<PAGE>
As filed with the Securities and Exchange Commission on March 26, 1999.
Registration No. 333-73235
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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.
and Other Registrants
(See Table of Other Registrants Below)
(Exact name of each Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7999 95-3667491
(state or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
</TABLE>
1050 South Prairie Avenue, Inglewood, California 90301
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
---------------
G. MICHAEL FINNIGAN
Chief Financial Officer
Hollywood Park, Inc.
1050 South 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. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
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
- -------------------------------------------------------------------------------------------------
9 1/4% Series B Senior Subordinated
Notes due 2007...................... $350,000,000 100% $350,000,000 $97,300(2)
- -------------------------------------------------------------------------------------------------
Guaranties of 9 1/4% Series B Senior
Subordinated Notes due 2007......... $350,000,000 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 March 2, 1999 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>
State or Other I.R.S.
Jurisdiction of Employer
Exact Name of Registrant Incorporation Identification
as Specified in its Charter or Organization Number
- --------------------------- --------------- --------------
<S> <C> <C>
Hollywood Park Operating Company............... Delaware 95-3667220
Hollywood Park Fall Operating Company.......... Delaware 95-4093972
HP Yakama Consulting, Inc. .................... Delaware 94-4651282
HP Yakama, Inc. ............................... Delaware 95-4636368
Boomtown, Inc. ................................ Delaware 94-3044204
Hollywood Park Food Services, Inc. ............ California 95-2844591
HP/Compton, Inc. .............................. California 95-4545471
HP Casino, Inc. ............................... California 95-4548638
Crystal Park Hotel and Casino Development
Company, LLC.................................. California 95-4595453
Louisiana Gaming Enterprises, Inc. ............ Louisiana 72-1229201
Louisiana-I Gaming, a Louisiana Partnership in
Commendam..................................... Louisiana 72-1238179
Casino Magic Corp. ............................ Minnesota 64-0817483
Casino Magic American Corp. ................... Minnesota 41-1779346
Bayview Yacht Club, Inc. ...................... Mississippi 64-0824102
Mississippi-I Gaming, L.P. .................... Mississippi 64-0828954
Biloxi Casino Corp. ........................... Mississippi 64-0814408
Casino Magic Finance Corp. .................... Mississippi 64-0835473
Casino One Corporation......................... Mississippi 64-0814345
Bay St. Louis Casino Corp. .................... Mississippi 64-0814409
Mardi Gras Casino Corp. ....................... Mississippi 64-0793787
Boomtown Hotel & Casino, Inc. ................. Nevada 88-0101849
Boomtown Hoosier, Inc. ........................ Nevada 88-0355622
Indiana Ventures LLC........................... Nevada 93-1199012
Switzerland County Development Corp. .......... Nevada 95-4355039
Pinnacle Gaming Development Corp. ............. Colorado 84-1242274
Turf Paradise, Inc. ........................... Arizona 86-0114029
</TABLE>
<PAGE>
PROSPECTUS
[LOGO OF HOLLYWOOD PARK, INC.]
HOLLYWOOD PARK, INC.
OFFER TO EXCHANGE 9 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 FOR ANY
AND ALL OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
TERMS OF EXCHANGE OFFER
. Expires 5:00 p.m., New York City time, May 3, 1999, unless extended
. Subject to certain customary conditions, which we may waive
. All outstanding notes that are validly tendered and not withdrawn will be
exchanged
. Tenders of outstanding notes may be withdrawn any time prior to the
expiration of the exchange offer
. The exchange of notes should not be a taxable exchange for U.S. Federal
income tax purposes
. We will not receive any proceeds from the exchange offer
. The terms of the notes we will issue in the exchange offer are substantially
identical to the outstanding notes, except that certain transfer restrictions
and registration rights relating to the outstanding notes will not apply to
the registered notes
. Each broker-dealer that receives registered 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 notes. See "Plan of
Distribution".
For a discussion of certain factors that you should consider before
participating in this exchange offer, see "Risk Factors" commencing on page 12.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of those notes to be issued in the
exchange offer, nor have any of these organizations passed upon the adequacy or
accuracy 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, the Indiana Gaming Commission
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.
The date of this prospectus is March 29, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information...................................... i
Disclosure Regarding Forward-Looking Statements.......................... ii
Prospectus Summary....................................................... 1
Risk Factors............................................................. 12
Use of Proceeds.......................................................... 22
Capitalization........................................................... 22
Unaudited Pro Forma Combined Consolidated Financial Statements........... 23
Selected Historical Financial and Other Data............................. 31
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 35
Business................................................................. 48
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 73
Security Ownership of Certain Beneficial Owners and Management............. 81
Certain Relationships and Related
Transactions.............................................................. 83
Description of Certain Indebtedness........................................ 84
The Exchange Offer......................................................... 87
Description of Notes....................................................... 98
Certain United States Federal Income Tax Consequences...................... 141
Plan of Distribution....................................................... 144
Legal Matters.............................................................. 145
Experts.................................................................... 145
Index to Financial Statements.............................................. F-1
</TABLE>
----------------
WHERE YOU CAN FIND MORE INFORMATION
In connection with the exchange offer, we have filed with the Securities and
Exchange Commission (the "SEC" or the "Commission") a Registration Statement on
Form S-4 (together with all amendments, exhibits, schedules and supplements
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the 9 1/4% Series B Senior
Subordinated Notes. As permitted by SEC rules, this prospectus does not contain
all of the information set forth in the Registration Statement. For further
information about us and the 9 1/4% Series B Senior Subordinated Notes, you
should refer to the Registration Statement. This prospectus summarizes material
provisions of contracts and other documents to which we refer you. Since this
prospectus may not contain all of the information that you may find important,
you should review the full text of these documents. We have included copies of
these documents as exhibits to our Registration Statement.
We also file annual, quarterly and special reports, proxy statements and
other information with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). You may read and copy the Registration Statement
and our other SEC filings can be inspected and copied at the Public Reference
Section of the Commission located at Room 1024, Judiciary Plaza, 450 Fifth
Street, NW, Washington D.C. 20549. You may also obtain copies of such
materials, including copies of all or any portion of the Registration
Statement, from the Public Reference Section of the Commission at prescribed
rates. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference room. Such materials are also available on
the Commission's home page on the Internet (http://www.sec.gov). These
documents are also available for viewing at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. These incorporated documents contain
important business and financial information about us that is not included in
or delivered with this prospectus. The information incorporated by reference is
considered to be part of this prospectus, and earlier information incorporated
by reference may be updated and superseded by information in the prospectus,
and later information filed with the SEC will update and supersede the
information in this prospectus. We incorporate by reference the following:
(1) pages F-55 through F-84 of Amendment No. 4 to our Registration
Statement on Form S-4 filed February 6, 1998 (registration no. 333-34471);
i
<PAGE>
(2) our Annual Report on Form 10-K for the fiscal year ended December 31,
1997;
(3) our Quarterly Report on Form 10-Q for the quarter ended March 31,
1998;
(4) our Quarterly Report on Form 10-Q for the quarter ended June 30,
1998;
(5) our Quarterly Report on Form 10-Q for the quarter ended September 30,
1998;
(6) our Current Report on Form 8-K filed October 30, 1998;
(7) the description of our common stock set forth in our Registration
Statement on Form 8-A filed with the Commission on June 29, 1994; and
(8) all documents filed by us or our subsidiaries pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the date of this prospectus and prior to the expiration date of the
exchange offer shall be deemed to be incorporated by reference into this
prospectus from the date of filing of such documents.
THESE FILINGS ARE AVAILABLE WITHOUT CHARGE TO HOLDERS OF EXISTING NOTES. YOU
MAY REQUEST A COPY OF THESE FILINGS BY WRITING OR TELEPHONING US AT HOLLYWOOD
PARK, INC., ATTENTION: INVESTOR RELATIONS, 1050 SOUTH PRAIRIE AVENUE,
INGLEWOOD, CALIFORNIA 90301 (TELEPHONE (310) 419-1610). TO OBTAIN TIMELY
DELIVERY OF ANY COPIES OF FILINGS REQUESTED FROM US, PLEASE WRITE OR TELEPHONE
US NO LATER THAN APRIL 26, 1999.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This document includes or incorporates by reference "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
regarding, among other things, our business strategy, our prospects and our
financial position. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, they are inherently subject to
risks, uncertainties and assumptions about us and our subsidiaries. Important
factors that could cause actual results to differ materially from our
expectations are disclosed or incorporated by reference in this document, and
include, without limitation:
. the failure to complete or successfully operate planned expansion
projects;
. the failure to obtain adequate financing to meet our strategic goals;
. difficulties in completing the integration of Hollywood Park and Casino
Magic;
. the failure to obtain or retain licenses or regulatory approvals;
. and the other factors set forth under "Risk Factors."
All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements included in this document. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
document might not occur.
ii
<PAGE>
PROSPECTUS SUMMARY
The following summary contains basic information about this exchange offer.
It likely does not contain all the information that may be important to you.
For a more complete understanding of this exchange offer, we encourage you to
read this entire document and the documents we have referred you to, including
the financial data and the information set forth under the heading "Risk
Factors."
Unless the context may otherwise require, "we," "us," "our" and similar
terms, as well as references to "Hollywood Park" and the "Company" refer to
Hollywood Park, Inc. and its subsidiaries, except that all non-financial data
(1) for periods prior to October 15, 1998 do not include Casino Magic Corp.
("Casino Magic") (which we acquired on that date) and (2) for periods prior to
June 30, 1997 do not include Boomtown, Inc. (which we acquired on that date).
Certain information in this document is given for Hollywood Park, Inc. and its
"Restricted Subsidiaries" under the Indenture governing the 9 1/4% Senior
Subordinated Notes, on a consolidated basis, excluding the "Unrestricted
Subsidiaries" (the "Restricted Group").
The Company
General
We are a diversified gaming company that owns and/or operates eight casinos,
two pari-mutuel horse racing facilities, and two card club casinos at twelve
locations in Nevada, Mississippi, Louisiana, California, Arizona and Argentina.
We have also been approved to receive the final license to conduct riverboat
gaming on the Ohio River in Indiana and have begun development of a $150
million hotel/casino and golf resort at a site in Switzerland County, Indiana,
35 miles southwest of Cincinnati, Ohio. In addition to our operating
properties, we have significant excess land available for future sale or
development at four of our properties.
As part of our business strategy, we acquired Boomtown on June 30, 1997 and
Casino Magic on October 15, 1998. These companies own strategically located
properties in growing and established gaming markets and, at the time we
acquired them, were for the most part underperforming and had limited access to
capital for expansion. We recently hired four members of the senior management
team of Horseshoe Gaming to actively participate in the overall execution of
our business and operating strategies, including re-positioning the Boomtown
and Casino Magic properties and overseeing the construction and operations of
the Indiana Hotel and Casino Resort.
In light of the Boomtown and Casino Magic acquisitions, the following may be
helpful to give you an idea of the current size of our company. If the
acquisitions and related transactions had occurred on January 1, 1997 (which we
refer to as being on a "pro forma" basis), our total revenues would have been
approximately $610.8 million for the year ended December 31, 1997 and
approximately $495.2 million for the nine months ended September 30, 1998. On a
pro forma basis, earnings before interest, taxes, depreciation and amortization
(abbreviated as "EBITDA") would have totaled approximately $104.6 million for
the year ended December 31, 1997 and approximately $93.2 million for the nine
months ended September 30, 1998. On this basis, and giving effect to the
issuance of the 9 1/4% Senior Subordinated Notes on a pro forma basis, net loss
would have totaled $6.6 million for the year ended December 31, 1997 and net
income of approximately $4.0 million for the nine months ended September 30,
1998. In addition, on a pro forma basis, as of September 30, 1998, we would
have had total assets of approximately $966.4 million. On a pro forma basis,
after giving effect to the issuance of the 9 1/4% Senior Subordinated Notes,
including our use of proceeds from the sale of the 9 1/4% Series A Senior
Subordinated Notes, we would have had total indebtedness of approximately
$623.2 million as of September 30, 1998.
1
<PAGE>
Here is an overview of our gaming properties:
<TABLE>
<CAPTION>
Gaming Excess
Type of Square Slot Table Hotel Developable
Location/Property Gaming Facility Footage Machines Games Rooms Land (acres)
- ----------------- ------------------ ------- -------- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Bossier City, Louisiana
Casino Magic
Bossier(1)........... Dockside Riverboat 30,000 980 44 188 --
Harvey, Louisiana
Boomtown New Orleans.. Cruising Riverboat 30,000 1,089 49 -- --
Bay St. Louis,
Mississippi
Casino Magic Bay St.
Louis................ Dockside 39,500 1,132 42 201 50
Biloxi, Mississippi
Boomtown Biloxi....... Dockside 33,632 1,308 35 -- --
Casino Magic Biloxi... Dockside 47,700 1,174 41 378 --
Verdi, Nevada
Boomtown Reno......... Land-based 40,000 1,320 44 322 250
Los Angeles, California
Hollywood Park Race
Track................ Horse Racing -- -- -- -- 160
Hollywood Park-
Casino............... Card Club 30,000 -- 145 -- --
Crystal Park(2)....... Card Club 30,000 -- 60 226 --
Phoenix, Arizona
Turf Paradise......... Horse Racing -- -- -- -- 100
Neuquen Province,
Argentina(3)
Casino Magic Neuquen.. Land-based 27,000 398 40 -- --
Casino Magic San
Martin de los Andes.. Land-based 2,500 75 16 -- --
------- ----- --- ----- ---
SUBTOTAL ........... 310,332 7,476 516 1,315 560
Development Project
- -------------------
Switzerland County,
Indiana
Indiana Hotel/Casino
Resort (4)........... Cruising Riverboat 38,000 1,300 55 309 --
------- ----- --- ----- ---
TOTAL .............. 348,332 8,776 571 1,624 560
======= ===== === ===== ===
</TABLE>
- --------
(1) Casino Magic Bossier is owned by our wholly-owned subsidiary, Casino Magic
of Louisiana, Corp., which is an unrestricted subsidiary under the
Indenture governing the 9 1/4% Senior Subordinated Notes and does not
guarantee the 9 1/4% Senior Subordinated Notes.
(2) We own Crystal Park and lease it to an unaffiliated operator.
(3) We own 51% of Casino Magic's Neuquen Province casinos.
(4) We own 97% of the Indiana Hotel/Casino Resort, which we expect to complete
within 18 to 24 months.
2
<PAGE>
Business Strategy
Our strategic plan is to develop a broad base of regionally diversified
casino entertainment facilities by making selected acquisitions in the non-Las
Vegas, non-Atlantic City gaming markets and achieving economies of scale. In
the realization of this strategy, we acquired Boomtown on June 30, 1997, and
Casino Magic on October 15, 1998. Our management seeks to develop its casinos
and maximize profitability by:
. refinancing expensive debt;
. fostering customer loyalty by offering a value oriented, quality customer
service gaming experience;
. providing gaming and entertainment facilities uniquely designed for each
property and target customer base; and
. using focused direct marketing incentives.
Specific growth initiatives vary by property type:
. Boomtown Casinos. Since the acquisition, we refinanced Boomtown's
expensive debt and undertook various capital expenditure programs to
enlarge and enhance the facilities. The three Boomtown casinos are now
fully developed facilities that serve their local markets in a relaxed
and customer-friendly environment. The goal for our new management team
with respect to the Boomtown casinos is to maximize profitability through
cost control and increase market share through improved marketing.
. Casino Magic Properties. We believe the Casino Magic properties offer
significant growth potential through improved management and re-
positioning of the brand to a more upscale and exciting image. The
properties are well-located and have ample room for limited and focused
capital spending to make them more attractive and customer-friendly via
parking and room additions, casino expansion and renovation, and
additional entertainment amenities. We have already refinanced some high
cost debt at Casino Magic and completed a hotel development at Casino
Magic Bossier.
. Indiana Hotel/Casino Resort. On September 14, 1998, the Indiana Gaming
Commission approved us to receive the final riverboat gaming license on
the Ohio River in Indiana. We own 97% of the project, which is located on
a 197-acre site only 35 miles southwest of Cincinnati, Ohio and will be
the most accessible gaming facility from Lexington and other parts of
northern Kentucky. The project is expected to cost approximately $150
million (including land and pre-opening expenses but excluding
capitalized interest) and will include a cruising riverboat with 38,000
square feet of gaming space, a land-based facility with a 309-room hotel,
restaurants, convention space, an 18-hole championship golf course and
related amenities. The Indiana Hotel/Casino Resort is currently scheduled
to open in 18 to 24 months; however, there can be no assurance that
construction, regulatory or other issues will not delay the opening.
. Excess Land. There is significant excess land surrounding the Hollywood
Park and Turf Paradise properties. The land at these sites, totaling
approximately 653 acres, has a book value of $13.1 million. Management
believes the fair market value of the land is approximately $230 million.
Of the total acreage, approximately 260 acres are available for sale or
development. We also have excess land at our Reno and Bay St. Louis
properties. While this land offers extensive expansion opportunity at
each of these properties, we will aggressively pursue realization of
value through sale and/or development (including joint venture
arrangements).
. Additional Acquisitions. We continually evaluate opportunities to expand
and diversify our operations through acquisitions of gaming entities
operating in markets outside Las Vegas and Atlantic City, including
entities that are unable to maximize their potential due to capital
constraints or operating inefficiencies. We believe that our financial
and management resources can significantly improve the operations of
acquired entities. We have applied this strategy in both our recent
acquisition of Casino Magic and our earlier acquisition of Boomtown. In
both cases, we have streamlined operations, implemented expansion
projects and refinanced expensive debt.
3
<PAGE>
Recent Developments
Acquisition of Casino Magic
On October 15, 1998, we acquired Casino Magic for approximately $80.9
million in cash. In addition, Casino Magic had approximately $268.4 million of
indebtedness. For the nine months ended September 30, 1998, on a pro forma
basis Casino Magic had EBITDA of approximately $45.1 million. In keeping with
our business strategy, following the acquisition, we (1) eliminated redundant
management positions to streamline operations; (2) accelerated completion of
the 188-room hotel under construction at Casino Magic Bossier; and (3) reduced
interest expense by redeeming $135 million aggregate principal amount of Casino
Magic's 11 1/2% First Mortgage Notes at a redemption price of 103.833% of
principal amount plus accrued interest.
Bank Credit Facility
In connection with the Casino Magic acquisition, we executed an Amended and
Restated Reducing Revolving Loan Agreement ("Bank Credit Facility") with a
group of banks led by Bank of America National Trust and Savings Association
("Bank of America NT&SA") as Administrative Agent. This facility provides for a
reducing revolving line of credit of up to $300 million, with an option to
increase the facility by an additional $75 million, and expires on December 31,
2003. The facility is secured by liens on substantially all of our assets and
those of our material subsidiaries, except for Casino Magic of Louisiana, Corp.
and our Argentina subsidiaries. At December 31, 1998, the weighted average
interest rate under the Bank Credit Facility was 7.3%.
Consent Solicitation
We solicited consents to amend the indenture governing the 9 1/2% Senior
Subordinated Notes due 2007 (which we refer to as the "9 1/2% Notes") to create
more flexibility in certain of the covenants and to conform certain of the
covenants in the 9 1/2% Notes indenture to the covenants then proposed for the
indenture governing the 9 1/4% Senior Subordinated Notes. We received such
consents from the holders of a majority of the principal amount of the 9 1/2%
Notes and on February 5, 1999, we executed a supplemental indenture which,
among other things, lowers the required minimum consolidated coverage ratio to
2.00:1.00 and increases the size of our allowed borrowings under our Bank
Credit Facility from $100 million to $350 million. We paid holders of the 9
1/2% Notes $50.00 for each $1,000 principal amount of the 9 1/2% Notes for
which consents were obtained.
----------------
Our principal executive offices are located at 1050 South Prairie Avenue,
Inglewood, California, 90301. Our telephone number is (310) 419-1500.
4
<PAGE>
Summary of the Exchange Offer
The Exchange Offer.......... We are offering to exchange up to $350,000,000
aggregate principal amount of our new 9 1/4%
Series B Senior Subordinated Notes due 2007 which
have been registered under the Securities Act
(the "Exchange Notes") for a like amount of our
outstanding 9 1/4% Series A Senior Subordinated
Notes due 2007 which were issued in February 1999
in a private offering (the "Old Notes" and
together with the Exchange Notes, the "Notes").
The Exchange Notes are substantially identical to
the Old Notes, except that the Exchange Notes are
freely transferable by their holders (other than
as provided herein), and are not subject to any
covenant regarding registration under the
Securities Act.
Interest Payments........... The Exchange Notes will bear interest from their
date of issuance. Interest will accrue on the Old
Notes that are tendered in exchange for the
Exchange Notes through the issue date of the
Exchange Notes. Holders 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 Exchange
Notes, on the first interest payment date after
the expiration date.
Minimum Condition........... We are not conditioning the exchange offer on any
minimum aggregate principal amount of Old Notes
being tendered for exchange.
Expiration Date............. The exchange offer will expire at 5:00 p.m., New
York City time, on May 3, 1999, unless we decide
to 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.
Withdrawal Rights........... You may withdraw your tender at any time prior to
5:00 p.m., New York City time, on the expiration
date.
Exchange Date............... The date of acceptance for exchange of the Old
Notes will be as soon as practicable after the
expiration date.
Conditions to the Exchange
Offer...................... The exchange offer is subject to certain
customary conditions, which we may waive. In
addition, the issuance of the Exchange Notes in
the exchange offer requires the approval of the
Indiana Gaming Commission. We currently expect
that each of the conditions will be satisfied and
that no waivers will be necessary. See "The
Exchange Offer--Certain Conditions to the
Exchange Offer". We reserve the right to
terminate or amend the exchange offer at any time
before the expiration date if any such condition
occurs.
Procedures for Tendering
Old Notes.................. If you are a holder of Old Notes who wishes to
accept the exchange offer, you must complete,
sign and date the accompanying Letter of
Transmittal, or a facsimile thereof, or arrange
for The Depository Trust Company ("DTC") to
transmit certain required information to the
exchange agent in connection with a book-entry
transfer or
5
<PAGE>
mail or otherwise deliver such documentation,
together with your Old Notes, to the exchange
agent at the address set forth under "The
Exchange Offer--Exchange Agent".
By tendering your Old Notes in this manner, you
will be representing among other things, that:
. the Exchange Notes you acquire pursuant to the
exchange offer are being acquired in the
ordinary course of your business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the Exchange Notes
issued to you in the exchange offer; and
. you are not an "affiliate" of ours.
Use of Proceeds............. We will not receive any proceeds from the
issuance of Exchange Notes pursuant to the
exchange offer. We will pay all our expenses
incident to the exchange offer.
Certain United States
Federal Income Tax
Consequences............... The exchange of notes pursuant to the exchange
offer should not be a taxable event for federal
income tax purposes. See "Certain United States
Federal Income Tax Consequences".
Special Procedures for
Beneficial Owners.......... If you beneficially own Old Notes registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to
tender your Old Notes in the exchange offer, you
should contact such registered holder promptly
and instruct it to tender on your behalf. If you
wish to tender on your own behalf, you must,
prior to completing and executing the Letter of
Transmittal and delivering your Old Notes, either
arrange to have your Notes registered in your
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable time.
Guaranteed Delivery
Procedures................. If you wish to tender your Old Notes and time
will not permit your required documents to reach
the exchange agent by the expiration date, or the
procedure for book-entry transfer cannot be
completed on time, you may tender your Old Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Procedures for
Tendering Old Notes".
Acceptance of Old Notes and
Delivery of Exchange
Notes...................... We will accept for exchange all Old Notes which
are properly tendered in the exchange offer prior
to 5:00 p.m., New York City time, on the
expiration date. The Exchange Notes issued
pursuant to the exchange offer will be delivered
promptly following the expiration date. See "The
Exchange Offer--Acceptance of Old Notes for
Exchange; Delivery of Exchange Notes".
Effect on Holders of Old
Notes...................... As a result of this exchange offer, we will have
fulfilled a covenant contained in the
Registration Rights Agreement (the "Registration
Rights Agreement") dated as of February 18, 1999
among
6
<PAGE>
Hollywood Park, Inc., each of the subsidiary
guarantors named therein and Lehman Brothers
Inc., CIBC Oppenheimer Corp., Morgan Stanley &
Co. Incorporated, NationsBanc Montgomery
Securities LLC, SG Cowen Securities Corporation
and Wasserstein Perella Securities, Inc. (the
"Initial Purchasers") and, accordingly, there
will be no liquidated damages paid on the Old
Notes. If you do not tender your Old Notes in the
exchange offer, you will continue to hold such
Old Notes and will be entitled to all the rights
and limitations applicable thereto under the
Indenture dated as of February 18, 1999 among
Hollywood Park, Inc., the subsidiary guarantors
named therein and The Bank of New York as trustee
(the "Trustee") relating to the Old Notes and the
Exchange Notes (the "Indenture"), except for any
rights under the Registration Rights Agreement
that terminate as a result of the acceptance for
exchange of validly tendered Old Notes pursuant
to the exchange offer. If you do not tender your
Old Notes, you will not have any further
registration or exchange rights and your Old
Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the
trading market for untendered Old Notes could be
adversely affected.
Exchange Agent.............. The Bank of New York is serving as exchange agent
in connection with the exchange offer.
7
<PAGE>
Summary of Terms of the Exchange Notes
Capitalized terms used under this heading "Summary of Terms of the Exchange
Notes" have been defined under the heading "Description of Notes--Certain
Definitions." The Exchange Notes will evidence the same debt as the Old Notes
and will be entitled to the benefits of the Indenture. The following summary of
terms applies equally to the Exchange Notes and the Old Notes.
Issuer...................... Hollywood Park, Inc.
Securities Offered.......... $350,000,000 in principal amount of 9 1/4% Senior
Subordinated Notes due 2007.
Maturity.................... February 15, 2007.
Interest.................... Annual Rate -- 9 1/4%.
Payment frequency -- every six months on February
15 and August 15.
First payment -- August 15, 1999.
Subsidiary Guarantors....... Each guarantor is our subsidiary. However, not
all of our subsidiaries are guarantors of these
Notes. In particular, the following subsidiaries
are not guarantors: Casino Magic of Louisiana,
Corp., which owns our casino in Bossier City; its
immediate parent entity, Jefferson Casino
Corporation; Casino Magic Management Services
Corp., which provides management services at
Casino Magic Bossier; and Casino Magic Neuquen,
the company that owns our casinos in Argentina,
and its subsidiary. If we cannot make payments on
the Notes when they are due, the guarantor
subsidiaries must make them instead.
Optional Redemption......... On or after February 15, 2003, we may redeem some
or all of the Notes at any time at the redemption
prices listed in the section "Description of
Notes" under the heading "Optional Redemption."
Before February 15, 2002, we may redeem up to 25%
of the Notes initially issued with the proceeds
of certain offerings of equity in our Company at
109.25% of principal amount, plus accrued and
unpaid interest. See "Optional Redemption" in
"Description of Notes."
Change of Control Offer and
Asset Sale Offer........... If we experience specific kinds of changes of
control, we must offer to repurchase the Notes at
101% of their principal amount, plus accrued and
unpaid interest through, but not including, the
date of purchase. If we sell certain assets,
under certain circumstances we must offer to
repurchase the Notes at 100% of their principal
amount, plus accrued and unpaid interest through,
but not including, the date of purchase. See
"Repurchase at the Option of Holders-- Change of
Control" and "--Asset Sales" in the section
"Description of Notes."
Ranking..................... These Notes and the subsidiary guarantees are
senior subordinated debts.
8
<PAGE>
They rank behind all of our and our guarantor
subsidiaries' current and future senior debt,
which includes all borrowings under our Bank
Credit Facility and all other indebtedness, other
than our $125 million of 9 1/2% Notes, our trade
payables and any indebtedness that expressly
provides that it is not senior to these Notes and
the subsidiary guarantees.
Assuming we had completed this offering on
September 30, 1998 and applied the proceeds as
intended, these Notes and the subsidiary
guarantees:
. would have been subordinated to approximately
$31.1 million of senior debt;
. would have been effectively junior to
approximately $140.5 million of liabilities of
our unrestricted subsidiaries; and
. would have ranked equally with the $125 million
aggregate principal amount of 9 1/2% Notes.
Basic Covenants of
Indenture................... The Indenture restricts our ability and the
ability of our restricted subsidiaries to, among
other things:
. borrow money;
. pay dividends on or purchase our stock or our
restricted subsidiaries' stock;
. make investments;
. use assets as security in other transactions;
. sell certain assets or merge with or into other
companies; and
. enter into transactions with affiliates.
Certain of our subsidiaries are not subject to
the covenants in the Indenture. For more details,
see the section "Description of Notes" under the
heading "Certain Covenants."
For a discussion of certain factors that should be considered in connection
with an investment in the Notes, see "Risk Factors."
9
<PAGE>
Unaudited Summary Pro Forma Financial Data
The following unaudited summary pro forma combined consolidated statement of
operations for the year ended December 31, 1997 was prepared by combining
Hollywood Park's results with the following and reflects: (1) Boomtown's
results prior to Hollywood Park's June 30, 1997 acquisition of Boomtown
(exclusive of approximately a $1.9 million net loss, associated with Boomtown's
Las Vegas property, which was sold on July 1, 1997), including the early
retirement of $102.2 million principal amount of the Boomtown first mortgage
notes, (2) Hollywood Park's issuance of the 9 1/2% Notes; (3) Casino Magic's
results for the full year 1997 (Casino Magic was acquired on October 15, 1998),
including the redemption of $135 million principal amount of Casino Magic's 11
1/2% First Mortgage Notes; (4) the issuance of the Notes; and (5) the consent
fee paid to holders of the 9 1/2% Notes in the consent solicitation.
The following unaudited summary pro forma combined consolidated statement of
operations for the nine months ended September 30, 1998, was prepared by
combining Hollywood Park's results of operations with those of Casino Magic and
reflects: (1) the acquisition of Casino Magic (acquired on October 15, 1998),
including the redemption of $135 million principal amount of Casino Magic's 11
1/2% First Mortgage Notes; (2) the issuance of the Notes; and (3) the consent
fee paid to holders of the 9 1/2% Notes in the consent solicitation.
The following unaudited pro forma combined consolidated balance sheet has
been prepared by combining the unaudited balance sheets of Hollywood Park and
Casino Magic, both as of September 30, 1998, and reflects: (1) acquisition of
Casino Magic (acquired on October 15, 1998), including the redemption of
$135 million principal amount of Casino Magic's 11 1/2% First Mortgage Notes;
(2) the issuance of the Notes; and (3) the consent fee paid to holders of the 9
1/2% Notes in the consent solicitation.
The following financial information is based on, and should be read in
conjunction with, the historical consolidated financial statements and related
notes of Hollywood Park and Casino Magic and the unaudited pro forma combined
consolidated financial statements included elsewhere in this prospectus. This
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 Casino Magic acquisition and the issuance of the
Notes had occurred in an earlier period, nor is it necessarily indicative of
the future operating results or financial position.
Under the Indenture governing the Notes, the following subsidiaries have
been initially designated as "Unrestricted Subsidiaries": Casino Magic of
Louisiana, Corp., Jefferson Casino Corporation (the parent company of Casino
Magic of Louisiana, Corp.), Casino Magic Management Services Corp., and two
Argentina subsidiaries, Casino Magic Neuquen SA and Casino Magic Support
Services SA. Pro forma information under the heading "Total Company Pro Forma"
is provided for Hollywood Park and its subsidiaries, on a consolidated basis,
including the Unrestricted Subsidiaries (and is sometimes referred to as the
"Total Company"). Pro forma information under the heading "Restricted Group Pro
Forma" excludes the Unrestricted Subsidiaries and is provided for Hollywood
Park and its "Restricted Subsidiaries" under the Indenture, on a consolidated
basis (and is sometimes referred to as the "Restricted Group"). Hollywood
Park's Restricted Subsidiaries are all of its subsidiaries except for the
Unrestricted Subsidiaries.
10
<PAGE>
Summary Unaudited Pro Forma Financial Data
<TABLE>
<CAPTION>
Total Company Pro Forma Restricted Group Pro Forma
-------------------------- --------------------------
Nine months Nine months
Year ended ended Year ended ended
December 31, September 30, December 31, September 30,
1997 1998 1997 1998
------------ ------------- ------------ -------------
(in thousands, except ratios)
<S> <C> <C> <C> <C>
Income statement data:
Revenues............... $610,831 $495,175 $499,580 $395,060
Operating expenses..... 555,262 439,200 455,197 357,349
Operating income....... 55,569 55,975 44,383 37,711
Interest expense....... 61,154 46,749 44,227 34,118
Income (loss) before
extraordinary item.... (6,582) 3,999 675 997
Dividends on
convertible preferred
stock(a).............. 1,520 0 1,520 0
Income (loss) before
extraordinary item
allocated to common
shareholders.......... (8,102) 3,999 (845) 997
Other data:
Operating income......... $ 55,569 $ 55,975 $ 44,383 $ 37,711
Depreciation and
amortization............ 49,002 37,210 41,830 31,315
-------- -------- -------- --------
EBITDA(b)................ 104,571 93,185 86,213 69,026
Non-recurring expenses:
REIT restructuring..... 2,483 0 2,483 0
Hollywood Park/Boomtown
merger costs.......... 1,487 0 1,487 0
Hollywood Park/Casino
Magic merger costs.... 0 4,838 0 3,084
-------- -------- -------- --------
Adjusted EBITDA.......... $108,541 $ 98,023 $ 90,183 $ 72,110
======== ======== ======== ========
Ratio of Adjusted
EBITDA to interest
expense............... 1.77x 2.10x 2.04x 2.11x
Ratio of earnings to
fixed charges(c)...... 0.85x 1.06x 0.91x 0.97x
Balance sheet data:
Cash and cash
equivalents........... -- $104,837 -- $ 97,356
Total assets........... -- 966,418 -- 815,662
Total debt (current and
long term)............ -- 623,228 -- 506,088
Net debt(d)............ -- 514,932 -- 406,872
Stockholders' equity... -- 225,624 -- 218,907
</TABLE>
- --------
(a) As of August 28, 1997 Hollywood Park had caused conversion of all
convertible preferred stock, into 2,291,492 shares of Hollywood Park common
stock, and eliminated the future quarterly dividends.
(b) EBITDA is not a measure of financial performance under GAAP, but is used by
some investors to determine a company's ability to service or incur
indebtedness. EBITDA and Adjusted EBITDA are not calculated in the same
manner by all entities and accordingly, may not be appropriate measures for
performance. Neither EBITDA nor Adjusted EBITDA should be considered in
isolation from, or as a substitute for, net income (loss), cash flows from
operations or cash flow data prepared in accordance with GAAP.
(c) In computing the ratio of earnings to fixed charges: (1) earnings were
calculated from income from continuing operations, before income taxes and
fixed charges, and excluding capitalized interest and; (2) fixed charges
were computed from interest expense, amortization of debt issuance costs,
capitalized interest, and the estimated interest included in rental
expense. Hollywood Park's total company pro forma earnings for the year
ended December 31, 1997, were not sufficient to cover its pro forma fixed
charge requirement by $9.9 million. Hollywood Park's restricted group pro
forma earnings for the year ended December 31, 1997, and for the nine
months ended September 30, 1998, were not sufficient to cover its pro forma
fixed charge requirements by $4.1 million and $1.1 million, respectively.
(d) Net debt is total debt (current and long term) less cash and cash
equivalents and short term investments.
11
<PAGE>
RISK FACTORS
In addition to the other matters described in this prospectus, you should
carefully consider the following factors in connection with your decision to
accept the exchange offer. Many of the risk factors set forth below are equally
applicable to the Old Notes.
Old Notes Outstanding After the Exchange Offer Will Not Have Registration
Rights and We Expect the Market for such Old Notes to be Illiquid
If you do not exchange your Old Notes for Exchange Notes pursuant to the
exchange offer, you will continue to be subject to the restrictions on transfer
of such Old Notes. In general, you may not offer or sell Old Notes unless they
are registered under the Securities Act, 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. We do not currently intend
to register the Old Notes under the Securities Act. Based on interpretations by
the staff of the Commission, we believe that Exchange Notes issued pursuant to
the exchange offer may be offered for resale, resold or otherwise transferred
by their holders (unless such holder is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, so long
as the Old Notes were acquired in the ordinary course of the holders' business
and such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
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, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution."
To the extent that Old Notes are tendered and accepted in the exchange offer,
the trading market for untendered and tendered but unacceptable Old Notes will
be adversely affected.
You Cannot Be Sure that an Active Trading Market Will Develop for the Exchange
Notes
We are offering the Exchange Notes to the holders of the Old Notes. The Old
Notes were offered and sold in February 1999 to institutional investors and are
eligible for trading in the Private Offerings, Resale and Trading through
Automatic Linkages (PORTAL) Market.
We do not intend to apply for a listing of the Exchange Notes on a
securities exchange or on any automated dealer quotation system. There is
currently no established market for the Exchange Notes and we cannot assure you
as to the liquidity of markets that may develop for the Exchange Notes, your
ability to sell the Exchange Notes or the price at which you would be able to
sell the Exchange Notes. If such markets were to exist, the Exchange Notes
could trade at prices that may be lower than their principal amount or purchase
price depending on many factors, including prevailing interest rates and the
markets for similar securities. We expect that the Exchange Notes will be
designated for trading in the PORTAL market. The Initial Purchasers have
advised us that they currently intend to make a market with respect to the
Exchange Notes. However, the Initial Purchasers are not obligated to do so, and
any market making with respect to the Exchange Notes 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. Moreover, you cannot be sure that
the Exchange Notes will trade as one class with the Old Notes.
The liquidity of, and trading market for, the Exchange 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 our financial performance and prospects.
12
<PAGE>
We Have a Significant Amount of Debt
We have a significant amount of debt. The following chart shows certain
important credit statistics and is presented assuming we had completed the Old
Notes offering as of the dates or at the beginning of the periods specified
below and applied the proceeds as intended:
<TABLE>
<CAPTION>
Total Company
Pro Forma as of
September 30, 1998
-------------------------
(in thousands, unaudited)
<S> <C>
Total debt......................................... $623,228
Stockholders' equity............................... $225,624
Debt to equity ratio............................... 2.76x
</TABLE>
<TABLE>
<CAPTION>
Total Company Pro Forma
--------------------------------------------
For the Year Ended For the Nine Months Ended
December 31, 1997 September 30, 1998
------------------ -------------------------
<S> <C> <C>
Ratio of earnings to fixed
charges......................... 0.85x 1.06x
</TABLE>
Based upon our current level of operations and anticipated improvements, we
believe that our cash flow from operations, together with proceeds from this
offering and amounts we are able to borrow under our Bank Credit Facility, will
be adequate to meet our anticipated requirements for working capital, capital
expenditures, planned expansion costs and project development and acquisition
efforts, interest payments and scheduled principal payments for the foreseeable
future, and in any event for at least the next twelve months. Our ability to
make scheduled payments of principal and interest on and to refinance our debt,
including these Notes, and to fund planned expansion costs and project
development and acquisition efforts will depend on our ability to generate cash
in the future. We do not have complete control over our future performance
because it is subject to economic, financial, competitive, regulatory and other
factors affecting the gaming industry. It is possible that in the future our
business may not generate sufficient cash flow from operations to allow us to
service our debt and make necessary capital expenditures. If this situation
occurs, we may have to sell assets, restructure debt or obtain additional
equity capital. We cannot be sure that we would be able to do so or do so
without additional expense. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
Our level of debt may have important consequences on your investment in the
Notes. These consequences include:
. requiring a substantial portion of our cash flow from operations to be
used to pay interest and principal on our debt and therefore be
unavailable for other purposes including capital expenditures, project
expansion, development and acquisition efforts;
. limiting our ability to obtain additional financing;
. incurring higher interest expense in the event of increases in interest
rates on our borrowings which have variable interest rates;
. heightening our vulnerability to downturns in our business or in the
general economy and restricting us from making improvements or
acquisitions, or exploiting business opportunities; and
. limiting our ability to dispose of assets or pay cash dividends.
Failure to comply with these limitations could result in an event of default
under our debt agreements which, if not cured or waived, could result in a
significant portion of our debt becoming due and payable. We are not certain
that in such event we would have, or be able to obtain, sufficient funds to
make such accelerated payments, including payments on the Notes.
13
<PAGE>
We May Still Be Able to Incur Substantially More Debt
We and our subsidiaries may be able to incur substantial additional debt in
the future. The terms of the Indenture do not fully prohibit us or our
subsidiaries from doing so. Subject to satisfying the conditions for borrowing
under our Bank Credit Facility, the full amount remains fully available to us
even after completion of the Old Notes offering and all borrowings under our
Bank Credit Facility would be senior to the Notes and the subsidiary
guarantees. If new debt is added to our and our subsidiaries' current debt
levels, the related risks that we and they now face could intensify.
See "Capitalization," "Selected Financial Data," "Description of Notes--
Repurchase at Option of Holder--Change of Control" and "Description of Certain
Indebtedness--The Bank Credit Facility."
These Notes are Subordinated to Senior Debt and Effectively Subordinated to
Debt of Our Non-Guarantor Subsidiaries
These Notes and the subsidiary guarantees rank behind all of our and the
subsidiary guarantors' existing debt (other than our 9 1/2% Notes and trade
payables) and all of our and their future borrowings (other than trade
payables), except any future debt that expressly provides that it ranks equal
with, or subordinated in right of payment to, the Notes and the guarantees. As
a result, upon any distribution to our creditors or the creditors of the
guarantors in a bankruptcy, liquidation or reorganization or similar proceeding
relating to us or the guarantors or our or their property, the holders of
senior debt of Hollywood Park and the guarantors will be entitled to be paid in
full before any payment may be made with respect to these Notes or the
subsidiary guarantees. Further, our Bank Credit Facility is secured by
substantially all of our assets and those of our material subsidiaries, except
for Jefferson Casino Corporation, Casino Magic of Louisiana, Corp. and our
Argentina subsidiaries, Casino Magic Neuquen SA and Casino Magic Support
Services SA.
In addition, all payments on the Notes and the guarantees will be blocked in
the event of a payment default on senior debt and may be blocked for up to 179
of 360 consecutive days in the event of certain non-payment defaults on senior
debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantors, holders of the Notes will
participate with the holders of the 9 1/2% Notes, trade creditors and all other
holders of our subordinated debt and that of the guarantors in the assets
remaining after we and the subsidiary guarantors have paid all of the senior
debt. However, because the Indenture requires that amounts otherwise payable to
holders of the Notes in a bankruptcy or similar proceeding be paid to holders
of senior debt instead, holders of the Notes may receive less, ratably, than
holders of trade payables in any such proceeding. In any of these cases, we and
the subsidiary guarantors may not have sufficient funds to pay all of our
creditors. In addition, any amounts that holders of the Notes would become
entitled to in a bankruptcy or a similar proceeding would have to be shared
with the holders of the 9 1/2% Notes.
Assuming we had completed the Old Notes offering on September 30, 1998,
these Notes and the subsidiary guarantees would have been subordinated to $31.1
million of senior debt. We are permitted to borrow substantial additional debt,
including senior debt, in the future under the terms of the Indenture.
Moreover, some but not all of our subsidiaries guarantee the Notes. For
example, Casino Magic of Louisiana, Corp., which owns Casino Magic Bossier, and
Casino Magic Neuquen, the entity that operates the casinos in Argentina, are
not guarantors. In the event of a bankruptcy, liquidation or reorganization of
any of the non-guarantor subsidiaries, holders of their debt and their trade
creditors will generally be entitled to payment of their claims from the assets
of those subsidiaries before any assets are made available for distribution to
us. Assuming we had completed the Old Notes offering on September 30, 1998,
these Notes would have been effectively junior to approximately $140.5 million
of debt and other liabilities (including trade payables) of these non-guarantor
subsidiaries. On a pro forma basis, the non-guarantor subsidiaries generated
20.2% of our consolidated revenues in the nine-month period ended September 30,
1998 and held 15.6% of our consolidated assets as of September 30, 1998.
14
<PAGE>
We Face Significant Competition From Other Gaming Operations
We face significant competition in each of the jurisdictions in which we
have gaming operations. We expect this competition to intensify as new gaming
operators enter our markets and existing competitors expand their operations.
Our properties compete directly with other gaming properties in Louisiana,
Mississippi, Nevada, California and Arizona. To a lesser extent, we also
compete 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 our competitors have substantially greater name
recognition and marketing resources as well as access to lower-cost sources of
financing.
Competition in the Gulf Coast Markets. Our casinos in the Gulf Coast area
have experienced intense competition. In Mississippi, competing casino
operations have expanded and, as a result, a number of casinos in the Gulf
Coast market have failed. Further, Mississippi law does not limit the number of
gaming licenses that may be granted. Mirage Resorts is constructing a $650
million, 1,800-room hotel and casino in Biloxi and, in Bay St. Louis, Circus
Circus has announced plans to construct a $225 million, 1,500-room hotel and
casino at a location on Interstate 10 that would compete with our Bay St. Louis
property. Additionally, Park Place Entertainment has acquired and expects to
further develop Grand Casino's Biloxi property, and expects to complete Grand
Casino's construction of a 600-room expansion to its Gulfport facility, located
near Bay St. Louis, in June 1999.
In the Bossier City/Shreveport market, our 188-room, 30,000 gaming square
foot Casino Magic hotel/casino competes with three other properties. Two of
these properties are substantially similar to ours in size. The third,
Horseshoe Casino, recently completed construction of a 606-room luxury hotel
and 62,400 square foot, four-deck riverboat with approximately 30,000 square
feet of gaming space, making it the largest in the Bossier City/Shreveport
market. Additionally, Isle of Capri Casinos is currently constructing a 305-
room suite hotel, which is expected to open in the second quarter of 1999. A
consortium led by Hollywood Casino (which is not affiliated with Hollywood
Park, Inc.) recently received approval for a $185 million riverboat casino and
hotel in Shreveport. Finally, Harrah's announced a 500-room hotel at its
existing property in Shreveport.
In the New Orleans market, Harrah's is currently constructing a land-based
casino entertainment facility. The casino, which is scheduled to open in the
third quarter of 1999, will be the only land-based casino entertainment
facility in New Orleans.
While we believe we have been able to effectively compete in these markets
to date, increasing competition may adversely affect our gaming operations in
the future. We believe that increased legalized gaming in other states,
particularly in areas close to some of our existing gaming properties, such as
in Texas and Alabama, could adversely affect our operations.
Proposition 5; Competition in our California and Reno Markets. Indian tribes
have operated casinos in California for approximately ten years. There are
about 40 gambling halls currently operated by Indian tribes in California, but
most are significantly smaller than typical casinos in Las Vegas. In November
1998, California voters passed Proposition 5, a ballot initiative that, upon
becoming effective, would allow Indian tribes to conduct various gaming
activities including horse race wagering, gaming devices (including slot
machines), banked card games (i.e., where the casino has a stake in the amount
wagered or the outcome of the game), and lotteries. On December 2, 1998, the
California Supreme Court issued a stay on Proposition 5 based on the State of
California's position that the initiative violates the state constitution. We
are not certain if or when Proposition 5 will become effective or how it will
affect us; however, if Proposition 5 is implemented, increased competition from
Indian gaming could adversely affect our gaming operations in California and
Reno.
The Hollywood Park-Casino and Crystal Park also face competition from other
card club casinos in neighboring cities.
15
<PAGE>
We May Experience Difficulty Integrating Operations of Our Acquired Companies
and Managing Our Overall Growth
We may not be able to manage the combined operations of Hollywood Park and
Casino Magic effectively or realize any of the anticipated benefits of the
acquisition of this company, including streamlining operations or gaining
efficiencies from the elimination of duplicative functions. We acquired Casino
Magic in October 1998 and are continuing to integrate its operations with ours.
This integration will require continued dedication of management resources and
may temporarily detract from attention to our day-to-day business.
In addition, because we plan to continue pursuing expansion opportunities
aggressively, we face significant challenges not only in managing and
integrating Casino Magic's operations, but also in managing our expansion
projects and any other gaming operations we may acquire in the future.
Management of these new projects will require increased managerial resources,
and we intend to continue our efforts to enhance our gaming management team.
However, there can be no assurance that we will succeed in doing so. Failure to
manage our growth effectively could materially adversely affect our operating
results.
We Depend on the Mississippi and Louisiana Markets
Our operating strategy emphasizes attracting and retaining customers from
the local and repeat visitor market. All of our casinos in Mississippi and
Louisiana are dependent upon attracting customers within their respective
geographic markets. Moreover, with our acquisitions of Boomtown and Casino
Magic, we have three casinos in Mississippi, two in Biloxi and one in nearby
Bay St. Louis. We also have two casinos in Louisiana, one in Bossier City and
one in Harvey near New Orleans (though our Louisiana properties are located 320
miles apart). We cannot be sure that we will be able to continue to attract a
sufficient number of guests, gaming customers and other visitors in Mississippi
and Louisiana to make our operations profitable. In addition, adverse
regulatory changes or changes in the gaming environment in the Gulf Coast
states could have a material adverse effect on our operations.
We May Not be Able to Complete Expansion Projects on Time, on Budget or as
Planned
Our strategic plan involves significant future expansion, including the
development of the Indiana Hotel/Casino Resort in Switzerland County and
possible expansion of our other gaming properties. We also plan to sell or
develop certain unimproved acreage, principally at our racing facilities in
California and Arizona. We may not be successful in completing any currently
contemplated or future expansion projects and, even if they are completed, the
projects may not be successful. Numerous factors, including regulatory or
financial constraints, could intervene and cause us to alter, delay or abandon
our expansion plans.
Construction and Land Use Risks. If we proceed with a proposed expansion
project, we will face numerous risks which could require substantial changes to
proposed plans or otherwise alter the time frames or budgets initially
contemplated. Such risks include the ability to secure all required permits and
resolution of potential land use issues, as well as risks typically associated
with any construction project, including possible shortages of materials or
skilled labor, unforeseen engineering or environmental or geological problems,
work stoppages, weather interference and unanticipated cost overruns.
Risks in Expanding Operations to Additional Sites. Our ability to expand our
operations to additional gaming jurisdictions will depend upon a number of
factors, including our success in (1) identifying available suitable locations
and negotiating acceptable purchase or lease terms; (2) 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; and (3) obtaining necessary financing for the projects.
Political factors, such as the proposed referenda in Mississippi that were
declared invalid by a lower court which would have banned gaming in the state,
or other referenda or proposed legislation seeking to restrict or prohibit
gaming, may also inhibit our expansion. In addition, there can be no assurance
that gaming will remain a growth industry with opportunities for expansion. We
may incur significant costs, which it is our policy to expense as incurred,
with respect to proposed ventures that do not materialize.
16
<PAGE>
Weather and Other Conditions Could Seriously Disrupt Our Operations
Riverboat and Dockside Gaming Operations. Our riverboat and dockside
facilities in Mississippi and Louisiana, as well as any additional riverboats
that might be developed or acquired in the future such as the riverboat for the
Indiana Hotel/Casino Resort, 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. For riverboats that cruise there are
additional risks associated with the movement of vessels on inland waterways,
including risks of casualty due to river turbulence and severe weather
conditions.
For example, in September 1998, Hurricane Georges struck the Gulf Coast
region and caused Boomtown Biloxi, Casino Magic Biloxi, Casino Magic Bay St.
Louis and Boomtown New Orleans to shut down for approximately one week, though
none of our properties sustained significant damage. The loss of a riverboat
casino or a dockside casino from service for any period of time could adversely
affect our results of operations.
Boomtown Reno. Boomtown Reno's primary customer base is drawn from the
traffic flow on Interstate 80. 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 for Boomtown Reno.
We Experience Significant Quarterly and Annual Fluctuations in Operating
Results
We experience significant fluctuations in our quarterly and annual operating
results, due to seasonality and other factors. Historically, our subsidiaries
have generated a substantial majority of the income from operations before non-
recurring items in the quarters ending June 30 and September 30, with the
summer months being the strongest period. Conversely, the winter months, which
primarily cover the quarter ending March 31, are our slowest periods and have
historically resulted, and may in the future result, in losses in this quarter.
The gaming industry historically has experienced a general slowdown in the
fourth quarter of the calendar year with revenues typically declining during
this period. In addition, our Argentina operations experience seasonal
variation due to reliance on tourism.
We Face Extensive Regulation from Gaming Authorities
Licensing Requirements. The ownership and operation of gaming facilities are
subject to extensive state and local regulation. The states and localities in
which we and our subsidiaries conduct gaming operations require us to hold
various licenses, findings of suitability, registrations, permits and
approvals. The various regulatory authorities, including the Nevada State
Gaming Control Board, the Nevada Gaming Commission, the Mississippi Gaming
Commission, the Louisiana Gaming Control Board and the Indiana Gaming
Commission may, among other things, limit, condition, suspend or revoke a
license or approval to own the securities of any of our gaming subsidiaries for
any cause deemed reasonable by such licensing authorities. Substantial fines or
forfeiture of assets for violations of gaming laws or regulations may be levied
against us, our subsidiaries and the persons involved. The suspension or
revocation of any of our licenses or the levy on us of substantial fines or
forfeiture of assets would have a material adverse effect on our business.
To date, we have obtained all governmental licenses, findings of
suitability, registrations, permits and approvals necessary for the operation
of our gaming facilities. However, there can be no assurance that we can obtain
any new licenses, findings of suitability, registrations, permits and approvals
that may be required in the future or that existing ones will not be suspended
or revoked. Any expansion of our gaming operations in Nevada, Mississippi,
Louisiana, California or Arizona or into new jurisdictions will require various
additional
17
<PAGE>
licenses, findings of suitability, registrations, permits and approvals of the
gaming authorities. The approval process can be time consuming and costly and
has no assurance of success.
The Hollywood Park-Casino and Crystal Park have been and are currently
operating under provisional licenses in accordance with California law. In each
case, permanent licenses will not be granted until the newly formed California
Gambling Control Commission is fully constituted and commences operations. No
assurance can be given that permanent licenses will be obtained.
Gaming authorities have the authority generally to require that any
beneficial owner of our securities, including the Old Notes, the Exchange Notes
and the 9 1/2% Notes, file an application and be investigated for a finding of
suitability. If a record or beneficial owner of an Old Note, an Exchange Note
or a 9 1/2% Note is required by any gaming authority to be found suitable, such
owner will be required to apply for a finding of suitability within 30 days
after request of such gaming authority or within such earlier time prescribed
by such gaming authority. The applicant for a finding of suitability must pay
all costs of the investigation for such finding of suitability. If a record or
beneficial owner is required to be found suitable and is not found suitable, it
may be required pursuant to the terms of the Notes or law to dispose of the
Notes. See "Regulation and Licensing" and "Description of Notes--Optional
Redemption."
Other Regulatory Restrictions. Restrictions on transfers of, agreements not
to encumber or pledges of equity securities issued by a corporation which is
registered as an intermediary company by, or holds a gaming license issued by
the Nevada Gaming Commission, the Mississippi Gaming Commission, or the Indiana
Gaming Commission, or which is registered by the Nevada Gaming Commission or
the Mississippi Gaming Commission as an intermediary company, are ineffective
unless approved in advance by the Nevada Gaming Commission, the Mississippi
Gaming Commission or the Indiana Gaming Commission, as applicable.
Potential Changes in Regulatory Requirements. 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, in 1996, the State of Louisiana adopted a statute pursuant to
which voter referenda 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' and Casino Magic Bossier's operations at the end of their current
license terms. The parishes in which Boomtown New Orleans and Casino Magic
Bossier operate voted to continue gaming, but there can be no assurance that
similar referenda might not produce unfavorable results in the future.
Moreover, in Mississippi, two referenda were proposed in 1998 that would have,
if passed, banned gaming in Mississippi and required all currently legal gaming
entities to cease operations within two years of the ban. The referenda were
challenged in court and declared improper on constitutional and procedural
grounds. A third referendum similar to the prior proposals was recently filed
with the Mississippi Secretary of State. These referenda are discussed in more
detail below. In addition, unless and until California enacts legislation
permitting the operation generally of card club casinos by public companies,
our involvement in other card club casino projects (such as Crystal Park) will
be similarly limited to leasing the facility to an unaffiliated operator. The
returns from such arrangements could be substantially less than if we operated
such facilities directly.
National Gambling Impact Study Commission. The United States Congress has
established a National Gambling Impact Study Commission to conduct a
comprehensive study of the social and economic impact of gaming in the United
States. The National Commission is required to issue a report containing its
findings and conclusions, together with recommendations for legislation and
administrative actions, within two years after its first meeting, which
occurred on June 20, 1997. Any recommendations which may be made by the
National Commission could result in the enactment of new laws and/or the
adoption of new regulations which could adversely impact the gaming industry in
general. We are unable at this time to determine what recommendations, if any,
the National Commission will make, or the ultimate disposition of any such
recommendations.
From time to time, certain legislators have proposed the imposition of a
federal tax on gross gaming revenues. Any such tax could have a material
adverse effect on our business, financial condition or results of operations.
18
<PAGE>
Uncertain Status of Mississippi Anti-Gaming Initiatives
During 1998, two referenda were proposed which, if approved, would have
amended the Mississippi Constitution to ban gaming in Mississippi and would
have required all currently legal gaming operations to cease two years
thereafter. A Mississippi State Circuit Court judge ruled that the first of the
proposed referenda was invalid because, among other reasons, it failed to
include required information regarding its anticipated effect on government
revenues. The Mississippi Supreme Court affirmed the Circuit Court ruling on
procedural and other grounds. The second referendum proposal included the same
language on government revenues as the first referendum and was struck down by
another Mississippi State Circuit Court judge on the same grounds as the first.
On March 22, 1999, another such referendum was filed with the Mississippi
Secretary of State. The language of this most recent proposal also fails to
include information regarding its anticipated effect on government revenues and
may be subject to legal challenge on the same bases that the earlier proposals
were challenged successfully. Any such referendum must be approved by the
Mississippi Secretary of State and signatures of approximately 98,000
registered voters must be gathered and certified in order for such a proposal
to be included on a statewide ballot for consideration by the voters. The next
election for which the proponents could attempt successfully to place such a
proposal on the ballot would be in November 2000. It is likely at some point
that a revised initiative will be filed which will adequately address the
issues regarding the effect on government revenues of a prohibition of gaming
in Mississippi. However, it is too early in the process for us to make any
predictions with respect to whether the most recent proposal or another such
referendum will appear on a ballot or the likelihood of such a referendum being
approved by the voters. If such a referendum were passed and gaming were
prohibited in Mississippi, it would have a material adverse effect on us.
The Indenture Permits Substantial Disposition of Undeveloped Real Estate
We have significant excess developable land at four of our properties. The
terms of the Indenture permit us to sell or dispose of this land under certain
exceptions from the general Indenture restrictions on the disposition of assets
and restricted payments. In general, proceeds from the sale of undeveloped land
will not require us to make an offer to repurchase Notes no matter how the
proceeds are used as long as 60% of the consideration received for the sale is
in cash. In addition, the covenant entitled "Restricted Payments" permits
substantial conveyances of undeveloped real estate to unrestricted subsidiaries
and joint ventures. See "Description of Notes" under the heading "Repurchase at
the Option of Holders--Asset Sales" and related definitions, and "Certain
Covenants--Restricted Payments."
This Prospectus Contains Forward Looking Statements
Certain of the matters discussed concerning our operations, economic
performance and financial condition, including in particular the likelihood of
our success in developing and expanding our business, include forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Statements that are
predictive in nature, that depend upon or refer to future events or conditions
or that include words such as "expects", "anticipates", "intends", "plans",
"believes", "estimates" and similar expressions are forward-looking statements.
Although we believe that these statements are based upon reasonable
assumptions, we can give no assurance that their goals will be achieved.
Guaranties Could be Voided and Payments from Guarantors Could be Returned Under
Fraudulent Conveyance Laws
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, an obligation such as a guarantee could be voided, or
claims in respect of an obligation such as a guarantee could be subordinated to
all other debts of that guarantor if, among other things, the guarantor, at the
time it incurred the debt evidenced by its guarantee:
. received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; or
. was insolvent or rendered insolvent by reason of such incurrence; or
19
<PAGE>
. was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be required to be returned to the guarantor, or to a fund for the benefit of
the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
. the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets; or
. if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute
and mature; or
. it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history,
estimated values of assets and liabilities of each guarantor and other factors,
we believe that each guarantor, after giving effect to its guarantee of these
Notes, will not be insolvent, will not have unreasonably small capital for the
business in which it is engaged and will not have incurred debts beyond its
ability to pay such debts as they mature. There can be no assurance, however,
as to what standard a court would apply in making such determinations or that a
court would agree with our conclusions in this regard.
Our Year 2000 Compliance Efforts May Require Substantial Resources and Failure
by Us or Certain Third Parties to Be Year 2000 Compliant Poses Certain Risks
The inability of business processes to continue to function correctly after
the beginning of the Year 2000 could have serious adverse effects on companies
and entities throughout the world. Our business operations are also dependent
on the Year 2000 readiness of our customers and infrastructure suppliers in
areas such as utilities, communications, transportation and other services.
We have assembled a committee composed of individuals from each business
unit and each corporate function to identify and mitigate Year 2000 issues in
our information systems, products, facilities, suppliers and customers. We
believe we have identified all of the internal hardware and software
applications that will need to be upgraded or replaced. We are currently in the
process of procuring and installing hardware and software to make the necessary
repairs to all affected internal systems. As to external systems, we have been
assured by the lessors of our pari-mutuel racing services that those systems
will be Year 2000 compatible by March 1999.
We estimate that the total cost of addressing our Year 2000 issues will be
approximately $2 million. This cost estimate is based on numerous assumptions,
including the assumptions that we have already identified our most significant
Year 2000 issues and that our third party suppliers will timely complete their
Year 2000 programs without cost to us. However, there can be no guarantee that
these assumptions are accurate, and actual results could differ materially from
those anticipated.
We cannot assure you that our Year 2000 program will be effective, that our
estimates about the timing and cost of completing our program will be accurate,
or that our third party suppliers will timely resolve any or all Year 2000
problems with their systems. We have no alternative software system to handle
pari-mutuel wagering if the third party provided services fail. Any failure of
the third party suppliers to timely resolve their Year 2000 issues could result
in material disruption to our business. Such disruption could have a material
adverse effect on our business, financial condition and results of operations.
20
<PAGE>
Inability to Repurchase Notes Upon Change of Control Offer
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding Notes. However, it
is possible that we will not have sufficient funds at the time of the change of
control to make the required repurchase of Notes or that restrictions in our
Bank Credit Facility will not allow such repurchases or that the change of
control may result in a default under our Bank Credit Facility, which in turn
could delay or prevent repurchase of the Notes. In addition, certain important
corporate events, such as leveraged recapitalizations that would increase the
level of our indebtedness, would not constitute a "Change of Control" under the
Indenture. See "Description of Notes--Repurchase at the Option of Holders."
We Face Environmental Regulation of Our Real Estate
Our business is subject to a variety of federal, state and local
governmental regulations relating to the use, storage, discharge, emission and
disposal of hazardous materials. We believe that we are 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
our operations by government agencies or courts of law. We currently do not
have environmental impairment liability insurance, and a material fine or
penalty or a severe restriction would adversely affect our business.
21
<PAGE>
USE OF PROCEEDS
We will receive no proceeds from the exchange of Notes pursuant to the
exchange offer.
The net proceeds to us from the Old Notes offering, approximately $339.9
million after deducting the Initial Purchasers' discounts and commissions and
other estimated offering expenses which aggregated $10.1 million, were used to
repay outstanding borrowings under the Bank Credit Facility of approximately
$287 million. Remaining proceeds have been, and will continue to be, used for
general corporate purposes, primarily for 1999 capital expenditures.
The maturity date of borrowings under the Bank Credit Facility repaid with
the proceeds of the Old Notes offering was December 31, 2003 and, at December
31, 1998, the weighted average interest rate under the Bank Credit Facility was
7.3%. Of the $287 million of outstanding borrowings under the Bank Credit
Facility repaid with the proceeds of the Old Notes offering, we had borrowed
$222.6 million on October 15, 1998 to fund the purchase price of the
acquisition of Casino Magic and to redeem Casino Magic's 11 1/2% First Mortgage
Notes. The repayment of amounts outstanding under our Bank Credit Facility with
proceeds from the Old Notes offering did not reduce the size of the banks'
commitment to lend and, if we meet the relevant conditions for borrowing, we
could borrow the full amount available under the facility in the future,
including the amounts we repaid with the proceeds of the Old Notes offering.
CAPITALIZATION
The following table sets forth our unaudited actual and pro forma cash and
cash equivalents, debt and capitalization as of September 30, 1998, for the
Total Company on an actual and pro forma basis, and for the Restricted Group on
a pro forma basis, and includes the effect of the sale of the Old Notes and the
application of the associated proceeds. This table should be read in
conjunction with the Unaudited Pro Forma Combined Consolidated Financial
Statements, Management's Discussion and Analysis of Financial Condition and
Results of Operations, and Hollywood Park's and Casino Magic's historical
financial statements and associated notes.
<TABLE>
<CAPTION>
As of September 30, 1998
-----------------------------
Total Company Restricted
------------------ Group
Actual Pro Forma Pro Forma
-------- --------- ----------
(in thousands, unaudited)
<S> <C> <C> <C>
Cash and cash equivalents.................... $ 20,126 $104,837 $ 97,356
======== ======== ========
Current maturities of long term debt......... $ 2,058 $ 10,079 $ 6,472
Long term debt:
Secured notes payable, Bank Credit
Facility.................................. 40,000 0 0
9 1/4% Senior Subordinated Notes due 2007.. 0 350,000 350,000
9 1/2% Senior Subordinated Notes due 2007.. 125,000 125,000 125,000
Casino Magic of Louisiana, Corp. 13% First
Mortgage Notes due 2003................... 0 112,875 0
Other...................................... 3,574 25,274 24,616
-------- -------- --------
Total long term debt, including current
maturities.............................. 170,632 623,228 506,088
Total stockholders' equity............... 225,624 225,624 218,907
-------- -------- --------
Total capitalization..................... $396,256 $848,852 $724,995
======== ======== ========
- --------
Senior debt calculated:
Current maturities of long-term debt....... $ 2,058 $ 10,079 $ 6,472
Secured notes payable, Bank Credit
facility.................................. 40,000 0 0
Other long-term debt....................... 3,574 25,274 24,616
-------- -------- --------
$ 45,632 $ 35,353 $ 31,088
======== ======== ========
</TABLE>
22
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined consolidated statement of
operations for the year ended December 31, 1997 was prepared by combining
Hollywood Park's results with the following and reflects: (1) Boomtown's
results prior to Hollywood Park's June 30, 1997 acquisition (exclusive of an
approximately $1.9 million net loss, associated with Boomtown's Las Vegas
property, which was sold on July 1, 1997) including the early retirement of
$102.2 million principal amount of the Boomtown first mortgage notes, and the
issuance of the 9 1/2% Notes; (2) Casino Magic's results for the full year 1997
(Casino Magic was acquired on October 15, 1998), including the redemption of
$135 million principal amount of Casino Magic's 11 1/2% First Mortgage Notes;
(3) the issuance of the Notes; and (4) the consent fee paid to holders of the 9
1/2% Notes in the consent solicitation.
The following unaudited pro forma combined consolidated statement of
operations for the nine months ended September 30, 1998 was prepared by
combining Hollywood Park's results of operations with those of Casino Magic and
reflects: (1) the acquisition of Casino Magic (acquired on October 15, 1998),
including the redemption of $135 million principal amount of Casino Magic's 11
1/2% First Mortgage Notes; (2) the issuance of the Notes; and (3) the consent
fee paid to holders of the 9 1/2% Notes in the consent solicitation.
The following unaudited pro forma combined consolidated balance sheet has
been prepared by combining the unaudited balance sheets of Hollywood Park and
Casino Magic, both as of September 30, 1998, and reflects: (1) the acquisition
of Casino Magic (acquired on October 15, 1998), including the redemption of
$135 million principal amount of Casino Magic's 11 1/2% First Mortgage Notes;
(2) the issuance of the Notes; and (3) the consent fee paid to holders of the 9
1/2% Notes in the consent solicitation.
Under the Indenture, the following subsidiaries have been initially
designated as "Unrestricted Subsidiaries": Casino Magic of Louisiana, Corp.,
Jefferson Casino Corporation (the parent company of Casino Magic of Louisiana,
Corp.), Casino Magic Management Services Corp., and two Argentina subsidiaries,
Casino Magic Neuquen SA and Casino Magic Support Services SA. Pro forma
information under the heading "Pro Forma Combined Consolidated" is provided for
Hollywood Park and its subsidiaries, on a consolidated basis, including the
Unrestricted Subsidiaries. Pro forma information under the heading "Pro Forma
Combined Consolidated Restricted Group" excludes the Unrestricted Subsidiaries
and is provided for Hollywood Park and its "Restricted Subsidiaries" under the
Indenture, on a consolidated basis. Hollywood Park's Restricted Subsidiaries
are all of its subsidiaries except for the Unrestricted Subsidiaries.
Both the acquisitions of Boomtown and Casino Magic were accounted for under
the purchase method of accounting for a business combination. The following
unaudited pro forma combined consolidated financial statements should be read
in conjunction with the accompanying notes.
This pro forma financial information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or financial
position that would have occurred if Boomtown and Casino Magic had been
acquired as of January 1, 1997, or if the issuance of the Notes or the 9 1/2%
Notes had been completed in an earlier period, nor is it necessarily indicative
of future operating results or financial position.
The pro forma financial statements are based on, and should be read in
conjunction with, Hollywood Park's and Casino Magic's historical consolidated
financial statements and the related notes.
23
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is the calculation of the pro forma purchase price and pro
forma preliminary purchase price allocation for the Casino Magic acquisition.
The preliminary purchase price allocation is based on currently available
information as of September 30, 1998 and is subject to change.
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Pro forma purchase price:
Cost to purchase Casino
Magic common stock at
$2.27 per share........ $ 80,904
Transaction costs....... 2,810
Assumption of Casino
Magic debt............. 260,907
--------
$344,621
========
Pro forma preliminary
purchase price
allocation:
Property, plant and
equipment.............. $282,939
Other, net.............. 9,351
Goodwill................ 52,331
--------
$344,621
========
</TABLE>
24
<PAGE>
HOLLYWOOD PARK, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Boomtown, Hollywood Adjustments
Pro Forma Inc. Park, ---------------------- Elimination
Hollywood Adjusted Acquisition Inc. and Casino Casino Issuance Pro Forma of
Park, Boomtown, Pro Forma Boomtown, Magic Magic Corp. of the Combined Unrestricted
Inc. Inc. Adjustments Inc. Corp. Acquisition Notes Consolidated Group
--------- --------- ----------- --------- -------- ----------- -------- ------------ ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming.......... $137,659 $83,349 $ 0 $221,008 $246,320 $ 0 $ 0 $467,328 $105,781
Racing.......... 68,844 0 0 68,844 0 0 0 68,844 0
Food and
beverage........ 19,894 4,921 0 24,815 9,414 0 0 34,229 4,064
Hotel and
recreational
vehicle park.... 937 795 0 1,732 1,724 0 0 3,456 0
Truck stop and
service
station......... 8,633 6,570 0 15,203 0 0 0 15,203 0
Other income.... 12,161 5,321 0 17,482 4,289 0 0 21,771 1,406
-------- ------- ------- -------- -------- ------- -------- -------- --------
248,128 100,956 0 349,084 261,747 0 0 610,831 111,251
-------- ------- ------- -------- -------- ------- -------- -------- --------
Expenses:
Gaming.......... 74,733 42,886 0 117,619 155,885 0 0 273,504 66,630
Racing.......... 30,304 0 0 30,304 0 0 0 30,304 0
Food and
beverage........ 25,745 6,583 0 32,328 10,757 0 0 43,085 4,633
Hotel and
recreational
vehicle park.... 356 334 0 690 834 0 0 1,524 0
Truck stop and
service
station......... 7,969 6,046 0 14,015 0 0 0 14,015 0
Administration.. 61,514 23,596 0 85,110 45,099 (1,183)(g) 0 128,896 21,630
-- -- 0 -- -- (130)(h) -- -- --
Other........... 5,048 1,816 0 6,864 4,098 0 0 10,962 0
REIT
restructuring... 2,483 0 0 2,483 0 0 0 2,483 0
Hollywood
Park/Boomtown
merger costs.... 0 1,487 0 1,487 0 0 0 1,487 0
Depreciation and
amortization.... 18,157 8,522 264 (a) 26,943 20,751 1,308 (i) 0 49,002 7,172
-------- ------- ------- -------- -------- ------- -------- -------- --------
226,309 91,270 264 317,843 237,424 (5) 0 555,262 100,065
-------- ------- ------- -------- -------- ------- -------- -------- --------
Operating income
(loss)........... 21,819 9,686 (264) 31,241 24,323 5 0 55,569 11,186
Loss (gain) on
sale of assets.. 0 357 0 357 (2,632) 1,440 (j) 0 (835) (1,440)
Write off of
available for
sale
securities...... 0 0 0 0 1,350 0 0 1,350 0
Interest
expense......... 7,302 6,850 (108)(b) 14,406 31,385 (1,871)(k) (16,764)(m) 61,154 16,927
-- -- (5,922)(c) -- -- (319)(l) 32,375 (n) -- --
-- -- 5,938 (d) -- -- -- 1,264 (o) -- --
-- -- 346 (e) -- -- -- 678 (p) -- --
-------- ------- ------- -------- -------- ------- -------- -------- --------
Income (loss)
before minority
interests and
taxes............ 14,517 2,479 (518) 16,478 (5,780) 755 (17,533) (6,100) (4,301)
Minority
interests....... (3) 0 0 (3) 1,404 0 0 1,401 1,404
Income tax
expense
(benefit)....... 5,850 1,464 (102)(f) 7,212 (1,935) 825 (f) (7,021) (919) 1,552
-------- ------- ------- -------- -------- ------- -------- -------- --------
Income (loss)
before
extraordinary
item............. $ 8,670 $ 1,015 $ (416) $ 9,269 $ (5,249) $ (70) $(10,532) $ (6,582) $ (7,257)
======== ======= ======= ======== ======== ======= ======== ======== ========
Dividend
requirements on
convertible
preferred stock.. $ 1,520
Loss before
extraordinary
item allocated to
common
shareholders..... $ (8,102)
Per common share:
Loss before
extraordinary
item--basic..... $ (0.37)
Loss before
extraordinary
item--diluted... $ (0.37)
Number of
shares--basic... 22,010
Number of
shares--
diluted......... 22,340
<CAPTION>
Pro Forma
Combined
Consolidated
Restricted
Group
------------
<S> <C>
Revenues:
Gaming.......... $361,547
Racing.......... 68,844
Food and
beverage........ 30,165
Hotel and
recreational
vehicle park.... 3,456
Truck stop and
service
station......... 15,203
Other income.... 20,365
------------
499,580
------------
Expenses:
Gaming.......... 206,874
Racing.......... 30,304
Food and
beverage........ 38,452
Hotel and
recreational
vehicle park.... 1,524
Truck stop and
service
station......... 14,015
Administration.. 107,266
--
Other........... 10,962
REIT
restructuring... 2,483
Hollywood
Park/Boomtown
merger costs.... 1,487
Depreciation and
amortization.... 41,830
------------
455,197
------------
Operating income
(loss)........... 44,383
Loss (gain) on
sale of assets.. 605
Write off of
available for
sale
securities...... 1,350
Interest
expense......... 44,227
--
--
--
------------
Income (loss)
before minority
interests and
taxes............ (1,799)
Minority
interests....... (3)
Income tax
expense
(benefit)....... (2,471)
------------
Income (loss)
before
extraordinary
item............. $ 675
============
Dividend
requirements on
convertible
preferred stock..
Loss before
extraordinary
item allocated to
common
shareholders.....
Per common share:
Loss before
extraordinary
item--basic.....
Loss before
extraordinary
item--diluted...
Number of
shares--basic...
Number of
shares--
diluted.........
</TABLE>
25
<PAGE>
HOLLYWOOD PARK, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended September 30, 1998
<TABLE>
<CAPTION>
Pro Forma
Adjustments Pro Forma
---------------------- Combined
Hollywood Casino Casino Issuance Pro Forma Elimination of Consolidated
Park, Magic Magic Corp. of the Combined Unrestricted Restricted
Inc. Corp. Acquisition Notes Consolidated Group Group
--------- -------- ----------- -------- ------------ -------------- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming................ $173,552 $210,889 $ 0 $ 0 $384,441 $96,096 $288,345
Racing................ 48,085 0 0 0 48,085 0 48,085
Food and beverage..... 21,245 7,739 0 0 28,984 2,805 26,179
Hotel and recreational
vehicle park......... 1,362 3,196 0 0 4,558 0 4,558
Truck stop and service
station.............. 11,071 0 0 0 11,071 0 11,071
Other income.......... 13,434 4,602 0 0 18,036 1,214 16,822
-------- -------- ------- -------- -------- ------- --------
268,749 226,426 0 0 495,175 100,115 395,060
-------- -------- ------- -------- -------- ------- --------
Expenses:
Gaming................ 93,920 124,133 0 0 218,053 54,635 163,418
Racing................ 21,244 0 0 0 21,244 0 21,244
Food and beverage..... 27,601 8,587 0 0 36,188 3,303 32,885
Hotel and recreational
vehicle park......... 499 1,367 0 0 1,866 0 1,866
Truck stop and service
station.............. 10,164 0 0 0 10,164 0 10,164
Administration........ 62,678 40,291 (874)(g) 0 101,952 16,264 85,688
-- -- (143)(h) -- -- -- --
Other................. 5,586 2,099 0 0 7,685 0 7,685
Hollywood Park/Casino
Magic merger......... 0 4,838 0 0 4,838 1,754 3,084
Depreciation and
amortization......... 19,874 16,355 981 (i) 0 37,210 5,895 31,315
-------- -------- ------- -------- -------- ------- --------
241,566 197,670 (36) 0 439,200 81,851 357,349
-------- -------- ------- -------- -------- ------- --------
Operating income........ 27,183 28,756 36 0 55,975 18,264 37,711
Loss on write off of
assets............... 1,586 29 0 0 1,615 0 1,615
Interest expense...... 11,827 24,340 (1,403)(k) (11,748)(m) 46,749 12,631 34,118
-- -- (239)(l) 24,281 (n) -- -- --
-- -- -- 948 (o) -- -- --
-- -- -- 509 (p) -- -- --
-- -- -- (1,766)(q) -- -- --
-------- -------- ------- -------- -------- ------- --------
Income (loss) before
minority
interests and taxes.... 13,770 4,387 1,678 (12,224) 7,611 5,633 1,978
Minority interests...... 0 1,082 0 0 1,082 1,082 0
Income tax expense
(benefit).............. 4,903 1,453 1,064 (f) (4,890) 2,530 1,549 981
-------- -------- ------- -------- -------- ------- --------
Income (loss) before
extraordinary items.... $ 8,867 $ 1,852 $ 614 $ (7,334) $ 3,999 $ 3,002 $ 997
======== ======== ======= ======== ======== ======= ========
Per common share:
Income before
extraordinary item--
basic................ $ 0.15
Income before
extraordinary item--
diluted.............. $ 0.15
Number of shares--
basic................ 26,115
Number of shares--
diluted.............. 26,277
</TABLE>
26
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF OPERATIONS
Assumptions The unaudited pro forma combined consolidated statements of
operations for the year ended December 31, 1997 and the nine months ended
September 30, 1998, were prepared as if the following had taken place on
January 1, 1997: (1) the acquisition of Boomtown, including Boomtown's sale of
its Las Vegas property, the early retirement of the Boomtown first mortgage
notes; (2) the issuance of the 9 1/2% Notes; (3) the acquisition of Casino
Magic, including the redemption of $135 million principal amount of Casino
Magic's 11 1/2% First Mortgage Notes; (4) the issuance of the Notes; and (5)
the consent fee paid to holders of the 9 1/2% Notes in the consent
solicitation.
Pro Forma Adjustments The following adjustments have been made to the
unaudited pro forma combined consolidated statements of operations:
(a) To record six months of amortization of the approximately $20.5 million of
Boomtown excess purchase price over net assets acquired. This goodwill is
being amortized over 40 years.
(b) To eliminate the amortization of the discount associated with the Boomtown
first mortgage notes that were redeemed just subsequent to the close of the
June 30, 1997 acquisition.
(c) To eliminate the interest expense associated with the Boomtown first
mortgage notes that were redeemed just subsequent to the June 30, 1997
acquisition.
(d) To record the interest expense associated with the 9 1/2% Notes.
(e) To amortize the approximately $4.0 million of up-front loan fees associated
with the bank credit facility Hollywood Park executed in conjunction with
the acquisition of Boomtown.
(f) To record the tax expense or benefit associated with the net of the pro
forma adjustments, after adding back the amortization of goodwill (when
appropriate), which is not deductible for income tax purposes.
(g) To eliminate the compensation expense associated with three Casino Magic
corporate level executives who resigned and will not be replaced.
(h) To eliminate Casino Magic's directors fees and expenses. Casino Magic's
board was dissolved at the close of the acquisition.
(i) To amortize the approximately $52.3 million of Casino Magic excess purchase
price over net assets acquired. This goodwill will be amortized over 40
years.
(j) To eliminate the gain Casino Magic recorded upon selling a riverboat to
Hollywood Park.
(k) To record the amortization of the premium associated with the purchase
accounting write-up of the Casino Magic of Louisiana, Corp. $115 million
principal amount of 13% First Mortgage Notes to their fair market value at
the date of the Casino Magic acquisition. This premium will be amortized
over the remaining 59 months that these 13% First Mortgage Notes are
scheduled to be outstanding.
(l) To eliminate the interest expense associated with approximately $2.1
million principal amount of the Casino Magic of Louisiana, Corp. 13% First
Mortgage Notes tendered upon the required change in control offer, leaving
the Casino Magic of Louisiana, Corp. 13% First Mortgage Notes at a
principal balance of $112.9 million.
(m) To eliminate the interest expense associated with the $135 million
principal amount of Casino Magic 11 1/2% First Mortgage Notes that were
called on October 15, 1998.
(n) To record the interest expense associated with the Notes.
(o) To amortize the assumed debt issuance costs associated with the Notes.
(p) To amortize the assumed costs associated with modifying the indenture
governing the 9 1/2% Notes pursuant to the consent solicitation.
(q) To eliminate the interest expense associated with $40 million of borrowings
under the Bank Credit Facility repaid from the proceeds of the offering of
the Old Notes.
27
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF OPERATIONS--(Continued)
Reclassifications Certain reclassifications have been made to the Casino
Magic historical consolidated statements of operations to conform to the pro
forma combined consolidated statements of operations presentation.
Extraordinary Item The pro forma statement of operations for the year ended
December 31, 1997, excludes the extraordinary loss of $14.2 million (or
approximately $8.4 million, net of tax effect) related to the early retirement
of the Boomtown first mortgage notes. The approximate cost for the tender and
consent and the write off of debt issuance costs was $9.0 million and $5.2
million, respectively.
28
<PAGE>
HOLLYWOOD PARK, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
As of September 30, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
-------------------------- Combined
Hollywood Casino Pro Forma Elimination of Consolidated
Park, Casino Magic Corp. Issuance of Combined Unrestricted Restricted
Inc. Magic Corp. Acquisition the Notes Consolidated Group Group
--------- ----------- ----------- ----------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
------
Current Assets:
Cash and cash
equivalents........... $ 20,126 $ 26,809 $(12,480)(a) $70,382(k) $104,837 $ 7,481 $ 97,356
Restricted cash........ 798 85 0 0 883 0 883
Short term
investments........... 3,459 0 0 0 3,459 1,599 1,860
Other receivables,
net................... 7,061 2,792 609 (b) 0 10,462 640 9,822
Prepaid expenses and
other assets.......... 15,884 4,627 0 0 20,511 838 19,673
Deferred tax assets.... 10,250 0 6,974 (c) 0 17,224 0 17,224
Current portion of
notes receivable...... 2,340 0 0 0 2,340 0 2,340
-------- -------- -------- ------- -------- -------- --------
Total current assets... 59,918 34,313 (4,897) 70,382 159,716 10,558 149,158
Notes receivable....... 18,250 0 0 0 18,250 0 18,250
Property, plant and
equipment, net........ 301,125 290,070 (7,131)(d) 0 584,064 90,363 493,701
Land held for sale or
development........... 0 6,146 0 0 6,146 0 6,146
Foreign casino
concession agreement,
net................... 0 7,828 0 0 7,828 7,828 0
Debt related costs,
net................... 4,840 9,306 (1,617)(e) 16,894(l) 29,423 4,106 25,317
Gaming license costs,
net................... 0 36,847 0 0 36,847 36,847 0
Goodwill, net.......... 50,341 0 52,331 (f) 0 102,672 0 102,672
Other assets........... 18,445 3,027 0 0 21,472 1,054 20,418
-------- -------- -------- ------- -------- -------- --------
$452,919 $387,537 $ 38,686 $87,276 $966,418 $150,756 $815,662
======== ======== ======== ======= ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
---------------------
Current Liabilities:
Accounts payable....... $ 8,848 $ 13,201 $ 0 $ 0 $ 22,049 $ 6,469 $ 15,580
Accrued compensation... 7,620 9,605 0 0 17,225 3,420 13,805
Accrued liabilities.... 26,986 14,048 10,251 (g) 0 51,285 5,101 46,184
Accrued interest....... 2,642 9,468 (5,643)(h) (109)(m) 6,358 3,540 2,818
Gaming liabilities..... 3,698 1,786 0 0 5,484 737 4,747
Racing liabilities..... 263 0 0 0 263 0 263
Current portion of
notes payable......... 2,058 8,021 0 0 10,079 3,607 6,472
-------- -------- -------- ------- -------- -------- --------
Total current
liabilities........... 52,115 56,129 4,608 (109) 112,743 22,874 89,869
Notes payable.......... 168,574 260,907 96,283 (i) 87,385 (n) 613,149 113,533 499,616
Deferred tax
liabilities........... 6,606 1,065 0 0 7,671 4,050 3,621
Other liabilities...... 0 3,649 0 0 3,649 0 3,649
-------- -------- -------- ------- -------- -------- --------
Total liabilities...... 227,295 321,750 100,891 82,276 737,212 140,457 596,755
Minority interests..... 0 3,582 0 0 3,582 3,582 0
Stockholders' Equity:
Capital stock--
Preferred.............. 0 0 0 0 0 0 0
Common................. 2,580 357 (357)(j) 0 2,580 1 2,579
Capital in excess of
par value............. 218,023 67,123 (67,123)(j) 0 218,023 0 218,023
Retained earnings
(accumulated
deficit).............. 5,338 (5,275) 5,275 (j) 0 5,338 6,716 (1,378)
Accumulated other
comprehensive income
(loss)................ (317) 0 0 0 (317) 0 (317)
-------- -------- -------- ------- -------- -------- --------
Total stockholders'
equity................ 225,624 62,205 (62,205) 0 225,624 6,717 218,907
-------- -------- -------- ------- -------- -------- --------
$452,919 $387,537 $ 38,686 $87,276 $966,418 $150,756 $815,662
======== ======== ======== ======= ======== ======== ========
</TABLE>
29
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED
BALANCE SHEET
Assumptions The acquisition of Casino Magic was accounted for under the
purchase method of accounting for a business combination. The unaudited
combined consolidated balance sheet is presented as if the following had taken
place as of September 30, 1998: (1) the acquisition of Casino Magic, including
the redemption of $135 million principal amount of Casino Magic's 11 1/2% First
Mortgage Notes; (2) the issuance of the Notes; and (3) the consent fee paid to
holders of the 9 1/2% Notes in the consent solicitation.
Pro Forma Adjustments The following pro forma adjustments have been made to
the unaudited pro forma combined consolidated balance sheet:
(a) To record the net reduction in cash associated with the acquisition of
Casino Magic, the redemption of $135 million principal amount of the Casino
Magic 11 1/2% First Mortgage Notes, and the redemption of $2.1 million
principal amount of Casino Magic of Louisiana, Corp. 13% First Mortgage
Notes.
(b) To record the estimated interest receivable earned on the funds deposited
to retire $135 million principal amount of the Casino Magic 11 1/2% First
Mortgage Notes.
(c) To record the estimated 40% deferred tax asset associated with Casino
Magic's purchase accounting adjustments of approximately $17.4 million.
(d) To record Casino Magic's purchase accounting adjustment to write down
certain property and equipment to its fair market value.
(e) To eliminate the prepaid debt issuance costs associated with redemption of
$135 million principal amount of the Casino Magic 11 1/2% First Mortgage
Notes and $2.1 million principal amount of the Casino Magic of Louisiana,
Corp. 13% First Mortgage Notes, and to record debt issuance costs on the
Hollywood Park's bank borrowings incurred to acquire Casino Magic.
(f) To record the goodwill associated with the acquisition of Casino Magic.
(g) To record Casino Magic purchase accounting adjustments of $2.3 million, and
to accrue for Casino Magic's transaction and other costs of $8.0 million.
(h) To record interest payable associated with the redemption of $135 million
principal amount of Casino Magic's 11 1/2% First Mortgage Notes on October
15, 1998.
(i) To record the net increase in Hollywood Park's bank debt of $81.1 million
incurred to acquire Casino Magic, $141.5 to redeem $135 million principal
amount of the Casino Magic 11 1/2% First Mortgage Notes, and $2.1 million
principal amount of the Casino Magic of Louisiana, Corp. 13% First Mortgage
Notes tendered in the change of control offer. To record the purchase
accounting adjustment of $9.2 million, to record the Casino Magic of
Louisiana, Corp. 13% First Mortgage Notes at their fair market value, and
to record the write off of the balance of the original issued discount of
$1.6 million, associated with the $135 million principal amount of the
Casino Magic 11 1/2% First Mortgage Notes.
(j) To eliminate Casino Magic's equity accounts.
(k) To record the net cash proceeds of the offering of the Notes.
(l) To record the assumed debt issuance costs associated with the offering of
the Notes, and the costs associated with modifying the indenture governing
the 9 1/2% Notes pursuant to the consent solicitation.
(m) To eliminate the accrued interest payable on the Hollywood Park bank debt
repaid with the proceeds from the Old Notes offering.
(n) To record the net increase in debt in connection with the offering of the
Old Notes.
Reclassifications Certain reclassifications have been made to both the
Hollywood Park and the Casino Magic historical consolidated balance sheets to
conform to the pro forma combined consolidated balance sheet presentation.
30
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
The following selected historical financial information of Hollywood Park
and Casino Magic 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 herein. The Hollywood Park and Casino
Magic historical financial statement data as of and for the nine months ended
September 30, 1998 and 1997 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 positions as of such dates.
The selected unaudited pro forma financial data is derived from the
Unaudited Pro Forma Combined Consolidated Financial Statements, appearing
elsewhere in this prospectus, which give effect to the acquisition of Casino
Magic as a purchase, 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.
Certain amounts from the Hollywood Park and Casino Magic Historical Selected
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 acquisition of Casino Magic been consummated in an
earlier period, nor is it necessarily indicative of future operating results or
financial position.
31
<PAGE>
HOLLYWOOD PARK, INC.
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
------------------------------------------------ ------------------
1993 1994 1995 1996 1997(a) 1997 1998
-------- -------- -------- -------- -------- -------- --------
(unaudited)
(in thousands, except per share data and
ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of operations
data:
Revenues:
Gaming................. $ 0 $ 11,745 $ 26,656 $ 50,717 $137,659 $ 83,990 $173,552
Racing................. 63,850 78,719 77,036 71,308 68,844 48,084 48,085
Food and beverage...... 10,908 20,540 19,783 13,947 19,894 13,016 21,245
Other.................. 4,227 6,320 7,097 7,253 21,731 13,259 25,867
-------- -------- -------- -------- -------- -------- --------
78,985 117,324 130,572 143,225 248,128 158,349 268,749
-------- -------- -------- -------- -------- -------- --------
Expenses:
Gaming................. 0 0 5,291 27,249 74,733 45,117 93,920
Racing................. 20,860 23,393 30,960 30,167 30,304 21,615 21,244
Food and beverage...... 9,400 21,852 24,749 19,573 25,745 16,920 27,601
Administrative and
other................. 32,538 51,151 48,647 43,962 74,887 46,544 78,458
Depreciation and
amortization.......... 6,402 9,563 11,384 10,695 18,157 11,939 19,874
Non-recurring
expenses.............. 850 2,964 6,088 11,412 2,483 609 469
-------- -------- -------- -------- -------- -------- --------
70,050 108,923 127,119 143,058 226,309 142,744 241,566
-------- -------- -------- -------- -------- -------- --------
Operating income....... 8,935 8,401 3,453 167 21,819 15,605 27,183
Loss on write off of
assets................ 0 0 0 0 0 0 1,586
Interest expense....... 1,517 3,061 3,922 942 7,302 3,782 11,827
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
minority interests.... 7,418 5,340 (469) (775) 14,517 11,823 13,770
Minority interests..... 0 0 0 15 (3) 80 0
Income tax expense
(benefit)............. 1,025 1,568 693 3,459 5,850 4,624 4,903
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 6,393 $ 3,772 $ (1,162) $ (4,249) $ 8,670 $ 7,119 $ 8,867
======== ======== ======== ======== ======== ======== ========
Dividend requirements
on convertible
preferred stock....... $ 1,718 $ 1,925 $ 1,925 $ 1,925 $ 1,520 $ 1,520 $ 0
Net income (loss)
attributable to
(allocated to) common
shareholders.......... $ 4,675 $ 1,847 $ (3,087) $ (6,174) $ 7,150 $ 5,599 $ 8,867
======== ======== ======== ======== ======== ======== ========
Per common share:
Net income (loss)--
basic................. $ 0.30 $ 0.10 $ (0.17) $ (0.33) $ 0.33 $ 0.27 $ 0.34
Net income (loss)--
diluted............... $ 0.30 $ 0.10 $ (0.17) $ (0.33) $ 0.32 $ 0.27 $ 0.34
Number of common
shares--basic......... 15,418 18,224 18,399 18,505 22,010 20,596 26,115
Number of common
shares--diluted....... 17,465 20,516 20,691 20,797 22,340 20,596 26,277
Other data:
Cash flows provided by
(used in):
Operating activities... $ 13,280 $ (7,287) $ 20,291 $ 13,677 $ 18,454 $ 6,059 $ 14,790
Investing activities... (32,677) (7,331) (32,922) (19,893) (16,236) (5,884) (49,140)
Financing activities... 74,391 (8,877) (2,085) (4,268) 9,609 9,910 30,727
Capital expenditures... 12,902 27,584 25,150 23,786 32,505 (23,059) (34,981)
Ratio of earnings to
fixed charges(b)...... 5.89x 2.74x -- -- 2.74x 3.86x 2.00x
Balance sheet data:
Total assets........... $176,424 $246,573 $283,303 $205,886 $419,029 $413,379 $452,919
Other liabilities...... 21,876 36,518 101,928 47,444 65,573 61,741 58,721
Long term obligations.. 348 42,800 15,629 282 132,102 132,163 168,574
Stockholders' equity... 154,200 167,255 165,746 158,160 221,354 219,475 225,624
Operating income
(loss)................. $ 8,935 $ 8,401 $ 3,453 $ 167 $ 21,819 $ 15,605 $ 27,183
Add back depreciation
and amortization....... 6,402 9,563 11,384 10,695 18,157 11,939 19,874
-------- -------- -------- -------- -------- -------- --------
EBITDA................. 15,337 17,964 14,837 10,862 39,976 27,544 47,057
Add back:
Casino pre-opening and
training expenses..... 850 2,337 0 0 0 0 0
Turf Paradise
acquisition costs..... 0 627 0 0 0 0 0
Lawsuit settlement..... 0 0 6,088 0 0 0 0
Write off of investment
in a business......... 0 0 0 11,412 0 0 0
REIT restructuring..... 0 0 0 0 2,483 609 469
-------- -------- -------- -------- -------- -------- --------
Adjusted EBITDA........ $ 16,187 $ 20,928 $ 20,925 $ 22,274 $ 42,459 $ 28,153 $ 47,526
======== ======== ======== ======== ======== ======== ========
</TABLE>
- -------
Management believes that the following calculation of EBITDA and Adjusted
EBITDA are relevant to the note holders:
EBITDA is not a measure of financial performance under GAAP, but is used by
some investors to determine our ability to service or incur indebtedness.
EBITDA and Adjusted EBITDA are not calculated by all entities in the same
fashion and accordingly, may not be an appropriate measure of our performance.
Neither EBITDA nor Adjusted EBITDA should be considered in isolation from, or
as a substitute for, net income (loss), cash flows from operations, or cash
flow data prepared in accordance with GAAP.
(a) Inclusive of Boomtown's financial results as of the June 30, 1997,
acquisition forward.
(b) In computing the ratio of earnings to fixed charges: (1) earnings were
calculated from income from continuing operations, before income taxes and
fixed charges, and excluding capitalized interest; and (2) fixed charges
were computed from interest expense, amortization of debt issuance costs,
capitalized interest, and the estimated interest included in rental
expense. For the years ended December 31, 1995 and 1996, earnings were
insufficient to cover fixed charges by $1.1 million and $2.2 million,
respectively.
32
<PAGE>
CASINO MAGIC CORP.
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
------------------------------------------------ ------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
(unaudited)
(in thousands, except per share data and
ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of operations
data:
Revenues:
Casino................. $195,899 $178,337 $165,998 $167,153 $246,320 $186,411 $210,889
Food, beverage and
rooms................. 5,697 5,625 8,393 8,080 10,785 8,496 10,687
Royalty and management
fees.................. 0 0 2,224 3,100 0 0 0
Other.................. 808 1,056 1,108 1,945 4,369 3,327 3,813
-------- -------- -------- -------- -------- -------- --------
202,404 185,018 177,723 180,278 261,474 198,234 225,389
-------- -------- -------- -------- -------- -------- --------
Expenses:
Casino................. 66,142 73,213 69,655 74,943 118,467 88,899 100,673
Food and beverage and
rooms................. 7,309 6,610 8,020 8,391 11,396 8,874 10,389
Advertising and
marketing............. 17,457 25,097 25,874 20,902 36,427 28,517 26,593
Administrative and
other................. 35,096 42,474 38,206 40,448 49,820 38,124 38,083
Hollywood Park/Casino
Magic merger costs.... 0 0 0 0 0 0 4,838
Development............ 2,521 10,244 2,228 1,850 562 512 431
Depreciation and
amortization.......... 6,357 10,669 15,769 18,346 20,247 15,259 16,058
Non-recurring
expenses.............. 2,114 5,479 13,201 6,555 0 0 0
-------- -------- -------- -------- -------- -------- --------
136,996 173,786 172,953 171,435 236,919 180,185 197,065
-------- -------- -------- -------- -------- -------- --------
Operating income....... 65,408 11,232 4,770 8,843 24,555 18,049 28,324
Loss from
unconsolidated
subsidiary............ 0 408 112 26,502 505 405 349
Write off of
capitalized costs..... (3) 107 2,415 689 (1,555) (2,823) 155
Interest expense....... 5,680 13,935 15,766 17,917 31,385 23,704 23,433
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
minority interests.... 59,731 (3,218) (13,523) (36,265) (5,780) (3,237) 4,387
Minority interests..... 0 0 0 0 1,404 917 1,453
Income tax expense
(benefit)............. 21,225 (188) (3,231) (4,676) (1,935) (1,935) 1,082
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 38,506 $ (3,030) $(10,292) $(31,589) $ (5,249) $ (2,219) $ 1,852
Per common share:
Net income (loss)--
basic................. $ 1.32 $ (0.10) $ (0.31) $ (0.89) $ (0.15) $ (0.06) $ 0.05
Net income (loss)--
diluted............... $ 1.32 $ (0.11) $ (0.31) $ (0.89) $ (0.15) $ (0.06) $ 0.05
Number of common
shares--basic......... 29,079 28,934 33,261 35,448 35,663 35,643 35,722
Number of common
shares--diluted....... 29,088 27,314 33,261 35,448 35,663 35,643 35,722
Other data:
Cash flows provided by
(used in):
Operating activities... $ 54,077 $ 17,906 $ 15,348 $ 24,126 $ 23,781 $ 18,085 $ 23,192
Investing activities... (87,589) (56,470) (10,533) (86,778) (31,219) (9,017) (22,691)
Financing activities... 67,643 16,445 5,454 66,442 (6,122) (6,117) 3,807
Capital expenditures... (54,859) (27,445) (11,396) (67,850) (37,177) (28,996) (33,789)
Ratio of earnings to
fixed charges(a)...... 8.23x 0.74x 0.20x --x 0.74x 1.58x 1.02x
Balance sheet data:
Total assets........... $222,892 $252,623 $268,431 $369,800 $372,705 $368,118 $387,538
Other liabilities...... 24,050 37,404 36,412 47,914 59,780 52,995 64,426
Long term obligations.. 131,984 135,643 136,840 258,261 253,471 253,484 260,907
Stockholders' equity... 66,858 79,576 95,179 63,625 59,454 61,639 62,205
Operating income
(loss)................. $ 65,408 $ 11,232 $ 4,770 $ 8,843 $ 24,555 $ 18,049 $ 28,324
Add back depreciation
and amortization....... 6,357 10,669 15,769 18,346 20,247 15,259 16,058
-------- -------- -------- -------- -------- -------- --------
EBITDA................. 71,765 21,901 20,539 27,189 44,802 33,308 44,382
Add back:
Pre-opening costs...... 2,114 0 1,819 6,555 0 0 0
Abandoned project
costs................. 0 5,479 11,382 0 0 0 0
Hollywood Park/Casino
Magic merger.......... 0 0 0 0 0 0 4,838
-------- -------- -------- -------- -------- -------- --------
Adjusted EBITDA........ $ 73,879 $ 27,380 $ 33,740 $ 33,744 $ 44,802 $ 33,308 $ 49,220
======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------
Management believes that the following calculation of EBITDA and Adjusted
EBITDA are relevant to note holders:
EBITDA is not a measure of financial performance under GAAP, but is used by
some investors to determine a company's ability to service or incur
indebtedness. EBITDA and Adjusted EBITDA are not calculated by all entities in
the same fashion and accordingly, may not be an appropriate measure of
performance. Neither EBITDA nor Adjusted EBITDA should be considered in
isolation from, or as a substitute for, net income (loss), cash flows from
operations, or cash flow data prepared in accordance with GAAP.
(a) In computing the ratio of earnings to fixed charges: (1) earnings were
calculated from income from continuing operations, before income taxes and
fixed charges, and excluding capitalized interest; and (2) fixed charges
were computed from interest expense, amortization of debt issuance costs,
capitalized interest, and the estimated interest included in rental
expense. Casino Magic's ratio of earnings to fixed charges were
insufficient to cover fixed charges by $4.5 million in 1994, $14.4 million
in 1995, $42.0 million in 1996, $9.1 million in 1997, and $5.3 million for
the nine months ended September 30, 1997.
33
<PAGE>
HOLLYWOOD PARK, INC.
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
Total Company Pro Forma Restricted Group Pro Forma
-------------------------- --------------------------
Nine months Nine months
Year ended ended Year ended ended
December 31, September 30, December 31, September 30,
1997 1998 1997 1998
------------ ------------- ------------ -------------
(in thousands, except per share data and ratios)
<S> <C> <C> <C> <C>
Statement of operations
data:
Revenues:
Gaming................. $467,328 $384,441 $361,547 $288,345
Racing................. 68,844 48,085 68,844 48,085
Food and beverage...... 34,229 28,984 30,165 26,179
Other.................. 40,430 33,665 39,024 32,451
-------- -------- -------- --------
610,831 495,175 499,580 395,060
-------- -------- -------- --------
Expenses:
Gaming................. 273,504 218,053 206,874 163,418
Racing................. 30,304 21,244 30,304 21,244
Food and beverage...... 43,085 36,188 38,452 32,885
Administrative and
other................. 155,397 121,667 133,767 105,403
Depreciation and
amortization.......... 49,002 37,210 41,830 31,315
Non-recurring
expenses.............. 3,970 4,838 3,970 3,084
-------- -------- -------- --------
555,262 439,200 455,197 357,349
-------- -------- -------- --------
Operating income....... 55,569 55,975 44,383 37,711
(Gain)loss on write off
of assets............. (835) 1,615 605 1,615
Write off of available
for sale securities... 1,350 0 1,350 0
Interest expense....... 61,154 46,749 44,227 34,118
-------- -------- -------- --------
Income (loss) before
income taxes and
minority interests..... (6,100) 7,611 (1,799) 1,978
Minority interests...... 1,401 1,082 (3) 0
Income tax expense
(benefit).............. (919) 2,530 (2,471) 981
-------- -------- -------- --------
Net income (loss)....... $ (6,582) $ 3,999 $ 675 $ 997
======== ======== ======== ========
Dividend requirements on
convertible preferred
stock.................. $ 1,520 $ 0 $ 1,520 $ 0
Net income (loss)
attributable to
(allocated to) common
shareholders........... $ (8,102) $ 3,999 $ (845) $ 997
======== ======== ======== ========
Other data:
Ratio of Adjusted
EBITDA to interest
expense............... 1.77x 2.10x 2.04x 2.11x
Ratio of earnings to
fixed charges (a)..... 0.85x 1.06x 0.91x 0.97x
Balance sheet data:
Total assets........... -- $966,418 -- $815,662
Other liabilities...... -- 127,645 -- 97,139
Long term obligations.. -- 613,149 -- 499,616
Stockholders' equity... -- 225,624 -- 218,907
Operating income
(loss)................. $ 55,569 $ 55,975 $ 44,383 $ 37,711
Add back depreciation
and amortization....... 49,002 37,210 41,830 31,315
-------- -------- -------- --------
EBITDA................. 104,571 93,185 86,213 69,026
Add back:
REIT restructuring..... 2,483 0 2,483 0
Hollywood Park/Boomtown
merger costs.......... 1,487 0 1,487 0
Hollywood Park/Casino
Magic merger costs.... 0 4,838 0 3,084
-------- -------- -------- --------
Adjusted EBITDA........ $108,541 $ 98,023 $ 90,183 $ 72,110
======== ======== ======== ========
</TABLE>
- --------
Management believes that the following calculation of EBITDA and Adjusted
EBITDA are relevant to the noteholders:
(a) Hollywood Park's total company pro forma earnings for the year ended
December 31, 1997, were not sufficient to cover its pro forma fixed charge
requirement by $9.9 million. Hollywood Park's restricted group pro forma
earnings for the year ended December 31, 1997, and for the nine months
ended September 30, 1998, were not sufficient to cover its pro forma fixed
charge requirements by $4.1 million and $1.1 million, respectively.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the financial
statements, including the related notes, and the other financial information
appearing elsewhere in this prospectus, as well as the risks described in the
"Risk Factors" section. This discussion reflects the historical operations of
Hollywood Park and Casino Magic which, prior to the Casino Magic acquisition,
had operated separately. Results of operations of the acquired businesses,
Casino Magic and Boomtown, are included in the consolidated financial
statements for periods after the relevant acquisition date. As such, our
results of operations for the year ended December 31, 1997 are not comparable
to our results of operations for the year ended December 31, 1996, and our
results for the nine months ended September 30, 1998 are not comparable to the
nine months ended September 30, 1997.
History of Hollywood Park
Our predecessor, the Hollywood Park Turf Club, was organized in 1938 and
incorporated in Delaware in 1981. Historically, our operations focused on
thoroughbred racing facilities, principally at the Hollywood Park Race Track,
located in the Los Angeles metropolitan area. The Hollywood Park Race Track
remains one of the premier thoroughbred racing facilities in the United States.
Since 1991, we have expanded our gaming operations beyond the single
thoroughbred racing operation to become a diversified gaming company with
operations in many jurisdictions. We significantly expanded our casino
operations with the June 30, 1997 acquisition of Boomtown and its three
casinos, and the October 15, 1998 acquisition of Casino Magic and its five
casinos. The following is an overview of our gaming properties:
<TABLE>
<CAPTION>
Gaming Excess
Type of Square Slot Table Hotel Developable
Location/Property Gaming Facility Footage Machines Games Rooms Land (acres)
- ----------------- ------------------ ------- -------- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Bossier City, Louisiana
Casino Magic Bossier(1).. Dockside Riverboat 30,000 980 44 188 --
Harvey, Louisiana
Boomtown New Orleans..... Cruising Riverboat 30,000 1,089 49 -- --
Bay St. Louis, Mississippi
Casino Magic Bay
St. Louis................ Dockside 39,500 1,132 42 201 50
Biloxi, Mississippi
Boomtown Biloxi.......... Dockside 33,632 1,308 35 -- --
Casino Magic Biloxi...... Dockside 47,700 1,174 41 378 --
Verdi, Nevada
Boomtown Reno............ Land-based 40,000 1,320 44 322 250
Los Angeles, California
Hollywood Park Race
Track................... Horse Racing -- -- -- -- 160
Hollywood Park-Casino.... Card Club 30,000 -- 145 -- --
Crystal Park(2).......... Card Club 30,000 -- 60 226 --
Phoenix, Arizona
Turf Paradise............ Horse Racing -- -- -- -- 100
Neuquen Province,
Argentina(3) Casino Magic
Neuquen.................. Land-based 27,000 398 40 -- --
Casino Magic San Martin
de los Andes............ Land-based 2,500 75 16 -- --
------- ----- --- ----- ---
SUBTOTAL................ 310,332 7,476 516 1,315 560
<CAPTION>
Development Project
- -------------------
<S> <C> <C> <C> <C> <C> <C>
Switzerland County,
Indiana
Indiana Hotel/Casino
Resort(4)................ Cruising Riverboat 38,000 1,300 55 309 --
------- ----- --- ----- ---
TOTAL................... 348,332 8,776 571 1,624 560
======= ===== === ===== ===
</TABLE>
35
<PAGE>
- --------
(1) Casino Magic Bossier is owned by our wholly-owned subsidiary, Casino Magic
of Louisiana, Corp., which is an unrestricted subsidiary under the
Indenture governing the Notes and does not guarantee the Notes.
(2) We own Crystal Park and lease it to an unaffiliated operator.
(3) We own 51% of Casino Magic's Neuquen Province casinos.
(4) We own 97% of the Indiana Hotel/Casino Resort, which we expect to complete
within 18 to 24 months.
Results of Operations
The following discussion relates to historical results of operations for
Hollywood Park (excluding Casino Magic) and for Casino Magic separately.
Hollywood Park
For periods before June 30, 1997, Hollywood Park's financial results
consisted primarily of gaming revenues from the Hollywood Park Race Track, Turf
Paradise, Hollywood Park-Casino, and lease payments from the operator of
Crystal Park. For periods after June 30, 1997, when Hollywood Park acquired
Boomtown, Hollywood Park's financial results also included those of Boomtown.
Hollywood Park's acquisition of Boomtown was accounted for under the purchase
method of accounting for a business combination.
Nine Months Ended September 30, 1998 Compared to the Nine Months Ended
September 30, 1997
Results of operations for the nine months ended September 30, 1998 included
the results of operations of Boomtown, which was acquired by Hollywood Park on
June 30, 1997, and accounted for under the purchase method of accounting for a
business combination. As required under the rules of purchase accounting,
Boomtown's results of operations, prior to the acquisition, were not combined
with those of Hollywood Park, and therefore, the results of operations for the
nine months ended September 30, 1997 did not include Boomtown's results of
operations for the first two quarters of 1997, accounting for significant
differences when comparing the results of operations for the nine months ended
September 30, 1998 to the nine months ended September 30, 1997.
Total revenues increased by approximately $110,400,000, or 69.7%, for the
nine months ended September 30, 1998, as compared to the nine months ended
September 30, 1997. Included in the revenues for the 1998 period was
approximately $110,454,000 of revenues attributable to Boomtown through June
1998, for which there are no corresponding revenues in the 1997 period. Gaming
revenues increased by approximately $89,562,000, or 106.6% for the nine-month
period, with approximately $90,989,000 attributable to the inclusion of
Boomtown results through June 1998 with no corresponding Boomtown revenues in
the first six months of the 1997 period, netted against gaming revenue declines
of approximately $3,364,000 at the Hollywood Park-Casino primarily a result of
the ban on indoor smoking and recent economic problems in various Asian
countries (a significant portion of Hollywood Park-Casino's patrons are Asian).
Gaming revenues also declined by approximately $1,152,000 at the Crystal Park
Casino, which in 1998 was leased to a new operator with lower rent to allow
time to grow the business. The prior operator defaulted on the lease. As of
July 1, 1998, rent payable to the Company on the Crystal Park facility was
scheduled to increase to $350,000 per month, but the Company has agreed to
accept rent of $150,000 per month through January 1999. In present market
conditions, it is expected that the rent will remain between $100,000 and
$150,000 rather than increase as scheduled in the lease.
Food and beverage revenues increased by approximately $8,229,000, or 63.2%
for the nine-month period, due primarily to the inclusion of Boomtown revenues
of $7,031,000 through June 1998 with no corresponding Boomtown revenues in the
first six months of 1997, with the balance of the increase attributable to
increased
36
<PAGE>
sales at the three Boomtown properties due to the opening of new food service
outlets. Hotel and recreational vehicle park revenues (all of which were
attributable to Boomtown Reno) increased by $781,000, or 134.4%, due to there
being just three months of revenues in the 1997 amounts compared to nine months
of revenues in the 1998 results. Truck stop and service station revenues (all
of which were attributable to Boomtown Reno) increased by $6,174,000 for the
nine-month period, or 126.1%, due primarily to the inclusion of $6,546,000 of
revenues through June 1998 with no corresponding revenues in the first six
months of 1997, netted against a revenue decrease due to price competition in
the Reno market. Other income increased by $5,653,000, or 72.7%, for the nine-
month period, due to the inclusion of $5,163,000 of Boomtown revenues through
June 1998 with no corresponding revenues in the first six months of 1997, and
increased revenues associated with Boomtown New Orleans' Great Escape arcade,
which opened in July 1998.
Total operating expenses increased by $98,822,000, or 69.2%, during the nine
months ended September 30, 1998, as compared to the nine months ended September
30, 1997, due in part to the inclusion of approximately $96,966,000 of Boomtown
operating expenses through June 1998 for which there are no corresponding
amounts in the operating expenses for the first six months of 1997. Gaming
expenses increased by $48,803,000, or 108.2%, for the nine-month period,
primarily due to the inclusion of $49,855,000 of Boomtown expenses through June
1998 and no corresponding expenses in the 1997 period, netted against
$1,461,000 of expense savings at the Hollywood Park-Casino, a corresponding
result of the decrease in revenues.
Food and beverage expenses increased by $10,681,000, or 63.1%, for the nine-
month period, due in part to the inclusion of $8,593,000 of Boomtown expenses
through June 1998 with no corresponding expenses in the 1997 period, and cost
increases at the Boomtown properties in relation to increased food and beverage
sales, due to the opening of new food service outlets. Hotel and recreational
vehicle park expenses (all of which were attributable to Boomtown Reno)
increased by $300,000, or 150.8%, for the nine-month period, due to the
inclusion of $287,000 of expenses through June 1998 for which there are no
corresponding expenses in 1997. Truck stop and service station expenses (all of
which were attributable to Boomtown Reno) increased by $5,703,000, or 127.8%,
for the nine-month period, due primarily to the inclusion of $5,987,000 of
expenses through June 1998 with no corresponding expenses in the 1997 period,
netted against fuel cost decreases during 1998.
Administrative expenses increased by $23,587,000, or 61.1%, for the nine-
month period, due primarily to the inclusion of $22,829,000 of Boomtown
expenses through June 1998, with the balance of the increase primarily due to
additional staffing at the Hollywood Park corporate level and other expansion
related expense increases. Other expenses increased by $2,324,000, or 71.2%,
for the nine-month period, and included Boomtown costs through June 1998 of
$2,280,000 for which there are no corresponding costs in the 1997 results.
Depreciation and amortization increased by $7,935,000, or 66.5%, for the nine-
month period, with $7,165,000 of the increase attributable to the inclusion of
Boomtown expenses through June 1998 with no corresponding expenses in the 1997
period, with the balance of the increase due to Boomtown New Orleans' February
1998 placement of the new riverboat into service and the July 1998 opening of
the land-based Great Escape arcade and restaurant. Loss on write off of assets
related to the closing of the Hollywood Park Golf Center, and the associated
$1,086,000 write off of the Hollywood Park Golf Center assets, and the write
off of $500,000 related to an abandoned project in Kansas. Interest expense
increased by $8,045,000, or 212.7%, due to interest on the 9 1/2% Notes, which
were issued in August 1997, and interest on bank borrowings. Income tax expense
increased by $279,000, or 6.0%, due to increased pre-tax income in 1998 and
certain non-recurring tax benefits recorded in 1998.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996
As mentioned above, Boomtown's results of operations are not consolidated
with those of Hollywood Park's prior to June 30, 1997. As of April 1, 1996, the
results of operations of Sunflower Racing, Inc., a former subsidiary of the
Company, were no longer consolidated with Hollywood Park's results. Thus, the
results of operations for the year ended December 31, 1997 are exclusive of
Sunflower's results of operations, but the
37
<PAGE>
financial results for the year ended December 31, 1996 included Sunflower's
results of operations through March 31, 1996. Also included in the results of
operations for the year ended December 31, 1996 was the $11,412,000 one time,
non-cash write off of Hollywood Park's investment in Sunflower. See the
discussion in the following section for information on Sunflower.
