at a purchase price of $1,085
per $1,000 in principal amount, along with accrued interest thereon, pursuant
to a tender offer.
As a result of the Merger, Boomtown, as required under the indenture
governing the First Mortgage Notes, initiated a change in control purchase
offer at a price of $1,010 for each $1,000 for the remaining approximately
$1,358,000 aggregate principal amount of First Mortgage Notes outstanding.
This change in control purchase offer was completed on August 12, 1997, and
only a portion of the remaining First Mortgage Notes were tendered.
On August 4, 1997, Hollywood Park executed a purchase agreement pursuant to
which one of the Hollywood Park entities repurchased the barge and the
building shell at Boomtown Biloxi for at total cost of $5,250,000. A payment
of $1,500,000 was made on August 4, 1997, with the balance payable in three
equal annual installments of $1,250,000.
F-17
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of August 8, 1997, Boomtown New Orleans is wholly owned by the Company.
Previously, Boomtown New Orleans was owned and operated by the Louisiana
Partnership, of which 92.5% was owned by Hollywood Park with the remaining
7.5% owned by Skrmetta. On November 18, 1996, Boomtown entered into an
agreement with Skrmetta under which it would pay approximately $5,670,000 in
return for Skrmetta's interest in the Louisiana Partnership. Under the term of
the agreement, Boomtown made a down payment of $500,000, and the Company paid
the remaining $5,170,000 on August 8, 1997.
As of June 30, 1997, Boomtown had four outstanding notes payable totaling
approximately $2,704,000. Two of the notes which total $223,000 are secured by
furniture, fixtures and equipment, bear interest at 11.5% and mature in
September 1997. One note, in the amount of $2,294,000, was secured by the
Boomtown New Orleans riverboat, bore interest at 13.0% and was set to mature
in January 1999. On August 7, 1997, Boomtown elected to pre-pay this note and
incurred a 1.0% penalty. The remaining note, in the amount of $187,000, is
secured by gaming equipment, bears interest at 12.25% and matures December
1997. In addition to the notes payable, Boomtown also has capital lease
obligations for equipment with a total balance of approximately $3,994,000.
In connection with the sale its Las Vegas property, Boomtown took back two
notes receivable from Roski, the former lessor of the Las Vegas property,
totaling approximately $8,465,000. The first note receivable is for
$5,000,000, bearing interest at Bank of America's reference rate plus 1.5% per
year, with annual principal receipts of $1,000,000 plus accrued interest
commencing on July 1, 1998. The second note is for approximately $3,465,000,
bearing interest at Bank of America's reference rate plus 0.5% per year, with
the principal and accrued interest payable, in full, on July 1, 2000.
SUNFLOWER On March 24, 1994, an Amended and Restated Credit and Security
Agreement (the "Sunflower Senior Credit") was executed between Sunflower and
five banks in connection with the Company's acquisition of Sunflower. As of
June 30, 1997, the outstanding balance of the Sunflower Senior Credit was
$28,667,000. The Sunflower Senior Credit is non-recourse to Hollywood Park.
On May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the
Bankruptcy Code. The Cash Collateral Agreement suspended any interest or
principal payments on the Sunflower Senior Credit until September 17, 1997. On
July 15, 1997, Sunflower presented to the Bankruptcy Court a plan of
reorganization (the "Plan") which provides for the sale of Sunflower's
property to the Wyandotte Indians of Oklahoma (the "Wyandotte Indians"). Under
the Plan, the land would be held by the United States Government in trust for
the Wyandotte Indians, and a casino would be built on the property. Upon
completion of the casino, Hollywood Park and a partner (North American Sports
Management) would operate the facility in return for 30% of the profits. The
Company would guarantee certain bank debt of Sunflower of up to $28,667,000 to
allow the property to be released as collateral and then transferred to the
Wyandotte Indians. The Company's guaranty would not go into effect unless, and
until, all material regulatory approvals have been obtained for operation of
the casino, and approval has been obtained under the Bank Credit Facility, as
well.
In 1995, under a promissory note executed in December 1994, between
Hollywood Park and Sunflower, Hollywood Park advanced $2,500,000 to Sunflower
to make certain payments due on the Sunflower Senior Credit. The amounts
borrowed under the promissory note, along with accrued interest, are
subordinate to the Sunflower Senior Credit. Although the Company will continue
to pursue payment of the promissory note, for financial reporting purposes the
outstanding balance of the promissory note was written off as of March 31,
1996.
As of June 30, 1997 and December 31, 1996, Sunflower's unsecured notes
payable totaled $15,574,000. The unsecured notes payable included $13,060,000,
payable to Mr. Hubbard (Chief Executive Officer of Hollywood Park, and former
shareholder of Sunflower) on January 1, 2003. As a condition of the merger
between the Company and Sunflower, Hollywood Park contributed $5,000,000 in
cash to Sunflower to pay
F-18
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
accrued interest, and a portion of the note payable to Mr. Hubbard in exchange
for a reduction in the interest rate on this debt to 9.0% from 14.0%. The
remaining $2,514,000 relates to a Special Assessment note payable to Wyandotte
County, Kansas for the cost of construction of various streets and sewers
serving Sunflower. The Special Assessment note was entered into in 1990, and
is a 15 year note, with a fixed interest rate of 6.59%.
ANNUAL MATURITIES As of December 31, 1996, annual maturities of total notes
and loans payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDING:
------------
<S> <C>
December 31, 1997................................................... $ 50,000
December 31, 1998................................................... 50,000
December 31, 1999................................................... 50,000
December 31, 2000................................................... 50,000
December 31, 2001................................................... 50,000
Thereafter.......................................................... 200,000
</TABLE>
The fair values of the Company's various debt instruments discussed above
approximate their carrying amounts based on the fact that borrowings bear
interest at variable market based rates.
NOTE 6--LONG TERM GAMING ASSETS
Long term gaming assets relate to the capital lease between the Company and
the city of Compton covering the hotel, surrounding parking and an expansion
parcel at Crystal Park. With the completion of the construction of Crystal
Park, as of December 31, 1996, the long term gaming assets were reclassed to
property, plant and equipment.
The capital lease was entered into on August 3, 1995, and has a term of up
to 50 years. The annual rent payments start at $600,000 and increase every
fifth year until year 46, when they stabilize at $2,850,000. Hollywood Park
received a rent payment credit equal to the costs incurred to renovate Crystal
Park, and no cash rent payments are expected to be made until the nineteenth
year of the lease, or 2014.
NOTE 7--LONG TERM GAMING LIABILITIES
Long term gaming liabilities consist of the Company's capital lease
obligation associated with the lease of the hotel, surrounding parking and the
expansion parcel from the city of Compton for the Crystal Park Hotel and
Casino. This liability was reduced as the construction disbursements were
made.
NOTE 8--ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED
ASSETS TO BE DISPOSED OF
In 1995, Statement of Financial Accounting Standards No. 121 ("SFAS") 121
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of, was issued which established accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets. SFAS 121, which became effective for
Hollywood Park in the quarter ended March 31, 1996, addresses when impairment
losses should be recognized and how impairment losses should be measured.
Whenever there are recognized events or changes in circumstances that indicate
the carrying amount of an asset may not be recoverable, management reviews the
asset for possible impairment. In accordance with current accounting
standards, management uses estimated expected future net cash flows
(undiscounted and excluding interest costs, and grouped at the lowest level
for which there are identifiable cash flows that are as independent as
possible of other asset groups) to measure the recoverability of the asset. If
the expected future net cash flows are less than the carrying amount of the
asset an impairment loss would be recognized. An impairment loss would be
measured as the amount by which the carrying amount of the asset exceeded the
fair value of the asset, with
F-19
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
fair value measured as the amount at which the asset could be bought or sold
in a current transaction between willing parties, other than in a forced
liquidation sale. The estimation of expected future net cash flows is
inherently uncertain and relies to a considerable extent on assumptions
regarding current and future net cash flows, market conditions, and the
availability of capital. If, in future periods, there are changes in the
estimates or assumptions incorporated into the impairment review analysis the
changes could result in an adjustment to the carrying amount of the asset, but
at no time would previously recognized impairment losses be restored.
NOTE 9--DEVELOPMENT EXPENSES
Included in Administrative expenses were development costs of approximately
$1,092,000, $2,716,000, and $1,275,000 for the years ended December 31, 1996,
1995, and 1994, respectively. The expenses in 1996 consisted primarily of
costs related to the Inglewood site master plan and card clubs in California.
The expenses in 1995 consisted primarily of costs related to the following
projects: the environmental impact study for the proposed stadium at Hollywood
Park, card clubs under consideration in the cities of Stockton, Pomona and
South San Francisco, and the retail center project (since abandoned). The
costs incurred in 1994 were primarily generated by the initial financial and
economic analysis of the proposed stadium, numerous card clubs, and the music
dome.
Included in Administrative expenses for the six months ended June 30, 1997,
was $114,000 of development expenses; primarily related to the master site
plan for the Inglewood property.
Included in Administrative expenses for the six months ended June 30, 1996,
was $317,000 of development expenses; primarily related to the proposed
stadium, the master site plan for the Inglewood property, and card clubs in
Stockton and Hawaiian Gardens.
NOTE 10--ACCOUNTING FOR STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123 ("SFAS") 123 Accounting
for Stock-Based Compensation, requires that the Company disclose additional
information about employee stock-based compensation plans. The objective of
SFAS 123 is to estimate the fair value, based on the stock price at the grant
date, of the Company's stock options to which employees become entitled when
they have rendered the requisite service and satisfied any other conditions
necessary to earn the right to benefit from the stock options. The fair market
value of a stock option is to be estimated using an option-pricing model that
takes into account, as of the grant date, the exercise price and expected life
of the option, the current price of the underlying stock and its expected
volatility, expected dividends on the stock, and the risk-free interest rate
for the expected term of the options.
In computing the stock-based compensation the following assumptions were
made:
<TABLE>
<CAPTION>
RISK-FREE
INTEREST EXPECTED EXPECTED EXPECTED
RATE LIFE VOLATILITY DIVIDENDS
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
For options granted in the following
periods:
Second quarter 1995................. 5.0% 3 years 36.1% None
First quarter 1996.................. 5.0% 3 years 36.1% None
Second quarter 1996................. 5.1% 3 years 46.4% None
Fourth quarter 1996 (a)............. 5.0% 10 years 47.4% None
</TABLE>
- --------
(a) The options granted during the fourth quarter of 1996 were to the
Company's directors, and it is expected that the directors will hold
options for a longer period of time than the Company's employees.
F-20
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following set forth the pro forma financial results under the
implementation of SFAS 123:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------- ----------------------------------
1996 1995 1997 1996
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net income (loss) before
stock-based
compensation expense... ($4,249,000) ($1,162,000) $4,708,000 ($8,129,000)
Stock-based compensation 115,000 4,000 558,000 67,000
expense................ ---------------- ---------------- ---------------- -----------------
Pro forma net income ($4,364,000) ($1,166,000) $4,150,000 ($8,196,000)
(loss)................. ================ ================ ================ =================
Dividend requirements on
convertible preferred
stock.................. $1,925,000 $1,925,000 $962,000 $962,000
Pro forma net income
(loss) available to
(allocated to) common ($6,289,000) ($3,091,000) $3,188,000 ($9,158,000)
shareholders........... ================ ================ ================ =================
Per common share:
Pro forma net income
(loss) - primary..... ($0.34) ($0.17) $0.17 ($0.49)
Pro forma net income
(loss) - fully dilut-
ed................... ($0.34) ($0.17) $0.17 ($0.49)
Number of shares -
primary................ 18,505,378 18,399,040 18,462,062 18,612,850
Number of shares - fully
diluted................ 20,796,870 20,690,532 20,753,554 20,904,342
</TABLE>
NOTE 11--RACING OPERATIONS
The Company conducts thoroughbred racing at its Hollywood Park, Sunflower,
and Turf Paradise race tracks, located in California, Kansas and Arizona,
respectively. Sunflower is primarily a greyhound racing facility. On May 17,
1996, due to competition from Missouri riverboat gaming, Sunflower filed for
reorganization under Chapter 11 of the Bankruptcy Code, and as of April 1,
1996, Sunflower's operating results were no longer consolidated with Hollywood
Park's; therefore, Sunflower's 1996 racing results and statistics have been
excluded from this note. Sunflower is operating during the reorganization.
Under Kansas racing law, Sunflower is not granted any race days and does not
generate any pari-mutuel commissions. The Kansas Racing Commission granted
Sunflower the facility ownership and management licenses; with all race days
until the year 2014 granted to TRAK East, a Kansas not-for-profit corporation.
Sunflower has an agreement with TRAK East to provide the physical race tracks
along with management and consulting services for twenty-five years with
options to renew for one or more successive five year terms. The Agreement and
Restatement of Lease and Management Agreement was entered into as of September
14, 1989.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
LIVE ON-TRACK RACE DAYS
Hollywood Park race track..................................... 103 97 102
Turf Paradise race track...................................... 166 171 185
Sunflower--Horses............................................. -- 49 62
Sunflower--Greyhounds......................................... -- 294 213
</TABLE>
F-21
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the pari-mutuel handle and deductions, by racing facility for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
HOLLYWOOD PARK--LIVE HORSE RACING
Total pari-mutuel handle............. $677,827,000 $643,246,000 $699,748,000
Less patrons' winning tickets........ 547,775,000 520,291,000 565,685,000
------------ ------------ ------------
130,052,000 122,955,000 134,063,000
Less:
State pari-mutuel tax.............. 19,263,000 20,691,000 26,260,000
City of Inglewood pari-mutuel tax.. 1,287,000 1,384,000 1,711,000
Racing purses and awards........... 26,300,000 26,888,000 31,183,000
Satellite wagering fees............ 12,784,000 13,545,000 16,732,000
Interstate location fees........... 44,815,000 34,170,000 27,570,000
Other fees......................... 390,000 419,000 519,000
------------ ------------ ------------
Pari-mutuel commissions............ 25,213,000 25,858,000 30,088,000
Add off-track independent handle
commissions....................... 2,280,000 2,251,000 1,797,000
------------ ------------ ------------
Total pari-mutuel commissions
including charity days............ 27,493,000 28,109,000 31,885,000
Less charity day pari-mutuel
commissions....................... 0 0 739,000
------------ ------------ ------------
Total pari-mutuel commissions net
of charity days................... $ 27,493,000 $ 28,109,000 $ 31,146,000
============ ============ ============
</TABLE>
Turf Paradise races live five days a week, and on three of these days Turf
Paradise concurrently operates as a simulcast site.
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
TURF PARADISE--LIVE HORSE RACING
Total pari-mutuel handle.............. $147,748,000 $111,509,000 $96,493,000
Less patrons' winning tickets......... 114,585,000 86,460,000 74,918,000
------------ ------------ -----------
33,163,000 25,049,000 21,575,000
Less:
State pari-mutuel tax............... 18,000 345,000 669,000
Racing purses and awards............ 4,501,000 4,757,000 5,399,000
State sales tax..................... 302,000 415,000 537,000
Off-track commissions............... 115,000 117,000 137,000
Interstate location fees............ 20,034,000 10,943,000 6,006,000
------------ ------------ -----------
Pari-mutuel commissions............... 8,193,000 8,472,000 8,827,000
Add off-track independent handle
commissions.......................... 166,000 699,000 297,000
------------ ------------ -----------
Total pari-mutuel commissions
including charity days............... 8,359,000 9,171,000 9,124,000
Less charity day pari-mutuel
commissions.......................... 17,000 0 29,000
------------ ------------ -----------
Total pari-mutuel commissions net of
charity days......................... $ 8,342,000 $ 9,171,000 $ 9,095,000
============ ============ ===========
</TABLE>
F-22
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The acquisition of Sunflower was accounted for under the purchase method of
accounting and as such results of operations prior to the March 23, 1994
acquisition date are not presented.
<TABLE>
<CAPTION>
GREYHOUNDS HORSES
1995 1995
----------- ----------
<S> <C> <C>
TRAK EAST AT SUNFLOWER--LIVE RACING
Total pari-mutuel handle............................. $47,406,000 $2,844,000
Less patrons' winning tickets........................ 37,379,000 2,273,000
----------- ----------
10,027,000 571,000
Less: State pari-mutuel tax.......................... 1,721,000 104,000
Racing purses and awards............................. 2,230,000 190,000
----------- ----------
Total pari-mutuel commissions........................ $ 6,076,000 $ 277,000
=========== ==========
<CAPTION>
GREYHOUNDS HORSES
1994 1994
----------- ----------
<S> <C> <C>
Total pari-mutuel handle............................. $74,941,000 $6,274,000
Less patrons' winning tickets........................ 59,778,000 5,012,000
----------- ----------
15,163,000 1,262,000
Less: State pari-mutuel tax.......................... 2,527,000 210,000
Racing purses and awards............................. 3,372,000 421,000
----------- ----------
Total pari-mutuel commissions........................ $ 9,264,000 $ 631,000
=========== ==========
</TABLE>
As a stipulation to the granting of race dates, the California Horse Racing
Board ("CHRB") requires that Hollywood Park designate three days from both the
live Spring/Summer Meet and the Autumn Meeting as charity days. As of the 1994
Autumn Meeting, the charity day payments were changed to the net proceeds from
the charity days not to exceed 2/10 of 1.0% of the total live on-track pari-
mutuel handle for the respective race meet. Charity day payments must be made
to a distributing agent approved by the CHRB. The following table summarizes
the revenues and expenses that were excluded from the statements of operations
for the period prior to the 1994 Autumn Meeting and the total charity day
liability for the past three years:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Racing revenues.................................. $ 0 $ 0 $961,000
Less: Salaries, wages and employee benefits...... 0 0 285,000
Other expenses................................... 0 0 298,000
-------- -------- --------
Net proceeds (old charity day law)............... 0 0 378,000
Add: 2/10 of 1% of live on track pari-mutuel
handle as of the Autumn Meeting 1994 (revised
charity day law)................................ 338,000 370,000 117,000
-------- -------- --------
Total charity day payable........................ $338,000 $370,000 $495,000
======== ======== ========
</TABLE>
Arizona racing law requires that 1.0% of the total in-state pari-mutuel
handle (on-track live pari-mutuel handle and off-track within the state pari-
mutuel handle) of three charity days be paid to a distributing agent approved
by the Arizona Racing Commission. The Arizona Department of Racing did not
assign any charity days in 1995, therefore no payments were required. Turf
Paradise paid $17,000 to the distributing agent in 1996, and paid $29,000 in
1994.
Hollywood Park conducts simulcast meets of live races held at local southern
California race tracks. As of 1993, the Company began to simulcast races from
northern California concurrently with live on-track racing. In July 1994,
Assembly Bill 1418 was enacted allowing for unrestricted simulcasting between
northern and southern
F-23
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
California. Previous legislation, enacted in September 1993, limited such
simulcasting to races with purses of at least $20,000. A summary of simulcast
pari-mutuel handle and commissions for the years ended December 31, are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
HOLLYWOOD PARK--SIMULCAST RACING
Pari-mutuel handle:
Thoroughbred meets................ $375,910,000 $379,263,000 $291,526,000
Quarter Horse meets............... 23,067,000 22,793,000 18,754,000
Harness meets..................... 6,165,000 4,391,000 3,948,000
------------ ------------ ------------
$405,142,000 $406,447,000 $314,228,000
============ ============ ============
Pari-mutuel commissions:
Thoroughbred meets................ $ 12,669,000 $ 11,527,000 $ 7,624,000
Quarter Horse meets............... 454,000 457,000 377,000
Harness meets..................... 120,000 86,000 79,000
------------ ------------ ------------
$ 13,243,000 $ 12,070,000 $ 8,080,000
============ ============ ============
</TABLE>
TRAK East at Sunflower operates year round simulcasting of both greyhounds
and horses. Pari-mutuel handle and commissions earned by TRAK East for the
year ended December 31, 1995 and March 23, 1994 (the date Sunflower was
acquired) through December 31, 1994, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ----------- -----------
<S> <C> <C> <C>
TRAK EAST AT SUNFLOWER--SIMULCAST RACING
Pari-mutuel handle:
Greyhounds................................... $-- $10,871,000 $ 7,162,000
Horses....................................... -- 29,600,000 24,010,000
---- ----------- -----------
$-- $40,471,000 $31,172,000
==== =========== ===========
Pari-mutuel commission:
Greyhounds................................... $-- $ 2,342,000 $ 1,361,000
Horses....................................... -- 5,742,000 4,690,000
---- ----------- -----------
$-- $ 8,084,000 $ 6,051,000
==== =========== ===========
</TABLE>
Turf Paradise accepts simulcasts of live races from other tracks
concurrently with live on-track racing as well as operating as a simulcast
site for Prescott Downs between live meets. Turf Paradise also accepts
simulcast signals on the two dark days (days without live racing) a week
during the live on-track meet.
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
TURF PARADISE--SIMULCAST RACING
Pari-mutuel handle all meets............. $55,814,000 $55,093,000 $46,549,000
Pari-mutuel commissions all meets........ 4,768,000 3,909,000 3,410,000
</TABLE>
NOTE 12--INCOME TAXES
As discussed in Note 1, the Company accounts for income taxes under SFAS
109. On November 17, 1995, the Company acquired PCM and accounted for the
acquisition under the purchase method of accounting. Before the acquisition,
PCM was an S-corporation for income tax purposes and under the terms of the
merger was dissolved into Hollywood Park. On March 23, 1994, the Company
acquired Sunflower and accounted for the acquisition under the purchase method
of accounting. Before the acquisition, Sunflower was an S-corporation and
under the terms of the merger became a C-corporation for income tax purposes.
Turf Paradise was acquired on August 11, 1994, and was accounted for under the
pooling of interests method of accounting.
F-24
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The composition of the Company's income tax expense for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
----------- ----------- ----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
U.S. Federal........................... $ 4,341,000 $(1,681,000) $2,660,000
State.................................. (3,293,000) 4,092,000 799,000
----------- ----------- ----------
$ 1,048,000 $ 2,411,000 $3,459,000
=========== =========== ==========
YEAR ENDED DECEMBER 31, 1995:
U.S. Federal........................... $ 0 $ 473,000 $ 473,000
State.................................. 42,000 178,000 220,000
----------- ----------- ----------
$ 42,000 $ 651,000 $ 693,000
=========== =========== ==========
YEAR ENDED DECEMBER 31, 1994:
U.S. Federal........................... $ 1,094,000 $ 656,000 $1,750,000
State.................................. (1,155,000) 973,000 (182,000)
----------- ----------- ----------
$ (61,000) $ 1,629,000 $1,568,000
=========== =========== ==========
</TABLE>
The following table reconciles the Company's income tax expense (based on
its effective tax rate) to the federal statutory tax rate of 34%:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ----------
<S> <C> <C> <C>
Income (loss) before income tax expense,
at the statutory rate.................. $ (269,000) $(159,000) $1,816,000
Pooling costs......................... 0 0 213,000
Goodwill amortization................. 195,000 72,000 0
Political and lobbying costs.......... 291,000 353,000 179,000
State income taxes, net of federal tax
benefits............................. 800,000 145,000 (120,000)
Valuation allowance................... 0 0 (465,000)
Non-deductible expenses............... 105,000 260,000 0
Additional provisions................. 2,337,000 22,000 (55,000)
---------- --------- ----------
Income tax expense...................... $3,459,000 $ 693,000 $1,568,000
========== ========= ==========
</TABLE>
F-25
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For the years ended December 31, 1996, and 1995, the tax effects of temporary
differences that gave rise to significant portions of the deferred tax assets
and deferred tax liabilities are presented below, along with a summary of
activity in the valuation allowance.
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Current deferred tax assets:
Workers' compensation insurance reserve.......... $ 790,000 $ 905,000
General liability insurance reserve.............. 690,000 619,000
Legal accrual.................................... 58,000 76,000
Write off of investment in Sunflower............. 3,111,000 0
Development costs................................ 0 268,000
Lawsuit settlement............................... 1,104,000 2,087,000
Vacation and sick pay accrual.................... 270,000 377,000
Bad debt allowance............................... 437,000 739,000
Los Angeles revitalization zone credit........... 0 0
Other............................................ 435,000 177,000
------------ ------------
Current deferred tax assets.................... 6,895,000 5,248,000
Less valuation allowance......................... (120,000) (109,000)
------------ ------------
Current deferred tax assets.................... 6,775,000 5,139,000
Current deferred tax liabilities:
Business insurance and other..................... (353,000) (251,000)
------------ ------------
Net current deferred tax assets.................... $ 6,422,000 $ 4,888,000
============ ============
Non-current deferred tax assets:
Net operating loss carryforwards................. $ 0 $ 931,000
General business tax credits..................... 36,000 468,000
Los Angeles revitalization zone tax credits...... 9,299,000 6,406,000
Other............................................ 42,000 156,000
Alternative minimum tax credit................... 1,244,000 412,000
------------ ------------
Non-current deferred tax assets................ 10,621,000 8,373,000
Less valuation allowance......................... (5,511,000) (5,221,000)
------------ ------------
Non-current deferred tax assets................ 5,110,000 3,152,000
------------ ------------
Non-current deferred tax liabilities:
Expansion plans.................................. (400,000) (400,000)
Los Angeles revitalization zone accelerated
write-off....................................... (461,000) (560,000)
Depreciation and amortization.................... (10,580,000) (11,862,000)
Other............................................ (2,734,000) (413,000)
------------ ------------
Non-current deferred tax liabilities........... (14,175,000) (13,235,000)
------------ ------------
Net non-current deferred tax liabilities........... $ (9,065,000) $(10,083,000)
============ ============
</TABLE>
F-26
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is located in the Los Angeles revitalization tax zone and is
entitled to special state of California income tax credits related to sales
tax paid on operating materials and supplies, on construction assets and wages
paid to staff who reside within the zone. With the construction of the
Hollywood Park-Casino and Crystal Park, the Company earned substantial tax
credits related to sales tax paid on the assets acquired and on wages paid to
construction employees.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
---------- ----------
<S> <C> <C>
Valuation allowance at beginning of period................ $5,330,000 $2,986,000
Valuation allowance utilized during the year.............. 0 0
Valuation allowance established for California state...... 0 0
Los Angeles revitalization zone tax credit................ 302,000 2,344,000
---------- ----------
Valuation allowance at end of period.................... $5,632,000 $5,330,000
========== ==========
</TABLE>
As of December 31, 1995, the Company had a federal regular net tax operating
loss of approximately $2,200,000 that in 1996 the Company carried back to 1994
generating a cash refund of approximately $56,000 and increased the
alternative minimum tax credit by approximately $660,000, and also increased
the general business tax credits by approximately $19,000. As of December 31,
1996, the Company had approximately $36,000 of general business tax credits
and $1,244,000 of alternative minimum tax credits available to reduce future
federal income taxes, although in either case, the tax credits generally
cannot reduce federal taxes paid below the calculated amount of alternative
minimum tax. The general business tax credits expire in 2000, and the
alternative minimum tax credits do not expire. The Company's use of its tax
credit carryforwards is subject to certain limitations imposed by Section 383
of the Internal Revenue Code and by the separate return limitation year rules
of the consolidated return regulations. Although Management currently expects
that such limitations will not prevent the Company from fully utilizing the
benefits of its tax credits, it is possible that such limitations could defer
or reduce the Company's use of its general business tax credits and
alternative minimum tax credit carryforwards.
NOTE 13--STOCKHOLDERS' EQUITY
Effective August 28, 1997, the Company exercised its option to convert all
2,749,900 of its outstanding Depositary Shares into approximately 2,291,492
shares of its common stock; thereby eliminating in future periods the annual
preferred cash dividend of approximately $1,925,000 (unaudited).
On June 30, 1997, the Company issued approximately 5,362,850 shares of
Hollywood Park common stock, valued at $9.8125, (excluding 446,491 shares of
the Company's common stock repurchased from Roski, and subsequently retired),
to acquire Boomtown (unaudited).
During 1996 the Company announced its intention to repurchase and retire up
to 2,000,000 shares of its common stock on the open market or in negotiated
transactions. As of December 31, 1996, the Company had repurchased and retired
(with the last purchase in 1996 made on November 13, 1996) 222,300 common
shares at a cost of approximately $1,962,000.
On November 17, 1995, the Company acquired PCM's net assets for an aggregate
$2,640,000 payable in shares of Hollywood Park common stock, in three
installments: (i) shares of Hollywood Park common stock having a value of
$1,600,000, or 136,008 common shares were issued on November 17, 1995, (ii)
shares of Hollywood Park common stock, having a value of $540,000, or 48,674
common shares, were issued on November 19, 1996, and (iii) shares of Hollywood
Park common stock, having a value of $500,000, or 33,417 common shares were
issued on February 10, 1997.
F-27
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On March 23, 1994, the Company issued 591,715 shares of Hollywood Park
common stock to acquire Sunflower. An additional 55,574 shares of Hollywood
Park common stock were subsequently issued to Mr. Richard Boushka, a former
Sunflower shareholder, as required by the agreement of merger. The acquisition
of Sunflower was accounted for under the purchase method of accounting.
On August 11, 1994, the Company issued 1,498,016 shares of Hollywood Park
common stock to acquire Turf Paradise. The acquisition of Turf Paradise was
accounted for under the pooling of interests method of accounting and the
historical per common share earnings of the Company have been restated as if
the acquisition had occurred at the beginning of each period presented.
NOTE 14--LEASE OBLIGATIONS
The Company leases certain equipment primarily for use in racing operations
(pari-mutuel wagering equipment) and general office equipment. Minimum lease
payments required under operating leases that have initial terms in excess of
one year as of December 31, 1996 are approximately $1,354,000 in 1997 and
annually thereafter. Total rent expense for these long term lease obligations
for the years ended December 31, 1996, 1995 and 1994 was $1,378,000,
$1,318,000 and $1,437,000, respectively.
NOTE 15--RETIREMENT PLANS
The Hollywood Park Pension Plan (the "Pension Plan") was a non-contributory,
defined benefit plan covering employees of Hollywood Park, Inc. who met the
Pension Plan's service requirements, and all employees of Hollywood Park
Operating Company not eligible for participation in a multi-employer defined
benefit plan, who met the Pension Plan's service requirements.
Hollywood Park elected to terminate the Pension Plan as of January 31, 1997.
Accrued Pension Plan benefits were frozen as of September 1, 1996, for all
Pension Plan participants, except retained participants (participants who,
because of legal requirements, including the provisions of the National Labor
Relations Act, are represented by a collective bargaining agent), whose
accrued benefits were frozen as of December 31, 1996. As of the date the
Pension Plan benefits were frozen, participants became 100% vested in their
accrued benefits, regardless of the number of years of service. The funds
accumulated under the Pension Plan will be used to provide the retirement
benefits accrued by the participants. Pension Plan participants will receive
their fully accrued benefits only if the Pension Plan's assets are sufficient
to cover such accrued benefits, but in no event can the Pension Plan assets be
paid to the Company prior to the satisfaction of all accrued Pension Plan
benefits to the participants. Management presently believes that the
accumulated Pension Plan assets are sufficient to provide for the
participant's accumulated Pension Plan benefits.
The Company's Pension Plan funding policy was to contribute amounts to the
Pension Plan fund in an amount, at least equal to the minimum funding
requirements of the Employee Retirement Income Security Act of 1974, though
not in excess of the maximum deductible limit. The Pension Plan was subject to
full funding limitation in 1996; therefore, no contributions were made in
1996. The Company contributed approximately $22,000 to the Pension Plan in
1995.
F-28
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
RETIREMENT PLANS FUNDED STATUS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $2,627,000 and $4,078,000 at December 31,
1996 and 1995, respectively........................... $2,627,000 $4,190,000
========== ==========
Projected benefit obligation for service rendered to
date.................................................. $2,627,000 $5,080,000
Less Pension Plan assets at fair value................. 4,436,000 5,754,000
Less Pension Plan contribution......................... 0 22,000
---------- ----------
Pension Plan assets in excess of projected benefit
obligation............................................ 1,809,000 696,000
Unrecognized net gain from past experience different
from that assumed and effects of changes in
assumptions........................................... (1,052,000) (323,000)
Unrecognized net asset being recognized over 15 years.. (452,000) (539,000)
---------- ----------
Pension Plan asset (liability)....................... $ 305,000 $ (166,000)
========== ==========
Net pension expense--Service cost...................... $ 698,000 $ 314,000
Net pension expense--Interest cost..................... 325,000 354,000
Actual return on assets................................ (784,000) (753,000)
Net amortization and deferral.......................... 255,000 247,000
---------- ----------
Net periodic pension cost............................ $ 494,000 $ 162,000
========== ==========
</TABLE>
The December 31, 1996, reserve liabilities and related asset values for the
annuity contract are not included in the table above, because the Company
executed an agreement with the insurance company holding the annuity contracts
to no longer participate in the annual adjustments to the contract values. The
December 31, 1995, Pension Plan liabilities and assets included in the table
above are annuity contract reserve liabilities and the related assets for the
current Pension Plan retirees.
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations were 7.5% and 5.0%, respectively, at
December 31, 1996, and 8.0% and 5.0%, respectively, at December 31, 1995. The
expected long term rate of return on assets was 8.0% at December 31, 1996 and
1995.
The Company also contributed to several collectively-bargained multi-
employer pension and retirement plans (covering full and part-time employees)
which are administered by unions, and to a pension plan covering non-union
employees which is administered by an association of race track owners.
Amounts charged to pension cost and contributed to these plans for the years
ended December 31, 1996, 1995 and 1994 totaled $1,872,000, $1,781,000 and
$1,846,000, respectively. Contributions to the collectively-bargained plans
are determined in accordance with the provisions of negotiated labor contracts
and generally are based on the number of employee hours or days worked.
Contributions to the non-union plans are based on the covered employees'
compensation.
Information from the plans administrators is not available to permit the
Company to determine its share of unfunded vested benefits or prior service
liability. It is the opinion of management that no material liability exists.
There is no defined benefit pension plan for Turf Paradise.
Effective January 31, 1997, in conjunction with the termination of the
Pension Plan, Hollywood Park elected to terminate its non-qualified
Supplementary Employment Retirement Plan ("SERP"). The SERP was an unfunded
plan, established primarily for the purpose of restoring the retirement
benefits for highly compensated employees that were eliminated by the Internal
Revenue Service in 1994, when the maximum annual earnings
F-29
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
allowed for qualified pension plans was reduced to $150,000 from $235,850.
Messers, Hubbard, Finnigan and Robbins participated in the SERP prior to its
termination.
NOTE 16--RELATED PARTY TRANSACTIONS
Since November 1993, the Company has had an aircraft time sharing agreement
with R.D. Hubbard Enterprises, Inc., ("Hubbard Enterprises") which is wholly
owned by Mr. Hubbard. The agreement automatically renews each month unless
written notice of termination is given by either party at least two weeks
before a renewal date. The Company reimburses Hubbard Enterprises for expenses
incurred as a result of the Company's use of the aircraft, which totaled
approximately $120,000 in 1996, $126,000 in 1995, and $139,000 in 1994.
On March 23, 1994, the Company acquired Sunflower, a greyhound and
thoroughbred race track located in Kansas City, Kansas, in which Mr. Hubbard
owned a 60% interest. The agreement of merger also provided that under certain
circumstances the former Sunflower shareholders were entitled to receive
additional shares of Hollywood Park common stock. As of March 23, 1995, the
former Sunflower shareholders transferred their right to such additional
consideration to Hollywood Park for nominal consideration and have no further
entitlements to additional consideration.
On May 2, 1996, the Kansas Legislature adjourned without passing legislation
that would have allowed additional gaming at Sunflower, thereby permitting
Sunflower to more effectively compete with Missouri riverboat gaming. As a
result of the outcome of the Kansas Legislative session, Hollywood Park wrote
off its approximately $11,412,000 investment in Sunflower. There was no cash
involved in the write off of this investment. On May 17, 1996, Sunflower filed
for reorganization under Chapter 11 of the Bankruptcy Code. Sunflower is
operating during the reorganization.
NOTE 17--STOCK OPTION PLAN
In 1996, the shareholders of the Company adopted the 1996 Stock Option Plan
(the "1996 Plan"), which provides for the issuance of up to 900,000 shares.
Except for the provisions governing the number of shares issuable under the
1996 Plan and except for provisions which reflect changes in tax and
securities laws, the provisions of the 1996 Plan are substantially similar to
the provision of the prior plan adopted in 1993. The 1996 Plan is administered
and terms of option grants are established by the Board of Directors'
Compensation Committee. Under the terms of the 1996 Plan, options alone or
coupled with stock appreciation rights may be granted to selected key
employees, directors, consultants and advisors of the Company. Options become
exercisable ratably over a vesting period as determined by the Compensation
Committee and expire over terms not exceeding ten years from the date of
grant, one month after termination of employment, or six months after the
death or permanent disability of the optionee. The purchase price for all
shares granted under the 1996 Plan shall be determined by the Compensation
Committee, but in the case of incentive stock options, the price will not be
less than the fair market value of the common stock at the date of grant. On
April 26, 1996, the Company amended the non-qualified stock option agreements
issued through this date, to lower the per share price of the outstanding
options to $10.00. On May 19, 1995, the Company amended the non-qualified
stock option agreements issued through this date, to reflect the substantial
decline in the fair market value of the common stock, lowering the per share
price of the outstanding options to $13.00. In 1994, Turf Paradise had
approximately 23,000 stock options outstanding, all of which were fully
exercised prior to the acquisition.
F-30
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes information related to shares under option
and shares available for grant under the Plan.
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Options outstanding at beginning of year.......... 249,000 235,000 150,000
Options granted during the year................... 433,500 15,000 85,000
Options expired during the year................... (40,000) (1,000) 0
------- ------- -------
Options outstanding at end of year.............. 642,500 249,000 235,000
======= ======= =======
Total shares available for issuance under the
plan............................................. 900,000 625,000 625,000
Per share price of outstanding options issued in
prior year....................................... $ 10.00 $ 13.00 $ 25.50
Per share price of outstanding options issued in
current year..................................... $ 10.00 $ 13.25 $ 22.00
Per share price of outstanding options issued in
current year..................................... $ 11.50 -- --
Number of shares subject to exercisable option at
end of year...................................... 188,332 128,000 50,000
</TABLE>
NOTE 18--COMMITMENTS AND CONTINGENCIES
As previously reported by the Company, and described in the Company's Annual
Report on Form 10-K for 1994, six purported class actions (the "Class
Actions") were filed beginning in September 1994, against the Company and
certain of its directors and officers in the United States District Court,
Central District of California (the "District Court") and consolidated in a
single action entitled In re Hollywood Park Securities Litigation. On
September 15, 1995, a related stockholder derivative action, entitled Barney
v. Hubbard, et al. (the "Derivative Action"), was filed in the California
Superior Court for the County of San Diego (the "State Court").
The Company and other defendants each denied any liability or wrongdoing and
asserted various defenses. The District Court ordered the parties to engage in
non-binding mediation in an effort to settle all related claims. As previously
reported, as a result of the court ordered mediation, the parties reached an
agreement-in-principle to settle all claims raised in the Class and Derivative
Actions. The Company entered into the settlements in order to avoid the
expense, uncertainty and distraction of further litigation.
On November 6 and 13, 1995, respectively, the parties executed definitive
settlement agreements in the Derivative and Class Actions. Those agreements
provided for the release and dismissal of all claims raised or which might
have been raised in the Class and Derivative actions, subject to approval by
each of the respective courts. In settlement of the Class Actions, a
settlement fund in the principal amount of $5,800,000 has been created for the
benefit of the alleged class with contributions from the Company and the
insurance carrier for its directors and officers. After giving consideration
to the amounts to be received by the Company in settlement of the Derivative
Action, the Company's net settlement payment in the Class Actions was less
than $2,500,000. Under settlement of the Derivative Action, the Company will
receive a $2,000,000 payment from the insurance carrier which the Company will
use to pay plaintiff's attorneys fees and expenses and partially to defray the
Company's payment in the settlement of the Class Actions. The Derivative
Action settlement also includes provisions enhancing the Company's financial
controls and modifying certain terms of its acquisition of Sunflower.
On February 26, 1996, the District Court approved the settlement of the
Class Actions and entered a judgment dismissing the Class Actions in their
entirety. On May 6, 1996, the State Court approved the settlement of the
Derivative Action and entered a judgment dismissing the Derivative Action in
its entirety. On or about July 2, 1996, a notice of appeal was filed in
connection with the Derivative Action judgment, and on or about February 14,
1997, the appellant filed her opening brief. The Company intends to oppose the
purported appeal.
F-31
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company also executed a separate settlement as to all purported claims
against the Company and its officers and directors by the former controlling
stockholder of Turf Paradise (the "Walkers") in connection with the Company's
acquisition of Turf Paradise. Under the terms of the consummation of the
settlement of the Class and Derivative Actions, the Walkers were excluded from
participating in the Class Actions settlement fund, agreed to release all of
their potential threatened claims, and are to receive a payment in the
principal amount of $2,750,000.
The lawsuit settlement expense recorded in the accompanying statement of
operations for the year ended December 31, 1995, included $2,450,000 for the
Class Actions, $2,750,000 for the Walkers settlement and approximately
$888,000 in legal costs, for a total of approximately $6,088,000.
The accrued lawsuit settlement recorded in the accompanying financial
statements as of December 31, 1996, of $2,750,000 represents the settlement
with the Walkers.
Sunflower entered into a two year consulting agreement with Mr. Richard
Boushka, a former Sunflower shareholder, as of March 24, 1994. Consulting
services include assisting Sunflower in obtaining all approvals, licenses and
permits necessary for Sunflower to conduct casino gaming and to operate video
lottery terminals at or next to Sunflower's property. Under the terms of the
agreement Mr. Boushka will receive monthly payments totaling $100,000 per
year. As of May 1995, given Sunflower's financial results, all payments to Mr.
Boushka were suspended, though Mr. Boushka did continue to provide services
per the agreement.
F-32
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 19--UNAUDITED SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION
In connection with the issuance of the Hollywood Park Notes (as defined
elsewhere herein), Hollywood Park's subsidiaries (excluding Sunflower Racing,
Inc. and Subsidiary) will guarantee the Notes. The following is a summary of
the consolidating financial information:
SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION
AS OF YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR THE THREE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR ENTITIES
-------------------------------
HOLLYWOOD
HOLLYWOOD PARK SUNFLOWER
PARK, OPERATING TURF RACING, INC. HOLLYWOOD
INC. COMPANY HP/COMPTON, PARADISE, AND CONSOLIDATING PARK, INC.
(PARENT) AND SUBS. INC. INC. SUBSIDIARY ENTRIES CONSOLIDATED
--------- --------- ----------- --------- ------------ ------------- ------------
DECEMBER 31, 1996:
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets.......... $ 23,416 $12,526 $ 513 $ 4,504 $ -- $ 0 $ 40,959
Non-current assets...... 93,770 25,528 28,914 16,715 -- 0 164,927
Investment in subs...... 49,398 0 0 0 -- (49,398) 0
Inter-company........... (4,772) 0 2,748 2,096 -- (72) 0
-------- ------- ------- ------- -------- --------
$161,812 $38,054 $32,175 $23,315 -- $(49,470) $205,886
======== ======= ======= ======= ======== ========
Current liabilities..... $ 16,379 $16,064 $ 200 $ 2,721 $ -- $ 0 $ 35,364
Non-current liabilities. 3,775 5,572 3,015 0 -- 0 12,362
Inter-company........... 9,032 (9,032) 0 72 -- (72) 0
Equity.................. 132,626 25,450 28,960 20,522 -- (49,398) 158,160
-------- ------- ------- ------- -------- --------
$161,812 $38,054 $32,175 $23,315 -- $(49,470) $205,886
======== ======= ======= ======= ======== ========
Revenues................ $ 60,221 $63,587 $ 445 $17,190 $ 1,782 $ -- $143,225
Pre tax income (loss)... $(13,039) $10,361 $ 110 $ 3,016 $(1,238) -- $ (790)
Net income (loss)....... $(12,509) $ 6,987 $ 74 $ 2,034 $ (835) -- $ (4,249)
======== ======= ======= ======= ======= ========
<CAPTION>
DECEMBER 31, 1995:
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets.......... $ 36,774 $ 8,426 $ -- $ 2,859 $ 877 $ 0 $ 48,936
Non-current assets...... 122,860 28,100 -- 17,380 59,119 6,908 234,367
Investment in subs...... 27,008 0 -- 0 0 (27,008) 0
Inter-company........... 2,886 0 -- 0 0 (2,886) 0
-------- ------- ------- ------- -------- --------
$189,528 $36,526 -- $20,239 $59,996 $(22,986) $283,303
======== ======= ======= ======= ======== ========
Current liabilities..... $ 25,090 $13,278 $ -- $ 2,696 $33,898 $ (11) $ 74,951
Non-current liabilities. 18,741 3,199 -- 0 20,186 480 42,606
Inter-company........... (2,726) 2,726 -- 0 2,886 (2,886) 0
Equity.................. 148,423 17,323 -- 17,543 3,026 (20,569) 165,746
-------- ------- ------- ------- -------- --------
$189,528 $36,526 -- $20,239 $59,996 $(22,986) $283,303
======== ======= ======= ======= ======== ========
Revenues................ $ 39,429 $63,883 $ -- $17,485 $ 9,775 $ -- $130,572
Pre tax income (loss)... $ (5,601) $ 8,120 -- $ 2,574 $(5,562) -- $ (469)
Net income (loss)....... $ (4,241) $ 4,872 -- $ 1,544 $(3,337) -- $ (1,162)
======== ======= ======= ======= ========
<CAPTION>
DECEMBER 31, 1994:
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 21,016 $64,744 $ -- $17,313 $14,251 $ -- $117,324
Pre tax income (loss)... $ (2,876) $ 7,384 -- $ 1,873 $(1,041) -- $ 5,340
Net income (loss)....... $ (2,032) $ 5,216 -- $ 1,323 $ (735) -- $ 3,772
======== ======= ======= ======= ========
</TABLE>
F-33
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 20--UNAUDITED QUARTERLY INFORMATION
The following is a summary of unaudited quarterly financial data for the
years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996
---------------------------------------------------
DEC. 31, SEPT. 30, JUNE 30, MAR. 31,
--------- ---------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues................. $ 38,698 $ 30,247 $ 46,427 $ 27,853
========= ========= ========= ==========
Net income (loss)........ $ 3,277 $ 603 $ 5,249 $ (13,378)
========= ========= ========= ==========
Net income (loss)
available to (allocated
to) common shareholders. $ 2,795 $ 122 $ 4,768 $ (13,859)(a)
========= ========= ========= ==========
Per common share:
Net income (loss)--
primary............... $ 0.15 $ 0.01 $ 0.26 $ (0.74)
========= ========= ========= ==========
Net income (loss)--
fully diluted......... $ 0.15 $ 0.01 $ 0.25 $ (0.74)
========= ========= ========= ==========
Cash dividends......... $ 0.00 $ 0.00 $ 0.00 $ 0.00
========= ========= ========= ==========
<CAPTION>
1995
---------------------------------------------------
DEC. 31, SEPT. 30, JUNE 30, MAR. 31,
--------- ---------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues................. $ 36,693 $ 26,595 $ 42,828 $ 24,456
Net income (loss)........ $ 212 $ (5,637) $ 4,857 $ (594)
========= ========= ========= ==========
Net income (loss)
available to (allocated
to) common shareholders. $ (270)(b) $ (6,118)(c) $ 4,376 $ (1,075)(d)
========= ========= ========= ==========
Per common share:
Net income (loss)--
primary............... $ (0.01) $ (0.33) $ 0.24 $ (0.06)
========= ========= ========= ==========
Net income (loss)--
fully diluted......... $ (0.01) $ (0.33) $ 0.24 $ (0.06)
========= ========= ========= ==========
Cash dividends......... $ 0.00 $ 0.00 $ 0.00 $ 0.00
========= ========= ========= ==========
</TABLE>
- --------
(a) The primary reason for this quarter's loss was the $11,346,000 write off
of the Company's investment in Sunflower. Historically, the three months
ended March 31, produce a loss, because the Company does not operate live
on-track racing at Hollywood Park Race Track.
(b) The primary reason for this quarter's loss was due to losses at Sunflower
due to intense competition from nearby Missouri riverboat gaming.
(c) The primary reasons for this quarter's loss was the $5,627,000 of expense
related to the lawsuit settlement, and losses at Sunflower, due to
competition from Missouri riverboat gaming.
(d) The primary reasons for this quarter's loss was due to Hollywood Park Race
Track being closed for live on-track racing (as historically happens
during the three months ended March 31), and losses at Sunflower, due to
competition from Missouri riverboat gaming.
F-34
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 21--UNAUDITED SUBSEQUENT EVENTS
POSSIBLE RESTORATION OF REAL ESTATE INVESTMENT TRUST/PAIRED-SHARE
STRUCTURE From 1982 to 1991, the Company was operated as a Real Estate
Investment Trust ("REIT") known as Hollywood Park Realty Enterprises, Inc.
("HPRE"), and its stock was paired with, or stapled to, that of Hollywood Park
Operating Company ("HPOC"). HPRE was primarily an owner and lessor of real
property. HPOC was primarily engaged in the active conduct of racing
operations and leased a significant amount of real property from HPRE to
conduct those racing operations. Generally, a REIT is required to distribute,
as dividends to its stockholders, 95% of its taxable income (other than net
capital gains), and such amounts distributed are not subject to federal income
tax at the corporate level. Effective as of January 1, 1992, as part of a
corporate reorganization, HPRE and HPOC ceased operating in a REIT/Paired-
Share Structure, HPOC became a wholly owned subsidiary of HPRE and HPRE was
renamed Hollywood Park, Inc.
In May 1997, the Company announced that it was exploring the possibility of
restoring the REIT/Paired-Share Structure. Any decisions to proceed with
restoring the REIT/Paired-Share Structure will depend on a variety of factors,
including tax consequences and receipt of board, stockholder, regulatory and
other required approvals. There can be no assurance that the Company will
elect to proceed with the restoration of the REIT/Paired-Share Structure, or
that the benefits expected from the restoration will be achieved.
CRYSTAL PARK LLC On July 21, 1997, Crystal Park LLC filed an action for
unlawful detainer against Compton Entertainment, Inc. ("CEI"), the
unaffiliated third party operator, due to CEI's failure to pay the June 1997
rent and to make required additional rent payments. Crystal Park LLC contends
that the Lease terminated prior to the July 21, 1997 filing and that CEI is
currently occupying Crystal Park as a holdover tenant only, with no rights
under the Lease. CEI denies these contentions. On September 12, 1997, Crystal
Park LLC and CEI entered into an agreement which outlined occupancy payments
to be made by CEI in exchange for a continuance of the trial in the action for
unlawful detainer. CEI failed to make the final payment due under the
agreement. On October 24, 1997, Crystal Park LLC filed an action for unlawful
detainer against CEI, due to CEI's failure to pay the July 1997 rent.
On October 11, 1997, the California Attorney General revoked CEI's
conditional gaming registration, and the City revoked CEI's city gaming
license. Crystal Park LLC believes that CEI is attempting to have its
California conditional gaming registration and City Gaming license reinstated.
On October 27, 1997, Crystal Park LLC filed an action for unlawful detainer
against CEI due to the license revocation.
Crystal Park LLC is presently negotiating a new lease with California Casino
Management, Inc. ("CCM"), a California corporation, owned by Mr. Leo Chu,
which would take effect in the event that CEI is unable to continue as
operator/lessee of Crystal Park. Mr. Chu presently has a gaming registration
application pending with the California Attorney General to operate Crystal
Park. Mr. Chu currently holds a gaming registration to operate a small card
club in Northern California. Mr. Chu will also require a gaming license from
the City of Compton. It is expected that CCM would assume operations of
Crystal Park no later than December 1, 1997.
There can be no assurance that CCM will receive the necessary City and State
of California licenses to operate Crystal Park or that Crystal Park will be
able to locate a replacement operator/lessee who will be granted the required
licenses.
As of September 30, 1997, CEI owed Crystal Park LLC $600,000, of which
$200,000 is covered by a rent security deposit Crystal Park LLC received from
CEI in October 1996, and of which $350,000 was fully reserved and, therefore,
is not reflected in the operating results for the period ended September 30,
1997.
F-35
<PAGE>
HOLLYWOOD PARK, INC.
SELECTED FINANCIAL DATA BY OPERATIONAL LOCATION
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED THREE MONTHS ENDED
---------------------------------------------- YEAR ENDED ------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, JUNE 30, MARCH 31,
1996 1996 1996 1996 1996 1997 1997
------------ ------------- -------- --------- ------------ -------- ---------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Hollywood Park, Inc.
and Race Track......... $17,894 $13,496 $28,035 $ 5,701 $65,126 $26,958 $ 5,659
Hollywood Park, Inc.--
Casino Division........ 14,531 15,205 15,173 13,773 58,682 15,323 13,994
HP/Compton, Inc.--
Crystal Park Hotel and
Casino................. 445 0 0 0 445 900 600
Turf Paradise, Inc..... 5,828 1,546 3,219 6,597 17,190 3,143 6,562
Sunflower Racing, Inc.. 0 0 0 1,782 1,782 0 0
------- ------- ------- -------- ------- ------- -------
38,698 30,247 46,427 27,853 143,225 46,324 26,815
------- ------- ------- -------- ------- ------- -------
EXPENSES:
Hollywood Park, Inc.
and Race Track......... 15,131 11,856 19,522 9,335 55,844 18,293 8,617
Hollywood Park, Inc.--
Casino Division........ 12,885 12,676 12,576 12,297 50,434 12,927 12,445
HP/Compton, Inc.--
Crystal Park Hotel and
Casino................. 1 0 0 0 1 18 23
Turf Paradise, Inc..... 4,134 2,013 2,700 4,122 12,969 2,670 4,230
Sunflower Racing, Inc.. 0 0 0 1,703 1,703 0 0
------- ------- ------- -------- ------- ------- -------
32,151 26,545 34,798 27,457 120,951 33,908 25,315
------- ------- ------- -------- ------- ------- -------
NON-RECURRING EXPENSES:
Write off of investment
in Sunflower Racing,
Inc.................... 0 0 66 11,346 11,412 0 0
DEPRECIATION AND
AMORTIZATION:
Hollywood Park, Inc.
and Race Track......... 1,433 1,457 1,450 1,393 5,733 1,432 1,425
Hollywood Park, Inc.--
Casino Division........ 751 740 736 675 2,902 900 764
HP/Compton, Inc.--
Crystal Park Hotel and
Casino................. 319 0 0 0 319 402 400
Turf Paradise, Inc..... 294 301 301 309 1,205 297 295
Sunflower Racing, Inc.. 0 0 0 536 536 0 0
------- ------- ------- -------- ------- ------- -------
2,797 2,498 2,487 2,913 10,695 3,031 2,884
------- ------- ------- -------- ------- ------- -------
OPERATING INCOME (LOSS):
Hollywood Park, Inc.
and Race Track......... 1,330 183 7,063 (5,027) 3,549 7,233 (4,383)
Hollywood Park, Inc.--
Casino Division........ 895 1,789 1,861 801 5,346 1,496 785
HP/Compton, Inc.--
Crystal Park Hotel and
Casino................. 125 0 0 0 125 480 177
Turf Paradise, Inc..... 1,400 (768) 218 2,166 3,016 176 2,037
Sunflower Racing, Inc.. 0 0 0 (457) (457) 0 0
Write off of investment
in Sunflower Racing,
Inc.................... 0 0 (66) (11,346) (11,412) 0 0
------- ------- ------- -------- ------- ------- -------
3,750 1,204 9,076 (13,863) 167 9,385 (1,384)
------- ------- ------- -------- ------- ------- -------
INTEREST EXPENSE:
Hollywood Park, Inc.
and Race Track......... 24 20 54 63 161 65 64
Sunflower Racing, Inc.. 0 0 0 781 781 0 0
------- ------- ------- -------- ------- ------- -------
24 20 54 844 942 65 64
------- ------- ------- -------- ------- ------- -------
MINORITY INTEREST:
HP/Compton, Inc.--
Crystal Park Hotel and
Casino................. 15 0 0 0 15 42 22
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE
(BENEFIT):
Hollywood Park, Inc.
and Race Track......... 1,306 163 7,009 (5,090) 3,388 7,168 (4,447)
Hollywood Park, Inc.--
Casino Division........ 895 1,789 1,861 801 5,346 1,496 785
HP/Compton, Inc.--
Crystal Park Hotel and
Casino................. 110 0 0 0 110 438 155
Turf Paradise, Inc..... 1,400 (768) 218 2,166 3,016 176 2,037
Sunflower Racing, Inc.. 0 0 0 (1,238) (1,238) 0 0
Write off of investment
in Sunflower Racing,
Inc. .................. 0 0 (66) (11,346) (11,412) 0 0
------- ------- ------- -------- ------- ------- -------
3,711 1,184 9,022 (14,707) (790) 9,278 (1,470)
Income tax expense
(benefit)............... 434 581 3,773 (1,329) 3,459 3,675 (575)
------- ------- ------- -------- ------- ------- -------
Net income (loss)....... $ 3,277 $ 603 $ 5,249 $(13,378) $(4,249) $ 5,603 $ (895)
======= ======= ======= ======== ======= ======= =======
Dividend requirements on
convertible preferred
stock................... $ 482 $ 481 $ 481 $ 481 $ 1,925 $ 481 $ 481
------- ------- ------- -------- ------- ------- -------
Net income (loss)
available to (allocated
to) common
shareholders........... $ 2,795 $ 122 $ 4,768 $(13,859) $(6,174) $ 5,122 $(1,376)
======= ======= ======= ======== ======= ======= =======
Per common share:
Net income (loss)--
primary................ $ 0.15 $ 0.01 $ 0.26 $ (0.74) $ (0.33) $ 0.28 $ (0.07)
Net income (loss)--
fully diluted.......... $ 0.15 $ 0.01 $ 0.25 $ (0.74) $ (0.33) $ 0.27 $ (0.07)
Number of shares--
primary................. 18,365 18,535 18,613 18,610 18,505 18,462 18,372
Number of shares--fully
diluted................. 20,657 20,826 20,904 20,902 20,797 20,754 20,664
</TABLE>
F-36
<PAGE>
HOLLYWOOD PARK, INC.
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED DECEMBER 31,
(UNAUDITED)
-------------------------------------------------
ASSUMING FULL
PRIMARY DILUTION (a)
------------------------ ------------------------
1996 1995 1994 1996 1995 1994
------- ------- ------ ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Average number of common
shares outstanding.......... 18,365 18,486 18,370 18,365 18,486 18,370
Average common shares due to
assumed conversion of the
convertible preferred
shares...................... 0 0 0 2,291 2,291 2,291
------- ------- ------ ------- ------- ------
Total shares............... 18,365 18,486 18,370 20,656 20,777 20,661
======= ======= ====== ======= ======= ======
Net income................... $ 3,277 $ 212 $2,736 $ 3,277 $ 212 $2,736
Less dividend requirements on
convertible preferred
shares...................... 482 482 481 0 0 0
------- ------- ------ ------- ------- ------
Net income (loss) available
to (allocated to) common
shareholders................ $ 2,795 $ (270) $2,255 $ 3,277 $ 212 $2,736
======= ======= ====== ======= ======= ======
Net income (loss) per share.. $ 0.15 $ (0.01) $ 0.12 $ 0.16 $ 0.01 $ 0.13
======= ======= ====== ======= ======= ======
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------
ASSUMING FULL
PRIMARY DILUTION (a)
------------------------ ------------------------
1996 1995 1994 1996 1995 1994
------- ------- ------ ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Average number of common
shares outstanding.......... 18,505 18,399 18,224 18,505 18,399 18,224
Average common shares due to
assumed conversion of the
convertible preferred
shares...................... 0 0 0 2,291 2,291 2,291
------- ------- ------ ------- ------- ------
Total shares............... 18,505 18,399 18,224 20,796 20,690 20,515
======= ======= ====== ======= ======= ======
Net income (loss)............ $(4,249) $(1,162) $3,772 $(4,249) $(1,506) $3,772
Less dividend requirements on
convertible preferred
shares...................... 1,925 1,925 1,925 0 0 0
------- ------- ------ ------- ------- ------
Net income (loss) available
to (allocated to) common
shareholders................ $(6,174) $(3,087) $1,847 $(4,249) $(1,506) $3,772
======= ======= ====== ======= ======= ======
Net income (loss) per share.. $ (0.33) $ (0.17) $ 0.10 $ (0.20) $ (0.07) $ 0.18
======= ======= ====== ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ------------------------------
ASSUMING FULL ASSUMING FULL
PRIMARY DILUTION (a) PRIMARY DILUTION (a)
-------------- ------------- -------------- --------------
1997 1996 1997 1996 1997 1996 1997 1996
------ ------- ------ ------ ------ ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA--UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average number of common
shares outstanding..... 18,462 18,613 18,462 18,613 18,366 18,613 18,366 18,613
Average common shares
due to assumed
conversion of the
convertible preferred
shares................. 0 0 2,291 2,291 0 0 2,291 2,291
------ ------- ------ ------ ------ ------- ------ -------
Total shares.......... 18,462 18,613 20,753 20,904 18,366 18,613 20,657 20,904
====== ======= ====== ====== ====== ======= ====== =======
Net income (loss) ...... $5,603 $5,249 $5,603 $5,249 $4,708 $(8,129) $4,708 $(8,129)
Less dividend
requirements on
convertible preferred
shares................. 481 481 0 0 962 962 0 0
------ ------- ------ ------ ------ ------- ------ -------
Net income (loss)
available to (allocated
to) common
shareholders........... $5,122 $ 4,768 $5,603 $5,249 $3,746 $(9,091) $4,708 $(8,129)
====== ======= ====== ====== ====== ======= ====== =======
Net income (loss) per
share.................. $ 0.28 $ 0.26 $ 0.27 $ 0.25 $ 0.20 $ (0.49) $ 0.23 $ (0.39)
====== ======= ====== ====== ====== ======= ====== =======
</TABLE>
- -------
(a) The computed values, assuming full dilution, are anti-dilutive; therefore,
the primary share values are presented on the face of the Consolidated
Statements of Operations.
F-37
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<S> <C>
Allowance for bad debts:
Balance as of December 31, 1993. $ (31,000)
Charges to expense............ (137,000)
Write offs.................... 9,000
-----------
Balance as of December 31, 1994. (159,000)
Charges to expense............ (2,294,000)(a)
Write offs.................... 612,000
-----------
Balance as of December 31, 1995. (1,841,000)
Charges to expense............ (783,000)
Write offs.................... 1,535,000
-----------
Balance as of December 31, 1996. $(1,089,000)
===========
</TABLE>
- --------
(a) Hollywood Park assumed the allowance related to the Hollywood Park-Casino
gaming business in the November 17, 1995, acquisition of PCM.
F-38
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
Crystal Park Hotel and Casino Development Company, LLC:
We have audited the accompanying balance sheet of Crystal Park Hotel and
Casino Development Company, LLC (a California limited liability company) ("the
Company") as of December 31, 1996, and the related statements of operations,
members' equity and cash flows for the period from July 18, 1996 (date of
inception) to December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Crystal Park Hotel and
Casino Development Company, LLC as of December 31, 1996, and the results of
its operations and its cash flows for the period from July 18, 1996 to
December 31, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Los Angeles, California
July 16, 1997, except for Note 6
as to which the date is October 27, 1997
F-39
<PAGE>
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF
------------------------
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(UNAUDITED)
(IN THOUSANDS)
ASSETS
------
<S> <C> <C>
Real estate and leasehold interests held for
investment:
Land and land lease................................ $ 2,663 $ 2,663
Building........................................... 1,404 1,404
Leasehold interests and improvements............... 19,457 19,991
Less accumulated depreciation and amortization..... (271) (937)
------- -------
23,253 23,121
------- -------
Cash and cash equivalents............................ 200 687
Rent and other receivables........................... 229 662
Organization expenses, net........................... 452 419
Other assets, net.................................... 5,210 5,099
------- -------
Total Assets..................................... $29,344 $29,988
======= =======
<CAPTION>
LIABILITIES AND MEMBERS' EQUITY
-------------------------------
<S> <C> <C>
Accounts payable..................................... $ 1 $ 0
Lessee security deposit and other liabilities........ 200 220
------- -------
201 220
------- -------
Members' Equity:
HP/Compton, Inc.................................... 26,128 26,738
Redwood Gaming LLC................................. 2,010 2,020
First Park Investments, LLC........................ 1,005 1,010
------- -------
29,143 29,768
------- -------
Total Liabilities and Members' Equity............ $29,344 $29,988
======= =======
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE>
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS INCEPTION TO
ENDED JUNE 30, DECEMBER 31,
1997 1996(A)
-------------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Lease rent........................................ $1,500 $445
Expenses:
Administrative.................................... 41 1
Amortization...................................... 136 48
Depreciation...................................... 666 271
------ ----
843 320
------ ----
Net income.......................................... $ 657 $125
====== ====
</TABLE>
- --------
(a) Crystal Park opened for business on October 25, 1996. Crystal Park Hotel
and Casino Development Company, LLC was formed on July 18, 1996.
See accompanying notes to financial statements
F-41
<PAGE>
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
STATEMENTS OF MEMBERS' EQUITY
<TABLE>
<CAPTION>
REDWOOD FIRST PARK
HP/COMPTON, INC. GAMING LLC INVESTMENTS, LLC TOTAL
---------------- ---------- ---------------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Capital contributions.... $26,018 $2,000 $1,000 $29,018
Net income............... 110 10 5 125
------- ------ ------ -------
BALANCE, DECEMBER 31,
1996.................. 26,128 2,010 1,005 29,143
Capital contributions.... 384 0 0 384
Net income............... 592 43 22 657
Capital distributions.... (366) (33) (17) (416)
------- ------ ------ -------
BALANCE, JUNE 30, 1997
(UNAUDITED)........... $26,738 $2,020 $1,010 $29,768
======= ====== ====== =======
</TABLE>
See accompanying notes to financial statements.
F-42
<PAGE>
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED DECEMBER 31, 1996(A)
AND THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
SIX MONTHS
INCEPTION TO ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 125 $ 657
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 319 802
Decrease (increase) in organization expenses........ (48) 7
Increase in other assets............................ (168) 384
Increase in accounts receivable..................... (229) (433)
Increase in accounts payable and accrued liabili-
ties............................................... 201 20
------- ------
Net cash provided by operating activities......... 200 1,437
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to leasehold interests and improvements... 0 (534)
------- ------
Net cash used in investing activities............. 0 (534)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to minority members........................ 0 (50)
Payments to majority members........................ 0 (366)
------- ------
Net cash used for financing activities............ 0 (416)
------- ------
Increase in cash and cash equivalents............... 200 487
Cash and cash equivalents at the beginning of the
period............................................. 0 200
------- ------
Cash and cash equivalents at the end of the period.. $ 200 $ 687
======= ======
Supplemental disclosure of non-cash transactions:
Contribution of real estate and improvements by
majority member.................................... $20,776 $ 0
======= ======
Contribution of other assets by majority member..... $ 5,242 $ 384
======= ======
Contribution by minority members.................... $ 3,000 $ 0
======= ======
</TABLE>
- --------
(a) Crystal Park opened for business on October 25, 1996. Crystal Park Hotel
and Casino Development Company, LLC was formed on July 18, 1996.
See accompanying notes to financial statements.
F-43
<PAGE>
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE 1--COMPANY INFORMATION
On July 14, 1995, Hollywood Park, Inc. ("Hollywood Park") and Compton
Entertainment, Inc. ("CEI") executed an Amended and Restated Agreement
Respecting Pyramid Casino (the "Crystal Park Agreement") (Pyramid Casino was
subsequently changed to Crystal Park Hotel and Casino ("Crystal Park")),
finalizing the terms concerning the development, ownership and operation of a
card club in the city of Compton (the "City"). CEI entered into an Amended and
Restated Disposition and Development Agreement (the "DDA") with the City to
lease and purchase land located within the City as the card club site.
Under the terms of the Crystal Park Agreement, on August 3, 1995, Hollywood
Park paid CEI $2,000,000 for CEI's real property rights, including its rights
under the DDA ($1,000,000 was also paid for certain predevelopment assets when
the card club opened). On August 3, 1995, Hollywood Park paid CEI an
additional $500,000 to obtain a five year option to purchase CEI's gaming
license ("License Rights Option") (further, an extension fee of $1,499,000 was
also paid when the card club opened). If at the end of the five year term of
the option to purchase the gaming license, Hollywood Park is not able to own
and operate Crystal Park, CEI can elect to either negotiate a new lease or
acquire Hollywood Park's and any other investors' rights to Crystal Park for a
purchase price equal to fair market value as determined by the Crystal Park
Agreement. These payments are reflected as other assets in the accompanying
statements.
As required by the DDA, on August 3, 1995, Hollywood Park paid approximately
$2,006,000 to the City to purchase the convention center to house the card
club operations and entered into a 50 year lease with the City for the hotel,
parking and expansion parcels at the same site. Initial improvements made by
Hollywood Park to construct, install and equip the Crystal Park are credited
against the annual base rent. No cash rent payments are expected to be made
until after the nineteenth year of the lease, or 2014.
On July 18, 1996, Crystal Park Hotel and Casino Development Company, LLC, a
California limited liability company ("Crystal Park LLC"), was formed by
Hollywood Park, through its wholly owned subsidiary HP/Compton, Inc., ("HP/C")
Redwood Gaming LLC ("Redwood") and First Park Investments, LLC ("First Park")
for the purpose of constructing, owning and leasing Crystal Park. Upon
formation of Crystal Park LLC, Hollywood Park contributed as its member
contribution the amount it funded for initial improvements, as well as those
payments reflected as other assets in the accompanying statements. These
contributions were recorded at HP/C's carrying amounts, which approximated
fair value. Crystal Park opened on October 25, 1996, with 100 gaming tables,
approximately 282 hotel rooms, a restaurant, gift shop, full service health
spa and a lobby sports bar and lounge.
The hotel operates under a Radisson Hotels International, Inc. ("Radisson")
flag, under a 20 year License Agreement between HP/Compton, Inc. and Radisson.
HP/C can terminate the License Agreement, at no cost to HP/C, at the end of
the third, fifth or tenth year. Under terms of the License Agreement, HP/C has
the right to use of the Radisson name and logo in connection with the
operation of the hotel, as well as, participation in all Radisson system
advertising and marketing programs and use of Radisson's property management
system. Under the terms of the lease with CEI (the "Lease"), CEI is required
to make monthly payments equal to 4% of the hotel's gross room revenue, as
defined in the License Agreement ("Gross Room Sales"), and an amount equal to
3.5% of the Gross Room Sales, as well as, operate the hotel to achieve
conformity with the Radisson System's standards of quality and uniformity.
Current California law does not allow publicly traded companies, such as
Hollywood Park, to operate a card club (other than on the same property as a
race track); therefore, Crystal Park LLC (the entity which owns the facility)
executed a 60 month lease with CEI. Under the terms of the lease, Crystal Park
LLC, as the landlord, built and furnished the Crystal Park Hotel and Casino
for CEI to operate under a "triple net" lease arrangement, whereby CEI is
responsible for all operating expenses. Crystal Park LLC is not responsible
for any segment of
F-44
<PAGE>
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the daily operations of Crystal Park. If there is a change in California law,
allowing Hollywood Park to operate card clubs at sites other than its race
track property, Crystal Park LLC would operate the card club in partnership
with CEI, (the "Crystal Park Partnership") with Crystal Park LLC owning 67% of
the business. Under the terms of the Crystal Park Partnership, Crystal Park
LLC would receive 90% of the distributable cash flow until it has received its
approximately $30,000,000 initial investment in Crystal Park back, together
with an annualized 20% return on that investment
As of December 31, 1996, Hollywood Park, Redwood and First Park have an 88%,
8%, and 4% member interest, respectively, in Crystal Park LLC. As of June
1997, member interests were retroactively changed to: Hollywood Park (89.8%),
Redwood (6.8%), and First Park (3.4%). Crystal Park LLC profits and losses and
cash distributions are allocated to each member in accordance with the
specific provisions of the operating agreement. These allocations are not
necessarily proportionate to the respective member interests.
NOTE 2--BASIS OF ACCOUNTING AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The accompanying financial statements have been prepared
on an accrual basis in accordance with generally accepted accounting
principles.
ESTIMATES Financial statements prepared in accordance with generally
accepted accounting principles require the use of management estimates,
including estimates used to evaluate the recoverability of real estate and
leasehold interests held for investment and other assets, as discussed below.
These estimates are subject to a variety of risks and uncertainties that could
cause actual results to differ materially from those anticipated by Crystal
Park LLC's management, including the failure to retain the gaming license or
regulatory approvals or the inability to extend the License Rights Option if
it lapses.
REAL ESTATE AND LEASEHOLD INTERESTS HELD FOR INVESTMENT Depreciation and
amortization of building and improvements and leasehold interests are provided
using the straight-line method over their estimated useful lives of 40 years.
Furniture and equipment is being amortized on a straight line basis over their
estimated useful lives of 3 years to 10 years.
Real estate and leasehold interests are carried on Crystal Park LLC's
balance sheet at depreciated/amortized cost. Whenever there are recognized
events or changes in circumstances that affect the carrying amount, management
reviews the assets for possible impairment. In accordance with current
accounting standards, management uses estimated expected future net cash flows
to measure the recoverability of these assets.
The estimation of expected future net cash flows is inherently uncertain and
relies to a considerable extent on assumptions regarding current and future
economic and market conditions, and the availability of capital. If, in future
periods, there are changes in the estimates or assumptions incorporated into
the impairment review analysis, the changes could result in an adjustment to
the carrying amount of these assets.
ORGANIZATION EXPENSES Organization expenses are capitalized and are being
amortized on a straight-line basis over the five-year term of the CEI lease.
INCOME TAXES Income taxes are not recorded by Crystal Park LLC, and Crystal
Park LLC is not subject to Federal or state income taxes. Instead Crystal Park
LLC's income or loss is allocated to the members and included in their
respective income tax returns.
RECLASSIFICATIONS Certain reclassifications have been made to the 1996
balances to be consistent with the 1997 financial statement presentation.
F-45
<PAGE>
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--LEASEHOLD INTERESTS
Leasehold interests relate to a capital lease with the City covering the
hotel, surrounding parking and expansion parcels at Crystal Park. The lease
transfers substantially all benefits and risks incidental to the ownership of
the property to Crystal Park LLC.
The lease was entered into on August 3, 1995, and has a term of up to 50
years. The annual rent payments start at $600,000 and increase every fifth
year until year 46, when they stabilize at $2,850,000. Crystal Park LLC
receives a rent payment credit equal to the costs incurred to renovate Crystal
Park, and no cash rent payments are expected to be made until the nineteenth
year of the lease, or 2014. The Company has the option to either (1) purchase
all of the leasehold parcels at an amount based on a formula defined in the
lease agreement, or (2) purchase only the hotel and parking leasehold parcels
at a fixed price amount. Management expects that in the normal course of
business, and after the rent credits are fully utilized, it is probable that
it will exercise the option to purchase only the hotel and parking leasehold
parcels. If the option is exercised after the rent credits are fully utilized,
the future minimum lease payments for the remaining lease term total
approximately $3,350,000. The present value of the future minimum lease
payments, after a reduction of $2,700,000 for imputed interest based on the
Company's incremental borrowing rate, approximates $650,000. The rent payment
credits were considered in determining the future minimum lease payments.
NOTE 4--OTHER ASSETS
As described further in Note 1, other assets primarily represent payments to
CEI for:
<TABLE>
<S> <C>
Acquisition of rights under the DDA........................... $2,000,000
Certain predevelopment assets................................. 1,000,000
License Rights Option......................................... 1,999,000
</TABLE>
The acquisition of rights under the DDA and certain predevelopment assets
have been capitalized and are being amortized on a straight-line basis over
their estimated useful life of 40 years. The cost of the License Rights Option
has been capitalized and will be amortized when exercised or expensed when it
lapses.
NOTE 5--FUTURE LEASE RENTAL REVENUE
Under the terms of the lease with the operator, CEI would pay a monthly rent
of $200,000 for the first six months, $350,000 for months 7 through 12 and
$759,000 for months 13 through 60.