Total revenues for the year ended December 31, 1997, increased by
$104,903,000 or 73.2%, as compared to the year ended December 31, 1996,
primarily due to the inclusion of $105,781,000 of Boomtown revenues in 1997,
with no corresponding revenues recorded in 1996. Gaming revenues increased by
$86,942,000, or 171.4%, due primarily to Boomtown gaming revenues of
$84,620,000, and Crystal Park rent revenues of $2,222,000, in 1997, with no
corresponding Boomtown revenues in 1996. Crystal Park opened in late October
1996. As of December 19, 1997, Hollywood Park had leased Crystal Park to
California Casino Management, Inc., an unaffiliated third party. Previously,
Crystal Park was under lease to Compton Entertainment, Inc. On November 4,
1997, Hollywood Park obtained a judgment in an action for unlawful detainer
against Compton Entertainment, due to Compton Entertainment's failure to pay a
portion of the June 1997 rent and to make required additional rent payments. In
October 1997, the California Attorney General revoked Compton Entertainment's
conditional gaming registration, and the City of Compton revoked Compton
Entertainment's city gaming license.
Gaming revenues from racing decreased by $2,464,000, or 3.5%, due primarily
to one fewer live race day at the Hollywood Park Race Track, and the inclusion
of $1,317,000 of revenues from racing attributable to Sunflower in 1996, with
no corresponding Sunflower revenues in 1997.
Food and beverage revenues increased by $5,947,000, or 42.6%, due primarily
to the inclusion of Boomtown food and beverage revenues in 1997, with no
corresponding revenues in 1996. Hotel and recreational vehicle park and truck
stop and service station revenues related to Boomtown Reno, and there are no
corresponding revenues in 1996. Other income increased by $4,908,000, or 67.7%,
due primarily to the inclusion of Boomtown revenues in 1997 with no
corresponding revenues in 1996.
Total operating expenses (inclusive of approximately $93,072,000 of Boomtown
expenses in 1997, with no corresponding expenses in 1996) increased by
$83,251,000, or 58.2%, during the year ended December 31, 1997, as compared to
the year ended December 31, 1996. Gaming expenses increased by $47,484,000, or
174.3%, primarily due to the inclusion of Boomtown expenses of $46,380,000, and
increased tournament costs at the Hollywood Park-Casino.
Food and beverage expenses increased by $6,172,000, or 31.5%, due primarily
to Boomtown food and beverage expenses of $7,510,000, netted against expense
reductions at the Hollywood Park-Casino, that included labor savings due to the
closing of some food service outlets. Hotel and recreational vehicle park
expenses and truck stop and service station expenses related to Boomtown Reno,
and there are no corresponding expenses in 1996.
Administrative expenses increased by $20,037,000, or 48.3%, which included
$22,054,000 of Boomtown expenses, netted against Sunflower related
administrative costs included in the 1996 financial results, for which there
are no similar costs in the 1997 results. Other expenses increased by
$2,563,000, or 103.1%, due primarily to the inclusion of Boomtown expenses in
1997 with no corresponding expenses in 1996. Depreciation and amortization
increased by $7,462,000, or 69.8%, primarily due to the Boomtown and Crystal
Park LLC depreciation expense in 1997, with no corresponding expenses in 1996.
REIT restructuring expenses consisted primarily of legal and tax consulting
expenses incurred by Hollywood Park with respect to the preparation of
reinstatement of Hollywood Park's paired share REIT status, which was not
implemented. Interest expense increased by $6,360,000, due to interest on
Hollywood Park's $125,000,000 in principal amount of 9 1/2% Senior Subordinated
Notes that were issued in August 1997, short term bank borrowings (all of which
had been repaid as of December 31, 1997), and bank commitment fees. Income tax
expense increased by $2,391,000, or 69.1%, due to increased income before
income taxes in 1997 as compared to 1996.
38
<PAGE>
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 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 $50,717,000
were generated from the Hollywood Park-Casino gaming activities, which
Hollywood Park acquired from Pacific Casino Management 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 Pacific Casino
Management 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 Compton
Entertainment (the operator of Crystal Park). Racing revenues decreased by
$5,728,000, or 7.4%, primarily due to the exclusion of Sunflower's gaming
revenues from racing 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 Pacific Casino
Management in 1995 with no corresponding sales in 1996, 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, and the balance of the difference primarily
due to lower on-track attendance 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 $5,291,000 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 expenses decreased
by $5,176,000, or 20.9%, with $2,089,000 of the savings attributable to the
exclusion of Sunflower's expenses subsequent to the first quarter of 1996, and
the balance of the savings primarily attributable to cost savings programs
implemented at the Hollywood Park-Casino. Administrative expenses decreased by
$3,970,000, or 8.7%, 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, thereby allowing Sunflower to compete
with Missouri riverboat gaming. On May 17, 1996, Sunflower filed for
reorganization under Chapter 11 of the Bankruptcy Code. Sunflower's case has
been converted to a Chapter 7 liquidation under the Bankruptcy Code and final
sale of the property occurred in December 1998.
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
39
<PAGE>
goodwill associated with the November 17, 1995, acquisition of Pacific Casino
Management. 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.
Casino Magic
Casino Magic commenced operations on the Mississippi Gulf Coast in
September 1992 at Casino Magic Bay St. Louis. In 1993, Casino Magic opened
Casino Magic Biloxi. In 1995, Casino Magic opened two gaming facilities in the
Province of Neuquen, Argentina and, in 1997, Casino Magic sold 49% of its
Argentina subsidiary. In 1996, Casino Magic opened Casino Magic Bossier.
Nine Months Ended September 30, 1998 Compared to the Nine Months Ended
September 30, 1997
Consolidated revenues increased $27.2 million, or 13.7%, to $225.4 million
in the first nine months of 1998, compared to $198.2 million in the first nine
months of 1997. The increase in consolidated revenues was attributable to
increased revenues at all five casinos. The largest individual increase of
$15.4 million, or 22.5%, between the comparable periods, occurred at Casino
Magic Bossier. The increase at Casino Magic Bossier was attributable to
improved marketing efforts drawing more patrons to the property. Revenues at
Casino Magic Biloxi increased $9.0 million, or 18.6%, between the comparable
periods. Casino Magic Argentina's revenues increased $2.4 million, or 17.8%,
between the comparable periods. The increase resulted from the continuing
improvements in slot machine revenues due to an increase in the number of slot
machines.
Operating costs and expenses increased $16.9 million, or 9.4%, to $197.1
million in the first nine months of 1998 as compared to $180.2 million in the
first nine months of 1997. Casino expenses increased by $11.8 million, or
13.2%, due to increases in gaming taxes related to increased gaming revenues,
increased personnel costs related to the increased gaming volume and an
increase in slot point redemption values. Advertising and marketing costs
declined $1.9 million, to $26.6 million in the first nine months of 1998,
compared to $28.5 million in the first nine months of 1997. During the first
nine months of 1997 Casino Magic Bossier attempted to increase market share
and revenue with expensive promotions which were significantly less successful
than anticipated. In May 1997, the promotional programs of Casino Magic
Bossier were significantly reduced. Operating expenses for the nine months
ended September 30, 1998 include approximately $4.8 million of costs related
to the merger with Hollywood Park. These costs primarily related to conforming
accounting policies of Casino Magic with those of Hollywood Park.
Other (income) expense (non-operating income and expenses) increased to a
net expense of $23.9 million in the first nine months of 1998 as compared to
$21.3 million in the first nine months of 1997. In 1997 there was a non-
recurring net $2.6 million gain on sale of assets which included a $1.4
million gain on the sale of a riverboat to Hollywood Park, and a $1.3 million
gain on the sale of 49% of Casino Magic Argentina, netted against losses on
the sale of miscellaneous gaming and other equipment.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996
Consolidated revenues increased $81.2 million, or 45.0%, to $261.5 million
in 1997 compared to $180.3 million in 1996. The increase in 1997 consolidated
revenues is attributable to $93.2 million in revenues from Casino Magic's new
facility, Casino Magic Bossier, which opened on October 4, 1996.
Casino Magic Bossier revenues increased by $80.5 million in 1997 as compared
to 1996. This increase in revenues is the result of the facility opening in
late 1996 using a temporary facility and the completion of the permanent land
based pavilion, including restaurants, a gift shop and entertainment areas, on
December 31, 1996. Casino Magic Biloxi revenues declined $1.6 million, or
2.5%, from 1996 to 1997. This decline is primarily the result of competition
from other casinos with greater amenities than Casino Magic Biloxi. While
competitive pressures will likely continue to adversely affect Casino Magic
Biloxi's revenues and operating
40
<PAGE>
margins, management believes that the hotel completed in May 1998 at Casino
Magic Biloxi will help offset or reverse these declines in revenues.
Additionally, Casino Magic Biloxi may experience reduced revenues in 1998 due
to customer inconveniences, particularly those related to the construction of
the hotel entrance areas. However, management has taken precautions to minimize
the impact of the construction on the customer and will continue to do so.
Other fluctuations in revenues when comparing the periods ended December 31,
1997 to December 31, 1996 include: the loss of $3.1 million in royalties and
management fees from Greece in 1997 due to the termination of operations in
Greece in December 1996; loss of $0.8 million in revenues as a result of the
sale of Goldiggers in June 1996; revenues at Casino Magic Bay St. Louis
increased $4.5 million as the result of increased direct mail efforts and
improved amenities, which include a golf course and expanded buffet; and an
increase in revenues at Casino Magic Argentina of $1.7 million attributable to
the addition of seventy-five slot machines during the latter half of 1997 and
the continued popularity of slot machines at Casino Magic Argentina.
Total operating expenses increased $65.5 million, or 38.2%, to $236.9
million in 1997 compared to $171.4 million in 1996. Of this increase, $67.4
million is related to Casino Magic Bossier, which opened in October 1996 and
the closure of Goldiggers in June 1996, which decreased operating expenses, by
$1.2 million. Excluding the effects of Casino Magic Bossier and Goldiggers,
operating expenses in 1997 decreased by $0.7 million, or 0.5%, as compared to
operating expenses in 1996. Although total operating expenses remained flat
between the comparable periods for 1997 and 1996, there were significant
fluctuations in various categories. Casino expenses increased by $4.0 million
in 1997 as compared to 1996 as a result of increased expenses associated with
increases in player's club slot point redemption values, the increased use of
complimentaries in marketing efforts and increased gaming taxes due to
increased revenues. Other operating costs and expenses increased by $1.0
million as a result of the opening of a golf course at Casino Magic Bay St.
Louis in February 1997. Advertising and marketing expenses increased by $2.3
million due to increased motorcoach based marketing efforts at Casino Magic
Biloxi and the associated commission and giveaways expenses. The increases in
advertising and marketing expenses resulted from attempts to stabilize revenues
in Biloxi and offset the effects of the disruption caused by the hotel
construction. General and administrative expenses decreased by $2.7 million as
a result of efforts to contain expenses and staff reductions. The majority of
this decrease, $2.3 million, was at the corporate management level. Development
expenses decreased by $1.2 million as a result of decreased efforts to pursue
new gaming opportunities. Depreciation expenses decreased by $1.9 million due
to the sale of various assets held by Casino Magic including a jet airplane and
slot machines that were previously leased in Argentina. It is anticipated that
depreciation expense will increase after the opening of the hotel in Biloxi.
Consolidated "Other (income) expense" (non-operating income and expenses)
improved by $14.8 million, to a net expense of $30.3 million in 1997, compared
to a net expense of $45.1 million in 1996. Approximately $27.0 million of the
additional expenses in 1996 were attributable to management's decision to write
off its 49% equity interest in a gaming facility in Porto Carras, Greece. Net
interest expense increased by $13.5 million in 1997 compared to the same period
in 1996. This was due to the increased debt from the issuance of the
$115,000,000 principal amount of 13% Louisiana First Mortgage Notes by Casino
Magic of Louisiana, Corp. (a wholly-owned subsidiary of Casino Magic) in late
August 1996, and a reduction of $3.7 million in capitalized interest due to the
completion of the Casino Magic Bossier facility and the golf course at Casino
Magic Bay St. Louis. Other income increased by $2.3 million in 1997 compared to
the same period in 1996 due to a gain on the sale of the Crescent City
Riverboat and the gain on the sale of a 49% interest in Casino Magic Argentina.
Casino Magic's effective tax rates for 1997 and 1996 of approximately (26.9%)
and (12.9%), respectively, are the result of an allowance against deferred tax
assets. This allowance reduces net deferred tax assets to approximately zero.
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
Consolidated revenues increased $2.6 million, or 1.4%, to $180.3 million in
1996 compared to $177.7 million in 1995. The increase in 1996 consolidated
revenues is attributable to $12.7 million in revenues
41
<PAGE>
from Casino Magic Bossier, which opened using a temporary facility on October
4, 1996, and increased revenues from Casino Magic Argentina of $2.8 million, or
21.4%. The majority of the increase in revenues at Casino Magic Argentina
resulted from the increase in slot machine revenues of $3.4 million. Slot
machine revenues increased in 1996 compared to the same period in 1995 due to
an increase in the number of slot machines at Casino Magic Argentina from 89 to
400 in May 1995. The rest of the increase resulted from increased customer
counts and their influence on food and beverage revenues. These increases in
revenues at Casino Magic Argentina were partially offset by lower revenues from
table games. These increases in consolidated revenues were offset by lower
revenues at Casino Magic Bay St. Louis, Casino Magic Biloxi, and the loss of
approximately six months of revenues from the sale of a gaming facility in
Deadwood, South Dakota, which Casino Magic sold in June 1996. Casino Magic
Biloxi revenues declined $8.9 million, or 12.2%, from 1995 to 1996. This
decline was primarily the result of adjacent hotel/casino operations on both
sides of Casino Magic Biloxi that offer significantly greater amenities than
Casino Magic Biloxi. While competitive pressures will likely continue to
adversely affect Casino Magic Biloxi's revenues and operating margins,
management believes that the hotel completed in May 1998 at Casino Magic Biloxi
will help offset or reverse these declines in revenues. The combination of
construction disruption caused by the development of a new buffet and kitchen
and increased overall competition in the Gulf Coast and New Orleans markets,
both of which Casino Magic Bay St. Louis competes in, caused the $3.6 million,
or 4.1%, decline in revenues at Casino Magic Bay St. Louis. The loss of $1.4
million in corporate and other revenues is due to the sale of a gaming facility
located in Deadwood, South Dakota in June 1996. Although royalty and management
fee revenues increased by $0.9 million, or 39.3%, to $3.1 million in 1996,
Casino Magic has divested itself of all operations in Greece during 1996 where
the majority of all royalties and management fee revenues were generated.
Total operating costs and expenses were down $1.5 million, or 1.0%, in 1996
compared to 1995. Casino expenses increased $5.3 million, or 7.6%, during the
same period principally as a result of the opening of a new gaming facility in
Bossier City, Louisiana, which had $7.1 million in casino expenses in 1996.
This increase in casino expenses relating to Casino Magic Bossier was offset by
reduced expenses at Casino Magic Biloxi as a result of reduced revenues, and
the sale of Casino Magic's gaming facility at Deadwood, South Dakota in June
1996. Food and beverage costs increased $0.6 million, or 8.1%, as a result of
increased customer traffic at Casino Magic Argentina. Casino Magic Argentina
relies on its food and beverage facilities at the casino to promote casino
operations. Other operating costs and expenses increased $1.5 million, or
110.5%, to $2.8 million in 1996 compared to 1995. This increase was the result
of additions to amenities at Casino Magic Bay St. Louis, and the transfer of
the gift shop operations at Casino Magic Bay St. Louis and Casino Magic Biloxi
from a third party to Casino Magic. During 1996, Casino Magic Bay St. Louis
added amenities relating to the Arnold Palmer-designed golf course, such as the
pro shop, the Arnold Palmer Golf Academy and the groundskeeping department. In
addition, Casino Magic Bay St. Louis began operating a child-care facility for
casino patrons in 1996. Advertising and marketing expenses decreased by $5.0
million, or 19.2%, in 1996 as compared to 1995. This decrease was due to
several factors: a reduction in the use of air charters to attract customers;
the use of more cost efficient promotions concerning give-aways through the
Magic Money Players Club Card; and an overall reduction in marketing and
advertising costs during 1996. This decrease was offset by the opening of
Casino Magic's new facility, Casino Magic Bossier, in October 1996.
General and administrative expenses decreased $4.3 million, or 15.0%, in
1996 as compared to the same period of 1995. The decline resulted from cost
reduction measures implemented in early 1996, including the elimination of
several corporate officer positions. Property operation, maintenance and energy
costs increased by $3.4 million, or 83.2%, in 1996 as compared to 1995 as a
result of the addition of Casino Magic Bossier, the continued aging of the
facilities at Casino Magic Bay St. Louis and Casino Magic Biloxi which required
more maintenance in 1996, and the addition of the golf facility at Casino Magic
Bay St. Louis in 1996. Rents, property taxes and insurance costs increased by
$1.7 million, or 38.9%, in 1996 as compared to 1995. The increase was in part a
result of the addition of Casino Magic Bossier. Depreciation and amortization
increased $2.6 million, or 16.3%, in 1996 as compared to the same period in
1995. This increase resulted from the
42
<PAGE>
addition of tangible depreciable property, the amortization of the investment
costs in excess of equity interest in the 49% owned Greek gaming facility which
was amortized for 105 days in 1995 and for nine months in 1996, and a change in
1996 in the method used to amortize Casino Magic's land option deposits over
the life of the option. During 1996, management wrote-off the excess of equity
interest in the Greek gaming facility. Furthermore, the addition of Casino
Magic Bossier increased depreciation expense, while the divesting of Casino
Magic's gaming facility in Deadwood, South Dakota, decreased depreciation
expense. Preopening costs increased by $4.7 million, or 260.0%, in 1996 from
1995. This was a result of the opening of Casino Magic Bossier in October
1996. In 1995, Casino Magic opened the Greek gaming facility in which it had a
49% ownership.
Consolidated other (income) expense (non-operating income and expenses)
increased $26.8 million from a net expense of $18.3 million to a net expense of
$45.1 million over the comparative periods. Of this increase, $26.1 million was
due to Casino Magic's decision to write off its 49% equity interest in the
Greek gaming facility. Management's decision was based on the results from
Casino Magic's Greek gaming facilities after the opening of a competing casino
by Hyatt Corporation. Although Casino Magic anticipated some revenue loss as a
result of this increased competition, the actual effects were greater than
anticipated and resulted in a $2.0 million loss in operations at the Greek
gaming facility for the month of September 1996. Net interest expense (interest
expense less capitalized interest and interest income) increased $2.1 million
from 1995 to 1996. The increase reflects the cost of funding the development of
Casino Magic Bossier. In August 1996, the Company, through a wholly-owned
subsidiary, issued $115 million in first mortgage notes to fund Casino Magic
Bossier. In 1995, Casino Magic expensed capitalized costs relating to
development joint ventures in the amount of $2.2 million. In 1996, no such
expense was incurred. Casino Magic's effective tax rate for 1996 of
approximately (13.0%) resulted from an allowance against deferred tax assets of
approximately $8.2 million. This valuation allowance was recorded in
recognition of the Company's recent operating results. The effective tax rate
for 1995 of (24.0%) was due to significant permanent tax differences.
Year 2000 Issues
We are actively evaluating and resolving any potential impact of the Year
2000 problem on the processing of date-sensitive information by our information
systems, and the information systems of vendors upon whom we are dependent. The
Year 2000 problem exists because computer systems and applications were
historically designed to use two digit fields (rather than four) to designate a
year, and date sensitive systems may not properly recognize year 2000, which
could result in miscalculations or system failures. We have established a Year
2000 project team to evaluate the impact of the problem on our computer systems
and on enterprises with which we have significant business relationships. The
team, which is comprised of individuals from each business unit and each
corporate function, meets monthly to identify potential Year 2000 issues and to
develop and implement plans to fix any non-compliant aspects of our system.
Internal Computer Systems. We believe that our various financial reporting
software and associated hardware are Year 2000 compatible. We have become aware
that point of sale cash register systems, personal computer networks, and
gaming patron player tracking systems will need to be upgraded or replaced. We
are currently in the process of procuring and installing hardware and software
to make the necessary repairs to all affected internal systems.
External Computer Systems. We have sent Year 2000 compliance questionnaires
to all of our significant external goods and service providers. To date, other
than with respect to pari-mutuel wagering software and hardware, we are not
aware of any potential Year 2000 problems that would have a material effect on
us. We lease pari-mutuel wagering software and associated hardware. Our service
providers of this software and hardware have given us written assurance that
such software and hardware will be Year 2000 compatible by March 1999. We do
not have alternative systems to handle our pari-mutuel wagering. If such
service providers are unable to timely overcome any potential Year 2000 issues,
it would have a materially adverse effect on our racing operations.
43
<PAGE>
Estimated Cost of Year 2000 Compliance Efforts. We estimate that the total
cost of addressing our Year 2000 issues will be approximately $2,000,000. This
cost estimate is based on numerous assumptions, including the assumptions that
we have already identified our most significant Year 2000 issues and that our
third party suppliers will timely complete their Year 2000 programs without
cost to us. However, there can be no guarantee that these assumptions are
accurate, and actual results could differ materially from those anticipated.
Liquidity and Capital Resources
Hollywood Park's principal source of liquidity as of September 30, 1998,
excluding Casino Magic, was cash and cash equivalents of $20,126,000. Cash and
cash equivalents decreased by $3,623,000 during the nine months ended September
30, 1998. Net cash of $14,790,000 was provided by operating activities. Net
cash of $49,140,000 was used in investing activities. Cash of $33,375,000 was
used to purchase capital assets, including amounts spent for the Boomtown Reno
and Boomtown New Orleans construction projects. Cash of $8,012,000 was lent in
connection with the HP Yakama project. Cash of $3,232,000 was lent to Paul
Alanis, the Company's new President and Chief Operating Officer, for which the
Company holds a promissory note. Cash was used for short term investing (for
the purchase of Casino Magic common stock), and the Company, through its
wholly-owned subsidiary HP Casino, Inc., used cash of $1,946,000 to acquire the
remaining minority interest in Crystal Park. Net cash provided by financing
activities was $30,727,000, which included short term borrowings of $40,000,000
under the Company's Bank Credit Facility.
On October 14, 1998, the Company executed the Bank Credit Facility with a
group of banks with Bank of America NT&SA as Administrative Agent for up to
$300,000,000, with an option to increase this amount to $375,000,000. The Bank
Credit Facility also provides for sub-facilities for letters of credit of up to
$30,000,000, and swing line loans of up to $10,000,000. Prior to the execution
of the Bank Credit Facility, the Company was operating with a bank credit
facility (the "Old Bank Credit Facility") which was initially for $225,000,000,
and was reduced to $100,000,000 with the August 1997 issuance of the 9 1/2%
Notes. The Bank Credit Facility extended the maturity of the Old Bank Credit
Facility to December 31, 2003, reduced interest and commitment fee rates, and
amended certain covenants, as compared to the previous Old Bank Credit
Facility.
As of September 30, 1998, the Company had outstanding borrowings under the
Old Bank Credit Facility of $40,000,000 at a weighted average interest rate of
7.79%. On October 13, 1998, the Company borrowed an additional $5,000,000 under
the Old Bank Credit Facility. On October 15, 1998, the Company borrowed
$225,000,000 under the Bank Credit Facility with respect to the acquisition of
Casino Magic. The funds were utilized as follows: approximately $80,900,000 to
purchase Casino Magic's outstanding common stock; $141,515,000 to redeem Casino
Magic's 11 1/2% First Mortgage Notes due October 15, 2001 (the "Casino Magic
Notes"); and $2,125,000 to purchase the 13% First Mortgage Notes due 2003
issued by Casino Magic of Louisiana, Corp. tendered in the change of control
offer made in connection with the acquisition of Casino Magic. The Company
borrowed $5,000,000 on January 7, 1999, $5,000,000 on January 28, 1999 and
$7,000,000 on February 8, 1999 under the Bank Credit Facility for general
corporate purposes.
Under the Bank Credit Facility, the Company is not required to make any
principal payments prior to March 31, 2001, but must make monthly interest
payments. Starting March 31, 2001, and on the last day of each subsequent
calendar quarter, through December 31, 2002, the amount available under the
Bank Credit Facility will decrease by $15,000,000, and on the last day of each
calendar quarter for the period March 31, 2003, through September 30, 2003, it
will decrease by $25,000,000, with the balance of any principal outstanding due
on December 31, 2003. If the Bank Credit Facility has been increased, then the
amount of the reduction will increase proportionately. If the Company has
borrowings in excess of the reduced availability of the Bank Credit Facility,
these amounts are due on the same day as the scheduled reductions.
The annual interest rate under the Bank Credit Facility is determined, at
the Company's election, by reference to the "Eurodollar Rate" (for Eurodollar
loans) (for interest periods of one, two, three or six months) or the
"Alternate Base Rate" (for Base Rate loans), as these terms are defined in the
Bank Credit Facility, plus
44
<PAGE>
margins that vary depending on the Company's ratio of funded debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA"). With a funded
debt to EBITDA ratio of less than 2.00 to 1.00, the margin for Eurodollar loans
is 1.00% and nothing for Base Rate loans. The margin for each type of loan will
increase by 25 basis points (except the initial increase in the margin for Base
Rate loans, which increases by 12.5 basis points) for each 50 basis point
increase in the funded debt to EBITDA ratio. The maximum margin for Eurodollar
loans is 2.25%, and for Base Rate loans is 1.125%. The margin for the period
October 15, 1998, through November 30, 1998, for Eurodollar loans was 2.00% and
0.875% for Base Rate loans. Effective December 1, 1998 through February 28,
1999, the margins are 2.25% and 1.125% for Eurodollar and Base Rate loans,
respectively. After giving effect to this offering, the margins would continue
to be 2.25% and 1.125% for Eurodollar and Base Rate loans, respectively.
The Bank Credit Facility requires the payment of a quarterly commitment fee,
based on the Company's ratio of funded debt to EBITDA, applied to the average
amount of the unused portion of the Bank Credit Facility. The commitment fee
starts at 25 basis points when the ratio of funded debt to EBITDA is less than
2.00 to 1.00, and increases by 6.25 basis points for the first two increases in
the ratio of 50 basis points, then remains unchanged for the next 50 basis
point increase in the ratio, and thereafter increases by 6.25 basis points for
each 50 basis points increase in the ratio, up to a maximum of 50 basis points.
The commitment fee for the period October 15, 1998 through November 30, 1998
was 43.75 basis points, and for the period December 1, 1998 through February
28, 1999 is 50 basis points. After giving effect to this offering, the
commitment fee would continue to be 50 basis points.
The Bank Credit Facility allows for interest rate swap agreements, or other
interest rate protection agreements, up to a maximum notional amount of
$300,000,000. Presently, the Company does not use such financial instruments.
The net proceeds of the Old Notes offering were first used to repay
borrowings under the Bank Credit Facility. We have used, and will continue to
use, the remaining proceeds for general corporate purposes, primarily for 1999
capital expenditures.
The Company has entered into an agreement to sell 12 acres of land at its
Phoenix, Arizona based Turf Paradise racing facility, for approximately
$4,574,000. The purchaser, a national retailer, intends to construct a major
retail outlet at the site. The sale is expected to be completed in the first
quarter of 1999.
On August 6, 1997, Hollywood Park and Hollywood Park Operating Company co-
issued $125,000,000 aggregate principal amount of 9 1/2% Notes. The Company
paid liquidated damages at an annual rate of 0.5% of the principal amount of
the 9 1/2% Notes for the period January 27, 1998 to March 20, 1998 (the date of
consummation of a registered exchange offer for the 9 1/2% Notes).
Hollywood Park, through its wholly-owned subsidiary HP Yakama, loaned
approximately $9,618,000 to the Yakama Tribal Corporation to construct the
Legends Casino. The Tribal Corporation gave HP Yakama a promissory note for the
$9,618,000, payable in 84 equal installments at a 10% rate of interest.
As of September 30, 1998, the Company had invested approximately $3,845,000
(net of an unrealized loss of approximately $386,000) in equity securities
(including Casino Magic common stock), which were being held as available-for-
sale. Effective upon the completion of the Casino Magic acquisition, those
shares of Casino Magic common stock held by Hollywood Park were cancelled.
In October 1993, a wholly-owned subsidiary of Casino Magic issued and sold,
and Casino Magic guaranteed, $135,000,000 aggregate principal amount of the
Casino Magic Notes. On October 15, 1998, concurrent with the completion of the
Casino Magic acquisition, Casino Magic elected to redeem the Casino Magic Notes
at the optional redemption price of 103.833% and therefore deposited
approximately $141,515,000 with the trustee of the Casino Magic Notes.
Effective with the deposit, Casino Magic and the issuer were discharged from
further obligations for the Casino Magic Notes. The deposit was from proceeds
from borrowings under the Bank Credit Facility.
45
<PAGE>
In August 1996, Casino Magic of Louisiana, Corp., a wholly-owned subsidiary
of Casino Magic and the owner of Casino Magic Bossier, issued and sold
$115,000,000 aggregate principal amount of 13% First Mortgage Notes due August
15, 2003 (the "Louisiana Notes"). The Louisiana Notes provide for interest at
13% per year and for contingent interest in the amount of 5% of Casino Magic of
Louisiana's adjusted consolidated cash flow under certain circumstances. The
Louisiana Notes are secured by a first priority lien and security interest in
substantially all of the assets of Casino Magic of Louisiana, including the
Bossier Riverboat. Jefferson Casino Corporation, the immediate parent of Casino
Magic of Louisiana, guarantees the Louisiana Notes and the guarantee is secured
by all of the assets of Jefferson Casino Corporation, including all of the
capital stock of Casino Magic of Louisiana, Corp.
On November 13, 1998, due to the acquisition of Casino Magic by Hollywood
Park, Casino Magic of Louisiana, Corp. initiated a change in control purchase
offer at a price of $1,010 for each $1,000 principal amount of Louisiana Notes
outstanding. The change in control purchase offer expired December 23, 1998 and
$2,125,000 in principal amount of the Louisiana Notes were tendered.
As of September 30, 1998, Casino Magic and its subsidiaries (excluding
Casino Magic of Louisiana, Corp.) had other secured and unsecured debt
obligations as follows: (a) six secured notes aggregating approximately
$6,932,000, secured by certain furniture and fixtures at Casino Magic Biloxi,
with interest ranging from 9.5% to 10.3%, and maturity dates ranging from May
2002 to November 2002; (b) a note payable for approximately $2,727,000, secured
by land, bearing interest at prime, due March 2003; (c) an unsecured term note
payable for approximately $1,600,000, bearing interest at 8.25%, due September
1999; (d) an unsecured note payable for approximately $1,214,000, bearing
interest at prime rate plus 1% (9.5% as of September 30, 1998), due February
2000; (e) five other secured notes totaling approximately $1,236,000, with
interest rates ranging from 8.0% to 11.0%, and maturity dates ranging from
April 1999 to June 2004; and (f) various capital lease obligations, secured by
certain equipment, totaling approximately $630,000.
As of September 30, 1998, Casino Magic of Louisiana, Corp. had other secured
and unsecured debt obligations as follows: (a) a note payable for approximately
$1,540,000, secured by certain gaming equipment, bearing interest at 8.75%, due
September 1999; (b) a note payable for approximately $746,000, secured by
certain gaming equipment, bearing interest at 10.5%, due October 1999; (c) two
capital leases for slot machines aggregating $1,769,000; and (d) various other
capital lease obligations, totaling approximately $198,000.
Capital Commitments
As previously discussed, the Company was approved to receive a gaming
license to own and operate a riverboat casino in Indiana. As a result, the
Company has capital commitments of approximately $3,700,000 for the purchase of
the common stock of Pinnacle Gaming Development Corporation (the entity that
initially applied for the Indiana gaming license). The Indiana riverboat
project is expected to cost approximately $150,000,000 (including land and pre-
opening expenses but excluding capitalized interest), to be spent over the next
18 to 24 months. The Company believes that the Bank Credit Facility and
available future cash flow will be sufficient to fund the construction of the
Indiana Hotel/Casino Resort; however, there can be no assurance that additional
funds will not be required.
The Company anticipates spending approximately $26,000,000 in 1999 in
maintenance capital expenditures.
Expansion Costs
In addition to the current capital commitments discussed, Hollywood Park has
other capital needs with respect to Boomtown Reno and Casino Magic Bossier. As
of September 30, 1998, the Company had spent approximately $14,000,000 of the
estimated $25,000,000 on the expansion and renovation of Boomtown Reno,
including additional hotel rooms, expanded gaming space and other amenities.
The hotel opened in late December 1998. As of September 30, 1998, Casino Magic
had spent approximately $14,500,000 of the
46
<PAGE>
estimated $21,000,000 on the construction of a 188-room hotel and full service
restaurants which opened in December 1998 at Casino Magic Bossier.
General
Hollywood Park is continually evaluating future growth opportunities in the
gaming business. Hollywood Park expects that funding for the Indiana
Hotel/Casino Resort, payment of interest on the Notes and the 9 1/2% Notes,
payment of notes payable, and normal and necessary capital expenditure needs
will come from existing cash balances generated from operating activities and
borrowings from the Bank Credit Facility. In the opinion of management, these
resources will be sufficient to meet Hollywood Park's anticipated cash
requirements for the foreseeable future and in any event for at least the next
twelve months.
47
<PAGE>
BUSINESS
Hollywood Park
We are a diversified gaming company that owns and/or operates eight casinos,
two pari-mutuel horse racing facilities, and two card club casinos at twelve
locations in Nevada, Mississippi, Louisiana, California, Arizona and Argentina.
We have also been approved to receive the final license to conduct riverboat
gaming on the Ohio River in Indiana and have begun development of a $150
million hotel/casino and golf resort at a site in Switzerland County, Indiana,
35 miles southwest of Cincinnati, Ohio. In addition to our operating
properties, we have significant excess land available for future sale or
development at four of our properties.
In October 1998, we acquired Casino Magic and now own and operate Casino
Magic Bay St. Louis and Casino Magic Biloxi in Mississippi, Casino Magic
Bossier in Louisiana, and two Casino Magic casinos in Argentina. In 1997, we
acquired Boomtown and now own and operate Boomtown Reno in Verdi, Nevada,
Boomtown Biloxi in Biloxi, Mississippi, and Boomtown New Orleans in Harvey,
Louisiana. These companies own strategically located properties in growing and
established gaming markets and, at the time we acquired them, were for the most
part underperforming and had limited access to capital for expansion. In both
acquisitions, we have been able to use our financial and management resources
to streamline operations, implement expansion projects and enable the acquired
companies to refinance expensive debt.
Our two card club casinos in the Los Angeles metropolitan area, the
Hollywood Park-Casino and Crystal Park, offer a variety of card games,
including Poker, Pai Gow and California Blackjack, but by law may not
participate in the wagers made or the outcome of any card games, or offer other
games that are permitted in Nevada and other traditional jurisdictions. We own
and operate the Hollywood Park-Casino, and own and lease Crystal Park to an
unaffiliated third party operator.
Finally, we own and operate two pari-mutuel gaming facilities: Hollywood
Park Race Track, a premier thoroughbred racing facility located on a 378-acre
parcel within three miles of the Los Angeles International Airport, and Turf
Paradise Race Track in Phoenix, Arizona. Hollywood Park Race Track has been the
site of the prestigious Breeders' Cup on three occasions, the most recent in
1997.
In January 1999, we strengthened our gaming management team by hiring Paul
Alanis as our President and Chief Operating Officer and J. Michael Allen as
Senior Vice President-Gaming Operations. Both Mr. Alanis and Mr. Allen held
similar positions with Horseshoe Gaming Inc. Mr. Alanis and Mr. Allen were
hired to actively participate in the overall execution of our business and
operating strategies, including re-positioning the Boomtown and Casino Magic
properties and overseeing the construction and operations of the Indiana Hotel
and Casino Resort.
In light of the Boomtown and Casino Magic acquisitions, the following may be
helpful to give you an idea of the current size of our company. If the
acquisitions and related transactions had occurred on January 1, 1997 (which we
refer to as being on a "pro forma" basis), our revenues would have totaled
approximately $610.8 million for the year ended December 31, 1997 and
approximately $495.2 million for the nine months ended September 30, 1998. On a
pro forma basis, earnings before interest, taxes, depreciation and amortization
(abbreviated as "EBITDA") would have totaled approximately $104.6 million for
the year ended December 31, 1997 and approximately $93.2 million for the nine
months ended September 30, 1998. On this basis, and giving effect to the Old
Notes offering on a pro forma basis, net loss would have totaled $6.6 million
for the year ended December 31, 1997 and net income of approximately $4.0
million for the nine months ended September 30, 1998. In addition, on a pro
forma basis, as of September 30, 1998, we would have had total assets of
approximately $966.4 million. On a pro forma basis, giving effect to the Old
Notes offering, including our use of proceeds from that offering, we would have
had total indebtedness of approximately $623.2 million as of September 30,
1998.
48
<PAGE>
Corporate Structure
The following chart illustrates the organizational structure of our
principal operations. It is designed to depict how our various operations
relate to one another and our ownership interest in them. It does not contain
all of our subsidiaries and, in some cases for presentation purposes, we have
combined separate entities to indicate operational relationships. We have also
indicated the principal subsidiaries that initially are "Unrestricted
Subsidiaries" under the Indenture, i.e., the subsidiaries that are not
guarantors and are not subject to the Indenture covenants.
[CORPORATE ORGANIZATIONAL CHART APPEARS HERE]
49
<PAGE>
Business Strategy
Our strategic plan is to develop a broad base of regionally diversified
casino entertainment facilities by making selected acquisitions in the non-Las
Vegas, non-Atlantic City gaming markets and achieving economies of scale. In
the realization of this strategy, we acquired Boomtown on June 30, 1997, and
Casino Magic on October 15, 1998. Our management seeks to develop its casinos
and maximize profitability by:
.refinancing expensive debt;
.fostering customer loyalty by offering a value oriented, quality customer
service gaming experience;
. providing gaming and entertainment facilities uniquely designed for each
property and target customer base; and
.using focused direct marketing incentives.
Specific growth initiatives vary by property type:
Boomtown Casinos. Since the acquisition, we refinanced Boomtown's expensive
debt and undertook various capital expenditure programs to enlarge and enhance
the facilities. The three Boomtown casinos are now fully developed facilities
that serve their local markets in a relaxed and customer-friendly environment.
The goal for our new management team with respect to the Boomtown casinos is
to maximize profitability through cost control and increase market share
through improved marketing. We seek to enhance customer loyalty through direct
customer marketing and by providing customers a high value gaming experience.
Property enhancements and financial restructuring already undertaken at
Boomtown include the following:
Property Enhancements .Boomtown New Orleans: Replacement of existing
riverboat with the Boomtown Belle II, a
$16.4 million riverboat (including
installation and renovation) which is
bigger and has a more elegant decor (opened
February 1998)
.Boomtown New Orleans: $10 million expansion
of land-based premier, adult-oriented
dining and entertainment complex called
"The Great Escape" (opened July 1998)
.Boomtown Reno: $25 million expansion and
renovation, including 200 additional hotel
rooms, a complete renovation of existing
gaming floors, addition of 13,000 square
feet of gaming space (including 200 slot
machines) and 10,000 square feet of meeting
space, additional parking, a new buffet
restaurant, and other amenities (hotel
opened December 1998; other aspects of the
project expected to be completed in the
first quarter of 1999)
Financial Restructuring .Repurchase of $103.5 million principal amount
of Boomtown 11 1/2% First Mortgage Notes
.Repurchase of minority interests in Boomtown
New Orleans for $5.7 million and in
Boomtown Biloxi for $400,000
.Restructure high-cost operating leases
.Prepayment of $2 million note bearing 13%
interest and secured by the existing
Boomtown New Orleans riverboat
.Purchase of dockside barge at Boomtown Biloxi
for $5.3 million
Casino Magic Properties. We believe the Casino Magic properties offer
significant growth potential through improved management and re-positioning of
the brand to a more upscale and exciting image. The
50
<PAGE>
properties are well-located and have ample room for limited and focused capital
spending to make them more attractive and customer-friendly via parking and
room additions, casino expansion and renovation, and additional entertainment
amenities. Property enhancements and financial restructuring already undertaken
at Casino Magic include the following:
Property Enhancements .Casino Magic Bossier: Accelerated the $21
million construction of an 188-room hotel
with four master suites, 88 junior suites
and additional full service restaurants
(opened December 1998)
Financial Restructuring .Redemption of $135 million principal amount
of Casino Magic 11 1/2% First Mortgage
Notes
We are also considering the following expansion projects at existing Casino
Magic properties:
Possible Expansion .Casino Magic Biloxi: Renovation of the casino
Projects gaming area and its attendant amenities
.Casino Magic Bay St. Louis: Construction of a
300-room hotel next to the casino
.Casino Magic Bossier: Construction of a
second hotel tower consisting of 200
rooms--Our decision to pursue this project
will be made after we have evaluated the
results from the initial 188-room addition
completed in December 1998
Indiana Hotel/Casino Resort. On September 14, 1998, the Indiana Gaming
Commission approved us to receive the last available license to conduct
riverboat gaming operations on the Ohio River in Indiana. We expect to spend
approximately $150 million (including land and pre-opening expenses but
excluding capitalized interest) to develop a new gaming facility approximately
35 miles southwest of Cincinnati, Ohio in Switzerland County, Indiana. This
site will be the most accessible gaming facility from Lexington and other parts
of northern Kentucky. The project will include a cruising riverboat with 38,000
square feet of casino space, as well as a land-based facility with a 309-room
hotel, an 18-hole golf course, convention space, restaurants, and other related
amenities. We own 97% of the Indiana Hotel/Casino Resort; the remaining
interest is held by a non-voting local partner. While we expect to complete the
Indiana Hotel/Casino Resort in 18 to 24 months, construction matters or other
issues may delay the facility's opening.
Excess Land. We are exploring the development of our 378-acre Hollywood Park
Race Track property and our 275-acre Turf Paradise Race Track property. This
land has a combined book value of $13.1 million. Management believes the fair
market value of the land is approximately $230 million. The Hollywood Park Race
Track property has approximately 160 undeveloped acres and Turf Paradise has
approximately 100 undeveloped acres on which we seek to develop multi-use
retail, entertainment and/or sports venues. We have entered an agreement to
sell 12 acres of land at Turf Paradise on which the purchaser intends to
construct a major retail outlet.
We also have excess land at our Reno and Bay St. Louis properties. While the
excess land offers extensive expansion opportunity at each of these properties,
we will aggressively pursue realization of value through sale and/or
development (including joint venture arrangements).
Additional Acquisitions. We continually evaluate opportunities to expand and
diversify our operations through gaming acquisitions in markets outside Las
Vegas and Atlantic City, including entities which are unable to maximize their
potential due to operating inefficiencies or capital constraints. We believe
that by matching our financial and management resources with the opportunities
of the acquired entities, we can significantly improve their operations. We
have applied this strategy in our recent acquisition of Casino Magic and our
earlier acquisition of Boomtown. In both cases, since making the acquisitions,
we have used our resources to streamline operations, implement expansion
projects and refinance expensive debt.
51
<PAGE>
Louisiana Properties
Louisiana legalized riverboat and dockside gaming in 1991 and gaming
operations began in Louisiana in September 1993.
Casino Magic Bossier
Casino Magic Bossier opened in October 1996, with gaming operations
conducted from a dockside riverboat. The property includes 23 acres of land in
the Shreveport/Bossier City metropolitan area, approximately 180 miles east of
the Dallas-Fort Worth area. The site is highly visible with convenient access
from Interstate Highway 20, the major east-west artery connecting Dallas-Fort
Worth and Bossier City. Most of the customers at Casino Magic Bossier come from
eastern Texas.
The Casino Magic Bossier riverboat contains approximately 30,000 square feet
of gaming space, and offers 980 slot machines and 44 table games. The Casino
Magic Bossier facility includes a 55,000 square foot entertainment pavilion
with a 350-seat buffet, a gift shop, and live entertainment theater. We
recently completed a 188-room luxury hotel with four master suites, 88 junior
suites and a full service restaurant.
Casino Magic Bossier is owned and operated by Casino Magic of Louisiana,
Corp., an indirect wholly-owned subsidiary which will be an Unrestricted
Subsidiary under the Indenture governing the Notes.
Boomtown New Orleans
Boomtown New Orleans began operations in August 1994 on a 50-acre site in
Harvey, Louisiana, approximately ten miles from the French Quarter of New
Orleans. Three riverboats, including our Boomtown New Orleans casino, currently
operate in the New Orleans area. Boomtown New Orleans is located on the "West
Bank" in Jefferson Parish. The West Bank has approximately 300,000 local
residents who comprise a large majority of the Boomtown New Orleans customers.
In mid-February 1998, Boomtown New Orleans began conducting gaming
operations on the Boomtown Belle II, a 380-foot riverboat containing 30,000
square feet of gaming space. The new casino offers 1,089 slot machines and 49
table games. The Boomtown Belle II replaced a smaller riverboat that offered
911 slot machines and 55 table games. Boomtown New Orleans also includes a
land-based facility adjacent to the riverboat dock. The first floor of the
building offers patrons a buffet and a western saloon/dancehall. On July 1,
1998, we opened "The Great Escape," a $10 million expansion project located on
the second floor of the land-based facility. The Great Escape, a premier dining
and entertainment complex, features a 160-seat casual dining restaurant, 500-
person capacity banquet facilities and a state-of-the-art adult-oriented arcade
style amusement center offering numerous attractions, including a 3-D giant
screen thrill ride, virtual reality rides, golf simulators, and a billiard
center.
Mississippi Properties
Mississippi legalized dockside gaming in June 1990 and gaming operations
began in Mississippi in August 1992. We operate three of the eleven casinos in
the Mississippi Gulf Coast market. The Mississippi Gulf Coast is a traditional
vacation destination. The region draws an estimated 6.5 million visitors
annually, primarily from Louisiana, Mississippi, Alabama, Florida and Georgia.
Casino Magic Bay St. Louis
Casino Magic Bay St. Louis began operations in September 1992 as the first
dockside casino in Mississippi to utilize a fixed barge rather than a
traditional riverboat, which allowed for larger contiguous gaming areas and a
more spacious casino environment. Casino Magic Bay St. Louis is approximately
46 miles east of New Orleans, Louisiana. While Casino Magic Bay St. Louis
primarily serves the 4.1 million adults residing within 150 miles of Bay St.
Louis, approximately 50% of these customers come from the greater New Orleans
area.
52
<PAGE>
Casino Magic Bay St. Louis conducts gaming operations on a permanently
moored barge in a 17-acre marina with the adjoining land based facilities
situated on 591 acres. Casino Magic Bay St. Louis offers approximately 39,500
square feet of gaming space, with 1,132 slot machines and 42 table games. The
three story land-based building houses a restaurant, buffet, snack bar, gift
shop and live entertainment lounge. The property has a 201-room hotel, an 1,800
seat arena for concerts and sporting events, and an 18-hole golf course.
Casino Magic Biloxi
Casino Magic Biloxi, which opened in June 1993, is located on the Front Bay
of Biloxi in a strip with two other casinos on the major highway running
through the Mississippi Gulf Coast. Biloxi is approximately 50 miles west of
Mobile, Alabama. The target market for Casino Magic Biloxi is the 2.2 million
adults within a 200-mile radius of Biloxi and includes visitors from Alabama,
Mississippi and Florida.
Casino Magic Biloxi conducts gaming from a permanently moored barge with
approximately 47,700 square feet of gaming space with 1,174 slot machines and
41 gaming tables. The land-based facility, which is located adjacent to the
barge on the approximately 16-acre site, is approximately 21,600 square feet
and offers buffets and full service restaurants. On May 1, 1998, Casino Magic
Biloxi opened its 378-room luxury hotel, which includes 16 master suites, 70
junior suites, 6,600 square feet of convention and meeting space, a full
service restaurant and retail shops.
Boomtown Biloxi
Boomtown Biloxi began operations in July 1994. Boomtown Biloxi occupies
nineteen acres on Biloxi's historic Back Bay. We lease the site under a 99-year
lease that began in 1994. The casino is one-half mile from Interstate 110,
which is the main highway connecting Interstate 10 and Biloxi.
Boomtown Biloxi offers a 33,632-square foot casino constructed on a
permanently moored barge. The casino contains 1,308 slot machines and 35 table
games. The dockside property includes a land-based facility with restaurants
and other non-gaming activities. We purchased the barge and building shell for
$5.3 million from the lessor of those assets, National Gaming Mississippi,
Inc., of which a $2.5 million balance is due in two annual installments to be
paid in 1999 and 2000.
Nevada Property
Boomtown Reno
Boomtown Reno began operations over 30 years ago on 569 acres in Verdi,
Nevada, nine miles west of Reno and two miles from the California border. The
facility is located on Interstate 80, the major highway connecting Northern
California and Reno. We believe Boomtown Reno maintains a loyal customer base
primarily drawn from Interstate 80 traffic.
Boomtown Reno offers a 40,000-square foot casino with 1,320 slot machines,
44 table games, and two Keno games. Boomtown Reno opened a new 200-room hotel
tower in December 1998 to augment its existing 122-room hotel. It also offers a
35,000-square foot family entertainment center, a 16-acre truck stop, a
recreational vehicle park, and other related amenities.
California Properties
Hollywood Park Race Track
The Hollywood Park Race Track is located in the Los Angeles metropolitan
area, which has a population base of approximately 14 million people. The race
track sits on 378 acres, approximately 160 of which are undeveloped. Since
1938, the Hollywood Park Race Track has been among the country's most
distinguished thoroughbred racing facilities. In 1997, it hosted the Breeders'
Cup championship racing series for the third time.
53
<PAGE>
Through our wholly-owned subsidiary, Hollywood Park Operating Company, we
conduct two live on-track thoroughbred horse race meets per year. The meets
provide a total of approximately 95 to 100 race days per year, usually with
nine races a day. We also send the signal of our live races to hundreds of off-
track sites, including fairgrounds, hotels, casinos, and other race tracks, and
receive simulcast signals from live races conducted at other race tracks,
including Southern and Northern California tracks.
Hollywood Park derives revenues primarily from a share of the pari-mutuel
handle at rates fixed by the State of California. Pari-mutuel wagering means
that patrons bet against each other in a pool rather than against the operator
of the facility or with pre-set odds. Hollywood Park also receives revenue from
admission fees and concession sales.
The Hollywood Park-Casino
The Hollywood Park-Casino opened in July 1994 on the premises of the
Hollywood Park Race Track. We operate the casino under a California law that
permits publicly-traded pari-mutuel racing associations to operate card club
casinos on race track premises.
The Hollywood Park-Casino offers 145 table games in 30,000 square feet of
gaming space. California card club casinos may not participate in the wagers
made or in the outcome of any card games. The Hollywood Park-Casino offers only
certain card games, including Poker, Pai Gow and California Blackjack, but no
slot machines. Hollywood Park-Casino patrons pay a fee for seats at gaming
tables or for each hand played. We also derive revenue from food and beverage
sales, rental of facilities for bingo, gift shops and health club operations.
Crystal Park Hotel and Casino
Crystal Park opened in late 1996 as Southern California's first major
combined hotel and casino property. The 226-room hotel operates under a
Radisson Hotels International, Inc. flag. Crystal Park's casino, which has 60
table games, offers games similar to those offered at the Hollywood Park-
Casino.
Since Crystal Park is not located on the same property as a race track, an
unaffiliated operator who is licensed by the State of California and the City
of Compton operates Crystal Park under a four year triple-net lease. Although
the rent was due to increase to $350,000 per month as of July 1, 1998, we
agreed to accept rent of $150,000 per month through January 1999. We expect
that, under present market conditions, the monthly rent will not increase as
scheduled in the lease, but rather will remain between $100,000 and $150,000.
Arizona Property
Turf Paradise
We acquired Turf Paradise in 1994. Turf Paradise was organized in 1954 and
is located in the northwest region of Phoenix, Arizona on approximately 275
acres, approximately 100 of which are undeveloped. We have entered into an
agreement to sell 12 acres of the undeveloped land for approximately $4.6
million. The purchaser, a national retailer, intends to construct a major
retail outlet on the site. We expect to complete the sale in the first quarter
of 1999.
Turf Paradise conducts one live thoroughbred meet per year, which runs from
September to May. During live racing, Turf Paradise accepts simulcast races
from numerous race tracks, and also sends its live race signals to a large
number of off-track sites. Turf Paradise operates as a simulcast facility,
accepting race signals during its off season covering June through August.
Argentina Properties
We operate two casinos in the cities of Neuquen and San Martin de los Andes
in west central Argentina. Approximately 900,000 people live within a 150-mile
radius of the two cities. The cities are located near
54
<PAGE>
several Argentine tourist attractions, including national parks, ski resorts
and a wide variety of outdoor activities.
Casino Magic Argentina
In December, 1994, Casino Magic Neuquen SA, a wholly-owned subsidiary of
Casino Magic, entered into a twelve-year concession agreement with the
provincial government of the Argentine Province of Neuquen to operate the
casinos. Gaming operations began on January 1, 1995. On May 31, 1997, Casino
Magic sold a 49% interest in Casino Magic Neuquen SA to Crown Casino Corp. for
$7 million. We retain a controlling interest in Casino Magic Neuquen SA and
manage the casinos in Argentina for a fee equal to approximately two percent of
the casinos' gross revenues.
The larger casino, located in the city of Neuquen, contains approximately
27,000 square feet of gaming space and offers 398 slot machines, 40 table
games, and a 384-seat bingo facility. The smaller casino operates in San Martin
de los Andes, a resort town approximately 200 miles southwest of the city of
Neuquen. The San Martin de los Andes casino offers 75 slot machines and 16
table games in approximately 2,500 square feet of gaming space.
Other Gaming Interests
Legends Casino
Through HP Yakama, Inc., our wholly-owned subsidiary, we made a seven-year
loan of approximately $9.6 million, at 10% interest, to the Yakama Tribal
Gaming Corporation to construct the Legends Casino, which opened in May 1998 in
Toppenish, Washington. Legends Casino is approximately 160 miles from both
Seattle, Washington and Portland, Oregon, and features a 600-seat bingo hall,
electronic pull tabs, and table games, including Blackjack, Poker, Craps,
Roulette, Mini-bac, and Caribbean Stud. Legends Casino does not have slot
machines. The Yakama Tribal Gaming Corporation pays HP Yakama an amount equal
to 28% of Net Revenues (as defined in the relevant agreement). The payment
decreases to 22% over a seven-year period. HP Yakama pays 22% of payments
received from the Yakama Tribal Gaming Corporation to North American Sports
Management pursuant to a Profit Participation Agreement.
Employees
The following is a summary of Hollywood Park's employees by property:
<TABLE>
<CAPTION>
Total
Permanent Seasonal Staffing
Property Staff Staff Range
-------- --------- -------- ------------
<S> <C> <C> <C>
Hollywood Park-Casino........................ 1,415 -- 1,415
Boomtown Reno................................ 800 300 800-1,100
Boomtown New Orleans......................... 1,100 -- 1,100
Boomtown Biloxi.............................. 970 -- 970
Casino Magic Bay St. Louis................... 1,250 50 1,250-1,300
Casino Magic Biloxi.......................... 1,160 -- 1,160
Casino Magic Bossier......................... 1,425 -- 1,425
Casino Magic Argentina....................... 255 -- 255
Hollywood Park Race Track.................... 390 1,020 390-1,410
Turf Paradise................................ 85 425 85-510
Corporate.................................... 35 -- 35
----- ----- ------------
8,885 1,795 8,885-10,680
===== ===== ============
</TABLE>
We do not employ the staff at the Crystal Park Casino.
55
<PAGE>
Our staff is non-union, with the exception of the janitorial and food
service employees at the Hollywood Park-Casino and the majority of the seasonal
staff at the Hollywood Park Race Track. We believe that we have good
relationships with our employees. We are presently in or about to begin
discussions with the union representing the food service staff. We believe that
this contract will be renewed without incident, though there can be no
assurance that labor problems will be avoided.
Properties
The following describes our principal real estate properties:
Casino Magic Bossier. We own the 23-acre site on the Red River in Bossier
City, Louisiana on which Casino Magic Bossier is located. The property, which
contains a dockside casino and land-based facilities, including a new hotel
that opened in December 1998, secures the outstanding $112.9 million aggregate
principal amount of Louisiana Notes. Casino Magic Bossier is owned and operated
by Casino Magic of Louisiana, Corp., an indirect wholly-owned subsidiary which
is an unrestricted subsidiary under the Indenture governing the Notes.
Boomtown New Orleans. We own the approximately 50 acres in Harvey, Louisiana
on which Boomtown New Orleans is located. This property is approximately 10
miles from the French Quarter of New Orleans. We own all improvements to and
facilities on this property, including the riverboat casino.
Casino Magic Bay St. Louis. We own approximately 591 acres in the city of
Bay St. Louis, Mississippi, including the 17-acre marina where the gaming barge
is moored. The property includes an 18-hole golf course, a hotel, and other
land-based facilities, all of which we own.
Casino Magic Biloxi. Casino Magic Biloxi is located on an approximately 16-
acre site, which includes land located on both the north and south sides of
U.S. Highway 90. We own approximately 4.5 acres and lease approximately 11.5
acres, including approximately 6.4 acres of submerged tidelands adjacent to the
land which is leased from the State of Mississippi under a ten-year lease with
a five-year renewal option.
Boomtown Biloxi. We lease substantially all of the 19 acres on which
Boomtown Biloxi sits under a 99 year lease that began in 1994. In addition, we
lease property for parking under several lease agreements ranging from 10 to 25
years. We also lease approximately 5.1 acres of submerged tidelands at the
casino site from the State of Mississippi under a ten-year lease with a five-
year option to renew. We own the barge on which the casino is located and all
of the land-based facilities.
Boomtown Reno. We own the 569 acres of land in Verdi, Nevada on which
Boomtown Reno is located. We use approximately 61 acres for current operations.
We also own all of the improvements and facilities on the land, including the
casino, hotel, fun center, truck stop and recreational vehicle park. We also
own the related water rights and operate our own sewage treatment facility at
the site. Of the remaining acreage, we are considering developing approximately
250 acres.
Hollywood Park Race Track and Hollywood Park-Casino. We own approximately
378 acres in Inglewood, California. Management believes the fair market value
of the land equals approximately $200 million. The property contains the 60,000
square foot Hollywood Park-Casino, the Hollywood Park Race Track and our
executive offices. The Hollywood Park Race Track, Hollywood Park-Casino, and
parking areas cover approximately 218 acres, leaving approximately 160 acres
available for development.
Crystal Park Hotel and Casino. Crystal Park Hotel and Casino Development
Company, LLC, our wholly-owned subsidiary, leases the hotel from the City of
Compton under a 50-year lease, but owns the ground floor where the
approximately 40,000 square foot casino is located. It also owns approximately
six acres of land containing a parking structure used for the hotel and casino
and leases an additional approximately 35 acres of unimproved land to be used
for expansion or additional parking, if needed. An unaffiliated third party
operates Crystal Park under a four-year triple-net lease.
56
<PAGE>
Turf Paradise. We own approximately 275 acres in the northwest region of
Phoenix, Arizona, on which our Turf Paradise race track is located. Management
believes the land has a fair market value of approximately $30 million. The
site includes approximately 100 acres of undeveloped land. We have entered into
an agreement to sell 12 acres of the property to a national retailer, who plans
to construct a major retail outlet on the purchased parcels.
Argentina Properties. We operate two casinos in Argentina under a twelve-
year concession agreement with the provincial government of the Argentine
Province of Neuquen. Pursuant to the agreement, we operate a casino in the city
of Neuquen on an approximately 27,000 square foot site owned by the Province of
Neuquen and provided to us as part of the concession. The second casino is in
San Martin de los Andes on an approximately 2,500 square foot site which we
lease from a third party for a six-year term. We have the option to extend the
term of the concession agreement for a minimum of an additional five years if
we expend more than $5 million to construct a hotel in the Province of Neuquen.
Except for the Casino Magic Bossier and Argentina properties, substantially
all of the properties described above are pledged to secure obligations under
the Bank Credit Facility.
Regulation and Licensing
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) in parishes bordering the Red River, such as the Company's Casino Magic
property in Bossier, gaming may be conducted dockside; however, in all other
authorized locations such as Boomtown New Orleans, 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.
57
<PAGE>
No person may receive any percentage of the profits from the Company's
operations in Louisiana 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. In April 1996, the Board's predecessor confirmed that
Casino Magic Bossier's officers, key personnel, partners and persons holding a
5% or greater interest in the corporation were suitable and authorized to
acquire an existing licensee. 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 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 Louisiana State Police
Riverboat Gaming Division 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,
58
<PAGE>
(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 and 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.
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 the voters in the parishes of
Boomtown New Orleans and Casino Magic Bossier 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.
Mississippi. The ownership and operation of casino facilities in Mississippi
are subject to extensive state and local regulation, but primarily the
licensing and regulatory control of the Mississippi Gaming Commission (the
"Mississippi 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, was enacted June 29, 1990. Although not
identical, the Mississippi Act is similar to the Nevada Gaming Control Act. The
Mississippi Commission adopted regulations which are also similar in many
respects to the Nevada Gaming Commission's regulations.
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi 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 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
Commission. Changes in Mississippi laws or regulations may limit or otherwise
materially affect the types of gaming that may be conducted and such changes,
if enacted, could have an adverse effect on the Company and the Company's
Mississippi gaming operations.
The Mississippi Act provides for legalized dockside gaming at the discretion
of the 14 counties that 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. During 1998, certain anti-gaming groups proposed for adoption through
the initiative and referendum process certain amendments to the Mississippi
Constitution. The proposals were declared illegal by Mississippi courts on
constitutional and procedural grounds. If another such proposal were to be
offered and if a sufficient number of signatures were to be gathered to place a
legal initiative on the ballot, it is possible for the voters of Mississippi to
consider such a proposal in November of 2000. See "Risk Factors-- Uncertain
Status of Mississippi Anti-Gaming Initiative." As of January 1, 1999, 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
59
<PAGE>
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.
There are no limitations on the number of gaming licenses which may be issued
in Mississippi.
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 Commission. The Company must be registered under the Mississippi
Act as a publicly traded holding company for the Mississippi Gaming
Subsidiaries and is required periodically to submit detailed financial and
operating reports to the Mississippi Commission and furnish any other
information which the Mississippi 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
maintain a gaming license from the Mississippi Commission to operate a casino
in Mississippi. Such licenses are issued by the Mississippi Commission subject
to certain conditions, including continued compliance with all applicable state
laws and regulations.
Gaming licenses are not transferable, are issued for a two-year period and
must be renewed periodically thereafter. Boomtown Biloxi's license must be
renewed in July of 2000, Casino Magic Bay St. Louis's license must be renewed
in April of 2000, and Casino Magic Biloxi's license must be renewed in December
of 2000. No person may become a stockholder of or receive any percentage of
profits from a licensed subsidiary of a holding company without first obtaining
licenses and approvals from the Mississippi Commission. The Company has
obtained such approvals in connection with the licensing of its Mississippi
Gaming Subsidiaries, and the registration of the Company as a publicly-traded
holding company.
Certain officers and employees of the Company and the officers, directors
and certain key employees of the Company's Mississippi Gaming Subsidiaries must
be found suitable or be licensed by the Mississippi Commission. The Company
believes that findings of suitability with respect to such persons associated
with the Company or its Mississippi Gaming Subsidiaries have been applied for
or obtained, although the Mississippi Commission in its discretion may require
additional persons to file applications for findings of suitability. 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 Commission may deny an application for a finding of suitability for
any cause that it deems reasonable. Changes in certain licensed positions must
be reported to the Mississippi Commission. In addition to its authority to deny
an application for a finding of suitability, the Mississippi Commission has
jurisdiction to disapprove a change in a licensed position. The Mississippi
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.
Employees associated with gaming must obtain work permits that are subject
to immediate suspension under certain circumstances. The Mississippi Commission
shall refuse to issue a work permit to a person convicted of a felony and it
may refuse to issue a work permit to a gaming employee if the employee has
committed certain misdemeanors or knowingly violated the Mississippi Act or for
any other reasonable cause.
At any time, the Mississippi Commission has the power to investigate and
require the finding of suitability of any record or beneficial stockholder of
the Company. Mississippi law requires any person who acquires more than 5% of
the common stock of a publicly traded corporation registered with the
Mississippi Commission to report the acquisition to the Mississippi Commission,
and such person may be required to be found suitable. Also, any person who
becomes a beneficial owner of more than 10% of the common stock of such a
company, as reported to the Securities and Exchange Commission, must apply for
a finding of suitability by the Mississippi Commission and must pay the costs
and fees that the Mississippi Commission incurs in conducting the
investigation. The Mississippi 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
60
<PAGE>
company's common stock. However, the Mississippi Commission has adopted a
policy that permits certain institutional investors to own beneficially up to
10% of a registered public company's stock without a finding of suitability. If
a stockholder 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
Commission may be found unsuitable. Management believes that compliance by the
Company with the licensing procedures and regulatory requirements of the
Mississippi Commission will not affect the marketability of the Company's
securities. 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 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 stockholder 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; (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 Commission upon
request the identities of the holders of any of the Company's debt securities,
such as the Old Notes, the Exchange Notes and the 9 1/2% Notes. In addition,
under the Mississippi Act the Mississippi Commission 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. Although the Mississippi Commission generally does not require the
individual holders of obligations such as the Notes to be investigated and
found suitable, the Mississippi 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 Commission in connection with such an investigation.
Each Mississippi Gaming Subsidiary must maintain in Mississippi a current
ledger with respect to ownership of its equity securities, and the Company must
maintain in Mississippi a current list of stockholders of the Company which
must reflect the record ownership of each outstanding share of any class of
equity security issued by the Company. The ledger and stockholder lists must be
available for inspection by the Mississippi Commission at any time. If any
securities of the Company 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 Mississippi Commission. A failure to make such disclosure may be grounds
for finding the record holder unsuitable. The Company 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 bear a legend to the general effect that such
securities are subject to the Mississippi Act and the regulations of the
Mississippi Commission. The Company has received a waiver from this legend
requirement from the Mississippi Commission. The Mississippi Commission has the
power to impose additional restrictions on the holders of the Company's
securities at any time.
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 Commission. A Mississippi Gaming Subsidiary may not make an
issuance or a public offering of its securities, but may pledge or mortgage
casino facilities. The equity interests of a Mississippi Gaming Subsidiary may
not be pledged without the prior approval of the Mississippi Commission. The
Company may not make a public offering of its securities without the prior
approval of the Mississippi 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
61
<PAGE>
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.
Changes 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 the Company, cannot occur
without the prior approval of the Mississippi Commission. The Mississippi
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 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
Commission before the Company may make exceptional repurchases of voting
securities in excess of the current market price of its common stock (commonly
called "greenmail") or before a corporate acquisition opposed by management may
be consummated. Mississippi's gaming regulations will also require prior
approval by the Mississippi 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 Commission. The Mississippi Commission may
require determinations that, among other things, there are means for the
Mississippi Commission to have access to information concerning the out-of-
state gaming operations of the Company and its affiliates. The Mississippi
Commission must approve any future gaming operations of the Company outside
Mississippi. The Mississippi Commission has approved the Company's current
operations in other jurisdictions but must approve the Company's operations in
any new jurisdictions.
If the Mississippi Commission decides that a Mississippi Gaming Subsidiary
violated a gaming law or regulation, the Mississippi Commission could limit,
condition, suspend or revoke the license of the Mississippi Gaming Subsidiary.
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 Commission could attempt 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. The gross revenue fee
imposed by the Mississippi communities in which the Company's casino operations
are located equals approximately 4 percent of the gaming receipts.
62
<PAGE>
In October 1994, the Mississippi 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. The Company believes that all of its Mississippi Gaming
Subsidiaries currently meet 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 Commission as infrastructure. Parking facilities, roads, sewage and
water systems, or facilities normally provided by cities and/or counties are
excluded. The Mississippi 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 all of its Mississippi Gaming Subsidiaries currently meet
such requirements. The Mississippi Commission has recently approved amendments
to the regulation that would increase the infrastructure development
requirement from 25% to 100% for new casinos (or upon acquisition of a closed
casino), but would grandfather existing licensees.
The sale of food or alcoholic beverages at the Mississippi Gaming
Subsidiaries 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 the Mississippi Gaming Subsidiaries must be investigated by the Alcoholic
Beverage Control Division of the State Tax Commission (the "ABC") in connection
with the Mississippi Gaming Subsidiaries' liquor permits. Changes in licensed
positions must be approved by the ABC.
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 & 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 a 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
63
<PAGE>
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 a corporate position.
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 Company, Boomtown and 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, 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 be found suitable as a beneficial holder of the Company's
voting securities 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 beneficial ownership of 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
64
<PAGE>
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 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 of a Registered Corporation such as the Old Notes, the Exchange Notes
and the 9 1/2% Notes, 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 is not permitted to make a public offering of its securities
without the prior approval of the Nevada Commission if the securities or the
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. On March 25, 1999, the Nevada Commission granted the Company
prior approval to make public offerings for a period of
65
<PAGE>
two years, subject to certain conditions (the "Shelf Approval"). The Shelf
Approval also applies to any affiliated company wholly owned by the Company
(an "Affiliate"), which is a publicly traded corporation or would thereby
become a publicly traded corporation pursuant to a public offering. The Shelf
Approval also includes approval for Boomtown and the Gaming Subsidiary to
guarantee any security issued by, and for the Gaming Subsidiary to hypothecate
its assets to secure the payment or performance of any obligations issued by,
the Company or an Affiliate in a public offering under the Shelf Registration.
The Shelf Approval also includes approval to place restrictions upon the
transfer of and enter into agreements not to encumber the equity securities of
Boomtown and the Gaming Subsidiary (collectively, "Stock Restrictions"). The
Shelf Approval, however, may be rescinded for good cause without prior notice
upon the issuance of an interlocutory stop order by the Chairman of the Nevada
Board. The Shelf Approval does not constitute a finding, recommendation or
approval of the Nevada Gaming Authorities as to the accuracy or adequacy of
the prospectus or the investment merits of the securities offered thereby. Any
representation to the contrary is unlawful. The Exchange Offer will constitute
a public offering (as defined in the Nevada Act) and will be made pursuant to
the Shelf Approval. Any Stock restrictions in respect of the Exchange Notes
are covered by the Shelf Approval. Any Stock Restrictions in respect of the
Old Notes are not covered by the Shelf Approval and therefore require the
prior approval of the Nevada Commission in order to be effective. The Stock
Restrictions in respect of the Old Notes were approved by the Nevada
Commission on March 25, 1999.
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.
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 a
cabaret, nightclub, cocktail lounge or casino showroom in connection with the
serving or 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
66
<PAGE>
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 or enter into associations that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ, contract with, or associate with a person in the foreign
operation who has been denied a license or finding of suitability in Nevada on
the ground of personal unsuitability.
California. Operation of California card club casinos such as the Hollywood
Park-Casino and Crystal Park is governed by the Gambling Control Act (the
"GCA") and is subject to the oversight of the California Attorney General and
the California Gambling Control Commission. Under the GCA, 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 the Company conducts business.
Although the California Attorney General takes the position that, under the
GCA, 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") and
the subsequent enactment of SB-8 permit 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.
Pursuant to the GCA, 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 effective January 1, 1999. 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.
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
67
<PAGE>
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 has
received a provisional registration from the California Department of Justice.
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.
Indiana. On September 14, 1998, the Indiana Gaming Commission ("Indiana
Commission") voted to award a Certificate of Suitability to Pinnacle Gaming
Development Corporation ("Indiana Affiliate"), ninety-seven percent (97%) of
the equity of which is owned and controlled by affiliates of the Company. The
Certificate of Suitability authorizes the Indiana Affiliate to develop a
$148,000,000 riverboat gaming resort, including a hotel and golf course, in
Switzerland County, Indiana. Upon completion of development of the project in
accordance with the Certificate of Suitability and satisfaction of other
conditions, the Indiana Commission is expected to issue a license to the
Indiana Affiliate. That license would be the fifth and final license authorized
under Indiana law for riverboat gaming operations conducted from sites on the
Ohio River.
The ownership and operation of riverboat casinos docked at Indiana-based
sites are subject to extensive state regulation under the Indiana Riverboat
Gaming Act ("Indiana Act") and regulations which the Indiana Commission has
adopted under the Indiana Act. The Indiana Act and the regulations adopted to
date are significant to the Company's prospects for successfully developing and
operating the Switzerland County, Indiana based riverboat casino and associated
developments through its Indiana affiliate.
The Indiana Act extends broad and pervasive regulatory powers and authority
to the Indiana Commission. The Indiana Commission has adopted a comprehensive
set of regulations covering ownership and reporting for licensed riverboat
casinos together with "rules of the game" governing the actual operation of
riverboat casinos. The Indiana Commission has also adopted a set of regulations
under the Indiana Act which covers numerous operational matters concerning
riverboat casinos licensed by the Commission.
Among the regulations adopted by the Indiana Commission is one dealing with
riverboat excursions, routes and public safety. The Indiana Act requires
licensed riverboat casinos to be cruising vessels and the regulations carry out
the legislative intent with appropriate recognition of public safety needs. The
regulations explicitly preclude "dockside gambling." Riverboat gaming
excursions are limited to a duration of up to four hours unless otherwise
expressly approved by the Indiana Commission. All excursion routes and
schedules are subject to the approval of the Indiana Commission. No gaming may
be conducted while the boat is docked except: (1) for thirty-minute embarkment
and disembarkment periods at the beginning and end of a cruise; (2) if the
master of the riverboat reasonably determines that specific weather or water
conditions present a danger to the riverboat, its passengers and crew; (3) if
either the vessel or the docking facility is undergoing mechanical or
structural repair; (4) if water traffic conditions present a danger to the
riverboat, riverboat passengers and crew, or to other vessels on the water, or
(5) if the master has been notified that a condition exists that would cause a
violation of Federal law if the riverboat were to cruise.
For Ohio River excursions, such as those the Indiana Affiliate will conduct
from its Switzerland County development, "full excursions" must be conducted at
all times during the year unless the master determines
68
<PAGE>
otherwise, for the above-stated reasons. A "full excursion" is a cruise on the
Ohio River. The Ohio River has waters in both Indiana and Kentucky. The Company
believes there is ample room to cruise fully in Indiana waters on the Ohio
River with no need or likelihood of entering Kentucky waters. Therefore, the
provisions of Kentucky law (which preclude any kind of casino gaming) will not
have any impact on the Company's prospective Indiana operations.
An Indiana riverboat owner's license has an initial effective period of five
years; thereafter, a license is subject to annual renewal. The Indiana
Commission has broad discretion over the initial issuance of licenses and over
the renewal, revocation, suspension and control of riverboat owner's licenses.
The Indiana affiliate has received a Certificate of Suitability designed to
lead to issuance of a license upon completion of project development and
satisfaction of various conditions. The Indiana Act requires a reinvestigation
after three years to ensure the owner continues to be in compliance with the
Indiana Act. Officers, directors and principal owners of the actual license
holder and employees who are to work on the riverboat are subject to
substantial disclosure requirements as a part of securing and maintaining
necessary licenses. Significant contracts to which the Indiana Affiliate is
party are subject to disclosure and approval processes imposed by the
regulations. A riverboat owner's licensee may not enter into or perform any
contract or transaction in which it transfers or receives consideration which
is not commercially reasonable or which does not reflect the fair market value
of the goods or services rendered or received. All contracts are subject to
disapproval by the Indiana Commission. Suppliers of gaming equipment and
materials must also be licensed under the Indiana Act.
Licensees are statutorily required to disclose to the Indiana Commission the
identity of all directors, officers and persons holding direct or indirect
beneficial interests of 1% or greater. The Indiana Commission also requires a
broad and comprehensive disclosure of financial and operating information on
licensees and their principal officers, and those parent corporations and other
upstream owners. The Company and the Indiana Affiliate have provided full
information and documentation to the Indiana Commission. As part of the process
leading up to the issuance of the Certificate of Suitability they must continue
to do so until issuance of the license and then throughout the period of
licensure. The Indiana Act prohibits contributions to a candidate for a state,
legislative, or local office, or to a candidate's committee or to a regular
party committee by the holder of a riverboat owner's license or a supplier's
license, by an officer of a licensee, by an officer of a person that holds at
least a 1% interest in the licensee or by a person holding at least a 1%
interest in the licensee. The Indiana Commission has promulgated a rule
requiring quarterly reporting by such licensees, officers, and persons.
As a condition to receiving a license to conduct riverboat casino operations
from the Indiana Commission, the Company will be required to obtain permits and
approvals from the United States Army Corp of Engineers to develop the
facilities it will use to conduct operations. Clearances will be required to be
received from the Indiana Department of Natural Resources for portions of the
proposed development. Alcoholic beverage permits for riverboat excursions and
for the hotel and boarding facilities will be required as will various other
permits and governmental consents or clearances.
Adjusted gross receipts from gambling games authorized under the Indiana Act
are subject to a tax at the rate of 20% on adjusted gross receipts. "Adjusted
gross receipts" means the total of all cash and property received from gaming
operations less cash paid out as winnings and uncollectible gaming receivables
(not to exceed 2%). The Indiana Act also prescribes an additional tax for
admissions, based upon $3 per person per excursion. Property taxes may be
imposed on riverboats at rates determined by local taxing authorities. Income
to the Company from the Indiana Affiliate will be subject to the Indiana gross
income tax, the Indiana adjusted gross income tax and the Indiana supplemental
corporate net income tax. Sales on a riverboat and at related resort facilities
are subject to applicable use, excise and retail taxes. The Indiana Act
requires a riverboat owner licensee to directly reimburse the Indiana
Commission for the costs of inspectors and agents required to be present while
authorized gaming is conducted.
Through the establishment of purchasing "goals," the Indiana Act encourages
minority and women's business enterprise participation in the riverboat gaming
industry. Any person issued a riverboat owner's
69
<PAGE>
license must establish goals of at least 10% of the total dollar value of the
licensee's contracts for goods and services with minority business enterprises
and 5% of the total dollar value of the licensee's contracts for goods and
services with women's business enterprises. Compliance with these conditions is
incorporated into the Indiana Affiliate's Certificate of Suitability. The
Indiana Commission may suspend, limit or revoke the owner's license or impose a
fine for failure to comply with the statutory requirements.
Minimum and maximum wagers on games on the riverboat are left to the
discretion of the licensee. Wagering may not be conducted with money or other
negotiable currency. There are no statutory restrictions on extending credit to
patrons; however, the matter of credit may come under scrutiny in future
legislative sessions.
If an institutional investor acquires 5% or more of any class of voting
securities of a holding company of a licensee, the investor is required to
notify the Indiana Commission and to provide additional information, and may be
subject to a finding of suitability. Any other person who acquires 5% or more
of any class of voting securities of a holding company of a licensee is
required to apply to the Indiana Commission for a finding of suitability. A
riverboat licensee or an affiliate may not enter into a debt transaction of $1
million or more without approval of the Indiana Commission. The Indiana
Commission has taken the position that a "debt transaction" includes increases
in maximum amount available under reducing revolving credit facilities. A
riverboat owner's license is a revocable privilege and is not a property right
under the Indiana Act. A riverboat owner licensee or any other person may not
lease, hypothecate, borrow money against or loan money against or otherwise
scrutinize or monetize a riverboat owner's license.
The Governor of Indiana has appointed a study commission on the impact of
legalized wagering in Indiana. Its work product may result in calls for changes
to the legislative landscape surrounding gaming in Indiana.
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 June 1997, Turf Paradise received a live
racing permit from the ARC, which will remain in force through the 1999/2000
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.
Argentina. The Provincial Government of Neuquen, Argentina enacted a casino
privatization program to issue twelve-year exclusive concession agreements to
operate existing casinos. The Company's two casinos are the only casinos in the
province of Neuquen, in west central Argentina, and are located in Neuquen City
and San Martin de los Andes. The casinos had previously been operated by the
provincial government. The Ministry of Finance of Argentina has adopted a
modified regulatory system for casinos, based on the regulatory system utilized
by the State of Nevada, and such regulatory system is being administered by the
Provincial Government of Neuquen. The Company cannot predict what effect the
enactment of other laws, regulations or pronouncements relating to casino
operations may have on the operations of Casino Magic Argentina.
Litigation
Poulos Lawsuit. A class action lawsuit was filed on April 26, 1994, in the
United States District Court, Middle District of Florida (the "Poulos
Lawsuit"), naming as defendants 41 manufacturers, distributors and casino
operators of video poker and electronic slot machines, including Casino Magic.
The lawsuit alleges that the defendants have engaged in a course of fraudulent
and misleading conduct intended to induce people to play such games based on
false beliefs concerning the operation of the gaming machines and the extent to
which there is an opportunity to win. The suit alleges violations of the
Racketeer Influenced and Corrupt Organization Act, as well as claims of common
law fraud, unjust enrichment and negligent misrepresentation, and seeks damages
in excess of $6 billion. On May 10, 1994, a second class action lawsuit was
filed in the
70
<PAGE>
United States District Court, Middle District of Florida (the "Ahern Lawsuit"),
naming as defendants the same defendants who were named in the Poulos Lawsuit
and adding as defendants the owners of certain casino operations in Puerto Rico
and the Bahamas, who were not named as defendants in the Poulos Lawsuit. The
claims in the Ahern Lawsuit are identical to the claims in the Poulos Lawsuit.
Because of the similarity of parties and claims, the Poulos Lawsuit and Ahern
Lawsuit were consolidated into one case file in the United States District
Court, Middle District of Florida. On December 9, 1994 a motion by the
defendants for change of venue was granted, transferring the case to the United
States District Court for the District of Nevada, in Las Vegas. In an order
dated April 17, 1996, the court granted motions to dismiss filed by Casino
Magic and other defendants and dismissed the Complaint without prejudice. The
plaintiffs then filed an amended Complaint on May 31, 1996 seeking damages
against Casino Magic and other defendants in excess of $1 billion and punitive
damages for violations of the Racketeer Influenced and Corrupt Organizations
Act and for state common law claims for fraud, unjust enrichment and negligent
misrepresentation. Casino Magic and other defendants have moved to dismiss the
amended Complaint. Casino Magic believes that the claims are without merit and
does not expect that the lawsuit will have a material adverse effect on the
financial condition or results of operations of Casino Magic.
Casino America Litigation. On or about September 6, 1996, Casino America,
Inc. commenced litigation in the Chancery Court of Harrison County,
Mississippi, Second Judicial District, against Casino Magic, and James Edward
Ernst, its Chief Executive Officer, seeking injunctive relief and unspecified
compensatory damages in an amount to be proven at trial as well as punitive
damages. The plaintiff claims, among other things, that the defendants (i)
breached the terms of an agreement they had with the plaintiff, (ii) tortiously
interfered with certain of the plaintiff's business relations; and (iii)
breached covenants of good faith and fair dealing they allegedly owed to the
plaintiff. On or about October 8, 1996, the defendants interposed an answer,
denying the allegations contained in the Complaint. The discovery phase of this
litigation is continuing and a trial date was initially set for August 1998,
but was postponed to mid-1999 after the plaintiff requested a continuance.
While Casino Magic's management cannot predict the outcome of this action, it
believes plaintiff's claims are without merit and intends to vigorously defend
this action.
Astoria Entertainment, Inc. v. Edwin W. Edwards, et als., United States
District Court for the Eastern District of Louisiana, No. 98-3359. This civil
action was filed on November 12, 1998 in federal district court in New Orleans
against 21 defendants, including Edwin W. Edwards, Stephen Edwards, Edward J.
Debartolo, Jr., Debartolo Entertainment Louisiana Gaming, Inc., Hollywood
Casino Corporation, Boyd Kenner, Inc., Treasure Chest Casino, L.L.C., five
members of the former Louisiana Riverboat Gaming Commission, Hollywood Park,
Inc., Louisiana Gaming Enterprises, Inc., and Robert List (the latter three
hereafter are referred to as the "Hollywood Park/Boomtown defendants"). The
complaint alleges violations of the Racketeer Influenced and Corrupt
Organizations ("RICO") Act in connection with the awarding of riverboat gaming
licenses in Louisiana. The plaintiff, Astoria Entertainment, Inc. ("Astoria"),
contends that it has sustained damages due to alleged racketeering activities
of the defendants, allegedly resulting in corruption of the licensing process
and Astoria's failure to receive a license for riverboat gaming in, inter alia,
the West Bank of Jefferson Parish (suburban New Orleans). The Complaint seeks
damages of "not less than $340 million," plus treble damages, costs, and
attorneys' fees. On January 15, 1999, the Hollywood Park/Boomtown defendants
filed a motion to dismiss Astoria's Complaint for failure to state a claim
against those defendants. Astoria voluntarily dismissed its complaint, without
prejudice, on February 2, 1999 as to many of the defendants, including the
three Hollywood Park/Boomtown defendants.
Astoria Entertainment Inc. v. Edward J. DeBartolo, Jr., et als., Civil
District Court for the Parish of Orleans, State of Louisiana, No. 98-
20315. This action was filed on or about December 1, 1998 in state district
court in New Orleans against twelve defendants, including Edward J. Debartolo,
Jr., Debartolo Entertainment Louisiana Gaming, Inc., Hollywood Casino
Corporation, Robert Guidry, Boyd Gaming, Inc., Boyd Kenner, Inc., Treasure
Chest Casino, L.L.C., Hollywood Park, Inc., Robert List, Louisiana Gaming
Enterprises, Inc., Boomtown, Inc., and Louisiana-I Gaming, L.P. (the latter
five hereafter are referred to as the "Hollywood Park/Boomtown defendants").
The petition seeks damages against the Hollywood
71
<PAGE>
Park/Boomtown defendants and others "in excess of $300 million" for alleged
"intentional interference with economic advantage and/or prospective economic
advantage" and alleged "unjust enrichment" in connection with the licensing of
riverboat gaming in Louisiana. The plaintiff, Astoria Entertainment, Inc.
("Astoria"), alleges that the defendants were obligated to refrain from
intentional acts that would interfere with Astoria's alleged ability to obtain
a license for riverboat gaming in the West Bank of Jefferson Parish (suburban
New Orleans) and that the Hollywood Park/Boomtown defendants breached the
obligation by participating in alleged unlawful practices designed to gain an
improper advantage in obtaining a certificate of preliminary approval and
license for such riverboat gaming. The petition was not served upon any of the
Hollywood Park/Boomtown defendants until December 21, 1998, and an extension of
time within which to file responsive pleadings through and including February
4, 1999 was obtained. On February 4, 1999, the Hollywood Park/Boomtown
defendants filed the Louisiana state court equivalent of a motion to dismiss
for failure to state a claim and improper venue. On March 5, 1999, Astoria
voluntarily dismissed, without prejudice, all claims asserted against the
Hollywood Park/Boomtown defendants.
72
<PAGE>
MANAGEMENT
Directors and Executive Officers
Each of the executive officers of Hollywood Park, Inc. holds office at the
pleasure of the Board of Directors. The current directors and executive
officers of Hollywood Park, Inc. are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
R.D. Hubbard 63 Chairman of the Board and Chief Executive
Officer
J.R. Johnson 78 Director
Robert T. Manfuso 61 Director
Michael Ornest 41 Director
Timothy J. Parrott 50 Director
Lynn P. Reitnouer 66 Director
Herman Sarkowsky 73 Director
Marlin Torguson 54 Director
Warren B. Williamson 70 Director
G. Michael Finnigan 50 President and Chief Executive Officer of Realty
Investment Group, Inc., a subsidiary of
Hollywood Park; and Chief Financial Officer
Paul R. Alanis 50 President and Chief Operating Officer
J. Michael Allen 51 Senior Vice President/Chief Operating Officer
of Gaming Operations
Donald M. Robbins 51 Secretary; and President of Racing of Hollywood
Park Operating Company
</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; Chairman
of the Board and Chief Executive Officer, Hollywood Park Operating Company
since February 1991; President, 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), Sunflower (The Woodlands Race Tracks--greyhound
racing and horse racing) from 1988 to March 1994; President, Director, and
majority owner, Ruidoso Downs Racing, Inc. (horse racing) since 1988; Chairman
of the Board, Chief Executive Officer and sole stockholder, Multnomah Kennel
Club, Inc. (greyhound racing) from December 1991 to April 1998; owner and
breeder of numerous thoroughbreds and quarter horses since 1962.
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; Director, Logicon, Inc. (defense oriented
intelligence); 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.
73
<PAGE>
Mr. Ornest has been a director of the Company since October 1998 and his
family has been a shareholder of the Company since 1962; Director of the Ornest
Family Partnership since 1983; Director of the Ornest Family Foundation since
1993; Director of the Toronto Argonauts Football Club from 1988 to 1990;
President of the St. Louis Arena and Vice President of the St. Louis Blues
Hockey Club from 1983 to 1986 and Managing Director of the Vancouver Canadians
Baseball Club, Pacific Coast League from 1979 to 1980.
Mr. Parrott has served as a Director of the Company since June 1997;
Chairman of the Board and Chief Executive Officer, Boomtown, Inc. from
September 1992 to October 1998; President and Treasurer, Boomtown, Inc. from
June 1987 to September 1992; Director, Boomtown, Inc. since 1987; Chairman of
the Board and Chief Executive Officer, Boomtown Hotel & Casino, Inc. since May
1988; Chief Executive Officer, Parrott Investment Company (a family-held
investment company with agricultural interests in California) since April 1995;
Director, 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 (Chairman of the
Board), COHR, Inc. since 1986; Director, President, Forest Lawn Memorial Parks
Association since 1975; Trustee, University of California Santa Barbara
Foundation since 1992 (and Chairman in 1997 and 1998).
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, Eagle
Hardware & Garden, since 1990.
Mr. Torguson served as the Chairman of the Board of Casino Magic from
December 1, 1994 until the Company acquired Casino Magic. Mr. Torguson was
President and Chief Executive Officer of Casino Magic from April 1992 through
November 1994. From April 1992 to February 1993, Mr. Torguson also served as
the Chief Financial Officer and Treasurer of Casino Magic. Mr. Torguson was a
50 percent owner and a Vice President of G.M.T. Management Co. from December
1983 to December 1994. G.M.T. Management Co. was responsible for the operation
and management of Jackpot Junction Casino, located in Morton, Minnesota, from
December 1983 until January 1, 1992.
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 of Chandler Trusts 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. Finnigan has served as the President and Chief Executive Officer of
Realty Investment Group, Inc., a wholly-owned subsidiary of the Company which
conducts all of the Company's real estate business and related development
activities, since December 1998. He has also served as the Chief Financial
Officer and Executive Vice President of the Company and of Hollywood Park
Operating Company since March 1989. Mr. Finnigan served as the Company's
President, Sports and Entertainment, from January 1996 to December 1998;
President, Gaming and Entertainment from February 1994 to January 1996; and
Treasurer of the Company and of Hollywood Park Operating Company since March
1992; Chairman of the Board, Southern California Special Olympics since 1996;
Chairman of the Board, Centinela Hospital since 1996; and Director, Shoemaker
Foundation since 1993.
74
<PAGE>
Mr. Alanis has served as the President and Chief Operating Officer since
January 1999. Mr. Alanis served as President of Horseshoe Gaming, Inc., which
is the manager and a member of Horseshoe Gaming, L.L.C., and of Horseshoe GP,
Inc., a wholly-owned subsidiary of Horseshoe Gaming, L.L.C. from January 1996
to December 1998; President, KII-Pasadena, Inc. since December 1988; President,
Koar International, Inc. from 1991 until 1995.
Mr. Allen has served as the Company's Senior Vice President, Gaming
Operations, since January 1999. Mr. Allen served as Senior Vice President of
Horseshoe Gaming, Inc. from October 1, 1995 to December 31, 1998 and prior to
that as General Manager of the Horseshoe Casino Center from May 1994. Prior to
that, Mr. Allen served as Principal of Gaming Associates, Inc. from September
1992.
Mr. Robbins has served as Secretary of the Company since 1996 (formerly
Assistant Secretary since September 1991). He has also served as President of
Racing of Hollywood Park Operating Company since February 1994, Executive Vice
President of Hollywood Park Operating Company since 1988, and Secretary of
Hollywood Park Operating Company since July 1991. Mr. Robbins served as
President of the Company from September 1991 to December 1998; General Manager,
Hollywood Park Operating Company from 1986 to February 1994.
Executive Compensation
The following tables summarize the annual and long-term compensation of, and
stock options held by, Hollywood Park's Chief Executive Officer and the two
additional most highly compensated executive officers whose annual salaries and
bonuses exceeded $100,000 in total during the fiscal year ended December 31,
1998 (collectively, the "Named Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual ------------
Compensation Securities
----------------- Underlying
Name and Principal Salary Bonus Other Annual Options/ All Other
Position Year ($) ($) Compensation SARs (#) Compensation
- ------------------ ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
R.D. Hubbard 1998 $500,000 $160,000 $0 50,000 $ 2,370(a)
Chairman of the Board 1997 400,000 40,235 0 45,000 4,740
and Chief Executive 1996 400,000 0 0 85,000 0
Officer
G. Michael Finnigan 1998 $307,600 $ 75,000 $0 35,000 $23,633(b)
President, Sports and 1997 307,608 0 0 25,000 3,555
Entertainment, 1996 262,608 25,000 0 40,000 0
Executive
Vice President,
Treasurer, Chief
Financial Officer
Donald M. Robbins 1998 $295,000 $ 35,000 $0 15,000 $30,484(c)
President of Hollywood 1997 295,008 0 0 25,000 3,373
Park, Inc., President 1996 250,008 25,000 0 40,000 0
of Racing and
Secretary
</TABLE>
- --------
(a) Reflects Company matching contributions under the Hollywood Park 401(k)
Plan.
(b) Includes Company matching contribution under the Hollywood Park 401(k) Plan
of $2,370, and $21,262 of distribution related to the termination of the
Company's Supplemental Executive Retirement Plan
(c) Includes Company matching contribution under the Hollywood Park 401(k) Plan
of $2,249, and $28,235 of distribution related to the termination of the
Company's Supplemental Executive Retirement Plan.
On January 1, 1999, the Company appointed Paul Alanis as President and Chief
Operating Officer and Michael Allen as Senior Vice President and Chief
Operating Officer of the Company's Gaming Division. Mr. Alanis' annual base
salary will be $600,000 and Mr. Allen's will be $400,000. Mr. Alanis and Mr.
Allen were granted stock options to purchase 400,000 and 200,000 shares,
respectively, on September 10, 1998, but they were not eligible to exercise any
of the options until January 1, 1999.
75
<PAGE>
Stock Option Plans. In 1993 and 1996, the stockholders of Hollywood Park
adopted Stock Options Plans, which provided for the issuance of up to 625,000
and 900,000 shares of Hollywood Park common stock upon exercise of the options,
respectively. Except for the provisions governing the number of shares issuable
thereunder, and except for certain provisions which reflect changes in tax and
securities laws, the provisions of the Stock Option Plans are substantially
similar. The Hollywood Park Stock Option Plans are administered and terms of
option grants are established by the Compensation Committee of the Board of
Directors. Under the Hollywood Park Stock Option Plans, options alone or
coupled with stock appreciation rights may be granted to selected key
employees, directors, consultants and advisors of Hollywood Park. Options
become exercisable according to a vesting period as determined by the
Compensation Committee at the date of grant, and expire on the earlier of one
month after termination of employment, six months after the death or permanent
disability of the optionee, or the expiration of the fixed option term set by
the Compensation Committee at the grant date (not to exceed ten years from the
grant date). The exercise prices of all options granted under the Hollywood
Park Stock Options Plans are determined by the Compensation Committee on the
grant date, provided that the exercise price of an incentive stock option may
not be less than the fair market value of the common stock at the date of
grant.
As of December 31, 1998, all of the 625,000 shares eligible for issuance
under the 1993 Stock Option Plan had either been issued or were subject to
outstanding options, and of the 900,000 shares eligible for issuance under the
1996 Stock Option Plan, 260,688 were subject to outstanding options. In
addition, 968,111 and 303,924 shares of Hollywood Park common stock are
issuable upon exercise of options granted under pre-merger plans of Boomtown
and Casino Magic, respectively, which Hollywood Park assumed in each Merger,
Hollywood Park has filed registration statements with the Securities and
Exchange Commission covering an aggregate of 2,883,215 shares of Hollywood Park
common stock issuable upon exercise of options granted under the Hollywood Park
Stock Option Plans, the Stock Option Plans of Boomtown and the Stock Option
Plans of Casino Magic.
Options/SAR Grants In Last Fiscal Year. The following table summarizes the
option grants to Named Officers and Messrs. Alanis and Allen during the year
ended December 31, 1998:
<TABLE>
<CAPTION>
Individual Grants
- ---------------------------------------------------------------------------
Percent of
Total
Number of Options/ Potential Realizable Value
Securities SARs of Assumed Annual Rates
Underlying Granted to of Stock Price Appreciation
Options/SARs Employees Exercise of for Option Term
Granted in Fiscal Base Price Expiration ----------------------------
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
- ---- ------------ ---------- ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
R.D. Hubbard............ 50,000 5% $13.6250 Feb 3, 2008 $ 428,000 $1,086,000
G. Michael Finnigan..... 35,000 3% 13.6250 Feb. 3, 2008 300,000 760,000
Paul R. Alanis.......... 300,000 29% 10.1875 Sept. 10, 2008 1,922,000 4,871,000
100,000 10% 18.0000 Sept. 10, 2008 0 842,000
J. Michael Allen........ 150,000 14% 10.1875 Sept. 10, 2008 961,000 2,435,000
50,000 5% 18.0000 Sept. 10, 2008 0 421,000
Donald M. Robbins....... 15,000 1% 13.6250 Feb. 3, 2008 129,000 326,000
</TABLE>
76
<PAGE>
Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Options/SAR Values. The following table sets forth information with respect to
the exercise of stock options during the year ended December 31, 1998, and the
final year end value of unexercised options. None of the Named Officers
exercised, nor held, stock appreciation rights during the year ended December
31, 1998.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Securities In-the Money
Shares Underlying Option/SARs
Acquired Options/SARs At Fiscal
On Value At Fiscal Year-End ($)
Exercise Realized Year-End (#) Exercisable/
Name (#) ($) Exercisable/Unexercisable Unexercisable (a)
- ---- -------- -------- ------------------------- -----------------
<S> <C> <C> <C> <C>
R.D. Hubbard............ 0 $0 71,688/108,332 $0/$0
G. Michael Finnigan..... 0 0 60,001/64,999 $0/$0
Paul R. Alanis.......... 0 0 100,000/300,000 $0/$0
J. Michael Allen........ 0 0 50,000/150,000 $0/$0
Donald M. Robbins....... 0 0 60,001/44,999 $0/$0
</TABLE>
- --------
(a) Represents the difference between the market price of Hollywood Park Common
Stock on December 31, 1998, and the exercise price of the options.
Pension Plan
<TABLE>
<CAPTION>
Years of Qualified Service
---------------------------------------
Final Average Annual Salary 10 15 20 25 30
- --------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000................................ $24,745 $37,118 $49,490 $61,863 $66,863
$150,000 to $500,000 (a)................ 37,995 56,993 75,990 94,988 102,488
</TABLE>
- --------
(a) Under current provisions of the Internal Revenue Code, the maximum average
salary that may be used in calculating retirement benefits in 1996 was
$150,000. Benefits accrued on April 1, 1994 (based on prior compensation
limits) are grandfathered. Pension benefits were frozen as of September 1,
1996, for all plan participants, except retained participants, whose
benefits were frozen as of December 31, 1996.
Hollywood Park elected to terminate the Hollywood Park Pension Plan (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 Relation Act, are represented by
a collective bargaining agent) whose benefits were frozen as of December 31,
1996.
The Pension Plan was a non-contributory, defined benefit plan covering
employees of Hollywood Park, Inc., and all employees of HPOC, not eligible for
participation in a multi-employer defined benefit plan, who met the Pension
Plan's service requirement. R.D. Hubbard, G. Michael Finnigan, and Donald M.
Robbins, are the only officers or directors of the Company who participated in
the Pension Plan, and their Pension Plan benefits were frozen as of September
1, 1996, and as of that date, Messrs. Hubbard, Finnigan and Robbins had two,
six and ten years, respectively, of qualified years of service. Only amounts
earned by Messrs. Hubbard, Finnigan and Robbins listed under "Annual
Compensation-Salary" as shown in the Summary Compensation table, were
considered in determining their Pension Plan benefit levels.
The amounts listed in the above pension Plan table are estimated annual
retirement benefits under the Pension Plan (assuming payments were made on the
normal life annuity basis, and not under the provisions on survivor benefits)
at a normal retirement age of 65 in 1996, after various years of qualified
service, at selected average annual compensation levels. However, due to the
Pension Plan benefits being frozen as of September 1,
77
<PAGE>
1996, and based on their actual years of qualified service, and annual
compensation levels, Messrs. Hubbard, Finnigan and Robbins annual benefits,
expressed as a joint and survivor annuity payment, starting at age 65, are
$7,521, $29,082 and $51,009, respectively.
The amounts required to fund the pension Plan were determined actuarially,
and were paid by Hollywood Park to a life insurance company under an
unallocated annuity contract.
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 (the "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 allowed for qualified
pension plans was reduced to $150,000 from $235,850. Messes. Hubbard, Finnigan
and Robbins participated in the SERP, prior to its termination.
Director Compensation. All directors hold office until the next annual
meeting of stockholders and until their successors are duly elected and
qualified. Directors are entitled to receive, and in 1998 received, an annual
retainer of $25,000 per year plus a $1,000 for each Board meeting attended,
which they may take in cash or in deferred compensation under Hollywood Park's
Directors Deferred Compensation Plan as outlined below. In addition, members of
the Executive Committee, Audit Committee and Compensation Committee receive
$1,000 for each committee meeting attended, and such amounts are also eligible
for the Directors Deferred Compensation Plan. Furthermore, directors and their
guests are entitled, without charge, to use the Directors' Room at the
Hollywood Park Race Track, which is open on weekends and holidays during the
racing season.
On December 16, 1998, each of Messrs. Johnson, Manfuso, M. Ornest, Parrott,
Reitnouer, Sarkowsky, Torguson and Williamson was granted a non-qualified stock
option to purchase 2,000 shares of Hollywood Park common stock at an exercise
price of $8.75 per share. One-third of the shares purchasable upon exercise of
these options was vested on the grant date, with an additional one-third to
vest on each of the first and second anniversary of the grant date. All of
these options expire on the tenth anniversary of the grant date and (except for
the options granted to Messrs. Johnson, Reitnouer, and Williamson) were granted
under the Hollywood Park 1996 Stock Option Plan.
Directors Deferred Compensation Plan. Participation in Hollywood Park's
Directors Deferred Compensation Plan is limited to directors of Hollywood Park
and each eligible director may elect to defer all or a portion of his annual
retainer and any fees for meetings attended. Any such deferred compensation is
credited to a deferred compensation account, either in cash or in shares of
Hollywood Park Common Stock, at each director's election. As of the date the
director's compensation would otherwise have been paid, and depending on the
director's election, the director's deferred compensation account will be
credited with either (i) cash, (ii) the number of full and/or fractional shares
of Hollywood Park common stock obtained by dividing the amount of the
director's compensation for the calendar quarter or month which he elected to
defer, by the average of the closing price of Hollywood Park common stock on
the principal stock exchange on which the Company's common stock listed (or, if
the common shares are not listed on a stock exchange, the NASDAQ National
Market System) on the last ten business days of the calendar quarter or month
for which such compensation is payable or (iii) a combination of cash and
shares of Hollywood Park common stock as described in clause (i) and (iii). All
cash amounts credited to the director's deferred compensation account bear
interest at an amount to be determined from time to time by the Board of
Directors.
If a director has elected to receive shares of Hollywood Park common stock
in lieu of his retainer, such director's deferred compensation account is
credited at the end of each calendar quarter with the number of full and/or
fractional shares of Hollywood Park common stock obtained by dividing the
dividends which would have been paid on the shares credited to the director's
deferred compensation account as of the dividend record date, if any, occurring
during such calendar quarter is such shares had been shares of issued and
outstanding Hollywood Park common stock on such date, by the closing price of
the Hollywood Park common stock on the New York Stock Exchange on the date such
dividend(s) was paid. In addition, if Hollywood Park declares a
78
<PAGE>
dividend payable in shares of Hollywood Park common stock, the director's
deferred compensation account is credited at the end of each calendar quarter
with the number of full and/or fractional shares of Hollywood Park common stock
which such shares would have been entitled to if such shares had been shares of
issued and outstanding Hollywood Park common stock on the record date for such
stock dividend(s).
Participating directors do not have any interest in the cash and/or
Hollywood Park common stock credited to their deferred compensation accounts
until distributed in accordance with the Directors Deferred Compensation Plan,
nor do they have any voting rights with respect to such shares until shares
credited to their deferred compensation accounts are distributed. The rights of
a director to receive payments under the Deferred Compensation Plan are no
greater than the rights of an unsecured general creditor of Hollywood Park.
Each participating director may elect to have the aggregate amount of cash and
shares credited to his deferred compensation account distributed to him in one
lump sum payment or in a number of approximately equal annual installments over
a period of time not to exceed fifteen years. The lump sum payment or the first
installment will be paid as of the first business day of the calendar quarter
immediately following the cessation of the director's service as a director of
Hollywood Park. Prior to the beginning of any calendar year, a director may
elect to change the method of distribution, but amounts credited to a
director's account prior to the effective date of such change may not be
affected, but rather will be distributed in accordance with the election of the
time such amounts were credited to the director's deferred compensation
account.
The maximum number of shares of Hollywood Park common stock that can be
issued pursuant to the Directors Deferred Compensation Plan is 125,000 shares.
Hollywood Park is not required to reserve or set aside funds or shares of
Hollywood Park common stock for the payment of its obligations pursuant to the
Directors Deferred Compensation Plan. Hollywood Park is obligated to make
available, as and when required, a sufficient number of shares of common stock
to meet the needs of the Directors Plan. The shares of Hollywood Park Common
Stock to be issued under the Directors Deferred Compensation Plan may be either
authorized and unissued shares or reacquired shares.
Amendment, modification or termination of the Directors Deferred
compensation Plan may not (1) adversely affect any eligible director's rights
with respect to amounts then credited to his account or (2) accelerate any
payments or distributions under the Directors Deferred Compensation Plan
(except with regard to bona fide financial hardships).
Amendment, modification or termination of the Directors Deferred
Compensation Plan may not (i) adversely affect any eligible director's rights
with respect to amounts then credited to his account or (ii) accelerate any
payments or distributions under the Directors Deferred Compensation Plan
(except with regard to bona fide financial hardships).
Employment Contracts, Termination of Employment and Change-in-Control
Arrangement. The Company has entered into a three-year employment agreement
with G. Michael Finnigan, effective January 1, 1999. Mr. Finnigan's annual
compensation will be $400,000 with an annual bonus of up to $200,000. The bonus
is payable as follows: (a) an amount in the discretion of the Board in the
initial year, and (b) in the remaining years, $100,000 based on the Realty
Investment Group, Inc.'s (a subsidiary of the Company) performance and $100,000
at the discretion of the Board. If Mr. Finnigan terminates his employment for
good reason (defined for present purposes as a material breach of the
employment agreement by the Company and failure to timely remedy such breach),
or if the Company terminates him without cause, Mr. Finnigan will receive his
annual compensation for one year (including salary and bonus), with health and
disability insurance coverage for six months. Mr. Finnigan will also
immediately vest in all stock option grants.
The Company has entered into a three year employment agreement with Paul
Alanis, effective January 1, 1999. Mr. Alanis's annual compensation will be
$600,000, with an annual bonus of not less than $100,000 and up to $600,000.
The bonus is payable as follows: (a) $100,000 if Mr. Alanis remains employed by
Hollywood Park for the year in question; (b) $200,000 based on the Company's
actual earnings before interest, taxes depreciation and amortization as
compared to budget, and not exceeding the capital budget; and (c) the
79
<PAGE>
remaining $300,000 to awarded at the discretion of the Board of Directors. If
Mr. Alanis terminates his employment for good reason, or if the Company
terminates Mr. Alanis without cause, Mr. Alanis will receive an annual salary
of $700,000 through the balance of the contract period, and retain his health
and disability insurance for six months after termination. Mr. Alanis will also
immediately vest in all stock option grants. If Mr. Alanis terminates his
employment upon failure to be promoted to the Company's Chief Executive Officer
by December 31, 1999, he will be entitled to lump sum severance payments of
$700,000, and continued health and disability insurance coverage for six
months. Mr. Alanis would also immediately vest in 75% of the 400,000 options
granted to him on September 10, 1998.
The Company has also entered into a three-year employment agreement with J.
Michael Allen, effective January 1, 1999. Mr. Allen's annual compensation will
be $400,000 with a possible bonus of up to $200,000. The bonus is payable as
follows: (a) $100,000 based on the company's actual earnings before interest,
taxes depreciation and amortization as compared to budget, and not exceeding
the capital budget, and (b) $100,000 at the discretion of the Board of
Directors. If Mr. Allen terminates his employment for good reason, or if the
Company terminates him without cause, and so long as he does not compete with
the Company or its subsidiaries in the gaming business prior to the end of the
employment contract term, he will be entitled to $400,000 per year for the
balance of employment contract term, with health and disability insurance
coverage for six months. Mr. Allen will also immediately vest in all stock
option grants. If Mr. Allen terminates his employment due to Mr. Alanis's
failure to be promoted to the Company's Chief Executive Officer by December 31,
1999, he will receive any accrued but unpaid salary and vacation benefits.
The Company, through its wholly-owned subsidiary, Hollywood Park Operating
Company, has entered into a three-year employment agreement with Donald M.
Robbins, effective January 1, 1999. Mr. Robbins's annual compensation will be
$295,000 with a possible bonus at the discretion of the Board of Directors. If
Hollywood Park Operating Company terminates Mr. Robbins without cause prior to
January 1, 2000, Mr. Robbins will be entitled to receive a lump sum amount
equal to twice his annual compensation (including salary and bonus). If
Hollywood Park Operating Company terminates Mr. Robbins without cause after
January 1, 2000, he will be entitled to receive a lump sum amount equal to his
annual compensation for the balance of the term of the employment agreement
(including salary and bonus), but not less than his annual compensation for one
year (including salary and bonus). In either situation, Mr. Robbins will retain
health and disability insurance coverage for six months after termination and
will vest in all stock option grants. If Hollywood Park Operating Company
terminates Mr. Robbins without cause at any time after the term of the
employment agreement, he will be entitled to receive in a lump sum an amount
equal to one year's compensation (including salary and bonus), will retain
health and disability insurance coverage for six months after termination and
will vest in all stock option grants.
Compensation Committee Interlocks and Insider Participation. The members of
the Compensation Committee currently are Messrs. Johnson, Reitnouer and
Williamson. None of the members of the Compensation Committee were officers or
employees or former officers or employees of the Company or its subsidiaries.
80
<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 outstanding Hollywood
Park common stock) and number of shares and percent of the outstanding
Hollywood Park common stock beneficially owned as of March 15, 1999, 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 Outstanding(a)
- ------------------------------------ ------------ --------------
<S> <C> <C>
R.D. Hubbard................................... 2,736,488(b) 10.6%
Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Legg Mason, Inc................................ 2,709,095(c) 10.5%
111 South Calvert Street
Baltimore, Maryland 21202
State of Wisconsin Investment Board............ 1,611,000(d) 6.2%
P.O. Box 7842
Madison, Wisconsin 53707
Timothy J. Parrott............................. 443,716(e) 1.7%
J.R. Johnson................................... 380,760(f) 1.5%
Michael Ornest................................. 299,833(g) 1.2%
Warren B. Williamson........................... 159,917(h) *
Lynn P. Reitnouer.............................. 62,000(i) *
Herman Sarkowsky............................... 66,708(j) *
Robert T. Manfuso.............................. 40,333(k) *
Marlin Torguson................................ 30,667(l) *
G. Michael Finnigan............................ 110,417(m) *
Paul Alanis.................................... 400,000(n) 1.6%
J. Michael Allen............................... 50,000(o) *
Donald M. Robbins.............................. 80,672(p) *
Current Directors and Executive Officers as a
group (13 persons)............................ 4,861,511(q) 18.8%
</TABLE>
- --------
* Less than one percent (1%) of the outstanding common shares.
(a) Assumes exercise of stock options beneficially owned by the named
individual or entity into shares of Hollywood Park Common Stock. Based on
25,800,069 shares outstanding as of March 15, 1999.
(b) Includes 116,668 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 March 15, 1999.
(c) Based upon information provided by the stockholder in Schedule 13G filed
with the Commission on February 16, 1999. According to such Schedule 13G,
2,515,000 (9.75%) shares are held by Legg Mason Special Investment Trust,
Inc., with Legg Mason Fund Adviser, Inc. having power to dispose thereof.
The Schedule 13G further reports that the remaining shares are held by
various clients of Legg Mason Capital Management, Inc. and Legg Mason Wood
Walker, Inc., which have power to dispose thereof. Legg Mason Fund Adviser,
Inc., Legg Mason Capital Management, Inc. and Legg Mason Wood Walker, Inc.
are subsidiaries of Legg Mason, Inc.
(d) Based upon information provided by the stockholder in Schedule 13G filed
with the Commission on February 2, 1999.
81
<PAGE>
(e) Includes 270,945 shares of Hollywood Park Common Stock which Mr. Parrott
has the right to acquire upon the exercise of options which are exercisable
within 60 days of March 15, 1999, including 270,278 options assumed by the
Company in connection with the Boomtown Merger.
(f) Includes 12,000 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 March 15, 1999.
(g) Includes 667 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 March 15, 1999.
(h) Includes 12,000 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 March 15, 1999.
(i) Includes 12,000 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 March 15, 1999.
(j) Includes 12,000 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 March 15, 1999.
(k) Includes 12,000 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 March 15, 1999.
(l) Includes 30,667 shares of Hollywood Park Common Stock which Mr. Torguson
has the right to acquire upon the exercise of options which are exercisable
within 60 days of March 15, 1999.
(m) Includes 85,002 shares of Hollywood Park Common Stock which Mr. Finnigan
has the right to acquire upon the exercise of options which are exercisable
within 60 days of March 15, 1999.
(n) Includes 100,000 shares of Hollywood Park Common Stock which Mr. Alanis has
the right to acquire upon the exercise of options which are exercisable
within 60 days of March 15, 1999.
(o) Includes 50,000 shares of Hollywood Park Common Stock which Mr. Allen has
the right to acquire upon the exercise of options which are exercisable
within 60 days of March 15, 1999.
(p) Includes 78,334 shares of Hollywood Park Common Stock which Mr. Robbins has
the right to acquire upon the exercise of options which are exercisable
within 60 days of March 15, 1999.
(q) Includes 792,283 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 60 days of March 15, 1999. Excluding such
shares, the Directors and Executive Officers of Hollywood Park have
beneficial ownership of 4,057,228 shares of Hollywood Park Common Stock,
which represents 15.7% of the shares of Hollywood Park Common Stock
outstanding as of March 15, 1999.
82
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since November 1993, we have had an aircraft time sharing agreement with
R.D. Hubbard Enterprises, Inc., which is wholly owned by Mr. Hubbard. The
current agreement, effective as of June 1998, expires on December 31, 1999 and
thereafter automatically renews each month unless either party gives written
notice of termination at least two weeks before a renewal date. We reimbursed
Hubbard Enterprises approximately $72,000 in 1998 for our use of the aircraft.
Timothy J. Parrott purchased 270,738 shares of Boomtown common stock in
connection with Boomtown's 1988 acquisition of Boomtown Hotel & Casino, Inc.
(which operates Boomtown Reno). Mr. Parrott paid an aggregate purchase price of
$222,000, of which $1,000 was paid in cash and $221,000 was paid by a
promissory note secured by a pledge to Boomtown of all of the shares owned by
Mr. Parrott. As of October 31, 1998, Mr. Parrott resigned his position as
Chairman of Boomtown, and Hollywood Park retained him as a consultant to
provide executive consulting services to Hollywood Park relating to gaming and
other business issues. Mr. Parrott was retained for a three year period, with
an annual retainer of $350,000 with health and disability benefits equivalent
to those he received as a Boomtown employee. Mr. Parrott's note will be
forgiven in three equal parts on each anniversary of the consulting agreement.
In connection with the Boomtown merger, Mr. Parrott was designated as a Board
member and continues in that respect.
On August 31, 1998, we received a promissory note from Mr. Alanis for up to
$3.5 million evidencing a loan we made to Mr. Alanis of approximately $3.2
million to purchase 300,000 shares of our common stock in connection with Mr.
Alanis' becoming an officer of Hollywood Park. Mr. Alanis was formerly the
President of Horseshoe Gaming, Inc., the manager and a member of Horseshoe
Gaming, L.L.C. The promissory note bears interest at the prime interest rate,
but is not to exceed 10%. The principal amount of the promissory note, along
with any accrued interest, is due in full no later than December 31, 1999. The
promissory note is secured by Mr. Alanis' interest in Horseshoe Gaming, L.L.C.,
which has an approximate value well in excess of $3.5 million.
Marlin F. Torguson, who beneficially owned approximately 21.5% of the
outstanding common stock of Casino Magic, agreed, in connection with the Casino
Magic acquisition, to vote his Casino Magic shares in favor of the acquisition
by Hollywood Park. In addition, Mr. Torguson agreed to continue to serve as an
employee of Casino Magic for three years following the acquisition, and during
such three-year period not to compete with Hollywood Park or Casino Magic in
any jurisdictions in which either Hollywood Park or Casino Magic operates.
Hollywood Park agreed to appoint Mr. Torguson to the board of directors of
Hollywood Park. Hollywood Park has agreed to issue to Mr. Torguson 20,000
shares of Hollywood Park common stock per year during such three-year period
and pay him $300,000 per year of such period. In addition, Hollywood Park
agreed to grant Mr. Torguson options to acquire 30,000 shares of Hollywood Park
common stock at an exercise price equal to the closing price of Hollywood Park
common stock on the effective date of the Casino Magic acquisition. The
foregoing payments will be made to Mr. Torguson whether or not Hollywood Park
or Casino Magic terminates Mr. Torguson's employment (except for a termination
for cause).