As of December 31, 1996, the future cash rents receivable from the
noncancellable lease with CEI in each of the next five years are as follows:
<TABLE>
<S> <C>
1997.......................................................... $ 4,418,000
1998.......................................................... 9,108,000
1999.......................................................... 9,108,000
2000.......................................................... 9,108,000
2001.......................................................... 7,590,000
-----------
$39,332,000
===========
</TABLE>
The lease agreement contains several prepayment provisions, which, if
exercised, could lower the amounts listed above.
F-46
<PAGE>
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--UNAUDITED SUBSEQUENT EVENT
On July 21, 1997, Crystal Park LLC filed an action for unlawful detainer
against CEI, due to CEI's failure to pay the June 1997 rent and to make
required additional rent payments. Crystal Park LLC contends that the Lease
terminated prior to the July 21, 1997 filing and that CEI is currently
occupying Crystal Park as a holdover tenant only, with no rights under the
Lease. CEI denies these contentions. On September 12, 1997, Crystal Park LLC
and CEI entered into an agreement which outlined occupancy payments to be made
by CEI in exchange for a continuance of the trial in the action for unlawful
detainer. CEI failed to make the final payment due under the agreement. On
October 24, 1997, Crystal Park LLC filed an action for unlawful detainer
against CEI, due to CEI's failure to pay the July 1997 rent.
On October 11, 1997, the California Attorney General revoked CEI's
conditional gaming registration, and the City revoked CEI's city gaming
license. Crystal Park LLC believes that CEI is attempting to have its
California conditional gaming registration and City Gaming license reinstated.
On October 27, 1997, Crystal Park LLC filed an action for unlawful detainer
against CEI due to the license revocation.
Crystal Park LLC is presently negotiating a new lease with California Casino
Management, Inc. ("CCM"), a California corporation, owned by Mr. Leo Chu,
which would take effect in the event that CEI is unable to continue as
operator/lessee of Crystal Park. Mr. Chu presently has a gaming registration
application pending with the California Attorney General to operate Crystal
Park. Mr. Chu currently holds a gaming registration to operate a small card
club in Northern California. Mr. Chu will also require a gaming license from
the City of Compton. It is expected that CCM would assume operations of
Crystal Park no later than December 1, 1997.
There can be no assurance that CCM will receive the necessary City and State
of California licenses to operate Crystal Park or that Crystal Park will be
able to locate a replacement operator/lessee who will be granted the required
licenses.
As of September 30, 1997, CEI owed Crystal Park LLC $600,000, of which
$200,000 is covered by a rent security deposit Crystal Park LLC received from
CEI in October 1996, and of which $350,000 was fully reserved and, therefore,
is not reflected in the operating results for the period ended September 30,
1997.
F-47
<PAGE>
BOOMTOWN, INC.
CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Boomtown, Inc.
We have audited the accompanying consolidated balance sheets of Boomtown,
Inc. (the "Company") as of September 30, 1995 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended September 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Boomtown,
Inc. at September 30, 1995 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1996, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Reno, Nevada
November 15, 1996, except
for the first paragraph of
Note 13 as to which the
date is November 18, 1996
F-48
<PAGE>
BOOMTOWN, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (including restricted cash of
approximately $2.4 million as of September 30, 1995)..... $ 23,101 $ 20,775
Accounts receivable, net.................................. 942 924
Income taxes receivable................................... 1,815 1,508
Inventories............................................... 1,725 2,715
Prepaid expenses.......................................... 7,333 7,025
Other current assets...................................... 1,762 765
-------- --------
Total current assets.................................... 36,678 33,712
Property, plant and equipment, net........................ 145,330 150,955
Goodwill, net............................................. 6,267 6,644
Investment in lease, net.................................. 0 13,077
Notes receivable from a related party..................... 8,683 27,294
Other assets.............................................. 9,030 7,516
-------- --------
$205,988 $239,198
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 3,812 $ 3,747
Accrued compensation...................................... 3,611 2,930
Other accrued liabilities................................. 8,823 9,740
Accrued interest payable.................................. 5,005 4,959
Income taxes payable...................................... 751 506
Current portion of long-term debt......................... 5,032 2,948
-------- --------
Total current liabilities............................... 27,034 24,830
Long-term debt (net of unamortized discount of
approximately $2.5 million and $2.7 million as of
September 30, 1996, and 1995, respectively).............. 103,729 106,547
Deferred income taxes..................................... 3,183 1,621
Deferred gain on sale leaseback........................... 112 213
Minority interest......................................... 1,542 741
Commitments and contingencies (see Note 7 and Note 13).... -- --
Stockholders' equity:
Common stock, $0.01 par value, 20,000,000 shares
authorized 9,266,193 and 9,233,074 issued and outstanding
as of September 30, 1996 and 1995, respectively, net of a
note receivable from a stockholder of $221,000........... 103,653 103,453
Retained earnings (deficit)............................... (33,265) 1,793
-------- --------
Total stockholders' equity.............................. 70,388 105,246
-------- --------
$205,988 $239,198
======== ========
</TABLE>
See accompanying notes.
F-49
<PAGE>
BOOMTOWN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
---------------------------- ------------------
1996 1995 1994 1997 1996
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES:
Gaming..................... $188,368 $189,306 $ 76,326 $144,353 $139,350
Family entertainment cen-
ter....................... 6,300 6,387 3,656 4,035 4,426
Food and beverage.......... 16,314 15,613 7,973 13,036 12,293
Hotel and recreational ve-
hicle park................ 7,289 6,584 3,082 5,666 5,479
Showroom................... 823 440 329 623 0
Truck stop, service station
and mini-mart............. 14,401 10,811 10,858 9,901 9,815
Other income............... 2,547 2,626 1,151 1,490 2,816
-------- -------- -------- -------- --------
236,042 231,767 103,375 179,104 174,179
-------- -------- -------- -------- --------
EXPENSES:
Gaming..................... 73,479 73,233 30,818 60,665 54,609
Gaming equipment leases.... 6,716 5,811 412 3,299 5,041
Family entertainment cen-
ter....................... 3,332 3,274 1,762 2,550 2,390
Food and beverage.......... 19,213 17,639 8,179 17,159 14,569
Hotel and recreational ve-
hicle park................ 3,002 3,168 1,706 2,545 2,211
Showroom................... 683 308 2,130 426 0
Truckstop, service station
and mini-mart............. 13,038 9,722 9,661 9,037 8,869
Marketing and promotion.... 22,439 19,593 7,524 19,154 16,556
General and administrative. 70,620 75,296 25,760 45,496 52,751
Pre-opening expenses....... 0 0 15,787 0 0
Discontinued
projects/merger costs..... 1,603 6,054 0 1,802 920
Loss on sale of Boomtown
Las Vegas................. 36,563 0 0 1,271 36,563
Depreciation and amortiza-
tion...................... 10,618 10,422 5,891 11,636 8,135
-------- -------- -------- -------- --------
261,306 224,520 109,630 175,040 202,614
-------- -------- -------- -------- --------
Income (loss) from
operations.................. (25,264) 7,247 (6,255) 4,064 (28,435)
Interest expense, net of
capitalized interest........ (13,838) (13,434) (5,632) (10,439) (10,362)
Interest and other income.... 4,193 3,081 2,624 2,355 2,346
Loss on marketable
securities.................. 0 0 (1,691) 0 0
Gain (loss) on sale of
assets...................... 0 0 0 (109) 240
-------- -------- -------- -------- --------
Loss before minority
interests , extraordinary
item and income taxes....... (34,909) (3,106) (10,954) (4,129) (36,211)
Minority interests........... 645 1,105 352 (96) 878
-------- -------- -------- -------- --------
Loss before extraordinary
item and income taxes....... (34,264) (2,001) (10,602) (4,225) (35,333)
Income tax expense (benefit). 794 876 (2,779) (2,103) (50)
-------- -------- -------- -------- --------
Loss before extraordinary
item........................ (35,058) (2,877) (7,823) (2,122) (35,283)
Extraordinary loss, net of
tax effect.................. 0 0 (229) (8,420) 0
-------- -------- -------- -------- --------
Net loss..................... $(35,058) $ (2,877) $ (8,052) $(10,542) $(35,283)
======== ======== ======== ======== ========
Per common share:
Income (loss) before
extraordinary item........ $ (3.79) $ (0.31) $ (0.90) $ (0.21) $ (3.82)
======== ======== ======== ======== ========
Extraordinary loss......... $ 0.00 $ 0.00 $ (0.03) $ (0.86) $ 0.00
======== ======== ======== ======== ========
Net loss................... $ (3.79) $ (0.31) $ (0.93) $ (1.07) $ (3.82)
======== ======== ======== ======== ========
Number of common shares...... 9,248 9,228 8,690 9,830 9,243
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-50
<PAGE>
BOOMTOWN, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK RETAINED TOTAL
------------------- EARNINGS STOCKHOLDERS'
SHARES(#) AMOUNT($) (DEFICIT) EQUITY
--------- --------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCES, SEPTEMBER 30, 1993....... 8,506 $ 88,313 $ 12,722 $101,035
Issuance of common stock
warrants........................ 0 2,995 0 2,995
Employer 401(k) contributions.... 4 75 0 75
Common stock issued for
additional interest in Blue
Diamond Hotel & Casino, Inc.
(Boomtown Las Vegas)............ 714 11,964 0 11,964
Net loss......................... 0 0 (8,052) (8,052)
----- -------- -------- --------
BALANCES, SEPTEMBER 30, 1994....... 9,224 103,347 4,670 108,017
Employer 401(k) contributions.... 9 105 0 105
Net loss......................... 0 0 (2,877) (2,877)
----- -------- -------- --------
BALANCES, SEPTEMBER 30, 1995....... 9,233 103,452 1,793 105,245
Employer 401(k) contributions.... 33 200 0 200
Net loss......................... 0 0 (35,058) (35,058)
----- -------- -------- --------
BALANCES, SEPTEMBER 30, 1996....... 9,266 $103,652 $(33,265) $ 70,387
===== ======== ======== ========
</TABLE>
See accompanying notes.
F-51
<PAGE>
BOOMTOWN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
----------------------------- ------------------
1996 1995 1994 1997 1996
-------- -------- --------- -------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss.................. $(35,058) $ (2,877) $ (8,052) $(10,542) $(35,283)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Lease expense recorded in
exchange for limited
partnership interest..... 1,500 2,000 389 0 1,500
Minority interests........ (645) (1,105) (351) (1,542) (878)
Gain (loss) on sale of
property, plant and
equipment................ 191 164 (57) 117 0
Depreciation and
amortization............. 10,618 10,422 5,891 11,638 8,135
Loss on sale of Boomtown
Las Vegas................ 36,563 0 0 1,271 36,563
Deferred income taxes..... 2,598 1,614 (4,145) 2,028 1,199
Changes in operating
assets and liabilities:
Accounts receivable, net. (256) 397 (1,011) 228 0
Income taxes receivable.. (440) (1,508) 0 1,561 (1,604)
Inventories.............. 154 301 (2,453) (28) 275
Prepaid expenses......... (208) 93 (4,971) 2,041 1,319
Accounts payable, net.... 149 (5,406) 7,950 (308) 377
Income taxes payable..... 330 24 213 (8,611) 1,096
Accrued compensation..... 681 1,320 631 1,189 (1,397)
Other accrued
liabilities............. (1,048) 4,189 4,467 2,966 57
Accrued interest payable. 0 0 0 11,938 0
Discount on bonds........ 0 0 0 2,448 0
Other changes, net....... (1,278) 312 1,318 (4,199) (1,163)
-------- -------- --------- -------- --------
Net cash provided by
(used in) operating
activities.............. 13,851 9,940 (181) 12,195 10,195
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of
property, plant and
equipment................ 215 7,953 17,464 0 406
Additions to property,
plant and equipment...... (5,679) (15,146) (114,729) (9,718) (7,168)
Payments for future
development costs........ 0 1,871 (1,775) 0 0
Loans to related parties.. 0 0 (7,794) 0 0
Payments for purchase of
land option at Biloxi
property................. 0 0 0 (200) 0
Change in construction
related payables......... (84) (1,472) 680 0 (16)
-------- -------- --------- -------- --------
Net cash used in
investing activities.... (5,548) (6,794) (106,154) (9,918) (6,779)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from short-term
borrowings............... 0 5,000 0 0 0
Repayment of short-term
borrowings............... 0 (5,000) 0 0 0
Prepaid property lease.... (2,480) 0 0 0 (2,480)
Proceeds from long-term
debt..................... 377 8,794 100,240 1,381 2,457
Payment of long-term debt. (3,874) (2,363) (107) (6,548) (2,581)
Distributions to minority
interests................ 0 (193) 0 0 0
-------- -------- --------- -------- --------
Net cash (used in)
provided by financing
activities.............. (5,977) 6,238 100,133 (5,167) (2,605)
-------- -------- --------- -------- --------
Increase (decrease) in cash
and cash equivalents....... 2,326 9,384 (6,202) (2,890) 812
Cash and cash equivalents at
the beginning of the
period..................... 20,775 11,391 17,593 23,101 20,775
-------- -------- --------- -------- --------
Cash and cash equivalents at
the end of the period...... $ 23,101 $ 20,775 $ 11,391 $ 20,211 $ 21,587
======== ======== ========= ======== ========
</TABLE>
See accompanying notes.
F-52
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION--The consolidated financial
statements include the accounts of Boomtown, Inc. (the "Company" or
"Boomtown"), a Delaware corporation and all of its controlled subsidiaries and
partnerships. The significant operating subsidiaries include gaming operations
in Reno, Las Vegas ("Blue Diamond"), Biloxi ("Mississippi Partnership") and
New Orleans ("Louisiana Partnership"). All significant intercompany accounts
and transactions have been eliminated.
INTERIM FINANCIAL INFORMATION--The interim financial information is
unaudited. In the opinion of management, all adjustments considered necessary
for a fair presentation of the consolidated results of operations and
consolidated cash flows for the nine months ended June 30, 1997 and 1996, have
been included. All adjustments to the interim financial information were of a
normal recurring nature and consistent with the adjustments made in the
consolidated financial statements for the fiscal years ended September 30,
1994, 1995, and 1996, respectfully. The Company's operations are seasonal and
thus operating results for the nine months ended June 30, 1997 should not be
considered indicative of the results that may be expected for the fiscal year
ending September 30, 1997.
BOOMTOWN'S MERGER WITH HOLLYWOOD PARK, INC. ("HOLLYWOOD PARK")--On April 23,
1996, Boomtown entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Hollywood Park relating to the strategic combination of
Hollywood Park and Boomtown. Pursuant to the Merger Agreement and subject to
the terms and conditions set forth therein, Boomtown would become a wholly
owned subsidiary of Hollywood Park (the "Merger"). Pursuant to the Merger
Agreement, at the effective date of the Merger (the "Effective Date"), each
issued and outstanding share of Boomtown Common Stock will be converted into
the right to receive 0.625 (the "Exchange Ratio") of a share of Hollywood Park
Common Stock. The Merger is intended to be structured as a tax-free
reorganization for income tax purposes and will be accounted for as a purchase
for financial reporting purposes.
USE OF ESTIMATES--The accompanying consolidated financial statements have
been prepared in conformity with generally accepted accounting principles
which require the Company's management to make estimates and assumptions that
affect the amounts reported therein. Actual results could vary from such
estimates.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents consist of cash on hand
and in banks, interest bearing deposits and highly liquid investments with
original maturities of three months or less. Cash equivalents are carried at
cost which approximates market. The Company paid interest of approximately
$107,000 (net of $5,895,000 capitalized), $13,111,000 (net of $701,000
capitalized), and $13,793,000 (none capitalized) and income taxes of
approximately $1,089,000, $746,000, and $688,500 during the years ended
September 30, 1994, 1995 and 1996, respectively. Long-term debt incurred for
the purchase of property and equipment during the years ended September 30,
1994, 1995 and 1996 amounted to approximately $6,296,000, $1,677,000 and
$2,763,000, respectively.
CONCENTRATIONS OF CREDIT RISK--The Company places its cash in short-term
investments which potentially subject the Company to concentrations of credit
risk. Such investments are made with financial institutions having a high
credit quality and are collateralized by securities issued by the United
States Government and other investment grade securities.
INVENTORIES--Inventories consist primarily of fuel and petroleum products,
food and beverage stock and hotel linens, uniforms and supplies and are stated
at the lower of cost (determined using the first-in, first-out method) or
market.
F-53
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DEPRECIATION AND AMORTIZATION--Depreciation and amortization of property,
plant and equipment is provided on the straight-line method over the lesser of
the estimated useful lives of the respective assets or the lease term. The
estimated useful lives for each class of property, plant and equipment are as
follows:
<TABLE>
<S> <C>
Buildings and improvements..................................... 20-35 years
Furniture and fixtures......................................... 7-10 years
Gaming equipment............................................... 5-10 years
Outdoor signs.................................................. 10-20 years
Other assets................................................... 3-15 years
</TABLE>
In connection with the Swap Agreement (see Note 4) Blue Diamond's property
and equipment were written down to net realizable value as of September 30,
1996.
INTANGIBLES--Goodwill relates to the acquisition of the Reno property in
1988 and the investment in lease (at September 30, 1995) which resulted when
the Company purchased the remaining 50% ownership interest in Blue Diamond
(Note 4). Also, as more fully discussed in Note 4, Blue Diamond had an option
to purchase the Resort during a period of six months beginning in May 1996,
and ending in November 1996. However, through execution of the "Swap
Agreement" as discussed in Note 4, Roski and Boomtown entered into an
agreement to terminate the "Property Lease", whereby Boomtown would
immediately cease operations of the Blue Diamond Resort simultaneous with the
closing of Boomtown's merger with Hollywood Park, Inc., as previously
discussed. As a result of the Swap Agreement, the investment in lease was
expensed in fiscal 1996. Additional goodwill was recorded subsequent to
September 30, 1996, related to the Company's purchase of the minority
partner's interest in Louisiana--I Gaming, L.P. in December 1996 (Note 13)
(unaudited). Goodwill is being amortized on the straight-line method over
twenty-five years. Accumulated amortization at September 30, 1995 and 1996 was
approximately $3,314,000 and $3,145,000, respectively.
The carrying value of intangibles is periodically evaluated by management
and if facts and circumstances (including undiscounted cash flows) indicate an
impairment, the amount is reduced and an impairment loss is recorded.
GAMING REVENUES AND PROMOTIONAL ALLOWANCES--In accordance with industry
practice, the Company recognizes as gaming revenues the net win from gaming
activities, which is the difference between gaming wins and losses. Revenues
in the accompanying consolidated statements of operations exclude the retail
value of rooms, food and beverage and other promotional allowances provided to
customers without charge.
The estimated costs of providing such promotional allowances have been
classified as gaming operating expenses through interdepartmental allocations
as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
----------------------
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
Food and beverage................................... $5,433 $11,638 $12,746
Hotel............................................... 172 400 299
Other............................................... 43 167 210
------ ------- -------
Total............................................... $5,648 $12,205 $13,255
====== ======= =======
</TABLE>
STOCK BASED COMPENSATION--The Company accounts for its stock option plans in
accordance with the provisions of the Accounting Principles Board's Opinion
No. 25 (APB 25), "Accounting for Stock Issued to Employees". In 1995, the
Financial Accounting Standards Board released Statement of Financial
Accounting Standard No. 123 (SFAS 123), "Accounting for Stock Based
Compensation". SFAS 123 provides an alternative to APB 25 and is effective for
fiscal years beginning after December 15, 1995. The Company expects to
continue
F-54
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
to account for its stock plans in accordance with APB 25. Accordingly, SFAS
123 is not expected to have a material impact on the Company's consolidated
financial position or results of operations.
ADVERTISING COSTS--Advertising costs are expensed as incurred. Advertising
expenses for the years ended September 30, 1994, 1995 and 1996 totaled
approximately $2.6 million, $6.7 million and $6.3 million, respectively.
FUTURE DEVELOPMENT COSTS--The Company capitalizes costs associated with new
gaming projects until 1) the project is no longer considered viable and the
costs are expensed or 2) the likelihood of the project is relatively certain
and the costs are reclassified to pre-opening and expensed when operations
commence. During the year ended September 30, 1995, the Company expensed
approximately $6.1 million of future development costs. During fiscal 1996,
future development costs were approximately $1.6 million and included costs
associated with its pending merger with Hollywood Park, Inc. and its proposed
gaming project in the state of Indiana. These amounts are classified as
discontinued projects and future development costs in the accompanying
statements of operations.
PRE-OPENING EXPENSES--Pre-opening expenses were associated with the
acquisition, development and opening of the Company's new casino resorts.
These amounts were expensed in fiscal 1994, when the casinos commenced
operations and include items that were capitalized as incurred prior to
opening and items that are directly related to the opening of the property and
are non-recurring in nature.
INCOME TAXES--The Company accounts for income taxes under Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes", which requires the Company to record deferred income taxes for
temporary differences that are reported in different years for financial
reporting and for income tax purposes and classifies deferred tax liabilities
and assets into current and non-current amounts based on the classification of
the related assets and liabilities.
EXTRAORDINARY LOSS (UNAUDITED)--Boomtown recorded an extraordinary loss of
approximately $14.2 million (approximately $8.4 million net of tax effect) in
the period ended June 30, 1997, related to the tender and consent costs
(approximately $9.0 million) and the write-off of deferred financing costs
(approximately $5.2 million) associated with the early extinguishment of the
First Mortgage Notes.
MINORITY INTEREST--Minority interest represents the minority limited
partners' proportionate share of the equity and operations of the consolidated
partnerships.
NET LOSS PER SHARE--Net loss per share is computed using the weighted
average number of shares of Common Stock outstanding and common equivalent
shares from stock options and warrants are excluded from the computation
because their effect is antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact of Statement 128
on the calculation of primary and fully diluted earnings per share is not
expected to be material.
Fully diluted loss per share amounts are the same as primary per share
amounts for the periods presented.
RECLASSIFICATIONS--Certain reclassifications have been made to the 1994,
1995 and 1996 consolidated financial statements to conform to the 1997
presentation.
F-55
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. ISSUANCE OF COMMON STOCK AND WARRANTS
During October 1992, the Company sold 2,901,786 shares of common stock in an
initial public offering which generated net proceeds of approximately $26
million after deducting underwriting discounts and expenses. In addition, a
stockholder of the Company (the "Selling Stockholder") sold 835,714 shares of
common stock in the public offering and received proceeds to repay a
subordinated term note and $2 million to redeem all of its outstanding
preferred stock held by the Selling Stockholder.
In connection with the Company's initial public offering, the Company sold
to the underwriters for an aggregate of $25,000, warrants to purchase 162,500
shares of the Company's common stock at $12 per share. The warrants expire
October 1997 and 50% became exercisable in October 1993 and the remaining 50%
became exercisable in October 1994. At any time after October 1994 and prior
to the expiration of the warrants, the holders have a one time right to demand
a registration of the underlying shares, with expenses of such registration to
be paid by the Company.
During June 1993, the Company sold 2,223,380 shares of common stock in a
public offering which generated net proceeds of approximately $57.2 million
after deducting underwriting discounts and expenses. The proceeds were used to
fund a portion of the construction costs of the new gaming facilities and for
general corporate purposes. In addition, a stockholder of the Company sold
1,686,620 shares of common stock in the public offering and received proceeds,
net of underwriting discounts, of $43.9 million.
During November 1993, in connection with the placement of the First Mortgage
Notes (Note 5), the Company issued 472,500 warrants to purchase Common Stock
at $21.19 per share. The warrants became exercisable on December 10, 1993, and
expire on November 1, 1998.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1995 1996
-------- --------
<S> <C> <C>
Buildings and improvements.............................. $102,979 $105,097
Equipment............................................... 24,834 29,834
Boat.................................................... 18,925 18,925
Land and land improvements.............................. 17,397 17,690
Furniture and fixtures.................................. 13,166 13,428
Construction-in-progress................................ 1,631 1,370
-------- --------
178,932 186,344
Less accumulated depreciation and amortization.......... 27,977 35,949
Write-down of assets in connection with the Swap
Agreement (see Note 4)................................. 0 5,065
-------- --------
$150,955 $145,330
======== ========
</TABLE>
The construction-in-progress amounts at September 30, 1995 and 1996, relate
primarily to the costs associated with the on-going construction of the land-
based facility in Harvey, Louisiana.
Amortization of leased assets is included in depreciation and amortization
expense.
F-56
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. RELATED PARTY TRANSACTIONS
STOCKHOLDER NOTE--The note receivable from a stockholder was issued in
connection with the stockholder's purchase of the Company's common stock and
therefore has been presented as a reduction of stockholders' equity in the
accompanying consolidated balance sheets. This note, as amended, bears
interest at 6% with interest and principal payable in four annual installments
commencing April 7, 1998.
IVAC NOTE--Prior to the commencement of operations at Boomtown Las Vegas,
the Company loaned IVAC, a California general partnership controlled by Edward
P. Roski ("Roski") and a member of the Company's Board of Directors (the
"Stockholder"), approximately $27.3 million (the "IVAC Notes") for purposes of
constructing the Blue Diamond Resort (the "Resort"). One of the notes has a
principal balance of $7.5 million and the other note, a variable principal
note, has a principal balance of $19.8 million at September 30, 1995 and 1996,
and both notes bear interest at 10%. These notes were written down to their
net realizable value under the Swap Agreement of approximately $8.5 million at
September 30, 1996. The IVAC Notes are secured by separate deeds of trust on
the resort, which deeds of trust are subordinate to separate deeds of trust
securing Blue Diamond and the Company's obligations in connection with the
Indenture. As defined in the terms of the IVAC Notes, interest became payable
upon commencement of Blue Diamond's Las Vegas operations. Interest income
related to the IVAC Notes amounted to approximately $2,729,000 during the
years ended September 30, 1995 and 1996, respectively and offsets a portion of
the rent discussed in the following paragraph. Interest receivable from IVAC
amounted to approximately $227,000 at September 30, 1995 and 1996.
Prior to commencing gaming operations at the Las Vegas site on May 20, 1994,
the Company owned 50% of Blue Diamond and the Stockholder owned the remaining
50% of Blue Diamond. After commencement of operations of Blue Diamond, the
Company exercised its option to purchase all of the stockholder's ownership
interest in Blue Diamond for 714,286 shares of the Company's common stock.
Blue Diamond is leasing the resort from IVAC for an initial term of five years
with certain renewal options in certain very limited circumstances. Blue
Diamond had an option to purchase the resort from IVAC exercisable during a
period of six months beginning in May 1996, in exchange for, at IVAC's option,
either 1) shares of the Company's common stock (which would be at a minimum of
2.5 million shares) or 2) cash (which amount would be a minimum of $33
million). At the time of exercise, the investment in lease would be
capitalized as a part of the resort purchase price. In addition, the Company's
loans to IVAC including accrued interest (preceding paragraph) would be
capitalized as part of the resort purchase price.
TERMINATION OF LAS VEGAS PROPERTY LEASE--On August 12, 1996, Boomtown, Blue
Diamond, Hollywood Park, Roski, IVAC and Majestic Realty entered into the Blue
Diamond Swap Agreement (the "Swap Agreement") pursuant to which the parties
agreed that, upon consummation of the Merger, and contingent upon the closing
of the Merger, Boomtown and Blue Diamond (or any transferee thereof as set
forth in the Swap Agreement) would exchange their entire interest in the Blue
Diamond Resort (the "Resort") (including the IVAC Loans), and effectively
transfer all interest in the Resort to Roski, in exchange for a $5.0 million
unsecured promissory note (the "First Note") and will have an unsecured
promissory note (the "Second Note") equal in amount to the note to be issued
by Hollywood Park to Roski for the purchase of his Boomtown Common Stock
referred to in a following paragraph (valued at approximately $3.5 million)
and assumption by Roski, IVAC or an affiliate of certain liabilities (the
"Swap"). The First Note has an interest rate equal to the prime rate plus one
and one half percent (1.5%) per annum and will provide for annual principal
payments of one million dollars ($1,000,000) plus accrued interest and
maturing on the date that is five years after the Exchange Date (as such term
is defined in the Swap Agreement). The Second Note will have an interest rate
equal to the prime rate plus one-half percent (.5%) per annum and will provide
for a payment of all principal plus accrued interest on the date that is three
(3) years after the Exchange Date. Consummation of the Swap is subject to
obtaining all necessary Governmental approvals, including gaming approval.
F-57
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In exchange for its interest in the Resort, the Company will receive notes
from Roski payable to Boomtown with an estimated value totaling $8.5 million,
an estimated cash payment of $2.1 million, release from lease obligations
under the Resort lease, Roski's assumption of certain liabilities and note
obligations totaling approximately $3.8 million and the ongoing expenses of
the Resort. Additionally, Roski will assume all operating leases including any
residual balances due under such leases. The Swap Agreement requires approvals
from applicable gaming authorities and Boomtown intends to seek the consent of
the holders of a majority of the outstanding principal amount on the Notes
where defined. The Swap would be effected immediately following the Merger
which is expected to be completed by the end of the first quarter of calendar
1997.
In accordance with the terms of the Swap Agreement, with certain exceptions
set forth in the Swap Agreement, the Company will continue to operate the
property until consummation of the Merger. Boomtown and Blue Diamond will be
responsible for the liabilities of the Resort prior to the Swap and Roski will
be responsible for the liabilities of the Resort subsequent to the Swap. In
addition, Roski will resign from Boomtown's Board of Directors, effective as
of the Exchange Date. Subject to certain conditions set forth in the Swap
Agreement, the Swap may be effectuated through any structure agreed upon by
Boomtown and Hollywood Park. If the Swap were not consummated for any reason,
Boomtown would continue to operate the property through the expiration of the
lease term in July 1999, and the IVAC Notes would be required to be repaid to
Boomtown at such time.
Additionally, on August 12, 1996, Hollywood Park and Roski further entered
into a Stock Purchase Agreement (the "Stock Purchase Agreement") pursuant to
which Hollywood Park will, concurrently with the Swap, purchase the stock in
Boomtown held by Roski ("Roski Stock") for its market price on the date of the
Swap (estimated to be $3.5 million). The purchase price will be paid through
the issuance of an unsecured promissory note having an interest rate equal to
the prime rate plus one percent (1%) per annum and providing for four equal
annual principal payments plus accrued interest and maturing on the date that
is four years after the Exchange Date. The Stock Purchase Agreement may also
be terminated by Hollywood Park in the event that Boomtown and Hollywood Park,
in accordance with the provisions set forth in the Swap Agreement, elect to
utilize a structure to effect the Swap which would require Roski to retain the
Roski Stock.
The Company took a non-cash, pre-tax charge of $36.6 million related to the
Swap Agreement. The charge is comprised of the write-off of the Company's
investment in lease of $12.7 million, an $18.9 million write-down of the
related party notes receivable to $8.5 million and the write-down of the
remaining net assets less the liabilities assumed by Roski of $5.0 million. In
the event that the actual amount of the Second Note is less than $3.5 million
the Company will incur an additional loss on the sale of Blue Diamond.
The Company owns an 85% interest in the Mississippi Partnership. As a result
of executing a lease for the property upon which the Mississippi Partnership's
Biloxi, Mississippi gaming facility is located (Note 7), a 15% limited
partnership interest was transferred to an individual (the "Lessor") in lieu
of base rent payments for the first two years. After three years of operation,
either the Company or the Lessor may exercise an option to convert the
Lessor's ownership interest into the Company's common stock or cash, at the
option of the Lessor, at an amount calculated per the agreement which is based
upon a multiple of earnings.
The Company owned a 92.5% interest in the Louisiana Partnership. The
remaining 7.5% limited partnership interest was owned by the Lessor identified
in the preceding paragraph (the "Partner").
Quarterly distributions to all partners will be required in both the
Mississippi Partnership and the Louisiana Partnership based upon the pro-rata
share of cash flows generated, as defined. Subsequent to year-end Boomtown
entered into an agreement to purchase the Partner's 7.5% partnership interest
(see Note 13).
F-58
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1995 1996
-------- --------
<S> <C> <C>
11.5% first mortgage notes (net of unamortized
discount of approximately $2.7 million and $2.4
million as of September 30, 1995 and 1996,
respectively)........................................ $100,842 $101,052
13% note payable...................................... 4,336 3,227
Capital lease obligations............................. 1,126 2,734
11.5% notes payable................................... 2,431 1,300
12.25% note payable................................... 760 448
-------- --------
109,495 108,761
Less amounts due within one year...................... 2,948 5,032
-------- --------
$106,547 $103,729
======== ========
</TABLE>
On November 24, 1993, the Company completed the private placement of $103.5
million of 11.5% First Mortgage Notes Due November 2003 (the "Notes").
Interest on the Notes is payable semi-annually. The Notes will be redeemable
at the option of the Company, in whole or in part, on or after November 1,
1998, at a premium to the face amount ($103.5 million) which decreases on each
subsequent anniversary date, plus accrued interest to the date of redemption.
The Notes are secured by substantially all of the Company's assets.
The Indenture governing the Notes places certain business, financial and
operating restrictions on the Company and its subsidiaries including, among
other things, the incurrence of additional indebtedness, issuance of preferred
equity interests and entering into operating leases; limitations on dividends,
repurchases of capital stock of the Company and redemptions of subordinated
debt; limitations on amending existing partnership and facility construction
agreements; and limitations on the use of proceeds from the issuance of the
Notes.
The 13%, 11.5% and 12.25% notes payable are secured by property, plant and
equipment with net book values of approximately $17,296,000, $2,922,000 and
$718,000, at September 30, 1996. The notes mature in January 1999, September
1997, and January 1998, respectively.
The capital lease obligations are secured by equipment with a net book value
of $3,632,000 at September 30, 1996. The capital lease obligations mature
between September 1997 and January 1998.
Principal maturates of long-term debt by fiscal year as of September 30,
1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997.............................................................. $ 5,032
1998.............................................................. 2,084
1999.............................................................. 593
2000.............................................................. 0
2001.............................................................. 0
Thereafter........................................................ 103,500
--------
$111,209
========
</TABLE>
F-59
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES
The (benefit) provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
-----------------------
1994 1995 1996
------- ------- -----
<S> <C> <C> <C>
Current:
Federal........................................ $ 947 $(1,805) $(669)
State.......................................... 195 768 870
------- ------- -----
1,142 (1,037) 201
Deferred (primarily federal)................... (3,921) 1,913 593
------- ------- -----
$(2,779) $ 876 $ 794
======= ======= =====
</TABLE>
The difference between the Company's (benefit) provision for income taxes as
presented in the accompanying consolidated statements of operations and a
provision (benefit) for income taxes computed at the federal statutory rate is
comprised of the items shown in the following table as a percentage of pre-tax
earnings (loss):
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
---------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Income tax (benefit) provision at the statutory
rate............................................ (34.0)% (34.0)% (34.0)%
Goodwill amortization............................ 1.6 8.3 0.8
Meals and entertainment.......................... 1.3 17.5 0.4
Loss on investments.............................. 5.4 0.0 0.0
Loss on sale of Blue Diamond..................... 0.0 0.0 31.7
State income taxes, net of federal benefit....... (1.4) 41.0 1.8
Merger costs..................................... 0.0 0.0 1.3
Operating loss benefit limitation................ 0.0 8.0 0.0
Others, net...................................... 0.9 3.0 0.3
----- ----- -----
(26.2)% 43.8 % 2.3 %
===== ===== =====
</TABLE>
F-60
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The significant components of the deferred income tax assets and liabilities
included in the accompanying consolidated balance sheets are as follows (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1995 1996
------- --------
<S> <C> <C>
Deferred income tax assets:
Pre-opening costs, net of amortization............... $ 3,768 $ 2,607
Compensation accrued for stock appreciation rights
and stock option plans.............................. 1,062 1,062
Loss on sale of Blue Diamond......................... 0 1,722
Alternative minimum tax credit carryforwards......... 887 1,071
Capital loss carryforwards........................... 575 6,911
Operating loss carryforwards......................... 160 160
Merger expenses...................................... 0 402
Accrued expenses..................................... 1,410 1,829
Less valuation allowance--loss carryforwards and
merger expenses..................................... (735) (7,473)
------- --------
Total deferred income tax assets................... 7,127 8,291
------- --------
Deferred income tax liabilities:
Excess of book basis over tax basis of assets
acquired............................................ (3,232) (3,187)
Depreciation......................................... (3,692) (5,466)
Prepaid expenses..................................... (1,322) (1,101)
State deferreds...................................... (0) (249)
------- --------
Total deferred income tax liabilities.............. (8,246) (10,003)
------- --------
Net deferred income tax liability.................... $(1,119) $ (1,712)
======= ========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES--The Company and its subsidiaries lease facilities,
billboards and certain equipment under noncancelable operating lease
arrangements with terms in excess of one year. The aggregate future minimum
annual rental commitments as of September 30, 1996 under operating leases
having noncancelable lease terms in excess of one year are as follows (in
thousands):
<TABLE>
<CAPTION>
RELATED PARTY
(NOTE 4) OTHER
------------- -------
<S> <C> <C>
1997................................................. $ 5,429 $10,257
1998................................................. 5,429 3,437
1999................................................. 3,456 1,568
2000................................................. 0 451
2001................................................. 0 340
Thereafter........................................... 0 871
------- -------
$14,314 $16,924
======= =======
</TABLE>
TERMINATION OF LAS VEGAS PROPERTY LEASE--As more fully discussed in Note 4
the Company entered into the Swap Agreement pursuant to which Boomtown will be
released from its obligations under the Resort Lease.
BARGE LEASE--The Mississippi Partnership sold the barge in Biloxi,
Mississippi and the building upon the barge housing the casino to HFS Gaming
Corporation ("HFS"), a Delaware corporation. $2.4 million of the $11 million
sales price was held by the Company to be used for the development and
construction at the
F-61
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Mississippi casino site. Simultaneously with the sale, the Mississippi
Partnership leased the barge and building for 25 years and was granted the
option to purchase the leased asset for fair market value at the end of the
lease or upon the occurrence of certain events as defined in the lease
agreement. In the event of default by the Mississippi Partnership, HFS may
terminate the lease or require the Mississippi Partnership to repurchase the
assets for fair market value. HFS agreed to provide certain marketing services
for the Mississippi Partnership. The Mississippi Partnership will pay HFS
aggregate rent under the lease and payments for services under the marketing
agreement equal to approximately 20% of the annual adjusted earnings before
interest, taxes, depreciation and amortization, as defined, for the
Partnership (including the proposed hotel). As the lease payments represent
contingent rentals, they are excluded from the future minimum annual rental
commitments schedule above. HFS subsequently transferred its contractual
rights to National Gaming Corporation, Inc. ("NGC").
In November 1995, Boomtown executed an agreement with NGC whereby the $2.4
million was returned to NGC in return for reduction of the EBITDA
distributions from 20% to 16%. The $2.4 million is included on the
accompanying balance sheet as a component of other assets and it is being
amortized on the straight-line method over the remaining lease term.
Additionally, the Company secured an option to buy the barge from NGC as well
as to buy out the EBITDA participation at a cost approximating the original
investment made by HFS less the $2.4 million that was paid. The option
terminates on March 31, 1997, but is renewable for an additional two years for
$100,000 a year. Upon exercise of the barge and building purchase option, the
remaining unamortized balance of the $2.4 million was capitalized as a
component of the purchase price.
TIDELANDS LEASE--The Mississippi Partnership leases submerged tidelands at
the casino site from the State of Mississippi. Annual rent is $525,000 and the
term of the lease is ten years with a five-year option to renew. Rent in the
second five-year period of the lease will be determined in accordance with
Mississippi law. Annual rent in the five-year renewal term will be based on an
appraisal obtained by the State of Mississippi.
LAND LEASE WITH A RELATED PARTY--The Company signed an agreement to lease
property through the Mississippi Partnership intended for the development,
construction and operation of the Mississippi gaming facility. The Mississippi
Partnership invested $2 million as a long-term deposit on the lease and
committed to annual rentals of base rent (estimated at $2 million) and
percentage rent (5% of adjusted gaming win over $25 million), plus $200,000
per year during the first ten years of the lease. The Mississippi Partnership
exchanged a 15% interest with the lessor in lieu of base rent payments for the
first two years. Rent expense is being charged to operations for the two year
period and the lessor's limited partner capital account is being credited. The
lease term is 99 years and is cancelable upon one year's notice.
RENTAL EXPENSE--Included in the accompanying consolidated statements of
operations, rental expense was approximately, $3,879,000 (including $389,000
in contingent rentals), $16,102,000 (including $511,000 in contingent rentals)
and $19,243,000 (including $729,000 in contingent rentals) during the years
ended September 30, 1994, 1995 and 1996, respectively. During the years ended
September 30, 1994, 1995, and 1996, $2,418,000, $8,140,000 and $8,363,000,
respectively, of rental expense was with related parties.
SELF-INSURANCE--The Company maintains a plan of partial self-insurance for
medical and dental coverage for substantially all full-time employees and
their dependents. Claims aggregating between $50,000 and $75,000 or more per
individual during the policy year are fully covered by insurance. Management
has established reserves considered adequate to cover estimated future
payments on claims incurred through September 30, 1996.
GAMING LICENSE REQUIREMENTS--In October 1994, the Mississippi Gaming
Commission adopted a regulation that requires, as a condition of licensure or
license renewal, for a gaming establishment's plan to include various
expenditures including parking facilities and infrastructure facilities
amounting to at least 25% of the casino cost. Although the Company believes
they have satisfied this requirement, there can be no assurance the
Mississippi Gaming Commission will not require further development on the
casino site including hotel rooms and additional
F-62
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
parking facilities. Additionally, there can be no assurance that the
Partnership will be successful in completing such a project or that the
Partnership would be able to obtain a waiver if the Partnership decides not to
build.
8. FUNFLIGHT PROGRAM
The Company operates a gaming junket program under the name Boomtown
FunFlights. This program contracts with agents in various cities to book
passengers on a chartered airplane for either overnight or "turn-around"
flights to Boomtown Reno. The agents are paid a commission for each passenger
booked. The passenger pays a nominal "boarding fee" which is recorded as
revenue upon the passenger's arrival at the casino. The Company pays all costs
associated with this program.
9. STOCK OPTION PLANS
STOCK OPTION PLAN--On March 8, 1991, the Company's Board of Directors
adopted a non-qualified stock option plan for officers and key employees (the
"Option Plan"). The Option Plan authorized the grant of up to 198,744 shares
of the Company's common stock. All available shares under the Option Plan were
granted retroactive to October 1, 1989 to one individual at $.66 per share
subject to certain contingent exercisability provisions. This option was
amended in 1992, to provide full vesting and exercisability as of June 30,
1992, and it expires in March 2001.
The Option Plan was amended and restated on September 10, 1992 to provide
for the granting to employees of the Company of incentive stock options and
for the granting of non-statutory stock options and stock purchase rights to
employees and consultants of the Company. The options granted will be for
various terms not exceeding ten years and will vest over periods determined at
the date of grant. The exercise price for incentive stock options granted will
be not less than the fair market value of the common stock at the date of
grant. At September 30, 1996, the total number of shares reserved for issuance
under the Option Plan is 1,892,066 of which options to purchase 1,726,742
shares have been granted at exercise prices ranging from $.66 to $6.25 per
share. At September 30, 1996, options to purchase 586,992 shares of the
Company's common stock at exercise prices ranging from $.66 to $6.25 per share
were exercisable.
During the year ended September 30, 1996 the Company's Board of Directors
repriced certain non-executive options of the Option Plan totaling 165,000
shares to $9.00 from prices ranging from $11.50 to $20.75. Subsequently a
repricing occurred concurrent with the Merger Agreement (April 23, 1996)
whereby virtually all options outstanding, under the Option Plan as of such
date were repriced to $6.25.
1992 DIRECTORS' OPTION PLAN--On September 10, 1992, the Company's Board of
Directors adopted a directors' option plan (the "Directors' Plan") whereby
each non-employee director is granted an option to purchase 3,900 shares of
the Company's' common stock upon joining the Board and an option to purchase
1,300 shares of common stock on each anniversary date thereafter during their
tenure as a director. The options granted have a ten-year term and vest
ratably over a three-year period. The exercise price is the fair market value
of the common stock on the date of grant. Options granted under the Directors'
Plan may be exercised only (1) while the optionee director is serving as a
director on the Company's Board, (2) within twelve months after termination by
death or disability, or (3) within three months after termination as a
director for any other reason. A total of 45,000 share have been granted under
this plan at original exercise prices ranging from $4.88 to $26.50 per share.
At September 30, 1996, options to purchase 19,064 shares of the Company's
common stock at prices ranging from $12.00 to $26.50 were exercisable under
this plan.
1993 EMPLOYEE STOCK BONUS PLAN--On February 25, 1993, the Company's Board of
Directors adopted a Stock Bonus Plan (the "Bonus Plan") which covers certain
employees of the Company. The Company has authorized and reserved 5,000 shares
of common stock for granting under the Bonus Plan. The shares granted under
the plan vest ratably over a four-year period. At September 30, 1996, the
Company has not granted any shares under the Bonus Plan.
F-63
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. 401(k) PLAN
On January 1, 1993, the Company's Board of Directors approved a voluntary
savings and investment plan (the "401(k) Plan"). The 401(k) Plan is available
to all eligible employees of the Company and subsidiaries. Under the 401(k)
Plan the Company will match 50% of employees' contributions up to a maximum of
5% of the employees' wages. The Company's 401(k) Plan expense was
approximately, $233,000, $384,000 and $623,000 during the years ended
September 1994, 1995, and 1996, respectively.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported on the accompanying
consolidate balance sheets for cash and cash equivalents approximates their
fair value.
NOTES RECEIVABLE: The fair value of the Company's notes receivable at
September 30, 1995 was estimated by discounting the future cash flows using
interest rates determined by management to reflect the credit risk and
remaining maturities of the related notes receivable. The September 30, 1996
value was based on the negotiated price with Roski as discussed in Note 4.
11.5% FIRST MORTGAGE NOTES: The fair value of the Company's other long-term
notes are estimated based upon market quotes of notes with similar
characteristics and remaining maturities.
OTHER LONG-TERM DEBT: The fair values of the Company's notes payable and
capital lease obligations are estimated using discounted cash flow analyses,
based on the Company's current incremental borrowing rates for similar types
of borrowing instruments.
The carrying amounts and fair values of the Company's financial instruments
at September 30, 1995 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
-------------------
CARRYING
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
Cash and cash equivalents.............................. $ 20,775 $ 20,775
Notes receivable....................................... 27,294 26,652
11.5% first mortgage notes............................. 100,842 95,738
Other long-term debt................................... 8,653 8,390
<CAPTION>
SEPTEMBER 30, 1996
-------------------
CARRYING
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
Cash and cash equivalents.............................. $ 23,101 $ 23,101
Notes receivable....................................... 8,683 7,947
11.5% first mortgage notes............................. 101,052 106,605
Other long-term debt................................... 7,709 7,606
</TABLE>
F-64
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION (UNAUDITED)
In connection with the Notes issued in November 1993 (Note 5), the
subsidiaries of the Company (guarantor entities) have guaranteed the Notes.
Summarized consolidating financial information follows:
SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION
AS OF AND FOR THE YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR ENTITIES
-----------------------------------
BLUE
DIAMOND BOOMTOWN
BOOMTOWN, HOTEL & HOTEL & NON-WHOLLY ELIMINATION'S & BOOMTOWN
INC. CASINO, CASINO, OWNED RECLASSIFICATIONS INC.
(PARENT CO.) INC.(1) INC.(2) SUBSIDIARIES(3) DR(CR)(4) (CONSOLIDATED)
------------ -------- -------- --------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Current assets.......... $ 24,346 $ 4,756 $ 6,779 $ 11,170 $ (10,373) $ 36,678
Advances to affiliates.. 112,391 -- -- -- (112,391) --
Non-current assets...... 44,360 3,080 59,576 96,087 (33,793) 169,310
-------- -------- ------- -------- --------- --------
$181,097 $ 7,836 $66,355 $107,257 $(156,557) $205,988
======== ======== ======= ======== ========= ========
Current liabilities..... $ 6,652 $ 11,054 $ 4,523 $ 15,178 $ (10,373) $ 27,034
Non-current liabilities. 106,159 -- 209 2,460 (261) 108,567
Advances from parent.... -- 33,785 11,479 67,127 (112,391) --
Equity.................. 68,286 (37,003) 50,144 22,492 (33,532) 70,387
-------- -------- ------- -------- --------- --------
$181,097 $ 7,836 $66,355 $107,257 $(156,557) $205,988
======== ======== ======= ======== ========= ========
Revenues................ $ -- $ 44,721 $67,618 $123,703 $ -- $236,042
Income (loss) from
operations............. $(21,455) $(26,007) $ 3,602 $ 18,596 $ -- $(25,264)
Equity in earnings
(loss) of consolidated
subsidiaries and
partnerships........... $(12,559) $ -- $ -- $ -- $ 12,559 $ --
Net loss................ $(22,499) $(24,194) $ 1,496 $ 9,494 $ 645 $(35,058)
Net cash provided by
(used in) operating
activities............. $ 1,503 $ (3,606) $ (308) $ 13,781 $ -- $ 11,370
Net cash used in
investing activities... (544) (1,928) (3,075) -- (5,547)
Net cash provided by
(used in) financing
activities............. (1,857) 4,083 4,564 (10,287) -- (3,497)
-------- -------- ------- -------- --------- --------
Net increase (decrease)
in cash and cash
equivalents............ (354) (67) 2,328 419 -- 2,326
Cash and cash
equivalents:
Beginning of year..... 10,811 2,630 1,334 6,000 -- 20,775
-------- -------- ------- -------- --------- --------
End of year........... $ 10,457 $ 2,563 $ 3,662 $ 6,419 $ -- $ 23,101
======== ======== ======= ======== ========= ========
</TABLE>
- --------
Notes to Summarized Consolidating Financial Information:
(1) Blue Diamond Hotel & Casino, Inc. is a wholly-owned subsidiary that is
consolidated in the accompanying consolidated financial statements.
F-65
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) Boomtown Hotel and Casino, Inc. is a wholly-owned subsidiary that is
consolidated in the accompanying consolidated financial statements. These
amounts do not include the operations of the Company's wholly-owned
subsidiaries which are general partners of the Company's non-wholly owned
subsidiaries. The operations of such wholly-owned subsidiaries are
insignificant and have been included in the column "Non-wholly owned
Subsidiaries".
(3) "Non-wholly Owned Subsidiaries" include Boomtown, Inc.'s wholly-owned
subsidiaries in Mississippi and Louisiana and 100% of the assets,
liabilities and equity of the limited partnerships formed to operate the
gaming facilities in those states.
(4) Eliminations consist of Boomtown, Inc.'s (a) investment in the guarantor
entities, (b) advances to the guarantor and non-guarantor entities and
subsidiaries and (c) equity in earnings (loss) of consolidated
subsidiaries and partnerships. The advances are subordinated in right of
payment to the guarantees of the Notes.
F-66
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
GUARANTOR ENTITIES
---------------------------------------------------------
BOOMTOWN, BLUE DIAMOND BOOMTOWN LOUISIANA-I MISSISSIPPI-I ELIMINATION'S & BOOMTOWN,
INC. HOTEL & HOTEL & GAMING, GAMING, RECLASSIFICATIONS INC.
(PARENT CO.) CASINO, INC.(1) CASINO, INC.(2) L.P.(3) L.P.(4) DR(CR)(5) (CONSOLIDATED)
------------ --------------- --------------- ----------- ------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets... $ 22,294 $ 5,239 $ 6,592 $ 5,422 $ 5,535 $ (14,850) $ 30,232
Advances to
affiliates...... 111,239 0 0 0 0 (111,239) 0
Non-current
assets.......... 46,408 1,996 60,093 61,217 41,809 (37,348) 174,175
-------- -------- ------- ------- ------- --------- --------
$179,941 $ 7,235 $66,685 $66,639 $47,344 $(163,437) $204,407
======== ======== ======= ======= ======= ========= ========
Current
liabilities..... $ 3,522 $ 14,338 $ 6,197 $ 8,674 $ 9,647 $ (14,850) $ 27,528
Non-current
liabilities..... 115,630 0 109 1,085 23 0 116,847
Advances from
parent.......... 0 35,947 12,566 20,261 42,465 (111,239) 0
Equity........... 60,789 (43,050) 47,813 36,619 (4,791) (37,348) 60,032
-------- -------- ------- ------- ------- --------- --------
$179,941 $ 7,235 $66,685 $66,639 $47,344 $(163,437) $204,407
======== ======== ======= ======= ======= ========= ========
Revenues......... $ 0 $ 35,275 $45,824 $56,349 $41,656 $ 0 $179,104
Income (loss)
from operations. $ (3,290) $ (5,740) $(2,509) $12,732 $ 2,871 $ 0 $ 4,064
Equity in
earnings (loss)
of consolidated
subsidiaries.... $ 809 $ (809) $ 0
Net income
(loss).......... $(11,351) $ (6,046) (2,330) $10,403 $(1,122) $ (96) $(10,542)
Net cash provided
by (used in)
operating
activities...... (9,796) (517) 4,939 14,095 3,474 0 12,195
Net cash used in
investing
activities...... 0 (414) (5,332) (1,719) (2,453) 0 (9,918)
Net cash provided
by (used in)
financing
activities...... 4,822 1,628 713 (11,444) (886) 0 (5,167)
-------- -------- ------- ------- ------- --------- --------
Net increase
(decrease) in
cash and cash
equivalents..... (4,974) 697 320 932 135 0 (2,890)
Cash and cash
equivalents:
Beginning of
year........... 10,457 2,563 3,662 3,512 2,907 0 23,101
-------- -------- ------- ------- ------- --------- --------
End of period... $ 5,483 $ 3,260 $ 3,982 $ 4,444 $ 3,042 $ 0 $ 20,211
======== ======== ======= ======= ======= ========= ========
</TABLE>
- --------
Notes to Summarized Consolidating Financial Information:
(1) Blue Diamond Hotel & Casino, Inc. is a wholly-owned subsidiary that is
consolidated in the accompanying consolidated financial statements.
(2) Boomtown Hotel & Casino, Inc. is a wholly-owned subsidiary that is
consolidated in the accompanying consolidated financial statements. These
amounts do not include the operations of the Company's wholly-owned
subsidiaries which are general partners of the Company's non wholly-owned
subsidiaries.
(3) Louisiana-I Gaming, L.P. is a wholly-owned subsidiary (as of November 18,
1996) that is consolidated in the Company's consolidated financial
statements.
(4) Mississippi-I Gaming, L.P. is a non wholly-owned subsidiary of the Company
that is consolidated in the Company's consolidated financial statements.
(5) Eliminations consist of Boomtown, Inc.'s (a) investment in the guarantor
entities, (b) advances to the guarantor and non-guarantor subsidiaries and
(c) equity earnings (loss) of consolidated subsidiaries and partnerships.
The advances are subordinated in right of payment to the guarantees of the
Notes.
F-67
<PAGE>
BOOMTOWN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SUBSEQUENT EVENTS
ACQUISITION OF LOUISIANA PARTNERSHIP MINORITY INTEREST--On November 18, 1996
the Company entered into an agreement with Eric Skrmetta, the lessor, in which
the Company agreed to pay $5,673,000 in return for Skrmetta's 7.5% interest in
the Louisiana Partnership in addition to releasing the Company from any and
all claims, liabilities and causes of action of any kind arising from or
related to the Partnership Agreement. The agreement required Boomtown to make
a deposit of $500,000 by December 5, 1996 and the remaining $5,173,000 was
paid on August 8, 1997. (unaudited)
MERGER WITH HOLLYWOOD PARK (UNAUDITED)--On June 30, 1997, pursuant to the
Merger Agreement dated as of April 23, 1996, by and among Hollywood Park, HP
Acquisition, Inc., a wholly owned subsidiary of Hollywood Park, and Boomtown,
HP Acquisition, Inc. was merged with and into Boomtown.
SWAP AGREEMENT CONSUMMATION (UNAUDITED)--On July 1, 1997, Boomtown completed
a swap pursuant to the Swap Agreement. See Management's Discussion and
Analysis of Financial Condition and Results of Operations--"Boomtown--
Disposition of Boomtown Las Vegas."
EARLY EXTINGUISHMENT OF FIRST MORTGAGE NOTES (UNAUDITED)--Concurrently with
the closing of the Merger and the Swap, Hollywood Park supplied the funds
necessary to enable Boomtown to repurchase and retire an aggregate of
approximately $102.7 million in principal amount of Boomtown's First Mortgage
Notes (the "Notes") leaving an aggregate of approximately $1.4 million in
principal amount of the Notes outstanding. Boomtown recorded an extraordinary
loss of approximately $14.2 million (approximately $8.4 million net of tax
effect) in the period ended June 30, 1997, related to the tender and consent
costs (approximately $9.0 million) and the write-off of deferred financing
costs (approximately $5.2 million) associated with the early extinguishment of
the First Mortgage Notes.
BARGE AND BUILDING SHELL PURCHASE (UNAUDITED)--On August 4, 1997, Hollywood
Park executed a purchase agreement pursuant to which one of the Hollywood Park
entities repurchased the barge and the building shell at Boomtown Biloxi for a
total cost of $5,250,000. A payment of $1,500,000 was made on August 4, 1997,
with the balance payable in three equal annual installments of $1,250,000.
F-68
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, ANY
SECURITIES OFFERED HEREBY TO ANY PERSON IN OR BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPRESSION THAT THERE HAS NOT BEEN A CHANGE IN THE INFORMATION SET
FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE
HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... i
Documents Incorporated by Reference...................................... ii
Prospectus Summary....................................................... 1
Risk Factors............................................................. 14
Use of Proceeds.......................................................... 24
The Exchange Offer....................................................... 24
Certain Federal Income Tax Consequences.................................. 32
Capitalization........................................................... 34
Selected Historical and Pro Forma Financial Data......................... 35
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 39
Unaudited Pro Forma Combined Consolidated Condensed Financial Statements. 53
Business................................................................. 59
Management............................................................... 82
Security Ownership of Certain Beneficial Owners and Management........... 85
Description of Other Indebtedness........................................ 87
Description of Notes..................................................... 89
Plan of Distribution..................................................... 119
Book-Entry; Delivery and Form............................................ 120
Experts.................................................................. 121
Legal Matters............................................................ 121
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$125,000,000
[LOGO OF HOLLYWOOD PARK]
HOLLYWOOD PARK
SERIES B 9 1/2% SENIOR SUBORDINATED NOTES
DUE 2007
--------------------------------
PROSPECTUS
--------------------------------
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at its request in such capacity in another
corporation or business association, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit.
As permitted by Section 102(b)(7) of the DGCL, each Issuer's Certificate of
Incorporation, as amended, includes a provision that limits a director's
personal liability to such Issuer or its stockholders for monetary damages for
breaches of his or her fiduciary duty as a director. Article XIII of each
Issuer's Certificate of Incorporation, as amended, provides that no director
of such Issuer shall be personally liable to such Issuer or its stockholders
for monetary damages for breach of fiduciary duty to the fullest extent
permitted by the DGCL.
As permitted by Section 145 of the DGCL, each Issuer's Bylaws provide that,
to the fullest extent permitted by the DGCL, directors, officers and certain
other persons who are made, or are threatened to be made, parties to, or are
involved in, any action, suit or proceeding will be indemnified by such Issuer
with respect thereto.
Hollywood Park, Inc. maintains insurance policies under which its directors
and officers are insured, within the limits and subject to the limitations of
the policies, against expenses in connection with the defense of actions,
suits or proceedings, and certain liabilities that might be imposed as a
result of such actions, suits or proceedings, to which they are parties by
reason of being or having been directors or officers of Hollywood Park, Inc.
ITEM 21. EXHIBITS
A list of exhibits included as part of the Registration Statement is set
forth below:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization, by and among Hollywood Park,
Inc., and Pacific Casino Management, Inc., dated November 17, 1995, is
hereby incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K, filed November 30, 1995.
2.2 Agreement and Plan of Merger, by and among Hollywood Park, Inc., HP
Acquisition, Inc., and Boomtown, Inc., dated April 23, 1996, is hereby
incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K, filed May 3, 1996.
3.1 Certificate of Incorporation of Hollywood Park, Inc., is hereby
incorporated by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1 dated January 29, 1993.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.2 Amended By-laws of Hollywood Park, Inc. are hereby incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement on
Form S-1 dated January 29, 1993.
3.3* Certificate of Incorporation of Hollywood Park Operating Company
3.4* Amended By-laws of Hollywood Park Operating Company
3.5 Certificate of Incorporation of Hollywood Park Fall Operating Company
3.6 By-laws of Hollywood Park Fall Operating Company
3.7 Articles of Incorporation of Hollywood Park Food Services, Inc.
3.8 By-laws of Hollywood Park Food Services, Inc.
3.9 Articles of Incorporation of HP/Compton, Inc.
3.10 By-laws of HP/Compton, Inc.
3.11 Articles of Organization of Crystal Park Hotel and Casino Development
Company, LLC
3.12 Operating Agreement of Crystal Park Hotel and Casino Development
Company, LLC
3.13 Restated Articles of Incorporation of Turf Paradise, Inc.
3.14 By-laws of Turf Paradise, Inc.
3.15 Certificate of Incorporation of HP Yakama, Inc.
3.16 By-laws of HP Yakama, Inc.
3.17 Amended and Restated Certificate of Incorporation of Boomtown, Inc.
3.18 By-laws of Boomtown, Inc.
3.19 Certificate of Amended and Restated Articles of Incorporation of
Boomtown Hotel & Casino, Inc.
3.20 Revised and Restated By-laws of Boomtown Hotel & Casino, Inc.
3.21 Articles of Incorporation of Bayview Yacht Club, Inc.
3.22 By-laws of Bayview Yacht Club, Inc.
3.23 Certificate of Mississippi Limited Partnership of Mississippi-I
Gaming, L.P.
3.24 Amended and Restated Agreement of Limited Partnership of Mississippi-I
Gaming, L.P., is hereby incorporated by reference to Exhibit 10.31 to
the Company's Quarterly Report on Form 10-Q for the period ended June
30, 1997.
3.25 Articles of Incorporation of Louisiana Gaming Enterprises, Inc.
3.26 Amended and restated Partnership Agreement of Louisiana-I Gaming, a
Louisiana Partnership in Commendam
4.5 Convertible Preferred Stock Depositary Stock Agreement between
Hollywood Park, Inc. and Chase Mellon Shareholder Services, dated
February 9, 1993, is hereby incorporated by reference to Exhibit 4.5
to the Company's Registration Statement on Form S-1 dated January 29,
1993.
4.7 Hollywood Park 1996 Stock Option Plan is hereby incorporated by
reference to Exhibit 10.24 to the Company's Registration Statement on
Form S-4 dated September 18, 1996.
4.8 Hollywood Park 1993 Stock Option Plan is hereby incorporated by
reference to Appendix A to the Notice of Annual Meeting to
shareholders and Proxy Statement relating to the Annual Meeting of
Stockholders of Hollywood Park, Inc. held on May 17, 1993.
4.9 Indenture, dated August 1, 1997, by and among the Company, HPOC,
Hollywood Park Food Services, Inc., HP/Compton, Inc., Crystal Park
Hotel and Casino Development Company, LLC, HP Yakama, Inc., Turf
Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc.,
Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc., Mississippi-I
Gaming, L.P., Bayview Yacht Club, Inc. and The Bank of New York, as
trustee, is hereby incorporated by reference to Exhibit 10.37 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.10 Form of Series B 9 1/2% Senior Subordinated Note due 2007 (Included in
Exhibit 4.9).
5 Opinion of Irell & Manella LLP
10.1 Directors Deferred Compensation Plan for Hollywood Park, Inc. is
hereby incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
10.2 Lease Agreement dated as of January 1, 1989, by and between Hollywood
Park Realty Enterprises, Inc. and Hollywood Park Operating Company, as
amended, is hereby incorporated by reference to Exhibit 2 to the Joint
Annual Report on Form 10-K for the fiscal year ended December 31,
1989, of Hollywood Park Operating Company and Hollywood Park Realty
Enterprises, Inc.
10.3 Aircraft rental agreement dated November 1, 1993, by and between
Hollywood Park, Inc. and R.D. Hubbard Enterprises, Inc. is hereby
incorporated by reference to Exhibit 10.7 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
10.4 Amended and Restated Credit Agreement dated March 23, 1994, by and
between Sunflower Racing, Inc. and First Union National Bank of North
Carolina, Bank One Lexington, Texas Commerce Bank, Home State Bank of
Kansas City and Intrust Bank, N.A. is hereby incorporated by reference
to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994.
10.5 Pledge Agreement dated March 23, 1994, by and between Hollywood Park,
Inc., First Union National Bank of North Carolina, (as agent for the
ratable benefit of itself and the Banks named in the Amended and
Restated Credit Agreement included as Exhibit 10.4) is hereby
incorporated by reference to Exhibit 10.10 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994.
10.6 Amendment of Oil and Gas Lease dated January 10, 1995, by and between
Hollywood Park, Inc. and Casex Co., Nunn Ltd., and Vortex Energy &
Minerals is hereby incorporated by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994.
10.7 Agreement Respecting Pyramid Casino dated December 3, 1994, by and
between Hollywood Park, Inc. and Compton Entertainment, Inc., is
hereby incorporated by reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
10.8 Amendment to Agreement Respecting Pyramid Casino dated April 14, 1995,
by and between Hollywood Park, Inc., and Compton Entertainment, Inc.,
is hereby incorporated by reference to Exhibit 10.14 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
10.9 Amended and Restated Agreement Respecting Pyramid Casino dated July
14, 1995, by and between Hollywood Park, Inc., and Compton
Entertainment, Inc., is hereby incorporated by reference to
Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.
10.10 Amended and Restated Disposition and Development Agreement of Purchase
and Sale, and Lease with Option to Purchase, dated August 2, 1995, by
and between The Community Redevelopment Agency of the City of Compton
and Compton Entertainment, Inc., is hereby incorporated by reference
to Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995.
10.11 Guaranty, dated July 31, 1995, by Hollywood Park, Inc., in favor of
the Community Redevelopment Agency of the City of Compton, is hereby
incorporated by reference to Exhibit 10.17 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.
10.12 Lease by and between HP/Compton, Inc. and Compton Entertainment, Inc.,
dated August 3, 1995, is hereby incorporated by reference to Exhibit
10.18 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.13 First Amendment to Lease by and between HP/Compton, Inc., and Compton
Entertainment, Inc., dated March 12, 1996, is here by incorporated by
reference to Exhibit 10.18 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
10.14 Second Amendment to Lease by and between Crystal Park Hotel and Casino
Development Company LLC, and Compton Entertainment, Inc., dated
September 13, 1996, is hereby incorporated by reference to Exhibit
10.19 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996.
10.15 Assignment, Assumption and Consent Agreement, by and among HP/Compton,
Inc., and Crystal Park Hotel and Casino Development Company LLC,
Hollywood Park, Inc. and The Community Redevelopment Agency of the
City of Compton, dated July 18, 1996, is hereby incorporated by
reference to Exhibit 10.20 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996.
10.16 Consent of Compton Entertainment, Inc., and Rouben Kandilian, by and
between Hollywood Park, Inc., and Compton Entertainment, Inc., dated
August 29, 1996, is hereby incorporated by reference to Exhibit 10.21
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
10.17 License Agreement, dated June 27, 1996, by and between HP/Compton,
Inc., and Radisson Hotels International, Inc. is hereby incorporated
by reference to Exhibit 10.17 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996.
10.18 Operating Agreement for Crystal Park Hotel and Casino Development
Company LLC, dated July 18, 1996, effective August 28, 1996, is hereby
incorporated by reference to Exhibit 10.24 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996.
10.19 Blue Diamond Swap Agreement by and among Boomtown, Inc., Blue Diamond
Hotel & Casino, Inc., Hollywood Park, Inc., Edward P. Roski, Jr., IVAC
and Majestic Realty Co., dated August 12, 1996, is hereby incorporated
by reference to Exhibit 10.22 to the Company's Registration Statement
on Form S-4 filed September 18, 1996.
10.20 Stock Purchase Agreement, by and between Hollywood Park, Inc. and
Edward P. Roski, Jr., dated August 12, 1996, is hereby incorporated by
reference to Exhibit 10.23 to the Company's Registration Statement on
Form S-4 dated September 18, 1996.
10.21 Reducing Revolving Loan Agreement dated March 27, 1997, among
Hollywood Park, Inc., and Bank of Scotland, Bankers Trust Company,
Societe Generale, Bank of America National Trust and Savings
Association, is hereby incorporated by reference to Exhibit 10.27 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
10.22 Amendment No. 1 to Reducing Revolving Loan Agreement, dated June 30,
1997, is hereby incorporated by reference to Exhibit 10.29 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
10.23 Amendment No. 2 to Reducing Revolving Loan Agreement, dated July 30,
1997, is hereby incorporated by reference to Exhibit 10.30 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
10.24 Agreement of Limited Partnership for Huron Gaming, LP, a Delaware
Limited Partnership, Kansas Project, dated July 14, 1997, is hereby
incorporated by reference to Exhibit 10.28 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
10.25 Amended and Restated Agreement of Limited Partnership of Mississippi-I
Gaming, L.P., is hereby incorporated by reference to Exhibit 10.31 to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1997.
10.26 Amended Equity Conversion Agreement, dated July 18, 1994, by and
between Boomtown, Inc., and Eric Skrmmetta, is hereby incorporated by
reference to Exhibit 10.32 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.27 Ground Lease, dated October 19, 1993, between Raphael Skrmetta as
Landlord and Mississippi-I Gaming, L.P. as Tenant, is hereby
incorporated by reference to Exhibit 10.33 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
10.28 First Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi-I Gaming, L.P, is hereby incorporated
by reference to Exhibit 10.34 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997.
10.29 Second Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi-I Gaming, L.P, is hereby incorporated
by reference to Exhibit 10.35 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997.
10.30 Purchase Agreement, dated August 1, 1997, by and among the Company,
HPOC, Hollywood Park Food Services, Inc., HP/Compton, Inc., Crystal
Park Hotel and Casino Development Company, LLC, Hollywood Park Fall
Operating Company, HP Yakama, Inc., Turf Paradise, Inc., Boomtown,
Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, Louisiana
Gaming Enterprises, Inc., Mississippi-I Gaming, L.P., Bayview Yacht
Club, Inc., and the Initial Purchasers named therein, is hereby
incorporated by reference to Exhibit 10.36 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
10.31 Registration Rights Agreement, dated August 1, 1997, by and among the
Company, HPOC, Hollywood Park Food Services, Inc., HP/Compton, Inc.,
Crystal Park Hotel and Casino Development Company, LLC, Hollywood Park
Fall Operating Company, HP Yakama, Inc., Turf Paradise, Inc.,
Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming,
Louisiana Gaming Enterprises, Inc., Mississippi-I Gaming, L.P.,
Bayview Yacht Club, Inc., and the Initial Purchasers named therein, is
hereby incorporated by reference to Exhibit 10.38 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
12.1* Calculation of Historical Ratio of Earnings to Fixed Charges
12.2 Calculation of Pro Forma Ratio of Earnings to Fixed Charges
21.1* Subsidiaries of Hollywood Park, Inc.
23.1 Consent of Irell & Manella LLP (included in Exhibit 5).
23.2** Consent of Arthur Andersen LLP
23.3** Consent of Ernst & Young LLP
24.1* Powers of Attorney of officers and directors of Hollywood Park, Inc.
24.2* Powers of Attorney of officers and directors of Hollywood Park
Operating Company.
24.3* Powers of Attorney of officers and directors of Hollywood Park Fall
Operating Company.
24.4* Powers of Attorney of officers and directors of Hollywood Park Food
Services, Inc.
24.5* Powers of Attorney of officers and directors of HP/Compton, Inc.
24.6* Powers of Attorney of directors of HP/Compton, Inc. in the capacity of
manager of Crystal Park Hotel and Casino Development Company, LLC.
24.7* Powers of Attorney of officers and directors of Turf Paradise, Inc.
24.8* Powers of Attorney of officers and directors of HP Yakama, Inc.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
24.9* Powers of Attorney of officers and directors of Boomtown, Inc.
24.10* Powers of Attorney of officers and directors of Boomtown Hotel &
Casino, Inc.
24.11* Powers of Attorney of officers and directors of Bayview Yacht Club,
Inc.
24.12* Powers of Attorney of directors of Bayview Yacht Club, Inc. in the
capacity of General Partner of Mississippi I-Gaming, L.P.
24.13* Powers of Attorney of officers and directors of Louisiana Gaming
Enterprises, Inc.
24.14* Powers of Attorney of directors of Louisiana Gaming Enterprises, Inc.
in the capacity of General Partner of Louisiana I-Gaming, a Louisiana
Partnership in Commendam.
25.1* Statement Regarding Eligibility of Trustee
99** Form of Letter of Transmittal
</TABLE>
- --------
* Previously filed
** To be filed by amendment
ITEM 22. UNDERTAKINGS
1. The undersigned Registrants hereby undertake:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
II-6
<PAGE>
(c) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(d) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Issuers' annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of each Issuer pursuant to the foregoing provisions, or
otherwise, the Issuers has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of an action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Issuers will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(f) The undersigned Registrants hereby undertake to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with
the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act.
II-7
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either
one of whom may act without joinder of the other, as his or her attorney-in-
fact to sign on his or her behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and
additions to this Registration Statement as such attorney-in-fact may deem
appropriate or necessary.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
HOLLYWOOD PARK, INC.,
a Delaware corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
President--Sports and
Entertainment,
Executive Vice President,
Treasurer and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard* Chairman of the Board and October 30, 1997
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ Harry Ornest* Vice Chairman of the Board October 30, 1997
____________________________________
Harry Ornest
/s/ G. Michael Finnigan* Executive Vice President and October 30, 1997
____________________________________ Chief Financial Officer
G. Michael Finnigan (Principal Financial and
Accounting Officer)
/s/ Richard Goeglein* Director October 30, 1997
____________________________________
Richard Goeglein
/s/ Peter L. Harris* Director October 30, 1997
____________________________________
Peter L. Harris
/s/ J.R. Johnson* Director October 30, 1997
____________________________________
J.R. Johnson
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert T. Manfuso* Director October 30, 1997
____________________________________
Robert T. Manfuso
/s/ Timothy J. Parrott* Director October 30, 1997
____________________________________
Timothy J. Parrott
/s/ Lynn P. Reitnouer* Director October 30, 1997
____________________________________
Lynn P. Reitnouer
Director October , 1997
____________________________________
Warren B. Williamson
/s/ Herman Sarkowsky* Director October 30, 1997
____________________________________
Herman Sarkowsky
/s/ Delbert W. Yocam* Director October 30, 1997
____________________________________
Delbert W. Yocam
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
HOLLYWOOD PARK OPERATING COMPANY,
a Delaware corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
Executive Vice President,
Treasurer and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard* Chairman of the Board and October 30, 1997
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ Harry Ornest* Vice Chairman of the Board October 30, 1997
____________________________________
Harry Ornest
/s/ G. Michael Finnigan* Executive Vice President and October 30, 1997
____________________________________ Chief Financial Officer
G. Michael Finnigan (Principal Financial and
Accounting Officer)
____________________________________ Director October , 1997
Warren B. Williamson
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
HOLLYWOOD PARK FALL OPERATING
COMPANY,
a Delaware corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
Executive Vice President,
Treasurer and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard* Director and President October 30, 1997
____________________________________ (Principal Executive
R.D. Hubbard Officer)
/s/ Harry Ornest* Director October 30, 1997
____________________________________
Harry Ornest
____________________________________ Director October , 1997
Warren B. Williamson
/s/ G. Michael Finnigan* Executive Vice President, October 30, 1997
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
HOLLYWOOD PARK FOOD SERVICES, INC.,
a California corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
Executive Vice President,
Treasurer and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard* Director and President October 30, 1997
____________________________________ (Principal Executive
R.D. Hubbard Officer)
/s/ Harry Ornest* Director October 30, 1997
____________________________________
Harry Ornest
____________________________________ Director October , 1997
Warren B. Williamson
/s/ G. Michael Finnigan* Executive Vice President, October 30, 1997
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
HP/COMPTON INC.,
a California corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard* Director and President October 30, 1997
____________________________________ (Principal Executive
R.D. Hubbard Officer)
/s/ G. Michael Finnigan* Vice President and Chief October 30, 1997
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
CRYSTAL PARK HOTEL & CASINO
DEVELOPMENT COMPANY, LLC
By: its Manager
HP/COMPTON, INC.,
a California corporation
/s/ G. Michael Finnigan*
By: _______________________________
G. Michael Finnigan
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
HP/COMPTON, INC. MANAGER of Crystal Park October 30, 1997
Hotel & Casino Development
Company, LLC
/s/ R.D. Hubbard* Director and President of October 30, 1997
____________________________________ HP/Compton, Inc.
R.D. Hubbard
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
TURF PARADISE, INC.,
an Arizona corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
Vice President, Treasurer and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard* Director, President and October 30, 1997
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ G. Michael Finnigan* Director, Vice President, October 30, 1997
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary
(Principal Financial and
Accounting Officer)
/s/ Donald M. Robbins* Director, Vice President and October 30, 1997
____________________________________ Secretary
Donald M. Robbins
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
HP YAKAMA, INC.,
a Delaware corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
Vice President, Treasurer and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard* Director, President and October 30, 1997
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ Bruce Rimbo* Director October 30, 1997
____________________________________
Bruce Rimbo
/s/ G. Michael Finnigan* Director, Vice President, October 30, 1997
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
BOOMTOWN, INC.,
a Delaware corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Parrott* Chairman of the Board and October 30, 1997
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
/s/ Phil E. Bryan* Director, President and October 30, 1997
____________________________________ Chief Operating Officer
Phil E. Bryan
/s/ Robert F. List* Director, Executive Vice October 30, 1997
____________________________________ President and Secretary
Robert F. List
/s/ G. Michael Finnigan* Vice President, and Chief October 30, 1997
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
BOOMTOWN HOTEL & CASINO, INC.,
a Nevada corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Parrott* Chairman of the Board and October 30, 1997
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
/s/ Phil E. Bryan* Director, President and October 30, 1997
____________________________________ Chief Operating Officer
Phil E. Bryan
/s/ Robert F. List* Director, Senior Vice October 30, 1997
____________________________________ President, Secretary and
Robert F. List Treasurer
/s/ G. Michael Finnigan* Vice President, and Chief October 30, 1997
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
BAYVIEW YACHT CLUB, INC.,
a Mississippi corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Parrott* Chairman of the Board and October 30, 1997
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
/s/ Robert F. List* Director, Secretary and October 30, 1997
____________________________________ Treasurer
Robert F. List
/s/ G. Michael Finnigan* Vice President, and Chief October 30, 1997
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
MISSISSIPPI-I GAMING, L.P.
By: its General Partner
BAYVIEW YACHT CLUB, INC.,
a Mississippi corporation
/s/ G. Michael Finnigan*
By: ___________________________
G. Michael Finnigan
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
BAYVIEW YACHT CLUB, INC. GENERAL PARTNER October 30, 1997
Mississippi-I Gaming,
L.P.
/s/ Timothy J. Parrott* Director, Chairman and October 30, 1997
______________________________________ Chief Executive Officer
Timothy J. Parrott of Bayview Yacht Club,
Inc.
/s/ Robert F. List* Director, Secretary and October 30, 1997
______________________________________ Treasurer of Bayview
Robert F. List Yacht Club, Inc.
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
LOUISIANA GAMING ENTERPRISES, INC.,
a Louisiana corporation
/s/ G. Michael Finnigan*
By: _________________________________
G. Michael Finnigan
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Parrott* Chairman of the Board and October 30, 1997
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
/s/ Robert F. List* Director, Executive Vice October 30, 1997
____________________________________ President and Secretary
Robert F. List
/s/ G. Michael Finnigan* Vice President, and Chief October 30, 1997
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 30th day of October, 1997.
LOUISIANA-I GAMING, A LOUISIANA
PARTNERSHIP IN COMMENDAM
By: its General Partner
LOUISIANA GAMING ENTERPRISES,
INC.,
a Louisiana corporation
/s/ G. Michael Finnigan*
By: ___________________________
G. Michael Finnigan
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
LOUISIANA GAMING ENTERPRISES, INC. GENERAL MANAGER of October 30, 1997
Louisiana-I Gaming, a
Louisiana Partnership in
Commendam
/s/ Timothy J. Parrott* Director, Chairman and October 30, 1997
______________________________________ Chief Executive Officer
Timothy J. Parrott of Louisiana Gaming
Enterprises, Inc.
/s/ Robert F. List* Director, Executive Vice October 30, 1997
______________________________________ President and Secretary
Robert F. List of Louisiana Gaming
Enterprises, Inc.
</TABLE>
/s/ G. Michael Finnigan
*By: _______________________
G. Michael Finnigan
Attorney-in-Fact
II-22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization, by and among
Hollywood Park, Inc., and Pacific Casino Management,
Inc., dated November 17, 1995, is hereby incorporated
by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K, filed November 30, 1995.
2.2 Agreement and Plan of Merger, by and among Hollywood
Park, Inc., HP Acquisition, Inc., and Boomtown, Inc.,
dated April 23, 1996, is hereby incorporated by
reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K, filed May 3, 1996.
3.1 Certificate of Incorporation of Hollywood Park, Inc.,
is hereby incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement on Form S-1 dated
January 29, 1993.
3.2 Amended By-laws of Hollywood Park, Inc. are hereby
incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 dated
January 29, 1993.
3.3* Certificate of Incorporation of Hollywood Park
Operating Company
3.4* Amended By-laws of Hollywood Park Operating Company
3.5 Certificate of Incorporation of Hollywood Park Fall
Operating Company
3.6 By-laws of Hollywood Park Fall Operating Company
3.7 Articles of Incorporation of Hollywood Park Food
Services, Inc.
3.8 By-laws of Hollywood Park Food Services, Inc.
3.9 Articles of Incorporation of HP/Compton, Inc.
3.10 By-laws of HP/Compton, Inc.
3.11 Articles of Organization of Crystal Park Hotel and
Casino Development Company, LLC
3.12 Operating Agreement of Crystal Park Hotel and Casino
Development Company, LLC
3.13 Restated Articles of Incorporation of Turf Paradise,
Inc.
3.14 By-laws of Turf Paradise, Inc.
3.15 Certificate of Incorporation of HP Yakama, Inc.
3.16 By-laws of HP Yakama, Inc.
3.17 Amended and Restated Certificate of Incorporation of
Boomtown, Inc.
3.18 By-laws of Boomtown, Inc.
3.19 Certificate of Amended and Restated Articles of
Incorporation of Boomtown Hotel & Casino, Inc.
3.20 Revised and Restated By-laws of Boomtown Hotel &
Casino, Inc.
3.21 Articles of Incorporation of Bayview Yacht Club, Inc.
3.22 By-laws of Bayview Yacht Club, Inc.
3.23 Certificate of Mississippi Limited Partnership of
Mississippi-I Gaming, L.P.
3.24 Amended and Restated Agreement of Limited Partnership
of Mississippi-I Gaming, L.P., is hereby incorporated
by reference to Exhibit 10.31 to the Company's
Quarterly Report on Form 10-Q for the period ended June
30, 1997.
3.25 Articles of Incorporation of Louisiana Gaming
Enterprises, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
3.26 Amended and restated Partnership Agreement of
Louisiana-I Gaming, a Louisiana Partnership in
Commendam
4.5 Convertible Preferred Stock Depositary Stock Agreement
between Hollywood Park, Inc. and Chase Mellon
Shareholder Services, dated February 9, 1993, is hereby
incorporated by reference to Exhibit 4.5 to the
Company's Registration Statement on Form S-1 dated
January 29, 1993.
4.7 Hollywood Park 1996 Stock Option Plan is hereby
incorporated by reference to Exhibit 10.24 to the
Company's Registration Statement on Form S-4 dated
September 18, 1996.
4.8 Hollywood Park 1993 Stock Option Plan is hereby
incorporated by reference to Appendix A to the Notice
of Annual Meeting to shareholders and Proxy Statement
relating to the Annual Meeting of Stockholders of
Hollywood Park, Inc. held on May 17, 1993.
4.9 Indenture, dated August 1, 1997, by and among the
Company, HPOC, Hollywood Park Food Services, Inc.,
HP/Compton, Inc., Crystal Park Hotel and Casino
Development Company, LLC, HP Yakama, Inc., Turf
Paradise, Inc., Boomtown, Inc., Boomtown Hotel &
Casino, Inc., Louisiana-I Gaming, Louisiana Gaming
Enterprises, Inc., Mississippi-I Gaming, L.P., Bayview
Yacht Club, Inc. and The Bank of New York, as trustee,
is hereby incorporated by reference to Exhibit 10.37 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
4.10 Form of Series B 9 1/2% Senior Subordinated Note due
2007 (Included in Exhibit 4.9).
5 Opinion of Irell & Manella LLP
10.1 Directors Deferred Compensation Plan for Hollywood
Park, Inc. is hereby incorporated by reference to
Exhibit 10.6 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1991.
10.2 Lease Agreement dated as of January 1, 1989, by and
between Hollywood Park Realty Enterprises, Inc. and
Hollywood Park Operating Company, as amended, is hereby
incorporated by reference to Exhibit 2 to the Joint
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, of Hollywood Park Operating Company
and Hollywood Park Realty Enterprises, Inc.
10.3 Aircraft rental agreement dated November 1, 1993, by
and between Hollywood Park, Inc. and R.D. Hubbard
Enterprises, Inc. is hereby incorporated by reference
to Exhibit 10.7 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993.
10.4 Amended and Restated Credit Agreement dated March 23,
1994, by and between Sunflower Racing, Inc. and First
Union National Bank of North Carolina, Bank One
Lexington, Texas Commerce Bank, Home State Bank of
Kansas City and Intrust Bank, N.A. is hereby
incorporated by reference to Exhibit 10.9 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994.
10.5 Pledge Agreement dated March 23, 1994, by and between
Hollywood Park, Inc., First Union National Bank of
North Carolina, (as agent for the ratable benefit of
itself and the Banks named in the Amended and Restated
Credit Agreement included as Exhibit 10.4) is hereby
incorporated by reference to Exhibit 10.10 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994.
10.6 Amendment of Oil and Gas Lease dated January 10, 1995,
by and between Hollywood Park, Inc. and Casex Co., Nunn
Ltd., and Vortex Energy & Minerals is hereby
incorporated by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.7 Agreement Respecting Pyramid Casino dated December 3,
1994, by and between Hollywood Park, Inc. and Compton
Entertainment, Inc., is hereby incorporated by
reference to Exhibit 10.11 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994.
10.8 Amendment to Agreement Respecting Pyramid Casino dated
April 14, 1995, by and between Hollywood Park, Inc.,
and Compton Entertainment, Inc., is hereby incorporated
by reference to Exhibit 10.14 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
10.9 Amended and Restated Agreement Respecting Pyramid
Casino dated July 14, 1995, by and between Hollywood
Park, Inc., and Compton Entertainment, Inc., is hereby
incorporated by reference to Exhibit 10.15 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
10.10 Amended and Restated Disposition and Development
Agreement of Purchase and Sale, and Lease with Option
to Purchase, dated August 2, 1995, by and between The
Community Redevelopment Agency of the City of Compton
and Compton Entertainment, Inc., is hereby incorporated
by reference to Exhibit 10.16 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
10.11 Guaranty, dated July 31, 1995, by Hollywood Park, Inc.,
in favor of the Community Redevelopment Agency of the
City of Compton, is hereby incorporated by reference to
Exhibit 10.17 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.
10.12 Lease by and between HP/Compton, Inc. and Compton
Entertainment, Inc., dated August 3, 1995, is hereby
incorporated by reference to Exhibit 10.18 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
10.13 First Amendment to Lease by and between HP/Compton,
Inc., and Compton Entertainment, Inc., dated March 12,
1996, is here by incorporated by reference to
Exhibit 10.18 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
10.14 Second Amendment to Lease by and between Crystal Park
Hotel and Casino Development Company LLC, and Compton
Entertainment, Inc., dated September 13, 1996, is
hereby incorporated by reference to Exhibit 10.19 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.
10.15 Assignment, Assumption and Consent Agreement, by and
among HP/Compton, Inc., and Crystal Park Hotel and
Casino Development Company LLC, Hollywood Park, Inc.
and The Community Redevelopment Agency of the City of
Compton, dated July 18, 1996, is hereby incorporated by
reference to Exhibit 10.20 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1996.
10.16 Consent of Compton Entertainment, Inc., and Rouben
Kandilian, by and between Hollywood Park, Inc., and
Compton Entertainment, Inc., dated August 29, 1996, is
hereby incorporated by reference to Exhibit 10.21 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.
10.17 License Agreement, dated June 27, 1996, by and between
HP/Compton, Inc., and Radisson Hotels International,
Inc. is hereby incorporated by reference to Exhibit
10.17 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.
10.18 Operating Agreement for Crystal Park Hotel and Casino
Development Company LLC, dated July 18, 1996, effective
August 28, 1996, is hereby incorporated by reference to
Exhibit 10.24 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.19 Blue Diamond Swap Agreement by and among Boomtown,
Inc., Blue Diamond Hotel & Casino, Inc., Hollywood
Park, Inc., Edward P. Roski, Jr., IVAC and Majestic
Realty Co., dated August 12, 1996, is hereby
incorporated by reference to Exhibit 10.22 to the
Company's Registration Statement on Form S-4 filed
September 18, 1996.
10.20 Stock Purchase Agreement, by and between Hollywood
Park, Inc. and Edward P. Roski, Jr., dated August 12,
1996, is hereby incorporated by reference to Exhibit
10.23 to the Company's Registration Statement on Form
S-4 dated September 18, 1996.
10.21 Reducing Revolving Loan Agreement dated March 27, 1997,
among Hollywood Park, Inc., and Bank of Scotland,
Bankers Trust Company, Societe Generale, Bank of
America National Trust and Savings Association, is
hereby incorporated by reference to Exhibit 10.27 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997.
10.22 Amendment No. 1 to Reducing Revolving Loan Agreement,
dated June 30, 1997, is hereby incorporated by
reference to Exhibit 10.29 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1997.
10.23 Amendment No. 2 to Reducing Revolving Loan Agreement,
dated July 30, 1997, is hereby incorporated by
reference to Exhibit 10.30 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1997.
10.24 Agreement of Limited Partnership for Huron Gaming, LP,
a Delaware Limited Partnership, Kansas Project, dated
July 14, 1997, is hereby incorporated by reference to
Exhibit 10.28 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997.
10.25 Amended and Restated Agreement of Limited Partnership
of Mississippi-I Gaming, L.P., is hereby incorporated
by reference to Exhibit 10.31 to the Company's
Quarterly Report on Form 10-Q for the period ended
June 30, 1997.
10.26 Amended Equity Conversion Agreement, dated July 18,
1994, by and between Boomtown, Inc., and Eric
Skrmmetta, is hereby incorporated by reference to
Exhibit 10.32 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997.
10.27 Ground Lease, dated October 19, 1993, between Raphael
Skrmetta as Landlord and Mississippi-I Gaming, L.P. as
Tenant, is hereby incorporated by reference to
Exhibit 10.33 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997.
10.28 First Amendment to Ground Lease dated October 19, 1993,
between Raphael Skrmetta and Mississippi-I Gaming, L.P,
is hereby incorporated by reference to Exhibit 10.34 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
10.29 Second Amendment to Ground Lease dated October 19,
1993, between Raphael Skrmetta and Mississippi-I
Gaming, L.P, is hereby incorporated by reference to
Exhibit 10.35 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997.
10.30 Purchase Agreement, dated August 1, 1997, by and among
the Company, HPOC, Hollywood Park Food Services, Inc.,
HP/Compton, Inc., Crystal Park Hotel and Casino
Development Company, LLC, Hollywood Park Fall Operating
Company, HP Yakama, Inc., Turf Paradise, Inc.,
Boomtown, Inc., Boomtown Hotel & Casino, Inc.,
Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc.,
Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc.,
and the Initial Purchasers named therein, is hereby
incorporated by reference to Exhibit 10.36 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.31 Registration Rights Agreement, dated August 1, 1997, by
and among the Company, HPOC, Hollywood Park Food
Services, Inc., HP/Compton, Inc., Crystal Park Hotel
and Casino Development Company, LLC, Hollywood Park
Fall Operating Company, HP Yakama, Inc., Turf Paradise,
Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc.,
Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc.,
Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc.,
and the Initial Purchasers named therein, is hereby
incorporated by reference to Exhibit 10.38 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
12.1* Calculation of Historical Ratio of Earnings to Fixed
Charges
12.2 Calculation of Pro Forma Ratio of Earnings to Fixed
Charges
21.1* Subsidiaries of Hollywood Park, Inc.
23.1 Consent of Irell & Manella LLP (included in Exhibit 5).
23.2** Consent of Arthur Andersen LLP
23.3** Consent of Ernst & Young LLP
24.1* Powers of Attorney of officers and directors of
Hollywood Park, Inc.
24.2* Powers of Attorney of officers and directors of
Hollywood Park Operating Company.
24.3* Powers of Attorney of officers and directors of
Hollywood Park Fall Operating Company.
24.4* Powers of Attorney of officers and directors of
Hollywood Park Food Services, Inc.
24.5* Powers of Attorney of officers and directors of
HP/Compton, Inc.
24.6* Powers of Attorney of directors of HP/Compton, Inc. in
the capacity of manager of Crystal Park Hotel and
Casino Development Company, LLC.
24.7* Powers of Attorney of officers and directors of Turf
Paradise, Inc.
24.8* Powers of Attorney of officers and directors of HP
Yakama, Inc.
24.9* Powers of Attorney of officers and directors of
Boomtown, Inc.
24.10* Powers of Attorney of officers and directors of
Boomtown Hotel & Casino, Inc.
24.11* Powers of Attorney of officers and directors of Bayview
Yacht Club, Inc.
24.12* Powers of Attorney of directors of Bayview Yacht Club,
Inc. in the capacity of General Partner of Mississippi
I-Gaming, L.P.
24.13* Powers of Attorney of officers and directors of
Louisiana Gaming Enterprises, Inc.
24.14* Powers of Attorney of directors of Louisiana Gaming
Enterprises, Inc. in the capacity of General Partner of
Louisiana I-Gaming, a Louisiana Partnership in
Commendam.
25.1* Statement Regarding Eligibility of Trustee
99** Form of Letter of Transmittal
</TABLE>
- --------
* Previously filed
** To be filed by amendment
<PAGE>
EXHIBIT 3.5
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "HOLLYWOOD PARK FALL OPERATING COMPANY", FILED IN THIS OFFICE
ON THE TWENTY-THIRD DAY OF JANUARY, A.D. 1987, AT 2 O'CLOCK P.M.
---------------------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8585968
DATE: 07-31-97
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HOLLYWOOD PARK FALL OPERATING COMPANY
A Close Corporation
1. The name of the corporation is Hollywood Park Fall Operating Company.
2. The address of its registered office in the state of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is one hundred (100); all of such shares shall be without par
value.
-1-
<PAGE>
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof are as follows:
Shares of stock of this corporation are to be issued and held by each
and every stockholder of this corporation upon and subject to the following
terms and conditions:
All of the issued and outstanding stock of all classes shall be
represented by certificates and shall be held of record by not more than thirty
(30) persons, as defined in Section 342 of the General Corporation Law; and the
corporation shall make no offering of any of its stock of any class which would
constitute a "public offering" within the meaning of the United States
Securities Act of 1933, as it may be amended from time to time; and the consent
of the directors of the corporation shall be required to approve issuance or
transfer of any shares as being in compliance with the foregoing restrictions.
No holder of shares shall sell, assign or otherwise dispose of any
share or shares of stock of this corporation to any person, firm, corporation or
association, nor shall the executor, administrator, trustee, assignee, or other
legal representative of a deceased stockholder sell, assign, transfer or
otherwise dispose of any share or shares of the stock of this corporation to any
person, firm, corporation or
-2-
<PAGE>
association nor to any next of kin or legatees of a deceased stockholder,
without first offering said share or shares of stock for sale to the corporation
at a price representing the true book value thereof at the time of said offer
and the corporation shall have the right to purchase the same by the payment of
said purchase price at any time within thirty (30) days after receipt of written
notice of said offer. In the event that the corporation does not accept the
offer to sell said share or shares within thirty (30) days after receipt of the
written notice of said offer, the share or shares shall next be offered for sale
to the other stockholder or stockholders of said corporation at a price
representing the true book value thereof at the time of said offer and such
other stockholder or stockholders shall have the right to purchase the same by
the payment of such purchase price at any time within thirty (30) days after
receipt of written notice of said offer.
Compliance with the foregoing terms and conditions in regard to the
sale, assignment, transfer or other disposition of the shares of stock of this
corporation shall be a condition precedent to the transfer of such shares of
stock on the books of this corporation.
-3-
<PAGE>
5. The name and mailing address of each incorporator is as follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
John M. Garrick IVERSON, YOAKUM, PAPIANO & HATCH
611 West Sixth Street, Suite 1900
Los Angeles, California 90017
</TABLE>
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or appeal the by-laws of the corporation.
8. Meetings of stockholders may be held within or without the state of
Delaware, as the by-laws may provide. The books of the corporation may be kept
outside the state of Delaware at such a place or places as may be designated
from time to time by the Board of Directors or in the by-laws of the
corporation. Elections of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.
9. The corporation reserves the right to amend, alter, change or appeal
any provision contained in this certificate of incorporation, in the manner now
or hereafter prescribed by
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<PAGE>
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the general corporation law of the state of
Delaware does make this certificate, hereby declaring and certifying that this
is his act indeed and the facts herein stated are true, and accordingly has
hereunto set his hand this 21st day of January, 1987.
----------------------------------------------
John M. Garrick
of IVERSON, YOAKUM, PAPIANO & HATCH
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<PAGE>
EXHIBIT 3.6
HOLLYWOOD PARK FALL OPERATING COMPANY
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Inglewood, State of California, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
<PAGE>
Section 2. Annual meetings of stockholders, commencing with the year
1987, shall be held on the twenty first day of May if not a legal holiday, and
if a legal holiday, then on the next secular day following, at 10:30 A.M., or at
such other date and time as shall be designated from time to time by the board
of directors and stated in the notice of the meeting, at which they shall elect
by a plurality vote a board of directors, and transact such other business as
may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The
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<PAGE>
list shall also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
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<PAGE>
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
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<PAGE>
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The directors shall be elected at the annual meeting of
the stockholders, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the
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<PAGE>
directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these by-laws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
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<PAGE>
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
president on four (4) days' notice to each director, either by mail or by
telegram on forty eight (48) hours if personally delivered or by telephone;
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of two directors unless the board
consists of only one director; in which case special meetings shall be called by
the president or secretary in like manner and on like notice on the written
request of the sole director.
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<PAGE>
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and
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<PAGE>
such participation in a meeting shall constitute presence in person at the
meeting.
COMMITTEE'S OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock
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<PAGE>
adopted by the board of directors as provided in Section 151(a) fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation) adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of
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<PAGE>
directors shall have the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given
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<PAGE>
at the time when the same shall be deposited in the United States mail. Notice
to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
officers may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, one or more vice-
presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such
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<PAGE>
powers and perform such duties as shall be determined from time to time by the
board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
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<PAGE>
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so
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<PAGE>
affixed, it may be attested by his signature or by the signature of such
assistant secretary. The board of directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his signature.
Section 10. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its
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<PAGE>
regular meetings, or when the board of directors so requires, an account of all
his transactions as treasurer and of the financial condition of the corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated.
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<PAGE>
Certificates shall be signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors, or the president or a vice-
president and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
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<PAGE>
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
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<PAGE>
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its
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books as the owner of shares to receive dividends, and to vote as such owner,
and to hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the
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directors may modify or abolish any such reserve in the manner in which it was
created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
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INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new by-
laws be contained in the notice of such special meeting. If the power to adopt,
amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
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<PAGE>
AMENDMENT TO BY-LAWS
ADOPTED BY RESOLUTION
OF THE SOLE STOCKHOLDER OF
HOLLYWOOD PARK FALL OPERATING COMPANY
-------------------------------------
a Delaware corporation
(August 10, 1992)
"NOW, THEREFORE, BE IT RESOLVED, that the first three (3) sentences of
Article III, Section 1 of the By-laws of this corporation be, and they hereby
are, amended to read in full as follows:
`The Board of Directors shall consist of one (1) or more members. The
exact number of directors shall be fixed and may be changed from time to
time by a resolution duly adopted by the Board of Directors or the
stockholders, except as otherwise provided by law or the Certificate of
Incorporation.'
RESOLVED FURTHER, that the foregoing amendment of the By-laws of this
corporation be, and it hereby is, approved and adopted;"
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EXHIBIT 3.7
ARTICLES OF INCORPORATION
-------------------------
OF
--
WILLIAMS & SONS CATERING COMPANY, INC.
--------------------------------------
I.
The name of this corporation is:
WILLIAMS & SONS CATERING COMPANY, INC.
II.
The purposes for which this corporation is formed, and the specific
business in which the corporation is primarily to engage being set forth in
paragraph (1) below, are:
(1) The specific business in which the corporation is primarily to
engage is the catering and related on-premises and off-premises food service
businesses, and all similar businesses;
(2) To engage in any one or more other businesses or transactions
which the Board of Directors of this corporation may from time to time
authorize or approve, whether related or unrelated to the business described in
(1) above or to any other business then or theretofore done by this
corporation;
(3) To act as principal, agent, joint venturer, partner, or in any
other capacity which may be authorized or approved by the Board of Directors of
this corporation;
(4) To transact business in the State of California or in any other
jurisdiction of the United States of America or elsewhere in the world;
(5) To exercise all powers conferred by the laws of California upon
corporations formed under the laws pursuant to and under which this corporation
is formed, as such laws are now in effect or may at any time hereafter be
amended.
The foregoing statement of purposes shall be construed as a statement of
both purposes and powers, and the purposes and powers stated in each clause
shall, except where otherwise expressed, be in nowise limited or restricted by
any reference to or inference from the terms or provisions of any other
<PAGE>
clause, but shall be regarded as independent purposes and powers.
III.
The county in the State of California where the principal office for
transaction of the business of this corporation is to be located is Los Angeles
County.
IV.
The number of directors shall be two, and the number may be changed by a
by-law adopted by the vote of shareholders entitled to exercise a majority of
the voting powers of this corporation, or by the written assent of such
shareholders. The names and addresses of the persons who are appointed to act
as the first directors of this corporation are:
Name Address
---- -------
Richard C. Smith 611 West Sixth Street
Los Angeles, California 90017
Karen L. Guffin 611 West Sixth Street
Los Angeles, California 90017
V.
This corporation is authorized to issue only one class of stock. The
number of shares which this corporation is authorized to issue is Seven Hundred
Fifty (750). The par value of each share of stock shall be One Hundred Dollars
($100.00), and the aggregate par value of shares shall be Seventy-Five Thousand
Dollars ($75,000.00).
The shareholders of this corporation are hereby granted preemptive rights
to subscribe to any and all issues of shares or securities.
<PAGE>
IN WITNESS WHEREOF, for the purpose of forming this corporation under the
laws of the State of California, we, the undersigned, constituting the
incorporators of this corporation and the persons named herein as the first
directors of this corporation, have executed these Articles of Incorporation
this 13th day of July, 1973.
_________________________________
Richard C. Smith
_________________________________
Karen L. Guffin
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On this 13th day of July, 1973, before me, Lela Flowers, a notary public in
and for said county and state, personally appeared Richard C. Smith and Karen L.
Guffin, known to me to be the persons whose names are subscribed to the within
instrument, and acknowledged to me that they executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year in this certificate first above written.
_________________________________
Notary Public in and for said
County and State
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
NEIL PAPIANO and DONALD M. ROBBINS certify:
1. That they are the president and the secretary, respectively, of WILLIAMS &
SONS CATERING COMPANY, INC., a California corporation.
2. That at a meeting of the Board of Directors of said corporation, duly held
at 611 West Sixth Street, Los Angeles, California, on May 6, 1976, the following
resolution was adopted:
"RESOLVED: That Article I of the Articles of Incorporation of this
corporation be amended to read as follows:
'The name of this corporation is EPICUREAN, INC.'"
3. That the shareholders have adopted said amendment by written consent. That
the wording of the amended article, as set forth in the shareholders' written
consent, is the same as that set forth in the directors' resolution in Paragraph
2 above.
4. That the number of shares represented by written consent is 100. That the
total number of shares entitled to vote on or consent to the amendment is 100.
I certify (or declare) under penalty of perjury that the foregoing is true and
correct.
Executed on May 24, 1976 at Los Angeles, California.
_______________________________
NEIL PAPIANO, President
_______________________________
DONALD M. ROBBINS, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
EPICUREAN, INC.
G. Michael Finnigan and Donald M. Robbins certify that:
1. They are the Executive Vice President and the Secretary of Epicurean, Inc.,
a California corporation.
2. Article I, of the Articles of Incorporation of this corporation is amended
to read as follows:
"The name of this corporation is Hollywood Park Food Services, Inc."
3. The foregoing amendment of Articles of Incorporation has been duly approved
by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been duly approved
by the required vote of the sole shareholder in accordance with Section 902
of the Corporations Code. The total number of outstanding shares of the
corporation is 100. The number of shares voting in favor of the amendment
equaled or exceeded the vote required. The percentage vote required was
more than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Executed this 3rd day of March, 1992, at Inglewood, California.
_______________________________________
G. Michael Finnigan
Executive Vice President
_______________________________________
Donald M. Robbins, Secretary
<PAGE>
EXHIBIT 3.8
BY-LAWS
OF
HOLLYWOOD PARK FOOD SERVICES, INC.
(FNA: WILLIAMS & SONS CATERING COMPANY, INC.
AND
EPICUREAN, INC.)
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office for the transaction of
----------------
the business of the corporation is hereby located at 1050 South Prairie in the
City of Inglewood, County of Los Angeles, State of California. The board of
directors is hereby granted full power and authority to change said principal
office from one location to another in said County.
SECTION 2. OTHER OFFICES. Branch or subordinate offices may at any time
-------------
be established by the board of directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All annual meetings of shareholders and all
-----------------
other meetings of shareholders shall be held either at the principal office of
the corporation or at any other place within or without the State of California
which may be designated either by the board of directors pursuant to authority
hereinafter granted to said board, or by the written consent of all shareholders
entitled to vote thereat, given either before or after the meeting and filed
with the secretary of the corporation.
SECTION 2. ANNUAL MEETINGS. The annual meetings of shareholders shall be
---------------
held on second Thursday in May in each year at 2:30 o'clock P.M. of said day;
provided, however, that should said day fall upon a legal holiday, then any such
annual meeting of shareholders shall be held at the same time and place of the
next day thereafter ensuing which is not a legal holiday. At such meetings
directors shall be elected, reports of the affairs of the corporation shall be
considered, and any other business may be transacted which is within the power
of the shareholders.
<PAGE>
Written notice of each annual meeting shall be given to each shareholder
entitled to vote, either personally or by mail or other means of written
communication, charges prepaid, addressed to such shareholder at his address
appearing on the books of the corporation or given by him to the corporation for
the purpose of notice. If a shareholder gives no address, notice shall be
deemed to have been given if sent by mail or other means of written
communication addressed to the place where the principal office of the
corporation is situated, or if published at least once in some newspaper of
general circulation in the County in which said office is located. All such
notices shall be sent to each shareholder entitled thereto not less than ten
(10) days nor more than fifty (50) days before each annual meeting, and shall
specify the place, the day and the hour of such meeting, and shall state such
other matters, if any, as may be expressly required by statute.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders, for
----------------
any purpose or purposes whatsoever, may be called at any time by the president
or by the board of directors, or by one or more shareholders holding not less
than one-fifth of the voting power of the corporation. Except in special cases
where other express provision is made by statute, notice of such special
meetings shall be given in the same manner as for annual meetings of
shareholders. Notices of any special meeting shall specify in addition to the
place, day and hour of such meeting, the general nature of the business to be
transacted.
SECTION 4. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum no other business may be transacted at such meeting, except as
provided in Section 6 of Article I.
When any shareholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Save as aforesaid, it shall not be necessary
to give any notice of an adjournment or of the business to be transacted at an
adjourned meeting, other than by announcement at the meeting at which such
adjournment is taken.
SECTION 5. VOTING. Unless a record date for voting purposes be fixed as
------
provided in Section 1 of Article V of these By-laws, then, but subject to the
provisions of Sections 2218 to 2223 inclusive of the California General
Corporation Law, only persons in whose names shares entitled to vote stand on
the stock records of the corporation on the day three (3) days prior to any
meeting of shareholders shall be entitled to vote at such meeting. Such vote
may be viva voce or by
---- ----
-2-
<PAGE>
ballot; provided, however, that all elections for directors must be by ballot
upon demand made by a shareholder at any election and before the voting begins.
Every shareholder entitled to vote at any election for directors shall have the
right to cumulate his votes and give one candidate a number of votes equal to
the number of directors to be elected multiplied by the number of votes to which
his shares are entitled, or to distribute his votes on the same principle among
as many candidates as he shall think fit. The candidates receiving the highest
number of votes up to the number of directors to be elected shall be elected.
SECTION 6. QUORUM. The presence in person or by proxy of persons entitled
------
to vote a majority of the voting shares at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
SECTION 7. CONSENT OF ABSENTEES. The transactions of any meeting of
--------------------
shareholders, either annual or special, however called and noticed, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum be present either in person or by proxy, and if, either before or after
the meeting, each of the shareholders entitled to vote, not present in person or
by proxy, signs a written waiver of notice, or a consent to the holding of such
meeting, or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
SECTION 8. ACTION WITHOUT MEETING. Any action which, under any provision
----------------------
of the California General Corporation Law, may be taken at a meeting of the
shareholders, may be taken without a meeting if authorized by a writing signed
by all of the persons who would be entitled to vote upon such action at a
meeting, and filed with the secretary of the corporation.
SECTION 9. PROXIES. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the secretary of the corporation; provided that no such
proxy shall be valid after the expiration of eleven (11) months from the date of
its execution, unless the person executing it specified therein the length of
time for which such proxy is to continue in force, which in no case shall exceed
seven (7) years from the date of its execution.
-3-
<PAGE>
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Subject to limitations of the articles of
------
incorporation, of the By-laws, and of the California General Corporation Law as
to action which shall be authorized or approved by the shareholders, all
corporate powers shall be exercised by or under the authority of, and the
business and affairs of the corporation shall be controlled by, the board of
directors. Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the directors shall have the
following powers, to wit:
First - To select and remove all the officers, agents, and employees of the
corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the articles of incorporation or the By-laws, fix
their compensation, and require from them security for faithful service.
Second - To conduct, manage and control the affairs and business of the
corporation, and to make such rules and regulations therefor not inconsistent
with law, or with the articles of incorporation or the By-laws, as they may deem
best.
Third - To change the principal office for the transaction of the business
of the corporation from one location to another within the same County as
provided in Article I, Section 1, hereof; to fix and locate from time to time
one or more subsidiary offices of the corporation within or without the State of
California for the holding of any shareholders' meeting or meetings; and to
adopt, make and use a corporate seal, and to prescribe the forms of certificates
of stock, and to alter the form of such seal and of such certificates from time
to time, as in their judgment they may deem best, provided such seal and such
certificate shall at all times comply with the provisions of law.
Fourth - To authorize the issue of shares of stock of the corporation from
time to time, upon such terms and for such considerations as may be lawful.
Fifth - To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and securities therefor.
-4-
<PAGE>
Sixth - To appoint an executive committee and other committees, and to
delegate to the executive committee any of the powers and authority of the board
in the management of the business and affairs of the corporation, except the
power to declare dividends and to adopt, amend or repeal By-laws. The executive
committee shall be composed of two or more directors.
SECTION 2. NUMBER OF DIRECTORS. Amended by resolution of the sole
-------------------
shareholder 08/10/92.
SECTION 3. ELECTION AND TERM OF OFFICE. The directors shall be elected at
---------------------------
each annual meeting of shareholders, but if any such annual meeting is not held,
or the directors are not elected thereat, the directors may be elected at any
special meeting of shareholders held for that purpose. All directors shall hold
office until their respective successors are elected.
SECTION 4. VACANCIES. Vacancies in the board of directors may be filled
---------
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director, and each director so elected shall hold office until
his death, resignation or removal, or until his successor is elected at an
annual or a special meeting of the shareholders.
A vacancy or vacancies in the board of directors shall be deemed to exist
in case of the death, resignation or removal of any director, or if the
authorized number of directors be increased, or if the shareholders fail at any
annual or special meeting of shareholders at which any director or directors are
elected to elect the full authorized number of directors to be voted for at that
meeting.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors. If the board of directors
accepts the resignation of a director tendered to take effect at a future time,
the board or the shareholders shall have power to elect a successor to take
office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
SECTION 5. PLACE OF MEETING. Regular meetings of the board of directors
----------------
shall be held at any place within or without the State of California which has
been designated from time to time by resolution of the board or by written
consent of all members of the board. In the absence of such designation regular
meetings shall be held at the principal office of the corporation. Special
meetings of the board may
-5-
<PAGE>
be held either at a place so designated or at the principal office of the
corporation.
SECTION 6. ORGANIZATION MEETING. Immediately following each annual
--------------------
meeting of shareholders, the board of directors shall hold a regular meeting for
the purpose of organization, election of officers, and the transaction of other
business. Notice of such meeting is hereby dispensed with.
SECTION 7. OTHER REGULAR MEETINGS. Other regular meetings of the board of
----------------------
directors shall be held without call at such time as the board of directors may
from time to time designate; provided, however, should said day fall upon a
legal holiday, then said meeting shall be held at the same time on the next day
thereafter ensuing which is not a legal holiday. Notice of all such regular
meetings of the board of directors is hereby dispensed with.
SECTION 8. SPECIAL MEETINGS. Special meetings of the board of directors
----------------
for any purpose or purposes shall be called at any time by the president or, if
he is absent or unable or refuses to act, by any vice-president or by any two
directors.
Written notice of the time and place of special meetings shall be delivered
personally to each director, or sent to each director by mail or by other form
of written communication, charges prepaid, addressed to him at his address as it
is shown upon the records of the corporation, or, if it is not so shown on such
records or is not readily ascertainable, at the place in which the meeting of
the directors are regularly held. In case such notice is mailed or telegraphed,
it shall be deposited in the United States mail or delivered to the telegraph
company in the County in which the principal office of the corporation is
located at least forty-eight (48) hours prior to the time of the holding of the
meeting. In case such notice is delivered personally as above provided, it
shall be so delivered at least twenty-four (24) hours prior to the time of the
holding of the meeting. Such mailing, telegraphing or delivery as above
provided shall be due, legal and personal notice to such director.
SECTION 9. WAIVER OF NOTICE. The transactions of any meeting of the board
----------------
of directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum be
present, and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, or a consent to holding such meeting,
or an approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
-6-
<PAGE>
SECTION 10. QUORUM. A majority of the authorized number of directors
------
shall be necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done or made
by a majority of the directors present at a meeting duly held at which a quorum
is present shall be regarded as the act of the board of directors, unless a
greater number be required by law or by the articles of incorporation.
SECTION 11. ADJOURNMENT. A quorum of the directors may adjourn any
-----------
directors meeting to meet again at a stated day and hour; provided, however,
that in the absence of a quorum, a majority of the directors present at any
directors' meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the board.
SECTION 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
---------------------
holding an adjourned meeting need not be given to absent directors if the time
and place be fixed at the meeting adjourned.
SECTION 13. ACTION WITHOUT MEETING. Any action required or permitted to
----------------------
be taken by the board of directors under any provision of the California General
Corporation Law may be taken without a meeting if all members of the board shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
SECTION 14. FEES AND COMPENSATION. Directors shall not receive any stated
---------------------
salary for their services as directors, but, by resolution of the board, a fixed
fee, with or without expenses of attendance, may be allowed one or more of the
directors for attendance at each meeting. Nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee, or otherwise, and receiving
compensation therefor.
SECTION 15. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES.
----------------------------------------------------
(a) When a person is sued, either alone or with others, because he is
or was a director, officer, or employee of the corporation, in any proceeding
(whether brought by the corporation, its receiver, its trustee, one or more of
its shareholders or creditors, any governmental body, any public official, or
any private person or corporation, domestic or foreign) arising out of his
alleged misfeasance or nonfeasance in the performance of his duties or out of
any alleged wrongful act against the corporation or by the corporation, he may
be indemnified for his reasonable expenses, including
-7-
<PAGE>
attorneys' fees incurred in the defense of the proceeding, if both of the
following conditions exist:
(1) The person sued is successful in whole or in part, or the
proceeding against him is settled with the approval of the
court.
(2) The court finds that his conduct fairly and equitably merits
such indemnity.
The amount of such indemnity may be assessed against the corporation, its
receiver, or its trustee, by the court in the same or in a separate proceeding
and shall be so much of the expenses, including attorneys' fees incurred in the
defense of the proceeding, as the court determines and finds to be reasonable.
Application for such indemnity may be made either by a person sued or by the
attorney or other person rendering services to him in connection with the
defense, and the court may order fees and expenses to be paid directly to the
attorney or other person, although he is not a party to the proceeding. Notice
of the application for such indemnity shall be served upon the corporation, its
receiver, or its trustee, and upon the plaintiff and other parties to the
proceeding. The court may order notice to be given also to the shareholders in
the manner provided elsewhere in these By-laws for giving notice of
shareholders' meetings, in such form as the court directs.
(b) Notwithstanding the provisions of Subsection (a) of this Section
15, the board of directors may authorize the corporation to pay expenses
incurred by, or to satisfy a judgment or fine rendered or levied against, a
present or former director, officer or employee of the corporation in an action
brought by a third party against such person (whether or not the corporation is
joined as a party defendant) to impose a liability or penalty on such person for
an act alleged to have been committed by such person while a director, officer
or employee, or by the corporation, or by both; provided, the board of directors
determines in good faith that such director, officer or employee was acting in
good faith within what he reasonably believed to be the scope of his employment
or authority and for a purpose which he reasonably believed to be in the best
interests of the corporation or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. This Subsection (b) does not apply to any action instituted
or maintained in the right of the corporation by a shareholder or holder of a
voting trust certificate representing shares of the corporation.
(c) The provisions of this Section 15 shall apply to the estate,
executor, administrator, heirs, legatees or devisees of a director, officer or
employee, and the term
-8-
<PAGE>
"person" where used in the foregoing Subsections of this Section 15 shall
include the estate, executor, administrator, heirs, legatees or devisees of such
person.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
--------
president, a vice-president, a secretary and a treasurer. The corporation may
also have, at the discretion of the board of directors, a chairman of the board,
one or more additional vice-presidents, one or more assistant secretaries and
one or more assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article IV. One person may
hold two or more offices, except those of president and secretary.
SECTION 2. ELECTION. The officers of the corporation, except such
--------
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article IV, shall be chosen annually by the board of
directors, and each shall hold his office until he shall resign or shall be
removed or otherwise disqualified to serve, or his successor shall be elected
and qualified.
SECTION 3. SUBORDINATE OFFICERS, ETC. The board of directors may appoint
--------------------------
such other officers as the business of the corporation may require, each of whom
shall have such authority and perform such duties as are provided in these By-
laws or as the board of directors may from time to time specify, and shall hold
office until he shall resign or shall be removed or otherwise disqualified to
serve.
SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed, either
-----------------------
with or without cause, by a majority of the directors at the time in office, at
any regular or special meeting of the board, or, except in case of an officer
chosen by the board of directors, by any officer upon whom such power of removal
may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the board of
directors or to the president, or to the secretary of the corporation. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignations shall not be necessary to make it effective.
SECTION 5. VACANCIES. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other
-9-
<PAGE>
cause shall be filled in the manner prescribed in the By-laws for regular
appointments to such office.
SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the board, if there
---------------------
shall be such an officer, shall, if present, preside at all meetings of the
board of directors, and exercise and perform such other powers and duties as may
be from time to time assigned to him by the board of directors or prescribed by
these By-laws.
SECTION 7. PRESIDENT. Subject to such supervisory powers, if any, as may
---------
be given by the board of directors to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence of the chairman of the board, at all meetings of the board of directors.
He shall be ex officio a member of all the standing committees, including the
-- -------
executive committee, if any, and shall have the general powers and duties of
management usually vested in the office of the president of a corporation, and
shall have such other powers and duties as may be prescribed by the board of
directors or these By-laws.
SECTION 8. VICE PRESIDENT. In the absence or disability of the president,
--------------
the vice-presidents in order of their rank as fixed by the board of directors,
or if not ranked, the vice president designated by the board of directors, shall
perform all the duties of the president, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors
or these By-laws.
SECTION 9. SECRETARY. The secretary shall keep, or cause to be kept, a
---------
book of minutes at the principal office or such other place as the board of
directors may order, of all meetings of directors and shareholders, with the
time and place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present at directors'
meetings, the number of shares present or represented at shareholders' meetings
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal office or
at the office of the corporation's transfer agent, a share register, or a
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the
-10-
<PAGE>
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all the meetings
of the shareholders and of the board of directors required by these By-laws or
by law to be given, and he shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the board of directors or these By-laws. If for any reason the
secretary shall fail to give notice of any special meeting of the board of
directors called by one or more of the persons identified in the first paragraph
of Section 8, Article III, or if he shall fail to give notice of any special
meeting of the shareholders called by one or more of the persons identified in
Section 3, Article II, then any such person or persons may give notice of any
such special meeting.
SECTION 10. TREASURER. The treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all
reasonable times be open to inspection by any director.
The treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have such
other powers &nd perform such other duties as may be prescribed by the board of
directors or these By-laws.
ARTICLE V
MISCELLANEOUS
SECTION 1. RECORD DATE AND CLOSING STOCK BOOKS.
-----------------------------------
The board of directors may fix a time in the future as a record date for the
determination of the shareholders entitled to notice of and to vote at any
meeting of shareholders or entitled to receive any dividend or distribution, or
any allotment of rights, or to exercise rights in respect to any change,
conversion or exchange of shares. The record date so fixed shall be not more
than fifty (50) days prior to the date of the meeting or event for the purposes
of which it is fixed.
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<PAGE>
When a record date is so fixed, only shareholders who are such of record on that
date are entitled to notice of and to vote at the meeting or to receive the
dividend, distribution, or allotment of rights, or to exercise the rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date.
The board of directors may close the books of the corporation against
transfers of shares during the whole or any part of a period not more than fifty
(50) days prior to the date of shareholders' meeting, the date when the right to
any dividend, distribution, or allotment of rights vests, or the effective date
of any change, conversion or exchange of shares.
SECTION 2. INSPECTION OF CORPORATE RECORDS. The share register or
-------------------------------
duplicate share register, the books of account, and minutes of proceedings of
the shareholders and the board of directors and of executive committees of
directors shall be open to inspection upon the written demand of any shareholder
or the holder of a voting trust certificate, at any reasonable time, and for a
purpose reasonably related to his interests as a shareholder, or as the holder
of such voting trust certificate, and shall be exhibited at any time when
required by the demand at any shareholders' meeting of ten per cent (10%0 of the
shares represented at the meeting. Such inspection may be made in person or by
an agent or attorney, and shall include the right to make extracts. Demand of
inspection other than at a shareholders' meeting shall be made in writing upon
the president, secretary, assistant secretary or general manager of the
corporation.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
--------------------
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the board of directors.
SECTION 4. ANNUAL REPORT. The board of directors shall cause an annual
-------------
report to be sent to the shareholders not later than one hundred twenty (120)
days after the close of the fiscal year of the corporation.
SECTION 5. CONTRACT, ETC., HOW EXECUTED. The board of directors, except
----------------------------
as in these By-laws otherwise provided, may authorize any officer or officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the corporation, and such authority may be general or
confined to specific instances; and unless so authorized by the board of
directors, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its
-12-
<PAGE>
credit or to render it liable for any purpose or in any amount.
SECTION 6. CERTIFICATES OF STOCK. A certificate or certificates for
---------------------
shares of the capital stock of the corporation shall be issued to each
shareholder when any such shares are fully paid up. All such certificates shall
be signed by the president or a vice-president and the secretary or an assistant
secretary, or be authenticated by facsimiles of the signatures of the president
and secretary, or by a facsimile of the signature of the president and the
written signature of the secretary or an assistant secretary. Every certificate
authenticated by a facsimile of a signature must be countersigned by a transfer
agent or transfer clerk, and be registered by an incorporated bank or trust
company, either domestic or foreign, as registrar of transfers, before issuance.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the board of directors or these By-laws
may provide; provided, however, that any such certificate so issued prior to
full payment shall state on its face the amount remaining unpaid and the terms
of payment thereof.
No new certificate for shares shall be issued in lieu of an old certificate
unless the latter is surrendered and cancelled at the same time; provided,
however, that a new certificate will be issued without the surrender and
cancellation of the old certificate if (1) the old certificate is lost,
apparently destroyed or wrongfully taken; (2) the request for the issuance of
the new certificate is made within a reasonable time after the owner of the old
certificate has notice of its loss, destruction, or theft; (3) the request for
the issuance of a new certificate is made prior to the receipt of notice by the
corporation that the old certificate has been acquired by a bona fide purchaser;
(4) the owner of the old certificate files a sufficient indemnity bond with the
corporation; and (5) the owner satisfies any other reasonable requirements
imposed by the corporation. In the event of the issuance of a new certificate,
the rights and liabilities of the corporation, and of the holders of the old and
new certificates, shall be governed by the provisions of Sections 8104 and 8405
of the California Commercial Code.
SECTION 7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The president
----------------------------------------------
or any vice-president and the secretary or assistant secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or
-13-
<PAGE>
corporations may be exercised either by said officers in person or by any person
authorized so to do by proxy or power of attorney duly executed by said
officers.
SECTION 8. INSPECTION OF BY-LAWS. The corporation shall keep in it
---------------------
principal office or the transaction of business the original or a copy of these
By-laws as amended or otherwise altered to date, certified by the secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
SECTION 9. PERIODIC REPORTS. Regular reports containing detailed
----------------
financial and other information concerning the business and affairs of the
corporation shall be furnished periodically to the responsible officers and
directors of the corporation, and such reports shall be designed to keep each
such officer and director currently and reasonably informed of the affairs of
the corporation.
ARTICLE VI
AMENDMENTS
SECTION 1. POWER OF SHAREHOLDERS. New By-laws may be adopted or these By-
---------------------
laws may be amended or repealed by the vote of shareholders entitled to exercise
a majority of the voting power of the corporation or by the written assent of
such shareholders, except as otherwise provided by law or by the articles of
incorporation; provided that if the authorized number of directors of the
corporation is five (5) or more, the vote or written assent of shareholders
holding more than eighty per cent (80%) of the voting power of the corporation
shall be required to reduce the authorized number of directors below five (5).
SECTION 2. POWER OF DIRECTORS. Subject to the right of shareholders
------------------
as provided in Section 1 of this Article VI to adopt, amend or repeal By-laws,
By-laws other than a By-law or amendment thereof changing the authorized number
of directors may be adopted, amended or repealed by the board of directors at
any regular or special meeting thereof.
-14-
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting secretary of WILLIAMS & SONS
CATERING COMPANY, INC., a California corporation; and
(2) That the foregoing By-laws, comprising 15 pages, constitute the
original By-laws of said corporation as duly adopted at a meeting of the board
of directors thereof duly held August 1, 1973.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal
of said corporation this 1st day of August, 1973.
___________________________________
Fran E. Williams Secretary
(CORPORATE SEAL)
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<PAGE>
AMENDMENT TO BY-LAWS
ADOPTED BY RESOLUTION
OF THE SOLE SHAREHOLDER OF
HOLLYWOOD PARK FOOD SERVICES, INC.
----------------------------------
a California corporation
(August 10, 1992)
"NOW, THEREFORE, BE IT RESOLVED, that Article III, Section 2 of the
By-laws of this corporation be, and it hereby is, amended to read in full
as follows:
"Section 2. Number of Directors. The affairs of this
-------------------
corporation shall be managed by a Board of Directors consisting of not
less than three (3) nor more than five (5) directors. The exact
number of directors within the limits specified shall be fixed, and
may be changed from time to time, by a resolution duly adopted by the
Board of Directors or the shareholders. The limits may be changed, or
a single number fixed without provision for variation, by an amendment
to these bylaws duly adopted by the vote or written consent of a
majority of the outstanding shares entitled to vote; provided,
however, that if at any time the minimum number of directors is five
(5) or more, a bylaw reducing the minimum number of directors to a
number less than five (5) cannot be adopted if the votes cast against
its adoption at a meeting or the shares not consenting in the case of
action by written consent are equal to more than 16-2/3 percent of the
outstanding shares entitled to vote. No amendment may change the
stated maximum number of authorized directors to a number greater than
two times the stated minimum number of directors minus one."
RESOLVED FURTHER, that the foregoing amendment of the By-laws of this
corporation be, and it hereby is, approved and adopted;"
-16-
<PAGE>
EXHIBIT 3.9
ARTICLES OF INCORPORATION
OF
HP/COMPTON, INC.
----------------
ONE: The name of this corporation is HP/Compton, Inc.
---
TWO: The purpose of this corporation is to engage in any lawful act or
---
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
THREE: The name and address of this corporation's initial agent for
-----
service of process is:
G. Michael Finnigan
1050 South Prairie Avenue
Inglewood, California 90301
FOUR: This corporation is authorized to issue one class of shares of
----
stock; the total number of said shares is l00,000.
FIVE: The liability of the directors of this corporation for monetary
----
damages shall be eliminated to the fullest extent permissible under California
law.
SIX: This corporation is authorized to indemnify the directors and
---
officers of this corporation to the fullest extent permissible under California
law.
Dated: July 20, 1995
/s/ S.A. MORGAN
________________________________
S. A. Morgan, Incorporator
<PAGE>
EXHIBIT 3.10
BYLAWS
------
for the regulation, except as otherwise provided
by statute or the Articles of Incorporation,
of
HP/COMPTON, INC.
----------------
ARTICLE I. GENERAL PROVISIONS
------------------------------
Section 1.01 Principal Executive Office. The principal executive office of the
- ----------------------------------------
corporation shall be located at 1050 South Prairie Avenue, Inglewood, California
90301. The Board of Directors shall have the power to change the principal
office to another location and may fix and locate one or more subsidiary offices
within or without the State of California.
Section 1.02 Number of Directors. The number of directors of the corporation
- ---------------------------------
shall be one (1) until changed by a bylaw amending this Section 1.02 duly
adopted by the vote or written consent of a majority of the outstanding shares
entitled to vote; provided, however, that, if at any time the number of
directors is more than one, a bylaw reducing the number of directors to a number
less than five (5) cannot be adopted if the votes cast against its adoption at a
meeting or the shares not consenting in the case of action by written consent
are equal to more than 16-2/3 percent of the outstanding shares entitled to
vote.
ARTICLE II. SHARES AND SHAREHOLDERS
------------------------------------
Section 2.01 Meetings of Shareholders.
- --------------------------------------
(a) Place of Meetings. Meetings of shareholders shall be held at any place
-----------------
within or without the State of California designated by the Board of Directors.
In the absence of any such designation, shareholders' meetings shall be held at
the principal executive office of the corporation.
(b) Annual Meetings. An annual meeting of the shareholders of the
---------------
corporation shall be held on such date and at such time as shall be designated
by the Board of Directors. Should said day fall upon a legal holiday, the
annual meeting of shareholders shall be held at the same time on the next day
thereafter ensuing which is a full business day. At each annual meeting
directors shall be elected, and any other proper business may be transacted.
(c) Special Meetings. Special meetings of the shareholders may be called
----------------
by the Board of Directors, the chairman of the board, the president, or by the
holders of shares entitled to cast not less than 10% of the votes at the
meeting. Upon request in writing to the chairman of the
<PAGE>
board, the president, any vice president or the secretary by any person (other
than the board) entitled to call a special meeting of shareholders, the officer
forthwith shall cause notice to be given to the shareholders entitled to vote
that a meeting will be held at a time requested by the person or persons calling
the meeting, not less than 35 nor more than 60 days after the receipt of the
request. If the notice is not given within 20 days after receipt of the
request, the persons entitled to call the meeting may give the notice.
(d) Notice of Meetings. Notice of any shareholders' meeting shall be given
------------------
not less than 10 nor more than 60 days before the date of the meeting to each
shareholder entitled to vote thereat. Such notice shall state the place, date
and hour of the meeting and (i) in the case of a special meeting, the general
nature of the business to be transacted, and no other business may be
transacted, or (ii) in the case of the annual meeting, those matters which the
Board, at the time of the giving of the notice, intends to present for action by
the shareholders. The notice of any meeting at which directors are to be
elected shall include the names of nominees intended at the time of the notice
to be presented by the board for election.
If action is proposed to be taken at any meeting, which action is
within Sections 310, 902, 1201, 1900 or 2007 of the General Corporation Law of
the State of California, the notice shall also state the general nature of that
proposal.
Notice of a shareholders' meeting shall be given either personally or
by first-class mail, or other means of written communication, charges prepaid,
addressed to the shareholder at the address of such shareholder appearing on the
books of the corporation or given by the shareholder to the corporation for the
purpose of notice; or if no such address appears or is given, at the place where
the principal executive office of the corporation is located or by publication
at least once in a newspaper of general circulation in the county in which the
principal executive office is located. The notice shall be deemed to have been
given at the time when delivered personally or deposited in the mail or sent by
other means of written communication. An affidavit of mailing of any notice
executed by the secretary, assistant secretary or any transfer agent, shall be
prima facie evidence of the giving of the notice.
(e) Adjourned Meeting and Notice Thereof. Any meeting of shareholders may
------------------------------------
be adjourned from time to time by the vote of a majority of the shares
represented either in person or by proxy whether or not a quorum is present.
When a shareholders' meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the
-2-
<PAGE>
corporation may transact any business which might have been transacted at the
original meeting. However, if the adjournment is for more than 45 days or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.
(f) Waiver of Notice. The transactions of any meeting of shareholders,
----------------
however called and noticed, and wherever held, are as valid as though had at a
meeting duly held after regular call and notice, if a quorum is present either
in person or by proxy, and if, either before or after the meeting, each of the
persons entitled to vote, not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of the meeting or an approval of
the minutes thereof. The waiver of notice or consent need not specify either
the business to be transacted or the purpose of any annual or special meeting of
shareholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in the second paragraph of
subparagraph (d) of Section 2.01 of this Article II, the waiver of notice or
consent shall state the general nature of the proposal. All such waivers,
consents and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
(g) Quorum. The presence in person or by proxy of the persons entitled to
------
vote a majority of the shares entitled to vote at any meeting shall constitute a
quorum for the transaction of business. If a quorum is present, the affirmative
vote of the majority of the shares represented and voting at the meeting (which
shares voting affirmatively also constitute at least a majority of the required
quorum) shall be the act of the shareholders, unless the vote of a greater
number or voting by classes is required by law or the Articles of Incorporation
of the corporation.
The shareholders present at a duly called or held meeting at which a
quorum is present may continue to transact business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum, provided that any action taken (other than adjournment) must be approved
by at least a majority of the shares required to constitute a quorum.
Section 2.02 Action Without a Meeting. Any action which may be taken at any
- --------------------------------------
annual or special meeting of shareholders may be taken without a meeting and
without prior notice, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding shares having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Notwithstanding the foregoing, directors may not be elected by
-3-
<PAGE>
written consent except by unanimous written consent of all shares entitled to
vote for the election of directors, except as provided by Section 3.04 hereof.
Where the approval of shareholders is given without a meeting by less than
unanimous written consent, unless the consents of all shareholders entitled to
vote have been solicited in writing, the secretary shall give prompt notice of
the corporate action approved by the shareholders without a meeting. In the
case of approval of transactions pursuant to Section 310, 317, 1201 or 2007 of
the General Corporation Law of the State of California, the notice shall be
given at least ten (10) days before the consummation of any action authorized by
that approval. Such notice shall be given in the same manner as notice of
shareholders' meeting.
Section 2.03 Voting of Shares.
- ------------------------------
(a) In General. Except as otherwise provided in the Articles of
----------
Incorporation and subject to subparagraph (b) hereof, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of shareholders.
(b) Cumulative Voting. At any election of directors, every shareholder
-----------------
complying with this paragraph (b) and entitled to vote may cumulate his or her
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the shareholder's
shares are entitled, or distribute the shareholder's votes on the same principle
among as many candidates as the shareholder thinks fit. No shareholder shall be
entitled to cumulate votes (i.e., cast for any one or more candidates a number
of votes greater than the number of votes which such shareholder normally is
entitled to cast) unless such candidate or candidates' names have been placed
in nomination prior to the voting and the shareholder has given notice at the
meeting prior to the voting of the shareholder's intention to cumulate the
shareholder's votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. In any
election of directors, the candidates receiving the highest number of
affirmative votes up to the number of directors to be elected by such shares are
elected; votes against a director and votes withheld shall have no legal effect.
(c) Election by Ballot. Elections for directors need not be by ballot
------------------
unless a shareholder demands election by ballot at the meeting and before the
voting begins.
Section 2.04 Proxies. Every person entitled to vote shares may authorize
- ---------------------
another person or persons to act by proxy with respect to such shares. No proxy
shall be valid after the expiration of 11 months from the date thereof unless
otherwise
-4-
<PAGE>
provided in the proxy. Every proxy continues in full force and effect until
revoked by the person executing it prior to the vote pursuant thereto, except as
otherwise herein provided. Such revocation may be effected by a writing
delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by the person executing the prior proxy and presented
to the meeting, or as to any meeting by attendance at such meeting and voting in
person by the person executing the proxy. The dates contained on the forms of
proxy presumptively determine the order of execution, regardless of the postmark
dates on the envelopes in which they are mailed. A proxy is not revoked by the
death or incapacity of the maker unless, before the vote is counted, written
notice of such death or incapacity is received by the corporation. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Sections 705(e) and 705(f) of the California
General Corporation Law.
Section 2.05 Inspectors of Election.
- ------------------------------------
(a) Appointment. In advance of any meeting of shareholders the Board may
-----------
appoint inspectors of election to act at the meeting and any adjournment
thereof. If inspectors of election are not so appointed, or if any persons so
appointed fail to appear or refuse to act, the chairman of any meeting of
shareholders may, and on the request of any shareholder or a shareholder's proxy
shall, appoint inspectors of election (or persons to replace those who so fail
or refuse) at the meeting. The number of inspectors shall be either one or
three. If appointed at a meeting on the request of one or more shareholders or
proxies, the majority of shares represented in person or by proxy shall
determine whether one or three inspectors are to be appointed.
(b) Duties. The inspectors of election shall determine the number of
------
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum and the authenticity, validity and effect of
proxies, receive votes, ballots or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. The inspectors of election shall perform
their duties impartially, in good faith, to the best of their ability and as
expeditiously as is practical. If there are three inspectors of election, the
decision, act or certificate of a majority is effective in all respects as the
decision, act or certificate of all. Any report or certificate made by the
inspectors of election is prima facie evidence of the facts stated therein.
-5-
<PAGE>
Section 2.06 Record Date. In order that the corporation may determine the
- -------------------------
shareholders entitled to notice of any meeting or to vote or entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any other lawful action, the Board
may fix, in advance, a record date, which shall not be more than 60 nor less
than 10 days prior to the date of such meeting nor more than 60 days prior to
any other action. If no record date is fixed:
(1) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held.
(2) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board has been taken, shall be the day on which the first written consent
is given.
(3) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the board adopts the
resolution relating thereto, or the 60th day prior to the date of such other
action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless
the board fixes a new record date for the adjourned meeting, but the board shall
fix a new record date if the meeting is adjourned for more than 45 days from the
date set for the original meeting.
Shareholders at the close of business on the record date are entitled to
notice and to vote or to receive the dividend, distribution or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date,
except as otherwise provided in the Articles of Incorporation or by agreement or
in the California General Corporation Law.
Section 2.07 Share Certificates.
- --------------------------------
(a) In General. The corporation shall issue a certificate or certificates
----------
representing shares of its capital stock. Each certificate so issued shall be
signed in the name of the corporation by the chairman or vice chairman of the
board or the president or a vice president and by the chief financial officer or
an assistant treasurer or the secretary or any assistant secretary, shall state
the name of the record owner thereof and shall certify the number of shares and
the
-6-
<PAGE>
class or series of shares represented thereby. Any or all of the signatures on
the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
(b) Two or More Classes or Series. If the shares of the corporation are
-----------------------------
classified or if any class of shares has two or more series, there shall appear
on the certificate one of the following:
(1) A statement of the rights, preferences, privileges, and
restrictions granted to or imposed upon the respective classes or series of
shares authorized to be issued and upon the holders thereof; or
(2) A summary of such rights, preferences, privileges and restrictions
with reference to the provisions of the Articles of Incorporation and any
certificates of determination establishing the same; or
(3) A statement setting forth the office or agency of the corporation
from which shareholders may obtain upon request and without charge, a copy of
the statement referred to in subparagraph (1).
(c) Special Restrictions. There shall also appear on the certificate
--------------------
(unless stated or summarized under subpara graph (1) or (2) of subparagraph (b)
above) the statements required by all of the following clauses to the extent
applicable:
(1) The fact that the shares are subject to restrictions upon
transfer.
(2) If the shares are assessable, a statement that they are
assessable.
(3) If the shares are not fully paid, a statement of the total
consideration to be paid therefor and the amount paid thereon.
(4) The fact that the shares are subject to a voting agreement or an
irrevocable proxy or restrictions upon voting rights contractually imposed by
the corporation.
(5) The fact that the shares are redeemable.
(6) The fact that the shares are convertible and the period for
conversion.
-7-
<PAGE>
Section 2.08 Transfer of Certificates. Where a certificate for shares is
- --------------------------------------
presented to the corporation or its transfer clerk or transfer agent with a
request to register a transfer of shares, the corporation shall register the
transfer, cancel the certificate presented, and issue a new certificate if: (a)
the security is endorsed by the appropriate person or persons; (b) reasonable
assurance is given that those endorsements are genuine and effective; (c) the
corporation has no notice of adverse claims or has discharged any duty to
inquire into such adverse claims; (d) any applicable law relating to the
collection of taxes has been complied with; (e) the transfer is not in violation
of any federal or state securities law; and (f) the transfer is in compliance
with any applicable agreement governing the transfer of the shares.
Section 2.09 Lost Certificates. Where a certificate has been lost, destroyed
- -------------------------------
or wrongfully taken, the corporation shall issue a new certificate in place of
the original if the owner: (a) so requests before the corporation has notice
that the certificate has been acquired by a bona fide purchaser; (b) files with
the corporation a sufficient indemnity bond, if so requested by the Board of
Directors; and (c) satisfies any other reasonable requirements as may be imposed
by the Board. Except as above provided, no new certificate for shares shall be
issued in lieu of an old certificate unless the corporation is ordered to do so
by a court in the judgment in an action brought under Section 419(b) of the
California General Corporation Law.
ARTICLE III. DIRECTORS
-----------------------
Section 3.01 Powers. Subject to the provisions of the California General
- --------------------
Corporation Law and the Articles of Incorporation, the business and affairs of
the corporation shall be managed and all corporate powers shall be exercised by
or under the direction of the Board of Directors. The Board may delegate the
management of the day-to-day operations of the business of the corporation to a
management company or other person provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board.
Section 3.02 Committees of the Board. The Board may, by resolution adopted by
- -------------------------------------
a majority of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve at the pleasure
of the Board. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent member at any meeting of
the committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any such
committee, to the extent provided in the resolution of the
-8-
<PAGE>
Board, shall have all the authority of the Board, except with respect to:
(1) The approval of any action which also requires, under the
California General Corporation Law, shareholders' approval or approval of the
outstanding shares;
(2) The filling of vacancies on the Board or in any committee.
(3) The fixing of compensation of the directors for serving on the
Board or on any committee.
(4) The amendment or repeal of bylaws or the adoption of new bylaws.
(5) The amendment or repeal of any resolution of the Board which by
its express terms is not so amendable or repealable.
(6) A distribution (within the meaning of the California General
Corporation Law) to the shareholders of the corporation, except at a rate or in
a periodic amount or within a price range determined by the Board.
(7) The appointment of other committees of the Board or the members
thereof.
Section 3.03 Election and Term of Office. The directors shall be elected at
- -----------------------------------------
each annual meeting of shareholders but, if any such annual meeting is not held
or the directors are not elected thereat, the directors may be elected at any
special meeting of shareholders held for that purpose. Each director, including
a director elected to fill a vacancy, shall hold office until the expiration of
the term for which elected and until a successor has been elected and qualified.
Section 3.04 Vacancies. Except for a vacancy created by the removal of a
- -----------------------
director, vacancies on the Board may be filled by approval of the Board or, if
the number of directors then in office is less than a quorum, by (a) the
unanimous written consent of the directors then in office, (b) the affirmative
vote of a majority of the directors then in office at a meeting held pursuant to
notice or waivers of notice under the California General Corporation Law, or (c)
a sole remaining director. The shareholders may elect a director or directors
at any time to fill any vacancy or vacancies not filled by the directors, but
any such election by written consent requires the consent of a majority of the
outstanding shares entitled to vote.
The Board of Directors shall have the power to declare vacant the office of
a director who has been declared of unsound mind by an order of court, or
convicted of a felony.
-9-
<PAGE>
Section 3.05 Removal. Any or all of the directors may be removed without
---------------------
cause if such removal is approved by the vote of a majority of the outstanding
shares entitled to vote, except that no director may be removed (unless the
entire board is removed) when the votes cast against removal, or not consenting
in writing to such removal, would be sufficient to elect such director if voted
cumulatively at an election at which the same total number of votes were cast
(or, if such action is taken by written consent, all shares entitled to vote
were voted) and the entire number of directors authorized at the time of the
director's most recent election were then being elected.
Section 3.06 Resignation. Any director may resign effective upon giving
- -------------------------
written notice to the chairman of the board, the president, the secretary or the
Board of Directors of the corporation, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective.
Section 3.07 Meetings of the Board of Directors and Committees.
- ---------------------------------------------------------------
(a) Regular Meetings. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and place within or without the State as may be
designated from time to time by resolution of the Board or by written consent of
all members of the Board or in these bylaws.
(b) Organization Meeting. Immediately following each annual meeting of
--------------------
shareholders the Board of Directors shall hold a regular meeting for the purpose
of organization, election of officers, and the transaction of other business.
Notice of such meetings is hereby dispensed with.
(c) Special Meetings. Special meetings of the Board of Directors for any
----------------
purpose or purposes may be called at any time by the chairman of the board or
the president or, by any vice president or the secretary or any two directors.
(d) Notices; Waivers. Special meetings shall be held upon four days'
----------------
notice by mail or forty-eight hours' notice delivered personally or by telephone
or telegraph. Notice of a meeting need not be given to any director who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
-10-
<PAGE>
(e) Adjournment. A majority of the directors present, whether or not a
-----------
quorum is present, may adjourn any meeting to another time and place. If the
meeting is adjourned for more than 24 hours, notice of such adjournment to
another time and place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of adjournment.
(f) Place of Meeting. Meetings of the Board may be held at any place
----------------
within or without the state which has been designated in the notice of the
meeting or, if not stated in the notice or there is no notice, then such meeting
shall be held at the principal executive office of the corporation, or such
other place designated by resolution of the Board.
(g) Presence by Conference Telephone Call. Members of the Board may
-------------------------------------
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Such participation constitutes presence in person at
such meeting.
(h) Quorum. A majority of the authorized number of directors constitutes a
------
quorum of the Board for the transaction of business. Every act or decision done
or made by a majority of the directors present at a meeting duly held at which a
quorum is present is the act of the Board of Directors, unless a greater number
be required by law or by the Articles of Incorporation. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, if any action taken is approved by at least a
majority of the required quorum for such meeting.
Section 3.08 Action Without Meeting. Any action required or permitted to be
- ------------------------------------
taken by the Board of Directors, may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such directors.
Section 3.09 Committee Meetings. The provisions of Sections 3.07 and 3.08 of
- --------------------------------
these bylaws apply also to committees of the Board and action by such
committees, mutatis mutandis.
ARTICLE IV. OFFICERS
---------------------
Section 4.01 Officers. The officers of the corporation shall consist of a
- ----------------------
chairman of the board or a president, or both, a secretary, a chief financial
officer, and such additional officers as may be elected or appointed in
accordance with Section 4.03 of these bylaws and as may be necessary to enable
-11-
<PAGE>
the corporation to sign instruments and share certificates. Any number of
offices may be held by the same person.
Section 4.02 Elections. All officers of the corporation, except such officers
- -----------------------
as may be otherwise appointed in accordance with Section 4.03, shall be chosen
by the Board of Directors, and shall serve at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any contract of
employment.
Section 4.03 Other Officers. The Board of Directors, the chairman of the
- ----------------------------
board, or the president at their or his discretion, may appoint one or more vice
presidents, one or more assistant secretaries, a treasurer, one or more
assistant treasurers, or such other officers as the business of the corporation
may require, each of whom shall hold office for such period, have such authority
and perform such duties as the Board of Directors, the chairman of the board,
or the president, as the case may be, may from time to time determine.
Section 4.04 Removal. Subject to the rights, if any, of an officer under any
- ---------------------
contract of employment, any officer may be removed, either with or without
cause, by the Board of Directors, or, except in case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors, without prejudice to the rights, if any, of
the corporation under any contract to which the officer is a party.
Section 4.05 Resignation. Any officer may resign at any time by giving written
- -------------------------
notice to the Board of Directors or to the president, or to the secretary of the
corporation without prejudice to the rights, if any, of the corporation under
any contract to which the officer is a party. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4.06 Vacancies. A vacancy in any office because of death, resignation,
- -----------------------
removal, disqualification or any other cause shall be filled in the manner
prescribed in these bylaws for regular appointments to such office.
Section 4.07 Chairman of the Board. The chairman of the board, if there shall
- -----------------------------------
be such an officer, shall, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors. If there is no
president, the chairman of the board shall in addition be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 4.08 below.
-12-
<PAGE>
Section 4.08 President. Subject to such supervisory powers, if any, as may be
- -----------------------
given by the Board of Directors to the chairman of the board, if there be such
an officer, the president shall be general manager and chief executive officer
of the corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and affairs of
the corporation. He shall preside at all meetings of the shareholders and, in
the absence of the chairman of the board, or if there be none, at all meetings
of the Board of Directors. He shall be ex-officio a member of all the standing
committees, including the executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these bylaws.
Section 4.09 Vice President. In the absence of the president or in the event
- ----------------------------
of the president's inability or refusal to act, the vice president, or in the
event there be more than one vice president, the vice president designated by
the Board of Directors, or if no such designation is made, in order of their
election, shall perform the duties of president and when so acting, shall have
all the powers of and be subject to all the restrictions upon the president.
Any vice president shall perform such other duties as from time to time may be
assigned to such vice president by the president or the Board of Directors.
Section 4.10 Secretary. The secretary shall keep or cause to be kept the
- -----------------------
minutes of proceedings and record of shareholders, as provided for and in
accordance with Section 5.01(a) of these bylaws.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these bylaws or by
law to be given, and shall have such other powers and perform such other duties
as may be prescribed by the Board of Directors.
Section 4.11 Chief Financial Officer. The chief financial officer shall have
- -------------------------------------
general supervision, direction and control of the financial affairs of the
corporation and shall have such other powers and duties as may be prescribed by
the Board of Directors or these bylaws. In the absence of a named treasurer,
the chief financial officer shall also have the powers and duties of the
treasurer as hereinafter set forth and shall be authorized and empowered to sign
as treasurer in any case where such officer's signature is required.
Section 4.12 Treasurer. The treasurer shall keep or cause to be kept the books
- -----------------------
and records of account as provided for and in accordance with Section 5.01(a) of
these bylaws. The books
-13-
<PAGE>
of account shall at all reasonable times be open to inspection by any director.
The treasurer shall deposit all moneys and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or these bylaws. In the absence of a named chief financial officer,
the treasurer shall be deemed to be the chief financial officer and shall have
the powers and duties of such office as hereinabove set forth.
ARTICLE V. MISCELLANEOUS
-------------------------
Section 5.01 Records and Reports.