83
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
Bank Credit Facility
In connection with the acquisition of Casino Magic, we entered into the Bank
Credit Facility with a group of banks (the "Banks") for whom Bank of America
NT&SA acts as Administrative Agent. The Bank Credit Facility provides us with a
revolving line of credit of up to $300 million, with a letter of credit sub-
facility of $30 million and swing line sub-facility of $10 million provided by
the Administrative Agent. Under the terms of the Bank Credit Facility, now that
we have been approved to receive the gaming license in Indiana, we may request
that the line of credit be increased to $375 million. The Bank Credit Facility
matures December 31, 2003; however, the Banks have the right to terminate the
line of credit upon a "Change in Control", as defined in the Bank Credit
Facility.
The commitment under the revolving line of credit will be reduced by $15
million, commencing March 31, 2001, and on the last day of each third calendar
month thereafter until December 31, 2002. Commencing on March 31, 2003 and on
the last day of each third calendar month thereafter, the amount available for
borrowing under the line of credit will decrease by $25 million. If the
facility has been increased, the reduction amounts are to be increased
proportionately.
The annual interest rate under the Bank Credit Facility is determined, at
the Company's election, by reference to the "Eurodollar Rate" (for Eurodollar
loans) (for interest periods of one, two, three or six months) or the
"Alternate Base Rate" (for Base Rate loans), as these terms are defined in the
Bank Credit Facility, plus margins that vary depending on the Company's ratio
of funded debt to earnings before interest, taxes, depreciation and
amortization ("EBITDA"). With a funded debt to EBITDA ratio of less than 2.00
to 1.00, the margin for Eurodollar loans is 1.00% and nothing for Base Rate
loans. The margin for each type of loan will increase by 25 basis points
(except the initial increase in the margin for Base Rate loans, which increases
by 12.5 basis points) for each 50 basis point increase in the funded debt to
EBITDA ratio. The maximum margin for Eurodollar loans is 2.25%, and for Base
Rate loans is 1.125%. The margin for the period October 15, 1998, through
November 30, 1998, for Eurodollar loans was 2.00% and 0.875% for Base Rate
loans. Effective December 1, 1998 through February 28, 1999, the margins are
2.25% and 1.125% for Eurodollar and Base Rate loans, respectively. After giving
effect to this offering, the margins would continue to be 2.25% and 1.125% for
Eurodollar and Base Rate loans, respectively.
The commitment fee for the facility also varies based on the ratio of funded
debt to EBITDA, starting from 25 basis points when the ratio is less than 2.00,
and increasing by 6.25 basis points for the first two increases in the ratio of
50 basis points, then remaining unchanged for the next 50 basis points increase
in the ratio, and thereafter increasing by 6.25 basis points for each 50 basis
points increase in the ratio, up to a maximum of 50 basis points.
Our obligations under the Bank Credit Facility are guaranteed by all of our
significant subsidiaries (except Casino Magic of Louisiana, Corp. and Casino
Magic Neuquen) and are secured by a first lien and security interest on
substantially all of our assets and the assets of our significant subsidiaries,
except for specified permitted liens incurred in connection with, or existing
at the time of, acquisition of property or subsidiaries.
The Bank Credit Facility imposes various customary affirmative covenants on
us and our subsidiaries, including among others, reporting covenants, covenants
to maintain insurance, comply with laws, maintain properties and other
covenants customary in commercial bank financings of this type.
The Bank Credit Facility imposes various negative covenants on us and our
subsidiaries including, without limitation: (1) restrictions on the payment of
subordinated obligations, (2) disposition of property, (3) mergers, (4) hostile
acquisitions, (5) payment of dividends and other distributions, (6) change in
the nature of our business, (7) restrictions on the incurrence of additional
debt and guaranties of debt, (8) restrictions on capital expenditures and
operating leases, (9) restrictions on investments, (10) restrictions on
transactions with affiliates, (11) restrictions on liens and negative pledges,
and (12) restrictions on amendments and modifications
84
<PAGE>
of subordinated indebtedness. In addition, we must comply with various
financial covenants, including interest coverage ratio, and funded debt to
EBITDA ratio.
Events of default under the Bank Credit Facility include, among other
things: (1) failure to make payments when due, (2) breach of representations or
warranties, (3) events of insolvency, (4) failure to pay other debt for
borrowed money, or other breach or default under agreements for such other debt
allowing the holder or lender to accelerate its maturity, or require such debt
to be redeemed or repurchased, (5) final judgment in an amount in excess of
$1.0 million which has not been stayed or satisfied within 30 days, (6)
revocation of the licenses affecting gaming operations accounting for 5% or
more of consolidated gross revenues, and (7) failure to comply with covenants.
Hollywood Park 9 1/2% Senior Subordinated Notes
On August 6, 1997, we and our wholly-owned subsidiary, Hollywood Park
Operating Company, jointly issued $125,000,000 aggregate principal amount of 9
1/2% Senior Subordinated Notes. These notes bear interest at 9 1/2% per year,
and interest is payable on each February 1 and August 1. The 9 1/2% Notes may
be redeemed, at our option and at the option of Hollywood Park Operating
Company, in whole or in part, on or after August 1, 2002 at the following
premiums over face: (1) on and after August 1, 2002, but before August 1, 2003:
104.75%; (2) on and after August 1, 2003, but before August 1, 2004: 102.375%;
(3) on and after August 1, 2004, but before August 1, 2005: 101.188%; and (4)
on and after August 1, 2005, and thereafter: 100%. Our obligations and those of
Hollywood Park Operating Company on the 9 1/2% Notes are not secured by any of
our assets, but are guaranteed by all of our material restricted subsidiaries.
The 9 1/2% Notes are governed by an indenture dated August 1, 1997, as
amended, which contains covenants limiting the ability of Hollywood Park and
Hollywood Park Operating Company and their respective subsidiaries to incur
additional debt, issue preferred stock, pay dividends or make certain
distributions, repurchase their stock, grant liens on their property, enter
into certain transactions with their affiliates, sell assets or enter into
mergers or consolidations, or sell stock in their subsidiaries. The indenture
also requires that we and Hollywood Park Operating Company offer to repurchase
the 9 1/2% Notes upon a change of control, as defined in the indenture. In a
supplemental indenture dated February 5, 1999, the indenture was amended to
make changes consented to by holders of the 9 1/2% Notes in the consent
solicitation.
Events of default under the indenture include: (1) failure to make payments
on the 9 1/2% Notes when due, (2) failure to comply with covenants, (3) failure
to pay other debt of $10 million or more, or default under such debt resulting
in acceleration of the maturity of such debt, (4) failure to satisfy or
discharge any final judgment in excess of $10 million, and (5) occurrence of
certain insolvency events.
Casino Magic of Louisiana, Corp. 13% First Mortgage Notes
On August 22, 1996, Casino Magic of Louisiana, Corp., our indirect wholly-
owned subsidiary which owns and operates Casino Magic Bossier, issued and sold
$115,000,000 aggregate principal amount of 13% First Mortgage Notes due 2003.
The Louisiana Notes provide for interest at 13% per year, payable semi-annually
on each February 15 and August 15, and at maturity. The Louisiana Notes also
provide for contingent interest in the amount of 5% of Casino Magic of
Louisiana, Corp.'s "Adjusted Consolidated Cash Flow", as defined in the
indenture for the Louisiana Notes, for the "Accrual Period", which is generally
the six month period ending December 31 or June 30, as the case may be. The
contingent interest is payable on each interest payment date, but may be
deferred at the option of Casino Magic of Louisiana, Corp., if and to the
extent that: (1) the payment of such contingent interest will cause Casino
Magic of Louisiana, Corp.'s "Adjusted Fixed Charge Coverage Ratio" for the most
recently completed four full fiscal quarters preceding such interest payment
date to be less than 1.5 to 1.0 on a pro forma basis, giving effect to the
payment of such contingent interest, and (2) the principal amount of the
Louisiana Notes to which such contingent interest relates has not then matured
or otherwise become due and payable. "Adjusted Fixed Charge Coverage Ratio" is
defined in the indenture as the ratio obtained by dividing the "Adjusted
Consolidated Cash Flow" by the "Fixed Charges."
85
<PAGE>
The aggregate contingent interest payable in any Accrual Period is reduced by
the portion of such interest that relates to Louisiana Notes that were not
outstanding as of the record date, each February 1 and August 1, preceding such
interest payment date.
The Louisiana Notes are secured by a first priority lien and security
interest in substantially all of the assets of Casino Magic of Louisiana,
Corp., including the Bossier riverboat. Jefferson Casino Corporation, the
immediate parent of Casino Magic of Louisiana, Corp., guarantees the Louisiana
Notes and the guarantee is secured by all of the assets of Jefferson Casino
Corporation, including all of the capital stock of Casino Magic of Louisiana,
Corp.
The Louisiana Notes are governed by an indenture which contains certain
covenants limiting the ability of Casino Magic of Louisiana, Corp. and its
subsidiaries to engage in any line of business other than the gaming business
and activities incidental to it, to borrow additional moneys or otherwise
become liable for additional debt, to pay dividends, issue preferred stock,
make investments and certain types of payments, to grant liens in their
property or enter into mergers or consolidations, or to enter into certain
specified transactions with their affiliates. The covenants also limit the
ability of Jefferson Casino Corporation to engage in any business other than
owning the stock of Casino Magic of Louisiana, Corp. or to incur any debt or
make any investments. The indenture also contains covenants which require
Casino Magic of Louisiana, Corp. to make an offer to repurchase the Louisiana
Notes upon certain sales of assets, casualty losses and changes in the control
of Casino Magic of Louisiana, Corp. or Jefferson Casino Corporation. Our
acquisition of Casino Magic resulted in a change in control. Accordingly,
Casino Magic of Louisiana, Corp. offered to repurchase the Louisiana Notes. The
offer expired on December 23, 1998 and holders of an aggregate principal amount
of approximately $2.1 million principal amount of Louisiana Notes accepted the
offer.
The indenture provides for certain events of default which include failure
to pay interest or contingent interest due on the Louisiana Notes, failure to
pay the principal or premium on the Louisiana Notes at maturity, upon
redemption or otherwise, failure to comply with the covenants contained in the
indenture, failure to pay certain other indebtedness, failure to satisfy a
final judgment, breach of any material representation or warranty in the
indenture and related documents, becoming insolvent or seeking relief under any
bankruptcy laws, and failure to continue operations.
The Louisiana Notes may only be redeemed at the option of Casino Magic of
Louisiana, Corp. after August 14, 2000, at the following redemption prices: (1)
after August 14, 2000, and before August 15, 2001: 106.5%; (2) after August 14,
2001, and before August 15, 2002: 104.332%, and (3) after August 14, 2002:
102.166%. Upon any acceleration of the maturity of the Louisiana Notes as a
result of an event of default caused by the willful action or inaction of
Casino Magic of Louisiana, Corp., the applicable redemption premiums set forth
above will also become due and payable in addition to the principal and other
amounts otherwise due on the Louisiana Notes. In the event of an acceleration
of the maturity of the Louisiana Notes as a result of a willful default before
August 15, 2000, when the Louisiana Notes may not be redeemed at the option of
Casino Magic of Louisiana, Corp., the following premiums will apply: (1) after
August 14, 1998, and before August 15, 1999: 109.750%, and (2) after August 14,
1999, and before August 15, 2000: 108.125%.
86
<PAGE>
THE EXCHANGE OFFER
General
The Company hereby offers, upon the terms and subject to the conditions set
forth in this prospectus and in the accompanying Letter of Transmittal (which
together constitute the exchange offer (the "Exchange Offer")), to exchange up
to $350 million aggregate principal amount of Exchange Notes for a like
aggregate principal amount of Old Notes properly tendered on or prior to the
Expiration Date (as defined below) and not withdrawn as permitted pursuant to
the procedures described below. The Exchange Offer is being made with respect
to all of the Old Notes.
As of the date of this prospectus, $350 million aggregate principal amount
of the Old Notes is outstanding. This prospectus, together with the Letter of
Transmittal, is first being sent on or about March 29, 1999, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain conditions
set forth under "--Certain Conditions to the Exchange Offer" below. The Company
currently expects that each of the conditions will be satisfied and that no
waivers will be necessary.
Purpose of the Exchange Offer
The Old Notes were issued on February 18, 1999 (the "Issuance Date") in a
transaction exempt from the registration requirements of the Securities Act.
Accordingly, the Old Notes may not be reoffered, resold, or otherwise
transferred unless so registered or unless an applicable exemption from the
registration and prospectus delivery requirements of the Securities Act is
available.
In connection with the issuance and sale of the Old Notes, the Company
entered into the Registration Rights Agreement, which requires that:
. the Company file with the Commission a registration statement relating to
the Exchange Offer not later than 45 days after the date of issuance of
the Old Notes, and
. the Company use its best efforts to cause the registration statement
relating to the Exchange Offer to become effective under the Securities
Act not later than 150 days after the date of issuance of the Old Notes,
and
. the Exchange Offer be consummated not later than 30 business days after
the target date for the effectiveness of the Registration Statement,
. or, if obligated to file a shelf registration statement, that the Company
use its best efforts to file the shelf registration statement with the
Commission within 30 days after such filing obligation arises and to
cause the shelf registration statement to be declared effective within 90
days after such obligation arises.
A copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement.
The Exchange Offer is being made by the Company to satisfy its obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by The Depository Trust Company. Other than
pursuant to the Registration Rights Agreement, the Company is not required to
file any registration statement to register any outstanding Old Notes. Holders
of Old Notes who do not tender their Old Notes or whose Old Notes are tendered
but not accepted would have to rely on exemptions to registration requirements
under the securities laws, including the Securities Act, if they wish to sell
their Old Notes.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company
87
<PAGE>
has not sought its own interpretive letter and there can be no assurance that
the staff would make a similar determination with respect to the Exchange Offer
as it has in such interpretive letters to third parties. Based on these
interpretations by the Staff, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a Holder (other than any Holder
who is a broker-dealer or an "affiliate" of the Company within the meaning of
Rule 405 of the Securities Act) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Exchange Notes, as to which
such Holder must acknowledge. See "--Resale of Exchange Notes". Any holder who
is an affiliate of the Company or who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes cannot rely on
such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange 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, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution".
Terms of the Exchange
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Old Notes. The terms of the Exchange Notes are identical in all material
respects to the terms of the Old Notes for which they may be exchanged pursuant
to this Exchange Offer, except that the Exchange Notes will generally be freely
transferable by holders thereof and will not be subject to any covenant
regarding registration. The Exchange Notes will evidence the same indebtedness
as the Old Notes and will be entitled to the benefits of the Indenture. See
"Description of Notes".
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
Tendering holders of the Old Notes will be required to make the
acknowledgements referred to in the last paragraph of the heading "--Purpose of
the Exchange Offer." Tendering holders of the Old Notes shall 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 the Old
Notes pursuant to the Exchange Offer.
Expiration Date; Extension; Termination; Amendment
The Exchange Offer will expire at 5:00 p.m., New York City time, on May 3,
1999, unless the Company, in its sole discretion, has extended the period of
time for which the Exchange Offer is open (such date, as it may be extended, is
referred to herein as the "Expiration Date"). The Expiration Date will be at
least 20 business days after the commencement of the Exchange Offer in
accordance with Rule 14e-1(a) under the Exchange Act. The Company expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open, and thereby delay acceptance for
exchange of any Old Notes, by giving oral or written notice to the Exchange
Agent and by timely public announcement no later than 9:00 a.m. New York City
time, on the next business day after the previously scheduled Expiration Date.
During any such extension, all Old Notes previously tendered will remain
subject to the Exchange Offer unless properly withdrawn.
The Company expressly reserves the right to
. terminate or amend the Exchange Offer and not to accept for exchange any
Old Notes not theretofore accepted for exchange upon the occurrence of
any of the events specified below under "Certain Conditions to the
Exchange Offer" which have not been waived by the Company and
. amend the terms of the Exchange Offer in any manner.
88
<PAGE>
If any such termination or amendment occurs and is determined by the Company to
be a material change, the Company will notify the Exchange Agent and will
either issue a press release or give oral or written notice to the holders of
the Old Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time. Unless the Company
terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date, the Company will exchange the Exchange Notes for the Old Notes
as soon as practicable after the Expiration Date (such date is referred to as
the "Exchange Date").
Interest on Exchange Notes
The Exchange Notes will bear interest from their date of issuance. Interest
will accrue on the Old Notes that are tendered in exchange for the Exchange
Notes through the issue date of the Exchange 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 Exchange Notes, on the first interest payment
date after the Expiration Date. Interest on the Exchange Notes will be payable
semi-annually on each February 15 and August 15, commencing on August 15, 1999.
Procedures for Tendering Old Notes
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this prospectus and in the accompanying
Letter of Transmittal.
A holder of Old Notes may tender the same by
. properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this prospectus to the Letter of Transmittal
shall be deemed to include a facsimile thereof) and delivering the same,
together with the certificate or certificates representing the Old Notes
being tendered and any required signature guarantees and any other documents
required by the Letter of Transmittal, to the Exchange Agent (as defined
below) at its address set forth below on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or
. complying with the guaranteed delivery procedures described below.
The method of delivery of Old Notes, Letters of Transmittal and all other
required documents is at the election and risk of the holders. If such delivery
is by mail, it is recommended that registered mail properly insured, with
return receipt requested, be used. In all cases, sufficient time should be
allowed to insure timely delivery. No Old Notes or Letters of Transmittal
should be sent to the Company.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a "book-
entry transfer facility") whose name appears on a security listing as the owner
of Old Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed
by the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Old Notes not exchanged are to be delivered to an address
other than that of
89
<PAGE>
the registered holder appearing on the note register for the Old Notes, the
signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this prospectus to establish accounts with respect to the
Old Notes at the book-entry transfer facility for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date, a letter,
telegram or facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from an Eligible
Institution setting forth the name and address of the tendering holder, the
names in which the Old Notes are registered and, if possible, the certificate
numbers of the Old Notes to be tendered, and stating that the tender is being
made thereby and guaranteeing that within three business days after the
Expiration Date, the 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
the book-entry transfer facility), will be delivered by such Eligible
Institution together with a properly completed and duly executed Letter of
Transmittal (and any other required documents). Unless Old Notes being tendered
by the above-described method are deposited with the Exchange Agent within the
time period set forth above (accompanied or preceded by a properly completed
Letter of Transmittal and any other required documents), the Company may, at
its option, reject the tender. Copies of the notice of guaranteed delivery
("Notice of Guaranteed Delivery") which may be used by Eligible Institutions
for the purposes described in this paragraph are available from the Exchange
Agent.
A tender will be deemed to have been received as of the date when
. the tendering holder's properly completed and duly signed Letter of
Transmittal accompanied by the Old Notes (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the book-
entry transfer facility) is received by the Exchange Agent, or
. a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) from an Eligible
Institution is received by the Exchange Agent.
Issuances of Exchange Notes in exchange for Old Notes tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made only
against deposit of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer (including the Letter
90
<PAGE>
of Transmittal and the instructions thereto) by the Company shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes for exchange must be cured within such
reasonable period of time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of Old
Notes for exchange, nor shall any of them incur any liability for failure to
give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney 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 Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things:
. the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder,
. that neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and
. that neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company, or if it is
an affiliate it will comply with the registration and prospectus
requirements of the Securities Act to the extent applicable.
Each broker-dealer that receives Exchange 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 must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution".
Terms and Conditions of the Letter of Transmittal
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer:
The party tendering Notes for exchange (the "Transferor") exchanges, assigns
and transfers the Old Notes to the Company and irrevocably constitutes and
appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to
cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Exchange Agent or the Company to be necessary or desirable to complete
the exchange, assignment and transfer of tendered Old Notes or transfer
ownership of such Old Notes on the account books maintained by a book-entry
transfer facility and also agrees to comply with its obligations under the
Registration Rights Agreement. The Transferor further agrees that acceptance of
any tendered Old Notes by the Company and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of
certain of its obligations under the Registration Rights Agreement. All
authority conferred by the Transferor will survive the death or incapacity of
the Transferor and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
91
<PAGE>
The Transferor certifies that it is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act and that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes.
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 Exchange Notes.
Each Transferor which is a broker-dealer receiving Exchange Notes for its own
account must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. 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.
Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter
must be received by the Exchange Agent at the address set forth herein prior to
the Expiration Date. Any such notice of withdrawal must:
. specify the name of the person having tendered the Old Notes to be
withdrawn (the "Depositor"),
. identify the Old Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Old Notes),
. specify the principal amount of Notes to be withdrawn,
. include a statement that such holder is withdrawing his election to have
such Old Notes exchanged,
. 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 or as
otherwise described above (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee
under the Indenture register the transfer of such Old Notes into the name
of the person withdrawing the tender, and
. specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. The Exchange Agent will return the
properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and
number of the account at the book-entry transfer facility to be credited
with the withdrawn Old Notes or otherwise comply with the book-entry
transfer facility procedure. All questions as to the validity of notices
of withdrawals, including time of receipt, will be determined by the
Company and such determination will be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such book-
entry transfer facility specified by the 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 under "--Procedures for Tendering Old Notes" above at any time on or
prior to the Expiration Date.
92
<PAGE>
Acceptance of Old Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly on the Exchange Date, all Old Notes properly
tendered and will issue the Exchange Notes promptly after such acceptance. See
"--Certain Conditions to the Exchange Offer" below. For purposes of the
Exchange Offer, the Company shall be deemed to have accepted properly tendered
Old Notes for exchange when, as and if the Company has given oral or written
notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note.
In all cases, issuance of Exchange Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely book-entry
confirmation of such Old Notes into the Exchange Agent's account at the book-
entry transfer facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such non-exchanged Old Notes will be credited to an account
maintained with such book-entry transfer facility) as promptly as practicable
after the expiration of the Exchange Offer.
Certain Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company shall not be required to accept for
exchange, or to issue Exchange Notes in exchange for, any Old Notes and may
terminate or amend the Exchange Offer (by oral or written notice to the
Exchange Agent or by a timely press release) if at any time before the
acceptance of such Old Notes for exchange or the exchange of the Exchange Notes
for such Old Notes, any of the following conditions exist:
(1) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange
Offer which, in the sole judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or have a
material adverse effect on the contemplated benefits of the Exchange Offer
to the Company; or
(2) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company that is or may be adverse to the Company, or the
Company shall have become aware of facts that have or may have adverse
significance with respect to the value of the Old Notes or the Exchange
Notes or that may materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(3) any law, rule or regulation or applicable interpretations of the
staff of the Commission is issued or promulgated which, in the good faith
determination of the Company, do not permit the Company to effect the
Exchange Offer; or
(4) the approval of the issuance of the Exchange Notes in the exchange
offer has not been obtained from the Indiana Gaming Commission; or
(5) any governmental approval has not been obtained, which approval the
Company, in its sole discretion, deems necessary for the consummation of
the Exchange Offer; or
(6) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law statute, rule or
regulation) which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
have a material adverse effect on the contemplated benefits of the Exchange
Offer to the Company; or
93
<PAGE>
(7) there shall occur a change in the current interpretation by the staff
of the Commission which permits the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes to be offered for resale, resold
and otherwise transferred by holders thereof (other than any such holder
that is an "affiliate" of the Company 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 Exchange Notes
are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the
distribution of such Exchange Notes; or
(8) there shall have occurred:
. any general suspension of, shortening of hours for, or limitation on
prices for, trading in securities on any national securities exchange
or in the over-the-counter market (whether or not mandatory),
. any limitation by any governmental agency or authority which may
adversely affect the ability of the Company to complete the
transactions contemplated by the Exchange Offer,
. a declaration of a banking moratorium or any suspension of payments
in respect of banks by Federal or state authorities in the United
States (whether or not mandatory),
. a commencement of a war, armed hostilities or other international or
national crisis directly or indirectly involving the United States,
. any limitation (whether or not mandatory) by any governmental
authority on, or other event having a reasonable likelihood of
affecting, the extension of credit by banks or other lending
institutions in the United States, or
. in the case of any of the foregoing existing at the time of the
commencement of the Exchange Offer, a material acceleration or
worsening thereof.
The Company expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Old Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Old Notes). In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date
in any respect whether or not any of the conditions set forth above occur.
The foregoing conditions are for the sole benefit of the Company and maybe
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which maybe
asserted at any time and from time to time.
If the Company waives or amends the foregoing conditions, it will, if
required by law, extend the Exchange Offer for a minimum of five business days
from the date that the Company first gives notice, by public announcement or
otherwise, of such waiver or amendment, if the Exchange Offer would otherwise
expire within such five business-day period. Any determination by the Company
concerning the events described above will be final and binding upon all
parties.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this prospectus constitutes
apart or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended. In any such event the Company is required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange.
94
<PAGE>
Exchange Agent
The Bank of New York has been appointed as the "Exchange Agent" for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below:
<TABLE>
<S> <C>
By Hand/Overnight Courier: By Mail:
------------------------- -------
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street, Floor 7E
Corporate Trust Services Window New York, New York 10286
Ground Level Attn: Martha James
New York, New York 10286 Reorganization Section
Attn: Martha James
Reorganization Section
</TABLE>
By Facsimile: (212) 815-6339
Attn.: Reorganization Section
Telephone: (212) 815-6335
Questions and requests for assistance, requests for additional copies of this
prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF TRANSMITTAL,
OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER OTHER THAN THE
ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID
DELIVERY.
Solicitation of Tenders; Fees and Expenses
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, 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.
The Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this and other related documents to the beneficial owners
of the Old Notes and in handling or forwarding tenders for their customers.
The Company will pay all expenses incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent, Trustee, registration
fees, accounting, legal, printing and related fees and expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the respective dates as of
which information is given herein. The Exchange Offer is not being made to (nor
will tenders be accepted from or on behalf of) holders of Old Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction. However,
the Company may, at its discretion, take such action as it may deem necessary
to make the Exchange Offer in any such jurisdiction and extend the Exchange
Offer to holders of Old Notes in such jurisdiction. In certain jurisdictions,
the Exchange Offer may be made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
95
<PAGE>
Transfer Taxes
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or 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 Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Accounting Treatment
The Exchange Notes will be recorded at the carrying value of the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of Exchange Notes for Old Notes. Expenses incurred in
connection with the issuance of the Exchange Notes will be amortized over the
term of the Exchange Notes.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for Exchange 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. Old Notes not
exchanged pursuant to the Exchange Offer will continue to remain outstanding in
accordance with their terms. In general, the Old Notes may not be offered or
sold unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register the Old Notes under the Securities Act.
Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of Old Notes are
urged to consult their financial and tax advisors in making their own decision
on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement to effect the Exchange Offer. Holders of Old Notes who do not tender
their Old Notes in the Exchange Offer will continue to hold such Old Notes and
will be entitled to all the rights and limitations applicable thereto under the
Indenture, except for any such rights under the Registration Rights Agreement
that by their terms terminate or cease to have further effectiveness as a
result of the making of this Exchange Offer. All untendered Old Notes will
continue to be subject to the restrictions on transfer set forth in the
Indenture. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered Old Notes could be adversely
affected.
The Company may in the future seek to acquire, subject to the terms of the
Indenture, untendered Old Notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plan to acquire any Old Notes which are not tendered in the Exchange
Offer.
Resale of Exchange Notes
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the Staff would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on
96
<PAGE>
these interpretations by the staff, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by a Holder (other than
any Holder who is a broker-dealer or an "affiliate" of the Company within the
meaning of Rule 405 of the Securities Act) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Exchange Notes. However, any
holder who is an "affiliate" of the Company or who has an arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Old
Notes from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act:
. could not rely on the applicable interpretations of the staff and
. must comply with the registration and prospectus delivery requirements of
the Securities Act. A broker-dealer who holds Old Notes that were
acquired for its own account as a result of market-making or other
trading activities may be deemed to be an "underwriter" within the
meaning of the Securities Act and must, therefore, deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of Exchange Notes. Each such broker-dealer that receives Exchange
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, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution".
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company
has agreed, pursuant to the Registration Rights Agreement and subject to
certain specified limitations therein, to register or qualify the Exchange
Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Exchange Notes reasonably requests. Such
registration or qualification may require the imposition of restrictions or
conditions (including suitability requirements for offers or purchasers) in
connection with the offer or sale of any Exchange Notes.
97
<PAGE>
DESCRIPTION OF NOTES
The Old Notes were issued and the Exchange Notes offered hereby will be
issued under an indenture dated as of February 18, 1999 (the "Indenture") among
the Company, as issuer, the Guarantors named therein and The Bank of New York,
as trustee (the "Trustee"). The terms of the Exchange 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 "Trust Indenture Act"). The
Exchange Notes are subject to all such terms, and holders of the Exchange Notes
are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of the material provisions of the Indenture
describes the material terms of the Indenture but does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to
the Trust Indenture Act.
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions." In this description, the word "Company"
refers only to Hollywood Park, Inc. and not to any of its subsidiaries or
affiliates.
On February 18, 1999, the Company issued $350 million aggregate principal
amount of Old Notes under the Indenture. The terms of the Exchange Notes are
identical in all material respects to the Old Notes, except for certain
transfer restrictions and registration and other rights relating to the
exchange of the Old Notes for the Exchange Notes. The Trustee will authenticate
and deliver Exchange Notes for original issue only in exchange for a like
principal amount of Old Notes. Any Old Notes that remain outstanding after the
consummation of the Exchange Offer, together with the Exchange Notes, will be
treated as a single class of securities under the Indenture. Accordingly, all
references herein to specified percentages in aggregate principal amount of the
outstanding Notes shall be deemed to mean, at any time after the Exchange Offer
is consummated, such percentage in aggregate principal amount of the Old Notes
and Exchange Notes then outstanding.
Brief Description of the Notes and the Guarantees
The Notes
These Notes:
. are general unsecured obligations of the Company;
. are subordinated in right of payment to all existing and future Senior
Debt of the Company;
. are effectively subordinated to all secured Indebtedness of the Company;
. rank equally with its 9 1/2% Senior Subordinated Notes due 2007 issued by
the Company and Hollywood Park Operating Company;
. are senior in right of payment to any future Indebtedness of the Company
that is specifically subordinated to the Notes; and
. are unconditionally guaranteed by the Guarantors.
The Guarantees
These Notes are guaranteed by each of the existing and future Material
Restricted Subsidiaries of the Company, which are initially all of the
subsidiaries of the Company except:
Hollywood Park Kansas, Inc.
Sunflower Racing, Inc. and its subsidiary SR Food & Beverage Company
98
<PAGE>
the following subsidiaries of Casino Magic Corp.:
Jefferson Casino Corporation and its subsidiary Casino Magic of Louisiana,
Corp.
Casino Magic Neuquen S.A. and its subsidiary Casino Magic Support Services
SA
Casino Magic Management Services Corp.
St. Louis Casino Corp.
Boston Casino Corp.
Casino Advertising, Inc.
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.
Boomtown Las Vegas, Inc.
and the subsidiaries of any of the foregoing.
The Guarantees of these Notes:
. are general unsecured obligations of each Guarantor;
. are subordinated in right of payment to all existing and future Senior
Debt of each Guarantor;
. are effectively subordinated to all secured Indebtedness of each
Guarantor;
. rank equally with each Guarantor's guarantee of the 9 1/2% Senior
Subordinated Notes due 2007 issued by the Company and Hollywood Park
Operating Company; and
. are senior in right of payment to any future Indebtedness of each
Guarantor that is specifically subordinated to the Guarantees.
Assuming we had completed the offering of these Notes and applied the net
proceeds as intended, as of September 30, 1998, the Company and the Guarantors
would have had total Senior Debt (including secured Indebtedness) of
approximately $31.1 million, plus an aggregate of approximately $15.6 million
of accounts payable ranking equally with the Notes. As indicated above and as
discussed in detail below under the subheading "Subordination," payments on the
Notes and under the Guarantees will be subordinated to the payment of Senior
Debt. The Indenture permits us and the Guarantors to incur additional Senior
Debt.
As of the date of the Indenture, all of our Subsidiaries were "Restricted
Subsidiaries," except for Sunflower Racing, Inc. and its subsidiary SR Food &
Beverage Company, Jefferson Casino Corporation and its subsidiary Casino Magic
of Louisiana, Corp., Casino Magic Neuquen S.A. and its subsidiary Casino Magic
Support Services SA and Casino Magic Management Services Corp. However, under
the circumstances described below under the subheading "Certain Covenants--
Designation of Restricted and Unrestricted Subsidiaries," we will be permitted
to designate certain of our subsidiaries as "Unrestricted Subsidiaries."
Unrestricted Subsidiaries are not subject to many of the restrictive covenants
in the Indenture. Unrestricted Subsidiaries do not guarantee these Notes.
Not all of our "Restricted Subsidiaries" guarantee these Notes. In the event
of a bankruptcy, liquidation or reorganization of any of these non-guarantor
subsidiaries, these non-guarantor subsidiaries will pay the holders of their
debt and their trade creditors before they will be able to distribute any of
their assets to us. The
99
<PAGE>
guarantor subsidiaries generated 79.8% of our pro forma consolidated revenues
in the nine-month period ended September 30, 1998 and held 84.4% of our pro
forma consolidated assets as of September 30, 1998. See footnote 18 to our
Consolidated Financial Statements for year ended December 31, 1997 and footnote
7 to our Consolidated Financial Statements for the nine months ended September
30, 1998, included at the back of this prospectus for more detail about the
division of our consolidated revenues and assets between our guarantor and non-
guarantor subsidiaries. The issuance of the Exchange Notes in the exchange
offer requires the approval of the Indiana Gaming Commission.
Principal, Maturity and Interest
The Notes are limited to a maximum aggregate principal amount of $350
million. The Company issues Notes in denominations of $1,000 and integral
multiples of $1,000. The Notes will mature on February 15, 2007.
Interest on these Notes accrues at the rate of 9 1/4% per annum and is
payable semi-annually in arrears on February 15 and August 15, commencing on
August 15, 1999. The Company will make each interest payment to the Holders of
record of these Notes on the immediately preceding February 1 and August 1.
Interest on these Notes will accrue from the date of original issuance or,
if interest has already been paid, from the date it was most recently paid. The
Exchange Notes will bear interest from their date of issuance. Interest will
accrue on the Old Notes that are tendered in exchange for the Exchange Notes
through the issue date of the Exchange 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 Exchange 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.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Company, the Company
will make all principal, premium and interest payments on those Notes in
accordance with those instructions. All other payments on these Notes will be
made at the office or agency of the Company maintained for such purpose within
the City and State of New York unless the Company elects to make interest
payments by check mailed to the Holders at their address set forth in the
register of Holders; provided that all payments with respect to Global Notes,
and any definitive Notes the Holder of which has given wire instructions to the
Company will be made by wire transfer. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose.
Optional Redemption
The Company does not have the option to redeem the Notes prior to February
15, 2003. Thereafter, the Company has 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 February 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003............................................................ 104.625%
2004............................................................ 103.083%
2005............................................................ 101.542%
2006 and thereafter............................................. 100.000%
</TABLE>
Notwithstanding the foregoing, the Company 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
100
<PAGE>
more Public Equity Offerings of common stock of the Company at a redemption
price in cash of 109.25% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date;
provided that:
(1) at least 75% of the initially outstanding aggregate principal amount
of Notes remains outstanding immediately after the occurrence of such
redemption;
(2) notice of any such redemption shall be given by the Company to the
Holders and the Trustee within 15 days after the consummation of any such
Public Equity Offering; and
(3) such redemption shall occur within 60 days of the date of such
notice.
In addition to the foregoing, if any Gaming Authority requires that a holder
or beneficial owner of Notes must be licensed, qualified or found suitable
under any applicable Gaming Laws and such holder or beneficial owner:
(1) 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
(2) is denied such license or qualification or not found suitable,
the Company shall have the right, at its option:
(1) 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
(2) to call for the redemption of the Notes of such holder or beneficial
owner at a redemption price equal to the least of:
(A) the principal amount thereof,
(B) the price at which such holder or beneficial owner acquired the
Notes, in the case of either clause (A) above or this clause (B),
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
(C) such other lesser amount as may be required by any Gaming
Authority.
The Company 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.
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 as follows:
(1) if the Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed, or
(2) 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.
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
101
<PAGE>
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.
The Company may obtain a satisfaction and discharge from all of its
obligations under the Indenture and the Notes concurrently with its issuance of
any notice to redeem all of the outstanding Notes by (1) depositing cash or
Cash Equivalents in an amount sufficient to pay and discharge the entire
indebtedness on the outstanding Notes for principal, premium (if any), and
interest to the redemption date set forth in the notice of redemption, (2)
paying or providing for the payment of all other sums payable under the
Indenture or the Notes including, without limitation, the expenses and fees of
the Trustee, and (3) delivering an Officer's Certificate and opinion of
counsel, each stating that all conditions precedent herein provided for the
satisfaction and discharge of the Indenture have been complied with, and
otherwise complying with any additional provisions of Section 314(c) of the
Trust Indenture Act in connection with such satisfaction and discharge. Upon
compliance with the foregoing, the Trustee shall execute proper instrument(s)
acknowledging the satisfaction and discharge of the Indenture.
Mandatory Redemption
Except as described below under "Repurchase at the Option of Holders," the
Company is not 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
Old Notes and the related Guaranties are, and on the Exchange Notes and related
Guaranties will be, subordinated to the prior payment in full of all Senior
Debt, whether outstanding on the Issue Date or thereafter Incurred.
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:
(1) 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 on Obligations in respect of the Notes (except that the
Trustee or the holders may receive payments and other distributions made
from the defeasance or redemption trust described under "Legal Defeasance
and Covenant Defeasance" or "Selection and Notice" and the issuance of
Permitted Junior Securities), and
(2) until all Obligations with respect to Senior Debt (as provided in
clause (1) 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 or
redemption trust described under "Legal Defeasance and Covenant Defeasance"
or "Selection and Notice" and the issuance of 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 or redemption trust described under "Legal Defeasance
and Covenant Defeasance" or "Selection
102
<PAGE>
and Notice" and the issuance of 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:
(1) 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
determine whether any such default has occurred, or
(2) 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:
(1) in the case of a payment default, upon the date on which such default
is cured or waived, and
(2) 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 Company 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--The Notes are Subordinated to Senior Debt and Effectively Subordinated
to Debt of Our Non-Guarantor Subsidiaries."
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 Company 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 plus accrued and unpaid interest thereon, if any, to the date of
repurchase. Within 30 days following any Change of Control, the Company 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 Company 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.
103
<PAGE>
On the Change of Control Payment Date, the Company 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
Company.
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 Company 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 provides that, prior to complying with the provisions of this
covenant, but in any event within 90 days following a Change of Control, the
Company will either:
(1) repay all outstanding obligations with respect to Senior Debt,
(2) obtain the requisite consents, if any, from the holders of Senior
Debt to permit the repurchase of the Notes required by this covenant, or
(3) deliver to the Trustee an Officer's Certificate to the effect that no
action of the kind described in clause (1) or (2) 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
Company 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 Company becomes a party may
contain, restrictions on the ability of the Company to purchase any Notes, and
also may provide that certain change of control events with respect to the
Company would constitute a default thereunder. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing Notes, the
Company could seek the consents of its lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain all such requisite consents or repay such borrowings,
the Company will remain prohibited from purchasing Notes. In such case, the
Company's 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 Company 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
Company 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 Company and its 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
104
<PAGE>
Notes to require the Company to repurchase such Notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of the Company or the Company and its 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:
(1) 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
(2) 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. For purposes of this
provision, each of the following shall be deemed to be cash:
(A) any 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
Company and (iv) Non-Recourse Indebtedness) that are assumed by the
transferee of any such assets, and
(B) to the extent of the cash received, any notes or other
obligations received by the Company or any such Restricted Subsidiary
from such transferee that are converted by such Obligor into cash
within 60 days of receipt.
Notwithstanding the foregoing, an Obligor will be permitted to consummate an
Asset Sale without complying with the foregoing provisions if:
(1) 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,
(2) the transaction constitutes a "like-kind exchange" of the type
contemplated by Section 1031 of the Internal Revenue Code, and
(3) 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 Company 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:
(1) 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 not otherwise prohibited by
the Indenture, or
(2) to permanently prepay or repay Indebtedness of any Obligor other than
Indebtedness that is subordinate in right of payment to the Notes.
105
<PAGE>
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 the Company or the affected Obligor determines not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses (1) or (2)
of the preceding paragraph (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 (1) or (2) of the
preceding paragraph (each a "Net Proceeds Offer Amount"), will be applied by
the Company 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, on a pro rata basis
(A) Notes at a purchase price in cash equal to 100% of the aggregate principal
amount of Notes, in each case, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon on the Net Proceeds Offer Payment Date and (B) 9 1/2%
Senior Subordinated Notes due 2007 issued by the Company and Hollywood Park
Operating Company to the extent required by the terms thereof; provided that
if at any time within 360 days after an Asset Sale any non-cash consideration
received by the Company 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 or received by 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 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 to 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 neither the Company nor any Restricted
Subsidiary will, directly or indirectly:
(1) 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 the Company
or a Restricted Subsidiary) in respect of the Company's or any Restricted
Subsidiary's Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or
such Restricted Subsidiary, as applicable) or to the direct or indirect
holders of the Company's or such Restricted Subsidiary's Equity Interests
in their capacity as such,
106
<PAGE>
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, any payment in connection with any merger or
consolidation involving the Company or any Restricted Subsidiary) Equity
Interests of the Company or any Restricted Subsidiary or of any direct or
indirect parent or Affiliate of the Company or any Restricted Subsidiary
(other than any such Equity Interests owned by the Company or any
Restricted Subsidiary),
(3) 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
(4) make any Investment (other than Permitted Investments) (each of the
foregoing prohibited actions set forth in clauses (1), (2), (3) and (4)
being referred to as a "Restricted Payment"),
if at the time of such proposed Restricted Payment or immediately after giving
effect thereto,
(1) a Default or an Event of Default has occurred and is continuing or
would result therefrom,
(2) 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
(3) 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 Company) exceeds or would exceed the sum, without duplication, of:
(A) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company and the Restricted Subsidiaries 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
(B) 100% of the aggregate net cash proceeds received by the Company
from any Person (other than from a Subsidiary of the Company) from the
issuance and sale of Qualified Capital Stock of the Company or the
conversion of debt securities or Disqualified Capital Stock into
Qualified Capital Stock (to the extent that proceeds of the issuance of
such Qualified Capital Stock would have been includable in this clause
if such Qualified Capital Stock had been initially issued 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 (i) borrowed from the Company or any Restricted
Subsidiary, unless and until and to the extent such borrowing is
repaid, or (ii) contributed, extended, guaranteed or advanced by the
Company or any Restricted Subsidiary (including, without limitation, in
respect of any employee stock ownership or benefit plan)), plus
(C) 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
(D) 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 the Company or any Restricted Subsidiary in respect of any
Restricted Investment, in each such case (i) reduced by the amount of
any Amount Limitation Restoration (as defined below) for such
Restricted Investment and (ii) valued at the cash or marked-to-market
value of Cash Equivalents received with respect to such Restricted
Investment (less the cost of disposition, if any), plus
107
<PAGE>
(E) to the extent that any Person becomes a Restricted Subsidiary or
an Unrestricted Subsidiary is redesignated as a Restricted Subsidiary
after the date of the Indenture, the lesser of (i) the fair market
value of the Restricted Investment of the Company and its Restricted
Subsidiaries in such Person as of the date it becomes a Restricted
Subsidiary or in such Unrestricted Subsidiary on the date of
redesignation as a Restricted Subsidiary or (ii) the fair market value
of such Restricted Investment as of the date such Restricted Investment
was originally made in such Person or, in the case of the redesignation
of an Unrestricted Subsidiary into a Restricted Subsidiary which
Subsidiary was designated as an Unrestricted Subsidiary after the date
of the Indenture, the amount of the Company's Restricted Investment
therein as determined under the last paragraph of this covenant, plus
the aggregate fair market value of any additional Restricted
Investments (each valued as of the date made) by the Company and its
Restricted Subsidiaries in such Unrestricted Subsidiary after the date
of the Indenture; provided that any amount so determined in (i) or (ii)
shall be reduced to the extent that such Investment shall have been
recouped as an Amount Limitation Restoration to the Amount Limitations
of clause (4) (including (4)(A)) or (6) below.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph will not prohibit:
(1) 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 (1);
(2) 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 (A) 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 (B) 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;
(3) 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 (A) solely in
exchange for shares of Qualified Capital Stock of the Company or for
Permitted Refinancing Indebtedness, or (B) through the application of the
net proceeds of a substantially concurrent sale for cash (other than to an
Obligor) of (i) shares of Qualified Capital Stock of the Company or
warrants, rights or options to acquire Qualified Capital Stock of the
Company or (ii) 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 (3) and would not
result therefrom;
(4) Restricted Payments in an amount not in excess of $50 million in the
aggregate for all such Restricted Payments made in reliance upon this
clause (4), for the purpose of (A) Limited Real Estate Development not to
exceed $25 million or (B) developing, constructing, improving or acquiring
(i) a Casino or Casinos or, if applicable, any Related Business in
connection with such Casino or Casinos or (ii) a Related Business to be
used primarily in connection with an existing Casino or Casinos;
(5) redemptions, repurchases or repayments to the extent required by any
Gaming Authority having jurisdiction over the Company or any Restricted
Subsidiary or deemed necessary by the Board of the Company in order to
avoid the suspension, revocation or denial of a gaming license by any
Gaming Authority;
(6) other Restricted Payments not to exceed $20 million in the aggregate;
provided no Default or Event of Default then exists or would result
therefrom;
(7) 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
108
<PAGE>
of its respective Subsidiaries upon death, disability or termination of
employment or directorship of such employees or directors;
(8) 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:
(A) to the extent of capital contributions made to such Restricted
Subsidiary (other than capital contributions made to such Restricted
Subsidiary by the Company or any Restricted Subsidiary),
(B) to the extent that they constitute 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,
(C) to the extent required by applicable law, or
(D) 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 (D) 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 (C), no Default or Event of
Default has occurred and is continuing at the time of such Restricted
Payment or would result therefrom, and provided further that, except in the
case of clause (C) or (D), such distributions are made pro rata with the
distributions paid contemporaneously to the Company or a Restricted
Subsidiary or their Affiliates holding an interest in such Equity
Interests;
(9) 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 Company and its Restricted
Subsidiaries on the date of such conveyance plus (B) the acres of
undeveloped real estate previously so conveyed by the Company and its
Restricted Subsidiaries 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
(10) Investments, not to exceed $15 million in the aggregate, in any
combination of (A) readily marketable equity securities and (B) assets of
the kinds described in the definition of "Cash Equivalents"; provided, that
for the purposes of this clause (10), 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 (2), (3), (4),
(6), (8) and (9) 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. Restricted Payments under clauses (4), (4)(A),
(6) and (10) shall be limited to the respective amounts of $50 million,
$25 million, $20 million and $15 million set forth in such clauses (each, an
"Amount Limitation") The Amount Limitation for each clause shall be permanently
reduced at the time of any Restricted Payment made under such clause; provided,
however, that to the extent that a Restricted Investment made under such clause
is sold for cash or Cash Equivalents or otherwise liquidated or repaid for cash
or Cash Equivalents, or principal repayments or returns of capital are received
by the Company or any Restricted Subsidiary in respect of such Restricted
Investment, valued, in each such case at the cash or marked-to-market value of
Cash Equivalents received with respect to such Restricted Investment (less the
cost of disposition, if any), then the Amount Limitation for such clause shall
be increased by the amount so received by the Company or a Restricted
Subsidiary (an "Amount Limitation Restoration"). In no event shall the
aggregate Amount Limitation Restorations for a Restricted Investment exceed the
original amount of such Restricted Investment.
With respect to clauses (4), (4)(A) and (6) above, the respective Amount
Limitation under each such clause, as applicable, shall also be increased when
any Person becomes a Restricted Subsidiary or an
109
<PAGE>
Unrestricted Subsidiary is redesignated as a Restricted Subsidiary (each such
increase also referred to as an "Amount Limitation Restoration") by the lesser
of (i) the fair market value of the Restricted Investment made under clause
(4), (4)(A) or (6) in such Person as of the date it becomes a Restricted
Subsidiary or in such Unrestricted Subsidiary as of the date of redesignation,
as the case may be, or (ii) the fair market value of such Restricted Investment
as of the date such Restricted Investment was originally made in such Person
or, in the case of the redesignation of an Unrestricted Subsidiary into a
Restricted Subsidiary which Subsidiary was designated as an Unrestricted
Subsidiary after the date of the Indenture, the amount of the Company's
Restricted Investment therein as determined under the last paragraph of this
covenant, plus the aggregate fair market value of any additional Investments
(each valued as of the date made) made under clause (4), (4)(A) or (6) in such
Unrestricted Subsidiary after the date of the Indenture.
Not less than once each fiscal quarter, the Company shall deliver to the
Trustee an Officers' Certificate stating that each Restricted Payment (and any
Amount Limitation Restoration relied upon in making such Restricted Payment)
made during the prior fiscal quarter 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 Company's
latest available internal quarterly financial statements. In the event that the
Company makes one or more Restricted Payments in an amount exceeding $3 million
that have not been covered by an Officers' Certificate issued pursuant to the
immediately preceding sentence, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payments (and any Amount
Limitation Restoration relied upon in making such Restricted Payment) comply
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 Company's latest available internal quarterly financial
statements.
The Board of the Company 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 to constitute Investments in an amount equal to the greatest of:
(1) the net book value of such Investments at the time of such
designation,
(2) the fair market value of such Investments at the time of such
designation, and
(3) 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 Company will not, directly or indirectly:
(1) Incur any Indebtedness or issue any Disqualified Capital Stock, other
than Permitted Indebtedness, or
(2) cause or permit any of its 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, the Company may issue
Disqualified Capital Stock, and any Obligor may Incur Indebtedness (including,
without limitation, Acquired Debt) or issue preferred stock, if:
(1) 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
110
<PAGE>
(2) immediately after giving pro forma effect to such proposed Incurrence
or issuance and the receipt and application of the net proceeds therefrom,
the Company's Consolidated Coverage Ratio would not be less than 2.00:1.00.
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 (1) through (11) of such
definition or is entitled to be Incurred pursuant to the second paragraph of
this covenant, the Company will, in its 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 Company may
reclassify such Indebtedness from time to time in its 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:
(1) 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
(2) 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.
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:
(1) pay dividends or make any other distributions on its Capital Stock,
(2) make loans or advances to or pay any Indebtedness or other
obligations owed to any Obligor or to any Restricted Subsidiary, or
(3) transfer any of its property or assets to any Obligor or to any
Restricted Subsidiary (each such encumbrance or restriction in clause (1),
(2) or (3), a "Payment Restriction").
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(A) applicable law or required by any Gaming Authority;
(B) the Indenture;
(C) 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;
111
<PAGE>
(D) any instrument governing Acquired Debt Incurred in connection with an
acquisition by any Obligor or Restricted Subsidiary 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;
(E) 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;
(F) any restrictions of the nature described in clause (3) above with
respect to the transfer of assets secured by a Lien that was permitted by the
Indenture to be Incurred;
(G) 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 the Company than the provisions relating to such
encumbrance or restriction contained in the Indebtedness being refinanced; or
(H) 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:
(1) either
(A) in the case of a consolidation or merger, such Obligor shall be
the surviving or continuing corporation, or
(B) 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 (i) 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 (ii) 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;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(B)(ii) 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), the
Obligors, including any such other Person becoming an Obligor through the
operation of clause (1)(B) 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;
(3) in the event that such transaction involves (A) the incurrence by the
Company or any Restricted Subsidiary, directly or indirectly, of additional
Indebtedness (and treating any Indebtedness not previously an obligation of
the Company or any of its Restricted Subsidiaries incurred in connection
with or as a result of such transaction as having been incurred at the time
of such transaction) and/or (B) the assumption contemplated by clause
(1)(B)(ii) 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),
112
<PAGE>
then immediately after giving effect to such incurrence and/or assumption
under clauses (A) and (B), (i) the Obligors, including any such other
Person becoming an Obligor through the operation of clause (1)(B) 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 (ii) 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 (1)(B)(i) above and either (a) also satisfied the condition set
forth in clause (1)(B)(ii) above and caused each acquired Person to become
a Guarantor or (b) 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";
(4) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(B)(ii) 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
(5) 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 (2) above in accordance with the terms of
the Indenture and the Notes after the consummation of such transaction.
Notwithstanding clauses (2) and (3) 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 the Company or to a
Restricted Subsidiary, 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.
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
the Company, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
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:
(1) 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;
(2) with respect to any Affiliate Transaction involving aggregate
consideration of $5 million or more, a majority of the disinterested
members of the Board of the Company (and of any other affected Obligor,
113
<PAGE>
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
(3) with respect to any Affiliate Transaction involving value of $15
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 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 and Restricted
Subsidiaries to the extent any such transaction is otherwise in compliance
with, or not prohibited by, the Indenture,
(3) any Restricted Payment permitted by the terms of the covenant
described above under the heading "--Restricted Payments" or
(4) provision of management services (including any agreements therefor)
to an Unrestricted Subsidiary in connection with the development,
construction and operation of gaming facilities, provided the Obligor is
reimbursed for all costs and expenses it incurs in providing such services.
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:
(1) increase the rate of or change the time for payment of interest on
such subordinated indebtedness,
(2) increase the principal of, advance the final maturity date of or
shorten the Weighted Average Life to Maturity of any such subordinated
indebtedness,
(3) alter the redemption provisions or the price or terms at which any
Obligor is required to offer to purchase such subordinated indebtedness, or
(4) 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.
114
<PAGE>
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 Company will furnish to the Trustee for
mailing to the holders of Notes:
(1) all quarterly and annual financial information that would be required
to be contained in a filing or filings by the Company with the Commission
on Forms 10-Q and 10-K if the Company was 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 Company's certified independent accountants,
and
(2) all current reports that would be required to be filed by the Company
with the Commission on Form 8-K if the Company was required to file such
reports,
in each case within 15 days of the time periods specified in the SEC's rules
and regulations.
In addition, whether or not required by the rules and regulations of the
Commission, the Company 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 Company has
agreed that, for so long as any Notes remain outstanding, it 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 Company 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:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes or the Guaranties (whether or
not prohibited by the subordination provisions of the Indenture);
(2) 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);
(3) failure by any Obligor for 60 days after written notice to comply
with any of its other agreements in the Indenture, the Notes or the
Guaranties;
(4) 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;
(5) 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
115
<PAGE>
(6) 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 Company (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, 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 Company would have
had to pay if the Company 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
February 15, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to February 15, 2003, 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.
The Company will be required to deliver to the Trustee annually statements
regarding compliance with the Indenture, and the Company is 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.
116
<PAGE>
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and all
obligations of the Guarantors discharged with respect to their Guarantees
("Legal Defeasance") except for:
(1) the rights of holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest on such Notes
when such payments are due from the trust referred to below;
(2) the Company's 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;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and the Guarantors released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants 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 under "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:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the holders of the Notes, cash in U.S. dollars, non-callable
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 Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel reasonably acceptable to the Trustee
confirming that:
(A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling, or
(B) since the date of the Indenture, 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;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel 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;
(4) no Default or Event of Default shall have occurred and be continuing
either:
(A) 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
117
<PAGE>
(B) insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after
the date of deposit;
(5) 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 the Company or
any of its Restricted Subsidiaries is a party or by which the Company or
any of its Restricted Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable Bankruptcy Law;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the holders of Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent 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 Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is 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):
(1) reduce the principal amount of Notes whose holders must consent to an
amendment, supplement or waiver,
(2) 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"),
(3) reduce the rate of or change the time for payment of interest on any
Note,
(4) 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),
(5) make any Note payable in money other than that stated in the Notes,
118
<PAGE>
(6) 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,
(7) 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"), or
(8) 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 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.
In addition, any amendment (1) to the provisions of the article of the
Indenture which governs subordination or (2) which releases any Guarantor from
its obligations under any Guaranty, in either case 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 the Company, 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.
The Trustee also serves as trustee under the indenture governing the 9 1/2%
Notes.
Additional Information
Anyone who receives this prospectus may obtain a copy of the Indenture
without charge by writing to Hollywood Park, Inc., 1050 South Prairie Avenue,
Inglewood CA 90301, Attn: Assistant Treasurer.
Book-Entry, Delivery and Form
Exchange Notes exchanged for Old Notes through the book-entry transfer
facility may be represented by one or more Global Notes (the "Global Exchange
Notes"). The Global Exchange Notes will be deposited upon issuance with the
Trustee as custodian for The Depository Trust Company ("DTC"), in New York, New
York, and registered in the name of DTC or its nominee, in each case for credit
to an account of a direct or indirect participant in DTC as described below.
Beneficial interests in the Global Exchange Notes may also be held through the
Euroclear System ("Euroclear") and Cedel, S.A. ("Cedel") (as indirect
participants in DTC).Transfers of beneficial interests in the Global Exchange
Notes will be subject to the applicable rules and procedures of DTC and its
direct or indirect participants (including, if applicable, those of Euroclear
and Cedel), which may change from time to time.
119
<PAGE>
Exchange Notes exchanged for Old Notes which are in the form of registered
definitive certificates will be issued in the form of certificated Exchange
Notes. Such certificated Exchange Notes may, unless the Global Exchange Notes
previously have been exchanged for certificated Exchange Notes, be exchanged
for an interest in the Global Exchange Notes representing the principal amount
at maturity of Exchange Notes being transferred.
Initially, the Trustee will act as Paying Agent and Registrar. The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
Purchases of Notes under the DTC system must be made by or through
Participants, who will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note ("Beneficial Owner")
is in turn to be recorded on the Participants' and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in Notes,
except in the event that use of the book-entry system for the Notes is
discontinued. To facilitate subsequent transfers, all Notes deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Notes with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Notes; DTC's records reflect only the
identity of the Participants to whose accounts such Notes are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Redemption notices shall be sent to Cede & Co. If less than all
of the Notes within an issue are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each Participant in such issue to be
redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to
Notes. Under its usual procedures, DTC mails an Omnibus Proxy to the Company as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Participants to whose accounts the Notes
are credited on the record date identified in a listing attached to the Omnibus
Proxy.
120
<PAGE>
Investors in the Global Exchange Notes may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations (including Euroclear and Cedel) which are Participants in
such system. Euroclear and Cedel will hold interests in the Global Exchange
Notes on behalf of their participants through customers' securities accounts in
their respective names on the books of their respective depositories, which are
Morgan Guaranty Trust Company of New York, Brussels office, as operator of
Euroclear, and Citibank, N.A., as operator of Cedel. All interests in a Global
Exchange Note, including those held through Euroclear or Cedel, may be subject
to the procedures and requirements of DTC. Those interests held through
Euroclear or Cedel may also be subject to the procedures and requirements of
such systems. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interests in a Global Exchange Note to such
persons will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Exchange
Note to pledge such interests to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interest in the Global Exchange Notes
will not have Exchange Notes registered in their names, will not receive
physical delivery of Exchange Notes in certificated form and will not be
considered the registered owners or "Holders" thereof under the Indenture for
any purpose.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Exchange Note registered in the name
of DTC or its nominee will be payable to DTC in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the Exchange Notes, including
the Global Exchange Notes, are registered as the owners thereof for the purpose
of receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Company, the Trustee nor any agent of the Company or
the Trustee has or will have any responsibility or liability for (i) any aspect
of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interest in the
Global Exchange Notes, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global Exchange Notes or (ii) any
other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Company that its
current practice, upon receipt of any payment in respect of securities such as
the Exchange Notes (including principal and interest), is to credit the
accounts of the relevant Participants with the payment on the payment date, in
amounts proportionate to their respective holdings in the principal amount of
beneficial interest in the relevant security as shown on the records of DTC
unless DTC has reason to believe it will not receive payment on such payment
date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Exchange Notes will be governed by standing instructions
and customary practices and will be the responsibility of the Participants or
the Indirect Participants and will not be the responsibility of DTC, the
Trustee or the Company. Neither the Company nor the Trustee will be liable for
any delay by DTC or any of its Participants in identifying the Beneficial
Owners of the Exchange Notes, and the Company and the Trustee may conclusively
rely on and will be protected in relying on instructions from DTC or its
nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants, interest
in the Global Exchange Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in
all cases to the rules and procedures of DTC and its Participants. See "--Same
Day Settlement and Payment."
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
121
<PAGE>
Cross-market transfers between the Participants in DTC, on the one hand, and
Euroclear or Cedel participants, on the other hand, will be effected through
DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or Cedel, as the case may
be, by the counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such system.
Euroclear or Cedel, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective depositary to
take action to effect final settlement on its behalf by delivering or receiving
interests in the relevant Global Exchange Note in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Euroclear participants and Cedel participants may not
deliver instructions directly to the depositories for Euroclear or Cedel.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Exchange Notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global
Exchange Notes and only in respect of such portion of the aggregate principal
amount of the Exchange Notes as to which such Participant or Participants has
or have given such direction. However, if there is an Event of Default under
the Exchange Notes, DTC reserves the right to exchange the Global Exchange
Notes for Exchange Notes in certificated form, and to distribute such Exchange
Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Exchange Notes among
Participants in DTC, Euroclear and Cedel, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee nor any of their
respective agents 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.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
Exchange of Book-Entry Notes for Certificated Notes
A Global Exchange Note is exchangeable for definitive Exchange Notes in
registered certificated form ("Certificated Notes") if (i) DTC (x) notifies the
Company that it is unwilling or unable to continue as depositary for the Global
Exchange Notes and the Company thereupon fails to appoint a successor
depositary or (y) has ceased to be a clearing agency registered under the
Exchange Act, (ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of the Certificated Notes or (iii) there
shall have occurred and be continuing a Default or Event of Default with
respect to the Exchange Notes. In addition, beneficial interests in a Global
Exchange Note may be exchanged for Certificated Notes upon request but only
upon prior written notice given to the Trustee by or on behalf of DTC in
accordance with the Indenture. In all cases, Certificated Notes delivered in
exchange for any Global Exchange Note or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested by
or on behalf of the depositary (in accordance with its customary procedures).
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Exchange Notes (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder. With respect to
Exchange Notes in certificated form, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the
Holders thereof or, if no such account is specified, by mailing a check to each
such Holder's registered address. The Notes represented by the Global Exchange
Notes are expected to be eligible to trade in the PORTAL
122
<PAGE>
market and to trade in the Depositary's Same-Day Funds Settlement System, and
any permitted secondary market trading activity in such Exchange Notes will,
therefore, be required by the Depositary to be settled in immediately available
funds. The Company expects that secondary trading in any certificated Exchange
Notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Exchange Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. DTC has advised the Company
that cash received in Euroclear or Cedel as a result of sales of interests in a
Global Exchange Note by or through a Euroclear or Cedel participant to a
Participant in DTC will be received with value on the settlement date of DTC
but will be available in the relevant Euroclear or Cedel cash account only as
of the business day for Euroclear or Cedel following DTC's settlement date.
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 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:
(1) 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
(2) any director, officer or partner of such Person or any Person
specified in clause (1) 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.
"Asset Acquisition" means:
(1) an Investment by any Obligor in any other Person pursuant to which
such Person shall become an Obligor or a Restricted Subsidiary of an
Obligor or shall be merged into, or with any Obligor or Restricted
Subsidiary of an Obligor, or
(2) 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.
123
<PAGE>
"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 the Company with or into another
Person (other than another Obligor) whereby such Restricted Subsidiary shall
cease to be a Restricted Subsidiary of the Company) to any Person of:
(1) 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
(2) any Capital Stock of any Restricted Subsidiary,
other than, in both cases:
(A) any disposition to the Company,
(B) any disposition to any Obligor or Restricted Subsidiary,
(C) 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",
(D) any transaction or series of related transactions resulting in Net
Cash Proceeds to such Obligor of less than $1 million,
(E) any transaction that is consummated in accordance with the covenant
described above under the caption "--Merger, Consolidation or Sale of
Assets,"
(F) the sale or discount, in each case without recourse (direct or
indirect), of accounts receivable arising in the ordinary course of
business of the Company or such Restricted Subsidiary, as the case may be,
but only in connection with the compromise or collection thereof,
(G) 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,
(H) a disposition of assets constituting a Permitted Investment, or
(I) any disposition of undeveloped or substantially undeveloped real
estate, provided that in such disposition:
(i) the Obligor making such disposition receives consideration at the
time of such disposition at least equal to the fair market value of the
real estate assets disposed of (as determined reasonably and in good
faith by the Board of such Obligor), and
(ii) at least 60% of the consideration received from such disposition
by the Obligor making such disposition is cash or Cash Equivalents and
is received at the time of the consummation of such disposition. (For
purposes of this provision, each of the following shall be deemed to be
cash: (A) any liabilities as shown on such 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
Company and (iv) Non-Recourse Indebtedness) that are assumed by the
transferee of any such assets, and (B) to the extent of the cash
received, any notes or other obligations received by the Obligor making
the disposition from such transferee that are converted by such Obligor
into cash within 60 days of receipt.)
"Bank Credit Facility" means the Credit Facility provided to the Company
pursuant to the Amended and Restated Reducing Revolving Loan Agreement, dated
as of October 14, 1998, by and among the Company, the financial institutions
from time to time named therein (the "Banks"), Bank of Scotland and Societe
General, as Managing Agents, First National Bank of Commerce, as Co-Agent, and
Bank of America NT&SA, as Administrative 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.
124
<PAGE>
"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.
"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.
"Capital Stock" means:
(1) 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
(2) 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:
(1) Government Securities;
(2) 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;
(3) 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 (1), (2) and (4) hereof, entered into with
any financial institution meeting the qualifications specified in clause
(2) above;
(4) 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;
(5) 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
(6) mutual funds and money market accounts investing at least 90% of the
funds under management in instruments of the types described in clauses (1)
through (5) 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:
(1) 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 the
Company, or the Company and its 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),
(2) the adoption, or, if applicable, the approval of any requisite
percentage of the Company's stockholders of a plan relating to the
liquidation or dissolution of the Company,
125
<PAGE>
(3) 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 the Company (measured by voting power rather than number of
shares), or
(4) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of the Company (together
with any new directors whose election to such Board or whose nomination for
election by the stockholders of the Company was approved by a vote of a
majority of the directors of the Company 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 of the Company then in office.
"Casino" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
building, restaurant, hotel, theater, parking facilities, retail shops, land,
golf courses and other recreation and entertainment facilities, marina,
vessel, barge, ship and equipment.
"Consolidated Coverage Ratio" means, with respect to any Person on any date
of determination, the ratio of:
(1) 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
(2)(A) Consolidated Interest Expense during such period plus (B)
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 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 applicable Determination Date.
In making such computation, Consolidated Interest Expense:
(1) 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
(2) 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.
For purposes of calculating Consolidated EBITDA of the Company for the most
recently completed period of four full fiscal quarters ending on the last day
of the last quarter for which internal financial statements are available
(such period of four fiscal quarters, the "Measurement Period"), not more than
135 days prior to the transaction or event giving rise to the need to
calculate the Consolidated EBITDA,
(1) any Person that is a Restricted Subsidiary on such Determination Date
(or would become a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of the
Consolidated Coverage Ratio) shall be deemed to have been a Restricted
Subsidiary at all times during such Measurement Period,
(2) any Person that is not a Restricted Subsidiary on such Determination
Date (or would cease to be a Restricted Subsidiary on such Determination
Date in connection with the transaction that requires the determination of
the Consolidated Coverage Ratio) will be deemed not to have been a
Restricted Subsidiary at any time during such Measurement Period,
126
<PAGE>
(3) if the Company or any Restricted Subsidiary shall have in any manner
(A) acquired (including through an Asset Acquisition or the
commencement of activities constituting such operating business) or
(B) disposed of (including by way of an Asset Sale or the termination
or discontinuance of activities constituting such operating business)
any operating business during such Measurement Period or after the end of
such Measurement Period and on or prior to the Determination Date, such
calculation shall be made on a pro forma basis in accordance with GAAP as
if, in the case of an Asset Acquisition or the commencement of activities
constituting such operating business, all such transactions had been
consummated on the first day of such Measurement Period and, in the case of
an Asset Sale or termination or discontinuance of activities constituting
such operating business, all such transactions had been consummated prior
to the first day of such Measurement Period; provided, however, that such
pro forma adjustment shall not give effect to the Consolidated EBITDA of
any acquired Person to the extent that such Person's net income would be
excluded pursuant to clause (6) of the definition of Consolidated Net
Income and
(4) any Indebtedness Incurred and proceeds thereof received and applied
as a result of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio will be deemed to have been so Incurred,
received and applied on the first day of such Measurement Period.
"Consolidated EBITDA" means, with respect to any Person for any period, the
sum (without duplication) of:
(1) the Consolidated Net Income of such Person for such period, plus
(2) 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,
(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 (except as otherwise provided in clause (E) below) and
other than any non-cash charge for such period constituting an
extraordinary item of loss, and
(E) any non-recurring costs or expenses of an acquired company or
business incurred in connection with the purchase or acquisition of such
acquired company or business by such Person and any non-recurring
adjustments necessary to conform the accounting policies of the acquired
company or business to those of such Person, less
(3)(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:
(1) 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
127
<PAGE>
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
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period, and
(3) 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
(4) 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:
(1) net after-tax gains and losses from all sales or dispositions of
assets outside of the ordinary course of business,
(2) net after-tax extraordinary or non-recurring gains or losses,
(3) 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,
(4) the cumulative effect of a change in accounting principles,
(5) 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 the Company due to the
restrictions set forth in clause (6) below (regardless of any waiver of
such conditions)),
(6) 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,
(7) 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,
(8) 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),
128
<PAGE>
(9) 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
(10) the net income (but not loss) of any Unrestricted Subsidiary, except
that the Company's or any Restricted Subsidiary's equity in the net income
of any Unrestricted Subsidiary or other Person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Unrestricted Subsidiary or Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders of such Person and
its consolidated Subsidiaries as of such date, plus
(2) 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:
(1) 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,
(2) all investments as of such date in unconsolidated Subsidiaries and in
Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and
(3) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance with
GAAP.
"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 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.
"Determination Date" means, with respect to any calculation, the date on or
as of which such calculation is made in accordance with the terms hereof.
"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 the Company as "Designated
Senior Debt."
129
<PAGE>
"Disqualified Capital Stock" means any Capital 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, Washoe
County, Nevada gaming authorities, the Nevada Gaming Commission, Mississippi
Gaming Commission, Indiana Gaming Commission, California Gambling Control
Commission, Louisiana Gaming Control Board, California Horse Racing Board and
the Arizona Racing 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:
(1) constitutions, treaties, statutes or laws governing gaming operations
(including without limitation card club casinos and pari mutuel race
tracks) and rules, regulations and ordinances of any Gaming Authority,
(2) Gaming Approvals and
(3) 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 Subsidiary of
the Company, which has guaranteed the obligations of the Company arising under
or in connection with the Notes, as required by the Indenture.
"Guaranty" means a guaranty by a Guarantor of the Obligations of the Company
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
130
<PAGE>
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,
(1) any obligations for money borrowed,
(2) any obligation evidenced by bonds, debentures, notes, or other
similar instruments,
(3) Letter of Credit Obligations and obligations in respect of other
similar instruments,
(4) any obligations to pay the deferred purchase price of property or
services, including Capitalized Lease Obligations,
(5) the maximum fixed redemption or repurchase price of Disqualified
Capital Stock,
(6) Indebtedness of other Persons of the types described in clauses (1)
through (5) 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,
(7) indebtedness of other Persons of the types described in clauses (1)
through (5) above, guaranteed by such Person or any of its Restricted
Subsidiaries and
(8) 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. For purposes of this
definition, the "maximum fixed redemption or repurchase price" of any
Disqualified Capital Stock that does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were repurchased on the date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of the issuing Person. Unless
otherwise specified in the Indenture, the amount outstanding at any time of
any Indebtedness issued with original issue discount is the full amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP.
"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:
(1) 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);
(2) 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);
131
<PAGE>
(3) 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); and
(4) 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 amount of any non-cash Investment shall be the fair market
value of such Investment, as determined conclusively in good faith by
management of the Company or the affected Restricted Subsidiary, as applicable,
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 Person as of the time such Investment is made or such other
time as specified in the Indenture. Unless otherwise required by the Indenture,
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 February 18, 1999.
"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).
"Limited Real Estate Development" means the development or improvement of
(1) any undeveloped or substantially undeveloped real estate held by the
Company or a Subsidiary on the date of the Indenture or (2) any undeveloped or
substantially undeveloped real estate that is acquired by the Company or a
Subsidiary in an acquisition of a company that is primarily in the Casino
business.
"Material Restricted Subsidiary" means any Subsidiary which is both a
Material Subsidiary and a Restricted Subsidiary.
"Material Subsidiary" means any Subsidiary of the Company other than a Non-
Material 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:
(1) 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),
(2) 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,
(3) 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
132
<PAGE>
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
(4) 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-Material Subsidiaries" means all Subsidiaries not designated as
Material Subsidiaries by the Company; provided, that all such Subsidiaries
(other than Unrestricted Subsidiaries) may not, in the aggregate at any time
have assets (attributable to the Company's and its Restricted Subsidiaries'
equity interest in such entity) constituting more than 5% of the Company's
total assets on a consolidated basis based on the Company's most recent
internal financial statements. As of the Issue Date, the Non-Material
Subsidiaries shall be all the Company's Subsidiaries existing as of the Issue
Date other than the Guarantors as of the Issue Date and the Unrestricted
Subsidiaries as of the Issue Date.
"Non-Recourse Indebtedness" means Indebtedness of an Unrestricted Subsidiary
(1) 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;
(2) 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
(3) 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.
The foregoing notwithstanding, if an Obligor or a Restricted Subsidiary makes a
loan to an Unrestricted Subsidiary that is permitted under the covenant
described under the caption "Restricted Payments" and is otherwise permitted to
be incurred under the Indenture, such loan shall constitute Non-Recourse
Indebtedness.
"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 the Company or any Guarantor.
"Paying Agent" means the Person so designated by the Company in accordance
with the Indenture, initially the Trustee.
"Permitted Indebtedness" means, without duplication, each of the following:
(1) Indebtedness of the Company or any Restricted Subsidiary outstanding
on the Issue Date and reflected in the financial statements set forth in
the offering memorandum relating to the Old Notes 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 thereof;
(2) Indebtedness Incurred by the Company under the Notes and by the
Guarantors under the Guaranties;
133
<PAGE>
(3) Indebtedness Incurred by the Company or any Restricted Subsidiary
pursuant to the Bank Credit Facility; provided that the aggregate principal
amount of Indebtedness outstanding thereunder as of any date of Incurrence
shall not exceed $350 million, to be reduced dollar-for-dollar by the
amount of (A) any increase to the face amount of Support Obligations
permitted to be Incurred pursuant to clause (11) of this definition and (B)
the aggregate amount of all Net Cash Proceeds of Asset Sales applied by an
Obligor to permanently prepay or repay Indebtedness under the Bank Credit
Facility pursuant to the covenant described above under the caption "--
Asset Sales."
(4) Indebtedness of the Company to any Obligor or of any Guarantor to any
other Obligor for so long as such Indebtedness is held by the Company or by
another Obligor; provided that:
(A) any Indebtedness of the Company to any other Obligor is unsecured
and evidenced by an intercompany promissory note that is subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and the Registration Rights Agreement, and
(B) if as of any date any Person other than the Company 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 (4) by the issuer of such Indebtedness;
(5) Indebtedness of a Restricted Subsidiary to the Company 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 (5) by the issuer of such Indebtedness;
(6) Permitted Refinancing Indebtedness;
(7) 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 (7);
(8) Indebtedness Incurred by the Company or any Restricted Subsidiary
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 the Company's or such Subsidiary's
business, as applicable, 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 for each of the Company or any Restricted Subsidiary,
or
(B) $60 million in the aggregate for all of the Company and its
Restricted Subsidiaries, and additional Indebtedness of the kind
described in this clause (8) with respect to which neither the Company
nor any Restricted Subsidiary is directly or indirectly liable, and
which is expressly made non-recourse to all of such Person's assets,
except the asset so financed;
(9) Interest Swap Obligations entered into not as speculative Investments
but as hedging transactions designed to protect the Company and its
Restricted Subsidiaries against fluctuations in interest rates in
connection with Indebtedness otherwise permitted hereunder;
(10) Indebtedness of the Company or any Restricted Subsidiary 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 Person's
industry; provided, that such Indebtedness shall be Incurred solely in
connection with the development, construction, improvement or enhancement
of assets useful in such Person's business; and
(11) other Indebtedness consisting of Support Obligations not exceeding
$25 million in aggregate principal amount at any time, which may be
increased by the Company in its discretion, subject to
134
<PAGE>
availability under, and a corresponding reduction to, the principal amount
of Indebtedness permitted to be Incurred under the Bank Credit Facility
pursuant to clause (3) of this definition.
"Permitted Investments" means, without duplication, each of the following:
(1) Investments in cash (including deposit accounts with major commercial
banks) and Cash Equivalents;
(2) Investments by the Company or a Restricted Subsidiary in the Company
or any Restricted Subsidiary or any Person that is or will immediately
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 Restricted Subsidiary; provided that
Investments in any such Person (other than the Company or any Restricted
Subsidiary) made prior to such Investment shall not be "Permitted
Investments"; and provided further 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 Restricted Subsidiary;
(3) 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 the Company
and its consolidated subsidiaries in any other such Person;
(4) accounts receivable created or acquired in the ordinary course of
business of the Company or any Restricted Subsidiary on ordinary business
terms;
(5) Investments arising from transactions by the Company or a Restricted
Subsidiary 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);
(6) 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
(7) Investments consisting of advances to officers, directors and
employees of the Company or a Restricted Subsidiary for travel,
entertainment, relocation, purchases of Capital Stock of the Company or a
Restricted Subsidiary 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:
(1) Liens in favor of the Company or Liens on the assets of any Guarantor
so long as such Liens are held by another Obligor;
(2) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or a Restricted Subsidiary;
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 the Company or such Restricted
Subsidiary, as applicable;
(3) Liens on property existing at the time of acquisition thereof by any
Obligor or Restricted Subsidiary; provided that such Liens were not
Incurred in anticipation of such acquisition;
135
<PAGE>
(4) Liens Incurred to secure Indebtedness permitted by clause (8) of the
definition of Permitted Indebtedness, attaching to or encumbering only the
subject assets and directly related property such as proceeds and products
thereof and accessions and replacements thereto;
(5) 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;
(6) Liens created by "notice" or "precautionary" filings in connection
with operating leases or other transactions pursuant to which no
Indebtedness is Incurred by the Company or any Restricted Subsidiary;
(7) Liens existing on the Issue Date;
(8) Liens for taxes, assessments or governmental charges or claims
(including, without limitation, Liens securing the performance of workers
compensation, social security, or unemployment insurance obligations) 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;
(9) Liens on shares of any equity security or any warrant or option 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 applicable
Gaming Laws; provided that this clause (9) shall apply only so long as such
Gaming Laws 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 (9) shall be of no
further effect;
(10) Liens on securities constituting "margin stock" within the meaning
of Regulation T, U or X promulgated by the Board of Governors of the
Federal Reserve System, to the extent that (i) prohibiting such Liens would
result in the classification of the obligations of the Company under the
Notes as a "purpose credit" and (ii) the Investment by any Obligor in such
margin stock is permitted by the Indenture;
(11) Liens securing Permitted Refinancing Indebtedness; provided that any
such Lien attaches only to the assets encumbered by the predecessor
Indebtedness, unless the Incurrence of such Liens is otherwise permitted
under the Indenture;
(12) Liens securing stay and appeal bonds or judgment Liens in connection
with any judgment not giving rise to an Event of Default under paragraph
(5) of the Events of Default;
(13) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business, in respect of obligations not
constituting Indebtedness and not past due; provided that adequate reserves
shall have been established therefor in accordance with GAAP;
(14) easements, rights-of-way, zoning restrictions, reservations,
encroachments and other similar charges or encumbrances in respect of real
property which do not individually or in the aggregate, materially
interfere with the conduct of business by any Obligor;
(15) any interest or title of a lessor under any Capitalized Lease
Obligation permitted to be incurred hereunder;
(16) Liens upon specific items of inventory or equipment and proceeds
thereof, Incurred to secure obligations in respect of bankers' acceptances
issued or created for the account of any Obligor or Restricted Subsidiary
in the ordinary course of business to facilitate the purchase, shipment, or
storage of such inventory or equipment;
(17) Liens securing Letter of Credit Obligations permitted to be Incurred
hereunder Incurred in connection with the purchase of inventory or
equipment by an Obligor or Restricted Subsidiary in the ordinary course of
the business and secured only by such inventory or equipment, the documents
issued in connection therewith and the proceeds thereof and
136
<PAGE>
(18) Liens in favor of the Trustee arising under the Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any Restricted Subsidiary 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 Person arising under clauses (1),
(2), (6), (8), (10) or (11) 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:
(1) 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;
(2) 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;
(3) 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
(4) such Permitted Refinancing Indebtedness shall be Indebtedness solely
of the Obligor or Restricted Subsidiary 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):
(1) the sale, lease or conveyance of all or substantially all of the
assets of such Person otherwise than as an entirety or substantially as an
entirety, and
(2) 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:
(1) R.D. Hubbard,
(2) any spouse, parent or child of such Principal, or
(3) 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
(1) or (2) 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.
"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.
137
<PAGE>
"Related Business" means the gaming (including pari-mutuel betting) business
and any and all reasonably related businesses necessary for, in support or
anticipation of and ancillary to or in preparation for, the gaming business
including, without limitation, the development, expansion or operation of any
Casino (including any land-based, dockside, riverboat or other type of Casino),
owned, or to be owned, by the Company or one of its Subsidiaries.
"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 the Company.
"S&P" means Standard & Poors Rating Group, a division of The McGraw-Hill
Industries, Inc., and its successors.
"Senior Debt" means:
(1) all Indebtedness outstanding under Credit Facilities and all Hedging
Obligations with respect thereto,
(2) any other Indebtedness permitted to be Incurred by the Company 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
(3) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or owing
by the Company,
(2) any Indebtedness of any Obligor to any of its Restricted Subsidiaries
or other Affiliates,
(3) any trade payables,
(4) any Indebtedness that is incurred in violation of the Indenture, and
(5) 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.
Notwithstanding anything in the Indenture to the contrary Senior Debt shall
not include the 9 1/2% Notes. The Indenture will expressly provide that the
Obligations in respect of the Notes and the Guarantees will be on a parity
with the Obligations in respect of the 9 1/2% Notes and the guarantees
thereof in right of payment.
"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:
(1) 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
(2) 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 of which such Obligor is the managing general partner.
138
<PAGE>
"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:
(1) 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
(2) 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 any Subsidiary of the Company that is
designated by the Board of the Company as its Unrestricted Subsidiary pursuant
to a Board resolution; but only to the extent that such Subsidiary:
(A) has, or will have after giving effect to such designation, 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 (i) to subscribe for additional equity
interests or (ii) 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 the Company 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," the Company shall be in default of such
covenant). The Board of the Company 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
(1) 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
(2) no Default or Event of Default would be in existence following such
designation.
139
<PAGE>
As of the Issue Date, the following entities shall be Unrestricted
Subsidiaries: Jefferson Casino Corporation, Casino Magic of Louisiana, Corp.,
Casino Magic Management Services Corp., Sunflower Racing, Inc., SR Food &
Beverage Company, Casino Magic Neuquen S.A. and Casino Magic Support Services
S.A.
"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.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the Company's calculations of the number of years obtained by
dividing:
(1) the then outstanding aggregate principal amount of such Indebtedness
into:
(2) the total of the products obtained by multiplying:
(A) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of 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.
140
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
resulting from the Exchange Offer and from the ownership of the Notes. This
discussion is a general summary only and does not address all tax aspects of
ownership of the Notes that may be relevant to a prospective investor's
particular circumstances. This discussion deals only with Notes held as capital
assets and does not deal with the consequences to special classes of holders of
the Notes, such as dealers in securities or currencies, life insurance
companies, tax exempt entities, financial institutions, persons with a
functional currency other than the U.S. dollar, or investors in pass-through
entities such as partnerships. It does not deal with the effects of any
arrangement entered into by a holder of the Notes that partially or completely
hedges the Notes, or otherwise holding the Notes as part of a synthetic
security or other integrated investment. The discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations,
rulings, and judicial decisions thereunder as of the date hereof, any of which
may be repealed or modified in a manner resulting in federal income tax
consequences that differ from those described below. In addition, the
discussion relies upon the description provided to the Company by the DTC,
Euroclear, and Cedel of their depository procedures and the procedures of their
Participants and Indirect Participants in maintaining a book-entry system
reflecting the beneficial ownership of the Notes.
Holders tendering their Old Notes or prospective purchasers of Exchange
Notes should consult their own tax advisors concerning the federal income tax
consequences resulting from their particular situations, and concerning the
state or local income or franchise tax consequences, gift and estate tax
consequences, or the consequences under the laws of any other taxing
jurisdiction.
U.S. Holders
The following discussion addresses the United States federal income tax
consequences to a U.S. Holder of a Note. For purposes of this discussion, a
U.S. Holder is a Holder that is (i) a citizen or resident of the United States,
(ii) a corporation, partnership, or other entity organized under the laws of
the United States or any political subdivision of the United States, (iii) an
estate taxed by the United States without regard to the source of its income,
or (iv) a trust if a court within the United States can exercise primary
supervision over its administration and one or more United States persons have
authority to control all of its substantial decisions.
Payments of Interest
Payments of stated interest on a Note will be taxable as ordinary interest
income at the time it is received or accrued, depending upon the method of
accounting applicable to the holder of the Note.
Exchange Offer in Connection with Registration of the Notes
The exchange of the Old Notes for the Exchange Notes (with substantially
identical terms) in connection with the registration of the Exchange Notes
should not be a taxable event for federal income tax purposes, and a Holder
should have the same tax basis and holding period in the Exchange Notes that
the Holder had in the Old Notes.
Market Discount
Any gain or loss on a disposition of a Note would generally be capital gain
or loss. However, a subsequent purchaser of a Note who did not acquire the Note
at its original issue, and who acquires such Note at a price that is less than
the stated redemption price of the Note at its maturity (that is, its face
amount if issued at par), may be required to treat the Note as a "market
discount bond". Any recognized gain on a disposition of the Note would then be
treated as ordinary income to the extent that it does not exceed the "accrued
market discount" on the Note. In general, accrued market discount is that
amount that bears the same ratio to the excess of the stated redemption price
of the Note over the purchaser's basis in the Note immediately after its
acquisition, as the number of days the purchaser holds the Note bears to the
number of days after the date the purchaser acquired the Note up to (and
including) the date of its maturity. In addition, there are rules deferring the
deduction of all or part of the interest expense on indebtedness incurred or
continued to purchase or carry such bond, and permitting a holder to elect to
include accrued market discount in income on a current basis.
141
<PAGE>
Backup Withholding and Information Reporting
In general, a U.S. Holder of a Note will be subject to backup withholding at
the rate of 31% with respect to interest, principal and premium, if any, paid
on a Note, unless the holder (a) is an entity (including corporations, tax-
exempt organizations and certain qualified nominees) that is exempt from
withholding and, when required, demonstrates this fact, or (b) provides the
Company with its Taxpayer Identification Number ("TIN") (which, for an
individual, would be the holder's Social Security number), certifies that the
TIN provided to the Company is correct and that the holder has not been
notified by the Internal Revenue Service that it is subject to backup
withholding due to underreporting of interest or dividends, and otherwise
complies with applicable requirements of the backup withholding rules. In
addition, such payments of interest, principal and premium to U.S. Holders that
are not corporations, tax-exempt organizations or qualified nominees will
generally be subject to information reporting requirements.
The amount of any backup withholding from a payment to a U.S. Holder will be
allowed as a credit against such holder's federal income tax liability and may
entitle such holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
Non-U.S. Holders
The following discussion addresses the principal U.S. federal income tax
consequences to a Holder of a Note that is not a U.S. Holder--referred to in
this discussion as a Non-U.S. Holder. As discussed above, this discussion does
not address all tax aspects of ownership of the Notes that may be relevant to a
prospective investor's particular circumstances, including holding the Notes
through a partnership or holding the Notes through a hybrid entity (an entity
that is a pass-through entity for U.S. tax purposes but not for foreign tax
purposes).
Payments of Interest
Generally, payments of stated interest on a Note will not be subject to U.S.
federal income tax if the interest qualifies as portfolio interest. Interest on
the Notes will qualify as portfolio interest if the Non-U.S. Holder (i) does
not actually or constructively own 10 percent of more of the total combined
voting power of all voting stock of the Company, (ii) is not a "controlled
foreign corporation" with respect to which the Company is a "related person" as
such terms are defined in the Code, and (iii) provides the required
certifications that the beneficial owner of the Notes is not a U.S. person.
However, the interest on the Notes will be taxed at regular U.S. federal income
tax rates if the interest constitutes income that is effectively connected with
the conduct of a U.S. trade or business and, if the Non-U.S. Holder can claim
the benefit of an income tax treaty, is attributable to a U.S. permanent
establishment or fixed base. Such income is referred to in this discussion as
U.S. trade or business income. If the Non-U.S. Holder is a corporation,
interest that constitutes U.S. trade or business income may also be subject to
the "branch profits tax" at 30 percent or, if applicable, a lower rate
determined by an income tax treaty.
Interest that neither qualifies as portfolio interest nor constitutes U.S.
trade or business income will be subject to U.S. withholding tax at the rate of
30 percent, unless such withholding tax is reduced or eliminated by an
applicable income tax treaty. To claim the protection of an income tax treaty,
a Non-U.S. Holder must provide a properly executed Form 1001 prior to the
payment of interest, and must periodically update the filing. New regulations
scheduled to take effect on January 1, 2000, will replace these forms with new
forms and procedures, and may require a Non-U.S. Holder to obtain a taxpayer
identification number and to provide documentary evidence of residence in order
to claim a treaty benefit.
Sale, Exchange or Redemption of Notes
Gain realized by a Non-U.S. Holder on the sale, exchange, redemption or
other disposition of a Note will generally not be subject to U.S. federal
income tax, unless (i) such gain constitutes U.S. trade or business income,
(ii) the Non-U.S. Holder is an individual who holds the Note as a capital asset
and is present in the United States for 183 days or more in the taxable year of
the disposition, or (iii) the Non-U.S. Holder is a former citizen or resident
of the United States subject to certain rules related to that status.
142
<PAGE>
Federal Estate Tax
Notes held by an individual who is not a citizen or resident of the United
States for federal estate tax purposes at the time of his or her death will not
be subject to U.S. federal estate tax if the interest on the Notes qualifies
for the portfolio interest exemption from U.S. federal income tax under the
rules described above.
Information Reporting and Backup Withholding
The Company must report to the Internal Revenue Service and to each Non-U.S.
Holder any interest that is subject to U.S. withholding tax or that is exempt
from withholding tax pursuant to either a tax treaty or the portfolio interest
exemption. Copies of these information returns may also be available to the tax
authorities of the country in which the Non-U.S. Holder resides under the
provisions of various treaties or agreements for the exchange of information.
Non-U.S. Holders other than corporations may be subject to backup
withholding and additional information reporting. Neither backup withholding
nor information reporting will apply to payments of portfolio interest by the
Company to a Non-U.S. Holder, if the Non-U.S. Holder properly certifies that it
is not a U.S. Holder or otherwise establishes an exemption. However, such
certification or exemption is not effective if the Company or its paying agent
has actual knowledge that the Holder is a U.S. Holder or that the conditions of
another exemption relied upon by the Non-U.S. Holder are not satisfied.
Payments of principal on the Notes by the Company to a Non-U.S. Holder may
be subject to backup withholding and information reporting unless the Non-U.S.
Holder properly certifies as to those items described below in connection with
payments made by brokers or otherwise establishes an exemption (provided that
neither the Company nor its paying agent has actual knowledge that the Holder
is a U.S. Holder or that the conditions of another exemption relied upon by the
Non-U.S. Holder are not satisfied).
Neither backup withholding nor information reporting will apply to the
payment of the proceeds from the disposition of the Notes to or through the
United States office of any broker if the Non-U.S. Holder (i) properly
certifies (A) that he is not a U.S. Holder, (B) that he does not expect to be
present within the U.S. for 183 days or more during the calendar year and (C)
none of his gains from transactions effected with the payor during the calendar
year are expected to be effectively connected with a U.S. trade or business; or
(ii) otherwise establishes an exemption, and neither the Company nor its paying
agent has actual knowledge that the conditions of any claimed exemption are not
satisfied. If proceeds from the disposition of the Notes are paid to or through
the foreign office of a U.S. broker, information reporting (but not backup
withholding) is required unless the broker has documentary evidence that the
owner is a foreign person and the broker has no actual knowledge to the
contrary. Similar rules apply to the foreign office of a foreign broker if
either (i) the foreign broker is a controlled foreign corporation within the
meaning of the Code, or (ii) 50 percent or more of the gross income of the
foreign broker during a specified testing period was effectively connected with
the conduct of a trade or business within the United States. If proceeds from
the disposition of the Notes are paid to or through the foreign office of a
foreign broker that does not have these characteristics, neither information
reporting nor backup withholding is required.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or credit against such Non-U.S.
Holder's federal income tax liability.
New regulations revising the information and reporting rules will become
effective on January 1, 2000. In general, these new regulations will not
materially change the withholding and information reporting requirements, but
will change various forms and certification procedures.
143
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange 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 Exchange Notes. 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 Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities (other than Old Notes acquired directly from the
Company). To the extent any such broker-dealer participates in the Exchange
Offer and so notifies the Company, or causes the Company to be so notified in
writing, the Company has agreed that, subject to certain exceptions, a period
of 180 days after the date of this prospectus, it will make this prospectus, as
amended or supplemented, available to such broker-dealer for use in connection
with any such resale, and will promptly send additional copies of this
prospectus and any amendment or supplement to this prospectus to any broker-
dealer that requests such documents in the Letter of Transmittal.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange 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 Exchange Notes or a combination of such
methods of resale, at prevailing market prices at the time of resale, at prices
related to such prevailing market prices or at 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 or any such Exchange Notes. Any broker-
dealer that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act, and any profit on any such resale of
Exchange Notes and any commissions 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.
By its acceptance of the Exchange Offer, any broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby agrees to notify the
Company prior to using the prospectus in connection with the sale or transfer
of Exchange Notes, and acknowledges and agrees that, upon receipt of notice
from the Company of the happening of any event which makes any statement in
this prospectus untrue in any material respect or which requires the making of
any changes in this prospectus in order to make the statements therein not
misleading or which may impose upon the Company disclosure obligations that the
Company determines in good faith may not be in the best interests of the
Company (which notice the Company agrees to deliver promptly to such broker-
dealer), such broker-dealer will suspend use of this prospectus until the
Company has notified such broker-dealer that delivery of this prospectus may
resume and has furnished copies of any amendment or supplement to this
prospectus to such broker-dealer.
144
<PAGE>
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
Hollywood Park by Irell & Manella LLP, Los Angeles, California.
EXPERTS
Hollywood Park's consolidated financial statements as of December 31, 1997
and 1996, and for each of the three years in the period ended December 31,
1997, included in this prospectus, to the extent and for the periods indicated
in their report with respect thereto have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their report appearing herein, and
are included herein, in reliance upon authority of said firm as experts in
giving said report.
Casino Magic's consolidated financial statements as of December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997,
appearing in this prospectus, to the extent and for the periods indicated in
their report with respect thereto, have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their report appearing herein and
are included herein in reliance upon the authority of said firm as experts in
giving said report.
The consolidated financial statements (including schedule) of Boomtown as of
September 30, 1996 and 1995 and for each of the three years in the period ended
September 30, 1996, incorporated by reference into this prospectus and
Registration Statement from Amendment No. 4 to the Registration Statement (Form
S-4 No. 333-34471) of Hollywood Park have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein.
Such consolidated financial statements (including schedule) are incorporated
herein by reference, in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
145
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Hollywood Park, Inc.
Consolidated Balance Sheets as of September 30, 1998 and December 31,
1997................................................................... F-2
Consolidated Statements of Operations for the three and nine months
ended September 30, 1998 and 1997...................................... F-3
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997............................................ F-4
Notes to Consolidated Financial Statements.............................. F-5
Calculation of Earnings Per Share....................................... F-17
Report of Independent Public Accountants, Arthur Andersen LLP........... F-18
Consolidated Balance Sheets as of December 31, 1997 and 1996............ F-19
Consolidated Statements of Operations for the years ended December 31,
1997, 1996 and 1995.................................................... F-20
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995................................. F-21
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.................................................... F-22
Notes to Consolidated Financial Statements.............................. F-23
Schedule II............................................................. F-47
Calculation of Earnings Per Share....................................... F-48
Casino Magic Corp.
Condensed Consolidated Balance Sheets as of September 30, 1998 and
December 31, 1997...................................................... F-49
Condensed Consolidated Statements of Operations for the three months
ended September 30, 1998 and 1997...................................... F-50
Condensed Consolidated Statements of Operations for the nine months
ended September 30, 1998 and 1997...................................... F-51
Condensed Consolidated Statement of Cash Flows for the nine months ended
September 30, 1998 and 1997............................................ F-52
Notes to Consolidated Financial Statements.............................. F-53
Report of Independent Public Accountants, Arthur Andersen LLP........... F-55
Consolidated Statements of Operations for the years ended December 31,
1997, 1996 and 1995.................................................... F-56
Consolidated Balance Sheets as of December 31, 1997 and 1996............ F-57
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1997, 1996 and 1995....................................... F-58
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.................................................... F-60
Notes to Consolidated Financial Statements.............................. F-63
</TABLE>
F-1
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of
--------------------------
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
(in thousands)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents......................... $ 20,126 $ 23,749
Restricted cash................................... 798 407
Short term investments............................ 3,459 0
Other receivables, net............................ 7,061 9,417
Prepaid expenses and other assets................. 16,160 10,948
Deferred tax assets............................... 10,250 8,118
Current portion of notes receivable............... 2,340 42
-------- --------
Total current assets............................ 60,194 52,681
Notes receivable.................................... 18,250 9,548
Property, plant and equipment, net.................. 301,125 300,666
Goodwill, net....................................... 50,341 33,017
Other assets........................................ 23,009 23,117
-------- --------
$452,919 $419,029
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable.................................. $ 8,848 $ 11,277
Accrued lawsuit settlement........................ 0 2,750
Accrued compensation.............................. 7,620 7,627
Accrued liabilities............................... 26,986 19,105
Accrued interest.................................. 2,642 5,175
Gaming liabilities................................ 3,698 3,853
Racing liabilities................................ 263 4,093
Current portion of notes payable.................. 2,058 3,437
-------- --------
Total current liabilities....................... 52,115 57,317
Notes payable....................................... 168,574 132,102
Deferred tax liabilities............................ 6,606 6,310
-------- --------
Total liabilities............................... 227,295 195,729
Minority interests.................................. 0 1,946
Stockholders' Equity:
Capital stock--
Preferred--$1.00 par value, authorized 250,000
shares; none issued and outstanding............ 0 0
Common--$.10 par value, authorized 40,000,000
shares; 25,800,069 issued and outstanding in
1998, and 26,220,528 in 1997................... 2,580 2,622
Capital in excess of par value.................... 218,023 222,350
Retained earnings (accumulated deficit)........... 5,338 (3,532)
Accumulated other comprehensive loss.............. (317) (86)
-------- --------
Total stockholders' equity...................... 225,624 221,354
-------- --------
$452,919 $419,029
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three
months ended For the nine months
September 30, ended September 30,
------------------- --------------------
1998 1997 1998 1997
--------- --------- ---------- ---------
(in thousands, except per share data--
unaudited)
<S> <C> <C> <C> <C>
Revenues:
Gaming............................. $ 58,846 $ 57,143 $ 173,552 $ 83,990
Racing............................. 11,371 12,216 48,085 48,084
Food and beverage.................. 7,383 6,156 21,245 13,016
Hotel and recreational vehicle
park.............................. 637 581 1,362 581
Truck stop and service station..... 4,525 4,897 11,071 4,897
Other income....................... 4,705 4,217 13,434 7,781
--------- --------- ---------- ---------
87,467 85,210 268,749 158,349
--------- --------- ---------- ---------
Expenses:
Gaming............................. 30,604 29,956 93,920 45,117
Racing............................. 5,562 6,206 21,244 21,615
Food and beverage.................. 10,065 8,101 27,601 16,920
Hotel and recreational vehicle
park.............................. 212 199 499 199
Truck stop and service station..... 4,177 4,461 10,164 4,461
Administration..................... 20,088 20,091 62,209 38,622
Other.............................. 2,011 1,823 5,586 3,262
REIT restructuring................. 0 609 469 609
Depreciation and amortization...... 6,825 6,159 19,874 11,939
--------- --------- ---------- ---------
79,544 77,605 241,566 142,744
--------- --------- ---------- ---------
Operating income..................... 7,923 7,605 27,183 15,605
Loss on write off of assets........ 1,586 0 1,586 0
Interest expense................... 4,112 3,653 11,827 3,782
--------- --------- ---------- ---------
Income before minority interests and
income taxes........................ 2,225 3,952 13,770 11,823
Minority interests................. 0 17 0 80
Income tax expense................. 253 1,524 4,903 4,624
--------- --------- ---------- ---------
Net income........................... $ 1,972 $ 2,411 $ 8,867 $ 7,119
========= ========= ========== =========
Dividend requirements on convertible
preferred stock..................... $ 0 $ 558 $ 0 $ 1,520
Net income available to common
shareholders........................ $ 1,972 $ 1,853 $ 8,867 $ 5,599
Per common share:
Net income--basic.................. $ 0.08 $ 0.08 $ 0.34 $ 0.27
Net income--diluted................ $ 0.08 $ 0.08 $ 0.34 $ 0.27
Number of shares--basic.............. 26,101 24,706 26,115 20,596
Number of shares--diluted............ 26,101 24,706 26,277 20,596
</TABLE>
F-3
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine
months ended
September 30,
-------------------
1998 1997
-------- ---------
(in thousands--
unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 8,867 $ 7,119
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................ 19,874 11,939
Minority interests....................................... 0 17
Loss on sale or disposal of property, plant and
equipment............................................... 985 488
(Increase) decrease in restricted cash................... (391) 3,277
Decrease (increase) in other receivables, net............ 2,356 (944)
(Increase) decrease in prepaid expenses and other
assets.................................................. (5,648) 894
Increase in deferred tax assets.......................... (2,132) (1,681)
Decrease in accounts payable............................. (2,429) (2,151)
Decrease in accrued lawsuit settlement................... (2,750) 0
Decrease in accrued compensation......................... (7) (1,788)
Increase (decrease) in accrued liabilities............... 2,287 (10,381)
(Decrease) increase in gaming liabilities................ (155) 1,197
Decrease in racing liabilities........................... (3,830) (3,496)
Decrease in accrued interest payable..................... (2,533) 0
Increase in deferred tax liabilities..................... 296 1,569
-------- ---------
Net cash provided by operating activities............... 14,790 6,059
-------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment............... (34,981) (23,059)
Receipts from sale of property, plant and equipment...... 650 114
Principal collected on notes receivable.................. 2,071 31
Note receivable, Paul Alanis............................. (3,232) 0
Note receivable, HP Yakama investment.................... (8,012) 0
Purchase of short term investments....................... (3,690) (1,946)
Proceeds from short term investments..................... 0 6,712
Payment to buy-out minority interest in Crystal Park
LLC..................................................... (1,946) 0
Cash acquired in the purchase of a business, net of
transaction and other costs............................. 0 12,264
-------- ---------
Net cash used in investing activities................... (49,140) (5,884)
-------- ---------
Cash flows from financing activities:
Proceeds from secured Bank Credit Facility............... 40,000 112,000
Payment of secured Bank Credit Facility.................. 0 (112,000)
Redemption of Boomtown 11.5% First Mortgage Notes........ (1,253) (110,924)
Proceeds from issuance of 9.5% Notes..................... 0 125,000
Payment of secured notes payable......................... 0 (4,282)
Payment of unsecured notes payable....................... (3,654) (31)
Common stock options exercised........................... 1,174 1,667
Purchase and retirement of Hollywood Park common stock... (5,540) 0
Dividends paid to preferred stockholders................. 0 (1,520)
-------- ---------
Net cash provided by financing activities............... 30,727 9,910
-------- ---------
(Decrease) increase in cash and cash equivalents......... (3,623) 10,085
Cash and cash equivalents at the beginning of the
period.................................................. 23,749 11,922
-------- ---------
Cash and cash equivalents at the end of the period....... $ 20,126 $ 22,007
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1--Summary of Significant Accounting Policies
General Hollywood Park, Inc. (the "Company" or "Hollywood Park") is a
diversified gaming, sports and entertainment company engaged in the ownership
and operation of casinos (including card club casinos), pari-mutuel racing
facilities, and the development of other gaming and sports related
opportunities. Hollywood Park owns and operates, through its Boomtown, Inc.
("Boomtown") subsidiary, land-based, riverboat and dockside gaming operations
in Verdi, Nevada ("Boomtown Reno"), Harvey, Louisiana ("Boomtown New Orleans")
and Biloxi, Mississippi ("Boomtown Biloxi"), respectively. As of October 15,
1998, the Company expanded its gaming operations through the acquisition of
Casino Magic Corp. ("Casino Magic"). Casino Magic operates dockside gaming in
Bay St. Louis, Mississippi ("Casino Magic Bay St. Louis") and in Biloxi,
Mississippi ("Casino Magic Biloxi"); riverboat gaming in Bossier City,
Louisiana ("Casino Magic Bossier"); and is 51% owner of two land-based casinos
in Argentina ("Casino Magic Argentina"). Hollywood Park also owns two card club
casinos located in the Los Angeles metropolitan area. The Hollywood Park-Casino
is operated by the Company, and is located on the same property as the
Hollywood Park Race Track. The Company also owns the Crystal Park Hotel and
Casino (the "Crystal Park Casino"), which is leased to an unaffiliated
operator. Presently, Hollywood Park is the only company that owns and operates
both California card club casinos and traditional casinos in Nevada, Louisiana
and Mississippi. The Company's premier thoroughbred racing facilities are, the
Hollywood Park Race Track, which the Company has owned for 60 years, and Turf
Paradise, Inc. ("Turf Paradise"), located in Phoenix, Arizona.
The financial information included herein has been prepared in conformity
with generally accepted accounting principles as reflected in Hollywood Park's
consolidated Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, for the year ended December 31, 1997.
The information furnished herein is unaudited; however, in the opinion of
management it reflects all normal and recurring adjustments necessary to
present a fair statement of the financial results for the interim periods. It
should be understood that accounting measurements at 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 Company's horse racing business.
Consolidation The consolidated financial statements presented herein,
include the accounts of Hollywood Park and its wholly owned subsidiaries: (a)
Boomtown, and Boomtown's six active subsidiaries; (1) Boomtown Hotel & Casino,
Inc., (2) Bayview Yacht Club, Inc., (3) Mississippi--I Gaming, L.P., (4)
Louisiana Gaming Enterprises, Inc., (5) Louisiana--I Gaming, and (6) Boomtown
Hoosier, Inc.; (b) Hollywood Park Operating Company and its two wholly owned
subsidiaries, Hollywood Park Food Services, Inc. and Hollywood Park Fall
Operating Company; (c) Turf Paradise, Inc.; (d) HP Yakama, Inc.; and (e)
HP/Compton, Inc. and HP Casino, Inc., which own 89.8% and 10.2%, respectively,
of the Crystal Park Hotel and Casino Development Company LLC ("Crystal Park
LLC"). The Hollywood Park-Casino is a division of Hollywood Park, Inc.
As of October 15, 1998, the consolidated financial statements will also
include Casino Magic's thirteen active subsidiaries: (1) Mardi Gras Casino
Corp., (2) Biloxi Casino Corp., (3) Casino Magic Finance Corp., (4) Jefferson
Casino Corp., (5) Casino Magic of Louisiana, Corp., (6) Casino Magic Neuquen,
(7) Casino Magic Support Services SA, (8) Casino Magic American Corp., (9)
Casino Magic Management Services Corp., (10) Bay St. Louis Casino Corp., (11)
Boston Casino Corp., (12) Casino One Corporation, and (13) St. Louis Casino
Corp.
F-5
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Restricted Cash Restricted cash as of September 30, 1998 and December 31,
1997, was for amounts due to horsemen for purses, stakes and awards.
Capitalized Interest During the three and nine months ended September 30,
1998, the Company capitalized interest related to construction projects of
approximately $295,000 and $802,000, respectively. Capitalized interest for
both the three and nine months ended September 30, 1997 was $15,000.
Comprehensive Income Statement of Financial Accounting Standards No. 130,
("SFAS 130") Reporting Comprehensive Income, requires that the Company disclose
comprehensive income and its components. The objective of SFAS 130 is to report
a measure of all changes in equity of an enterprise that result from
transactions and other economic events of the period other than transactions
with owners. Comprehensive income is the sum of the following; net income
(loss) and other comprehensive income (loss), which is defined as all other
nonowner changes in equity.
The Company has recorded unrealized gain (loss) on securities as other
comprehensive income (loss) in the accompanying financial statements.
Comprehensive income was computed as follows:
<TABLE>
<CAPTION>
For the
Three Months
Ended
September 30,
--------------
1998 1997
------ ------
(in
thousands,
unaudited)
<S> <C> <C>
Net income.................................................. $1,972 $2,411
Other comprehensive income (loss):
Unrealized loss on securities............................. (315) 0
Less reclassification adjustment for realized (gain)
loss..................................................... 0 0
------ ------
Comprehensive income........................................ $1,657 $2,411
====== ======
</TABLE>
<TABLE>
<CAPTION>
For the
Nine Months
Ended
September 30,
--------------
1998 1997
------ ------
(in
thousands,
unaudited)
<S> <C> <C>
Net income................................................... $8,867 $7,119
Other comprehensive income (loss):
Unrealized loss on securities.............................. (231) 0
Less reclassification adjustment for realized loss......... 0 1
------ ------
Comprehensive income......................................... $8,636 $7,120
====== ======
</TABLE>
Estimates Financial statements prepared according to 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. Actual results could differ from these estimates.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
of 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
F-6
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 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.
Earnings Per Share Basic earnings per share were computed by dividing net
income available to common shareholders (net income less preferred dividend
requirements) by the weighted average number of common shares outstanding
during the period. Diluted per share amounts were similarly computed, but
include the effect, when dilutive, of the conversion of the convertible
preferred shares (which is applicable to the three and nine months ended
September 30, 1997, only), and the assumed exercise of stock options.
Redemption of Depositary Shares As of August 28, 1997, the Company's
2,749,900 outstanding depositary shares were converted into 2,291,492 shares of
the Company's common stock, thereby, eliminating future annual preferred stock
cash dividend payments of approximately $1,925,000.
Cash Flows Cash and cash equivalents included certificates of deposit and
short term investments with maturities of 90 days or less.
Racing Revenues and Expenses The Company records pari-mutuel revenues,
admissions, food and beverage and other income associated with racing on a
daily basis, except for seasonal admissions, which are recorded ratably over
the racing season. Expenses associated with racing revenues were charged
against income in those periods in which racing revenues were recognized.
Gaming Revenue and Promotional Allowances Gaming revenues at the Boomtown
properties consisted of the difference between gaming wins and losses, or net
win from gaming activity, and at the Hollywood Park-Casino consisted of fees
collected from patrons on a per seat or per hand basis. Revenues in the
accompanying statements of operations excluded the retail value of food and
beverage provided to players on a complimentary basis. The estimated cost of
providing these promotional allowances during the three months ended
September 30, 1998 and 1997, was $3,206,000 and $2,745,000, respectively, and
for the nine months ended September 30, 1998 and 1997, was $10,683,000 and
$3,410,000, respectively. (The amount for the nine months ended September 30,
1997, is exclusive of the costs associated with Boomtown's operations, prior to
June 30, 1997.)
Reclassifications Certain reclassifications have been made to the 1997
balances to be consistent with the 1998 financial statement presentation.
Note 2--Acquisition of Casino Magic Corp.
On October 15, 1998, Hollywood Park acquired Casino Magic, pursuant to the
February 19, 1998 Agreement of Merger among Casino Magic Corp., Hollywood Park,
Inc., and HP Acquisition II, Inc. (a wholly owned subsidiary of Hollywood
Park), pursuant to which HP Acquisition II, Inc., was merged into Casino Magic,
with Casino Magic surviving and becoming a wholly owned subsidiary of Hollywood
Park. The Casino Magic Merger will be accounted for under the purchase method
of accounting for a business combination. Hollywood Park paid $2.27 per Casino
Magic common share outstanding, or approximately $81,100,000.
F-7
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Casino Magic owns and operates dockside gaming properties in Bay St. Louis,
Mississippi, and Biloxi, Mississippi, riverboat gaming in Bossier City,
Louisiana, and is a 51% partner in two land-based casinos in Argentina.
Note 3--Acquisition of Boomtown, Inc.
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 "Boomtown Merger"). As a result of the Boomtown
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 per share (excluding shares
repurchased from Edward P. Roski, Jr. ("Roski") and subsequently retired) were
issued in the Boomtown Merger.
The Boomtown Merger was accounted for under the purchase method of
accounting for a business combination. The purchase price of the Boomtown
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 which considered the impact of general economic,
financial and market conditions on the assets acquired and liabilities assumed,
it was determined that the estimated fair values approximated their carrying
value. The Boomtown Merger generated approximately $21,136,000 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. As of
June 30, 1997, the excess acquisition cost over the recorded value of the
assets was estimated at approximately $2,683,000. As of June 30, 1998, the
Company revised its initial estimates of the excess acquisition cost over the
recorded value to $21,136,000, due primarily to a reduction in the valuation of
certain gaming fixed assets and provisions for additional liabilities.
The Company acquired three of the four Boomtown properties; Boomtown Reno,
Boomtown New Orleans, and Boomtown Biloxi. In connection with the Boomtown
Merger, Boomtown's Las Vegas property was divested on July 1, 1997.
Note 4--Short Term Investments
As of September 30, 1998, short term investments consisted of investments in
equity securities. These investments were recorded at fair value in the
accompanying financial statements, as determined by the quoted market price,
and are classified as available-for-sale. As of September 30, 1998, the Company
recorded an unrealized loss on these investments of approximately $231,000.
Included in the portfolio of equity securities were 792,900 shares of Casino
Magic common stock, for which the Company paid approximately $2.00 per common
share, or a total cost of approximately $1,615,000 (inclusive of commissions).
F-8
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 5--Property, Plant and Equipment
Property, plant and equipment held as of September 30, 1998, and December
31, 1997, consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
(in thousands)
<S> <C> <C>
Land and land improvements........................ $ 50,349 $ 50,945
Buildings and building improvements............... 279,451 270,271
Equipment......................................... 88,561 77,337
Vessels........................................... 16,690 18,925
Construction in progress.......................... 15,875 21,896
-------- --------
450,926 439,374
Less accumulated depreciation..................... 149,801 138,708
-------- --------
$301,125 $300,666
======== ========
</TABLE>
Note 6--Secured and Unsecured Notes Payable
Notes payable as of September 30, 1998, and December 31, 1997, consisted of
the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
(in thousands)
<S> <C> <C>
Secured notes payable, Bank Credit Facility..... $ 40,000 $ 0
Secured notes payable, other.................... 2,500 3,750
Unsecured 9.5% Notes............................ 125,000 125,000
Boomtown 11.5% First Mortgage Notes............. 0 1,253
Unsecured notes payable......................... 3,031 4,009
Capital lease obligations....................... 101 1,527
-------- --------
170,632 135,539
Less current maturities......................... 2,058 3,437
-------- --------
$168,574 $132,102
======== ========
</TABLE>
Secured Notes Payable, Bank Credit Facility On October 15, 1998, the
Company executed the Amended and Restated Reducing Revolving Loan Agreement
with a bank syndicate led by Bank of America National Trust and Savings
Association (the "Bank Credit Facility") for up to $300,000,000, with an
option to increase this amount to $375,000,000. The Bank Credit Facility also
provides for sub-facilities for letters of credit up to $30,000,000, and swing
line loans of up to $10,000,000. Prior to the execution of the Bank Credit
Facility, the Company was operating with a previous bank credit facility,
which was initially for $225,000,000, and was reduced to $100,000,000 with the
August 1997 issuance of the 9.5% Hollywood Park Notes. The Bank Credit
Facility extended the maturity of the Bank Credit Facility to December 31,
2003, reduced interest and commitment fee rates, and amended certain
covenants, as compared to the previous bank credit facility.
F-9
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Unsecured 9.5% Notes On August 6, 1997, Hollywood Park, Inc. and Hollywood
Park Operating Company, co-issued $125,000,000 of Series A 9 1/2% Senior
Subordinated Notes due 2007 (the "Series A 9 1/2% Notes"). On March 20, 1998,
the Company completed a registered exchange offer for the Series A 9 1/2%
Notes, pursuant to which all $125,000,000 principal amount of the Series A 9
1/2% Notes were exchanged by the holders for $125,000,000 aggregate principal
amount of Series B 9 1/2% Senior Subordinated Notes due 2007, of the Company
and Hollywood Park Operating Company (the "Series B 9 1/2% Notes") and,
together with the Series A 9 1/2% Notes, (the "9 1/2% Notes") were registered
under the Securities Act on Form S-4. Interest on the 9 1/2% Notes is payable
semi-annually, on February 1st and August 1st. The Company paid Liquidated
Damages at an annual rate of 0.5% of the principal amount of the 9 1/2% Notes
for the period January 27, 1998 to March 20, 1998 (the date of consummation of
the exchange offer). The 9 1/2% Notes are redeemable, at the option of
Hollywood Park and Hollywood Park Operating Company, in whole or in part, on or
after August 1, 2002, at a premium to face amount, plus accrued interest, as
follows: (a) August 1, 2002 at 104.75%; (b) August 1, 2003 at 102.375%;
(c) August 1, 2004 at 101.188%; and (d) August 1, 2005 and thereafter at 100%.
The 9 1/2% Notes are unsecured obligations of Hollywood Park and Hollywood Park
Operating Company, guaranteed by all other material restricted subsidiaries of
either Hollywood Park or Hollywood Park Operating Company.
The indenture governing the 9 1/2% Notes contains certain covenants that,
among other things, limit the ability of Hollywood Park, Hollywood Park
Operating Company and their restricted subsidiaries to incur additional
indebtedness and issue preferred stock, pay dividends or make other
distributions, repurchase equity interests 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. The Casino Magic Merger and the execution
of the Bank Credit Facility, were permitted under the terms of the indenture,
given the redemption of the $135,000,000 Casino Magic Notes and establishing
certain Casino Magic subsidiaries as Unrestricted Subsidiaries, as defined in
the indenture.
Boomtown 11.5% First Mortgage Notes As permitted in the indenture (the
"Boomtown Indenture") governing the Boomtown 11.5% First Mortgage Notes (the
"Boomtown Notes") in June 1998, Boomtown elected to satisfy and discharge its
obligation regarding the $1,253,000 of Boomtown Notes. As of June 9, 1998,
Boomtown had satisfied all conditions required to discharge its obligations
under the Boomtown Indenture. The total cost to redeem the Boomtown Notes was
$1,378,000.
F-10
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 7--Consolidating Condensed Financial Information
Hollywood Park's subsidiaries (excluding non-material subsidiaries) have
fully and unconditionally guaranteed the payment of all obligations under the 9
1/2% Notes. Hollywood Park's subsidiaries (excluding certain subsidiaries) have
fully and unconditionally guaranteed the payment of all obligations under
Hollywood Park's 9 1/4% Senior Subordinated Notes (the "Notes"). Hollywood Park
Operating Company co-issued the 9 1/2% Notes and is a guarantor on the Notes.
The following is the consolidating information for the issuers of the 9 1/2%
Notes and the Notes and their respective subsidiaries:
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the Three and Nine Months Ended September 30, 1998 and 1997
and Balance Sheets as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park (c)
Operating Co. (a) (b) Wholly
Hollywood (co-obligor 9 Wholly Majority Owned Consolidating
Park, Inc. 1/2% Notes/ Owned Owned Non- and Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
obligor) on the Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
---------- ------------- ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet
As of September 30, 1998
Current assets.......... $ 16,057 $ 4,670 $ 33,143 $ 6,272 $ 69 $ (17) $ 60,194
Property, plant and
equipment, net......... 65,513 22,010 169,060 44,542 0 0 301,125
Other non-current
assets................. 33,683 4,564 39,662 2,061 1,294 10,336 91,600
Investment in
subsidiaries........... 207,061 15,373 97,687 0 0 (320,121) 0
Inter-company........... 129,610 142,200 128,587 13 0 (400,410) 0
-------- -------- -------- ------- ------ --------- --------
$451,924 $188,817 $468,139 $52,888 $1,363 $(710,212) $452,919
======== ======== ======== ======= ====== ========= ========
Current liabilities..... $ 12,730 $ 10,509 $ 21,350 $ 5,485 $ 0 $ (17) $ 50,057
Notes payable, current.. 693 32 67 1,266 0 0 2,058
Notes payable, long
term................... 42,079 125,228 17 1,250 0 0 168,574
Other non-current
liabilities............ 13,312 0 3,853 0 (10,559) 6,606
Inter-company........... 142,174 21,004 188,551 48,681 0 (400,410) 0
Equity (deficit)........ 240,936 32,044 254,301 (3,794) 1,363 (299,226) 225,624
-------- -------- -------- ------- ------ --------- --------
$451,924 $188,817 $468,139 $52,888 $1,363 $(710,212) $452,919
======== ======== ======== ======= ====== ========= ========
Statement of Operations
For the three months
ended
September 30, 1998
Revenues:
Gaming................ $ 11,542 $ 0 $ 33,977 $13,327 $ 0 $ 0 $ 58,846
Racing................ 0 10,112 1,259 0 0 0 11,371
Food and beverage..... 1,228 0 4,817 1,338 0 0 7,383
Equity in
subsidiaries......... 6,408 4 8,370 0 0 (14,782) 0
Inter-company
interest............. 0 0 1,352 0 0 (1,352) 0
Other................. 939 240 7,874 814 0 0 9,867
-------- -------- -------- ------- ------ --------- --------
20,117 10,356 57,649 15,479 0 (16,134) 87,467
-------- -------- -------- ------- ------ --------- --------
Expenses:
Gaming................ 6,617 0 16,934 7,053 0 0 30,604
Racing................ 0 4,807 755 0 0 0 5,562
Food and beverage..... 2,857 0 5,488 1,720 0 0 10,065
Administrative and
other................ 3,985 4,420 13,155 4,561 367 0 26,488
REIT restructuring.... 0 0 0 0 0 0 0
Depreciation and
amortization......... 1,041 993 3,710 945 0 136 6,825
-------- -------- -------- ------- ------ --------- --------
14,500 10,220 40,042 14,279 367 136 79,544
-------- -------- -------- ------- ------ --------- --------
Operating income
(loss)................. 5,617 136 17,607 1,200 (367) (16,270) 7,923
Loss on write off of
assets................. 1,586 0 0 0 0 1,586
Interest expense........ 1,050 3,194 (211) 79 0 0 4,112
Inter-company interest.. 0 0 0 1,352 0 (1,352) 0
-------- -------- -------- ------- ------ --------- --------
Income (loss) before
taxes.................. 2,981 (3,058) 17,818 (231) (367) (14,918) 2,225
Income tax expense
(benefit).............. 973 0 (720) 0 0 0 253
-------- -------- -------- ------- ------ --------- --------
Net income (loss)....... $ 2,008 $ (3,058) $ 18,538 $ (231) $ (367) $ (14,918) $ 1,972
======== ======== ======== ======= ====== ========= ========
</TABLE>
F-11
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information--(Continued)
For the Three and Nine Months Ended September 30, 1998 and 1997
and Balance Sheets as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park
Hollywood Operating Co. (c)
Park, (co-obligor 9 (a) (b) Majority Wholly Owned Consolidating
Inc. 1/2% Notes/ Wholly Owned Owned Non- and Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
obligor) on the Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
--------- ------------- ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
For the nine months
ended September 30,
1998
Revenues:
Gaming................ $34,659 $ 0 $ 97,296 $41,597 $ 0 $ 0 $173,552
Racing................ 0 37,984 10,101 0 0 0 48,085
Food and beverage..... 3,527 0 13,894 3,824 0 0 21,245
Equity in
subsidiaries......... 22,688 240 7,031 0 0 (29,959) 0
Inter-company
interest............. 0 0 4,053 0 0 (4,053) 0
Other................. 2,836 1,706 19,040 2,285 0 0 25,867
------- ------- -------- ------- ----- -------- --------
63,710 39,930 151,415 47,706 0 (34,012) 268,749
------- ------- -------- ------- ----- -------- --------
Expenses:
Gaming................ 20,078 0 51,906 21,936 0 0 93,920
Racing................ 0 16,588 4,656 0 0 0 21,244
Food and beverage..... 7,608 0 15,201 4,792 0 0 27,601
Administrative and
other................ 13,505 13,179 38,154 13,160 460 0 78,458
REIT restructuring.... 469 0 0 0 0 0 469
Depreciation and
amortization......... 3,248 2,981 10,709 2,727 0 209 19,874
------- ------- -------- ------- ----- -------- --------
44,908 32,748 120,626 42,615 460 209 241,566
------- ------- -------- ------- ----- -------- --------
Operating income
(loss)................. 18,802 7,182 30,789 5,091 (460) (34,221) 27,183
Loss on write off of
assets................. 1,586 0 0 0 0 0 1,586
Interest expense........ 2,598 9,377 (412) 264 0 0 11,827
Inter-company interest.. 0 0 0 4,053 0 (4,053) 0
------- ------- -------- ------- ----- -------- --------
Income (loss) before
taxes.................. 14,618 (2,195) 31,201 774 (460) (30,168) 13,770
Income tax expense
(benefit).............. 5,613 0 (710) 0 0 0 4,903
------- ------- -------- ------- ----- -------- --------
Net income (loss)....... $ 9,005 $(2,195) $ 31,911 $ 774 $(460) $(30,168) $ 8,867
======= ======= ======== ======= ===== ======== ========
Statement of Cash Flows:
For the nine months
ended September 30,
1998
Net cash provided by
(used in) operating
activities............. $(2,921) $ 2,053 $ 35,132 $ 2,110 $(460) $(21,124) $ 14,790
Net cash used in
investing activities... (9,020) (1,266) (37,139) (1,715) 0 0 (49,140)
Net cash provided by
(used in) financing
activities............. 34,909 0 (2,902) (745) 0 (535) 30,727
</TABLE>
F-12
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the Three and Nine Months Ended September 30, 1998 and 1997
and Balance Sheets as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park
Hollywood Operating Co. (c)
Park, (co-obligor 9 (a) (b) Majority Wholly Owned Consolidating
Inc. 1/2% Notes/ Wholly Owned Owned Non and Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
obligor) on the Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
--------- ------------- ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
For the three months
ended September 30, 1997
Revenues:
Gaming................. $12,676 $ 0 $30,460 $14,007 $ 0 $ 0 $57,143
Racing................. 0 10,791 1,425 0 0 0 12,216
Food and beverage...... 1,129 0 4,112 915 0 0 6,156
Equity in
subsidiaries.......... 9,108 (167) 7,911 0 0 (16,852) 0
Inter-company
interest.............. 0 0 2,354 0 0 (2,354) 0
Other.................. 1,282 92 7,513 808 0 0 9,695
------- ------- ------- ------- --- -------- -------
24,195 10,716 53,775 15,730 0 (19,206) 85,210
------- ------- ------- ------- --- -------- -------
Expenses:
Gaming................. 6,600 0 16,163 7,193 0 0 29,956
Racing................. 0 5,357 849 0 0 0 6,206
Food and beverage...... 2,316 0 4,591 1,194 0 0 8,101
Administrative and
other................. 4,900 4,266 13,340 4,280 0 0 26,786
REIT restructuring..... 397 0 0 0 0 0 397
Depreciation and
amortization.......... 1,118 950 2,733 1,341 0 17 6,159
------- ------- ------- ------- --- -------- -------
15,331 10,573 37,676 14,008 0 17 77,605
------- ------- ------- ------- --- -------- -------
Operating income........ 8,864 143 16,099 1,722 0 (19,223) 7,605
Interest expense........ 1,252 2,080 232 89 0 0 3,653
Inter-company interest.. 102 0 974 1,278 0 (2,354) 0
------- ------- ------- ------- --- -------- -------
Income (loss) before
taxes.................. 7,510 (1,937) 14,893 355 0 (16,869) 3,952
Minority interests...... 0 0 0 0 0 17 17
Income tax expense
(benefit).............. (1,085) 0 2,609 0 0 0 1,524
------- ------- ------- ------- --- -------- -------
Net income (loss)....... $ 8,595 $(1,937) $12,284 $ 355 $ 0 $(16,886) $ 2,411
======= ======= ======= ======= === ======== =======
</TABLE>
F-13
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information--(Continued)
For the Three and Nine Months Ended September 30, 1998 and 1997
and Balance Sheets as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park
Operating
Co.
(co-obligor
Hollywood 9 (c)
Park, 1/2% Notes/ (a) (b) Majority Wholly Owned Consolidating
Inc. Guarantor Wholly Owned Owned Non and Hollywood
(Parent on the Guarantor Guarantor Guarantor Eliminating Park, Inc.
obligor) Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
--------- ----------- ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
For the nine months ended
September 30, 1997
Revenues:
Gaming.................. $38,023 $ 0 $30,460 $15,507 $ 0 $ 0 $ 83,990
Racing.................. 0 38,195 9,889 0 0 0 48,084
Food and beverage....... 3,376 0 8,725 915 0 0 13,016
Equity in subsidiaries.. 11,961 126 8,505 0 0 (20,592) 0
Inter-company interest.. 0 0 2,354 0 0 (2,354) 0
Other................... 3,428 1,274 7,749 808 0 0 13,259
------- ------- ------- ------- --- -------- --------
56,788 39,595 67,682 17,230 $ 0 (22,946) 158,349
======= ======= ======= ======= === ======== ========
Expenses:
Gaming.................. 21,761 0 16,163 7,193 $ 0 0 45,117
Racing.................. 0 16,895 4,720 0 0 0 21,615
Food and beverage....... 7,069 0 8,657 1,194 0 0 16,920
Administrative and
other.................. 13,175 13,557 15,491 4,321 0 0 46,544
REIT restructuring...... 609 0 0 0 0 0 609
Depreciation and
amortization........... 3,512 2,815 3,452 2,143 0 17 11,939
------- ------- ------- ------- --- -------- --------
46,126 33,267 48,483 14,851 0 17 142,744
------- ------- ------- ------- --- -------- --------
Operating income......... 10,662 6,328 19,199 2,379 0 (22,963) 15,605
Interest expense......... 1,368 2,093 232 89 0 0 3,782
Inter-company interest... 102 0 974 1,278 0 (2,354) 0
------- ------- ------- ------- --- -------- --------
Income before taxes...... 9,192 4,235 17,993 1,012 0 (20,609) 11,823
Minority interests....... 0 0 0 0 0 80 80
Income tax expense....... 2,020 0 2,604 0 0 0 4,624
------- ------- ------- ------- --- -------- --------
Net income............... $ 7,172 $ 4,235 $15,389 $ 1,012 $ 0 $(20,689) $ 7,119
======= ======= ======= ======= === ======== ========
</TABLE>
F-14
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the Three and Nine Months Ended September 30, 1998 and 1997
and Balance Sheets as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park
Operating
Co.
(co-obligor
Hollywood 9 (a) (c)
Park, 1/2% Notes/ Wholly (b) Majority Wholly Consolidating
Inc. Guarantor Owned Owned Owned Non- and Hollywood
(Parent on the Guarantor Guarantor Guarantor Eliminating Park, Inc.
obligor) Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
--------- ----------- ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Cash Flows:
For the nine months ended
September 30, 1997
Net cash provided by
(used in) operating
activities............. $ 16,964 $(131,497) $ 128,142 $ 8,070 $ 0 $ (15,620) $ 6,059
Net cash provided by
(used in) investing
activities............ 16,619 (4,036) (14,091) (4,376) 0 0 (5,884)
Net cash provided by
(used in) financing
activities............ 147 124,968 (113,720) (2,100) 0 615 9,910
Balance Sheet
As of December 31, 1997
Current assets.......... $ 17,020 $ 3,867 $ 25,074 $ 6,720 $ 0 $ 0 $ 55,505
Property, plant and
equipment, net........ 68,515 23,753 140,105 68,293 0 0 300,666
Other non-current
assets................ 25,130 4,701 29,320 7,611 0 (1,080) 62,858
Investment in
subsidiaries.......... 126,121 15,132 116,020 0 0 (257,273) 0
Inter-company.......... 125,210 148,380 122,035 0 0 (395,625) 0
-------- --------- --------- ------- --- --------- --------
$361,996 $ 195,833 $ 432,554 $82,624 $ 0 $(653,978) $419,029
======== ========= ========= ======= === ========= ========
Current liabilities..... $ 16,890 $ 14,232 $ 19,583 $ 6,612 $ 0 $ 0 $ 57,317
Notes payable, long
term.................. 2,406 125,256 1,936 2,504 0 0 132,102
Other non-current
liabilities........... 4,753 5,202 83 0 0 (3,728) 6,310
Inter-company.......... 146,145 21,589 178,448 49,443 0 (395,625) 0
Minority interest...... 0 0 0 0 0 1,946 1,946
Equity................. 191,802 29,554 232,504 24,065 0 (256,571) 221,354
-------- --------- --------- ------- --- --------- --------
$361,996 $ 195,833 $ 432,554 $82,624 $ 0 $(653,978) $419,029
======== ========= ========= ======= === ========= ========
</TABLE>
- --------
(a) The Company's wholly owned guarantor subsidiaries on the 9 1/2% Notes are:
HP Casino, Inc., HP/Compton, Inc., Turf Paradise, Inc., Hollywood Park Food
Services, Inc., Hollywood Park Fall Operating Company, Boomtown, Inc.,
Boomtown Hotel & Casino, Inc., Louisiana--I Gaming, Louisiana Enterprises,
Inc., Bayview Yacht Club, Inc., and for periods after December 31, 1997,
Crystal Park Hotel and Casino Development Company, LLC. Due to the June 30,
1997, Boomtown Merger being accounted for under the purchase method of
accounting for a business combination, the 1997 financial results do not
include the financial results of Boomtown, Inc., Boomtown Hotel & Casino,
Inc., Louisiana--I Gaming, Louisiana Enterprises, Inc., and Bayview Yacht
Club, Inc., prior to June 30, 1997.
(b) As of December 31, 1997, Mississippi--I Gaming, L.P. which was added as of
the June 30, 1997, Boomtown Merger, was the Company's only majority owned
guarantor subsidiary on the 9 1/2% Notes. Due to the
F-15
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Boomtown Merger being accounted for under the purchase method of accounting
for a business combination, Mississippi--I Gaming, L.P.'s financial results
were not included for the period prior to June 30, 1997. Prior to December
31, 1997, Crystal Park Hotel and Casino Development Company, LLC was also a
majority owned guarantor subsidiary.
(c) As of 1998, Boomtown Hoosier, Inc. and its subsidiaries were the Company's
only wholly owned non-guarantor subsidiaries on the 9 1/2% Notes with
financial activity. Boomtown Hoosier, Inc.'s and its subsidiaries' prior
financial activity was not material.
F-16
<PAGE>
HOLLYWOOD PARK, INC.
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months ended
September 30,
---------------------------------------
Basic Diluted(a)
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Average number of common shares
outstanding........................... 26,101 24,706 26,101 24,706
Average common shares due to assumed
conversion of convertible preferred
shares (b)............................ 0 0 0 0
Average common shares due to assumed
conversion of stock options........... 0 0 0 0
--------- --------- --------- ---------
Total shares........................... 26,101 24,706 26,101 24,706
========= ========= ========= =========
Net income............................. $ 1,972 $ 2,411 $ 1,972 $ 2,411
Less dividend requirements on
convertible preferred shares.......... 0 558 0 0
--------- --------- --------- ---------
Net income available to common
shareholders.......................... $ 1,972 $ 1,853 $ 1,972 $ 2,411
========= ========= ========= =========
Net income per share................... $ 0.08 $ 0.08 $ 0.08 $ 0.10
========= ========= ========= =========
<CAPTION>
For the nine months ended September 30,
---------------------------------------
Basic Diluted(a)
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Average number of common shares
outstanding........................... 26,115 20,596 26,115 20,596
Average common shares due to assumed
conversion of convertible preferred
shares (b)............................ 0 0 0 0
Average common shares due to assumed
conversion of stock options........... 0 0 162 0
--------- --------- --------- ---------
Total shares........................... 26,115 20,596 26,277 20,596
========= ========= ========= =========
Net income............................. $ 8,867 $ 7,119 $ 8,867 $ 7,119
Less dividend requirements on
convertible preferred shares.......... 0 1,520 0 0
--------- --------- --------- ---------
Net income available to common
shareholders.......................... $ 8,867 $ 5,599 $ 8,867 $ 7,119
========= ========= ========= =========
Net income per share................... $ 0.34 $ 0.27 $ 0.34 $ 0.35
========= ========= ========= =========
</TABLE>
- --------
(a) When the computed diluted values are anti-dilutive, the basic per share
values are presented on the face of the consolidated statements of
operations.
(b) As of 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.
F-17
<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, 1997, and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. 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, 1997, and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Los Angeles, California
February 27, 1998
F-18
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December
31,
------------------
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents................................ $ 23,749 $ 11,922
Restricted cash.......................................... 407 4,486
Short term investments................................... 0 4,766
Other receivables, net................................... 9,417 7,110
Prepaid expenses and other assets........................ 18,473 6,215
Deferred tax assets...................................... 8,118 6,422
Current portion of notes receivable...................... 42 38
-------- --------
Total current assets................................... 60,206 40,959
Notes receivable........................................... 9,428 819
Property, plant and equipment, net......................... 300,666 130,835
Goodwill, net.............................................. 33,017 20,370
Other assets............................................... 15,712 12,903
-------- --------
$419,029 $205,886
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable......................................... $ 11,277 $ 10,043
Accrued lawsuit settlement............................... 2,750 2,750
Accrued compensation..................................... 7,627 4,198
Accrued liabilities...................................... 19,105 9,733
Accrued interest......................................... 5,175 0
Gaming liabilities....................................... 3,853 2,499
Racing liabilities....................................... 4,093 6,106
Current portion of notes payable......................... 3,437 35
-------- --------
Total current liabilities.............................. 57,317 35,364
Notes payable.............................................. 132,102 282
Deferred tax liabilities................................... 6,310 9,065
-------- --------
Total liabilities...................................... 195,729 44,711
Minority interests......................................... 1,946 3,015
Stockholders' Equity:
Capital stock--
Preferred--$1.00 par value, authorized 250,000 shares;
none issued and outstanding as of year end 1997,
27,499 issued and outstanding during 1996............. 0 28
Common--$.10 par value, authorized 40,000,000 shares;
26,220,528 issued and outstanding in 1997, and
18,332,016 in 1996.................................... 2,622 1,833
Capital in excess of par value........................... 222,350 167,074
Accumulated deficit...................................... (3,618) (10,775)
-------- --------
Total stockholders' equity............................. 221,354 158,160
-------- --------
$419,029 $205,886
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands, except per
share data)
<S> <C> <C> <C>
Revenues:
Gaming........................................ $137,659 $ 50,717 $ 26,656
Racing........................................ 68,844 71,308 77,036
Food and beverage............................. 19,894 13,947 19,783
Hotel and recreational vehicle park........... 937 0 0
Truck stop and service station................ 8,633 0 0
Other income.................................. 12,161 7,253 7,097
-------- -------- --------
248,128 143,225 130,572
-------- -------- --------
Expenses:
Gaming........................................ 74,733 27,249 5,291
Racing........................................ 30,304 30,167 30,960
Food and beverage............................. 25,745 19,573 24,749
Hotel and recreational vehicle park........... 356 0 0
Truck stop and service station................ 7,969 0 0
Administration................................ 61,514 41,477 45,447
Other......................................... 5,048 2,485 3,200
Depreciation and amortization................. 18,157 10,695 11,384
REIT restructuring............................ 2,483 0 0
Write off of investment in Sunflower.......... 0 11,412 0
Lawsuit settlement............................ 0 0 6,088
-------- -------- --------
226,309 143,058 127,119
-------- -------- --------
Operating income................................ 21,819 167 3,453
Interest expense................................ 7,302 942 3,922
-------- -------- --------
Income (loss) before minority interests and
income taxes................................... 14,517 (775) (469)
Minority interests............................ (3) 15 0
Income tax expense............................ 5,850 3,459 693
-------- -------- --------
Net income (loss)............................... $ 8,670 $ (4,249) $ (1,162)
======== ======== ========
Dividend requirements on convertible preferred
stock.......................................... $ 1,520 $ 1,925 $ 1,925
Net income (loss) attributable to (allocated to)
common shareholders............................ $ 7,150 $ (6,174) $ (3,087)
Per common share:
Net income (loss)--basic...................... $ 0.33 $ (0.33) $ (0.17)
Net income (loss)--diluted.................... $ 0.32 $ (0.33) $ (0.17)
Number of shares--basic......................... 22,010 18,505 18,399
Number of shares--diluted....................... 22,340 20,797 20,691
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Capital
in
Excess Total
Preferred Common of Par Accumulated Stockholders'
Stock Stock Value Deficit Equity
--------- ------ -------- ----------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
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 8,670 8,670
Issuance of common stock
to acquire--Pacific
Casino Management,
Inc.................... 0 3 497 0 500
Issuance of common stock
to acquire--Boomtown,
Inc.................... 0 582 56,425 0 57,007
Repurchase and
retirement of common
stock.................. 0 (45) (3,420) 0 (3,465)
Common stock options
exercised.............. 0 20 1,975 0 1,995
Conversion of
convertible preferred
stock.................. (28) 229 (201) 0 0
Investment in bonds--
unrealized holding
gain................... 0 0 0 7 7
Preferred stock
dividends--$55.27 per
share.................. 0 0 0 (1,520) (1,520)
---- ------ -------- -------- --------
Balance at year end
1997.................... $ 0 $2,622 $222,350 $ (3,618) $221,354
==== ====== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended
December 31,
-----------------------------
1997 1996 1995
--------- -------- --------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 8,670 $ (4,249) $ (1,162)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization................. 18,157 10,027 10,857
Minority interests............................ (3) 15 0
Changes in accounts due to deconsolidation of
subsidiary in bankruptcy:
Property, plant and equipment............... 0 58,380 0
Secured notes payable....................... 0 (28,918) 0
Unsecured notes payable..................... 0 (15,323) 0
Goodwill and lease with TRAK East........... 0 6,908 0
Unrealized (gain) loss on short term bond
investing.................................... 10 (2) 64
Loss on sale or disposal of property, plant
and equipment................................ 632 10 0
Changes in assets and liabilities, net of the
effects of the purchase of a business:
Decrease (increase) in restricted cash...... 4,079 (1,360) (2,427)
Increase in casino lease and related
interest receivable, net................... 0 0 (9,204)
Decrease (increase) in other receivables,
net........................................ (312) 1,037 77
Increase in prepaid expenses and other
assets..................................... (452) (3,524) (304)
Increase in deferred tax assets............. (1,696) (1,534) (349)
(Decrease) increase in accounts payable..... (2,468) (2,475) 5,685
(Decrease) increase in accrued lawsuit
settlement................................. 0 (2,482) 5,232
(Decrease) increase in accrued
compensation............................... (1,004) 903 (761)
(Decrease) increase in accrued liabilities.. (8,460) (3,489) 6,437
Increase (decrease) in gaming liabilities... 1,354 (1,499) 3,998
Increase (decrease) in racing liabilities... (2,013) 2,270 1,404
Increase in accrued interest payable........ 5,175 0 0
Payments to minority members................ (89) 0 0
Increase (decrease) in deferred tax
liabilities................................ (3,126) (1,018) 744
--------- -------- --------
Net cash provided by operating
activities............................... 18,454 13,677 20,291
--------- -------- --------
Cash flows from investing activities:
Additions to property, plant and equipment..... (32,505) (23,786) (25,150)
Receipts from sale of property, plant and
equipment..................................... 187 9 98
Principal collected on notes receivable........ 52 34 31
Purchase of short term investments............. (1,946) (16,888) (35,875)
Proceeds from short term investments........... 6,712 18,569 29,428
Payment to buy-out minority interest in Crystal
Park LLC...................................... (1,000) 0 0
Long term gaming assets........................ 0 2,169 (2,169)
Cash acquired in the purchase of a business,
net of transaction and other costs............ 12,264 0 715
--------- -------- --------
Net cash used in investing activities..... (16,236) (19,893) (32,922)
--------- -------- --------
Cash flows from financing activities:
Proceeds from secured Bank Credit Facility..... 112,000 0 0
Proceeds from secured notes payable............ 0 0 3,358
Proceeds from unsecured notes payable.......... 0 0 1,681
Payment of secured Bank Credit Facility........ (112,000) (3,358) (1,386)
Payment of secured notes payable............... (4,917) 0 0
Payment of unsecured notes payable............. (25) (23) (3,813)
Proceeds from issuance of 9.5% Notes........... 125,000 0 0
Payment of 11.5% Boomtown First Mortgage
Notes......................................... (110,924) 0 0
Payments from minority interest partners....... 0 3,000 0
Common stock options exercised................. 1,995 0 0
Common stock repurchase and retirement......... 0 (1,962) 0
Dividends paid to preferred stockholders....... (1,520) (1,925) (1,925)
--------- -------- --------
Net cash provided by (used in) financing
activities............................... 9,609 (4,268) (2,085)
--------- -------- --------
Increase (decrease) in cash and cash
equivalents................................... 11,827 (10,484) (14,716)
Cash and cash equivalents at the beginning of
the period.................................... 11,922 22,406 37,122
--------- -------- --------
Cash and cash equivalents at the end of the
period........................................ $ 23,749 $ 11,922 $ 22,406
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1--Summary of Significant Accounting Policies
General Hollywood Park, Inc. (the "Company" or "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 gaming and sports related
opportunities. The Company owns and operates through its Boomtown, Inc.
("Boomtown") subsidiary 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 owns
two card club casinos in the Los Angeles metropolitan area. The Hollywood Park-
Casino is operated by the Company and the Crystal Park Hotel and Casino (the
"Crystal Park Casino"), which as of December 31, 1997, was 100% owned by the
Company (previously it was 93% owned by the Company) is leased to an
unaffiliated third party operator. The Company owns two premier thoroughbred
racing facilities, the Hollywood Park Race Track (the Hollywood Park-Casino is
located adjacent to the Hollywood Park Race Track), and Turf Paradise, Inc.
("Turf Paradise") which is located in Phoenix, Arizona. The Company also owns
Sunflower Racing, Inc. ("Sunflower") a greyhound and thoroughbred racing
facility in Kansas City, Kansas, though due to intense competition from nearby
Missouri riverboat gaming, on May 17, 1996, Sunflower filed for reorganization
under Chapter 11 of the Bankruptcy Code. Sunflower is operating as a debtor in
possession during the bankruptcy.
Consolidation The consolidated financial statements for the year ended
December 31, 1997, included the accounts of Hollywood Park and its wholly owned
subsidiaries: (a) Boomtown, which was acquired by the Company on June 30, 1997,
and was accounted for under the purchase method of accounting for a business
combination, and Boomtown's six active subsidiaries (1) Boomtown Hotel &
Casino, Inc., (2) Bayview Yacht Club, Inc., (3) Mississippi--I Gaming, L.P.,
(4) Louisiana Gaming Enterprises, Inc., (5) Louisiana--I Gaming and (6)
Boomtown Hoosiers, Inc.; (b) Hollywood Park Operating Company, and its two
wholly owned subsidiaries, Hollywood Park Food Services, Inc. and Hollywood
Park Fall Operating Company; (c) Turf Paradise, Inc.; (d) HP Yakama, Inc.; (e)
HP Kansas, Inc.; (f) HP/Compton, Inc. and HP Casino, Inc., which as of December
31, 1997, own 89.8% and 10.2%, respectively, of the Crystal Park Hotel and
Casino Development Company LLC, ("Crystal Park LLC"), which built and presently
leases the Crystal Park Casino, to an unaffiliated third party. As of March 31,
1996, the Company wrote off its investment in Sunflower and its wholly owned
subsidiary SR Food and Beverage, Inc., due to Sunflower's inability to compete
with nearby Missouri riverboat gaming, and as of April 1, 1996, no longer
consolidated Sunflower's operating results with the Company's. The Hollywood
Park-Casino is a division of Hollywood Park, Inc.
Restricted Cash Restricted cash as of December 31, 1997 and 1996, was for
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 racing on
a daily basis, except for seasonal admissions, which were recorded ratably over
the racing season. Expenses associated with racing revenues were charged
against income in those periods in which racing revenues were recognized. Other
expenses were recognized as they occurred throughout the year.
Gaming Revenue and Promotional Allowances Gaming revenues at the three
Boomtown properties consisted of the difference between gaming wins and losses,
or net win from gaming activity, and at the Hollywood Park-Casino 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, hotel rooms and other items provided to patrons on a complimentary
basis. The estimated cost of providing these promotional allowances during the
years ended December 31, 1997, and 1996, was $8,285,000 (which includes
Boomtown's promotional allowances as of June 30, 1997), and $1,316,000,
respectively. There were no comparable costs for the year ended December 31,
1995.
F-23
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Capitalized Interest Interest of $425,000 was capitalized during the year
ended December 31, 1997. No capitalized interest was recorded during the years
ended December 31, 1996, and 1995, 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.
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 expense, and betterments were
capitalized. The cost of property sold or otherwise disposed of and its
associated 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. In future
periods, if 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.
Earnings Per Share Basic 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. 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 original maturities of 90 days or less.
F-24
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 and
1995 balances to be consistent with the 1997 financial statement presentation.
Note 2--Acquisitions
Acquisition of Boomtown, Inc. 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 "Boomtown Merger"). As
a result of the Boomtown 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 per share (excluding shares repurchased from Edward P. Roski, Jr.
("Roski") and subsequently retired, as described below) were issued in the
Boomtown Merger.
The Boomtown Merger was accounted for under the purchase method of
accounting for a business combination. The purchase price of the Boomtown
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 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 value. The Boomtown 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 on July 1, 1997 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 Boomtown 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 annually and annual principal payments in five equal
installments of approximately $693,000 are due commencing July 1, 1998.
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"); whereby PCM leased
F-25
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and operated the gaming floors of the Hollywood Park-Casino, and the Company
operated all other aspects of the business. In 1994, under the California
Gaming Registration Act, it was then 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 and among other things allowed a publicly
traded racing association, such as Hollywood Park, to operate a card club
casino on the same premises as a race track. On November 17, 1995, Hollywood
Park purchased the gaming floor business from PCM for $2,640,000, which was
paid for with 218,099 shares of the Company's common stock. The approximately
$21,658,000 of excess acquisition cost over the recorded value of net assets
acquired from PCM was allocated to goodwill, and is being amortized over 40
years. The amortization of the goodwill is not deductible for income tax
purposes.
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 Boomtown Merger)
were combined with Hollywood Park's. Pro forma adjustments were made for the
following: elimination of the amortization of the issuance costs associated
with Boomtown's 11.5% First Mortgage Notes; amortization of the issuance costs
associated with the $125,000,000 of Hollywood Park and Hollywood Park Operating
Company Series A 9.5% Senior Subordinated Notes due 2007 (the "Notes") (see
Note 6. Secured and Unsecured Notes Payable); amortization of the excess
purchase price over net assets acquired in the Boomtown Merger; elimination of
the amortization of the discount associated with the Boomtown 11.5% First
Mortgage Notes; interest expense associated with the promissory notes from
Hollywood Park to Roski; elimination of the interest expense associated with
the Boomtown 11.5% 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 expense associated with the
pro forma adjustments.
Hollywood Park, Inc.
Unaudited Pro Forma Combined Consolidated Results of Operations
<TABLE>
<CAPTION>
1997 1996
-------- --------
(in thousands,
except per share
data)
<S> <C> <C>
Revenues:
Gaming................................................. $221,008 $208,699
Racing................................................. 68,844 71,308
Other.................................................. 59,232 56,576
-------- --------
349,084 336,583
-------- --------
Operating income (loss)(a)............................... 30,889 (18,083)
Net income (loss)........................................ $ 9,264 $(37,523)
======== ========
Dividend requirements on preferred stock................. $ 1,520 $ 1,925
Net income (loss) to common shareholders................. $ 7,744 $(39,448)
======== ========
Per common share:
Net income (loss)--basic............................... $ 0.31 $ (1.65)
Net income (loss)--diluted............................. $ 0.31 $ (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-26
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pending Merger with Casino Magic Corp. On February 19, 1998, the respective
Boards of Directors of Hollywood Park and Casino Magic Corp. ("Casino Magic")
approved and signed an Agreement and Plan of Merger among Casino Magic Corp.,
Hollywood Park, Inc., and HP Acquisition II, Inc. (a wholly owned subsidiary of
Hollywood Park), pursuant to which HP Acquisition II, Inc., will merge into
Casino Magic, and Casino Magic will survive and become a wholly owned
subsidiary of Hollywood Park. Hollywood Park will pay cash of $2.27 for each
issued and outstanding share of Casino Magic common stock, or approximately
$81,000,000.
On February 23, 1998, Hollywood Park entered into a voting agreement (the
"Voting Agreement") with Marlin F. Torguson ("Mr. Torguson") pursuant to which,
among other things, Mr. Torguson has agreed to vote the 7,954,500 shares of
Casino Magic common stock he beneficially owns in favor of approval and
adoption of the Agreement and Plan of Merger and the Casino Magic Merger and
any matter that could reasonably be expected to facilitate the Casino Magic
Merger. Mr. Torguson also agreed to continue to serve as an employee of Casino
Magic for three years following the Casino Magic Merger, and not to compete
with Hollywood Park or Casino Magic in any jurisdictions in which either
presently operates.
Casino Magic owns and operates dockside and riverboat gaming properties in
Bay St. Louis, Mississippi ("Casino Magic Bay St. Louis"), Biloxi, Mississippi
("Casino Magic Biloxi") and Bossier City, Louisiana, ("Casino Magic Bossier")
respectively, and is a 51% partner in two land-based casinos in Argentina.
Casino Magic Bay St. Louis, started operations in September 1992, on a
permanently moored barge in a 17 acre marina with the adjoining land based
facilities situated on 591 acres. Bay St. Louis is approximately 46 miles east
of New Orleans and 40 miles west of Biloxi. Casino Magic Bay St. Louis offers
approximately 39,500 square feet of gaming space, with 1,132 slot machines and
42 table games. The land based building is three stories with a restaurant,
buffet, snack bar, gift shop, and a live entertainment lounge. In December
1994, Casino Bay St. Louis also opened the Casino Magic Inn; a 201 room hotel,
including four deluxe and 20 junior suites. The property also contains the
Magic Dome, an 1,800 seat arena, which hosts approximately 50 events annually,
including nationally televised boxing matches, concerts and other special
events. With the late 1997 addition of the 18 hole Bridges Golf Resort, Casino
Magic Bay St. Louis is positioned as a full service vacation destination.
Casino Magic Biloxi began casino operations in June 1993 and is located on
the Gulf of Mexico in the Mississippi Gulf Coast Region. The property is
situated on the Front Bay on the beach of the Gulf of Mexico in a strip with
four other casinos, and is located on the major highway running through the
Mississippi Gulf Coast. (Boomtown Biloxi is located on the Back Bay of Biloxi.)
Casino Magic Biloxi conducts gaming from a permanently moored barge with
approximately 47,700 square feet of gaming space with 1,174 slot machines and
41 gaming tables. The land based facility is located adjacent to the barge on
the approximately 11.5 acre site. In late spring 1998, Casino Magic Biloxi
expects to open its 378 room luxury hotel (Casino Magic is anticipating a four-
star rating for this hotel), to include 16 master suites, 70 junior suites,
6,600 square feet of convention and meeting space, a full service restaurant
and numerous themed retail shops. The casino's land based facility is
approximately 21,600 square feet. Casino Magic Biloxi offers buffets, full
service restaurants and nationally franchised fast food services.
Casino Magic Bossier opened in October 1996, with casino operations
conducted from a dockside riverboat. The property is highly visible with
convenient access from Interstate Highway 20, a major thoroughfare between
Bossier City/Shreveport and the Dallas-Fort Worth area approximately 180 miles
to the west. The Casino Magic Bossier riverboat measures 254 feet long and 78
feet wide with approximately 30,000 square feet of gaming space, and offers 980
slot machines and 44 table games. The Casino Magic Bossier facility includes a
55,000 square foot entertainment pavilion connected to a garage providing
parking for approximately 1,400 vehicles. The entertainment pavilion includes
the 350 seat Abracadabra buffet
F-27
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
restaurant, a gift shop, a bar and lounge area, and a 300 seat live
entertainment theater. The entertainment pavilion also includes two smaller
full service restaurants. Casino Magic Bossier is just beginning construction
on an 188 room hotel with four master suites, 88 junior suites and additional
full service restaurants.
In December 1994, Casino Magic, through its wholly owned subsidiary, Casino
Magic Neuquen SA, ("Casino Magic Argentina") entered into a twelve year
concession agreement with the Province of Neuquen, Argentina. Casino Magic
Argentina operates two casinos in the Province of Neuquen in the cities of
Neuquen and San Martin de los Andes in west-central Argentina. Neuquen Province
is the gateway to the well established resort, tour destinations and ski
resorts of the Andes Mountains. There are approximately 900,000 residents
within a 50 mile radius of the two cities. Casino Magic Argentina, which began
operations in January 1995, includes approximately 29,000 square feet of gaming
space and contains approximately 64 table games, 400 slot machines and a 384
seat bingo facility.
Note 3--Supplemental Disclosure of Cash Flow Information
<TABLE>
<CAPTION>
For the years
ended December 31,
------------------
1997 1996 1995
------ ---- ------
(in thousands)
<S> <C> <C> <C>
Cash paid during the year for:
Interest............................................... $1,321 $299 $2,098
Income taxes........................................... 827 40 143
------ ---- ------
$2,148 $339 $2,241
====== ==== ======
</TABLE>
Note 4--Short Term Investments
As of December 31, 1997, Hollywood Park had liquidated its investments in
corporate bonds. During the year ended December 31, 1997, net proceeds from the
sale or redemption of corporate bond investments was approximately $4,766,000,
with gross realized gains and losses of approximately $9,000, and $88,000,
respectively.
As of December 31, 1996, short term investments consisted of corporate bonds
valued at $4,766,000, with Moody's ratings of Ba2 to B3, and Standard and Poors
ratings of BB+ to B-, though some of the bonds were 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 expected to liquidate
these investments in its normal operating cycle the investments were classified
as short term, were 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.
F-28
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 5--Property, Plant and Equipment
Property, plant and equipment held at December 31, 1997, and 1996 consisted
of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1997(a) 1996
-------- --------
(in thousands)
<S> <C> <C>
Land and land improvements................................ $ 50,945 $ 32,215
Buildings................................................. 270,271 150,935
Equipment................................................. 77,337 31,531
Vessel.................................................... 18,925 0
Construction in progress.................................. 21,896 128
-------- --------
439,374 214,809
Less accumulated depreciation............................. 138,708 83,974
-------- --------
$300,666 $130,835
======== ========
</TABLE>
- --------
(a) Includes Boomtown's assets.
Note 6--Secured and Unsecured Notes Payable
Notes payable as of December 31, 1997, and 1996 consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------
1997(a) 1996
--------- -----
(in thousands)
<S> <C> <C>
Secured notes payable....................................... $ 3,750 $ 0
9.5% Series A Notes......................................... 125,000 0
11.5% Boomtown First Mortgage Notes......................... 1,253 0
Capital lease obligations................................... 1,527 0
Unsecured note payable...................................... 4,009 317
--------- -----
135,539 317
Less current maturities..................................... 3,437 35
--------- -----
$ 132,102 $ 282
========= =====
</TABLE>
- --------
(a) Includes notes payable related to Boomtown.
Hollywood Park On June 30, 1997, Hollywood Park and a bank syndicate led by
Bank of America finalized the Bank Credit Facility, a reducing revolving credit
facility allowing for drawings up to $225,000,000. On August 7, 1997, the Bank
Credit Facility was reduced by $125,000,000 (the aggregate principal amount of
the Series A 9.5% Senior Subordinated Notes due 2007 (the "Notes") issued as
described below) to $100,000,000. Of the $100,000,000, as a result of covenant
limitations, approximately $88,800,000 was available as of December 31, 1997.
As of December 31, 1997, the Company did not have outstanding borrowings under
the Bank Credit Facility, except for a $2,035,000 letter of credit. 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.
On February 19, 1998, Hollywood Park announced the Casino Magic Merger, and
under the terms of the Agreement and Plan of Merger, Hollywood Park will pay
cash of $2.27 for each issued and outstanding share of Casino Magic common
stock, or approximately $81,000,000. The Company has begun discussions to amend
F-29
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the Bank Credit Facility to increase the borrowing capacity to provide the
funds required for the Casino Magic Merger. A formal amendment has not yet been
signed, and there is no assurance that such an amendment will be completed,
although the bank group has given verbal assurance of its intent to provide
such an increased facility.
The Bank Credit Facility has been amended twice. The first amendment, among
other matters, reduced the availability of the facility until the Bank Credit
Facility was approved by the Louisiana Gaming Control Board. Hollywood Park
received this approval on July 10, 1997. The second amendment, among other
things, allowed the co-issuance of the Notes by Hollywood Park Operating
Company 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 line 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 Hollywood Park, 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, depreciation and amortization ("EBITDA"). The margins
start at 1.25% for Eurodollar loans and at 0.25% for Base Rate loans, at a
funded debt to EBITDA ratio of less than 1.50. Thereafter, the margin 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
December 31, 1997, were 2.00% with respect to the Eurodollar Rate based
interest rate and 1.00% with respect to the Base Rate interest rate.
The Bank Credit Facility allows for interest rate swap agreements, or other
interest rate protection agreements, up to a maximum notional amount of
$125,000,000. Presently, Hollywood Park does not utilize such financial
instruments.
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 Hollywood Park'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
January 1, 1998, the commitment fee is 50 basis points.
On July 3, 1997, Hollywood Park borrowed $112,000,000 from the Bank Credit
Facility to fund Boomtown's offer to purchase the 11.5% Boomtown First Mortgage
Notes (the "Boomtown 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
Series A 9.5% Senior Subordinated Notes due 2007 (the "Series A Notes"). The
Series A
F-30
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Notes were co-issued by Hollywood Park and Hollywood Park Operating Company,
and were issued pursuant to a private offering under the Securities Act of
1933, as amended (the "Securities Act"). The balance of the proceeds from the
issuance of the Series A Notes was used primarily for the purchase of a new
riverboat for Boomtown New Orleans, and other general corporate needs.
On March 20, 1998, the Company completed a registered exchange offer for the
Series A Notes, pursuant to which all $125,000,000 principal amount of the
Series A Notes were exchanged by the holders for $125,000,000 aggregate
principal amount of Series B 9.5% Senior Subordinated Notes due 2007 of the
Company and Hollywood Park Operating Company (together with the Series A Notes,
the "Notes") which were registered under the Securities Act on Form S-4.
Interest on the Notes is payable semi-annually, on February 1st and August 1st.
The Notes will be redeemable at the option of Hollywood Park and Hollywood Park
Operating 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 face amount
decreasing on each subsequent anniversary date. The Notes are unsecured
obligations of Hollywood Park and Hollywood Park Operating Company, guaranteed
by all other material restricted subsidiaries of either Hollywood Park or
Hollywood Park Operating Company.
The indenture governing the Notes contains certain covenants that, among
other things, limit the ability of Hollywood Park, Hollywood Park Operating
Company and their restricted subsidiaries to incur additional indebtedness and
issue preferred stock, pay dividends or make other distributions, repurchase
equity interests 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. There are no provisions in the indenture governing the Notes
which will prevent the previously mentioned Casino Magic Merger.
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 to purchase the Hollywood Park common stock issued to Roski in the
Boomtown Merger. The promissory note bears interest equal to the
Bank of America reference rate plus 1.0%. Interest is payable annually with
five annual principal payments of approximately $693,000 commencing July 1,
1998.
Boomtown In November 1993, Boomtown issued $103,500,000 of 11.5% 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, along with accrued interest thereon.
An additional $105,000 of the remaining Boomtown Notes were tendered in the
post Boomtown Merger change of control purchase offer, at a price of $1,010 for
each $1,000, completed August 12, 1997. As of December 31, 1997, there were
$1,253,000 of 11.5% Boomtown Notes outstanding.
On August 4, 1997, Hollywood Park executed a promissory note for the
purchase of 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 due of $3,750,000 payable in three equal annual installments of
$1,250,000. Interest on the promissory note is equal to the prime interest rate
in effect on the first day of each year. The principal amount of the promissory
note, together with accrued interest, may be repaid, without penalty, in whole
or in part, at any time.
On August 7, 1997, Boomtown New Orleans prepaid a 13.0% note secured by the
former riverboat, then in use, for approximately $2,107,000 (inclusive of a
1.0% prepayment penalty).
As of December 31, 1997, Boomtown had a note payable of approximately
$252,000 along with various capital lease obligations for gaming and other
operating equipment, totaling approximately $1,527,000.
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 Hollywood
F-31
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Park's acquisition of Sunflower. As of December 31, 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 it issues its pending ruling regarding approval of Sunflower's proposed
plan of reorganization. The Cash Collateral Agreement requires Sunflower to
make certain cash payments to Wyandotte County, Kansas, the creditors under the
Sunflower Credit and TRAK East (the unaffiliated non-profit holder of the pari-
mutuel racing license in Kansas, and operator of racing at Sunflower).
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 Tribe of Oklahoma (the "Wyandotte Tribe"). The Plan was
amended on October 31, 1997. Under the Plan, some or all of the land would be
held by the United States Government in trust for the Wyandotte Tribe, and a
casino would be developed on the property. Upon completion of the casino, HP
Kansas, Inc. ("HP Kansas") (a wholly-owned subsidiary of Hollywood Park) and a
partner (North American Sports Management or an affiliate) will provide
financing and consulting services for the development and operation of a
casino. Under this arrangement, HP Kansas would be entitled to receive a share
of the revenues of the casino. Under the plan, in order to allow the property
to be released as collateral and sold to the Wyandotte Tribe, Sunflower will be
required to have standby letters of credit issued to support certain payments
to be made to the lenders under the Sunflower Senior Credit and the Wyandotte
County Treasurer's office. The aggregate amount of such letters of credit is
anticipated to be in excess of $29,000,000. Hollywood Park will arrange for the
issuance of such letters of credit on behalf of Sunflower. It is anticipated
that the earliest that the bankruptcy court will rule on the Plan is in the
second quarter of 1998.
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 Hollywood Park 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.
Annual Maturities As of December 31, 1997, annual maturities of total notes
and loans payable are as follows:
<TABLE>
<CAPTION>
Year ending:
------------ (in thousands)
<S> <C>
December 31, 1998........................................... $ 3,437
December 31, 1999........................................... 2,162
December 31, 2000........................................... 2,050
December 31, 2001........................................... 805
December 31, 2002........................................... 776
Thereafter.................................................. 126,309
</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 7--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
F-32
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 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 8--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>
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-33
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following sets forth the pro forma financial results under the
implementation of SFAS 123:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------
1997 1996 1995
------- ------- -------
(in thousands, except
per share data)
<S> <C> <C> <C>
Net income (loss) before stock-based
compensation expense........................... $ 8,670 $(4,249) $(1,162)
Stock-based compensation expense................ 543 81 4
------- ------- -------
Pro forma net income (loss)..................... $ 8,127 $(4,330) $(1,166)
======= ======= =======
Dividend requirements on convertible preferred
stock.......................................... $ 1,520 $ 1,925 $ 1,925
Pro forma net income (loss) to common
shareholders................................... $ 6,607 $(6,255) $(3,091)
======= ======= =======
Per common share:
Pro forma net income (loss)--basic............ $ 0.30 $ (0.34) $ (0.17)
Pro forma net income (loss)--diluted.......... $ 0.30 $ (0.34) $ (0.17)
Number of shares--basic......................... 22,010 18,505 18,399
Number of shares--diluted....................... 22,340 20,797 20,691
</TABLE>
Note 9--Racing Operations
The Company conducts thoroughbred racing at its Hollywood Park and Turf
Paradise race tracks, located in California and Arizona, respectively.
Sunflower race track, in Kansas, is primarily a greyhound racing facility with
a limited number of days of thoroughbred racing each summer. 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 racing results and statistics are included in
this note for 1995 only. Sunflower is operating as a debtor in possession
during the bankruptcy. 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, which was entered into in
September 1989, 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 terms.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Live on-track race days
Hollywood Park race track..................................... 102 103 97
Turf Paradise race track...................................... 159 166 171
Sunflower--Horses............................................. -- -- 49
Sunflower--Greyhounds......................................... -- -- 294
</TABLE>
F-34
<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>
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Hollywood Park--live horse racing
Total pari-mutuel handle........................... $663,175 $677,827 $643,246
Less patrons' winning tickets...................... 535,816 547,775 520,291
-------- -------- --------
127,359 130,052 122,955
Less:
State pari-mutuel tax............................ 15,923 19,263 20,691
City of Inglewood pari-mutuel tax................ 1,176 1,287 1,384
Racing purses and awards......................... 25,881 26,300 26,888
Satellite wagering fees.......................... 11,738 12,784 13,545
Interstate location fees......................... 47,524 44,815 34,170
Other fees....................................... 356 390 419
-------- -------- --------
Pari-mutuel commissions............................ 24,761 25,213 25,858
Add off-track independent handle commissions....... 2,195 2,280 2,251
-------- -------- --------
Total pari-mutuel commissions...................... $ 26,956 $ 27,493 $ 28,109
======== ======== ========
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Turf Paradise--live horse racing
Total pari-mutuel handle........................... $166,976 $147,748 $111,509
Less patrons' winning tickets...................... 129,212 114,585 86,460
-------- -------- --------
37,764 33,163 25,049
Less:
State pari-mutuel tax............................ 0 18 345
Racing purses and awards......................... 4,339 4,501 4,757
State sales tax.................................. 183 302 415
Off-track commissions............................ 316 115 117
Interstate location fees......................... 24,790 20,034 10,943
-------- -------- --------
Pari-mutuel commissions............................ 8,136 8,193 8,472
Add off-track independent handle commissions....... 193 166 699
-------- -------- --------
Total pari-mutuel commissions including charity
days.............................................. 8,329 8,359 9,171
Less charity day pari-mutuel commissions........... 18 17 0
-------- -------- --------
Total pari-mutuel commissions net of charity days.. $ 8,311 $ 8,342 $ 9,171
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Greyhounds Horses
1995 1995
---------- ------
(in thousands)
<S> <C> <C>
TRAK East at Sunflower--live racing
Total pari-mutuel handle..................................... $47,406 $2,844
Less patrons' winning tickets................................ 37,379 2,273
------- ------
10,027 571
Less:
State pari-mutuel tax...................................... 1,721 104
Racing purses and awards................................... 2,230 190
------- ------
Total pari-mutuel commissions................................ $ 6,076 $ 277
======= ======
</TABLE>
F-35
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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. The charity day
payments are 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 Company made charity day payments
of $310,000, $338,000 and $370,000 for the years ended December 31, 1997, 1996
and 1995, respectively.
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 $18,000 to the distributing agent in 1997, and paid $17,000 in
1996.
Hollywood Park Race Track conducts simulcast meets of live races held at
local southern California race tracks and simulcasts races from northern
California tracks concurrent with the Company's live race meets.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Hollywood Park--simulcast racing
Pari-mutuel handle:
Thoroughbred meets................................ $371,716 $375,910 $379,263
Quarter Horse meets............................... 22,821 23,067 22,793
Harness meets..................................... 7,402 6,165 4,391
-------- -------- --------
$401,939 $405,142 $406,447
======== ======== ========
Pari-mutuel commissions:
Thoroughbred meets................................ $ 12,863 $ 12,669 $ 11,527
Quarter Horse meets............................... 449 454 457
Harness meets..................................... 144 120 86
-------- -------- --------
$ 13,456 $ 13,243 $ 12,070
======== ======== ========
</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 are as follows:
<TABLE>
<CAPTION>
1995
--------------
(in thousands)
<S> <C>
TRAK East at Sunflower--simulcast racing
Pari-mutuel handle:
Greyhounds................................................ $10,871
Horses.................................................... 29,600
-------
$40,471
=======
Pari-mutuel commission:
Greyhounds................................................ $ 2,342
Horses.................................................... 5,742
-------
$ 8,084
=======
</TABLE>
F-36
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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>
1997 1996 1995
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Turf Paradise--simulcast racing
Pari-mutuel handle all meets........................... $60,493 $55,814 $55,093
Pari-mutuel commissions all meets...................... 5,020 4,768 3,909
</TABLE>
Note 10--Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 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.
The composition of the Company's income tax expense for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- ------
(in thousands)
<S> <C> <C> <C>
Year ended December 31, 1997:
U.S. Federal...................................... $(1,616) $ 6,972 $5,356
State............................................. (698) 1,192 494
------- ------- ------
$(2,314) $ 8,164 $5,850
======= ======= ======
Year ended December 31, 1996:
U.S. Federal...................................... $ 4,341 $(1,681) $2,660
State............................................. (3,293) 4,092 799
------- ------- ------
$ 1,048 $ 2,411 $3,459
======= ======= ======
Year ended December 31, 1995:
U.S. Federal...................................... $ 0 $ 473 $ 473
State............................................. 42 178 220
------- ------- ------
$ 42 $ 651 $ 693
======= ======= ======
</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>
1997 1996 1995
------ ------ -----
(in thousands)
<S> <C> <C> <C>
Income (loss) before income tax expense, at the
statutory rate.................................... $4,935 $ (269) $(159)
Employee meals................................... 192 0 0
Goodwill amortization............................ 317 195 72
Political and lobbying costs..................... 246 291 353
State income taxes, net of federal tax benefits.. 494 800 145
Other non-deductible expenses.................... (334) 105 260
Additional provisions............................ 0 2,337 22
------ ------ -----
Income tax expense................................. $5,850 $3,459 $ 693
====== ====== =====
</TABLE>
F-37
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, and 1996, 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>
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Current deferred tax assets:
Workers' compensation insurance reserve.................... $ 790 $ 790
General liability insurance reserve........................ 1,012 690
Legal accrual.............................................. 58 58
Write off of investment in Sunflower....................... 3,111 3,111
Development costs.......................................... 0 0
Lawsuit settlement......................................... 1,104 1,104
Vacation and sick pay accrual.............................. 872 270
Bad debt allowance......................................... 528 437
Other...................................................... 1,999 435
-------- --------
Current deferred tax assets................................ 9,474 6,895
Less valuation allowance................................... (306) (120)
-------- --------
Current deferred tax assets................................ 9,168 6,775
Current deferred tax liabilities:
Business insurance and other............................... (1,050) (353)
-------- --------
Net current deferred tax assets............................ $ 8,118 $ 6,422
======== ========
Non-current deferred tax assets:
Net operating loss carryforwards........................... $ 5,489 $ 0
General business investment tax credits.................... 828 36
Alternative minimum tax credits............................ 3,946 1,244
Los Angeles revitalization zone tax credits................ 11,798 9,299
Boomtown Merger costs...................................... 2,406 0
Capital loss divestiture of Boomtown Las Vegas............. 3,147 0
Other...................................................... 2,717 42
-------- --------
Non-current deferred tax assets............................ 30,331 10,621
Less valuation allowance................................... (13,524) (5,511)
-------- --------
Non-current deferred tax assets............................ 16,807 5,110
-------- --------
Non-current deferred tax liabilities:
Expansion plans............................................ (400) (400)
Los Angeles revitalization zone accelerated write-off...... (461) (461)
Excess book value over tax basis of acquired assets........ (4,048) 0
Depreciation and amortization.............................. (17,382) (10,580)
Other...................................................... (826) (2,734)
-------- --------
Non-current deferred tax liabilities....................... (23,117) (14,175)
-------- --------
Net non-current deferred tax liabilities................... $ (6,310) $ (9,065)
======== ========
</TABLE>
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.
F-38
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
December 31,
--------------
1997 1996
------- ------
(in thousands)
<S> <C> <C>
Valuation allowance at beginning of period.................. $ 5,632 $5,330
Valuation allowance for Boomtown NOL carryforwards and tax
credits.................................................... 5,699 0
Los Angeles revitalization zone tax credit.................. 2,499 302
------- ------
Valuation allowance at end of period........................ $13,830 $5,632
======= ======
</TABLE>
As of December 31, 1997, the Company had federal net operating loss ("NOL")
and capital loss ("CL") carryforwards of approximately $17,800,000, and
$8,600,000, respectively, comprised principally of NOL carryforwards acquired
in the Boomtown Merger, and CL carryforwards resulting from the disposition of
Boomtown's Las Vegas property. The NOL carryforwards expire on various dates
through 2012, and the CL carryforwards expire on various dates through 2002. In
addition, the Company has approximately $400,000 of general business tax
credits, comprised principally of FICA credits, and approximately $3,800,000 of
alternative minimum tax credits available to reduce future federal income
taxes. These tax credits generally cannot reduce federal taxes paid below the
amount of alternative minimum tax. The general business tax credits expire in
2000. The alternative minimum tax credits do not expire.
Under several provisions of the Internal Revenue Code (the "Code") and the
regulations promulgated thereunder, the utilization of NOL, CL and tax credit
carryforwards to reduce tax liability is restricted under certain
circumstances. Events which cause such a limitation include, but are not
limited to, certain changes in the ownership of a corporation. The Boomtown
Merger caused such a change in ownership with respect to Boomtown. As a result,
the Company's use of approximately $14,800,000 of Boomtown's NOL carryforwards,
$1,400,000 of Boomtown's CL carryforwards, and $3,400,000 of Boomtown's tax
credit carryforwards is subject to certain limitations imposed by Sections 382
and 383 of the Code and by the separate return limitation year rules of the
consolidated return regulations. These limitations restrict the amount of such
carryforwards that may be used by the Company in any taxable year and,
consequently, are expected to defer the Company's use of a substantial portion
of such carryforwards and may ultimately prevent the Company's use of a portion
thereof. Therefore, a valuation allowance has been recorded related to the
Boomtown carryforwards.
For California tax purposes, as of December 31, 1997, the Company also had
approximately $11,700,000 of Los Angeles Revitalization Zone ("LARZ") tax
credits. The LARZ tax credits can only be used to reduce certain California tax
liability and cannot be used to reduce federal tax liability. A valuation
allowance has been recorded with respect to the LARZ tax credits because the
Company may not generate enough income subject to California tax to utilize the
LARZ tax credits before they expire.
Note 11--Stockholders' Equity
On June 30, 1997, the Company acquired Boomtown 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 net shares of Hollywood
Park common stock were issued. In connection with the Boomtown Merger, the
Company purchased and retired 446,491 shares of Hollywood Park common stock
received by a former Boomtown shareholder.
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.
F-39
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 12--Lease Obligations
The Company leases certain equipment for use in gaming and racing operations
and general office equipment. Minimum lease payments required under operating
leases that have initial terms in excess of one year as of December 31, 1997
are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1998..................................... $1,870
1999..................................... 1,104
2000..................................... 422
2001..................................... 380
2002..................................... 366
Thereafter............................... 529
</TABLE>
Total rent expense for these long term lease obligations for the years ended
December 31, 1997, 1996 and 1995 was $2,453,000, $1,378,000, and $1,318,000,
respectively.
Note 13--Retirement Plans
As of January 31, 1997, Hollywood Park terminated its Pension Plan, which
was a non-contributory defined benefit Pension Plan covering certain employees
of Hollywood Park, Inc. and Hollywood Park Operating Company. Pension Plan
participants' accrued Pension Plan benefits were frozen as of September 1,
1996, except for certain retained participants (participants who, because of
legal requirements, including the provisions of the National Labor Relations
Act, were represented by a collective bargaining agent), whose accrued Pension
Plan benefits were frozen as of December 31, 1996. The funds accumulated under
the Pension Plan were distributed to the Pension Plan participants, and no
Pension Plan assets were paid to the Company. During 1996, the Pension Plan was
subject to the full funding limitation and thus no contributions were made.
Retirement Plans Funded Status
<TABLE>
<CAPTION>
December 31,
-------------
1997 1996
----- -------
(in
thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
$2,627,000 at December 31, 1996.............................. $0 $ 2,627
===== =======
Projected benefit obligation for service rendered to date....... $0 $ 2,627
Less Pension Plan assets at fair value.......................... 0 4,436
Less Pension Plan contribution.................................. 0 0
----- -------
Pension Plan assets in excess of projected benefit obligation... 0 1,809
Unrecognized net gain from past experience different from that
assumed and effects of changes in assumptions.................. 0 (1,052)
Unrecognized net asset being recognized over 15 years........... 0 (452)
----- -------
Pension Plan asset.............................................. $0 $ 305
===== =======
Net pension expense--Service cost............................... $0 $ 698
Net pension expense--Interest cost.............................. 0 325
Actual return on assets......................................... 0 (784)
Net amortization and deferral................................... 0 255
----- -------
Net periodic pension cost....................................... $0 $ 494
===== =======
</TABLE>
F-40
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The December 31, 1996, reserve liabilities and related asset values for the
annuity contract were 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 weighted average discount rate used in determining the actuarial present
value of the projected benefit obligations was 8.0% at December 31, 1996. The
expected long term rate of return on assets was 8.0% at December 31, 1996.
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, 1997, 1996 and 1995 totaled $1,842,000, $1,872,000, and
$1,781,000, respectively. Contributions to the collectively-bargained plans
were 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 was 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.
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 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 14--Related Party Transactions
In November 1993, Hollywood Park entered into 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. Hollywood Park reimburses Hubbard Enterprises for
expenses incurred as a result of Hollywood Park's use of the aircraft, which
totaled approximately $106,000 in 1997, $120,000 in 1996, and $126,000 in 1995.
In May 1988, Boomtown acquired all of the outstanding stock of Boomtown
Hotel & Casino, Inc. which owns and operates Boomtown Reno for $16,700,000 in
cash (the "1988 Acquisition"). In order to finance the 1988 Acquisition,
including the retirement of existing debt, Boomtown sold equity securities to
Kenneth Rainin and Timothy J. Parrott, and Boomtown Reno entered into various
loan documents with Merrill Lynch Interfunding, Inc. Pursuant to a stock
purchase agreement, Mr. Rainin purchased 2,000 shares of Boomtown preferred
stock and 3,042,000 shares of Boomtown common stock for an aggregate purchase
price of approximately $4,000,000 in cash, and Mr. Parrott purchased 270,738
shares of Boomtown common stock for an aggregate purchase price of $222,000, of
which $1,000 was paid in cash and $221,000 by a promissory note (the "Parrott
Note") secured by a pledge to Boomtown of all of the shares owned by Mr.
Parrott. The Parrott Note, as amended in April 1997, provides that (I) interest
on the Parrott Note, which accrues at a rate of 6.0% per annum, compounded
annually, is payable in arrears on April 7th of each year, commencing April 7,
1998, and (ii) principal is payable in four annual installments beginning April
7, 1998. The Parrott Note was previously amended in November 1994 to provide
that the shares owned by Mr. Parrott would be released from the pledge and
would no longer secure the amounts outstanding under the Parrott Note.
Hollywood Park notes
F-41
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
that the interest rate of 6% under the amended Parrott Note is less than
Hollywood Park's current borrowing rate. However, this interest rate was in
effect under the original version of the Parrott Note executed in 1988 prior to
Boomtown's public offering and Hollywood Park's subsequent acquisition of
Boomtown.
With the exception of the interest rate on the Parrott Note, Hollywood Park
believes that the terms of the following transactions were at least as
favorable as could have been obtained by Hollywood Park from third parties in
arms length transactions.
Note 15--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.
As of December 31, 1997, all of the 625,000 shares eligible for issuance
under the 1993 Plan had either been issued or were subject to outstanding
options, and of the 900,000 shares eligible for issuance under the 1996 Plan,
40,000 were subject to outstanding options. In addition, 1,008,454 shares of
Hollywood Park common stock were issuable upon exercise of options granted
before the Boomtown Merger under Boomtown's 1990 Stock Option Plan and the 1992
Director Option Plan, these options were assumed by Hollywood Park in the
Boomtown Merger.
The following table summarizes information related to shares under option
and shares available for grant under the Plan.
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- -------
<S> <C> <C> <C>
Options outstanding at beginning of year.... 622,500 249,000 235,000
Options granted during the year............. 261,000 413,500 15,000
Options expired or forfeited during the
year....................................... (26,001) (40,000) (1,000)
--------- --------- -------
Options outstanding at end of year.......... 857,499 622,500 249,000
========= ========= =======
Shares available for issuance under the 1993
Plan....................................... 625,000 625,000 625,000
Shares available for issuance under the 1996
Plan....................................... 900,000 900,000 0
--------- --------- -------
Total shares available for issuance....... 1,525,000 1,525,000 625,000
========= ========= =======
Per share price of outstanding options
issued in prior year....................... $ 10.00 $ 10.00 $ 13.00
Per share price of outstanding options
issued in prior year....................... $ 11.50 $ 10.00 $ 13.25
Per share price of outstanding options
issued in current year..................... $ 14.75 $ 11.50 --
Number of shares subject to exercisable
options at end of year..................... 696,813 188,332 128,000
</TABLE>
F-42
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 16--Commitments and Contingencies
On August 6, 1997, Hollywood Park and Hollywood Park Operating Company, as
co-obligors, issued $125,000,000 of Notes (as previously discussed). The Notes
are fully and unconditionally, jointly and severally, guaranteed on a senior
subordinated basis by all of Hollywood Park's material subsidiaries.
Note 17--Unaudited Quarterly Information
The following is a summary of unaudited quarterly financial data for the
years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997
--------------------------------
Dec. Sept. June
31, 30, 30, Mar. 31,
------- ------- ------- --------
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Revenues................................. $89,779 $85,210 $46,324 $ 26,815
======= ======= ======= ========
Net income (loss)........................ $ 1,551 $ 2,411 $ 5,603 $ (895)
======= ======= ======= ========
Net income (loss) available to (allocated
to) common shareholders................. $ 1,551 $ 1,853 $ 5,122 $ (1,376)
======= ======= ======= ========
Per common share:
Net income (loss)--basic............... $ 0.06 $ 0.08 $ 0.28 $ (0.07)
======= ======= ======= ========
Net income (loss)--diluted............. $ 0.06 $ 0.08 $ 0.27 $ (0.07)
======= ======= ======= ========
Cash dividends........................... $ 0.00 $ 0.00 $ 0.00 $ 0.00
======= ======= ======= ========
<CAPTION>
1996
--------------------------------
Dec. Sept. June
31, 30, 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)
======= ======= ======= ========
Per common share:
Net income (loss)--basic............... $ 0.15 $ 0.01 $ 0.26 $ (0.74)
======= ======= ======= ========
Net income (loss)--diluted............. $ 0.15 $ 0.01 $ 0.25 $ (0.74)
======= ======= ======= ========
Cash dividends......................... $ 0.00 $ 0.00 $ 0.00 $ 0.00
======= ======= ======= ========
</TABLE>
The primary reason for the loss for the quarter ended March 31, 1996, 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.
Note 18--Consolidating Condensed Financial Information
Hollywood Park's subsidiaries (excluding Sunflower and other inconsequential
subsidiaries) have fully and unconditionally guaranteed the payment of all
obligations under the Hollywood Park 9.5% Senior Subordinated Notes due 2007.
The following is the consolidating financial information for the co-obligors
and their respective subsidiaries:
F-43
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information
As of and For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Hollywood (b) (c)
Hollywood Park (a) Majority Wholly Consolidating
Park, Inc. Operating Wholly Owned Owned Owned Non- and Hollywood
(Parent Co. Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) (co-obligor) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------ ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
As of and for the year
ended Dec. 31, 1997
Balance Sheet
Current assets.......... $ 19,844 $ 8,568 $ 25,074 $ 6,720 $ 0 $ 0 $ 60,206
Property, plant and
equipment, net......... 68,515 23,753 140,105 68,293 0 0 300,666
Other non-current
assets................. 22,306 0 29,320 7,611 0 (1,080) 58,157
Investment in
subsidiaries........... 126,121 15,132 116,020 0 0 (257,273) 0
Inter-company........... 125,210 148,380 122,035 0 0 (395,625) 0
-------- --------- --------- ------- --- --------- --------
$361,996 $ 195,833 $ 432,554 $82,624 $ 0 $(653,978) $419,029
======== ========= ========= ======= === ========= ========
Current liabilities..... $ 16,890 $ 14,232 $ 19,583 $ 6,612 $ 0 $ 0 $ 57,317
Notes payable, long
term................... 2,406 125,256 1,936 2,504 0 0 132,102
Other non-current
liabilities............ 4,753 5,202 83 0 0 (3,728) 6,310
Inter-company........... 146,145 21,589 178,448 49,443 0 (395,625) 0
Minority interest....... 0 0 0 0 0 1,946 1,946
Equity.................. 191,802 29,554 232,504 24,065 0 (256,571) 221,354
-------- --------- --------- ------- --- --------- --------
$361,996 $ 195,833 $ 432,554 $82,624 $ 0 $(653,978) $419,029
======== ========= ========= ======= === ========= ========
Statement of Operations
Revenues:
Gaming................. $ 50,820 $ 0 $ 58,622 $28,217 $ 0 $ 0 $137,659
Racing................. 0 39,930 28,914 0 0 0 68,844
Food and beverage...... 4,659 0 13,483 1,752 0 0 19,894
Equity in
subsidiaries.......... 13,963 3,735 (43) 0 0 (17,655) 0
Inter-company.......... 0 0 4,823 0 0 (4,823) 0
Other.................. 4,601 1,808 13,789 1,533 0 0 21,731
-------- --------- --------- ------- --- --------- --------
74,043 45,473 119,588 31,502 0 (22,478) 248,128
Expenses:
Gaming................. 28,353 0 32,370 14,010 0 0 74,733
Racing................. 0 17,822 12,482 0 0 0 30,304
Food and beverage...... 9,658 0 13,784 2,303 0 0 25,745
Administrative and
other................. 18,282 14,536 33,277 8,792 0 0 74,887
REIT restructuring..... 2,483 0 0 0 0 0 2,483
Depreciation and
amortization.......... 4,632 3,804 6,229 3,459 0 33 18,157
-------- --------- --------- ------- --- --------- --------
63,408 36,162 98,142 28,564 0 33 226,309
-------- --------- --------- ------- --- --------- --------
Operating income
(loss)................. 10,635 9,311 21,446 2,938 0 (22,511) 21,819
Interest expense........ 1,789 5,368 (37) 182 0 0 7,302
Inter-company interest.. 0 0 2,244 2,579 0 (4,823) 0
-------- --------- --------- ------- --- --------- --------
Income (loss) before
minority interests and
taxes.................. 8,846 3,943 19,239 177 0 (17,688) 14,517
Minority interests...... 0 0 0 0 0 (3) (3)
Income tax expense...... 4,124 0 1,726 0 0 0 5,850
-------- --------- --------- ------- --- --------- --------
Net income (loss)....... $ 4,722 $ 3,943 $ 17,513 $ 177 $ 0 $ (17,685) $ 8,670
======== ========= ========= ======= === ========= ========
Statement of Cash Flows:
Net cash provided by
(used in) operating
activities............ $ 19,559 $(117,960) $ 129,260 $ 5,250 $ 0 $ (17,655) $ 18,454
Net cash provided by
(used in) investing
activities............ 14,747 (3,139) (23,516) (4,328) 0 0 (16,236)
Net cash provided by
(used in) financing
activities............ 475 124,975 (114,345) (2,373) 0 877 9,609
</TABLE>
F-44
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information
As of and For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Hollywood (b) (c)
Hollywood Park (a) Majority Wholly Consolidating
Park, Inc. Operating Wholly Owned Owned Owned Non- and Hollywood
(Parent Co. Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) (co-obligor) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------ ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
As of and for the year
ended Dec. 31, 1996
Balance Sheet
Current assets.......... $ 23,522 $ 7,362 $ 9,646 $ 429 $ 0 $ 0 $ 40,959
Property, plant and
equipment, net......... 70,443 24,353 12,786 23,253 0 0 130,835
Other non-current
assets................. 23,322 0 5,108 5,662 0 0 34,092
Investment in
subsidiaries........... 28,723 45,432 23,852 0 0 (98,007) 0
Inter-company........... 72,099 11,386 0 0 0 (83,485) 0
-------- ------- ------- ------- ------- --------- --------
$218,109 $88,533 $51,392 $29,344 $ 0 $(181,492) $205,886
======== ======= ======= ======= ======= ========= ========
Current liabilities..... $ 16,324 $ 7,032 $11,807 $ 201 $ 0 $ 0 $ 35,364
Notes payable, long
term................... 0 282 0 0 0 0 282
Other non-current
liabilities............ 3,859 5,206 0 0 0 0 9,065
Inter-company........... 39,851 50,479 7,677 0 0 (98,007) 0
Minority interest....... 0 0 0 0 0 3,015 3,015
Equity.................. 158,075 25,534 31,908 29,143 0 (86,500) 158,160
-------- ------- ------- ------- ------- --------- --------
$218,109 $88,533 $51,392 $29,344 $ 0 $(181,492) $205,886
======== ======= ======= ======= ======= ========= ========
Statement of Operations
Revenues:
Gaming................. $ 50,272 $ 0 $ 0 $ 445 $ 0 $ 0 $ 50,717
Racing................. 0 41,423 28,568 0 1,317 0 71,308
Food and beverage...... 4,956 0 8,533 0 458 0 13,947
Equity in
subsidiaries.......... 1,751 3,408 0 0 0 (5,159) 0
Other.................. 4,993 1,915 338 0 7 0 7,253
-------- ------- ------- ------- ------- --------- --------
61,972 46,746 37,439 445 1,782 (5,159) 143,225
-------- ------- ------- ------- ------- --------- --------
Expenses:
Gaming................. 27,249 0 0 0 0 0 27,249
Racing................. 0 17,999 11,903 0 265 0 30,167
Food and beverage...... 10,930 0 8,235 0 408 0 19,573
Administrative and
other................. 18,316 15,059 9,556 1 1,030 0 43,962
Write off of investment
in Sunflower.......... 11,412 0 0 0 0 0 11,412
Depreciation and
amortization.......... 4,665 3,645 1,479 319 536 51 10,695
-------- ------- ------- ------- ------- --------- --------
72,572 36,703 31,173 320 2,239 51 143,058
-------- ------- ------- ------- ------- --------- --------
Operating income
(loss)................. (10,600) 10,043 6,266 125 (457) (5,210) 167
Interest expense........ 134 27 0 0 781 0 942
-------- ------- ------- ------- ------- --------- --------
Income (loss) before
minority interests and
taxes.................. (10,734) 10,016 6,266 125 (1,238) (5,210) (775)
Minority interests...... 0 0 0 0 0 15 15
Income tax expense...... 3,421 0 38 0 0 0 3,459
-------- ------- ------- ------- ------- --------- --------
Net income (loss)....... $(14,155) $10,016 $ 6,228 $ 125 $(1,238) $ (5,225) $ (4,249)
======== ======= ======= ======= ======= ========= ========
Statement of Cash Flows:
Net cash provided by
(used in) operating
activities............ $ (6,205) $ 4,956 $ 2,426 $ 200 $(3,588) $ 15,888 $ 13,677
Net cash used in
investing activities.. (963) (5,992) (354) 0 0 (12,584) (19,893)
Net cash used in
financing activities.. (4,245) (23) 0 0 0 0 (4,268)
</TABLE>
F-45
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information
As of and For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Hollywood (b) (c)
Hollywood Park (a) Majority Wholly Consolidating
Park, Inc. Operating Wholly Owned Owned Owned Non- and Hollywood
(Parent Co. Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) (co-obligor) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------ ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
As of and for the year
ended Dec. 31, 1995
Statement of Operations
Revenues:
Gaming................. $ 26,656 $ 0 $ 0 $ 0 $ 0 $ 0 $ 26,656
Racing................. 0 42,648 27,542 0 6,846 0 77,036
Food and beverage...... 7,422 0 9,489 0 2,872 0 19,783
Equity in
subsidiaries.......... (3,610) 1,983 0 0 0 1,627 0
Other.................. 2,420 4,176 444 0 57 0 7,097
-------- ------- ------- --- ------- ------- --------
32,888 48,807 37,475 0 9,775 1,627 130,572
-------- ------- ------- --- ------- ------- --------
Expenses:
Gaming................. 5,291 0 0 0 0 0 5,291
Racing................. 0 16,745 12,830 0 1,385 0 30,960
Food and beverage...... 12,964 0 9,288 0 2,497 0 24,749
Administrative and
other................. 16,411 17,746 9,184 0 5,306 0 48,647
Lawsuit settlement..... 6,088 0 0 0 0 0 6,088
Depreciation and
amortization.......... 3,887 3,236 1,586 0 2,468 207 11,384
-------- ------- ------- --- ------- ------- --------
44,641 37,727 32,888 0 11,656 207 127,119
-------- ------- ------- --- ------- ------- --------
Operating income
(loss)................. (11,753) 11,080 4,587 0 (1,881) 1,420 3,453
Interest expense........ 172 29 30 0 3,691 0 3,922
-------- ------- ------- --- ------- ------- --------
Income (loss) before
taxes.................. (11,925) 11,051 4,557 0 (5,572) 1,420 (469)
Income tax expense...... 510 0 182 0 1 0 693
-------- ------- ------- --- ------- ------- --------
Net income (loss)....... $(12,435) $11,051 $ 4,375 $ 0 $(5,573) $ 1,420 $ (1,162)
======== ======= ======= === ======= ======= ========
Statement of Cash Flows:
Net cash provided by
(used in) operating
activities............ $ 2,575 $11,864 $ 2,794 $ 0 $ 1,431 $ 1,627 $ 20,291
Net cash provided by
(used in) investing
activities............ (40,218) (5,371) (1,831) 0 0 14,498 (32,922)
Net cash provided by
(used in) financing
activities............ 1,433 21 (1,913) 0 (1,626) 0 (2,085)
</TABLE>
- -------
(a) The following wholly owned guarantor subsidiaries were included in each
period presented: Turf Paradise, Inc., Hollywood Park Food Services, Inc.,
and Hollywood Park Fall Operating Company. As of and for the year ended
December 31, 1997, the following wholly owned guarantor subsidiaries were
also included: HP Yakama, Inc., Boomtown, Inc., Boomtown Hotel & Casino,
Inc., Louisiana--I Gaming, HP/Compton, Inc. (included as of October 1996)
and Louisiana Gaming Enterprises, Inc. Due to the June 30, 1997, Boomtown
Merger being accounted for under the purchase method of accounting for a
business combination, the financial results as of and for the year ended
December 31, 1997, included Boomtown, Inc.'s, Boomtown Hotel & Casino,
Inc.'s, Louisiana--I Gaming's, and Louisiana Gaming Enterprises, Inc.'s
financial results for the six months ended December 31, 1997, only.
(b) The Company's majority owned guarantor subsidiaries are Crystal Park Hotel
and Casino Development Company, LLC (which as of December 31, 1997, became
a wholly owned subsidiary) and Mississippi--I Gaming, L.P., (which was
added as of the June 30, 1997, Boomtown Merger). As a result of the
Boomtown Merger, Mississippi--I Gaming, L.P.'s financial results are
included for the six months ended December 31, 1997, only.
(c) Sunflower Racing, Inc. and its wholly owned subsidiary, SR Food and
Beverage, Inc., were the Company's only wholly owned non-guarantor
subsidiaries with material financial activity during the periods presented.
As of March 31, 1996, the financial results of these two wholly owned non-
guarantor subsidiaries were no longer consolidated with the Company's
financial results, due to the write off of Hollywood Park's investment in
these subsidiaries. All other wholly owned non-guarantor subsidiaries are
either empty companies established for potential development projects that
were subsequently abandoned, or the subsidiary's financial activity was
immaterial.
F-46
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Allowance for bad debts:
Balance as of December 31, 1994.................................. $ (159)
Charges to expense............................................. (2,294)
Write offs..................................................... 612
-------
Balance as of December 31, 1995.................................. (1,841)
Charges to expense(a).......................................... (783)
Write offs..................................................... 1,535
-------
Balance as of December 31, 1996.................................. (1,089)
Add Boomtown balance as of June 30, 1997(b).................... (225)
Charges to expense............................................. (189)
Write offs..................................................... 754
-------
Balance as of December 31, 1997.................................. $ (749)
=======
</TABLE>
- --------
(a) Hollywood Park assumed the bad debt allowance related to the Hollywood
Park-Casino gaming business in the November 17, 1995, acquisition of PCM.
(b) Hollywood Park acquired Boomtown as of June 30, 1997.
F-47
<PAGE>
HOLLYWOOD PARK, INC.
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months ended December 31,
------------------------------------------------
Basic Diluted
----------------------- -----------------------
1997 1996 1995 1997 1996 1995
------- ------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Average number of common
shares outstanding.......... 26,209 18,365 18,486 26,705 18,365 18,486
Average common shares due to
assumed conversion of
convertible preferred
shares...................... 0 0 0 0 2,291 2,291
------- ------- ------- ------- ------- -------
Total shares................. 26,209 18,365 18,486 26,705 20,656 20,777
======= ======= ======= ======= ======= =======
Net income................... $ 1,551 $ 3,277 $ 212 $ 1,551 $ 3,277 $ 212
Less dividend requirements on
convertible preferred
shares...................... 0 482 482 0 0 0
------- ------- ------- ------- ------- -------
Net income (loss) available
to (allocated to) common
shareholders................ $ 1,551 $ 2,795 $ (270) $ 1,551 $ 3,277 $ 212
======= ======= ======= ======= ======= =======
Net income (loss) per share.. $ 0.06 $ 0.15 $ (0.01) $ 0.06 $ 0.16 $ 0.01
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------------
Basic Diluted
------------------------ ------------------------
1997 1996 1995 1997 1996 1995
------- ------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Average number of common
shares outstanding........ 22,010 18,505 18,399 22,340 18,505 18,399
Average common shares due
to assumed conversion of
convertible preferred
shares.................... 0 0 0 0 2,291 2,291
------- ------- ------- ------- ------- -------
Total shares............... 22,010 18,505 18,399 22,340 20,796 20,690
======= ======= ======= ======= ======= =======
Net income (loss).......... $ 8,670 $(4,249) $(1,162) $ 8,670 $(4,249) $(1,162)
Less dividend requirements
on convertible preferred
shares.................... 1,520 1,925 1,925 1,520 0 0
------- ------- ------- ------- ------- -------
Net income (loss)
attributable to (allocated
to) common shareholders... $ 7,150 $(6,174) $(3,087) $ 7,150 $(4,249) $(1,162)
======= ======= ======= ======= ======= =======
Net income (loss) per
share..................... $ 0.33 $ (0.33) $ (0.17) $ 0.32 $ (0.20) $ (0.06)
======= ======= ======= ======= ======= =======
</TABLE>
- --------
Note: As of August 28, 1997, the Company's 2,749,900 outstanding depositary
shares were converted into 2,291,492 shares of the Company's common stock.
F-48
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September
30, December 31,
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents........................ $ 25,295,310 $ 20,986,510
Restricted marketable securities................. 1,599,185 10,629,405
Other current assets............................. 7,419,491 8,124,872
------------ ------------
Total current assets............................. 34,313,986 39,740,787
Property and equipment, net...................... 290,070,366 263,993,452
Other long term assets........................... 63,153,166 68,970,578
------------ ------------
$387,537,518 $372,704,817
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities................................ $ 56,129,525 $ 51,031,097
Other long term liabilities and minority interest.. 8,295,675 8,748,212
Long term debt, net of current maturities.......... 260,907,007 253,471,219
Shareholders' Equity:
Common stock, $0.01 par, 50,000,000 shares
authorized, 35,722,124 issued and outstanding... 357,221 357,221
Undesignated stock, 2,500,000 shares authorized,
none issued..................................... 0 0
Additional paid in capital....................... 67,122,856 67,122,852
Retained deficit................................. (5,182,721) (7,762,270)
Less unearned compensation....................... (92,045) (263,514)
------------ ------------
62,205,311 59,454,289
------------ ------------
$387,537,518 $372,704,817
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
F-49
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
September 30,
------------------------
1998 1997
----------- -----------
(unaudited)
<S> <C> <C>
Revenues:
Casino............................................ $72,680,370 $62,680,205
Food and beverage................................. 2,634,965 2,404,469
Rooms............................................. 1,387,192 328,578
Other operating income............................ 1,188,888 1,081,882
----------- -----------
Total revenues.................................. 77,891,415 66,495,134
----------- -----------
Costs and expenses:
Casino............................................ 36,807,824 30,658,015
Food and beverage................................. 3,300,242 1,767,142
Rooms............................................. 674,773 140,554
Other operating costs and expenses................ 778,737 1,017,571
Advertising and marketing......................... 8,627,711 7,112,014
General and administrative........................ 6,011,762 6,181,399
Hollywood Park/Casino Magic merger costs.......... 4,838,200 0
Property operation, maintenance and energy cost... 3,100,368 2,625,158
Rents, property taxes and insurance............... 2,273,863 1,906,446
Development expenses.............................. 211,010 56,750
Depreciation and amortization..................... 5,710,806 4,905,523
----------- -----------
Total costs and expenses........................ 72,335,296 56,370,572
----------- -----------
Income from operations.............................. 5,556,119 10,124,562
----------- -----------
Other (Income) Expenses:
Equity loss from unconsolidated subsidiary........ 104,929 176,005
Interest expense, net............................. 8,452,613 7,954,345
Loss (gain) from sale of assets................... 154,733 (1,337,687)
Other............................................. (1,111,410) (57,828)
----------- -----------
Total other expense............................. 7,600,865 6,734,835
----------- -----------
Income (loss) before income taxes and minority
interest of subsidiary............................. (2,044,746) 3,389,727
Income tax expense.................................. 341,034 0
Minority interest................................... 230,189 715,023
----------- -----------
Net income (loss)................................... $(2,615,969) $ 2,674,704
=========== ===========
Net income (loss) per common share:
Basic............................................. $ (0.07) $ 0.07
=========== ===========
Diluted........................................... $ (0.07) $ 0.07
=========== ===========
Average shares and equivalents outstanding:
Basic............................................. 35,722,124 35,654,174
=========== ===========
Diluted........................................... 35,722,124 35,735,741
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-50
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------------
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
Revenues:
Casino........................................... $210,889,320 $186,411,356
Food and beverage................................ 7,738,947 7,391,186
Rooms............................................ 2,948,279 1,103,592
Other operating income........................... 3,812,725 3,327,423
------------ ------------
Total revenues................................. 225,389,271 198,233,557
------------ ------------
Costs and expenses:
Casino........................................... 100,672,992 88,899,256
Food and beverage................................ 9,033,811 8,364,166
Rooms............................................ 1,355,063 509,219
Other operating costs and expenses............... 2,965,292 3,326,192
Advertising and marketing........................ 26,593,631 28,517,336
General and administrative....................... 19,811,647 20,261,984
Hollywood Park/Casino Magic merger costs......... 4,838,200 0
Property operation, maintenance and energy cost.. 8,581,279 8,669,605
Rents, property taxes and insurance.............. 6,724,510 5,866,014
Development expenses............................. 430,858 511,882
Depreciation and amortization.................... 16,058,414 15,258,905
------------ ------------
Total costs and expenses....................... 197,065,697 180,184,559
------------ ------------
Income from operations............................. 28,323,574 18,048,998
------------ ------------
Other (Income) Expenses:
Equity loss from unconsolidated subsidiary....... 349,236 405,066
Interest expense, net............................ 23,432,882 23,703,909
Loss (gain) from sale of assets.................. 154,733 (2,578,231)
Other............................................ 0 (244,461)
------------ ------------
Total other expense............................ 23,936,851 21,286,283
------------ ------------
Income (loss) before income taxes and minority
interest of subsidiary............................ 4,386,723 (3,237,285)
Income tax expense (benefit)....................... 1,453,207 (1,935,000)
Minority interest.................................. 1,081,962 916,535
------------ ------------
Net income (loss).................................. $ 1,851,554 $ (2,218,820)
============ ============
Net income (loss) per common share:
Basic............................................ $ 0.05 $ (0.06)
============ ============
Diluted.......................................... $ 0.05 $ (0.06)
============ ============
Average shares and equivalents outstanding:
Basic............................................ 35,722,124 35,642,780
============ ============
Diluted.......................................... 35,722,124 35,642,780
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
F-51
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
Cash flows from Operating Activities:
Net income (loss)................................ $ 1,851,554 $ (2,218,828)
Adjustments for non-cash charges................. 31,074,459 14,574,699
Changes in assets and liabilities................ (9,733,526) 5,728,959
------------ ------------
Net Cash Provided by Operating Activities.......... 23,192,487 18,084,830
------------ ------------
Cash Flows from Investing Activities:
Acquisitions of property and equipment........... (33,789,422) (28,996,109)
Proceeds from sale of subsidiary and property and
equipment....................................... 0 19,833,971
Decrease in marketable securities................ 9,030,220 0
Other, net....................................... 2,068,230 145,313
------------ ------------
Net Cash Used in Investing Activities.............. (22,690,972) (9,016,825)
------------ ------------
Cash Flows from Financing Activities:
Principal payments on notes payable and long term
debt............................................ (6,410,856) (12,285,515)
Net proceeds from issuance of long term debt..... 10,270,979 6,514,988
Other, net....................................... (52,837) (346,958)
------------ ------------
Net Cash Provided by (Used in) Financing
Activities........................................ 3,807,286 (6,117,485)
------------ ------------
Net Increase in Cash and Cash Equivalents.......... 4,308,801 2,950,520
Cash and Cash Equivalents, Beginning of Period..... 20,986,510 34,546,166
------------ ------------
Cash and Cash Equivalents, End of Period........... $ 25,295,311 $ 37,496,686
============ ============
Supplemental Cash Flow Information
Cash Paid During the Period for:
Interest (net of amount capitalized)........... $ 21,678,773 $ 25,104,711
Income taxes (net of refunds).................. 0 (6,382,324)
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Property and equipment and other asset
acquisitions included in accounts and
construction payable and accrued expenses....... 6,404,228 1,658,604
Property and equipment financed with long term
debt............................................ 6,142,215 946,004
Common stock grants to officers.................. 0 171,469
</TABLE>
See notes to condensed consolidated financial statements.
F-52
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with Respect to the Three and Nine Months Ended
September 30, 1998 and 1997 is Unaudited)
1. Summary of significant accounting policies:
Organization and basis of presentation:
Casino Magic Corp. and Subsidiaries is an international gaming company with
operations in Bay Saint Louis, Mississippi ("Casino Magic Bay St. Louis"),
Biloxi, Mississippi ("Casino Magic Biloxi"), Bossier City, Louisiana ("Casino
Magic Bossier"), and the Argentina Province of Neuquen in the cities of Neuquen
City and San Martin de los Andes ("Casino Magic Argentina").
Unless the context requires otherwise, reference in this report to the
"Company" means Casino Magic Corp. and its relevant subsidiaries, and reference
to "Casino Magic" means Casino Magic Corp.
The consolidated financial statements include the accounts of Casino Magic
and its wholly-owned and majority-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated.
The accompanying unaudited consolidated financial statements contain all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. The results of operations for
the interim periods are not necessarily indicative of results of operations for
an entire year. It is suggested that these consolidated financial statements be
read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, and Form 10-Q for June 30, 1998.
Certain reclassifications have been made to 1997 amounts to conform with the
September 30, 1998 presentation.
2. New Accounting Pronouncements
(a) Accounting for Start-Up Costs:
During April 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position 98-5 ("SOP"), "Reporting on the Costs of Start-Up
Activities." The SOP requires costs of start-up activities and organization
costs to be expensed as incurred. The SOP is effective for financial statements
for fiscal years beginning after December 15, 1998. The company has adopted the
SOP.
(b) Accounting for Derivative Instruments and Hedging Activities:
In September 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16,
F-53
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1998 and thereafter). Statement 133 cannot be applied retroactively. Statement
133 must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired or
substantively modified after December 31, 1997 (and, at the company's election,
before January 1, 1998).
The Company's management believes the impact of adopting Statement 133 on
the financial statements is expected to be immaterial.
3. Long Term Debt:
Additions to long-term debt during the first nine months of 1998 consist of
the following:
<TABLE>
<CAPTION>
Ending
Balances at
September 30,
1998
-------------
<S> <C>
Notes payable, bank(a)....................................... $2,727,038
Notes payable, equipment contracts(b)........................ $1,842,636
Notes payable, other(c)...................................... $6,931,889
</TABLE>
- --------
(a) Consists of one note payable to The Peoples Bank, collateralized by certain
parcels of land, payable in fifty-nine monthly payments of $61,100
including interest at 8.5% through February 2002 with a final balloon
payment of $60,120 in March 2002.
(b) Consists of three notes payable collateralized by equipment. The details of
these notes is as follows: (i) Original balance of $2,021,744 note payable
in twenty-three monthly payments of $92,795, including interest of 10.5%
with final balloon payment at term of note. This note replaces two previous
notes with original balances of $946,005 and $1,075,740. (ii) Original
balance of $57,584.04 note payable in twelve monthly payments of $4,798.67,
including interest of 12%. (iii) Original balance of $239,760 note payable
in twenty-three monthly principal payments of $9,990 including interest at
3% over prime (11.25% at 9/30/98) and a final balloon payment at term of
note.
(c) Consists of six notes payable to Boeing Capital Corp. All notes
collateralized by furniture and equipment used at the 378 room hotel at
Casino Magic Biloxi. The Notes are as follows:
1) Note in the original balance of $4,347,833, payable in forty-seven
monthly installments of $110,523.04 including interest of 10.12% through
April 2002 with a final balloon payment of $112,400 in May 2002.
2) Note in the original balance of $733,516.63, payable in one
installment of $21,616.66 on July 1, 1998, and forty-seven monthly
installments of $18,714.77 including interest at 10.314% through April
2002.
3) Note in the original balance of $391,024.97, payable in one
installment of $2,885.61 on August 1, 1998, and forty-eight installments of
$9,958.37 including interest at 10.2179% through August 2002.
4) Note in the original balance of $328,148.41, payable in one
installment of $1,769.63 on July 1, 1998, and forty-eight monthly
installments of $8,357.07 including interest at 10.2179% through August
2001.
5) Note in the original balance of $559,191,80, payable in forty-eight
monthly installments beginning October 1, 1998 including interest at
9.9384% through September 2002.
6) Progress loan balance of $933,769.16. Interest payable monthly at 3%
above prime rate (11.25% as of 9/30/98).
F-54
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Casino Magic Corp.:
We have audited the accompanying consolidated balance sheets of Casino Magic
Corp. (a Minnesota corporation) and subsidiaries (the Company) as of December
31, 1997 and 1996, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 Casino Magic Corp. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana
February 27, 1998
F-55
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Casino.............................. $246,320,048 $167,153,012 $165,997,836
Food, beverage and rooms............ 10,784,762 8,080,067 8,392,529
Royalty and management fees......... -- 3,099,407 2,224,351
Other Operating revenues............ 4,369,206 1,945,357 1,108,049
------------ ------------ ------------
261,474,016 180,277,843 177,722,765
------------ ------------ ------------
Costs and expenses:
Casino.............................. 118,467,492 74,943,304 69,654,888
Food and beverage................... 10,756,505 7,351,838 6,795,164
Rooms............................... 639,778 1,039,081 1,224,685
Other operating costs and expenses.. 4,292,276 2,807,038 1,333,183
Advertising and marketing........... 36,427,434 20,901,821 25,873,832
General and administrative.......... 26,425,200 24,216,613 28,501,308
Property operation, maintenance and
energy cost........................ 11,210,297 7,433,262 4,057,144
Rents, property taxes and
insurance.......................... 7,891,199 5,991,261 4,314,355
Depreciation and amortization....... 20,246,663 18,346,202 15,768,546
Preopening expenses................. -- 6,554,535 1,818,715
Development expenses................ 562,419 1,849,583 2,228,549
Write-off capitalized costs relating
to inactive developments........... -- -- 11,381,945
------------ ------------ ------------
236,919,263 171,434,538 172,952,314
------------ ------------ ------------
Income from operations................ 24,554,753 8,843,305 4,770,451
Other (income) expense:
Interest expense.................... 34,723,613 25,071,767 17,436,904
Interest capitalized................ (1,963,955) (5,717,494) (867,236)
Interest income..................... (1,375,100) (1,436,468) (803,624)
Loss from unconsolidated
subsidiaries....................... 505,424 26,501,808 112,250
Write-off of capitalized costs
primarily relating to joint
ventures........................... -- -- 2,210,219
Other............................... (1,555,201) 689,221 204,981
------------ ------------ ------------
30,334,781 45,108,834 18,293,494
------------ ------------ ------------
Income (loss) before income taxes and
Minority interest in income of
subsidiary........................... (5,780,028) (36,265,529) (13,523,043)
Income tax benefit.................... (1,935,000) (4,676,182) (3,230,864)
Minority Interest..................... 1,404,180 -- --
------------ ------------ ------------
Net loss.............................. $ (5,249,208) $(31,589,347) $(10,292,179)
============ ============ ============
Net loss per common share:
Basic............................... $ (0.15) $ (0.89) $ (0.31)
============ ============ ============
Diluted............................. $ (0.15) $ (0.89) $ (0.31)
============ ============ ============
Average shares and equivalents
outstanding:
Basic............................... 35,662,616 35,448,068 33,260,904
============ ============ ============
Diluted............................. 35,662,616 35,448,068 33,260,904
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-56
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents........................ $ 20,901,510 $ 17,561,512
Restricted Cash.................................. 85,000 16,984,654
Restricted Marketable Securities................. 10,629,405 --
Prepaid expenses................................. 3,330,041 2,844,995
Notes and accounts receivable, net............... 3,781,945 2,889,486
Other current assets............................. 1,012,886 873,676
------------ ------------
Total current assets............................ 39,740,787 41,154,323
------------ ------------
Property and equipment, net........................ 263,993,452 243,692,571
------------ ------------
Other long-term assets:
Notes receivable................................. 3,385,198 4,119,700
Investments in unconsolidated subsidiaries....... 713,035 957,831
Options and land deposits........................ -- 2,282,244
Foreign casino concession agreement, net of
accumulated amortization of $2,846,685 in 1997
and $1,897,790 in 1996.......................... 8,540,055 9,488,950
Deferred gaming license cost, net of accumulated
amortization of $2,013,838 in 1997 and $395,489
in 1996......................................... 38,048,426 38,337,333
Property held for development.................... 525,000 3,040,357
Property held for sale........................... 5,606,265 15,108,541
Debt issuance costs, net of accumulated
amortization of $4,289,382 in 1997 and
$2,506,133 in 1996.............................. 8,957,645 10,195,688
Deposits and other............................... 3,194,954 1,421,979
------------ ------------
Total other long-term assets.................... 68,970,578 84,952,623
------------ ------------
$372,704,817 $369,799,517
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes and contracts payable...................... $ 305,925 $ 4,708,603
Current maturities of long-term debt............. 8,590,945 4,648,638
Accounts Payable................................. 9,323,949 7,945,068
Accrued Expenses................................. 11,522,887 11,320,101
Accrued Interest................................. 9,783,784 8,830,040
Accrued payroll and related benefits............. 7,719,441 8,341,720
Accrued progressive gaming liabilities........... 1,445,257 1,121,623
Other current liabilities........................ 2,338,909 731,018
------------ ------------
Total current liabilities....................... 51,031,097 47,646,811
------------ ------------
Deferred income taxes.............................. -- 266,761
------------ ------------
Other long-term liabilities and minority interest.. 8,748,212 --
------------ ------------
Long-term debt, net of current maturities.......... 253,471,219 258,261,231
------------ ------------
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par, 50,000,000 shares,
authorized 35,722,124 issued and outstanding in
1997 and 35,637,083 in 1996 issued and
outstanding..................................... 357,221 356,371
Undesignated stock, 2,500,000 shares authorized,
None issued..................................... -- --
Additional paid-in capital....................... 67,122,852 67,123,702
Retained earnings (deficit)...................... (7,762,270) (2,513,062)
Unrealized holding loss on securities............ -- (850,156)
Less unearned compensation....................... (263,514) (492,141)
------------ ------------
Total shareholders' equity...................... 59,454,289 63,624,714
------------ ------------
$372,704,817 $369,799,517
============ ============
</TABLE>
See notes to consolidated financial statements.
F-57
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Foreign
------------------- paid-in currency
Shares Amount capital adjustment
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 29,961,750 $299,618 $41,127,168 --
Amortization of unearned
compensation..................... -- -- -- --
Write-off of unearned
compensation..................... -- -- (1,642,886) --
Stock options granted to executive
officers......................... -- -- 101,563 --
Vested stock grants to executive
officers......................... 16,250 162 (162) --
Net proceeds from exercise of
employee stock options........... 308,564 3,086 376,726 --
Net proceeds from common stock
issued pursuant to Reg. S........ 1,771,000 17,710 8,303,095 --
Stock issued for consultants'
compensation..................... 12,000 120 63,632 --
Stock issued for land............. 3,210,000 32,100 17,758,277 --
Foreign currency translation...... -- -- -- (224,195)
Net loss.......................... -- -- -- --
---------- -------- ----------- --------
Balance at December 31, 1995 35,279,564 $352,796 $66,087,413 (224,195)
Amortization of unearned
compensation..................... -- -- -- --
Stock options granted to executive
officers......................... -- -- 567,188 --
Net proceeds from exercise of
warrants......................... -- -- 500 --
Net proceeds from exercise of
employee and non-employee
director stock options........... 357,519 3,575 453,654 --
Casino One Corp. acquisition...... -- -- 14,947 --
Unrealized Holding Loss on
Securities Available for Sale.... -- -- -- --
Foreign currency translation
adjustment....................... -- -- -- 224,195
Net loss.......................... -- -- -- --
---------- -------- ----------- --------
Balance at December 31, 1996 35,637,083 $356,371 $67,123,702 --
Amortization of unearned
compensation
Vested stock grants to executive
officers......................... 85,041 850 (850)
Available for Sale................ -- -- -- --
Loss on Securities................ -- -- -- --
Net loss.......................... -- -- -- --
Balance at December 31, 1997....... 35,722,124 $357,221 $67,122,852 --
========== ======== =========== ========
</TABLE>
See notes to consolidated financial statements.
F-58
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY--(Continued)
<TABLE>
<CAPTION>
Unrealized
holding loss
on securities Retained Less
available for (deficit) Unearned
sale earnings compensation Total
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31,
1994 -- $ 39,368,464 $(1,218,751) $ 79,576,499
Amortization of
unearned
compensation.......... -- -- 470,962 470,962
Write-off of unearned
compensation.......... -- -- 735,819 (907,067)
Stock options granted
to executive
officers.............. -- -- (101,563) --
Vested stock grants to
executive officers.... -- -- -- --
Net proceeds from
exercise of employee
stock options......... -- -- -- 379,812
Net proceeds from
common stock issued
pursuant to Reg. S.... -- -- -- 8,320,805
Stock issued for
consultants'
compensation.......... -- -- -- 63,752
Stock issued for land.. -- -- -- 17,790,377
Foreign currency
translation........... -- -- -- (224,195)
Net loss............... -- (10,292,179) -- (10,292,179)
-------- ------------ ----------- ------------
Balance at December 31,
1995 -- $ 29,076,285 $ (113,533) $ 95,178,766
Amortization of
unearned
compensation.......... -- -- 188,580 188,580
Stock options granted
to executive
officers.............. -- -- (567,188) --
Net proceeds from
exercise of warrants.. -- -- -- 500
Net proceeds from
exercise of employee
and non-employee
director stock
options............... -- -- -- 457,229
Casino One Corp.
acquisition........... -- -- -- 14,947
Unrealized Holding Loss
on Securities
Available for Sale.... (850,156) -- -- (850,156)
Foreign currency
translation
adjustment............ -- -- -- 224,195
Net loss............... (31,589,347) (31,589,347)
-------- ------------ ----------- ------------
Balance at December 31,
1996 (850,156) $ (2,513,062) $ (492,141) $ 63,624,714
Amortization of
unearned
compensation.......... 228,627 228,627
Vested stock grants to
executive officers.... --
Loss on Securities..... --
Available for Sale..... 850,156 850,156
Net loss............... (5,249,208) (5,249,208)
-------- ------------ ----------- ------------
Balance at December 31,
1997................... -- $ (7,762,270) $ (263,514) $ 59,454,289
======== ============ =========== ============
</TABLE>
See notes to consolidated financial statements.
F-59
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................ $(5,249,208) $(31,589,347) $(10,292,179)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation........................ 17,655,235 16,263,270 13,387,345
Amortization........................ 2,591,428 2,082,932 2,381,201
Loss (gain) on disposal of property
and equipment...................... (2,632,633) 339,056 466,712
Amortization of original issue
discount and deferred debt issuance
costs.............................. 1,966,074 1,496,259 94,351
Amortization of unearned stock
compensation, net of recoveries.... 228,627 188,580 (436,105)
Consultants' compensation recognized
on issuance of stock............... -- -- 63,752
Gain on contract settlement......... -- -- (855,000)
Write-off of preopening costs,
development project costs, land
options and deposits & property
held for development............... -- 7,054,532 12,104,212
Net loss on investment in
unconsolidated subsidiaries........ 505,424 22,436,241 112,250
Minority interest................... 1,404,180 -- --
Decrease in income tax receivable... -- 4,225,047 1,899,459
(Increase) decrease in prepaid
expenses........................... (507,361) 88,861 1,634,019
Decrease in notes and accounts
receivable, net.................... 2,327,826 (147,705) (4,753,232)
Decrease in deferred income taxes--
current............................ 3,157,856 2,923,171 (720,628)
Increase in other current assets.... (139,210) (277,793) (129,225)
Decrease in net deferred income tax
liability--non current............. (266,759) (4,173,197) (1,063,610)
Increase (decrease) in accounts
payable............................ (2,251,299) 2,924,820 (389,241)
Increase (decrease) in accrued
expenses........................... 3,595,066 (4,278,518) (2,026,436)
Increase in accrued interest........ 888,886 3,487,883 208,449
Increase (decrease) in accrued
payroll and related benefits....... (622,279) 1,255,364 2,236,447
Increase (decrease) in accrued
progressive gaming liabilities..... 323,634 55,376 (393,866)
Decrease in income taxes payable.... 805,716 (228,591) 959,609
----------- ------------ ------------
Net cash provided by operating
activities....................... $23,781,203 $ 24,126,241 $ 15,348,284
=========== ============ ============
</TABLE>
See notes to consolidated financial statements.
F-60
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from investing activities:
Proceeds from sale of property and
equipment......................... $ 19,895,616 $ 1,436,821 $ 173,389
Acquisitions of property and
equipment......................... (37,176,995) (67,850,010) (11,396,332)
Acquisitions of gaming license..... -- (15,250,000) --
Acquisitions of property held for
sale.............................. (126,400) 40,437 --
Investments in unconsolidated
subsidiaries...................... (260,628) (651,206) (6,117,636)
Expenditures for organizational and
acquisition cost.................. -- (359) (80,788)
Expenditures for land options and
deposits.......................... -- (480,000) (1,326,130)
Expenditures for development and
preopening costs.................. -- (6,554,535) (130,794)
(Increase) decrease in deposits and
other long-term assets............ (2,920,936) 2,530,873 (1,898,786)
(Increase) decrease in marketable
securities........................ (10,629,405) -- 10,244,233
------------ ------------ ------------
Net cash used in investing
activities...................... (31,218,748) (86,777,979) (10,532,844)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of debt or
notes payable..................... 6,350,000 121,043,749 202,011
Payments of debt issuance costs.... (349,955) (5,419,575) (2,000)
Principal payments on notes
payable........................... (4,606,480) (1,010,180) (1,185,342)
Principal payments on long-term
debt.............................. (7,515,676) (48,644,469) (2,261,096)
Net proceeds from sale of common
stock............................. -- 14,947 8,320,805
Net proceeds from exercise of
employee stock options............ -- 457,734 379,812
------------ ------------ ------------
Net cash provided by (used in)
financing activities............ (6,122,111) 66,442,206 5,454,190
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents.................... (13,559,656) 3,790,468 10,269,630
Cash and cash equivalents, beginning
of period........................... 34,546,166 30,755,698 20,486,068
------------ ------------ ------------
Cash and cash equivalents, including
restricted cash,
end of period....................... $ 20,986,510 $ 34,546,166 $ 30,755,698
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-61
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Interest paid, net of amount
capitalized............................ $29,551,551 $12,379,128 $15,406,868
Income taxes paid, net of refunds....... (6,382,324) (7,604,043) (4,236,206)
Supplemental schedule of non-cash
operating, investing, and financing
activities:
Other current assets.................... 22,315 -- --
Other current liabilities............... 302,758 -- --
Property and equipment and other asset
acquisitions financed with short-term
notes payable.......................... -- -- 850,208
Property and equipment and other asset
acquisitions included in accounts and
construction payable and accrued
expenses............................... 1,805,945 5,455,469 177,091
Gaming license acquisition financed with
long-term debt......................... -- 21,617,612 --
Land acquired through the issuance of
common stock........................... -- -- 22,140,969
Property and equipment under capital
leases................................. 375,891 81,114 63,632
Property and equipment and property held
for sale financed with long-term debt.. -- 30,728,879 --
Consulting services performed for common
stock.................................. -- -- 63,752
Common stock granted to officers........ -- 567,188 101,563
Commitment for land options............. $ -- $ -- $ (156,725)
</TABLE>
See notes to consolidated financial statements.
F-62
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies:
Organization and basis of presentation:
Casino Magic Corp. and Subsidiaries is an international gaming company with
operations in Bay Saint Louis, Mississippi ("Casino Magic-BSL"), Biloxi,
Mississippi ("Casino Magic-Biloxi"), Bossier City, Louisiana ("Casino Magic-
Bossier City"), and the Argentina Province of Neuquen in the cities of
Neuquen City and San Martin de los Andes ("Casino Magic-Neuquen").
Unless the context requires otherwise, reference in this Annual Report to
the "Company" means Casino Magic Corp. and its relevant subsidiaries, and
reference to "Casino Magic" means Casino Magic Corp.
The consolidated financial statements include the accounts of Casino Magic
Corp. and its wholly-owned and majority-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated.
Casino revenues and complimentaries:
In accordance with common industry practice, casino revenues are the net of
gaming wins less losses. Revenues exclude the retail value of complimentary
rooms, food and beverage furnished gratuitously to customers. The estimated
departmental costs of providing rooms is not significant, and the estimated
departmental costs of providing food and beverage services are included in
casino expense as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
$ 21,846,000 $13,838,000 $12,072,000
============ =========== ===========
</TABLE>
Cash and cash equivalents:
For purposes of the consolidated balance sheets and statements of cash
flows, the Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Marketable Securities:
The Company holds U.S. agency securities as held to maturity and as such,
the investments are recorded at amortized costs, which, based on the short term
nature of the investments approximates fair value.
Restricted Funds:
The Louisiana First Mortgage Notes (See Note 8), restrict the use of certain
cash amounts. At December 31, 1997, funds relating to the net proceeds from the
sale of the Crescent City Queen Riverboat ($11.7 million) are restricted to be
used for capital improvements at Casino Magic-Bossier City. The balances that
remain in these restricted accounts at December 31, 1997 are shown as
restricted marketable securities. At December 31, 1996, funds shown as
restricted cash relate to proceeds from the issuance of the Louisiana First
Mortgage Notes and were restricted for use in the original construction of the
land based pavilion and facilities at Casino Magic-Bossier City.
Property and equipment:
Property and equipment are stated at cost. Depreciation, including
amortization of capital leases and leasehold improvements, is computed using
the straight-line method. Estimated useful lives for property and
F-63
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
equipment are 15-31 1/2 years for barges and buildings, life of the lease for
leasehold improvements and 5-7 years for furniture and equipment.
Normal repairs and maintenance are charged to expense when incurred.
Expenditures which materially extend the useful life of capital assets are
capitalized.
In June 1997, the Company changed the depreciable lives on the asset
categories, land improvements, buildings and improvements, and barges and
improvements from originally estimated useful lives of 10 or 15 years to 31
years. The useful lives for these assets originally reflected their tax lives
and have been changed to anticipated useful lives. These changes reduced the
December 31, 1997, net loss by $859,796 and the loss share by $0.02. Excluding
the change in depreciable lives net loss and earnings per share would have been
$(6,109,004) and $(0.17), respectively.
Investments in unconsolidated subsidiaries:
Investments in unconsolidated subsidiaries where the Company exercises
significant influence are accounted for under the equity method.
Options and land deposits:
The costs of land options are amortized over the life of the option until
such time as the option is exercised or considered impaired by Management. As
of December 31, 1997, all land options were fully reserved.
Amortization of intangibles:
Deferred charges relating to debt issuance costs and original issue
discounts on long-term debt instruments are amortized over the life of the
related debt using the effective interest rate method to provide a constant
yield.
Included under other long term assets is "Deferred gaming license cost."
Deferred gaming license cost represents the estimated fair value of the
Louisiana gaming license, an asset acquired in conjunction with the purchase of
Crescent City Development Corporation ("Crescent City" see Note 5). This cost
is being amortized on a straight-line basis over twenty-five years, the
estimated period to be benefited by the license which commenced at the time
gaming operations began in Bossier City.
The costs capitalized to acquire the foreign casino concession agreement are
being amortized on a straight-line basis over the twelve-year life of the
agreement.
Development and preopening costs:
All internal salary and related costs of the Company's development
activities are expensed as incurred. Amounts paid for outside consultants and
professional fees are expensed until gaming has been legalized in the
jurisdiction, the Company has an approved site and there is a reasonable
likelihood that the Company will be granted a gaming license. Preopening costs
are capitalized then expensed when the related business commences operations.
Income taxes:
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis.
F-64
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
Earnings per share:
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 ("FAS 128"), "Earnings Per Share", which simplifies the computation of
earnings per share ("EPS"). FAS 128 is effective for financial statements
issued for periods ending after December 15, 1997, and requires restatement for
all prior period earnings per share data presented. Under FAS 128, the Company
computes two earnings per share amounts--basic EPS and EPS assuming dilution.
Basic Weighted average number of shares of common stock outstanding for the
1997, 1996 and 1995 periods were 35,662,616, 35,448,068 and 33,260,904
respectively. EPS assuming dilution is based on the weighted average number of
shares of common stock outstanding for the periods, including common equivalent
shares which reflect the dilutive effect of stock options granted to certain
employees and outside directors on various dates through December 31, 1997.
Dilutive options that are issued during a period or that expire or are
cancelled during a period are reflected in EPS assuming dilution computations
for the time they were outstanding during the periods being reported. There
were no common equivalent shares for 1997, 1996 and 1995. For the years ended
December 31, 1997, 1996 and 1995, the Company had 2,943,535, 2,320,292, and
2,2107,642 options which were considered antidilutive as a result of the
exercise price of the options exceeding the average price for the period, or
that the Company had a net loss for the period and therefore are not included
in the calculation of common stock outstanding.
Certain significant risks and uncertainties:
Gaming regulation licensing. The Company has gaming operations in the United
States and abroad that depend on the continued licensability or qualification
of the Company and subsidiaries that hold gaming licenses in various
jurisdictions. Such licensing and qualifications are reviewed periodically by
the gaming authorities in those jurisdictions.
Competition. The gaming industry is extremely competitive and the Company
faces competition from new developments in both the United States, specifically
on the Mississippi Gulf Coast and in Louisiana, and abroad.
Foreign operations. The Company has investments and net assets of
approximately $9 million in gaming operations outside of the United States
which are subject to risks associated with the distance of these casino
facilities from the Company's executive offices, the stability of the relevant
government, regulations imposed by foreign governments, the continued ability
to repatriate cash, and currency exchange issues.