- ---------------------------------
(a) Books of Account and Proceedings. The corporation shall keep adequate
--------------------------------
and correct books and records of account and shall keep minutes of the
proceedings of its shareholders, Board and committees of the board and shall
keep at its principal executive office, or at the office of its transfer agent
or registrar, a record of its shareholders, giving the names and addresses of
all shareholders and the number and class of shares held by each. Such minutes
shall be kept in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
(b) Annual Report. An annual report to shareholders referred to in Section
-------------
1501 of the California General Corporation Law is expressly dispensed with, but
nothing herein shall be interpreted as prohibiting the Board of Directors from
issuing annual or other periodic reports to the shareholders of the corporation
as they consider appropriate.
(c) Shareholders' Requests for Financial Reports. If no annual report for
--------------------------------------------
the last fiscal year has been sent to shareholders, the corporation shall, upon
the written request of any shareholder made more than 120 days after the close
of that fiscal year, deliver or mail to the person making the request within 30
days thereafter the financial statements for that year required by Section
1501(a) of the California General Corporation Law. Any shareholder or
shareholders holding at least 5 percent of the outstanding shares of any class
of this corporation may make a written request to the corporation for an income
statement of the corporation for the three-month, six-month or nine-month period
of the current fiscal year ended more than 30 days prior to the date of the
request and a balance sheet of the corporation as of the end
-14-
<PAGE>
of such period, and the corporation shall deliver or mail the statements to the
person making the request within 30 days thereafter. A copy of the statements
shall be kept on file in the principal office of the corporation for 12 months
and they shall be exhibited at all reasonable times to any shareholder demanding
an examination of them or a copy shall be mailed to such shareholder upon
demand.
Section 5.02 Rights of Inspection.
- ----------------------------------
(a) By Shareholders.
---------------
(1) Record of Shareholders. Any shareholder or shareholders holding
----------------------
at least 5 percent in the aggregate of the outstanding voting shares of the
corporation or who hold at least 1% of such voting shares and have filed a
Schedule 14B with the United States Securities and Exchange Commission relating
to the election of directors of the corporation shall have an absolute right to
do either or both of the following: (i) inspect and copy the record of
shareholders' names and addresses and shareholdings during usual business hours
upon five business days' prior written demand upon the corporation, or (ii)
obtain from the transfer agent for the corporation, upon written demand and upon
the tender of its usual charges for such a list (the amount of which charges
shall be stated to the shareholder by the transfer agent upon request), a list
of the shareholders' names and addresses, who are entitled to vote for the
election of directors, and their shareholdings, as of the most recent record
date for which it has been compiled or as of a date specified by the shareholder
subsequent to the date of demand. The list shall be made available on or before
the later of five business days after demand is received or the date specified
therein as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection and
copying by any shareholder or holder of a voting trust certificate at any time
during usual business hours upon written demand on the corporation, for a
purpose reasonably related to such holder's interests as a shareholder or holder
of a voting trust certificate.
(2) Corporate Records. The accounting books and records and minutes
-----------------
of proceedings of the shareholders and the Board and committees of the board
shall be open to inspection upon the written demand on the corporation of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours, for a purpose reasonably related to such holder's
interests as a shareholder or as the holder of such voting trust certificate.
This right of inspection shall also extend to the records of any subsidiary of
the corporation.
-15-
<PAGE>
(3) Bylaws. The corporation shall keep at its principal executive
------
office in this state, the original or a copy of its bylaws as amended to date,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
(b) By Directors. Every director shall have the absolute right at any
------------
reasonable time to inspect and copy all books, records and documents of every
kind and to inspect the physical properties of the corporation of which such
person is a director and also of its subsidiary corporations, domestic or
foreign. Such inspection by a director may be made in person or by agent or
attorney and the right of inspection includes the right to copy and make
extracts.
Section 5.03 Checks, Drafts, Etc. All checks, drafts or other orders for
- ---------------------------------
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board of Directors.
Section 5.04 Representation of Shares of Other Corporations. The chairman of
- ------------------------------------------------------------
the board, if any, president or any vice president of this corporation, or any
other person authorized to do so by the chairman of the board, president or any
vice president, is authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any other person
authorized so to do by proxy or power of attorney duly executed by said
officers.
Section 5.05 Indemnification and Insurance.
- -------------------------------------------
(a) Right to Indemnification. Each person who was or is made a party to or
------------------------
is threatened to be made a party to or is involuntarily involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "Proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the corporation or is or was serving (during such person's tenure as director
or officer) at the request of the corporation, any other corporation,
partnership, joint venture, trust or other enterprise in any capacity, whether
the basis of a Proceeding is an alleged action in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, shall be indemnified and held harmless by the corporation to the
fullest extent authorized by California
-16-
<PAGE>
General Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the corporation to provide broader indemnification rights than said law
permitted the corporation to provide prior to such amendment), against all
expenses, liability and loss (including attorneys' fees, judgments, fines, or
penalties and amounts to be paid in settlement) reasonably incurred or suffered
by such person in connection therewith. The right to indemnification conferred
in this Section shall be a contract right and shall include the right to be paid
by the corporation the expenses incurred in defending a Proceeding in advance of
its final disposition; provided, however, that, if California General
Corporation Law requires, the payment of such expenses in advance of the final
disposition of a Proceeding shall be made only upon receipt by the corporation
of an undertaking by or on behalf of such director or officer to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section or otherwise. No
amendment to or repeal of this Section 5.05 shall apply to or have any effect on
any right to indemnification provided hereunder with respect to any acts or
omissions occurring prior to such amendment or repeal.
(b) Right of Claimant to Bring Suit. If a claim for indemnity under
-------------------------------
paragraph (a) of this Section is not paid in full by the corporation within
ninety (90) days after a written claim has been received by the corporation, the
claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall also be entitled to be paid the expense of prosecuting such
claim including reasonable attorneys' fees incurred in connection therewith. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending a Proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the corporation) that the claimant has not met the standards of
conduct which make it permissible under California General Corporation Law for
the corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the corporation. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
California General Corporation Law, nor an actual determination by the
corporation (including its Board of Directors, independent legal counsel, or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
-17-
<PAGE>
(c) Non-Exclusivity of Rights. The rights conferred in this Section shall
-------------------------
not be exclusive of any other rights which any director, officer, employee or
agent may have or hereafter acquire under any statute, provision of the Articles
of Incorporation, bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, to the extent the additional rights to indemnification
are authorized in the Articles of Incorporation of the corporation.
(d) Insurance. In furtherance and not in limitation of the powers
---------
conferred by statute:
(1) the corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or is serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether or not
the corporation would have the power to indemnify the person against that
expense, liability or loss under the California General Corporation Law.
(2) the corporation may create a trust fund, grant a security interest
and/or use other means (including, without limitation, letters of credit, surety
bonds and/or other similar arrangements), as well as enter into contracts
providing indemnification to the full extent authorized or permitted by law and
including as part thereof provisions with respect to any or all of the foregoing
to ensure the payment of such amounts as may become necessary to effect
indemnification as provided therein, or elsewhere.
(e) Indemnification of Employees and Agents of the Corporation. The
----------------------------------------------------------
corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, including the right to be paid by
the corporation the expenses incurred in defending a Proceeding in advance of
its final disposition, to any employee or agent of the corporation to the
fullest extent of the provisions of this Section or otherwise with respect to
the indemnification and advancement of expenses of directors and officers of the
corporation.
Section 5.06 Employee Stock Purchase Plans. The corporation may adopt and
- -------------------------------------------
carry out a stock purchase plan or agreement or stock option plan or agreement
providing for the issue and sale for such consideration as may be fixed of its
unissued shares, or of issued shares acquired or to be acquired, to one or more
of the employees or directors of the corporation or of a subsidiary or to a
trustee on their behalf and for the payment for such shares in installments or
at one time, and may provide for aiding any such persons in paying for such
-18-
<PAGE>
shares by compensation for services rendered, promissory notes or otherwise.
A stock purchase plan or agreement or stock option plan or agreement may
include, among other features, the fixing of eligibility for participation
therein, the class and price of shares to be issued or sold under the plan or
agreement, the number of shares which may be subscribed for, the method of
payment therefor, the reservation of title until full payment therefor, the
effect of the termination of employment, an option or obligation on the part of
the corporation to repurchase the shares upon termination of employment, subject
to the provisions of the California General Corporation Law, restrictions upon
transfer of the shares and the time limits of and termination of the plan.
Section 5.07 Construction and Definitions. Unless the context otherwise
- ------------------------------------------
requires, the general provisions, rules of construction and definitions
contained in the California General Corporation Law shall govern the
construction of these bylaws. Without limiting the generality of the foregoing,
the masculine gender includes the feminine and neuter, the singular number
includes the plural and the plural number includes the singular, and the term
"person" includes a corporation as well as a natural person.
ARTICLE VI. AMENDMENTS
-----------------------
Section 6.01 Power of Shareholders. New bylaws may be adopted or these bylaws
- -----------------------------------
may be amended or repealed by the vote of shareholders entitled to exercise a
majority of the voting power of the corporation or by the written assent of such
shareholders, except as otherwise provided by law or by the Articles of
Incorporation.
Section 6.02 Power of Directors. Subject to the right of shareholders as
- --------------------------------
provided in Section 6.01 to adopt, amend or repeal bylaws, any bylaw may be
adopted, amended or repealed by the Board of Directors other than a bylaw or
amendment thereof changing the authorized number of directors, if such number is
fixed, or the maximum-minimum limits thereof, if an indefinite number.
-19-
<PAGE>
The undersigned, as the incorporator of HP/Compton, Inc. hereby adopts the
foregoing bylaws as the bylaws of said corporation.
Dated as of July 21, 1995.
______________________________
S. A. Morgan, Incorporator
The undersigned, being the Sole Director of HP/Compton, Inc. hereby adopts
the foregoing bylaws as the bylaws of said corporation.
Dated as of July 21, 1995.
_____________________________
R. D. Hubbard, Director
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting Secretary of HP/Compton,
Inc. and that the foregoing bylaws were adopted as the bylaws of said
corporation as of the 21st day of July 1995, by the Sole Director of said
corporation.
Dated as of July 21, 1995.
_____________________________
Donald Robbins, Secretary
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<PAGE>
TABLE OF CONTENTS
- -----------------
Page
----
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ARTICLE I. GENERAL PROVISIONS 1
Section 1.01 Principal Executive Office 1
Section 1.02 Number of Directors 1
ARTICLE II. SHARES AND SHAREHOLDERS 1
Section 2.01 Meetings of Shareholders 1
(a) Place of Meetings 1
(b) Annual Meetings 1
(c) Special Meetings 1
(d) Notice of Meetings
(e) Adjourned Meeting and Notice
Thereof 2
(f) Waiver of Notice 3
(g) Quorum 3
Section 2.02 Action Without a Meeting 3
Section 2.03 Voting of Shares 4
(a) In General 4
(b) Cumulative Voting 4
(c) Election by Ballot 4
Section 2.04 Proxies 4
Section 2.05 Inspectors of Election 5
(a) Appointment 5
(b) Duties 5
Section 2.06 Record Date.. 6
Section 2.07 Share Certificates 6
(a) In General 6
</TABLE>
-21-
<PAGE>
<TABLE>
<S> <C> <C> <C>
(b) Two or More Classes or Series 7
(c) Special Restrictions 7
Section 2.08 Transfer of Certificates 8
Section 2.09 Lost Certificates 8
Section 3.01 Powers 8
Section 3.02 Committees of the Board 8
Section 3.03 Election and Term of Office 9
Section 3.04 Vacancies.... 9
Section 3.05 Removal 10
Section 3.06 Resignation.. 10
Section 3.07 Meetings of the Board of
Directors and Committees.....
(a) Regular Meetings 10
(b) Organization Meeting 10
(c) Special Meetings 10
(d) Notices; Waivers 10
(e) Adjournment 11
(f) Place of Meeting 11
(g) Presence by Conference Telephone Call 11
(h) Quorum 11
Section 3.08 Action Without Meeting 11
Section 3.09 Committee Meetings 11
ARTICLE IV. OFFICERS....... 11
Section 4.01 Officers 11
Section 4.02 Elections.... 12
Section 4.03 Other Officers 12
</TABLE>
-22-
<PAGE>
<TABLE>
<S> <C>
Section 4.04 Removal........... 12
Section 4.05 Resignation.. 12
Section 4.06 Vacancies.... 12
Section 4.07 Chairman of the Board 12
Section 4.08 President.... 13
Section 4.09 Vice President 13
Section 4.10 Secretary.... 13
Section 4.11 Chief Financial Officer 13
Section 4.12 Treasurer.... 13
ARTICLE V. MISCELLANEOUS... 14
Section 5.01 Records and Reports 14
(a) Books of Account and Proceedings 14
(b) Annual Report 14
(c) Shareholders' Requests for
Financial Reports............ 14
Section 5.02 Rights of Inspection 15
(a) By Shareholders 15
(1) Record of Shareholders 15
(2) Corporate Records 15
(3) Bylaws 16
(b) By Directors 16
Section 5.03 Checks, Drafts, Etc 16
Section 5.04 Representation of Shares of
Other Corporations........... 16
Section 5.05 Indemnification and
Insurance.................... 16
(a) Right to Indemnification 16
(b) Right of Claimant to Bring Suit 17
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
(c) Non-Exclusivity of Rights 18
(d) Insurance 18
(e) Indemnification of Employees and
Agents of the Corporation 18
Section 5.06 Employee Stock Purchase
Plans........................ 18
Section 5.07 Construction and
Definitions.................. 19
ARTICLE VI. AMENDMENTS..... 19
Section 6.01 Power of Shareholders 19
Section 6.02 Power of Directors 19
</TABLE>
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<PAGE>
EXHIBIT 3.11
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
SPACE ABOVE THIS LINE FOR RECORDER'S USE
================================================================================
STATE OF CALIFORNIA
BILL JONES
SECRETARY OF STATE
SACRAMENTO
I, BILL JONES, Secretary of State of California, hereby certify:
That the annexed transcript of 1 page(s) was prepared by and in this
_____
office from the record on file, of which it purports to be a copy, and that it
is full, true and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California
JUL 30, 1997
--------------------------
Secretary of State
===============================================================================
<PAGE>
STATE OF CALIFORNIA
BILL JONES
SECRETARY OF STATE
LLC-1
LIMITED LIABILITY COMPANY
ARTICLES OF ORGANIZATION
IMPORTANT - Read the instructions before completing the form.
---------
This document is presented for filing pursuant to Section 17050 of the
California Corporations Code.
- -------------------------------------------------------------------------------
1. Limited liability company name:
(End the name with "LLC" or "Limited Liability Company". No periods between
the letters in "LLC". "Limited" and "Company" may be abbreviated to "Ltd."
and "Co.")
Crystal Park Hotel and Casino Development Company, LLC
- -------------------------------------------------------------------------------
2. Latest date (month/day/year) on which the limited liability company is to
dissolve:
December 31, 2026
- -------------------------------------------------------------------------------
3. The purpose of the limited company is to engage in any lawful act or
activity for which a limited liability company may be organized under the
Beverly-Killea Limited Liability Company Act.
- -------------------------------------------------------------------------------
4. Enter the name of initial agent for service of process and check the
appropriate provision below:
G. Michael Finnigan , which is
------------------------------------------------------------------
[ X ] an individual residing in California, Proceed to Item 5.
[ ] a corporation which has filed a certificate pursuant to Section
1505 of the California Code. Skip Item 5 and proceed to Item 6.
- --------------------------------------------------------------------------------
5. If the initial agent for service of process is an individual, enter a
business or residential street address in California:
Street address: 1050 South Prairie Avenue
City: Inglewood State: CALIFORNIA Zip Code: 90301
- --------------------------------------------------------------------------------
6. The limited liability company will be managed by: (check one)
[ X ] one manager [ ] more than one manager [ ] limited liability
company members
- --------------------------------------------------------------------------------
7. If other matters are to be included in the Articles of Organization attach
one or more separate pages.
Number of pages attached, if any: -0-
- --------------------------------------------------------------------------------
8. It is hereby declared that I am the person who
executed this instrument, which execution is
my act and deed.
--------------------------------------------------
Signature of organizer
Joan L. Lesser
--------------------------------------------------
Type or print name of organizer
Date: May 28 , 19 96
------------------------------------ -----
- --------------------------------------------------------------------------------
101996150023
FILED; REGISTRN/ARTICLES OF ORG.
AT SACRAMENTO, CA ON MAY 29, 1996
SECRETARY OF STATE OF CALIFORNIA
- --------------------------------------------------------------------------------
LLC-1 Approved by the Secretary of State
Filing Fee $70 1/96
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 3.12
OPERATING AGREEMENT
FOR
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT
COMPANY, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER
APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT
REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS AGREEMENT IS
FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS AND CONDITIONS WHICH ARE SET FORTH
HEREIN.
<PAGE>
OPERATING AGREEMENT
FOR
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
This Operating Agreement is made as of July 18, 1996, by and among
HP/COMPTON, INC., a California corporation ("HPC"), REDWOOD GAMING LLC, a
California limited liability company ("DeBartolo") and FIRST PARK INVESTMENTS,
LLC, a California limited liability company ("Chu"), with reference to the
following facts:
A. Compton Entertainment, Inc., a California corporation ("CEI") and
each of its officers, directors and shareholders has been licensed (the "City
License") by the City of Compton (the "City") to own and operate a card club
(the "Card Club") located in the area known as Alameda Auto Plaza in the City
(the "Card Club Site").
B. Pursuant to an Amended and Restated Agreement Respecting Pyramid
Casino by and between Hollywood Park, Inc., a Delaware corporation and the
parent corporation of HPC ("HPI"), on the one hand, and CEI and the principal
shareholder of CEI, Rouben Kandilian, on the other hand (the "Purchase
Agreement"), HPC (by assignment of HPI's rights thereunder) acquired CEI's
rights to the Card Club Site, including its rights under that certain Amended
and Restated Disposition and Development Agreement, Agreement of Purchase and
Sale, and Lease with Option to Purchase (the "DDA") with The Community
Redevelopment Agency of the City (the "Real Property Rights"), the plans and
specifications for the construction of the Card Club (the "Plans"), an option
(the "License Rights Option") to acquire the City License and all other assets
held by CEI pertaining to the Card Club.
C. Pursuant to the DDA, HPC has leased certain improvements on the Card
Club Site adjacent to the Card Club which HPC is obligated to remodel, furnish
and operate as a hotel (the "Hotel").
D. HPC and CEI have entered into a Lease of the Card Club, dated as of
August 3, 1995, with HPC as Landlord and CEI as Tenant (the "Lease"). Pursuant
to the Lease, HPC is to construct, develop and furnish the Card Club on the Card
Club Site pursuant to the Plans. Costs of construction, development and
furnishing of the Card Club and the Hotel and related start-up matters
(collectively, "Project Costs") are expected to be approximately $25,000,000,
including an aggregate $5,000,000 paid or to be paid by HPC to CEI for the Real
Property Rights, the Plans, the License Rights Option and the exercise price
-1-
<PAGE>
under the License Rights Option. HPC has expended approximately $9,200,000 to
date on Project Costs and related matters.
E. Section 5.4.1 of the Purchase Agreement provides that at such time
as HPI is licensed as an operator of the Card Club under applicable California
law and City ordinances, the Lease shall terminate and CEI and HPI shall enter
into a partnership agreement (or limited liability company operating agreement)
for the ownership and operation of the Card Club.
F. HPC, DeBartolo and Chu wish to form a limited liability company to
acquire all of HPC's rights to construct and own the Card Club, to acquire HPC's
rights under the Lease, the DDA and the Purchase Agreement and to enter into
this Agreement for the management and operation of the Company (as hereinafter
defined).
G. The Members have executed, and have filed or will cause to be filed
with the California Secretary of State, Articles of Organization ("Articles") of
Crystal Park Hotel and Casino Development Company, LLC, a California limited
liability company (the "Company"), pursuant to the provisions of California
Corporations Code, Title 2.5, also known as the Beverly-Killea Limited Liability
Company Act (the "Act").
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the Members (capitalized terms are generally defined in
Schedule I) by this Agreement set forth the operating agreement for the Company
- ----------
under the laws of the State of California.
ARTICLE 1
ORGANIZATIONAL MATTERS
1.1 FORMATION. Pursuant to the Act, the Members have formed a
---------
California limited liability company under the laws of the State of California
by filing the Articles with the California Secretary of State and entering into
this Agreement. The rights and liabilities of the Members shall be determined
pursuant to the Act and this Agreement. To the extent that the rights or
obligations of any Member are different by reason of any provision of this
Agreement than they would be in the absence of such provision, this Agreement
shall, to the extent permitted by the Act, control.
1.2 NAME. The name of the Company shall be "CRYSTAL PARK HOTEL AND
----
CASINO DEVELOPMENT COMPANY, LLC." The business of the Company may be conducted
under that name or, upon compliance with applicable laws, any other name that
the Manager deems appropriate or advisable. The Manager shall file any
fictitious name certificates and similar filings, and any
-2-
<PAGE>
amendments thereto, that the Manager considers appropriate or advisable.
1.3 TERM. The term of this Agreement shall be co-terminus with the
----
period of duration of the Company provided in the Articles, unless extended or
sooner terminated as hereinafter provided.
1.4 COMPANY PROPERTY. Pursuant to Section 21 hereof, the property of
----------------
the Company (the "Company Property") shall consist of all of HPC's interest in
the Card Club Site, including the Real Property Rights, the Card Club, the
License Rights Option, HPC's rights under the Purchase Agreement, the Lease, and
the DDA, and all other assets and properties, tangible and intangible, that are
hereafter acquired or received by the Company. No Member, individually, shall
have any ownership of the Company Property.
1.5 OFFICE AND AGENT. The Company shall continuously maintain an office
----------------
and registered agent in the State of California as required by the Act. The
principal office of the Company shall be as determined by the Manager. The
Company also may have such offices, anywhere within and without the State of
California, as the Manager from time to time may determine. The registered
agent shall be as stated in the Articles or as otherwise determined by the
Manager.
1.6 ADDRESSES OF THE MEMBERS. The respective names and addresses of the
------------------------
Members are set forth on Exhibit A. The Manager shall revise Exhibit A from
--------- ---------
time to time as changes in the information on that Exhibit occur.
1.7 PURPOSE OF COMPANY. The purpose of the Company is to engage in any
------------------
lawful activity for which a limited liability company may be organized under the
Act. Notwithstanding the foregoing, without the written consent of all of the
Members, the Company shall not engage in any business other than the following:
(a) The business of developing and owning the Card Club and, after
such time as applicable law is amended to permit public companies to operate
card clubs or HPI or HPC is otherwise legally permitted to operate the Card
Club, to obtain all necessary licenses and approvals for, and to transfer the
Company Assets to, Newco in accordance with the Purchase Agreement, with Newco
thereafter to own and operate the Card Club and to own, lease or operate or to
provide for the operation by others of the other Company Assets;
(b) The business of remodeling, furnishing and operating or
contracting for the operation of the Hotel;
(c) The business of acquiring the Card Club Site or other property
pursuant to the DDA and developing, constructing,
-3-
<PAGE>
operating, contracting for the operation of and/or leasing other improvements at
the Card Club Site or such other property as may be acquired and/or leased
pursuant to the DDA; and
(d) Such other activities directly related to the foregoing businesses
as may be necessary, advisable or appropriate to further the foregoing business.
In furtherance of this purpose, after such time as applicable law is amended to
permit public companies to operate card clubs or HPI or HPC is otherwise legally
permitted to operate the Card Club, each Member shall, and shall cause each
person or entity that has a direct or indirect interest in such Member and who
is required to apply for a license in order for the Company or Newco to acquire
a license to operate the Card Club to, apply to the appropriate governmental
authorities to obtain such licenses and approvals as are necessary for the
Company or Newco to obtain a license to operate the Card Club.
ARTICLE 2
CAPITAL CONTRIBUTIONS
2.1 INITIAL CAPITAL CONTRIBUTIONS. The Members shall make the following
-----------------------------
contributions to the Company ("Initial Capital Contributions"):
Chu $ 1,000,000
HPC $22,000,000
DeBartolo $ 2,000,000
Chu and DeBartolo shall contribute their Initial Capital Contributions in cash
on the effective date of this Agreement. HPC shall satisfy a portion of its
Initial Capital Contribution by assigning to the Company all of its right, title
and interest in and to the Card Club Site, including without limitation the Real
Property Rights and HPC's rights under the Purchase Agreement, the Lease and the
License Rights Option (together, the "Initial Card Club Assets"), upon approval
of such assignment by the City and CEI. The Company shall assume all of HPC's
obligations under or with respect to the Initial Card Club Assets, including
without limitation obligations under the agreements set forth in Schedule 2.1,
------------
and shall indemnify HPC and HPI and hold each of them harmless from and against
all losses, liabilities, costs and expenses with respect thereto (the "Card Club
Liabilities"). The parties agree that the net fair market value of the non-cash
assets contributed by HPC (i.e., the value of the Initial Card Club Assets minus
----
the value of the Card Club Liabilities) is equal to the amount of HPC's Initial
Expenses which, as of July 8, 1996, were approximately Nine Million Two Hundred
Thousand Dollars ($9,200,000), as shown on Schedule 6.5. HPC shall contribute,
------------
as and when required by
-4-
<PAGE>
the Company, cash of up to the difference between the Initial Expenses on the
date that the Initial Card Club Assets are assigned to the Company and Twenty-
Two Million Dollars ($22,000,000).
2.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as may be explicitly
--------------------------------
agreed in writing by the Member and the Company, no Member shall be required to
make any additional Capital Contributions. If the Manager notifies the Members,
from time to time upon at least twenty (20) days' prior written notice, that
additional Capital Contributions are necessary for (i) the acquisition,
development and construction of the Card Club and the remodeling and furnishing
of the Hotel and related activities in accordance with the Budget in effect from
time to time or (ii) the acquisition and/or leasing of the Card Club Site or
other property pursuant to the DDA or (iii) such improvements to the Card Club
Site or other property acquired and/or leased pursuant to the DDA as are agreed
upon by a Super Majority Interest or (iv) the payment of Card Club Liabilities
or (v) such additional expenses as may be incurred after such time as applicable
law is amended to permit public companies to operate card clubs or HPI or HPC is
otherwise legally permitted to operate the Card Club, in connection with the
formation of Newco and in connection with the operation by Newco of the Card
Club or (vi) any other business purpose of the Company (collectively,
"Additional Capital Contributions") each of the Members shall have the right,
but not the obligation, to contribute as Additional Capital an amount equal to
its respective Profit Percentage Interest of such Additional Capital
Contribution. If any Member elects not to make such Additional Capital
Contribution (the "Non-participating Member Contribution"), and HPC contributes
its Profit Percentage Interest of such Additional Capital Contribution, then HPC
shall be entitled to contribute as an Additional Capital Contribution an amount
equal to the Non-participating Member Contribution. To the extent that the
Members do not contribute their respective Profit Percentage Interests of
Additional Capital Contributions, their Profit Percentage Interests shall be
adjusted in accordance with Section 2.7.
2.3 CAPITAL ACCOUNTS. The Company shall establish an individual Capital
----------------
Account for each Member. The Company shall determine and maintain each Capital
Account in accordance with Regulations Section 1.704-1(b)(2)(iv). Upon the
contributions by the Members under Section 2.1 and 2.2, each such Member will
receive a credit to its Capital Account in the amount of cash or the fair market
value of property so contributed. If a Member Transfers all or a part of such
Member's Membership Interest in accordance with this Agreement, such Member's
Capital Account attributable to the Transferred Membership Interest shall carry
over to the new owner of such Membership Interest pursuant to Regulations
Section 1.704-1(b)(2)(iv)(1). Each Capital Account shall consist of a Member's
paid-in Capital Contribution(s) (whether in cash, property, services or
otherwise, including a
-5-
<PAGE>
Member's payment of claims against or liabilities of the Company to the extent
that the payor has no right of indemnification or contribution) (a) increased by
such Member's allocated share of Net Profits in accordance with Article 3
hereof, (b) decreased by such Member's allocated share of Net Losses and
distributions in accordance with Article 3 hereof, and (c) adjusted as otherwise
required in accordance with the Code, Regulations and generally accepted
accounting principles (to the extent consistent with the Code and Regulations).
If the book value of property is adjusted pursuant to Regulations 1.704-
1(b)(2)(ix)(f), Capital Accounts shall be adjusted as provided in Regulations
Section 1.704-1(b)(2)(iv)(g).
2.4 NO INTEREST ON OR WITHDRAWAL OF CAPITAL. No Member shall be
---------------------------------------
entitled to receive any interest on such Member's Capital Contributions. Except
as otherwise provided by law, no Member shall be entitled to withdraw or reduce
its Capital Contribution or to demand or receive property other than cash in
return for its Capital Contribution. No Member shall have any obligation, upon
winding up of the Company, to restore any deficit balance in its Capital Account
for the benefit of the other Members.
2.5 THIRD PARTY LOANS. The Company may seek debt financing from banks,
-----------------
savings and loan associations or other financial institutions from time to time
if the Manager determines that the Initial Capital Contributions are
insufficient for the conduct of its business or if the Manager otherwise
determines in good faith that such financing is necessary or desirable ("Third
Party Loans"), provided that no Member shall be required to guarantee any Third
--------
Party Loan unless such Member agrees to do so. Third Party Loans may be secured
by liens on the Company Property and shall have such other terms and conditions
as may be determined by a Super Majority Interest.
2.6 SHORT-TERM ADVANCES. Any Member may, but shall be under no
-------------------
obligation to, advance funds in excess of its obligation to make Initial Capital
Contributions and Additional Capital Contributions ("Advances") in order to pay
operational expenditures on a short-term basis in contemplation of income from
operations or a disbursement of funds from Third Party Loans, if, in the
judgment of the Manager, payment of expenditures cannot or should not be delayed
until such funds are obtained by the Company. Amounts funded by a Member
pursuant to this Section 2.6 shall bear interest at the Rate plus 200 basis
points (but in no event greater than the maximum rate permitted under applicable
law), and shall be repaid immediately upon receipt of funds contemplated to be
received as provided above or from other Company assets as agreed by all of the
Members.
2.7 DILUTION. In the event that HPC contributes its Profit Percentage
--------
Interest of an Additional Capital Contribution
-6-
<PAGE>
and Chu and/or DeBartolo, as applicable, does not contribute its Profit
Percentage Interest of such Additional Capital Contribution, the Profit
Percentage Interests shall be recalculated such that (a) Chu's or DeBartolo's
(as applicable) Profit Percentage Interest shall equal one-hundred (100)
multiplied by a fraction, the numerator of which shall equal Chu's or
DeBartolo's (as applicable) Capital Contributions and the denominator of which
shall equal the total of all Capital Contributions by all Members; and (b) the
Profit Percentage Interest of HPC shall be increased by the reduction in the
Profit Percentage Interest of Chu or DeBartolo (as applicable) determined
pursuant to clause (a) of this Section 2.7 from the Profit Percentage Interest
of Chu or DeBartolo (as applicable) immediately prior to such determination.
ARTICLE 3
ALLOCATIONS OF NET PROFITS AND NET LOSSES
3.1 ALLOCATIONS OF INCOME AND NET PROFITS. After giving effect to the
-------------------------------------
special allocations set forth in Sections 3.3 and 3.4 hereof, Net Profits shall
be allocated in accordance with the Members' Profit Percentage Interests, which
shall initially be as follows:
HPC 88%
DeBartolo 8%
Chu 4%
The foregoing Profit Percentage Interests shall be subject to adjustment from
time to time upon the admission of new Members or in accordance with Section 27.
3.2 ALLOCATIONS OF NET LOSSES. After giving effect to the special
-------------------------
allocations set forth in Sections 3.3 and 3.4 hereof, Net Losses shall be
allocated to the Members as follows:
3.2.1 POSITIVE CAPITAL ACCOUNTS. Net Losses shall first be
-------------------------
allocated to the Members in proportion to and to the extent of their positive
Capital Account balances.
3.2.2 PROFIT PERCENTAGE INTERESTS. Except as provided in
---------------------------
Section 3.2.1, Net Losses shall be allocated to the Members in proportion to
their Profit Percentage Interests.
3.3 SPECIAL ALLOCATIONS.
-------------------
3.3.1 MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse
------------------------------
Deductions for any Fiscal Year and any other deductions or losses for any Fiscal
Year referable to a liability owed by the Company to (or guaranteed or
indemnified by) a Member for which no other Member bears the economic risk
-7-
<PAGE>
of loss shall be specially allocated to the Member who bears the economic risk
of loss with respect to the Member Nonrecourse Debt or other liability to which
such Member Nonrecourse Deductions or other deductions are attributable in
accordance with Regulations Section 1.704-2(i) and Regulations Section 1.704-
1(b).
3.3.2 NONRECOURSE DEDUCTIONS REFERABLE TO LIABILITIES OWED TO
-------------------------------------------------------
NON-MEMBERS. Any Nonrecourse Deductions for any Fiscal Year and any other
- -----------
deductions or losses for any Fiscal Year referable to a liability owed by the
Company to a Person other than a Member for which no Member bears the economic
risk of loss shall be specially allocated to the Members in proportion to their
Profit Percentage Interests.
3.3.3 MEMBER MINIMUM GAIN CHARGEBACK. Except as otherwise
------------------------------
provided in Regulation Section 1.704-2(i)(4), notwithstanding any other
provision of this Article 3, if there is a net decrease in Member Nonrecourse
Debt Minimum Gain (as defined in Regulations Section 1.704-2(i)(2)) attributable
to a Member Nonrecourse Debt during any Fiscal Year, each Member who has a share
of the Member Nonrecourse Minimum Gain attributable to such Member Nonrecourse
Debt (which share shall be determined in accordance with Regulations Section
1.704-2(i)(5)) shall be specially allocated items of Company income and gain for
such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal
to that portion of such Member's share of the net decrease in Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the
previous sentence shall be made in proportion to the amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(i)(4) and 1.704-
2(j)(2). This Section 3.3.3 is intended to comply with the minimum gain
chargeback requirement contained in Regulations Section 1.704-2(i)(4) and shall
be interpreted consistently therewith.
3.3.4 MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
-----------------------
Regulations Section 1.704-2(f), notwithstanding any other provision of this
Article 3, if there is a net decrease in Company Minimum Gain during any Fiscal
Year, each Member shall be specially allocated items of Company income and gain
for such Fiscal Year (and, if necessary, in subsequent Fiscal Years) in an
amount equal to the portion of such Member's share of the net decrease in
Company Minimum Gain which share of such net decrease shall be determined in
accordance with Regulations Section 1.704-2(g)(2). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Section 1.704-2(f)(6) and
1.704-2(j)(2). This Section 3.3.4 is intended to comply with the minimum gain
chargeback requirement contained in
-8-
<PAGE>
Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
3.3.5 QUALIFIED INCOME OFFSET. In the event a Member
-----------------------
unexpectedly receives any adjustments, allocations, or distributions described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) or any other event
creates an Adjusted Capital Account Deficit, items of Company income and gain
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate such excess deficit balance as quickly as possible.
3.4 CURATIVE ALLOCATIONS. The allocations set forth in Section 3.3
--------------------
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gain, loss, or deduction pursuant to this Section 3.4. Therefore,
notwithstanding any other provision of this Article 3 (other than the Regulatory
Allocations), the Members shall make such offsetting special allocations of
Company income, gain, loss, or deduction in whatever manner they determine
appropriate so that, after such offsetting allocations are made, a Member's
Capital Account balance is, to the extent possible, equal to the Capital Account
balance such Member would have had if the Regulatory Allocations were not part
of this Agreement and all Company items were allocated pursuant to Sections 3.1
and 3.2.
3.5 APPLICATION OF SECTION 704(c) PRINCIPLES. Notwithstanding the
----------------------------------------
preceding sections of this Article 3:
(a) Section 704(c) of the Code shall apply to the allocation of
items of income, gain, deduction and loss related to contributed property having
a tax basis at the time of contribution that differs from its fair market value;
and
(b) Regulations Section 1.704-1(b)(2)(iv)(f) shall apply to the
items of income, gain, deduction and loss related to property the book value of
which is adjusted pursuant to that Regulations Section.
3.6 ALLOCATION OF EXCESS NON-RECOURSE LIABILITIES. For purposes of
---------------------------------------------
Section 752 of the Code and Section 1.752-2(a)(3) of the Regulations, "excess
non-recourse liabilities" shall be allocated among the Members in accordance
with their Profit Percentage Interests.
3.7 INTENTION TO BE TAXED AS A PARTNERSHIP. The Company shall be
--------------------------------------
treated as a partnership for tax purposes.
3.8 ALLOCATION OF NET PROFITS AND LOSSES IN RESPECT OF A TRANSFERRED
----------------------------------------------------------------
INTEREST. If any Membership Interest is
- --------
-9-
<PAGE>
Transferred, or is increased or decreased by reason of the admission of a new
Member, Additional Capital Contributions or otherwise, during any Fiscal Year of
the Company, each item of income, gain, loss, deduction or credit of the Company
for such Fiscal Year shall be allocated among the Members by the Manager in
accordance with any method permitted by Section 706(d) of the Code and the
applicable Regulations in order to take into account the Members' varying
Percentage Interests during the Year.
3.9 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members are aware
--------------------------------------------
of the income tax consequences of the allocations made by this Article 3 and
hereby agree to be bound by the provisions of this Article 3 in reporting their
shares of Company income and loss for income tax purposes.
ARTICLE 4
DISTRIBUTIONS
4.1 DISTRIBUTION OF ASSETS BY THE COMPANY. Subject to applicable law
-------------------------------------
and any limitations contained elsewhere in this Agreement, no distribution shall
be made if, after giving effect to the distribution, (a) the Company would not
be able to pay its debts as they become due in the usual course of business, or
(b) the Company's total assets would be less than the sum of its total
liabilities.
4.2 NET CASH FLOW. Subject to Section 41, Net Cash Flow, if any, shall
-------------
be distributed within thirty (30) days after the end of each calendar quarter to
the Members in accordance with the Members' respective Profit Percentage
Interests on the date of the distribution.
4.3 PERSONS TO RECEIVE DISTRIBUTION. All distributions shall be made to
-------------------------------
the Persons who, according to the books and records of the Company, are the
holders of record of the Economic Interests in respect of which such
distributions are made on the actual date of distribution. Neither the Company
nor any Company Person shall incur any liability for making distributions in
accordance with this Section 4.3.
4.4 FORM OF DISTRIBUTION. A Member, regardless of the nature of the
--------------------
Member's Capital Contribution, has no right to demand and receive any
distribution from the Company in any form other than money. No Member may be
compelled to accept from the Company a distribution of any asset in kind in lieu
of a proportionate distribution of money being made to other Members.
4.5 WITHHOLDING ON DISTRIBUTIONS. Each Member consents and agrees that
----------------------------
the Company may deduct and withhold amounts for tax or other obligations of such
Member on any amount
-10-
<PAGE>
distributed or allocated by the Company to such Member, and to any assignee of a
Member's Membership Interest (or the related Economic Interest), if the Company
believes in good faith that it is required by law to do so. All amounts so
withheld with respect to such Member, substitute Member, or Economic Interest
Owner shall be treated as amounts distributed to such Person pursuant to Section
9.5 or 9.6 for all purposes under this Agreement. In addition, the affected
Member, substitute Member or Economic Interest Owner shall reimburse the Company
for any such amounts so withheld to the extent not deducted from a distribution.
4.6 RETURN OF DISTRIBUTIONS. Except for distributions made in violation
-----------------------
of the Act or this Agreement, no Member or Economic Interest Owner shall be
obligated to return any distribution to the Company or pay the amount of any
distribution for the account of the Company or to any creditor of the Company.
The amount of any distribution returned to the Company by a Member or Economic
Interest Owner or paid by a Member or Economic Interest Owner for the account of
the Company or to a creditor of the Company shall be added to the account or
accounts from which it was subtracted when it was distributed to the Member or
Economic Interest Owner.
ARTICLE 5
MEMBERS
5.1 LIMITED LIABILITY. Except as required under the Act or as expressly
-----------------
set forth in this Agreement, no Member shall be personally liable for any debt,
obligation or liability of the Company, whether that liability or obligation
arises in contract, tort or otherwise.
5.2 ADMISSION OF ADDITIONAL MEMBERS. No additional Members shall be
-------------------------------
admitted unless approved by a Super Majority Interest. No additional Member
shall become a Member until such additional Member has made any required Capital
Contribution and has become a party to this Agreement by executing a signature
page agreeing to the terms and provisions hereof, and substitute Members may
only be admitted in accordance with Article 7.
5.3 TRANSACTIONS WITH THE COMPANY. A Company Person or any Affiliate
-----------------------------
may lend money to and transact other business with the Company only in
accordance with this Agreement or with the prior approval of holders of a
majority of the Profit Percentage Interests held by the disinterested Members
after full disclosure of the Member's involvement. Subject to other applicable
law, such Member has the same rights and obligations with respect thereto as a
person who is not a Member.
-11-
<PAGE>
5.4 MEMBERS ARE NOT AGENTS. Pursuant to Article 6, the management of
----------------------
the Company is vested in the Manager. Unless expressly and duly authorized in
writing to do so by the Manager, no Member, acting solely in the capacity of a
Member, is an agent of the Company nor can any Member in such capacity bind or
execute any instrument on behalf of the Company or render the Company liable for
any purpose.
5.5 VOTING RIGHTS.
-------------
5.5.1 GENERAL RULE. Except as expressly provided in this
------------
Agreement, the Articles or the Act, Members shall have no voting, approval or
consent rights. Except as otherwise expressly provided in this Agreement, in
all instances in which a vote, approval, consent or agreement of the Members is
required, a vote, approval or consent of a Super Majority Interest (or, in
instances in which there are defaulting Members or an assignment of a Membership
Interest, non-defaulting Members or Members who are not assignors of a
Membership Interest, respectively, who hold eighty (80%) of the Profit
Percentage Interests held by all such non-defaulting or non-assigning Members)
shall be required.
5.5.2 MEETINGS OF MEMBERS. No annual or regular meetings of
-------------------
Members are required. A meeting of the Members may be called by any Manager or
by Members with collective Profit Percentage Interests of at least ten percent
(10%). Meetings of Members may be held at such date, time and place within or
without the State of California as the Manager may fix from time to time.
Notice of any meeting shall be given in accordance with Section 17104 of the
Corporations Code. At any Members' meeting, the Manager shall preside at the
meeting and shall designate an officer or representative of a Member to act as
secretary of the meeting. The secretary of the meeting shall prepare minutes of
the meeting, which shall be placed in the minute books of the Company. Any
action that may be taken at a meeting of Members may be taken without a meeting,
if a consent in writing setting forth the action so taken, is signed and
delivered to the Company by Members having not less than the minimum number of
votes that would be necessary to authorize or take that action at a meeting at
which all Members entitled to vote on that action at a meeting were present and
voted. All such consents shall be filed with the Company and shall be
maintained in the Company records. Members may participate in any Members'
meeting through the use of any means of conference telephones or similar
communications equipment as long as all Members participating can hear one
another. A Member so participating is deemed to be present in person at the
meeting.
5.5.3 PROXIES. Every Member entitled to vote at a meeting may
-------
authorize another person or persons to act by proxy with respect to his, her or
its Membership Interest. No proxy shall be valid after the expiration of 11
months from the date thereof unless otherwise provided in the proxy. Every
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proxy continues in full force and effect until revoked by the Member executing
it prior to the vote pursuant thereto, except as otherwise herein provided.
Such revocation may be effected by a writing delivered to the Company stating
that the proxy is revoked or by a subsequent proxy executed by the Member
executing the prior proxy and presented to the meeting, or as to any meeting by
attendance at such meeting and voting in person by the person executing the
proxy. The dates contained on the forms of proxy presumptively determine the
order of execution, regardless of the postmark dates on the envelopes in which
they are mailed. A proxy is not revoked by the death or incapacity of the
Member unless, before the vote is counted, written notice of such death or
incapacity is received by the Company. The revocability of a proxy that states
on its face that it is irrevocable shall be governed by the provisions of
Sections 703(e) and 705(f) of the California General Corporation Law.
5.6 WITHDRAWAL, RESIGNATION AND RETIREMENT. Except as required by law,
--------------------------------------
no Member may withdraw, resign or retire from the Company without the express
consent of a Super Majority Interest.
ARTICLE 6
MANAGEMENT AND CONTROL OF THE COMPANY
6.1 MANAGEMENT OF THE COMPANY BY THE MANAGER.
----------------------------------------
6.1.1 EXCLUSIVE MANAGEMENT BY THE MANAGER. Subject to the
-----------------------------------
provisions of the Articles and this Agreement, the business, property and
affairs of the Company shall be managed, and all powers of the Company shall be
exercised, by or under the direction of the Manager. The Manager shall have,
without limitation the authority to exercise all rights and fulfill all
obligations with respect to the Initial Card Club Assets, including without
limitation rights and obligations under the agreements set forth in Schedule
--------
2.1.
- ---
6.1.2 AGENCY AUTHORITY OF THE MANAGER. Subject to the rights of
-------------------------------
the Members as set forth in Section 6.3, the Manager shall have signing
authority with respect to all matters on behalf of the Company, including
without limitation the authority to endorse checks, drafts and other evidences
of indebtedness made payable to the order of the Company or to sign checks,
drafts and other instruments obligating the Company to pay money, or sign
agreements or other documents. Subject to the provisions of the Articles and
this Agreement, the Manager may delegate any of its powers hereunder.
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<PAGE>
6.2 MANAGER.
-------
6.2.1 INITIAL MANAGER. HPC shall be the initial Manager.
---------------
6.2.2 TERM OF OFFICE; SUCCESSOR MANAGER. The Manager shall hold
---------------------------------
office for a term commencing on the date of appointment (or in the case of the
initial Manager, commencing on the date hereof) and expiring upon the earlier of
(i) the date on which such Manager resigns, (ii) the date on which the Manager
becomes an Excluded Member pursuant to Section 92 hereof or (iii) the date on
which the Manager ceases to be a Member owning at least a 20% interest in the
capital and profits of the Company. Upon the expiration of the term of office
of a Manager, a successor Manager shall be elected by a Super Majority Interest,
including HPC in its capacity as a Member (unless HPC's term as the Manager
expired by reason of clause (ii) above), provided that such successor Manager
--------
must be a Member owning at least a 20% interest in the capital and profits of
the Company unless agreed upon in writing by all of the Members.
6.2.3 RESIGNATION. The Manager may resign at any time by giving
-----------
written notice to the Members without prejudice to the rights, if any, of the
Company under any contract to which the Manager is a party. The resignation of
any Manager shall take effect upon receipt of that notice or at such later time
as shall be specified in the notice; and, unless otherwise specified in the
notice, acceptance of the resignation shall not be necessary to make it
effective. A Manager who has an incapacity shall be deemed to have resigned.
For purposes of this Section 6.2.3, "incapacity" shall mean, as to any Manager,
as applicable, (i) the death or adjudication or incompetence or insanity in the
case of a natural person, (ii) the inability of a Manager to fulfill his
obligations under this Agreement because of injury or physical or mental illness
and such incapacity shall exist for ninety (90) working days in the aggregate
during any consecutive twelve (12) month period, (iii) the termination of a
trust in the case of a trustee of a trust, the dissolution and commencement of
winding up of a partnership in the case of a partnership, the filing of a
certificate of dissolution or its equivalent in the case of a corporation or a
limited liability company and the distribution by a fiduciary of an estate's
entire interest in the Company, or (iv) the Bankruptcy of such Manager. The
resignation of a Manager shall not affect the Manager's rights as a Member and
shall not by itself constitute a withdrawal of a Member.
6.3 LIMITATIONS ON MANAGER'S AUTHORITY. Notwithstanding the foregoing,
----------------------------------
the Manager shall not, without the written consent of all of the Members, which
consent shall not be unreasonably delayed or withheld:
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(a) do any act in contravention of this Agreement in its present
form or as amended;
(b) confess a judgment against the Company;
(c) cause the Company to enter into any arrangement with itself or
any of its affiliates or other related entities as principal on terms less
favorable to the Company as would be obtained from an unaffiliated third party;
(d) dissolve the Company except in accordance with Article 9 hereof;
(e) change the nature of the business of the Company (provided,
--------
however, that to the extent agreed to by a Super Majority Interest the Company
- -------
may determine to undertake additional businesses at the Card Club Site or other
property leased or acquired by the Company pursuant to the DDA in addition to
the Card Club and the Hotel).
6.4 CARD CLUB OPERATOR; HOTEL OPERATOR; OTHER OFFICERS.
--------------------------------------------------
6.4.1 CARD CLUB OPERATOR; HOTEL OPERATOR. Pursuant to the
----------------------------------
Lease, CEI will act as the operator of the Card Club (the "Card Club Operator")
until such time as the Company may be licensed to act as the Card Club Operator,
at which time the Company and CEI shall form Newco to operate the Card Club, the
Hotel and related businesses, in accordance with the Purchase Agreement. When
the Company and CEI form Newco, subject to the terms of the Purchase Agreement,
the Manager shall select the chief operating officer and manager of the Card
Club (and may enter into employment agreements with such persons as it deems
appropriate). Such chief operating officer and manager, under the supervision
of the Manager, shall be responsible for the day-to-day management of the
operations of the Card Club and shall make all the decisions required to be made
regarding the day-to-day administration, supervision, management and control of
the operations of the Card Club. The chief operating officer (and all other
employees of the Company) shall report directly to and shall be supervised by
the Manager. The Hotel operator shall be selected by the Manager.
6.4.2 OTHER OFFICERS. The Manager may appoint such other
--------------
officers as may be deemed necessary or advisable from time to time by the
Manager. All officers, including the chief operating officer, shall serve at
the pleasure of the Manager, subject to all rights, if any, of an officer under
any contract of employment. Any individual may hold any number of offices with
such duties and powers as designated by the Manager.
6.5 REMUNERATION AND REIMBURSEMENT OF MEMBERS. Except as otherwise
-----------------------------------------
authorized in, or pursuant to, this Agreement, no Member is entitled to
remuneration for acting on behalf of the Company or in connection with the
Company's business. HPC shall
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receive a credit against its Initial Capital Contribution for all Initial
Expenses paid for by HPC or HPI. A schedule setting forth the Initial Expenses
paid for by HPC or HPI as of July 8, 1996, is attached hereto as Schedule 6.5.
------------
The Manager shall be entitled to full reimbursement of its actual costs incurred
in connection with the Company's ownership and/or operation of the Card Club,
including salaries and other compensation of all employees hired for or assigned
to Card Club operations but excluding any allocation for general and
administrative overhead costs. The Members shall be entitled to reimbursement
of reasonable out-of-pocket expenses incurred or services provided for the
purposes of the Company at the request of the Manager.
6.6 BUDGETS. The Manager shall prepare an initial capital budget and
-------
annual capital and operating budgets and operating plans for the Company for
each fiscal year, which annual budgets and plans shall be delivered to the
Members for informational purposes.
6.7 BANK ACCOUNTS. All funds of every kind and nature received by the
-------------
Company, including capital contributions, loan proceeds, and operating receipts
shall be deposited in such bank accounts in the name of the Company as shall be
determined from time to time by the Manager. Company funds shall not be
commingled with funds of any Member or others.
6.8 INSURANCE. The Company shall procure and maintain in full force and
---------
effect insurance on the Card Club and other Company Property, including
liability, fire, extended property and business interruption insurance, naming
the Company and the Manager as insureds thereunder (the terms and coverage
amounts of which shall be that customary in the industry). The Company shall
procure and maintain any additional insurance coverage required by applicable
City ordinances or written order.
ARTICLE 7
TRANSFER AND ASSIGNMENT OF INTERESTS
7.1 RESTRICTIONS ON TRANSFER; TRANSFERS OF ECONOMIC INTERESTS. No
---------------------------------------------------------
Member may Transfer its Membership Interest or Economic Interest in the Company,
in whole or in part, without the prior written consent of the Manager (or, in
the case of HPC if HPC is then the Manager, holders of a majority of the Profit
Percentage Interests excluding those held by HPC), which consent may be given or
withheld, conditioned or delayed by the Manager or such holders, as applicable,
in its or their sole discretion; provided that any Member may Transfer its
Economic Interest to another Member or to an Affiliate without consent. The
Transfer of an Economic Interest to an Affiliate or another Member shall not
effect a Transfer of the Membership Interest of the transferring Member and the
transferee shall in no event be
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<PAGE>
deemed substituted as a Member of the Company, except to the extent of the
Economic Interest so Transferred unless otherwise agreed by all of the Members.
No Transfer of an Economic Interest permitted by this Agreement shall effect a
novation or release any of the transferor Member's obligations hereunder, and
the Transferring Member shall continue to be obligated under each and every
provision of this Agreement. No Economic Interest Owner of the Company shall
have any right to participate in the management of the business and affairs of
the Company or to become a Member thereof.
7.2 RIGHTS OF FIRST REFUSAL. If a Member has received the prior written
-----------------------
consent of the Manager (or, in the case of HPC if HPC is then the Manager,
holders of a majority of the Profit Percentage Interests excluding those held by
HPC), to a proposed Transfer in accordance with Section 7.1, prior to seeking to
sell all or any portion of its Membership Interest (the "Transferable
Interest"), (i) each Member other than HPC shall first offer HPC and, as long as
HPC is the Manager, the other Members and (ii), HPC subject to the requirements
of the Purchase Agreement regarding the rights of CEI in connection with
Transfers by HPC, shall offer to the other Members (in each case, collectively
with HPC, the "Offerees") the right to purchase the Transferable Interest (or in
the case of HPC, if CEI had the right pursuant to the Purchase Agreement to
exercise a right of first refusal and did so, the remainder, if any, of the
Transferable Interest following such exercise) on the same terms and conditions
as the selling Member intends to sell such interest, or on the same terms and
conditions as the offer received from a prospective purchaser, as the case may
be (herein, the "First Opportunity Offer"). The First Opportunity Offer, once
made, shall constitute an irrevocable binding offer by the selling Member to
sell the Transferable Interest to the Offerees, who shall have thirty (30) days
after receipt of the First Opportunity Offer within which to accept same in
writing. If any of the Offerees timely accepts the First Opportunity Offer, the
selling Member shall sell the Transferable Interest to such accepting Offerees
on a pro rata basis in accordance with their Profit Percentage Interests (or if
only one Offeree accepts in a timely manner, such Offeree may purchase the
entire Transferable Interest), on the same terms and conditions as the First
Opportunity Offer; provided, however, that such sale shall be consummated within
--------
ninety (90) days of the Offerees' acceptance of the First Opportunity Offer. If
the Offerees fail to timely accept the First Opportunity Offer or do not agree
to purchase all of the Transferable Interest, the selling Member (other then
HPC, if it has previously made such offer to CEI) shall offer the still
available portion of the Transferable Interest to CEI in accordance with the
terms and conditions of the Purchase Agreement. If CEI agrees to purchase (x)
all of the still available portion of the Transferable Interest of DeBartelo or
Chu, as applicable, or (y) all or any portion of the Transferable Interest of
HPC, the sale of the Transferable Interest to CEI and the accepting Offerees, if
any, shall be
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<PAGE>
consummated in accordance with the Purchase Agreement. If the accepting
Offerees, if any, and CEI together do not agree to purchase the entire
Transferable Interest, then the selling Member shall be free to sell the
Transferable Interest to any third party, subject to the terms of this Agreement
and of the Purchase Agreement. Each of the Members acknowledges receipt of a
copy of the Purchase Agreement and hereby agrees to be bound by all the
provisions thereof, including without limitation (i) the grant to CEI by each of
them of a right of first refusal with respect to Transfers of their respective
Membership Interests herein, and (ii) the provisions regarding the price below
which Membership Interests may not be sold, all as set forth in Section 10.2 of
the Purchase Agreement.
7.3 TRANSFERS SUBJECT TO LICENSES AND APPROVALS. Notwithstanding any
-------------------------------------------
other provision of this Agreement, at such time as a public company is permitted
under applicable law to own and operate a card club, or HPI or HPC is otherwise
legally permitted to operate the Card Club, no Transfer of a Membership Interest
or an Economic Interest in the Company may be made unless and until the
transferee has obtained all licenses and approvals necessary for the ownership
and operation of the Card Club from the City and any other necessary or
applicable licensing authorities and has executed an agreement to be bound by
all provisions of this Agreement.
7.4 EFFECT OF NON-COMPLIANCE. Any purported Transfer not permitted by
------------------------
this Agreement shall be void ab initio and of no effect against the Company, any
---------
other Member or any creditor of or claimant against the Company.
7.5 EFFECT OF TRANSFER. A transferee of a Membership Interest shall
------------------
have the right to become a substitute Member only if (a) the requirements of
Sections 7.1 and 7.2, and as applicable, Sections 7.3 and 7.8, are met, (b) such
person executes an instrument satisfactory to all of the Members accepting and
adopting the terms and provisions of this Agreement, and (c) such person pays
any reasonable expenses in connection with its admission as a new Member. The
admission of a substitute Member shall not result in the release of the Member
who assigned the Membership Interest from any liability that such Member may
have to the Company or to any Member.
7.6 RIGHTS OF LEGAL REPRESENTATIVES. Subject to the provisions of
-------------------------------
Section 9.2, if a Member who is an individual dies or is adjudged by a court of
competent jurisdiction to be incompetent to manage the Member's person or
property, the Member's executor, administrator, guardian, conservator, or other
legal representative shall have all the rights of a holder of an Economic
Interest, but shall have no right to become a substitute Member without the
consent otherwise required pursuant to this Agreement. If a Member is a
corporation, trust, or other entity and is dissolved or terminated, the
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powers described in the preceding sentence may be exercised by such Member's
legal representative or successor.
7.7 OBLIGATION TO COMPLY WITH APPLICABLE LAW. At such time as a public
----------------------------------------
company is permitted under applicable law to own and operate a card club, or HPI
or HPC is otherwise legally permitted to operate the Card Club, the Company
shall promptly apply to obtain licensing and the necessary approvals to permit
Newco to acquire the Company Assets and to operate the Card Club, the Hotel and
related businesses and all Members hereby agree to obtain (and to cause each of
their directors, officers, equity owners and other Affiliates, as applicable, to
obtain) all required licenses and approvals as promptly as possible. If any
Member or any director, officer, equity owner or other Affiliate of any Member
(collectively a "Noncomplying Person") is unable, at any time, to obtain or
maintain such licensing or otherwise comply with applicable law, such Member
shall take such action, including without limitation, a corporate restructuring
or the severing of its relationship with the Noncomplying Person, in order to
comply with applicable law within thirty (30) days of the date on which the
Noncomplying Person was unable or ceased to comply with such law. If a Member
is unable to satisfy the requirements of the preceding sentence, then the
Company (or, if the Company is unable to do so, the other Members) shall
purchase such Member's Membership Interest (on a pro rata basis in accordance
with their respective Profit Percentage Interests, if the purchasers are the
other Members). The purchase price of the sale required by the previous
sentence shall equal the Fair Value of such Member's Membership Interest
determined in accordance with the procedures for determining the Fair Value of
Chu's and DeBartolo's Membership Interests as set forth in Section 7.9.3 and
shall be payable in equal quarterly installments over five (5) years with
interest at the Rate. A Member that is removed from the Company pursuant to this
Section shall have no further right to participate, in any way, in the business
of the Company (specifically including the right to receive distributions from,
or to share in the Net Profits, Net Losses or similar items of, the Company or
to approve Company actions).
7.8 CHANGES OF CONTROL -- DEBARTOLO AND CHU. During the term of this
---------------------------------------
Agreement, each of Chu and DeBartolo shall prohibit each of its equity owners
from effecting any Transfer of their ownership interests that would result in a
Change of Control, respectively, of Chu or DeBartolo. Chu represents and
warrants to HPC and DeBartolo that attached hereto as Schedule 7.8A is a true
-------------
and complete list setting forth each of the equity owners of Chu, showing the
percentage interest owned. DeBartolo represents and warrants to HPC and Chu
that attached hereto as Schedule 7.8B is a true and complete list setting forth
-------------
each of the equity owners of DeBartolo, showing the percentage interest owned.
Each of Chu and DeBartolo hereby agrees to provide the Manager (or HPC, if HPC
is no longer the Manager) with prompt notice of any proposed sale by an equity
owner of his, her or
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its ownership interest. Concurrently with the execution of this Agreement, each
of Chu and DeBartolo shall cause any certificates representing such ownership
interests to bear a legend substantially as follows:
"THE OWNERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN TRANSFER RESTRICTIONS CONTAINED IN THE OPERATING AGREEMENT OF
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER. ANY TRANSFER
OF SHARES IN VIOLATION OF SUCH PROVISIONS SHALL BE NULL AND VOID AB
--
INITIO."
-------
The Members hereby agree that any Change of Control, merger, sale of assets,
recapitalization or other corporate restructuring of HPI shall not constitute a
Transfer or Change of Control of HPC for purposes of this Agreement.
7.9 PUT/CALL.
--------
7.9.1 CHU/HPC. Within one-hundred twenty (120) days following
-------
each of the following events, subject to CEI's rights pursuant to the Purchase
Agreement, Chu shall have the right to notify HPC of its election to cause HPC
to purchase its Membership Interest, and HPC shall have the right to notify Chu
of its election to purchase Chu's Membership Interest, for a price equal to the
Fair Value of Chu's Membership Interest, which price shall be payable in
accordance with Section 7.9.4. This right and obligation shall be personal to
Chu and may not be assigned or transferred, even if there is a permitted
Transfer of Chu's Membership Interest. The events giving rise to rights of each
of HPC and Chu under this Section 7.9.1 are as follows:
(a) An HPI Change;
(b) The death of Leo Chu;
(c) The death of Ivy Chu; or
(d) The date that is five (5) years after the date hereof.
7.9.2 DEBARTOLO/HPC. Within one-hundred twenty (120) days
-------------
following each of the following events, subject to CEI's rights pursuant to the
Purchase Agreement, DeBartolo shall have the right to notify HPC of its election
to cause HPC to purchase its Membership Interest in the Company, and HPC shall
have the right to notify DeBartolo of its election to purchase DeBartolo's
Membership Interest, for a price equal to the Fair Value of DeBartolo's
Membership Interest, which price shall be payable in accordance with Section
7.9.4. This right and obligation shall be personal to DeBartolo and may not be
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assigned or transferred, even if there is a permitted Transfer of DeBartolo's
Membership Interest. The events giving rise to the rights of each of DeBartolo
and HPC under this Section 7.9.2 are as follows:
(a) An HPI Change; or
(b) The date that is five (5) years after the date hereof.
7.9.3 DETERMINATION OF FAIR VALUE. The Fair Value of the
---------------------------
Membership Interest of Chu or DeBartolo for purposes hereof shall be determined
as follows.
(a) During the first eighteen (18) months after the date
hereof, the Fair Value shall be determined by multiplying the Profit Percentage
Interest of Chu or DeBartolo as applicable by the total Capital Contributions to
the Company of all of the Members from its inception to the date of the purchase
of such interest.
(b) From and after the date that is eighteen (18) months after
the date hereof, the Fair Value shall mean the price that an unaffiliated third
party would be willing to pay for the Membership Interest of Chu or DeBartolo,
as applicable (the "Acquired Interest"), considering the value of the Company's
business and assets at the time and its liabilities (with no minority discount
applied). HPC and DeBartolo or Chu, as applicable, shall attempt to agree on the
Fair Value during the sixty (60) day period after the notification by HPC, on
the one hand, or Chu or DeBartolo, on the other, of its election to purchase or
sell the Acquired Interest pursuant to Section 7.9.1 or 7.9.2. If HPC and
DeBartolo or Chu, as applicable, cannot agree on the Fair Value during such
sixty (60) day period, then the Fair Value of the Acquired Interest shall be
determined by an appraisal. Either HPC, on the one hand, or DeBartolo or Chu, on
the other hand, may initiate an appraisal by notifying the other in writing of
its designation of a nationally recognized investment banking firm to determine
the Fair Value of the Acquired Interest. Within ten (10) days following receipt
of such designation, the other shall either notify HPC or DeBartolo or Chu, as
the case may be, of its designated appraiser, which shall also be a nationally
recognized investment banking firm, or, in the absence of notice, shall be
deemed to have accepted the investment banking firm designated by the other. The
investment banking firm (or firms) so appointed shall make a determination of
the Fair Value within thirty (30) days after the deemed acceptance of the first
designated investment banking firm or, if applicable, the appointment of the
second investment banking firm, and shall concurrently exchange and/or deliver
such determinations to HPC or DeBartolo or Chu. If only one investment banking
firm has been appointed, the determination by such firm of the Fair Value shall
be final and binding. If two
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firms have been appointed, and the determinations of the two firms are within
ten percent (10%) of each other, the average of the two determinations shall be
the Fair Value. If the two determinations are not within ten percent (10%) of
each other, then the two investment banking firms shall select a third
investment banking firm within fifteen (15) days after the determinations have
been exchanged; and if the two investment banking firms are unable to agree
within that period on a third firm, such appointment will be made by the
American Arbitration Association. If a third investment banking firm is
appointed, the third investment banking firm shall make the determination of the
Fair Value, which shall be within the range of the determinations made by the
first two firms, within fifteen (15) days after the appointment of the third
firm. Each of HPC on the one hand and Chu or DeBartolo on the other shall pay
one-half (1/2) of the cost of the investment banking firm, if only one is
appointed; if two firms are appointed, HPC on the one hand, and Chu or
DeBartolo, on the other hand, shall each pay the fees and costs of the
investment banking firm appointed by such Person; and the fees and costs of a
third investment banking firm shall be divided equally between them.
7.9.4 HPC OPTION. HPC shall have the option to pay for the
----------
Acquired Interest either by the issuance of HPI Common Stock (or common stock of
any successor to HPI) in an amount equal to the Fair Value or by payment of the
Fair Value in cash by wire transfer; provided, that HPC may elect to pay for the
--------
Acquired Interest by issuing common stock only if HPI or its successor is a
public company at the time. HPC shall make such election by notice to Chu or
DeBartolo as applicable within thirty (30) days after the determination of the
Fair Value of the Acquired Interest. If HPC elects to pay for the Acquired
Interest by the issuance of HPI Common Stock, Chu or DeBartolo, as applicable,
shall be entitled to exercise piggyback registration rights and demand
registration rights on one occasion each with respect to such common stock, on
the terms and conditions contained in Article 11 hereof. For purposes hereof,
the value of HPI's stock shall be determined by reference to the closing price
on the principal stock exchange on which such shares are then listed or, if such
shares are not then listed on a stock exchange, by reference to the closing
price (if approved for quotation on the Nasdaq National Market) or the mean
between the bid and asked price (if other over-the-counter issue) of a share as
supplied by the National Association of Securities Dealers, Inc. through Nasdaq
(or its successor in function), in each case as reported by The Wall Street
Journal, for the business day immediately following the date of the election
made by HPC, DeBartolo or Chu pursuant to Section 7.9.1 or 7.9.2 (or, if for any
reason no such price is available, in such other manner as the Board of
Directors of HPI may deem appropriate to reflect the then fair market value
thereof). If HPC is no longer the Manager at the time HPC, Chu or DeBartolo
exercises its right hereunder, the parties acknowledge that Chu or DeBartolo
must first offer its
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Membership Interest to CEI in accordance with the terms of the Purchase
Agreement.
7.9.5 CLOSING. The closing (the "Closing") of any sale pursuant
-------
hereto shall be held at a mutually acceptable place, on a date (the "Closing
Date") not more than the later of (i) one-hundred twenty (120) days after the
election made by HPC, DeBartolo or Chu pursuant to Section 7.9.1 or 7.9.2, or
(ii) thirty (30) days after determination of the Fair Value of the Membership
Interest of Chu or DeBartolo as applicable, which date shall be established by
HPC upon not less than ten (10) business days' prior written notice to Chu or
DeBartolo, as applicable. Conveyance shall be made by an appropriate assignment,
duly and validly executed by Chu or DeBartolo, as applicable, conveying the
Acquired Interest, free and clear of all liens, claims, encumbrances and rights
of others and containing customary representations and warranties to HPC,
including without limitation, representations and warranties that (i) there are
no outstanding options, warrants or other rights to purchase such Membership
Interest; and (ii) Chu or DeBartolo, as applicable, has full power and authority
to sell its Membership Interest and such sale is not prohibited by and will not
conflict with the terms of any other understanding, agreement or arrangement to
which Chu or DeBartolo, as applicable, is a party or by which it is bound.
7.10 TAG-ALONG RIGHTS.
----------------
7.10.1 RIGHT TO PARTICIPATE IN SALE. Following compliance with
----------------------------
all applicable requirements of this Agreement governing the Transfer of
Membership Interests, including the requirements of the Purchase Agreement
regarding offering the Membership Interest to CEI, if any Member ("Selling
Member") enters into an agreement to transfer, sell or otherwise dispose of any
portion of its Membership Interest (other than a Transfer of an Economic
Interest to an Affiliate or another Member as permitted by Section 7.1) (such
transfer, sale or other disposition being referred to as a "Tag-Along Sale"),
then each other Member ("Tag-Along Member") shall have the right, but not the
obligation, to participate in such Tag-Along Sale. The portion of its
Membership Interest that each Tag-Along Member will be entitled to include in
such Tag-Along Sale (the "Member's Allotment") shall be determined by
multiplying (i) the Profit Percentage Interest represented by the Membership
Interest proposed to be sold, transferred or otherwise disposed of pursuant to
the Tag-Along Sale, by (ii) such Tag-Along Member's Profit Percentage Interest
on the day immediately preceding the Tag-Along Notice Date (as defined below).
Any sales of any portion of its Membership Interest by a Tag-Along Member as a
result of the foregoing "Tag-Along Rights" shall be on the same terms and
conditions as the proposed Tag-Along Sale by the Selling Member. The "Tag-Along
Notice Date" shall be the date that the Tag-Along Sale Notice (as defined below)
is delivered to Members.
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7.10.2 SALE NOTICE. The Selling Member shall provide the other
-----------
Members with written notice (the "Tag-Along Sale Notice") not more than sixty
(60) nor less than thirty (30) days prior to the proposed date of the Tag-Along
Sale (the "Tag-Along Sale Date"). Each Tag-Along Sale Notice shall set forth:
(i) the name and address of each proposed transferee or purchaser of a
Membership Interest in the Tag-Along Sale; (ii) the Profit Percentage Interest
represented by the Membership Interest proposed to be transferred or sold by the
Selling Member; (iii) the proposed amount and form of consideration to be paid
for such Membership Interest and the terms and conditions of payment offered by
each proposed transferee or purchaser; (iv) confirmation that the proposed
purchaser or transferee has been informed of the "Tag-Along Rights" provided for
herein and has agreed to purchase the Membership Interest in accordance with the
terms hereof; and (v) the Tag-Along Sale Date.
7.10.3 TAG-ALONG NOTICE. If a Member wishes to participate in
----------------
the Tag-Along Sale, such Member shall provide written notice (the "Tag-Along
Notice") to the Selling Member no less than ten (10) business days prior to the
Tag-Along Sale Date. If a Tag-Along Notice is not received by the Selling
Member from a Member prior to the ten (10) day period specified above, the
Selling Member shall have the right to sell or otherwise transfer the Membership
Interest specified in the Tag-Along Sale Notice to the proposed purchaser or
transferee without any participation by such Member. The Tag-Along Notice shall
set forth the Profit Percentage Interest represented by the Membership Interest
that such Member elects to include in the Tag-Along Sale, which shall not exceed
the Member's Allotment. The Tag-Along Notice shall also specify the aggregate
Profit Percentage Interest represented by such Member's Membership Interest as
of the close of business on the day immediately preceding the Tag-Along Notice
Date, which such Member desires also to include in the sale ("Additional
Membership Interests") in the event there is any under-subscription for the
entire amount of all Members' Allotments. In the event there is an under-
subscription in the aggregate of such Members' Allotments, the Selling Member
shall apportion the unsubscribed Members' Allotments to such holders whose Tag-
Along Notices specified an amount of Additional Membership Interests, which
apportionment shall be on a pro rata basis among such Members in accordance with
--- ----
the number of Additional Membership Interests specified by all such Members in
their Tag-Along Notices. The Tag-Along Notice given by the Member shall
constitute such Member's binding agreement to sell such Membership Interest on
the terms and conditions applicable to the Tag-Along Sale, subject to the
provisions of this Section 7.10.
7.10.4 VOID TRANSFERS. If the Selling Member fails to sell or
--------------
otherwise Transfer its Membership Interest or any portion thereof on terms and
conditions which are no more
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favorable in any material respect to the Selling Member than as stated in the
Tag-Along Sale Notice on or prior to the Tag-Along Sale Date, such sale or
Transfer shall be null and void, and any subsequent sale or Transfer of such
Membership Interest must comply with all of the requirements of this Agreement.
7.10.5 EXEMPT TRANSFERS. The provisions of this Section 7.10
----------------
shall not apply to any Transfer, sale or other disposition by any Member to one
of its Affiliates (provided that prior to any such disposition the Member
complies with the requirements of this Agreement regarding Transfers).
ARTICLE 8
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
8.1 FISCAL YEAR. The fiscal year of the Company shall be the calendar
-----------
year. The decision to engage outside accountants for the Company and the
selection of such outside accountants, if any, shall be made by the Manager.
8.2 BOOKS AND RECORDS. Each Member and each Economic Interest Owner,
-----------------
and their duly authorized representatives shall at all times, during regular
business hours, have reasonable access to and may inspect and copy at its own
expense any of the books and records of the Company set forth in this Section,
for purposes reasonably related to such person's interest in the Company. Each
Member shall be entitled at any time to have the Company's books and records
examined or audited at such Member's expense, and HPC shall cooperate fully with
the party or parties making such examination or audit on behalf of such Member.
The books of account of the Company shall be maintained and prepared in
accordance with generally accepted accounting principles, consistently applied.
The Company shall maintain at its principal office in California all of the
following:
(a) A current list of the full name and last known business or
residence address of each Member and Economic Interest Owner set forth in
alphabetical order, together with the Capital Contributions, Capital Account and
Profit Percentage Interest of each Member and Economic Interest Owner;
(b) A current list of the full name and business or residence
address of the Manager and each officer;
(c) A copy of the Articles and any and all amendments thereto together
with executed copies of any powers of attorney pursuant to which the Articles or
any amendments thereto have been executed;
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(d) Copies of the Company's federal, state and local income tax or
information returns and reports, if any, for the six (6) most recent taxable
years;
(e) A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed;
(f) Copies of the financial statements of the Company, if any, for
the six (6) most recent Fiscal Years;
(g) The Company's books and records as they relate to the internal
affairs of the Company for at least the current and past four (4) Fiscal Years;
(h) Originals or copies of all minutes, actions by written consent,
consents to action and waivers of notice to Members and Member votes, actions
and consent, if any; and
(i) Any other information required to be maintained by the Company
pursuant to the Act.
8.3 STATEMENTS.
----------
8.3.1 ANNUAL REPORT. Within one-hundred twenty (120) days after
-------------
the end of each calendar year, the Manager shall deliver to each of the other
Members audited financial statements of the Company, certified by Arthur
Anderson & Co., Inc. or such other "Big Six" accounting firm selected by the
Manager.
8.3.2 TAX INFORMATION. The Manager shall cause to be prepared
---------------
at least annually, at Company expense, information necessary for the preparation
of the Members' and Economic Interest Owners' federal and state income tax
returns. The Manager shall send or cause to be sent to each Member or Economic
Interest Owner within ninety (90) days after the end of each taxable year such
information as is necessary to complete federal and state income tax or
information returns and a copy of the Company's federal, state, and local income
tax or information returns for that year.
8.3.3 ANNUAL STATE REPORT. The Manager shall cause to be filed
-------------------
at least annually with the California Secretary of State the statement required
under California Corporations Code (S)17060.
8.3.4 MONTHLY REPORTS. As soon as practicable following the end
---------------
of each month, the Manager shall deliver to each of the other Members a copy of
such monthly financial reports of income and expense of the Company as are
prepared by the Manager with respect to the Company.
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8.4 FILINGS. The Manager, at Company expense, shall cause the income
-------
tax returns for the Company to be prepared and timely filed with the appropriate
authorities. The Manager, at Company expense, shall cause to be prepared and
timely filed, with appropriate federal and state regulatory and administrative
bodies, amendments to, or restatements of, the Articles and all reports required
to be filed by the Company with those entities under the Act or other then
current applicable laws, rules, and regulations. If the Manager or any officer
required by the Act to execute or file any document fails, after demand, to do
so within a reasonable period of time or refuses to do so, any other officer or
Member may prepare, execute and file that document with the California Secretary
of State.
8.5 BANK ACCOUNTS. The Manager shall maintain the funds of the Company
-------------
in one or more separate bank accounts in the name of the Company, and shall not
permit the funds of the Company to be commingled in any fashion with the funds
of any other Person.
8.6 TAX MATTERS FOR THE COMPANY HANDLED BY THE MANAGER AND TAX MATTERS
------------------------------------------------------------------
PARTNER. The Manager shall from time to time cause the Company to make such tax
- -------
elections as the Manager deems to be in the best interests of the Company and
the Members. The Tax Matters Partner, as defined in Code Section 6231, shall
represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by tax authorities, including resulting
judicial and administrative proceedings, and shall expend the Company funds for
professional services and costs associated therewith. The Tax Matters Partner
shall oversee the Company tax affairs in the overall best interests of the
Company. If for any reason the Tax Matters Partner resigns or can no longer
serve in that capacity, a Super Majority Interest may designate another Member
to be Tax Matters Partner.
ARTICLE 9
DISSOLUTION AND WINDING UP
9.1 EVENTS OF DISSOLUTION. The Company shall be dissolved, its assets
---------------------
shall be disposed of, and its affairs wound up on the first to occur of the
following:
9.1.1 The happening of any event of dissolution specified in the
Articles;
9.1.2 The entry of a decree of judicial dissolution pursuant to
Section 17351 of the Corporations Code;
9.1.3 The vote of a Super Majority Interest;
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9.1.4 The occurrence of a Dissolution Event unless there are at least
two Remaining Members in addition to the Excluded Member (it being agreed that,
if there are not at that time at least two Remaining Members in addition to the
Excluded Member, the sole Remaining Member shall in its sole and absolute
discretion have the right to admit another Member to the Company) and a Majority
Interest consent within ninety (90) days of the Dissolution Event to the
continuation of the business of the Company; or
9.1.5 The expiration of the period fixed for the duration of the
Company as stated in the Articles.
9.2 EFFECT OF A DISSOLUTION EVENT (OTHER THAN DISSOLUTION). If
------------------------------------------------------
following a Dissolution Event, the Remaining Members vote to continue the
business of the Company, such Remaining Member(s) shall purchase the Excluded
Member's interest in the Company, on a pro rata basis in accordance with their
respective Profit Percentage Interests, for an aggregate purchase price equal to
the amount that the Excluded Member would be entitled to receive for the Fair
Value of the Excluded Member's Membership Interest as determined in accordance
with the procedures for determining the Fair Value of Chu's and DeBartolo's
Membership Interests set forth in Section 7.9.3, payable in equal quarterly
installments over five (5) years with interest at the Rate. Following such
purchase, the Remaining Members shall continue the operation of the Company
independently of the Excluded Member. Upon such vote by the Remaining Members
to continue the business of the Company, the Excluded Member shall have no
further right to participate, in any way, in the business of the Company
(specifically including the right to receive distributions from, or to share in
the Net Profits, Net Losses or similar items of, the Company or to approve
Company actions). Election of the Remaining Member(s) to continue the business
of the Company under this Section 9.2 shall not preclude such Remaining
Member(s) from pursuing any and all other remedies available to it or them under
this Agreement, at law or in equity.
9.3 CERTIFICATE OF DISSOLUTION. As soon as possible after the
--------------------------
occurrence of any of the events specified in Section 9.1 above, any Member shall
execute a Certificate of Dissolution in such form as shall be prescribed by the
California Secretary of State and file the Certificate as required by the Act.
9.4 WINDING UP. Upon the occurrence of any event specified in Section
----------
9.1 above, the Company shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors. The Manager shall be responsible for overseeing the winding
up and liquidation of Company, shall take full account of the liabilities of
Company and assets, shall either cause its assets to be sold or distributed, and
if sold as promptly as is
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consistent with obtaining the fair market value thereof, shall cause the
proceeds therefrom, to the extent sufficient therefor, to be applied and
distributed as provided in Section 9.6. The Manager shall give written notice of
the commencement of winding up by mail to all known creditors and claimants
whose addresses appear on the records of the Company. The Manager shall be
entitled to reasonable compensation for its services in winding up the Company's
affairs.
9.5 DISTRIBUTIONS IN KIND. Any non-cash asset distributed to one or
---------------------
more Members shall first be valued at its fair market value to determine the Net
Profit or Net Loss that would have resulted if such asset were sold for such
value, such Net Profit or Net Loss shall then be allocated pursuant to Article
3, and the Members' Capital Accounts shall be adjusted to reflect such
allocations. The amount distributed and charged to the Capital Account of each
Member receiving an interest in such distributed asset shall be the fair market
value of such interest (which shall mean the price that an independent third
party would pay for such asset, net of any liability secured by such asset that
such Member assumes or takes subject to). The fair market value of such asset
shall be determined by the Manager or if there is an objection by any Member,
the fair market value shall be determined by an independent appraiser (which
must be recognized as an expert in valuing the type of asset involved) selected
by the Manager or liquidating trustee and approved by a Super Majority Interest.
9.6 ORDER OF PAYMENT UPON DISSOLUTION. After determining that all known
---------------------------------
debts and liabilities of the Company in the process of winding-up, including,
without limitation, debts and liabilities to Members who are creditors of the
Company, have been paid or adequately provided for, the remaining assets shall
be distributed to the Members in accordance with their positive Capital Account
balances, after taking into account income and loss allocations for the
Company's taxable year during which liquidation occurs. Such liquidating
distributions shall be made by the end of the Company's taxable year in which
the Company is liquidated, or, if later, within ninety (90) days after the date
of such liquidation.
9.7 COMPLIANCE WITH REGULATIONS. All payments to the Members upon the
---------------------------
winding up and dissolution of the Company shall be strictly in accordance with
the positive capital account balance limitation and other requirements of
Regulations Section 1.704-1(b)(2)(ii)(d).
9.8 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Except as otherwise
-------------------------------------------
specifically provided in this Agreement, each Member shall be entitled to look
solely at the assets of the Company for the return of its positive Capital
Account balance and shall have no recourse for such Member's Capital
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Contribution and/or share of Net Profits (upon dissolution or otherwise) against
the Manager, officers, or any other Member.
9.9 CERTIFICATE OF CANCELLATION. The Persons who filed the Certificate
---------------------------
of Dissolution shall cause to be filed in the office of, and on a form
prescribed by, the California Secretary of State, a certificate of cancellation
of the Articles upon the completion of the winding up of the affairs of the
Company.
9.10 NO ACTION FOR DISSOLUTION. No Member or Economic Interest Owner has
-------------------------
any interest in specific property of the Company. Without limiting the
foregoing, each Member and Economic Interest Owner irrevocably waives during the
term of the Company any right that he or it may have to maintain any action for
partition with respect to the property of the Company. Except as expressly
permitted in this Agreement, a Member or Economic Interest Owner shall not take
any voluntary action that directly causes a Dissolution Event. The Members
acknowledge that irreparable damage would be done to the goodwill and reputation
of the Company if any Member should bring an action in court to dissolve the
Company under circumstances where dissolution is not required by Section 9.1.
This Agreement has been drawn carefully to provide fair treatment of all parties
and equitable payment in liquidation of the Economic Interests. Accordingly,
except where the Members have failed to liquidate the Company as required by
this Article 9, each Member hereby waives and renounces such Member's right to
initiate legal action to seek the appointment of a receiver or trustee to
liquidate the Company or to seek a decree of judicial dissolution of the Company
on the ground that (a) it is not reasonably practicable to carry on the business
of the Company in conformity with the Articles or this Agreement, or (b)
dissolution is reasonably necessary for the protection of the rights or
interests of the complaining Member. Damages for breach of this Section 9.10
shall be monetary damages only (and not specific performance), and the damages
may be offset against distributions by the Company to which such Member would
otherwise be entitled.
ARTICLE 10
INDEMNIFICATION AND INSURANCE
10.1 INDEMNIFICATION OF COMPANY PERSONS. The Company shall indemnify any
----------------------------------
Company Person who was or is a party or is threatened to be made a party to, or
otherwise becomes involved in, any Proceeding (including a Proceeding by or in
the right of the Company) by reason of the fact that such Company Person is or
was an agent of the Company against all Expenses, amounts paid in settlement,
judgments, fines, penalties and ERISA excise taxes actually and reasonably
incurred by or levied against such Company Person in connection with such
Proceeding
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if such Company Person acted in good faith and in a manner such Company Person
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal Proceeding, had no reasonable cause to believe
such Company Person's conduct was unlawful. The termination of any Proceeding,
whether by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that a
Company Person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company or, with
respect to any criminal Proceeding, that a Company Person had reasonable cause
to believe that such Company Person's conduct was unlawful. To the fullest
extent permitted by applicable law, a Company Person shall be conclusively
presumed to have met the relevant standards of conduct, as defined by the laws
of the State of California or other applicable jurisdictions, for
indemnification pursuant to this Section 10.1, unless and until a court of
competent jurisdiction, after all appeals, finally determines to the contrary,
and the Company shall bear the burden of proof of establishing by clear and
convincing evidence that such Company Person failed to meet such standards of
conduct. In any event, the Company Person shall be entitled to indemnification
from the Company to the fullest extent permitted by applicable law, including,
without limitation, any amendments thereto subsequent to the date of this
Agreement that increase the protection of Company Persons allowable under such
laws.
10.2 SUCCESSFUL DEFENSE. Notwithstanding any other provision of this
------------------
Agreement, to the extent that a Company Person has been successful on the merits
or otherwise in defense of any Proceeding referred to in Section 101, or in
defense of any claim, issue or matter therein, such Company Person shall be
indemnified against Expenses actually and reasonably incurred in connection
therewith to the fullest extent permitted by the laws of California or other
applicable jurisdictions, including, without limitation, any amendments thereto
subsequent to the date of this Agreement that increase the protection of Company
Persons allowable under such laws.
10.3 INDEMNIFICATION OF OTHER AGENTS. The Company may, but shall not be
-------------------------------
obligated to, indemnify any Person (other than a Company Person) who was or is a
party or is threatened to be made a party to, or otherwise becomes involved in,
any Proceeding (including any Proceeding by or in the right of the Company) by
reason of the fact that such Person is or was an agent of the Company, against
all Expenses, amounts paid in settlement, judgments, fines, penalties and ERISA
excise taxes actually and reasonably incurred by such Person in connection with
such Proceeding under the same circumstances and to the same extent as is
provided for or permitted in this Article 10 with respect to a Company Person,
or with respect to such circumstances and on such terms as the Manager may
determine.
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10.4 RIGHT TO INDEMNIFICATION UPON APPLICATION.
-----------------------------------------
10.4.1 TIMING. Any indemnification or advance under Section 10.1
------
or 10.3 shall be made promptly, and in no event later than sixty (60) days,
after the Company's receipt of the written request of a Company Person therefor,
unless, in the case of an indemnification, a determination shall have been made
as provided in Section 10.1 that such Company Person has not met the relevant
standard for indemnification set forth in that Section.
10.4.2 ENFORCEMENT. The right of a Person to indemnification or
-----------
an advance of Expenses as provided by this Article 10 shall be enforceable in
any court of competent jurisdiction. The burden of proving by clear and
convincing evidence that indemnification or advances are not appropriate shall
be on the Company. Neither the failure by the Manager or Members of the Company
or its independent legal counsel to have made a determination that
indemnification or an advance is proper in the circumstances, nor any actual
determination by the Manager or Members of the Company or its independent legal
counsel that indemnification or an advance is not proper, shall be a defense to
the action or create a presumption that the relevant standard of conduct has not
been met. In any such action, the Person seeking indemnification or advancement
of Expenses shall be entitled to recover from the Company any and all expenses
of the types described in the definition of Expenses actually and reasonably
incurred by such Person in such action, but only if such Person prevails
therein. A Person's Expenses incurred in connection with any Proceeding
concerning such Person's right to indemnification or advances in whole or in
part pursuant to this Agreement shall also be indemnified by the Company
regardless of the outcome of such a Proceeding, unless a court of competent
jurisdiction finally determines that each of the material assertions made by
such Person in the Proceeding was not made in good faith or was frivolous.
10.5 PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred by a Company
------------------------------
Person in connection with a Proceeding shall be paid by the Company in advance
of the final disposition of such Proceeding upon receipt of a written
undertaking by or on behalf of such Company Person to repay such amount if it
shall ultimately be determined that such Company Person is not entitled to be
indemnified by the Company as authorized in this Article 10.
10.6 LIMITATIONS ON INDEMNIFICATION. No payments pursuant to this
------------------------------
Agreement shall be made by the Company:
(a) To indemnify or advance funds to any Person with respect to a
Proceeding initiated or brought voluntarily by such Person and not by way of
defense, except as provided in Section 10.4.2 with respect to a Proceeding
brought to establish or enforce a right to indemnification under this Agreement,
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otherwise than as required under California law, but indemnification or
advancement of Expenses may be provided by the Company in specific cases if a
determination is made that such indemnification or advancement is appropriate.
The determination as to whether any such indemnification or advancement of
Expenses is appropriate shall be made (i) by the Manager or, if there is more
than one Manager (provided the Manager is not a party to such Proceeding)
Managers by a majority vote of a quorum consisting of Managers who were not
parties to such Proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of such disin terested Managers so directs, by independent
legal counsel in a written opinion, or (iii) by the Members by a vote of Members
holding a Super Majority Interest, whether or not constituting a quorum, who
were not parties to such Proceeding;
(b) To indemnify or advance funds to any Person for any Expenses,
judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes
resulting from the such Person's conduct which is finally adjudged to have been
willful misconduct, knowingly fraudulent or deliberately dishonest; or
(c) If a court of competent jurisdiction finally determines that any
indemnification or advance of Expenses hereunder is unlawful.
10.7 OTHER TERMS OF INDEMNIFICATION.
------------------------------
10.7.1 PARTIAL INDEMNIFICATION. If a Person is entitled under
-----------------------
any provision of this Article 10 to indemnifica tion by the Company for a
portion of Expenses, amounts paid in settlement, judgments, fines, penalties or
ERISA excise taxes incurred by such Person in any Proceeding but not, however,
for the total amount thereof, the Company shall nevertheless indemnify such
Person for the portion of such Expenses, amounts paid in settlement, judgments,
fines, penalties or ERISA excise taxes to which such Person is entitled, except
that no indemnification shall be given for Expenses in connection with a
Proceeding brought by the Company if the Person is found liable on any portion
of the claims in such Proceeding.
10.7.2 INDEMNITY NOT EXCLUSIVE. The indemnification and
-----------------------
advancement of Expenses provided by, or granted pursuant to, the provisions of
this Article 10, shall not be deemed exclusive of any rights to which any Person
seeking indemnification or advancement of Expenses may be entitled under any
agreement, vote of Members, determination of the Board, or otherwise, both as to
action in such Person's capacity as an agent of the Company and as to action in
another capacity while serving as an agent.
10.7.3 INSURANCE. The Company shall have the power to purchase
---------
and maintain insurance or other financial arrangement on behalf of any Person
who is or was an agent of
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the Company against any liability asserted against such Person and incurred by
such Person in any such capacity, or arising out of such Person's status as an
agent, whether or not the Company would have the power to indemnify such Person
against such liability under the provisions of this Article 10 or of Section
17155 of the Act. In the event a Person shall receive payment from any
insurance carrier or from the Plaintiff in any action against such Person with
respect to indemnified amounts after payment on account of all or part of such
indemnified amounts having been made by the Company pursuant to this Article 10,
such Person shall reimburse the Company for the amount, if any, by which the sum
of such payment by such insurance carrier or such plaintiff and payments by the
Company to such Person exceeds such indemnified amounts; provided, however, that
such portions, if any, of such insurance proceeds that are required to be
reimbursed to the insurance carrier under the terms of its insurance policy
shall not be deemed to be payments to such Person hereunder. In addition, upon
payment of indemnified amounts under the terms and conditions of this Agreement,
the Company shall be subrogated to such Person's rights against any insurance
carrier with respect to such indemnified amounts (to the extent permitted under
such insurance policies). Such right of subrogation shall be terminated upon
receipt by the Company of the amount to be reimbursed by such Person pursuant to
the second sentence of this Section 10.7.3.
10.7.4 HEIRS, EXECUTORS AND ADMINISTRATORS. The indemnification
-----------------------------------
and advancement of Expenses provided by, or granted pursuant to, this Article 10
shall, unless otherwise provided when authorized or ratified, continue as to a
Person who has ceased to be an agent of the Company and shall inure to the
benefit of such Person's heirs, executors and administrators.
ARTICLE 11
REGISTRATION RIGHTS
In the event that, following the exercise of a right to cause a Membership
Interest to be purchased or sold pursuant to Section 7.9, HPC exercises its
right pursuant to Section 7.9.4 to pay for the Acquired Interest with HPI Common
Stock, then the provisions of this Article 11 shall apply. The rights set forth
in this Article 11 shall be personal to Chu and DeBartolo and may not be
assigned or transferred.
11.1 INCIDENTAL REGISTRATION. Each time HPI proposes to file a
-----------------------
Registration Statement, if Chu or DeBartolo, as applicable, has not theretofore
exercised its rights pursuant to Section 11.1A hereof, HPI shall take the
following steps:
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11.1.1 NOTICE. Mail a written notice of the offering and the name of
------
the managing underwriter (if any) to each Holder at the address shown on the
books and records of HPI at least thirty (30) days prior to the filing of any
such Registration Statement; and
11.1.2 INCLUSION OF SHARES. Include in such Registration
-------------------
Statement any and all Registrable Securities specified in a notice by the Holder
which is received by the Company not less than fifteen (15) days following the
mailing of the notice specified in Section 1111 above. In connection with any
registration, the Selling Holder must: (i) sell such Registrable Securities in
the manner and on the terms adopted by or through the underwriter(s) acting on
behalf of HPI in connection with such registration, if such underwriter(s) so
requests; and (ii) accept a reduction (including a total elimination) in the
number of shares to be included in such registration on a pro rata basis (based
on the number of shares held by each) with any other selling shareholders
holding contractual registration rights (except that HPI and any shareholder who
has exercised demand registration rights with respect to such Registration
Statement shall not be affected by such reduction) if the underwriter(s)
reasonably deem that without such reduction (or elimination) HPI might be
substantially hindered in the terms or number of securities which it could sell
in such registration. Nothing in this Section 11.1.2 shall limit the ability of
HPI to withdraw a Registration Statement it has filed either before or after
effectiveness thereof. In the case of an underwritten offering, a Selling
Holder may withdraw his, her or its included shares after the filing of the
Registration Statement only (i) with the consent of the underwriter; (ii) if the
final price is less than the range of prices given in the preliminary
prospectus; (iii) if HPI breaches its obligations; or (iv) as provided in
Section 11.2.2.
11.1A DEMAND REGISTRATION.
-------------------
11.1A.1 NOTICE OF DEMAND. At any time after Chu or DeBartolo
----------------
receives Registrable Securities, each of Chu or DeBartolo shall have the right
to request by written notice to HPI that HPI register the Registrable Securities
under the 1933 Act. Each of Chu and DeBartolo shall have the right to make one
such demand (except that if such demand is withdrawn pursuant to Section
11.1A.3, such demand shall not be deemed to have been made for purposes of this
limitation); and each such demand must include all Registrable Securities held
by Chu or DeBartolo, as applicable. Each notice shall set forth (i) the number
of shares to be included; (ii) the names of the Selling Holder; and (iii) the
proposed manner of sale. Within ten (10) days after receipt of such notice, the
Company shall notify the other Holder (if any) and offer to such Holder the
opportunity to include its shares in such registration.
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<PAGE>
11.1A.2 HOLDER AND REGISTRATION. Promptly after receipt of any
-----------------------
notice pursuant to Section 11.1A.1, HPI shall prepare and file with the SEC, a
Registration Statement on any applicable form, with respect to all the
Registrable Securities held by such Selling Holder.
11.1A.3 HOLDBACK. In the event that registration is demanded
--------
pursuant to Section 11.1A.1, and HPI determines that the shares for which
registration is requested cannot be sold without serious injury to HPI or its
existing shareholders, HPI shall have the option to require the Selling Holders
to withdraw such registration demand and not make any other demand for a period
of up to one-hundred eighty (180) days (which may be extended if such facts
continue to be in effect).
11.2 REGISTRATION PROCEDURES. Whenever HPI shall register any securities
-----------------------
pursuant to this Article 11, the parties agree as follows:
11.2.1 SELLING HOLDER INFORMATION. Each Selling Holder shall
--------------------------
provide HPI with such information about such Holder and his, her or its intended
manner of distributing the Registrable Securities, and shall otherwise cooperate
with HPI and the underwriter(s) as may be needed or helpful in the reasonable
opinion of HPI to complete any obligation of HPI hereunder. Failure to comply
with this requirement shall excuse HPI from any further obligation to a Selling
Holder to include his, her or its shares in that Registration Statement;
11.2.2 CONSULTATION. HPI shall supply copies of any Registration
------------
Statement, any amendment thereto and any communications of the SEC related
thereto to each Selling Holder and Seller's Underwriter and shall provide each
Selling Holder and Seller's Underwriter with a reasonable opportunity, prior to
filing such document with the SEC, to provide comments with respect to any
matters in such documents that describe such Selling Holder, the Seller's
Underwriter or the distribution of securities held by such Selling Holder
("Selling Holder Matters"). HPI will immediately amend such Registration
Statement to include such reasonable changes relating to Selling Holder Matters
as the Selling Holders and the Seller's Underwriter reasonably agree should be
included therein. Any Selling Holder requesting a change refused by HPI may
withdraw his, her or its shares from the Registration Statement;
11.2.3 PROVISION OF PROSPECTUSES. HPI shall furnish each Selling
-------------------------
Holder such number of copies of preliminary and final prospectuses, each in
conformity with the requirements of the 1933 Act, and such other documents as
such Selling Holder may reasonably request in order to facilitate the public
sale or other disposition of such securities;
11.2.4 BLUE SKY COMPLIANCE. HPI shall use its reasonable efforts
-------------------
to register or qualify the securities covered
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<PAGE>
by such Registration Statement under the securities or "blue sky" laws of such
jurisdictions as each Selling Holder shall reasonably request (provided,
however, that HPI shall not be required (i) to consent to, or take any action
which would subject it to, general service of process for all purposes or (ii)
to qualify to do business in any jurisdiction where it is not then subject or
qualified);
11.2.5 AMENDMENTS. HPI shall use its reasonable efforts to
----------
prepare and file promptly with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith, as may
be necessary to keep such Registration Statement continuously effective and in
compliance with the 1933 Act for up to four (4) months, or until all Registrable
Securities registered in that Registration Statement are sold, whichever is
earlier;
11.2.6 PROSPECTUS DELIVERY. At any time when a sale or other
-------------------
public disposition pursuant to a Registration Statement is subject to a
prospectus delivery requirement, HPI shall immediately notify each Selling
Holder and Sellers' Underwriter of the occurrence of any event as a result of
which the prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing. Upon receipt of
such a notice, each Selling Holder shall immediately discontinue sales or other
dispositions of Registrable Securities pursuant to the Registration Statement.
The Selling Holders may resume sales only upon receipt of amended prospectuses
or after such Selling Holders have been advised by HPI that the use of the
previous prospectus may be legally resumed;
11.2.7 STOP-ORDERS. HPI agrees to immediately notify each
-----------
Selling Holder (i) of the issuance by the SEC of any stop order or order
suspending the effectiveness of any Registration Statement or the initiation of
any proceedings for that purpose, or (ii) of the receipt by HPI of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction, or the initiation of any
proceedings for such purpose. HPI, with the reasonable cooperation of the
Selling Holders, shall make every reasonable effort to contest any such
proceedings and to obtain the withdrawal of any such order at the earliest
possible moment;
11.2.8 UNDERWRITING AGREEMENT. At the request of HPI or any
----------------------
underwriter of the offering, each Selling Holder shall enter into an
underwriting agreement in a form reasonably agreed upon by HPI and such
underwriter(s); and
11.2.9 COMPLIANCE WITH LAWS. In all actions taken under this
--------------------
Agreement, each Selling Holder agrees to use
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<PAGE>
his, her or its best efforts to comply with all provisions of the 1933 Act as
well as any other applicable law.
11.3 REGISTRATION NOT REQUIRED. HPI shall have no obligation to any
-------------------------
Holder under this Article 11 with respect to whom HPI has obtained an opinion of
counsel, in form reasonably satisfactory to such Holder, to the effect that the
Registrable Securities involved may be immediately sold to the public without
registration thereof, whether pursuant to Rule 144 or otherwise.
11.4 DELAY OF REGISTRATION. No Holder shall have any right to take any
---------------------
action to restrain, enjoin or otherwise delay the filing or effectiveness of any
Registration Statement on the basis of any controversy which might arise with
respect to the interpretation or implementation of this Article 11.
11.5 INDEMNITY.
---------
11.5.1 HPI'S INDEMNITY. HPI will indemnify each Selling Holder
---------------
and any Sellers' Underwriter (and any of their officers and directors and
persons who control such Holder or Underwriter within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act) against all claims, losses,
damages, liabilities and expenses resulting from any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
from any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as the same is based on (i) information furnished in writing to
the Company by such Holder, an underwriter, or any Selling Holder expressly for
use therein, or (ii) the circumstances set forth in Section 1152(y) hereof.
11.5.2 THE HOLDER'S INDEMNITY. Each Selling Holder will
----------------------
indemnify (i) HPI, any underwriter, and any other person selling under a
Registration Statement (and any of their officers and directors and persons who
control HPI, such underwriter or such other persons within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act) against all claims,
losses, damages, liabilities and expenses resulting from (x) any untrue
statement or alleged untrue statement of a material fact contained in that
Registration Statement or from any omission or alleged omission to state a
material fact required to be stated or necessary to make the statements therein
not misleading, but only to the extent based upon information furnished in
writing to the Company by such Holder expressly for inclusion in that
Registration Statement or other document or (y) any untrue statement or alleged
untrue statement of a material fact contained in, or any omission or alleged
omission of a material fact from, a prospectus if (i) a later prospectus
corrected the untrue statement or alleged untrue statement, or omission or
alleged omission, (ii) at such time the Company had advised the Holder of the
availability of
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<PAGE>
the revised prospectus, and (iii) there would have been no such liability had
such later prospectus actually been delivered to the purchaser at or prior to
confirmation of sale.
11.6 EXPENSES OF REGISTRATION. The Selling Holder shall bear all
------------------------
expenses incurred in any Registration undertaken pursuant to Section 11.1A,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.), legal fees, brokerage or underwriting fees, expenses or commissions, fees
and expenses of complying with securities and blue sky laws and regulations,
printing expenses and fees and disbursements of the independent certified public
accountants and of HPI's counsel. With respect to any Registration undertaken
pursuant to Section 111, HPI shall bear all expenses other than Selling Holder
Expenses (defined below). Each Selling Holder shall bear his, her or its
equitable share of any Selling Holder Expenses. "Selling Holder Expenses" shall
consist of (i) Selling Holder's legal costs, (ii) any proportionate share of
brokerage or underwriting fees, expenses or commissions, (iii) any fees and
expenses of complying with blue sky laws to the extent registration in the
applicable state is requested by a Selling Holder pursuant to Section 1124
hereof, and (iv) any other costs required to be paid by Selling Holders in order
to comply with state securities laws and regulations.
11.7 TERMINATION. Each Holder shall have no further rights under this
-----------
Article at any time (i) after such time as no further Registrable Securities of
such Holder remain outstanding or (ii) such Holder has exercised his, her or its
registration rights under Section 11.1A on one occasion, whichever comes first.
Further, each Holder shall have the right to participate in any Registration
undertaken pursuant to Section 111 only once.
ARTICLE 12
MISCELLANEOUS
12.1 OTHER VENTURES; COMPETITION.
---------------------------
(a) Nothing contained in this Agreement or in law shall be construed
to limit or restrict in any way the freedom of any Member, or any shareholders
or affiliates of a Member, to conduct any other business venture or activity
whatsoever, including the ownership, development, leasing, sale, financing,
operation and management of other card clubs or casinos nor to require any
accountability to the Company or to any other Member, whether or not such other
business ventures are in direct or indirect competition with the business of the
Company.
-39-
<PAGE>
(b) No Member need afford the Company or any other Member or any
affiliate of a Member the opportunity to acquire or invest in any other
property, project or enterprise, regardless of whether such property, project or
enterprise would, but for this sentence, be deemed an opportunity of the
Company.
12.2 COUNSEL TO THE COMPANY. Counsel to the Company may also be counsel
----------------------
to any Member or any Affiliate of a Member. The officers of the Company may
execute on behalf of the Company and the Members any consent to the
representation of the Company that counsel may request pursuant to the
California Rules of Professional Conduct or similar rules in any other
jurisdiction.
12.3 GENERAL PROVISIONS.
------------------
12.3.1 COMPLETE AGREEMENT. This Agreement and any documents
------------------
referred to herein or executed contemporaneously herewith constitute the
parties' entire agreement with respect to the subject matter hereof and
supersede all prior or contemporaneous agreements, representations, warranties,
statements, promises and understandings, whether oral or written, with respect
to the subject matter hereof.
12.3.2 DISPUTES.
--------
12.3.2.1 GOVERNING LAW; JURISDICTION. This Agreement has been
---------------------------
negotiated and entered into in the State of California, concerns a California
business and all questions with respect to the Agreement and the rights and
liabilities of the parties will be governed by the laws of that state,
regardless of the choice of law provisions of California or any other
jurisdiction. Any and all disputes between the parties which may arise pursuant
to this Agreement not covered by arbitration will be heard and determined before
an appropriate federal or state court located in Los Angeles, California. The
parties hereto acknowledge that such court has the jurisdiction to interpret and
enforce the provisions of this Agreement and the parties waive any and all
objections that they may have as to personal jurisdiction or venue in any of the
above courts.
12.3.2.2 ARBITRATION AS EXCLUSIVE REMEDY. Except for actions
-------------------------------
seeking injunctive relief and for actions pursuant to Sections 101 and 1042,
which may be brought before any court having jurisdiction, any claim arising out
of or relating to (i) this Agreement, including without limitation its validity,
interpretation, enforceability or breach, or (ii) the relationship between the
parties (including without limitation its commencement and termination) whether
based on breach of covenant, breach of an implied covenant or intentional
infliction of emotional distress or other tort or contract theories, which are
not settled by agreement between the parties, shall be settled by arbitration in
Los Angeles County, California, before a sole arbitrator who shall be a retired
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<PAGE>
judge of the Los Angeles Superior Court or retired justice of the California
Court of Appeal or Supreme Court. The sole arbitrator shall be selected by
mutual agreement of the parties within fifteen (15) days after service of a
notice of intent to arbitrate by any party. If the parties are unable to select
a mutually agreeable arbitrator, then a retired judge or justice of the
California state courts shall be selected by order of the court pursuant to the
provisions of Code of Civil Procedure (S)1281.6. The parties hereby (i) consent
to the in personam jurisdiction of the Superior Court of the State of California
for purposes of the enforcement of this arbitration provision and confirming any
such award and entering judgment thereof; (ii) agree to use their best efforts
to keep all matters relating to any arbitration hereunder confidential; and
(iii) agree that the arbitrators may not assess any remedy other than the
awarding of actual out-of-pocket damages suffered and/or punitive damages when
appropriate. In any arbitration proceedings hereunder (a) all testimony of
witnesses shall be taken under oath; (b) discovery will be allowed under the
provisions of Section 1283.05 of the Code of Civil Procedure, as presently in
force, which are incorporated herein; (c) production of documents will be
allowed as provided for by Section 2031 of the Code of Civil Procedure; and (d)
upon conclusion of any arbitration, the arbitrator shall render findings of fact
and conclusions of law in a written opinion setting forth the basis and reasons
for any decision reached and deliver such documents to each party to this
Agreement along with a signed copy of the award in accordance with Section
1283.6 of the California Code of Civil Procedure. Each party agrees that,
except as expressly provided above, the arbitration provisions of this Agreement
are its exclusive remedy and expressly waives any right to seek redress in
another forum. Each party shall share equally the fees of the arbitrator during
the arbitration, but the fees of the arbitrator shall be borne by the losing
party. Any arbitration shall be commenced within forty-five (45) days, and
completed within ninety (90) days, of the appointment of the arbitrator.
12.3.3 ADDITIONAL DOCUMENTS. Each party hereto agrees to execute
--------------------
any and all further documents and writings and to perform such other actions
which may be or become necessary or expedient to effectuate and carry out this
Agreement.
12.3.4 NOTICES. Unless otherwise specifically permitted by this
-------
Agreement, all notices under this Agreement shall be in writing and shall be
delivered by personal service, telecopy, federal express or comparable overnight
service or certified mail (if such service is not available, then by first class
mail), postage prepaid, to such address as may be designated from time to time
by the relevant party, and which shall initially be as set forth on Exhibit A.
---------
All other notices shall be deemed given when received. No objection may be made
to the manner of delivery of any notice actually received in writing by an
authorized agent of a party.
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<PAGE>
12.3.5 PARTIES.
-------
12.3.5.1 NO THIRD-PARTY BENEFITS. None of the provisions of
-----------------------
this Agreement shall be for the benefit of, or enforceable by, any third party.
12.3.5.2 SUCCESSORS AND ASSIGNS. Except as provided herein to
----------------------
the contrary, this Agreement shall be binding upon and inure to the benefit of
the parties, their respective successors and permitted assigns.
12.3.6 GOVERNING LAW; JURISDICTION. This Agreement has been
---------------------------
negotiated and entered into in the State of California, concerns a California
business and all questions with respect to the Agreement and the rights and
liabilities of the parties will be governed by the laws of that state,
regardless of the choice of law provisions of California or any other
jurisdiction.
12.3.7 WAIVER OF JURY. WITH RESPECT TO ANY DISPUTE ARISING UNDER
--------------
OR IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, AS TO WHICH NO
MEMBER INVOKES THE RIGHT TO ARBITRATION HEREINABOVE PROVIDED, OR AS TO WHICH
LEGAL ACTION NEVERTHELESS OCCURS, EACH MEMBER HEREBY IRREVOCABLY WAIVES ALL
RIGHTS IT MAY HAVE TO DEMAND A JURY TRIAL, INCLUDING ITS CONSTITUTIONAL RIGHTS.
THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY THE MEMBERS AND
EACH MEMBER ACKNOWLEDGES THAT NONE OF THE OTHER MEMBERS NOR ANY PERSON ACTING ON
BEHALF OF THE OTHER PARTIES HAS MADE ANY REPRESENTATION OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE
MEMBERS EACH FURTHER ACKNOWLEDGE THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE
WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
THE MEMBERS EACH FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTAND THE
MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.
12.3.8 WAIVERS STRICTLY CONSTRUED. With regard to any power,
--------------------------
remedy or right provided herein or otherwise available to any party hereunder
(i) no waiver or extension of time shall be effective unless expressly contained
in a writing signed by the waiving party; and (ii) no alteration, modification
or impairment shall be implied by reason of any previous waiver, extension of
time, delay or omission in exercise, or by any other indulgence.
12.3.9 RULES OF CONSTRUCTION.
---------------------
12.3.9.1 HEADINGS. The Article and Section headings in this
--------
Agreement are inserted only as a matter of convenience, and in no way define,
limit, or interpret the scope of this Agreement or of any particular Article or
Section.
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<PAGE>
12.3.9.2 TENSE AND CASE. Throughout this Agreement, as the context
--------------
may require, references to any word used in one tense or case shall include all
other appropriate tenses or cases.
12.3.9.3 SEVERABILITY. The validity, legality or enforceability
------------
of the remainder of this Agreement will not be affected even if one or more of
the provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
12.3.9.4 AGREEMENT NEGOTIATED. The parties hereto are
--------------------
sophisticated and have been represented by lawyers throughout this transaction
who have carefully negotiated the provisions hereof. As a consequence, the
parties do not believe that the presumptions of Civil Code Section 1654 and
similar laws or rules relating to the interpretation of contracts against the
drafter of any particular clause should be applied in this case and therefore
waive their effects. Only the final executed version of this Agreement may be
admitted into evidence or used for any purpose, and drafts of this Agreement
shall be disregarded for all purposes.
12.3.10 COUNTERPARTS. This Agreement may be executed
------------
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
12.4 AMENDMENTS. Except as set forth in the next sentence, all
----------
amendments to this Agreement shall be in writing and approved by all of the
Members. The Manager may amend Exhibit A hereto at any time and from time to
---------
time to reflect the admission or withdrawal of any Member, or the change in any
Member's Capital Contributions, Profit Percentage Interests, or any changes in
the Member's addresses, all as contemplated by this Agreement.
12.5 RELIANCE ON AUTHORITY OF PERSON SIGNING AGREEMENT. If a Member is
-------------------------------------------------
not a natural person, neither the Company nor any Member will be required to
determine the authority of the individual signing this Agreement to make any
commitment or undertaking on behalf of such entity or to determine any fact or
circumstance bearing upon the existence of the authority of such individual.
12.6 INVESTMENT REPRESENTATION. Each Member hereby represents and
-------------------------
warrants to, and agrees with, the other Members and the Company that he or it is
acquiring the Membership Interest for investment purposes for his or its own
account only and not with a view to or for sale in connection with any
distribution of all or any part of the Membership Interest. No other person
will have any direct or indirect beneficial interest in or right to the
Membership Interest.
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<PAGE>
12.7 LLC AS CARD CLUB OPERATOR. At such time as HPI or HPC may be
-------------------------
licensed as an owner and operator of a card club under applicable California law
and the City ordinance, if applicable law then prohibits a card club operator
from being organized as a limited liability company or the Company as a limited
liability company from being the manager or the managing general partner of
Newco, the Company shall be reorganized as a California limited partnership,
with HPC as the managing general partner, and the Members shall enter into a
Limited Partnership Agreement containing substantially the same terms and
provisions hereof, modified as necessary to reflect the fact that the entity is
a California limited partnership.
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<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the day and year set
forth above.
HP/COMPTON, INC.
By: ___________________________
G. Michael Finnigan
Its: Vice President
REDWOOD GAMING LLC
By: ___________________________
Its: __________________________
FIRST PARK INVESTMENTS, LLC
By: ___________________________
Leo Chu
Its: __________________________
<PAGE>
SCHEDULE I
----------
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below (all terms used in this Agreement that are not defined in this
Schedule I shall have the meanings set forth elsewhere in this Agreement):
- ----------
"1933 ACT" shall mean the Securities Act of 1933, as amended, or any
--------
future comparable law.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended, or
--------
any future comparable law.
"ACQUIRED INTEREST" is defined in Section 793.
-----------------
"ACT" means the Beverly-Killea Limited Liability Company Act, codified in
---
the California Corporations Code, Section 17000 et seq., as the same may be
-- ---
amended from time to time.
"ADDITIONAL CAPITAL CONTRIBUTIONS" has the meaning set forth in Section
--------------------------------
22.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member, the
--------------------------------
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts that such Member is
obligated to restore pursuant to any provision of this Agreement or is deemed to
be obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5);
(b) Credit to such Capital Account the amount of the deductions and
losses referable to any outstanding recourse liabilities owed by the Company to
such Member for which no other Member bears any economic risk of loss and the
amount of the deductions and losses referable to such Member's share (determined
in accordance with the Member's Profit Percentage Interest) of outstanding
recourse liabilities owed by the Company to non-Members for which no Member
bears any economic risk of loss; and
(c) Debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-
- - - -
1(b)(2)(ii)(d)(6).
- -
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
- -------------
-1-
<PAGE>
"ADVANCES" has the meaning set forth in Section 2.6.
--------
"AFFILIATE" means any individual, partnership, corporation, trust or
---------
other entity or association, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with, a
Member. The term "control," as used in the immediately preceding sentence,
means, with respect to a corporation or limited liability company, the right to
exercise, directly or indirectly, fifty percent (50%) of the voting rights
attributable to the controlled corporation or limited liability company and,
with respect to any individual, partnership, trust, other entity or association,
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the controlled entity.
"AGREEMENT" means this Operating Agreement, as originally executed and as
---------
amended and/or restated from time to time.
"ARTICLES" means the Articles of Organization for the Company originally
--------
filed with the California Secretary of State, as amended and/or restated from
time to time.
"BANKRUPTCY" means: (i) being adjudicated bankrupt or insolvent in
----------
proceedings filed against a Person or its ultimate "parent" entity under any
section or chapter of the United States Bankruptcy Code, as amended from time to
time, or any similar law or statute of any state thereof (collectively
"Bankruptcy Laws"); (ii) any petition for reorganization or arrangement under
any Bankruptcy Laws; (iii) proceedings under any Bankruptcy Laws to have a
Person adjudicated a bankrupt or insolvent, which proceedings are not dismissed
within ninety (90) days of commencement; (iv) the general assignment by any
Person for the benefit of creditors; (v) the appointment of a receiver for all
or substantially all of the assets of any Person and the failure to have such
receiver discharged within ninety (90) days after appointment; (vi) the
suffering by any Member of any assignment by operation of law, or any
attachment, sequestration, garnishment or lien against, or the occurrence of a
levy on, such Person's interest in the Company, or any portion thereof, with the
same not being discharged of record by bonding or otherwise within ninety (90)
days after notice to such Member of such event.
"CAPITAL ACCOUNT" means with respect to any Member the capital account
---------------
that the Company establishes and maintains for such Member pursuant to Section
23.
"CAPITAL CONTRIBUTION" means the total value of cash and the fair market
--------------------
value (as determined by the Managers or as agreed upon by the Members under this
Agreement) of property (including promissory notes or other obligations to
contribute cash or property) or services contributed by Members.
-2-
<PAGE>
"CAPITAL INTERESTS" means the ratio of each Member's Capital Account to
-----------------
the total of all Member's Capital Accounts at any time.
"CARD CLUB" has the meaning set forth in Recital A of this Agreement.
---------
"CARD CLUB OPERATOR" has the meaning set forth in Section 641.
------------------
"CARD CLUB SITE" has the meaning set forth in Recital A of this
--------------
Agreement.
"CHANGE OF CONTROL" means that, with respect to a Person, more than 50%
-----------------
of the beneficial ownership (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, whether or not such provision is
applicable to such Person) of its securities, as of the date of this Agreement,
is Transferred to another Person or group of Persons that is not an Affiliate of
the current owners. In the case of Chu, a Change of Control shall occur if Leo
and Ivy Chu together do not own more than 50% of the beneficial ownership of
Chu; and in the case of DeBartolo, a Change of Control shall occur if Edward J.
DeBartolo or Cynthia R. DeBartolo do not own more than 50% of the beneficial
ownership of DeBartolo.
"CHU" means FIRST PARK INVESTMENTS, LLC, a California limited liability
---
company.
"CITY" has the meaning set forth in Recital A of this Agreement.
----
"CODE" means the Internal Revenue Code of 1986, as amended from time to
----
time, the provisions of succeeding law and to the extent applicable, the
Regulations.
"COMPANY" means CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC, a
-------
California limited liability company.
"COMPANY MINIMUM GAIN" has the meaning ascribed to the term "Partnership
--------------------
Minimum Gain" in the Regulations Section 1.704-2(d).
"COMPANY PERSON" means a Member, Manager or officer of the Company.
--------------
"COMPANY PROPERTY" has the meaning set forth in Section 14.
----------------
"CORPORATIONS CODE" means the California Corporations Code, as amended
-----------------
from time to time, and the provisions of succeeding law.
-3-
<PAGE>
"DDA" has the meaning set forth in Recital B of this Agreement.
---
"DEBARTOLO" means REDWOOD GAMING LLC, a California limited liability
---------
company.
"DEFAULTING MEMBER" means any Member that has committed a material breach
-----------------
of this Agreement, including without limitation a breach pursuant to Section 27
hereof.
"DISSOLUTION EVENT" means (i) the death, insanity, expulsion, Bankruptcy
-----------------
or dissolution of any Member or the commission by a Member of a material default
under this Agreement which is incapable of cure or (ii) the withdrawal,
resignation or retirement of a Member without the prior consent of all of the
other Members.
"ECONOMIC INTEREST" means a Member's or Economic Interest Owner's share
-----------------
of one or more of the Company's Net Profits, Net Losses and distributions of the
Company's assets pursuant to this Agreement and the Act, but shall not include
any other rights of a Member including, without limitation, the right to vote or
participate in the management or, except as provided in Section 17106 of the
Corporations Code, any right to information concerning the business and affairs
of Company.
"ECONOMIC INTEREST OWNER" means the owner of an Economic Interest who is
-----------------------
not a Member.
"EXCLUDED MEMBER" means a Member that caused a Dissolution Event.
---------------
"EXPENSES" shall include, without limitation, attorneys' fees,
--------
disbursements and retainers, court costs, transcript costs, fees of accountants,
experts and witnesses, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees, and all other expenses
of the types customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, or being or preparing to be a
witness or other participant in a Proceeding.
"FAIR VALUE" shall be determined in accordance with Section 793.
----------
"FIRST OPPORTUNITY OFFER" has the meaning set forth in Section 72.
-----------------------
"FISCAL YEAR" means (i) the period commencing upon the formation of the
-----------
Company and ending on December 31, 1996, (ii) any subsequent twelve (12) month
period commencing on January 1 and ending on December 31, or (iii) any portion
of the period described in Clause (ii) of this sentence for which the Company is
required to allocate Profits, Losses, and other items
-4-
<PAGE>
of Company income, gain, loss, or deduction pursuant to Article 3 hereof.
"HOLDER" means either Chu or DeBartolo, who at that time, is the holder
------
of any Registrable Securities based on the records of HPI.
"HOTEL" is defined in Recital C.
-----
"HPC" means HP/Compton, Inc., a California corporation.
---
"HPI" means Hollywood Park, Inc., a Delaware corporation.
---
"HPI CHANGE" means that either R. D. Hubbard or G. Michael Finnigan
----------
("Finnigan") no longer serves in either (i) his current capacity or (ii) a
capacity that is senior to his current capacity with HPI or a successor (as long
as, in the case of Finnigan, the individual at HPI or its successor who is
primarily responsible for the Company reports directly or indirectly to
Finnigan).
"INITIAL CAPITAL CONTRIBUTIONS" has the meaning set forth in Section 21.
-----------------------------
"INITIAL CARD CLUB ASSETS" has the meaning set forth in Section 21.
------------------------
"INITIAL EXPENSES" means all monies expended or committed by HPC or HPI
----------------
with respect to the Card Club, the Hotel and related businesses prior to the
assignment of the Initial Card Club Assets to the Company, including without
limitation the costs of acquiring the Card Club Site.
"LEASE" has the meaning set forth in Recital D of this Agreement.
-----
"LICENSE RIGHTS OPTION" has the meaning set forth in Recital B of this
---------------------
Agreement.
"MAJORITY INTEREST" means Members holding in the aggregate over fifty
-----------------
percent (50%) of the aggregate of all Profit Percentage Interests; provided,
--------
however, that for purposes of Section 91, "Majority Interest" means more than
- -------
fifty percent (50%) of both the capital and profit interests in the Company
(within the meaning of such terms in Revenue Procedure 94-46, 1994-28 IRB 1)
held by the Remaining Members.
"MANAGER" shall mean the manager who is designated from time to time as
-------
provided in Section 62.
"MEMBER" means each Person who (a) is an Original Member, has been
------
admitted to the Company as a Member in accordance with the Articles and this
Agreement or is an assignee who has become a Member in accordance with Article 7
and (b) has not resigned,
-5-
<PAGE>
withdrawn, been expelled or, if other than an individual, dissolved.
"MEMBER-MANAGER" means a Manager who is a Member.
--------------
"MEMBER NONRECOURSE DEBT" has the meaning ascribed to the term "Partner
-----------------------
Nonrecourse Debt" in Regulations Section 1.704-2(b)(4).
"MEMBER NONRECOURSE DEDUCTIONS" means items of Company loss, deduction or
-----------------------------
Code Section 705(a)(2)(B) expenditures that are attributable to Member
Nonrecourse Debt or to other loans by a Member to the Company for which no other
Member bears the economic risk of loss.
"MEMBERSHIP INTEREST" means a Member's entire interest in the Company or
-------------------
any portion thereof, including without limitation the Member's Economic
Interest, the right to vote on or participate in the management and the right to
receive information concerning the business and affairs of the Company.
"NET CASH FLOW" means the sum of Net Cash From Operations and Net Cash
-------------
From Sales or Refinancings, where:
(a) "NET CASH FROM OPERATIONS" means the gross cash proceeds from
------------------------
Company operations (including sales and dispositions of property in the ordinary
course of business) less the portion thereof used to pay or establish reserves
for all Company expenses, debt payments, capital improvements, replacements, and
contingencies, all as determined by the Manager, subject to the reasonable
approval of all of the Members. Net Cash From Operations shall not be reduced
by depreciation, amortization, cost recovery deductions, or similar allowances,
but shall be increased by any reductions of reserves previously established
pursuant to the first sentence of this clause (a) and pursuant to the definition
below of Net Cash From Sales or Refinancings.
(b) "NET CASH FROM SALES OR REFINANCINGS" means the net cash proceeds
-----------------------------------
from all sales and other dispositions (other than in the ordinary course of
business) and all refinancings of property, less any portion thereof used to
establish reserves, all as determined by the Manager, subject to the reasonable
approval of all of the Members. Net Cash From Sales or Refinancings shall
include all principal and interest payments with respect to any note or other
obligation received by the Company in connection with sales and other
dispositions (other than in the ordinary course of business) of property.
"NET PROFITS" and "NET LOSSES" means the income, gain, loss, deductions
----------- ----------
and credits of the Company in the aggregate or separately stated, as
appropriate, determined in accordance with the method of accounting used on the
Company's information tax return filed for federal income tax purposes.
Notwithstanding
-6-
<PAGE>
the foregoing, any items of income, gain, loss or deduction that are specially
allocated pursuant to Section 33 or 34 shall not be taken into account in
computing Net Profits or Net Losses.
"NEWCO" means the limited liability company, general partnership or other
-----
entity formed by the Company and CEI to which the Company Assets will be
transferred in accordance with the Purchase Agreement after such time as
applicable law is amended to permit public companies to operate card clubs or
HPI or HPC is otherwise legally permitted to operate the Card Club.
"NONCOMPLYING PERSON" has the meaning set forth in Section 7.7.
-------------------
"NONRECOURSE LIABILITY" has the meaning set forth in Regulations Section
---------------------
1.752-1(a)(2).
"OFFEREES" has the meaning set forth in Section 7.2.
--------
"ORIGINAL MEMBERS" means HPC, DeBartolo and Chu.
----------------
"PERSON" means an individual, general partnership, limited partnership,
------
limited liability company, corporation, trust, estate, real estate investment
trust association or any other entity.
"PROCEEDING" means any action, suit, arbitration, alternative dispute
----------
resolution mechanism, investigation, administrative hearing or other proceeding,
whether civil, criminal, administrative or investigative in nature.
"PROFIT PERCENTAGE INTEREST" means the percentage interest of a Member in
--------------------------
Net Profits, as set forth in Section 3.1 and as adjusted from time to time in
accordance with Section 2.7.
"PURCHASE AGREEMENT" has the meaning set forth in Recital B of this
------------------
Agreement.
"RATE" means interest at an annual rate equal to the Bank of America's
----
prime interest rate in effect from time to time (but in no event greater than
the maximum rate permitted under applicable law).
"REAL PROPERTY RIGHTS" has the meaning set forth in Recital B of this
--------------------
Agreement.
"REGISTRABLE SECURITIES" means those shares of HPI Common Stock received
----------------------
or receivable by either Chu or DeBartolo under Section 7.9 of this Agreement
(including shares received from HPI with respect to or in replacement of such
shares by reason of splits, dividends and recapitalizations) but excluding any
shares which may be then sold to the public without registration
-7-
<PAGE>
pursuant to Rule 144 or other comparable provision under the 1933 Act ("Rule
144").
"REGISTRATION STATEMENT" means any registration statement or comparable
----------------------
document under the 1933 Act through which a public sale or disposition of HPI's
Common Stock may be registered or exempted from registration (except a form
exclusively for the sale or distribution of securities by HPI or to employees of
HPI or its subsidiaries or for use exclusively in connection with a business
combination).
"REGULATIONS" means, unless the context clearly indicates otherwise, the
-----------
regulations currently in force from time to time as final or temporary that have
been issued by the U.S. Department of Treasury pursuant to its authority under
the Code.
"REMAINING MEMBERS" means the Members other than the Excluded Member.
-----------------
"SEC" means the Securities and Exchange Commission.
---
"SELLING HOLDER" means with respect to any Registration Statement, any
--------------
Holder whose securities are included therein.
"SELLERS' UNDERWRITER" means with respect to any Registration Statement
--------------------
and only to the extent that HPI has not retained an underwriter for such
offering, the underwriter designated in writing by the Selling Holders, subject
to the prior approval of HPI, which may be withheld for any reason.
"SUPER MAJORITY INTEREST" means Members holding in the aggregate at least
-----------------------
eighty percent (80%) of all Profit Percentage Interests.
"TAX MATTERS PARTNER" shall be HPC or its successor as designated
-------------------
pursuant to Section 8.6.
"THIRD PARTY LOANS" has the meaning set forth in Section 2.5.
-----------------
"TRANSFER" means any sale, transfer, assignment, hypothecation or other
--------
voluntary disposition, whether by gift, bequest or otherwise. In the case of a
hypothecation, the Transfer shall be deemed to occur both at the time of the
initial pledge and at any pledgee's sale or a sale by any secured creditor.
"TRANSFERABLE INTEREST" has the meaning set forth in Section 7.2.
---------------------
-8-
<PAGE>
SCHEDULE 2.1
------------
INITIAL CARD CLUB ASSETS
------------------------
A. AGREEMENTS WITH COMPTON ENTERTAINMENT, INC. ("CEI")
1. Agreement In Principle, dated April 29, 1994, by and among Hollywood
Park, Inc., a Delaware corporation ("HPI") and CEI.
2. Amended and Restated Agreement Respecting Pyramid Casino, dated July
14, 1995, by and among HPI as Buyer, CEI as Seller and Shareholder,
together with (i) Exhibit A: Form of Lease, by and among HP/Compton
---------
as Landlord and CEI as Tenant; (ii) Exhibit B-1: Form of
-----------
Partnership Agreement Of Pyramid Casino Partners, a California
general partnership, by and among HPI and CEI; and Exhibit B-2:
-----------
Form of Limited Liability Company Operating Agreement Of Pyramid
Casino Company, LLC, by and among HPI and CEI.
3. Lease, dated August 3, 1995, by and among HPC as Landlord and CEI as
Tenant, as amended by that certain First Amendment to Lease.
4. Assignment, Acceptance and Assumption and Consent, dated August 2,
1995, to transfer and assign to HPC, all of its right, title and
interest in that certain Amended and Restated Agreement Respecting
Pyramid Casino, dated as of July 14, 1995, by and between HPI and
CEI and Shareholder.
5. License Rights Option Agreement, dated August 3, 1995, by and among
CEI as Optionor and HPC as Optionee.
B. AGREEMENTS WITH THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF COMPTON
("the Agency")
1. Amended and Restated Disposition and Development Agreement,
Agreement of Purchase and Sale, and Lease with Option to Purchase,
dated April 4, 1995 (the "DDA"), by and among the Agency and CEI.
2. Assignment, Assumption & Consent Agreement, dated July 31, 1995, by
and among CEI as Assignor, HPC as Assignee, HPI as Guarantor and the
Agency.
3. Guaranty, dated July 31, 1995, by HPI as Guarantor, in favor of the
Agency.
-1-
<PAGE>
4. Memorandum of Lease and Option to Purchase, dated July 31, 1995, by
and among the Agency as Landlord and HPC as Tenant, recorded August
3, 1995, as Instrument No. 95-1265412, in the Official Records, Los
Angeles County, California.
5. Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing, dated July 31, 1995, by HPC as Trustor, Chicago Title
Company, a California corporation, as Trustee and the Agency as
Beneficiary, recorded August 3, 1995, as Instrument No. 95-1265414,
in the Official Records, Los Angeles County, California.
6. UCC-1 Financing Statement dated July 31, 1995, executed by HPC as
Debtor, in favor of the Agency as Secured Creditor, recorded August
3, 1995, as Instrument No. 95-1265415, in the Official Records of
Los Angeles County, California.
7. UCC-1 Financing Statement, dated July 31, 1995, executed by HPC as
Debtor, in favor of the Agency as Secured Creditor, filed with the
Secretary of State-California.
8. Offset Agreement, dated as of July 31, 1995, by and among the
Agency, the City of Compton, HPC and CEI.
9. Representations and Warranties Agreement, dated August 2, 1995, by
and among CEI, HPC and the
Agency.
10. Slope Maintenance Agreement, dated August 2, 1995, by HPC in favor
of the City of Compton, recorded August 3, 1995, as Instrument No.
95-1265419, in the Official Records of Los Angeles County,
California.
-2-
<PAGE>
SCHEDULE 6.5
------------
-1-
<PAGE>
SCHEDULE 7.8A
-------------
Interests in FIRST PARK INVESTMENTS, LLC
Member Profit Percentage Interest
- ------ --------------------------
Leo Chu 50%
Ivy Chu 50%
-1-
<PAGE>
SCHEDULE 7.8B
-------------
Interests in REDWOOD GAMING LLC
Member Profit Percentage Interest
- ------ --------------------------
Cynthia R. DeBartolo 90%
Christine Catherine Muranski 10%
-1-
<PAGE>
Exhibit A
---------
<TABLE>
<CAPTION>
Initial
Profit Initial
Percentage Capital
Member's Name Member's Address Interests Contributions
- ---------------- -------------------------- ----------- --------------
<S> <C> <C> <C>
HPC 1050 South Prairie Avenue 88% $22,000,000
Inglewood, CA 90301
Attn: G. Michael Finnigan
DeBartolo 999 Baker Way, Suite 420 8% $ 2,000,000
San Mateo, CA 94404
Attn: Mark Rivers
Chu 515 North Camden Drive 4% $ 1,000,000
Beverly Hills, CA 90210
Attn: Leo Chu
</TABLE>
A-1
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 ORGANIZATIONAL MATTERS......................................... 2
1.1 FORMATION...................................................... 2
1.2 NAME........................................................... 2
1.3 TERM........................................................... 3
1.4 COMPANY PROPERTY............................................... 3
1.5 OFFICE AND AGENT............................................... 3
1.6 ADDRESSES OF THE MEMBERS....................................... 3
1.7 PURPOSE OF COMPANY............................................. 3
ARTICLE 2 CAPITAL CONTRIBUTIONS.......................................... 4
2.1 INITIAL CAPITAL CONTRIBUTIONS.................................. 4
2.2 ADDITIONAL CAPITAL CONTRIBUTIONS............................... 5
2.3 CAPITAL ACCOUNTS............................................... 5
2.4 NO INTEREST ON OR WITHDRAWAL OF CAPITAL........................ 6
2.5 THIRD PARTY LOANS.............................................. 6
2.6 SHORT-TERM ADVANCES............................................ 6
2.7 DILUTION....................................................... 6
ARTICLE 3 ALLOCATIONS OF NET PROFITS AND NET LOSSES....................... 7
3.1 ALLOCATIONS OF INCOME AND NET PROFITS......................... 7
3.2 ALLOCATIONS OF NET LOSSES..................................... 7
3.2.1 POSITIVE CAPITAL ACCOUNTS.............................. 7
3.2.2 PROFIT PERCENTAGE INTERESTS............................ 7
3.3 SPECIAL ALLOCATIONS........................................... 7
3.3.1 MEMBER NONRECOURSE DEDUCTIONS......................... 7
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.3.2 NONRECOURSE DEDUCTIONS REFERABLE TO LIABILITIES OWED
TO NON-MEMBERS......................................... 8
3.3.3 MEMBER MINIMUM GAIN CHARGEBACK......................... 8
3.3.4 MINIMUM GAIN CHARGEBACK................................. 8
3.3.5 QUALIFIED INCOME OFFSET................................. 9
3.4 CURATIVE ALLOCATIONS............................................ 9
3.5 APPLICATION OF SECTION 704(c) PRINCIPLES........................ 9
3.6 ALLOCATION OF EXCESS NON-RECOURSE LIABILITIES................... 9
3.7 INTENTION TO BE TAXED AS A PARTNERSHIP.......................... 9
3.8 ALLOCATION OF NET PROFITS AND LOSSES IN RESPECT OF A
TRANSFERRED INTEREST............................................ 9
3.9 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS.................... 10
ARTICLE 4 DISTRIBUTIONS................................................. 10
4.1 DISTRIBUTION OF ASSETS BY THE COMPANY......................... 10
4.2 NET CASH FLOW................................................. 10
4.3 PERSONS TO RECEIVE DISTRIBUTION............................... 10
4.4 FORM OF DISTRIBUTION.......................................... 10
4.5 WITHHOLDING ON DISTRIBUTIONS.................................. 10
4.6 RETURN OF DISTRIBUTIONS....................................... 11
ARTICLE 5 MEMBERS....................................................... 11
5.1 LIMITED LIABILITY............................................. 11
5.2 ADMISSION OF ADDITIONAL MEMBERS............................... 11
5.3 TRANSACTIONS WITH THE COMPANY................................. 11
5.4 MEMBERS ARE NOT AGENTS........................................ 12
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.5 VOTING RIGHTS................................................... 12
5.5.1 GENERAL RULE............................................. 12
5.5.2 MEETINGS OF MEMBERS...................................... 12
5.5.3 PROXIES.................................................. 12
5.6 WITHDRAWAL, RESIGNATION AND RETIREMENT.......................... 13
ARTICLE 6 MANAGEMENT AND CONTROL OF THE COMPANY......................... 13
6.1 MANAGEMENT OF THE COMPANY BY THE MANAGER........................ 13
6.1.1 EXCLUSIVE MANAGEMENT BY THE MANAGER...................... 13
6.1.2 AGENCY AUTHORITY OF THE MANAGER.......................... 13
6.2 MANAGER......................................................... 14
6.2.1 INITIAL MANAGER.......................................... 14
6.2.2 TERM OF OFFICE; SUCCESSOR MANAGER........................ 14
6.2.3 RESIGNATION.............................................. 14
6.3 LIMITATIONS ON MANAGER'S AUTHORITY.............................. 14
6.4 CARD CLUB OPERATOR; HOTEL OPERATOR; OTHER OFFICERS.............. 15
6.4.1 CARD CLUB OPERATOR; HOTEL OPERATOR....................... 15
6.4.2 OTHER OFFICERS........................................... 15
6.5 REMUNERATION AND REIMBURSEMENT OF MEMBERS....................... 15
6.6 BUDGETS......................................................... 16
6.7 BANK ACCOUNTS................................................... 16
6.8 INSURANCE....................................................... 16
ARTICLE 7 TRANSFER AND ASSIGNMENT OF INTERESTS........................... 16
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.1 RESTRICTIONS ON TRANSFER; TRANSFERS OF ECONOMIC INTERESTS....... 16
7.2 RIGHTS OF FIRST REFUSAL......................................... 17
7.3 TRANSFERS SUBJECT TO LICENSES AND APPROVALS..................... 18
7.4 EFFECT OF NON-COMPLIANCE........................................ 18
7.5 EFFECT OF TRANSFER.............................................. 18
7.6 RIGHTS OF LEGAL REPRESENTATIVES................................. 18
7.7 OBLIGATION TO COMPLY WITH APPLICABLE LAW........................ 19
7.8 CHANGES OF CONTROL -- DEBARTOLO AND CHU......................... 19
7.9 PUT/CALL........................................................ 20
7.9.1 CHU/HPC................................................... 20
7.9.2 DEBARTOLO/HPC............................................. 20
7.9.3 DETERMINATION OF FAIR VALUE............................... 21
7.9.4 HPC OPTION................................................ 22
7.9.5 CLOSING................................................... 23
7.10 TAG-ALONG RIGHTS................................................ 23
7.10.1 RIGHT TO PARTICIPATE IN SALE............................. 23
7.10.2 SALE NOTICE.............................................. 24
7.10.3 TAG-ALONG NOTICE......................................... 24
7.10.4 VOID TRANSFERS........................................... 24
7.10.5 EXEMPT TRANSFERS......................................... 25
ARTICLE 8 ACCOUNTING, RECORDS, REPORTING BY MEMBERS...................... 25
8.1 FISCAL YEAR..................................................... 25
8.2 BOOKS AND RECORDS............................................... 25
8.3 STATEMENTS...................................................... 26
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.3.1 ANNUAL REPORT..................................... 26
8.3.2 TAX INFORMATION................................... 26
8.3.3 ANNUAL STATE REPORT............................... 26
8.3.4 MONTHLY REPORTS................................... 26
8.4 FILINGS.................................................. 27
8.5 BANK ACCOUNTS............................................ 27
8.6 TAX MATTERS FOR THE COMPANY HANDLED BY THE MANAGER
AND TAX MATTERS PARTNER.................................. 27
ARTICLE 9 DISSOLUTION AND WINDING UP............................. 27
9.1 EVENTS OF DISSOLUTION.................................... 27
9.2 EFFECT OF A DISSOLUTION EVENT (OTHER THAN DISSOLUTION)... 28
9.3 CERTIFICATE OF DISSOLUTION............................... 28
9.4 WINDING UP............................................... 28
9.5 DISTRIBUTIONS IN KIND.................................... 29
9.6 ORDER OF PAYMENT UPON DISSOLUTION........................ 29
9.7 COMPLIANCE WITH REGULATIONS.............................. 29
9.8 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION.............. 29
9.9 CERTIFICATE OF CANCELLATION.............................. 30
9.10 NO ACTION FOR DISSOLUTION................................ 30
ARTICLE 10 INDEMNIFICATION AND INSURANCE......................... 30
10.1 INDEMNIFICATION OF COMPANY PERSONS....................... 30
10.2 SUCCESSFUL DEFENSE....................................... 31
10.3 INDEMNIFICATION OF OTHER AGENTS.......................... 31
10.4 RIGHT TO INDEMNIFICATION UPON APPLICATION................ 32
10.4.1 TIMING............................................ 32
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.4.2 ENFORCEMENT....................................... 32
10.5 PAYMENT OF EXPENSES IN ADVANCE........................... 32
10.6 LIMITATIONS ON INDEMNIFICATION........................... 32
10.7 OTHER TERMS OF INDEMNIFICATION........................... 33
10.7.1 PARTIAL INDEMNIFICATION.......................... 33
10.7.2 INDEMNITY NOT EXCLUSIVE.......................... 33
10.7.3 INSURANCE........................................ 33
10.7.4 HEIRS, EXECUTORS AND ADMINISTRATORS.............. 34
ARTICLE 11 REGISTRATION RIGHTS................................... 34
11.1 INCIDENTAL REGISTRATION................................... 34
11.1.1 NOTICE............................................ 35
11.1.2 INCLUSION OF SHARES............................... 35
11.1A DEMAND REGISTRATION............................... 35
11.1A.1 NOTICE OF DEMAND......................... 35
11.1A.2 HOLDER AND REGISTRATION.................. 36
11.1A.3 HOLDBACK................................. 36
11.2 REGISTRATION PROCEDURES................................... 36
11.2.1 SELLING HOLDER INFORMATION........................ 36
11.2.2 CONSULTATION...................................... 36
11.2.3 PROVISION OF PROSPECTUSES......................... 36
11.2.4 BLUE SKY COMPLIANCE............................... 36
11.2.5 AMENDMENTS........................................ 37
11.2.6 PROSPECTUS DELIVERY............................... 37
11.2.7 STOP-ORDERS....................................... 37
11.2.8 UNDERWRITING AGREEMENT............................ 37
11.2.9 COMPLIANCE WITH LAWS.............................. 37
</TABLE>
vi
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
11.3 REGISTRATION NOT REQUIRED.................................... 38
11.4 DELAY OF REGISTRATION........................................ 38
11.5 INDEMNITY.................................................... 38
11.5.1 HPI'S INDEMNITY...................................... 38
11.5.2 THE HOLDER'S INDEMNITY............................... 38
11.6 EXPENSES OF REGISTRATION..................................... 39
11.7 TERMINATION.................................................. 39
ARTICLE 12 MISCELLANEOUS............................................ 39
12.1 OTHER VENTURES; COMPETITION.................................. 39
12.2 COUNSEL TO THE COMPANY....................................... 40
12.3 GENERAL PROVISIONS........................................... 40
12.3.1 COMPLETE AGREEMENT.................................. 40
12.3.2 DISPUTES............................................ 40
12.3.2.1 GOVERNING LAW; JURISDICTION................ 40
12.3.2.2 ARBITRATION AS EXCLUSIVE REMEDY............ 40
12.3.3 ADDITIONAL DOCUMENTS................................ 41
12.3.4 NOTICES............................................. 41
12.3.5 PARTIES............................................. 42
12.3.5.1 NO THIRD-PARTY BENEFITS.................... 42
12.3.5.2 SUCCESSORS AND ASSIGNS..................... 42
12.3.6 GOVERNING LAW; JURISDICTION......................... 42
12.3.7 WAIVER OF JURY...................................... 42
12.3.8 WAIVERS STRICTLY CONSTRUED.......................... 42
12.3.9 RULES OF CONSTRUCTION............................... 42
12.3.9.1 HEADINGS.................................. 42
</TABLE>
vii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
12.3.9.2 TENSE AND CASE.................................. 43
12.3.9.3 SEVERABILITY.................................... 43
12.3.9.4 AGREEMENT NEGOTIATED............................ 43
12.3.10 COUNTERPARTS............................................... 43
12.4 AMENDMENTS......................................................... 43
12.5 RELIANCE ON AUTHORITY OF PERSON SIGNING AGREEMENT.................. 43
12.6 INVESTMENT REPRESENTATION.......................................... 43
12.7 LLC AS CARD CLUB OPERATOR.......................................... 44
</TABLE>
viii
<PAGE>
EXHIBIT 3.13
RESTATED ARTICLES OF INCORPORATION
OF
TURF PARADISE, INC.
Robert L. Walker, President, and Michael P. Perikly, Secretary, of
Turf Paradise, Inc., an Arizona corporation hereby certify as follows:
On November 17, 1993, by resolution adopted by the Board of Directors
of Turf Paradise, Inc., in accordance with Arizona Revised Statutes (S) 10-064,
the Articles of Incorporation of Turf Paradise, Inc., were restated as follows:
ARTICLE I
The names, residences and post office addresses of the incorporators
are:
<TABLE>
<CAPTION>
NAME RESIDENCE POST OFFICE ADDRESS
- ---- --------- -------------------
<S> <C> <C>
Walter R. Cluer 216 W. Turney Avenue Phoenix, Arizona
C. Thad Mullen 902 W. Campus Dr. Phoenix, Arizona
Charles L. Strouss 742 W. Monte Vista Rd. Phoenix, Arizona
</TABLE>
The name of this corporation shall be TURF PARADISE, INC. and its
principal place of business shall be in Phoenix, Maricopa County, Arizona, but
other offices may be established and maintained, within or outside of the State
of Arizona at such places as the Board of Directors may designate, where
meetings of shareholders and directors may be held, and any and all corporate
business transacted.
ARTICLE II
The general nature of the business in which this corporation shall
engage is as follows, to wit:
To carry on, or cause to be carried on, the business of a racecourse
in all its branches; to lay out and prepare, or cause to be layed out and
prepared, lands for the running of horse races, greyhound races and races of all
other kind and description without limitation; to purchase, lease, build,
construct, erect or otherwise acquire and to own, control, manage and conduct
racecourses, grand and other stands, stables, paddocks, parking facilities,
clubhouses, refreshment rooms, booths, concessions and other structures,
buildings and
<PAGE>
conveniences without limitation, and to contract, let, lease and rent the same
to others; to promote, hold and conduct race meetings and other shows and
exhibitions.
To purchase, lease, build, construct, erect or otherwise acquire
grounds and improvements for giving public exhibitions of baseball and other
field games, and outdoor entertainment of all kinds, and to promote, hold and
conduct the same; to contract, let, lease and rent such grounds and improvements
to others.
To purchase, lease or otherwise acquire and to own, control, operate
and conduct amusement enterprises of every kind and character without
limitation, and to purchase, lease, construct or otherwise acquire any lands,
building, improvements and conveniences incident to the conduct and operation of
such amusement enterprises.
To construct, purchase, lease or otherwise acquire, own, maintain,
operate, sell, lease or otherwise dispose of restaurants, inns, eating houses,
taverns, concessions and places of entertainment and refreshment.
To buy, sell and generally trade and deal in ice cream, confections,
delicacies and food products of every kind and description, soft drinks and
beverages of all kinds, and spirituous, vinous and malt liquors.
To purchase, buy, sell, acquire, rent, lease, hire, hypothecate,
mortgage, manufacture, handle, repair and dispose of automobiles, equipment and
parts thereof and therefor, and to dispose of automobile accessories, automobile
parts, tires and tubes, and to engage in a general automobile accessory,
automobile parts, replacement, tire and tube business.
To purchase, buy, sell, acquire, rent, lease, hire, hypothecate,
mortgage, manufacture, handle, repair and dispose of merchandise of all kinds,
including specifically (but not thereby excluding any merchandise) sporting
goods, guns, ammunition, athletic supplies, uniforms, hardware, books,
periodicals, animals, electric equipment, radio apparatus and the equipment
thereof and therefor, and to engage generally in the mercantile and sporting
goods business.
To buy, sell, rent, lease and otherwise deal in all kinds of
automobiles, tractors, trucks, motor vehicles, and motor equipment and
accessories, parts and appliances thereof, and to act as purchasing and selling
agent therefor; to lease, construct, buy or otherwise acquire, own, maintain and
operate sales rooms, storage houses, garages, factories, shops and buildings for
the sale, distribution, storage and repair of motor vehicles and equipment of
all kinds.
-2-
<PAGE>
To deal generally in airplanes, flying machines, and dirigible
balloons of any and all types whatsoever, of every name and nature, whether of
domestic or foreign make; to deal in parts and supplies for said machines; to
carry for hire passengers or freight in said machines, on special trips, or as
common carriers on regularly established routes; to maintain a service station
for the repair, overhauling and testing of said machines, and to maintain supply
depots for airplanes and flying machines service generally. Also to manufacture
and to buy and sell any and all machinery, supplies and equipment necessary or
incidental to carrying on the general business of buying, selling, repairing,
testing and flying airplanes and flying machines of every description, and to do
any and all things necessary and incidental to the carrying on of said business,
including the right to own, buy, lease or otherwise acquire such real estate, as
may be necessary for carrying out the purposes for which this corporation is
organized.
To buy, contract for, lease and in any and all other ways acquire,
take, hold and own, and to sell, mortgage, lease and otherwise dispose of lands,
and all other kinds and classes of real property and rights and interests
therein, and to improve, develop, subdivide and otherwise manage and operate the
same; to lend and invest its funds and secure the same by mortgage, deed of
trust, collateral or otherwise.
To buy, contract for, lease and in any and all other lawful ways
acquire, take, hold and own personal property of all kinds, and to sell,
mortgage, lease and otherwise dispose of the same; and to buy, sell, hold, use,
lease and deal in franchises, easements, licenses, privileges, rights of way,
and deal in personal property of every kind and character.
To borrow money and to issue bonds, debentures, notes and other
evidences of indebtedness and obligations from time to time for any lawful
corporate purpose and to mortgage, pledge and otherwise charge any or all of its
properties, rights, privileges and assets to secure the payment thereof.
To purchase, own, hold, hypothecate any patent rights, privileges,
trademarks or secret processes; to act as agent, trustee, broker, or in any
other fiduciary capacity.
To lend money, also purchase, acquire, own, hold, sell, assign,
transfer, mortgage, pledge or otherwise dispose of and deal in shares of the
capital stock, bonds, notes or other securities or evidences of indebtedness of
this or any other corporation or association, and to exercise all the rights,
powers and privileges of ownership, including the right to vote thereon to the
same extent as a natural person might or could do.
-3-
<PAGE>
To make and perform contracts of every kind and description, and in
carrying on its business or for the purpose of attaining and furthering any of
its objects, to do any and all things which a natural person could do, and which
now or hereafter may be authorized by law, and in general do and perform such
acts and things and transact such business in connection with the foregoing
objects not inconsistent with law, in any part of the world.