Severe weather. The Mississippi Gulf Coast is subject to severe weather,
including hurricanes. Severe weather could cause damage to one or both of the
Company's Mississippi casino facilities. The Company maintains insurance
against casualty losses resulting from severe weather and against business
interruption. Such insurance may not adequately compensate the Company for loss
of profits resulting from severe weather.
Construction. Risk include cost overruns, delay in receipt of governmental
approvals, shortages in materials or skilled labor, labor disputes, unforeseen
environmental or engineering problems, work stoppage, fire and other natural
disasters, construction scheduling problems and weather interferences, any of
which, if it occurred, could delay construction or result in a substantial
increase in costs to the Company.
Pervasiveness of estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial
F-65
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications:
Certain reclassifications have been made to the 1996 and 1995 amounts to
conform with the December 31, 1997 presentation.
2. Proposed Merger:
On February 19, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Hollywood Park, Inc. ("Hollywood"), and
Acquisition II, Inc. ("HP") a wholly-owned subsidiary of Hollywood. Under the
Merger Agreement, the Company has agreed to merge (the "Merger") with HP. Upon
such Merger, the Company shall be the surviving entity and will become a
wholly-owned subsidiary of Hollywood. Upon the Merger, the shareholders of the
Company will be entitled to receive $2.27 for each share of the Company's stock
held.
The Merger is subject to the approval of the Company's shareholders prior to
October 31, 1998, and to the approval of the Mississippi Gaming Commission, the
Nevada Gaming Commission, and the Louisiana Gaming Control Board. If the Merger
Agreement is terminated for certain reasons, the Company will be required to
pay Hollywood $3,500,000.
The Merger Agreement restricts the ability of the Company to engage in
certain transactions prior to the time of the Merger, except those which are in
the ordinary course of business consistent with past practice, unless the
Company obtains the consent of Hollywood, which consent may not be unreasonably
withheld. The Merger Agreement also imposes limits on the capital expenditures
and borrowing which the Company may effect, which are not inconsistent with the
Company's current plans.
3. Notes and Accounts Receivable:
Notes and accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Current:
Notes receivable.................................... $ 885,995 $ 790,228
Accounts receivable--air charter.................... 156,818 548,239
Accounts receivable--trade.......................... 3,601,778 2,505,463
Other............................................... 581,376 606,631
---------- ----------
5,225,967 4,450,561
Less allowance for doubtful accounts.................. 1,444,022 1,561,075
---------- ----------
Total Notes and Accounts Receivable (current)......... 3,781,945 2,889,486
Noncurrent:
Notes receivable.................................... 3,385,198 4,119,700
---------- ----------
Total Notes and Accounts Receivable................. $7,167,143 $7,009,186
========== ==========
</TABLE>
Included in notes receivable is a commercial loan in which the Company,
through a wholly-owned subsidiary, participated in the initial amount of $5
million. The entire loan amount is $17,500,000. A
F-66
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
consortium of lenders made the loan to the Sisseton-Wahpeton Dakota Nation, a
Native American Tribe, for the construction of a casino facility on Tribal
land. The term loan is repayable over a sixty-month period beginning February
1997, in monthly installments of $105,230 including principal and interest at a
fixed rate of 10% through February 2002.
4. Property and Equipment:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Land and improvements... $ 85,020,923 $ 67,658,624
Buildings and
improvements........... 69,193,225 44,554,665
Barges and
improvements........... 57,568,009 55,203,063
Leasehold improvements.. 300,801 382,907
Furniture and
equipment.............. 75,876,943 69,663,192
Construction in
progress............... 33,843,154 48,549,525
------------ ------------
321,803,055 286,011,976
Less accumulated
depreciation and
amortization........... (57,809,603) (42,319,405)
------------ ------------
$263,993,452 $243,692,571
============ ============
</TABLE>
5. Stock Acquisitions:
In May 1996, Casino Magic, through its wholly-owned subsidiary, Jefferson
Casino Corporation ("Jefferson Corp") acquired Crescent City Capital
Development Corp.("Crescent City") for $50 million plus the assumption of $5.7
million in equipment liabilities. Jefferson Corp paid $15 million in cash at
closing and caused Crescent City to issue $35 million of 11.5% secured, three
year notes. Crescent City, which was the subject of a plan of reorganization
under Chapter 11 of the U.S. Bankruptcy Code, owned the Crescent City Queen
riverboat ("Crescent City Riverboat"), gaming and related equipment and
surveillance equipment and a license to conduct riverboat gaming operations in
Louisiana. Crescent City emerged from the Bankruptcy proceedings as Casino
Magic of Louisiana Corp. ("Casino Magic-Bossier City"). The Company is using
Casino Magic-Bossier City's gaming license in Bossier City, Louisiana, where it
currently owns 23 acres of land. Although Jefferson Corp. was required to
purchase the Crescent City Riverboat to obtain the Louisiana gaming license,
the Crescent City Riverboat could not be used at Casino Magic-Bossier City
because of its width. Therefore, the Company purchased a casino riverboat (the
"Bossier Riverboat") for use at Casino Magic-Bossier City for $20 million. The
Crescent City Riverboat, was sold and the proceeds will be used to assist in
the funding of the pavilion expansion and construction of a hotel at Casino
Magic-Bossier City.
No assurances can be given that the proceeds from the sale of the Crescent
City Riverboat and the cash flow from the operations of Casino Magic-Bossier
City will be sufficient to complete such hotel and related facilities.
6. Dispositions:
In September 1997, the Company sold the Crescent City Riverboat for $11.7
million. Other income for the period ended December 31, 1997, includes the gain
on the sale of $1.4 million. The proceeds from the sale are restricted by the
Indenture governing the $115 First Mortgage Notes issued by Casino Magic-
Bossier City. The
F-67
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Indenture restriction requires the proceeds from the sale of the Crescent City
Riverboat to be used for capital improvements at the Casino Magic-Bossier City
facility or returned to the Indenture trustee.
On June 1, 1997, the Company sold a 49% interest in its wholly-owned
subsidiary, Casino Magic Neuquen S.A., for $7.0 million. The Company retained a
controlling interest in Casino Magic-Neuquen and manages its two facilities
located in Neuquen City and San Martin de Los Andes, Argentina for a fee equal
to two percent of Casino Magic-Neuquen's gross monthly revenues. The gain of
$1.3 million is recorded in other income.
At September 30, 1996, management determined that its 49% equity investment
in Porto Carras Casino S.A., and notes and accounts receivable relating to
unpaid management fees and royalties were impaired. Because of this impairment,
management wrote off its investment in such gaming facilities in Porto Carras,
Greece, ("Porto Carras") and all unpaid notes and receivables related thereto.
The total charge recorded relating to the write off of Porto Carras was $26.1
million. Management's decision was based, primarily, on the results from Porto
Carras after the opening of a competing casino. Although the Company
anticipated some revenue loss as a result of this increased competition, the
actual effects were much greater than anticipated and resulted in a $2.0
million loss from operations at Porto Carras for the month of September 1996.
Despite new marketing and cost containment efforts, these losses continued;
furthermore, the majority owner in Porto Carras venture was unwilling or unable
to advance any funds to the operation. Additionally, the majority owner
informed the Company that it did not intend to operate a substantial portion of
the Porto Carras resort area, consisting of two hotels and amenities, during
the 1997 season. These factors, among others, led to the Company's decision to
write off its investment in Porto Carras and led to the sale of Porto Carras,
for a nominal amount in December 1996.
7. Notes and Contracts Payable:
Short-term notes and contracts payable consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1996
-------- ----------
<S> <C> <C>
Construction contracts (a).............................. $ 382 $4,540,434
Other (b)............................................... 305,543 168,169
-------- ----------
$305,925 $4,708,603
</TABLE>
- --------
(a) Consists of various payables relating to both fixed and cost plus
contracts.
(b) In 1997, the balance consisted of five notes payable. The detail of these
notes is as follows: (i) $199,763 equipment, payable in monthly
installments of $15,814. (ii) $164,989 note collateralized by equipment,
payable in monthly installments of $14,892. (iii) three notes totaling
$12,000 collateralized by equipment, payable in total monthly installments
of $500.
F-68
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Long-Term Debt:
Long-term debt, including capital lease obligations, consists of the
following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Notes payable, bank(a)........................... $ 8,170,063 $ 9,585,130
Equipment contracts(b)........................... 2,099,465 622,274
Notes payable, land(c)........................... 2,052,569 3,470,415
Other(d)......................................... 920,422 308,514
Capital lease obligations (Note 9)............... 726,018 1,207,986
Louisiana First Mortgage Notes(e)................ 115,000,000 115,000,000
First Mortgage Notes(f).......................... 135,000,000 135,000,000
Unamortized original issue discount.............. (1,906,373) (2,284,450)
------------ ------------
262,062,164 262,909,869
Less current maturities.......................... (8,590,945) (4,648,638)
------------ ------------
$253,471,219 $258,261,231
============ ============
</TABLE>
- --------
(a) Consists of four notes payable to banks. The detail of these notes is as
follows: (i) Original balance of $3,000,000 uncollateralized promissory
note, payable in monthly installments of interest only through July 1996;
thereafter, principal and interest based on a 60 month amortization through
February 2000. The promissory note bears interest at prime plus 1% (9.5% at
December 31, 1997) throughout the life of the note with a final balloon
payment of $305,243 due in February 2000. (ii) Original balance of
$1,700,000 note collateralized by gaming equipment. Payments of principal
and interest based on a 36 month amortization through May 1998. The note
bears interest at prime plus .25%. (8.75% at December 31, 1997) with a
final balloon payment of $1,065,807 due in May 1998. (iii) Original balance
of $3,850,000 note collateralized by the equipment. The note is payable in
10 quarterly payments of $385,000, including interest at 8.25%. (iv)
Original balance of $2,500,000 uncollateralized line of credit due in March
1998 bearing interest at prime plus 1/4% (8.75% at December 31, 1997). In
March 1998 this note was refinanced to a term loan payable in eighteen
monthly installments of $142,760 bearing interest at 8.75%.
During 1997 the Company was not in compliance with certain debt covenants
relating to notes (iii) and (iv). The Company has received a waiver of the
covenants at December 31, 1997, and has restructured these covenants to
allow the Company to maintain compliance.
(b) Consists of two notes payable collateralized by equipment. The detail of
these notes is as follows: (i) Original balance of $946,005 note payable in
eleven monthly payments of $78,833, including interest at prime plus 3%.
(11.5% at December 31, 1997) with final balloon payment due at term of
note. (ii) Original balance of $1,075,740 note collateralized by equipment,
payable in twenty-three monthly payments of $44,823, including interest at
prime plus 1%. (9.50% at December 31, 1997) with final balloon payment due
at term of note. In March 1998 these notes were refinanced to a term loan
payable in twenty-three monthly installments of $93,465 bearing interest at
10.5% with a final balloon payment of $101,319 due in March 2000.
(c) Consists of three notes payable for land acquisitions. The detail of the
three notes is as follows: (i) Original balance of $700,000 note payable in
monthly installments of $14,959 including interest at prime plus 2% (10.50%
at December 31, 1997), through April 1999. (ii) Original balance of
$870,942 note payable in monthly installments of $12,134 including interest
at 8% through July 2003. (iii) Original
F-69
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
balance of $3,000,000 note payable in monthly installments of $111,699
including interest at 8.75% through November 1998.
(d) Consists of various collateralized notes payable through the year 2004. The
interest rates on these notes vary from 9.5% to 13.25% at fixed rates.
(e) On August 22, 1996, a wholly owned subsidiary of the Company, Casino Magic-
Bossier City, sold $115,000,000 aggregate principal amount of 13%, First
Mortgage Notes securities due in 2003 ("Louisiana First Mortgage Notes").
Contingent Interest is payable on the Louisiana First Mortgage Notes, on
each interest payment date, in an aggregate amount equal to 5% of Casino
Magic-Bossier City's Adjusted Consolidated Cash Flow (as defined in the
Louisiana First Mortgage Notes Indenture ("Louisiana Indenture") for the
Accrual Period (as defined in the Louisiana Indenture, but generally a
six month period) last completed prior to such interest payment date;
provided that no Contingent Interest is payable with respect to any period
prior to the Commencement Date (as defined in the Louisiana Indenture).
Payment of all or a portion of any installment of Contingent Interest may
be deferred, at the option of Casino Magic-Bossier City, if, and only to
the extent that, (i) the payment of such portion of Contingent Interest
will cause Casino Magic-Bossier City's Adjusted Fixed Charge Coverage Ratio
(as defined in the Louisiana Indenture) for Casino Magic-Bossier City's
most recently completed Reference Period prior to such interest payment
date to be less than 1.5 to 1.0 on a pro forma basis after giving effect to
the assumed payment of such Contingent Interest and (ii) the principal
amount of the Louisiana First Mortgage Notes corresponding to such
Contingent Interest has not then matured and become due and payable (at
stated maturity, upon acceleration, upon redemption, upon maturity of a
repurchase obligation or otherwise). The aggregate amount of Contingent
Interest payable in any Semiannual Period will be reduced pro rata for
reductions in the outstanding principal amount of notes prior to the close
of business on the record date immediately preceding such payment of
Contingent Interest. During 1997, the Company accrued $677,251 of
contingent interest, none of which was paid.
The Louisiana First Mortgage Notes are secured by a first priority security
interest, subject to permitted liens, in substantially all of the existing
and future assets of Bossier City, including the Bossier Riverboat and
substantially all of the other assets that comprise Casino Magic-Bossier
City.. The Jefferson Guarantee will be secured by a pledge of all of the
capital stock of Jefferson Casino Corp., a wholly owned subsidiary of the
Company.
Casino Magic-Bossier City has contractually committed to apply net proceeds
from the asset sale of the Crescent City Riverboat to the construction of
an entertainment facility or hotel.
The Louisiana First Mortgage Notes are governed by the Louisiana Indenture.
The Louisiana Indenture pursuant to which the Louisiana First Mortgage
Notes have been issued contains certain covenants that will limit the
ability of Casino Magic-Bossier City and its subsidiaries to, among other
things, incur additional indebtedness and issue preferred stock, pay
dividends, make investments or make other restricted payments, incur liens,
enter into mergers or consolidations, enter into transactions with
affiliates or sell assets.
The proposed Merger (See Note 2), if effected, is a Change of Control as
defined in the Louisiana Induenture. Upon a Change of Control, each holder
of Louisiana First Mortgage Notes will have the right to require Casino
Magic-Bossier City to repurchase all or any part of the Louisiana First
Mortgage Notes at a price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any, thereon to the
date of repurchase. Within 30 days following any Change of Control, the
Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to
repurchase the Louisiana First Mortgage Notes pursuant to the procedures
required by the Louisiana Indenture and described in such notice.
F-70
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Louisiana First Mortgage Notes are redeemable at the option of the
Company. The redemption amounts are as follows:
<TABLE>
<S> <C>
August 15,
2000............................................................. 106.500%
2001............................................................. 104.332%
2002............................................................. 102.166%
</TABLE>
(f) On October 14, 1993, a wholly owned indirect subsidiary of the Company,
Casino Magic Finance Corp. ("Finance Corp."), sold $135,000,000 in
aggregate principal amount of 11 1/2% First Mortgage Notes due in 2001
(the "Finance Notes") and warrants to purchase 810,000 shares of Casino
Magic Corp. common stock. Proceeds from the Notes were allocated by the
underwriter between the Finance Corp. and the Company based on the
estimated fair market value at the time of issuance of the Finance Notes
and the warrants in the amounts of $131,760,000 and $3,240,000 ($4 per
warrant), respectively. The value of the warrants is treated as original
issue discount for financial statement purposes, and is reflected in the
balance sheet net of amortization as an adjustment to the carrying value
of long-term debt. The Finance Notes are governed by an Indenture (the
"Indenture") entered into on the same date between Finance Corp., the
Company and IBJ Schroder Bank & Trust Company as the Trustee. Under
Section 4.10 of the Indenture, the Company's ability to pay dividends on
its common stock is restricted to an amount which is determined under a
formula based primarily on the Company's future income, and is precluded
upon the occurrence of an "Event of Default" as defined under the
Indenture. Events of Default include, among other things, the failure to
pay the interest or principal due on the Finance Notes, the entry of a
judgment in excess of $10,000,000 against the Company or Casino Magic-BSL,
Casino Magic-Biloxi and Finance Corp., which is not discharged within 60
days after entry, and the default by the Casino Magic or Casino Magic-BSL,
Casino Magic-Biloxi and Finance Corp. under indebtedness due to third
parties. The Indenture also contains certain covenants that restrict,
among other things, the making of certain investments, payments of
dividends and other distributions, the incurrence of additional
indebtedness and future guarantees of indebtedness, certain transactions
with shareholders and affiliates, certain mergers and consolidations,
certain asset sales and the creation of certain liens. The Finance Notes
are secured by a pledge of the stock of Finance Corp., Bay Saint Louis and
Biloxi along with the accounts receivable, inventories, property and
equipment, property held for development and deposits of Casino Magic-BSL
and Casino Magic-Biloxi.
The Merger (See Note 2) if completed would constitute a Change in Control
under the Finance Notes Induenture. If there is a decrease by one or more
gradations by a rating agency within 90 days of the public notice of the
Merger (February 19, 1998) would required Finance Corp to make an offer to the
holders of the Finance Notes to redemm them at a price equal to 101% of the
principal balance together with accrued and unpaid interest. The offer would
be required to be made, if at all, within 30 days after the Change of Control.
The Finance Notes are redeemable at the option of the Company. The
redemption amounts are as follows:
<TABLE>
<S> <C>
October 15,
1997............................................................ 105.750%
1998............................................................ 103.833%
1999............................................................ 101.917%
2000 and thereafter............................................. 100.000%
</TABLE>
F-71
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Maturities of the Company's long-term debt, including capital lease
obligations, as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1998.......................................................... $ 8,590,945
1999.......................................................... 3,503,955
2000.......................................................... 1,017,061
2001.......................................................... 250,963
2002.......................................................... 135,273,782
Thereafter.................................................... 115,331,829
------------
263,968,535
Unamortized Original Issue Discount........................... (1,906,371)
------------
$262,062,164
============
</TABLE>
9. Lease commitments:
The Company has long-term lease agreements for land for the site of Casino
Magic-Biloxi and additional land at Casino Magic-BSL. The Casino Magic-Biloxi
land is classified as an operating lease. The annual rental payments for the
initial five-year term of the Casino Magic-Biloxi land lease began June 5,
1993, and are $550,000, $250,000, $450,000, $450,000 and $200,000 for the first
through fifth year. The land lease contains seventeen, five-year renewal
options at contractually higher rentals, plus inflation adjustments not to
exceed 4.5% per year.
On June 4, 1993, the Company entered into a long-term agreement with the
State of Mississippi to lease 283,217 square foot of submerged lands or
tidelands for Casino Magic-Biloxi. The initial lease term expires May 31, 2003,
with one five year extension. Annual rental payments are due in advance on the
first of June in the amount of $595,000, plus an annual increase of $45,000 for
the first five years. In May 1998 the lease amount will be determined under
Mississippi law regarding the leasing of public trust tidelands.
The following is a schedule of future minimum lease payments for capital and
operating leases (with initial or remaining terms in excess of one year) as of
December 31, 1997:
<TABLE>
<CAPTION>
Year ending
December 31,
-------------------
Capital Operating
Leases Leases
-------- ----------
<S> <C> <C>
1998.................................................... $192,065 $1,479,257
1999.................................................... 207,325 1,164,357
2000.................................................... 153,856 1,026,287
2001.................................................... 20,348 782,454
2002.................................................... 22,007 775,000
Thereafter.............................................. 130,417 4,650,000
-------- ----------
Total minimum lease payments............................ 726,018 $9,877,355
==========
Less amount representing interest (9% to 13%)........... 145,059
--------
Present value of net minimum capital lease payments..... $580,959
========
</TABLE>
Rent expense for all non-cancelable operating leases were $3,644,000
$1,800,000, and $3,048,000 for the years ended December 31, 1997, 1996 and
1995, respectively.
F-72
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Other Commitments and Contingencies:
Ongoing legal proceedings:
A class action lawsuit was filed on April 26, 1994, in the United States
District Court, Middle District of Florida (the "Poulos Lawsuit"), naming as
defendants 41 manufacturers, distributors and casino operators of video poker
and electronic slot machines, including the Company. The lawsuit alleges that
such defendants have engaged in a course of fraudulent and misleading conduct
intended to induce people to play such games based on a false belief concerning
the operation of the gaming machines, as well as the extent to which there is
an opportunity to win. The suit alleges violations of the Racketeer Influenced
and Corrupt Organization Act, as well as claims of common law fraud, unjust
enrichment and negligent misrepresentation, and seeks damages in excess of $6
billion. On May 10, 1994, a second class action lawsuit was filed in the United
States District Court, Middle District of Florida (the "Ahern Lawsuit"), naming
as defendants the same defendants who were named in the Poulos Lawsuit and
adding as defendants the owners of certain casino operations in Puerto Rico and
the Bahamas, who were not named as defendants in the Poulos Lawsuit. The claims
in the Ahern Lawsuit are identical to the claims in the Poulos Lawsuit. Because
of the similarity of parties and claims, the Poulos Lawsuit and Ahern Lawsuit
were consolidated into one case file in the United States District Court,
Middle District of Florida. On December 9, 1994 a motion by the defendants for
change of venue was granted, transferring the case to the United States
District Court for the District of Nevada, in Las Vegas. In response to a
motion to dismiss the Complaint brought by the Company and other defendants,
the United States District Court for the District of Nevada entered an order
dated April 17, 1996, granting the motions and dismissing the complaint without
prejudice.
The plaintiffs then filed an amended Complaint on May 31, 1996, in which the
plaintiffs sought damages against the Company and other defendants in excess of
$1 billion and punitive damages for violations of the Racketeer Influenced and
Corrupt Organizations Act and for state common law claims for fraud, unjust
enrichment and negligent misrepresentation. The Company and other defendants
have moved to dismiss the amended Complaint. The Company believes that the
claims are without merit and does not expect that the lawsuit will have a
material adverse effect on the financial condition or results of operations of
the Company.
On or about September 6, 1996, Casino America, Inc. commenced litigation in
the Chancery Court of Harrison County, Mississippi, Second Judicial District,
against the Company, and James Edward Ernst, its Chief Executive Officer
(collectively "Defendants"), seeking injunctive relief and unspecified
compensatory damages in an amount to be proven at trial as well as punitive
damages. Plaintiff claims, among other things, that Defendants (i) breached the
terms of an agreement they had with Plaintiff, (ii) tortiously interfered with
certain business relations of plaintiff; and (iii) breached covenants of good
faith and fair dealing they allegedly owed to plaintiff. On or about October 8,
1996, Defendants interposed an answer to plaintiff's complaint denying the
allegations contained in the complaint. The discovery phase of this litigation
is continuing and a trial date has been set for August 1998. While the
Company's management cannot predict the outcome of this action, management
believes plaintiff's claims are without merit and the Company intends to
vigorously defend this action.
In addition, the Company is a litigant in legal matters arising in the
normal course of business. In the opinion of management, all such pending legal
matters are either adequately covered by insurance, or if not insured, will not
have a material adverse effect on the financial position or results of
operations of the Company.
Contractual agreements:
Argentina. In December 1994, the Company, through its wholly-owned
subsidiary, Casino Magic-Neuquen, entered into a 12-year concession agreement
with the Province of Neuquen, Argentina. Casino
F-73
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Magic-Neuquen which began operations in January 1995 operates two casinos in
the Province of Neuquen in the cities of Neuquen City and San Martin de los
Andes. The Company has unrestricted rights to increase the number of gaming
positions at both locations.
Camptown Greyhound Racing, Inc. On July 7, 1994, the Company and Alliance
Gaming Corp. (formerly United Gaming) formed two joint ventures ("KGP" and
"KFP") to lend Camptown Greyhound Racing, Inc. ("Camptown') approximately $3.2
million. On October 28, 1994, KFP executed a loan agreement with Boatmen's Bank
of Kansas City ("Boatmen's") whereby Boatmen's lent $3.2 million to Camptown.
KFP had collateralized the loan with a $3.1 million certificate of deposit
(one-half funded by each party to the joint venture) and, in addition,
guaranteed the repayment of the loan. In January 1996, Camptown filed for
protection under Chapter 11 of U.S. Bankruptcy Code. The Company's $1,580,000
share of the amount lent by KFP to Camptown was expensed in 1995.
In January 1997, the Company transferred all of its interest in KGP and KFP
to Alliance Gaming Corp., an unrelated third party, except for a deminimus
interest. The consideration for the transfer was Alliance Gaming Corp.'s
agreement to assume certain current financial obligations and to repay the
Company all of its cost in the project if they are successful in commencing
gaming operations at Camptown.
Indiana. The Company, through its wholly owned subsidiary, Crawford County
Casino, Corp. ("Indiana Corp.") is one of two applicants for the tenth gaming
license expected to be issued in the State of Indiana. If successful in
obtaining this gaming license, the Company has entered into an option agreement
to sell to Harrah's Operating Company the common stock of Indiana Corp. for
approximately $5.0 million. The option expires on January 2001. The Company can
give no assurances that a gaming license will be obtained in Indiana. All land
options held by Indiana Corp. associated with a possible gaming site are fully
reserved at December 31, 1997.
Land Acquisitions.
In 1993, the Company exercised its option to purchase of approximately 3.5
acres of unimproved land in downtown St. Louis, Missouri at a cost of
approximately $4,000,000. At December 31, 1997, approximately $4,000,000 is
included in property held for sale related to this transaction.
In 1994, the Company exercised an option and to purchase additional real
estate located in Downtown St. Louis, Missouri at a cost of approximately
$800,000. At December 31, 1997, approximately $800,000 is included in property
held for sale related to this transaction.
In 1992, the Company purchased real estate located in downtown Bay Saint
Louis, Mississippi at a cost of approximately $1,200,000. At December 31, 1997,
the Company had written down the value of the property to $800,000 and this
value is included in property held for sale.
The Company had acquired land and options to purchase land in order to
enhance the Company's developmental and licensing procurement potential in
various States. Management has significantly reduced its development of new
gaming venues and because of this all land options are reserved for on the
Company's financial statements at December 31, 1997.
11. Stock and employee benefit plans:
Incentive stock option plan:
In 1992, the Company adopted an incentive stock option plan (the "Plan") in
which directors, officers, and key employees of the Company participate. The
Company has registered 3,700,000 shares of the Company's common stock currently
authorized for issuance under the Plan pursuant to stock options.
F-74
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," effective in
1996. Under SFAS 123, companies can either record expense based on the fair
value of stock based compensation upon issuance or elect to remain under the
current "APB Opinion No. 25" method whereby no compensation cost is recognized
upon grant if certain requirements are met. The Company is continuing to
account for its stock-based compensation plans under APB Opinion No. 25.
However, pro forma disclosures as if the Company adopted the cost recognition
requirements under SFAS 123 are presented below.
A summary of the status of the Company's stock options, non-qualified
options, and warrants as of December 31, 1997, 1996 and 1995 and changes during
the years ended on those dates is presented below (shares in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1997 1996 1995
---------------------- ---------------------- ----------------------
Weighted Average Weighted Average Weighted Average
---------------------- ---------------------- ----------------------
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 4,200 $ .67 5,108 $ 7.60 4,943 $7.42
Granted................. 400 $1.69 1,998 $ 3.56 950 $5.06
Exercised............... (239) $1.59 (424) $ 1.72 (344) $1.43
Canceled................ (915) $2.23 (2,482) $12.00 (441) $4.61
Outstanding at end of
year................... 3,446 $3.96 4,200 $ 3.67 5,108 $7.60
Options exercisable at
end of year............ 1,985 $3.96 2,655 $ 3.11 3,072 $9.12
Options available for
future grants.......... 2,582 2,068 1,583
Weighted average fair
value of options
granted during the
year................... $1.69 $1.11 $1.28
</TABLE>
The following table summarizes information about stock options and warrants
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------- ---------------------------------
Number Wgtd. Avg. Wgtd. Avg. Number Wgtd. Avg.
Exercise Outstanding Remaining Exercise Exercisable Exercise
Price at 12/31/97 Contr. Life Price at 12/31/97 Price
-------- ----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$ 1.69............... 399,500 4.77 1.69 15,000 $ 1.69
2.75............... 980,000 0.81 2.75 980,000 2.75
3.50............... 150,000 4.56 3.50 30,000 3.50
3.63............... 1,288,200 3.70 3.63 575,375 3.63
3.75............... 3,000 4.66 3.75 600 3.75
5.81............... 200,000 4.48 5.81 200,000 5.81
7.20............... 69,100 1.30 7.20 69,100 7.20
7.35............... 50,000 1.88 7.35 50,000 7.35
15.30............... 200,000 6.30 15.30 60,000 15.30
--------- ---- ------ --------- ------
Totals............. 3,339,800 3.15 $ 3.96 1,980,075 $ 3.96
========= ==== ====== ========= ======
</TABLE>
F-75
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Had compensation cost for the Company's 1997, 1996 and 1995 grants for
stock-based compensation plans been determined consistent with SFAS 123, the
Company's net income and net earnings (loss) per common share for the years
ended December 31, 1997, 1996 and 1995 would approximate the pro forma amounts
below (in thousands, except per share data):
The fair value of each option granted during the periods presented is
estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 20%, (3) risk-free interest rates of 5.2%, 5.26%, 5.47% and 5.5%,
and (4) expected life of 2.25, 4.5, 6.75, and 9 years.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1997 1996 1995
---------------- ------------------ ------------------
As Reported As Reported As Reported
Pro Forma Pro Forma Pro Forma
---------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income (Loss)....... $(5,249) $(5,958) $(31,589) $(32,563) $(10,292) $(10,660)
Earnings per common
share
Basic................. $ (0.15) $ (0.17) $ (0.89) $ (0.92) $ (0.31) $ (0.32)
Diluted............... $ (0.15) $ (0.17) $ (0.89) $ (0.92) $ (0.31) $ (0.32)
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995,
and additional awards in future years are anticipated.
Pensions and other benefits:
In July 1993, the Company adopted The Casino Magic Corp. 401(k) Plan (the
"401(k) Plan"), a defined contribution plan covering all eligible employees of
the Company who have one year of service and are age twenty-one or older. The
401(k) Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). Each year, participants may contribute up to 15%
of pretax annual compensation, as defined in the 401(k) Plan. The Company's
matching and/or additional contributions may be contributed at the discretion
of the Company's Board of Directors. The Company's contributions to the 401(k)
Plan are allocated to employed participants' accounts as of the last day of the
plan year. Total employer contributions to the 401(k) Plan at December 31,
1997, 1996 and 1995 were approximately $201,000, $176,000, and $177,000,
respectively.
12. Write-off of capitalized costs relating to inactive developments:
In 1995, the Company decided to terminate development efforts with respect
to specific properties and jurisdictions. Because of this determination,
significant capitalized amounts relating to land, land options, joint ventures
and construction projects were written-off or revalued. In addition, certain
consulting agreements that were entered into to pursue gaming opportunities in
new jurisdictions were terminated. The amount expensed in the fourth quarter of
1995 was $14,542,164.
13. Advertising:
The company expenses all production and communication costs of advertising
as incurred. Advertising expense was approximately $7,815,000, $5,470,000, and
$4,472,000 for years ended December 31, 1997, 1996, and 1995, respectively.
14. Related Party Transactions:
During the years ended December 31, 1997, 1996, and 1995, the Company
incurred $7,247, $1,346,861 and $353,888, respectively, for architectural and
design services provided by an architectural firm that is wholly-owned by an
outside director and shareholder of the Company. The director resigned in
October 1996.
F-76
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During the years ended December 31, 1997, 1996, and 1995, the Company
incurred $145,744, $154,028 and $388,944, respectively, for legal services
provided by a law firm in which an outside director of the Company is a
shareholder.
During the year ended December 31, 1996 and 1995, the Company incurred
$219,800, and $387,422, respectively, for charter plane rentals provided by a
company that is wholly owned by the Company's Chairman.
The Company purchased a jet airplane in February 1996 from the Company's
Chairman. The Company paid $1.7 million for the airplane which approximated
fair value at the date of purchase. The plane was sold in February 1997 to an
unrelated third party for $1.4 million, which approximated fair value.
15. Income taxes:
Pretax financial income (loss) generated from domestic and foreign sources
was as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Domestic........................... $(12,132,945) $(15,322,992) $(15,336,975)
Foreign............................ 4,948,737 (20,942,537) 1,813,932
------------ ------------ ------------
Total pretax loss.................. $ (7,184,208) $(36,265,529) $(13,523,043)
============ ============ ============
</TABLE>
Provision (benefit) for income taxes for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Federal and state current............ $(2,733,203) $(4,253,704) $(2,546,443)
Foreign current...................... 1,064,963 827,548 1,099,816
Federal deferred..................... (266,760) (1,250,026) (1,221,514)
Foreign deferred..................... -- -- (562,723)
----------- ----------- -----------
Total................................ $(1,935,000) $(4,676,182) $(3,230,864)
=========== =========== ===========
</TABLE>
Components of deferred tax liabilities (assets) are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Depreciation and amortization.................. $ 12,154,826 $ 9,535,121
Foreign source income.......................... 257,949 257,949
------------ ------------
Gross deferred tax liabilities................. 12,412,775 9,793,070
------------ ------------
Write-off of preopening costs.................. (1,781,870) (2,493,074)
Tax benefits related to non-statutory stock
Options....................................... (504,000) (504,000)
Accrued employee benefits and liabilities...... (1,428,370) (1,433,067)
Abandoned development projects................. (1,515,657) (10,229,821)
Net operating loss carry-forward............... (21,299,675) (2,269,344)
Other.......................................... (902,737) (798,293)
------------ ------------
Gross deferred tax assets...................... (27,432,309) (17,727,599)
------------ ------------
Less valuation allowance....................... 15,019,534 8,201,290
============ ============
Net deferred tax liabilities................... $ -- $ 266,761
============ ============
</TABLE>
F-77
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate
to pre-tax income from continuing operations as a result of the following
differences:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C>
Statutory U.S. tax rate (35%)...... $(2,023,010) $(12,692,935) $(4,733,065)
Increase (decrease) in rates
resulting from:
Expenses which were non-deductible
for tax purposes.................. 1,299,010 357,805 733,876
Expenses which were deductible for
tax purposes and not book......... (6,988,244) -- --
Foreign taxes...................... 1,064,963 827,548 1,099,816
Valuation allowance................ 6,818,244 8,201,290 --
State tax benefit.................. -- (802,174) --
Other.............................. (2,105,996) (567,716) (331,491)
----------- ------------ -----------
Effective tax rate (33%), (13%) and
(24%), respectively............... $(1,935,000) $ (4,676,182) $(3,230,864)
=========== ============ ===========
</TABLE>
The valuation allowance against net deferred tax assets was recorded in
recognition of the significant operating losses incurred by the Company for
the last three years.
Mississippi State taxes were offset by a tax credit for state gaming taxes
based on gross revenues realized by Casino Magic-BSL and Casino Magic-Biloxi.
The credit is the lesser of the annual total gaming taxes paid or the state
income tax. Credit carry-forwards are not permitted.
Louisiana State taxes do not allow for an offset of state gaming taxes
based on gross revenues realized by Louisiana.
16. Fair value of financial instruments:
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- -------
(in thousands)
<S> <C> <C>
Cash and cash equivalents............................... 20,902 20,902
Marketable securities................................... 10,629 10,629
Notes receivable........................................ 3,385 3,385
Notes payable and current maturities of long-term debt
and long-term debt..................................... 262,368 247,568
</TABLE>
The following methods and assumptions were used by the Company in
estimating its fair value disclosure:
Cash and cash equivalents, and marketable securities. The carrying amount
reported on the consolidated balance sheet approximates its fair value
because of the short term nature of these instruments.
Notes receivable. This is a long-term note receivable from an Indian
Tribe. The fair value of the note approximates market value based on the
interest rate of the note and the collateral securing the note.
F-78
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Notes payable and current maturities of long-term debt and long-term
debt. The fair value of the Company's debt either approximates its carrying
value or is based upon the market price of the debt instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
17. Selected quarterly financial information (Unaudited):
<TABLE>
<CAPTION>
Year ended December 31, 1997
-------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Totals
------- ------- ------- ------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue....................... $65,781 $65,958 $66,495 $63,240 $261,474
Income from operations........ 1,997 5,927 10,125 6,506 24,555
Income (loss) before tax and
minority interest............ (5,607) (1,020) 3,390 (2,543) (5,780)
Net income (loss)............. (3,672) (1,222) 2,675 (3,030) (5,249)
Earnings (loss) per share:
Basic....................... (0.10) (0.03) 0.08 (.08) (0.15)
Diluted..................... (0.10) (0.03) 0.08 (.08) (0.15)
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1996
------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Totals
------- ------- ------- ------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue......................... $43,125 42,368 $43,271 $51,514 $180,278
Income from operations.......... 5,565 6,473 5,355 (8,550) 8,843
Income (loss) before tax........ 2,352 2,456 (26,024) (15,050) (36,266)
Net income (loss)............... 1,644 1,660 (20,683) (14,210) (31,589)
Earnings (loss) per share:
Basic......................... 0.05 0.05 (0.57) (0.40) (0.89)
Diluted....................... 0.05 0.05 (0.57) (0.40) (0.89)
</TABLE>
NOTE: Earnings (loss) per share totals will not necessarily agree to the
sum of the quarterly information
F-79
<PAGE>
We have not authorized any dealer, salesperson or other person to give any
information or to make any representations not contained in this prospectus in
connection with the exchange offer made by this prospectus and you must not
rely on any such information or representations as having been authorized by
us. Neither the delivery of this prospectus nor any sale made hereunder will,
under any circumstances, create any implication that there has been no change
in our affairs since the date as of which information is given in this
prospectus. This prospectus does not constitute an offer or solicitation 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
authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such
solicitation.
----------------
Dealer Prospectus Delivery Obligation
Until June 27, 1999 (90 days after commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in the exchange offer, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to any unsold allotments or
subscriptions.
$350,000,000
[LOGO OF HOLLYWOOD PARK, INC.]
HOLLYWOOD PARK, INC.
Offer to Exchange
9 1/4% Senior Subordinated Notes
due 2007
------------------
PROSPECTUS
------------------
March 29, 1999
<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 the person 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 the person in connection with such action, suit or proceeding if
the person acted in good faith and in a manner the person 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 the person's 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, the Company's Certificate of
Incorporation, as amended, includes a provision that limits a director's
personal liability to the Company or its stockholders for monetary damages for
breaches of his or her fiduciary duty as a director. Article XIII of the
Company's Certificate of Incorporation, as amended, provides that no director
of the Company 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, the Company'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 the Company
with respect thereto.
The Company 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 the Company.
ITEM 21. EXHIBITS
A list of exhibits included as part of the Registration Statement is set
forth below:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
2.1 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.
2.2 Agreement and Plan of Merger, dated as of February 19, 1998, among
Casino Magic Corp., Hollywood Park, Inc. and HP Acquisition II, Inc.,
is hereby incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, filed February 26, 1998.
3.1** Certificate of Incorporation of Hollywood Park, Inc.
3.2** Restated By-laws of Hollywood Park, Inc.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.3 Certificate of Incorporation of Hollywood Park Operating Company, is
hereby incorporated by reference to Exhibit 3.3 to the Company's Form
S-4 Registration Statement dated August 27, 1997.
3.4 Amended By-laws of Hollywood Park Operating Company, are hereby
incorporated by reference to Exhibit 3.4 to the Company's Form S-4
Registration Statement dated August 27, 1997.
3.5 Certificate of Incorporation of Hollywood Park Fall Operating Company,
is hereby incorporated by reference to Exhibit 3.5 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.6 By-laws of Hollywood Park Fall Operating Company are hereby
incorporated by reference to Exhibit 3.6 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.7 Articles of Incorporation of Hollywood Park Food Services, Inc., are
hereby incorporated by reference to Exhibit 3.7 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.8 By-laws of Hollywood Park Food Services, Inc., are hereby incorporated
by reference to Exhibit 3.8 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated October 30, 1997.
3.9 Articles of Incorporation of HP/Compton, Inc., are hereby incorporated
by reference to Exhibit 3.9 to the Company's Amendment No. 1 to Form
S-4 Registration dated October 30, 1997.
3.10 By-laws of HP/Compton, Inc., are hereby incorporated by reference to
Exhibit 3.10 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.11 Articles of Organization of Crystal Park Hotel and Casino Development
Company, LLC, are hereby incorporated by reference to Exhibit 3.11 to
the Company's Amendment No. 1 to Form S-4 Registration Statement dated
October 30, 1997.
3.12 Operating Agreement of Crystal Park Hotel and Casino Development
Company, LLC, are hereby incorporated by reference to Exhibit 3.12 to
the Company's Amendment No. 1 to Form S-4 Registration Statement dated
October 30, 1997.
3.13 Restated Articles of Incorporation of Turf Paradise, Inc., are hereby
incorporated by reference to Exhibit 3.13 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.14 By-laws of Turf Paradise, are hereby incorporated by reference to
Exhibit 3.14 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.15 Certificate of Incorporation of HP Yakama, Inc., is hereby
incorporated by reference to Exhibit 3.15 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.16 By-laws of HP Yakama, Inc., are hereby incorporated by reference to
Exhibit 3.16 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.17 Amended and Restated Certificate of Incorporation of Boomtown, Inc.,
is hereby incorporated by reference to Exhibit 3.17 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.18 By-laws of Boomtown, Inc., are hereby incorporated by reference to
Exhibit 3.18 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.19 Certificate of Amended and Restated Articles of Incorporation of
Boomtown Hotel & Casino, Inc., are hereby incorporated by reference to
Exhibit 3.19 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.20 Revised and Restated By-laws of Boomtown Hotel & Casino, Inc., are
hereby incorporated by reference to Exhibit 3.20 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.21 Articles of Incorporation of Bayview Yacht Club, Inc., are hereby
incorporated by reference to Exhibit 3.21 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.22 By-laws of Bayview Yacht Club, Inc., are hereby incorporated by
reference to Exhibit 3.22 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated October 30, 1997.
3.23 Certificate of Mississippi Limited Partnership of Mississippi-I
Gaming, L.P., are hereby incorporated by reference to Exhibit 3.23 to
the Company's Amendment No. 1 to Form S-4 Registration Statement dated
October 30, 1997.
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 quarter ended June 30,
1997.
3.25 Articles of Incorporation of Louisiana Gaming Enterprises, Inc., are
hereby incorporated by reference to Exhibit 3.25 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.26** Second Amended and Restated Partnership Agreement of Louisiana-I
Gaming, a Louisiana Partnership in Commendam
3.27** Certificate of Incorporation of HP Yakama Consulting, Inc.
3.28** By-laws of HP Yakama Consulting, Inc.
3.29** Articles of Incorporation of Casino Magic Corp.
3.30** Amended By-laws of Casino Magic Corp.
3.31** Articles of Incorporation of Casino Magic American Corp.
3.32** By-laws of Casino Magic American Corp.
3.33** Articles of Incorporation of Biloxi Casino Corp.
3.34** By-laws of Biloxi Casino Corp.
3.35** Articles of Incorporation of Casino Magic Finance Corp.
3.36** By-laws of Casino Magic Finance Corp.
3.37** Articles of Incorporation of Casino One Corporation
3.38** By-laws of Casino One Corporation
3.39** Articles of Incorporation of Bay St. Louis Casino Corp.
3.40** By-laws of Bay St. Louis Casino Corp.
3.41** Articles of Incorporation of Mardi Gras Casino Corp.
3.42** By-laws of Mardi Gras Casino Corp.
3.43** Articles of Incorporation of Boomtown Hoosier, Inc.
3.44** By-laws of Boomtown Hoosier, Inc.
3.45** Articles of Organization of Indiana Ventures LLC
3.46** Operating Agreement of Indiana Ventures LLC
3.47** Amended Articles of Incorporation of Switzerland County Development
Corp. (f/k/a Conrad (New Zealand) Corporation)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.48** By-laws of Switzerland County Development Corp. (f/k/a Conrad (New
Zealand)
Corporation)
3.49** Amended Articles of Incorporation of Pinnacle Gaming Development Corp.
3.50** By-laws of Pinnacle Gaming Development Corp.
3.51** Articles of Incorporation of HP Casino, Inc.
3.52** By-laws of HP Casino, Inc.
4.1 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.
4.2** Hollywood Park 1993 Stock Option Plan
4.3 Indenture, dated August 1, 1997, by and among the Company, Hollywood
Park Operating Company, Hollywood Park Food Services, Inc., Hollywood
Park Fall Operating Company, 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.
4.4* First Supplemental Indenture, dated as of February 5, 1999, to
Indenture dated as of August 1, 1997 governing the 9 1/2% Senior
Subordinated Notes due 2007, by and among the Company and Hollywood
Park Operating Company, as co-issuers, and Bayview Yacht Club, Inc.,
Boomtown Hotel & Casino, Inc., Boomtown, Inc., Crystal Park Hotel and
Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP/Compton, Inc., HP Yakama, Inc., Louisiana Gaming
Enterprises, Inc., Louisiana-I Gaming, a Louisiana Partnership in
Commendam, Mississippi-I Gaming, LP., and Turf Paradise, Inc. as
guarantors, and The Bank of New York, as trustee.
4.5 Form of Series B 9 1/2% Senior Subordinated Note due 2007 (included in
Exhibit 4.3), is hereby incorporated by reference to the Company's
Amendment No. 1 to Registration Statement on Form S-4 dated October
30, 1997.
4.6* Indenture, dated as of February 18, 1999, governing the 9 1/4% Senior
Subordinated Notes due 2007, by and among the Company as issuer, and
Bay St. Louis Casino Corp., Bayview Yacht Club, Inc., Biloxi Casino
Corp., Boomtown Hoosier, Inc., Boomtown Hotel & Casino, Inc.,
Boomtown, Inc., Casino Magic American Corp., Casino Magic Corp.,
Casino Magic Finance Corp., Casino One Corporation, Crystal Park Hotel
and Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana-I Gaming, a Louisiana Partnership in Commendam, Mardi
Gras Casino Corp., Mississippi-I Gaming, L.P., Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc. as initial guarantors, and The Bank of New York, as
trustee.
4.7* Form of Series B 9 1/4% Senior Subordinated Note due 2007 (included in
Exhibit 4.6).
5** Opinion of Irell & Manella LLP
10.1** Directors Deferred Compensation Plan for Hollywood Park, Inc.
10.2** Aircraft Time Sharing Agreement, dated June 2, 1998, by and between
Hollywood Park, Inc. and R.D. Hubbard Enterprises, Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.3 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.
10.4 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.
10.5 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.
10.6 Operating Agreement for Crystal Park Hotel and Casino Development
Company, LLC, a California Limited Liability Company, 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.
10.7 Lease, by and between Crystal Park Hotel and Casino Development
Company, LLC and California Casino Management, Inc., dated December
19, 1997, is hereby incorporated by reference to Exhibit 10.41 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997.
10.8 Addendum to the Lease Agreement dated December 19, 1997, by and
between Crystal Park Hotel and Casino Development Company, LLC and
California Casino Management, Inc., dated June 30, 1998, is hereby
incorporated by reference to Exhibit 10.46 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.
10.9 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.
10.10 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 filed September 18, 1996.
10.11** Second Addendum to the Lease Agreement dated December 19, 1997, by and
between Crystal Park Hotel and Casino Development Company, LLC and
California Casino Management, Inc., dated March 8, 1999.
10.12 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.
10.13 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.
10.14 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.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.15 Purchase Agreement, dated August 1, 1997, by and among the Company,
Hollywood Park Operating Company, 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 Gaming-I Gaming, Louisiana Gaming Enterprises, Inc.,
Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc., and the Initial
Purchasers named therein, is hereby by incorporated by reference to
Exhibit 10.36 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
10.16 Registration Rights Agreement, dated August 1, 1997, by and among the
Company, Hollywood Park Operating Company, 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.
10.17 Profit Participation Agreement, by and between Hollywood Park, Inc.,
and North American Sports Management, Inc., dated July 14, 1997, is
hereby incorporated by reference to Exhibit 10.40 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.18 Loan Agreement, by and between Yakama Tribal Gaming Corporation and HP
Yakama, Inc., dated September 11, 1997, is hereby incorporated by
reference Exhibit 10.41 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.
10.19 Security Agreement, by and between Yakama Tribal Gaming Corporation
and HP Yakama, Inc., dated September 11, 1997, is hereby incorporated
by reference to Exhibit 10.42 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997.
10.20 Master Lease, by and between The Confederated Tribes and Bands of the
Yakama Indian Nation and HP Yakama, Inc., dated September 11, 1997, is
hereby incorporated by reference to Exhibit 10.43 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.21 Sublease, by and between HP Yakama, Inc. and Yakama Tribal Gaming
Corporation, dated September 11, 1997, is hereby incorporated by
reference to Exhibit 10.44 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997.
10.22 Construction and Development Agreement, by and between Yakama Tribal
Gaming Corporation and HP Yakama Consulting, Inc., dated September 11,
1997, is hereby incorporated by reference to Exhibit 10.45 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
10.23 Consulting Agreement, by and between Yakama Tribal Gaming Corporation
and HP Yakama Consulting, Inc., dated September 11, 1997, is hereby
incorporated by reference to Exhibit 10.46 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997.
10.24 Termination of Consulting Agreement, among Yakama Tribal Gaming
Corporation, HP Yakama, Inc., and the Confederated Tribes and Bands of
the Yakama Indians, dated January 1, 1998, is hereby incorporated by
reference to Exhibit 10.42 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
10.25 Voting Agreement, dated as of February 25, 1998, by and between
Hollywood Park, Inc., and Marlin F. Torguson, is hereby incorporated
by reference to Exhibit 10.1 to the Company's Current Report on Form
8-K, filed February 26, 1998.
10.26 Public Trust Tidelands Lease, dated August 15, 1994, by and between
the Secretary of State on behalf of the State of Mississippi and
Mississippi-I Gaming, L.P., is hereby incorporated by reference to
Exhibit 10.43 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.27 Public Trust Tidelands Lease Amendment, dated March 31, 1997, by and
between the Secretary of State on behalf of the State of Mississippi
and Mississippi-I Gaming, L.P., is hereby incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
10.28 Option agreement, by and among The Webster Family Limited Partnership
and The Diuguid Family Limited Partnership, and Pinnacle Gaming
Development Corp., dated June 2, 1998, is hereby incorporated by
reference to Exhibit 10.47 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
10.29 Memorandum of Option Agreement, by and between the Webster Family
Limited Partnership and The Duiguid Family Limited Partnership, and
Pinnacle Gaming Development Corp., dated June 2, 1998, is hereby
incorporated by reference to Exhibit 10.48 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.
10.30 Amended and Restated Option Agreement, by and among Daniel Webster,
Marsha S. Webster, William G. Duiguid, Sara T. Diuguid, J.R. Showers,
III and Carol A. Showers, and Pinnacle Gaming Development Corp., dated
June 2, 1998, is hereby incorporated by reference to Exhibit 10.49 of
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
10.31 Memorandum of Amended and Restated Option Agreement, by and between
Daniel Webster, Marsha S. Webster, William Diuguid, Sara T. Diuguid,
J.R. Showers, III and Carol A. Showers, and Pinnacle Gaming
Development Corp., dated June 4, 1998, is hereby incorporated by
reference to Exhibit 10.50 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
10.32 Assignment of Option Agreement, by Daniel Webster and Marsha S.
Webster, and Pinnacle Gaming Development Corp., dated June 2, 1998, is
hereby incorporated by reference to Exhibit 10.51 of the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
10.33 Amended and Restated Reducing Revolving Loan Agreement, dated October
14, 1998, among Hollywood Park, Inc., and the banks named therein,
Societe Generale and Bank of Scotland (as Managing Agents), First
National Bank of Commerce (as Co-Agent), and Bank of America National
Trust and Savings Association (as Administrative Agent), is hereby
incorporated by reference to Exhibit 2 of the Company's Current Report
on Form 8-K, filed October 30, 1998.
10.34* Purchase Agreement, dated February 12, 1999, by and among the Company
Bay St. Louis Casino Corp., Bayview Yacht Club, Inc., Biloxi Casino
Corp., Boomtown Hoosier, Inc., Boomtown Hotel & Casino, Inc.,
Boomtown, Inc., Casino Magic American Corp., Casino Magic Corp.,
Casino Magic Finance Corp., Casino One Corporation, Crystal Park Hotel
and Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana-I Gaming, a Louisiana Partnership in Commendam, Mardi
Gras Casino Corp., Mississippi-I Gaming, L.P., Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc., and Lehman Brothers, Inc., CIBC Oppenheimer Corp.,
Morgan Stanley & Co., Incorporated, NationsBanc Montgomery Securities
LLC, SG Cowen Securities Corporation, and Wasserstein Perella
Securities, Inc., as initial purchasers.
10.35* Registration Rights Agreement, dated as of February 18, 1999, by and
among the Company and Bay St. Louis Casino Corp., Bayview Yacht Club,
Inc., Biloxi Casino, Corp., Boomtown Hoosier, Inc., Boomtown Hotel &
Casino, Inc., Boomtown, Inc., Casino Magic American Corp., Casino
Magic Finance Corp., Casino One Corporation, Crystal Park Hotel and
Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana-I Gaming, a Louisiana Partnership in Commendam, Mardi
Gras Casino Corp., Mississippi-I Gaming L.P. Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc., and Lehman
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
Brothers Inc., CIBC Oppenheimer Corp., Morgan Stanley & Co.
Incorporated, NationsBanc Montgomery Securities LLC, SG Cowen
Securities Corporation and Wasserstein Perella Securities, Inc., as
initial purchasers.
10.36** Employment Agreement, dated December 23, 1998, by and between
Hollywood Park, Inc. and G. Michael Finnigan.
10.37** Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Paul Alanis.
10.38** Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Mike Allen.
10.39** Employment Agreement, dated January 1, 1999, by and between Hollywood
Park, Inc. and Donald Robbins.
10.40** Purchase Agreement, dated as of February 25, 1998, among Hilton Gaming
(Switzerland County) Corporation and Boomtown Hoosier, Inc.
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
24.15* Powers of Attorney of officers and directors of Bay St. Louis Casino
Corp.
24.16* Powers of Attorney of officers and directors of Biloxi Casino Corp.
24.17* Powers of Attorney of officers and directors of Boomtown Hoosier, Inc.
24.18* Powers of Attorney of officers and directors of Casino Magic American
Corp.
24.19* Powers of Attorney of officers and directors of Casino Magic Corp.
24.20* Powers of Attorney of officers and directors of Casino Magic Finance
Corp.
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
24.21* Powers of Attorney of officers and directors of Casino One Corporation
24.22* Powers of Attorney of officers and directors of HP Casino, Inc.
24.23* Powers of Attorney of officers and directors of HP Yakama Consulting,
Inc.
24.24* Powers of Attorney of directors of Boomtown Hoosier, Inc. in the
capacity of manager of Indiana Ventures LLC
24.25* Powers of Attorney of officers and directors of Mardi Gras Casino
Corp.
24.26* Powers of Attorney of officers and directors of Pinnacle Gaming
Development Corp.
24.27* Powers of Attorney of officers and directors of Switzerland County
Development Corp.
25.1* Form T-1 Statement of Eligibility and Qualification, under the Trust
Indenture Act of 1939, of The Bank of New York, as Trustee
99.1** Form of Letter of Transmittal
99.2** Form of Notice of Guaranteed Delivery
</TABLE>
- --------
* Previously filed
** Filed herewith
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
II-9
<PAGE>
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
(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 the Company pursuant to the foregoing provisions, or
otherwise, the Company 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
Company will, unless in the opinion of its 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-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
HOLLYWOOD PARK, INC.,
a Delaware corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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>
R.D. Hubbard* Chairman of the Board and March 26, 1999
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ G. Michael Finnigan Chief Financial Officer March 26, 1999
____________________________________ (Principal Financial and
G. Michael Finnigan Accounting Officer)
Michael Ornest* Director March 26, 1999
____________________________________
Michael Ornest
Director
____________________________________
J.R. Johnson
Robert T. Manfuso* Director March 26, 1999
____________________________________
Robert T. Manfuso
Timothy J. Parrott* Director March 26, 1999
____________________________________
Timothy J. Parrott
Lynn P. Reitnouer* Director March 26, 1999
____________________________________
Lynn P. Reitnouer
Warren B. Williamson* Director March 26, 1999
____________________________________
Warren B. Williamson
Herman Sarkowsky* Director March 26, 1999
____________________________________
Herman Sarkowsky
Marlin Torguson* Director March 26, 1999
____________________________________
Marlin Torguson
</TABLE>
*By: /s/ G. Michael Finnigan
-----------------------
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 Amendment to the 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 26th day of March, 1999.
BAY ST. LOUIS CASINO CORP.,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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>
Marlin F. Torguson* Chairman of the Board, March 26, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 26, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
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 Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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>
Timothy J. Parrott* Chairman of the Board and March 26, 1999
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
Robert F. List* Director March 26, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Vice President, and Chief March 26, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
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 Amendment to the 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 26th day of March, 1999.
BILOXI CASINO CORP.,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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>
Marlin F. Torguson* Chairman of the Board, March 26, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 26, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
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 Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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>
Timothy J. Parrott* Chairman of the Board and March 26, 1999
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
Robert F. List* Director March 26, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Vice President, and Chief March 26, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
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 Amendment to the 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 26th day of March, 1999.
BOOMTOWN HOOSIER, 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 Amendment
to the 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>
Timothy J. Parrott* Director and President March 26, 1999
____________________________________ (Principal Executive
Timothy J. Parrott Officer)
Robert F. List* Director March 26, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Vice President and Chief March 26, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
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 Amendment to the 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 26th day of March, 1999.
BOOMTOWN HOTEL & CASINO, INC.,
a Nevada corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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>
Timothy J. Parrott* Chairman of the Board and March 26, 1999
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
Robert F. List* Director March 26, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Senior Vice President and March 26, 1999
____________________________________ Chief Financial Officer
G. Michael Finnigan (Principal Financial and
Accounting Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
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 Amendment to the 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 26th day of March, 1999.
CASINO MAGIC AMERICAN CORP.,
a Minnesota corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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>
Marlin F. Torguson* Chairman of the Board, March 26, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 26, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
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 Amendment to the 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 26th day of March, 1999.
CASINO MAGIC CORP.,
a Minnesota corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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>
Marlin F. Torguson* Chairman of the Board, March 26, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 26, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
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 Amendment to the 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 26th day of March, 1999.
CASINO MAGIC FINANCE CORP.,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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>
Marlin F. Torguson* Chairman of the Board, March 26, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 26, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
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 Amendment to the 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 26th day of March, 1999.
CASINO ONE CORPORATION,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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>
Marlin F. Torguson* Chairman of the Board, March 26, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 26, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
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 Amendment to the 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 26th day of March, 1999.
CRYSTAL PARK HOTEL AND 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 Amendment
to the 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 March 26, 1999
Hotel & Casino Development
Company, LLC
R.D. Hubbard* Director and President of March 26, 1999
____________________________________ HP/Compton, Inc.
R.D. Hubbard
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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>
R.D. Hubbard* Director and President March 26, 1999
____________________________________ (Principal Executive
R.D. Hubbard Officer)
Warren B. Williamson* Director March 26, 1999
____________________________________
Warren B. Williamson
/s/ G. Michael Finnigan Executive Vice President, March 26, 1999
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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>
R.D. Hubbard* Director and President March 26, 1999
____________________________________ (Principal Executive
R.D. Hubbard Officer)
Warren B. Williamson* Director March 26, 1999
____________________________________
Warren B. Williamson
/s/ G. Michael Finnigan Executive Vice President, March 26, 1999
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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>
R.D. Hubbard* Chairman of the Board and March 26, 1999
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ G. Michael Finnigan Executive Vice President, March 26, 1999
____________________________________ Treasurer and Chief
G. Michael Finnigan Financial Officer (Principal
Financial and Accounting
Officer)
Warren B. Williamson* Director March 26, 1999
____________________________________
Warren B. Williamson
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
HP CASINO, 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 Amendment
to the 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>
R.D. Hubbard* President (Principal March 26, 1999
____________________________________ Executive Officer)
R.D. Hubbard
Robert F. List* Director March 26, 1999
____________________________________
Robert F. List
Timothy J. Parrott* Director March 26, 1999
____________________________________
Timothy J. Parrott
/s/ G. Michael Finnigan Vice President and Chief March 26, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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>
R.D. Hubbard* Director and President March 26, 1999
____________________________________ (Principal Executive
R.D. Hubbard Officer)
/s/ G. Michael Finnigan Vice President and Chief March 26, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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>
R.D. Hubbard* Director, President and March 26, 1999
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
Bruce Rimbo* Director March 26, 1999
____________________________________
Bruce Rimbo
/s/ G. Michael Finnigan Director, Vice President, March 26, 1999
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
HP YAKAMA CONSULTING, 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 Amendment
to the 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>
R.D. Hubbard* Director, President and March 26, 1999
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
Bruce Rimbo* Director, Vice President and March 26, 1999
____________________________________ Secretary
Bruce Rimbo
/s/ G. Michael Finnigan Director, Vice President, March 26, 1999
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
INDIANA VENTURES LLC
By: its Manager
BOOMTOWN HOOSIER, 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 Amendment
to the 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>
BOOMTOWN HOOSIER, INC. MANAGER of Indiana Ventures March 26, 1999
LLC
Timothy J. Parrott* Director of Boomtown March 26, 1999
____________________________________ Hoosier, Inc.
Timothy J. Parrott
Robert F. List* Director of Boomtown March 26, 1999
____________________________________ Hoosier, Inc.
Robert F. List
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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>
Timothy J. Parrott* Chairman of the Board and March 26, 1999
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
Robert F. List* Director March 26, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Vice President and Chief March 26, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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 PARTNER of March 26, 1999
Louisiana-I Gaming, a
Louisiana Partnership in
Commendam
Timothy J. Parrott* Director of Louisiana March 26, 1999
______________________________________ Gaming Enterprises, Inc.
Timothy J. Parrott
Robert F. List* Director of Louisiana March 26, 1999
______________________________________ Gaming Enterprises, Inc.
Robert F. List
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
MARDI GRAS CASINO CORP.,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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>
Marlin F. Torguson* Chairman of the Board, March 26, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 26, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-33
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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 of March 26, 1999
Mississippi-I Gaming,
L.P.
Timothy J. Parrott* Director of Bayview March 26, 1999
______________________________________ Yacht Club, Inc.
Timothy J. Parrott
Robert F. List* Director of Bayview March 26, 1999
______________________________________ Yacht Club, Inc.
Robert F. List
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the 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>
R.D. Hubbard* Chairman of the Board and March 26, 1999
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
Timothy J. Parrott* Director March 26, 1999
____________________________________
Timothy J. Parrott
Robert F. List* Director March 26, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Director and President March 26, 1999
____________________________________ (Principal Financial and
G. Michael Finnigan Accounting Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-35
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
SWITZERLAND COUNTY DEVELOPMENT CORP.,
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 Amendment
to the 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>
Timothy J. Parrott* Director and President March 26, 1999
____________________________________ (Principal Executive
Timothy J. Parrott Officer)
Robert F. List* Director March 26, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Vice President and Chief March 26, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the 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 26th day of March, 1999.
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 Amendment
to the 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>
R.D. Hubbard* Director and Chief March 26, 1999
____________________________________ Executive Officer
R.D. Hubbard (Principal Executive Officer)
/s/ G. Michael Finnigan Director, Vice President, March 26, 1999
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary
(Principal Financial and
Accounting Officer)
Donald M. Robbins* Director March 26, 1999
____________________________________
Donald M. Robbins
</TABLE>
*By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Attorney-in-Fact
II-37
<PAGE>
EXHIBIT 3.1
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 AMENDMENT
OF "HOLLYWOOD PARK, INC.", FILED IN THIS OFFICE ON THE NINTH DAY OF JUNE, A.D.
1998, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
---------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9562542
DATE: 02-08-99
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HOLLYWOOD PARK, INC.
-------------------
a Delaware corporation
Hollywood Park, Inc., a corporation organized and existing under and
by virtue of the Laws of the State of Delaware (the "Corporation"), hereby
certifies as follows:
1. That ARTICLE XII of the Certificate of Incorporation is deleted in its
-----------
entirety.
2. That ARTICLE XIII is renumbered as ARTICLE XII.
------------ -----------
3. That ARTICLE XIV of the Certificate of Incorporation is renumbered as
-----------
ARTICLE XIII and amended to read in full as follows:
- ------------
"ARTICLE XIII
-------------
A. Definitions. For purposes of this Article XIII, the following terms
-----------
shall have the meanings specified below:
1. "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 promulgated by the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
2. "Affiliated Companies" shall mean those companies directly or
indirectly affiliated or under common Ownership or Control with the Corporation,
including, without limitation, subsidiaries, holding companies and intermediary
companies (as those and similar terms are defined in the Gaming Laws of the
applicable Gaming Jurisdictions) that are registered or licensed under
applicable Gaming Laws.
3. "Gaming" or "Gaming Activities" shall mean the conduct of gaming
and gambling activities, or the use of gaming devices, equipment and supplies in
the operation of a casino, card club or other enterprise, including, without
limitation, slot machines, gaming tables, cards, dice, gaming chips, player
tracking systems, cashless wagering systems and related and associated equipment
and supplies.
4. "Gaming Authorities" shall mean all international, foreign,
federal, state and local regulatory and licensing bodies and agencies with
authority over Gaming within any Gaming Jurisdiction.
5. "Gaming Jurisdictions" shall mean all jurisdictions, domestic and
foreign, and their political subdivisions, in which Gaming Activities are
lawfully conducted.
6. "Gaming Laws" shall mean all laws, statutes and ordinances
pursuant to which any Gaming Authority possesses regulatory and licensing
authority over Gaming within any Gaming Jurisdiction, and all rules and
regulations promulgated by such Gaming Authority thereunder.
-2-
<PAGE>
7. "Gaming Licenses" shall mean all licenses, permits, approvals,
authorizations, registrations, findings of suitability, franchises and
entitlements issued by a Gaming Authority necessary for or relating to the
conduct of Gaming Activities.
8. "Ownership or Control" (and derivatives thereof) shall mean (i)
ownership of record, (ii) "beneficial ownership" as defined in Rule 13d-3 or
Rule 16a-1(a)(2) promulgated by the SEC under the Exchange Act, (iii) the power
to direct and manage, by agreement, contract, agency or other manner, the voting
or management rights or disposition of securities of the Corporation, and/or
(iv) definitions of ownership or control under applicable Gaming Laws.
9. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust or any other entity.
10. "Redemption Date" shall mean the date by which the securities
Owned or Controlled by an Unsuitable Person are to be redeemed by the
Corporation.
11. "Redemption Notice" shall mean that notice of redemption served
by the Corporation on an Unsuitable Person if a Gaming Authority requires the
Corporation, or the Corporation deems it necessary or advisable, to redeem such
Unsuitable Person's securities. Each Redemption Notice shall set forth (i) the
Redemption Date; (ii) the number of shares of securities to be redeemed; (iii)
the Redemption Price and the manner of payment therefor; (iv) the place where
certificates for such shares shall be surrendered for payment; and (v) any other
requirements of surrender of the certificates, including how they are to be
endorsed, if at all.
12. "Redemption Price" shall mean the per share price for the
redemption of any securities to be redeemed pursuant to this Article, which
shall be that price (if any) required to be paid by the Gaming Authority making
the finding of unsuitability, or if such Gaming Authority does not require a
certain price per share to be paid, that sum deemed reasonable by the
Corporation (which may include, in the Corporation's discretion, the original
purchase price per share of the securities); provided, however, the Redemption
-------- -------
Price, unless the Gaming Authority requires otherwise, shall in no event exceed
(i) the closing sales price of the securities on the national securities
exchange on which such shares are then listed on the date the notice of
redemption is delivered to the Unsuitable Person by the Corporation, or (ii) if
such shares are not then listed for trading on any national securities exchange,
then the closing sales price of such shares as quoted in the NASDAQ National
Market System, or (iii) if the shares are not then so quoted, then the mean
between the representative bid and the ask price as quoted by NASDAQ or another
generally recognized reporting system. The Redemption Price may be paid in cash,
by promissory note, or both, as required by the applicable Gaming Authority and,
if not so required, as the Corporation elects.
13. "Unsuitable Person" shall mean a Person who Owns or Controls any
securities of the Corporation or any securities of or interest in any Affiliated
Company (i) that is determined by a Gaming Authority to be unsuitable to Own or
Control such securities or unsuitable to be connected with a Person engaged in
Gaming Activities in that Gaming Jurisdiction, or (ii) who causes the
Corporation or any Affiliated Company to lose or to be
-3-
<PAGE>
threatened with the loss of, or who, in the sole discretion of the Board of
Directors of the Corporation, is deemed likely to jeopardize the Corporation's
right to the use of or entitlement to, any Gaming License.
B. Compliance with Gaming Laws. The Corporation, all Persons Owning
---------------------------
or Controlling securities of the Corporation and any Affiliated Companies, and
each director and officer of the Corporation and any Affiliated Companies shall
comply with all requirements of the Gaming Laws in each Gaming Jurisdiction in
which the Corporation or any Affiliated Companies conduct Gaming Activities. All
securities of the Corporation shall be held subject to the requirements of such
Gaming Laws, including any requirement that (i) the holder file applications for
Gaming Licenses with, or provide information to, applicable Gaming Authorities,
or (ii) that any transfer of such securities may be subject to prior approval by
Gaming Authorities, and any transfer of securities of the Corporation in
violation of any such approval requirement shall not be permitted and the
purported transfer shall be void ab initio.
-- ------
C. Finding of Unsuitability.
------------------------
1. The securities of the Corporation Owned or Controlled by an
Unsuitable Person or an Affiliate of an Unsuitable Person shall be redeemable by
the Corporation, out of funds legally available therefor, by appropriate action
of the Board of Directors, to the extent required by the Gaming Authority making
the determination of unsuitability or to the extent deemed necessary or
advisable by the Corporation. If a Gaming Authority requires the Corporation, or
the Corporation deems it necessary or advisable, to redeem such securities, the
Corporation shall serve a Redemption Notice on the Unsuitable Person or its
Affiliate and shall purchase the securities on the Redemption Date and for the
Redemption Price set forth in the Redemption Notice. From and after the
Redemption Date, such securities shall no longer be deemed to be outstanding and
all rights of the Unsuitable Person or any Affiliate of the Unsuitable Person
therein, other than the right to receive the Redemption Price, shall cease. The
Unsuitable Person shall surrender the certificates for any securities to be
redeemed in accordance with the requirements of the Redemption Notice.
Notwithstanding the foregoing, so long as the Corporation and Hollywood Park
Operating Company are a paired stock real estate investment trust and operating
company, the Corporation may, in its sole discretion, convert any securities
that are redeemable pursuant to this Section (C)(1) into shares of Excess Stock
effective upon written notice to the Unsuitable Person or its Affiliate, and
such shares of Excess Stock shall be transferred to a Trust for sale to a
Permitted Transferee (as such terms are defined in Article IV) in accordance
with Sections (D)(4) through (9) of Article IV.
2. Commencing on the date that a Gaming Authority serves notice
of a determination of unsuitability or the loss or threatened loss of a Gaming
License upon the Corporation, and until the securities Owned or Controlled by
the Unsuitable Person or the Affiliate of an Unsuitable Person are Owned or
Controlled by Persons found by such Gaming Authority to be suitable to own them,
it shall be unlawful for the Unsuitable Person or any Affiliate of an Unsuitable
Person (i) to receive any dividend, payment, distribution or interest with
regard to the securities; (ii) to exercise, directly or indirectly or through
any proxy, trustee, or nominee, any voting or other right conferred by such
securities, and such securities shall not for any purposes be included in the
securities of the Corporation entitled
-4-
<PAGE>
to vote, or (iii) to receive any remuneration in any form from the Corporation
or an Affiliated Company for services rendered or otherwise.
D. Issuance and Transfer of Securities. The Corporation shall not
-----------------------------------
issue or transfer any securities or any interest, claim or charge thereon or
thereto except in accordance with applicable Gaming Laws. The issuance or
transfer of any securities in violation thereof shall be ineffective until (i)
the Corporation shall cease to be subject to the jurisdiction of the applicable
Gaming Authorities, or (ii) the applicable Gaming Authorities shall, by
affirmative action, validate said issuance or transfer or waive any defect in
said issuance or transfer.
E. Indenture Restrictions. The Corporation shall cause to be placed
----------------------
in every indenture or other operative document relating to publicly traded
securities (other than capital stock) of the Corporation a provision requiring
that any Person or Affiliate of a Person who holds the indebtedness represented
by that indenture and is found to be unsuitable to hold such interest shall have
the interest redeemed or shall dispose of the interest in the Corporation in the
manner set forth in the indenture or other document.
F. Notices. All notices given by the Corporation pursuant to this
-------
Article, including Redemption Notices, shall be in writing and shall be deemed
given when delivered by personal service or telegram, facsimile, overnight
courier or first class mail, postage prepaid, to the Person's address as shown
on the Corporation's books and records.
G. Indemnification. Any Unsuitable Person and any Affiliate of an
----------------
Unsuitable Person shall indemnify the Corporation and its Affiliated Companies
for any and all costs, including attorneys' fees, incurred by the Corporation
and its Affiliated Companies as a result of such Unsuitable Person's or
Affiliate's continuing Ownership or Control or failure to promptly divest itself
of any securities in the Corporation.
H. Fiduciary Obligations; Contractual Arrangements; Etc. Nothing
----------------------------------------------------
contained in this Article XIII shall be construed (i) to relieve any Unsuitable
Person (or Affiliate of such Person) from any fiduciary obligation imposed by
law, (ii) to prohibit or affect any contractual arrangement which the
Corporation may make from time to time with any holder of securities of the
Corporation to purchase all or any part of shares of capital stock or other
securities held by them, or (iii) to be in derogation of any action, past or
future, which has been or may be taken by the Board of Directors or any holder
of securities with respect to the subject matter of this Article XIII.
I. Injunctive Relief. The Corporation is entitled to injunctive
------------------
relief in any court of competent jurisdiction to enforce the provisions of this
Article and each holder of the securities of the Corporation shall be deemed to
have acknowledged, by acquiring the securities of the Corporation, that the
failure to comply with this Article will expose the Corporation to irreparable
injury for which there is no adequate remedy at law and that the Corporation is
entitled to injunctive relief to enforce the provisions of this Article.
J. Legend. The restrictions set forth in this Article XIII shall be
------
noted conspicuously on any certificate representing securities of the
Corporation in accordance
-5-
<PAGE>
with the requirements of the Delaware General Corporation Law and applicable
Gaming Laws."
4. That the foregoing amendments have 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 Common Stock of the
Corporation entitled to vote thereon with respect to all amendments, except the
amendment deleting ARTICLE XII relating to the required vote for certain
-----------
transactions, which was approved by the affirmative vote of the holders of at
least 70% of the outstanding Common Stock of the Corporation entitled to vote
thereon. There are no shares of the Corporation's Preferred Stock outstanding.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment of
Certificate of Incorporation to be duly executed by its authorized officer this
5/th/ day of June, 1998.
HOLLYWOOD PARK, INC.
By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Title: Executive Vice President; Treasurer
and Chief Financial Officer
-6-
<PAGE>
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
DESIGNATION OF "HOLLYWOOD PARK, INC.", FILED IN THIS OFFICE ON THE TWENTY-
SEVENTH DAY OF OCTOBER, A.D. 1997, AT 9:01 O'CLOCK A.M.
/s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9562544
DATE: 02-08-99
<PAGE>
HOLLYWOOD PARK, INC.
CERTIFICATE OF ELIMINATION
OF
THE $70 CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the
Delaware General Corporation Law
Hollywood Park, Inc., a corporation organized and existing under and
by virtue of the Laws of the State of Delaware (the "Corporation"), hereby
certifies as follows:
1. That the Corporation filed a Certificate of Powers, Designations,
Preferences and Rights (the "Certificate of Designation") of the $70 Convertible
Preferred Stock ("Convertible Preferred Stock") with the Delaware Secretary of
State on February 2, 1993.
2. That at a meeting held on September 16, 1997, the Board of
Directors of the Corporation duly adopted the following resolutions providing
for the elimination of the Corporation's series of Convertible Preferred Stock:
"NOW, THEREFORE, BE IT RESOLVED, that none of the authorized
shares of the Corporation's $70 Convertible Preferred Stock ("Convertible
Preferred Stock") are outstanding and no shares of Convertible Preferred
Stock will be issued subject to the Certificate of Powers, Designations,
Preferences and Rights providing for the creation thereof, which was filed
with the Delaware Secretary of State on February 2, 1993 (the "Certificate
of Designation");
RESOLVED FURTHER, that the officers of the Corporation, and any
of them, be, and they hereby are, authorized, empowered and directed for
and on behalf of the Corporation and in its name to prepare or cause to be
prepared, execute, acknowledge and file a certificate of elimination of the
series of Convertible Preferred Stock (the "Certificate of Elimination") in
accordance with Delaware law, indicating therein (i) that none of the
authorized shares of Convertible Preferred Stock remain outstanding, (ii)
that no shares of Convertible Preferred Stock will be issued subject to the
Certificate of Designation and (iii) that the filing the Certificate of
Elimination with the Delaware Secretary of State shall have the effect of
eliminating from the Corporation's Certificate of Incorporation, as
amended, all matters set forth in the Certificate of Designation with
respect to the series of Convertible Preferred Stock; and
RESOLVED FURTHER, that the officers of the Corporation, and any
of them, be, and they hereby are, authorized, empowered and directed for
and on behalf of the Corporation and in its name to do, or cause to be done
all such further acts or things and to execute and deliver, or cause to be
executed and delivered, all such further documents, instruments and
certificates, as such officers, or any of them, may in their discretion
deem necessary, advisable or appropriate in connection with the Certificate
of Elimination, the execution and delivery of such documents,
-2-
<PAGE>
instruments and certificates and the taking of any such action conclusively
to evidence the due authorization thereof by the Corporation."
3. That no shares of Convertible Preferred Stock issued subject to
the Certificate of Designation remain outstanding and none will be issued
subject to the Certificate of Designation.
4. That this Certificate of Elimination shall become effective upon
filing with the Delaware Secretary of State and shall have the effect of
eliminating from the Corporation's Certificate of Incorporation, as amended, all
matters set forth in the Certificate of Designation with respect to the series
of Convertible Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Elimination to be duly executed by its authorized officer this 24/th/ day of
October, 1997.
HOLLYWOOD PARK, INC.
By: /s/ G. Michael Finnigan
------------------------------------
G. Michael Finnigan,
President, Sports and Entertainment;
Executive Vice President; Treasurer;
and Chief Financial Officer
-3-
<PAGE>
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 CHANGE OF
REGISTERED AGENT OF "HOLLYWOOD PARK, INC.", FILED IN THIS OFFICE ON THE TWENTY-
SEVENTH DAY OF OCTOBER, A.D. 1997, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
-----------------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9562546
DATE: 02-08-99
<PAGE>
CERTIFICATE OF CHANGE
OF
LOCATION OF REGISTERED OFFICE
AND REGISTERED AGENT
OF
HOLLYWOOD PARK, INC.
--------------------
a Delaware corporation
Hollywood Park, Inc., a corporation organized and existing under and by
virtue of the Laws of the State of Delaware (the "Corporation"), hereby
certifies that the following is a true copy of resolutions duly adopted by the
Board of Directors of the Corporation at a meeting held on September 16, 1997:
"NOW, THEREFORE, BE IT RESOLVED, that the location of the Registered
Office of the Corporation in the State of Delaware be, and the same hereby
is, changed to 30 Old Rudnick Lane, in the City of Dover, County of Kent;
RESOLVED FURTHER, that the name of the Registered Agent of the
Corporation in the State of Delaware at such address be, and the same
hereby is, changed to CorpAmerica, Inc.; and
RESOLVED FURTHER, that the officers of the Corporation be, and each of
them hereby is, authorized, empowered and directed for and on behalf of the
Corporation and in its name to prepare or cause to be prepared, execute,
acknowledge and file a certificate of change of location of registered
office and registered agent in accordance with Delaware law."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Change
of Location of Registered Office and Registered Agent to be duly executed by its
authorized officer this 24/th/ day of October, 1997.
HOLLYWOOD PARK, INC.
By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
President, Sports and Entertainment;
Executive Vice President; Treasurer;
and Chief Financial Officer
-2-
<PAGE>
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 AMENDMENT
OF "HOLLYWOOD PARK, INC.", FILED IN THIS OFFICE ON THE TWENTY-NINTH DAY OF JULY,
A.D. 1994, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
----------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9562548
DATE: 02-08-99
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
HOLLYWOOD PARK, INC.
--------------------
a Delaware corporation
Hollywood Park, Inc., a corporation organized and existing under and by
virtue of the Laws of the State of Delaware (the "Corporation"), hereby
certifies as follows:
1. The Certificate of Incorporation of the Corporation is amended to
add a new ARTICLE XIV to read in its entirety as follows:
-----------
"ARTICLE XIV"
-------------
A. So long as the Corporation or any subsidiary thereof engages
in, or intends to engage in, the operation of licensed card clubs
regulated under the California Gaming Registration Act or any other
applicable federal, state or local statutes, ordinances, rules or
regulations, all securities of the Corporation shall be held subject
to the proviso that if continued Ownership or Control (as defined in
paragraph B) of the securities by any person or entity or any of its
Affiliates (a "Disqualified Person") would cause the Corporation or
any subsidiary thereof to lose or prevent the reinstatement of any
government-issued franchise or license necessary for the operation of
any such licensed card club, such securities Owned or Controlled by
such Disqualified Person or its Affiliates (the "Disqualified
Securities") shall be redeemable by the Corporation, out of funds
legally available therefor, by action of the Board of Directors, to
the extent necessary to prevent the loss or secure the reinstatement
of any government-issued franchise or license held by the Corporation
or any subsidiary thereof, which franchise or license is conditioned
upon some or all of the holders of the Corporation's securities
possessing prescribed qualifications. Any determination made by the
Board of Directors that a person or entity is a "Disqualified Person"
or an Affiliate of a Disqualified Person shall be final.
B. "Ownership or Control" or "Owned or Controlled" shall refer
to (i) ownership of record, (ii) beneficial ownership, or (iii) the
power to direct, by agreement, contract, agency or any other manner,
the voting or disposition of securities of the Corporation. Any
determination made by the Board of Directors regarding the foregoing
shall be final.
C. The terms "Affiliate" and "Associate" shall have the
respective meaning ascribed to such terms in rule 12b-2 promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act") as in
effect on April 27, 1994 (the term "registrant" in said Rule 12b-2
meaning in this case the Corporation).
-2-
<PAGE>
D. Commencing on the earlier of the date that (i) the
appropriate governmental authority serves written notice upon the
Corporation that a person or entity is or might be a Disqualified
Person or (ii) the Corporation serves written notice upon the record
holder of Disqualified Securities that it or any other person or
entity that Owns or Controls the Disqualified Securities is a
Disqualified Person or an Affiliate of a Disqualified Person, it shall
be unlawful for the record holder of the Disqualified Securities or
the Disqualified Person or Affiliate of such person (a) to receive
dividends or interest upon the record holder's securities in the
Corporation; (b) to exercise, directly or through any trustee or
nominee, any right conferred by such securities, including the right
to vote such shares; or (c) to receive any remuneration in any form
from the Corporation for services rendered or otherwise. Notices
shall be deemed given when delivered by personal service or telegram
or telecopy, or upon deposit with any reputable overnight courier or
in the United States mails, delivered or mailed, in the case of a
record holder of Disqualified Securities, to the record holder's
address shown on the Corporation's books and records. Any
Disqualified Holder and each Affiliate of such person shall indemnify
the Corporation and its subsidiaries for any and all direct or
indirect costs, including attorneys' fees, incurred by the Corporation
and its subsidiaries as a result of such Disqualified Holder's or
Affiliate of such person's continuing ownership or failure to divest
promptly of any Disqualified Securities. Notwithstanding the
foregoing, a Disqualified Holder or Affiliate of such person need not
dispose of its securities during the pendency of any appeal of the
determination of unsuitability or disqualification, provided that (a)
the Disqualified Holder and each Affiliate of such person indemnifies
the Corporation and its subsidiaries as provided above and (b) the
appropriate governmental authorities consent in writing prior to the
date set by the Corporation for redemption of such securities to such
non-disposal during the pendency of the appeal.
E. The per share redemption price (the "Redemption Price") of
any securities to be redeemed pursuant to this Article XIV shall be
the closing sales price on the New York Stock Exchange Composite Tape
on the date the notice of redemption is given by the Company; or if
such shares are not then listed for trading on the New York Stock
Exchange, then the closing sales price of such shares on any other
national securities exchange on which such shares are then listed; or
if such shares are not then listed on any national securities
exchange, then the closing sales price as quoted in the NASDAQ
National Market System; or if the shares are not then so quoted, then
the mean between the representative bid and ask prices as quoted by
NASDAQ or another generally recognized reporting system. The
redemption price may be paid in cash, by delivery of a promissory note
of the Corporation, or a combination of both, at the election of the
Corporation. Any such promissory note shall have a maturity of not
more than ten years from the date of issuance and shall bear interest
at the rate equal to the then-current coupon rate of a ten-year
Treasury note as such rate is published in the Wall Street Journal or
comparable publication.
-3-
<PAGE>
F. A notice of redemption (the "Redemption Notice") shall be
given by personal delivery, telegram, telecopy, overnight courier or
first class mail, postage prepaid, not less than 10 days prior to the
date on which the Disqualified Securities are to be redeemed (the
"Redemption Date") to the record holder of any Disqualified
Securities, delivered to such record holder's address shown on the
Corporation's books and records. Each such notice of redemption shall
state (i) the Redemption Date; (ii) the number of shares of securities
to be redeemed; (iii) the Redemption Price, and the manner of payment
thereof; and (iv) the place where certificates for such shares are to
be surrendered for payment of the Redemption Price. From and after the
Redemption Date, the securities called for redemption shall no longer
be deemed to be outstanding and all rights of the holders thereof as
stockholders (other than the right to receive the Redemption Price) of
the Corporation shall cease. Upon surrender of the certificates for
any securities to be redeemed in accordance with the requirements of
the notice of redemption (properly endorsed or assigned for transfer
if the Board of Directors shall so require and the notice shall so
state), such securities shall be redeemed by the Corporation at the
Redemption Price.
G. All Securities of the Corporation and any Subsidiary shall
also be held subject to the condition that any transfer thereof may be
subject to prior approval by Gaming Authorities.
H. The Corporation shall cause to be placed in every indenture
or other operative instrument of Publicly-traded Securities (other
than capital stock) of the Corporation entered into from the date of
the filing of this Certificate of Incorporation a provision requiring
that any holder of such indebtedness who is found to be a Disqualified
Person (or Affiliate of such person) shall have his interest redeemed
or shall dispose of his interest in the Corporation in the manner set
forth in the indenture or other operative document.
I. Nothing contained in this Article XIV shall be construed (1)
to relieve any Disqualified Person (or Affiliate of such person) from
any fiduciary obligation imposed by law, (2) to prohibit or affect any
contractual arrangement which the Corporation may make from time to
time with any holder of Securities to purchase all or any part of
shares of capital stock or other Securities held by them, or (3) to be
in derogation of any action, past or future, which has been or may be
taken by the Board of Directors or any holder of Securities with
respect to the subject matter of this Article XIV.
J. The Corporation will be entitled to injunctive relief in any
court of competent jurisdiction to enforce the provisions of this
Article XIV and each holder of the Publicly-traded Securities of the
Corporation will be deemed to have acknowledged by acquiring or
retaining Securities of the Corporation that failure to comply with
this Article XIV will expose the Corporation to irreparable injury for
which there is no adequate remedy at
-4-
<PAGE>
law and that the Corporation is entitled to injunctive relief to
enforce the provisions of this Article XIV."
2. That the foregoing amendment to the Certificate of Incorporation
has been duly adopted in accordance with the provisions of Section 242 of
the Delaware General Corporation Law (i) by resolution of the Board of
Directors of the Corporation and (ii) by the affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock
and at least two-thirds of the outstanding shares of $70 Convertible
Preferred Stock of the Corporation entitled to vote thereon.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to the Certificate of Incorporation to be signed and attested by its
duly authorized officers this 22nd day of July, 1994.
HOLLYWOOD PARK, INC.
By: /s/ G. Michael Finnigan
---------------------------
G. Michael Finnigan
Executive Vice President
Attest:
/s/ Donald M. Robbins
- ----------------------------
Donald M. Robbins
Assistant Secretary
-5-
<PAGE>
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 AMENDMENT
OF "HOLLYWOOD PARK, INC.", FILED IN THIS OFFICE THE FIRST DAY OF JUNE, A.D.
1993, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
-----------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9562550
DATE: 02-08-99
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HOLLYWOOD PARK, INC.
---------------------
a Delaware corporation
Hollywood Park, Inc., a corporation organized and existing under and by
virtue of the Laws of the State of Delaware (the "Company"), hereby certifies as
follows:
1. That the first sentence of ARTICLE IV of the Certificate of
----------
Incorporation of the Company is amended to read in its entirety as follows:
"The amount of the total authorized capital stock of the
corporation is 40,250,000 shares which is divided into two classes as
follows:
250,000 shares of Preferred Stock having a par value of $1.00 per
share; and
40,000,000 shares of Common Stock having a par value of $0.10 per
share."
2. That the foregoing amendment to the Certificate of Incorporation
has been duly adopted in accordance with the provisions of Section 242 of
the Delaware General Corporation Law, by resolution of the Board of
Directors of the Company and by the affirmative vote of the holders of at
least a majority of the outstanding Common Stock of the company entitled to
vote thereon. There are no shares of the Company's Preferred Stock
outstanding.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to
the Certificate of Incorporation to be signed and attested by its duly
authorized officers this 28th day of May, 1993.
----
HOLLYWOOD PARK, INC.
By: /s/ G. Michael Finnigan
--------------------------
G. Michael Finnigan
Executive Vice President
Attest:
/s/ Donald M. Robbins
-----------------------
Donald M. Robbins
Assistant Secretary
-3-
<PAGE>
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 AGREEMENT
OF MERGER, WHICH MERGES:
"HOLLYWOOD PARK, INC.", A DELAWARE CORPORATION,
WITH AND INTO "HOLLYWOOD PARK REALTY ENTERPRISES, INC." UNDER THE NAME OF
"HOLLYWOOD PARK REALTY ENTERPRISES, INC.", A CORPORATION ORGANIZED AND EXISTING
UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE
THE FIFTEENTH DAY OF APRIL, A.D. 1982, AT 10 O'CLOCK A.M.
/s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9562562
DATE: 02-08-99
<PAGE>
AGREEMENT OF MERGER
-------------------
AGREEMENT OF MERGER dated of November 9, 1981, by and between HOLLYWOOD
PARK, INC. ("HPI") and HOLLYWOOD PARK REALTY ENTERPRISES, INC. ("Realty" or the
"Surviving Corporation") (said two corporations being herein sometimes
collectively called the "Constituent Corporations").
RECITALS
--------
A. HPI is a corporation duly organized and existing under the laws of the
State of Delaware, its principal office in the State of California being located
in Los Angeles County; and
B. Realty is a wholly-owned subsidiary of HPI and is a corporation duly
organized and existing under the laws of the State of Delaware, having been
incorporated on October 26, 1981 by a Certificate of Incorporation filed with
the Secretary of State on that date, its registered office in the State of
Delaware being located in New Castle County; and
C. HPI and Realty have entered into an agreement styled "Agreement and
Plan of Reorganization" (the "Plan") with Hollywood Park Operating Company
("Operating Company"), a wholly-owned subsidiary of HPI and a corporation duly
organized and existing under the laws of the State of Delaware, having been
incorporated on October 26, 1981, by a Certificate of Incorporation filed with
the Secretary of State on that date, its registered office in the State of
Delaware being located in New Castle County; and
D. HPI, Realty and Operating Company have mutually promised to and desire
to execute all documents necessary to conform with the terms and conditions of
the Plan; and
E. The respective boards of directors of HPI and Realty have determined
that it is advisable that HPI be merged into Realty on the terms and conditions
hereinafter set forth; and
F. HP1 has an authorized capitalization consisting of 1,000,000 shares of
Preferred Stock, $1.00 per value, of which no shares are outstanding on the date
hereof, and 9,000,000 shares of Common Stock $0.80 par value ("HPI Common
Stock"), of which 2,456,809 shares are outstanding on the date hereof; and
G. Realty has an authorized capitalization consisting of 250,000 shares of
Preferred Stock, $1.00 par value, of which no shares are outstanding on the date
hereof, and 4,500,000 shares of Common Stock $0.10 par value ("Realty Common
Stock"), of which 100 shares are outstanding on the date hereof; and
NOW, THEREFORE, HPI and Realty do hereby agree in accordance with the
provisions of the General Corporation Law of the State of Delaware that HPI
shall be, at the effective time of the merger, merged into Realty, which shall
be the surviving corporation, and that the terms and conditions of such merger
and the mode of carrying it into effect shall be as follows:
<PAGE>
AGREEMENT
---------
In order to consumate this Agreement and to effect such merger, the parties
hereto agree as follows:
ARTICLE I
---------
Each share of Realty Common Stock immediately outstanding prior to the
Effective Time of the Merger shall, at the Effective Time of the Merger cease to
exist and be cancelled and returned to the authorized and unissued capital of
Realty.
ARTICLE II
----------
At the Effective Time of the merger, HPI shall be merged into Realty, the
separate existence of HPI shall cease and Realty shall continue in existence,
and, without other transfer, succeed to and possess all of the properties,
rights, privileges, immunities, powers, and purposes, and shall be subject to
all the obligations, restrictions, disabilities and duties of each of the
Constituent Corporations, all without further act or deed.
ARTICLE III
-----------
The Certificate of Incorporation of the Surviving Corporation, as amended
and in effect at the effective time of the Merger, shall continue in full force
and effect until altered, amended, or repealed as provided therein or as
provided by law.
ARTICLE IV
----------
The by-laws of the Surviving Corporation, as amended and in effect at the
Effective Time of the merger, shall continue in full force and effect until
altered, amended or repealed as provided therein or as provided by law.
ARTICLE V
---------
The directors of Realty holding office immediately prior to the Effective
Time of the merger shall become the directors of the Surviving Corporation and
shall continue until removed as provided by law or until the election of their
respective successors. The officers of the Realty at the effective time of the
merger shall continue to hold office until removed as provided by law or until
the election of their respective successors.
ARTICLE VI
----------
Upon the Effective Time of the merger each share of HPI Common Stock
outstanding immediately prior to the merger and all right in respect thereof,
shall be converted into and exchanged for one share of Realty Common Stock.
Each holder of a certificate or certificates theretofore representing a share or
shares of HPI Common Stock shall, upon presentation of such certificate or
certificates for surrender to the Surviving Corporation or its agents, be
entitled to receive in exchange therefore a certificate or certificates
representing the whole shares of fully paid and non-assessable Realty Common
Stock to which such holder shall be entitled upon the aforesaid basis of
exchange. Each share of HPI Common Stock outstanding immediately prior to the
merger shall, upon the Effective Time of the merger, forthwith cease to exist
and be cancelled. Until any such
-2-
<PAGE>
outstanding certificates of HPI shall be so surrendered, no dividend payable to
the holder of record of Common Stock of Realty as of any date subsequent to the
Effective Time of the Merger shall be paid to the holder of an outstanding
certificate of HPI, but upon surrender of such certificate there shall be paid
to the record holder of the certificate evidencing ownership of Realty Common
Stock issued in exchange therefore the amount of dividends, if any, which
theretofore became payable with respect to the shares of Realty represented by
the certificates without any interest being due or paid with respect to such
unpaid dividends.
ARTICLE VII
-----------
The merger shall become effective upon the filing in the office of the
Secretary of State of the State of Delaware of an executed counterpart of this
Agreement of Merger and certificates of the Constituent Corporations as provided
by the laws of Delaware ("Effective Time"). The Constituent Corporations shall
do all other acts and things as shall be necessary or desirable in order to
effectuate the merger.
ARTICLE VIII
------------
To the extent permitted by applicable law, HPI and Realty, by mutual
consent of their respective duly authorized officers, may amend, modify and
supplement this Agreement of Merger in such manner as may be agreed upon by them
in writing at any time before or after approval or adoption thereof by the
shareholders of HPI or of Realty. However, no condition shall be waived which,
in the judgment of the respective Boards of Directors, would be materially
adverse to their companies or their shareholders if waived.
ARTICLE IX
----------
This Agreement of Merger may be abandoned at any time before or after
approval or adoption thereof by the shareholders of HPI or Realty
notwithstanding favorable action on the merger by the shareholders of either or
both Constituent Corporations but not later than the Effective Time of the
merger, by the mutual consent of the boards of directors of UPI or Realty.
In the event of abandonment by the boards of directors of HPI or Realty as
provided above, written notice shall forthwith be given to the other party.
ARTICLE X
---------
This Agreement of Merger may be executed in counterparts, each of which
when so executed shall be deemed to be an original, and such counterparts shall
together constitute but one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, HPI and REALTY, pursuant to the approval and authority
duly given by resolutions adopted by their respective boards of directors, have
each caused this Agreement of Merger to be executed by its President or a vie*
President and attested by its Secretary or an Assistant Secretary and its
corporate seal to be affixed as of the date and year first above written.
HOLLYWOOD PARK, INC.
By: /s/ Vernon O. Underwood
---------------------------------------
President
ATTEST:
/s/ James E. Kenney
---------------------
Secretary
HOLLYWOOD PARK REALTY ENTERPRISES, INC.
By: /s/ John V. Newman
---------------------------------------
President
ATTEST:
By: __________________
Secretary
-4-
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On this 12 day of April in the year 1982, before me, Hugh G. Gibson Notary
-- ----- --------------
Public of said State, duly commissioned and sworn, personally appeared Vernon O.
Underwood and James E. Kenney, known to me to be the Chairman and the Secretary,
respectively, of HOLLYWOOD PARK, INC., a Delaware corporation, the corporation
that executed the within Instrument, known to me to be the persons who executed
the within Instrument on behalf of the corporation therein named and
acknowledged to me that such corporation executed the same pursuant to its by-
laws or a resolution of its board of directors.
IN WITNESS WHEREOF. I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Hugh G. Gibson
---------------------------------------
Notary Public in and for said State
[SEAL]
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On this 12 day of April, 1982 the year 1982, before me, Hugh G. Gibson a
-- ----------- --------------
Notary Public of said State, duly commissioned and sworn, personally appeared
John V. Newman and Robert A. Hamilton, known to me to be the President and the
Secretary, respectively, of HOLLYWOOD PARK REALTY ENTERPRISES, INC., a Delaware
corporation, the corporation that executed the within Instrument, known to me to
be the persons who executed the within Instrument on behalf of the corporation
therein named and acknowledged to me that such corporation executed the same
pursuant to its by-laws or a resolution of its board of directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Hugh G. Gibson
----------------------------------------
Notary Public in and for said State
[SEAL]
-5-
<PAGE>
CERTIFICATES
------------
The undersigned, Secretary of HOLLYWOOD PARK, INC., a Delaware corporation,
hereby certifies, Pursuant to Sections 251-252 of the General Corporation Law of
the state of Delaware that the total number of shares of common stock (the only
class of capital stock outstanding) of HOLLYWOOD PARK, INC, outstanding on the
record date and entitled to vote an the Merger was 2,456,805; that at a properly
noticed meeting of shareholders on April 12, 1982 the principal terms of the
attached Agreement of Merger were duly approved by a vote of 2,026,772 shares
---------
for the Agreement of Merger, constituting a 82.49% of the outstanding shares of
------
HOLLYWOOD PARK, INC.; and that the number of shares voted in favor of the
Agreement of Merger equals or exceeds the number of shares required to approve
the Agreement of Merger.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on the
12/th/ day of April, 1982.
- ------ -----
The undersigned, Assistant Secretary of HOLLYWOOD PARK REALTY ENTERPRISES,
INC., a Delaware corporation, hereby certifies, pursuant to Section 251 of the
General Corporation Law of the State of Delaware that the foregoing Agreement of
Merger to which this Certificate is attached was duly approved and adopted on
November 9, 1981 by written consent of the holder of all of the outstanding
- ----------------
shares of capital stock of HOLLYWOOD PARK REALTY ENTERPRISES, INC., which would
have been entitled to vote on such matter had a meeting been called for such
purpose, pursuant to Section 228 of the General Corporation Law of the State of
Delaware which authorizes such action to be so taken.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on the
12/th/ day of April, 1982.
- ------ -----
/s/ Gay Firestone Wray
------------------------
Secretary
-6-
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On this 12 day of April 1982 in the year 1982, before me, Hugh G. Gibson a
-- ---------- --------------
Notary Public of said State, duly commissioned and sworn, personally appeared
James E. Kenney, known to me to be the Secretary of HOLLYWOOD PARK, INC., a
Delaware corporation, the corporation that executed the within Instrument, known
to me to be the person who executed the within Instrument on behalf of the
corporation therein named and acknowledged to me that such corporation executed
the same pursuant to its by-laws or a resolution of its board of directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Hugh G. Gibson
----------------------------------------
Notary Public in and for said State
[SEAL]
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On this 12 day of April in the year 1982, before me, Hugh G. Gibson a
-- ----- --------------
Notary Public of said State, duly commissioned and sworn, personally appeared
Gay Firestone Wray, known to me to be the Assistant Secretary of HOLLYWOOD PARK
REALTY ENTERPRISES, INC., a Delaware corporation, the corporation that executed
the within Instrument, known to me to be the person who executed the within
Instrument on behalf of the corporation therein named and acknowledged to me
that such corporation executed the same pursuant to its by-laws or a resolution
of its board of directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Hugh G. Gibson
----------------------------------------
Notary Public in and for said State
[SEAL]
-7-
<PAGE>
RE-EXECUTION
------------
The foregoing Agreement of Merger, having been duly executed and delivered
on behalf of each of the Constituent Corporations, HOLLYWOOD PARK, INC. and
HOLLYWOOD PARK REALTY ENTERPRISES, INC., duly adopted by their respective
stockholders, the fact of such adopting having been certified thereon by the
Secretary of each of such corporations, all in accordance with Section 251 of
the General Corporation Law of the State of Delaware, is hereby, in addition,
executed by the President or a Vice President and attested by the Secretary or
an Assistant Secretary of each of the Constituent corporations on behalf of such
corporations, respectively, on April 12, 1982.
HOLLYWOOD PARK, INC.
By: /s/ Vernon O. Underwood
-----------------------------------------
Vernon O. Underwood
Attest:
/s/ James E. Kenney
-------------------------
James E. Kenney
HOLLYWOOD PARK REALTY ENTERPRISES, INC.
By: /s/ Hal W. Brown, Jr.
-----------------------------------------
Hal W. Brown, Jr.
Attest:
/s/ Gay Firestone Wray
-------------------------
Gay Firestone Wray
-8-
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On this 12 day of April in the year 1982, before me, Hugh G. Gibson a
-- ----- --------------
Notary Public of said State, duly commissioned and sworn, personally appeared
Vernon O. Underwood and James E. Kenney, known to me to be the Chairman and the
Secretary, respectively, of HOLLYWOOD PARK, INC., a Delaware corporation, the
corporation that executed the within Instrument, known to me to be the persons
who executed the within Instrument on behalf of the corporation therein named
and acknowledged to me that such corporation executed the same pursuant to its
by-laws or a resolution of its board of directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Hugh G. Gibson
----------------------------------------
Notary Public in and for said State
[SEAL]
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On this 12 day of April in the year 1982, before me, Hugh G. Gibson a
-- ----- --------------
Notary Public of said State, duly commissioned and sworn, personally appeared
Hal W. Brown, Jr. and Gay Firestone Wray, known to me to be the Chairman and the
Assistant Secretary, respectively, of HOLLYWOOD PARK REALTY ENTERPRISES, INC., a
Delaware corporation, the corporation that executed the within Instrument, known
to me to be the persons who executed the within Instrument on behalf of the
corporation therein named and acknowledged to me that such corporation executed
the same pursuant to its by-laws or a resolution of its board of directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Hugh G. Gibson
----------------------------------------
Notary Public in and for said State
[SEAL]
-9-
<PAGE>
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 REALTY ENTERPRISES, INC.", FILED IN THIS OFFICE
ON THE TWENTY-SIXTH DAY OF OCTOBER, A.D. 1981, AT 10 O'CLOCK A.M.
/s/ Edward J. Freel
----------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9562566
DATE: 02-08-99
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HOLLYWOOD PARK REALTY ENTERPRISES, INC.
---------------------------------------
ARTICLE I
---------
The name of the Corporation is: Hollywood Park Realty Enterprises, Inc.
ARTICLE II
----------
The address of its registered office in the State of Delaware is 100 West
Tenth Street, Wilmington, County of New Castle. The name of its registered agent
is The Corporation Trust Company.
ARTICLE III
-----------
The nature of the business to be conducted or promoted is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV
----------
The amount of the total authorized capital stock of the corporation is
10,000 shares which are divided into two classes as follows:
2,500 shares of Preferred Stock having a par value of $1.00 per share;
and
7,500 shares of Common Stock having a par value of $0.10 per share.
The designations, voting powers, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions of the above classes of stock are as follows:
A. Preferred Stock
---------------
The Board of Directors is expressly authorized, from time to time, (1)
to fix the number of shares of one or more series of Preferred Stock; (2)
to determine the designation of any such series; (3) to determine or alter,
without limitation or restriction, the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of
Preferred Stock; and (4) within the limits or restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the
number of shares constituting any series, to increase or decrease (but not
below the number of shares then outstanding) the number of shares of any
such series subsequent to the issue of shares of that series.
-2-
<PAGE>
B. Common Stock.
------------
(i) Subject to the preferential rights of the Preferred Stock,
the holders of the Common Stock shall be entitled to receive, to the
extent permitted by law, such dividends as may be declared from time
to time by the Board of Directors.
(ii) In the event of the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of the corporation,
after distribution in full of the preferential amount to be
distributed to the holders of shares of the Preferred Stock, holders
of the Common Stock shall be entitled to receive all the remaining
assets of the corporation of whatever kind available for distribution
to stockholders, ratably in proportion to the number of shares of
Common Stock held by them respectively. A consolidation, merger or
reorganization of the corporation with any other corporation or
corporations, or a sale of all or substantially all of the assets of
the corporation, shall not be considered a dissolution, liquidation or
winding up of the corporation within the meaning of these provisions.
(iii) Except as may be otherwise required by law, each share of
Common Stock shall entitle the holder to one vote in respect of each
matter voted by the stockholders.
ARTICLE V
---------
Any and all right, title, interest and claim in or to any dividends
declared by the corporation, whether in cash, stock, or otherwise, which are
unclaimed by the stockholder entitled thereto for a period of six years after
the close of business on the payment date, shall be and is deemed to be
extinguished and abandoned; and such unclaimed dividends in the possession of
the corporation, its transfer agents or other agents or depositories shall at
such time become the absolute property of the corporation, free and clear of any
and all claims of any persons whatsoever.
ARTICLE VI
----------
In furtherance and not in limitation of the power conferred by statute, the
Board of Directors is expressly authorized to make, alter, amend or repeal the
by-laws of the corporation.
ARTICLE VII
-----------
Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or
-3-
<PAGE>
class of creditors, and/or of the stockholders or class of stockholders of the
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
ARTICLE VIII
------------
The corporation shall indemnify its officers and directors to the full
extent permitted by the Delaware General Corporation Law.
ARTICLE IX
----------
Elections of directors need not be by written ballot unless the by-laws of
the corporation so provide.
ARTICLE X
---------
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE XI
----------
The name and mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Candace K. Fullmer Suite 4100, 55 E. Monroe St.
Chicago, Illinois 60603
ARTICLE XII
-----------
The affirmative vote or written consent of the holders of 70% of all
outstanding shares of all classes of stock of the Corporation entitled to vote
thereon, considered for the purposes of this Article TWELFTH as one class, shall
be required:
(a) for the adoption of any agreement for the merger of the
Corporation with or into any other corporation or for the consolidation of
the Corporation with any other corporation;
(b) to authorize any sale, lease, transfer or exchange of all or
substantially all of the assets of the Corporation to any other person (as
hereinafter defined);
-4-
<PAGE>
(c) to authorize the dissolution of the Corporation;
(d) to alter, amend or repeal this Article TWELFTH.
For the purposes of this Article TWELFTH, the term person shall mean any
corporation, partnership, association, or any other business entity, trust,
estate or individual.
This Article TWELFTH shall not apply to a merger if no vote of stockholders
of the Corporation is necessary under Delaware law to authorize it.
IN WITNESS WHEREOF, I have signed this Certificate of Incorporation this
23rd day of October, 1981.
- ----
/s/ Candace K. Fullmer
------------------------
Candace K. Fullmer
-5-
<PAGE>
EXHIBIT 3.2
HOLLYWOOD PARK, INC.
RESTATED BYLAWS
AS OF
APRIL 13, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - STOCKHOLDERS................................................. 1
Section 1. Annual Meeting......................................... 1
Section 2. Special Meetings: Notice............................... 3
Section 3. Notice of Meetings..................................... 3
Section 4. Quorum................................................. 3
Section 5. Organization........................................... 4
Section 6. Conduct of Business.................................... 4
Section 7. Proxies and Voting..................................... 4
Section 8. Stock List............................................. 5
Section 9. Consent of Stockholders in Lieu of Meeting............. 5
ARTICLE II - BOARD OF DIRECTORS........................................... 6
Section 1. Number, Election and Term of Directors................. 6
Section 2. Newly Created Directorships and Vacancies.............. 7
Section 3. Regular Meetings....................................... 7
Section 4. Special Meetings....................................... 8
Section 5. Quorum................................................. 8
Section 6. Participation in Meetings By Conference Telephone...... 8
Section 7. Conduct of Business.................................... 8
Section 8. Powers................................................. 8
Section 9. Compensation of Directors.............................. 9
Section 10. Director Emeritus...................................... 9
ARTICLE III - COMMITTEES................................................... 10
Section 1. Committees of the Board of Directors................... 10
Section 2. Conduct of Business.................................... 10
Section 3. Standing Executive Committee........................... 11
Section 4. Audit Committee........................................ 12
Section 5. Compensation Committee................................. 13
ARTICLE IV - OFFICERS..................................................... 13
Section 1. Generally.............................................. 13
Section 2. Chairman of the Board.................................. 13
Section 3. Vice Chairman of the Board............................. 14
Section 4. President.............................................. 14
Section 5. Chief Operating Officer................................ 14
Section 6. Vice Presidents........................................ 15
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7. Treasurer................................................... 15
Section 8. Assistant Treasurer......................................... 15
Section 9. Secretary................................................... 16
Section 10. Assistant Secretary......................................... 16
Section 11. Controller.................................................. 16
Section 12. Delegation of Authority..................................... 16
Section 13. Removal..................................................... 16
Section 14. Resignations................................................ 17
Section 15. Action with Respect to Securities of Other Corporations..... 17
ARTICLE V - STOCK............................................................. 17
Section 1. Certificates of Stock....................................... 17
Section 2. Transfers of Stock.......................................... 17
Section 3. Record Date................................................. 17
Section 4. Lost, Stolen or Destroyed Certificates...................... 18
Section 5. Regulations................................................. 19
ARTICLE VI - NOTICES........................................................... 19
Section 1. Notices..................................................... 19
Section 2. Waivers..................................................... 19
ARTICLE VII - MISCELLANEOUS..................................................... 19
Section 1. Facsimile Signatures........................................ 19
Section 2. Corporate Seal.............................................. 20
Section 3. Reliance upon Books, Reports and Records.................... 20
Section 4. Fiscal Year................................................. 20
Section 5. Time Periods................................................ 20
ARTICLE VIII- INDEMNIFICATION OF DIRECTORS AND OFFICERS......................... 20
Section 1. Right to Indemnification.................................... 20
Section 2. Right to Advancement of Expenses............................ 21
Section 3. Right of Indemnitee to Bring Suit........................... 21
Section 4. Non-Exclusivity of Rights................................... 22
Section 5. Insurance................................................... 22
Section 6. Indemnification of Employees and Agents of the Corporation.. 22
ARTICLE IX - AMENDMENTS........................................................ 23
</TABLE>
-ii-
<PAGE>
RESTATED BYLAWS
OF
HOLLYWOOD PARK, INC.
--------------------
(HEREINAFTER REFERRED TO AS THE "CORPORATION")
ARTICLE I - STOCKHOLDERS
--------- ------------
Section 1. Annual Meeting.
---------- --------------
(1) An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within 13 months of the last annual meeting of stockholders.
(2) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of the notice provided for in this bylaw, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this bylaw.
(3) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (2) of this
bylaw, the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not less than 90 days nor more than 120 days prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the 120th day prior to such annual
meeting and not later than the close of business on the later of the 90th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the Corporation. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); (b)
as to any other business that the stockholder proposes to bring before the
meeting, a brief
<PAGE>
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the capital stock of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(4) Notwithstanding anything in the second sentence of paragraph (3) of
this bylaw to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this bylaw shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Corporation.
(5) Only such persons who are nominated in accordance with the procedures
set forth in these Bylaws shall be eligible to serve as directors and only such
business shall be conducted at an annual meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
these Bylaws. The chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in these Bylaws
and, if any proposed nomination or business is not in compliance with these
Bylaws, to declare that such defective proposed nomination or business shall be
disregarded.
(6) For purposes of these Bylaws, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(7) Notwithstanding the foregoing provisions of this bylaw, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
bylaw. Nothing in this bylaw shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
-2-
<PAGE>
Section 2. Special Meetings: Notice.
---------- ------------------------
Special meetings of the stockholders, other than those required by statute,
may be called at any time by the Chairman of the Board or by a majority of
directors then in office pursuant to a resolution approved by the Board of
Directors. Notice of every special meeting, stating the place, date, time and
purpose, shall be given by mailing, postage prepaid, at least 10 but not more
than 60 days before each such meeting, a copy of such notice addressed to each
stockholder of the Corporation at his post office address as recorded on the
books of the Corporation. The Board of Directors may postpone or reschedule any
previously scheduled special meeting.
Only such business shall be conducted at a special meeting of stockholders
as shall have been brought before the meeting pursuant to the Corporation's
notice of meeting.
Section 3. Notice of Meetings.
---------- ------------------
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than 10 nor more than 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 required by law (meaning,
here and hereinafter, as required from time to time by the Delaware General
Corporation Law or the Certificate of Incorporation of the Corporation).
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 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 4. Quorum.
---------- ------
At any meeting of the stockholders, the holders of one-third (1/3) 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 rules
of the principal stock exchange upon which the Corporation's securities are
listed. Where a separate vote by a class or classes is required, one-third
(1/3) of the outstanding shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter unless or except to the extent that the
presence of a larger number may be required by law or the rules of the principal
stock exchange upon which the Corporation's securities are listed.
-3-
<PAGE>
If a quorum shall fail to attend any meeting, the chairman of the meeting
may adjourn the meeting to another place, date, or time.
Section 5. Organization.
---------- ------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board or, in his or her absence,
the Chief Executive Officer of the Corporation or, in his or her absence, the
President of the Corporation or, in his or her absence, such person as may be
designated by the Chairman of the Board or the President or, in the absence of
such a person, such person as may be chosen by the holders of one-third (1/3) of
the shares entitled to vote who are present, in person or by proxy, shall call
to order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
Section 6. Conduct of Business.
---------- -------------------
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The chairman shall have the power to adjourn the meeting to another place, date
and time. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting.
Section 7. 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 or by a
transmission permitted by law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or by his or her 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.
-4-
<PAGE>
The Corporation may, and to the extent required by law, shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Corporation may designate one or
more persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting may, and to the extent required by law, shall,
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. Every vote taken by ballots shall
be counted by a duly appointed inspector or inspectors.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast affirmatively or negatively.
Section 8. 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 his
or her 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 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 9. Consent of Stockholders in Lieu of Meeting.
---------- ------------------------------------------
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 or consents 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 and shall be delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery
-5-
<PAGE>
made to the Corporation's registered office shall be made by hand or certified
or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within 60 days of the date of the
earliest dated consent delivered to the Corporation, a written consent or
consents signed by a sufficient number of holders to take action are delivered
to the Corporation in the manner prescribed in the preceding paragraph.
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 II - BOARD OF DIRECTORS
---------- ------------------
Section 1. Number, Election and Term of Directors.
---------- --------------------------------------
(1) The Board of Directors shall consist of one (1) or more members.
Except as required by law, and subject to the rights of the holders of any
series of preferred stock to elect directors under specified circumstances, the
number of directors shall be fixed and may be changed from time to time
exclusively by the Board of Directors pursuant to a resolution duly adopted by
the Board of Directors. Except as provided in Section 2 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.
(2) Upon the effectiveness of the merger (the "Merger") of HP Acquisition,
Inc., a Delaware corporation, with and into Boomtown, Inc., a Delaware
corporation ("Boomtown"), the total number of persons serving on the Board of
Directors of the Corporation shall be 11, seven (7) of whom shall be Parent
Directors and four (4) of whom shall be Boomtown Directors (as such terms are
defined below). The persons to serve on the Board of Directors of the
Corporation who are "Parent Directors" shall be selected solely by and at the
absolute discretion of the Board of Directors of the Corporation from among
persons who are members of the Board of Directors of the Corporation prior to
the effective date of the Merger. The persons to serve on the Board of
Directors of the Corporation who are "Boomtown Directors" shall be selected
solely by and at the absolute discretion of the Board of Directors of Boomtown
from among persons who were members of the Board of Directors of Boomtown prior
to the effective date of the Merger. For a period of three (3) years from the
effective date of the Merger, the number of members of the Corporation's Board
of Directors shall not be greater than 11 members [(plus up to two (2)
-6-
<PAGE>
representatives of the holders of the Preferred Stock to the extent they
exercise their right to elect up to two (2) additional directors to the
Corporation's Board of Directors ("Preferred Directors")] unless otherwise
approved by a majority of the Boomtown Directors then on the Corporation's Board
of Directors (provided that such approval of Boomtown Directors shall not be
--------
required in the case of an increase, which is divisible by three (3), in the
number of persons serving on the Corporation's Board of Directors where one
Boomtown Director (selected by a majority of the Boomtown Directors then on the
Corporation's Board of Directors) is added for every two (2) Parent Directors
added). [Any Preferred Director shall not be considered to be either a Boomtown
Director or a Parent Director.] The Corporation shall cause the Board of
Directors of the Corporation and any nominating committee thereof to take such
steps as are necessary to nominate the initial Boomtown Directors (or their
replacement, which replacement shall be selected by a majority of the Boomtown
Directors then on the Corporation's Board of Directors) for re-election at the
first three (3) annual stockholders meetings following the effective date of the
Merger.
This Section 1(2) may not be amended for a period of three (3) years from
the effective date of the Merger without the approval of a majority of Boomtown
Directors then on the Corporation's Board of Directors.
Section 2. Newly Created Directorships and Vacancies.
---------- -----------------------------------------
Except as required by law, and subject to the rights of the holders of any
series of preferred stock with respect to such series of preferred stock, and
unless the Board of Directors otherwise determines, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
only by a majority vote of the directors then in office, though less than a
quorum, and directors so chosen shall hold office for a term expiring at the
next annual meeting of stockholders and until such director's successor shall
have been duly elected and qualified. No decrease in the number of authorized
directors constituting the entire Board of Directors shall shorten the term of
any incumbent director.
Section 3. Regular Meetings.
---------- ----------------
A regular meeting of the Board of Directors shall be held without other
notice than this bylaw, immediately following and at the same place as the
annual meeting of stockholders, unless otherwise provided by the Board of
Directors. Additional regular meetings of the Board of Directors shall be held
at such place or places, on such date or dates, and at such time or times as
shall have been established by the Board of Directors and publicized among all
directors. A notice of each regular meeting shall not be required.
-7-
<PAGE>
Section 4. Special Meetings.
---------- ----------------
Special meetings of the Board of Directors may be called by the Chairman of
the Board, or by the President or by a majority of directors then in office and
shall be held at such place, on such date, and at such time as they or he or she
shall fix. Notice of the place, date, and time of each such special meeting
shall be given each director by whom it is not waived by mailing written notice
not less than four (4) days before the meeting or by hand delivery to the
recipient thereof or by recognized overnight delivery service or by telephone or
by telegraphing or telexing or by facsimile transmission of the same not less
than 24 hours before the meeting. Unless otherwise indicated in the notice
thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
---------- ------
At any meeting of the Board of Directors, a quorum for all purposes shall
consist of the greater of (i) a majority of directors then in office or (ii)
one-third (l/3) of the total number of directors including vacancies. If a
quorum shall fail to attend any meeting, a majority of those present may adjourn
the meeting to another place, date, or time, without further notice or waiver
thereof.
Section 6. Participation in Meetings By Conference Telephone.
---------- -------------------------------------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or 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 such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
---------- -------------------
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Powers.
---------- ------
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
-8-
<PAGE>
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon
any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for directors, officers, employees and
agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors.
---------- -------------------------
Unless otherwise restricted by the Certificate of Incorporation, the Board
of Directors shall have the authority to fix the compensation of the 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 paid a stated salary or paid other
compensation 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. Director Emeritus.
----------- -----------------
The Board of Directors, may designate any person who has served as a
director of this Corporation as Director Emeritus, upon resignation or other
retirement or termination of any such director's tenure of office. Any Director
Emeritus shall be extended thereafter all of the incidental courtesies of
Hollywood Turf Club usually extended to active directors, and so long as such
person shall
-9-
<PAGE>
desire the same, each such person shall be known as a Director Emeritus. Such
courtesies shall include the use of a director's badge, together with the use of
the Director's Lounge and similar incidental privileges. The Director Emeritus
shall not, however, be entitled to attend any meetings of the Board of Directors
or of any committee thereof without special invitation nor shall such Director
Emeritus have any vote or voice in management other than merely as a
stockholder, if he be such a stockholder. The privileges and position of a
Director Emeritus hereunder shall be personal, non-transferable and shall cease
entirely upon his death and may be revoked by the Board of Directors with or
without cause at any time.
ARTICLE III - COMMITTEES
----------- ----------
Section 1. Committees of the Board of Directors.
---------- ------------------------------------
The Board of Directors may designate one (1) or more committees, each
committee to consist of one (1) or more of the directors of the Corporation
appointed by the Board of Directors or the Chairman of the Board. The Board of
Directors or the Chairman of the Board may appoint one (1) 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 present at any meeting and not
disqualified from voting, whether or not such member or 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 such
committee, to the extent provided in the resolution of the Board of Directors,
or in these Bylaws, 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 the following matters: (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by
Delaware General Corporation Law to be submitted to stockholders for approval or
(ii) adopting, amending or repealing any bylaw of the Corporation.
Section 2. Conduct of Business.
---------- -------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
-10-
<PAGE>
Section 3. Standing Executive Committee.
---------- ----------------------------
The Board of Directors shall appoint at least three (3) members of the
Board to comprise an Executive Committee. The Executive Committee shall have
and exercise all the powers and authority of the full Board of Directors in the
management of the business and affairs of the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, and these Bylaws.
For a period of three (3) years after the effective date of the Merger, the
Executive Committee of the Corporation's Board of Directors will consist of six
(6) members, comprised of four (4) Parent Directors (the "Parent Committee
Members") and two (2) Boomtown Directors (the "Boomtown Committee Members");
provided that if one of the initial Parent Committee Members ceases to be a
member of the Executive Committee for any reason or for no reason, the Executive
Committee will consist of five (5) members, comprised of three (3) Parent
Committee Members and two (2) Boomtown Committee Members. The number of members
of the Executive Committee shall not be greater than six (6) members (or five
(5) members if one of the initial Parent Committee Members ceases to be a member
of the Executive Committee) at any time during such three (3) year period
without the consent of the majority of the Boomtown Committee Members. The
initial Boomtown Committee Members will be Timothy J. Parrott and Richard J.
Goeglein. If either Messrs. Parrott or Goeglein shall be unavailable to serve,
any replacement Boomtown Committee Members shall be selected by a majority of
the Boomtown Directors then on the Corporation's Board of Directors. The
initial Parent Committee Members shall be R.D. Hubbard and three (3) other
Parent Directors selected by a majority of the Parent Directors then on the
Corporation's Board of Directors. Subject to the proviso set forth in the first
sentence of this paragraph, if either Mr. Hubbard or one or more of such other
initial Parent Committee Members shall be unavailable to serve, any replacement
Parent Committee Member shall be selected by a majority of the Parent Directors
then on the Corporation's Board of Directors. Notice of meetings of the
Executive Committee shall state the place, date and hour of the meeting and
shall be given to each member of the Executive Committee personally, by mail,
courier, telephone, telecopy or telegram on not less than 24 hours' notice.
Members of the Executive Committee may participate in such meetings by means of
conference telephone. Meetings of the Executive Committee may be held without
notice if all the members thereof are present or if all those not present waive
such notice in writing whether before or after the meeting.
This Section 3 may not be amended for a period of three (3) years from the
effective date of the Merger without the approval of a majority of Boomtown
Directors then on the Corporation's Board of Directors.
-11-
<PAGE>
Section 4. Audit Committee.
---------- ---------------
The Corporation's Board of Directors shall have an Audit Committee
comprised of at least three (3) members, all of whom shall consist solely of
non-officer directors who shall meet the standards for membership as set forth
in Rule 303.00 of the New York Stock Exchange ("NYSE") Company Guide or any
successor rule adopted by the NYSE with respect to such membership.
In addition to such other responsibilities as may be delegated to the Audit
Committee from time to time, the Audit Committee shall: (i) review and approve
all related party transactions between the Corporation or any of its
subsidiaries and any officer or director (or their affiliates) having a total
value of more than $60,000 (or such higher amount as may be specified from time
to time by applicable rules and regulations of the Securities and Exchange
Commission ("SEC") as the threshold at which disclosure of such transactions is
required in the Corporation's annual report, proxy statement or other periodic
filing), other than compensation arrangements, incentive plans, stock options
plans or similar plans or arrangements, and transactions that are subject to
approval by another committee of the Board of Directors consisting of a majority
of directors who are disinterested in the subject transaction; (ii) require the
Corporation's internal audit department to review, at least annually, all such
related party transactions and report thereon to the Audit Committee; (iii)
report annually on all related party transactions as required by the SEC's proxy
rules and shall, at least quarterly, report on any related party transaction
involving $2 Million or more, either in the Corporation's quarterly report on
Form 10-Q or in its quarterly shareholders report; (iv) recommend an independent
firm of certified public accountants to conduct the audit of the Corporation's
annual financial statements, and confer with the selected firm as to the scope
and procedures of its audit; (v) require the Corporation's independent auditors,
as a part of their engagement, to render to the Corporation a "Report to
Management" as to the Corporation's system of internal financial and accounting
controls. The Audit Committee shall review that report and any response thereto
by management. At the conclusion of the annual audit, the Audit Committee shall
receive a copy of the report of the independent auditors, and review that report
as well as any concerns, comments or suggestions that the auditors may provide;
(vi) on at least an annual basis, review the Corporation's internal financial
and accounting controls with the Corporation's financial and accounting
officers, and report thereon to the Corporation's Board of Directors with any
recommendations for improvement or correction as the Audit Committee may
determine appropriate. Thereafter, the Audit Committee shall supervise the
implementation of any recommendations of the Board with respect thereto; and
(vii) review, at least annually, the adequacy and competency of the
Corporation's accounting and financial staff and internal audit department.
The Audit Committee may retain independent experts, including legal counsel
and investment counsel, at its discretion and at the Corporation's expense.
-12-
<PAGE>
Section 5. Compensation Committee.
---------- ----------------------
The Corporation's Board of Directors shall have a Compensation Committee
comprised of at least one (1) member. In addition to such other
responsibilities and authority as may be delegated to the Compensation Committee
from time to time, the Compensation Committee shall have the authority to (i)
assist with the administration of the Corporation's compensation plans including
recommendations to the Board of Directors with respect to the establishment of
such plans and the terms and provisions thereof, (ii) make recommendations to
the Board of Directors with respect to the annual salaries and other
compensation of the officers of the Corporation, and (iii) provide assistance
and recommendations to the Board of Directors with respect to the compensation
policies and practices of the Corporation.
ARTICLE IV - OFFICERS
---------- --------
Section 1. Generally.
---------- ---------
The officers of the Corporation shall be elected by the Board of Directors
and shall consist of a Chairman of the Board, one or more Vice Chairmen of the
Board, a President, one or more Vice Presidents, a Secretary, and a Treasurer.
The Board of Directors may also appoint an Executive Vice President, a
Controller, one or more Assistant Secretaries and Assistant Treasurers, a Chief
Operating Officer, a General Manager of the Corporation's racing operations and
such other officers as it shall deem necessary from time to time. The principal
officers of the Corporation shall be chosen annually by the Board and shall hold
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any number of offices may be held by the same
person unless the Certificate of Incorporation or these Bylaws otherwise
provide.
Section 2. Chairman of the Board.
---------- ---------------------
The Chairman of the Board shall be the Chief Executive Officer of the
Corporation and shall, if present, preside at all meetings of the stockholders
and of the Board of Directors. If the Chairman of the Board is unable or
declines to act as Chief Executive Officer, then the Vice Chairman of the Board
shall be Chief Executive Officer. If there is more than one Vice Chairman of
the Board appointed, then the Vice Chairman with the longest continuous service
on the Board shall assume the duties of Chief Executive Officer in the absence
of the Chairman of the Board. If both the Chairman of the Board and any Vice
Chairman of the Board are unable or decline to act as Chief Executive Officer,
then the President shall become the Chief Executive Officer of the Corporation.
The Chief Executive Officer shall be the principal executive officer of the
Corporation and shall in general supervise and control all of the business and
affairs of the Corporation. He shall preside at all meetings of the
stockholders and of the Board of Directors and shall see that orders and
resolutions of the Board of Directors are carried into effect. He may sign
bonds,
-13-
<PAGE>
mortgages, certificates for shares and all other contracts and documents
whether or not under the seal of the Corporation except in cases where the
signing and execution thereof shall be expressly delegated by law, by the Board
of Directors or by these Bylaws to some other officer or agent of the
Corporation. He shall have general powers of supervision and shall be the final
arbiter of all differences between officers of the Corporation and his decision
as to any matter affecting the Corporation shall be final and binding between
the officers of the Corporation subject only to actions of the Board of
Directors. He may also delegate such of his duties to the Vice Chairman of the
Board or the President or such other officers as the Chairman of the Board from
time to time deems appropriate.
Section 3. Vice Chairman of the Board.
---------- ---------------------------
The Board of Directors may appoint one or more Vice Chairman of the Board
any of whom shall, in the absence of the Chairman of the Board or in the event
of his inability or refusal to act, perform the duties of the Chairman of the
Board and Chief Executive Officer and when so acting, shall have all the powers
of and be subject to all the restrictions upon the Chairman of the Board and
Chief Executive Officer. If more than one Vice Chairman is appointed the Vice
Chairman shall assume the duties of the Chairman of the Board in order of their
continuous service on this Board with the person having the longest continuous
service being the first to act. The Vice Chairman shall perform such other
duties as the Chief Executive Officer or the Board of Directors shall prescribe.
Section 4. President.
---------- ---------
In the absence of any Chief Executive Officer as the succession to that
position is prescribed in these Bylaws or in the event of the inability or
refusal of any such Chief Executive Officer to act, the President shall perform
the duties of the Chief Executive Officer, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the Chief Executive
Officer. He shall, at all times, have concurrent power with the Chief Executive
Officer to sign bonds, mortgages, certificates for shares and other contracts
and documents whether or not under the seal of the Corporation except in cases
where the signing and execution thereof shall be expressly delegated by law, by
the Board of Directors, or by these Bylaws to some other officer or agent of the
Corporation. The President shall also perform such other duties as the Chief
Executive Officer or the Board of Directors may from time to time prescribe.
Section 5. Chief Operating Officer.
---------- -----------------------
The Chief Operating Officer shall be an employee of this Corporation and
shall serve at the pleasure of the Board of Directors. The Chief Operating
Officer may, but need not be, a member of the Board of Directors, but in either
event, shall be reportable to and act under the direction of the Chairman of the
Board and Board
-14-
<PAGE>
of Directors. The Chief Operating Officer shall supervise the daily operations
and affairs of the Corporation under the direction of the Chairman of the Board
or such other persons as the Chairman of the Board may appoint from time to time
for that purpose and shall, within the limits specified in this Section, control
all of this corporation's racing activities, supervise its employees and
personnel, administer this Corporation's operating policies, and make such daily
operating decisions as are reasonably necessary for effective management. The
Chief Operating Officer shall have no authority to sign bonds, mortgages,
certificates for shares or other documents or to obligate this Corporation for
any sum in excess of $25,000.00 except as shall be expressly delegated by the
Board of Directors or by these Bylaws. The Chief Operating Officer shall make
such reports to the Board of Directors and to the Chairman of the Board as may
be directed by those entities and shall make a detailed report to the Chairman
of the Board and to the Board of Directors on the results of racing operations
and on the financial affairs of this Corporation no less frequently than
monthly.
Section 6. Vice Presidents.
---------- ---------------
In the absence of the President or in the event of his inability or refusal
to act, the Vice President, if one has been elected by the Board, (or in the
event there be more than one Vice President, the Executive Vice President or in
the event there is no Executive Vice President, the Vice President with the
longest continuous service on the Board of Directors of this Corporation) shall
perform the duties of the President, and when so acting, shall have all the
power of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties as the Chief Executive Officer or the
Board of Directors may from time to time prescribe.
Section 7. Treasurer.
---------- ---------
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. 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 Chairman of the Board and the
Board of Directors, at its 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 8. Assistant Treasurer.
---------- -------------------
The Assistant Treasurer 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 as the Chairman of
the Board or the
-15-
<PAGE>
Board of Directors may from time to time prescribe or perform such duties of the
Treasurer as the Treasurer of this Corporation may delegate from time to time.
Section 9. Secretary.
---------- ---------
The Secretary (or Assistant Secretary if appropriately delegated) 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 for that purpose and shall perform like
duties for the standing committee 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 the Chief Executive Officer. 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
affixed, it may be attested by his signature or such Assistant Secretary. The
Chairman of the Board or 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. Assistant Secretary.
----------- -------------------
The Assistant Secretary 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 as the Chairman of
the Board or the Board of Directors, or the Secretary may from time to time
prescribe.
Section 11. Controller.
----------- ----------
The Controller shall keep or cause to be kept correct records of the
business and transactions of the Corporation and shall, upon request, at all
reasonable times exhibit or cause to be exhibited such records to any of the
directors of the Corporation at the place where such records are maintained. He
shall perform such other duties as from time to time may be assigned to him by
the Chairman of the Board or the Board of Directors.
Section 12. Delegation of Authority.
----------- -----------------------
The Board of Directors may from time to time delegate the powers or duties
of any officer to any other officers or agents, notwithstanding any provision
hereof.
Section 13. Removal.
----------- -------
Any officer of the Corporation may be removed at any time, with or without
cause, by the Board of Directors.
-16-
<PAGE>
Section 14. Resignations.
----------- ------------
Any officer of the Corporation may resign at any time by giving written
notice of his resignation to the Board or the Chairman of the Board or the
Secretary. Any such resignation shall take effect at the time specified
therein, or if the time when it shall become effective shall not be specified
therein, then it shall take effect immediately upon its receipt by the Board or
the Chairman of the Board or Secretary; and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 15. Action with Respect to Securities of Other Corporations.
----------- -------------------------------------------------------
Unless otherwise directed by the Board of Directors, the Chairman of the
Board or the President or any officer of the Corporation authorized by the
Chairman of the Board or the President shall have power to vote and otherwise
act on behalf of the Corporation, in person or by proxy, at any meeting of
stockholders of or with respect to any action of stockholders of any other
corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
--------- -----
Section 1. Certificates of Stock.
---------- ---------------------
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board, President or a Vice
President, and by the Secretary or an Assistant Secretary, or the Treasurer or
an Assistant Treasurer, certifying the number of shares owned by him or her.
Any or all of the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
---------- ------------------
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of this Article V, an
outstanding certificate for the number of shares involved shall be surrendered
for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
---------- -----------
(1) In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any
-17-
<PAGE>
other lawful action, the Board of Directors may, except as otherwise required by
law, fix a record date, which record date shall not precede the date on which
the resolution fixing the record date is adopted and which record date shall not
be more than 60 nor less than 10 days before the date of any meeting of
stockholders, nor more than 60 days prior to the time for such other action as
hereinbefore described; provided, however, that if no record date is fixed by
the Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held, and, for determining stockholders entitled to receive
payment of any dividend or other distribution or allotment of rights or to
exercise any rights of change, conversion or exchange of stock or for any other
purpose, the record date shall be at the close of business on the day on which
the Board of Directors adopts a resolution relating thereto. 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.
(2) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within 10 days after the date on
which such a request is received, adopt a resolution fixing the record date. If
no record date has been fixed by the Board of Directors within 10 days of the
date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation in the manner prescribed by Article I, Section 9 of these Bylaws.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts the resolution taking such prior action.
Section 4. Lost, Stolen or Destroyed Certificates.
---------- --------------------------------------
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may
-18-
<PAGE>
establish concerning proof of such loss, theft or destruction and concerning the
giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
---------- -----------
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
---------- -------
Section 1. Notices.
---------- -------
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, recognized overnight delivery service or by sending such notice by
facsimile, receipt acknowledged, or by prepaid telegram or mailgram. Any such
notice shall be addressed to such stockholder, director, officer, employee or
agent at his or her last known address as the same appears on the books of the
Corporation. The time when such notice is received, if hand delivered, or
transmitted or dispatched, if delivered through the mails or by facsimile,
telegram or mailgram, shall be the time of the giving of the notice.
Section 2. Waivers.
---------- -------
A written waiver of any notice, signed by a stockholder, director, officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, director, officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
Attendance at any meeting shall constitute waiver of notice except attendance
for the sole purpose of objecting to the timeliness of notice.
ARTICLE VII - MISCELLANEOUS
----------- -------------
Section 1. Facsimile Signatures.
---------- --------------------
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
-19-
<PAGE>
Section 2. Corporate Seal.
---------- --------------
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
---------- ----------------------------------------
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director, committee member, or officer
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation.
Section 4. Fiscal Year.
---------- -----------
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
---------- ------------
In applying any provision of these Bylaws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
------------ -----------------------------------------
Section 1. Right to Indemnification.
---------- ------------------------
Each person who was or is made a party or is threatened to be made a party
to or is otherwise 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 an officer of the
Corporation or is or was serving 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, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is an alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation
-20-
<PAGE>
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 such law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith; provided, however, that, except as
provided in Section 3 of this Article VIII with respect to proceedings to
enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation.
Section 2. Right to Advancement of Expenses.
---------- --------------------------------
The right to indemnification conferred in Section 1 of this Article VIII
shall include the right to be paid by the Corporation the expenses (including
attorney's fees) incurred in defending any such proceeding in advance of its
final disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 2 or otherwise. The rights to indemnification and
to the advancement of expenses conferred in Sections 1 and 2 of this Article
VIII shall be contract rights and such rights shall continue as to an indemnitee
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the indemnitee's heirs, executors and administrators.
Section 3. Right of Indemnitee to Bring Suit.
---------- ---------------------------------
If a claim under Section 1 or 2 of this Article VIII is not paid in full by
the Corporation within 60 days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall also be entitled to be paid the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit
-21-
<PAGE>
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the Delaware General
Corporation Law. 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 suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article VIII or otherwise shall be on the
Corporation.
Section 4. Non-Exclusivity of Rights.
---------- -------------------------
The rights to indemnification and to the advancement of expenses conferred
in this Article VIII shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, the Corporation's Certificate
of Incorporation or Bylaws, any agreement, or by vote of the Corporation's
stockholders or disinterested directors or otherwise.
Section 5. Insurance.
---------- ---------
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or 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 such person against such expense, liability or loss under the
Delaware General Corporation Law.
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 and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
-22-
<PAGE>
ARTICLE IX - AMENDMENTS
---------- ----------
In furtherance and not in limitation of the powers conferred by law, the
Board of Directors is expressly authorized to make, alter, amend and repeal
these Bylaws subject to the power of the holders of capital stock of the
Corporation to alter, amend or repeal the Bylaws; provided, however, that, with
respect to the powers of holders of capital stock to make, alter, amend and
repeal Bylaws of the Corporation, notwithstanding any other provision of these
Bylaws or any provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law, these
Bylaws or any preferred stock, the affirmative vote of the holders of at least
66 K% of the voting power of all of the then-outstanding shares entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to make, alter, amend or repeal any provision of these Bylaws.
-23-
<PAGE>
EXHIBIT 3.26
SECOND 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>
TABLE OF CONTENTS
-----------------
Page
<TABLE>
<S> <C>
SECTION 1 DEFINITIONS.................................................. 2
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............................. 5
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...................................... 6
3.7 Percentage Interest.......................................... 7
3.8 Interest on Capital.......................................... 7
SECTION 4 DISTRIBUTIONS, PROFITS AND LOSSES............................ 7
4.1 Distributions................................................ 7
4.2 Allocations of Partnership Profits and Losses................ 8
4.3 Modifications to Preserve Underlying Economic Objectives..... 11
4.4 Withholding Taxes and Fees................................... 11
4.5 Nonallocation of Distributions to Increases in Minimum Gain.. 11
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
4.6 Allocation of Liabilities.................................... 12
SECTION 5 ADMINISTRATIVE PROVISIONS.................................... 12
5.1 Power of Limited Partners.................................... 12
5.2 Management by the General Partner............................ 12
5.3 Restrictions on Powers of the General Partner................ 13
5.4 Competing Ventures........................................... 13
5.5 Disclosures.................................................. 13
5.6 Reimbursement to the General Partner......................... 14
5.7 Compensation................................................. 14
5.8 Tax Matters Partner.......................................... 14
5.9 Books, Records and Annual Financial Statements............... 14
SECTION 6 TRANSFER OF A PARTNERSHIP INTEREST; WITHDRAWALS.............. 15
6.1 Transfers.................................................... 15
6.2 Withdrawal of a Limited Partner.............................. 16
SECTION 7 DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP............... 16
7.1 Dissolving Events............................................ 16
7.2 Special Meeting to Dissolve or Continue the Partnership...... 16
7.3 Winding Up of the Partnership................................ 17
SECTION 8 LIABILITY AND INDEMNIFICATION OF THE GENERAL PARTNER......... 18
8.1 Liability.................................................... 18
8.2 Indemnification.............................................. 18
SECTION 9 GENERAL PROVISIONS........................................... 18
9.1 Special Meetings............................................. 18
9.2 Entire Agreement............................................. 18
</TABLE>
-ii-
<PAGE>
<TABLE>
Page
<S> <C>
9.3 Amendments................................................... 19
9.4 Governing Law................................................ 19
9.5 Severability................................................. 19
9.6 Counterparts................................................. 19
9.7 Survival of Rights........................................... 19
9.8 Arbitration and Attorneys' Fees.............................. 19
9.9 Notices...................................................... 19
9.10 Consents..................................................... 20
9.11 No Partition................................................. 20
9.12 Representation by Limited Partners........................... 20
9.13 Valuation.................................................... 20
9.14 Mutual Selection............................................. 20
</TABLE>
-iii-
<PAGE>
SECOND AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
LOUISIANA-I GAMING,
A LOUISIANA PARTNERSHIP IN COMMENDAM
THIS SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT (this "Agreement")
of Louisiana-I Gaming, a Louisiana Partnership in Commendam (the "Partnership"),
is entered into as of August 8, 1997, by and among Louisiana Gaming Enterprises,
Inc., a Louisiana corporation (the "General Partner"), Boomtown, Inc., a
Delaware corporation ("Boomtown"), 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 original Partnership Agreement was amended and restated by
that certain Amended and Restated Partnership Agreement of Louisiana-I Gaming, a
Louisiana Partnership in Commendam, dated September 16, 1993, by the General
Partner, Boomtown and Eric Skrmetta ("Skrmetta"), pursuant to which (among other
things) Skrmetta was admitted as a limited partner of the Partnership;
WHEREAS, Boomtown has purchased from Skrmetta, and Skrmetta has sold and
assigned to Boomtown, all right, title and interest of Skrmetta in, under and to
the Partnership pursuant to that certain Assignment of Partnership Interest
dated August 6, 1997, between Skrmetta, as assignor, and Boomtown, as assignee;
and
WHEREAS, the General Partner and Boomtown are the only remaining partners
of the Partnership and desire again to amend and restate in its 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;
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:
<PAGE>
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 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
-2-
<PAGE>
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).
--------------------
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 riverboat gaming facility and related improvements
-------
owned and operated by the Partnership in Harvey, Louisiana.
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.
--------
-3-
<PAGE>
Transferring Partner shall 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 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 and
registered office of the Partnership shall be c/o Smith Martin, 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. The federal tax
identification number of the Partnership is 72-1238179.
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
---------------------
field, 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. 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.
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
-5-
<PAGE>
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.
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 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(b)(iv)), the Capital Accounts of the Partners
shall be adjusted to reflect the allocation of such Losses to the Limited
Partner.
-6-
<PAGE>
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 95%
Except as specifically provided in Section 3.7(b), 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.
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:
-7-
<PAGE>
(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) shad be
distributed in accordance with the provisions of Section 7.3.
(c) No distribution shall be made to a Limited Partner pursuant to
Section4.1(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;
-8-
<PAGE>
(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 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).
-9-
<PAGE>
(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 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 item 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 Disparites. 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 Allocations 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
-10-
<PAGE>
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.
(g) Adjustment to Capital Accounts for Distributions of Property.
-------------------------------------------------------------
If property distributed in kind is reflected 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 Modifications 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 in 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
-----------------------------------------------------------
extent 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
-11-
<PAGE>
that Partner are not reversed 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.
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's expense;
-12-
<PAGE>
(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;
(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.
-13-
<PAGE>
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 (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 Partne 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 Partnership financial information
necessary for such Partner, or its constituent partners or shareholders, to
compute its or their quarterly Federal estimated tax Liability.
-14-
<PAGE>
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
-----------------------------------------
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 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.
(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
-------- -------
requirement 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.
-15-
<PAGE>
(c) Transfers by the General Partner. The General Partner shall not
--------------------------------
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 Partners. 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.
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:
(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; and
(f) 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
-16-
<PAGE>
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.
(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 73(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
-17-
<PAGE>
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.
8.2 Indemnification. In the absence of fraud, gross negligence,
---------------
material breach of fiduciary duty, or willful misconduct on the part of 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, or 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 notice.
9.2 Entire Agreement. This Agreement contains the entire
----------------
understanding the Partners and supersedes 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.
-18-
<PAGE>
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 interest 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 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 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
-19-
<PAGE>
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.
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 of 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.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
GENERAL PARTNER: LIMITED PARTNER:
LOUISIANA GAMING ENTERPRISES, BOOMTOWN, INC.,
INC., a Louisiana corporation a Delaware corporation
By: /s/ Robert F. List By: /s/ Robert F. List
----------------------------- -----------------------------
Robert F. List, Robert F. List,
Senior Vice President Executive Vice President and
Corporate Counsel
-21-
<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. 95%
P.O. Box 399
Verdi, NV 89439
</TABLE>
REGISTERED ADDRESS OF PARTNERSHIP:
4132 Peters Road
Harvey, LA 70058
<PAGE>
STATE OF MISSISSIPPI
SECRETARY OF STATE
DICK MOLPUS
================================================================================
Mississippi Corporation Information System
Corporation Name
BILOXI CASINO CORP.
Corp ID: 0586827
Filed: 08/17/1990 at 8:00 A.M.
Dick Molpus
Secretary of State
Filing Fee Receipt: $50.00
Secretary of State
P.O. Box 136
Jackson, MS 39205
(601) 359-1333
================================================================================
401 MISSISSIPPI STREET . P.O. BOX 136 . JACKSON, MS 39205
TELEPHONE (601) 359-1350
<PAGE>
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:
Biloxi Casino Corp.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2. Domicile address is: 1900 24/th/ Avenue
------------------------------------------------------
STREET
Gulfport, MS 39501
---------------------------------------------------------------------------
CITY/STATE/ZIP
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) as follows: (THIS IS FOR PROFIT ONLY):
Classes(es) No. of Shares Authorized
----------- ------------------------
COMMON 10,000
-------------------------- --------------------------------
(one class only)
-------------------------- --------------------------------
-------------------------- --------------------------------
4. (b) If more than one (1) class of shares is authorized, the preferences,
limitations, and relative rights of each class are as follows:
5. The street address of its initial registered office is:
1900 24/th/ Avenue
---------------------------------------------------------------------------
STREET
Gulfport, MS 39501
---------------------------------------------------------------------------
NAME/STREET ADDRESS/CITY/STATE/ZIP
and the name of its initial registered agent at such address is:
Virgil G. Gillespie
---------------------------------------------------------------------------
6. The name and complete address of each incorporator is as
follows (PLEASE TYPE OR PRINT):
Virgil G. Gillespie
---------------------------------------------------------------------------
1900 24/th/ Avenue, Gulfport, MS 39501
---------------------------------------------------------------------------
NAME/STREET ADDRESS/CITY/STATE/ZIP
7. Other provisions: Shareholders have preemptive right to acquire a
-------------------------------------------------------
proportionate share of any additional stock issued or sale of treasury
---------------------------------------------------------------------------
stock, based upon the pro rata share of stock of any given stockholder, as
---------------------------------------------------------------------------
his shares bear to the total amount of stock issued.
---------------------------------------------------------------------------
/s/ Virgil G. Gillespie
----------------------------
Virgil G. Gillespie
----------------------------
INCORPORATORS (SIGNATURES)
<PAGE>
August 16, 1990
MISSISSIPPI SECRETARY OF STATE
CORPORATE DIVISION
P.O. BOX 136
JACKSON, MS 39205
RE: INCORPORATION OF BILOXI CASINO CORP.
Dear Sir:
We enclose the Articles of Incorporation of Dixieland Casino Corp. The
articles are executed in original and exact copy. The necessary parties have
signed the document in black ink.
Our check for the $50 filing fee is enclosed, along with a stamped, self
addressed envelope for return mailing of evidenced copy of filing.
If you have any questions please call me.
Sincerely,
/s/ Robert G. Gillespie, Jr.
Robert G. Gillespie, Jr.
<PAGE>
EXHIBIT 3.27
Certificate
of
Incorporation
HP Yakama Consulting, Inc.
-------------------------
a Delaware corporation
FIRST: The name of the corporation is HP Yakama Consulting, 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
<PAGE>
any right or protection of a director of the corporation existing at the time of
such repeal or modification.
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 13th day of August, 1997.
/s/ S. A. Morgan
----------------------------------
S. A. Morgan, Incorporator
<PAGE>
EXHIBIT 3.28
..............................................................
HP Yakama Consulting, 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>
-i-
<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>
-ii-
<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>
-iii-
<PAGE>
Bylaws
of
HP Yakama Consulting, 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.
-2-
<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 adjournment 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 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
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
Certificate 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 Consulting, Inc. hereby
adopts the foregoing Bylaws as the Bylaws of said corporation.
Dated as of August 13, 1997.
/s/ S. A. Morgan
---------------------------------
S. A. Morgan, Incorporator
The undersigned, constituting the Board of Directors of HP Yakama
Consulting, Inc. hereby adopt the foregoing Bylaws as the Bylaws of said
corporation.
Dated as of August 13, 1997.
/s/ R. D. Hubbard
---------------------------------
R. D. Hubbard, Director
/s/ G. Michael Finnigan
---------------------------------
G. Michael Finnigan, Director
/s/ Bruce Rimbo
---------------------------------
Bruce Rimbo, Director
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting Secretary of HP Yakama
Consulting, Inc. and that the foregoing Bylaws were adopted as the Bylaws of
said corporation as of the 13th day of August, 1997, by the Board of Directors
of said corporation.
Dated as of August 13, 1997.
/s/ Bruce Rimbo
---------------------------------
Bruce Rimbo, Secretary
-13-
<PAGE>
EXHIBIT 3.29
State of Minnesota
SECRETARY OF STATE
Certificate of Merger
I, Joan Anderson Growe, Secretary of State of Minnesota, certify that: the
documents required to effectuate a merger between the entities listed below and
designating the surviving entity have been filed in this office on the date
noted on this certificate; and the qualification of any non-surviving entity to
do business in Minnesota is terminated on the effective date of this merger.
Merger Filed Pursuant to Minnesota Statutes, Chapter: 302A
State of Formation and Names of Merging Entities:
MN: HP ACQUISITION II, INC.
MN: CASINO MAGIC CORP.
State of Formation and Name of Surviving Entity:
MN: CASINO MAGIC CORP.
Effective Date of Merger: October 15, 1998
Name of Surviving Entity After Effective Date of Merger:
CASINO MAGIC CORP
This certificate has been issued on: October 15, 1998
/s/ Joan Anderson Growe
------------------------------------------
Secretary of State.
<PAGE>
ARTICLES OF MERGER
OF
HP ACQUISITION II, INC.
AND
CASINO MAGIC CORP.
To the Secretary of State
State of Minnesota
Pursuant to the provisions of the Minnesota Business Corporation Act governing
the merger of two or more domestic corporations for profit, the corporations
hereinafter named do hereby adopt the following Articles of Merger.
1. The names of the merging corporations are HP Acquisition II, Inc., which is
a corporation for profit organized under the laws of the State of Minnesota, and
which is subject to the provisions of the Minnesota Business Corporation Act,
and Casino Magic Corp., which is a corporation for profit organized under the
laws of the State of Minnesota, and which is subject to the provisions of the
Minnesota Business Corporation Act.
2. Annexed hereto as Exhibit A and made a part hereof is the Plan of Merger for
merging HP Acquisition II, Inc. with and into Casino Magic Corp. as approved by
resolution of the directors and as approved by the shareholders of each of said
merging corporations.
3. The Plan of Merger has been approved by HP Acquisition II, Inc. and Casino
Magic Corp. pursuant to Chapter 302A, Minnesota Statutes.
4. Casino Magic Corp. will continue its existence as the surviving corporation
under its present name pursuant to the provisions of the Minnesota Business
Corporation Act.
5. The merger of HP Acquisition II, Inc. with and into Casino Magic Corp. shall
become effective when the Secretary of State of the State of Minnesota files
these Articles of Merger.
<PAGE>
The undersigned hereby certify that they are each authorized to execute this
document and further certify that they understand that by signing this document,
they are subject to the penalties of perjury as set forth in Section 609.48, as
if they had signed this document under oath.
Executed on October 13, 1998.
HP ACQUISITION II, INC.
By: /s/ G. Michael Finnigan
---------------------------------------
G. Michael Finnigan
Its: Chief Executive Officer, Secretary
and Chief Financial Officer
--------------------------------------
CASINO MAGIC CORP.
By: /s/ James E. Ernst
---------------------------------------
James E. Ernst
Its: President and Chief Executive Officer
--------------------------------------
-2-
<PAGE>
EXHIBIT A
PLAN OF MERGER
OF
CASINO MAGIC CORP. AND HP ACQUISITION II, INC.
WHEREAS, Casino Magic Corp. (the "Company") is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Minnesota.
WHEREAS, HP Acquisition II, Inc. ("HP Acquisition") is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Minnesota.
WHEREAS, the Company, HP Acquisition and Hollywood Park, Inc., a Delaware
corporation, entered into an Agreement and Plan of Merger dated February 19,
1998 (the "Agreement") which contemplates that upon satisfaction of certain
conditions HP Acquisition will merge with and into the Company.
WHEREAS, the Agreement contemplates that the terms under which HP
Acquisition shall be merged into the Company are to be set forth in this Plan of
Merger.
WHEREAS, on February 19, 1998, the respective Boards of Directors of the
Company and HP Acquisition approved (i) the execution and delivery of the
Agreement; (ii) this Plan of Merger, and (iii) the submission of this Plan of
Merger and the Agreement to the respective shareholders of the Company and HP
Acquisition for approval as required by law.
THE MERGER
SECTION 1. THE MERGER. In accordance with the provisions of the
Minnesota Business Corporation Act (the "MBCA", at the Effective Time (as
defined in Section 2), HP Acquisition shall be merged with and into the Company
(the "Merger"). Following the Merger, the separate existence of HP Acquisition
shall cease and the Company shall be the surviving corporation in the Merger and
retain the name "Casino Magic Corp."
SECTION 2. EFFECTIVE TIME OF MERGER. The Merger shall become effective
upon the filing of Articles of Merger containing this Plan of Merger and such
other documents as are required by the MBCA to be filed with the Minnesota
Secretary of State (the time of such filing being the "Effective Time").
SECTION 3. ARTICLES OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION. The Articles of Incorporation and By-Laws of the Company at the
Effective Time shall remain the Articles of Incorporation and By-Laws of the
Company as the surviving corporation in the Merger.
<PAGE>
SECTION 4. BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
The directors and officers of the Company at the Effective Time shall continue
to be the directors and officers of the Company, as the surviving corporation in
the Merger, until their respective successors are duly elected or appointed.
SECTION 5. CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof:
a. each share of $0.01 par value common stock of the Company which is
issued and outstanding immediately prior to the Effective Time which is held by
a shareholder who does not dissent from the Merger as provided under Sections
302A.471 and 302A.473 of the MBCA, shall, be converted into the right to receive
$2.27 (the "Merger Consideration"); and
b. each share of capital stock of HP Acquisition which is issued and
outstanding immediately prior to the Effective Time shall be converted into and
become a fully paid and nonassessable share of the $0.01 par value common stock
of the Company.
SECTION 6. EXCHANGE OF OPTIONS. Promptly following the Effective Time, as
provided in the Agreement, Hollywood Park, Inc. will exchange options to
purchase shares of the $0.10 par value common stock of Hollywood Park, Inc. for
the options to purchase shares of the $0.01 par value common stock of the
Company which are outstanding immediately prior to the Effective Time. Each such
existing option of the Company which is outstanding immediately prior to the
Effective Time will be exchanged for a new option having similar terms and
conditions except that the exercise price of the new option shall be obtained by
(i) dividing the exercise price of the old option by $2.27, and (ii) multiplying
the resulting amount by $15.075; and that the number of shares purchasable under
the new option shall be obtained by multiplying the number of shares purchasable
under the existing option by 0.15058.
SECTION 7. DISSENTING SHARES. Notwithstanding anything in this Plan of
Merger to the contrary, shares of the Company which are held immediately prior
to the Effective Time by shareholders that dissent from the Merger in compliance
with all relevant provisions of Sections 302A.471 and 302A.473 of the MBCA shall
not be converted into the right to receive the Merger Consideration, but shall
instead be surrendered to the Company and the Company shall make payment
therefore pursuant to such provisions of the MBCA.
SECTION 8. PAYMENT OF THE MERGER CONSIDERATION. Prior to the Effective
Time, Hollywood Park, Inc. shall appoint a bank or trust company as its paying
agent (the "Paying Agent") and deposit with the Paying Agent immediately
available funds in an amount sufficient to pay the aggregate Merger
Consideration. Promptly following the Effective Time, Hollywood Park, Inc. will
cause the Paying Agent to mail to each record owner of common stock of the
Company outstanding immediately prior to the Effective Time instructions for the
surrender to the Paying Agent of certificates for the shares in exchange for the
payment of the Merger Consideration. The Merger Consideration will be payable
upon surrender of the certificates for the shares surrendered accompanied by a
properly completed letter of instruction and transmittal (the "Transmittal
Document") in such form as the Paying Agent may reasonably require to be used.
Risk of loss and title to certificates being surrendered shall pass only upon
the proper delivery of the certificate to the Paying
-2-
<PAGE>
Agent. Upon receipt by the Paying Agent of the certificate and the Transmittal
Document, the certificate shall be cancelled and the Paying Agent shall effect
the payment of the Merger Consideration as provided for in the Transmittal
Document.
SECTION 9. AMENDMENT OF PLAN OF MERGER. Following approval of this Plan of
Merger by the shareholders of the Company and HP Acquisition, but prior to the
Effective Time, the respective Boards of Directors of the Company and HP
Acquisition shall have the authority to amend Sections 5 and 6 of this Plan of
Merger solely for the purpose of implementing an increase in the amount of the
Merger Consideration as may be agreed to between the Company and Hollywood Park,
Inc. pursuant to the Agreement.
-3-
<PAGE>
State of Minnesota
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
I, Joan Anderson Growe, Secretary of State of Minnesota, do certify that:
Articles of Incorporation, duly signed and acknowledged under oath, have been
filed on this date in the Office of the Secretary of State, for the
incorporation of the following corporation, under and in accordance with the
provisions of the chapter of Minnesota Statutes listed below.
This corporation is now legally organized under the laws of Minnesota.
Corporate Name: Casino Magic Corp
Corporate Charter Number: 7K-37
Chapter Formed Under: 302A
This certificate has been issued on 04/17/1992.
/s/ Joan Anderson Growe
------------------------
Secretary of State.
<PAGE>
ARTICLES OF INCORPORATION
OF
CASINO MAGIC CORP.
The undersigned, being of full age, for the purpose of organizing a
corporation under Minnesota Statutes, Chapter 302A, and acts amendatory thereto,
does hereby adopt, sign and acknowledge the following Articles of Incorporation.
ARTICLE I
Name
----
The name of the corporation shall be "Casino Magic Corp."
ARTICLE II
Registered Office
-----------------
The address of the corporation's registered office in the State of
Minnesota is 580 International Centre, 900 Second Avenue South, Minneapolis, MN
55402.
ARTICLE III
Authorized Shares
-----------------
The corporation shall have the authority to issue an aggregate of
17,500,000 shares, all of which shall be common voting shares having a par value
of $0.01 per share, and 2,500,000 undesignated shares.
The Board of Directors of the corporation may, from time to time, establish
by resolution different classes or series of shares from the undesignated shares
and may fix the rights and preferences of said shares in any class or series.
-1-
<PAGE>
ARTICLE IV
Incorporator
------------
The name and address of the sole incorporator of the corporation is Roger
H. Frommelt, 580 International Centre, 900 Second Avenue South, Minneapolis, MN
55402.
ARTICLE V
Cumulative Voting
-----------------
No shareholder of the corporation shall have any right to cumulate votes
with respect to shares of the corporation in the election of members of the
Board of Directors of the corporation, or when voting on any other matter.
ARTICLE VI
Preemptive Rights
-----------------
No shareholder of the corporation, by reason of such status as a
shareholder, shall have any right to acquire any portion of the unissued shares
or other securities of the corporation, or any rights to purchase such shares or
other securities, which the corporation may from time to time offer or sell to
any person.
ARTICLE VII
Director Liability
------------------
No member of the Board of Directors of the corporation shall have personal
liability to the corporation or its shareholders for monetary damages for any
breach of fiduciary duty, except for the following:
(a) any breach of a director's duty of loyalty to the corporation or its
shareholders;
(b) any act or omission not in good faith, or that involves intentional
misconduct or a knowing violation of law;
(c) any act prohibited under or regulated by Minnesota Statutes, Section
302A.559 concerning illegal distributions, or by Minnesota Statutes,
Section 80A.23 concerning civil liabilities for securities violations; or
-2-
<PAGE>
(d) any transaction from which the director derives an improper personal
benefit.
ARTICLE VIII
Control Share Acquisitions
--------------------------
Neither Section 302A.671 of the Minnesota Statutes, nor any other provision
contained in the Minnesota Statutes relating to any "control share acquisition"
as defined in Section 302A.011, Subd. 38 of the Minnesota Statutes, shall apply
to this corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of April,
1992.
/s/ Roger H. Frommelt
---------------------------
Roger H. Frommelt
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
On this 16th day of April, 1992, before me, a Notary Public, personally
appeared Roger H. Frommelt to me personally known to be the person described in
and who executed the foregoing instrument, and he acknowledged that he executed
the same as his free act and deed.
/s/ Jean M. Davis
-----------------------
Notary Public
-3-
<PAGE>
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
CASINO MAGIC CORP.
I, Marlin F. Torguson, Chief Executive Officer of Casino Magic Corp., a
Minnesota corporation (the "Company") , hereby certify that the following is a
true and correct copy of a resolution amending the Company's Articles of
Incorporation, adopted pursuant to the terms of Minnesota Statutes, Chapter 302A
by the shareholders of the Company at a duly constituted meeting of such
shareholders held on May 14, 1993:
"RESOLVED, that the Articles of Incorporation of Casino Magic Corp. (the
"Articles") are hereby amended to add the following as Article III of the
Articles and it shall supersede and replace in its entirety the existing
Article III of the Articles:
'ARTICLE III
Authorized Shares
-----------------
The corporation shall have the authority to issue an aggregate of
50,000,000 shares, all of which shall be common voting shares having a par
value of $0.01 per share, and 2,500,000 undesignated shares.
The Board of Directors of the corporation may, from time to time,
establish by resolution different classes or series of shares from the
undesignated shares and may fix the rights and preferences of said shares
in any class or series.'"
IN WITNESS WHEREOF, the undersigned, being duly authorized by the Company,
has executed these Articles of Amendment as of the 14th day of May, 1993.
/s/ Marlin F. Torguson
----------------------------------
Marlin F. Torguson
Chief Executive Officer
<PAGE>
STATE OF MISSISSIPPI )
) ss.
COUNTY OF HANCOCK )
The foregoing instrument was acknowledged before me this 14th day of May,
1993, by Marlin F. Torguson, to me personally known to be the Chief Executive
Officer of Casino Magic Corp., a Minnesota corporation, who declared that the
execution of said instrument is the act and deed of said corporation and that
the facts stated therein are true.
/s/ Michele Kimmel
--------------------------------------
Notary Public
-2-
<PAGE>
EXHIBIT 3.30
BY-LAWS
OF
CASINO MAGIC CORP.
(A MINNESOTA CORPORATION)
ARTICLE I
DEFINITIONS
-----------
BY-LAW 1.01. The following words or phrases when used in these By-Laws, shall
- -----------
have the meanings set forth below:
a. "Articles of Incorporation" shall mean the Articles of Incorporation of
the Corporation.
b. "Board of Directors" shall mean the Board of Directors of the
Corporation.
c. "Corporation" shall mean Casino Magic Corp.
d. "Director" shall mean a member of the Board of Directors.
e. "Shares" shall mean the authorized shares of the Corporation as
identified in the Corporation's Articles of Incorporation.
f. "Shareholder" or "shareholders" shall mean a shareholder or the
shareholders of record of the Corporation.
g. "Statute" shall mean the applicable statute or statutes of the
Minnesota Business Corporation Act, being Chapter 270 of the 1981 Laws of
Minnesota.
h. "Voting Shares" shall mean the shares which entitle the record owner to
vote on matters relating to the affairs of the Corporation under the Articles of
Incorporation or by statute.
ARTICLE II
OFFICES, BOOKS AND RECORDS
--------------------------
BY-LAW 2.01 REGISTERED AND OTHER OFFICES. The registered office of the
- -----------------------------------------
Corporation in Minnesota shall be that most recently adopted either in the
Articles of Incorporation or any amendment thereto, or by the Board of Directors
in a statement filed with the Secretary of State of Minnesota establishing the
registered office in the manner prescribed by law. The Corporation may have
such other offices, within or without the State of Minnesota, as the Board of
Directors shall, from time to time, determine.
<PAGE>
BY-LAW 2.02 MAINTENANCE OF RECORDS. The original books and records of the
- ------------------------------------
Corporation, or copies thereof, shall be maintained at the principal executive
office of the Corporation. Certain records, statements and agreements, or
copies thereof, shall be available for examination by the shareholders on such
terms and conditions as the Board of Directors may from time to time impose,
consistent with statute.
ARTICLE III
SHAREHOLDERS' MEETING
---------------------
BY-LAW 3.01 PLACE. Meetings of the shareholders shall be held in the county
- -------------------
where the principal executive office of the Corporation is located; provided
that any meeting not called by or at the demand of a shareholder or shareholders
pursuant to statute, may be held at such other place as the chief executive
officer or the Board of Directors may designate.
BY-LAW 3.02 REGULAR MEETING. A regular meeting of the shareholders shall be
- -----------------------------
held during the third month following the end of the Corporation's fiscal year
for federal income tax purposes, on such date, and at such time and place, as
may be specified by the chief executive officer, unless some other date, time or
place is specified by the Board of Directors.
BY-LAW 3.03 SPECIAL MEETING. A special meeting of the shareholders may be
- -----------------------------
called for any purpose by the chief executive officer, the chief financial
officer, the Board of Directors, or a shareholder or shareholders holding at
least ten percent of the voting shares of the Corporation. A special meeting of
the shareholders shall be called by the Board of Directors on the demand,
pursuant to statute, of shareholders holding at least ten percent of the
outstanding voting shares of the Corporation. Business transacted at any
special meeting of the shareholders shall be confined to the purposes stated in
the notice of such meeting.
BY-LAW 3.04 NOTICE. Written notice of the place, date and time of any
- --------------------
meeting of the shareholders shall be given to each shareholder entitled to vote
thereat by mailing said notice postage prepaid, to the shareholder's address of
record. Notice of a regular meeting of the shareholders shall be given at least
ten days before the meeting. Notice of a special meeting shall be given at
least five days before the meeting. No notice of any meeting of the
shareholders may be mailed more than sixty days before such meeting. The notice
of any special meeting shall set forth the purposes of the meeting and, in a
general nature, the business to be transacted. In determining the number of
days of notice required under this By-Law, the date upon which any notice is
deposited in the U.S. Mail shall be included as one day and the date of the
meeting which is the subject of the notice shall not be included.
BY-LAW 3.05 WAIVER OF NOTICE; CONSENT MEETINGS. Notice of the time, place
- ------------------------------------------------
and purpose of any meeting of the shareholders may be waived by any shareholder
before, at, or after any such meeting. Any action which may be taken at a
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all shareholders who would be entitled to a notice of meeting
for such purpose. Attendance at a meeting of the shareholders is a waiver of
the notice of that meeting, unless at the beginning of that meeting a
shareholder objects that the meeting is not lawfully called or convened, or
unless prior to the vote on any item of business, a shareholder objects that the
item may not be lawfully
-2-
<PAGE>
considered at that meeting and such shareholder does not participate in the
consideration of that item at that meeting.
BY-LAW 3.06 QUORUM; ADJOURNMENT. The presence at any meeting, in person or
- ----------------------------------
by proxy, of the shareholders owning at least one-third of the outstanding
voting shares shall constitute a quorum for the transaction of business. Once a
quorum is established at any meeting of the shareholders, the voluntary
withdrawal of any shareholder from the meeting shall not affect the authority of
the remaining shareholders to conduct any business which properly comes before
the meeting. In the absence of a quorum, those present may adjourn the meeting
from day to day or time to time without further notice other than announcement
at such meeting of such date, time and place of the adjourned meeting. At an
adjourned meeting of the shareholders at which a quorum is present, any business
may be transacted which might have been transacted at the meeting as originally
noticed.
BY-LAW 3.07 VOTING; RECORD DATE. At each meeting of the shareholders, each
- ----------------------------------
shareholder entitled to vote thereat may vote in person or by proxy duly
appointed by an instrument in writing subscribed by such shareholder. At a
meeting of the shareholders, each shareholder shall have one vote for each
voting share standing in such shareholder's name on the books of the
Corporation, or on the books of any transfer agent appointed by the Corporation,
on the record date established by the Board of Directors, which date may not be
more than sixty days from the date of any such meeting. If no record date has
been established, the record date shall be as of the close of business on the
date of the original notice of the meeting of the shareholders, or the date
immediately preceding the date such notice is mailed to the shareholders,
whichever is earlier. Upon the demand of any shareholder at the meeting, the
vote for directors, or the vote upon any question before the meeting, shall be
by written ballot. All elections shall be effected, and all questions shall be
decided, by shareholders owning a majority of the shares present in person and
by proxy, except as otherwise specifically provided for by statute or by
Articles of Incorporation.
BY-LAW 3.08 VOTING; CUMULATIVE. Except to the extent limited or prevented by
- ---------------------------------
the Articles of Incorporation, shareholders may cumulate their votes in the
election of directors, if, more than 48 hours, prior to any meeting of the
shareholders at which such directors are to be elected, any officer of the
Corporation receives written notice from a shareholder of such shareholder's
intention to cumulate votes in the election of directors. If such notice is
received, the person presiding as chairman over such meeting shall announce,
before the election of such directors, that all shareholders shall cumulate
their votes in the election of directors. A shareholder shall cumulate votes by
multiplying the number of members of the Board of Directors to be elected by the
number of shares owned by such shareholder, and casting the resulting number of
votes for one candidate, or dividing such votes among any number of candidates,
for membership on the Board of Directors.
BY-LAW 3.09 PRESIDING OFFICER. The chief executive officer of the
- --------------------------------
Corporation or any person so designated by the chief executive officer shall
preside as chairman over all meetings of the shareholders; provided, however,
that in the absence of the chief executive officer or his designee at any
meeting of the shareholders, the meeting shall choose any person present to act
as the presiding officer of the meeting.
-3-
<PAGE>
BY-LAW 3.10 CONDUCT OF MEETINGS OF SHAREHOLDERS. Subject to the following,
- --------------------------------------------------
meetings of shareholders generally shall follow accepted rules of parliamentary
procedure:
a. The chairman of the meeting shall have absolute authority over
matters of procedure and there shall be no appeal from the ruling of the
chairman. If the chairman, in his absolute discretion, deems it advisable
to dispense with the rules of parliamentary procedure as to any one meeting
of shareholders or part thereof, the chairman shall so state and shall
clearly state the rules under which the meeting or appropriate part thereof
shall be conducted.
b. If disorder should arise which prevents continuation of the
legitimate business of the meeting, the chairman may quit the chair and
announce the adjournment of the meeting; and upon his so doing, the meeting
is immediately adjourned.
c. The chairman may ask or require that anyone leave the meeting who
is not a bona fide shareholder of record entitled to notice of the meeting,
or a duly appointed proxy thereof.
BY-LAW 3.11 INSPECTORS OF ELECTION. The Board of Directors in advance of any
- -------------------------------------
meeting of shareholders may appoint one or more inspectors to act at such
meeting or adjournment thereof. If inspectors of election are not so appointed,
the person acting as chairman of any such meeting may, and on the request of any
shareholder or his or her proxy shall, make such appointment. In case any
person appointed as inspector shall fail to appear to act, the vacancy may be
filled by appointment made by the Board of Directors in advance of the meeting,
or at the meeting by the officer or person acting as chairman. The inspectors
of election shall determine the number of shares outstanding, the voting power
of each, the shares represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, and shall receive votes, ballots,
assents or consents, hear and determine all challenges and questions in any way
arising and announce the result, and do such acts as may be proper to conduct
the election or vote with fairness to all shareholders. No inspector whether
appointed by the Board of Directors or by the officer or person acting as
chairman need be a shareholder.
ARTICLE IV
BOARD OF DIRECTORS
------------------
BY-LAW 4.01 NUMBER, ELECTION AND TERM. The Board of Directors shall consist
- ----------------------------------------
of one or more members. The number of the members of the Board of Directors to
be elected at any meeting of the shareholders shall be determined from time to
time by the Board of Directors and, if the Board of Directors does not expressly
fix the number of directors to be so elected, then the number of directors shall
be the number of directors elected at the preceding regular meeting of
shareholders. The number of directors may be increased at any subsequent
special meeting of shareholders called for the election of additional directors,
by the number so elected. A director need not be a shareholder. Directors
shall be elected at each regular meeting of the shareholders, and each director
shall be elected to serve for an indefinite term, terminating at the next
regular meeting of the shareholders and the election
-4-
<PAGE>
of a qualified successor by the shareholders, or the earlier death, resignation,
removal or disqualification of such director.
BY-LAW 4.02 REGULAR MEETINGS. Unless otherwise specified by the directors,
- -------------------------------
the regular meeting of the Board of Directors shall be held at the place of, and
immediately following the adjournment of, the regular meeting of the
shareholders. At such meeting of the Board of Directors, the Board of Directors
shall elect such officers as are deemed necessary for the operation and
management of the Corporation, and transact such other business as may properly
come before it.
BY-LAW 4.03 SPECIAL MEETINGS. Special meetings of the Board of Directors may
- -------------------------------
be called by the chief executive officer, the President or any director at any
time, to be held at the principal executive office of the Corporation, or at
some other location which is either within 50 miles of the principal executive
offices of the Corporation, determined at any prior meeting of the Board of
Directors, or agreed to by a majority of the members of the Board of Directors.
BY-LAW 4.04 NOTICE. Notice of the date, time and place of meetings of the
- ---------------------
Board of Directors shall be given to each director personally or by telegraph
dispatched at least two days prior to the meeting, or shall be given by mail
dispatched at least four days prior to the meeting. In determining the number
of days of notice required under this By-Law, the date upon which any such
notice is delivered, deposited in the U.S. Mail, or telegraphed, shall be
included as one day, and the date of the meeting which in the subject of the
notice shall not be included. In the case of meetings held by voice
communication as provided in By-Law 4.05 below, such notice shall set forth the
specific manner in which the meeting is to be held. Any director may, before,
at, or after a meeting of the Board of Directors, waive notice thereof. Any
director who attends a meeting shall be deemed to have waived notice of the
meeting, unless such director objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called and does not
participate in the meeting. Unless otherwise provided by the Board of
Directors, the provisions of this By-Law shall apply in all respects to the
notice requirements of meetings of any committee established by the Board of
Directors.
BY-LAW 4.05 TELEPHONE AND CONSENT MEETINGS. Participation in any meeting of
- ---------------------------------------------
the Board of Directors or of any committee established by the Board of Directors
by conference telephone or other similar means of communication, whereby all
persons participating in the meeting can simultaneously and continuously hear
each other, shall constitute presence in person at that meeting. Any action
which might be taken at a meeting of the Board of Directors or any committee
established by the Board of Directors may be taken without a meeting if done in
writing, signed by all members of the Board of Directors or such committee, as
the case may be.
BY-LAW 4.06 QUORUM/VOTING. At all meetings of the Board of Directors or of
- ----------------------------
any committee established by the Board of Directors, a majority of the members
must be present to constitute a quorum for the transaction of business. Each
member shall have one vote. Voting by proxy, or the establishment of a quorum
by proxy, is prohibited. The act of the majority of the members present at any
meeting at which there is a quorum shall be the act of the Board of Directors or
such committee, as the case may be. In the absence of a
-5-
<PAGE>
quorum, a majority of those present may adjourn the meeting from day to day or
time to time without notice other than announcement at such meeting of the date,
time and place of the adjourned meeting.
BY-LAW 4.07 ORDER OF BUSINESS/RECORD. The Board of Directors, or any
- ---------------------------------------
committee established by the Board of Directors, may, from time to time,
determine the order of the business at any meeting thereof. If a Secretary of
the Corporation has been elected by the Board of Directors, such Secretary shall
keep a record of all proceedings at a meeting of the Board of Directors;
otherwise, a Secretary Pro Tem, chosen by the person presiding over the meeting
as chairman, shall so act.
BY-LAW 4.08 VACANCY. A vacancy in membership of the Board of Directors shall
- ----------------------
be filled by the affirmative vote of the remaining members of the Board of
Directors, though less than a quorum, and a member so elected shall serve until
his successor is elected by the shareholders at their next regular meeting, or
at a special meeting duly called for that purpose.
BY-LAW 4.09 COMMITTEES. The directors may, by resolution adopted by a
- -------------------------
majority of the members of the Board of Directors, designate one or more persons
to constitute a committee which, to the extent provided in such resolution,
shall have and exercise the authority of the Board of Directors in the
management of the business of the Corporation. Any such committee shall act
only in the interval between meetings of the Board of Directors and shall be
subject at all times to the control and direction of the Board of Directors.
Unless otherwise provided by the Board of Directors, a meeting of any committee
established by the Board of Directors may be called by any member thereof.
BY-LAW 4.10 OTHER POWERS. In addition to the powers and authorities
- ---------------------------
conferred upon them by By-Laws, the Board of Directors shall have the power to
do all acts necessary and expedient to the conduct of the business of the
Corporation which are not conferred upon the shareholders by statute, these By-
Laws, or the Articles of Incorporation.
ARTICLE V
SHARES
------
BY-LAW 5.01 ISSUANCE OF SECURITIES. The Board of Directors is authorized to
- -------------------------------------
issue securities of the Corporation, and rights thereto, to the full extent
authorized by the Articles of Incorporation, in such amounts, at such times and
to such persons as may be determined by the Board of Directors and permitted by
law, subject to any limitations specified in these By-Laws.
BY-LAW 5.02 CERTIFICATES FOR SHARES. Every shareholder shall be entitled to
- --------------------------------------
a certificate, to be in such form as prescribed by law and adopted by the Board
of Directors, evidencing the number of shares of the Corporation owned by such
shareholder. The certificates shall be signed by the chief executive officer;
provided that if a transfer agent has been appointed for the Corporation's
shares, such signature may be a facsimile.
BY-LAW 5.03 TRANSFER OF SHARES. Subject to any applicable or reasonable
- ---------------------------------
restrictions which may be imposed by the Board of Directors, shares of the
corporation shall be transferred upon written demand of the shareholder named in
the certificate, or the
-6-
<PAGE>
shareholder's legal representative, or the shareholder's duly authorized
attorney-in-fact, accompanied by a tender of the certificates to be transferred
properly endorsed, and payment of all transfer taxes due thereon, if any. The
Corporation may treat, as the absolute owner of shares of the Corporation, the
person or persons in whose name or names the shares are registered on the books
of the Corporation.
BY-LAW 5.04 LOST CERTIFICATE. Any shareholder claiming a certificate
- -------------------------------
evidencing ownership of shares to be lost, stolen or destroyed shall make an
affidavit or affirmation of that fact in such form as the Board of Directors may
require, and shall, if the Board of Directors so require, give the Corporation
(and its transfer agent, if a transfer agent be appointed) a bond of indemnity
in such form with one or more sureties satisfactory to the Board of Directors,
in such amount as the Board of Directors may require, whereupon a new
certificate may be issued of the same tenor and for the same number of shares as
the one alleged to have been lost, stolen or destroyed.
BY-LAW 5.05 PREEMPTIVE RIGHTS. Except to the extent limited or prevented in
- --------------------------------
the Articles of Incorporation or by statute, each shareholder shall have the
right to acquire a fraction of the unissued shares or rights to purchase
unissued shares, of the same class or series held by the shareholder, which the
Corporation proposes to issue. The fraction of the shares of the new issue
which may be purchased under this paragraph shall be the ratio that the number
of shares of that class or series owned by the shareholder before the new issue
bears to the total number of shares of that class or series outstanding before
the new issue.
ARTICLE VI
OFFICERS
--------
BY-LAW 6.01 ELECTION OF OFFICERS. The Board of Directors, at its regular
- -----------------------------------
meeting held after each regular meeting of shareholders shall, and at any
special meeting may, elect a Chief Executive Officer and a Chief Financial
Officer. Except as may otherwise be determined from time to time by the Board
of Directors, such officers shall exercise such powers and perform such duties
as are prescribed by these By-Laws. The Board of Directors may elect such other
officers and agents as it shall deem necessary from time to time, including Vice
Presidents and a Chairman of the Board who shall exercise such powers and
perform such duties, not in conflict with the duties of officers designated in
these By-Laws, as shall be determined from time to time by the Board of
Directors.
BY-LAW 6.02 TERMS OF OFFICE. The officers of the Corporation shall hold
- ------------------------------
office until their successors are elected and qualified, notwithstanding an
earlier termination of their office as directors. Any officer elected by the
Board of Directors may be removed with or without cause by the affirmative vote
of a majority of the Board of Directors present at a meeting.
BY-LAW 6.03 SALARIES. The salaries of all officers of the Corporation shall
- -----------------------
be determined by the Board of Directors.
BY-LAW 6.04 CHIEF EXECUTIVE OFFICER. The President shall be the chief
- --------------------------------------
executive officer of the Corporation, unless the Board of Directors shall elect
a Chairman of the Board, and
-7-
<PAGE>
designate such Chairman as the Chief Executive Officer, in which case the
Chairman of the Board shall be the chief executive officer. The chief executive
officer shall;
a. have general active management of the business of the Corporation;
b. when present, and except where the Board of Directors elect a
Chairman of the Board, preside at all meetings of the Board of Directors
and of the shareholders;
c. see that all orders and resolutions of the Board of Directors are
carried into effect;
d. sign and deliver in the name of the Corporation any deeds,
mortgages, bonds, contracts or other instruments pertaining to the business
of the Corporation, except in cases in which the authority to sign and
deliver is required by law to be exercised by another person or is
expressly delegated by the Articles of Incorporation or these By-Laws or by
the Board of Directors to some other officer or agent of the Corporation;
e. maintain records of and, whenever necessary, certify all
proceedings of the Board of Directors and the shareholders; and
f. perform other duties prescribed by the Board of Directors.
BY-LAW 6.05 CHIEF FINANCIAL OFFICER. The Treasurer shall be the chief
- --------------------------------------
financial officer of the Corporation, and as such shall:
a. keep accurate financial records for the Corporation;
b. deposit all money, drafts, and checks in the name of and to the
credit of the Corporation in the banks and depositories designated by the
Board of Directors;
c. endorse for deposit all notes, checks, and drafts received by the
Corporation as ordered by the Board of Directors, making proper vouchers
therefor;
d. disburse funds of the Corporation, and issue checks and drafts in
the name of the Corporation, as ordered by the Board of Directors;
e. render to the chief executive officer and the Board of Directors,
whenever requested, an account of all transactions by the Treasurer and of
the financial condition of the Corporation; and
f. perform other duties prescribed by the Board of Directors or by
the chief executive officer, under whose supervision the Treasurer shall
be.
-8-
<PAGE>
BY-LAW 6.06 SECRETARY. The Secretary, if elected, shall:
- ------------------------
a. attend all meetings of the Board of Directors at the request of
the chief executive officer or the Board of Directors, and shall attend all
meetings of the shareholders and record all votes and the minutes of all
proceedings in a book kept for that purpose; and shall perform like duties
for a committee when required by the chief executive officer; and
b. perform other duties prescribed by the Board of Directors or by
the chief executive officer, under whose supervision the Secretary shall
be.
BY-LAW 6.07 DELEGATION OF AUTHORITY. Except where prohibited or limited by
- --------------------------------------
the Board of Directors, an officer elected by the Board of Directors may
delegate some or all of the duties or powers of his or her office to another
person, provided that such delegation is in writing, and a copy of such written
delegation, identifying the person to whom those duties or powers are delegated,
and specifying the nature, extent and any limitations of the duties or powers
delegated, is delivered in the same manner as provided for notices of meetings
of the Board of Directors to all members of the Board of Directors prior to such
delegation becoming effective.
ARTICLE VII
MISCELLANEOUS
-------------
BY-LAW 7.01 CORPORATE SEAL. If so directed by the Board of Directors, the
- -----------------------------
Corporation may use a corporate seal. The failure to use such seal, however,
shall not affect the validity of any documents executed on behalf of the
Corporation. The seal need only include the word "seal," but it may also
include, at the discretion of the Board of Directors, such additional wording as
is permitted by the statute.
BY-LAW 7.02 REIMBURSEMENT BY DIRECTORS AND OFFICERS. Any payments made to
- ------------------------------------------------------
any officer or director of this Corporation, such as salary, commission, bonus,
interest, or rent, or entertainment expenses 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 or director to the Corporation to
the full extent of such disallowance. It shall be the duty of the Board of
Directors to enforce payment of each said amount disallowed. In lieu of payment
by the officer or director, subject to the determination of the Board of
Directors, proportionate amounts may be withheld from his future compensation
payments until the amount owed to the Corporation has been recovered.
BY-LAW 7.03 AMENDMENTS TO BY-LAWS. These By-Laws may be amended or altered
- ------------------------------------
by the vote of a majority of all of the members of the Board of Directors at any
meeting. Such authority of the Board of Directors is subject to the power of
the shareholders to adopt, amend or repeal By-Laws adopted, amended or repealed
by the Board of Directors, pursuant to statute at any regular or special meeting
called for that purpose.
-9-
<PAGE>
The foregoing By-Laws of this Corporation were adopted by the Board of
Directors on the 20th day of April, 1992.
/s/ Marlin F. Torguson
------------------------
Marlin F. Torguson
Chief Executive Officer
-10-
<PAGE>
RESOLUTION ADOPTED BY BOARD OF DIRECTORS
OF
CASINO MAGIC CORP.
ON
AUGUST 17, 1992
RESOLVED, that By-Law 4.01 of the By-Laws of Casino Magic Corp. is hereby
amended to read as follows, and it shall supercede and replace in its entirety
the existing By-Law 4.01:
"BY-LAW 4.01 NUMBER, ELECTION AND TERM. The Board of Directors shall consist of
-------------------------------------
one or more members. The number of the members of the Board of Directors to be
elected at any meeting of the shareholders shall be determined from time to time
by the Board of Directors and, if the Board of Directors does not expressly fix
the number of directors to be so elected, then the number of directors shall be
the number of directors elected at the preceding regular meeting of the
shareholders, provided that prior to January 1, 1993, the directors may increase
the number of members of the Board of Directors and elect additional directors
to the vacancies so created subject to the power of the shareholders at the next
meeting of shareholders to remove the director(s) so elected and to reduce the
size of the Board. The number of directors may be increased at any subsequent
special meeting of shareholders called for the election of additional directors,
by the number so elected. A director need not be a shareholder. Directors
shall be elected at each regular meeting of the shareholders, and each director
shall be elected to serve for an indefinite term, terminating at the next
regular meeting of the shareholders and the election of a qualified successor,
or the earlier death, resignation, removal or disqualification of such
director."
-11-
<PAGE>
RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS
OF
CASINO MAGIC CORP.
ON
APRIL 4, 1995
RESOLVED, that pursuant to the authority provided to the Casino Magic Corp. (the
"Corporation") Board of Directors set forth in By-Law 7.03, By-Law 4.09 of the
By-Laws of the Corporation is hereby amended to read as follows, and it shall
supersede and replace in its entirety the existing By-Law 4.09:
"BY-LAW 4.09 COMMITTEES. The Directors may, by resolution adopted by
----------------------
a majority of the members of the Board of Directors present at any
duly held meeting thereof, designate one or more persons to constitute
a committee which, to the extent provided in such resolution, shall
have and exercise the authority of the Board of Directors in the
management of the business of the Corporation. The authority of any
such committee and any member thereof, may be terminated at the
discretion of the Board of Directors. Unless otherwise provided by
the Board of Directors, a meeting of any committee established by the
Board of Directors may be called by any member thereof."
-12-
<PAGE>
RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS
OF
CASINO MAGIC CORP.
ON
APRIL 16, 1996
RESOLVED, that the By-Laws of Casino Magic Corp. (the "Corporation") are hereby
amended to add a By-Law 4.11, which will read as follows:
"BY-LAW 4.11 REMOVAL BY BOARD OF DIRECTORS. The Board of Directors may
------------------------------------------
remove as a member of the Board of Directors any person who has:
(i) been convicted of a felony, or indicted by a grand jury for
the commission of a felony, while nominated for or serving
as a member of the Board of Directors;
(ii) been convicted of a felony at any time, unless all relevant
facts and circumstances relating to such conviction were
disclosed in writing by such member to each member of the
Board of Directors at least 90 but not more than 180 days
prior to such member's initial nomination and election as a
member of the Board of Directors;
(iii) has been convicted of a gross misdemeanor involving moral
turpitude while nominated for or serving as a member of the
Board of Directors; or
(iv) has been found ineligible or otherwise unsuitable to serve
as a member of the Board of Directors by any governmental
authority which regulates gaming and has jurisdiction over
the operations or license application of, or license, permit
or franchise granted to, the Corporation or any subsidiary
thereof.
The authority to remove a member pursuant to this By-Law provision may be
exercised by a majority of the disinterested members of the board of
Directors. For the purpose of this By-Law provision, all members of the
Board of Directors, except for the member whose removal is being proposed,
shall be deemed to be disinterested."
RESOLVED FURTHER, that the Secretary of the Corporation is authorized and
directed to make the foregoing By-Law 4.11 a part of the Corporation's permanent
records.
-13-
<PAGE>
AMENDMENT OF BY-LAWS
OF
CASINO MAGIC CORP.
------------------
A MINNESOTA CORPORATION
Section 4.01 of the By-Laws of Casino Magic Corp., a Minnesota
corporation, was amended by resolution duly adopted by Written Consent of the
Sole Shareholder as of October 15, 1998 to read in its entirety as follows:
BY-LAW 4.01 Number, Election and Term. The Board of
--------------------------------------
Directors shall consist of one or more members. The
number of the members of the Board of Directors shall
be determined from time to time by the majority vote or
unanimous written consent of the shareholders as
providedby the Minnesota Business Corporation Act. A
director need not be a shareholder. Directors shall
be elected at each regular meeting of the shareholders,
and each director shall be elected to serve for an
indefinite term, terminating at the next regular meeting
of the shareholders and the election of a qualified
successor, or the earlier death, resignation, removal or
disqualification of such director.
Section 6.04 of the By-Laws of Casino Magic Corp., a Minnesota
corporation, was amended by resolution duly adopted by Written Consent of the
Sole Director as of October 15, 1998 to read in its entirety as follows:
BY-LAW 6.04 Chief Executive Officer. 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 active management of the business 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. The President shall see that all orders
and resolutions of the Board are carried into effect,
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
-14-
<PAGE>
may be prescribed by the Board of Directors or these By-
Laws. He shall sign and deliver in the name of the
Corporation any deeds, mortgages, bonds, contracts or
other instruments pertaining to the business of the
Corporation, except in cases in which the authority to
sign and deliver is required by law to be exercised by
another person or is delegated by the Board of Directors
to some other officer or agent of the Corporation.
-15-
<PAGE>
EXHIBIT 3.31
State of Minnesota
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
I, Joan Anderson Growe, Secretary of State of Minnesota, do certify that:
Articles of Incorporation, duly signed and acknowledged under oath, have been
filed on this date in the Office of the Secretary of State, for the
incorporation of the following corporation, under and in accordance with the
provisions of the chapter of Minnesota Statutes listed below.
This corporation is now legally organized under the laws of Minnesota.
Corporate Name: Casino Magic American Corp.
Corporate Charter Number: 8C-739
Chapter Formed Under: 302A
This certificate has been issued on 02/01/1994.
Joan Anderson Growe
--------------------------
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
CASINO MAGIC AMERICAN CORP.
The undersigned, being of full age, for the purpose of organizing a
corporation under Minnesota Statutes, Chapter 302A, and acts amendatory thereto,
does hereby adopt, sign and acknowledge the following Articles of Incorporation.
ARTICLE I
Name
----
The name of the corporation shall be "Casino Magic American Corp."
ARTICLE II
Registered Office
-----------------
The address of the corporation's registered office in the State of
Minnesota is 580 International Centre, 900 Second Avenue South, Minneapolis,
Minnesota 55402.
ARTICLE III
Authorized Shares
-----------------
The corporation shall have the authority to issue an aggregate of 1,000
shares, all of which shall be common voting shares having a par value of $0.01
per share.
The Board of Directors of the corporation may, from time to time, establish
by resolution different classes or series of shares ; and may fix the rights and
preferences of said shares in any class or series.
-1-
<PAGE>
ARTICLE IV
Incorporator
------------
The name and address of the sole incorporator of the corporation is James
W. Rude, Esq., Frommelt & Eide, Ltd., 580 International Centre, 900 Second
Avenue South, Minneapolis, Minnesota 55402.
ARTICLE V
Cumulative Voting
-----------------
No shareholder of the corporation shall have any right to cumulate votes
with respect to shares of the corporation in the election of members of the
Board of Directors of the corporation, or when voting on any other matter.
ARTICLE VI
Preemptive Rights
-----------------
No shareholder of the corporation, solely by reason of such status as a
shareholder, shall have any right to acquire any portion of the unissued shares
or other securities of the corporation, or any rights to purchase such shares or
other securities, which the corporation may from time to time offer or sell to
any person.
ARTICLE VII
Director Liability
------------------
No member of the Board of Directors of the corporation shall have personal
liability to the corporation or its shareholders for monetary damages for any
breach of fiduciary duty, except for the following:
(a) any breach of a director's duty of loyalty to the corporation
or its shareholders;
-2-
<PAGE>
(b) any act or omission not in good faith, or that involves
intentional misconduct or a knowing violation of law;
(c) any act prohibited under or regulated by Minnesota Statutes,
Section 302A.559 concerning illegal distributions, or by Minnesota
Statutes, Section 80A.23 concerning civil liabilities for securities
violations; or
(d) any transaction from which the director derives an improper
personal benefit.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of February,
1994.
/s/
-------------------------
James W. Rude
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
On this 1st day of February, 1994, before me, a Notary Public, personally
appeared James W. Rude to me personally known to be the person described in and
who executed the foregoing instrument, and he acknowledged that he executed the
same as his free act and deed.
Susan Nichols
---------------------------
Notary Public
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
FEB 01 1994
Joan Anderson Growe
Secretary of State
-3-
<PAGE>
EXHIBIT 3.32
BY-LAWS
OF
CASINO MAGIC AMERICAN CORP.
(A MINNESOTA CORPORATION)
ARTICLE I
DEFINITIONS
-----------
BY-LAW 1.01. The following words or phrases when used in these By-Laws, shall
- -----------
have the meanings set forth below:
a. "Articles of Incorporation" shall mean the Articles of
Incorporation of the Corporation.
b. "Board of Directors" shall mean the Board of Directors of the
Corporation.
c. "Corporation" shall mean Casino Magic Management Services Corp.
d. "Director" shall mean a member of the Board of Directors.
e. "Shares" shall mean the authorized shares of the Corporation as
identified in the Corporation's Articles of Incorporation.
f. "Shareholder" or "shareholders" shall mean a shareholder or the
shareholders of record of the Corporation.
g. "Statute" shall mean the applicable statute or statutes of the
Minnesota Business Corporation Act, being Chapter 270 of the 1981 Laws of
Minnesota.
h. "Voting Shares" shall mean the shares which entitle the record
owner to vote on matters relating to the affairs of the Corporation under
the Articles of Incorporation or by statute.
ARTICLE II
OFFICES, BOOKS AND RECORDS
--------------------------
BY-LAW 2.01 REGISTERED AND OTHER OFFICES. The registered office of the
- -------------------------------------------
Corporation in Minnesota shall be that most recently adopted either in the
Articles of Incorporation or any amendment thereto, or by the Board of Directors
in a statement filed with the Secretary of State of Minnesota establishing the
registered office in the manner prescribed by law. The Corporation may have
such other offices, within or without the State of Minnesota, as the Board of
Directors shall, from time to time, determine.
<PAGE>
BY-LAW 2.02 MAINTENANCE OF RECORDS. The original books and records of the
- -------------------------------------
Corporation, or copies thereof, shall be maintained at the principal executive
office of the Corporation. Certain records, statements and agreements, or
copies thereof, shall be available for examination by the shareholders on such
terms and conditions as the Board of Directors may from time to time impose,
consistent with statute.
ARTICLE III
SHAREHOLDERS' MEETING
---------------------
BY-LAW 3.01 PLACE. Meetings of the shareholders shall be held in the county
- --------------------
where the principal executive office of the Corporation is located; provided
that any meeting not called by or at the demand of a shareholder or shareholders
pursuant to statute, may be held at such other place as the chief executive
officer or the Board of Directors may designate.
BY-LAW 3.02 REGULAR MEETING. A regular meeting of the shareholders shall be
- -------------------------------
held during the third month following the end of the Corporation's fiscal year
for federal income tax purposes, on such date, and at such time and place, as
may be specified by the chief executive officer, unless some other date, time or
place is specified by the Board of Directors.
BY-LAW 3.03 SPECIAL MEETING. A special meeting of the shareholders may be
- -------------------------------
called for any purpose by the chief executive officer, the chief financial
officer, the Board of Directors, or a shareholder or shareholders holding at
least ten percent of the voting shares of the Corporation. A special meeting of
the shareholders shall be called by the Board of Directors on the demand,
pursuant to statute, of shareholders holding at least ten percent of the
outstanding voting shares of the Corporation. Business transacted at any
special meeting of the shareholders shall be confined to the purposes stated in
the notice of such meeting.
BY-LAW 3.04 NOTICE. Written notice of the place, date and time of any
- ----------------------
meeting of the shareholders shall be given to each shareholder entitled to vote
thereat by mailing said notice postage prepaid, to the shareholder's address of
record. Notice of a regular meeting of the shareholders shall be given at least
ten days before the meeting. Notice of a special meeting shall be given at
least five days before the meeting. No notice of any meeting of the
shareholders may be mailed more than sixty days before such meeting. The notice
of any special meeting shall set forth the purposes of the meeting and, in a
general nature, the business to be transacted. In determining the number of
days of notice required under this By-Law, the date upon which any notice is
deposited in the U.S. Mail shall be included as one day and the date of the
meeting which is the subject of the notice shall not be included.
BY-LAW 3.05 WAIVER OF NOTICE; CONSENT MEETINGS. Notice of the time, place
- --------------------------------------------------
and purpose of any meeting of the shareholders may be waived by any shareholder
before, at, or after any such meeting. Any action which may be taken at a
meeting of the shareholders may be taken without a meeting if authorized by a
writing signed by all shareholders who would be entitled to a notice of meeting
for such purpose. Attendance at a meeting of the shareholders is a waiver of
the notice of that meeting, unless at the beginning of that meeting a
shareholder objects that the meeting is not lawfully called or convened, or
unless prior to the vote on any item of business, a shareholder objects that the
item may not be lawfully
-2-
<PAGE>
considered at that meeting and such shareholder does not participate in the
consideration of that item at that meeting.
BY-LAW 3.06 QUORUM; ADJOURNMENT. The presence at any meeting, in person or
- ----------------------------------
by proxy, of the shareholders owning at least twenty five percent of the
outstanding voting shares shall constitute a quorum for the transaction of
business. Once a quorum is established at any meeting of the shareholders, the
voluntary withdrawal of any shareholder from the meeting shall not affect the
authority of the remaining shareholders to conduct any business which properly
comes before the meeting. In the absence of a quorum, those present may adjourn
the meeting from day to day or time to time without further notice other than
announcement at such meeting of such date, time and place of the adjourned
meeting. At an adjourned meeting of the shareholders at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally noticed.
BY-LAW 3.07 VOTING: RECORD DATE. At each meeting of the shareholders, each
- -----------------------------------
shareholder entitled to vote thereat may vote in person or by proxy duly
appointed by an instrument in writing subscribed by such shareholder. At a
meeting of the shareholders, each shareholder shall have one vote for each
voting share standing in such shareholder's name on the books of the
Corporation, or on the books of any transfer agent appointed by the Corporation,
on the record date established by the Board of Directors, which date may not be
more than sixty days from the date of any such meeting. If no record date has
been established, the record date shall be as of the close of business on the
date of the original notice of the meeting of the shareholders, or the date
immediately preceding the date such notice is mailed to the shareholders,
whichever is earlier. Upon the demand of any shareholder at the meeting, the
vote for directors, or the vote upon any question before the meeting, shall be
by written ballot. All elections shall be effected, and all questions shall be
decided, by shareholders owning a majority of the shares present in person and
by proxy, except as otherwise specifically provided for by statute or by
Articles of Incorporation.
BY-LAW 3.08 PRESIDING OFFICER. The chief executive officer of the
- ---------------------------------
Corporation or any person so designated by the chief executive officer shall
preside as chairman over all meetings of the shareholders; provided, however,
that in the absence of the chief executive officer or his designee at any
meeting of the shareholders, the meeting shall choose any person present to act
as the presiding officer of the meeting.
BY-LAW 3.09 CONDUCT OF MEETINGS OF SHAREHOLDERS. Subject to the following,
- ---------------------------------------------------
meetings of shareholders generally shall follow accepted rules of parliamentary
procedure:
a. The chairman of the meeting shall have absolute authority over
matters of procedure and there shall be no appeal from the ruling of the
chairman. If the chairman, in his absolute discretion, deems it advisable
to dispense with the rules of parliamentary procedure as to any one meeting
of shareholders or part thereof, the chairman shall so state and shall
clearly state the rules under which the meeting or appropriate part thereof
shall be conducted.
b. If disorder should arise which prevents continuation of the
legitimate business of the meeting, the chairman may quit the chair and
announce the
-3-
<PAGE>
adjournment of the meeting; and upon his so doing, the meeting is
immediately adjourned.
c. The chairman may ask or require that anyone leave the meeting who
is not a bona fide shareholder of record entitled to notice of the meeting,
or a duly appointed proxy thereof.
BY-LAW 3.10 INSPECTORS OF ELECTION. The Board of Directors in advance of any
- --------------------------------------
meeting of shareholders may appoint one or more inspectors to act at such
meeting or adjournment thereof. If inspectors of election are not so appointed,
the person acting as chairman of any such meeting may, and on the request of any
shareholder or his or her proxy shall, make such appointment. In case any
person appointed as inspector shall fail to appear to act, the vacancy may be
filled by appointment made by the Board of Directors in advance of the meeting,
or at the meeting by the officer or person acting as chairman. The inspectors
of election shall determine the number of shares outstanding, the voting power
of each, the shares represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, and shall receive votes, ballots,
assents or consents, hear and determine all challenges and questions in any way
arising and announce the result, and do such acts as may be proper to conduct
the election or vote with fairness to all shareholders. No inspector whether
appointed by the Board of Directors or by the officer or person acting as
chairman need be a shareholder.
ARTICLE IV
BOARD OF DIRECTORS
------------------
BY-LAW 4.01 NUMBER, ELECTION AND TERM. The Board of Directors shall consist
- -----------------------------------------
of one or more members. The number of the members of the Board of Directors to
be elected at any meeting of the shareholders shall be determined from time to
time by the Board of Directors and, if the Board of Directors does not expressly
fix the number of directors to be so elected, then the number of directors shall
be the number of directors elected at the preceding regular meeting of
shareholders. The number of directors may be increased at any subsequent
special meeting of shareholders called for the election of additional directors,
by the number so elected. A director need not be a shareholder. Directors
shall be elected at each regular meeting of the shareholders. Each director
shall be elected to serve for an indefinite term, terminating at the next
regular meeting of the shareholders and the election of a qualified successor by
the shareholders, or the earlier death, resignation, removal or disqualification
of such director.
BY-LAW 4.02 REGULAR MEETINGS. Unless otherwise specified by the directors,
- --------------------------------
the regular meeting of the Board of Directors shall be held at the place of, and
immediately following the adjournment of, the regular meeting of the
shareholders. At such meeting of the Board of Directors, the Board of Directors
shall elect such officers as are deemed necessary for the operation and
management of the Corporation, and transact such other business as may properly
come before it.
BY-LAW 4.03 SPECIAL MEETINGS. Special meetings of the Board of Directors may
- --------------------------------
be called by the chief executive officer, the President or any director at any
time, to be held at the principal executive office of the Corporation, or at
some other location which is either
-4-
<PAGE>
within 50 miles of the principal executive offices of the Corporation,
determined at any prior meeting of the Board of Directors, or agreed to by a
majority of the members of the Board of Directors.
BY-LAW 4.04 NOTICE. Notice of the date, time and place of meetings of the
- ----------------------
Board of Directors shall be given to each director personally or by telegraph
dispatched at least two days prior to the meeting, or shall be given by mail
dispatched at least four days prior to the meeting. In determining the number
of days of notice required under this By-Law, the date upon which any such
notice is delivered, deposited in the U.S. Mail, or telegraphed, shall be
included as one day, and the date of the meeting which in the subject of the
notice shall not be included. In the case of meetings held by voice
communication as provided in By-Law 4.05 below, such notice shall set forth the
specific manner in which the meeting is to be held. Any director may, before,
at, or after a meeting of the Board of Directors, waive notice thereof. Any
director who attends a meeting shall be deemed to have waived notice of the
meeting, unless such director objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called and does not
participate in the meeting. Unless otherwise provided by the Board of
Directors, the provisions of this By-Law shall apply in all respects to the
notice requirements of meetings of any committee established by the Board of
Directors.
BY-LAW 4.05 TELEPHONE AND CONSENT MEETINGS. Participation in any meeting of
- ----------------------------------------------
the Board of Directors or of any committee established by the Board of Directors
by conference telephone or other similar means of communication, whereby all
persons participating in the meeting can simultaneously and continuously hear
each other, shall constitute presence in person at that meeting. Any action
which might be taken at a meeting of the Board of Directors or any committee
established by the Board of Directors may be taken without a meeting if done in
writing, signed by all members of the Board of Directors or such committee, as
the case may be.
BY-LAW 4.06 QUORUM/VOTING. At all meetings of the Board of Directors or of
- -----------------------------
any committee established by the Board of Directors, a majority of the members
must be present to constitute a quorum for the transaction of business. Each
member shall have one vote. Voting by proxy, or the establishment of a quorum
by proxy, is prohibited. The act of the majority of the members present at any
meeting at which there is a quorum shall be the act of the Board of Directors or
such committee, as the case may be. In the absence of a quorum, a majority at
those present may adjourn the meeting from day to day or time to time without
notice other than announcement at such meeting of the date, time and place of
the adjourned meeting.
BY-LAW 4.07 ORDER OF BUSINESS/RECORD. The Board of Directors, or any
- ----------------------------------------
committee established by the Board of Directors, may, from time to time,
determine the order of the business at any meeting thereof. If a Secretary of
the Corporation has been elected by the Board of Directors, such Secretary shall
keep a record of all proceedings at a meeting of the Board of Directors;
otherwise, a Secretary Pro-Tem, chosen by the person presiding over the meeting
as chairman, shall so act.
BY-LAW 4.08 VACANCY. A vacancy in membership of the Board of Directors shall
- -----------------------
be filled by the affirmative vote of the remaining members of the Board of
Directors, though
-5-
<PAGE>
less than a quorum, and a member so elected shall serve until his successor is
elected by the shareholders at their next regular meeting, or at a special
meeting duly called for that purpose.
BY-LAW 4.09 COMMITTEES. The directors may, by resolution adopted by a
- --------------------------
majority of the members of the Board of Directors, designate one or more persons
to constitute a committee which, to the extent provided in such resolution,
shall have and exercise the authority of the Board of Directors in the
management of the business of the Corporation. Any such committee shall act
only in the interval between meetings of the Board of Directors and shall be
subject at all times to the control and direction of the Board of Directors.
Unless otherwise provided by the Board of Directors, a meeting of any committee
established by the Board of Directors may be called by any member thereof.
BY-LAW 4.10 OTHER POWERS. In addition to the powers and authorities
- ----------------------------
conferred upon them by By-Laws, the Board of Directors shall have the power to
do all acts necessary and expedient to the conduct of the business of the
Corporation which are not conferred upon the shareholders by statute, these By-
Laws, or the Articles of Incorporation.
ARTICLE V
SHARES
------
BY-LAW 5.01 ISSUANCE OF SECURITIES. The Board of Directors is authorized to
- --------------------------------------
issue securities of the Corporation, and rights thereto, to the full extent
authorized by the Articles of Incorporation, in such amounts, at such times and
to such persons as may be determined by the Board of Directors and permitted by
law, subject to any limitations specified in these By-Laws.
BY-LAW 5.02 CERTIFICATES FOR SHARES. Every shareholder shall be entitled to
- ---------------------------------------
a certificate, to be in such form as prescribed by law and adopted by the Board
of Directors, evidencing the number of shares of the Corporation owned by such
shareholder. The certificates shall be signed by the chief executive officer;
provided that if a transfer agent has been appointed for the Corporation's
shares, such signature may be a facsimile.
BY-LAW 5.03 TRANSFER OF SHARES. Subject to any applicable or reasonable
- ----------------------------------
restrictions which may be imposed by the Board of Directors, shares of the
corporation shall be transferred upon written demand of the shareholder named in
the certificate, or the shareholder's legal representative, or the shareholder's
duly authorized attorney-in-fact, accompanied by a tender of the certificates to
be transferred properly endorsed, and payment of all transfer taxes due thereon,
if any. The Corporation may treat, as the absolute owner of shares of the
Corporation, the person or persons in whose name or names the shares are
registered on the books of the Corporation.
BY-LAW 5.04 LOST CERTIFICATE. Any shareholder claiming a certificate
- --------------------------------
evidencing ownership of shares to be lost, stolen or destroyed shall make an
affidavit or affirmation of that fact in such form as the Board of Directors may
require, and shall, if the Board of Directors so require, give the Corporation
(and its transfer agent, if a transfer agent be appointed) a bond of indemnity
in such form with one or more sureties satisfactory to the Board of Directors,
in such amount as the Board of Directors may require, whereupon a new
-6-
<PAGE>
certificate may be issued of the same tenor and for the same number of shares as
the one alleged to have been lost, stolen or destroyed.
ARTICLE VI
OFFICERS
--------
BY-LAW 6.01 ELECTION OF OFFICERS. The Board of Directors, at its regular
- ------------------------------------
meeting held after each regular meeting of shareholders shall, and at any
special meeting may, elect a Chief Executive Officer and a Chief Financial
Officer. Except as may otherwise be determined from time to time by the Board
of Directors, such officers shall exercise such powers and perform such duties
as are prescribed by these By-Laws. The Board of Directors may elect such other
officers and agents as it shall deem necessary from time to time, including
Executive Vice Presidents, Vice Presidents, Secretary, Treasurer and a Chairman
of the Board who shall exercise such powers and perform such duties, not in
conflict with the duties of officers designated in these By-Laws, as shall be
determined from time to time by the Board of Directors.
BY-LAW 6.02 TERMS OF OFFICE. The officers of the Corporation shall hold
- -------------------------------
office until their successors are elected and qualified, notwithstanding an
earlier termination of their office as directors. Any officer elected by the
Board of Directors may be removed with or without cause by the affirmative vote
of a majority of the Board of Directors present at a meeting.
BY-LAW 6.03 SALARIES. The salaries of all officers of the Corporation shall
- ------------------------
be determined by the Board of Directors.
BY-LAW 6.04 CHIEF EXECUTIVE OFFICER. The President shall be the chief
- ---------------------------------------
executive officer of the Corporation, unless the Board of Directors shall elect
a Chairman of the Board, and designate such Chairman as the Chief Executive
Officer, in which case the Chairman of the Board shall be the chief executive
officer. The chief executive officer shall;
a. have general active management of the business of the
Corporation;
b. when present, and except where the Board of Directors elects a
Chairman of the Board, preside at all meetings of the Board of Directors
and of the shareholders;
c. see that all orders and resolutions of the Board of Directors are
carried into effect;
d. sign and deliver in the name of the Corporation any deeds,
mortgages, bonds, contracts or other instruments pertaining to the business
of the Corporation, except in cases in which the authority to sign and
deliver is required by law to be exercised by another person or is
expressly delegated by the Articles of Incorporation or these By-Laws or by
the Board of Directors to some other officer or agent of the Corporation;
e. maintain records of and, whenever necessary, certify all
proceedings of the Board of Directors and the shareholders; and
-7-
<PAGE>
f. perform other duties prescribed by the Board of Directors.
BY-LAW 6.05 CHIEF FINANCIAL OFFICER. The Treasurer shall be the chief
- ---------------------------------------
financial officer of the Corporation, and as such shall:
a. keep accurate financial records for the Corporation;
b. deposit all money, drafts, and checks in the name of and to the
credit of the Corporation in the banks and depositories designated by the
Board of Directors;
c. endorse for deposit all notes, checks, and drafts received by the
Corporation as ordered by the Board of Directors, making proper vouchers
therefor;
d. disburse funds of the Corporation, and issue checks and drafts in
the name of the Corporation, as ordered by the Board of Directors;
e. render to the chief executive officer and the Board of Directors,
whenever requested, an account of all transactions by the Treasurer and of
the financial condition of the Corporation; and
f. perform other duties prescribed by the Board of Directors or by
the chief executive officer, under whose supervision the Treasurer shall
be.
BY-LAW 6.06 SECRETARY. The Secretary, if elected, shall:
- -------------------------
a. attend all meetings of the Board of Directors at the request of
the chief executive officer or the Board of Directors, and shall attend all
meetings of the shareholders and record all votes and the minutes of all
proceedings in a book kept for that purpose; and shall perform like duties
for a committee when required by the chief executive officer; and
b. perform other duties prescribed by the Board of Directors or by
the chief executive officer, under whose supervision the Secretary shall
be.
BY-LAW 6.07 DELEGATION OF AUTHORITY. Except where prohibited or limited by
- ---------------------------------------
the Board of Directors, an officer elected by the Board of Directors may
delegate some or all of the duties or powers of his or her office to another
person, provided that such delegation is in writing, and a copy of such written
delegation, identifying the person to whom those duties or powers are delegated,
and specifying the nature, extent and any limitations of the duties or powers
delegated, is delivered in the same manner as provided for notices of meetings
of the Board of Directors to all members of the Board of Directors prior to such
delegation becoming effective.
ARTICLE VII
MISCELLANEOUS
-------------
BY-LAW 7.01 CORPORATE SEAL. If so directed by the Board of Directors, the
- ------------------------------
Corporation may use a corporate seal. The failure to use such seal, however,
shall not affect the validity
-8-
<PAGE>
of any documents executed on behalf of the Corporation. The seal need only
include the word "seal," but it may also include, at the discretion of the Board
of Directors, such additional wording as is permitted by the statute.
BY-LAW 7.02 REIMBURSEMENT BY DIRECTORS AND OFFICERS. Any payments made to
- -------------------------------------------------------
any officer or director of this Corporation, such as salary, commission, bonus,
interest, or rent, or entertainment expenses 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 or director to the Corporation to
the full extent of such disallowance. It shall be the duty of the Board of
Directors to enforce payment of each said amount disallowed. In lieu of payment
by the officer or director, subject to the determination of the Board of
Directors, proportionate amounts may be withheld from his future compensation
payments until the amount owed to the Corporation has been recovered.
BY-LAW 7.03 AMENDMENTS TO BY-LAWS. These By-Laws may be amended or altered
- -------------------------------------
by the vote of a majority of all of the members of the Board of Directors at any
meeting. Such authority of the Board of Directors is subject to the power of
the shareholders to adopt, amend or repeal By-Laws adopted, amended or repealed
by the Board of Directors, pursuant to statute at any regular or special meeting
called for that purpose.
The foregoing By-Laws of this Corporation were adopted by the Board of
Directors on the ____ day of ________________, 1993.
/s/ Marlin F. Torguson
---------------------------------------
Marlin F. Torguson
Chief Executive Officer
-9-
<PAGE>
EXHIBIT 3.33
STATE OF MISSISSIPPI
SECRETARY OF STATE
DICK MOLPUS
================================================================================
- --------------------------------------------------------------------------------
Mississippi Corporation Information System
Corporation Name
BILOXI CASINO CORP.
Corp ID: 0586827
Filed: 08/27/1992 at 8:00 A.M.
Dick Molpus
Secretary of State
Filing Fee Receipt: $50.00
Secretary of State
P.O. Box 136
Jackson, MS 39205
(601) 359-1333
- --------------------------------------------------------------------------------
================================================================================
401 MISSISSIPPI STREET. P.O. BOX 136. JACKSON, MS 39205
TELEPHONE (601) 359-1350
<PAGE>
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:
Biloxi Casino Corp.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2. Domicile address is: 1900 - 24/th/ Avenue
-------------------------------------------------------
STREET
Gulfport, Mississippi 39501
----------------------------------------------------------------------------
CITY/STATE/ZIP
3. FOR NON-PROFITS ONLY: 99 years or
----------------------- ------------------------
4. (a) The number (and classes, if any) of shares the corporation is
authorized is issue is (are) as follows: (THIS IS FOR PROFIT ONLY):
Classes(es) No. of Shares Authorized
----------- ------------------------
Common 10,000
------------------------ --------------------------------
(one class only)
------------------------ --------------------------------
------------------------ --------------------------------
4. (b) If more than one (1) class of shares is authorized, the preferences,
limitations, and relative rights of each class are as follows:
5. The street address of its initial registered office is:
1900 - 24/th/ Avenue
----------------------------------------------------------------------------
STREET
Gulfport, Mississippi 39501
----------------------------------------------------------------------------
CITY/STATE/ZIP
and the name of its initial registered agent at such address is:
Virgil G. Gillespie
----------------------------------------------------------------------------
6. The name and complete address of each incorporator is as follows (PLEASE
TYPE OR PRINT):
Virgil G. Gillespie
----------------------------------------------------------------------------
1900 - 24/th/ Avenue, Gulfport, Mississippi 39501
----------------------------------------------------------------------------
NAME/STREET ADDRESS/CITY/STATE/ZIP
7. Other provisions: Shareholders have preemptive right to acquire a
----------------------------------------------------------
proportionate share of any additional stock issued or sale of treasury
----------------------------------------------------------------------------
stock, based upon the pro rata share of stock of any given stockholder, as
----------------------------------------------------------------------------
his shares bear to the total amount of stock issued.
----------------------------------------------------------------------------
/s/ Virgil G. Gillespie
----------------------------------
Virgil G. Gillespie
----------------------------------
INCORPORATORS (SIGNATURES)
-2-
<PAGE>
March 13, 1992
Secretary Of State
P.O. Box 136
Jackson, Mississippi 39205
RE: ARTICLES OF INCORPORATION
BILOXI CASINO CORP.
Dear Sir:
I enclose herewith duplicate originals of Articles of Incorporation for
Biloxi Casino Corp., which I would thank you to file and return to me. Also
enclosed is my check for $50.00 as a filing fee.
Yours very truly,
/s/ Virgil G. Gillespie
Virgil G Gillespie
VGG/jpc
Enclosures
-3-
<PAGE>
EXHIBIT 3.34
BY-LAWS
OF
BILOXI CASINO CORP.
ARTICLE I
---------
NAME AND LOCATION
-----------------
SECTION 1. The name of the corporation is BILOXI CASINO CORP. Business
----------
will be conducted under the name of BILOXI CASINO CORP.
SECTION 2. The initial registered office shall be located at 1900 24th
----------
Avenue, Gulfport, Mississippi, 39501. The Corporation may have other offices,
including its principal office, at other locations. An annual Shareholders
meeting will be held at the principal office unless otherwise designated in the
Notice of the Meeting or in Waiver of such Notice.
ARTICLE II
----------
SHAREHOLDERS
------------
SECTION 1. The annual meeting of the Shareholders shall be held at 10:00
----------
a.m. on the first Monday of January of each year at the principal office of the
corporation, or at such other place as may be designated in the Notice of the
Meeting or Waiver of Notice thereof. At such meeting, the Shareholders shall
elect directors to serve until their successors shall be elected and qualified.
SECTION 2. Special meetings of Shareholders may be held at such place as
----------
may be designated in the call thereof by consent in writing of all Shareholders,
or by demand signed by the holders of at least ten percent (10%) of the stock.
Special meetings of
<PAGE>
the Shareholders may also be called by resolution of the Board of Directors at a
duly held meeting of said Board of Directors.
SECTION 3. Notice of the time and place of all annual and special meetings
----------
shall be mailed or personally delivered by the Secretary to each Shareholder no
fewer than ten (10) days but not more than sixty (60) days before the date
thereof, unless Waiver of said Notice and Call is given.
SECTION 4. The President of the corporation shall preside at all
----------
shareholders' meetings.
SECTION 5. At every such meeting each Shareholder shall be entitled to
----------
cast one (1) vote for each share of stock held in his name, either in person or
by written proxy. All proxies shall be filed with the Secretary and by him/her
entered of record in the Minutes of the meeting. In voting for Directors of the
corporation, each Shareholder shall be authorized to cumulate his vote in
accordance with the laws of the State of Mississippi.
SECTION 6. A quorum for the transaction of business shall consist of a
----------
number of shares, present personally or by proxy, representing the majority of
shares of stock issued and outstanding.
SECTION 7. Official Shareholders action may be taken in the absence of
----------
annual, special, or any other duly called meeting, where said action is taken by
consent in writing of the Shareholders themselves representing One Hundred
percent (100%) of the shares of stock issued and outstanding.
-2-
<PAGE>
ARTICLE III
-----------
DIRECTORS
---------
SECTION 1. The business and property of the corporation shall be managed
----------
by a Board of one or more Directors, who shall be elected by the Shareholders at
their annual meeting, except that vacancies on the Board of Directors may be
filled by an election at a duly constituted meeting of the Board of Directors
and Directors so elected shall serve the remaining portion of the term of the
former Director. A Director need not be a Shareholder. Each year at the annual
meeting of Shareholders, the Shareholders shall establish the size of the Board
of Directors and thus fix the number of Directors to be elected. If not
established at such annual meeting the size of the Board shall remain as
theretofore constituted. The initial number of Directors shall be one.
SECTION 2. All Directors shall hold office for one (1) year and until
----------
their successors are duly elected and qualified.
SECTION 3. The regular meeting of the Directors shall be held at the
----------
principal office of the corporation at 1900 24th Avenue, Gulfport, MS 39501, or
at such place as may be designated in the written Notice of the Meeting, or in
the Waiver of Notice thereof, immediately after the adjournment of each annual
Shareholder's meeting.
SECTION 4. Special meetings of the Board of Directors may be held at the
----------
same place or places as provided for the annual meeting thereof, and may be
called by the President or by consent of all Directors, or at the request of any
Director and on Notice in writing at least five (5) days prior to such meeting
to the other Directors.
-3-
<PAGE>
SECTION 5. A quorum for the transaction of business at any meeting of the
----------
Directors shall consist of a majority of the Board as established by the
Shareholders. If there are two Directors, the quorum shall consist of one.
SECTION 6. The Directors shall elect the officers of the Corporation and
----------
fix their salaries, such election being at the Director's meeting following each
annual Shareholder's meeting.
ARTICLE IV
----------
OFFICERS
--------
SECTION 1. The officers of this corporation shall be a President and a
----------
Secretary/Treasurer, who shall be elected for the term of one (1) year by the
Board of Directors and shall hold office until their successors are duly elected
and qualified. The same individual may simultaneously hold more than one
office. One or more Vice Presidents may be elected. It shall not be necessary
to elect a Vice President.
SECTION 2. The President shall preside at all Shareholders' meetings;
----------
shall have supervision of the affairs of the corporation and officers; and shall
sign all Share Certificates and written contracts of the corporation. He/She
shall have general charge of executing contracts and of conducting the affairs
of the corporation; shall have custody of the personal property, machinery, and
equipment of the corporation; and shall perform all other duties such as are
incident to this office.
SECTION 3. A Vice President shall serve as President in his/her absence
----------
and shall under such circumstances shall have and fulfill all of the rights and
duties of said President.
-4-
<PAGE>
SECTION 4. The Secretary/Treasurer shall issue notices of all Directors
----------
and Shareholders' meetings and shall keep the Minutes thereof; shall have charge
of all corporate books, records, and papers; shall be custodian of the corporate
seal; shall attest with his/her signature and impress with the corporate seal
all Share Certificates and written contracts of the corporation; and shall
perform such other duties as may be assigned to said office.
ARTICLE V
---------
DIVIDENDS AND FINANCE
---------------------
SECTION 1. Dividends, to be paid out of the surplus earnings of the
----------
Corporation, may be declared from time to time by resolution of the Board of
Directors, but no dividend shall be paid that will impair the capital of the
Corporation.
SECTION 2. The funds of the Corporation shall be deposited in such
----------
manner as the Directors shall designate.
SECTION 3. The fiscal year of the Corporation shall commence on January
----------
1st of each year.
ARTICLE VI
----------
AMENDMENTS
----------
SECTION 1. These By-Laws may be amended by a majority vote of the Board of
----------
Directors at any regular meeting or special meeting of the Board of Directors or
by consent action in writing of all members of the Board of Directors of the
Corporation.
ARTICLE VII
-----------
SECTION 1. The Corporation has the authority to enter into restrictive
----------
agreements with Shareholders regarding the sale and exchange of corporate
shares, provided
-5-
<PAGE>
that such agreement has been approved by One Hundred per cent (100%) of the
Shareholders.
SECTION 2. The Corporation, by its president, may execute the necessary
----------
Internal Revenue Service Forms to be taxed by it as an S Corporation (under
Section 1362 of the Internal Revenue Code), provided that such action is
approved by the Board of Directors and ratified by One Hundred per cent (100%)
of the Shareholders.
APPROVED BY THE STOCKHOLDER ON THE 4th DAY OF APRIL, 1992.
----
/s/ Marlin F. Torguson
------------------------------
MARLIN F. TORGUSON
-6-
<PAGE>
EXHIBIT 3.35
STATE OF MISSISSIPPI
Office of the Secretary of State
Dick Molpus, Secretary of State
Jackson, Mississippi
MISSISSIPPI CORPORATION INFORMATION SYSTEM
Corporation Name
CASINO MAGIC FINANCE CORP.
Corp. ID: 0600353
Filed: 09/03/1993 AT 8:00 A.M.
Dick Molpus
Secretary of State
Filing Fee Receipt: $50.00
Secretary of State
P.O. Box 136
Jackson, MS 39205
(601) 359-1333
<PAGE>
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:
CASINO MAGIC FINANCE CORP.
_______________________________________________________________
2. Domicile address is:
1719 BEACH BOULEVARD-SUITE 306
_______________________________________________________________
Street
BILOXI, MISSISSIPPI 39531
_______________________________________________________________
City/State/County/Zip
3. The period of 99 YEARS duration is (NONPROFIT ONLY may be perpetual)
4. (a) The number (and classes, if any) of shares the corporation is is(are)as
authorized to issue follows (THIS IS FOR PROFIT ONLY)
Class(es) No. of Shares Authorized
--------- ------------------------
Common 10,000
______________ ________________________
______________ ________________________
______________ ________________________
4. (b) If more than one (1) class of shares is authorized, the preferences,
limitations, and relative rights class are as follows:
5. The street address of its initial registered office is:
1719 BEACH BOULEVARD SUITE 306
_____________________________________________________________
Street
BILOXI, MISSISSIPPI 39531
_____________________________________________________________
CITY/STATE/ZIP
and the name of its initial registered agent at such address is:
VIRGIL G. GILLESPIE
6. The name and complete address of each incorporator is as follows (PLEASE
TYPE OR PRINT)
VIRGIL G. GILLESPIE
____________________________________________________________
1719 BEACH BOULEVARD SUITE 306
BILOXI, MISSISSIPPI 39531
<PAGE>
7. Other provisions: Shareholders have preemptive right to acquire a
proportionate share of any additional stock issued or sale of treasury
stock, based upon the pro rata share of stock of any given stockholder, as
his shares bear to the total of stock issued.
/s/ Virgil G. Gillespie
------------------------------
VIRGIL G. GILLESPIE
__________________________
Incorporators Signatures
<PAGE>
DATE
Secretary of State
P.O. Box 136
Jackson, MS 39205-0136
RE: ARTICLES OF INCORPORATION
CASINO MAGIC FINANCE CORP.
Dear Sir:
I enclose herewith duplicate originals of Articles of Incorporation for CASINO
MAGIC FINANCE CORP., which I would thank you to file and return to me.
Also enclosed is a check for $50.00 as a filing fee.
Thanking you for your attention to this matter, I am,
Yours very truly,
GILLESPIE & BLESSEY
/s/ Virgil G. Gillespie
VIRGIL G. GILLESPIE
VGG/jpc
Enclosures:
<PAGE>
EXHIBIT 3.36
BY-LAWS
OF
CASINO MAGIC FINANCE CORP.
ARTICLE I.
----------
NAME AND LOCATION
-----------------
SECTION 1. The name of the Corporation is CASINO MAGIC FINANCE CORP.
----------
Business will be conducted under the name of CASINO MAGIC FINANCE CORP.
SECTION 2. The initial registered office shall be located at 1719 Beach
----------
Boulevard, Suite 306, Biloxi, Mississippi, 39531. The business office of the
Corporation shall be 711 Casino Magic Drive, Bay St. Louis, Mississippi, 39520.
The Corporation may have other offices, including its principal office, at other
locations. An annual Shareholders meeting will be held at the principal office
unless otherwise designated in the Notice of the Meeting or in Waiver of such
Notice.
ARTICLE II.
-----------
SHAREHOLDERS
------------
SECTION 1. The annual meeting of the Shareholders shall be held at 10:00
----------
a.m. on the second Monday of January of each year at the principal office of the
corporation, or at such other place as may be designated in the Notice of the
Meeting or Waiver of Notice thereof. At such meeting the Shareholders shall
elect directors to serve until their successors shall be elected and qualified.
<PAGE>
SECTION 2. Special meetings of Shareholders may be held at such place as
----------
may be designated in the call thereof by consent in writing of all Shareholders,
or by demand signed by the holders of at least ten percent of the stock. Special
meetings of the Shareholders may also be called by resolution of the Board of
Directors at a duly held meeting of said Board of Directors.
SECTION 3. Notice of the time and place of all annual and special meetings
----------
shall be mailed or personally delivered by the Secretary to each Shareholder no
fewer than ten days but not more than sixty days before the date thereof, unless
Waiver of said Notice and Call is given.
SECTION 4. The President of the Corporation shall preside at all
----------
Shareholders' meetings.
SECTION 5. At every such meeting each Shareholder shall be entitled to
----------
cast one vote for each share of stock held in his name, either in person or by
written proxy. All proxies shall be filed with the Secretary and entered of
record in the minutes of the meeting. In voting for Directors of the
Corporation, each Shareholder shall be authorized to cumulate his vote in
accordance with the laws of the State of Mississippi.
SECTION 6. A quorum for the transaction of business shall consist of a
----------
number of shares, present personally or by proxy, representing the majority of
shares of voting stock issued and outstanding.
SECTION 7. Any action of the Shareholders may be taken in the absence of
----------
annual, special or any other duly called meeting, where said action is taken by
consent in writing by all holders of the Corporation's issued and outstanding
voting stock.
<PAGE>
ARTICLE III.
------------
DIRECTORS
---------
SECTION 1. The business and property of the Corporation shall be managed
----------
by a Board of one or more Directors, who shall be elected by the Shareholders at
their annual meeting, except that vacancies on the Board of Directors may be
filled by an election at a duly constituted meeting of the Board of Directors
and Directors so elected shall serve the remaining portion of the term of the
former Director. A Director need not be a Shareholder. Each year at the annual
meeting of Shareholders, the Shareholders shall establish the size of the Board
of Directors and thus fix the number of Directors to be elected. If not
established at such annual meeting the size of the Board shall remain as
theretofore constituted. The initial number of Directors shall be five.
SECTION 2. All Directors shall hold office for one year and until their
----------
successors are duly elected and qualified.
SECTION 3. The regular meeting of the Directors shall be held at the
----------
office of the Corporation at 711 Casino Magic Drive, Bay St. Louis, Mississippi,
39520, or at such place as may be designated in the written Notice of the
Meeting, or in the Waiver of Notice thereof, immediately after the adjournment
of each annual Shareholder's meeting.
SECTION 4. Special meetings of the Board of Directors may be held at the
----------
same place or places as provided for the annual meeting thereof, and may be
called by the President or at the request of any Director on Notice in writing
at least five days prior to such meeting to the other Directors.
<PAGE>
SECTION 5. A quorum for the transaction of business at any meeting of the
----------
Directors shall consist of a majority of the Board as established by the
Shareholders. If there are two Directors, the quorum shall consist of one.
SECTION 6. The Directors shall elect the officers of the corporation and
----------
fix their salaries, such election being at the Director's meeting following each
annual Shareholder's meeting.