ARTICLE III
The capital stock of the corporation shall consist of 10,000,000
shares of common stock having no par value per share, and 300,000 shares of
preferred stock of the par value of $20.00 each share. All issued shares of the
capital stock shall be deemed fully paid and non-assessable. The shares of
capital stock may be issued and sold from time to time by the corporation for
such consideration and upon such terms as may from time to time be fixed by the
Board of Directors without action by the shareholders. All or any portion of
the capital stock may be issued in payment for real or personal property,
services, or any other right or thing of value, for the use and purposes of the
corporation, and when so issued shall become and be fully paid and non-
assessable; and the directors shall be the sole judges of any property, right or
thing acquired in exchange for capital stock.
The holders of preferred stock shall be entitled to receive out of
funds legally available therefor an annual dividend at the rate of and up to the
amount of One Dollar ($1.00) per share, payable before any dividends are paid
upon common stock, and such preferential dividend shall be cumulative.
Upon any dissolution, liquidation, merger or consolidation of the
company (whether voluntary or involuntary) or upon any distribution of capital,
or in the event of insolvency, there shall be paid to the holders of the
preferred stock Twenty Dollars ($20.00) per share before any sum shall be paid
to or any assets distributed among the holders of common stock.
The corporation may at any time, and from time to time, at the option
of the Board of Directors, upon sixty (60) days' notice by mail to the holders
of record thereof, redeem and retire the whole or an part of the outstanding
preferred stock on any dividend paying date after the issuance thereof, by
paying all unpaid dividends accrued thereon together with the redemption price
determined as follows:
(a) if such redemption is made within three years after the issuance
thereof, the redemption price shall be Twenty and 40/100 Dollars
($20.40) for each share redeemed;
-4-
<PAGE>
(b) if such redemption is made more than three but less than five
years after the issuance thereof, the redemption price shall
be Twenty and 20/100 Dollars ($20.20) for each share redeemed;
(c) if such redemption is made more than five years after the
issuance thereof, the redemption price shall be Twenty Dollars
($20.00) for each share redeemed.
If less than all of the outstanding shares of preferred stock are to be
redeemed, the shares to be redeemed shall be selected by lot in such manner as
the Board of Directors shall determine.
If the holder of any preferred stock called for redemption shall fail
to surrender the certificates evidencing such shares, such shares shall
nevertheless be deemed to have been redeemed, retired and cancelled upon the
date fixed for redemption, and the former holder thereof shall not have or
exercise any right with respect thereto except to receive the amount payable on
account of such redemption, without interest, upon surrender of the certificate
evidencing the shares redeemed.
Holders of the preferred stock shall have no right to vote at any
regular or special meeting of the shareholders, and shall have no voice in the
management of the affairs of the corporation; except that in the event of the
failure of the corporation to pay two annual dividends to the preferred
shareholders, then and thereafter until all past dividends are paid the
preferred shareholders shall have equal voting rights and powers with the common
shareholders.
ARTICLE IV
The duration of the Corporation shall be perpetual.
ARTICLE V
The affairs of the corporation shall be conducted by a Board of
Directors and such officers as the said directors may elect or appoint. The
number of directors shall be designated in the bylaws from time to time but
shall not be less than five nor more than fifteen. The directors shall be
elected each year at the Annual Meeting and shall serve until their successors
have been elected and shall qualify.
The initial directors of the corporation were:
Walter R. Cluer
C. Thad Mullen
Charles L. Strouss
-5-
<PAGE>
The directors shall have power to adopt, amend and rescind bylaws, to
fill vacancies occurring in the Board from any cause, and appoint from their own
number an executive committee and vest such committee with all the powers
granted the directors by these articles.
ARTICLE VI
(This Article deleted by amendment June 4, 1980)
ARTICLE VII
The private property of the stockholders, directors and officers of
this corporation shall be forever exempt from its debts and obligations.
ARTICLE VIII
This corporation does hereby appoint MICHAEL P. PERIKLY, of Phoenix,
Maricopa County, Arizona, who has been a bona fide resident of Phoenix, Maricopa
County, Arizona, for at least three (3) years, its lawful agent in and for the
State of Arizona, for and on behalf of this corporation to accept and
acknowledge service of, and upon whom may be served all necessary process or
processes in any action, suit or proceeding that may be brought against said
corporation in any of the courts of the said State of Arizona, such service of
process or notice, or the acceptance thereof by said agent endorsed thereon to
have the same effect as if served upon the President and Secretary of said
corporation.
ARTICLE IX
To the fullest extent that the law of the State of Arizona, as it now
exists or as it may hereafter be amended, permits the elimination of or
limitation on the liability of directors, no director of the corporation shall
be liable for monetary damages for any action taken or for any failure to take
any action. Any repeal or modification of this Article shall be prospective
only and shall not adversely affect any limitation on the personal liability of
a director of the corporation existing at the time of such repeal or
modification.
ARTICLE X
The Corporation expressly elects not to be subject to the provisions
of Arizona Revised Statutes, Title 10, Chapter 6, Article 2, or any
substantially similar successor law. This Article X shall become effective at
the later of January 23, 1989 or the filing with the Arizona corporation
Commission of Articles of Amendment adopting this Article X.
-6-
<PAGE>
ARTICLE XI
The Corporation expressly elects not to be subject to the provisions
of Arizona Revised Statutes, Title 10, Chapter 6, Article 3, or any
substantially similar successor law. This Article XI shall become effective
September 9, 1990 and shall not apply to any business combination of the
corporation with an interested shareholder whose share acquisition date was on
or before July 22, 1987.
The foregoing Restated Articles of Incorporation correctly set forth
without change all of the operative provisions of the Articles of Incorporation
as heretofore amended and supersede the original Articles of Incorporation and
all amendments thereto.
The names and addresses of the persons who are serving as directors as
of the effective date of these Restated articles of Incorporation are:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Frank J. Kush 113 E. Loma Vista Drive
Tempe, AZ 85282
William S. Levine 2810 W. Camelbek Road
Phoenix, AZ 85017
John R. Long c/o Ladbroke Racing Corporation
Foster Plaza 9, 750 Holiday Dr.
Pittsburgh, PA 15220
Dwight Patterson 1761 W. Kiowa
Mesa, AZ 85202
Michael P. Perikly 1501 W. Bell Road
Phoenix, AZ 85023
Robert L. Walker 1501 W. Bell Road
Phoenix, AZ 85023
Max Wilson 1325 Villa Nueva
Litchfield Park, AZ 85340
</TABLE>
-7-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Restated
Articles of Incorporation for and on behalf of Turf Paradise, Inc., this 24th
day of November, 1993.
TURF PARADISE, INC.
By_____________________________
Robert Walker, President
By_____________________________
Michael P. Perikly, Secretary
-8-
<PAGE>
ARTICLES OF MERGER
OF
HP ACQUISITION, INC.,
WITH AND INTO
TURF PARADISE, INC.
These Articles of Merger are delivered to the Arizona Corporation
Commission for filing pursuant to Section 10-074, Arizona Revised Statutes, by
HP Acquisition, Inc., an Arizona corporation ("Merging Corporation"), and Turf
Paradise, Inc., an Arizona corporation ("Surviving Corporation").
FIRST: The Plan of Merger attached hereto as Exhibit 1 and incorporated
herein by this reference was approved by the shareholders of both the
Merging Corporation and the Surviving Corporation.
SECOND: As to each such corporation, the number of shares outstanding and
entitled to vote on such Plan of Merger are as follows:
<TABLE>
<CAPTION>
Number of Shares
Name of Outstanding and
Corporation Entitled to Vote Class
----------- ---------------- -----
<S> <C> <C>
Turf Paradise, Inc. 2,596,438 Common
No Par Value
HP Acquisition, Inc. 1,000 Common
$1.00 Par Value
</TABLE>
-1-
<PAGE>
THIRD: As to each such corporation, the total number of shares voted for and
against such Plan of Merger are as follows:
<TABLE>
<CAPTION>
Name of Voted Voted
Corporation Class For Against
----------- ----- ----- -------
<S> <C> <C> <C>
Turf Paradise, Inc. Common 1,872,781 6,699
No Par Value
HP Acquisition, Inc. Common 1,000 -0-
$1.00 Par Value
</TABLE>
FOURTH: Pursuant to the Plan of Merger, the Restated Articles of
Incorporation of the Surviving Corporation are hereby amended as
set forth in Exhibit 2 hereto.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument for
and on behalf of said corporations this ____ day of August, 1994.
SURVIVING CORPORATION: TURF PARADISE, INC.
By:_____________________________
Robert L. Walker, President
By:_____________________________
Michael P. Perikly, Secretary
MERGING CORPORATION: HP ACQUISITION, INC.
By:_____________________________
G. Michael Finnigan,
Vice President
By:_____________________________
G. Michael Finnigan,
Assistant Secretary
-3-
<PAGE>
EXHIBIT 1
---------
PLAN OF MERGER
PLAN OF MERGER dated as of March 30, 1994 by and among Hollywood Park,
Inc., a Delaware corporation ("PARENT"), HP Acquisition, Inc., an Arizona
corporation and a wholly-owned subsidiary of Parent ("SUB"), and Turf Paradise,
Inc., an Arizona corporation ("TURF").
In consideration of the mutual representations, warranties and covenants
contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth below
shall have the following meanings:
1.1 "AGCL" shall mean the Arizona General Corporation Law.
1.2 "CLOSING" shall mean the closing of the transactions contemplated by
this Plan of Merger and the Merger Agreement held pursuant to Section 1.3 of the
Merger Agreement.
1.3 "EFFECTIVE TIME" shall mean the time at which the Articles of Merger
in connection with the Merger are filed with the Arizona Corporation Commission.
1.4 "EFFECTIVE DATE" shall mean the date on which the Effective Time shall
occur.
1.5 "MERGER AGREEMENT" shall mean that certain Agreement of Merger dated
March 30, 1994, by and among Parent, Sub and Turf.
1.6 "PARENT COMMON STOCK" shall mean the common stock, par value $.10 per
share, of Parent.
1.7 "STOCKHOLDERS MEETING" shall mean the meeting of the stockholders of
Turf held pursuant to Section 4.4 of the Merger Agreement.
1.8 "SUB COMMON STOCK" shall mean the common stock, $1.00 par value per
share, of Sub.
1.9 "SURVIVING CORPORATION" shall mean Turf as the corporation surviving
the Merger.
1.10 "TURF COMMON STOCK" shall mean the common stock, no par value per
share, of Turf.
-4-
<PAGE>
ARTICLE II
TERMS OF MERGER
2.1 The Merger. Subject to the terms and conditions of this Plan of
----------
Merger and the Merger Agreement, Sub shall be merged with and into Turf and the
separate corporate existence of Sub shall cease (the "MERGER"). The Merger
shall become effective at the Effective Time.
2.2 Conversion of Sub Common Stock. Each of the one thousand (1000)
------------------------------
shares of Sub Common Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger, and without any action on the
part of the holder thereof, be converted into one (1) share of validly issued,
fully paid and nonassessable shares of common stock of the Surviving
Corporation.
2.3 Conversion of Turf Common Stock. At the Effective Time, by virtue of
-------------------------------
the Merger, and without any action on the part of Parent, Sub, Turf or any
holder of Turf Common Stock: Subject to Sections 2.4 and 4.2 hereof, all shares
of Turf Common Stock shall be cancelled and extinguished and shall be converted
into the right to receive that number of shares of validly issued, fully paid
and nonassessable Parent Common Stock as have a Fair Market Value (as defined
below) of $13.00 per share of Turf Common Stock. For purposes of this Section
2.3, the Fair Market Value of a share of Parent Common Stock shall mean the
weighted average price of all trades on the NASDAQ National Market System (as
reported by NASDAQ) for the twenty trading days ending on the date immediately
preceding the date of the Closing.
2.4 Dissenters Rights. Subject to the second sentence of this Section
-----------------
2.4, notwithstanding anything to the contrary in section 2.3, any shares of Turf
Common Stock held by a holder who has demanded and perfected his right for
appraisal of such shares in accordance with AGCL Section 10-081 and who, as of
the Effective Time, has not effectively withdrawn or lost such right to
appraisal ("DISSENTING SHARES"), shall not be converted into or represent a
right to receive Parent Common Stock pursuant to section 2.3 and payment for
fractional shares pursuant to section 4.2, but the holder thereof shall only be
entitled to such rights as are granted under AGCL Section 10-081.
Notwithstanding the foregoing, if any holder of shares of Turf Common Stock who
demands appraisal of such shares under AGCL Section 10-081 shall effectively
withdraw or lose (through failure to perfect or otherwise) such holder's right
to appraisal, then, as of the later of the Effective Time or the occurrence of
such event, such holder's shares shall automatically be converted into and
represent only the right to receive Parent Common Stock pursuant to section 2.3
and payment for fractional shares pursuant to section 4.2, without interest
thereon, upon
-5-
<PAGE>
surrender of the certificate or certificates representing such shares.
2.5 Articles of Incorporation. The Articles of Incorporation of the
-------------------------
Surviving Corporation shall be amended and restated at and as of the Effective
Time to read as did the Articles of Incorporation of Sub immediately before the
Effective Time, a copy of which is attached hereto as Exhibit A (except that the
name of the Surviving Corporation shall remain unchanged).
2.6 By-laws. The By-laws of the Surviving Corporation shall be amended
-------
and restated at and as of the Effective Time to read as did the By-laws of the
Sub immediately before the Effective Time (except that the name of the Surviving
Corporation shall remain unchanged).
2.7 Directors and Officers. The directors and officers of Sub at the
----------------------
Effective Time shall be the directors and officers of the Surviving Corporation
and shall hold office from the Effective Time until their respective successors
are duly elected or appointed and qualified in the manner provided in the By-
laws of the Surviving Corporation, or as otherwise provided by law.
ARTICLE III
EFFECT OF MERGER
Following the Merger, Turf will be the Surviving Corporation and will
operate under the name "Turf Paradise, Inc.", and the separate corporate
existence of Sub shall cease. The Merger shall have the further effects set
forth in AGCL Section 10-076.
ARTICLE IV
DELIVERY OF CONSIDERATION
4.1 Surrender of Certificates by Turf Stockholders. As soon as
----------------------------------------------
practicable after the Effective Time, Parent shall make available, and each
holder of Turf Common Stock immediately before the Effective Time (a "HOLDER")
shall be entitled to receive, upon surrender to the exchange agent selected by
Parent (the "EXCHANGE AGENT") of certificates representing such Holder's total
ownership of Turf Common Stock, certificates representing the number of shares
of Parent Common Stock as is determined pursuant to Section 2.3, taking into
account any fractional shares payable in cash in accordance with Section 4.2.
Such certificates representing Parent Common Stock shall be deemed to have been
issued on the Effective Date. Until surrendered in accordance with the
provisions of this Section 4.1, a certificate that immediately prior to the
Effective Time represented shares of Turf Common
-6-
<PAGE>
Stock shall represent for all purposes only the right to receive Parent Common
Stock. At any time after six months following the Effective Time, Parent may
act as Exchange Agent for all purposes under this Plan of Merger and the Merger
Agreement.
4.2 Fractional Shares. Notwithstanding anything to the contrary in
-----------------
Section 2.3, no fractional share of Parent Common Stock shall be issued. In
lieu of issuing fractional shares, each holder of Turf common Stock (a "HOLDER")
who would otherwise have been entitled to a fractional share of Parent Common
Stock pursuant to Section 2.3 shall be entitled to receive upon surrender to the
Exchange Agent pursuant to Section 4.1 of certificates representing such
Holder's total ownership of Turf Common Stock cash (without interest) in an
amount equal to such Holder's proportionate interest in the net proceeds from
the sale or sales in the open market by the Exchange Agent, on behalf of all
such Holders, of the aggregate fractional shares of Parent Common Stock that
would otherwise have been issued pursuant to Section 2.3. As soon as
practicable after the Effective Date, the Exchange Agent shall determine the
number of "EXCESS SHARES", which shall be the excess of (i) the number of shares
of Parent Common Stock delivered to the Exchange Agent by Parent over (ii) the
aggregate number of full shares of Parent Common Stock to be issued to Holders,
and as soon as practicable shall sell the Excess Shares at the prevailing prices
on the NASDAQ National Market System in one or more sales. Such sales shall be
in round lots to the extent practicable. Parent shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs incurred in connection
with such sales. Until distribution to Holders, the net proceeds of such sales
shall be held by the Exchange Agent in trust for such Holders.
4.3 Dividends; Transfer Taxes. No dividends or other distributions that
-------------------------
are declared or made with respect to Parent Common Stock to be issued pursuant
to Section 2.3 will be paid until the certificates representing the Turf Common
Stock converted into such Parent Common Stock are surrendered pursuant to
Section 4.1. Upon such surrender, there shall be paid to the person in whose
name the certificates representing such Parent Common Stock shall be issued any
dividends or other distributions that shall have become payable with respect to
such Parent Common Stock in respect of a record date that is later than the
Effective Date. In no event shall Parent be obligated to pay any interest with
respect to such dividends or other distributions. In the event that any
certificates for any shares of Parent Common Stock are to be issued in a name
other than that in which the certificates representing shares of Turf Common
Stock surrendered in exchange therefor are registered, it shall be a condition
of such exchange that the person requesting such exchange shall pay to the
Exchange Agent any transfer or other taxes required by reason of the issuance of
certificates for such shares of
-7-
<PAGE>
Parent Common Stock in a name other than that of the registered holder of the
certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Exchange Agent nor any party to this Agreement shall be
liable to a holder of shares of Turf Common Stock for any shares of Parent
Common Stock or dividends thereon delivered to a public official pursuant to any
applicable escheat law.
4.4 Closing of Transfer Books. After the Effective Time, there shall be
-------------------------
no transfers on the stock transfer books of the Surviving Corporation of the
shares of Turf Common Stock issued and outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates representing shares
of Turf Common Stock are presented to the Surviving Corporation, they shall be
cancelled and exchanged for shares of Parent Common Stock, as provided in
Section 4.1.
ARTICLE V
MISCELLANEOUS
5.1 Conditions Precedent. The respective obligations of each party under
--------------------
this Plan of Merger shall be subject to the satisfaction, prior to or on the
date of the Closing, of the conditions set forth in Articles VI and VII of the
Merger Agreement, each of which conditions may be waived by the appropriate
party.
5.2 Termination. The Merger Agreement may be terminated pursuant to
-----------
Section 8.1 thereof, and this Plan of Merger shall terminate upon the
termination of the Merger Agreement in accordance with Section 8.1 thereof. In
the event of any such termination, all obligations of the parties under the
Merger Agreement and this Plan of Merger shall terminate without liability of
any part, to any other party, except (a) that the obligations set forth in
Sections 2.18, 3.5, 10.4, 10.9, 10.13 and 10.14 of the Merger Agreement shall
survive any such termination, and (b) for liability for out-of-pocket expenses
for any intentional material misrepresentation set forth in the Merger
Agreement.
5.3 Cooperation. Each party hereto agrees to execute any and all further
-----------
documents and writings and perform such other reasonable actions, whether before
or after the Closing, that may be or become necessary, proper or advisable to
effectuate and carry out such transactions and to obtain all governmental
consents (which shall not include any obligation to make payments other than
required filing fees).
5.4 Amendments. To the extent permitted by law, this Plan of Merger may
----------
be amended by a written agreement signed by all of the parties hereto; provided,
however, that the
-8-
<PAGE>
provisions of Articles II and IV of this Plan of Merger relating to the
consideration to be paid for the shares of Turf Common Stock shall not be
amended after the Stockholders Meeting so as to decrease the amount or change
the form of such consideration without the approval of such stockholders.
HOLLYWOOD PARK, INC.
By:_____________________________
G. Michael Finnigan
Executive Vice President,
Chief Financial Officer and
President-Gaming and
Entertainment Division
HP ACQUISITION, INC.
By:_____________________________
G. Michael Finnigan
Vice President, Treasurer and
Assistant Secretary
TURF PARADISE, INC.
By:_____________________________
Robert L. Walker
President
-9-
<PAGE>
EXHIBIT A
---------
ARTICLES OF INCORPORATION
OF
HP ACQUISITION, INC.
--------------------
The undersigned, having associated ourselves together for the purpose
of forming a corporation under and by virtue of the laws of the State of
Arizona, do hereby adopt the following original Articles of Incorporation:
I
Name
----
The name of the corporation is HP Acquisition, Inc. (the
"Corporation").
II
Incorporators
-------------
The names and addresses of the incorporators are as follows:
Alvin G. Segel, Esq.
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
Ian C. Wiener, Esq.
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
-10-
<PAGE>
III
Purpose and Initial Business
----------------------------
The purpose for which the Corporation is organized is the transaction
of any or all lawful business for which corporations may be incorporated under
the laws of the State of Arizona, as they may be amended from time to time.
The Corporation initially intends to conduct the business of owning
and operating a horse racetrack facility.
IV
Authorized Capital
------------------
The aggregate authorized capital stock of the Corporation shall be One
Thousand (1,000) shares of Common Stock, $1.00 Par Value. The Board of
Directors of the Corporation may, from time to time, cause the Corporation to
purchase its own shares to the extent of the unreserved and unrestricted earned
capital surplus of the Corporation; and may, from time to time, distribute on a
pro rata basis to its shareholders out of the capital surplus of the Corporation
a portion of its assets, in cash or property. The Corporation may issue rights
and options to purchase shares of stock of the Corporation to directors,
officers or employees of the Corporation or any affiliate thereof, and no
shareholder approval or ratification of any such issuance of rights and options
shall be required.
-11-
<PAGE>
V
Board of Directors
------------------
The initial Board of Directors shall consist of three (3) directors.
The names and addresses of those persons to serve as directors until the first
annual meeting of shareholders or until their successors are elected and qualify
are:
Gordon Michael Finnigan
c/o Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Randall Dee Hubbard
c/o Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Donald M. Robbins
c/o Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
VI
Statutory Agent
---------------
The name and address of the initial statutory agent of the Corporation
is The Prentice Hall Corporation System, Inc., 7037 North 11th Street, Phoenix,
Arizona 85020.
VII
Indemnification of Directors
----------------------------
A director of this Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director except for liability to the extent provided by applicable law
-12-
<PAGE>
(i) for any breach of the director's duty of loyalty to the Corporation or its
shareholders, (ii) for acts or omissions which are not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for
authorizing the unlawful payment of a dividend or other distribution on the
Corporation's capital stock or the unlawful purchase of its capital stock, (iv)
for any transaction from which the director derived an improper personal
benefit, and (v) for a violation of Section 10-041 of the Arizona General
Corporation Law as the same exists or hereafter may be amended. If the Arizona
General Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
Arizona General Corporation Law. Any repeal or modification of this Article
shall be prospective only and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of such
repeal or modification.
IN WITNESS WHEREOF, we hereunto affix our signatures this 22nd day of
March, 1994.
________________________________
Alvin G. Segel
________________________________
Ian C. Wiener
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<PAGE>
EXHIBIT 2
---------
AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION
OF
TURF PARADISE, INC.
Effective this 11th day of August, 1994, and pursuant to that certain
Plan of Merger dated as of March 30, 1994 by and among Hollywood Park, Inc., a
Delaware corporation, HP Acquisition, Inc., an Arizona corporation and Turf
Paradise, Inc., an Arizona corporation ("TURF PARADISE"), the Restated Articles
of Incorporation of Turf Paradise (the "RESTATED ARTICLES") are hereby amended
as follows:
1. Article II of the Restated Articles is hereby amended and
restated in its entirety as follows:
ARTICLE II.
The purpose for which the corporation is organized is the
transaction of any or all lawful business for which corporations may
be incorporated under the laws of the State of Arizona, as they may be
amended from time to time.
The corporation initially intends to conduct the business of
owning and operating a horse racetrack facility.
2. Article III of the Restated Articles is hereby amended and
restated in its entirety as follows:
ARTICLE III.
The aggregate authorized capital stock of the corporation shall
be One Thousand (1,000) shares of Common Stock, $1.00 Par Value. The
Board of Directors of the corporation may, from time to time, cause
the corporation to purchase its own shares to the extent of the
unreserved and unrestricted earned capital surplus of the corporation;
and may, from time to time, distribute on a pro rata basis to its
shareholders out of the capital surplus of the corporation a portion
of its assets, in cash or property. The corporation may issue rights
and options to purchase shares of stock of the corporation to
directors, officers or employees of the corporation or any affiliate
thereof, and
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no shareholder approval or ratification of any such issuance of rights
and options shall be required.
3. Article V of the Restated Articles is hereby amended and restated
in its entirety as follows:
ARTICLE V.
The initial Board of Directors of the corporation consisted of
three (3) directors. The names and addresses of the initial directors
of the corporation were:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Walter R. Cluer 216 W. Turney Avenue
Phoenix, Arizona
C. Thad Mullen 902 W. Campus Dr.
Phoenix, Arizona
Charles L. Strouss 742 W. Monte Vista Rd.
Phoenix, Arizona
</TABLE>
4. Article IX of the Restated Articles is hereby amended and restated
in its entirety as follows:
ARTICLE IX
A director of this corporation shall not be personally liable to
the corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability to the extent
provided by applicable law (i) for any breach of the director's duty
of loyalty to the corporation or its shareholders, (ii) or acts or
omissions which are not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for authorizing the
unlawful payment of a dividend or other distribution on the
corporation's capital stock or the unlawful purchase of its capital
stock, (iv) for any transaction from which the director derived an
improper personal benefit, and (v) for a violation of Section 10-041
of the Arizona General Corporation Law as the same exists or hereafter
may be amended. If the Arizona General Corporation Law hereafter is
amended to authorize the further
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elimination or limitation of the liability of directors, then the
liability of a director of the corporation, in addition to the
limitation on personal liability provided herein, shall be limited to
the fullest extent permitted by the amended Arizona General
Corporation Law. Any repeal or modification of this Article shall be
prospective only and shall not adversely affect any limitation on the
personal liability of a director of the corporation existing at the
time of such repeal or modification.
5. Article X of the Restated Articles is hereby deleted in its
entirety.
6. Article XI of the Restated Articles is hereby deleted in its
entirety.
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EXHIBIT 3.14
BYLAWS
OF TURF PARADISE, INC.
(FORMERLY: HP ACQUISITION, INC.)
ARTICLE I.
Offices.
-------
Section 1. Organization. Turf Paradise, Inc. (formerly, HP
------------
Acquisition, Inc.) (the "Corporation") is a corporation organized under the
General Corporation Law of the State of Arizona.
Section 2. Offices. The Corporation may maintain a principal
-------
office and other offices, either within or without the State of Arizona, as
determined by the Board of Directors or as the business of the Corporation may
require from time to time, where all business of the Corporation may be
transacted.
Section 3. Known Place of Business. The known place of business
-----------------------
of the Corporation required to be maintained in the State of Arizona may be the
office of its statutory agent. The address of the known place of business may
be changed from time to time by the Board of Directors.
ARTICLE II.
Shareholders
------------
Section 1. Annual Meetings. The annual meetings of the
---------------
shareholders of the Corporation shall be held on such date, at such time and at
such place, either within or without the State of Arizona, as shall be
designated from time to time by the Board of Directors, for the purpose of
electing a Board of Directors for the ensuing year and for the transacting of
such other business properly coming before said meeting. If the election of
directors shall not be held on the day designated for any annual meeting of the
shareholders, or at any adjournment thereof, the Board of Directors shall cause
a special meeting of the shareholders to be held as soon thereafter as
conveniently possible for the purpose of electing a Board of Directors for the
ensuing year and for the transacting of such other business properly coming
before said meeting.
Section 2. Special Meetings. Special meetings of the
----------------
shareholders, for any purpose or purposes, unless otherwise prescribed by
statute, may be called by the President or by a majority of the Board of
Directors, and shall be called by the President at the request in writing of the
holders of not fewer than one-tenth of all the shares entitled to vote at the
meeting. Such request shall state the purpose or purposes of the proposed
meeting.
<PAGE>
Section 3. Place of Meetings. The Board of Directors may designate
-----------------
any place, either within or without the State of Arizona, as the place of
meeting for any annual meeting or for any special meeting of the shareholders.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Arizona, as the place
for the holding of such a meeting. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the known place of
business of the Corporation in the State of Arizona.
Section 4. Notice of Meetings. Written notice stating the place,
------------------
day and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall, unless otherwise prescribed
by statute, be delivered not less than ten (10) nor more than fifty (50) days
before the date of the meeting, either personally or by mail, by an officer of
the Corporation at the direction of the person or persons calling the meeting,
to each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
postage prepaid, addressed to the shareholder at his or her address as it
appears on the stock transfer books of the Corporation.
When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each shareholder entitled to vote at
the meeting.
Section 5. Fixing Date for Determination of Shareholders of
------------------------------------------------
Record. In order that the Corporation may determine the shareholders entitled
to notice of or to vote at any meeting of shareholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of shares, or for the purpose of any other lawful
action, the Board of Directors of the Corporation may fix, in advance, a record
date, which shall not be more than seventy (70) nor less than ten (10) days
before the date of such meeting, nor more than seventy (70) days nor less than
ten (10) days prior to the date on which any other action is to be taken.
A determination of the shareholders of record entitled to notice of or
to vote at a meeting of shareholders
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shall apply to any adjournment of the meeting; provided, however, that the Board
of Directors may fix a new record date for the adjourned meeting and further
provided that the adjournment or adjournments do not exceed thirty (30) days in
the aggregate.
Section 6. Voting Record. The officer or agent having charge of
-------------
the stock transfer books for shares of the Corporation shall make a complete
record of the shareholders entitled to vote at each meeting of shareholders or
any adjournment thereof, arranged in alphabetical order, with the address of and
the number of shares held by each. Such record shall be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any shareholders during the whole time of the meeting for the purposes thereof.
Section 7. Quorum. Unless otherwise provided by the Corporation's
------
Articles of Incorporation, a majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. All shares represented and
entitled to vote on any single subject matter which may be brought before the
meeting shall be counted for the purposes of a quorum. Only those shares
entitled to vote on a particular subject matter shall be counted for the
purposes of voting on that subject matter. Business may be conducted once a
quorum is present and may continue until adjournment of the meeting
notwithstanding the withdrawal or temporary absence of sufficient shares to
reduce the number present to less than a quorum. Unless otherwise required by
law, the affirmative vote of the majority of shares represented at the meeting
and entitled to vote on a subject matter shall be the act of the shareholders;
provided, however, that if the shares then represented are less than required to
constitute a quorum, the affirmative vote must be such as would constitute a
majority if a quorum were present and, provided further, that the affirmative
vote of the majority of the shares then present is sufficient in all cases to
adjourn the meeting.
Section 8. Proxies. At all meetings of shareholders, a
-------
shareholder may vote in person or by proxy executed in writing by the
shareholder or by his or her duly authorized attorney-in-fact and delivered to
the Corporation's Secretary or other authorized officer before or at the time of
its exercise. No proxy shall be valid after eleven (11) months from the date of
its execution, unless otherwise provided in the proxy. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the shares itself or an
interest in the Corporation generally. A proxy is not revoked by the
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death or incapacity of the maker unless, before the vote is counted or a quorum
is determined, written notice of the death or incapacity is given to the
Corporation.
Section 9. Voting of Shares by Certain Holders. Shares of its own
-----------------------------------
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held by the Corporation, shall neither be entitled to vote nor
counted for quorum purposes; provided, however, that nothing herein shall be
construed as limiting the right of the Corporation to vote its own stock held by
it in a fiduciary capacity.
Shares standing in the name of another corporation may be voted by
such officer, agent or proxy as the bylaws of such other corporation may
prescribe, or, in the absence of such provision, as the Board of Directors of
such other corporation may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee, other than a trustee
in bankruptcy, may be voted by him either in person or by proxy, but no such
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name.
Shares standing in the name of a receiver, trustee in bankruptcy, or
assignee for the benefit of creditors may be voted by such representative,
either in person or by proxy. Shares held by or under the control of such a
receiver or trustee may be voted by such receiver or trustee, either in person
or by proxy, without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver or trustee
was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
If shares stand in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety or tenants by community property or otherwise, or if two or more
persons have the same fiduciary relationship with respect to the same shares,
unless the Corporation is given written notice to the contrary and is furnished
with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting shall
have the following effect: (a) if only one votes, his act binds, (b) if more
than one votes, the act of the majority so voting binds all, and (c) if more
than one votes, but the vote is
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evenly split on any one particular matter, each fraction may vote the shares in
question proportionally.
Shares standing in the name of a married woman but not also standing
in the name of her husband with such a designation of the marital relationship
on the certificate, may be voted and all rights incident thereto may be
exercised in the same manner as if she were unmarried.
Section 10. Voting Rights. Each outstanding share entitled to vote
-------------
or fraction thereof shall be entitled to one vote or corresponding fraction
thereof on each matter submitted to a vote at a meeting of shareholders, except
as may be otherwise provided by law or in the Articles of Incorporation.
At each election for directors every shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote, or to cumulate his votes by giving
one candidate as many votes as the number of such directors multiplied by the
number of his shares shall equal, or by distributing such votes on the same
principle among any number of such candidates.
Section 11. Presiding Officer and Order of Business. Meetings of
---------------------------------------
shareholders shall be presided over by the President, or, if he is not present
or there is none, by a Vice President, or, if he is not present or there is
none, by a person chosen by the Board of Directors; if no such person is present
or has been chosen, the shareholders owning a majority of the shares of capital
stock of the Corporation issued and outstanding and entitled to vote at the
meeting and who are present in person or represented by proxy shall choose any
person present to act as chairman of the meeting. The Secretary of the
Corporation, or, if he is not present or there is none, an Assistant Secretary,
or, if he is not present or there is none, a person chosen by the Board of
Directors, shall act as secretary at meetings of shareholders; if no such person
is present or has been chosen, the shareholders owning a majority of the shares
of capital stock of the Corporation issued and outstanding and entitled to vote
at the meeting who are present in person or represented by proxy shall choose
any person present to act as secretary of the meeting.
Section 12. Action by Shareholders Without a Meeting. Any action
----------------------------------------
required or permitted to be taken at a meeting of the shareholders may be taken
without a meeting if a consent in writing, setting forth the action so taken, is
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof. Such consent shall
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have the same effect as the unanimous vote of the shareholders.
ARTICLE III.
Directors
---------
Section 1. Powers of Directors. The business and affairs of the
-------------------
Corporation shall be managed by its Board of Directors except as may be reserved
by law or the Articles of Incorporation to the shareholders.
Section 2. Number, Tenure and Qualifications. The number of
---------------------------------
directors of the Corporation shall be three (3). The number of persons to serve
on the Board of Directors of the Corporation shall be fixed by the shareholders
at the annual meeting of shareholders or at any special meeting called for that
purpose, except that the Board of Directors shall always consist of not less
than one (1) person nor more than five (5) persons; provided, further, that no
decrease in the number of persons to serve on the Board of Directors shall have
the effect of shortening the term of any incumbent Director. The Board of
Directors, by the vote of the majority of the directors then in office, may,
between annual meetings of the shareholders, increase the membership of the
Board by not more than two (2) persons and by like vote, appoint qualified
persons to fill the vacancies created thereby. Each director shall hold office
until the next succeeding annual meeting. Notwithstanding the foregoing, each
director shall hold office until his successor is elected and qualified, or
until his earlier resignation or removal. Any director may resign at any time
upon written notice to the Corporation. The directors need not be residents of
the State of Arizona or shareholders of the Corporation.
Section 3. Vacancies. Any vacancy occurring in the Board of
---------
Directors, including a vacancy created by an increase in the number of
directors, may be filled by the affirmative vote of the majority of the
remaining directors, although less than a quorum, or by a sole remaining
director, and any director so chosen shall hold office until the next election
of directors when his successor is elected and qualified. When one or more
directors shall resign from the Board of Directors, effective at a future time,
a majority of the directors then in office, including those who have so
resigned, shall have the power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office until the next election
of directors when his successor is elected and qualified.
Section 4. Removal. At a meeting of shareholders called expressly
-------
for that purpose and by a vote of the holders of a majority of the shares then
entitled to vote at an election of the directors, any director or the
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entire Board of Directors may be removed, with or without cause. If less than
the entire Board of Directors is to be removed, no one of the directors may be
removed if the votes cast against his removal would be sufficient to elect him
if then cumulatively voted at an election of the entire Board of Directors.
Section 5. Quorum. A majority of the number of directors then
------
serving shall constitute a quorum for the transaction of business at any meeting
of the Board of Directors, but if less than such majority is present at a
meeting, the majority of the directors present may adjourn the meeting from time
to time without further notice.
Section 6. Manner of Acting. The act of the majority of the
----------------
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 7. Regular and Special Meetings. Meetings of the Board of
----------------------------
Directors, regular or special, may be held either within or without the State of
Arizona, and may be held by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, their participation in such a meeting to constitute
presence in person.
Regular meetings of the Board of Directors may be held with or without
notice as otherwise prescribed for special meetings hereinafter. Said regular
meetings shall be held immediately after, and at the same place as, the annual
meeting of shareholders.
Special meetings of the Board of Directors may be called by or at the
request of the President or a majority of the Board of Directors.
Section 8. Notice. Notice of any special meeting shall be
------
delivered at least twenty-four (24) hours previous thereto by personal delivery
or by telephone or telecopier, or at least two (2) days previous thereto in
writing by mail or by overnight courier, to each director at his address as it
appears in the records of the Corporation. If mailed, such notice shall be
deemed to be delivered two (2) business days after deposit in the United States
mail, so addressed, postage prepaid. If sent by telecopier, such notice shall
be deemed to be delivered on the day and at the time of transmission. Notices
sent by any other means shall be deemed delivered when received.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
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Section 9. Action Without a Meeting. Any action required or
------------------------
permitted to be taken by the Board of Directors at a meeting, may be taken
without a meeting if all directors consent thereto in writing specifically
setting forth such action taken. Such consent shall have the same effect as an
unanimous vote.
Section 10. Compensation. By resolution of the Board of Directors,
------------
each director may be paid his expenses, if any, of attending at each meeting of
the Board of Directors, and may be paid a stated salary as director or a fixed
sum for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the Corporation in any other
capacity such as an officer or specifically designated agent and receiving
compensation and reimbursement of reasonable expenses for such other services.
Section 11. Presumption of Assent. A director of the Corporation
---------------------
who is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the Secretary of the
Corporation within ten (10) days after the adjournment of the meeting, or at the
time of the next meeting, whichever is sooner. Such right to dissent shall not
apply to a director who voted in favor of such action.
ARTICLE IV.
Officers
--------
Section 1. Number. The officers of the Corporation shall be a
------
President, one or more Vice-Presidents (the number thereof to be determined by
the Board of Directors), a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers, assistant officers and
agents as may be deemed necessary may be elected or appointed by the Board of
Directors. Any two or more offices may be held by the same person, except the
two offices of President and Secretary.
Section 2. Election and Term of Office. The officers of the
---------------------------
Corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently possible. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his earlier death, resignation, or removal.
Section 3. Removal. Any officer or agent may be removed by the
-------
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby, but
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such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other reason, may be filled by
the Board of Directors for the unexpired portion of the term.
Section 5. The President. The President shall be the chief
-------------
executive officer of the Corporation and, subject to the direction of the Board
of Directors, shall have general charge of the business, affairs, and property
of the Corporation and general supervision over its other officers and agents.
In general, he shall perform all duties incident to the office of President and
shall see that all orders and resolutions of the Board of Directors are carried
into effect.
Unless otherwise prescribed by the Board of Directors, the President
shall have full power and authority to attend, act, and vote on behalf of the
Corporation at any meeting of the security holders of other corporations in
which the Corporation may hold securities. At any such meeting, the President
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities that the Corporation might have possessed and
exercised if it had been present. The President shall further possess the power
to endorse such securities for transfer on behalf of the Corporation by signing
the name of the Corporation in his capacity as President. The Board of
Directors may from time to time confer like powers upon any other person or
persons.
Section 6. Vice-Presidents. In the absence of the President or in
---------------
the event of his death, inability or refusal to act, the Vice-President (or in
the event there be more than one Vice-President, the Vice-Presidents in the
order designated at the time of their election, or in the absence of any
designation, then in the order of their election) shall perform the duties and
exercise the powers of the President and when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the President. Any
Vice-President shall have such powers and perform such duties as may be
delegated to him by the Board of Directors or assigned to him by the President.
Section 7. Secretary. The Secretary shall (a) keep the minutes of
---------
all meetings and proceedings of the Board of Directors and of the shareholders,
(b) see that all notices are duly given in accordance with the provisions of
these Bylaws or as required by law, (c) have charge of all the corporate books
and records except for such financial books and records as are the
responsibility of the Treasurer, (d) have charge of the seal of the Corporation,
(e) see that the
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seal of the Corporation is affixed to all documents the execution of which on
behalf of the Corporation under its seal is duly authorized, (f) keep a register
of the post office address of each shareholder which shall be furnished to the
Corporation and to the Secretary by such shareholder, (g) sign with the
President, or a Vice-President, certificates for shares of the Corporation the
issuance of which has been duly authorized by the Board of Directors, (h) have
general charge of the stock transfer books of the Corporation, and (i) in
general perform all of the duties as, from time to time, may be assigned to him
by the President or Board of Directors.
Section 8. Assistant Secretary. The Assistant Secretary, if any,
-------------------
shall, in the absence or disability of the Secretary, perform the duties and
exercise the power of the Secretary and perform such other duties as may be
assigned by the Secretary, the President or the Board of Directors of the
Corporation.
Section 9. Treasurer. The Treasurer shall (a) have charge and
---------
custody of and be responsible for all funds and securities of the Corporation,
and all financial books, records and accounts of the Corporation, (b) receive
and give receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all such monies in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the Board
of Directors, and (c) in general perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by the President or by the Board of Directors.
Section 10. Salaries. The compensation of all officers shall be
--------
fixed by resolution of the Board of Directors, except that the Board of
Directors may authorize the President and/or the Vice-President(s) to fix any
compensation of any officer not exceeding a total amount or amounts specified by
the Board of Directors. No officer shall be prevented from receiving such
compensation by virtue of his also serving as a director of the Corporation.
Section 11. Reimbursement by Officers. Any payments made to an
-------------------------
officer of the Corporation such as a salary, commission, bonus, interest, or
rent, or entertainment expense incurred by him, which shall be disallowed in
whole or in part as a deductible expense by the Internal Revenue Service, shall
be reimbursed by such officer of the Corporation to the full extent of such
disallowance. It shall be the duty of the Directors, as a Board, to enforce
payment of each amount disallowed. In lieu of payment by the officer, subject
to the determination of the Directors, proportionate amounts may be withheld
from his future compensation payments until the amount owed to the Corporation
has been recovered.
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ARTICLE V.
Contracts, Loans, Checks and Deposits
-------------------------------------
Section 1. Contracts. The Board of Directors may authorize any
---------
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
-----
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. Checks and Other Instruments. All checks drafts or
----------------------------
other orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall from
time to time be determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation not otherwise
--------
employed shall be deposited to the credit of the Corporation in such banks,
trust companies or other depositories as the Board of Directors may select.
ARTICLE VI.
Certificates for Shares and Their Transfer
------------------------------------------
Section 1. Certificates for Shares. Certificates representing the
-----------------------
shares of the Corporation shall be in such form as shall be determined by the
Board of Directors. Such certificates shall be signed by the President or a
Vice-President and by the secretary or an assistant secretary of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof. The signatures of such officers upon a certificate may be facsimiles
if the certificate is countersigned by a transfer agent or registered by a
registrar, other than the Corporation itself or an employee of the Corporation.
No certificate shall be issued for any share until such share is fully paid.
Each certificate representing shares shall state upon the face thereof
(a) that the Corporation is organized under the laws of the State of Arizona,
(b) the name of the person to whom issued, (c) the number, class and designation
of the series, if any, which the certificate represents, and (d) the par value
of each share represented by the certificate or a statement that the shares are
without par value.
Any restriction on the right to transfer shares and any reservation of
lien on the shares shall be noted on the
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face or the back of the certificate by providing (a) a statement of the terms of
such restriction or reservation, (b) a summary of the terms of such restriction
or reservation and a statement that the Corporation will mail to the shareholder
a copy of such restrictions or reservations without charge within five (5) days
after receipt of written notice therefor, (c) if the restriction or reservation
is contained in the Articles of Incorporation or Bylaws or an instrument in
writing to which the Corporation is a party, a statement to that effect and a
statement that the Corporation will mail to the shareholder a copy of such
restriction or reservation without charge within five (5) days after receipt of
written request therefor, or (d) if each such restriction or reservation is
contained in an instrument in writing to which the Corporation is not a party, a
statement to that effect.
Each certificate for shares shall be consecutively numbered or
otherwise identified.
Section 2. Transfer of Shares. Shares of the stock of the
------------------
Corporation shall be transferred on the stock transfer books of the Corporation
only by the holder thereof, or by his or her duly authorized representative,
after furnishing suitable evidence of authority upon surrender of the
certificates of a like number of shares properly endorsed.
Section 3. Lost, Stolen, Mutilated or Destroyed Certificates. If
-------------------------------------------------
the owner of a security notifies the Corporation that the certificate has been
lost, stolen, mutilated or destroyed and requests a replacement certificate, the
Secretary shall direct that a new certificate be issued upon receipt of an
affidavit executed by the owner stating that the certificate has been lost,
stolen, mutilated or destroyed. In addition the Secretary may, in his
discretion, require the owner to execute an indemnity agreement, to provide the
Corporation with a sufficient indemnity bond, and/or to provide such other
security and assurances as the Secretary deems appropriate to protect the
Corporation against losses arising out of the issuance of the replacement
certificate.
ARTICLE VII.
Dividends
---------
The Board of Directors may, from time to time, declare and the
Corporation may pay dividends on the outstanding shares in the manner and upon
the terms and conditions provided by law.
ARTICLE VIII.
Corporate Seal
--------------
The Board of Directors may provide a corporate seal which, in such
event, shall be circular in form, shall have
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<PAGE>
inscribed thereon the name of the Corporation, the year of its incorporation,
and the state of incorporation. The seal shall be in the custody of the
Secretary.
ARTICLE IX.
Waiver of Notice
----------------
Whenever any notice is required to be given to any shareholder or
director of the Corporation, a waiver thereof in writing signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be equivalent to the giving of such notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends such meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
ARTICLE X.
Amendment of Bylaws
-------------------
The power to alter, amend or repeal the Bylaws or adopt new Bylaws,
subject to repeal or change by action of the shareholders, shall be vested in
the Board of Directors.
ARTICLE XI.
Fiscal Year
-----------
The fiscal year of the Corporation shall be determined from time to
time by the Board of Directors.
ARTICLE XII.
Affiliated Transactions and Interested Directors
------------------------------------------------
Section 1. Affiliated Transactions. No contract or other
-----------------------
transaction between the Corporation and one or more of its directors, or between
the Corporation and any other corporation, firm, association or other entity in
which one or more of its directors are directors or officers, or are financially
interested, shall be void or voidable because of such relationship or interest
or because such director or directors are present at the meeting of the Board of
Directors or a committee thereof which authorizes, approves or ratifies such
transaction or because his or their votes are counted for such purpose, if:
a. The fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes,
approves or ratifies the contract or transaction by a vote or consent
sufficient for the purpose without counting the votes or consents of
such interested directors; or
-13-
<PAGE>
b. The fact of such relationship or interest is disclosed or
known to the stockholders entitled to vote thereon, and they
authorize, approve or ratify such contract or transaction by vote or
written consent; or
c. The contract or transaction is fair and reasonable to the
Corporation at the time the contract or transaction is authorized,
approved or ratified in the light of circumstances known to those
entitled to vote thereon at that time.
Any person seeking to establish that a contract or transaction described in this
Article is void or voidable for any reason set forth in this Article shall first
prove, by a preponderance of the evidence, that the provisions of subparagraphs
(a), (b) and (c) of this Section 1 are not applicable.
Section 2. Determining Quorum. Common or interested directors may
------------------
be counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes, approves or ratifies the
contract or transaction.
ARTICLE XIII.
Miscellaneous
-------------
Section 1. Indemnification of Directors and Officers. The
-----------------------------------------
directors and officers of the Corporation shall be indemnified to the fullest
extent permissible under Arizona law.
-14-
<PAGE>
EXHIBIT 3.15
Certificate of Incorporation
of
HP Yakama, Inc.
--------------
a Delaware corporation
FIRST: The name of the corporation is HP Yakama, Inc.
-----
SECOND: The address of the corporation's registered office in the
------
State of Delaware is 30 Old Rudnick Lane, in the City of Dover, County of Kent.
The name of the corporation's registered agent at such address is CorpAmerica,
Inc.
THIRD: The purpose of the corporation is to engage in any lawful act
-----
or activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The total number of shares of stock which the corporation is
------
authorized to issue is three thousand (3,000) shares of common stock, having a
par value of one cent ($0.01) per share.
FIFTH: The business and affairs of the corporation shall be managed
-----
by or under the direction of the board of directors, and the directors need not
be elected by ballot unless required by the bylaws of the corporation.
SIXTH: In furtherance and not in limitation of the powers conferred
-----
by the laws of the State of Delaware, the board of directors is expressly
authorized to make, amend and repeal the bylaws.
SEVENTH: A director of the corporation shall not be personally liable
-------
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. Any repeal or modification of this
provision shall not adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or modification.
-1-
<PAGE>
EIGHTH: The corporation reserves the right to amend and repeal any
------
provision contained in this Certificate of Incorporation in the manner from time
to time prescribed by the laws of the State of Delaware and all rights herein
conferred upon stockholders are granted subject to this reservation.
NINTH: The incorporator is S. A. Morgan, whose mailing address is
-----
1800 Avenue of the Stars, Suite 900, Los Angeles, California 90067.
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming
a corporation under the laws of the State of Delaware do make, file and record
this Certificate of Incorporation, and, accordingly, have hereto set my hand
this 20th day of May, 1997.
/s/ S. A. Morgan
______________________________________
S. A. Morgan, Incorporator
-2-
<PAGE>
EXHIBIT 3.16
..............................................................
HP Yakama, Inc.
BYLAWS
..............................................................
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I OFFICES....................................................... 1
Section 1. Registered Office............................. 1
Section 2. Other Offices................................. 1
ARTICLE II MEETINGS OF STOCKHOLDERS..................................... 1
Section 1. Place of Meetings............................. 1
Section 2. Annual Meetings............................... 1
Section 3. Special Meetings.............................. 1
Section 4. Notice of Meetings............................ 2
Section 5. Quorum; Adjournment........................... 2
Section 6. Proxies and Voting............................ 2
Section 7. Stock List.................................... 3
Section 8. Actions by Stockholders....................... 3
ARTICLE III BOARD OF DIRECTORS......................................... 3
Section 1. Duties and Powers............................. 3
Section 2. Number and Term of Office..................... 3
Section 3. Vacancies..................................... 4
Section 4. Meetings...................................... 4
Section 5. Quorum........................................ 4
Section 6. Actions of Board Without a Meeting............ 4
Section 7. Meetings by Means of Conference Telephone..... 4
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 8. Committees..................................... 5
Section 9. Compensation................................... 5
Section 10. Removal........................................ 5
ARTICLE IV OFFICERS...................................................... 5
Section 1. General........................................ 5
Section 2. Election; Term of Office....................... 6
Section 3. Chairman of the Board.......................... 6
Section 4. President...................................... 6
Section 5. Vice President................................. 6
Section 6. Secretary...................................... 6
Section 7. Assistant Secretaries.......................... 7
Section 8. Treasurer...................................... 7
Section 9. Assistant Treasurers........................... 7
Section 10. Other Officers................................. 7
ARTICLE V STOCK......................................................... 8
Section 1. Form of Certificates........................... 8
Section 2. Signatures..................................... 8
Section 3. Lost Certificates.............................. 8
Section 4. Transfers...................................... 8
Section 5. Record Date.................................... 8
Section 6. Beneficial Owners.............................. 9
Section 7. Voting Securities Owned by the Corporation..... 9
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI NOTICES...................................................... 9
Section 1. Notices....................................... 9
Section 2. Waiver of Notice.............................. 9
ARTICLE VII GENERAL PROVISIONS.......................................... 10
Section 1. Dividends..................................... 10
Section 2. Disbursements................................. 10
Section 3. Corporation Seal.............................. 10
ARTICLE VIII DIRECTORS' LIABILITY AND INDEMNIFICATION................... 10
Section 1. Directors' Liability.......................... 10
Section 2. Right to Indemnification...................... 11
Section 3. Right of Claimant to Bring Suit............... 11
Section 4. Non-Exclusivity of Rights..................... 12
Section 5. Insurance and Trust Fund...................... 12
Section 6. Indemnification of Employees and Agents of the
Corporation.................................. 12
Section 7. Amendment..................................... 12
ARTICLE IX AMENDMENTS................................................... 12
</TABLE>
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<PAGE>
Bylaws
of
HP Yakama, Inc.
---------------
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office of the Corporation
---------- -----------------
shall be in the City of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
---------- -------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of the stockholders for the
---------- -----------------
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be
---------- ---------------
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders may be
---------- ----------------
called by the Board of Directors, the Chairman of the Board, the President, or
by the holders of shares entitled to cast not less than 10% of the votes at the
meeting. Upon request in writing to the Chairman of the Board, the President,
any Vice President or the Secretary by any person (other than the board)
entitled to call a special meeting of stockholders, the officer forthwith shall
cause notice to be given to the stockholders entitled to vote that a meeting
will be held at a time requested by the person or persons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after the receipt
of the request. If the notice is not given within 20 days after receipt of the
request, the persons entitled to call the meeting may give the notice.
-1-
<PAGE>
Section 4. Notice of Meetings. Written notice of the place, date, and
---------- ------------------
time of all meetings of the stockholders shall be given not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or as required from time to time by the Delaware General
Corporation Law or the Certificate of Incorporation.
Section 5. Quorum; Adjournment. At any meeting of the stockholders, the
---------- -------------------
holders of a majority of all of the shares of the stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law or the Certificate of Incorporation. If a quorum shall
fail to attend any meeting, the chairman of the meeting or the holders of a
majority of the shares of stock entitled to vote who are present, in person or
by proxy, may adjourn the meeting to another place, date, or time without notice
other than announcement at the meeting, until a quorum shall be present or
represented.
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 6. Proxies and Voting. At any meeting of the stockholders, every
---------- ------------------
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting.
Each stockholder shall have one vote for every share of stock entitled to
vote which is registered in his name on the record date for the meeting, except
as otherwise provided herein or required by law or the Certificate of
Incorporation.
All voting, including on the election of directors but excepting where
otherwise provided herein or required by law or the Certificate of
Incorporation, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or such stockholder's proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Certificate of Incorporation, all
other matters shall be determined by a majority of the votes cast.
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<PAGE>
Section 7. Stock List. A complete list of stockholders entitled to vote
---------- ----------
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in such stockholder's name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 8. Actions by Stockholders. Unless otherwise provided in the
---------- -----------------------
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. Duties and Powers. The business of the Corporation shall be
---------- -----------------
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 2. Number and Term of Office. The Board of Directors shall
---------- -------------------------
consist of one (1) or more members. The number of directors shall be fixed and
may be changed from time to time by resolution duly adopted by the Board of
Directors or the stockholders, except as otherwise provided by law or the
Certificate of Incorporation. Except as provided in Section 3 of this Article,
directors shall be elected by the holders of record of a plurality of the votes
cast at Annual Meetings of Stockholders, and each director so elected shall hold
office until the next Annual Meeting and until his or her successor is duly
elected and qualified, or until his or her earlier resignation or removal. Any
director may resign at any time upon written notice to the Corporation.
Directors need not be stockholders.
-3-
<PAGE>
Section 3. Vacancies. Vacancies and newly created directorships resulting
---------- ---------
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director or by the stockholders entitled to vote at any Annual or
Special Meeting held in accordance with Article II, and the directors so chosen
shall hold office until the next Annual or Special Meeting duly called for that
purpose and until their successors are duly elected and qualified, or until
their earlier resignation or removal.
Section 4. Meetings. The Board of Directors of the Corporation may hold
---------- --------
meetings, both regular and special, either within or without the State of
Delaware. The first meeting of each newly-elected Board of Directors shall be
held immediately following the Annual Meeting of Stockholders and no notice of
such meeting shall be necessary to be given the newly-elected directors in order
legally to constitute the meeting, provided a quorum shall be present. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman of the
Board, the President or a majority of the directors then in office. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date of
the meeting, by telephone or telegram on twenty-four (24) hours' notice, or on
such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances. Meetings may be held at any time
without notice if all the directors are present or if all those not present
waive such notice in accordance with Section 2 of Article VI of these Bylaws.
Section 5. Quorum. Except as may be otherwise specifically provided by
---------- ------
law, the Certificate of Incorporation or these Bylaws, at all meetings of the
Board of Directors, a majority of the directors then in office shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions of Board Without a Meeting. Unless otherwise provided
---------- ----------------------------------
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
---------- -----------------------------------------
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all
-4-
<PAGE>
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 7 shall constitute presence in person at such
meeting.
Section 8. Committees. The Board of Directors may, by resolution passed
---------- ----------
by a majority of the directors then in office, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member
of a committee, and in the absence of a designation by the Board of Directors of
an alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such absent
or disqualified member. Any committee, to the extent allowed by law and
provided in the Bylaw or resolution establishing such committee, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Each
committee shall keep regular minutes and report to the Board of Directors when
required.
Section 9. Compensation. Unless otherwise restricted by the Certificate
---------- ------------
of Incorporation or these Bylaws, the Board of Directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 10. Removal. Unless otherwise restricted by the Certificate of
----------- -------
Incorporation or Bylaws, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
OFFICERS
--------
Section 1. General. The officers of the Corporation shall be appointed by
---------- -------
the Board of Directors and shall consist of a Chairman of the Board or a
President, or both, a Secretary and a Treasurer (or a position with the duties
and responsibilities of a Treasurer). The Board of Directors may also appoint
one or more vice presidents, assistant secretaries or assistant treasurers, and
such other officers as the Board of Directors, in its discretion, shall deem
necessary or appropriate from time to time. Any
-5-
<PAGE>
number of offices may be held by the same person, unless the Certificate of
Incorporation or these Bylaws otherwise provide.
Section 2. Election; Term of Office. The Board of Directors at its first
---------- ------------------------
meeting held after each Annual Meeting of Stockholders shall elect a Chairman of
the Board or a President, or both, a Secretary and a Treasurer (or a position
with the duties and responsibilities of a Treasurer), and may also elect at that
meeting or any other meeting, such other officers and agents as it shall deem
necessary or appropriate. Each officer of the Corporation shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors together with the powers and duties customarily exercised by
such officer; and each officer of the Corporation shall hold office until such
officer's successor is elected and qualified or until such officer's earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. The Board of Directors may at any time, with or without
cause, by the affirmative vote of a majority of directors then in office, remove
any officer.
Section 3. Chairman of the Board. The Chairman of the Board, if there
---------- ---------------------
shall be such an officer, shall be the chief executive officer of the
Corporation. The Chairman of the Board shall preside at all meetings of the
stockholders and the Board of Directors and shall have such other duties and
powers as may be prescribed by the Board of Directors from time to time.
Section 4. President. The President shall be the chief operating officer
---------- ---------
of the Corporation, shall have general and active management of the business of
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall have and exercise such
further powers and duties as may be specifically delegated to or vested in the
President from time to time by these Bylaws or the Board of Directors. In the
absence of the Chairman of the Board or in the event of his inability or refusal
to act, or if the Board has not designated a Chairman, the President shall
perform the duties of the Chairman of the Board, and when so acting, shall have
all of the powers and be subject to all of the restrictions upon the Chairman of
the Board.
Section 5. Vice President. In the absence of the President or in the
---------- --------------
event of his inability or refusal to act, the Vice President (or in the event
there be more than one vice president, the vice presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. The vice presidents shall perform such other duties and have
such other powers as the Board of Directors or the President may from time to
time prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
---------- ---------
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be
-6-
<PAGE>
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or the President. If the Secretary shall be unable or
shall refuse to cause to be given notice of all meetings of the stockholders and
special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the President may choose
another officer to cause such notice to be given. The Secretary shall have
custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his or her signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
Section 7. Assistant Secretaries. Except as may be otherwise provided in
---------- ---------------------
these Bylaws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, or the Secretary, and shall have the authority to
perform all functions of the Secretary, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Secretary.
Section 8. Treasurer. The Treasurer shall be the Chief Financial Officer,
---------- ---------
shall have the custody of the corporate funds and securities, shall keep
complete and accurate accounts of all receipts and disbursements of the
Corporation, and shall deposit all monies and other valuable effects of the
Corporation in its name and to its credit in such banks and other depositories
as may be designated from time to time by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation, taking proper vouchers and receipts
for such disbursements, and shall render to the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all
his or her transactions as Treasurer and of the financial condition of the
Corporation. The Treasurer shall, when and if required by the Board of
Directors, give and file with the Corporation a bond, in such form and amount
and with such surety or sureties as shall be satisfactory to the Board of
Directors, for the faithful performance of his or her duties as Treasurer. The
Treasurer shall have such other powers and perform such other duties as the
Board of Directors or the President shall from time to time prescribe.
Section 9. Assistant Treasurers. Except as may be otherwise provided in
---------- --------------------
these Bylaws, Assistant Treasurers, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, or the Treasurer, and shall have the authority to
perform all functions of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer.
Section 10. Other Officers. Such other officers as the Board of Directors
----------- --------------
may choose shall perform such duties and have such powers as from time to time
may be
-7-
<PAGE>
assigned to them by the Board of Directors. The Board of Directors may delegate
to any other officer of the Corporation the power to choose such other officers
and to prescribe their respective duties and powers.
ARTICLE V
STOCK
-----
Section 1. Form of Certificates. Every holder of stock in the Corporation
---------- --------------------
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board or the President or a Vice President and (ii)
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by such
holder in the Corporation.
Section 2. Signatures. Any or all the signatures on the certificate may
---------- ----------
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
---------- -----------------
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or such owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
---------- ---------
the manner prescribed by law and in these Bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by such person's attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine the
---------- -----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of such meeting, nor more
-8-
<PAGE>
than sixty (60) days prior to any other action. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjourn ment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
---------- -----------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive divi dends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
Section 7. Voting Securities Owned by the Corporation. Powers of
---------- ------------------------------------------
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chairman of the Board, the President,
any Vice President or the Secretary and any such officer may, in the name of and
on behalf of the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
ARTICLE VI
NOTICES
-------
Section 1. Notices. Whenever written notice is required by law, the
---------- -------
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, telex or cable and such notice shall be
deemed to be given at the time of receipt thereof if given personally or at the
time of transmission thereof if given by telegram, telex or cable.
Section 2. Waiver of Notice. Whenever any notice is required by law, the
---------- ----------------
Certificate of Incorporation or these Bylaws to be given to any director, member
or a committee or stockholder, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to notice.
-9-
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
---------- ---------
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special meeting
or by any Committee of the Board of Directors having such authority at any
meeting thereof, and may be paid in cash, in property, in shares of the capital
stock or in any combination thereof. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors from time to time, in its absolute
discretion, deems proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for any proper purpose, and the Board of Directors may modify or
abolish any such reserve.
Section 2. Disbursements. All notes, checks, drafts and orders for the
---------- -------------
payment of money issued by the Corporation shall be signed in the name of the
Corporation by such officers or such other persons as the Board of Directors may
from time to time designate.
Section 3. Corporation Seal. The corporate seal, if the Corporation shall
---------- ----------------
have a corporate seal, shall have inscribed thereon the name of the Corporation,
the year of its organization and the words "Corporate Seal, Delaware". The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VIII
DIRECTORS' LIABILITY AND INDEMNIFICATION
----------------------------------------
Section 1. Directors' Liability. A director of the Corporation shall not
---------- --------------------
be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware General
Corporation Law is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended. Any repeal or
modification of this provision shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
This Section 1 is also contained in Article SEVENTH of the Corporation's
Cer tificate of Incorporation, and accordingly, may be altered, amended or
repealed only to the extent and at the time such Certificate Article is altered,
amended or repealed.
-10-
<PAGE>
Section 2. Right to Indemnification. Each person who was or is made a
---------- ------------------------
party to or is threatened to be made a party to or is involuntarily involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he or she is or was a
director or officer of the Corporation, or is or was serving (during his or her
tenure as director and/or officer) at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, whether the basis of such Proceeding
is an alleged action or inaction in an official capacity as a director or
officer or in any other capacity while serving as a director or officer, shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law (or other applicable law), as
the same exists or may hereafter be amended, against all expense, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection with such Proceeding. Such director or
officer shall have the right to be paid by the Corporation for expenses incurred
in defending any such Proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law (or other applicable law)
requires, the payment of such expenses in advance of the final disposition of
any such Proceeding shall be made only upon receipt by the Corporation of an
undertaking by or on behalf of such director or officer to repay all amounts so
advanced if it should be determined ultimately that he or she is not entitled to
be indemnified under this Article or otherwise.
Section 3. Right of Claimant to Bring Suit. If a claim under Section 2 of
---------- -------------------------------
this Article is not paid in full by the Corporation within ninety (90) days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim, together with interest thereon, and, if successful in whole
or in part, the claimant shall also be entitled to be paid the expense of
prosecuting such claim, including reasonable attorneys' fees incurred in
connection therewith. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
Proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law (or other applicable law) for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation (or
of its full Board of Directors, its directors who are not parties to the
Proceeding with respect to which indemnification is claimed, its stockholders,
or independent legal counsel) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law (or other applicable law), nor
an actual determination by any such person or persons that such claimant has not
met such applicable standard of conduct, shall be a defense to such action or
create a presumption that the claimant has not met the applicable standard of
conduct.
-11-
<PAGE>
Section 4. Non-Exclusivity of Rights. The rights conferred by this
---------- -------------------------
Article shall not be exclusive of any other right which any director, officer,
representative, employee or other agent may have or hereafter acquire under the
Delaware General Corporation Law or any other statute, or any provision
contained in the Corporation's Certificate of Incorporation or Bylaws, or any
agreement, or pursuant to a vote of stockholders or disinterested directors, or
otherwise.
Section 5. Insurance and Trust Fund. In furtherance and not in limitation
---------- ------------------------
of the powers conferred by statute:
(1) the Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of law; and
(2) the Corporation may create a trust fund, grant a security interest
and/or use other means (including, without limitation, letters of credit, surety
bonds and/or other similar arrangements), as well as enter into contracts
providing indemnification to the fullest extent permitted by law and including
as part thereof provisions with respect to any or all of the foregoing, to
ensure the payment of such amount as may become necessary to effect
indemnification as provided therein, or elsewhere.
Section 6. Indemnification of Employees and Agents of the Corporation.
---------- ----------------------------------------------------------
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, including the right to be paid by
the Corporation the expenses incurred in defending any Proceeding in advance of
its final disposition, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article VIII or otherwise with respect
to the indemnification and advancement of expenses of directors and officers of
the Corporation.
Section 7. Amendment. Any repeal or modification of this Article VIII
---------- ---------
shall not change the rights of an officer or director to indemnification with
respect to any action or omission occurring prior to such repeal or
modification.
ARTICLE IX
AMENDMENTS
----------
Except as otherwise specifically stated within an Article to be altered,
amended or repealed, these Bylaws may be altered, amended or repealed and new
Bylaws may be adopted at any meeting of the Board of Directors or of the
stockholders, provided notice of the proposed change was given in the notice of
the meeting.
-12-
<PAGE>
The undersigned, as the Incorporator of HP Yakama, Inc. hereby adopts the
foregoing Bylaws as the Bylaws of said corporation.
Dated as of May 20, 1997.
________________________________
S. A. Morgan, Incorporator
The undersigned, constituting the Board of Directors of HP Yakama, Inc.
hereby adopt the foregoing Bylaws as the Bylaws of said corporation.
Dated as of May 20, 1997.
________________________________
R. D. Hubbard, Director
________________________________
G. Michael Finnigan, Director
________________________________
Bruce Rimbo, Director
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting Secretary of HP Yakama,
Inc. and that the foregoing Bylaws were adopted as the Bylaws of said
corporation as of the 20th day of May, 1997, by the Board of Directors of said
corporation.
Dated as of May 20, 1997.
________________________________
Bruce Rimbo, Secretary
-13-
<PAGE>
EXHIBIT 3.17
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
BOOMTOWN, INC.
ARTICLE FIRST
-------------
The name of the Corporation is Boomtown, Inc.
ARTICLE SECOND
--------------
The address of the Corporation's registered office in the State of Delaware
is 30 Old Rudnick Lane, in the City of Dover, County of Kent. The name of its
registered agent at such address is CorpAmerica, Inc.
ARTICLE THIRD
-------------
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
ARTICLE FOURTH
--------------
4.1. AUTHORIZED SHARES. The Corporation is authorized to issue one class
-----------------
of shares to be designated Common Stock. The total number of shares of Common
Stock the Corporation shall have authority to issue is Eleven Million
(11,000,000), with par value of $.01 per share.
4.2. COMMON STOCK
------------
1. Voting Rights. Except as otherwise required by law or expressly
-------------
provided herein, each share of Common Stock shall entitle the holder thereof to
one vote on each matter submitted to a vote of the stockholders of the
Corporation.
2. Dividend Rights. Subject to provisions of law, the holders of
---------------
Common Stock shall be entitled to receive dividends at such times and in such
amounts as may be determined by the Board of Directors of the Corporation.
3. Liquidation Rights. In the event of any liquidation, dissolution
------------------
or winding up of the Corporation, whether voluntary or involuntary, after
payment or provision for payment of the debts and other liabilities of the
Corporation, the holders of Common Stock shall be entitled to share ratably in
the remaining assets of the Corporation.
<PAGE>
ARTICLE FIFTH
-------------
The Corporation is to have perpetual existence.
ARTICLE SIXTH
-------------
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make the
Bylaws of the Corporation and, to the extent permitted therein, to alter or
repeal such Bylaws.
ARTICLE SEVENTH
---------------
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of the Corporation.
Election of directors need not be by written ballot unless the Bylaws of the
Corporation so provide.
ARTICLE EIGHTH
--------------
To the fullest extent permitted by Delaware General Corporation Law as the
same exists or may hereafter be amended, a director of the Corporation shall not
be liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director. This ARTICLE EIGHTH shall not be amended,
--------------
repealed or otherwise modified for a period of six years from the effective date
of the merger of HP Acquisition, Inc., a Delaware corporation, with and into the
Corporation, in any manner that would adversely affect any rights of
indemnification of persons covered hereby on such effective date. Any repeal or
modification of this ARTICLE EIGHTH shall not adversely affect any right or
--------------
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE NINTH
-------------
Except as expressly provided herein, the Corporation reserves the right to
amend, alter, change or repeal any provision contained in this Amended and
Restated Certificate of Incorporation in the manner now or hereafter prescribed
herein and by the laws of the State of Delaware, and all rights conferred upon
stockholders are granted subject to this reservation.
-2-
<PAGE>
State of Delaware
Office of the Secretary of State PAGE 1
___________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "BOOMTOWN, INC.", FILED IN THIS OFFICE ON THE FIRST DAY OF JULY, A.D. 1997,
AT 9 O'CLOCK A.M.
___________________________________
Edward J. Freel, Secretary of State
2129753 8100 AUTHENTICATION: 8585976
971252630 DATE: 07-31-97
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
BOOMTOWN, INC.
--------------
a Delaware corporation
Boomtown, Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
1. That Section 4.1 of ARTICLE FOURTH of the Amended and Restated
--------------
Certificate of Incorporation of this corporation is amended to read in full as
follows:
"The Corporation is authorized to issue one class of shares to be
designated Common Stock. The total number of shares of Common Stock the
Corporation shall have authority to issue is Three Thousand (3,000), with
par value of $.01 per share.
Upon effectiveness of this amendment to the Amended and Restated
Certificate of Incorporation, each Nine Hundred Fifty Thousand (950,000)
shares of Common Stock issued and outstanding immediately prior thereto,
shall be automatically combined into one (1) share of Common Stock. No
fractional shares shall be issued to the sole stockholder in connection
with such reverse stock split, but in lieu thereof the total amount paid to
the sole stockholder for fractional shares, if any, shall be an aggregate
of $10 in cash."
2. That the foregoing amendment has been duly adopted in accordance with
the provisions of Section 242 of the Delaware General Corporation Law, by
approval of the Board of Directors of the corporation and by the affirmative
vote of the holders of at least a majority of the outstanding stock of the
corporation entitled to vote.
IN WITNESS WHEREOF, Boomtown, Inc. has caused this Certificate of Amendment
of Amended and Restated Certificate of Incorporation to be duly executed by its
authorized officer this day of July, 1997.
Boomtown, Inc.
By:________________________
Timothy J. Parrott
Chairman of the Board and
Chief Executive Officer
<PAGE>
EXHIBIT 3.18
..............................................................
BOOMTOWN, INC.
BYLAWS
EFFECTIVE JUNE 30, 1997
..............................................................
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I OFFICES....................................................... 1
Section 1. Registered Office................................ 1
Section 2. Other Offices.................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS..................................... 1
Section 1. Place of Meetings................................ 1
Section 2. Annual Meetings.................................. 1
Section 3. Special Meetings................................. 1
Section 4. Notice of Meetings............................... 2
Section 5. Quorum; Adjournment.............................. 2
Section 6. Proxies and Voting............................... 2
Section 7. Stock List....................................... 3
Section 8. Actions by Stockholders.......................... 3
ARTICLE III BOARD OF DIRECTORS.......................................... 3
Section 1. Duties and Powers................................ 3
Section 2. Number and Term of Office........................ 4
Section 3. Vacancies........................................ 4
Section 4. Meetings......................................... 4
Section 5. Quorum........................................... 5
Section 6. Actions of Board Without a Meeting............... 5
Section 7. Meetings by Means of Conference Telephone........ 5
Section 8. Committees....................................... 5
Section 9. Compensation..................................... 6
Section 10. Removal......................................... 6
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV OFFICERS...................................................... 6
Section 1. General........................................... 6
Section 2. Election; Term of Office.......................... 6
Section 3. Chairman of the Board............................. 7
Section 4. President......................................... 7
Section 5. Vice President.................................... 7
Section 6. Secretary......................................... 7
Section 7. Assistant Secretaries............................. 8
Section 8. Treasurer......................................... 8
Section 9. Assistant Treasurers.............................. 8
Section 10. Other Officers................................... 8
ARTICLE V STOCK.......................................................... 9
Section 1. Form of Certificates.............................. 9
Section 2. Signatures........................................ 9
Section 3. Lost Certificates................................. 9
Section 4. Transfers......................................... 9
Section 5. Record Date....................................... 9
Section 6. Beneficial Owners................................. 10
Section 7. Voting Securities Owned by the Corporation........ 10
ARTICLE VI NOTICES....................................................... 10
Section 1. Notices........................................... 10
Section 2. Waiver of Notice.................................. 11
ARTICLE VII GENERAL PROVISIONS........................................... 11
Section 1. Dividends......................................... 11
Section 2. Disbursements..................................... 11
Section 3. Corporation Seal.................................. 11
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII DIRECTORS' LIABILITY AND
INDEMNIFICATION.................................................. 11
Section 1. Directors' Liability............................. 11
Section 2. Nature of Indemnity.............................. 12
Section 3. Procedure for Indemnification of Directors and
Officers....................................... 12
Section 4. Article Not Exclusive............................ 13
Section 5. Insurance........................................ 13
Section 6. Expenses......................................... 13
Section 7. Employees and Agents............................. 14
Section 8. Contract Rights.................................. 14
Section 9. Merger or Consolidation.......................... 14
Section 10. Amendments...................................... 14
ARTICLE IX AMENDMENTS................................................... 15
</TABLE>
<PAGE>
BYLAWS
OF
BOOMTOWN, INC.
--------------
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office of the Corporation
---------- -----------------
shall be in the City of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
---------- -------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of the stock holders for the
---------- -----------------
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be
---------- ---------------
held on such date and at such time as shall be designated from time to time by
the Board of Direc tors and stated in the notice of the meeting, at which meet
ings the stockholders shall elect by a plurality vote a Board of Directors, and
transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders may be
---------- ----------------
called by the Board of Directors, the Chairman of the Board, the President, or
by the holders of shares entitled to cast not less than 10% of the votes at the
meeting. Upon request in writing to the Chairman of the Board, the President,
any Vice President or the Secretary by any person (other than the board)
entitled to call a special meeting of stockholders, the officer forthwith shall
cause notice to be given to the stockholders entitled to vote that a meeting
will be held at a time requested by the person or per sons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after the receipt
of the request. If the notice is not given within 20 days after receipt of the
request, the persons entitled to call the meeting may give the notice.