SECTION 7. At regular or special meetings of the Board of Directors, any
----------
one or more of the Directors may attend any such meeting via telephone, the same
as if the Director were personally present at the meeting. Any waiver of notice
of any such meeting may be signed and delivered by facsimile.
ARTICLE IV.
-----------
OFFICERS
--------
SECTION 1. The officers of this Corporation shall be a President and CEO,
----------
an Executive Vice President, and a Treasurer, who shall be elected for the term
of one year by the Board of Directors and shall hold office until their
successors are duly elected and qualified. The same individual may
simultaneously hold more than one office. One or more Vice Presidents may be
elected. It shall not be necessary to elect a Vice President or a Secretary, but
such offices may be filled by election at a regular or special meeting of the
Board of Directors.
SECTION 2. The President shall preside at all Shareholders' meetings;
----------
shall have supervision of the affairs of the Corporation and officers; and shall
sign all Share Certificates and written contracts of the Corporation. The
President shall have general
<PAGE>
charge of executing contracts and of conducting the affairs of the Corporation;
shall have custody of the personal property, machinery, and equipment of the
Corporation; and shall perform all other duties such as are incident to this
office.
SECTION 3. The Executive Vice President shall serve as President in the
----------
President's absence and under such circumstances shall have and fulfill all of
the rights and duties of said President.
SECTION 4. If elected by the Board of Directors, the Secretary shall issue
----------
notices of all duly called meetings of the Board of Directors and Shareholders,
and shall keep the Minutes thereof; shall have charge of all corporate books,
records and papers; and shall perform such other duties as may be assigned to
said office. If no secretary is elected any other officer may perform such
duties.
ARTICLE V.
----------
DIVIDENDS AND PIWANCE
---------------------
SECTION 1. Dividends, to be paid out of the surplus earnings of the
----------
Corporation, may be declared from time to time by resolution of the Board of
Directors, but no dividend shall be paid that will impair the capital of the
Corporation.
SECTION 2. The funds of the Corporation shall be deposited in such manner
----------
as the Directors shall designate.
SECTION 3. The fiscal year of the Corporation shall commence on January
----------
1st of each year.
<PAGE>
ARTICLE VI.
-----------
AMENDMENTS
----------
SECTION 1. These By-Laws may be amended by a majority vote of the Board of
----------
Directors at any regular meeting or special meeting of the Board of Directors or
by consent action in writing of all members of the Board of Directors of the
Corporation.
I, Roger H. Frommelt, Secretary of Casino Magic Finance Corp. hereby
certify that the forgoing By-Laws were duly adopted by the Board of Directors of
this Corporation on October 1, 1993.
/s/ Roger H. Frommelt
- ----------------------------
Roger H. Frommelt, Secretary
<PAGE>
EXHIBIT 3.37
STATE OF MISSISSIPPI
SECRETARY OF STATE
DICK MOLPUS
================================================================================
- --------------------------------------------------------------------------------
Mississippi Corporation Information System
Corporation Name
CASINO ONE CORPORATION
Corp ID: 0586932
Filed: 03/19/1992 at 8:00 A.M.
Dick Molpus
Secretary of State
Filing Fee Receipt: $50.00
Secretary of State
P.O. Box 136
Jackson, Ms 39205
(601) 359-1333
- --------------------------------------------------------------------------------
================================================================================
401 MISSISSIPPI STREET . P.O. BOX 136 . JACKSON, MS 39205
TELEPHONE (601) 359-1350
<PAGE>
X PROFIT [ ] NONPROFIT
(CHECK APPROPRIATE BOX)
The undersigned persons, pursuant to Section 79-4-202 (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
Casino One Corporation
----------------------------------------------------------------------------
____________________________________________________________________________
2. Domicile address is 145 South Second Street East
--------------------------------------------------------
STREET
Tunica, MS 38676
- --------------------------------------------------------------------------------
CITY/STATE/COUNTY/ZIP
3. FOR NON-PROFITS ONLY: The period of duration is ______________ years or
____________ perpetual.
4. (a) The number (and classes, if any) of shares the corporation is
authorized to issue is (are) as follows (THIS IS FOR PROFIT ONLY):
Class(es) No. of Shares Authorized
--------- ------------------------
Common 1,000,000
----------------- ------------------------
_________________ ________________________
_________________ ________________________
4. (b) If more than one (1) class of shares is authorized, the preferences,
limitations, and relative rights of each class are as follows:
5. The street address of its initial registered office is
145 South Second Street East
----------------------------------------------------------------------------
STREET
Tunica, MS 38676
----------------------------------------------------------------------------
CITY/STATE/ZIP
and the name of its initial registered agent at such address is
Brian P. Bolis
- --------------------------------------------------------------------------------
6. The name and complete address of each incorporator is as follows (PLEASE
TYPE OR PRINT):
Brian P. Bolis, 145 S. Second St E, P.O. Box 1354, Tunica, MS 38676
- --------------------------------------------------------------------------------
Bobby G. Bordges, P.O. Box 1914, Tunica, MS 38676
- --------------------------------------------------------------------------------
NAME/STREET ADDRESS/CITY/STATE/ZIP
7. Other provisions: __________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
/s/ Brian P. Bolis
-----------------------------------
/s/ Bobby G. Bordges
-----------------------------------
INCORPORATORS (SIGNATURE)
<PAGE>
ARTICLES OF MERGER
OF
CASINO ONE ACQUISITION CORPORATION
(a Mississippi corporation)
into
CASINO ONE CORPORATION
(a Mississippi corporation)
Pursuant to the Mississippi Business Corporation Act, the undersigned
corporation executes the following Articles of Merger:
FIRST: The Plan of Merger attached hereto as Appendix A and made a part
hereof has been approved by each constituent corporation.
SECOND: As to each constituent corporation, the designation, number of
outstanding shares and number of votes entitled to be cast by each voting group
entitled to vote separately on the Plan of Merger are as follows:
<TABLE>
<CAPTION>
Designation of Number of Number of Votes
--------------
Name of Corporation Class Outstanding Shares Entitled to be Cast
- ------------------------ ----- ------------------ -------------------
<S> <C> <C> <C>
Casino One Acquisition
Corporation Common Stock 100 100
Casino One Corporation Common Stock 100,000 100,000
</TABLE>
THIRD: As to each constituent corporation, the total number of votes cast
for and against the Plan of Merger by each voting group were as follows, which
number was sufficient for approval by such voting group:
<TABLE>
<CAPTION>
Designation of Total Voted
--------------
Name of Corporation Class Outstanding Shares Against
- ------------------- ----- ------------------ -------
<S> <C> <C> <C>
Casino One Acquisition
Corporation Common Stock 100 0
Casino One Corporation Common Stock 100,000 0
Dated this 11/th/ day of May, 1993.
</TABLE>
CASINO ONE CORPORATION
By /s/ Sheldon T. Fleck
-------------------------------------------
Sheldon T. Fleck, Secretary/
Treasurer (and Secretary of Casino
One Acquisition Corporation)
<PAGE>
APPENDIX A
----------
PLAN OF MERGER
ARTICLE 1.
NAMES OF MERGING CORPORATIONS AND SURVIVING CORPORATIONS
The names of the Merging Corporations are Casino One Acquisition
Corporation, a Mississippi corporation ("Acquisition") and Casino One
Corporation, a Mississippi corporation ("COC"). Acquisition and COC shall be
merged pursuant to the Laws of the State of Mississippi (the "Merger") into a
single corporation which shall be COC (hereinafter sometimes referred to as the
"Surviving Corporation."). Acquisition and COC are sometimes herein referred to
as the "Merging Corporations."
ARTICLE 2.
MEANS OF EFFECTING MERGER AND CONVERTING STOCK
2.1) In accordance with the provisions of this Plan and the applicable
laws of the State of Mississippi, at the Effective Time (as defined in Section
2.2 hereof), Acquisition shall be merged with and into COC, and COC shall be the
Surviving Corporation and shall continue its corporate existence and
organization under the laws of the State of Mississippi.
2.2) As used in this Agreement, the term "Effective Date" shall be the
time of the filing of Articles of Merger containing this Plan of Merger with the
Mississippi Secretary of State in the manner described in Section 79-4-11.05 of
the Mississippi Business Corporation Act.
2.3) At the Effective Date, by virtue of the Merger and without any action
by any shareholder of Acquisition, all of the shares of Common Stock of
Acquisition that are outstanding at the Effective Date shall be surrendered,
cancelled, and retired, and in exchange therefor, the Surviving Corporation
shall issue to Gaming Corporation of America, a Minnesota corporation ("GCA"),
which is the sole shareholder of Acquisition, 100 shares of Common Stock of the
Surviving Corporation.
2.4) At the Effective Date, by virtue of the Merger and without any action
by any shareholder of COC, all shares of Common Stock of COC that are
outstanding at the Effective Date (other than shares of Common Stock of COC
issued to GCA) shall be converted in the aggregate into 730,000 shares of GCA
Common Stock. Any shares of COC Common Stock issued and held in the treasury of
COC at the Effective Date shall be cancelled. Each shareholder of COC
immediately prior to the Effective Date shall receive such shareholder's pro
rata portion of such aggregate number of GCA shares set forth above (rounded to
the nearest whole share of GCA stock and based on the number of COC shares held
by such shareholder compared to the total number of outstanding COC shares
immediately prior to the Effective Date).
2.5) As soon as practicable after the Effective Date, each holder of an
outstanding certificate which immediately prior to the Effective Date
represented outstanding shares of COC Common Stock, upon surrender of such
certificate to the Surviving Corporation, shall
<PAGE>
be entitled to receive shares of GCA Common Stock as provided above. Until so
surrendered, each outstanding certificate which prior to the Effective Date
represented shares of COC Common Stock shall be deemed for all corporate
purposes to evidence the ownership of the right to receive the shares of GCA
Common Stock into which such securities have been so converted pursuant to the
terms of the Merger.
ARTICLE 3.
ORGANIZATION OF SURVIVING CORPORATION
3.1) The Articles of Incorporation of COC at the Effective Date shall be
and remain the Articles of Incorporation of the Surviving Corporation until
amended in accordance with law.
3.2) The Bylaws of COC at the Effective Date shall be the Bylaws of the
Surviving Corporation until amended in accordance with law.
3.3) The directors and officers of Acquisition immediately prior to the
Effective Date shall be and become the directors and officers of the Surviving
Corporation on the Effective Date.
ARTICLE 4.
GENERAL PROVISIONS
4.1) At the Effective Date:
(a) The Merging Corporations shall be a single corporation, which shall
be COC.
(b) The separate existence of Acquisition shall cease.
(c) COC shall have all the rights, privileges, immunities and powers and
shall be subject to all of the duties and liabilities of a corporation organized
under the Mississippi Business Corporation Act.
(d) COC shall thereupon and thereafter possess all the rights,
privileges, immunities, and franchises, as well of a public as of a private
nature, of each of the Merging Corporations; and all property, real, personal
and mixed, and all debts due on whatever account, including subscriptions to
shares, and all other choses in action, and all and every other interest, of or
belonging to or due to each of the Merging Corporations, shall be taken and
deemed to be transferred to and vested in COC without further act or deed; and
the title to any real estate, or any interest therein, vested in any of the
Merging Corporation shall not revert or be in any way impaired by reason of the
Merger.
(e) COC shall thenceforth be responsible and liable for all the
liabilities and obligations of each of the Merging Corporations and any claim
existing or action or proceeding pending by or against any of the Merging
Corporation may be prosecuted as if the Merger had not taken place, or COC may
be substituted in its place. Neither the rights of creditors nor any liens upon
the property of any such corporation shall be impaired by the Merger.
-2-
<PAGE>
(f) The aggregate amount of the net assets of the Merging Corporations
which was available for the payment of dividends immediately prior to the Merger
shall continue to be available for the payment of dividends by COC.
4.2) If at any time after the Effective Date, the Surviving Corporation
shall consider or be advised that any instruments of further assurance are
desirable in order to evidence the vesting in it of the title of either of the
Merging Corporations to any of the property rights of the Merging Corporations,
the appropriate officers or directors of the Surviving Corporation or of
Acquisition are hereby authorized to execute, acknowledge, and deliver all such
instruments of further assurance and to do all other acts or things, either in
the name of the Surviving Corporation or in the name of Acquisition, as may be
requisite or desirable to carry out the provisions of this Plan of Merger.
-3-
<PAGE>
EXHIBIT 3.38
BY-LAWS
OF
CASINO ONE CORPORATION
ARTICLE I.
----------
NAME AND LOCATION
-----------------
SECTION 1. The name of the corporation is CASINO ONE CORPORATION. Business
---------
will be conducted under the name of CASINO ONE CORPORATION.
SECTION 2. The initial registered office shall be located at 145 S. Second
----------
Street, Tunica, Mississippi, 38676. The Corporation may have other offices,
including its principal office, at other locations. An annual Shareholders
meeting will be held at the principal office unless otherwise designated in the
Notice of the Meeting or in Waiver of such Notice.
ARTICLE II.
-----------
SHAREHOLDERS
------------
SECTION 1. The annual meeting of the Shareholders shall be held at 10:00
----------
a.m. on the second Monday of January of each year at the principal office of the
corporation, or at such other place as may be designated in the Notice of the
Meeting or Waiver of Notice thereof. At such meeting, the Shareholders shall
elect directors to serve until their successors shall be elected and qualified.
SECTION 2. Special meetings of Shareholders may be held at such place as
---------
may be designated in the call thereof by consent in writing of all Shareholders,
or by demand signed by the holders of at least ten per cent (10%) of the stock.
Special meetings of the Shareholders may also be called by resolution of the
Board of Directors at a duly held meeting of said Board of Directors.
<PAGE>
SECTION 3. Notice of the time and place of all annual and special meetings
----------
shall be mailed or personally delivered by the Secretary to each Shareholder no
fewer than ten (10) days but not more than sixty (60) days before the date
thereof, unless Waiver of said Notice and Call is given.
SECTION 4. The President of the corporation shall preside at all
----------
Shareholders' meetings.
SECTION 5. At every such meeting each Shareholder shall be entitled to
----------
cast one (1) vote for each share of stock held in his name, either in person or
by written proxy. All proxies shall be filed with the Secretary and by him/her
entered of record in the Minutes of the meeting. In voting for Directors of the
corporation, each Shareholder shall be authorized to cumulate his vote in
accordance with the laws of the State of Mississippi.
SECTION 6. A quorum for the transaction of business shall consist of a
----------
number of shares, present personally or by proxy, representing the majority of
shares of stock issued and outstanding.
SECTION 7. Official Shareholders action may be taken in the absence of
----------
annual, special, or any other duly called meeting, where said action is taken by
consent in writing of the Shareholders themselves representing One Hundred per
cent (100%) of the shares of stock issued and outstanding.
ARTICLE III.
------------
DIRECTORS
---------
SECTION 1. The business and property of the corporation shall be managed
----------
by a Board of two or more Directors, who shall be elected by the Shareholders at
their annual
- 2 -
<PAGE>
meeting, except that vacancies on the Board of Directors may be filled by an
election at a duly constituted meeting of the Board of Directors and Directors
so elected shall serve the remaining portion of the term of the former Director.
A Director need not be a Shareholder. Each year at the annual meeting of
Shareholders, the Shareholders shall establish the size of the Board of
Directors and thus fix the number of Directors to be elected. If not established
at such annual meeting, the size of the Board shall remain as theretofore
constituted. The initial number of Directors shall be two.
SECTION 2. All Directors shall hold office for one (1) year and until
----------
their successors are duly elected and qualified.
SECTION 3. The regular meeting of the Directors shall be held at the
----------
principal office of the corporation at or at such place as may be designated in
the written Notice of the Meeting, or in the Waiver of Notice thereof,
immediately after the adjournment of each annual Shareholder's meeting.
SECTION 4. Special meetings of the Board of Directors may be held at the
----------
same place or places as provided for the annual meeting thereof, and may be
called by the President or by consent of all Directors, or at the request of any
Director and on Notice in writing at least five (5) days prior to such meeting
to the other Directors.
SECTION 5. A quorum for the transaction of business at any meeting of the
----------
Directors shall consist of a majority of the Board as established by the
Shareholders. If there are two Directors, the quorum shall consist of one.
- 3 -
<PAGE>
SECTION 6. The Directors shall elect the officers of the Corporation and
----------
fix their salaries, such election being at the Director's meeting following each
annual Shareholder's meeting.
ARTICLE IV.
-----------
OFFICERS
--------
SECTION 1. The officers of this corporation shall be a President and a
----------
Secretary/Treasurer, who shall be elected for the term of one (1) year by the
Board of Directors and shall hold office until their successors are duly elected
and qualified. The same individual may simultaneously hold more than one
office. One or more Vice Presidents may be elected. It shall not be necessary
to elect a Vice President.
SECTION 2. The President shall preside at all Shareholders' meetings;
----------
shall have supervision of the affairs of the corporation and officers; and shall
sign all Share Certificates and written contracts of the corporation. He/She
shall have general charge of executing contracts and of conducting the affairs
of the corporation; shall have custody of the personal property, machinery, and
equipment of the corporation; and shall perform all other duties such as are
incident to this office.
SECTION 3. A Vice President shall serve as President in his/her absence
---------
and under such circumstances shall have and fulfill all of the rights and duties
of said President.
SECTION 4. The Secretary/Treasurer shall issue notices of all Directors
----------
and Shareholders' meetings and shall keep the Minutes thereof; shall have charge
of all corporate books, records, and papers; shall be custodian of the corporate
seal; shall attest with his/her
- 4 -
<PAGE>
signature and impress with the corporate seal all Share Certificates and written
contracts of the corporation, and shall perform such other duties as may be
assigned to said office.
ARTICLE V.
----------
DIVIDENDS AND FINANCE
---------------------
SECTION 1. Dividends, to be paid out of the surplus earnings of the
----------
Corporation, may be declared from time to time by resolution of the Board of
Directors, but no dividend shall be paid that will impair the capital of the
Corporation.
SECTION 2. The funds of the Corporation shall be deposited in such manner
----------
as the Directors shall designate.
SECTION 3. The fiscal year of the Corporation shall commence on January
----------
1st of each year.
ARTICLE VI.
-----------
AMENDMENTS
----------
SECTION 1. These By-Laws may be amended by a majority vote of the Board of
----------
Directors at any regular meeting or special meeting of the Board of Directors or
by consent action in writing of all members of the Board of Directors of the
Corporation.
ARTICLE VII.
------------
SECTION 1. The Corporation has the authority to enter into restrictive
----------
agreements with shareholders regarding the sale and exchange of corporate
shares, provided that such agreement has been approved by one Hundred per cent
(100%) of the Shareholders.
- 5 -
<PAGE>
SECTION 2. The Corporation, by its president, may execute the necessary
----------
Internal Revenue Service Forms to be taxed by it as an S Corporation (under
Section 1362 of the Internal Revenue Code), provided that such action is
approved by the Board of Directors and ratified by one Hundred per cent (100%)
of the Shareholders.
APPROVED BY THE STOCKHOLDERS ON THE 5TH DAY OF MAY, 1992.
/s/ Brian P. Bolis
------------------------------
BRIAN P. BOLIS
/s/ Bobby G. Bordges
------------------------------
BOBBY G. BORDGES
- 6 -
<PAGE>
EXHIBIT 3.39
STATE OF MISSISSIPPI
SECRETARY OF STATE
DICK MOLPUS
================================================================================
/s/ Dick Molpus
================================================================================
401 MISSISSIPPI STREET -- P.O. BOX 138 -- JACKSON, MS 38206
<PAGE>
TELEPHONE (401) 266-1380
(Attach condensed copy)
[X] PROFIT [_] NONPROFIT
(Mark Appropriate Box)
The undersigned persons, purchased in Section 79-11-137 (a nonprofit
corporation) of the Mississippi Code of 1972, hereby execute the following
document and set forth:
1. The name of the corporation is:
BAY ST. LOUIS CASINO CORP.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2. Domestic address is 1900 24TH AVENUE
---------------------------------------------------------
GULFPORT, MISSISSIPPI 39501
----------------------------------------------------------------------------
3. FOR NON-PROFITS ONLY: The period of expiration is 99 years or ______________
4. (a) The number (and classes, if any) of shares the corporation is
authorized to issue is (are) as follows (THIS IS FOR PROFIT ONLY):
Class(es) No. of Shares Authorized
-------- ------------------------
COMMON 10,000
------------------------- --------------------------------
_________________________ ________________________________
_________________________ ________________________________
4. (b) If more than one (1) class of shares is authorized, the preferences,
limitations, and relative rights of each class are as follows:
5. The street address of its initial registered office is:
1900 24/TH/ AVENUE
----------------------------------------------------------------------------
GULFPORT, MISSISSIPPI 39501
----------------------------------------------------------------------------
City/State/Zip
and the name of its initial registered agent at such address is: VIRGIL G.
---------
GILLESPIE
---------
6. The name and complete address of each incorporator is as follows (PLEASE
TYPE OR PRINT):
VIRGIL G. GILLESPIE
----------------------------------------------------------------------------
1900 24/TH/ AVENUE
----------------------------------------------------------------------------
GULFPORT, MISSISSIPPI 39501
----------------------------------------------------------------------------
Name/Street Address/City/State/Zip
7. Other provisions: Shareholders have presumptive right to acquire a
----------------------------------------------------------------------------
proportionate share of any additional stock issued or sale of treasury
----------------------------------------------------------------------------
stock, based upon the pro rate share of stock of any given stockholder, as
----------------------------------------------------------------------------
his shares bear to the total amount of stock issued.
---------------------------------------------------
/s/ Virgil G. Gillespie
-----------------------------------
VIRGIL G. GILLESPIE
___________________________________
INCORPORATORS (SIGNATURES)
<PAGE>
Office of
VIRGIL G. GILLESPIE
ATTORNEY AT LAW
April 6, 1992
Secretary of State
P.O. Box 136
Jackson, Mississippi 39205-0136
RE: ARTICLES OF INCORPORATION
BAY ST. LOUIS CASINO CORP.
Dear Sir:
I enclose herewith duplicate originals of Articles of Incorporation for Bay St.
Louis Casino Corp., which I would thank you to file and return to me. Also
enclosed is my check for $50.00 as a filing fee.
Yours very truly,
/s/ Virgil G. Gillespie
VIRGIL G. GILLESPIE
VGG/jpc
Enclosures:
<PAGE>
EXHIBIT 3.40
BY-LAWS
OF
BAY ST. LOUIS CASINO CORP.
ARTICLE I.
----------
NAME AND LOCATION
-----------------
SECTION 1. The name of the corporation is BAY ST. LOUIS CASINO CORP.
---------
Business will be conducted under the name of BAY ST. LOUIS CASINO CORP.
SECTION 2. The initial registered office shall be located at 1900 24th
---------
Avenue,Gulfport, Mississippi, 39501. The Corporation may have other offices,
including its principal office, at other locations. An annual Shareholders
meeting will be held at the principal office unless otherwise designated in the
Notice of the Meeting or in Waiver of such Notice.
ARTICLE II.
-----------
SHAREHOLDERS
------------
SECTION 1. The annual meeting of the Shareholders shall be held at 10:00
----------
a.m. on the first Monday of January of each year at the principal office of the
corporation, or at such other place as may be designated in the Notice of the
Meeting or Waiver of Notice thereof. At such meeting, the Shareholders shall
elect directors to serve until their successors shall be elected and qualified.
SECTION 2. Special meetings of Shareholders may be held at such place
----------
as may be designated in the call thereof by consent in writing of all
Shareholders, or by demand signed by the holders of at least ten per cent (10%)
of the stock. Special meetings of the
<PAGE>
Shareholders may also be called by resolution of the Board of Directors at a
duly held meeting of said Board of Directors.
SECTION 3. Notice of the time and place of all annual and special meetings
----------
shall be mailed or personally delivered by the Secretary to each Shareholder no
fewer than ten (10) days but not more than sixty (60) days before the date
thereof, unless Waiver of said Notice and Call is given.
SECTION 4. The President of the corporation shall preside at all
----------
Shareholders' meetings.
SECTION 5. At every such meeting each Shareholder shall be entitled to
----------
cast one (1) vote for each share of stock held in his name, either in person or
by written proxy. All proxies shall be filed with the Secretary and by him/her
entered of record in the Minutes of the meeting. In voting for Directors of the
corporation, each Shareholder shall be authorized to cumulate his vote in
accordance with the laws of the State of Mississippi.
SECTION 6. A quorum for the transaction of business shall consist of a
----------
number of shares, present personally or by proxy, representing the majority of
shares of stock issued and outstanding.
SECTION 7. Official Shareholders action may be taken in the absence of
----------
annual, special, or any other duly called meeting, where said action is taken by
consent in writing of the Shareholders themselves representing One Hundred per
cent (100%) of the shares of stock issued and outstanding.
-2-
<PAGE>
ARTICLE III.
------------
DIRECTORS
---------
SECTION 1. The business and property of the corporation shall be managed
----------
by a Board of one or more Directors, who shall be elected by the Shareholders at
their annual meeting, except that vacancies on the Board of Directors may be
filled by an election at a duly constituted meeting of the Board of Directors
and Directors so elected shall serve the remaining portion of the term of the
former Director. A Director need not be a Shareholder. Each year at the annual
meeting of Shareholders, the Shareholders shall establish the size of the Board
of Directors and thus fix the number of Directors to be elected. If not
established at such annual meeting the size of the Board shall remain as
theretofore constituted. The initial number of Directors shall be one.
SECTION 2. All Directors shall hold office for one (1) year until their
----------
successors are duly elected and qualified.
SECTION 3. The regular meeting of the Directors shall be held at the
----------
principal office of the corporation at 1900 24th Avenue, Gulfport, MS 39501, or
at such place as may be designated in the written Notice of the Meeting, or in
the Waiver of Notice thereof, immediately after the adjournment of each annual
Shareholder's meeting.
SECTION 4. Special meetings of the Board of Directors may be held at the
----------
same place or places as provided for the annual meeting thereof, and may be
called by the President or by consent of all Directors, or at the request of any
Director and on Notice in writing at least five (5) days prior to such meeting
to the other Directors.
-3-
<PAGE>
SECTION 5. A quorum for the transaction of business at any meeting of the
----------
Directors shall consist of a majority of the Board as established by the
Shareholders. If there are two Directors, the quorum shall consist of one.
SECTION 6. The Directors shall elect the officers of the Corporation and
----------
fix their salaries, such election being at the Director's meeting following each
annual Shareholder's meeting.
ARTICLE IV.
-----------
OFFICERS
--------
SECTION 1. The officers of this corporation shall be a President and a
----------
Secretary/Treasurer, who shall be elected for the term of one (1) year by the
Board of Directors and shall hold office until their successors are duly elected
and qualified. The same individual may simultaneously hold more than one
office. One or more Vice Presidents may be elected. It shall not be necessary
to elect a Vice President.
SECTION 2. The President shall preside at all Shareholders' meetings;
----------
shall have supervision of the affairs of the corporation and officers; and shall
sign all Share Certificates and written contracts of the corporation. He/She
shall have general charge of executing contracts and of conducting the affairs
of the corporation; shall have custody of the personal property, machinery, and
equipment of the corporation; and shall perform all other duties such as are
incident to this office.
SECTION 3. A Vice President shall serve as President in his/her absence
----------
and under such circumstances shall have and fulfill all of the rights and duties
of said President.
-4-
<PAGE>
SECTION 4. The Secretary/Treasurer shall issue notices of all Directors
----------
and Shareholders' meetings and shall keep the Minutes thereof; shall have charge
of all corporate books, records, and papers; shall be custodian of the corporate
seal; shall attest with his/her signature and impress with the corporate seal
all Share Certificates and written contracts of the corporation; and shall
perform such other duties as may be assigned to said office.
ARTICLE V.
----------
DIVIDENDS AND FINANCE
---------------------
SECTION 1. Dividends, to be paid out of the surplus earnings of the
----------
Corporation, may be declared from time to time by resolution of the Board of
Directors, but no dividend shall be paid that will impair the capital of the
Corporation.
SECTION 2. The funds of the Corporation shall be deposited in such manner
----------
as the Directors shall designate.
SECTION 3. The fiscal year of the Corporation shall commence on January
----------
1st of each year.
ARTICLE VI.
-----------
AMENDMENTS
----------
SECTION 1. These By-Laws may be amended by a majority vote of the Board of
----------
Directors at any regular meeting or special meeting of the Board of Directors or
by consent action in writing of all members of the Board of Directors of the
Corporation.
-5-
<PAGE>
ARTICLE VII.
------------
SECTION 1. The Corporation has the authority to enter into restrictive
----------
agreements with Shareholders regarding the sale and exchange of corporate
shares, provided that such agreement has been approved by One Hundred per cent
(100%) of the Shareholders.
SECTION 2. The Corporation, by its president, may execute the necessary
----------
Internal Revenue Service Forms to be taxed by it as an S Corporation (under
Section 1362 of the Internal Revenue Code), provided that such action is
approved by the Board of Directors and ratified by One Hundred per cent (100%)
of the Shareholders.
APPROVED BY THE STOCKHOLDER ON THE 23/rd/ DAY OF APRIL, 1992
------
/s/ Marlin F. Torguson
------------------------------
MARLIN F. TORGUSON
-6-
<PAGE>
EXHIBIT 3.41
STATE OF MISSISSIPPI
SECRETARY OF STATE
DICK MOLPUS
================================================================================
---------------------------------------------------------------------
Mississippi Corporation Information System
Corporation Name
MARDI GRAS CASINO CORP.
Corp ID: 0586827
Filed: 08/17/1990 at 8:00 A.M.
Dick Molpus
Secretary of State
Filing Fee Receipt: $50.00
Secretary of State
P.O. Box 136
Jackson, MS 39205
(601) 359-1333
---------------------------------------------------------------------
================================================================================
401 MISSISSIPPI STREET. P.O. BOX 136. JACKSON, MS 39205
TELEPHONE (601) 359-1350
<PAGE>
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:
Mardi Gras Casino Corp.
---------------------------------------------------------------------------
2. Domicile address is: 1900 24/th/ Avenue
-------------------------------------------------------
STREET
Gulfport, MS 39501
---------------------------------------------------------------------------
CITY/STATE/ZIP
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) as follows: (THIS IS FOR PROFIT ONLY):
Classes(es) No. of Shares Authorized
----------- ------------------------
COMMON 10,000
-------------------------- --------------------------------
(one class only)
-------------------------- ________________________________
__________________________ ________________________________
4. (b) If more than one (1) class of shares is authorized, the preferences,
limitations, and relative rights of each class are as follows:
5. The street address of its initial registered office is:
1900 24/th/ Avenue
--------------------------------------------------------------------------
STREET
Gulfport, MS 39501
--------------------------------------------------------------------------
NAME/STREET ADDRESS/CITY/STATE/ZIP
and the name of its initial registered agent at such address is:
Virgil G. Gillespie
--------------------------------------------------------------------------
6. The name and complete address of each incorporator is as follows (PLEASE
TYPE OR PRINT):
Virgil G. Gillespie
---------------------------------------------------------------------------
1900 24/th/ Avenue, Gulfport, MS 39501
---------------------------------------------------------------------------
NAME/STREET ADDRESS/CITY/STATE/ZIP
7. Other provisions: Shareholders have preemptive right to acquire a
---------------------------------------------------------------------------
proportionate share of any additional stock issued or sale of treasury
---------------------------------------------------------------------------
stock, based upon the pro rata share of stock of any given stockholder, as
---------------------------------------------------------------------------
his shares bear to the total amount of stock issued.
---------------------------------------------------------------------------
/s/ Virgil G. Gillespie
---------------------------
Virgil G. Gillespie
---------------------------
INCORPORATORS (SIGNATURES)
<PAGE>
August 16, 1990
MISSISSIPPI SECRETARY OF STATE
CORPORATE DIVISION
P.O. BOX 136
JACKSON, MS 39205
RE: INCORPORATION OF MARDI GRAS CASINO CORP.
Dear Sir:
We enclose the Articles of Incorporation of Dixieland Casino Corp. The
articles are executed in original and exact copy. The necessary parties have
signed the document in black ink.
Our check for the $50 filing fee is enclosed, along with a stamped, self
addressed envelope for return mailing of evidenced copy of filing.
If you have any questions please call me.
Sincerely,
/s/ Robert G. Gillespie, Jr.
Robert G. Gillespie, Jr.
<PAGE>
EXHIBIT 3.42
BY LAWS
OF
MARDI GRAS CASINO CORP.
ARTICLE I.
----------
NAME AND LOCATION
-----------------
SECTION 1. The name of the corporation is MARDI GRAS CASINO CORP.
----------
Business will be conducted under the name of MARDI GRAS CASINO CORP.
SECTION 2. The registered office shall be located at 1900 24th Avenue,
---------
Gulfport, Mississippi, 39501. The Corporation may have other offices, including
its principal office, at other locations. An annual Shareholders meeting will
be held at the principal office unless otherwise designated in the Notice of the
Meeting or in Waiver of such Notice.
ARTICLE II.
-----------
SHAREHOLDERS
------------
SECTION 1. The annual meeting of the Shareholders shall be held at 10:00
----------
a.m. on the first Monday of January of each year at the principal office of the
corporation, or at such other place as may be designated in the Notice of the
Meeting or Waiver of Notice thereof. At such meeting, the Shareholders shall
elect directors to serve until their successors shall be elected and qualified.
SECTION 2. Special meetings of Shareholders may be held at such place as
----------
may be designated in the call thereof by consent in writing of all Shareholders,
or by demand signed by the holders of at least ten per cent (10%) of the stock.
Special meetings of the Shareholders may also be called by resolution of the
Board of Directors at a duly held meeting of said Board of Directors.
<PAGE>
SECTION 3. Notice of the time and place of all annual and special meetings
----------
shall be mailed or personally delivered by the Secretary to each Shareholder no
fewer than ten (10) days but not more than sixty (60) days before the date
thereof, unless Waiver of said Notice and Call is given.
SECTION 4. The President of the corporation shall preside at all
----------
Shareholders' meetings.
SECTION 5. At every such meeting each Shareholder shall be entitled to
----------
cast one (1) vote for each share of stock held in his name, either in person or
by written proxy. All proxies shall be filed with the Secretary and by him/her
entered of record in the Minutes of the meeting. In voting for Directors of the
corporation, each Shareholder shall be authorized to cumulate his vote in
accordance with the laws of the State of Mississippi.
SECTION 6. A quorum for the transaction of business shall consist of a
----------
number of shares, present personally or by proxy, representing the majority of
shares of stock issued and outstanding.
SECTION 7. Official Shareholders action may be taken in the absence of
----------
annual, special, or any other duly called meeting, where said action is taken by
consent in writing of the shareholders themselves representing One Hundred per
cent (100%) of the shares of stock issued and outstanding.
ARTICLE III.
------------
DIRECTORS
---------
SECTION 1. The business and property of the corporation shall be managed
----------
by a Board of one or more Directors, who shall be elected by the Shareholders at
their annual meeting, except that vacancies on the Board of Directors may be
filled by an election at a duly constituted meeting of the Board of Directors
and Directors so elected shall serve the
- 2 -
<PAGE>
remaining portion of the term of the former Director; and a Director need not be
a Shareholder. Each year at the annual meeting of Shareholders, the Shareholders
shall establish the size of the Board of Directors and thus fix the number of
Directors to be elected.
SECTION 2. All Directors shall hold office for one (1) year and until
----------
their successors are duly elected and qualified.
SECTION 3. The regular meeting of the Directors shall be held at the
----------
principal office of the corporation at 1900 24th Avenue, Gulfport, MS 39501, or
at such place as may be designated in the written Notice of the Meeting, or in
the Waiver of Notice thereof, immediately after the adjournment of each annual
Shareholder's meeting.
SECTION 4. Special meetings of the Board of Directors may be held at the
----------
same place or places as provided for the annual meeting thereof, and may be
called by the President or by consent of all Directors, or at the request of any
Director and on Notice in writing at least five (5) days prior to such meeting
to the other Directors.
SECTION 5. A quorum for the transaction of business at any meeting of the
----------
Directors shall consist of a majority of the Board as established by the
Shareholders. If there are two Directors, the quorum shall consist of one.
SECTION 6. The Directors shall elect the officers of the Corporation and
----------
fix their salaries, such election being at the Director's meeting following each
annual Shareholder's meeting.
ARTICLE IV.
-----------
OFFICERS
--------
SECTION 1. The officers of this corporation shall be a President, one or
----------
more Vice Presidents, and a Secretary/Treasurer, who shall be elected for the
term of one (1) year by
- 3 -
<PAGE>
the Board of Directors and shall hold office until their successors are duly
elected and qualified. The same individual may simultaneously hold more than one
office. It shall not be necessary to elect a Vice President.
SECTION 2. The President shall preside at all Shareholders' meetings;
----------
shall have supervision of the affairs of the corporation and officers; and shall
sign all Share Certificates and written contracts of the corporation. He/She
shall have general charge of executing contracts and of conducting the affairs
of the corporation; shall have custody of the personal property, machinery, and
equipment of the corporation; and shall perform all other duties such as are
incident to this office.
SECTION 3. A Vice President shall serve as President in his/her absence
----------
and under such circumstances shall have and fulfill all of the rights and duties
of said President.
SECTION 4. The Secretary/Treasurer shall issue notices of all Directors
----------
and Shareholders' meetings and shall keep the Minutes thereof; shall have charge
of all corporate books, records, and papers; shall be custodian of the corporate
seal; shall attest with his/her signature and impress with the corporate seal
all Share Certificates and written contracts of the corporation; and shall
perform such other duties as may be assigned to said office.
ARTICLE V.
----------
DIVIDENDS AND FINANCE
---------------------
SECTION 1. Dividends, to be paid out of the surplus earnings of the
----------
Corporation, may be declared from time to time by resolution of the Board of
Directors, but no dividend shall be paid that will impair the capital of the
Corporation.
SECTION 2. The funds of the Corporation shall be deposited in such manner
----------
as the Directors shall designate.
- 4 -
<PAGE>
SECTION 3. The fiscal year of the Corporation shall commence on January
----------
1st of each year.
ARTICLE VI.
-----------
AMENDMENTS
----------
SECTION 1. These By-Laws may be amended by a majority vote of the Board of
----------
Directors at any regular meeting or special meeting of the Board of Directors or
by consent action in writing of all members of the Board of Directors of the
Corporation.
- 5 -
<PAGE>
ARTICLE VII.
------------
SECTION 1. The Corporation has the authority to enter into restrictive
----------
agreements with Shareholders regarding the sale and exchange of corporate
shares, provided that such agreement has been approved by One Hundred per cent
(100%) of the Shareholders.
SECTION 2. The Corporation, by its president, may execute the necessary
----------
Internal Revenue Service Forms to be taxed by it as an S Corporation (under
Section 1362 of the Internal Revenue Code), provided that such action is
approved by the Board of Directors and ratified by One Hundred per cent (100%)
of the Shareholders.
APPROVED BY THE BOARD OF DIRECTORS ON THE 29th DAY OF October 1990.
/s/ Tom Guggisberg
---------------------------------
TOM GUGGISBERG
APPROVED BY THE STOCKHOLDERS ON THE 29th DAY OF October, 1990.
/s/ Marlin F. Torguson
---------------------------------
MARLIN F. TORGUSON
- 6 -
<PAGE>
EXHIBIT 3.43
ARTICLES OF INCORPORATION
OF
BOOMTOWN HOOSIER, INC.
The undersigned do hereby associate themselves into a corporation,
under and by the virtue of the Nevada Revised Statutes, Title 7, Chapter 78, as
amended, and do hereby certify and adopt the following Articles of
Incorporation:
ARTICLE I
---------
The name of the corporation is BOOMTOWN HOOSIER, INC.
ARTICLE II
----------
The registered agent of the corporation is Sierra Corporate Services
and the location of the registered office of the corporation in the State of
Nevada is 241 Ridge Street, 4th Floor, Reno, Nevada. Branch offices may
hereafter be established at such other place or places, either within or without
the State of Nevada as may be determined from time to time by the Board of
Directors.
ARTICLE III
-----------
The purpose for which said corporation is formed is to engage in any
lawful activity. The corporation shall have all powers authorized by Title 7,
Chapter 78, of the Nevada Revised Statutes, as amended, except as otherwise
provided in these Articles or subsequent amendments thereto.
ARTICLE IV
----------
The amount of the authorized capital stock of this corporation is
1,000 shares with $.01 par value.
<PAGE>
Any and all shares of stock of this corporation of any class shall be
paid in as the Board of Directors may designate and as provided by law, in cash,
real or personal property, option to purchase, or any other valuable right or
thing, for the uses and purposes of the corporation, and said shares of stock
when issued in exchange therefor shall thereupon and thereby become and are
fully paid, the same as though paid for in cash, and shall be nonassessable
forever, and the judgment of the Board of Directors of the corporation
concerning the value of the property, right or thing, acquired in purchase or
exchange for capital stock shall be conclusive. No stockholder shall have any
preemptive rights.
ARTICLE V
---------
Section 1. Directors
The members of the governing board of the Corporation shall be
designated as Directors. The board of directors shall consist of three (3)
members. The number of directors of the Corporation may be increased or
decreased from time to time as provided in the By-Laws of the Corporation.
Section 2. Personal Liability
Directors of the corporation shall not be personally liable to the
corporation or its stockholders for damages for breach of fiduciary duty as a
director, 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 the provisions of Chapter 78 of the Nevada Revised Statutes. If
Chapter 78 of the Nevada Revised Statutes is amended after approval by the
stockholders of this article to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the corporation
- 2 -
<PAGE>
shall be eliminated or limited to the full extent permitted by Chapter 78 of
the Nevada Revised Statutes, as so amended.
Section 3. Indemnification
Each person who is or was a director of the corporation (including the
heirs, executors, administrators or estate of such person) shall be indemnified
by the corporation as of right to the full extent permitted by Chapter 78 of the
Nevada Revised Statutes against any liability, cost or expense asserted against
such director and incurred by such director by reason of the fact that such
person is or was a director. The expenses of directors, past or present,
incurred in defending a civil or criminal action, suit, or proceeding must be
paid by the corporation as incurred and in advance of the final disposition of
the action, suit or proceeding upon receipt of an undertaking by or on behalf of
the director to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation.
Section 4. Indemnification and Insurance
The corporation to the full extent of its power to do so, shall
indemnify all directors, officers, employees, and/or agents in accordance with
the provisions of the Nevada Revised Statutes. Further, the corporation shall
have power to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee, or
agent or another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him in any such capacity or
arising out of this status as such, whether or not the corporation would have
the power to indemnify him against such liability under the provisions of Nevada
law.
- 3 -
<PAGE>
Section 5. Modifications
Any repeal or modification of all or any portion of the provisions of
this Article by the stockholders of the corporation shall not adversely affect
any right or protection of an officer or director of the corporation existing at
the time of such repeal or modification.
ARTICLE VI
----------
The names and addresses of the first Board of Directors of the
corporation are as follows:
Sara Smithson
1749 Terrace Heights Lane
Reno, Nevada 89523
Norma Zirbel
415 Rue de la Rouge
Sparks, Nevada 89434
Sybil Maldonado
1112 Bradley Square
Sparks, Nevada 89431
ARTICLE VII
-----------
The stock of this corporation, after the amount of the subscription
price, or par value has been fully paid in, shall be nonassessable forever, and
shall not be subject to pay the debts of the corporation.
ARTICLE VIII
------------
The names and address of the incorporators signing these Articles of
Incorporation are as follows:
Sara Smithson
1749 Terrace Heights Lane
Reno, Nevada 89523
- 4 -
<PAGE>
Norma Zirbel
415 Rue de la Rouge
Sparks, Nevada 89434
ARTICLE IX
----------
The corporation is to have perpetual existence.
ARTICLE X
---------
A resolution, in writing, signed by all of the members of the Board of
Directors of the corporation, 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
of the corporation under its proper date.
ARTICLE XI
----------
The Directors shall have the power to make and alter the Bylaws of the
corporation. Bylaws so made by the Directors under the power so conferred may
be altered, amended or repealed by the Directors or by the Stockholders at any
meeting called and held for that purpose.
IN WITNESS WHEREOF, we have hereunto set our hands and executed these
Articles of Incorporation this 18th day of December 1995.
/s/ Sarah Smithson
-------------------------------
SARAH SMITHSON
/s/ Norma Zirbel
-------------------------------
NORMA ZIRBEL
- 5 -
<PAGE>
STATE OF NEVADA )
) SS.
COUNTY OF WASHOE )
On this 18th day of December, 1995, personally appeared before the
undersigned, a Notary Public in and for the County of Washoe, State of Nevada,
Sarah Smithson and Norma Zirbel, known to me to be the persons described in and
who executed the foregoing instrument freely and voluntarily and for the uses
and purposes therein 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.
/s/
-------------------------------
Notary Public
- 6 -
<PAGE>
EXHIBIT 3.44
BY-LAWS OF
BOOMTOWN HOOSIER, INC.
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Reno, County of
Washoe, State of Nevada, or other location as the Board of Directors may
determine.
Section 2. The corporation may also have offices at such other places 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 annual meetings of the stockholders shall be at the call of
the Directors. Special meetings of the stockholders may be held at such place
as shall be stated in the notice of the meeting, or in a duly executed waiver of
notice thereof.
Section 2. Special meetings of the stockholders for any purpose or purposes,
unless otherwise prescribed by statute or by the Articles of Incorporation, may
be called by the president, and shall be called by the president or secretary at
the request in writing of stockholders owning a majority of the entire stock of
the corporation issued and outstanding, and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting.
Section 3. Written notice of the annual meeting and of all special meetings
of the stockholders, signed by the president or a vice-president, or the
secretary or an assistant secretary, stating the purpose or purposes for which
the meeting is called and the time when and the place where it is to be held
shall either be delivered personally or shall be mailed to each stockholder of
record entitled to vote thereat not less than ten nor more than sixty days prior
to the meeting, and if mailed it shall be directed to any such stockholder at
his address as it appears on the records of the corporation.
Section 4. Business transacted at all special meetings shall be confined to
the objects stated in the call.
Section 5. The holders of a majority of the stock issued and outstanding, and
entitled to vote thereat, present in person or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of the stockholders for
the transaction of business except as otherwise provided by statute, by the
Articles of Incorporation or by these By-laws. If, however, such quorum shall
not be present or represented by proxy, 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
<PAGE>
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.
Section 6. When a quorum is present or represented 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 Articles of Incorporation or of these By-laws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.
Section 7. At each meeting of the stockholders, every 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 or by his duly authorized
attorney. Each stockholder shall have one vote for each share of stock having
voting power, registered in his name on the books of the corporation on the date
of closing the books of the corporation against transfers of stock or on the
record date fixed for the determination of stockholders entitled to vote at such
meeting or, if the books be not closed or a record date fixed, then on the date
of such meeting. All questions shall be decided by a plurality vote.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be not less than one nor more than nine. Directors need not be
stockholders. They shall be elected at the annual meeting of the stockholders,
and each director shall be elected to serve until his successor shall be elected
and shall qualify.
Section 2. The directors may hold their meetings and have one or more offices
inside or outside Nevada at such places as they may from time to time determine.
The original or duplicate stock ledger or a statement setting out the name and
address of the custodian thereof shall be kept at the principal office in
Nevada.
Section 3. Vacancies in the Board of Directors may be filled by a majority
vote of the remaining directors, though less than a quorum, and each director so
elected shall hold office for the unexpired term in respect to which such
vacancy occurred or until the next annual election of directors.
Section 4. The property and business of the corporation shall be managed by
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 Articles 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 5. The first meeting of each newly elected Board shall be held at
such time and place either within or without the State of Nevada, 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 to
legally constitute the meeting, provided a quorum shall be
-2-
<PAGE>
present or they may meet at such place and time as shall be fixed by the consent
in writing of all the directors.
Section 6. Regular meetings of the Board of Directors may be 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.
Section 7. Special meetings of the Board of Directors may be called by the
president on three days notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the president or secretary in
like manner and on like notice on the written consent of two directors.
Section 8. A majority of the directors at a meeting duly assembled 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 a
quorum is present 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. Any action of a majority, although not at a regularly
called meeting, and the record thereof, if assented to in writing by all of the
other members of the board, shall be as valid and effective in all respects as
if passed by the board in regular meeting. The Directors may act in lieu of a
meeting by written resolutions.
COMMITTEES OF DIRECTORS
Section 9. 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 two or more of the directors of the corporation, which, to the
extent provided in said resolution or resolutions, shall have and may exercise
the powers of the Board of Directors in the management of the business and
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 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 10. The committees shall keep regular minutes of their proceedings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 11. Directors, as such shall not receive any stated salary for their
services, but by resolution 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 board; provided, however, that nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 12. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 13. Any director may be removed from office by the vote or written
consent of stockholders representing not less than two-thirds of the issued and
outstanding capital stock having voting power, and his successor may be elected
at the same meeting. No
-3-
<PAGE>
director shall be removed from office except upon the vote or written consent of
stockholders owning sufficient shares to have prevented his election to office
in the first instance.
ARTICLE IV
NOTICES
Section 1. Whenever under the provisions of the statutes or of the Articles
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 such address as appears on the books of the corporation, and such
notice shall be deemed to be given at the time when the same shall be thus
mailed.
Section 2. Whenever all parties entitled to vote at any meeting, whether of
directors or stockholders, consent, either by a writing on the records of the
meeting or filed with the secretary, or by presence at such meeting and oral
consent entered on the minutes, or by taking part in the deliberations at such
meeting without objection, the actions taken at such meeting shall be as valid
as if had at a meeting regularly called and noticed, and at such meeting any
business may be transacted which is not excepted from the written consent or to
the consideration of which no objection for want of notice is made at the time,
and if any meeting be irregular for want of notice or such consent, provided a
quorum was present at such meeting, the proceedings of such meeting may be
ratified and approved and rendered valid and the irregularity or defect therein
waived by a writing signed by all parties having the right to vote thereat.
Such consent or approval, if given by stockholders, may be by proxy or attorney,
but all such proxies and powers of attorney must be in writing.
Section 3. Whenever any notice whatsoever is required to be given under the
provisions of the statute, of the Articles of Incorporation or of these By-laws,
a waiver thereof in writing signed by the person entitled to said notice either
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 directors
and shall be a president, a vice-president, a secretary, and a treasurer. Any
two offices, except the offices of president and vice-president, may be held by
the same person.
Section 2. The Board of Directors, at its first meeting after each annual
meeting of stockholders, shall choose a president from its members, and shall
choose a vice-president, a secretary and a treasurer, none of whom need be a
member of the board.
Section 3. The board may appoint additional vice-presidents, and assistant
secretaries and assistant treasurers and 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.
-4-
<PAGE>
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 in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board 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.
THE PRESIDENT
Section 6. The president 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.
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.
VICE-PRESIDENT
Section 8. The vice-president shall, in the absence or disability of the
president, perform the duties and exercise the powers of president, and shall
perform such other duties as the Board of Directors shall prescribe.
THE SECRETARY
Section 9. 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 of
Directors, affix the same to any instrument requiring a seal, and when so
affixed, it shall be attested by his signature or by the signature of the
treasurer or an assistant secretary.
THE TREASURER
Section 10. 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 11. 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
-5-
<PAGE>
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.
Section 12. If required by the Board of Directors, he shall give the
corporation a bond 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 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.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Certificates of stock of the corporation shall be in such form not
inconsistent with the Articles of Incorporation as shall be approved by the
Board of Directors, shall be issued under the seal of the corporation and shall
be numbered and shall be entered in the books of the corporation as they are
issued. They shall exhibit the holder's name and the number of shares owned by
him and shall be signed by the president or vice-president and the secretary or
an assistant secretary or the treasurer or an assistant treasurer. If any stock
certificate is countersigned or otherwise authenticated by a transfer agent or
transfer clerk and a registrar, a facsimile of the signatures of the said
officers may be printed or lithographed upon such certificates and the stock
certificates shall set forth the designations, preferences and relative,
participating, optional or other special rights of the various classes of stock
or series thereof and the qualifications, limitations or restrictions of such
rights.
TRANSFERS OF STOCK
Section 2. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate of stock duly endorsed or accompanied by proper
evidence of succession, assignment 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.
CLOSING OF TRANSFER BOOKS
Section 3. The directors may prescribe a period not exceeding forty days
prior to any meeting of the stockholders or prior to the day appointed for the
payment of dividends during which no transfer of stock on the books of the
corporation may be made, or may fix a day not more than forty days prior to the
holding of any such meeting or the date for the payment of any such dividend as
the day as of which stockholders entitled to notice of and to vote at such
meeting and entitled to receive payment of such dividend shall be determined;
and only stockholders of record on such day shall be entitled to notice or to
vote at such meeting or to receive payment of such dividend.
REGISTERED STOCKHOLDERS
Section 4. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder-in-fact thereof and, accordingly,
shall not be bound to
-6-
<PAGE>
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of Nevada.
LOST CERTIFICATES
Section 5. The Board of Directors may direct a new certificate or
certificates of stock 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
certificate 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,
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.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the Articles of Incorporation, if any relate thereto, 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 Articles of Incorporation.
Section 2. Before payment of any dividend or making any distribution of
profits, there may be set aside out of the 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 fund 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 interests of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation shall
be signed by such officer or officers as the Board of Directors may from time to
time designate.
FISCAL YEAR
Section 4. The fiscal year shall begin the first day of each year.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of the
corporation, the date of its incorporation and the words "Corporate Seal,
Nevada."
-7-
<PAGE>
INDEMNIFICATION
Section 6. Each person who is or was a director or officer of the corporation
(including the heirs, executors, administrators or estate of such person) shall
be indemnified by the corporation as of right against any liability, cost, or
expense incurred by such director or officer by reason of the fact that such
person is or was a director, officer, employee, or agent of the corporation, or
is 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, except to the extent that such indemnification is prohibited
by Chapter 78 of the Nevada Revised Statutes. The expenses of directors or
officers, past or present, incurred in defending a civil or criminal action,
suit, or proceeding must be paid by the corporation as incurred and in advance
of the final disposition of the action, suit, or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation.
ARTICLE VIII
AMENDMENTS
Section 1. These By-laws may be altered or amended at any regular meeting of
the stockholders or at any special meeting of the stockholders at which a quorum
is present or represented, if notice of the proposed alteration or amendment be
contained in the notice of such meeting, by the affirmative vote of a majority
of the stock issued and outstanding and entitled to vote at such meeting and
present and represented thereat, or by the affirmative vote of a majority of the
board or at any meeting of the board or by the written consent of all of the
members of the board.
I, THE UNDERSIGNED, being the Secretary of BOOMTOWN HOOSIER, INC., DO
HEREBY CERTIFY the foregoing to be the By-laws of said corporation, as adopted
at a meeting of the directors held on the 20th day of December, 1995.
/s/ Sylvia Maldonado
--------------------------
Secretary
-8-
<PAGE>
EXHIBIT 3.45
ARTICLES OF ORGANIZATION
OF
INDIANA VENTURES LLC
The undersigned person acting as the organizer to form a limited
liability company (the "Company") under the provisions of Chapter 86 of the
Nevada Revised Statutes, adopt the following Articles of Organization.
ARTICLE 1
NAME
The name of the Company is Indiana Ventures LLC.
ARTICLE 2
PERIOD OF DURATION
The latest date upon which the Company will dissolve is fifty-five
(55) years after the date of filing of the Articles of Organization with the
Secretary of State of the State of Nevada, unless the Company is earlier
dissolved in accordance with either the provisions of the Operating Agreement of
the Company (as originally executed and as amended from time to time (the
"Operating Agreement'), or the Nevada Limited Liability Company Act, Nev. Rev.
Stat. (S)(S) 86.011 to 86.571, as amended from time to time (the "Act").
Capitalized terms used herein but not defined shall have the meanings set forth
in the Operating Agreement.
ARTICLE 3
PURPOSE
The purpose of the Company shall be:
A. to own, lease, operate, construct, acquire and maintain a
riverboat gaming project to be located in Switzerland County, Indiana and such
other facilities related thereto as may be approved in accordance with the
Operating Agreement and associated intangible property rights such as trade or
service marks, and to engage in any lawful business and matters reasonably
related thereto whether directly or through one or more Subsidiaries;
B. to exercise all other powers necessary to, or reasonably connected
with, the Company's businesses and which may legally be exercised by limited
liability companies under the Act; and
C. to engage in all activities necessary, customary, convenient, or
incident to any of the foregoing.
<PAGE>
ARTICLE 4
PRINCIPAL PLACE OF BUSINESS
The principal place of business of the Company within the State of
Nevada shall first be at 3930 Howard Hughes Parkway, Las Vegas, Nevada 89109.
The records required by Nev. Rev. Stat. (S) 86.241 shall be maintained at this
address.
ARTICLE 5
RESIDENT AGENT
The Company's registered office shall first be at 1700 Bank of America
Plaza, 300 S. Fourth St., Las Vegas, NV 89101 and the name of its initial
resident agent at such address shall be Lionel Sawyer & Collins.
ARTICLE 6
RIGHT TO CONTINUE BUSINESS
Upon the death, insanity, retirement, resignation, expulsion,
bankruptcy, dissolution of a Member or occurrence of any other event which
terminates the continued membership of a Member in the Company, the Company
shall be dissolved, unless the business of the Company is continued by the
consent of not less than a majority in interest of the Members as provided in
the Operating Agreement.
ARTICLE 7
MANAGEMENT
Section 8.01 Management. The business and affairs of the Company
----------
shall be managed by the Members solely in accordance with the provisions of the
Operating Agreement.
Section 8.02 Names and Addresses. The names and addresses of the
-------------------
Members are:
Name Address
---- -------
Full House, L.L.C. 5008 West 96/th/ St.
Indianapolis, Indiana
46268
Hilton Gaming (Switzerland County) 3930 Howard Hughes Parkway
Corporation Las Vegas, NV 89109
Boomtown Hoosier, Inc. P.O. Box 399
Verdi, NV 89439
Section 8.03 Right to Contract Debt. The Members may contract debts
----------------------
on behalf of the Company only in compliance with the provisions of the Operating
Agreement.
-2-
<PAGE>
ARTICLE 8
DATA RESPECTING ORGANIZER
The name and post office address of the organizer, who is not a Member
or manager of the Company, is as follows:
Teresa M. Ovies
50 W. Liberty #1100
Reno, NV 89501
EXECUTED this 22 day of December, 1995.
/s/ Teresa M. Ovies
---------------------------------
Teresa M. Ovies, Organizer
STATE OF NEVADA )
)ss:
COUNTY OF WASHOE )
This instrument was acknowledged before me on Dec 22 1995, by Teresa
M. Ovies.
/s/ Irene E. Madrid
---------------------------------
NOTARY PUBLIC
-3-
<PAGE>
EXHIBIT 3.46
OPERATING AGREEMENT OF
INDIANA VENTURES LLC
A NEVADA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made as of this __________ day of December,
1995, by and among the members of Indiana Ventures LLC, a Nevada limited
liability company (the "Company"), all of whom have signed this Operating
Agreement.
NOW THEREFORE, pursuant to the Act (as hereinafter defined), the following
agreement, including, without limitation, Appendix 1 (Tax Accounting Procedures)
attached hereto and by reference incorporated herein shall constitute the
Operating Agreement, as amended from time to time, for the Company.
ARTICLE 1
---------
DEFINITIONS
-----------
The following terms used in this Operating Agreement shall have the
following meanings (unless otherwise expressly provided herein). Other
capitalized terms used herein and not defined have the meanings set forth in
Appendix 1 (Tax Accounting Procedures).
1.1. "Act" means the Nevada Limited Liability Company Act, Nevada Rev.
---
Stat. (S)(S) 86.011 to 86.571, as amended from time to time.
1.2. "Affiliate" means a Person that directly, or indirectly through one
---------
or more intermediaries, controls, is controlled by, or is under common control
with, a specified Person.
1.3. "Agreement" means this Operating Agreement, including without
---------
limitation, the Appendix 1 (Tax Accounting Procedures) hereto as originally
executed and as amended from time to time.
1.4. "Approval" and "Approved" are defined in Article 8.
-------- --------
1.5. "Assignee" means a transferee of a Member's Interest who has not been
--------
admitted as a Substitute Member.
1.6. "Boomtown" means Boomtown Hoosier, Inc.
--------
1.7. "Capital Contribution" means the Initial Capital Contributions of a
--------------------
Member, to the extent actually made, together with the amount of money and the
Asset Value of any property other than money subsequently contributed to the
Company by a Member with respect to such Member's Interest in the Company.
1.8. "Company" means Indiana Ventures LLC, a Nevada limited liability
-------
company.
1
<PAGE>
1.9. "Entity" and "Entities" means any general partnership, government
------ --------
entity, limited partnership, limited liability company, corporation, joint
venture, trust, business trust, cooperative, association or other organization.
1.10. "Gaming Authorities" means all agencies, authorities and
------------------
instrumentalities of the United States, any state, nation, or other governmental
entity, or any subdivision thereof, regulating gaming or related activities.
1.11. "Hilton" means Hilton Gaming (Switzerland County) Corporation.
------
1.12. "Initial Capital Contribution" means the Capital Contributions
agreed to be made by the initial Members as described in Article 4.
1.13. "License" means any license, finding of suitability, qualification,
-------
approval or permit by or from any Gaming Authority.
1.14. "Majority Member" is defined in Section 8.1.
---------------
1.15. "Managing Member" means, so long as Hilton and Boomtown hold the
---------------
Original Percentages, collectively Hilton and Boomtown, who must act by
unanimous consent as set forth in Section 8.1. In the event Hilton and Boomtown
no longer hold the Original Percentages, Managing Member shall mean the Majority
Member subject to the provisions of Section 8.8 hereof.
1.16. "Member" means those Persons executing this Agreement and any
------
Person who may hereafter become an additional or substituted Member.
1.17. "Member's Interest" means a Member's Units, share of the Profits and
-----------------
Losses of the Company and the right to receive distributions of the Company's
assets.
1.18. "Minority Member" is defined in Section 8.1.
---------------
1.19. "Non-Voting Member" means a Member holding Non-Voting Units.
-----------------
1.20. "Non-Voting Units" means the 30 Non-Voting Units as further
----------------
described in Article 5, or as converted from Voting Units pursuant to Section
5.1.
1.21. "Original Percentages" means the respective percentages of Voting
--------------------
Units initially held by Hilton and Boomtown as set forth in Section 5.1 hereof
namely, approximately 51.6% and 48.4%.
1.22. "Person" shall mean any individual or Entity, and the heirs,
------
executors, administrators, legal representatives, successors, and assigns of
such Person where the context so requires.
1.23. "Property" means all real and personal property, tangible and
--------
intangible, owned by the Company.
-2-
<PAGE>
1.24. "Subsidiary" means any Entity or Entities owned or controlled
----------
directly or indirectly by the Company.
1.25. "Substituted Member" means an Assignee who has been admitted to all
------------------
of the rights of membership pursuant to Article 10.
1.26. "The Project" means a riverboat gaming project to be located in
-----------
Switzerland County, Indiana and such other facilities related thereto as may be
approved by the Managing Member and associated intangible property rights such
as trade or service marks.
1.27. "Units" as to any Member shall mean and refer to the number of
-----
Voting Units or Non-Voting Units, as the case may be, in the Company shown next
to the name of such Member in Article 5 as the same may be amended from time to
time.
1.28. "Voting Members" shall mean those Members holding Voting Units.
--------------
1.29. "Voting Units" shall mean the 970 Voting Units, as further described
------------
in Article 5 hereof, entitled to exercise all of the voting power of the
Company.
ARTICLE 2
---------
FORMATION OF COMPANY
--------------------
2.1. Formation. The Articles of Organization attached hereto as Appendix
---------
2 and incorporated by reference herein (the "Articles of Organization") are
hereby ratified and incorporated by reference in this Agreement. Upon the filing
of the Articles of Organization the Company automatically shall be formed as a
Nevada limited liability company under and pursuant to the Act, and the parties
hereto shall take all action necessary to cause such formation.
2.2. Name. The name of the Company is Indiana Ventures LLC.
----
2.3. Principal Place of Business. The principal place of business of the
---------------------------
Company within the State of Nevada shall first be at 3930 Howard Hughes Parkway,
Las Vegas, Nevada 89109. The Company may locate its places of business and
registered office at any other place or places as the Managing Member may from
time to time deem advisable.
2.4. Registered Office and Agent. The Company's registered office shall
---------------------------
first be at 1700 Bank of America Plaza, 300 S. Fourth Street, Las Vegas, Nevada
89101. The name of its initial resident agent at such address shall be Lionel
Sawyer & Collins.
2.5. Term. The latest date upon which the Company will dissolve is fifty-
----
five (55) years after the date of filing of the Articles of Organization with
the Secretary of State of the State of Nevada, unless the Company is earlier
dissolved in accordance with either the provisions of this Agreement or the Act.
ARTICLE 3
---------
BUSINESS OF THE COMPANY
-----------------------
3.1. Permitted Businesses. The purpose of the Company shall be:
--------------------
-3-
<PAGE>
a. to own, lease, operate, construct, acquire and maintain the
Project and to engage in any lawful business and matters reasonably related
thereto whether directly or through one or more Subsidiaries;
b. to exercise all other powers necessary to, or reasonably connected
with, the Company's businesses and which may legally be exercised by limited
liability companies under the Act; and
c. to engage in all activities necessary, customary, convenient, or
incident to any of the foregoing.
3.2. Limits on Foreign Activity. The Company shall not directly engage in
--------------------------
business in any state, territory or country which does not recognize limited
liability companies or the effectiveness of the Act in limiting the liabilities
of the Members of the Company. If the Company desires to conduct business in
any such State, it shall do so through an entity which will ensure limited
liability to the Members.
ARTICLE 4
---------
CONTRIBUTIONS TO COMPANY
------------------------
4.1. Members' Initial Capital Contributions.
--------------------------------------
a. The total Initial Capital Contribution to the Company shall be
Five Hundred Thousand Dollars ($500,000.00). Each Member shall pay a share of
the Initial Capital Contribution proportionate to its respective number of Units
described in Section 5.1 below concurrently with the signing this Agreement. As
part of its share of the Initial Capital Contribution, Hilton shall contribute
to the Company all of the outstanding shares of stock of Switzerland County
Development Corporation, a Nevada corporation. The Members agree that the value
of such contribution is $100.00. The Initial Capital Contribution first shall be
applied to the organizational expenses of the Company, including without
limitation, legal, accounting and promotional fees and costs and thereafter
utilized for capital expenditures, working capital or other expenses of the
Company's business in the discretion of the Managing Member. Without limiting
the foregoing, the Initial Capital Contribution shall be used, in part, to
reimburse the expenses (including legal fees) of Hilton and Boomtown in
organizing the Company, performing due diligence with respect to the Project,
preparing and filing applications with Governmental Authorities relating to the
Project and all other expenses associated with acquisition of, or otherwise
with, the Project. In lieu of receiving reimbursement for such expenses, Hilton
and Boomtown may set-off such expenses against the amounts of their respective
Initial Capital Contributions to the extent approved by the Managing Member.
4.2. Additional Capital Contributions. Except with respect to the Initial
--------------------------------
Capital Contributions and as otherwise provided for in Article 8 to remedy or
prevent a deficit or under the Act, unless all Members agree, no Member shall be
obligated to make any additional Capital Contributions to the Company. If the
Company needs additional capital to meet its obligations, the Company may borrow
all or part of such additional capital from any source, including, without
limitation, any Member. No Member shall be obligated to make a loan to the
Company.
-4-
<PAGE>
4.3. No Third Party Beneficiaries. The provisions of this Article 4 are
----------------------------
not intended to be for the benefit of and shall not confer any rights on any
creditor or other Person (other than a Member in such Member's capacity as a
Member) to whom any debts, liabilities or obligations are owed by the Company or
any of the Members.
4.4. Withdrawal or Reduction of Members' Contributions to Capital.
------------------------------------------------------------
a. A Member shall not receive out of the Company's Property any part
of such Member's contributions to capital until all liabilities of the Company,
except liabilities to Members on account of their contributions to capital, have
been paid or there remains Property of the Company sufficient to pay them.
b. A Member shall not resign before the dissolution and winding up
of the Company, subject to the provisions of Chapter 463 of the Nevada Revised
Statutes or other applicable law.
c. A Member, irrespective of the nature of such Member's
contribution, has the right to demand and receive only cash in return for such
Member's contribution to capital.
4.5. Miscellaneous.
-------------
a. No Interest on Capital Contribution. No Member shall be entitled
-----------------------------------
to or shall receive interest on such Member's Capital Contribution.
b. No Withdrawal of Capital Contribution. No Member may withdraw any
-------------------------------------
capital from the capital of the Company except as expressly provided herein or
in the Act.
ARTICLE 5
---------
AUTHORIZATION AND ISSUANCE OF UNITS
-----------------------------------
5.1. Authorization and Issuance of Initial Units. There are hereby
-------------------------------------------
authorized 1000 Units consisting of 970 Voting Units and 30 Non-Voting Units.
Except as otherwise expressly provided herein or in the Act, solely Members
holding Voting Units shall be entitled to participate in the management and
control of the Company or its business and to vote on any matter affecting the
Company, provided, however, during any period when the percentage of Voting
Units of either of Hilton or Boomtown falls below the Original Percentage, the
Voting Units of the Person holding less than its Original Percentage shall
convert to Non-Voting Units until such time, if ever, that the Original
Percentage for such Person is restored. The foregoing authorized Units are
issued as follows:
Member Units
------ -----
Full House, L.L.C. 30 Non-Voting Units
Hilton 500 Voting Units
Boomtown 470 Voting Units
-5-
<PAGE>
5.2. Securities Law Qualification. THE SECURITIES REPRESENTED BY THIS
----------------------------
DOCUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.
THERE IS NO PUBLIC TRADING MARKET FOR THE MEMBER'S INTERESTS AND IT IS NOT
ANTICIPATED THAT ONE WILL DEVELOP. ADDITIONALLY, THERE ARE SUBSTANTIAL
RESTRICTIONS UPON THE TRANSFERABILITY OF THE MEMBER'S INTERESTS. NO SALE OR
ASSIGNMENT BY A MEMBER OF HIS MEMBER'S INTERESTS OR SUBSTITUTION OF MEMBERS MAY
BE MADE WITHOUT CERTAIN CONSENTS. THEREFORE, MEMBERS MAY NOT BE ABLE TO
LIQUIDATE THEIR INVESTMENTS IN THE EVENT OF AN EMERGENCY. FURTHER, MEMBER'S
INTERESTS MAY NOT BE READILY ACCEPTED AS COLLATERAL FOR A LOAN. MEMBER'S
INTERESTS SHOULD BE CONSIDERED ONLY AS A LONG TERM INVESTMENT.
Each Member represents and warrants to the other Members and the Company as
follows:
A. Such Member is capable of protecting his own interests in connection
with acquisition of such Member's Interest.
B. Such Member is able to bear the economic risk of losing his entire
investment in the Company.
C. The investment of such Member in the Company does not exceed ten
percent (10%) of such Member's (or such Member's ultimate parent
Entity's) net worth.
D. Such Member has been furnished with materials relating to the Company
which the Member has requested and has been afforded the opportunity
to make inquiries of and has received answers from representatives of
the Company concerning the Company, the terms and conditions of the
offering of Member's Interests or any other matters relating to the
Company, and has further been afforded the opportunity to obtain any
additional information necessary to verify the accuracy of any
information provided (to the extent the Company possesses such
information or could acquire it without unreasonable effort or
expense).
E. Such Member has by reason of his own business and financial experience
the capacity to evaluate the merits and risks of the prospective
investment in the Company and protect his interests in connection with
such investment.
F. Such Member (together with such Member's spouse, if applicable, or
such Member's ultimate parent Entity) has (1) a net worth of at least
One Million Dollars ($1,000,000.00), or (2) has had during the last
two tax years, and expects to have during the current taxable year,
annual income of at least Two Hundred Thousand Dollars ($200,000.00),
or has had (together with such Member's spouse, if applicable) during
the last two taxable years, and
-6-
<PAGE>
expects to have during the current taxable year, annual income of at
least Three Hundred Thousand Dollars ($300,000.00) without regard to
this investment in the Company.
5.3. Authorization and Sale of Additional Units. Subject to the provisions
------------------------------------------
of Section 8.2 hereof, additional Units shall be authorized and issued only upon
the Approval by the Managing Member.
ARTICLE 6
---------
DISTRIBUTIONS
-------------
6.1. Optional Distributions. Except for the mandatory distributions in
----------------------
this Article 6, distributions shall be made when and as declared by the Managing
Members. Any distributions shall be made to the Members pro rata in accordance
with their respective Units, provided that no distribution shall be made to a
Member which will cause or increase an Adjusted Capital Account Deficit for such
Member; and provided that distributions shall only be made to the extent that,
after giving effect to a distribution, the assets of the Company are in excess
of all liabilities of the Company except liabilities to Members on account of
their Capital Contributions.
6.2. Tax Distributions. To the extent that sufficient funds exist, and
-----------------
provided no distribution shall be made which will cause or increase an Adjusted
Capital Account Deficit for a Member, the Company shall distribute to each
Member not later than ninety (90) days after the close of each Fiscal Year, pro
rata in accordance with its Units, no less than its share of the "Tax
Distribution Amount." The Tax Distribution Amount shall be determined for each
Fiscal Year by: (A) multiplying the "Marginal Tax Rate" (as defined below) for
that Fiscal Year by the taxable income of the Company (as determined under
Section 703(a) of the Code for that Fiscal Year), and subtracting (B) the sum of
all other distributions to Members during the Fiscal Year (other than
distributions required under this Section 6.2 in respect of one or more prior
Fiscal Years). The "Marginal Tax Rate" for any particular Fiscal Year shall be
the sum of: (A) the highest tax rate that would be imposed on any Member under
either Section 1 or 11 of the Code, whichever is higher, for that Fiscal Year,
plus (B) the highest marginal tax rate for corporate taxation, or the highest
marginal tax rate for individual taxation, whichever marginal rate is higher, of
the State of California.
6.3. Amounts Withheld. All amounts withheld pursuant to the Code or any
----------------
provision of any state or local tax law with respect to any payment, allocation
or distribution to the Company or the Members shall be treated as amounts
distributed to the Members pursuant to this Article 6 for all purposes under
this Agreement. The Company is authorized to withhold from distributions, or
with respect to allocations, to the Member and to pay over to any federal, state
or local government any amounts required to be so withheld, pursuant to the Code
or any provisions of any other federal, state or local law and shall allocate
such amounts to the Members with respect to which such amount was withheld.
-7-
<PAGE>
ARTICLE 7
---------
BOOKS, RECORDS AND ACCOUNTING
-----------------------------
7.1. Books and Records.
-----------------
a. The Company shall maintain at its principal place of business
books of account that accurately record all items of income and expenditure
relating to the business of the Company and that accurately and completely
disclose the results of the operations of the Company. Such books of account
shall be maintained on the method of accounting selected by the Managing Member
and on the basis of the Fiscal Year. Each Member, upon not less than seventy-two
(72) hours advance written notice to the Managing Member, at such Member's own
expense shall have the right to inspect, copy, and audit the Company's books and
records at any time during normal business hours without notice to any other
Member.
b. The Company shall keep at its registered office such records as
are required by the Act.
7.2. Tax Returns. The Managing Member shall cause independent certified
-----------
public accountants of the Company to prepare and timely file all income tax and
other tax returns of the Company. The Company shall furnish to each Member a
copy of all such returns together with all schedules thereto and such other
information which each Member may reasonably request in connection with such
Member's own tax affairs.
ARTICLE 8
---------
MANAGEMENT
----------
8.1. General Management.
------------------
a. The business and affairs of the Company shall be managed by or
under the direction of the Managing Member. The Managing Member shall direct,
manage and control the business of the Company and, subject to the limitations
and qualifications set forth in this Article 8, shall have full and complete
authority, power and discretion to make any and all decisions and to do any and
all things which the Managing Member shall deem to be reasonably required or
convenient in light of the Company's business and objectives.
All actions on behalf of the Company may be taken only after Approval (as
hereinafter defined) by the Managing Member. During the period that Hilton and
Boomtown hold the Original Percentages of Voting Units, "Approval" and
"Approved" mean the unanimous approval of Hilton and Boomtown. During any period
that one or other of Hilton and Boomtown holds a higher percentage of Voting
Units than its Original Percentage, and the other's Voting Units have converted
to Non-Voting Units in accordance with Section 5.1 hereof, then the Person
holding the higher percentage than such Person's Original Percentage shall be
deemed the "Majority Member" and the other Person holding a lower percentage
than its Original Percentage shall be deemed the "Minority Member," "Approval"
and "Approved" shall mean approval by the Majority Member and Managing Member
shall be deemed to refer only to the Majority Member. By way of example, if
after the date hereof Boomtown holds 52% of the Voting Units and Hilton holds
48%, Approval and Approved shall mean approval solely by Boomtown, Boomtown
shall be the Majority
-8-
<PAGE>
Member, and therefore the Managing Member, and Hilton's Units shall be converted
to Non-Voting Units.
Without limiting the generality of the foregoing, the Managing Member shall
have sole power and authority, on behalf of the Company, upon Approval:
i. to acquire property from any Person as the Managing Member may
determine. The fact that a Member is directly or indirectly an Affiliate of such
Person shall not prohibit the Managing Member from dealing with that Person;
ii. to establish policies for investment and to make investments of
Company funds (by way of example but not limitation) in time deposits, short
term governmental obligations, commercial paper or other investments;
iii. to make distribution of available cash to Members;
iv. to employ accountants, legal counsel, managers, managing agents
or other experts or consultants to perform services for the Company, including,
without limitation, those for the predevelopment and development of the Project
and to compensate them from Company funds;
v. to borrow money on behalf of the Company from banks, other
lending institutions, the Members, or Affiliates of the Members on such terms as
they deem appropriate, and in connection therewith, to hypothecate, encumber and
grant security interests in the assets of the Company to secure repayment of the
borrowed sums. Except as otherwise provided in the Act, no debt shall be
contracted or liability incurred by or on behalf of the Company except by the
Company's Managing Member;
vi. to purchase liability and other insurance to protect the
Company's Property and business;
vii. to organize Entities to serve as the Company's subsidiaries, to
determine the form and structure thereof and control the same;
viii. to execute, deliver and perform any agreements on behalf of the
Company, with any other Person for any purpose, subject to the spending limits
as Managing Member may Approve;
ix. to hire, terminate and compensate employees involved in the
day-to-day operations of the Company's facilities; and
x. to determine maintenance, operation, fixtures, hours of
operation, service and promotional activities at the Company's Property.
b. Unless authorized to do so by this Agreement or by Approval of the
Managing Member, no Member, agent or employee of the Company shall have any
power or authority to bind the Company in any way, to pledge its credit or to
render it liable pecuniarily for any purpose. However, the Managing Member may
act (or may cause the Company to act) by a duly authorized power of attorney.
-9-
<PAGE>
c. At any time that the Managing Member consists of two Members,
the board of directors of each Subsidiary shall consist of any even number of
members and Boomtown and Hilton shall each be entitled to elect one-half of the
members of all such boards. In the event of a vacancy on the board of directors
of any Subsidiary, the Member who elected such director shall solely be entitled
to fill such vacancy. In all other circumstances, the board shall be appointed
by the sole Managing Member.
d. The Managing Member must at all times hold at least twenty
percent (20%) of all outstanding Member's Interests.
8.2. Actions Requiring Minority Member Approval.
------------------------------------------
(a) Notwithstanding any other provision of this Agreement, during any
time that the Managing Member consists solely of the Majority Member, and so
long as the Minority Member owns at least twenty percent (20%) of the total
Units, the Managing Member shall not take any of the following actions without
the consent of the Minority Member:
(i) Adoption of the annual budget for the Project;
(ii) The making of a capital expenditure in excess of $500,000.00;
(iii) The issuance of additional Units;
(iv) Transactions with an Affiliate other than transactions with
Affiliates on terms consistent with an arms-length transaction with
third-parties. After approval of the management agreement with an
Affiliate as described in Section 8.5 by Hilton and Boomtown, any
subsequent management agreement with an Affiliate upon
substantially the same terms and conditions as the approved
agreement shall not require the consent of the Minority Member; or
(v) Amendment of this Agreement or the Articles of Organization so as
to adversely impact the Minority Member;
(vi) Expulsion of any Member pursuant to Section 10.6;
(vii) The requirement of additional Capital Contributions by the Members.
(b) In the event that Managing Member and the Minority Member are
unable to agree upon any proposed action which requires the consent of the
Minority Member pursuant to Section 8.2(a) above, either person may elect to
submit resolution of the issue to binding arbitration conducted in accordance
with the provisions of Section 8.09 hereof.
8.3. No Liability for Certain Acts. The Managing Member shall perform
-----------------------------
its duties in good faith, in a manner such Managing Member reasonably believes
to be in the best interests of the Company, or not opposed to the best interests
of the Company. Provided the Managing Member so acts at all relevant times, the
Managing Member shall not be responsible to any Members because of a loss of
their investment in the Company or a loss in the operations of the Company. The
Managing Member does not, in any way, guarantee the return of the Members'
Capital Contributions or a profit for the Members from
-10-
<PAGE>
the operations of the Company. The Managing Member shall incur no liability to
the Company or to any of the Members as a result of engaging in any other
business or venture. The Managing Member shall be entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, in each case prepared or presented by Persons listed below
unless such Managing Member has knowledge concerning the matter in question that
would cause such reliance to be unwarranted:
a. one or more employees or other agents of the Company whom the Managing
Member reasonably believes to be reasonably reliable and competent in the
matters presented; and
b. legal counsel, public accountants, or other persons as to matters that
the Managing Member reasonably believes to be within such Persons' professional
or expert competence.
8.4. Indemnity of the Managing Member, Employees or Agents.
-----------------------------------------------------
a. The Company agrees to indemnify, pay, protect and hold harmless
such Managing Member (on demand of and to the satisfaction of such Managing
Member) from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, proceedings, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
all reasonable costs and expenses in connection therewith, of investigation,
defense, appeal and -- provided that consent to settlement from all Members is
obtained, which consent shall not be unreasonably withheld -- expenses of
settlement, of any and all suits, actions or proceedings instituted against a
Managing Member or the Company) which may be imposed on, incurred by, or
asserted against a Managing Member or the Company in any way relating to or
arising out of, or alleged to relate to or arise out of, any action or inaction
on the part of the Company or on the part of a Managing Member, acting in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Company, in connection with the formation, operation
and/or management of the Company, the Company's purchase and operation of the
Project, and/or as a result of a Managing Member's agreement to act as Managing
Member of the Company. If any action, suit or proceeding shall be pending or
threatened against the Company or a Managing Member relating to or arising out
of, or alleged to relate to or arise out of, any such action or nonaction, a
Managing Member shall have the right to employ, at the expense of the Company,
separate counsel of such Managing Member's choice in such action, suit or
proceeding and the Company shall advance the reasonable out-of-pocket expenses
of such Managing Member in connection therewith. The satisfaction of the
obligations of the Company under this Section shall be from and limited to the
assets of the Company and no Member shall have any personal liability on account
thereof. The foregoing rights of indemnification are in addition to and shall
not be a limitation of any rights of indemnification as provided in Sections
86.411 through 86.451 of the Act, as such may be amended from time to time.
b. This Section shall not limit the Company's power to pay or
reimburse expenses incurred by a Managing Member in connection with such
Managing Member's appearance as a witness in a proceeding at a time when the
Managing Member has not been made a named defendant or respondent in the
proceeding.
-11-
<PAGE>
c. The Company may indemnify and advance expenses to an employee or
agent of the Company who is not a Managing Member to the same or to a greater
extent as the Company may indemnify and advance expenses to a Managing Member;
and
d. The Company shall use its best efforts to purchase and maintain
insurance in the amount of at least $2,000,000.00, on behalf of a Person who is
or was a Managing Member, Member, employee, fiduciary, or agent of the Company
or who, while a Managing Member, Member, employee, fiduciary, or agent of the
Company, is or was serving at the request of the Company as manager, member,
director, officer, partner, trustee, employee, fiduciary, or agent of any other
foreign or domestic limited liability company or any corporation, partnership,
joint venture, trust, other enterprise, or employee benefit plan against any
liability asserted against or incurred by such Person in any such capacity or
arising out of such Person's status as such, whether or not the Company would
have the power to indemnify such Person against such liability under the
provisions of this Section. Any such insurance may be procured from any
insurance company designated by the Managing Member, whether such insurance
company is formed under the laws of this state or any other jurisdiction of the
United States or elsewhere.
e. Any indemnification of or advance of expenses to a Managing Member
in accordance with this Section, if arising out of a proceeding by or on behalf
of the Company, shall be reported in writing to the Members within a reasonable
time after demand therefor is made.
f. For purposes of this Section 8.4, Managing Members shall include a
former Managing Member.
8.5. Transactions with Company or Otherwise. A Managing Member shall
--------------------------------------
not be required to manage the Company as such Managing Member's sole and
exclusive activity, and any of the Members or Managing Member, or any agent,
servant, or employee of any of the Members or Managing Member, may engage in and
possess any interest in other businesses or ventures of every nature and
description, independently or with other Persons, whether or not directly or
indirectly in competition with the business or purpose of the Company, and
neither the Company nor any of the Members shall have any rights, by virtue of
this Agreement or otherwise, in and to such independent ventures or the income
or profits derived therefrom, or any rights, duties, or obligations in respect
thereof. The Members or Managing Member or any Affiliate of any Member or
Managing Member may lend money to, act as surety for, and transact other
business with the Company, including, without limitation, management or
marketing agreements requiring the Company to pay fees or other compensation
from Company funds and shall have the same rights and obligations with respect
thereto as a Person who is not a Member or Managing Member of the Company,
except that nothing contained in this Section shall be construed to relieve a
Member from any duties to the Company. Without limiting the generality of the
foregoing, the Members acknowledge that an Affiliate of Hilton or Boomtown, or
both, may enter into a management agreement with the Company or a Subsidiary for
management of the Project and that such agreement may provide for management
fees of two percent (2%) of gross revenues and five percent (5%) of EBITDA (as
defined in such management agreement) from the Project.
-12-
<PAGE>
8.6. Annual Operating Budget And Members' Additional Capital Contributions
---------------------------------------------------------------------
for Operating Deficits.
- ----------------------
a. The Company shall annually adopt a budget.
b. The Managing Member shall prepare a budget in every Fiscal Year.
The budget shall be adopted if Approved. The budget may require Members to make
additional Capital Contributions to remove or prevent any deficits of the
Company, and the Managing Member shall also be entitled to require additional
Capital Contributions from the Members from time to time in the event of
deficits not anticipated in the budget. The Members shall make the additional
Capital Contributions in proportion to the number of Units held in the Company.
8.7. Failure to Make Required Additional Capital Contributions. If a Member
---------------------------------------------------------
fail to make a required additional Capital Contribution ("Noncontributing
Member") then any other Voting Member who contributed its required Capital
Contributions ("Contributing Member") shall have the right to elect to rely on
this section in which event, the following provisions shall apply. Any
Contributing Member may give notice (a "Contribution Notice") to the
Noncontributing Member that the Contributing Member has elected to make all or
any portion of the Noncontributing Member's Capital Contribution and receive an
increase in its percentage ownership interest and number of Units pursuant to
the following formula. The Contributing Member's percentage ownership interest
in the Company shall be increased to the percentage represented by a fraction,
the numerator of which is the sum of the Contributing Member's Initial Capital
Contribution and all additional Capital Contributions by the Contributing
Member, and the denominator of which is the sum of the initial Capital
Contribution and all additional Capital Contributions by all Members. The
Noncontributing Member shall transfer that portion of its Units (the
"Transferred Interest") to the Contributing Member necessary to increase the
Contributing Member's percentage ownership interest in the Company to the amount
calculated in accordance with the preceding sentence. In the event more than one
Contributing Member elects to make the additional Capital Contribution on behalf
of the Noncontributing Member and purchase the Transferred Interest, the
Contributing Members shall make such additional Capital Contribution, and the
Transferred Interest shall be allocated among the Contributing Members, in
proportion to their then existing ownership of Units in the Company. The
Noncontributing Member shall execute and deliver to the Contributing Member(s)
all such documents and instruments as are reasonably necessary or appropriate to
affect such transfer within five (5) days after receipt of the Contribution
Notice and payment of the portion of the additional Capital Contribution being
made by the Contributing Member(s). The Noncontributing Member shall also, upon
the request of the Contributing Member(s), at any time and from time to time,
execute and deliver such other documents and instruments as the Contributing
Member(s) determines are necessary or desirable to transfer ownership, title and
control of the Transferred Interest. The Noncontributing Member shall transfer
the Transferred Interest free of all liens and encumbrances. The provisions of
this Section are intended as the sole remedy of the Members in the event a
Member fails to make an additional Capital Contribution.
8.8. Repurchase of Transferred Interest. A Noncontributing Member shall have
----------------------------------
the option to repurchase all, but not less than all, of its previously
Transferred Interest(s) at
-13-
<PAGE>
any time prior to the earlier of (i) the date two years after the date of this
Agreement and (ii) opening of the Project for business to the public (the
"Repurchase Deadline"), for a purchase price (the "Repurchase Price") equal to
the amount of the Noncontributing Member's additional Capital Contribution made
by the Contributing Member together with interest thereon from the date the
additional Capital Contribution is made at the rate of ten percent (10%) per
annum. The Noncontributing Member shall exercise the foregoing option by written
notice to the Contributing Member at least ten (10) days prior to the Repurchase
Deadline. The Transferred Interest(s) shall be assigned to the Noncontributing
Member within ten (10) days after receipt of notice of the exercise of the
option to repurchase by an appropriate instrument of assignment and upon payment
of the Repurchase Price to the Contributing Member in cash or cash equivalent.
The Noncontributing Member shall be responsible for any costs or fees associated
with its repurchase of the Transferred Interest(s). Upon repurchase of all of
its Transferred Interest(s) pursuant to this Section such that its Original
Percentage is restored, any Units of the Noncontributing Member converted to
Non-Voting Units shall be converted back to Voting Units and such
Noncontributing Member shall again become a Managing Member.
8.9. Management Disputes. During any time that the Managing Member
-------------------
consists of more than one Person, in the event of any dispute arising under or
in connection with management of the Company, and if such dispute cannot be
settled through direct discussions, the Persons who are the Managing Member
shall first endeavor to settle the dispute in an amicable manner by mediation
administered by the American Arbitration Association under its Commercial
Mediation Rules. Mediation shall be conducted for a period of thirty (30) days
after selection of a mediator in accordance with the Commercial Mediation Rules,
and may be initiated by written notice of one Managing Member to the other. In
the event of a dispute relating to the requirement of an additional Capital
Contribution only, and after expiration of the period for mediation without a
resolution of the dispute, either Person may require that the dispute be settled
by arbitration held in Las Vegas, Nevada in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect and the
following procedures, which procedures shall control in the event of conflict
with such Commercial Arbitration Rules:
(a) Within ten (10) days after notice from one Person to the other that
it has elected that the dispute be arbitrated, both Persons shall
contact the American Arbitration Association to commence selection of
the arbitrators in accordance with their Commercial Arbitration
Rules. The panel to be appointed shall consist of three neutral
arbitrators.
(b) Subject to the time restrictions set forth below, the arbitrators
shall conduct the arbitration in such manner (including the allowance
of such discovery as the arbitrators determine appropriate under the
circumstances) and on such a schedule as the arbitrators deem to be
fair and reasonable and to provide each party with an adequate
opportunity to present and support its position. The arbitrators
shall resolve the dispute and give the parties written notice of
their decision, with the reasons therefore set out in full, within
thirty (30) days after the arbitrators' selection and shall have ten
(10) days thereafter to reconsider and modify such decision if any
party so requests. Thereafter the
-14-
<PAGE>
arbitrators' decision shall be final, binding, and nonappealable. The
arbitrators shall be bound by the terms of this Agreement and
applicable law.
(c) The arbitrators shall have authority to award relief under legal or
equitable principles, including interim and preliminary relief. The
arbitrators shall allocate the costs of the arbitration, including
the arbitrators' fee, between the parties upon such basis as the
arbitrators deem equitable. The arbitrators shall also award such
incidental recovery, such as interest, as required by this Agreement.
(d) Judgment upon the award rendered by the arbitrators may be entered in
any court having personal and subject matter jurisdiction.
(e) If for any reason whatsoever the written decision and award of the
arbitrators shall not be rendered within the time limits set forth in
this Section 8.8, either party may apply to any court having
jurisdiction by action, proceeding or otherwise (but not by a new
arbitration proceeding) as may be proper to determine the question in
dispute consistently with the provisions of this Agreement.
ARTICLE 9
---------
RIGHTS AND OBLIGATIONS OF MEMBERS
---------------------------------
9.1. Limitation of Liability. Each Member's liability shall be limited as
-----------------------
set forth herein and in the Act and other applicable law.
9.2. Company Debt Liability Indemnity.
--------------------------------
a. A Member will not personally be liable for any debts or losses of
the Company, except as provided in the Act.
b. Except to the extent due to such Member's default hereunder or
under the Articles of Organization, the Company agrees to indemnify, pay,
protect and hold harmless any Member (on demand and to the satisfaction of the
Member) from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, proceedings, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
all reasonable costs and expenses in connection therewith of investigation,
defense, appeal and -- provided that consent to settlement from all Members is
obtained, which consent shall not be unreasonably withheld -- expenses of
settlement of any and all suits, actions or proceedings instituted against the
Member), which may be imposed on, incurred by, or asserted against the Member
(solely as a result of such Member being a Member) in any way relating to any
agreement, liability, commitment, expense or obligation of the Company. If any
such action, suit or proceeding shall be pending or threatened against a Member,
the Member shall have the right to employ, at the expense of the Company,
separate counsel of such Member's choice in such action, suit or proceeding, and
the Company shall advance the reasonable expenses of such Member in connection
therewith. The satisfaction of the obligations of the Company under this Section
shall be from and limited to the assets of the Company and no Member shall have
any personal
-15-
<PAGE>
liability on account thereof. The foregoing rights of indemnification are in
addition to and shall not be a limitation of any rights that may be provided in
the Act.
9.3. List of Members. Upon written request of any Member, the Managing
---------------
Member shall provide a list showing the names, addresses and Units of the
Members in the Company.
9.4. Liability of a Member to the Company.
------------------------------------
a. When a Member has rightfully received the return in whole or in
part of such Member's Capital Contribution, the Member is nevertheless liable to
the Company for any sum, not in excess of the return of its Capital Contribution
with interest at the rate provided for judgments under the laws of the State of
Nevada, necessary to discharge the Company's liability to all creditors of the
Company who extended credit or whose claims arose before the return of such
Member's Capital Contribution.
b. When a Member has received a distribution wrongfully conveyed by
the Company, the Member shall hold such distribution as trustee for the Company.
ARTICLE 10
----------
TRANSFER OF INTERESTS
---------------------
10.1. Right to Pledge. Every Member's Interest may be pledged to secure any
---------------
borrowing of a Member or its Affiliates.
10.2. Admission of Substituted Member. Members holding Voting Units may
-------------------------------
freely assign or transfer their Member's Interests among themselves or to
Affiliates of Members holding Voting Units. If a Member transfers its Member's
Interest to a Person who is not already a Member or an Affiliate of a Member
holding Voting Units (or transfers title as a result of exercise of rights under
a security interest), and Members holding at least 80% of the then outstanding
Voting Units approve of such proposed transfer or assignment, the transferee or
assignee of the Member's Interests shall become a "Substituted Member" (as such
term is defined below). If Members holding at least 50% of the then outstanding
Voting Units do not approve of such transfer or assignment, the transferee or
assignee of the Member's Interest shall have no right to participate in the
management of the business and affairs of the Company, to vote its Units, or to
be admitted as a Member, but shall only be entitled to receive the share of
profits, losses and distributions, to which the transferring Member would
otherwise be entitled. As a condition to the receipt of same, the transferee or
assignee may be required by the Managing Member to pay any Capital Contributions
to which the transferor or assignor would have been liable. A "Substituted
Member" is a Person admitted to all the rights of a Member. The Substituted
Member has all the rights and powers and is subject to all the restrictions and
liabilities of his assignor whether accrued prior to or after the date of
substitution (including, without limitation, the right to allocations of profits
under Section 1.2(a) of Appendix 1 to the extent attributed to the interest
acquired by the Substituted Member), except that the substitution of the
assignee does not release the assignor from liability to the Company. In any
event, no transfer of a Member's Interest in the Company (including the transfer
of any right to receive or share in profits, losses, or distributions) shall be
effective unless and until written notice (including
-16-
<PAGE>
the name and address of the proposed transferee or assignee and the date of such
transfer) has been provided to the Company and the nontransferring Member(s).
Every Person before becoming a Substituted Member must assume this Agreement in
writing.
No Member shall be entitled to transfer less than 100% of his Member's
Interest except in the case of a transfer between Members.
10.3. Denial. If at any time (a) a Member or any Person associated in any
------
way with a Member (collectively, the "Defaulting Member") is denied a license,
found unsuitable, or is denied or otherwise unable to obtain any other License
or with respect to the Project or any other gaming operation elsewhere in the
world by a Gaming Authority or is required by any Gaming Authority to apply for
a License and does not apply within any required time limit (including
extensions, if any), withdraws any application for a License other than upon a
determination by the applicable Gaming Authority that such License is not
required, and if the result of the foregoing has or would have an adverse effect
on the Company, the Project, any other Member (referred to herein as
"Nondefaulting Member") or any Affiliate of a Nondefaulting Member or does or
would materially delay obtaining any License affecting the Company, any
Affiliate of the Company, the Project, a Nondefaulting Member or its Affiliate,
or (b) any Gaming Authority commences or threatens to commence any suit or
proceeding against the Company, its Affiliates, the Project, a Nondefaulting
Member or its Affiliates or to terminate or deny any right or License of the
Company, its Affiliate, the Project, a Nondefaulting Member or its Affiliate
because of this Agreement or the relationship to the Defaulting Member (all of
the foregoing events described in (a) and (b) above are collectively referred to
as a "Denial"), said Denial shall constitute a default by the Defaulting Member
and the Nondefaulting Members may pursue any available remedies.
Without limitation on the foregoing, if the Denial may be cured by the
replacement of one or more individuals as shareholders, officers, employees or
directors of the Defaulting Member, then the Defaulting Member shall have up to
sixty (60) days from such Denial (but not more than twenty (20) days less than
the period, if any, as may be allowed by the Gaming Authorities to effect such
cure), to replace the disapproved individual with someone, or sell his Member's
Interest to someone acceptable to the Gaming Authorities and approved by the
Members as set forth above in this Article 10. If a cure of the type described
in the preceding sentence is not feasible or permitted, or if not effected
within the time periods prescribed above, the Voting Members who are not
Defaulting Members shall have the right to purchase such Defaulting Member's
Interest, prorata according to the purchasing Members Units in the Company, at a
purchase price (the "Purchase Price") equal to fifty percent (50%) of the total
unreturned Capital Contributions of such Defaulting Member, by giving written
notice (the "Purchase Notice") to the Defaulting Member. Payment of the
Purchase Price shall be by execution and delivery of a promissory note by the
purchasing Member(s) to the Defaulting Member, amortized and payable over five
(5) years from the date of such note, prepayable at any time at the option of
the purchasing Member(s) without penalty, with monthly payments, and bearing
interest at the rate announced by Bank of America, NT&SA as its prime rate of
interest from time to time, or if Bank of America NT&SA no longer announces a
prime rate of interest, a substitute financial institution acceptable to the
purchasing Member(s). The Defaulting Member shall execute and deliver to the
purchasing Member(s) all such documents and instruments as are reasonably
necessary or appropriate to effect such transfer within five (5) days after
receipt
-17-
<PAGE>
of the Purchase Notice and the purchasing Member(s) shall deliver this
promissory note(s) representing the Purchase Price concurrently with such
delivery. The Defaulting Member shall also, upon the request of the purchasing
Member(s), at any time and from time to time, execute and deliver such other
documents and instruments as the purchasing Member(s) determines are necessary
or desirable to transfer ownership, title and control of such Defaulting
Member's Interest. The Defaulting Member shall transfer his Member's Interest
free of all liens and encumbrances.
10.5 Mandatory Transfers. Pursuant to Section 5.02.3 of that Stock
-------------------
Purchase Agreement (the "Stock Agreement") dated December ___, 1995 between the
Company, and Century Casinos, Inc., a Delaware corporation, and Cimarron
Investment Properties Corp., a Colorado corporation (collectively "Seller") the
Company is required to transfer the Shares (as defined in the Stock Agreement)
and all rights of the Company, or any affiliate, in the Project, to Seller under
certain circumstances, involving termination of the Stock Agreement. The
Members hereby agree that no consent or approval by any Member is required in
connection with the transfer of Shares or any other right in the Project in
compliance with the Stock Agreement. Each Member shall take all necessary
action to comply with the provisions of Section 5.02.3 of the Stock Agreement,
including, without limitation, the transfer of its Member's Interest to Seller
in the event and to the extent required pursuant to such section.
10.7 Public Trading. No Member shall transfer its Member's Interest if
--------------
such transfer could cause the Company to be deemed a "publicly traded
partnership," as that term is defined in Section 7704 of the Code.
ARTICLE 11
----------
DISSOLUTION AND TERMINATION
---------------------------
11.1. Dissolution.
-----------
a. The Company shall be dissolved upon the occurrence of any of the
following events ("Dissolution Event"):
i. when the period fixed for the duration of the Company shall
expire;
ii. if the Company voluntarily enters bankruptcy chapter VII or
another insolvency proceeding that contemplates its final liquidation, or does
so involuntarily and such proceeding is not vacated or dismissed within 120 days
after commencement thereof;
iii. by the vote or written consent of all Members;
iv. upon: (1) a Member's resignation, expulsion, retirement,
death, insanity, voluntary bankruptcy under chapter VII or another voluntary
insolvency proceeding that contemplates a Member's final liquidation, or (2) a
Member's involuntary bankruptcy without such proceeding being vacated or
dismissed within 120 days after commencement thereof, or (3) a dissolution of a
Member or occurrence of any other event which terminates the continued
membership of a Member in the Company; unless the
-18-
<PAGE>
business of the Company, including without limitation the operation of the
Company's Property, is continued by the consent of Members holding a majority in
interest in the Company within ninety (90) days after the occurrence of such
event and there are at least two remaining Members.
b. As soon as possible following the occurrence of any Dissolution
Event the appropriate representative of the Company shall make all filings and
do all acts necessary to dissolve the Company.
11.2. Distribution of Assets Upon Dissolution. In settling accounts after
---------------------------------------
dissolution, the assets of the Company shall be distributed in the following
order:
a. first, to pay those liabilities to creditors, in the order of
priority as provided by law (except those to Members on account of their Capital
Contributions); and
b. next, to the Members pro rata in accordance with the positive
balances in their Capital Accounts, after taking into account all adjustments to
the Capital Accounts for all periods until each Member's Capital Account shall
be reduced to zero.
11.3. Winding Up. Except as provided by law, upon dissolution, each
----------
Member shall look solely to the assets of the Company for the return of its
Capital Contribution. If the Company Property remaining after the payment or
discharge of the debts and liabilities of the Company is insufficient to return
the Capital Contribution of each Member, such Member shall have no recourse
against any other Member. The winding up of the affairs of the Company and the
distribution of its assets shall be conducted exclusively by the Managing
Member, who are hereby authorized to take all actions necessary to accomplish
such distribution, including without limitation, selling any Company assets the
Managing Member deem necessary to accomplish such distribution, including
without limitation, selling any Company assets the Managing Member deem
necessary or appropriate to sell. In the discretion of the Managing Member, a
pro rata portion of the accounts that otherwise would be distributed to the
Members under this Article may be withheld to provide a reasonable reserve for
unknown or contingent liabilities of the Company.
11.4. Notice of Dissolution. Within thirty (30) days of the happening of a
---------------------
Dissolution Event, the Managing Member shall give written notice thereof to each
of the Members, to all creditors of the Company, to the banks and other
financial institutions with which the Company normally does business, and to all
other parties with whom the Company regularly conducts business, and shall
publish notice of dissolution in a newspaper of general circulation in each
place in which the Company generally conducts business.
ARTICLE 12
----------
MISCELLANEOUS PROVISIONS
------------------------
12.1. Notices. Any notice or communication required or permitted to be
-------
given by any provision of this Agreement, including but not limited to any
consents, shall be in writing and shall be deemed to have been given and
received by the Person to whom directed (a) when delivered personally to such
Person or to an officer or partner of the Member to which directed, (b) the
first business day which is twenty-four (24) hours after transmitted by
facsimile, evidence of transmission attached, to the facsimile number of such
-19-
<PAGE>
Person who has notified the Company and every other Member of its facsimile
number, (c) three (3) business days after being posted in the United States
mails if sent by registered, express or certified mail, return receipt
requested, postage and charges prepaid, or (d) one (1) business day after
deposited with overnight courier, return receipt requested, delivery charges
prepaid, in either case addressed to the Person to which directed at the address
shown on the page containing their signature, or such other address of which
such Person has notified the Company and every other Member. Notice by facsimile
shall be deemed given at the time provided in clause (c) above, provided,
however, concurrently with notice by facsimile, a duplicate of such notice must
also be given in the form set forth in any of clauses (a), (b) or (d) above.
12.2. Application of Nevada Law. This Agreement, and the application and
-------------------------
interpretation hereof, shall be governed exclusively by its terms and by the
laws of the State of Nevada, and specifically the Act.
12.3. Waiver of Action for Partition. Each Member irrevocably waives
------------------------------
during the term of the Company any right that such Member may have to maintain
any action for partition with respect to the Property of the Company.
12.4. Amendments. Any amendment to this Agreement or the Articles of
----------
Organization shall first be recommended to the Members by the Managing Member. A
vote on an amendment to this Agreement or the Articles of Organization shall be
taken within thirty (30) days after notice thereof has been given to the Members
unless such period is otherwise extended by applicable laws, regulations, or
agreement of the Members. Subject to the provisions of Section 8.2 hereof, a
proposed amendment shall become effective at such time as it has been approved
by members holding at least 60% of the Voting Units. Upon such approval of an
amendment, all Members shall execute and acknowledge the amendment to the extent
required by law.
12.5. Construction. Whenever the singular number is used in this Agreement
------------
and when required by the context, the same shall include the plural, and the
masculine gender shall include the feminine and neuter genders and vice versa.
12.6. Headings. The headings in this Agreement are inserted for
--------
convenience only and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof.
12.7. Waivers. The failure of any party to seek redress for violation of
-------
or to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
12.8. Rights and Remedies Cumulative. Except as otherwise provide herein,
the rights and remedies provided by this Agreement are cumulative and the use of
any one right or remedy by any party shall not preclude or waive the right to
use any or all other remedies. Said rights and remedies are given in addition to
any other rights and remedies the parties may have by law, statute, ordinance or
otherwise. The Managing Member may seek to enforce this Agreement on behalf of
the Company against any Member by action in any
-20-
<PAGE>
court. The prevailing party shall obtain reasonable attorneys' fees and costs
from the losing party.
12.9. Severability. If any provision of this Agreement or the application
------------
thereof to any Person or circumstance shall be invalid, illegal or unenforceable
to any extent, the remainder of this Agreement and the application thereof shall
not be affected and shall be enforceable to the fullest extent permitted by law.
12.10. Heirs, Successors and Assigns. Each and all of the covenants, terms,
-----------------------------
provisions and agreements herein contained shall be binding upon and inure to
the benefit of the parties hereto and, to the extent assignment is permitted by
this Agreement, their respective heirs, legal representatives, successors and
assigns.
12.11. Creditors. None of the provisions of this Agreement shall be for the
---------
benefit of or enforceable by any creditors of the Company.
12.12. Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original but all of which shall constitute one and
the same instrument.
12.13. Further Assurances. The Members agree that they and each of them
------------------
will take whatever action or actions as are deemed by counsel to the Company to
be reasonably necessary or desirable from time to time to effectuate the
provisions or intent of this Agreement, and to that end, the Members agree that
they will execute, acknowledge, seal, and deliver any further instruments or
documents which may be necessary to give force and effect to this Agreement or
any of the provisions hereof, or to carry out the intent of this Agreement or
any of the provisions hereof.
12.14. Entire Agreement. This Agreement and every Appendix attached hereto
----------------
set forth all (and are intended by all parties hereto to be an integration of
all) of the promises, agreements, conditions, understandings, warranties, and
representations among the parties hereto with respect to the Company; and there
are no promises, agreements, conditions, understandings, warranties, and
representations among the parties hereto with respect to the Company; and there
are no promises, agreements, conditions, understanding, warranties or
representations, oral or written, express or implied, among them other than as
set forth herein.
-21-
<PAGE>
12.15. Business Days. For purposes of this Agreement, a "business day" is
-------------
a day other than a Saturday or Sunday on which banks in Nevada, are open for
business.
Hilton Gaming (Switzerland County)
Corporate, Member
By: /s/
---------------------------------
Title: /s/
------------------------------
Address: 3830 Howard Hughes Parkway
Las Vegas, NV 89109
Boomtown Hoosier, Inc., Member
By: /s/ Robert F. List
---------------------------------
Title: Vice President
---------------------------------
Address: P.O. Box 399
Verdi, NV 89439
Full House, L.L.C.
By: /s/ John M. House
---------------------------------
Title: Member
---------------------------------
Address: 5008 West 96th Street
Indianapolis, IN 46268
-22-
<PAGE>
APPENDIX 1
----------
TAX ACCOUNTING PROCEDURES
-------------------------
1.1. Tax Definitions. The following terms used in this Appendix shall
---------------
have the following meanings (unless otherwise expressly provided herein):
a. "Adjusted Capital Account Deficit" with respect to any Member
--------------------------------
means the deficit balance if any, in such Member's Capital Account as of the end
of any Fiscal Year after giving effect to the following adjustments: (i) credit
to such Capital Account the sum of (A) any amount which such Member is obligated
to restore to such Capital Account pursuant to any provision of this Agreement,
plus (B) an amount equal to such Member's share of Membership Minimum Gain, as
defined below, as determined under Regulation Section 1.704-2(g) and such
Member's share of Member Nonrecourse Debt Minimum Gain, as defined below, as
determined under Regulation Section 1.704-2(g) and such Member's share of Member
Nonrecourse Debt Minimum Gain, as defined below, as determined under Regulation
Section 1.704-2(i)(5), plus (C) any amounts which such Member is deemed to be
obligated to restore pursuant to Regulation Section 1.7041(b)(2)(ii)(c); and
(ii) debit to such Capital Account the items described in Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
b. "Asset Value" with respect to any Company asset means:
-----------
i. The fair market value when contributed of any asset
contributed to the Company by any Member;
ii. The fair market value on the date of distribution of any
asset distributed by the Company to any Member as consideration for a Member's
Interest in the Company;
iii. The fair market value of all Property at the time of the
happening of any of the following events: (A) the admission of a Member to, or
the increase of a Member's Interest of an existing Member in, the Company in
exchange for a Capital Contribution; or (B) the liquidation of the Company under
Regulation Section 1.704-1(b)(2)(ii)(g); or
iv. The Basis of the asset in all other circumstances.
For purposes of this definition, fair market value shall be determined by the
Managing Member of the Company.
c. "Basis" with respect to an asset means the adjusted basis from
-----
time to time of such asset for federal income tax purposes.
d. "Capital Account" means an account maintained for each Member in
---------------
accordance with Regulation Sections 1.704-1(b) and 1.704-2 and to which the
following provisions apply to the extent not inconsistent with such Regulations.
i. There shall be credited to each Member's Capital Account: (1)
such Member's Capital Contributions; (2) such Member's distributive share of
Profits; (3)
Tax Accounting Procedures
-23-
<PAGE>
any items of income or gain specially allocated to such Member under this
Agreement; and (4) the amount of any Company liabilities (determined as provided
in Code Section 752(c) and the Regulations thereunder) assumed by such Member or
to which Property distributed to such Member is subject;
ii. There shall be debited to each Member's Capital Account (1) the
amount of money and the Asset Value of any Property distributed to such Member
pursuant to this Agreement; (2) such Member's distributive share of Profits; (3)
any items of expense or loss which are specially allocated to such Member under
this Agreement, and (4) the amount of liabilities (determined as provided in
Code Section 752(c) and the Regulations thereunder) of such Member assumed by
the Company (within the meaning of Code Section 704) or to which Property
contributed to the Company by such Member is subject; and
iii. The Capital Account of any transferee Member shall include the
appropriate portion of the Capital Account of the Member from whom the
transferee Member's Interest was obtained.
e. "Code" shall mean the Internal Revenue Code of 1986 or corresponding
----
provisions of subsequent superseding federal revenue laws.
f. "Depreciation" for any Fiscal Year or other period means the cost
------------
recovery deduction with respect to an asset for such year or other period as
determined for federal income tax purposes, provided that if the Asset Value of
such asset differs from its Basis at the beginning of such year or other period,
depreciation shall be determined as provided in Regulation Section 1.704-
1(b)(2)(iv)(g)(3).
g. "Fiscal Year" means the taxable year of the Company for federal income
-----------
tax purposes as determined by Code Section 706 and the Regulations thereunder.
h. "Profits" and "Losses" for any Fiscal year or other period means an
------- ------
amount equal to the Company's taxable income or loss for such year or period
determined in accordance with Code Section 703(a) and the Regulations thereunder
with the following adjustments:
i. All items of income, gain, loss and deduction of the Company
required to be stated separately shall be included in taxable income or loss;
ii. Income of the Company exempt from federal income tax shall be
treated as taxable income;
iii. Expenditures of the Company described in Code Section
705(a)(2)(B) or treated as such expenditures under Regulation Section 1.704-
1(b)(2)(iv)(i) shall be subtracted from taxable income;
iv. The difference between Basis and Asset Value shall be treated as
gain or loss upon the happening of any event described in Sections 1.1(b)(ii) or
(iii);
Tax Accounting Procedures
-24-
<PAGE>
v. Gain or loss resulting from the disposition of Property
from which gain or loss is recognized for federal income tax purposes shall be
determined with reference to the Asset Value of such Property;
vi. Depreciation shall be determined based upon Asset Value
as determined under section 1.704-1(b)(2)(iv)(g)(3) instead of as determined for
federal income tax purposes; and
vii. Items which are specially allocated shall not be taken
into account.
i. "Regulations" means the federal income tax regulations, including
-----------
temporary (but not proposed) regulations, promulgated under the Code.
1.2. Allocation of Profits. After giving effect to the special
---------------------
allocations set forth in Section 1.4 hereof, Profits for any Fiscal Year shall
be allocated as follows:
a. Profits shall first be allocated to the Members in
proportion and up to the amount which, when added to aggregate profits
previously allocated under this Section 1.2(a) equals the aggregate amount of
losses allocated to the Members under Section 1.3(b) hereof.
b. Thereafter, profits shall be allocated to each Member pro
rata in proportion to the ratio of that Member's Units to all other Units
outstanding.
1.3. Allocation of Losses. After giving effect to the special
--------------------
allocations set forth in Section 1.4 hereof, Losses for any Fiscal Year shall be
allocated as follows:
a. Subject to the limitations in Section 1.3(b) hereof, Losses
shall be allocated to each Member pro rata in proportion to the ratio of that
Member's Units to all other Units outstanding.
b. Losses allocated to any Member pursuant to this Agreement
shall not exceed the maximum amount of Losses that may be allocated without
causing such Member to have an Adjusted Capital Account Deficit at the end of
the Fiscal Year for which the allocation is made. Any losses not allocated to a
Member as a result of the preceding sentence shall be allocated to other Members
("Allocable Members") for whom such allocation would not cause an Adjusted
Capital Account Deficit at the end of the Fiscal Year for which the allocation
is made pro rata in proportion to such Allocable Member's Units, but only to the
extent that such allocation does not cause such Allocable Member to have an
Adjusted Capital Account Deficit at the end of the Fiscal Year for which the
allocation is made. If there are no Allocable Members, this section 1.3(b)
limitation shall not apply and Losses shall be allocated to each Member pro rata
in proportion to the ratio of that Member's Units to all other Units
outstanding.
1.4. Special Provisions.
------------------
a. Minimum Gain Chargeback. Notwithstanding any other provision of
-----------------------
this Agreement, if there is a net decrease in Membership Minimum Gain (as
defined in
Tax Accounting Procedures
-25-
<PAGE>
Regulation Section 1.704-2(d)) during any Fiscal Year, then each Member shall be
allocated such amount of income and gain for such year (and subsequent years, if
necessary) determined under and in the manner required by Regulation Section
1.704-2(f) as is necessary to meet the requirements for a minimum gain
chargeback as provided in that Regulation.
b. Member Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding
-----------------------------------------------
any other provision of this Agreement, if there is a net decrease in Member
Nonrecourse Debt Minimum Gain (as defined in accordance with Regulation Section
1.704-2(i)(3)) attributable to a Member Nonrecourse Debt (as defined in
Regulation Section 1.704-2(b)(4)) during any Fiscal Year, any Member who has a
share of the Member Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt determined in accordance with Regulation Section 1.704-2(i)(5)
shall be allocated such amount of income and gain for such year (and subsequent
years, if necessary) determined under and in the manner required by Regulation
Section 1.704-2(i)(4) as is necessary to meet the requirements for a chargeback
of Member Nonrecourse Debt Minimum Gain as is provided in that Regulation.
c. Qualified Income Offset. If a Member unexpectedly receives any
-----------------------
adjustment, allocation or distribution described in Regulation Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be
specifically allocated to such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Subsection shall be made only if and to the extent
that such Member would have an Adjusted Capital Account Deficit after all other
allocations provided for in Sections 1.2, 1.3 and this Section 1.4 of this
Appendix have been made without giving effect to this Subsection (c).
d. Gross Income Allocation. In the event any Member has a deficit
-----------------------
Capital Account at the end of Fiscal Year which is in excess of the sum of (i)
the amount such Member is obligated to restore pursuant to this Agreement, and
(ii) the amount such Member is deemed to be obligated to restore pursuant to
Regulations 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially
allocated items of Company income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this Subsection
shall be made only if and to the extent that such Member would have a deficit
Capital Account after all other allocations provided for in Sections 1.2, 1.3,
and this Section 1.4 of this Agreement have been made without giving effect to
Subsection (c) immediately above and this Subsection (d).
e. Nonrecourse Deductions. Nonrecourse Deductions (as determined
----------------------
under Regulation Section 1.704-2(c)) for any Fiscal Year shall be allocated
among the Members in proportion to their Units.
f. Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
-----------------------------
(as defined under Regulation Section 1.704-2(i)(2)) shall be allocated pursuant
to Regulation Section 1.704-2(i)(1) to the Member who bears the economic risk of
loss with respect to the "Member Nonrecourse Debt" (as defined in Regulation
Section 1.704-2(b)(4)) to which it is attributable.