-1-
<PAGE>
Section 4. Notice of Meetings. Written notice of the place, date, and
---------- ------------------
time of all meetings of the stockholders shall be given not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or as required from time to time by the Delaware General
Corporation Law or the Certificate of Incorporation.
Section 5. Quorum; Adjournment. At any meeting of the stockholders, the
---------- -------------------
holders of a majority of all of the shares of the stock entitled to vote at the
meeting, present in per son or by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law or the Certificate of Incorpora tion. If a quorum shall
fail to attend any meeting, the chairman of the meeting or the holders of a
majority of the shares of stock entitled to vote who are present, in person or
by proxy, may adjourn the meeting to another place, date, or time without notice
other than announcement at the meeting, until a quorum shall be present or
represented.
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meet ing if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity here with. At any
adjourned meeting, any business may be trans acted which might have been
transacted at the original meeting.
Section 6. Proxies and Voting. At any meeting of the stockholders, every
---------- ------------------
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting.
Each stockholder shall have one vote for every share of stock entitled to
vote which is registered in his name on the record date for the meeting, except
as otherwise provided herein or required by law or the Certificate of
Incorporation.
All voting, including on the election of directors but excepting where
otherwise provided herein or required by law or the Certificate of
Incorporation, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or such stockholder's proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the
-2-
<PAGE>
procedure established for the meeting. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Certificate of Incorporation, all
other matters shall be determined by a majority of the votes cast.
Section 7. Stock List. A complete list of stockholders entitled to vote
---------- ----------
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
reg istered in such stockholder's name, shall be open to the exam ination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 8. Actions by Stockholders. Unless otherwise provided in the
---------- -----------------------
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and with out a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writ ing.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. Duties and Powers. The business of the Cor poration shall be
---------- -----------------
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by the Certificate of Incorporation or by these
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Bylaws directed or required to be exercised or done by the stockholders.
Section 2. Number and Term of Office. The Board of Directors shall
---------- -------------------------
consist of one (1) or more members. The num ber of directors shall be fixed and
may be changed from time to time by resolution duly adopted by the Board of
Directors or the shareholders, except as otherwise provided by law or the
Certificate of Incorporation. Until otherwise resolved by the Board of
Directors, the number of directors shall be three (3). Except as provided in
Section 3 of this Article, directors shall be elected by the holders of record
of a plurality of the votes cast at Annual Meetings of Stockholders, and each
director so elected shall hold office until the next Annual Meeting and until
his or her successor is duly elected and qualified, or until his or her earlier
resignation or removal. Any director may resign at any time upon written notice
to the Corporation. Directors need not be stockholders.
Section 3. Vacancies. Vacancies and newly created directorships resulting
---------- ---------
from any increase in the authorized number of directors may be filled by a
majority of the direc tors then in office, although less than a quorum, or by a
sole remaining director or by the stockholders entitled to vote at any Annual or
Special Meeting held in accordance with Article II, and the directors so chosen
shall hold office until the next Annual or Special Meeting duly called for that
purpose and until their successors are duly elected and qualified, or until
their earlier resignation or removal.
Section 4. Meetings. The Board of Directors of the Cor poration may hold
---------- --------
meetings, both regular and special, either within or without the State of
Delaware. The first meeting of each newly-elected Board of Directors shall be
held immedi ately following the Annual Meeting of Stockholders and no notice of
such meeting shall be necessary to be given the newly-elected directors in order
legally to constitute the meeting, provided a quorum shall be present. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman of the
Board, the President or a majority of the directors then in office. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date of
the meeting, by tel ephone or telegram on twenty-four (24) hours' notice, or on
such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circum stances. Meetings may be held at any
time without notice if all the directors are present or if all those not present
waive such notice in accordance with Section 2 of Article VI of these Bylaws.
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Section 5. Quorum. Except as may be otherwise specifi cally provided by
---------- ------
law, the Certificate of Incorporation or these Bylaws, at all meetings of the
Board of Directors, a majority of the directors then in office shall constitute
a quorum for the transaction of business and the act of a major ity of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meet ing from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions of Board Without a Meeting. Unless otherwise provided
---------- ----------------------------------
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
---------- -----------------------------------------
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Cor poration, or any committee designated by the Board
of Direc tors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or simi lar communications
equipment by means of which all persons participating in the meeting can hear
each other, and partici pation in a meeting pursuant to this Section 7 shall
consti tute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution passed
---------- ----------
by a majority of the directors then in office, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member
of a committee, and in the absence of a designation by the Board of Directors of
an alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such absent
or disqualified member. Any committee, to the extent allowed by law and
provided in the Bylaw or resolution establishing such committee, shall have and
may exercise all the powers and authority of the Board of Directors in the man
agement of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Each
committee shall keep regu-
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lar minutes and report to the Board of Directors when required.
Section 9. Compensation. Unless otherwise restricted by the Certificate
---------- ------------
of Incorporation or these Bylaws, the Board of Directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director
from serving the Corpora tion in any other capacity and receiving compensation
there for. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 10. Removal. Unless otherwise restricted by the Certificate of
----------- -------
Incorporation or Bylaws, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
OFFICERS
--------
Section 1. General. The officers of the Corporation shall be appointed by
---------- -------
the Board of Directors and shall consist of a Chairman of the Board or a
President, or both, a Secre tary and a Treasurer (or a position with the duties
and responsibilities of a Treasurer). The Board of Directors may also appoint
one or more vice presidents, assistant secretaries or assistant treasurers, and
such other officers as the Board of Directors, in its discretion, shall deem
necessary or appropriate from time to time. Any number of offices may be held
by the same person, unless the Certificate of Incorporation or these Bylaws
otherwise provide.
Section 2. Election; Term of Office. The Board of Directors at its first
---------- ------------------------
meeting held after each Annual Meeting of Stockholders shall elect a Chairman of
the Board or a Pres ident, or both, a Secretary and a Treasurer (or a position
with the duties and responsibilities of a Treasurer), and may also elect at that
meeting or any other meeting, such other officers and agents as it shall deem
necessary or appropriate. Each officer of the Corporation shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors together with the powers and duties customarily exercised by
such officer; and each officer of the Corporation shall hold office until such
officer's successor is elected and qualified or until such officer's earlier res
ignation or removal. Any officer may resign at any time upon written notice to
the Corporation. The Board of Directors may at any time, with or without cause,
by the affirmative vote of a majority of directors then in office, remove any
officer.
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<PAGE>
Section 3. Chairman of the Board. The Chairman of the Board, if there
---------- ---------------------
shall be such an officer, shall be the chief executive officer of the
Corporation. The Chairman of the Board shall preside at all meetings of the
stockholders and the Board of Directors and shall have such other duties and
powers as may be prescribed by the Board of Directors from time to time.
Section 4. President. The President shall be the chief operating officer
---------- ---------
of the Corporation, shall have general and active management of the business of
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall have and exer cise such
further powers and duties as may be specifically delegated to or vested in the
President from time to time by these Bylaws or the Board of Directors. In the
absence of the Chairman of the Board or in the event of his inability or refusal
to act, or if the Board has not designated a Chairman, the President shall
perform the duties of the Chairman of the Board, and when so acting, shall have
all of the powers and be subject to all of the restrictions upon the Chairman of
the Board.
Section 5. Vice President. In the absence of the Presi dent or in the
---------- --------------
event of his inability or refusal to act, the Vice President (or in the event
there be more than one vice president, the vice presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the Pres ident, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. The vice presidents shall perform such other duties and have
such other powers as the Board of Directors or the President may from time to
time prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
---------- ---------
Board of Directors and all meetings of stock holders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or the President. If the Secretary shall be unable or shall refuse to cause to
be given notice of all meetings of the stockholders and special meet ings of the
Board of Directors, and if there be no Assistant Secretary, then either the
Board of Directors or the President may choose another officer to cause such
notice to be given. The Secretary shall have custody of the seal of the Corpora
tion and the Secretary or any Assistant Secretary, if there be one, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by the signature of the Secretary or by the signature of any
such
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<PAGE>
Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corpo ration and to attest the
affixing by his or her signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
Section 7. Assistant Secretaries. Except as may be oth erwise provided in
---------- ---------------------
these Bylaws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, or the Secretary, and shall have the authority to
perform all functions of the Secretary, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Secretary.
Section 8. Treasurer. The Treasurer shall be the Chief Financial Officer,
---------- ---------
shall have the custody of the corporate funds and securities, shall keep
complete and accurate accounts of all receipts and disbursements of the
Corporation, and shall deposit all monies and other valuable effects of the
Corporation in its name and to its credit in such banks and other depositories
as may be designated from time to time by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation, taking proper vouchers and receipts
for such disbursements, and shall render to the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all
his or her transac tions as Treasurer and of the financial condition of the Cor
poration. The Treasurer shall, when and if required by the Board of Directors,
give and file with the Corporation a bond, in such form and amount and with
such surety or sureties as shall be satisfactory to the Board of Directors, for
the faithful performance of his or her duties as Treasurer. The Treasurer shall
have such other powers and perform such other duties as the Board of Directors
or the President shall from time to time prescribe.
Section 9. Assistant Treasurers. Except as may be oth erwise provided in
---------- --------------------
these Bylaws, Assistant Treasurers, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, or the Treasurer, and shall have the authority to
perform all functions of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer.
Section 10. Other Officers. Such other officers as the Board of Directors
----------- --------------
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
dele gate to any other officer of the Corporation the power to
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<PAGE>
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
-----
Section 1. Form of Certificates. Every holder of stock in the Corporation
---------- --------------------
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board or the President or a Vice President and (ii)
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by such
holder in the Corporation.
Section 2. Signatures. Any or all the signatures on the certificate may
---------- ----------
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certifi cate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
---------- -----------------
certificate to be issued in place of any cer tificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affida vit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or such owner's legal representative, to adver tise the same in
such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
---------- ---------
the manner prescribed by law and in these Bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by such person's attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine the
---------- -----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or
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<PAGE>
exchange of stock, or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
(60) days nor less than ten (10) days before the date of such meeting, nor more
than sixty (60) days prior to any other action. A determina tion of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjourn ment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
---------- -----------------
recognize the exclusive right of a person regis tered on its books as the owner
of shares to receive divi dends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
Section 7. Voting Securities Owned by the Corporation. Powers of
---------- ------------------------------------------
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chairman of the Board, the Presi dent,
any Vice President or the Secretary and any such officer may, in the name of and
on behalf of the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
ARTICLE VI
NOTICES
-------
Section 1. Notices. Whenever written notice is required by law, the
---------- -------
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stock holder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corpora tion, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be depos ited in the United States mail. Written notice may also
be given personally or by telegram, telex or cable and such notice shall be
deemed to be given at the time of receipt thereof if given personally or at the
time of transmission thereof if given by telegram, telex or cable.
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<PAGE>
Section 2. Waiver of Notice. Whenever any notice is required by law, the
---------- ----------------
Certificate of Incorporation or these Bylaws to be given to any director, member
or a committee or stockholder, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to notice.
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
---------- ---------
Corporation, subject to the provisions of the Certifi cate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special meeting
or by any Commit tee of the Board of Directors having such authority at any
meeting thereof, and may be paid in cash, in property, in shares of the capital
stock or in any combination thereof. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors from time to time, in its absolute
discretion, deems proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for any proper purpose, and the Board of Directors may modify or
abolish any such reserve.
Section 2. Disbursements. All notes, checks, drafts and orders for the
---------- -------------
payment of money issued by the Corporation shall be signed in the name of the
Corporation by such offi cers or such other persons as the Board of Directors
may from time to time designate.
Section 3. Corporation Seal. The corporate seal, if the Corporation shall
---------- ----------------
have a corporate seal, shall have inscribed thereon the name of the Corporation,
the year of its organiza tion and the words "Corporate Seal, Delaware". The
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or reproduced or otherwise.
ARTICLE VIII
DIRECTORS' LIABILITY AND INDEMNIFICATION
----------------------------------------
Section 1. Directors' Liability. No director of the Corporation shall be
---------- --------------------
personally liable to the Corporation or its stockholders for monetary damages
for any breach of fidu ciary duty by such a director as a director.
Notwithstanding the foregoing sentence, a director shall be liable to the extent
provided by applicable law (i) for any breach of the director's duty of loyalty
to the Corporation or its stock holders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from
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<PAGE>
which such director derived an improper personal benefit. No amendment to or
repeal of this Article shall apply to or have any effect on the liability or
alleged liability of any direc tor of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
If the Delaware General Corporation Law is amended hereafter to further
eliminate or limit the personal liability of directors, the liability of a
director of the Corporation shall be limited or eliminated to the fullest extent
permitted by the Delaware General Corporation Law, as amended.
Section 2. Nature of Indemnity. Each person who was or is made a party or
---------- -------------------
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, is or was a
director or officer, of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, fiduciary, or agent of another
corporation or of a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless by the corporation to the fullest extent which
it is empowered to do so by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended against all expense,
liability and loss (including attorneys' fees actually and reasonably incurred
by such person in connection with such proceeding) and such indemnification
shall inure to the benefit of his or her heirs, executors and administrators;
provided, however, that, except as provided in Section 3 hereof, the corporation
may indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the board of directors of the corporation. The right to indemnification
conferred in this Article VIII shall be a contract right and, subject to
Sections 3 and 6 hereof, shall include the right to be paid by the corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition. The corporation may, by action of its board of directors, provide
indemnification to employees and agents of the corporation which the same scope
and effect as the foregoing indemnification of directors and officers.
Section 3. Procedure for Indemnification of Directors and Officers. Any
---------- -------------------------------------------------------
indemnification of a director or officer of the corporation under Section 2 of
this Article VIII or advance of expenses under Section 6 of this Article VIII
shall be made promptly, and in any event within 30 days, upon the written
request of the director or officer. If a determination by the corporation that
the director or officer in entitled to indemnification pursuant to this Article
VIII is required, and the corporation fails to respond within sixty days to a
written request for indemnity, the corporation shall be deemed to have approved
the request. If the corporation denies a written request for indemnification or
advancing of
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<PAGE>
expenses, in whole or in part, or if payment in full pursuant to such request in
not made within 30 days, the right to indemnification or advances as granted by
this Article VIII shall be enforceable by the director or officer in any court
of competent jurisdiction. Such person's costs and expenses incurred in
connection with successfully establishing his or her right to indemnification,
in whole or in part, in any such action shall also be indemnified by the
corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any, has
been tendered to the corporation) that the claimant has not met the standards of
conduct which make it permissible under the General Corporation Law of the State
of Delaware for the corporation to indemnify the claimant for the amount
claimed, but the burden of such defense shall be on the corporation. Neither
the failure of the corporation (including its board of directors, independent
legal counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the corporation (including its board of directors, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
Section 4. Article Not Exclusive. The rights to indemnification and the
---------- ---------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article VIII shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 5. Insurance. The corporation may purchase and maintain insurance
---------- ---------
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article VIII.
Section 6. Expenses. Expenses incurred by any person described in Section
---------- --------
2 of this Article VIII in defending a proceeding shall be paid by the
corporation in advance of such proceeding's final disposition unless otherwise
determined by
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<PAGE>
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 7. Employees and Agents. Persons who are not covered by the
---------- --------------------
foregoing provisions of this Article VIII and who are or were employees or
agents of the corporation, or who are or were serving at the request of the
corporation an employees or agents of another corporation, partnership, joint
venture, trust or other enterprise, may be indemnified to the extent authorized
at any time or from time to time by the board of directors.
Section 8. Contract Rights. The provisions of this Article VIII shall be
---------- ---------------
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article VIII and
the relevant provisions of the General Corporation Law of the State of Delaware
or other applicable law are in effect, and any repeal or modification of this
Article VIII or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceedings then existing.
Section 9. Merger or Consolidation. For purposes of this Article VIII,
---------- -----------------------
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
VIII with respect to the resulting or surviving corporation as he or she would
have with respect to such constituent corporation if its separate existence had
continued.
Section 10. Amendments. This Article VIII shall not be amended, repealed
----------- ----------
or otherwise modified, for a period of six years from the effective date of the
merger of HP Acquisition, Inc., a Delaware corporation, with and into Boomtown,
Inc., a Delaware corporation, in any manner that would adversely affect any
rights of indemnification of persons covered hereby on such effective date.
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<PAGE>
ARTICLE IX
AMENDMENTS
----------
Except as otherwise specifically stated within an Article to be altered,
amended or repealed, these Bylaws may be altered, amended or repealed and new
Bylaws may be adopted at any meeting of the Board of Directors or of the
stockholders, provided notice of the proposed change was given in the notice of
the meeting.
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<PAGE>
EXHIBIT 3.19
FILING FEE: $75.OO
BY: MCDONALD, CABANO, WILSON
P.O. BOX 2670
RENO, NEVADA 89505
CERTIFICATE OF AMENDED
----------------------
AND RESTATED ARTICLES
---------------------
OF INCORPORATION FOR
--------------------
BOOMTOWN, INC.
--------------
a Nevada Corporation
--------------------
RICHARD N. SCOTT and ROBERT H. MOORE certify that:
1. They are the president and secretary, respectively, of BOOMTOWN, INC.,
a Nevada Corporation (the "Corporation").
2. Capital has been contributed to the Corporation.
3. Pursuant to Nevada Revised Statutes (S)(S)(S) 78.385, 78.390, 78.395
and 78.403, the amended and restated articles of incorporation of the
Corporation set forth immediately below have been duly approved by the required
vote of shareholders of the Corporation and are set forth as follows:
FIRST: The name of the corporation is BOOMTOWN, INC., a Nevada
-----
corporation.
SECOND: The address and location of the principal office of the
------
Corporation in the State of Nevada is Interstate 80 and Garson Road, Verdi,
Washoe County, Nevada. (Amended July 10, 1987)
THIRD: The purposes for which the Corporation is organized are as
-----
follows:
(a) to conduct gaming in the State of Nevada in accordance with the
laws of the State of Nevada and the United States of America; and
(b) to engage in any lawful activity. (Amended December 31, 1969)
FOURTH: The aggregate number of shares that the Corporation shall have
------
authority to issue is Three Hundred
<PAGE>
Thousand (300,000) shares of common stock with a par value of One Dollar ($1.00)
per share (herein referred to as "Common Stock").
Any and all shares of stock in this Corporation shall be paid in as the
Board of Directors may designate and as provided by law, in cash, real or
personal property, services, leases, options to purchase, or any other valuable
right or thing for the uses or purposes of the Corporation, and all shares of
stock when issued in exchange therefor, shall thereupon and thereby become and
be fully paid the same as though paid for in cash and shall be nonassessable
forever, and shall not be subject to pay the debt of the Corporation. The
judgment of the Directors as to the value of any property, right or thing,
acquired in purchase or exchange will be conclusive.
The Corporation shall not issue any stock or securities except in
accordance with the provisions of the Nevada Gaming Control Act and the
regulations thereunder. The issuance of any stock or securities in violation
thereof shall be ineffective and such stock or securities shall be deemed not to
be issued and outstanding until (1) the Corporation shall cease to be subject to
the jurisdiction of the Nevada Gaming Commission, or (2) the Nevada Gaming
Commission shall, by affirmative action, validate said issuance or waive any
defect in issuance.
No stock or securities issued by the Corporation and no interest, claim or
charge therein or thereto shall be
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<PAGE>
transferred in any manner whatsoever except in accordance with the provisions of
the Nevada Gaming Control Act and the regulations thereunder. Any transfer in
violation thereof shall be ineffective until (1) the Corporation shall cease to
be subject to the jurisdiction of the Nevada Gaming Commission, or (2) the
Nevada Gaming Commission shall, by affirmative action, validate said transfer or
waive any defect in said transfer.
If the Commission at any time determines that a holder of stock or other
securities of this Corporation is unsuitable to hold such securities, then until
such securities are owned by persons found by the Commission to be suitable to
own them, (a) the Corporation shall not be required or permitted to pay any
dividend or interest with regard to the securities, (b) the holder of such
securities shall not be entitled to vote on any matter as the holder of the
securities, and such securities shall not for any purposes be included in the
securities of the Corporation entitled to vote, and (c) the Corporation shall
not pay any remuneration in any form to the holder of the securities. (Amended
July 10, 1987)
FIFTH: Members of the Governing Board shall be known as "Directors" and
-----
the number thereof shall be not less than three (3) nor more than ten (10), the
exact number to be fixed by the By-Laws of the Corporation, provided that the
number so fixed by the By-Laws may be increased or decreased from time to time.
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<PAGE>
The names and addresses of the present Board of Directors who are to serve
as Directors until the successors have been elected are as follows:
ROBERT A. CASHELL 4150 Basque Lane
Reno, Nevada
NANCY P. CASHELL 4150 Basque Lane
Reno, Nevada
ROBERT H. MOORE P.O. Box 1848
Reno, Nevada
RICHARD N. SCOTT 1190 Williams Avenue
Reno, Nevada
FRANK GIANOPULUS 1525 Webster Way
Reno, Nevada
JAMES MIDDAUGH P.O. Box 251
Verdi, Nevada
LARRY TILLER 8505 Lone Tree Lane
Reno, Nevada
(Amended July 10, 1987)
SIXTH: The names and post office addresses of each of
-----
the incorporators are as follows:
ROBERT A. CASHELL 4150 Basque Lane
Reno, Nevada
ROBERT H. MOORE P.O. Box 1848
Reno, Nevada
RICHARD R. KEARNEY 1200 Grand View Avenue
Reno, Nevada
ROBERT L. McDONALD 60 Court Street
Reno, Nevada
DONALD L. CARANO 60 Court Street
Reno, Nevada
SEVENTH: The Corporation is to have perpetual existence. (Amended July
-------
10, 1987)
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<PAGE>
EIGHTH: In furtherance and not in limitation of the rights, powers,
------
privileges and discretionary authority granted or conferred by the Private
Corporations Law of the State of Nevada or other statutes or laws of the State
of Nevada, the Board of Directors is expressly authorized:
A. To make, amend, alter or repeal the Bylaws of the Corporation;
B. To authorize and cause to be executed mortgages and liens upon the
real and personal property of the Corporation;
C. To set apart out of any funds of the Corporation available for
dividends, a reserve or reserves for any proper purpose and to reduce any such
reserve in the manner in which it was created;
D. To adopt from time to time Bylaw provisions with respect to
indemnification of directors, officers, employees, agents and other persons as
it shall deem expedient and in the best interests of the Corporation and to the
fullest extent permitted by the Private Corporations Law of the State of Nevada;
and
E. To fix and determine designations, preferences, privileges, rights and
powers and relative, participating, optional or other special rights,
qualifications, limitations or restrictions on the capital stock of the
Corporation as provided by Nevada Revised Statutes (S) 78.195, unless otherwise
provided herein. (Amended July 10, 1987)
NINTH: A resolution in writing, signed by all of the members of the
-----
Board of Directors, shall be and constitute action by the Board of Directors to
the effect therein expressed, with the same force and effect as though such
resolution had been passed at a duly convened meeting, and it shall be the duty
of the secretary to record every such resolution in the minute book under its
proper date. (Amended July 10, 1987)
TENTH: Subject to the provisions of the Private Corporations Law of the
-----
State of Nevada, no director,
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<PAGE>
officer, or stockholder of the Corporation shall be liable individually or
personally to the Corporation for damages resulting from a breach of fiduciary
duty as a director or officer except for (i) acts or omissions which involve
intentional misconduct, fraud, or a knowing violation of law; or (ii) the
payment of dividends in violation of Nevada Revised Statutes (S) 78.300.
Neither the amendment or repeal of this Article TENTH, nor the adoption of
any provision of the Articles of Incorporation or Bylaws or of any statute
inconsistent with this Article TENTH, shall eliminate or reduce the effect of
this Article TENTH in respect of any acts or omissions occurring prior to such
amendment, repeal or adoption of an inconsistent provision. (Amended July 10,
1987)
ELEVENTH: The initial resident agent of the Corporation in the State of
--------
Nevada is:
Robert H. Moore
Interstate 80 and Garson Road
Verdi, Nevada 89439
(Amended July 10, 1987)
IN WITNESS WHEREOF, we have hereunto set our hands and executed these
Amended Articles of Incorporation this ___ day of _______________, ____.
_____________________________
Richard N. Scott,
President
_____________________________
Robert H. Moore,
Secretary
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<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF WASHOE )
On this ____ day of _______________, 19___, personally appeared before the
undersigned, a Notary Public in and for the County of Washoe, State of Nevada,
Richard N. Scott and Robert H. Moore, known to me to be the persons described in
and who executed the foregoing instrument freely and voluntarily and for the
uses and purposes mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_____________________________
NOTARY PUBLIC
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<PAGE>
INVOICE #29025 DF EXPEDITE #E028
CT CORPORATION SYSTEM
ATTN: BARBARA CANNIZZO
49 STEVENSON ST. STE. 900
SAN FRANCISCO, CA 94105
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
BOOMTOWN, INC.
Richard N. Scott and Leo W. Sumrall certify that:
1. They are the President and Secretary respectively, of BOOMTOWN, INC.,
a Nevada Corporation (the "Corporation").
2. Pursuant to Nevada Revised Statutes SS 78.388 and 78,390, the
amendment to the Articles of Incorporation of the Corporation set forth
immediately below has been duly approved by the written consent of the sole
stockholder of the Corporation and is as follows:
Article FIRST is amended to read in its entirety as follows:
"FIRST: The name of the Corporation is Boomtown Hotel and Casino, Inc."
-----
IN WITNESS WHEREOF, we have hereunto set our hands and executed this
Certificate.
Dated: ________________
---------------------------
Richard N. Scott, President
---------------------------
Leo W. Sumrall, Secretary
STATE OF NEVADA )
) SS.
COUNTY OF SANTA CLARA )
On ______________, 19__, personally appeared before me, a Notary Public,
Richard N. Scott and Leo W. Sumrall, who acknowledged that they executed the
above instrument.
---------------------------
NOTARY PUBLIC
<PAGE>
ARTICLES OF MERGER
OF
BOOMTOWN WATER COMPANY, INC.
INTO
BOOMTOWN HOTEL & CASINO, INC.
FIRST: Boomtown Hotel & Casino, Inc. (hereinafter referred to as the
"Parent Corporation"), a corporation of the State of Nevada, owns all of the
outstanding shares of each class of Boomtown Water Company, Inc. (hereinafter
referred to as the "Subsidiary Corporation") a corporation of the State of
Nevada.
SECOND: A plan of merger was adopted by the Board of Directors of the
Parent Corporation whereby the Subsidiary Corporation is to be merged into the
Parent Corporation.
THIRD: Approval of the stockholders of either the Parent or Subsidiary
Corporation was not required.
FOURTH: The complete executed plan of merger is on file at the place of
business of the Parent Corporation located at the intersection of Interstate 80
and Boomtown Garson Road, Verdi, Nevada 89439, and a copy of the plan will be
furnished by the Parent Corporation, on request and without cost, to any
stockholder or any corporation which is a party to this merger.
FIFTH: The Articles of Incorporation of the Parent Corporation in effect
immediately prior to the filing of these Articles of Merger shall continue in
full force and effect as the Articles of Incorporation of the Parent Corporation
until duly amended in accordance with the provisions thereof and applicable law.
BOOMTOWN HOTEL & CASINO, INC.
By:
-------------------------------------
Richard N. Scott, President
By:
------------------------------------
Leo W. Sumrall, Assistant
Secretary
<PAGE>
State of Nevada )
) ss.
County of Washoe )
On ___________________________ , personally appeared before me, a Notary
Public _________________________________________ who acknowledged that they
(Names of persons appearing and signing document)
executed the above instrument.
__________________________________
Signature of Notary
<PAGE>
ARTICLES OF MERGER
MERGING
BOOMTOWN WATER COMPANY, INC. 2244-86
(NV)
INTO
BOOMTOWN HOTEL & CASINO, INC. 697-67 SURVIVOR
(NV)
FILED BY:
MCDONALD, CARANO, WILSON ETAL
P.O. BOX 2670
RENO, NV 89505
RETURN VIA: RENO/CARSON
FILE NO: 697-67 SURVIVOR
FILE DATE: 11/5/93
FILING FEE: $75.OO TS REC. #C97209
Exp. #51038
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<PAGE>
EXHIBIT 3.20
REVISED AND RESTATED BY-LAWS
OF
BOOMTOWN HOTEL & CASINO, INC., a Nevada Corporation
(Formerly Boomtown, Inc.)
<PAGE>
REVISED AND RESTATED BY-LAWS
OF
BOOMTOWN, INC., a Nevada Corporation
Interstate 80 and Garson Road, Verdi, Nevada
OFFICES
1. The principal office shall be in the County of Washoe, State of
Nevada.
2. The corporation may also have an office or offices at such other place
or places, within or without the State of Nevada, as the Board of Directors may
from time to time designate or the business of the corporation require.
STOCKHOLDERS
3. The annual meeting of the stockholders of the corporation, commencing
with the year 1970, shall be held at the principal office of the corporation in
the State of Nevada, or at such other place within or without the State of
Nevada as may be determined by the Board of Directors and as shall be designated
in the notice of said meeting, on the 1st day of May of each year (or if said
day be a legal holiday, then on the next succeeding day not a legal holiday),
for the purpose of electing directors and for the transaction of such other
business as may be properly brought before the meeting.
If the election of directors shall not be held on the day designated herein
for any annual meeting, or at any adjournment thereof, the Board of Directors
shall cause the election to be held at a special meeting of the stockholders as
soon thereafter as conveniently may be. At such meeting the stockholders may
elect the directors and transact other business with the same force and effect
as at an annual meeting duly called and held.
4. Special meetings of the stockholders shall be held at the.principal
office of the corporation in the State of Nevada, or at such other place within
or without the State of Nevada, as may be designated in the notice of said
meeting, upon call of the Board of Directors or of the President, or any Vice
President, or the Secretary at the request in writing of stockholders owning at
least 30% of the issued and outstanding capital stock of the corporation
entitled to vote thereat.
5. Notice of the purpose or purposes and of the time and place within or
without the State of Nevada of every meeting of stockholders shall be in writing
and signed by the Chairman of the Board, or the President, or the Executive Vice
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<PAGE>
President or a Vice President, or the Secretary, or an Assistant Secretary and a
copy thereof shall be served either personally, or by mail, or by any other
lawful means, not less than ten days before the meeting, upon each stockholder
of record entitled to vote at such meeting. If mailed, such notice shall be
directed to each stockholder at his address as it appears on the stock book
unless he shall have filed with the Secretary of the corporation a written
request that notices intended for him to be mailed to some other address, in
which case it shall be mailed or transmitted to the address designed in such
request. Such further notice shall be given as may be required by law. Except
as otherwise expressly provided by statute, no publication of any notice of a
meeting of stockholders shall be required. Notice of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy, or who shall, in person or by
attorney thereunto authorized, waive such notice in writing or by telegraph,
cable, radio, or wireless either before or after such meeting. Except where
otherwise required by law, notice of any adjourned meeting of the stockholders
of the corporation shall not be required to be given.
6. At any meeting of the stockholders, each stockholder having the right
to vote shall be entitled to vote in person, or by proxy appointed by an
instrument in writing, subscribed by such stockholder and bearing a date not
more than six months prior to said meeting unless said instrument provides for a
longer period. Each stockholder having the right to vote shall have one vote
for each share of stock having voting power, registered in his name on the books
of the corporation.
7. Whenever the vote of stockholders at a meeting thereof is required
or permitted to be taken in connection with any corporate action by any
provision of the General Corporation Law of the State of Nevada, or of the
Articles of Incorporation, or of these By-Laws, the meeting and vote of
stockholders may be dispensed with, if all stockholders who would have been
entitled to vote upon the action, if such meeting were held, shall consent in
writing to such corporate action being taken.
DIRECTORS
8. The number of directors which shall constitute the whole Board shall
at all times be no fewer than three (3) nor more than ten (10).
9. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 11 hereof, and each director shall
be elected to serve until his successor shall be elected and shall qualify,
Directors need not be stockholders.
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<PAGE>
10. The directors may hold their meeting within or without the State of
Nevada and may keep all books and records of the corporation at places which may
be designated by the Board from time to time, except for those books and records
which the laws of the State of Nevada require to be kept in Nevada.
11. If any vacancy or vacancies shall occur in the Board of Directors
caused by reason of death, resignation, retirement, disqualification or removal
from office of any director or directors, or caused in any other manner, or any
new directorship is created by any increase in the authorized number of
directors, a majority of the directors then in office, although less than a
quorum, may choose a successor or successors, or fill the newly created
directorship, and the directors so chosen shall hold until the next annual
election of directors and until their successors shall be duly elected and shall
be qualified, unless sooner displaced.
12. The annual meeting of the Board of Directors for the election of
officers shall be held on the same day as the annual meeting of the
stockholders, immediately after the adjournment of such annual meeting of the
stockholders or as soon thereafter as may be possible and convenient.
13. The property and business of the corporation shall be managed and
controlled by its Board of Directors and such officers, agents and employees as
said Board of Directors may elect, employ and authorize. The Board of Directors
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute and the Articles of Incorporation or by these By-
Laws directed or required to be exercised or done by the stockholders.
COMMITTEES OF DIRECTORS
14. The Board of Directors may, by resolution or resolutions, passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation, shall have and may
exercise the powers of the Board of Directors in the management of the business
affairs of the corporation, and may have power to authorize the seal of the
corporation to be affixed to all papers which may require it. Such committees
or committee shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors.
COMPENSATION OF DIRECTORS
15. Directors as such, shall not receive any stated salary for their
services, but, by resolutions of the Board a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the
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<PAGE>
Board; provided, that nothing herein contained shall be construed to preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
MEETINGS OF THE BOARD
16. Regular meetings of the Board may he held without notice at such time
and place either within or without the State of Nevada as shall from time to
time be determined by the Board.
17. Special meetings of the Board, to be held at any convenient place, may
be called by the Chairman of the Board on five days' notice to each director,
either personally, or by mail, or by telegram, or by telephone; special meeting
shall be called by the Chairman of the Board or Secretary in like manner and on
like notice on the written request of two directors. Notice of any meeting may
be waived by any director in the manner provided by Section 20 hereof. If all
directors shall be present at any meeting, neither notice of written waiver of
notice of the time and place of such meeting, shall be necessary to its
validity. Unless otherwise expressly indicated in the notice thereof, any and
all business may be transacted at a special meeting of the Board of Directors.
18. At all meetings of the Board a majority of the directors shall be
necessary and sufficient to constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors except as may be
otherwise specifically provided by statute or by the Articles of Incorporation
or by these By-laws. If a quorum shall not be present at any meeting of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement of the meeting, until a quorum
shall be present.
NOTICES
19. Whenever, under the provisions of the statutes, or the Articles of
Incorporation, or these By-Laws, notice is required to be given to any director
or stockholder, it shall not be construed to mean personal notice, but such
notice may be given in writing, by mail, by depositing same in the post office,
or in a letter box, in a postpaid, sealed envelope, addressed to such director
or stockholder at such address as appears on the books of the corporation, or,
in default of other address, to such director or stockholder in the General Post
Office in the City of Reno, Nevada, and such notice shall be deemed to be given
at the time that the same shall be thus mailed.
-5-
<PAGE>
20. Whenever any notice is required to be given under the provisions of
the statutes or of the Articles of Incorporation, or of these By-Laws, a waiver
thereof, in writing signed by the person or persons entitled to said notice,
whether before or after the time stated therein shall be deemed equivalent
thereto.
OFFICERS
21. The officers of the corporation shall be chosen by the directors and
shall be a Chairman of the Board, a President, an Executive Vice President, and
a Secretary/Treasurer. The Board of Directors may also choose additional vice
presidents, and one or more assistant secretaries and assistant treasurers. Two
or more offices may be held by the same person, except that where the offices of
President and Secretary are held by the same person, such person shall not hold
any other office.
22. The Board of Directors at its first meeting after each annual meeting
of the stockholders shall choose a Chairman of the Board, a President and an
Executive Vice President from its members and one or more Vice Presidents, a
Secretary and a Treasurer.
23. The Board may appoint such other officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board.
24. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy shall be filled by the
Board of Directors.
CHAIRMAN OF THE BOARD
25. The Chairman of the Board shall be the chief executive officer of the
corporation; he shall preside at all meetings of the stockholders and directors,
shall be ex-officio a member of all standing committees, shall have general and
active management of the business of the corporation, and shall see that all
orders and resolutions of the Board are carried into effect.
PRESIDENT
26. The President shall execute bonds, mortgages and other contracts,
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and
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<PAGE>
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
VICE PRESIDENT
27. The Vice Presidents in the order of their seniority shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President, and shall perform such other duties as the Board of
Directors shall prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
28. The Secretary shall attend all sessions of the Board and all meetings
of the stockholders and record all votes and the minutes of all proceedings in a
book to be kept for that purpose and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or President, under whose supervision he shall be. He shall keep in safe
custody the seal of the corporation, and, when authorized by the Board, affix
the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of the Treasurer or an Assistant
Secretary.
29. The Assistant Secretaries in order of their seniority shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as the Board of
Directors shall prescribe.
THE TREASURER AND ASSISTANT TREASURERS
30. The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors.
31. He shall disburse the funds of the corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the President and directors, at the regular meetings of the board, or whenever
they may require it, an account of all his transactions as Treasurer and of the
financial condition of the corporation.
32. If required, by the Board of Directors, he shall give the corporation,
a bond (which shall be renewed every six years), in such sum and with such
surety or sureties as shall be satisfactory to the Board for the faithful
performance of the duties of his office and for the restoration to the
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<PAGE>
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
33. The assistant Treasurers in the order of their seniority shall, in the
absence or liability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as the Board of
Directors shall prescribe.
CERTIFICATE OF STOCK
34. A stock book shall be kept for each class of stock of this
corporation. All certificates of stock shall be numbered and shall be entered
in the stock book as they are issued. They shall exhibit the holder's name, the
number of shares, and the rights, preference and limitations of the stock and
shall be signed by the Chairman of the Board, President or a Vice President, and
the Secretary or an Assistant Secretary, or by the Treasurer, or an Assistant
Treasurer, and shall bear the impress of the corporate seal.
TRANSFERS OF STOCK
35. Any certificate of stock may be transferred, sold, assigned, or
pledged by an endorsement in writing to that effect on the back of such
certificate, which endorsement must be guaranteed by a State or National Bank or
trust Company, and such transfer, sale, assignment, or pledge shall be completed
by the delivery of such certificate by the transferrer to the transferee. Until
notice of such transfer has been given to the Secretary of the company, and the
certificate of stock so transferred has been surrendered for cancellation, and a
new certificate of stock has been issued in lieu of that surrendered, this
company may and shall regard and treat the transferrer as still being the owner
of the stock evidenced by such certificate.
CLOSING OF TRANSFER BOOKS
36. The Board of Directors shall have power to close the stock transfer
books of the corporation for a period not exceeding fifty days preceding the
date of any meeting of stockholders or the date for payment of any dividend or
the date of the allotment of rights or the date when any change or conversion or
exchange of capital stock shall go into effect or for a period of not exceeding
fifty days in connection with obtaining the consent of stockholders for any
purpose; provided, however, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding fifty
days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
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<PAGE>
when any change or conversion or exchange of capital stock, or to give such
consent, and in such case such stockholders and only such stockholders as shall
be stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, or to give such consent, as the case may be notwithstanding any
transfer of any stock on the books of the corporation after any such record date
as aforesaid.
37. All surrendered certificates of stock shall be marked "Cancelled" by
the Secretary, with the date of cancellation, and shall be immediately placed in
the stock certificate book attached to the memorandum stub of their issue.
LOST CERTIFICATE
38. The Board of Directors may direct a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificates of stock to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost or
destroyed.
FINANCES
39. The funds of the company shall be deposited in the name of the company
in such bank or banks as the Board of Directors shall designate from time to
time. Funds so deposited shall be drawn only upon checks or vouchers signed by
such officer or officers of the company, or other proper persons as may be
designated from time to time by the Chairman of the Board.
40. No notes, bonds or other interest bearing obligations of the company
shall be issued unless and until the issuance thereof has been authorized by the
Chairman of the Board, and such notes, bonds or other interest bearing
obligations when so authorized shall be signed by the Chairman of the Board or
President or a Vice President, and attested by the Secretary or an Assistant
Secretary.
MISCELLANEOUS
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<PAGE>
41. The corporation may rely upon and act in accordance with any agreement
of the stockholders that may be made among themselves, and filed with the
Secretary, provided such agreement is not contrary to the statutes, the Articles
of Incorporation or these By-Laws.
42. All provisions of the statutes of the State of Nevada and of the
Articles of Incorporation of the company regulating and conduct of its affairs
are incorporated by reference as a part of these By-Laws, and should any
provision of the By-Laws be inconsistent with said statutes or Articles of
Incorporation, such provision of the By-Laws shall be of no force and effect,
but shall be absolutely void.
AMENDMENTS
43. The Directors may alter, amend or modify these By-Laws, or repeal any
part thereof by a majority vote. A certified copy of such altered, amended or
modified provision or statement of the repeal of any provision, or of any
addition to the By-Laws shall be sent by the Secretary to each stockholder
within thirty days after such action by the Board of Directors.
44. The seal impressed immediately below shall be the official seal of the
corporation.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, being the directors of this corporation named in
the Articles of Incorporation, do hereby assent to the foregoing By-Laws and
adopt the same as the By-Laws of this corporation.
IN WITNESS WHEREOF, we have hereunto subscribed our names this 10th day of
July, 1987, and by these presents certify that the foregoing By-Laws do
constitute the By-Laws of this corporation.
-10-
<PAGE>
EXHIBIT 3.21
ARTICLES OF INCORPORATION
(Attach conformed copy.)
X PROFIT NONPROFIT
- -
(Mark Appropriate Box)
The undersigned persons, pursuant to Section 79-4-2.02 (if a profit
corporation) or Section 79-11-137 (if a nonprofit corporation) of the
Mississippi Code of 1972, hereby execute the following document and set forth:
1. The name of the corporation is: BAYVIEW YACHT CLUB, INC.
2. Domicile address is: 676 BAYVIEW DRIVE
BILOXI, MS 39530
3. The period of duration is: 99 YEARS
4. (a) The number (and classes, if any) of shares the corporation is
authorized to issue is (are)
(THIS IS FOR PROFIT ONLY):
<TABLE>
<CAPTION>
Class(es) No. of Shares Authorized
--------- ------------------------
<S> <C>
COMMON 1,000
</TABLE>
4. (b) If more than one (1) class of shares is authorized, the preferences,
limitations and relative rights of each class are as follows: N/A
5. The street address of its initial registered office is
185 REYNOIR STREET
BILOXI, MS 39530
and the name of its initial registered agent at such address is: GERALD
BLESSEY
6. The name and complete address of each incorporator is as follows (PLEASE
TYPE OR PRINT):
ERIC F. SKRMETTA, 3536 LOWERLINE ST., NEW ORLEANS, LA 70125
GERALD BLESSEY, 185 REYNOIR STREET, BILOXI, MS 39530
7. Other provisions: N/A
__________________________
__________________________
INCORPORATORS (SIGNATURES)
<PAGE>
EXHIBIT 3.22
BYLAWS
OF
BAYVIEW YACHT CLUB, INC.
ARTICLE I. PRINCIPAL OFFICE
The principal office of the corporation in the State of Mississippi shall
be located in the City of Biloxi, County of Harrison. The corporation may have
such other offices, either within or without the State of Mississippi, as the
board of directors may designate or as the business of the corporation may
require from time to time.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
--------------
be held on the first Tuesday in the month of April, in each year at the hour of
10:00 o'clock, a.m., or such other time and date as may be determined by the
directors, for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting. If the day fixed for
the annual meeting shall be a legal holiday in the State of Mississippi, such
meeting shall be held on the next succeeding business day.
If the election of directors shall not be held on the day designated herein
for any annual meeting of the shareholders, or at any adjournment thereof, the
board of directors shall cause the election to be held at a special meeting of
the shareholders as soon thereafter as conveniently may be.
Section 2. Special Meetings. The corporation shall hold a special meeting
----------------
of shareholders (1) on call of its board of directors or the president; or (2)
unless the articles of incorporation provide otherwise, if the holders of at
least ten percent (10%) of all the votes entitled to be cast on any issue
proposed to be considered at the proposed special meeting sign, date and deliver
to the corporation's secretary one or more written demands for the meeting
describing the purpose or purposes for which it is to be held. If not otherwise
fixed under applicable law, the record date for determining shareholders
entitled to demand a special meeting shall be the date the first shareholder
signs the demand.
Section 3. Place of Meeting. The board of directors may designate any
----------------
place, either within or without the State of Mississippi, for any annual meeting
or for any special meeting of shareholders. A valid waiver of notice signed by
all shareholders entitled to notice may designate any place, either within or
without the State of Mississippi, as the place for any annual meeting or for any
special meeting of
<PAGE>
shareholders. Unless the notice of the meeting states otherwise, shareholders'
meetings shall be held at the corporation's principal office.
Section 4. Notice of Meeting. The corporation shall notify shareholders
-----------------
of the date, time and place of each annual and special shareholders' meeting no
fewer than ten (10) nor more than sixty (60) days before the meeting date.
Unless applicable law or the articles of incorporation require otherwise, the
corporation shall give notice only to shareholders entitled to vote at the
meeting.
Unless applicable law or the articles of incorporation require otherwise,
notice of an annual meeting need not include a description of the purpose or
purposes for which the meeting is called. Notice of a special meeting must
include a description of the purpose or purposes for which the meeting shall be
called. Only business within the purpose or purposes described in the meeting
notice may be conducted at a special shareholders' meeting.
Unless these bylaws require otherwise, if an annual or special
shareholders' meeting is adjourned to a different date, time or place, notice
need not be given of the new date, time or place if the new date, time or place
is announced at the meeting before adjournment. If a new record date for the
adjourned meeting is or must be fixed under applicable law or Article II,
Section 5 of these bylaws, however, notice of the adjourned meeting must be
given under this section to persons who are shareholders as of the new record
date.
Section 5. Closing of Transfer Books or Fixing of Record Date. The board
--------------------------------------------------
of directors of the corporation may fix the record date for one or more voting
groups in order to determine shareholders entitled to notice of a shareholders'
meeting, to demand a special meeting, to vote or to take any other action. A
record date may not be more than seventy (70) days before the meeting or action
requiring a determination of shareholders. If not otherwise fixed by law, the
record date for determining shareholders entitled to notice of and to vote at an
annual or special shareholders' meeting shall be the day before the first notice
is delivered to shareholders. If the board of directors does not fix the record
date for determining shareholders entitled to a distribution (other than one
involving a purchase, redemption or other acquisition of the corporation's
shares), it shall be the date the board of directors authorizes the
distribution. A determination of shareholders entitled to notice of or to vote
at a shareholders' meeting shall be effective for any adjournment of the meeting
unless the board of directors fixes a new record date, which it must do if the
meeting is adjourned to a date more than one hundred twenty (120) days after the
date fixed for the original meeting.
-2-
<PAGE>
Section 6. Voting Lists. After fixing a record date for a meeting, the
------------
corporation shall prepare an alphabetical list of the names of all its
shareholders who are entitled to notice of a shareholders' meeting. The list
must be arranged by voting group (and within each voting group by class or
series of shares) and show the address of and number of shares held by each
shareholder.
The shareholders' list must be available for inspection by any shareholder
beginning two (2) business days after notice of the meeting is given for which
the list was prepared and continuing through the meeting, at the corporation's
principal office or at a place identified in the meeting notice in the city
where the meeting will be held. A shareholder, his agent or attorney shall be
entitled on written demand to inspect and, subject to the requirements of
applicable law, to copy the list during regular business hours and at his
expense, during the period it shall be available for inspection. The
corporation shall make the shareholders' list available at the meeting, and any
shareholder, his agent or attorney shall be entitled to inspect the list at any
time during the meeting or any adjournment.
Section 7. Quorum. Shares entitled to vote as a separate voting group may
------
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless the articles of incorporation or applicable
law impose other quorum requirements, a majority of the votes entitled to be
cast on the matter by a voting group, represented in person or by proxy, shall
constitute a quorum of that voting group for action on that matter. If less
than a majority of the outstanding shares are represented at a meeting, a
majority of the shares so represented may adjourn the meeting from time to time
without further notice except as may be required by Article II, Section 4 of
these bylaws or by applicable law. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. Once a share is
represented for any purpose at a meeting, it shall be deemed present for quorum
purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned meeting.
Section 8. Proxies. A shareholder may appoint a proxy to vote or
-------
otherwise act for him by signing an appointment form, either personally or by
his attorney-in-fact. An appointment of a proxy shall be effective when
received by the secretary or other officer or agent authorized to tabulate votes
of the corporation. An appointment shall be valid for eleven (11) months unless
a longer period is expressly provided in the appointment form. An appointment
of a proxy shall be revocable by the shareholder unless the appointment form
conspicuously states that it is irrevocable and the
-3-
<PAGE>
appointment shall be coupled with an interest. Appointments coupled with an
interest include the appointment of (1) a pledgee; (2) a person who purchased or
agreed to purchase the shares; (3) a creditor of the corporation who extended it
credit under terms requiring the appointment; (4) an employee of the corporation
whose employment contract requires the appointment; or (5) a party to a voting
agreement created under applicable law.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity shall be received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his
authority under the appointment. An appointment made irrevocable because it is
coupled with an interest shall be revoked when the interest with which it is
coupled is extinguished. A transferee for value of shares subject to an
irrevocable appointment may revoke the appointment if he did not know of its
existence when he acquired the shares and the existence of the irrevocable
appointment was not noted conspicuously on the certificate representing the
shares or on the information statement for shares without certificates.
Subject to applicable law and to any express limitation on the proxy's
authority appearing on the face of the appointment form, the corporation shall
be entitled to accept the proxy's vote or other action as that of the
shareholder making the appointment.
Section 9. Voting of Shares. Except as provided below or unless the
----------------
articles of incorporation provide otherwise, and subject to the provisions of
Section 12 of this Article II, each outstanding share, regardless of class,
shall be entitled to one (1) vote on each matter voted on at a shareholders'
meeting. If a quorum exists, action on a matter (other than the election of
directors) by a voting group shall be approved if the votes cast within the
voting group favoring the action exceed the votes cast opposing the action,
unless the articles of incorporation or applicable law require a greater number
of affirmative votes. Unless otherwise provided in the articles of
incorporation, directors shall be elected by a plurality of the votes cast by
the shares entitled to vote in the election at a meeting at which a quorum is
present.
Section 10. Voting of Shares by Certain Holders. Shares standing in the
-----------------------------------
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine.
Absent special circumstances, shares of this corporation shall not be
entitled to vote if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and
-4-
<PAGE>
this corporation owns, directly or indirectly, a majority of the shares of the
second corporation entitled to vote for the directors of the second corporation.
This does not limit the power of this corporation to vote any shares, including
its own shares, held by it in a fiduciary capacity.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name. Shares standing in
the name of a receiver may be voted by such receiver, and shares held by or
under the control of a receiver may be voted by such receiver without the
transfer thereof into his name if authority so to do be contained in an
appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Section 11. Informal Action by Shareholders. Action required or permitted
-------------------------------
by applicable law to be taken at a shareholders' meeting may be taken without a
meeting if the action is taken by all the shareholders entitled to vote on the
action. The action must be evidenced by one or more written consents describing
the action taken, signed by all the shareholders entitled to vote on the action,
and delivered to the corporation for inclusion in the minutes or filing with the
corporate records. If not otherwise determined under applicable law, the record
date for determining shareholders entitled to take action without a meeting
shall be the date the first shareholder signs such consent. A consent signed
under this section has the effect of a meeting vote and may be described as such
in any document.
If applicable law requires that notice of proposed action be given to
nonvoting shareholders and the action is to be taken by unanimous consent of the
voting shareholders, the corporation must give its nonvoting shareholders
written notice of the proposed action at least ten (10) days before the action
is taken. The notice must contain or be accompanied by the same material that,
under applicable law, would have been required to be sent to nonvoting
shareholders in a notice of meeting at which the proposed action would have been
submitted to the shareholders for action.
Section 12. Cumulative Voting. Shareholders shall have the right to
-----------------
cumulate their votes for directors unless the articles of incorporation provide
otherwise, and the shareholders shall be entitled to multiply the number of
votes
-5-
<PAGE>
they are entitled to cast by the number of directors for whom they are entitled
to vote and cast the product for a single candidate or distribute the product
among two (2) or more candidates.
Section 13. Shares Held by Nominees. The corporation may establish a
-----------------------
procedure by which the beneficial owner of shares that are registered in the
name of a nominee shall be recognized by the corporation as the shareholder.
The extent of this recognition may be determined in the procedure. The
procedure may set forth: (1) the types of nominees to which it applies; (2) the
rights or privileges that the corporation recognizes in a beneficial owner; (3)
the manner in which the procedure shall be selected by the nominee; (4) the
information that must be provided when the procedure is selected; (5) the period
for which selection of the procedure shall be effective; and (6) other aspects
of the rights and duties created.
Section 14. Corporation's Acceptance of Votes. If the name signed on a
---------------------------------
vote, consent, waiver or proxy appointment corresponds to the name of the
shareholder, the corporation, if acting in good faith, shall be entitled to
accept the vote, consent, waiver or proxy appointment and give it effect as the
act of the shareholder.
If the name signed on a vote, consent, waiver or proxy appointment does not
correspond to the name of its shareholder, the corporation, if acting in good
faith, shall nevertheless be entitled to accept the vote, consent, waiver or
proxy appointment and give it effect as the act of the shareholder if: (1) the
shareholder is an entity and the name signed purports to be that of an officer
or agent of the entity; (2) the name signed purports to be that of an
administrator, executor, guardian or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver or
proxy appointment; (3) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver or proxy appointment; (4) the name signed
purports to be that of a pledgee, beneficial owner or attorney-in-fact of the
shareholder and, if the corporation requests, evidence acceptable to the
corporation of the signatory's authority to sign for the shareholder has been
presented with respect to the vote, consent, waiver or proxy appointment; (5)
two (2) or more persons are the shareholders as co-tenants or fiduciaries and
the name signed purports to be the name of at least one (1) of the co-owners and
the person signing appears to be acting on behalf of all the co-owners.
-6-
<PAGE>
The corporation shall be entitled to reject a vote, consent, waiver or
proxy appointment if the secretary or other officer or agent authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers. All corporate powers shall be exercised by or
--------------
under the authority of, and the business and affairs of the corporation managed
under the direction of, its board of directors, subject to any limitation set
forth in the articles of incorporation.
Section 2. Number, Election, Tenure and Qualifications. The number of
-------------------------------------------
directors of the corporation shall be the number established by the shareholders
from time to time. Directors are elected at the first annual shareholders'
meeting and at each annual meeting thereafter unless their terms are staggered
in the articles of incorporation. The terms of the initial directors of the
corporation expire at the first shareholders' meeting at which directors shall
be elected. The terms of all other directors expire at the next annual
shareholders' meeting following their election unless their terms shall be
staggered in the articles of incorporation. A decrease in the number of
directors does not shorten an incumbent director's term. The term of a director
elected to fill a vacancy expires at the next shareholders' meeting at which
directors shall be elected. Despite the expiration of a director's term, he
continues to serve until his successor shall be elected and qualifies or until
there shall be a decrease in the number of directors. A director need not be a
resident of this state or a shareholder of the corporation.
Section 3. Resignation of Directors; Removal of Directors by Shareholders.
--------------------------------------------------------------
(a) A director may resign at any time by delivering written notice to the
board of directors, to its chairman or to the corporation. A resignation shall
be effective when the notice is delivered unless the notice specifies a later
effective date.
(b) The shareholders may remove one or more directors with or without cause
unless the articles of incorporation provide that directors may be removed only
for cause. If a director is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove him. If
cumulative voting is authorized, a director may not be removed if the number of
votes sufficient to elect him under cumulative voting is voted against his
removal. If cumulative voting is not authorized, a director may be removed only
if the number of votes cast to remove him
-7-
<PAGE>
exceeds the number of votes cast not to remove him. A director may be removed
by the shareholders only at a meeting called for the purpose of removing him and
the meeting notice must state that the purpose, or one (1) of the purposes, of
the meeting shall be removal of the director.
Section 4. Regular Meetings. Unless the articles of incorporation or
----------------
these bylaws provide otherwise, a regular meeting of the board of directors
shall be held without other notice than this bylaw immediately after, and at the
same place as, the annual meeting of shareholders.
Section 5. Special Meetings. Special meetings of the board of directors
----------------
may be called by or at the request of the president or any director. Unless the
articles of incorporation or these bylaws provide for a longer or shorter
period, special meetings of the board of directors must be preceded by at least
two (2) days, notice of the date, time and place of the meeting. If no place
for the meeting has been designated in the notice, the meeting shall be held at
the principal office of the corporation. The notice need not describe the
purpose of the special meeting unless required by the articles of incorporation
or these bylaws.
Section 6. Place of Meetings. The board of directors may hold regular or
-----------------
special meetings in or out of this state.
Section 7. Quorum. Unless the articles of incorporation or these bylaws
------
require a greater number, a quorum of the board of directors consists of a
majority of the number of directors fixed by Article III, Section 2, or a
majority of the number of directors prescribed, or if no number is prescribed,
the number in office immediately before the meeting begins, if the corporation
has a variable-range size board. If less than such number necessary for a
quorum shall be present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 8. Manner of Acting. If a quorum is present when a vote is taken,
----------------
the affirmative vote of a majority of directors present is the act of the board
of directors unless the articles of incorporation or bylaws require the vote of
a greater number of directors.
Section 9. Action Without a Meeting. Unless the articles of incorporation
------------------------
or bylaws provide otherwise, action required or permitted to be taken at a board
of directors' meeting may be taken without a meeting if the action is taken by
all members of the board. The action must be evidenced by one or more written
consents describing the action taken, signed by each director, and included in
the minutes or filed with the corporate records reflecting the action taken.
Action taken under this section shall be effective when the
-8-
<PAGE>
last director signs the consent, unless the consent specifies a different
effective date. Such a consent has the effect of a meeting vote and may be
described as such in any document.
Section 10. Vacancies. Unless the articles of incorporation provide
---------
otherwise, if a vacancy occurs on the board of directors, including a vacancy
resulting from an increase in the number of directors, (i) the shareholders may
fill the vacancy, (ii) the board of directors may fill the vacancy, or (iii) if
the directors remaining in office constitute fewer than a quorum of the board,
they may fill the vacancy by the affirmative vote of a majority of all the
directors remaining in office. If the vacant office was held by a director
elected by a voting group of shareholders, only the holders of shares of that
voting group shall be entitled to fill the vacancy if it is filled by the
shareholders. A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date or otherwise) may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
Section 11. Compensation. Unless the articles of incorporation or these
------------
bylaws provide otherwise, the board of directors may fix the compensation of
directors. By resolution of the board of directors, each director may be paid
his expenses, if any, of attendance at each meeting of the board of directors,
and may be paid a stated salary as a director or a fixed sum for attendance at
each meeting of the board of directors or both. No such payment shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 12. Executive and Other Committees. Unless the articles of
------------------------------
incorporation or bylaws provide otherwise, the board of directors may create an
executive committee and one or more other committees and appoint members of the
board of directors to serve on them. Each committee must have two (2) or more
members, who serve at the pleasure of the board of directors. The creation of a
committee and appointment of members to it must be approved by the greater of
(1) a majority of all the directors in office when the action is taken or (2)
the number of directors required by the articles of incorporation or bylaws to
take action. To the extent specified by the board of directors or in the
articles of incorporation or bylaws, each committee may exercise the authority
of the board of directors. A committee may not, however, authorize
distributions; approve or propose to shareholders action required by applicable
law to be approved by shareholders; fill vacancies on the board of directors or
on any of its committees; amend articles of incorporation pursuant to applicable
law authorizing amendment by the board of directors; adopt, amend, or repeal
bylaws; approve a plan of merger not requiring shareholder approval; authorize
or approve the reacquisition of shares, except according to a
-9-
<PAGE>
formula or method prescribed by the board of directors; or authorize or approve
the issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences and limitations of a class or
series of shares, except that the board of directors may authorize a committee
(or a senior executive officer of the corporation) to do so within limits
specifically prescribed by the board of directors. Provisions of these bylaws
governing meetings, action without meetings, notice and waiver of notice, and
quorum and voting requirements of the board of directors, apply to committees
and their members as well.
Section 13. Participation by Telephonic or Other Means. Unless the
------------------------------------------
articles of incorporation or these bylaws provide otherwise, the board of
directors may permit any or all directors to participate in a regular or special
meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means
shall be deemed to be present in person at the meeting.
ARTICLE IV. OFFICERS
Section 1. Number. The officers of the corporation shall be a chairman of
------
the board, a president, a vice president, a secretary and a treasurer, each of
whom shall be elected by the board of directors. Such other officers, assistant
officers and agents as may be deemed necessary may be elected or appointed by
the board of directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Officers. The officers of the corporation
-----------------------------
to be elected by the board of directors shall be elected annually by the board
of directors at the regular meeting of the board of directors immediately
following the annual meeting of the shareholders. If the election of officers
shall not be held at such meeting, such election shall be held as soon
thereafter as conveniently may be. Each officer shall continue to serve until
his successor is elected and qualifies or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
Section 3. Resignation or Removal of Officers and Agents.
---------------------------------------------
(a) An officer or agent may resign at any time by delivering written notice
to the board of directors, to its chairman or to the corporation. A resignation
shall be effective when the notice is delivered unless the notice specifies a
later effective date.
-10-
<PAGE>
(b) Any officer or agent may be removed by the board of directors whenever
in its judgment, the best interests of the corporation will be served thereby,
but such removal shall be without prejudice to the contract rights, if any, of
the person so removed. Election or appointment of an officer or agent shall not
of itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
Section 5. Chairman of the Board. The chairman of the board must be a
---------------------
member of the board of directors at the time of election to such office. When
present he shall preside at all meetings of the shareholders and of the board of
directors. He may sign, with the president and secretary or any other proper
officer of the corporation thereunto authorized by the board of directors, any
deeds, mortgages, bonds, contracts or other instruments which the board of
directors has authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the board of directors or by
these bylaws to some other officer or agent of the corporation, or shall be
required by law to be otherwise signed or executed; and in general shall perform
all duties incident to the office of chairman of the board and such other duties
as may be prescribed by the board of directors from time to time.
Section 6. President. The president shall be the principal executive
---------
officer of the corporation and, subject to the control of the chairman and the
board of directors, shall have general supervision and control of the business
and affairs of the corporation. In the absence of the chairman of the board of
directors, he shall, when present, preside at all meetings of the shareholders
and of the board of directors. He may sign, with the secretary or any other
proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the board of directors from time to time.
Section 7. Vice President. In the absence of the president or in the
--------------
event of his death, inability or refusal to act, the vice president shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president.
-11-
<PAGE>
The vice president shall perform such other duties as from time to time may be
assigned to him by the president or by the board of directors.
Section 8. Secretary. The secretary shall (a) prepare and keep the
---------
minutes of the directors' and shareholders' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation and see that the seal
of the corporation is affixed to all documents the execution of which on behalf
of the corporation under its seal is duly authorized; (d) authenticate records
of the corporation; (e) keep a register of the post office address of each
shareholder which shall be furnished to the secretary by such shareholder; (f)
sign with the president, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolutions of the board of
directors; (g) have general charge of the stock transfer books of the
corporation; (h) in general perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to him by
the president or by the board of directors.
Section 9. Treasurer. The treasurer shall: (a) have charge and custody
---------
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for monies due and payable to the corporation from any
source whatsoever, and deposit all such monies in the name of the corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with these bylaws; and (c) in general perform all of the duties
incident to the office of treasurer and such other duties as from time to time
may be assigned to him by the president or by the board of directors. If
required by the board of directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the board of directors shall determine.
Section 10. Compensation. The board of directors may fix the compensation
------------
of the officers. No such payment shall preclude any officer from serving the
corporation in any other capacity and receiving compensation therefor.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The board of directors may authorize any officer or
---------
officers, agent or agents; to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
-----
corporation and no evidences of indebtedness
-12-
<PAGE>
shall be issued in its name unless authorized by a resolution of the board of
directors. Such authority may be general or confined to specific instances.
Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for
-------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
Section 4. Deposits. All funds of the corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the corporation in such
banks, companies or other depositories as the board of directors may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Shares shall be represented by
-----------------------
certificates. Certificates representing shares of the corporation shall be in
such form as shall be determined by the board of directors. At a minimum, each
share certificate must state on its face (1) the name of the corporation and
that the corporation is organized under the law of the State of Mississippi; (2)
the name of the person to whom issued; and (3) the number and class of shares
and the designation of the series, if any, the certificate represents. If the
corporation is authorized to issue different classes of shares or different
series within a class, the designations, relative rights, preferences and
limitations applicable to each class and the variations in rights, preferences
and limitations determined for each series (and the authority of the board of
directors to determine variations for future series) must be summarized on the
front or back of each certificate or the corporation must furnish the
shareholder this information on request in writing and without charge.
Each share certificate must be signed (either manually or in facsimile) by
the president or a vice president and by the secretary or an assistant secretary
or by such other officers designated in the bylaws or by the board of directors
so to do, and may be sealed with the corporate seal. If the person who signed
(either manually or in facsimile) a share certificate no longer holds office
when the certificate is issued, the certificate is nevertheless valid.
All certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be cancelled and no new
certificate shall be issued until the former
-13-
<PAGE>
certificate for a like number of shares shall have been surrendered and
cancelled, except that in the case of a lost, destroyed, or mutilated
certificate a new one may be issued therefor upon such terms and indemnity to
the corporation as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation
------------------
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares.
ARTICLE VII. INDEMNIFICATION
Section 1. Right of Indemnity. The corporation may indemnify its officers
------------------
and directors to the fullest extent permitted under applicable law.
Section 2. Right of Corporation to Insure. The corporation may purchase
------------------------------
and maintain insurance on behalf of an individual who is or was a director,
officer, employee or agent of the corporation or who, while a director, officer,
employee or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against liability asserted against or
incurred by him in that capacity or arising from his status as a director,
officer, employee or agent, whether or not the corporation would have power to
indemnify him against such liability under applicable law.
ARTICLE VIII. NOTICE
Notice shall be in writing unless oral notice is reasonable under the
circumstances. Notice may be communicated in person; by telephone, telegraph,
teletype or other form of wire or wireless communication; or by mail or private
carrier. If these forms of personal notice shall be impracticable, notice may
be communicated by a newspaper of general circulation in the area where
published; or by radio, television or other form of public broadcast
communication.
Written notice to shareholders, if in a comprehensible form, shall be
effective when mailed, if mailed postpaid and correctly addressed to the
shareholder's address shown in the corporation's current record of shareholders.
-14-
<PAGE>
Except as provided above with respect to notice to shareholders, written
notice, if in a comprehensible form, shall be effective at the earliest of the
following:
(1) When received;
(2) Five (5) days after its deposit in the United States
mail, as evidenced by the postmark, if mailed postpaid and correctly addressed;
(3) On the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee.
Oral notice shall be effective when communicated if communicated in a
comprehensible manner.
If applicable law prescribes notice requirements for particular
circumstances, those requirements govern. If the articles of incorporation or
these bylaws prescribe notice requirements, not inconsistent with this section
or other provisions of applicable law, those requirements govern.
ARTICLE IX. WAIVER OF NOTICE; ASSENT TO ACTIONS
Unless otherwise provided by law, a shareholder or director of the
corporation may waive any notice required by applicable law, the articles of
incorporation or these bylaws, before or after the date and time stated in the
notice. Except as provided below, the waiver must be in writing, be signed by
the shareholder or director entitled to the notice, and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting. A shareholder's attendance at a meeting (i)
waives objection to lack of notice or defective notice of the meeting unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (ii) waives objection to consideration
of a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter when it is presented.
A director who is present at a meeting of the board of directors or a
committee of the board of directors when corporate action is taken shall be
deemed to have assented to the action taken unless: (1) he objects at the
beginning of the meeting (or promptly upon his arrival) to holding it or
-15-
<PAGE>
transacting business at the meeting; (2) his dissent or abstention from the
action taken shall be entered in the minutes of the meeting; or (3) he delivers
written notice of his dissent or abstention to the presiding officer of the
meeting before its adjournment or to the corporation immediately after
adjournment of the meeting. The right of dissent or abstention shall not be
available to a director who votes in favor of the action taken.
ARTICLE X. EMERGENCY BYLAWS
The emergency bylaws provided in this article shall be operative during any
emergency in the conduct of the business of the corporation, notwithstanding any
different provision in the preceding articles of the bylaws or in the articles
of incorporation of the corporation or in the Mississippi Business Corporation
Act. An emergency exists if a quorum of the corporation's directors cannot
readily be assembled because of some catastrophic event. To the extent not
inconsistent with the provisions of this article, the bylaws provided in the
preceding articles shall remain in effect during such emergency and upon its
termination the emergency bylaws shall cease to be operative.
During any such emergency:
(a) A meeting of the board of directors may be called by any officer or
director of the corporation. Notice of the meeting shall be given by the
officer or director calling the meeting only to those directors whom it is
practicable to reach and may be given in any practicable manner, including by
publication and radio.
(b) One or more officers of the corporation present at a meeting of the
board of directors may be deemed to be directors for the meeting, in order of
rank and within the same rank in order of seniority, as necessary to achieve a
quorum.
(c) The board of directors, either in anticipation of or during any such
emergency, may modify lines of succession to accommodate the incapacity of any
director, officer, employee or agent.
(d) The board of directors, either in anticipation of or during any such
emergency, may relocate the principal offices or regional offices, or authorize
the officers to do so.
Corporate action taken in good faith during an emergency under this section
to further the ordinary business affairs of the corporation binds the
corporation and may not be used to impose liability on a corporate director,
officer, employee or agent.
-16-
<PAGE>
These emergency bylaws shall be subject to repeal or change by further
action of the board of directors or by action of the shareholders, but no such
repeal or change shall modify the provisions of the next preceding paragraph
with regard to action taken prior to the time of such repeal or change. Any
amendment of these emergency bylaws may make any further or different provision
that may be practical and necessary for the circumstances of the emergency.
ARTICLE XI. FISCAL YEAR
The fiscal year of the corporation shall begin on January 1 and end on
December 31 in each year.
ARTICLE XII. DISTRIBUTIONS
The board of directors may authorize and the corporation may make
distributions to its shareholders, subject to restriction by the articles of
incorporation and applicable law.
ARTICLE XIII. CORPORATE SEAL
The board of directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "Corporate Seal".
ARTICLE XIV. AMENDMENTS
Unless the articles of incorporation, applicable law or a resolution of the
shareholders reserves this power exclusively to the shareholders in whole or
part, the corporation's board of directors may amend or repeal these bylaws and
adopt new bylaws at any regular or special meeting of the board of directors.
ACCEPTED THIS 23rd day of March, 1993.
By:___________________________________________
Title: Secretary
-17-
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PRINCIPAL OFFICE.................................................................. 1
ARTICLE II SHAREHOLDERS...................................................................... 1
Section 1 Annual Meeting....................................................... 1
Section 2 Special Meetings..................................................... 1
Section 3 Place of Meeting..................................................... 1
Section 4 Notice of Meeting.................................................... 2
Section 5 Closing of Transfer Books or Fixing of Record Date................... 2
Section 6 Voting Lists......................................................... 3
Section 7 Quorum............................................................... 3
Section 8 Proxies.............................................................. 3
Section 9 Voting of Shares..................................................... 4
Section 10 Voting of Shares by Certain Holders.................................. 4
Section 11 Informal Action by Shareholders...................................... 5
Section 12 Cumulative Voting.................................................... 5
Section 13 Shares Held by Nominees.............................................. 6
Section 14 Corporation's Acceptance of Votes.................................... 6
ARTICLE III BOARD OF DIRECTORS................................................................ 7
Section 1 General Powers....................................................... 7
Section 2 Number, Election, Tenure and Qualifications.......................... 7
Section 3 Resignation of Directors; removal of Directors by Shareholders....... 7
Section 4 Regular Meetings..................................................... 8
Section 5 Special Meetings..................................................... 8
Section 6 Place of Meetings.................................................... 8
Section 7 Quorum............................................................... 8
Section 8 Manner of Acting..................................................... 8
Section 9 Action Without a Meeting............................................. 8
Section 10 Vacancies............................................................ 9
Section 11 Compensation......................................................... 9
Section 12 Executive and Other Committees....................................... 9
Section 13 Participation by Telephonic or Other Means........................... 10
ARTICLE IV OFFICERS.......................................................................... 10
Section 1 Number............................................................... 10
Section 2 Election and Term of Officers........................................ 10
Section 3 Resignation or Removal of Officers and Agents........................ 10
Section 4 Vacancies............................................................ 11
Section 5 Chairman of the Board................................................ 11
Section 6 President............................................................ 11
Section 7 Vice President....................................................... 11
Section 8 Secretary............................................................ 12
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 9 Treasurer............................................................. 12
Section 10 Compensation.......................................................... 12
ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS.............................................. 12
Section 1 Contracts............................................................. 12
Section 2 Loans................................................................. 12
Section 3 Checks, Drafts, Etc................................................... 13
Section 4 Deposits.............................................................. 13
ARTICLE VI CERTIFICATES FOR SHARES AND THEIR TRANSFER......................................... 13
Section 1 Certificates for Shares............................................... 13
Section 2 Transfer of Shares.................................................... 14
ARTICLE VII INDEMNIFICATION.................................................................... 14
Section 1 Right of Indemnity.................................................... 14
Section 2 Right of Corporation to Insure........................................ 14
ARTICLE VIII NOTICE............................................................................. 14
ARTICLE IX WAIVER OF NOTICE; ASSENT TO ACTIONS................................................ 15
ARTICLE X EMERGENCY BYLAWS................................................................... 16
ARTICLE XI FISCAL YEAR........................................................................ 17
ARTICLE XII DISTRIBUTIONS...................................................................... 17
ARTICLE XIII CORPORATE SEAL..................................................................... 17
ARTICLE XIV AMENDMENTS......................................................................... 17
ii
</TABLE>
<PAGE>
EXHIBIT 3.23
CERTIFICATE OF MISSISSIPPI LIMITED PARTNERSHIP
(Attach duplicate original)
The undersigned general partners, pursuant to Section 79-14-201 of the
Mississippi Code of 1972, as amended, hereby executes the following certificate
of Limited Partnership and set forth:
1. The name of the Limited Partnership is: Mississippi-I Gaming, L.P.,
Federal Tax ID: Applied for
2. The name, street and mailing address of each General Partner is as follows:
Bayview Yacht Club, Inc., Interstate 80, Garson Road Exit, P.O. Box 399,
Verdi, Nevada 89439-0399
3. The street and mailing address of the registered office is 633 North State
Street, Jackson, Mississippi 39202, and the registered agent at such
address is Thomas B. Shepherd
4. The latest date upon which the Limited Partnership is to dissolve is April
30, 2092
5. Other matters the general partners determine to include are: None
By: Bayview Yacht Club, Inc.
------------------------------------------------------
Printed Name/ Robert List, Vice President
General Partner
STATE OF MISSISSIPPI
COUNTY OF __________
I, _________________________, a notary public do hereby certify that on
this ____ day of April, 1993, personally appeared before me Robert List, who,
being by me first duly sworn, declared that he is the Vice President of Bayview
Yacht Club, Inc. the General Partner of Mississippi-I Gaming, L.P., that he
executed the foregoing document on behalf of the General Partner of this Limited
Partnership, and that the statements therein contained are true.
________________________________
Notary Public
Notary Seal
<PAGE>
EXHIBIT 3.25
UNITED STATES OF AMERICA
STATE OF LOUISIANA
FOX MCKEITHEN
SECRETARY OF STATE
As Secretary of State, of the State of Louisiana, I do hereby Certify that the
annexed and following is a True and Correct copy of the Articles of
Incorporation, Initial Report, Amendments and 1996 Annual Report of
LOUISIANA GAMING ENTERPRISES, INC.
A LOUISIANA corporation domiciled at HARVEY,
As shown by comparison with documents filed and recorded in this Office.
In testimony whereof, I have hereunto set my hand and caused the Seal of my
Office to be affixed at the City of Baton Rouge on,
April 29, 1997
/s/ Fox McKeithen
CBU
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION *UNITED STATES OF AMERICA
*
OF *STATE OF LOUISIANA
*
LOUISIANA GAMING ENTERPRISES, INC. *PARISH OF JEFFERSON
******************************************************************************
BE IT KNOWN that on the 22nd day of October, 1991, before me, William L.
Von Hoene, Notary Public duly commissioned and qualified in and for the State
and parish aforesaid, personally appeared the subscribers hereto, of full age of
majority, who declared to me, Notary, in the presence of the undersigned
competent witnesses, that availing themselves of the provisions of the Louisiana
Business Corporation Law (Louisiana R.S. 12:1 et seq), they do hereby form,
------
organize and constitute themselves, as well as all such other persons who may
hereafter join or become associated with them or their successors; into a
business corporation under and in accordance with the following Articles of
Incorporation:
ARTICLE I
The name of the Corporation is LOUISIANA GAMING ENTERPRISES, INC.
ARTICLE II
The Corporation's purpose is to engage in any lawful activity for which
corporations may be formed under the Louisiana Business Corporation Law.
ARTICLE III
The Corporation has authority to issue 100 shares of common stock without
par value.
-2-
<PAGE>
ARTICLE IV
The Incorporators' names and post office addresses are:
Name Address
---- -------
Eric F. Skrmetta 501 Destrehan Avenue
Harvey, Louisiana 70058
ARTICLE V
Shareholders shall have preemptive rights.
ARTICLE VI
The business affairs of the corporation shall be managed by the Board of
Directors. The number of directors shall be such number, not less than three
nor more than five, as may be designated in the by-laws and if not designated,
as may from time to time be elected by the shareholders, except that when all of
the outstanding shares are held of record by fewer than three shareholders, then
there need be only as many directors as there are shareholders, but this shall
not prevent a greater number of directors as aforesaid. Any director absent
from a meeting of the Board of Directors, or any committee thereof, may be
represented by any other director who may cast the absent director's vote
according to his or her written instructions, general or special.
ARTICLE VII
Special meetings of shareholders may be called by the president or by a
majority of the Board of Directors.
ARTICLE VIII
Without any necessity of action by the shareholders, previously authorized
but unissued shares of stock of the
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<PAGE>
corporation may be issued from time to time by the Board of Directors, and any
and all shares so issued and paid for, shall be deemed full paid stock and not
liable to any further assessment or call, and the holder of such shares shall
not be liable for any further payment thereon.
ARTICLE IX
In the election of directors, each shareholder of record shall have the
right to multiply the number of votes to which he or she is entitled by the
number of directors to be elected, and to cast all such votes for one candidate,
or distribute them among any two or more candidates.
ARTICLE X
Whenever the affirmative vote of shareholders is required to authorize or
constitute corporate action, the consent in writing to such action signed only
by shareholders holding that proportion of the total voting power on the
question which is required by law or by these Articles of Incorporation,
whichever requirement is higher, shall be sufficient for the purpose, without
necessity for a meeting of shareholders.
ARTICLE XI
Cash, property or share dividends, shares issuable to shareholders in
connection with a reclassification of stock, and the redemption price of
redeemed shares, which are not claimed by the shareholders entitled thereto
within one year after the dividend or redemption price became payable or the
shares became issuable, despite reasonable efforts by the
-4-
<PAGE>
corporation to pay the dividend or redemption price or deliver the certificates
for the shares to such shareholders within such time, shall, at the expiration
of such time, revert in full ownership to the corporation, and the corporation's
obligation to pay such dividend or redemption price or issue such shares, as the
case may be, shall thereupon cease; provided that the board of directors may, at
any time, for any reason satisfactory to it, but need not, authorize (a) payment
of the amount of any cash or property dividend or redemption price or (b)
issuance of any shares, ownership of which has reverted to the corporation
pursuant to this article, to the entity who or which would be entitled thereto
had such reversion not occurred.
THUS DONE AND PASSED IN MULTIPLE ORIGINALS in Harvey, State of Louisiana,
on the day, month and year hereinabove set forth in the presence of the
undersigned competent witnesses and me, Notary, after due reading of the whole.
WITNESSES:
/s/
-------------------
/s/
-------------------
/s/ Eric F. Skrmetta
--------------------
Eric F. Skrmetta
/s/ William L. Von Hoene
--------------------------------------------------
William L. Von Hoene, NOTARY PUBLIC
-5-
<PAGE>
INITIAL REPORT
OF
LOUISIANA GAMING ENTERPRISES, INC.
ARTICLE I
The Corporation's registered office is located at and its municipal address
is 501 Destrehan Avenue, Harvey, Louisiana 70058.
ARTICLE II
Its registered agent is Eric F. Skrmetta; his address is 501 Destrehan
Avenue, Harvey, Louisiana 70058.
ARTICLE III
The first directors are:
Eric F. Skrmetta 501 Destrehan Avenue
Harvey, Louisiana 70058
/s/ Eric F. Skrmetta
--------------------
Eric F. Skrmetta
-6-
<PAGE>
AFFIDAVIT OF ACCEPTANCE OF APPOINTMENT
--------------------------------------
BY DESIGNATED REGISTERED AGENT
------------------------------
Corporations Department
Office of the Secretary of State
State of Louisiana
STATE OF LOUISIANA
PARISH OF JEFFERSON
On the 22nd day of October, 1991, before me, a Notary Public in and for the
State and Parish aforesaid, personally came and appeared Eric F. Skrmetta, whose
post office address is 501 Destrehan, Harvey, Louisiana 70058, who is to me
known to be the person, and who, being duly sworn, acknowledged to me that he
does hereby accept appointment as the Registered Agent of LOUISIANA GAMING
ENTERPRISES, INC., which is a Corporation authorized to transact business in the
State of Louisiana pursuant to the provisions of the Title 12, Chapter 1, 2, and
3.
/s/ Eric F. Skrmetta
--------------------
Eric F. Skrmetta
REGISTERED AGENT
Subscribed and sworn to before
me on the day, month, and year
first above set forth
/s/ William L. Von Hoene
- -----------------------------------
William L. Von Hoene, Notary Public
-7-
<PAGE>
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W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE
AND/OR CHANGE OF REGISTERED AGENT
Secretary of State (R.S. 12.104 & 12.236)
--------------------------------------------------------------------------------
Domestic Corporation Return to: Corporations Division
(Business or Non-Profit) P.O. Box 94125
Enclose $20.00 filing fee Baton Rouge, LA 70804-3125
Make remittance payable to Phone (504) 925-4704
Secretary of State
Do not send cash
- --------------------------------------------------------------------------------------------------------------
Corporation Name LOUISIANA GAMING ENTERPRISES, INC.
----------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
CHANGE OF LOCATION OF REGISTERED OFFICE
[Eligible]
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
---------------------------------
JASON A. RABALAIS, VICE PRESIDENT & GENERAL MANAGER
CHANGE OF REGISTERED AGENT(S)
Notice is hereby given that the Board of Directors of the above named
corporation has authorized the change of the corporation's registered agent(s).
The name(s) and address(es) of the new registered agent(s) are as follows
MR.JASON A. RABALAIS, 4132 PETERS ROAD, HARVEY, LOUISIANA 70058
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
---------------------------------
President, Vice President or Secretary
JASON A. RABALAIS, VICE PRESIDENT & GENERAL MANAGER
AGENT AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE
[Eligible]
- ------------------------------------------------------------------------------------------------------------
- ----------------- .
JASON A. RABALAIS
------------------------
------------------------
Registered Agent(s)
Sworn to and subscribed before me this __________ day of __________, 19__
------------------------
Notary
</TABLE>
-8-
<PAGE>
UNANIMOUS WRITTEN CONSENT
-------------------------
OF THE SHAREHOLDERS OF
----------------------
LOUISIANA GAMING ENTERPRISES, INC.
----------------------------------
Pursuant to La R.S. 12:76 and in lieu of a meeting of Shareholders of
Louisiana Gaming Enterprises, Inc. (the "Corporation") for such purposes, the
undersigned being all of the Shareholders of this Corporation, do hereby take
and authorize by unanimous written consent each and all of the following actions
for election of Directors as hereinafter set forth:
RESOLVED, that the following named individuals are hereby elected as
Directors of the Corporation effective immediately and shall serve until their
respective successors are chosen and qualified:
Robert F. List
Timothy J. Parrot
There being no further business to be taken by the undersigned Shareholders
pursuant to this Unanimous Written Consent, each of the Shareholders has signed
this Unanimous Written Consent as of the date indicated below, and this
Unanimous Written Consent shall be filed with or otherwise entered on the
minutes and other appropriate records of this Corporation.
____________________________, 1996.
Boomtown, Inc.
Sole Shareholder
By:___________________________
Timothy J. Parrot
Authorized Representative
CERTIFICATE
I, Secretary of Louisiana Gaming Enterprises, Inc. (the "Corporation"),
hereby certify that the subscribers to the foregoing consent are the registered
holders of all of the outstanding shares of the Corporation having voting powers
on the matters set forth therein, on this ____ day of _________, 1996.
____________________________________
Robert F. List
Secretary
-9-
<PAGE>
UNANIMOUS WRITTEN CONSENT
-------------------------
OF THE BOARD OF DIRECTORS
-------------------------
LOUISIANA GAMING ENTERPRISES, INC.
----------------------------------
Pursuant to La R.S. 12:81C(9), and in lieu of a meeting of the Board of
Directors for such purposes, the undersigned, being all of the Directors of
Louisiana Gaming Enterprises, Inc. (the "Corporation") do hereby take and
authorize by unanimous written consent each and all of the following actions for
appointment of officers as hereinafter set forth:
RESOLVED, that the following persons are nominated and elected as officers
of the corporation effective immediately to serve until their respective
successors are chosen and qualfied:
Chairman of the Board - Timothy J. Parrot
Chief Executive Officer - Timothy J. Parrot
President - Phil Bryan
Secretary/Treasurer - Robert F. List
IN WITNESS WHEREOF, this Unanimous Written Consent has been executed by
each Director of the Corporation on the date written below.
/s/ Timothy J. Parrot September 2, 1996
------------------------------ ------------------------
Timothy J. Parrot
/s/ Robert F. List September 2, 1996
------------------------------ ------------------------
Robert F. List
CERTIFICATE
I, Secretary of Louisiana Gaming Enterprises, Inc. (the "Corporation"),
certify that the subscribers to the foregoing consent constitute all of the
members of the Board of Directors of the Corporation having voting power on the
matters set forth therein, on the 2nd day of Sept., 1996.
----- ------
/s/
---------------------------
Robert F. List
Secretary
-10-
<PAGE>
EXHIBIT 3.26
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
LOUISIANA-I GAMING,
A LOUISIANA PARTNERSHIP IN COMMENDAM
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE REGULATORY
AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS AGREEMENT OF LIMITED
PARTNERSHIP OR THE LIMITED PARTNERSHIP INTERESTS PROVIDED FOR HEREIN. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE LIMITED PARTNERSHIP INTERESTS HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), IN RELIANCE UPON THE
EXEMPTIONS SET FORTH IN SECTION 4(2) THEREOF AND IN RULE 506 OF REGULATION D
PROMULGATED THEREUNDER; THE ISSUER IS UNDER NO OBLIGATION TO REGISTER THE
LIMITED PARTNERSHIP INTERESTS UNDER THE 1933 ACT.
A LIMITED PARTNERSHIP INTEREST MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE 1933
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL PARTNER THAT SUCH
REGISTRATION IS NOT REQUIRED. ADDITIONAL RESTRICTIONS ON THE TRANSFER OF
LIMITED PARTNERSHIP INTERESTS ARE CONTAINED IN SECTION 6 OF THIS AGREEMENT.
BASED UPON THE FOREGOING, A PURCHASER OF A LIMITED PARTNERSHIP INTEREST MUST BE
PREPARED TO BEAR THE ECONOMIC RISK OF INVESTMENT THEREIN FOR AN INDEFINITE
PERIOD OF TIME.
<PAGE>
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
LOUISIANA-I GAMING,
A LOUISIANA PARTNERSHIP IN COMMENDAM
THIS AMENDED AND RESTATED PARTNERSHIP AGREEMENT (this "Agreement") of
Louisiana-I Gaming, a Louisiana Partnership in Commendam (the "Partnership"), is
entered into as of ___________, 1993 by and among Louisiana Gaming Enterprises,
Inc., a Louisiana corporation (the "General Partner"), Boomtown, Inc., a
Delaware corporation ("Boomtown") as a limited partner, Eric Skrmetta
("Skrmetta"), as a limited partner and those other persons who have executed
this Agreement as limited partners (collectively with Boomtown, the partners in
commendam or "Limited Partners"). The General Partner and the Limited Partners
are referred to collectively as the "Partners" and each individually as a
"Partner."
WITNESSETH:
-----------
WHEREAS, the original Partnership Agreement of Louisiana-I Gaming, a
Louisiana Partnership in Commendam, was entered into on April 20, 1993; and
WHEREAS, the parties hereto desire to amend and restate in their entirety
the Partnership Agreement of Louisiana-I Gaming, a Louisiana Partnership in
Commendam, to set forth their understandings with respect to the business
affairs of the Partnership and to provide for the admission of Eric Skrmetta as
a limited partner;
NOW, THEREFORE, in consideration of the mutual promises made herein, the
parties intending to be legally bound, hereby agree that the Partnership
Agreement is hereby amended and restated in its entirety to read as follows:
SECTION 1
---------
DEFINITIONS
-----------
As used in this Agreement:
Act shall mean the Louisiana Partnership Law, Louisiana Civil Code Articles
---
2801-2848.
Additional Capital Contribution shall mean any contribution to the capital
-------------------------------
of the Partnership (including the initial capital contribution of a person
admitted as an
<PAGE>
additional Limited Partner pursuant to Section 3.3) made on a date subsequent to
the date of this Agreement. Each Additional Capital Contribution shall be
deemed to be made as of the close of business on the date thereof.
Authorized Transferee shall have the meaning set forth in Section
---------------------
6.1(a)(iv).
Bankruptcy shall mean, with respect to a Partner, the commencement of any
----------
bankruptcy or insolvency case or proceeding against such Partner which shall
continue and remain unstayed and in effect for a period of 60 consecutive days,
or the filing by such Partner of a petition, answer or consent seeking relief
under any applicable Federal or state bankruptcy, insolvency or similar law.
Capital Account shall mean, for each Partner, a separate account that is:
---------------
(a) increased by (i) the amount of such Partner's Capital Contribution
and (ii) allocations of Profits to such Partner pursuant to Section 4.2;
(b) decreased by (i) the amount of cash distributed to such Partner by
the Partnership, (ii) the fair market value of any other property distributed to
such Partner by the Partnership (determined as of the date of distribution,
without regard to Section 7701(g) of the Code, and net of liabilities secured by
such property that the Partner assumes or to which the Partner's ownership of
the property is subject), and (iii) allocations of Losses to such Partner
pursuant to Section 4.2; and
(c) otherwise adjusted so as to conform to the requirements of
Sections 704(b) and (c) of the Code and the regulations issued thereunder.
Capital Contribution shall mean, for any Partner, the net amount of cash
--------------------
and the fair market value, without regard to Section 7701(g) of the Code, of any
other property (determined as of the date of contribution and net of liabilities
secured by such property that the Partnership assumes or to which the
Partnership's ownership of the property is subject) contributed by such Partner
to the capital of the Partnership. A Partner's Capital Contribution shall
include such Partner's Additional Capital Contributions.
Code shall mean the Internal Revenue Code of 1986, as amended.
----
Dissolution of a Partner which is not a natural person shall mean that such
-----------
Partner has terminated its existence (whether as a partnership, corporation or
other legal entity) and dissolved; provided, however, that a change in the
-------- -------
membership of a Partner that is a partnership shall not constitute a
"Dissolution" of such Partner, so long as the business of the Partner is
continued in partnership form, regardless of whether such Partner is deemed
technically dissolved for partnership or tax law purposes.
Distributable Income shall have the meaning set forth in Section 4.1(a).
--------------------
-2-
<PAGE>
Fiscal Year shall mean the period from January 1 through December 31 of
-----------
each year (unless otherwise required by law).
Indemnified Person shall have the meaning set forth in section 8.2.
------------------
Liquidating Partner shall mean the General Partner unless another person is
-------------------
selected pursuant to Section 7.2.
Majority-In-Interest of the Limited Partners shall mean a group of Limited
--------------------------------------------
Partners whose aggregate Percentage Interests are in excess of 50 percent of the
total Percentage Interests of all of the Limited Partners.
Minimum Gain of the Partnership shall, as provided in Treasury Regulation
------------
Section 1.704-2, mean the total amount of gain the Partnership would realize for
Federal income tax purposes if it disposed of all assets subject to nonrecourse
liability for no consideration other than full satisfaction thereof.
Nonrecourse Deduction shall mean an item of loss, expense or deduction
---------------------
(other than a Partner Nonrecourse Deduction) attributable to a nonrecourse
liability of the Partnership within the meaning of Treasury Regulation Section
1.704-2(b).
Partner Nonrecourse Deduction shall mean an item of loss, expense or
-----------------------------
deduction attributable to a nonrecourse liability of the Partnership for which a
Partner bears the economic risk of loss within the meaning of Treasury
Regulation Section 1.704-2(i).
Percentage Interest shall have the meaning set forth in Section 3.7.
-------------------
Profits and Losses of the Partnership shall mean items of income and gain
------------------
(including items not subject to Federal income tax) and items of loss, expense
and deduction (including items not deductible, depreciable, amortizable or
otherwise excludable from income for Federal income tax purposes), respectively,
as determined under Federal income tax principles.
Project shall mean the proposed gaming facility which is described with
-------
particularity on Schedule B attached hereto.
Required License shall have the meaning set forth in Section 2.7.
----------------
Substitute Partner shall have the meaning set forth in Section 6.1(a).
------------------
Transfer shall have the meaning set forth in Section 6.1.
--------
Transferring Partner shill have the meaning set forth in Section 6.1(a)(i).
--------------------
Unreturned Capital Contribution shall mean, with respect to each Partner,
-------------------------------
the amount of such Partner's Capital Contribution reduced by the amount
distributed to such
-3-
<PAGE>
Partner pursuant to Section 4.1(a)(i). For purposes of the preceding sentence,
the "amount distributed" with regard to any distribution of property in kind
shall be equal to the fair market value of such property, without regard to
Section 7701(g) of the Code, determined as of the date of distribution and net
of liabilities secured by the property that the distributee Partner assumes or
to which the distributee Partner's ownership of the property is subject.
SECTION 2
---------
FORMATION OF LIMITED PARTNERSHIP
--------------------------------
2.1 Formation, Name and Principal Office. The Partners hereby enter into
------------------------------------
and form the Partnership for the limited purpose and scope set forth in this
Agreement. Except as otherwise provided herein, the Partnership shall be a
partnership in commendam governed by the Act. The name of the Partnership shall
be "Louisiana-I Gaming, a Louisiana Partnership in Commendam." The principal ad
registered office of the Partnership shall be c/o Smith, Martin & Schneider, 700
Camp Street, New Orleans, Louisiana 70130 or, upon written notice to the Limited
Partners, at such other place as may be designated by the General Partner.
2.2 Purpose and Scope of the Partnership. The purpose of the Partnership
------------------------------------
shall be to:
(i) lease or otherwise acquire property;
(ii) develop one or more of the following on the property, to the
extent allowed by and in conformance with applicable law: (a) a riverboat
gaming vessel; (b) a dockside gaming vessel; or (c) a land-based casino;
(iii) develop any facilities that are related to, necessary for the
operation of, or compatible with and enhance the gaming operation to be
conducted on the property, including parking areas, entertainment and lodging
facilities, food and beverage service, passenger ticketing facilities, docking
facilities, storage and maintenance facilities (including fueling facilities for
any riverboat vessel);
(iv) engage in any other lawful activities determined by the General
Partner to be necessary or advisable in furtherance of the foregoing.
2.3 Names and Addresses of the Partners. The name and address of each
-----------------------------------
Partner shall be set forth on Schedule A.
2.4 Term of the Partnership. The Partnership commenced on April 20, 1993
-----------------------
and shall continue for a period of 99 years thereafter, unless earlier dissolved
and terminated pursuant to Section 7.
-4-
<PAGE>
2.5 Required Documents.
------------------
(a) Partnership Documents. The General Partner shall cause to be
---------------------
filed, recorded or amended, as necessary, a certificate of limited partnership
or partnership in commendam and any other documents required to be filed,
recorded or amended in connection with the formation or operation of the
Partnership pursuant to the laws of the State of Louisiana or any other
jurisdiction in which the Partnership's business is conducted.
(b) Other Documents. The Limited Partners shall execute and
---------------
acknowledge as requested by the General Partner such documents as may be
necessary or desirable to (i) comply with legal requirements applicable to the
formation of the Partnership or the operation of the Partnership's business, or
(ii) otherwise give effect to the terms of this Agreement.
(c) Special Power of Attorney. Each Limited Partner hereby grants to
-------------------------
the General Partner a special power of attorney irrevocably appointing the
General Partner as the Limited Partner's attorney-in-fact with power and
authority to execute and acknowledge, in the Limited Partner's name and on its
behalf, any document described in Section 2.5(b). Such special power of
attorney is coupled with an interest.
2.6 Title to Property. Title to all Partnership property shall be held in
-----------------
the name of the Partnership.
2.7 Required Licenses. Each Partner shall use its reasonable efforts to
-----------------
obtain and continue to hold all governmental licenses, permits and similar
authorizations that are necessary or advisable in connection with the business
of the Partnership, as determined by the General Partner in its reasonable
discretion ("Required Licenses").
SECTION 3
---------
CAPITALIZATION OF THE PARTNERSHIP
---------------------------------
3.1 Initial Capital Contribution. Each Partner shall make a contribution
----------------------------
to the capital of the Partnership. The initial capital contribution of the
General Partner shall be $250,000 payable not later than the date on which the
Partnership commences to conduct gaming operations. The initial capital
contribution of Boomtown shall be $4,750,000 payable not later than the date on
which the Partnership commences to conduct gaming operations. Skrmetta's
initial Capital Contribution shall be $1,000 payable upon execution of this
Agreement. Each other Limited Partner's initial capital contribution shall be
in such amount as shall be agreed to by the General Partner and shall be set
forth on Schedule A.
-5-
<PAGE>
3.2 Additional Capital Contributions.
--------------------------------
(a) General. Except as otherwise specifically provided in this
-------
Section 3.2, no Partner shall be permitted or required to make an Additional
Capital Contribution.
(b) Mandatory Additional Contributions by the General Partner. The
---------------------------------------------------------
General Partner shall make any capital contribution required in connection with
the dissolution of the Partnership pursuant to Section 7.3(e). In addition, the
General Partner shall make any capital contributions necessary for it to
maintain, at all times during the term of the Partnership, a positive Capital
Account balance at least equal to the lesser of (i) one percent of the aggregate
positive Capital Account balances of the Partners or (ii) $500,000.
(c) Other Additional Contributions. Prior to completion of the
------------------------------
Project, any Partner may contribute additional capital to the Partnership upon
the consent of the General Partner. Once the Project has been completed, if the
General Partner determines in its sole discretion that the Partnership needs
additional capital for any purpose, the General Partner may offer to the
Partners the opportunity to make Additional Capital Contributions; provided,
--------
that Skrmetta shall be entitled to make his pro rata share of any Additional
Capital Contributions (i.e., that portion which would preclude a change to
Skrmetta's Percentage Interest under section 3.7), using the proceeds of a loan
from the Partnership to Skrmetta, which loan shall be repaid solely out of
amounts otherwise distributable by the Partnership to Skrmetta, under this
Agreement.
3.3 Admission of Additional Limited Partners. Subject to its authority to
----------------------------------------
approve Transfers of limited partnership interests under Section 6, the General
Partner may admit additional persons as Limited Partners only with the consent
of all the Limited Partners and only in compliance with applicable gaming laws.
3.4 Withdrawal and Return of Capital. Except as provided in Sections 4.1,
--------------------------------
6.2 and 7.3, (i) no Partner may withdraw any portion of its Capital Contribution
without the prior consent of the General Partner and a Majority-In-Interest of
the Limited Partners and (ii) no Partner shall be entitled to a return of such
Partner's Capital Contribution.
3.5 Loans to the Partnership. If the General Partner determines that the
------------------------
Partnership needs additional capital for any purpose, the General Partner may
offer to the Partners, pro rata in proportion to their respective Percentage
Interests, the opportunity to lend a specified amount of cash to the Partnership
at a rate of interest equal to the prime rate of interest quoted from time to
time by the Bank of America N.T.S.A. San Francisco main branch plus two percent
(but not to exceed the maximum rate permitted under applicable law). If any
Partner declines to lend its pro rata share of such amount to the Partnership,
the other Partners may elect to lend to the Partnership all or a portion of the
amount necessary to cover the resulting shortfall (in such
-6-
<PAGE>
proportions as the General Partner may determine in its sole discretion).
Notwithstanding the foregoing, the General Partner shall not raise capital
through Partner loans to the Partnership without first offering the Partners an
opportunity to contribute the needed capital through Additional Capital
Contributions pursuant to Section 3.2(c).
3.6 Limitation of Liability. Except as otherwise required by the Act or
-----------------------
in connection with a claim against a Limited Partner for recovery of
distributions received by such Limited Partner in violation of this Agreement,
the liability of each Limited Partner for Partnership Losses shall not exceed
the value of such Limited Partner's interest in the Partnership. Any cash or
property that a Limited Partner is obligated to return to the Partnership shall
be returned immediately upon demand therefor by the General Partner. A Limited
Partner obligated to return property may, at its option, return cash equal to
the fair market value of the property (determined by the General Partner in its
reasonable discretion as of the date of such return). If, as a result of a
Limited Partner receiving a distribution of cash or property that it is required
to return, Losses which otherwise would have been allocated to the Limited
Partner were allocated to the General Partner (and such allocation has not been
reversed pursuant to Section 4.2(D)(iv)), tho Capital Accounts of the Partners
shall be adjusted to reflect the allocation of such Losses to the Limited
Partner.
3.7 Percentage Interest.
-------------------
(a) Upon execution of this Agreement by the Partners, the percentage
interests ("Percentage Interests") of the Partners shall be as follows:
General Partner 5%
Boomtown 87.5%
Skrmetta 7.5%
Except as specifically provided in (b) below, the Percentage Interests
of the Partners shall not subsequently be adjusted.
(b) If, after completion of the Project, there is an Additional
Capital Contribution, the Percentage Interests of the Partners shall immediately
thereafter be adjusted so that the Percentage Interest of each Partner is equal
to the ratio that (A) the sum of such Partner's share of the Additional Capital
Contributions made on such date and the fair market value of such Partner's
interest in the Partnership (determined as of the time immediately prior to such
Additional Capital Contributions) bears to (B) the sum of all Additional Capital
Contributions made on such date and the aggregate fair market value of the
Partners' interests in Partnership (determined as of the time immediately prior
to such Additional capital Contributions).
3.8 Interest on Capital. No Partner shall be entitled to interest on such
-------------------
Partner's Capital Contribution.
-7-
<PAGE>
SECTION 4
---------
DISTRIBUTIONS, PROFITS AND LOSSES
---------------------------------
4.1 Distributions.
-------------
(a) Except as otherwise required pursuant to Section 4.1(b) or (c) or
applicable law, the Partnership shall make distributions of cash or property
from time to time at the discretion of the General Partner; provided, however,
-------- -------
that, subject to the foregoing limitations, the Partnership shall make quarterly
distributions of Distributable Income as follows:
(i) Within 45 days after the end of each of the first three
quarters of each Fiscal Year, 75 percent of the Partnership's Distributable
Income for such quarter shall be distributed to the Partners in proportion to
their respective Percentage Interests; and
(ii) Within 60 days after the end of the final quarter of each
Fiscal Year, 100 percent of any previously undistributed Distributable Income
for such Fiscal Year shall be distributed to the Partners in proportion to their
respective Percentage Interests.
For purposes of this Section 4.1(a), "Distributable Income" for any period
shall mean:
(i) the sum of the Partnership's (A) net income, (B)
depreciation and amortization charges, and (C) provision for income taxes or
similar governmental fees; reduced by
(ii) the sum of the Partnership's (A) capital expenditures in
the normal course of operation, (B) scheduled principal repayments on
indebtedness, and (C) income taxes or similar governmental fees actually paid
(all of the foregoing items in this sentence to be determined with regard to
amounts accrued or incurred in accordance with generally accepted accounting
principles consistently applied); and further reduced by
(iii) 50 percent of the aggregate deficit in Distributable
Income, if any, for all prior periods (provided, however, that the reduction
-----------------
required under this clause (iii) shall not be applied for purposes of
determining the historic Distributable Income for any prior period).
(b) Notwithstanding Section 4.1(a), cash or property of the
Partnership available for distribution upon the dissolution of the Partnership
(including cash or property received upon the sale or other disposition of
assets in anticipation of or in connection with such dissolution) shall be
distributed in accordance with the provision of Section 7.3.
-8-
<PAGE>
(c) No distribution shall be made to a Limited Partner pursuant to
Section 4.1(a) if and to the extent that, upon a hypothetical liquidation of the
Partnership in accordance with the provisions of Section 7.3 immediately
subsequent to such distribution, the Limited Partner would have a deficit
Capital Account balance.
4.2 Allocations of Partnership Profits and Losses.
---------------------------------------------
(a) Except as otherwise provided in this Section 4.2, Profits and
Losses of the Partnership shall be allocated among the Partners as follows:
(i) Profits of the Partnership shall be allocated:
(A) First, to the Partners in proportion to their
respective negative Capital Account balances until no Partner has a negative
Capital Account balance;
(B) Next, to the Partners in proportion to their respective
Unreturned Capital Contributions until the Capital Account balance of each
Partner is not less than such Partner's Unreturned Capital Contribution; and
(C) Finally, to the Partners in proportion to their
respective Percentage Interests.
(ii) Next, Losses of the Partnership shall be allocated:
(A) First, to the Partners in proportion to the amounts by
which the Capital Account balance of each Partner exceeds such Partner's
Unreturned Capital Contribution until the Capital Account balance of each
Partner does not exceed such Partner's Unreturned Capital Contribution;
(B) Next, to the Partners in proportion to their respective
Unreturned Capital Contributions until the Capital Account balance of each
Partner does not exceed zero; and
(C) Finally, to the Partners in proportion to their
respective Percentage Interests.
(iii) Notwithstanding the foregoing provisions of this Section
4.2(a):
(A) Nonrecourse Deductions shall be allocated among the
Partners in proportion to their respective Percentage Interests;
(B) In accordance with the provisions of Treasury
Regulation Section 1.704-2(i), each item of Partner Nonrecourse Deduction shall
be
-9-
<PAGE>
allocated among the Partners in proportion to the economic risk of loss that the
Partners bear with respect to the nonrecourse liability of the Partnership to
which such item of Partner Nonrecourse Deduction is attributable; and
(C) Solely for purposes of determining the amounts to be
allocated among the Partners under Section 4.2(a)(i) and (ii), the Capital
Account balances of the Partners shall not reflect any reduction thereof caused
by (1) the allocation to the Partners' Capital Accounts of Nonrecourse
Deductions or Partner Nonrecourse Deductions under this Section 4.2(a)(iii), or
(2) any distributions that, notwithstanding the provisions of Section 4.5, are
allocable to increases in the Partnership's Minimum Gain under Treasury
Regulation Section 1.704-2(h) (except to the extent that such Nonrecourse
Deductions, Partner Nonrecourse Deductions or distributions have been offset by
operation of the minimum gain chargeback provisions of Section 4.2(b)(iii)).
(b) Allocation Adjustments Required to Comply With Section 704(b) of
----------------------------------------------------------------
the Code.
- --------
(i) Limitations on Allocation of Losses. Notwithstanding the
-----------------------------------
provisions of Section 4.2(a)(ii), there shall be no allocation of Losses to any
Limited Partner which would create or increase a deficit balance in such Limited
Partner's Capital Account unless such allocation would be treated as valid under
Section 704(b) of the Code. Any Losses that cannot be allocated to a Limited
Partner pursuant to the preceding sentence shall be reallocated to the General
Partner.
(ii) Qualified Income Offset. Notwithstanding the provisions of
-----------------------
section 4.2(a)(i), if in any Fiscal Year a Limited Partner receives (or is
reasonably expected to receive) a distribution, or an allocation or adjustment
to such Limited Partner's Capital Account, that creates or increases (or is
reasonably expected to create or increase) a deficit balance in such Limited
Partner's Capital Account, there shall be allocated to the Limited Partner such
items of Partnership income or gain as are necessary to satisfy the requirements
of a "qualified income offset" within the meaning of Treasury Regulation Section
1.704-1(b).
(iii) Minimum Gain Chargeback. Notwithstanding the provisions of
-----------------------
Section 4.2(a), this Section 4.2(b)(iii) hereby incorporates by reference the
"minimum gain chargeback" provisions of Treasury Regulation Section 1.704-2. In
general, upon a reduction of the Partnership's Minimum Gain, the preceding
sentence shall require that items of income and gain be allocated among the
Partners in a manner that reverses prior allocations of Nonrecourse and Partner
Nonrecourse Deductions as well as reductions in the Partners' Capital Account
balances resulting from distributions that, notwithstanding Section 4.5, are
allocable to increases in the Partnership's Minimum Gain. Subject to the
provisions of Section 704 of the Code and the regulations thereunder, if the
General Partner determines at any time that operation of such "minimum gain
chargeback" provisions likely will not achieve such a reversal by the
-10-
<PAGE>
conclusion of the liquidation of the Partnership, the General Partner shall
adjust the allocation provisions of this Section 4.2 as necessary to accomplish
that result.
(iv) Allocations Subsequent to Certain Allocation Adjustments.
--------------------------------------------------------
Any allocations of items of Profits or Losses pursuant to Section 4.2(b)(i) or
(ii) shall be taken into account in computing subsequent allocations pursuant to
Section 4.2(a) so that the net amount of any items so allocated and all other
items allocated to each Partner pursuant to Section 4.2(a) shall, to the extent
possible, be equal to the net amount that would have been allocated to each
Partner pursuant to the provisions of Section 4.2(a) without application of
Section 4.2(b)(i) or (ii).
(c) Book - Tax Accounting Disparities. If Partnership property is
---------------------------------
reflected in the Capital Accounts of the Partners at a book value that differs
from the adjusted tax basis of such property (whether because such property was
contributed to the Partnership by a Partner or because of a revaluation of the
Partners' Capital Accounts under Treasury Regulation Section 1.704-1(b)),
allocations of depreciation, amortization, income, gain or loss with respect to
such property shall be made among the Partners in a manner which takes such
difference into account in accordance with Code Section 704(c) and Treasury
Regulation Section 1.704-1(b).
(d) Minimum Allocation to General Partner. Notwithstanding anything
-------------------------------------
in this Agreement to the contrary, but subject to the provisions of Section
4.2(b)(ii) and (iii), the General Partner shall be allocated pro rata at least
one percent of each item of Partnership income, gain, loss, expense or
deduction.
(e) Special Allocations in Connection with Certain Transactions.
-----------------------------------------------------------
Subject to the provisions of Section 4.2(b), if the Partnership is entitled to a
tax deduction in connection with the acquisition or receipt by the General
Partner of an interest in the Partnership, then the deduction shall be allocated
entirely to such Partner. Any amount that such Partner is required to include
in income for Federal income tax purposes in connection with the acquisition or
receipt of such interest shall be treated as a contribution to the capital of
the Partnership by such Partner.
(f) Allocation in Event of Transfer. If an interest in the
-------------------------------
Partnership is Transferred in accordance with Section 6, there shall be
allocated to the Transferring Partner during the Fiscal Year of Transfer the
product of (i) the Partnership's Profits or Losses allocable to such Transferred
interest for such Fiscal Year and (ii) a fraction, the numerator of which is the
number of days such Partner held the Transferred interest during such Fiscal
Year and the denominator of which is the total number of days in such Fiscal
Year. All remaining Partnership Profits and Losses allocable to such
Transferred interest for such Fiscal Year shall be allocated to the Substitute
Partner acquiring such interest. Such allocations shall be made without regard
to the date, amount or recipient of any distributions which may have been made
with respect to such Transferred interest. As of the date of such Transfer, the
Substitute Partner shall succeed to the Capital Account and Capital Contribution
of the Transferring Partner to the extent attributable to the Transferred
interest.
-11-
<PAGE>
(g) Adjustment to Capital Accounts for Distributions of Property. If
------------------------------------------------------------
property distributed in kind is reelected in the Capital Accounts of the
Partners at a book value that differs from the fair market value of such
property on the date of distribution, the difference shall be treated as Profit
or Loss on the sale of the property and shall be allocated among the Partners in
accordance with the provisions of this Section 4.2.
(h) Tax Credits and Similar Items. Any tax credits or similar items
-----------------------------
not allocable pursuant to Section 4.2(a) through (g) shall be allocated to the
Partners in proportion to their respective Percentage Interests; provided,
--------
however, that at least one percent of each such item shall be allocated to the
- -------
General Partner.
4.3 Modification to Preserve Underlying Economic Objectives. If, in the
-------------------------------------------------------
opinion of counsel to the Partnership, there is a change in the Federal income
tax law (including the Code as well as the regulations, rulings, and
administrative practices thereunder) which makes it necessary or prudent to
modify the allocation provisions of this Section 4 in order to preserve the
underlying economic objectives of the Partners as reflected in this Agreement,
the General Partner shall make the minimum modification necessary to achieve
such purpose.
4.4 Withholding Taxes and Fees. The Partnership shall withhold taxes and
--------------------------
similar governmental fees from distributions to, and allocations among, the
Partners to the extent required by law (as determined by the General Partner in
its sole discretion). Any amount so withheld by the Partnership with regard to
a Partner shall be treated for purposes of this Agreement as an amount actually
distributed to such Partner. An amount shall be considered withheld by the
Partnership if remitted to a governmental agency without regard to whether such
remittance occurs at the same time as the distribution or allocation to which it
relates. To the extent operation of the foregoing provisions of this Section
4.4 would create or increase a deficit balance in a Limited Partner's Capital
Account (excluding for this purpose any portion of such deficit attributable to
the Partner's share of the Partnership's Minimum Gain as determined under
Treasury Regulation Section 1.704-2), the amount of the deemed distribution
shall instead be treated as a distribution received in violation of this
Agreement and subject to the provisions of Section 3.6.
4.5 Nonallocation of Distributions to Increases In Minimum Gain. To the
-----------------------------------------------------------
extend permitted under Treasury Regulation Section 1.704-2(h), distributions to
Partners shall not be allocable to increases in the Partnership's Minimum Gain.
In general, and except as provided in such regulation, the preceding sentence is
intended to insure that reductions in a Partner's Capital Account balance
resulting from distributions of money or other property to that Partner are not
revered by the minimum gain chargeback provisions of Section 4.2(b)(iii).
4.6 Allocation of Liabilities. Solely for purposes of determining the
-------------------------
Partners' respective shares of the nonrecourse liabilities of the Partnership
within the meaning of Treasury Regulation Section 1.752-3(a)(3), each Partner's
interest in Partnership Profits shall be equal to such Partner's Percentage
Interest.
-12-
<PAGE>
SECTION 5
---------
ADMINISTRATIVE PROVISIONS
-------------------------
5.1 Power of Limited Partners.
-------------------------
(a) No Management by Limited Partners. Except as specifically
---------------------------------
required under the Act or permitted under this Agreement, the Limited Partners
shall not take part in the management or control of, and shall not bind or act
for, the Partnership.
(b) Majority-In-Interest Approval for Certain Actions. The approval
-------------------------------------------------
of a Majority-In-Interest of the Limited Partners shall be required in order for
the General Partner to:
(i) liquidate substantially all of the Partnership's assets; or
(ii) otherwise discontinue the Partnership's business.
5.2 Management by the General Partner. The General Partner shall devote
---------------------------------
such time and attention, and shall diligently perform those duties, as are
reasonably necessary to manage effectively the Partnership's affairs.
Subject to the provisions of the Act and this Agreement, the General
Partner shall have the power to perform acts necessary or appropriate for the
efficient management of the Partnership including, without limitation, the right
to:
(a) Acquire, manage, develop, hold, lease, improve, control, operate,
and sell or otherwise dispose of property, on behalf of the Partnership;
(b) Borrow money on behalf of the Partnership or encumber Partnership
property solely for the purpose of obtaining financing for the Partnership's
business, and to extend or modify any obligations of the Partnership;
(c) Employ or retain any qualified person to perform services or
provide advice for the benefit of the Partnership and pay reasonable
compensation therefor;
(d) Compromise, arbitrate or otherwise adjust claims in favor of or
against the Partnership, and commence or defend litigation with respect to the
Partnership or any assets of the Partnership, at the Partnership expense;
(e) Cause the Partnership to maintain, at the Partnership's expense,
insurance coverage reasonably satisfactory to the General Partner with regard to
any circumstance or condition which may affect the Partnership or the liability
of the General Partner in its capacity as such;
-13-
<PAGE>
(f) Open, conduct business regarding, draw checks or other payment
orders upon, and close cash, checking, custodial or similar accounts with banks
or brokers on behalf of the Partnership and pay the customary fees and charges
applicable to transactions in respect of all such accounts;
(g) Cause the Partnership to enter into, make and perform such
contracts, agreements and other undertakings, and to do such other acts, as it
may deem necessary or advisable for, or as may be incidental to, the conduct of
the business of the Partnership, including, without limitation, contracts,
agreements, undertakings and transactions with any Partner or with any other
person or entity related to any Partner, provided, however, that transactions
-------- -------
with such persons and entities for the account of the Partnership shall be on
terms no less favorable to the Partnership than are generally afforded to
unrelated third parties in comparable transactions; and
(h) Assume and exercise all powers and responsibilities granted a
general partner by the laws of the State of Louisiana.
5.3 Restrictions on Powers of the General Partner. The General Partner
---------------------------------------------
shall not do any act in contravention of this Agreement or, subject to the
provisions of Section 5.4, any act which is detrimental to the business of the
Partnership. The General Partner shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Partnership. The General
Partner shall not use, or permit another to use, such funds or assets in any
manner except for the exclusive benefit of the Partnership.
5.4 Competing Ventures. The Limited Partners understand that the General
------------------
Partner may have other business activities which may take the major part of the
General Partner's total time devoted to business matters. Accordingly, the
General Partner shall not be bound to devote all of the General Partner's
business time to the affairs of the Partnership, but shall devote such time and
attention to the Partnership's business as may be required in order to assure
that the Partnership's business is conducted in a diligent and proper manner.
During the continuance of this Agreement, Boomtown and the General Partner
and/or their respective affiliated entities may (i) engage in any activity
whether or not in direct competition with the Partnership for such Partner's own
profit and advantage without the consent of any other Partner or the
Partnership, or (ii) possess an interest in any other business venture of any
nature or description independently or with others. Neither the Partnership nor
any Partner shall have any right by virtue of this Agreement in and to any
Partner's separate business venture or to the income or profits derived
therefrom.
5.5 Disclosures. Each Partner shall furnish any data with respect to
-----------
itself reasonably required in connection with financing or operation of the
Partnership's business.
5.6 Reimbursement to the General Partner. The General Partner shall be
------------------------------------
reimbursed for amounts paid to third parties for, or on behalf of, the
Partnership
-14-
<PAGE>
(including, without limitation, amounts paid in connection with the formation of
the Partnership).
5.7 Compensation. Partners and affiliates of Partners shall be entitled
------------
to receive fair market value compensation (as determined by the General Partner
in its reasonable discretion and in accordance with the provisions of Section
5.2(g)) for services provided to, or for the benefit of, the Partnership.
5.8 Tax Matters Partner.
-------------------
(a) General. The General Partner is hereby designated the "tax
-------
matters partner" of the Partnership within the meaning of Section 6231(a)(7) of
the Code. Except as specifically provided in the Code and the regulations
issued thereunder, the General Partner in its sole discretion shall have
exclusive authority to act for or on behalf of the Partnership with regard to
tax matters, including, without limitation, the authority to make (or decline to
make) any available tax elections.
(b) Notice of Inconsistent Treatment of Partnership Item. No Partner
----------------------------------------------------
shall file a notice with the Internal Revenue Service under Section 6222(b) of
the Code in connection with such Partner's intention to treat an item on such
Partner's Federal income tax return in a manner which is inconsistent with the
treatment of such item on the Partnership's Federal income tax return unless
such Partner has, not less than 30 days prior to the filing of such notice,
provided the General Partner with a copy of the notice and thereafter in a
timely manner provides such other information related thereto as the General
Partner shall reasonably request.
(c) Notice of Settlement Agreement. Any Limited Partner entering into
------------------------------
a settlement agreement with the Secretary of the Treasury which concerns a
Partnership item shall notify the General Partner of such settlement agreement
and its terms within 60 days from the date thereof.
5.9 Books, Records and Annual Financial Statements.
----------------------------------------------
(a) The Partnership shall maintain or cause to be maintained true and
proper books, records, reports, and accounts in which shall be entered, on the
accrual basis, all transactions of the Partnership. Such books, records,
reports and accounts shall be located at the principal place of business of the
Partnership and shall be available to any Partner for inspection and copying
during reasonable business hours.
(b) The Partnership shall cause to be delivered to each Partner within
90 days after the expiration of each Fiscal Year an annual report containing all
Partnership information necessary for preparation of the Federal, state and
local income tax returns of such Partner. Upon election by the General Partner
or written request from a Limited Partner that is a "10-percent owner" of the
Partnership within the meaning of Section 6654(d)(1)(E) of the Code, the
Partnership shall make reasonable efforts (as determined by the General Partner
in its sole discretion) to provide interim
-15-
<PAGE>
Partnership financial information necessary for such Partner, or its constituent
partners or shareholders, to compute its or their quarterly Federal estimated
tax liability.
SECTION 6
---------
TRANSFER OF A PARTNERSHIP INTEREST; WITHDRAWALS
-----------------------------------------------
6.1 Transfers. No sale, transfer, assignment or other disposition (a
---------
"Transfer") of a Partner's interest in violation of this Agreement shall be
valid or effective.
(a) Limited Partners -- Voluntary Transfers. The Transfer of a
---------------------------------------
Limited Partner's interest in the Partnership to another person (a "Substitute
Partner") shall be valid and effective if the following conditions are
satisfied:
(i) Execution of Documents. The Limited Partner whose interest is
----------------------
Transferred (the "Transferring Partner") and the Substitute Partner shall
properly execute documents or instruments which the General Partner reasonably
determines to be necessary or desirable to effect such Transfer, including
written acceptance, ratification and approval of all of the terms and conditions
of this Agreement and any amendments hereto.
(ii) Compliance With Applicable Laws and Rules. The Transfer of
-----------------------------------------
the interest shall not at the time of the Transfer and will not thereafter, to
the reasonable satisfaction of the General Partner, violate any applicable law
or governmental rule, including, without limitation, any Federal or state
securities or gaming law or rule (based upon the presumption, for this purpose,
that the business operations of the Partnership shall not be changed to
accommodate the Transfer of a Limited Partner's interest in the Partnership).
(iii) Tax Effects. The Transfer of the interest shall not, to the
-----------
reasonable satisfaction of the General Partner, cause the Partnership to (A)
terminate within the meaning of Section 708 of the Code; (B) qualify as a
"publicly traded partnership" within the meaning of Section 469(k), 512(c)(2) or
7704 of the Code; or (C) be classified for Federal income tax purposes as an
association taxable as a corporation.
(iv) Consent of the General Partner. The prior written consent of
------------------------------
the General Partner to such Transfer shall be obtained by the Transferring
Partner, the granting or denial of which shall be in the General Partner's sole
discretion. Notwithstanding the preceding sentence, the General Partner shall
be deemed to have consented to the Transfer of all or a portion of Skrmetta's
limited partnership interest to one or more Authorized Transferees; provided,
--------
however, that the General Partner shall not be deemed to have consented to any
- -------
Transfer that would result in Skrmetta's limited partnership interest being held
by more than four separate persons.
-16-
<PAGE>
As used herein, "Authorized Transferee" means (i) any shareholder of
one or more of the corporate entities, if any, of which Skrmetta is comprised,
(ii) any immediate family member of such a shareholder, (iii) any of Raphael,
Eric, Dennis or Barbara Skrmetta or an immediate family member thereof, or (iv)
any corporation, trust or other entity wholly owned by any or all of Raphael,
Eric, Dennis or Barbara Skrmetta. For purposes of the preceding sentence, the
"immediate family" of an individual shall include and be limited to such
individual's parents, siblings, spouse, children, grandchildren and great
grandchildren.
Notwithstanding the foregoing provisions of this Section 6.1(a)(iv),
no person (including, without limitation, an Authorized Transferee) shall be
admitted to the Partnership without the prior written consent of the General
Partner, the granting or denial of which shall be in the General Partner's sole
discretion.
(b) Limited Partners -- Involuntary Transfers. A person may become
-----------------------------------------
the assignee of all or a portion of a Limited Partner's interest in the Profits
and Losses of the Partnership upon (i) the death, Bankruptcy, incapacity, or
Dissolution of such Limited Partner; (ii) foreclosure against that portion of
such Limited Partner's interest in the Partnership which was pledged as security
for an obligation; or (iii) a transfer to such Limited Partner's spouse pursuant
to a divorce decree or settlement. In the event a person becomes the assignee
of an interest in the Profits and Losses of the Partnership under the preceding
sentence, the General Partner shall, in its sole discretion, (i) admit such
assignee to the Partnership as a Substitute Partner (provided, however, that the
-------- -------
requirements of Section 6.1(a)(ii) and (iii) shall in all events be satisfied)
or (ii) redeem such assignee's interest by treating such assignee as a
withdrawing Limited Partner under the rules set forth in Section 6.2.
(c) Transfers by the General Partner. The General Partner shall not
--------------------------------
Transfer its interest in the Partnership in violation of applicable law or
without the prior written consent of all the Limited Partners; provided,
--------
however, that the General Partner shall not be required to obtain such consent
- -------
for a Transfer which consists solely of an assignment of all or a portion of the
General Partner's interest in the allocations and distributions of the
Partnership.
6.2 Withdrawal of a Limited Partner. A Limited Partner shall not withdraw
-------------------------------
from the Partnership without the written consent of the General Partner, the
granting or denial of which shall be in the General Partner's sole discretion.
A Limited Partner permitted to withdraw from the Partnership pursuant to this
Section 6.2 shall receive the amount of cash and/or property (as determined in
the reasonable discretion of the General Partner) that such Limited Partner
would have received if, on the effective date of such withdrawal, the
Partnership had been dissolved and liquidated pursuant to Section 7.3. Upon the
withdrawal of a Limited Partner from the Partnership, such Limited Partner's
Percentage Interest shall be allocated among the remaining Partners in
proportion to the remaining Partners' respective Percentage Interests as in
effect immediately prior to the withdrawal.
-17-
<PAGE>
6.3 Mandatory Transfer of a Partner's Interest. The following provisions
------------------------------------------
shall apply to Skrmetta's Partnership interest.
(a) Failure by Skrmetta to Obtain or Hold a Required License. If
--------------------------------------------------------
Skrmetta (i) fails to obtain a Required License, or (ii) loses or has revoked a
Required License and fails to reacquire such license within the shorter of a
reasonable period of time or such period as is required by applicable law, then
Skrmetta shall use its reasonable efforts to, within such aforementioned time
period, sell or otherwise Transfer (in a transaction that satisfies the
requirements of Section 6.1(a)) its interest in the Partnership to a person that
holds all Required Licenses.
If Skrmetta fails to obtain or reacquire a Required License or to sell
or otherwise Transfer its Partnership interest in accordance with the terms of
the preceding paragraph (including, without limitation, the time period
described therein) or Skrmetta's failure to hold all Required Licenses
--
materially impairs the ability of the Partnership to conduct its business (as
determined by the General Partner in its reasonable discretion), then the
Partnership shall have an immediate and continuing right to redeem Skrmetta's
Partnership interest for fair market value on the date of redemption (as
determined by agreement among the Partners or, if any Partner declares that no
agreement can be reached, by arbitration in accordance with the provisions of
Section 9.8).
(b) Failure by the General Partner or Boomtown to Obtain or Hold a
--------------------------------------------------------------
Required License. If the General Partner or Boomtown fails to obtain or
- ----------------
reacquire a Required License within the shorter of a reasonable period of time
or such period as is required by applicable law and the failure materially
impairs the ability of the Partnership to conduct its business, then such
Partner shall use its reasonable efforts to sell or otherwise Transfer its
interest in the Partnership, for a price and on such other terms as are
reasonably acceptable to such Partner, to a person that holds all Required
Licenses. If such Partner is the General Partner, the consent of all the
Limited Partners shall be required for the sale or other Transfer of its
interest to occur.
If a Partner required to sell or otherwise Transfer its Partnership
interest under the terms of the preceding paragraph fails to effect such sale or
other Transfer within the applicable time period, the Partnership shall
immediately attempt to sell its business assets for a price and on such other
terms as are acceptable in the reasonable discretion of the General Partner. If
no such sale is effected within a reasonable period of time, the Partnership
shall be dissolved and liquidated in accordance with the provisions of Section
7.
SECTION 7
---------
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
----------------------------------------------
7.1 Dissolving Events. The Partnership shall be dissolved upon the
-----------------
occurrence of any of the following events:
-18-
<PAGE>
(a) Expiration of the Partnership term;
(b) Issuance of an order by a court of competent jurisdiction
requiring the dissolution of the Partnership;
(c) Permanent cessation of the Partnership's business;
(d) Consent of the General Partner and a Majority-in-Interest of the
Limited Partners to dissolve;
(e) The withdrawal, retirement, Bankruptcy, Dissolution, death or
incapacity of the General Partner, unless the remaining Partners elect to
continue the Partnership pursuant to section 7.2;
(f) Failure by the Partnership to sell its business assets in
accordance with the provisions of Section 6.3(b); and
(g) Any other event which results in dissolution of the Partnership
under the Act.
7.2 Special Meeting to Dissolve or Continue the Partnership. Upon the
-------------------------------------------------------
withdrawal, retirement, Bankruptcy, Dissolution, death or incapacity of the
General Partner, the two Limited Partners having the largest Capital Account
balances shall, in accordance with the provisions of the Act, notify the
remaining Limited Partners of a special meeting of the Limited Partners to be
held not less than 10 nor more than 60 days after the date of such event. At
that meeting the Limited Partners may by unanimous vote elect to continue the
business of the Partnership and agree to the appointment of a new General
Partner. If the Limited Partners do not elect to continue the business of the
Partnership and to appoint a new General Partner, a Liquidating Partner shall be
elected by a Majority-In-Interest of the Limited Partners; the Liquidating
Partner shall then cause the Partnership to be liquidated in accordance with the
provisions of Section 7.3.
Written consent of a Partner to continuation of the Partnership and the
election of a new General Partner or to dissolution of the Partnership and the
election of a Liquidating Partner shall be counted as a vote at such special
meeting.
7.3 Winding Up of the Partnership.
-----------------------------
(a) Upon dissolution of the Partnership, the Liquidating Partner shall
promptly wind up the affairs of the Partnership in accordance with the
provisions of this Section 7.3. The Partnership shall engage in no further
business except as may be necessary, in the reasonable discretion of the
Liquidating Partner, to preserve the value of the Partnership's assets during
the period of dissolution and liquidation.
-19-
<PAGE>
(b) Distributions to the Partners in liquidation may be made in cash
or in kind, or partly in cash and partly in kind, as determined by the
Liquidating Partner. Distributions in kind shall be valued at fair market value
as reasonably determined by the Liquidating Partner and shall be subject to such
conditions and restrictions as may be necessary or advisable in the reasonable
discretion of the Liquidating Partner to preserve the value of the property so
distributed.
(c) The Profits and Losses of the Partnership during the period of
dissolution and liquidation shall be allocated among the Partners in accordance
with the provisions of Section 4.2. If any property is distributed in kind, the
Capital Accounts of the Partners shall be adjusted in accordance with the
provisions of Section 4.2(g).
(d) The assets of the Partnership (including, without limitation,
proceeds from the sale or other disposition of any assets during the period of
dissolution and liquidation) shall be applied as follows:
(i) First, to repay any indebtedness of the Partnership, whether
to third parties or the Partners, in the order of priority required by law;
(ii) Next, to any reserves which the Liquidating Partner
reasonably deems necessary for contingent or unforeseen liabilities or
obligations of the Partnership (which reserves when they become unnecessary
shall be distributed in the remaining priorities set forth in this Section
7.3(d)); and
(iii) Next, to the Partners in proportion to their respective
positive Capital Account balances (after taking into account all adjustments to
the Partners' Capital Accounts required under Section 7.3(c)).
(e) If, after allocation of all Profits and Losses of the Partnership
pursuant to Section 7.3(c), the Capital Account balance of the General Partner
is less than zero, the General Partner shall, prior to application and
distribution of the Partnership's assets pursuant to Section 7.3(d), contribute
to the capital of the Partnership sufficient cash and/or property to increase
the General Partner's Capital Account balance to zero.
SECTION 8
---------
LIABILITY AND INDEMNIFICATION OF THE GENERAL PARTNER
----------------------------------------------------
8.1 Liability. Except as otherwise specifically provided in this
---------
Agreement, the General Partner (and its affiliates) shall not be personally
liable for the return of any contributions made to the capital of the
Partnership by the Limited Partners. In the absence of fraud, gross negligence,
material breach of fiduciary duty, or willful misconduct by the General Partner,
the General Partner (and its affiliates) shall not be liable to the Partnership
or the Limited Partners for any act or omission concerning the Partnership's
business.
-20-
<PAGE>
8.2 Indemnification. In the absence of fraud, gross negligence, material
---------------
breach of fiduciary duty, or willful misconduct on the part an Indemnified
Person, the Partnership shall indemnify and hold each Indemnified Person
harmless from and against any loss, expense, damage or injury suffered or
sustained by any of them by reason of any acts, omissions, or alleged acts or
omissions arising out of any activity performed on behalf of the Partnership.
This indemnification shall include, but not be limited to: (i) payment of
reasonable attorneys' fees and other expenses incurred in settling any claim or
threatened action, or incurred in any finally-adjudicated legal proceeding, and
(ii) the removal of any liens affecting the property of an Indemnified Person
(which liens shall be deemed a debt of the Partnership to such Indemnified
Person to be repaid in full before any distributions are made to the Partners
pursuant to this Agreement). As used herein, "Indemnified Person" means the
General Partner, any business entity of which the General Partner is an officer,
director, partner or shareholder, or any employee or agent thereof. The total
obligation of the Partnership to all Indemnified Person under this section 8.2
shall be limited to the assets of the Partnership (excluding, solely for
purposes of this sentence, any obligation of the General Partner to restore a
deficit balance in its Capital Account pursuant to Section 7.3(e)).
SECTION 9
---------
GENERAL PROVISIONS
------------------
9.1 Special Meetings. Subject to the provisions of the Act, the General
----------------
Partner may call a special meeting of all Partners at any reasonable time on not
less than 10 nor more than 60 days written notice.
9.2 Entire Agreement. This Agreement, the Subscription Agreement between
----------------
Skrmetta and the Partnership, and the Cancellation Agreement between Skrmetta
and Boomtown, both of even date herewith contain the entire understanding among
the Partners and supersede any prior written or oral agreement between them
respecting the Partnership. There are no representations, agreements,
arrangements, or understandings, oral or written, among the Partners relating to
the Partnership which are not fully expressed in this Agreement, the
Subscription Agreement between Skrmetta and the Partnership, or the Cancellation
Agreement between Skrmetta and Boomtown, both of even date herewith.
9.3 Amendments.
----------
(a) General. This Agreement is subject to amendment only with the
-------
written consent of the General Partner and a Majority-In-Interest of the Limited
Partners; provided, however, that there shall be no amendment to this Agreement
-------- -------
which reduces a Limited Partner's interests in the Profits, distributions or
capital of the Partnership without the consent of such Limited Partner.
(b) Amendments to Comply with Gaming or Similar Laws. Notwithstanding
------------------------------------------------
the provisions of Section 9.3(a), the Partners hereby agree in advance
-21-
<PAGE>
that this Agreement shall be amended as necessary to comply with the
requirements of any gaming or similar law or governmental rule that regulates or
otherwise pertains to the business of the Partnership.
9.4 Governing Law. All questions with respect to the interpretation of
-------------
this Agreement and the rights and liabilities of the Partners shall be governed
by the laws of the State of Louisiana as they are applied to contracts entered
into between residents of Louisiana.
9.5 Severability. In the event any one or more of the provisions of this
------------
Agreement are determined to be invalid or unenforceable, such provision or
provisions shall be deemed severable from the remainder of this Agreement and
shall not cause the invalidity or unenforceability of the remainder of this
Agreement.
9.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and when so executed, all of such counterparts shall constitute a
single instrument binding upon all parties notwithstanding the fact that all
parties are not signatory to the original or to the same counterpart.
9.7 Survival of Rights. Subject to the restrictions against unauthorized
------------------
assignment or transfer set forth in this Agreement, the provisions of this
Agreement shall inure to the benefit of and be binding upon each Partner and
such Partner's heirs, devises, legatees, personal representatives, successors,
and assigns.
9.8 Arbitration and Attorneys' Fees. Any controversy or claim arising out
-------------------------------
of or relating to this Agreement, the Partnership, or the Partners' respective
rights and duties shall be settled by arbitration in the State of Nevada. Such
arbitration shall be in accordance with the rules of the American Arbitration
Association, and judgment upon the award may be entered in any court of
competent jurisdiction. The prevailing Partner or Partners in such arbitration
and any ensuing legal action shall be reimbursed by the Partner or Partners who
do not prevail for their reasonable attorney's, accountant's and expert's fees
and the costs of such actions.
9.9 Notices. Any notice shall be in writing and shall be deemed duly
-------
given when personally delivered to the Partner to whom it is directed, or in
lieu of such personal service, when deposited in the United States mail,
registered or certified mail, postage prepaid, to the address set forth on
Schedule A for such Partner, or to any other address of which the General
Partner is notified by such Partner in writing. Notice also shall be deemed
duly given when actually received by the Partner to whom it is directed via
telecopy, electronic transfer, telex or telegram.
9.10 Consents. All consents, agreements and approvals provided for or
--------
permitted by this Agreement shall be in writing and signed copies thereof shall
be retained with the books of the Partnership.
-22-
<PAGE>
9.11 No Partition. Except as otherwise permitted by this Agreement, no
------------
Partner shall have the right, and each Partner does hereby agree that it shall
not seek, to cause a partition of the Partnership's property whether by court
action or otherwise.
9.12 Representation by Limited Partners. Each Limited Partner hereby
----------------------------------
represents that, with respect to its limited partnership interest in the
Partnership: (i) it is acquiring or has acquired such interest for purposes of
investment only, for its own account (or a trust account if such Limited Partner
is a trustee), and not with a view to resell or distribute the same or any part
thereof; and (ii) no other person has any interest in such limited partnership
interest or in the rights of such Limited Partner under this Agreement other
than a spouse having a community property or similar interest under applicable
state law. Each Limited Partner also warrants to the Partnership and the other
Partners that it has the business and financial knowledge and experience
necessary to purchase a limited partnership interest in the Partnership in the
amount of its capital contributions to the Partnership on the terms contemplated
herein and that it has the ability to bear the risks of such investment
(including the risk of sustaining a complete loss of all such capital
contributions) without the need for the investor protections provided by the
registration requirements of the Securities Act of 1933, as amended.
9.13 Valuation. If (i) the fair market value of any asset or other item of
---------
property (including, without limitation, a limited partnership interest in the
Partnership) is required to be determined under the terms of this Agreement or
any other agreement or arrangement to which the Partnership is subject, and (ii)
no standard for determining such fair market value is provided for under the
applicable provision of this Agreement or such other agreement or arrangement,
then the fair market value of the asset or other item of property shall be
determined by the General Partner in its reasonable discretion.
9.14 Mutual Selection. Each Partner hereby specifically consents to and
----------------
endorses the selection of all other Partners admitted to the Partnership
pursuant to the terms of this Agreement.
-23-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
GENERAL PARTNER: LIMITED PARTNERS:
LOUISIANA GAMING ENTERPRISES, BOOMTOWN, INC., a Delaware
INC., a Louisiana corporation corporation
__________________________________________________________________
By: Robert F. List By: Robert F. List
Title: Senior Vice-President Title:
ERIC SKRMETTA
________________________________
By: Eric Skrmetta
Title: Limited Partner
-24-
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Name and Address Capital Contribution Percentage Interest
<S> <C> <C>
Louisiana Gaming Enterprises, Inc. 5%
700 Camp Street
New Orleans, LA 70130
Boomtown, Inc. 87.5%
P.O. Box 399
Verdi, NV 89439
Eric Skrmetta 7.5%
501 Destrehan Avenue
Harvey, LA 70058
</TABLE>
REGISTERED ADDRESS OF PARTNERSHIP:
2439 Manhattan Blvd., Suite 105
Harvey, LA 70058
-25-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE
AND/OR CHANGE OF REGISTERED AGENT
Secretary of State (R.S. 12.104 & 12.236)
-----------------------------------------------------------------------------------
<S> <C> <C>
Domestic Corporation Return to: Corporations Division
(Business or Non-Profit) P.O. Box 94125
Enclose $20.00 filing fee Baton Rouge, LA 70804-3125
Make remittance payable to Phone (504) 925-4704
Secretary of State
Do not send cash
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Corporation Name LOUISIANA-I GAMING, A LOUISIANA PARTNERSHIP IN COMMENDAM
--------------------------------------------------------
D/B/A BOOMTOWN CASINO WESTBANK
- ------------------------------
CHANGE OF LOCATION OF REGISTERED OFFICE
Notice is hereby given that the Board of Directors of the above named
corporation has authorized a change in the location of the corporation's
registered office. The new registered office is located at:
4132 PETERS ROAD, HARVEY, LOUISIANA 70058
------------------------------------------
------------------------------------------
To be signed by one (1) officer or two (2) directors
JASON A. RABALAIS, VICE PRESIDENT & GENERAL MANAGER
CHANGE OF REGISTERED AGENT(S)
Notice is hereby given that the Board of Directors of the above named
corporation has authorized the change of the corporation's registered agent(s).
The name(s) and address(es) of the new registered agent(s) is/are as follows:
MR. JASON A. RABALAIS, 4132 PETERS ROAD, HARVEY LOUISIANA 70058
----------------------------------------------------------------
-------------------------
President, Vice President or Secretary
JASON A. RABALAIS, VICE PRESIDENT & GENERAL MANAGER
AGENT AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE
I hereby acknowledge and accept the appointment of registered agent(s) for and
on behalf of the above named corporation.
JASON A. RABALAIS
-------------------------------
-------------------------------
Registered Agent(s)
Sworn to and subscribed before me this _________ day of __ , 19__ .
---------------------------
Notary
-26-
<PAGE>
LOUISIANA-I GAMING,
A LOUISIANA PARTNERSHIP IN COMMENDAM
4132 PETERS ROAD
HARVEY, LA 70058
June 4, 1996
Mr. Fox McKeithen
LA Secretary of State
P.O. Box 94125
Baton Rouge, LA 70004-9125
Re: Notice of Change of Registered Office
Louisiana-I Gaming, a Louisiana Partnership in Commendam
Dear Mr. McKeithen:
Please be advised the Registered Office of Louisiana-I Gaming, a Louisiana
Partnership in Commendam has been changed. The new address is:
4132 Peters Road
Harvey, LA 70058
Sincerely,
Louisiana-I Gaming, a Louisiana Partnership in
Commendam
By: Louisiana Gaming Enterprises, Inc.
General Partner
By:___________________________________
Robert F. List
Secretary/Treasurer
-27-
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
SECTION 1 DEFINITIONS....................................................... 1
SECTION 2 FORMATION OF LIMITED PARTNERSHIP.................................. 4
2.1 Formation, Name and Principal Office.............................. 4
2.2 Purpose and Scope of the Partnership.............................. 4
2.3 Names and Addresses of the Partners............................... 4
2.4 Term of the Partnership........................................... 4
2.5 Required Documents................................................ 5
2.6 Title to Property................................................. 5
2.7 Required Licenses................................................. 5
SECTION 3 CAPITALIZATION OF THE PARTNERSHIP................................. 5
3.1 Initial Capital Contribution...................................... 5
3.2 Additional Capital Contributions.................................. 6
3.3 Admission of Additional Limited Partners.......................... 6
3.4 Withdrawal and Return of Capital.................................. 6
3.5 Loans to the Partnership.......................................... 6
3.6 Limitation of Liability........................................... 7
3.7 Percentage Interest............................................... 7
3.8 Interest on Capital............................................... 7
SECTION 4 DISTRIBUTIONS, PROFITS AND LOSSES................................. 8
4.1 Distributions..................................................... 8
4.2 Allocations of Partnership Profits and Losses..................... 9
4.3 Modification to Preserve Underlying Economic
Objectives........................................................ 12
4.4 Withholding Taxes and Fees........................................ 12
4.5 Nonallocation of Distributions to Increases In
Minimum Gain...................................................... 12
4.6 Allocation of Liabilities......................................... 12
SECTION 5 ADMINISTRATIVE PROVISIONS......................................... 13
5.1 Power of Limited Partners......................................... 13
5.2 Management by the General Partner................................. 13
5.3 Restrictions on Powers of the General Partner..................... 14
5.4 Competing Ventures................................................ 14
5.5 Disclosures....................................................... 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.6 Reimbursement to the General Partner.............................. 14
5.7 Compensation...................................................... 15
5.8 Tax Matters Partner............................................... 15
5.9 Books, Records and Annual Financial Statements.................... 15
SECTION 6 TRANSFER OF A PARTNERSHIP INTEREST;
WITHDRAWALS....................................................... 16
6.1 Transfers......................................................... 16
6.2 Withdrawal of a Limited Partner................................... 17
6.3 Mandatory Transfer of a Partner's Interest........................ 18
SECTION 7 DISSOLUTION AND LIQUIDATION OF THE
PARTNERSHIP....................................................... 18
7.1 Dissolving Events................................................. 18
7.2 Special Meeting to Dissolve or Continue the
Partnership....................................................... 19
7.3 Winding Up of the Partnership..................................... 19
SECTION 8 LIABILITY AND INDEMNIFICATION OF THE
GENERAL PARTNER................................................... 20
8.1 Liability......................................................... 20
8.2 Indemnification................................................... 21
SECTION 9 GENERAL PROVISIONS................................................ 21
9.1 Special Meetings.................................................. 21
9.2 Entire Agreement.................................................. 21
9.3 Amendments........................................................ 21
9.4 Governing Law..................................................... 22
9.5 Severability...................................................... 22
9.6 Counterparts...................................................... 22
9.7 Survival of Rights................................................ 22
9.8 Arbitration and Attorneys' Fees................................... 22
9.9 Notices........................................................... 22
9.10 Consents.......................................................... 22
9.11 No Partition...................................................... 23
9.12 Representation by Limited Partners................................ 23
9.13 Valuation......................................................... 23
9.14 Mutual Selection.................................................. 23
</TABLE>
-ii-
<PAGE>
EXHIBIT 5
[Irell & Manella LLP Letterhead]
October 30, 1997
Hollywood Park, Inc.
Hollywood Park Operating Company
1050 South Prairie Avenue
Inglewood, California 90301
Re: Series B 9-1/2% Senior Subordinated Notes Due 2007
--------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Hollywood Park, Inc. and Hollywood Park
Operating Company (collectively, the "Issuers") in connection with the
preparation and filing by the Companies of a Registration Statement on Form S-4
(the "Registration Statement") filed with the Securities and Exchange Commission
on August 27, 1997 under the Securities Act of 1933, as amended (the "Act"),
relating to the offer to exchange an aggregate principal amount of up to
$125,000,000 of Series A 9-1/2% Senior Subordinated Notes due 2007 (the "Old
Notes") for a like principal amount of Series B 9-1/2% Senior Subordinated Notes
due 2007 (the "New Notes"). Terms defined in the Registration Statement and not
otherwise defined herein are used herein with the meanings as so defined.
For the purposes of rendering this opinion, we have reviewed the following
documents:
(a) the Registration Statement;
(b) the Indenture;
(c) the form of the New Notes; and
(d) the form of the Old Notes.
<PAGE>
Hollywood Park, Inc.
Hollywood Park Operating Company
October 30, 1997
Page 2
As your counsel in connection with this registration, we have examined (in
addition to the documents listed above) the proceedings taken and proposed to be
taken in connection with the issuance of the New Notes. We have also reviewed
such other matters and documents as we have deemed necessary or relevant as a
basis for this opinion.
Based on the foregoing, and on the assumptions herein set forth, and
subject to the limitations, qualifications and exceptions set forth herein, we
are of the opinion that:
Upon completion of the proceedings being taken or which we, as your
counsel, contemplate will be taken prior to the issuance of the New Notes
(including, without limitation, (a) the due authorization and execution of the
New Notes by the Issuers, (b) the authentication thereof by the Trustee and (c)
the delivery thereof against receipt of the Old Notes surrendered in exchange
therefor), the New Notes issuable upon consummation of the Exchange Offer will
be duly authorized and legally issued and will constitute binding obligations of
the Issuers, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
(including without limitation preferences, equitable subordination and
fraudulent conveyances), and subject, as to the binding nature of such
obligations, to general principles of equity, including without limitation
principles governing the availability of specific performance, injunctive relief
and other equitable remedies and principles of commercial reasonableness, good
faith and fair dealing (regardless of whether relief is sought in a proceeding
at law or in equity).
The opinion herein is limited to the laws of the State of California and
the Delaware General Corporation Law. In this regard, we note that Section
11.08 of the Indenture provides that the Indenture and the New Notes.
Consequently, our opinion as it relates to the binding nature of the New Notes
assumes that the laws of the State of California are identical to the
corresponding laws of the state of New York in all pertinent aspects, although
we have not conducted any investigation with respect to that matter.
Furthermore, we render no opinion with respect to said Section 11.08 (and the
corresponding provision of the New Notes) or the
<PAGE>
Hollywood Park, Inc.
Hollywood Park Operating Company
October 30, 1997
Page 3
appropriate choice of laws with respect to the Indenture or the New Notes.
This opinion is rendered solely for your benefit in connection with the
transactions described above. This opinion may not be used or relied upon by
any other person and may not be disclosed, quoted, filed with a governmental
agency or otherwise referred to without our prior written consent. However, we
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and the reference to this firm under the caption "Legal Matters" in
the Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/Irell & Manella LLP
Irell & Manella LLP
<PAGE>
EXHIBIT 12.2
HOLLYWOOD PARK, INC.
CALCULATION OF PRO FORMA RATIO OF EARNINGS
TO FIXED CHARGES
(IN THOUSANDS, EXCEPT THE RATIO)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------
<S> <C> <C>
Earnings:
Pre tax income (loss)............................... $(33,402) $ 9,612
Fixed charges....................................... 20,520 8,964
Less capitalized interest........................... (1,446) 0
-------- -------
Total Earnings.................................... $(14,328) $18,576
======== =======
Fixed charges:
Capitalized interest................................ 1,446 0
Interest expense.................................... 15,468 7,398
Amortization of debt discount (premium)............. 0 0
Amortization of debt issuance costs................. 444 222
Portion of rent expense representative of the
interest factor.................................... 3,162 1,344
-------- -------
Total fixed charges............................... $ 20,520 $ 8,964
======== =======
Ratio of earnings to fixed charges.................. -- (2) 2.07
======== =======
</TABLE>
- --------
(1) In computing the ratio of earnings to fixed charges: (a) earnings have
been based on income from continuing operations before income taxes and
fixed charges (exclusive of interest capitalized) and (b) fixed charges
consist of interest and amortization of debt discount and expense
(including amounts capitalized) and the estimated interest portion of
rents.
(2) The Company's earnings were not sufficient to cover its fixed charge
requirements by $34.8 million for the year ended December 31, 1996.