Tax Accounting Procedures
-26-
<PAGE>
g. Code Section 754 Adjustment. To the extent that an adjustment to
---------------------------
the Basis of any asset pursuant to Code Section 734(b) or Code Section 743(b) is
required to be taken into account in determining Capital Accounts as provided in
Regulation Section 1.704-1(b)(2)(iv)(u), the adjustment shall be treated (if an
increase) as an item of gain or (if a decrease) as an item of loss, and such
gain or loss shall be allocated to the Members consistent with the allocation of
the adjustment pursuant to such Regulation.
h. Purpose and Application. The purpose and the intent of the special
-----------------------
allocations provided for in this Section are to comply with the provisions of
Regulation Sections 1.704-1(b) and 1.704-2, and such special allocations are to
be made so as to accomplish that result. However, to the extent possible, the
Managing Member, in allocating items of income, gain, loss, or deduction among
the Members, shall take into account the special allocations in such a manner
that the net amount of allocations to each Member shall be the same as such
Member's distributive share of Profits and Losses would have been had the events
requiring the special allocations not taken place. The Managing Member shall
apply the provisions of this Section in whatever order the Managing Member
reasonably believe will minimize the effect of the special allocations.
1.5. General Provisions.
------------------
a. Except as otherwise provided in this Agreement, the Members'
distributive shares of all items of Company income, gain, loss, and deduction
are the same as their distributive shares of Profits and Losses.
b. The Managing Member shall allocate Profits, Losses, and other
items properly allocable to any period using any method permitted by Code
Section 706 and the Regulations thereunder.
c. To the extent permitted by Regulations Section 1.704-2(h) and
Section 1.704-2(i)(6), the Managing Member shall endeavor to avoid treating
distributions as being from the proceeds of a Nonrecourse Liability (as defined
in Regulation Sections 1.704-2(b)(3)) or a Member Nonrecourse Debt.
d. If there is an increase or decrease in one or more Unit(s) in the
Company during a Fiscal Year, each Member's distributive share of Profits or
Losses or any item thereof for such Fiscal Year shall be determined by any
method prescribed by Code Section 706(d) or the Regulations thereunder that
takes into account the varying Members' Interests in the Company during such
Fiscal Year.
e. The Members agree to report their shares of income and loss for
federal income tax purposes in accordance with the provisions of this Agreement.
1.6. Code Section 704(c) Allocations. Solely for federal income tax
-------------------------------
purposes and not with respect to determining any Member's Capital Account,
distributive shares of Profits, Losses, other items, or distributions, a
Member's distributive share of income, gain, loss, or deduction with respect to
any Property (other than money) contributed to the Company, or with respect to
any Property the Asset Value of which was determined as provided in this
Agreement upon the acquisition of one or more additional Units in the
Tax Accounting Procedures
-27-
<PAGE>
Company by a new Member or existing Member in exchange for a Capital
Contribution, shall be determined in accordance with Code Section 704(c) and the
Regulations thereunder or with the principles of such provisions.
1.7. Allocations Relating to Taxable Issuance of Units. Any income, gain,
-------------------------------------------------
loss or deduction realized by the Company as a direct or indirect result of the
issuance of a Unit by the Company (the "Issuance Items") shall be allocated
among the Members, so that, to the extent possible, the net amount of such
Issuance Items, together with all other allocations under this Agreement to each
Member, shall be equal to the net amount that would have been allocated to each
such Member if the Issuance Items had not been realized.
1.8. Curative Reallocations Regarding Payments to Members. To the extent
----------------------------------------------------
that compensation paid to any Member by the Company ultimately is not determined
to be a guaranteed payment under Code Section 707(c) or a payment other than in
his capacity as a Member pursuant to Code Section 707(a), the Member shall be
specially allocated gross income of the Company in an amount equal to the amount
of such compensation, and the Member's Capital Account shall be adjusted to
reflect the payment of such compensation. If the Company's gross income for a
Fiscal Year is less than the amount of such compensation paid in such year, the
Member shall be specially allocated gross income of the Company in the
succeeding year or years until the total amount so allocated equals the total
amount of such compensation.
1.9. Division Among Members. If there is a change in a Member's Interest
----------------------
in the Company during a Fiscal Year, any distributions thereafter shall be made
so as to take into account the varying Units of the Members during the period to
which the distribution relates in any manner chosen by the Managing Member that
is provided in Code Section 706(d) and the Regulations thereunder.
1.10. Special Basis Adjustment. At the request of either the transferor
------------------------
or transferee in connection with a transfer of a Member's Interest in the
Company, the Managing Member may, in their sole discretion, cause the Company to
make the election provided for in Code Section 754 and maintain a record of the
adjustments to Basis of Property resulting from that election. Any such
transferee shall pay all costs incurred by the Company in connection with such
election and the maintenance of such records.
1.11. Tax Matters Member.
------------------
a. ____________________ is hereby designated the Tax Matters Member
(as defined in the Code) on behalf of the Company.
b. Without the consent of the Members holding at least 60% of the
Voting Units, the Tax Matters Member shall have no right to extend the statute
of limitations for assessing or computing any tax liability against the Company
or the amount of any Company tax item.
c. If the Tax Matters Member elects to file a petition for
readjustment of any Company tax item (in accordance with Code Section 6226(a))
such petition shall be
Tax Accounting Procedures
-28-
<PAGE>
filed in the United States Tax Court unless the Members holding at least 60% of
the Voting Units agree otherwise.
d. The Tax Matters Member shall, within ten (10) business days after
receipt thereof, forward to each Member a photocopy of any correspondence
relating to the Company received from the Internal Revenue Service. The Tax
Matters Member shall, within ten (10) business days thereof, advise each Member
in writing of the substance of any conversation held with any representative of
the Internal Revenue Service.
e. Any reasonable costs incurred by the Tax Matters Member for
retaining accountants and/or lawyers on behalf of the Company in connection with
any Internal Revenue Service audit of the Company shall be expenses of the
Company. Any accountants and/or lawyers retained by the Company in connection
with any Internal Revenue Service audit of the Company shall be selected by the
Tax Matters Member and the fees therefor shall be expenses of the Company.
1.12. Deemed Liquidation. If no Dissolution Event has occurred, but the
------------------
Company is deemed liquidated for federal income tax purposes within the meaning
of Regulation Section 1.704-(b)(2)(ii)(g), the Company shall not be wound up and
dissolved but its assets and liabilities shall be deemed to have been
distributed to the Members and contributed to a new Company which shall operate
and be governed by the terms of this Agreement.
Tax Accounting Procedures
-29-
<PAGE>
December 22, 1995
Full House, L.L.C. Boomtown Hoosier, Inc.
5008 West 96th St. P.O. Box 399
Indianapolis, Indiana 46268 Vardi, NV 89439
Re: Operating Agreement (the "Agreement") for Indiana Ventures LLC.
Ladies and Gentlemen:
This letter will set forth the understanding of the parties with respect to
certain provisions of the Agreement. Capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Agreement. Attached
hereto as Exhibit A are pages from the Agreement showing changes to the
Agreement, indicated by blacklining, requested by tax counsel to Boomtown (the
"Tax Changes"). The Members intend to execute the Agreement today, however, the
Tax Changes have not been reviewed by tax counsel to Hilton. The Members agree
that notwithstanding the execution of the Agreement by the Members, Tax Changes
shown are subject to review of Hilton's tax counsel and the Members shall make
any revisions to the Tax Changes determined to be reasonably necessary by joint
agreement of tax counsel to Hilton and Boomtown such agreement to occur on or
before December 27, 1995.
Please signify your agreement with the terms hereof by executing a copy of
this letter as provided below and returning it to the undersigned.
Very truly yours,
Hilton Gaming (Switzerland County) Corporation
By: /s/
--------------------------------
Title: President
--------------------------------
Accepted and Agreed this
22nd day of December
- ---- --------
Boomtown Hoosier, Inc. Full House, L.L.C.
By: /s/ Robert F. List By:
-------------------- -------------------------------
Title: Vice President Title:____________________________
----------------
<PAGE>
December 22, 1995
Full House, L.L.C. Boomtown Hoosier, Inc.
5008 West 96th St. P.O. Box 399
Indianapolis, Indiana 46268 Vardi, NV 89439
Re: Operating Agreement (the "Agreement") for Indiana Ventures LLC.
Ladies and Gentlemen:
This letter will set forth the understanding of the parties with respect to
certain provisions of the Agreement. Capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Agreement. Attached
hereto as Exhibit A are pages from the Agreement showing changes to the
Agreement, indicated by blacklining, requested by tax counsel to Boomtown (the
"Tax Changes"). The Members intend to execute the Agreement today, however, the
Tax Changes have not been reviewed by tax counsel to Hilton. The Members agree
that notwithstanding the execution of the Agreement by the Members, Tax Changes
shown are subject to review of Hilton's tax counsel and the Members shall make
any revisions to the Tax Changes determined to be reasonably necessary by joint
agreement of tax counsel to Hilton and Boomtown such agreement to occur on or
before December 27, 1995.
Please signify your agreement with the terms hereof by executing a copy of
this letter as provided below and returning it to the undersigned.
Very truly yours,
Hilton Gaming (Switzerland County) Corporation
By:________________________________
Title:_____________________________
Accepted and Agreed this 22nd
----
day of December
--------
Boomtown Hoosier, Inc. Full House, L.L.C.
By:___________________________ By: /s/ John M. House
------------------------
Title:________________________ Title: Member
---------------------
<PAGE>
EXHIBIT 3.47
FILING FEE: $125.00 K.K.
RECEIPT #C 34138
PRENTICE-HALL CORP.
502 EAST JOHN STREET, #E
CARSON CITY, NEVADA 89701
ARTICLES OF INCORPORATION
-------------------------
OF
CONRAD (NEW ZEALAND) CORPORATION
__________
I, the person hereinafter named as incorporator, for the purpose of
associating to establish a corporation, under the provisions and subject to the
requirements of Title 7, Chapter 78 of Nevada Revised Statutes, and the acts
amendatory thereof, and hereinafter sometimes referred to as the General
Corporation Law of the State of Nevada, do hereby adopt and make the following
Articles of Incorporation:
FIRST: The name of the corporation (hereinafter called the corporation) is
-----
CONRAD (NEW ZEALAND) CORPORATION.
SECOND: The name of the corporation's resident agent in the State of
------
Nevada is The Prentice-Hall Corporation System, Nevada, Inc., and the street
address of the said resident agent where process may be served on the
corporation is 502 East John Street, Carson City, NV 89706.
THIRD: The number of shares the corporation is authorized to issue is
-----
$25,000 dollars, consisting of 25,000 shares of a par value of ($1.00) one
dollar each. All of said shares are of one class and are designated as Common
Stock.
No holder of any of the shares of any class of the corporation shall be
entitled as of right to subscribe for, purchase, or otherwise acquire any shares
of any class of the corporation which the corporation proposes to issue or any
rights or options which the corporation proposes to grant for the purchase of
shares of any class of the corporation or for the purchase of any shares, bonds,
securities, or obligations of the corporation which are convertible into or
exchangeable for, or which carry any rights, to subscribe for, purchase, or
otherwise acquire shares of any class of the corporation; and any and all of
such shares, bonds, securities, or obligations of the corporation, whether now
or hereafter authorized or created, may be issued, or may be reissued or
transferred if the same have been reacquired and have treasury status, and any
and all of such rights and options may be granted by the Board of Directors to
such persons, firms, corporations, and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its discretion
may determine, without first offering the same, or any thereof, to any said
holder.
<PAGE>
FOURTH: The governing board of the corporation shall be styled as a "Board
------
of Directors," and any member of said Board shall be styled as a "Director."
The number of members constituting the first Board of Directors of the
corporation is Five; and the name and the post office box or street address,
either residence or business, of each of said members are as follows:
NAME ADDRESS
---- -------
Barron Hilton 9336 Civic Center Drive
Beverly Hills, CA 90209
Gregory R. Dillon 9336 Civic Center Drive
Beverly Hills, CA 90209
Eric M. Hilton 9336 Civic Center Drive
Beverly Hills, CA 90209
William C. Lebo, Jr. 9336 Civic Center Drive
Beverly Hills, CA 90209
Maurice J. Scanlon 9336 Civic Center Drive
Beverly Hills, CA 90209
The number of directors of the corporation may be increased or decreased in
the manner provided in the Bylaws of the corporation; provided, that the number
of directors shall never be less than one. In the interim between election of
directors by stockholders entitled to vote, all vacancies, including vacancies
caused by an increase in the number of directors and including vacancies
resulting from the removal of directors by the stockholders entitled to vote
which are not filled by said stockholders, may be filled by the remaining
directors, though less than a quorum.
FIFTH: The name and the post office box or street address, either
-----
residence or business, of the incorporator signing these Articles of
Incorporation is as follows:
NAME ADDRESS
---- -------
K. S. Mays 5670 Wilshire Blvd., Ste. 750
Los Angeles, CA 90035
SIXTH: The corporation shall have perpetual existence.
-----
SEVENTH: The personal liability of the directors of the corporation is
-------
hereby eliminated to the fullest extent permitted by the General Corporation Law
of the State of Nevada, as the same may be amended and supplemented.
EIGHTH: The corporation shall, to the fullest extent permitted by the
------
General Corporation Law of the State of Nevada, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said Law from
<PAGE>
and against any and all of the expenses, liabilities, or other matters referred
to in or covered by said Law, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person.
NINTH: The corporation may engage in any lawful activity.
-----
TENTH: The corporation reserves the right to amend, alter, change, or
-----
repeal any provision contained in these Articles of Incorporation in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, I do hereby execute these Articles of Incorporation on
January 17, 1991.
/s/ K.S. Mays
--------------------
K. S. Mays, Incorporator
<PAGE>
STATE OF CALIFORNIA )
) SS.:
COUNTY OF LOS ANGELES )
On this 17th day of January, 1992, personally appeared before me, a Notary
Public in and for the State and County aforesaid, K. S. Mays, known to me to be
the person described in and who executed the foregoing Articles of
Incorporation, and who acknowledged to me that she executed the same freely and
voluntarily and for the uses and purposes therein mentioned.
WITNESS my hand and official seal, the day and year first above written.
/s/ Jillaine E. Costelloe
---------------------------------
Notary Public
(Notarial Seal)
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
CONRAD (NEW ZEALAND) CORPORATION
Pursuant to the provisions of Nevada Revised Statutes, Title 7,
Chapter 78, the undersigned officers do hereby certify:
FIRST: The name of the Corporation is CONRAD (NEW ZEALAND)
CORPORATION.
SECOND: The Board of Directors of the Corporation duly adopted the following
resolutions on December 21, 1995
WHEREAS, this Board of Directors deems it advisable and desirable
to change the Corporation's name to SWITZERLAND COUNTY DEVELOPMENT
CORP.: and
WHEREAS, the sole shareholder of the Corporation has approved such
proposed corporate name change by executing an Action Taken By
Written Consent of the Sole Shareholder dated December 21, 1995.
THEREFORE, IT IS RESOLVED that Article First of the Corporation's
Articles of Incorporation be amended to read as follows:
"FIRST: The name of the corporation (hereinafter called "the
corporation") is SWITZERLAND COUNTY DEVELOPMENT CORP.
RESOLVED FURTHER, that the Corporation's President, or one of the
Vice Presidents, and its Secretary, or one of its Assistant
Secretaries, are hereby authorized to execute a certificate setting
forth the said Amendment and to cause the same to be filed pursuant
to the provisions of Nevada Revised Statutes, Title 7, Chapter 78.
THIRD: The total number of outstanding shares of the Corporation having voting
power is 100 shares, and the total number of votes entitled to be cast by the
sole shareholder is 100.
FOURTH: The sole shareholder of all the aforesaid total number of outstanding
shares having voting power, to wit, 100 shares, dispensed with the holding of a
meeting of stockholders and adopted the amendments herein certified by a consent
in writing signed
<PAGE>
by the sole shareholder in accordance with the provisions of Nevada Revised
Statutes, Title 7, Section 78.320.
Signed on December 21, 1995.
CONRAD (NEW ZEALAND) CORPORATION
By: /s/ Steve Krithis
-----------------------
Vice President
/s/ Cheryl L. Marsh
------------------------
Secretary
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On December 21, 1995 before me, David Marote, Notary Public, personally
appeared STEVE KRITHIS and CHERYL L. MARSH, personally 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 their authorized capacities, and that by
their signatures on the instrument the entity upon behalf of which the persons
acted, executed this instrument.
WITNESS my hand and official seal.
/s/ David Marote
----------------------
David Marote, Notary Public
<PAGE>
EXHIBIT 3.48
BYLAWS
------
OF
CONRAD (NEW ZEALAND) CORPORATION
(a Nevada corporation)
_________
ARTICLE I
---------
STOCKHOLDERS
------------
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
-------------------------------
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation or by agents designated by the Board of Directors, certifying the
number of shares owned by him in the corporation and setting forth any
additional statements that may be required by the General Corporation Law of the
State of Nevada (General Corporation Law). If any such certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk
or by a registrar other than the corporation, of facsimile of the signature of
any such officers or agents designated by the Board may be printed or
lithographed upon such certificate in lieu of the actual signatures. If any
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any certificate or certificates shall cease
to be such officer or officers of the corporation before such certificate or
certificates shall have been delivered by the corporation, the certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be such officer or officers of the corporation.
Whenever the corporation shall be authorized to issue more than one class
of stock or more than one series of any class of stock, the certificates
representing stock of any such class or series shall set forth thereon the
statements prescribed by the General Corporation Law. Any restrictions on the
transfer or registration of transfer of any shares of stock of any class or
series shall be noted conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
<PAGE>
2. FRACTIONAL SHARE INTERESTS. The corporation shall not be obliged
--------------------------
to but may execute and deliver a certificate for or including a fraction of a
share. In lieu of executing and delivering a certificate for a fraction of a
share, the corporation may pay to any person otherwise entitled to become a
holder of a fraction of a share an amount in cash specified for such purpose as
the value thereof in the resolution of the Board of Directors, or other
instrument pursuant to which such fractional share would otherwise be issued,
or, if not specified therein, then as may be determined for such purpose by the
Board of Directors of the issuing corporation; or may execute and deliver
registered or bearer scrip over the manual or facsimile signature of an officer
of the corporation or of its agent for that purpose, exchangeable as therein
provided for full share certificates, but such scrip shall not entitle the
holder to any rights as a stockholder except as therein provided. Such scrip may
provide that it shall become void unless the rights of the holders are exercised
within a specified period and may contain any other provisions or conditions
that the corporation shall deem advisable. Whenever any such scrip shall cease
to be exchangeable for full share certificates, the shares that would otherwise
have been issuable as therein provided shall be deemed to be treasury shares
unless the scrip shall contain other provision for their disposition.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the
---------------
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes, if any, due
thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
----------------------------
stockholders entitled to notice 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 the 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 directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If no record date
is fixed, the record date for determining stockholders entitled to notice or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is expressed; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any 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.
-2-
<PAGE>
5. MEANING OF CERTAIN TERMS. As used in these Bylaws in respect of
------------------------
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock" or
"shares of stock" or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record of outstanding
shares of stock when the corporation is authorized to issue only one class of
shares of stock, and said reference is also intended to include any outstanding
share or shares of stock and any holder or holders of record of outstanding
shares of stock of any class upon which or upon whom the Articles of
Incorporation confers such rights where there are two or more classes or series
of shares of stock or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the articles of incorporation may
provide for more than one class or series of shares of stock, one or more of
which are limited or denied such rights thereunder; provided, however, that no
such right shall vest in the event of an increase or a decrease in the
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the Articles of Incorporation.
6. STOCKHOLDER MEETINGS.
--------------------
- TIME. The annual meeting shall be held on the date and at the time
----
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A
special meeting shall be held on the date and at the time fixed by the
directors.
- PLACE. Annual meetings and special meetings shall be held at such place,
-----
within or without the State of Nevada, as the directors may, from time to time,
fix.
- CALL. Annual meetings and special meetings may be called by the
----
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Notice of all meetings shall be in writing
--------------------------
and signed by the President or a Vice-President, or the Secretary, or an
Assistant Secretary, or by such other person or persons as the directors must
designate. The notice must state the purpose or purposes for which the meeting
is called and the time when, and the place, where it is to be held. A copy of
the notice must be either delivered personally or mailed postage prepaid to each
stockholder not less than ten nor more than sixty days before the meeting. If
mailed, it must be directed to the stockholder at his address as it appears upon
the records of the corporation. Any stockholder may waive notice of any meeting
by a writing signed by him, or his duly authorized attorney, either before or
after the meeting; and whenever notice of any kind is required to be given under
the provisions of the General Corporation Law, a waiver thereof in writing and
duly signed whether before or after the time stated therein, shall be deemed
equivalent thereto.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided over
------------------
by one of the following officers in the order of seniority and if present and
acting the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman
-3-
<PAGE>
to be chosen by the stockholders. The Secretary of the corporation, or in his
absence, an Assistant Secretary of the corporation, or in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present the Chairman of the meeting
shall appoint a secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another person or
--------------------
persons to act for him by proxy in any manner described in, or otherwise
authorized by, the provisions of Section 78.355 of the General Corporation Law.
- INSPECTORS. The directors, in advance of any meeting, may, but need not,
----------
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them.
- QUORUM. Stockholders holding at least a majority of the voting power are
------
necessary to constitute a quorum at a meeting of stockholders for the
transaction of business unless the action to be taken at the meeting shall
require a greater proportion. The stockholders present may adjourn the meeting
despite the absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof to one
------
vote. In the election of directors, a plurality of the votes cast shall elect.
Any other action shall be authorized by stockholders who hold at least a
majority of the voting power and are present at a meeting at which a quorum is
present, except where the General Corporation Law, the Articles of
Incorporation; or these Bylaws prescribe a different percentage of votes and/or
a different exercise of voting power. In the election of directors, voting need
not be by ballot; and, except as otherwise may be provided by the General
Corporation Law, voting by ballot shall not be required for any other action.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Except as may otherwise be
-----------------------------------
provided by the General Corporation Law, any action required or permitted to be
taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by stockholders holding at least a majority of
the voting power; provided that if a different proportion of voting power is
required for such an action at a meeting, then that proportion of written
consents is required. In no instance where action is authorized by written
consent need a meeting of stockholders be called or noticed. Any
-4-
<PAGE>
written consent shall be subject to the requirements of Section 78.320 of the
General Corporation Law and of any other applicable provision of law.
ARTICLE II
----------
DIRECTORS
---------
1. FUNCTIONS AND DEFINITION. The business and affairs of the
------------------------
corporation shall be managed by the Board of Directors of the corporation. The
Board of Directors shall have authority to fix the compensation of the members
thereof for services in any capacity. The use of the phrase "whole Board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. Each director must be at least 18
-------------------------
years of age. A director need not be a stockholder or a resident of the State of
Nevada. The initial Board of Directors shall consist of five (5) persons.
Thereafter the number of directors constituting the whole board shall be at
least one. Subject to the foregoing limitation and except for the first Board of
Directors, such number may be fixed from time to time by action of the
stockholders or of the directors, or, if the number is not fixed, the number
shall be five (5). The number of directors may be increased or decreased by
action of the stockholders or of the directors.
3. ELECTION AND TERM. Directors may be elected in the manner
-----------------
prescribed by the provisions of Sections 78.320 through 78.335 of the General
Corporation Law of Nevada. The first Board of Directors shall hold office until
the first election of directors by stockholders and until their successors are
elected and qualified or until their earlier resignation or removal. Any
director may resign at any time upon written notice to the corporation.
Thereafter, directors who are elected at an election of directors by
stockholders, and directors who are elected in the interim to fill vacancies and
newly created directorships, shall hold office until the next election of
directors by stockholders and until their successors are elected and qualified
or until their earlier resignation or removal. In the interim between elections
of directors by stockholders, newly created directorships and any vacancies in
the Board of Directors, including any vacancies resulting from the removal of
directors for cause or without cause by the stockholders and not filled by said
stockholders, may be filled by the vote of a majority of the remaining directors
then in office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
--------
-. TIME. Meetings shall be held at such time as the Board shall fix,
----
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the State
-----
of Nevada as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the time
----
and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of
-5-
<PAGE>
the Board, if any, the Vice-Chairman of the Board, if any, of the President, or
of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for
---------------------------------------
regular meetings for which the time and place have been fixed. Written, oral,
or any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. Notice if any need not be given to a director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
-----------------
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as the Articles of
Incorporation or these Bylaws may otherwise provide, and except as otherwise
provided by the General Corporation Law, the act of a majority of the directors
present at a meeting at which a quorum is present is the act of the Board. The
quorum and voting provisions herein stated shall not be construed as conflicting
with any provisions of the General Corporation Law and these Bylaws which govern
a meeting of directors held to fill vacancies and newly created directorships in
the Board or action of disinterested directors.
Members of the Board or of any committee which may be designated by the
Board may participate in a meeting of the board or of any such committee, as the
case may be, by means of a telephone conference or similar method of
communication by which all persons participating in the meeting hear each other.
Participation in a meeting by said means constitutes presence in person at the
meeting.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
-----------------------
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if Present and acting, or the president, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed
--------------------
for cause or without cause in accordance with the provisions of the General
Corporation Law.
6. COMMITTEES. Whenever its number consists of two or more, the
----------
Board of Directors may designate one or more committees which have such powers
and duties as the Board shall determine. Any such committee, to the extent
provided in the resolution or resolutions of the board, shall have and may
exercise 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 or stamp
of the corporation to be affixed to all papers on which the corporation desires
to place a seal or stamp. Each committee must include at least one director. The
Board of Directors may appoint natural persons who are not directors to serve on
committees.
-6-
<PAGE>
7. WRITTEN ACTION. Any action required or permitted to be taken at a
--------------
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if, before or after the action, a written consent thereto is
signed by all the members of the Board or of the committee, as the case may be.
ARTICLE III
-----------
OFFICERS
--------
1. The corporation must have a President, a Secretary, and a
Treasurer, and, if deemed necessary, expedient, or desirable by the Board of
Directors, a Chairman of the Board, a Vice-Chairman of the Board, an Executive
Vice-President, one or more other Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers and
agents with such titles as the resolution choosing them shall designate. Each of
any such officers shall be chosen by the Board of Directors or chosen in the
manner determined by the Board of Directors.
2. QUALIFICATIONS. Except as may otherwise be provided in the
--------------
resolution choosing him, no officer other than the Chairman of the Board, if
any, and the Vice-Chairman of the Board, if any, need be a director.
Any person may hold two or more offices, as the directors may determine.
3. TERM OF OFFICE. Unless otherwise provided in the resolution
--------------
choosing him, each officer shall be chosen for a term which shall continue until
the meeting of the Board of Directors following the next annual meeting of
stockholders and until his successor shall have been chosen and qualified.
Any officer may be removed, with or without cause, by the Board of
Directors or in the manner determined by the Board.
Any vacancy in any office may be filled by the Board of Directors or in the
manner determined by the Board.
4. DUTIES AND AUTHORITY. All officers of the corporation shall have
--------------------
such authority and perform such duties in the management and operation of the
corporation as shall be prescribed in the resolution designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions or instruments may be inconsistent therewith.
ARTICLE IV
----------
REGISTERED OFFICE
-----------------
The location of the initial registered office of the corporation in the
State of Nevada is the address of the initial resident agent of the corporation,
as set forth in the original Articles of Incorporation.
-7-
<PAGE>
The corporation shall maintain at said registered office a copy, certified
by the Secretary of State of the State of Nevada, of its Articles of
Incorporation, and all amendments thereto, and a copy, certified by the
Secretary of the corporation, of these Bylaws, and all amendments thereto. The
corporation shall also keep at said registered office a stock ledger or a
duplicate stock ledger, revised annually, containing the names, alphabetically
arranged, of all persons who are stockholders of the corporation, showing their
places of residence, if known, and the number of shares held by them
respectively or a statement setting out the name of the custodian of the stock
ledger or duplicate stock ledger, and the present and complete post office
address, including street and number, if any, where such stock ledger or
duplicate stock ledger is kept.
ARTICLE V
---------
CORPORATE SEAL OR STAMP
-----------------------
The corporate seal or stamp shall be in such form as the Board of Directors
may prescribe.
ARTICLE VI
----------
FISCAL YEAR
-----------
The fiscal year of the corporation shall begin on the first day of January
in each year and end on the 31st of December next following.
ARTICLE VII
-----------
CONTROL OVER BYLAWS
-------------------
The power to amend, alter, and repeal these Bylaws and to make new Bylaws
shall be vested in the Board of Directors subject to the Bylaws, if any, adopted
by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of
the Bylaws of Conrad (New Zealand) Corporation, a Nevada corporation, as in
effect on the date hereof.
WITNESS my hand and the seal or stamp of the corporation.
Dated: January 22, 1992.
/s/ Cheryl L. Marsh
-------------------------------------------------------
Secretary of
CONRAD (NEW ZEALAND) CORPORATION
(SEAL)
-8-
<PAGE>
EXHIBIT 3.49
STATE OF COLORADO
DEPARTMENT OF
STATE
CERTIFICATE
I, VICTORIA BUCKLEY, SECRETARY OF STATE OF THE STATE OF
COLORADO HEREBY CERTIFY THAT
ACCORDING TO THE RECORDS OF THIS OFFICE
PINNACLE GAMING DEVELOPMENT CORP.
(COLORADO CORPORATION)
FILE # 19931093552 WAS FILED IN THIS OFFICE ON September 08, 1993 AND HAS
COMPLIED WITH THE APPLICABLE PROVISIONS OF THE LAWS OF THE STATE OF
COLORADO AND ON THIS DATE IS IN GOOD STANDING AND AUTHORIZED AND COMPETENT
TO TRANSACT BUSINESS OR TO CONDUCT ITS AFFAIRS WITHIN THIS STATE.
Dated: February 22, 1999
/s/ Victoria Buckley
--------------------------------------------------------
Secretary of State
<PAGE>
CORP OCR
ARTICLES OF INCORPORATION
SUBMIT ORIGINAL OCR AND ONE COPY
PROFIT CORPORATION NAME AND PRINCIPAL
ADDRESS
NAME: Pinnacle Gaming Development Corp.
STREET: 7302 S. Alton Way, Suite J CITY: Englewood STATE: CO ZIP: 80112
THIS DOCUMENT MUST 931093552 $50.00
BE TYPED IN BLACK SOS 09-08-93 12:54
SECRETARY OF STATE-1560 BROADWAY #200, DENVER, CO 80202
(303) 894-2200 EXT 2
CUMULATIVE VOTING SHARES OF STOCK IS AUTHORIZED. YES[_] NO[X] IF DURATION IS
LESS THAN PERPETUAL ENTER NUMBER OF YEARS
THERE ARE PROVISIONS LIMITING OR DENYING TO
SHAREHOLDERS THE PREEMPTIVE RIGHT TO ACQUIRE IF YES: state provision
ADDITIONAL OR TREASURY SHARES OF THE CORPORATION. on a separate 8 1/2 X 11
YES [_] NO [X] SHEET OF PAPER.
STOCK INFORMATION: (if additional space is needed, continue on separate
8 1/2 X 11 sheet of paper).
STOCK CLASS Common AUTHORIZED SHARES 1,000,000 PAR VALUE $ 0.01
STOCK CLASS AUTHORIZED SHARES PAR VALUE
THE NAME OF THE INITIAL REGISTERED AGENT AND THE ADDRESS OF THE REGISTERED
OFFICE IS: (corporation use LAST NAME space)
LAST NAME: The Benefit Group, Inc. FIRST & MIDDLE NAME:
STREET: 7302 S. Alton Way, CITY: Englewood STATE: CO ZIP: 80112
Suite J
DIRECTORS: HOW MANY DIRECTORS CONSTITUTE THE INITIAL BOARD OF DIRECTORS OF THE
CORPORATION?: One
THE NAMES AND ADDRESSES OF THE PERSONS WHO ARE TO SERVE AS DIRECTORS UNTIL THE
1st ANNUAL MEETING OF SHAREHOLDERS OR UNTIL THEIR SUCCESSORS ARE ELECTED AND
QUALIFIED ARE: (If more than three, continue on a 8 1/2 X 11 SHEET OF PAPER)
LAST NAME: Faestel FIRST & MIDDLE NAME: Catherine Delores
STREET: 7302 S. Alton Way, CITY: STATE: ZIP:
Suite J
LAST NAME: FIRST & MIDDLE NAME:
STREET: CITY: STATE: CO ZIP:
LAST NAME: FIRST & MIDDLE NAME:
STREET: CITY: STATE: ZIP:
INCORPORATORS: NAMES AND ADDRESSES: (if more than two, continue on a separate
8 1/2 X 11 SHEET OF PAPER)
NAME ADDRESS
Catherine D. Faestel 7302 S. Alton Way, Suite J, Englewood, CO 80112
------------------------- ------------------------------------------------
WE THE UNDERSIGNED PERSON(S) OF THE AGE OF 18 YEARS OR MORE, ACTING AS
INCORPORATOR(S) OF A CORPORATION UNDER THE COLORADO CORPORATION CODE, ADOPT THE
ABOVE ARTICLES OF INCORPORATION. THE CORPORATION IS ORGANIZED FOR ANY LAWFUL
PURPOSES. A MORE SPECIFIC PURPOSE MAY BE STATED ON A SEPARATE 8 1/2 X 11 SHEET
OF PAPER.
/s/ Catherine D. Faestel
- -------------------------------------------------
SIGNATURE
PLEASE READ REVERSE SIDE BEFORE COMPLETING
<PAGE>
MAIL TO
Colorado Secretary of State
Corporations Office
1560 Broadway Suite 200
Denver, Colorado 80202
(303) 894-2200
Submit in duplicate
Filing Fee: $60.00
This document must be typed
- ----
RESTATED ARTICLES OF INCORPORATION WITH AMENDMENTS
Pursuant to the provisions of the Colorado Corporation Code, the undersigned
corporation adopts the following amended and restated articles of incorporation.
These articles correctly set forth the provisions of the articles of
incorporation, as amended, and supersede the original articles of incorporation
and all amendments thereto.
First: The name of the corporation is (Note 1)________________________________
Pinnacle Gaming Development Corp.
- -------------------------------------------------------------------------------
Second: The following amended and restated articles of incorporation were
adopted on December 13, 1993, in the manner marked with an X below:
Such amended and restated articles of incorporation were adopted by the
_____ board of directors where no shares have been issued.
X Such amended and restated articles of incorporation were adopted by a vote
- -----
of the shareholders. The number of shares voted for the amended and
restated articles of incorporation was sufficient for approval.
ARTICLE I: The name of the corporation as amended is (Note 2)__________________
________________________________________________________________________________
ATTACH A COPY OF YOUR AMENDED AND RESTATED ARTICLES OF INCORPORATION
PINNACLE GAMING DEVELOPMENT CORP. (Note 1)
-----------------------------------------
By /s/ Erwin Haitzmann
------------------------------------------------
XXX Erwin Haitzmann President
-------------------------------
And /s/ Norbert Teufelberger (Note 3)
-----------------------------------------
XXX Norbert Teufelberger Secretary
---------------------------
(Note 4)
______________________________________
Director
<PAGE>
Notes: 1. Exact corporate name of the corporation adopting the amended and
restated articles of incorporation. (If there is a name change
amendment, the name before the amendment is filed)
2. If restated articles contain an amendment to the corporate name, the
corporate name as amended.
3. Signatures and titles of officers signing for the corporation
4. WHERE NO SHARES HAVE BEEN ISSUED, the signature of a director.
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
PINNACLE GAMING DEVELOPMENT CORP.
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is Pinnacle Gaming Development Corp.
SECOND: The following amendments to the Articles of Incorporation were
adopted by the stockholders of the Corporation on December 13, 1993, in the
manner prescribed by the Colorado Corporation Code. The number of shares voted
for the amendments was sufficient for approval. The following articles are
amended in their entirety to read:
ARTICLE I
Name
----
The name of the Corporation shall be Pinnacle Gaming Development Corp.
ARTICLE II
Duration
--------
The period of duration of the Corporation shall be perpetual.
ARTICLE III
Purpose
-------
The purpose for which the Corporation is organized is the transaction of
all lawful business for which corporations may be incorporated pursuant to the
Colorado Corporation Code.
ARTICLE IV
Capital Stock
-------------
The total number of shares of stock which the Corporation shall have
authority to issue is 10,000,000 shares, consisting of 10,000,000 shares of
Common Stock, having a par value of $.01 per share.
-1-
<PAGE>
ARTICLE V
Cumulative Voting
-----------------
Cumulative voting shall not be allowed in elections of directors or for any
other purpose.
ARTICLE VI
Preemptive Rights
-----------------
No holders of shares of capital stock of the Corporation shall be entitled,
solely by virtue of being shareholders, to any preemptive or preferential right
to acquire any unissued stock or treasury stock or any other securities which
the Corporation may now or hereafter be authorized to issue. However, the
Corporation is authorized to transact all lawful business for which corporations
may be incorporated under the Colorado Corporation Code, which includes
authority to grant contractual or preferential purchase rights to holders of its
capital stock.
ARTICLE VII
Initial Registered office and Agent
-----------------------------------
The address of the Corporation's initial registered office in Colorado for
purposes of the Colorado Corporation Code shall be:
Suite 755
50 South Steele Street
Denver, Colorado 80209
The name of the Corporation's initial registered agent at the address of
the aforesaid registered office for purposes of the Colorado Corporation Code
shall be:
Norbert Teufelberger
ARTICLE VIII
Directors
---------
The affairs of the Corporation shall be governed by a Board of Directors
consisting of not less than three (except that there need be only as many
directors as there are, or initially will be, shareholders in the event that the
outstanding shares are, or initially will be, held of record by fewer than three
shareholders) nor more than seven (7) directors, each being natural persons, of
the age of eighteen years or older, who shall be elected in accordance with the
Bylaws of the Corporation. Subject to such limitations, the number of directors
shall be fixed by or in the manner provided in the Bylaws of the Corporation, as
may be amended from time to time, except as to the number constituting the
initial board which number shall be three (3).
-2-
<PAGE>
The names and addresses of the members of the initial Board of Directors,
who shall hold office until the first annual meeting of the shareholders of the
Corporation or until their successors shall have been elected and qualified,
are:
Name Address
- ---- -------
James D. Forbes Suite 755
50 South Steele Street
Denver, Colorado 80209
Erwin Haitzmann Suite 755
50 South Steele Street
Denver, Colorado 80209
Norbert Teufelberger Suite 755
50 South Steele Street
Denver, Colorado 80209
ARTICLE IX
Voting
------
When, with respect to any action to be taken by shareholders of the
Corporation, the Colorado Corporation Code requires the affirmative vote of the
holders of two-thirds of the outstanding shares entitled to vote thereon, or of
any class or series, such action may be taken by the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote on such action.
ARTICLE X
Bylaws
------
The initial Bylaws of the Corporation shall be adopted by the Board of
Directors. The power to alter, amend, or repeal the Bylaws or to adopt new
Bylaws shall be vested in the Board of Directors. The Bylaws may contain any
provision for the regulation and management of the affairs of the Corporation
not inconsistent with law or these Articles of Incorporation.
ARTICLE XI
Elimination of Personal Liability of a Director
-----------------------------------------------
Except for the liability of a director to the Corporation or to its
shareholders for monetary damages for:
(i) any breach of the director's duty of loyalty to the Corporation or
to its shareholders;
<PAGE>
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(iii) acts specified in Section 7-5-114, or any successor provision,
of the Colorado Corporation Code; or
(iv) any transaction from which the director derived an improper
personal benefit,
there shall be no personal liability of a director to the Corporation or to its
shareholders for monetary damages for breach of fiduciary duty as a director.
ARTICLE XII
Incorporator
------------
The name and address of the incorporator of the Corporation is as follows:
Name Address
---- -------
Catherine D. Faestel Suite J
7302 S. Alton Way
Englewood, Colorado 80112
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows:
None.
FOURTH: The manner in which such amendment effects a change in the amount
of stated capital, and the amount of stated capital as changed by such
Amendment, are as follows:
None.
Dated: December 13, 1993 PINNACLE GAMING DEVELOPMENT CORP.
By /s/ Erwin Haitzmann
--------------------------------
Erwin Haitzmann, President
Attest: /s/ Norbert Teufelberger
--------------------------------
Norbert Teufelberger, Secretary
<PAGE>
(CORPORATE SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 13th day of
December, 1993, by Erwin Haitzmann and Norbert Teufelberger, President and
Secretary, respectively, of Pinnacle Gaming Development Corp., a Colorado
corporation, on behalf of the Corporation and verified by each person on behalf
of the Corporation, under penalties of perjury, that the foregoing instrument is
the Corporation's deed and act and that the facts stated therein are true.
Witness my hand and official seal.
(SEAL)
----------------------------------
/s/
----------------------------------
Notary Public
(S E A L)
1625 Broadway, #1600
----------------------------------
Address
Denver, CO
----------------------------------
-5-
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
PINNACLE GAMING DEVELOPMENT CORP.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of incorporation:
FIRST: The name of the Corporation is Pinnacle Gaming Development Corp.
SECOND: The following amendment to the Articles of Incorporation was
adopted by the shareholders of the Corporation on May 3, 1995, in the manner
prescribed by the Colorado Business Corporation Act. The number of shares voted
for the amendments was sufficient for approval.
ARTICLE XIII
Notwithstanding any other provision of these Articles of Incorporation to
the contrary, all shares of capital stock of the Corporation shall always be
subject to redemption by the Corporation, by action of the Board of Directors,
if in the good faith judgment of the Board of Directors in accordance with its
fiduciary duties such action should be taken, pursuant to any applicable
provision of law, to the extent necessary to obtain a license or franchise, or
to prevent the loss or secure the reinstatement of any license or franchise from
any governmental agency held by the Corporation or any Subsidiary to conduct any
portion of the business of the Corporation, or any Subsidiary, which license or
franchise is conditioned upon some or all of the holders of the Corporation's
stock of any class or series possessing prescribed qualifications. The terms and
conditions of such redemption shall be as follows:
(a) the redemption price of the shares to be redeemed pursuant to
this Article XIII shall be equal to the Fair Market Value of such shares or such
other redemption price as required by pertinent state or federal law pursuant to
which the redemption is required;
(b) the redemption price of such shares may be paid in cash,
Redemption Securities or any combination thereof;
(c) if less than all the shares held by Disqualified Holders are to
be redeemed, the shares to be redeemed shall be selected in such manner as shall
be determined by the Board of Directors, which may include selection first of
the most recently purchased shares thereof, selection by lot or selection in any
other manner determined by the Board of Directors;
(d) at least 30 days' written notice of the Redemption Date shall be
given to the record holders of the shares selected to be redeemed (unless waived
in writing by any such holder); provided, however, that the Redemption Date may
be the date on which
-1-
<PAGE>
written notice shall be given to record holders if the cash or Redemption
Securities necessary to effect the redemption shall have been deposited in trust
for the benefit of such record holders and subject to immediate withdrawal by
them upon surrender of the stock certificates fur their shares to be redeemed;
(e) from and after the Redemption Date or such earlier date as
mandated by pertinent state or federal law, any and all rights of whatever
nature, which may be held by the owners of shares selected for redemption
(including without limitation any rights to vote or participate in dividends
declared on stock of the same class or series as such shares), shall cease and
terminate and they shall thenceforth be entitled only to receive the cash or
Redemption Securities payable upon redemption; and
(f) such other terms and conditions as the Board of Directors shall
determine.
For purposes of this Article XIII:
(i) "Disqualified Holder" shall mean any holder of shares of stock of
the Corporation of any class (or classes) or series whose holding of such stock,
either individually or when taken together with the holding of shares of stock
of the Corporation of any class (or classes) or series by any other holders, may
result, in the good faith judgment of the Board of Directors in accordance with
its fiduciary duties, in the loss of, or the failure to secure a license or
franchise or the reinstatement of, any license or franchise from any
governmental agency held by the Corporation or any Subsidiary to conduct any
portion of the business of the Corporation or any Subsidiary.
(ii) "Fair Market Value" of a share of the Corporation's stock of any
class or series shall mean the average Closing Price for such a share for the 45
most recent days on which shares of stock of such class or series shall have
been traded preceding the day on which notice of redemption shall be given
pursuant to paragraph (d) of this Article XIII; provided, however, that if
shares of stock of such class or series are not traded on any securities
exchange or in the over-the-counter market, "Fair Market Value" shall be
determined by the Board of Directors in good faith; and provided, further,
however, that Fair Market Value of a share held by any stockholder who purchased
any stock of the class (or classes) or series subject to redemption within 120
days of a Redemption Date need not (unless otherwise determined by the Board of
Directors) exceed the purchase price paid by him for any stock of such class of
the Corporation. "Closing Price" on any day means the reported closing sales
price or, in case no such sale takes place, the average of the reported closing
bid and asked prices on the Composite Tape for the New York Stock Exchange-
Listed Stocks, or, if stock of the class or series in question is not quoted on
such Composite Tape, on the New York Stock Exchange, or, if such stock is not
listed on such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the closing sales
price, or for such stock on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such prices or
quotations are available, the fair market value on the day in question as
determined by the Board of Directors in good faith.
<PAGE>
(iii) "Redemption Date" shall mean the date fixed by the Board of
Directors for the redemption of any shares of stock of the Corporation pursuant
to this of Article XIII.
(iv) "Redemption Securities" shall mean any debt or equity securities
of the Corporation, any Subsidiary or any other corporation, or any combination
thereof, having such terms and conditions as shall be approved by the Board of
Directors and which, together with cash, if any, to be paid as part of the
redemption price, which has a value, at the time notice of redemption is given
pursuant to paragraph (d) of this Article XIII, at least equal to the Fair
Market Value of the shares to be redeemed pursuant to this Article XIII
(assuming, in the case of Redemption Securities to be publicly traded, such
Redemption Securities were fully distributed and subject only to normal trading
activity).
(v) "Subsidiary" shall mean any entity more than 50% of whose
outstanding capitalization entitled to vote generally in the election of
directors or other similar governing body is owned by the Corporation, by one or
more subsidiaries of the Corporation, or by the Corporation and one or more of
its subsidiaries.
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows:
None.
FOURTH: The manner in which such amendment effects a change in the amount
of stated capital, and the amount of stated capital as changed by such
amendment, are as follows:
None.
DATED: May 4th, 1995 PINNACLE GAMING DEVELOPMENT CORP.
By /s/ James D. Forbes
-----------------------------------
James D. Forbes, Vice President
ATTEST:
/s/ Norbert Teufelberger
-------------------------------------
Norbert Teufelberger, Secretary
Address: 50 South Steele Street, Suite 755
(CORPORATE SEAL) Denver, Colorado 80209
<PAGE>
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 4th day of May,
---
1995, James D. Forbes and Norbert Teufelberger, Vice President and Secretary,
respectively, of Pinnacle Gaming Development Corp., a Colorado corporation, on
behalf of the Corporation and verified by each person on behalf of the
Corporation, under penalties of perjury, and that the foregoing instrument is
the Corporation's deed and act and that the facts stated therein are true.
Witness my hand and official seal.
/s/ Patricia Brackelbank
--------------------------------------
Notary Public
(SEAL)
My Commission Expires 5/17/98
-----------------
<PAGE>
READ INSTRUCTIONS ON REVERSE SIDE BEFORE COMPLETING
SUBMIT SIGNED FORM WITH FILING FEE
<TABLE>
<S> <C>
Report Year 1995 SECRETARY OF STATE
MAILING DATE 09/01/95 FILED
FORMATION BELOW IS ON FILE IN THIS OFFICE DO NOT CHANGE PRE-PRINTED INFORMATION SEP 25 1995
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE NAME REGISTERED AGENT, REGISTERED OFFICE, CITY, STATE & ZIP FOR OFFICE USE ONLY
931093552 DP STATE/COUNTRY OF INC CO.
TEUFELBERGER NORBERT
PINNACLE GAMING DEVELOPMENT CORP.
951119234 C $25.00
50 S STEELE ST. 755 SECRETARY OF STATE
DENVER CO 80209 09-27-95 08:03
FIRST REPORT OR CORRECTIONS IN THIS COLUMN
- ----------------------------------------------------------------------------------------------------------------------------------
RETURN COMPLETED REPORTS TO: TYPE NEW AGENT NAME
Department of State
--------------------------------------------------
Cororate Report Section SIGNATURE OF NEW REGISTERED AGENT
--------------------------------------------------
1560 Broadway, Suite 200 MUST HAVE A STREET ADDRESS
--------------------------------------------------
Denver, CO 80202 CITY STATE ZIP
- ----------------------------------------------------------------------------------------------------------------------------------
OFFICERS NAME AND ADDRESS TITLE Erwin Haitzmann President
50 S. Steele Street, Suite 755
Denver, CO 80209
- ----------------------------------------------------------------------------------------------------------------------------------
James D. Forbes VP
50 S. Steele Street, Suite 755
Denver, CO 80209
- ----------------------------------------------------------------------------------------------------------------------------------
Norbert Teufelberger Sec. & Treas.
50 S. Steele Street, Suite 755
Denver, CO 80209
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
DIRECTORS OR LIMITED LIABILITY COMPANY MANAGERS Erwin Haitzmann
50 S. Steele Street, Suite 755
Denver, CO 80209
- -----------------------------------------------------------------------------------------------------------------------------------
James D. Forbes
50 S. Steele Street, Suite 755
Denver, CO 80209
- -----------------------------------------------------------------------------------------------------------------------------------
Norbert Teufelberger
50 S. Steele Street, Suite 755
Denver, CO 80209
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Address of Principal Place of Business
Street: 50 S. Steele Street, Suite 755
City: Denver State: CO Zip 80209
SIGNATURE
Under penalties of perjury and as an authorized officer, I declare that this
biennial report and, if applicable, the statement of change of registered office
and/or agent, has been examined by me and is, to the best of my knowledge and
belief, true, correct, and complete.
/s/ Norbert Teufelberger
- ----------------------------------------
Authorized Agent
Title: Secretary & Treasurer Date: September 8, 1995
NOTE: DO NOT USE THIS BOX IF THIS IS YOUR FIRST REPORT!!!! SEE
INSTRUCTIONS ON REVERSE.IF THERE ARE NO CHANGES SINCE YOUR LAST REPORT,
[_] MARK THIS BOX, SIGN ABOVE AND RETURN WITH THE FEE AND BY THE DATE DUE
INDICATED ABOVE (UPPER LEFT HAND CORNER). IF YOU ARE FILING AFTER THE DATE
DUE ABOVE, CONTACT THIS OFFICE FOR THE PROPER FEE. (303) 894-2251
SEE INSTRUCTIONS ON BACK
<PAGE>
<TABLE>
<S> <C> <C>
Mail to: Secretary of State FOR OFFICE USE ONLY
Corporations Section
1560 Broadway, Suite 200
Denver, CO 80202
MUST BE TYPED (303) 894-2251
FILING FEE: $10.00 Fax (303) 894-2242 951158136 C $10.00
MUST SUBMIT TWO COPIES SECRETARY OF STATE
STATEMENT OF CHANGE OF 12-26-95 15:02
REGISTERED OFFICE OR
PLEASE INCLUDE A TYPED SELF REGISTERED AGENT, OR BOTH
ADDRESSED ENVELOPE ---------------------
</TABLE>
Pursuant to the provisions of the Colorado Business Corporation Act, the
Colorado Nonprofit Corporation Act, the Colorado Uniform Limited Partnership Act
of 1981 and the Colorado Limited Liability Company Act, the undersigned,
organized under the laws of:
Colorado
----------------------------------------------------------------------
submits the following statement for the purpose of changing its registered
office or its registered agent, or both, in the state of Colorado:
FIRST: The name of the corporation, limited partnership or limited liability
company is: Pinnacle Gaming Development Corp.
----------------------------------------------------------
SECOND: Street address of current REGISTERED OFFICE is: 50 S. Steele Street,
----------------------
Suite 755, Denver, Colorado 80209
-----------------------------------------------------------------------
(Include City, State, Zip)
and if changed, the new street address is: 1675 Broadway, Suite 1200,
---------------------------
Denver, Colorado 80202
-----------------------------------------------------------------------
THIRD: The name of its current REGISTERED AGENT is: Norbert Teufelberger
--------------------------
and if changed, the new registered agent is: The Corporation Company
-------------------------
Signature of New Registered Agent: /s/ Registered Agent
-------------------------------------
Principal place of business:___________________________________________
The address of its registered office and the address of the business office of
its registered agent, as changed, will be identical.
PINNACLE GAMING DEVELOPMENT CORP.
-------------------------------------
Name of Entity
By: /s/ Treasurer
----------------------------------
Its: Treasurer
---------------------------------
Title
<PAGE>
<TABLE>
<S> <C> <C>
SECRETARY OF STATE FOR OFFICE USE ONLY
CORPORATIONS SECTION
MUST BE TYPED
FILING FEE: $10.00
MUST SUBMIT TWO COPIES STATEMENT OF CHANGE OF 961047470 C $15.00
REGISTERED OFFICE OR SECRETARY OF STATE
REGISTERED AGENT, OR BOTH 04-05-96
PLEASE INCLUDE A TYPED SELF
ADDRESSED ENVELOPE --------------------
</TABLE>
Pursuant to the provisions of the Colorado Business Corporation Act, the
Colorado Nonprofit Corporation Act, the Colorado Uniform Limited Partnership Act
of 1981 and the Colorado Limited Liability Company Act, the undersigned,
organized under the laws of: COLORADO submits the following statement for the
--------
purpose of changing its registered office or its registered agent, or both, in
the state of Colorado:
FIRST: The name of the corporation, limited partnership or limited liability
company is: PINNACLE GAMING DEVELOPMENT CORP.
--------------------------------------------
SECOND: Street address of current REGISTERED OFFICE is: 1675 Broadway, Suite
--------------------
1200, Denver, CO 80202
----------------------------
and if changed, the new street address is:___________________________
c/o The Prentice-Hall Corporation System, Inc.
One Civic Center Plaza, 1560 Broadway, Denver, Colorado 80202
---------------------------------------------------------------------
THIRD: The name of its current REGISTERED AGENT is: The Corporation Company
-------------------------
and if changed, the new registered agent is: The Prentice-Hall
-----------------
Corporation System, Inc.
------------------------
Signature of New Registered Agent: /s/ of the Registered Agent
---------------------------
Principal place of business:___________________________________
The address of its registered office and the address of the business office of
its registered agent, as changed, will be identical.
PINNACLE GAMING DEVELOPMENT CORP.
---------------------------------------
Name of Entity
By: /s/ Secretary
------------------------------------
Its: Secretary
-----------------------------------
Title
<PAGE>
FEE $ 25.00 STATE OF COLORADO
-----------
ON OR BEFORE BIENNIAL REPORT OF
DATE DUE 11/30/1997 A CORPORATION OR LIMITED LIABILITY COMPANY
--------------
REPORT YEAR 1997
- -----------
READ INSTRUCTIONS ON REVERSE SIDE BEFORE COMPLETING
SUBMIT SIGNED FORM WITH FILING FEE
MAILING DATE 09/01/1997
FORMATION BELOW IS ON FILE IN THIS OFFICE DO NOT CHANGE PRE-PRINTED INFORMATION
<TABLE>
<S> <C>
CORPORATE NAME REGISTERED AGENT, REGISTERED OFFICE, CITY, STATE & ZIP FOR OFFICE USE ONLY
931093552 DP STATE/COUNTRY OF INC CO.
19931093552 DPC STATE/COUNTRY OF INC CO 19971165887 M
PRENTICE-HALL CORP SYSTEM INC. $ 25.00
PINNACLE GAMING DEVELOPMENT CORP. Secretary of State
1560 BROADWAY 10-16-97 13:48:22
DENVER, CO 80202-5817
FIRST REPORT OR CORRECTIONS IN THIS COLUMN
- -----------------------------------------------------------------------------------------------------------------------------------
RETURN COMPLETED REPORTS TO: TYPE NEW AGENT NAME
Department of State
-------------------------------------------------
Cororate Report Section SIGNATURE OF NEW REGISTERED AGENT
-------------------------------------------------
1560 Broadway, Suite 200 MUST HAVE A STREET ADDRESS
-------------------------------------------------
Denver, CO 80202 CITY STATE ZIP
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS NAME AND ADDRESS TITLE Arthur M. Goldberg
3930 Howard Hughes Pkwy.
Las Vegas, NV 89109
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy J. Parrott
P.O. Box 399
Verdi, NV 89439
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy M. Hawes
3930 Howard Hughes Pkwy.
Las Vegas, NV 89109
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECTORS OR LIMITED LIABILITY COMPANY MANAGERS
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE SEE ATTACHED LIST.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Address of Principal Place of Business
Street: 9336 Civic Center Drive
City: Beverly Hills State: CA Zip 90210
SIGNATURE
Under penalties of perjury and as an authorized officer, I declare that this
biennial report and, if applicable, the statement of change of registered office
and/or agent, has been examined by me and is, to the best of my knowledge and
belief, true, correct, and complete.
By: /s/ Director
------------------------
Authorized Agent
Title: Director Date: October 3, 1997
NOTE: DO NOT USE THIS BOX IF THIS IS YOUR FIRST REPORT!!!! SEE
[_] INSTRUCTIONS ON REVERSE. IF THERE ARE NO CHANGES SINCE YOUR LAST REPORT,
MARK THIS BOX, SIGN ABOVE AND RETURN WITH THE FEE AND BY THE DATE DUE
INDICATED ABOVE (UPPER LEFT HAND CORNER). IF YOU ARE FILING AFTER THE
DATE DUE ABOVE, CONTACT THIS OFFICE FOR THE PROPER FEE. (303) 894-2251
SEE INSTRUCTIONS ON BACK
<PAGE>
PINNACLE GAMING DEVELOPMENT CORP.
(A COLORADO CORPORATION)
DIRECTORS
Arthur M. Goldberg
3930 Howard Hughes Pkwy.
Las Vegas, NV 89109
Timothy J. Parrott
P.O. Box 399
Verdi, NV 89439
Timothy M. Hawes
3930 Howard Hughes Pkwy.
Las Vegas, NV 89109
Robert F. List
P.O. Box 399
Verdi, NV 89439
<PAGE>
EXHIBIT 3.50
BYLAWS
OF
PINNACLE GAMING DEVELOPMENT CORP.
ARTICLE I
Offices
-------
Section 1. Offices:
- -------------------
The principal office of the Corporation shall be at Suite 755, 50 South
Steele Street, in the City of Denver, County of Denver, State of Colorado, and
the Corporation shall have other offices at such places as the Board of
Directors may from time to time determine.
ARTICLE II
Shareholders' Meetings
----------------------
Section 1. Place:
- -----------------
The place of shareholders' meetings shall be the principal office of the
Corporation unless some other place either within or without the State of
Colorado shall be determined and designated from time to time by the Board of
Directors.
Section 2. Annual Meeting:
- --------------------------
The annual meeting of the shareholders of the Corporation for the election
of directors to succeed those whose terms expire, and for the transaction of
such other business as may properly come before the meeting, shall be held each
year on the last day of November beginning in the year 1994. If the annual
meeting of the shareholders be not held, or if held and directors shall not have
been elected for any reason, then the election of directors may be held at any
meeting of shareholders thereafter called pursuant to these Bylaws and the laws
of Colorado.
Section 3. Special Meetings:
- ----------------------------
Special meetings of the shareholders for any purpose or purposes may be
called by the President, the Board of Directors, or the holders of ten percent
or more of all the shares entitled to vote at such meeting, by the giving of
notice in writing as hereinafter described.
Section 4. Voting:
- ------------------
At all meetings of shareholders, voting may be viva voce; but any qualified
voter may demand a stock vote, whereupon such vote shall be taken by ballot and
the Secretary shall record the name of the shareholder voting, the number of
shares voted, and, if such vote shall be by proxy, the name of the proxy holder.
Voting may be in person or by proxy
<PAGE>
appointed in writing, manually signed by the shareholder or his duly authorized
attorney-in-fact. No proxy shall be valid after eleven months from the date of
its execution, unless otherwise provided therein.
Each shareholder shall have such rights to vote as the Articles of
Incorporation provide for each share of stock registered in his name on the
books of the Corporation, except where the transfer books of the Corporation
shall have been closed or a date shall have been fixed as a record date, not to
exceed, in any case, fifty days preceding the meeting, for the determination of
shareholders entitled to vote. The Secretary of the Corporation shall make, at
least ten days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list, for a Period of ten days prior to such meeting, shall
be kept on file at the principal office of the Corporation and shall be subject
to inspection by any shareholder for any purpose germane to the meeting at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any shareholder for any purpose germane to the meeting during the whole time of
the meeting.
Section 5. Order of Business:
- -----------------------------
The order of business at any meeting of shareholders shall be as follows:
1. Calling the meeting to order.
2. Calling of roll.
3. Proof of notice of meeting.
4. Report of the Secretary of the stock represented at the meeting
and the existence or lack of a quorum.
5. Reading of minutes of last previous meetings and disposal of any
unapproved minutes.6. Reports of officers.
7. Reports of committee.
8. Election of directors, if appropriate.
9. Unfinished business.
10. New business.
11. Adjournment.
To the extent that these Bylaws do not apply, Roberts' Rules of Order shall
prevail.
-2-
<PAGE>
Section 6. Notices:
- -------------------
Written or printed notice stating the place, day, and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten nor more than fifty days before
the date of the meeting, either personally or by mail, by or at the direction of
the President, the Secretary, or the officer or persons calling the meeting, to
each shareholder of record entitled to vote at such meeting, except that, if the
authorized capital stock is to be increased, at least thirty days' notice shall
be given. Notice to shareholders of record, if mailed, shall be deemed delivered
as to any shareholder of record when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the Corporation, with postage prepaid. If three successive letters
mailed to the last-known address of any shareholder of record are returned as
undeliverable, no further notices to such shareholder shall be necessary until
another address for such shareholder is made known to 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 of record entitled
to vote at the meeting.
Section 7. Quorum:
- ------------------
A quorum at any annual or special meeting shall consist of the
representation in person or by proxy of a majority in number of the shares of
outstanding capital stock of the Corporation entitled to vote at such meeting,
and the vote of a majority of the quorum shall be the act of the shareholders
unless the vote of a greater number, or voting by classes, is required by the
Colorado Corporation Code or the Articles of Incorporation. In the event a
quorum be not present, the meeting may be adjourned by those present for a
period not to exceed sixty days at any one adjournment. The shareholders
entitled to vote, present either in person or by proxy at such adjourned
meeting, shall, if equal to one-half of the shares entitled to vote at the
meeting, constitute a quorum, and the vote of a majority of the quorum shall be
the act of the shareholders at such adjourned meeting unless the vote of a
greater number, or voting by classes, is required by the Colorado Corporation
Code or the Articles of Incorporation.
Section 8. Action by Shareholders Without a Meeting:
- ----------------------------------------------------
Any action required to be or which may be taken at a meeting of the
shareholders of the Corporation may be taken without a meeting if one or more
written consents setting forth the action so taken is signed by all of the
shareholders entitled to vote with respect to the subject matter thereof, and
delivered to the Secretary of the Corporation for inclusion in the corporate
records. Such action is effective when all shareholders entitled to vote have
signed the consent, unless the consent specifies a different effective date.
-3-
<PAGE>
ARTICLE III
Board of Directors
------------------
Section 1. Organization and Powers:
- -----------------------------------
The Board of Directors shall constitute the policy-making or legislative
authority of the Corporation. Management of the affairs, property, and business
of the Corporation shall be vested in the Board of Directors, which shall
consist of not less than three nor more than seven members, who shall be elected
at the annual meeting of shareholders by a plurality vote for a term of one
year, and shall hold office until their successors are elected and qualify.
Directors need not be shareholders of the Corporation nor residents of Colorado.
Directors shall have all powers with respect to the management, control, and
determination of policies of the Corporation that are not limited by these
Bylaws, the Articles of Incorporation, or the statutes of the State of Colorado,
and the enumeration of any power shall not be considered a limitation thereof.
Section 2. Vacancies:
- ---------------------
Any vacancy in the Board of Directors, however caused or created, shall be
filled by the affirmative vote of a majority of the remaining directors, though
lose than a quorum of the Board, or at a special meeting of the shareholders
called for that purpose. The directors elected to fill vacancies shall hold
office for the unexpired term and until their successors are elected and
qualify.
Section 3. Regular Meetings:
- ----------------------------
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 or any special meeting of shareholders at which a
director or directors shall have been elected. The Board of Directors may
provide by resolution the time and place, either within or without the State of
Colorado, for the holding of additional regular meetings without other notice
than such resolution.
Section 4. Special Meetings:
- ----------------------------
Special Meetings of the Board of Directors may be held at the principal
office of the Corporation, or such other place as may be fixed by resolution of
the Board of Directors for such purpose, at any time on call of the President or
of any member of the Board, or may be held at any time and place without notice,
by unanimous written consent of all the members, or with the presence and
participation of all members at such meeting.
Section 5. Notices:
- -------------------
Notices of both regular and special meetings, save when held by unanimous
consent or participation, shall be mailed by the Secretary to each member of the
Board not less than ten days before any such meeting and notices of special
meetings may state the purposes thereof. No failure or irregularity of notice of
any regular meeting shall invalidate such meeting or any proceeding thereat.
-4-
<PAGE>
Section 6. Quorum and Manner of Acting:
- ---------------------------------------
A quorum for any meeting of the Board of Directors shall be a majority of
the Board of Directors as then constituted. Any 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. Any action of such majority, although not at a regularly
called meeting, and the record thereof, if assented to in writing by all of the
other members of the Board, shall always be as valid and effective in all
respects as if otherwise duly taken by the Board of Directors.
Section 7. Committees:
- ----------------------
The Board of Directors may, by resolution of a majority of the full Board,
designate two or more directors to constitute an Executive Committee and one or
more other committees, each of which shall have and may exercise, to the extent
provided in such resolution, all of the authority of the Board of Directors in
the management of the Corporation, except that no such committee shall have the
authority to declare dividends or distributions; approve or recommend to
shareholders actions or proposals required by the Colorado Corporation Code to
be approved by shareholders; fill vacancies on the Board of Directors or any
committee thereof; amend the Corporation's Bylaws; approve a plan of merger not
requiring shareholder approval; reduce earned or capital surplus; authorize or
approve the reacquisition of shares unless pursuant to a general formula or
method specified by the Board of Directors pursuant to the Colorado Corporation
Code; or authorize or approve the issuance or sale of, or any contract to issue
or sell, shares or designate the terms of a series of a class of shares.
Neither the designation of any such committee, the delegation of authority
to such committee, nor any action by such committee, the delegation of authority
to such committee, nor any action by such committee pursuant to its authority
shall alone constitute compliance by any member of the Board of Directors, nor a
member of the committee in question, with his responsibility to act in good
faith, in a manner he reasonably believes to be in the best interests of the
Corporation, and with such care as an ordinarily prudent person in like position
would use under similar circumstances.
Section 8. Action by Directors Without a Meeting:
- -------------------------------------------------
Any action required to be, or which may be, taken at a meeting of the Board
of Directors, Executive Committee or other committee of the directors, may be
taken without a meeting if one or more written consents setting forth the action
so taken is signed by all directors or committee members entitled to vote with
respect to the subject matter thereof, and delivered to the Secretary of the
Corporation for inclusion in the corporate records. Such action is effective
when all directors or committee members have signed the consent, unless the
consent specifies a different effective date.
Section 9. Order of Business:
- -----------------------------
The order of business at any regular or special meeting of the Board of
Directors, unless otherwise prescribed for any meeting by the Board, shall be as
follows:
1. Reading and disposal of any unapproved minutes.
-5-
<PAGE>
2. Reports of officers and committees.
3. Unfinished business.
4. New business.
5. Adjournment.
To the extent that these Bylaws do not apply, Roberts' Rules of Order shall
prevail.
Section 10. Remuneration:
- -------------------------
No stated salary shall be paid to directors for their services as such,
but, by resolution of the Board of Directors, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board. Members of special or standing committees may be allowed
like compensation for attending meetings. Nothing herein contained shall be
construed to preclude any director from receiving compensation for serving the
Corporation in any other capacity, subject to such resolutions of the Board of
Directors as may then govern receipt of such compensation.
ARTICLE IV
Officers
--------
Section 1. Titles:
- ------------------
The officers of the Corporation shall consist of a President, a Secretary,
and a Treasurer, each of whom shall be elected for one year by the directors at
their first meeting following the annual meeting of shareholders. Such officers
shall hold office until their successors are elected and qualify. The Board of
Directors may from time to time elect or appoint such other officers and
assistant officers as it deems necessary, each of whom shall serve during such
terms as may be fixed by the Board at a duly held meeting. Any two or more
offices may be held by the same person except the offices of President and
Secretary.
Section 2. President:
- ---------------------
The President shall preside at all meetings of shareholders and, in the
absence of a, or the, Chairman of the Board of Directors, at all meetings of the
directors. He shall be generally vested with the power of the chief executive
officer of the Corporation and shall countersign all certificates, contracts,
and other instruments of the Corporation as authorized by the Board of Directors
or required by law. He shall make reports to the Board of Directors and
shareholders and shall perform such other duties and services as may be required
of him from time to time by the Board of Directors.
Section 3. Vice President.
- --------------------------
If a Vice President is elected or appointed, or if more than one Vice
President is elected, the Vice President bearing the title of "Senior" or
Executive" Vice President, or similar title, shall perform all the duties of the
President if the President is absent or for any
-6-
<PAGE>
reason is unable to perform his duties and shall have such other duties as the
Board of Directors shall authorize or direct.
Section 4. Secretary:
- ---------------------
The Secretary shall issue notices of all meetings of shareholders and
directors, shall keep minutes of all such meetings, and shall record all
proceedings. He shall have custody and control of the corporate records and
books, excluding the books of account, together with the corporate seal. He
shall make such reports and perform such other duties as may be consistent with
his office or as may be required of him from time to time by the Board of
Directors.
Section 5. Treasurer:
- ---------------------
The Treasurer shall have custody of all monies and securities of the
Corporation and shall have supervision over the regular books of account. He
shall deposit all monies, securities, and other valuable effects of the
Corporation in such banks and depositaries as the Board of Directors may
designate and shall disburse the funds of the Corporation in payment of just
debts and demands against the Corporation, or as they may be ordered by the
Board of Directors, shall render such account of his transactions as may be
required of him by the President or the Board of Directors from time to time and
shall otherwise perform such duties as may be required of him by the Board of
Directors.
The Board of Directors may require the Treasurer to give a bond
indemnifying the Corporation against larceny, theft, embezzlement, forgery,
misappropriation, or any other act of fraud or dishonesty resulting from his
duties as Treasurer of the Corporation, which bond shall be in such amount as
appropriate resolution or resolutions of the Board of Directors may require.
Section 6. Vacancies or Absences:
- ---------------------------------
If a vacancy in any office arises in any manner, the directors then in
office may choose, by a majority vote, a successor to hold office for the
unexpired term of the officer. If any officer shall be absent or unable for any
reason to perform his duties, the Board of Directors, to the extent not
otherwise inconsistent with these Bylaws, may direct that the duties of such
officer during such absence or inability shall be performed by such other
officer or subordinate officer as seems advisable to the Board.
Section 7. Compensation:
- ------------------------
No officer shall receive any salary or compensation for his services unless
and until the Board of Directors authorizes and fixes the amount and terms of
such salary or compensation.
-7-
<PAGE>
ARTICLE V
Stock
-----
Section 1. Certificates of Shares:
- ----------------------------------
Each holder of stock of the Corporation shall be entitled to a stock
certificate signed by the President (or Vice President if one is appointed) and
also by the Secretary or an assistant secretary of the Corporation. The
certificates of shares shall be in such form, not inconsistent with the Articles
of Incorporation, as shall be prepared or approved by the Board of Directors.
All certificates shall be consecutively numbered. Each certificate shall state
upon its face that the Corporation is organized under the laws of Colorado; the
name of the person to whom issued; the number and class of shares and the
designation of the series, if any, which such certificate represents; the par
value of each share represented by the certificate, or a statement that the
shares are without par value. The name of the person owning the shares
represented thereby, with the number of such shares and the date of issue, shall
be entered on the Corporation's books, and no certificate shall be valid unless
it be signed by the proper officers as set forth above. The seal of the
Corporation, or a facsimile thereof, may be affixed to the stock certificates.
The signatures of officers as above described on any such certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar both of which may be the Corporation itself or an employee of the
Corporation.
Section 2. New Certificates:
- ----------------------------
All certificates surrendered to the Corporation shall be canceled and no
new certificate shall be issued, except to evidence transfer of stock from the
unissued stock or treasury of the Corporation, or, in the case of a lost
certificate, except upon posting a bond of indemnity in such form and with such
surety or sureties and for such amount as shall be satisfactory to the directors
and upon producing by affidavit or otherwise such evidence of loss or
destruction as the Board may require, until the former certificates for the same
number of shares have been surrendered and canceled.
Section 3. Transfer of Shares:
- ------------------------------
Shares in the capital stock of the Corporation shall be transferred only on
the books of the Corporation by the holder thereof in person, or by his
attorney, upon surrender and cancellation of certificates for a like number of
shares. The delivery of a certificate of stock of this Corporation to a bona
fide purchaser or pledgee for value, together with a written transfer of the
same or a written power of attorney to sell, assign, and transfer the same,
signed by the owner of the certificate, shall be a sufficient delivery to
transfer the title against all persons except the Corporation. No transfer of
stock shall be valid against the Corporation until it shall have been registered
upon the books of the Corporation.
Section 4. Closing of Transfer Books or Provisions for Record Date:
- -------------------------------------------------------------------
For purposes or determining shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of dividends, the stock transfer books may be closed by the
Board of Directors for a period not
-8-
<PAGE>
exceeding fifty days prior to such action. In lieu of closing the stock transfer
books, the Board of Directors may fix in advance a day not more than fifty days
prior to the holding of any such meeting of shareholders, or payment of
dividends, as the day as of which shareholders entitled to notice of and to vote
at such meeting, or to payment of dividends, as the case may be, shall be
determined.
Section 5. Regulations:
- -----------------------
The Board of Directors shall have power and authority to take all action
they deem expedient concerning the issue, transfer, and registration of
certificates for shares of the capital stock of the Corporation. The Board of
Directors may appoint a transfer agent and a registrar and may require all stock
certificates to bear the signature of such transfer agent or such registrar.
Section 6. Restrictions on Stock:
- ---------------------------------
The Board of Directors may restrict any stock issued by giving the
Corporation or any shareholder "first right of refusal to purchase" the stock,
by making the stock redeemable or by restricting the transfer of the stock,
under such terms and in such manner as the directors may deem necessary and as
are not inconsistent with the Articles of Incorporation or the laws of the State
of Colorado. Any stock so restricted must carry a stamped legend setting out the
restriction or conspicuously noting the restriction and stating where it may be
found in the records of the Corporation.
ARTICLE VI
Dividends and Finances
----------------------
Section 1. Dividends:
- ---------------------
Dividends may be declared by the directors and paid out of any funds
legally available therefor under the laws of Colorado, as may be deemed
advisable from time to time by the Board of Directors of the Corporation. Before
declaring any dividends, the Board of Directors may set aside out of net profits
or earned or other surplus such sums as the Board may think proper as a reserve
fund to meet contingencies or for other purposes deemed proper and to the best
interests of the Corporation.
Section 2. Monies:
- ------------------
The monies, securities, and other valuable effects of the Corporation shall
be deposited in the name of the Corporation in such banks or trust companies as
the Board of Directors shall designate and shall be drawn out or removed only as
may be authorized by the Board of Directors from time to time.
Section 3. Fiscal Year:
- -----------------------
Unless and until the Board of Directors by resolution shall determine
otherwise, the fiscal year shall begin on the last day of the calendar year and
end on the first day of the calendar year and the first fiscal period shall end
December 31, 1993.
-9-
<PAGE>
ARTICLE VII
Seal
----
The Board of Directors shall provide a corporate seal which shall be in the
form of a circle and shall have inscribed thereon the name of the Corporation
and the words "SEAL, Colorado," and shall be entrusted in the care of the
Secretary or such other officer of the Corporation as the Board of Directors
shall designate.
ARTICLE VIII
Notices
-------
Section 1. Requirements:
- ------------------------
Whenever a notice shall be required by the statutes of the State of
Colorado or by these Bylaws, such notice may be given in writing by depositing
the same in the United States mails in a postpaid, sealed envelope addressed to
the person for whom such notice is intended to his or her home or other address,
as the same shall appear on the stock transfer books of the Corporation. A
waiver of any notice in writing, signed by a shareholder, director, or officer,
whether before, at, or after the time stated in such waiver for holding a
meeting, shall be deemed the equivalent of duly giving such notice.
Section 2. Waiver:
- ------------------
By attending a meeting, a shareholder: (a) waives objection to lack of
notice or defective notice of such meeting unless the shareholder, at the
beginning of the meeting, objects to the holding of the meeting or the
transacting of business at the meeting; and (b) waives objection to
consideration at such meeting of a particular matter not within the purpose or
purposes described in the meeting notice unless the shareholder objects to
considering the matter when it is presented.
By attending or participating in a regular or special meeting, a director
waives any required notice of such meeting unless the director, at the beginning
of the meeting, objects to the holding of the meeting or the transacting of
business at the meeting.
Section 3. Ratification:
- ------------------------
The ratification or approval in writing of the minutes of any meeting of
shareholders, directors, or officers shall have the same force and effect as if
the ratifying or approving shareholder, director, or officer were present in
person at said meeting.
ARTICLE IX
Amendments
----------
Subject to repeal or change by action of the shareholders, or unless the
shareholders in amending or repealing a particular bylaw expressly provide that
the Board of Directors
-10-
<PAGE>
may not amend or repeal such bylaw, these Bylaws may be altered, amended, or
repealed by resolution of a majority of the Board.
ARTICLE X
Indemnification
---------------
Section 1. Definitions:
- ------------------------
For purposes of this Article X, the following terms shall have the meanings
set forth below:
(a) "Corporation" includes the Corporation and any domestic or
foreign predecessor entity of the Corporation in a merger, consolidation,
or other transaction in which the predecessor's existence ceased upon
consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
Corporation and an individual who, while a director of the Corporation, is
or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, or agent of any other foreign or domestic
corporation or of any partnership, joint venture, trust, other enterprise,
or employee benefit plan. A director shall be considered to be serving an
employee benefit plan at the Corporation's request if his duties to the
Corporation also impose duties on or otherwise involve services by him to
the plan or to participants in or beneficiaries of the plan.
(c) "Expenses" includes attorney fees.
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expense incurred with respect to a proceeding.
(e) "Official capacity," when used with respect to a director,
means the office of director in the Corporation, and, when used with
respect to an individual other than a director, means the office in the
Corporation held by the officer or the employment or agency relationship
undertaken by the employee or agent on behalf of the Corporation. "Official
capacity" does not include service for any other foreign or domestic
corporation or for any partnership, joint venture, trust, other enterprise,
or employee benefit plan.
(f) "Party" includes an individual who was, is, or is threatened to
be made a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
-11-
<PAGE>
Section 2. Permissive Indemnification:
- ---------------------------------------
(a) Except as provided in paragraph (d) of this Section 2, the
Corporation may indemnify against liability incurred in any proceeding an
individual made a party to the proceeding because he is or was a director
if: (i) he conducted himself in good faith; (ii) he reasonably believed:
(A) in the case of conduct in his official capacity with the Corporation,
that his conduct was in the Corporation's best interests; or (B) in all
other cases, that his conduct was at least not opposed to the Corporation's
best interests; and (iii) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan
for a purpose he reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirements of subparagraph (B) of subparagraph (ii) of paragraph (a) of
this Section 2. A director's conduct with respect to an employee benefit
plan for a purpose that he did not reasonably believe to be in the
interests of the participants in or beneficiaries of the plan shall be
deemed not to satisfy the requirements of subparagraph (i) of paragraph (a)
of this Section 2.
(c) The termination of any proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, is not of itself determinative that the individual did not meet
the standard of conduct set forth in paragraph (a) of this Section 2.
(d) The Corporation may not indemnify a director under this Section
2 either: (i) in connection with a proceeding by or in the right of the
Corporation in which the director was adjudged liable to the Corporation;
or (ii) in connection with any proceeding charging improper personal
benefit to the director, whether or not involving action in his official
capacity, in which he was adjudged liable on the basis that personal
benefit was improperly received by him.
(e) Indemnification permitted under this Section 2 in connection
with a proceeding by or in the right of the Corporation is limited to
reasonable expenses incurred in connection with the proceeding.
Section 3. Mandatory Indemnification:
- --------------------------------------
Unless limited by the Articles of Incorporation, the Corporation shall be
required to indemnify a person who is or was a director of the Corporation and
who was wholly successful, on the merits or otherwise, in defense of any
proceeding to which he was a party against reasonable expenses incurred by him
in connection with the proceeding.
Section 4. Court-Ordered Indemnification:
- ------------------------------------------
Unless limited by the Articles of Incorporation, a director who is or was a
party to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving
-12-
<PAGE>
any notice the court considers necessary, may order indemnification in the
following manner:
(a) If it determines the director is entitled to mandatory
indemnification under Section 3, the court shall order indemnification, in
which case the court shall also order the Corporation to pay the director's
reasonable expenses incurred to obtain court-ordered indemnification.
(b) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances,
whether or not he met the standard of conduct set forth in paragraph (a) of
Section 2 or was adjudged liable in the circumstances described in
paragraph (d) of Section 2, the court may order such indemnification as the
court deems proper; except that the indemnification with respect to any
proceeding in which liability shall have been adjudged in the circumstances
described in paragraph (d) of Section 2 is limited to reasonable expenses
incurred.
Section 5. Determination:
- --------------------------
(a) The Corporation may not indemnify a director under Section 2
unless authorized in the specific case after a determination has been made
that indemnification of the director is permissible in the circumstances
because he has met the standard of conduct set forth in paragraph (a) of
Section 2.
(b) The determination required to be made by paragraph (a) of this
Section 5 shall be made: (i) by the Board of Directors by a majority vote
of a quorum, which quorum shall consist of directors not parties to the
proceeding; or (ii) if a quorum cannot be obtained, by a majority vote of a
committee of the Board designated by the Board, which committee shall
consist of two or more directors not parties to the proceeding; except that
directors who are parties to the proceeding may participate in the
designation of directors for the committee.
(c) If the quorum cannot be obtained or the committee cannot be
established under paragraph (b) of this Section 5, or even if a quorum is
obtained or a committee designated if such quorum or committee so directs,
the determination required to be made by paragraph (a) of this Section 5
shall be made: (i) by independent legal counsel selected by a vote of the
Board of Directors or the committee in the manner specified in subparagraph
(i) or (ii) of paragraph (b) of this Section 5 or, if a quorum of the full
Board cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full Board; or
(ii) by the shareholders.
(d) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible; except that, if the
determination that indemnification is permissible is made by independent
legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by the body that selected said
counsel.
-13-
<PAGE>
Section 6. Payment In Advance:
- -------------------------------
(a) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to the proceeding in advance of the
final disposition of the proceeding if: (i) the director furnishes the
Corporation a written affirmation of his good-faith belief that he has met
the standard of conduct described in subparagraph (i) of paragraph (a) of
Section 2; (ii) the director furnishes the Corporation a written
undertaking, executed personally or on his behalf, to repay the advance if
it is determined that he did not meet such standard of conduct; and (iii) a
determination is made that the facts then known to those making the
determination would not preclude indemnification under this Section 6.
(b) The undertaking required by subparagraph (ii) of paragraph (a)
of this Section 6 shall be an unlimited general obligation of director, but
need not be secured and may be accepted without reference to financial
ability to make repayment.
Section 7. Indemnification of Officers, Employees and Agents:
- --------------------------------------------------------------
Unless limited by the Articles of Incorporation:
(a) An officer of the Corporation who is not a director is entitled
to mandatory indemnification pursuant to Section 3 of this Article X and is
entitled to apply for court-ordered indemnification pursuant to Section 4
of this Article X in each case to the same extent as a director;
(b) The Corporation may indemnify and advance expenses pursuant to
Section 6 of this Article X to an officer, employee, or agent of the
Corporation who is not a director to the same extent as a director; and
(c) The Corporation may indemnify and advance expenses to an
officer, employee, or agent of the Corporation who is not a director to a
greater extent if consistent with law and if provided for by its Articles
of Incorporation, Bylaws, resolution of its shareholders or directors, or
in a contract.
Section 8. Insurance:
- ----------------------
The Corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, fiduciary, or agent of
the Corporation and who, while a director, officer, employee, fiduciary or agent
of the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, fiduciary, or agent of any other
foreign or domestic corporation or of any partnership, joint venture, trust,
other enterprise, or employee benefit plan against any liability asserted
against or 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 this section.
-14-
<PAGE>
Section 9. Notice to Shareholders:
- -----------------------------------
Any indemnification of or advance of expenses to a director in accordance
with this Article X, if arising out of a proceeding by or on behalf of the
Corporation, shall be reported in writing to the shareholders with or before the
notice of the next shareholders' meeting.
CERTIFICATE
-----------
I do hereby certify that I was Secretary of the Corporation on December 2,
1993, the date that Action by Unanimous Written Consent was taken, and I do
hereby certify that the above and foregoing Bylaws were duly adopted as the
Bylaws of said Corporation by such Action by Unanimous Consent.
/s/ Norbert Teufelberger
-------------------------------------
(SEAL)
-15-
<PAGE>
EXHIBIT 3.51
ARTICLES OF INCORPORATION
OF
HP CASINO, INC.
---------------
ONE: The name of this corporation is HP Casino, 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: October 4, 1995
/s/ Rita Burns
________________________________
Rita Burns, Incorporator
<PAGE>
EXHIBIT 3.52
BYLAWS
------
for the regulation, except as
otherwise provided by statute or
the Articles of Incorporation, of
HP CASINO, INC.
---------------
a California corporation
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<S> <C>
ARTICLE I. GENERAL PROVISIONS
1.01 Principal Executive Office 1
1.02 Number of Directors 1
ARTICLE II. SHARES AND SHAREHOLDERS
2.01 Meetings of Shareholders 1
(a) Place of Meetings 1
(b) Annual Meetings 1
(c) Special Meetings 2
(d) Notice of Meetings 2
(e) Adjourned Meeting and Notice Thereof 2
(f) Waiver of Notice 3
(g) Quorum 3
2.02 Action Without a Meeting 3
2.03 Voting of Shares 4
(a) In General 4
(b) Cumulative Voting 4
(c) Election by Ballot 4
2.04 Proxies 5
2.05 Inspectors of Election 5
(a) Appointment 5
(b) Duties 5
2.06 Record Date 6
2.07 Share Certificates 6
(a) In General 6
(b) Two or More Classes or Series 7
(c) Special Restrictions 7
2.08 Transfer of Certificates 8
2.09 Lost Certificates 8
ARTICLE III. DIRECTORS
3.01 Powers 8
3.02 Committees of the Board 8
3.03 Election and Term of Office 9
3.04 Vacancies 9
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<S> <C>
3.05 Removal 10
3.06 Resignation 10
3.07 Meetings of the Board of Directors and
Committees 10
(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
3.08 Action Without Meeting 11
3.09 Committee Meetings 11
ARTICLE IV. OFFICERS
4.01 Officers 11
4.02 Elections 12
4.03 Other Officers 12
4.04 Removal 12
4.05 Resignation 12
4.06 Vacancies 12
4.07 Chairman of the Board 12
4.08 President 13
4.09 Vice President 13
4.10 Secretary 13
4.11 Chief Financial Officer 13
4.12 Treasurer 14
ARTICLE V. MISCELLANEOUS
5.01 Records and Reports 14
(a) Books of Account and Proceedings 14
(b) Annual Report 14
(c) Shareholders' Requests for Financial Reports 14
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
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<S> <C>
5.03 Checks, Drafts, Etc. 16
5.04 Representation of Shares of Other Corporations 16
5.05 Indemnification and Insurance 16
(a) Right to Indemnification 16
(b) Right of Claimant to Bring Suit 17
(c) Non-Exclusivity of Rights 18
(d) Insurance 18
(e) Indemnification of Employees and Agents of the Corporation 18
5.06 Employee Stock Purchase Plans 18
5.07 Construction and Definitions 19
ARTICLE VI. AMENDMENTS
6.01 Power of Shareholders 19
6.02 Power of Directors 19
</TABLE>
-111-
<PAGE>
BYLAWS
for the regulation, except as otherwise provided
by statute or the Articles of Incorporation,
of
HP CASINO, INC.
---------------
ARTICLE I. GENERAL PROVISIONS
------------------------------
Section 1.01 Principal Executive Office. The Board of Directors shall fix the
- ----------------------------------------
location of the principal executive office of the corporation at any place
within or without the State of California. The Board of Directors shall have
the power to change the principal executive 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 (1), 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.
<PAGE>
(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 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
-2-
<PAGE>
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 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
-3-
<PAGE>
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 writ ten 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.
-4-
<PAGE>
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 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 cer-
-5-
<PAGE>
tificate made by the inspectors of election is prima facie evidence of the facts
stated therein.
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
-6-
<PAGE>
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 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 subparagraph (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.
-7-
<PAGE>
(6) The fact that the shares are convertible and the period for
conversion.
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
-8-
<PAGE>
committee, to the extent provided in the resolution of the 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.
-9-
<PAGE>
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.
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
-10-
<PAGE>
the corporate records or made a part of the minutes of the meeting.
(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
-11-
<PAGE>
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 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
-12-
<PAGE>
be the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 4.08 below.
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.
-13-
<PAGE>
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 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-
-14-
<PAGE>
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 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
-15-
<PAGE>
shall also extend to the records of any subsidiary of the corporation.
(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,
-16-
<PAGE>
shall be indemnified and held harmless by the corporation to the fullest extent
authorized by California 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,
-17-
<PAGE>
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(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
shares
-18-
<PAGE>
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 Casino, Inc., hereby adopts the
foregoing bylaws as the bylaws of said corporation.
Dated as of October 5, 1995.
/s/ Rita Burns
_______________________________
Rita Burns, Incorporator
The undersigned, constituting the sole director of HP Casino, Inc., hereby
adopts the foregoing bylaws as the bylaws of said corporation.
Dated as of October 5, 1995.
/s/ R. D. Hubbard
_______________________________
R. B. Hubbard, Sole Director
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting Secretary of HP Casino,
Inc., and that the foregoing bylaws were adopted as the bylaws of said
corporation as of the 5th day of October, 1995, by the sole director of said
corporation.
Dated as of October 5, 1995.
/s/ Donald M. Robbins
_______________________________
Donald M. Robbins, Secretary
-20-
<PAGE>
Exhibit 4.2
HOLLYWOOD PARK, INC.
1993 STOCK OPTION PLAN
1. Purpose.
The purpose of this 1993 Stock Option Plan (the "Plan") of Hollywood Park,
Inc., a Delaware corporation (the "Company"), is to secure for the Company and
its stockholders the benefits arising from stock ownership by selected key
employees, directors, consultants and advisors of the Company or its
subsidiaries as the Committee (hereinafter defined) may from time to time
determine. The Plan will provide a means whereby (i) such employees may
purchase shares of the Common Stock of the Company pursuant to options which
will qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) such employees or other
persons may purchase shares of the Common Stock of the Company pursuant to "non-
incentive" or "non-qualified" stock options and (iii) any of such persons may
receive shares of the Common Stock of the Company, or cash in lieu thereof,
pursuant to stock appreciation rights granted in tandem with such options.
2. Administration.
The Plan shall be administered by the Company's Compensation Committee or
to another committee established by the Board of Directors of the Company to
administer the Plan and to whom administration of the Plan will be duly
delegated (in either event, the "Committee"), which Committee shall consist of
two or more directors, each of whom shall be a "disinterested person," within
the meaning of Rule 16b-3(c) (2) (i) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). No member of the Committee shall be eligible for
grants to acquire, or allocations of, equity securities of the Company under the
Plan or under any other plan of the Company or its affiliates for a period of
one year before or during membership on the Committee (or for such other period
as may be required from time to time by Rule 16b-3 of the Exchange Act), except
any such plans that would not disqualify any member from qualifying as a
"disinterested person" pursuant to said Rule. Any action of the Committee with
respect to administration of the Plan shall be taken by a majority vote or
written consent of its members.
Subject to the express provisions of the Plan, the Committee shall have
authority (i) to construe and interpret the Plan, (ii) to define the terms used
herein, (iii) to prescribe, amend and rescind rules and regulations relating to
the Plan, (iv) to determine the individuals to whom and the time or times at
which options shall be granted, the terms and provisions of the option
agreements (which need not be identical), whether such options will be incentive
stock options or non-qualified stock options, whether to include a stock
appreciation right with an option and the terms of such rights, the number of
shares to be subject to each option, the option price, the number of
installments, if any, in which each option may be exercised, and the duration of
each option, (v) to approve and determine the duration of leaves of absence
which may be granted to participants without constituting a termination of their
employment for the purposes of the Plan, and (vi) to make all other
determinations necessary or advisable for the administration of the Plan. All
determinations
<PAGE>
and interpretations made by the Committee shall be binding and conclusive on all
participants in the Plan and their legal representatives and beneficiaries.
The Company will indemnify and hold harmless the members of the Board of
Directors and the Committee from and against any and all liabilities, costs and
expenses incurred by such persons as a result of any act, or omission to act, in
connection with the performance of such persons' duties, responsibilities and
obligations under the Plan, other than such liabilities, costs and expenses as
may result from the gross negligence, bad faith, willful misconduct and/or
criminal acts of such persons.
3. Shares Subject to the Plan.
Subject to adjustment as provided in paragraph 16 hereof, the shares to be
offered under the Plan shall consist of the Company's authorized but unissued
Common Stock, par value $.10 per share (hereinafter called "stock") and the
aggregate amount of such stock which may be issued upon exercise of all options
under the Plan shall not exceed 625,000 shares (as adjusted to reflect the one-
for-four stock dividend to be paid on June 1, 1993). If any option granted
under the Plan shall expire or terminate for any reason (other than surrender at
the time of exercise of a related stock appreciation right provided for in
paragraph 8 hereof), without having been exercised in full, the unpurchased
shares subject thereto shall again be available for options to be granted under
the Plan.
4. Eligibility and Participation.
All key employees, directors (other than Committee members), consultants
and advisers, of the Company or of any subsidiary corporation (as defined in
Section 425(f) of the Code) shall be eligible for selection to Participate in
the Plan, except that only regular employees, of the Company or a subsidiary may
receive incentive stock options under the Plan. An individual who has been
granted an option may, if such individual is otherwise eligible, be granted an
additional option or options if the Committee shall so determine, subject to the
other provisions of the Plan. Such options may be granted in lieu of
outstanding options previously granted under this Plan or may be in addition to
such options.
No incentive stock option may be granted to any person who, at the time the
incentive stock option is granted, owns shares of the Company's outstanding
Common Stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company (and of its affiliates, if
applicable), unless the exercise price of such option is at least 110 percent
(110%) of the fair market value of the stock subject to the option and such
option by its terms is not exercisable after the expiration of five years from
the date such option is granted.
The aggregate fair market value (determined at the time the options are
granted) of the shares covered by incentive stock options granted to any one
employee under this Plan or any other incentive stock option plan of the Company
which may become exercisable for the first time in any one calendar year shall
not exceed $100,000; provided, however, that if the Code or the regulations
thereunder shall permit a greater amount of incentive stock options to vest in
any calendar year, then such higher limit shall be applicable, subject to the
provisions of the specific option agreement.
-2-
<PAGE>
All options granted under the Plan shall be granted within ten years from
April 20, 1993.
5. Duration of Options.
Each option and all rights associated therewith shall expire on such date
as the Committee may determine, and shall be subject to earlier termination as
provided herein; provided, however, that in the case of incentive stock options,
each incentive stock option and all rights associated therewith shall expire in
any event within ten (10) years of the date on which such incentive stock option
is granted; and provided further that all such options and rights shall be
subject, to earlier termination as hereinafter provided.
6. Purchase Price.
The purchase price of the stock covered by each option shall be determined
by the Committee, but in the case of incentive stock options, shall be not less
than one hundred percent (100%) of the fair market value of such stock on the
date the incentive stock option is granted. The purchase price of the shares
upon exercise of an option shall be paid in full at the time of exercise (i) in
cash or by check payable to the order of the Company, (ii) by delivery of shares
of Common Stock of the Company already owned by, and in the possession of the
option holder, or (iii) if authorized by the Committee or if specified in the
option being exercised, by a promissory note made by the option holder in favor
of the Company, upon the terms and conditions determined by the Committee and
secured by the shares issuable upon exercise complying with applicable law
(including, without limitation, date corporate and federal margin requirements),
or any combination thereof. Shares of Common Stock used to satisfy the exercise
price of an option shall be valued at their fair market value determined (in
accordance with paragraph 9 hereof) as of the close of the business day
immediately preceding the date of exercise. Deliveries of cash, shares, and
notices to the Company shall be directed to the Secretary of the Company.
7. Exercise of Options.
Each option granted under this Plan shall be exercisable and the total
number of shares subject thereto shall be purchasable, in such installments
(which need not be equal) during the period prior to its expiration date as the
Committee shall determine, but in no event shall any option be exercisable for
at least six months after the date of grant (except in the case of death of the
option holder). Unless otherwise determined by the Committee, if the option
holder shall not in any given installment period purchase all of the shares
which the option holder is entitled to purchase in such installment period, then
the option holder's right to purchase any shares not purchased in such
installment period shall continue until the expiration date or sooner
termination of the option holder's option. No option or installment thereof may
be exercised except in respect of whole shares, and fractional share interest
shall be disregarded except that they may be accumulated in accordance with the
preceding sentence. No partial exercise of any option may be for less than one
hundred (100) shares.
Nothing contained in this Plan (or in any option granted pursuant to this
Plan) shall confer upon any option holder who is an employee any right to
continue in the employ of the Company or of any subsidiary, or interfere in any
way with the right of the Company or any
-3-
<PAGE>
subsidiary to terminate his employment at any time or to increase or decrease
his compensation from the rate in existence at the time of the granting of an
option, and further, nothing contained herein or in any option agreement shall
affect any contractual rights of an option holder who is an employee.
Nothing contained in this Plan (or in any option granted pursuant to this
Plan) shall confer upon any option holder who is not an employee the right to
continue serving as a director of the Company or of any subsidiary, or interfere
in any way with the right of the Company or any subsidiary to remove a director.
8. Stock Appreciation Rights.
If deemed appropriate by the Committee, any stock option may be coupled
with a stock appreciation right at the time of the grant of the option, or the
Committee may grant a stock appreciation right to any person at any time after
granting an option to such person prior to the end of the term of such
associated option. Such stock appreciation right shall be subject to such terms
and conditions not inconsistent with the Plan as the Committee shall impose,
provided that:
(1) A stock appreciation right shall be exercisable to the extent,
and only to the extent, the associated option is exercisable and shall be
exercisable only for such period as the Committee may determine (which
period may expire prior to the expiration date of the option).
(2) A stock appreciation right shall entitle the option holder to
surrender to the Company unexercised the option to which it is related, or
any portion thereof, and to receive from the Company in exchange therefor
that number of shares (rounded down to the nearest whole number) having an
aggregate value equal to the excess of the fair market value of one share
(determined as hereinafter provided) over the option price per share
specified in such option multiplied by the number of shares subject to the
option, or portion thereof, which is so surrendered.
(3) The Committee may, at its sole discretion, elect to settle, or
the stock appreciation right may permit the optionee to elect to receive
(subject to approval by the Committee), any part or all of the Company's
obligation arising out of the exercise of a stock appreciation right by the
payment of cash having a value equal to the aggregate fair market value of
that part or all of the shares it would otherwise be obligated to deliver.
Notwithstanding the foregoing, in no event shall cash be payable to an
officer or director of the Company upon exercise of a stock appreciation
right if the stock appreciation right was exercised during the first six
months of its term and unless the stock appreciation right was exercised
during a period of ten business days beginning with the third business day
after the release to the public of a quarterly or annual summary statement
of the Company's sales and earnings or unless the transaction is otherwise
exempt form the operation of Section 16(b) of the Securities Exchange Act
of 1934.
9. Fair Market Value of Common Stock.
-4-
<PAGE>
The fair market value of a share of Common Stock of the Company shall be
determined for purposes of the Plan 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 a
National Market issue) 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 through NASDAQ (or its successor in function), in each case
as reported by The Wall Street Journal, for the business day the option or stock
appreciation right is granted or exercised, or on the next preceding day on
which such stock is traded or listed if none of such stock was traded on the day
such option was granted or exercised (or, if for any reason no such price is
available, in such other manner as the Committee may deem appropriate to reflect
the then fair market value thereof).
10. Withholding Tax.
Upon (i) the disposition by an employee or other person of shares of stock
acquired pursuant to the exercise of an incentive stock option granted pursuant
to the Plan within two years of the granting of the incentive stock option or
within one year after exercise of the incentive stock option; (ii) the exercise
by an employee or other person of "non-incentive" or "non-qualified" options; or
(iii) the exercise by an employee or other person of a stock appreciation right;
the Company shall have the right to (a) require such employee or other person to
pay the Company the amount of any taxes which the Company may be required to
withhold with respect to such shares or (b) deduct from all amounts paid in cash
with respect to the exercise of a stock appreciation right the amount of any
taxes which the Company may be required to withhold with respect to such cash
amounts.
11. Non-Transferability.
All options (and any accompanying stock appreciation rights) granted under
the Plan shall, by their terms, be non-transferable by the option holder, either
voluntarily or by operation of law, otherwise than by will or the laws of
descent and distribution, and shall be exercisable during the option holder's
lifetime only by the option holder, regardless of any community property
interest therein of the spouse of the option holder, or such spouse's successors
in interest. If the spouse of the option holder shall have acquired a community
property interest in any such option (or accompanying stock appreciation right),
the option holder, or the option holder's permitted successors in interest, may
exercise the option (or accompanying stock appreciation right) on behalf of the
spouse of the option holder or such spouse's successors in interest.
12. Holding of Stock After Exercise of Option.
At the discretion of the Committee, any option may provide that the option
holder, by accepting such option, represents and agrees, for the option holder
and the option holder's permitted transferees (by will or the laws of descent
and distribution), that none of the shares purchased upon exercise of the option
or any accompanying stock appreciation right will be acquired with a view to any
sale, transfer or distribution of such shares in violation of the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder, or
any applicable state "blue sky" laws, and the person entitled to exercise the
same shall furnish evidence satisfactory to the Company (including a written and
signed representation)
-5-
<PAGE>
to that effect in form and substance satisfactory to the Company, including an
indemnification of the Company in the event of any violation of the Securities
Act of 1933 or state blue sky law by such person.
13. Termination of Employment or Services Rendered.
If a holder of an incentive stock option ceases to be employed by the
Company or one of its subsidiaries for any reason other than the option holder's
death or permanent disability (within the meaning of Section 105(d) (4) of the
Code), the option holder's incentive stock option (and any accompanying stock
appreciation rights) shall be exercisable for a period of three (3) months after
the date the option holder ceases to be an employee of the Company or such
subsidiary (unless by its terms it sooner expires) to the extent exercisable on
the date of such cessation of employment and shall thereafter expire and be void
and of no further force or effect.
Unless otherwise specified in the individual option agreement, if a holder
of non-qualified stock option ceases to be employed by or perform services for
the Company or one of its subsidiaries for any reason other than the option
holder's death or permanent disability (within the meaning of Section 105(d) (4)
of the Code), the option holder's nonqualified stock option (and any
accompanying stock appreciation rights) shall be exercisable for a period of one
(1) month after the date the option holder ceases to be an employee of or to
perform services for the Company or such subsidiary (unless by its terms it
sooner expires) to the extent exercisable on the date of such cessation of
employment and shall thereafter expire and be void and of no further force or
effect.
A leave of absence approved in writing by the Committee shall not be deemed
a termination of employment for the purposes of this paragraph 13, but no
incentive stock option may be exercised during any such leave of absence, except
during the first three (3) months thereof.
Unless otherwise specified in the individual option agreement, during such
period after notice to terminate, such option shall be exercisable only as to
those shares with respect to which installments, if any, had accrued as of the
date of termination.
14. Death or Permanent Disability of Option Holder.
If the holder of an incentive stock option dies or becomes permanently
disabled while the option holder is employed by the Company or one of its
subsidiaries, the option holder's option (and any accompanying stock
appreciation right) shall expire one (1) year after the date of such death or
permanent disability unless by its terms it sooner expires. During such period
after death, such option (and any accompanying stock appreciation right) may, to
the extent that it remained unexercised (but exercisable by the option holder
according to such option's terms) on the date of such death or permanent
disability, be exercised by the person or persons to whom the option holder's
rights under the option shall pass by will or by the laws of descent and
distribution.
Unless otherwise specified in the individual option agreement, if the
holder of a non-qualified stock option dies or becomes permanently disabled, the
option holder's option (and any accompanying stock appreciation right) shall
expire six (6) months after the date of such
-6-
<PAGE>
death or permanent disability, be exercised by the person or persons to whom the
option holder's rights under the option shall pass by will or by the laws of
descent and distribution.
15. Privileges of Stock Ownership.
No person entitled to exercise any option or stock appreciation right
granted under the Plan shall have any of the rights or privileges of a
stockholder of the Company in respect of any shares of stock issuable upon
exercise of such option or stock appreciation right until such option holder has
become the holder of record of such shares. No adjustment shall be made for
dividends or distributions of rights in respect of such shares if the record
date is prior to the date on which such option holder becomes the holder of
record, except as set forth in Paragraph 16 hereof.
Upon the exercise of an option or any accompanying stock appreciation
right, unless there is in effect at that time a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") permitting the resale
of such shares received upon exercise to the public by the option holder (and
there is available for delivery a prospectus meeting the requirements of Section
10(a) (3) of the Securities Act), the option holder (or the option holder's
permitted transferees by will or the laws of descent and distribution) shall
represent and warrant in writing to the Company that the shares purchased upon
exercise of the option or any accompanying stock appreciation right are being
acquired for investment and not with a view to the sale, transfer or
distribution thereof in violation of the Securities Act and the rules and
regulations promulgated thereunder, or any applicable state "blue sky" laws.
The person entitled to exercise the option or the accompanying stock
appreciation rights shall furnish evidence satisfactory to the Company,
including a written and signed representation to the foregoing effect in form
and substance satisfactory to the Company, including an indemnification of the
Company in the event of any violation of the Securities Act of 1933 or state
blue sky laws by such person. If, subsequent to the exercise of an option,
there should become effective under the Securities Act, a registration statement
permitting the resale to the public shares of the capital stock of the Company
issued upon exercise of options granted under this Plan, and if there is
available for delivery by the option holder a prospectus meeting the
requirements of Section 10(a) (3) of the Securities Act, then any
representations and warranties previously made that such shares were being
acquired for investment and not with a view to the sale, transfer or
distribution thereof shall be disregarded, and the holders of shares shall be
released from such representations and warranties with respect to such shares.
No shares shall be sold, issued or delivered upon the exercise of any
option or accompanying stock appreciation right unless and until there shall
have been full compliance with any then applicable requirements of the
Securities Act of 1933 (whether by registration or satisfaction of exemption
conditions), all applicable listing requirements of any national securities
exchange on which shares of the same class are then listed, and any other
requirements of law or any regulatory bodies have jurisdiction over such sale,
issuance and delivery.
16. Adjustments.
-7-
<PAGE>
If the outstanding shares of the Common Stock of the Company are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company through reorganization, recapitalization,
reclassificiation, stock dividend, stock split, reverse stock split, merger,
consolidation, combination, exchange of shares, or other similar transaction,
the Committee shall make an appropriate and proportionate adjustment in the
maximum number and kind of shares as to which options may be granted under this
Plan, including the maximum number that may be granted hereunder or to any one
participant. A corresponding adjustment changing the number or kind of shares
allocated to unexercised options or portions thereof, which shall have been
granted prior to any such change, shall likewise be made, to the end that the
optionee's proportionate interest shall be maintained as before the occurrence
of such events. Any such adjustment in the outstanding options shall be made
without change in the aggregate purchase price applicable to the unexercised
portion of the option but with a corresponding adjustment in the price for each
share or other unit of any security covered by the option, provided, however,
that each such adjustment in the number and kind of shares subject to
outstanding options, including any adjustment in the option price, shall be made
in such a manner as not to constitute a "modification" as defined in Section 424
of the Code. Any such adjustment made by the Committee shall be conclusive.
Upon (i) the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation
(except for a transaction the principal purpose of which is to change the State
of the Company's incorporation), (ii) a sale of all or substantially all the
property or more than eighty percent (80%) of the then outstanding shares of
stock of the Company to another corporation or (iii) if the majority of any
class of directors be comprised of individuals who were not either nominated by
the then existing Board of Directors or had not been appointed by the then
existing Board of Directors (any of the foregoing, a "Corporate Transaction"),
subject to the following sentence, the Plan shall terminate and be of no further
force and effect. Notwithstanding the foregoing, the Committee shall provide in
writing in connection with any such transaction for any or all of the following
alternatives (separately or in combination): (i) for the options and any
accompanying stock appreciation rights theretofore granted more than six months
before such transaction to become immediately exercisable notwithstanding the
provisions of paragraph 7 hereof; (ii) for the assumption by the successor
corporation of the options and stock appreciation rights theretofore granted or
the substitution by such corporation for such options and rights of new options
and rights covering the stock of the successor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices; (iii) for the continuance of the Plan by such successor
corporation in which event the Plan and the options and any accompanying stock
appreciation rights theretofore granted shall continue in the manner and under
the terms so provided, or (iv) for the payment in cash or stock in lieu of an in
complete satisfaction of such options and rights. It is expressly contemplated
that an option can be exercised subject to the consummation of a Corporate
Transaction.
Adjustments under this paragraph 16 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall be
issued under the Plan upon any such adjustment.
-8-
<PAGE>
At the discretion of the Committee, any option may contain provisions to
the effect that upon the happening of certain events, including a change of
control (as defined by the Committee in the option) of the Company, any
outstanding options and accompanying stock appreciation rights not theretofore
exercisable shall immediately become exercisable in their entirety,
notwithstanding any of the other provisions of the option.
17. Amendment and Termination of Plan.
The Committee may at any time suspend, amend or terminate the Plan and may
with the consent of an option holder, make such modifications of the terms and
conditions of his option as it shall deem advisable; provided that except as
permitted under the provisions of Paragraph 16 hereof, an amendment or
modification which would:
a) increase the maximum shares available for grant under the Plan;
b) change the minimum purchase price of incentive stock options set
forth in Paragraph 5 (provided, however, that the Committee may cancel and
regrant at a lower price all or any options granted under the Plan);
c) materially modify the requirements as to eligibility for
participation in the Plan;
d) materially increase the benefits accruing to participants under
the Plan;
e) increase the maximum term of incentive stock options provided for
in paragraph 5;
f) permit the granting of options or stock appreciation rights to
anyone other than as provided in paragraph 4; or
g) otherwise require Shareholder Approval (as defined below) under
Rule 16b-3 under the Exchange Act or Section 422 of the Code,
may not be adopted without further approval by the affirmative vote of the
holders of a majority of securities of the Company present, or represented, and
entitled to vote at a meeting duly held in accordance with the applicable laws
of the State or other jurisdiction in which the Company is incorporated, or by
the written consent of the holders of a majority of the Securities of the
Company entitled to vote ("Shareholder Approval").
No option may be granted during any suspension or after such termination.
The amendment, suspension or termination of the Plan shall not, without the
consent of the option holder, alter or impair any rights or obligations under
any option or accompanying stock appreciation right theretofore granted under
the Plan. An option may be terminated by agreement between an optionee and the
Company and in lieu of the terminated option, a new option may be granted with
an exercise price which may be higher or lower than the exercise price of the
terminated option.
-9-
<PAGE>
18. Effective Date of Plan.
This plan shall be effective upon adoption by the Board of Directors of the
Company and Shareholder Approval (as defined in Paragraph 17) within twelve
months from the date the Plan is adopted by the Board of Directors. Any options
granted under the Plan prior to obtaining such Shareholder Approval shall be
granted under the conditions that the options so granted: (1) shall not be
exercisable prior to such approval, and (2) shall become null and void if such
Shareholder Approval is not obtained.
-10-
<PAGE>
EXHIBIT 5
March 25, 1999
Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Re: 9 1/4% Series B Senior Subordinated Notes Due 2007
---------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Hollywood Park, Inc., a Delaware corporation
(the "Company"), in connection with the offer to exchange (the "Exchange Offer")
all of the Company's previously issued $350,000,000 aggregate principal amount
of 9 1/4% Series A Senior Subordinated Notes due 2007 (the "Old Notes") for
$350,000,000 aggregate principal amount of 9 1/4% Series B Senior Subordinated
Notes due 2007 (the "Exchange Notes"). A registration statement on Form S-4
relating to the Exchange Offer has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Registration
Statement"). This opinion is furnished to you in connection with the
registration of the Exchange Notes.
We are familiar with the corporate proceedings taken by the Company in
connection with the issuance of the Exchange Notes pursuant to the Exchange
Offer. It is our opinion that the Exchange Notes, when issued pursuant to the
terms of the Exchange Offer, will be legally issued, fully paid and non-
assessable and will constitute binding obligations of the Company.
Our opinion set forth above is subject to and limited by the following:
(a) the effect of bankruptcy, insolvency, reorganization, moratorium and other
similar laws and legal and equitable principles relating to, limiting or
affecting the enforcement of creditors' rights generally including, without
limitation, preferences, equitable subordination and fraudulent conveyances, and
(b) the effect of general principles of equity, whether applied by a court of
law or equity.
We consent to the filing of this opinion as Exhibit 5 to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the Prospectus which is a part of the Registration Statement. This opinion is
furnished to you in connection with the registration of the Exchange Notes
pursuant to the Exchange Offer, is solely for your benefit
<PAGE>
Hollywood Park, Inc.
March 25, 1999
Page 2
and may not be relied upon by, nor copies delivered to, any other person or
entity without our prior written consent.
Sincerely,
/s/ Irell & Manella LLP
IRELL & MANELLA LLP
<PAGE>
Exhibit 10.1
HOLLYWOOD PARK OPERATING COMPANY
DIRECTORS DEFERRED COMPENSATION PLAN
1. Eligibility. Each member of the Board of Directors of Hollywood Park
-----------
Operating Company (the "Corporation") is eligible to participate in the Plan.
2. Participation.
-------------
(a) Time of Election. Six months prior to the beginning of a calendar
----------------
year, commencing with calendar year 1993, each eligible Director may elect to
participate in the Plan by directing that all or any part of the compensation
(including fees payable for services as chairman or a member of a committee of
the Board) which otherwise would have been payable currently for services
rendered as a Director during such calendar year and succeeding calendar years
shall be credited to a deferred compensation account (the "Director's Account").
Any person who shall become a Director during any calendar year, and who was not
a Director of the Corporation prior to the beginning of such calendar year, may
elect, within 30 days after the Director's term begins, to defer payment of all
or any part of the Director's compensation earned during the remainder of such
calendar year and for succeeding calendar years; provided, however, that such
election shall only be implemented six months after the date such election is
filed with the Corporation pursuant to Section 2(b). Notwithstanding the
foregoing, with respect to calendar year 1992, each eligible Director may elect
within two weeks after the effective date of this Plan (as described in
Paragraph 6, below) to defer the Director's Compensation for services rendered
as a Director beginning six months after such election .
(b) Form and Duration of Election. An election to participate in the
-----------------------------
Plan shall be made by written notice signed by the Director and filed with the
Secretary of the Corporation. Such election shall specify the amount of the
Director's compensation to be deferred and specify an allocation of the deferral
between cash and stock as herein provided. Such election shall continue until
the Director terminates such election by signed written notice filed with the
Secretary of the Corporation. Any such termination shall become effective six
months after notice is given and only with respect to fees payable for services
rendered as a Director thereafter. Amounts credited to the Director's Account
prior to the effective date of termination shall not be affected by such
termination and shall be distributed only in accordance with the terms of the
Plan.
If a Director participates in both this Plan and the Hollywood Park
Realty Enterprises, Inc. Deferred Compensation Plan, such Director must make
identical elections (including termination) under each plan.
(c) Renewal. A Director who has terminated his election to
-------
participate may thereafter file another election to participate for the calendar
year subsequent to the filing of such election and succeeding calendar years,
subject to Section 2(a) hereof.
<PAGE>
3. The Director's Account. All compensation which a Director has elected
----------------------
to defer under the Plan shall be credited, at the Director's election, to the
Director's Account as follows:
(a) As of the date the Director's compensation would otherwise be
payable, the Director's Account will be credited with an equivalent cash amount.
The cash credited to the Director's Account shall be reduced by the amount of
Paired Stock credited to the Director's Account pursuant to subparagraph (b).
(b) As of the date the Director's compensation would otherwise be
payable, there shall be credited to the Director's Account the number of full
and fractional shares of the Corporation's Common Stock obtained by dividing the
amount of the Director's compensation for the calendar quarter or month, as the
case may be, which he elected to defer by the average of the closing price of a
share of Paired Stock (as described below) on the NASDAQ National Market System
on the last ten business days of the calendar quarter or month, as the case may
be, for which such compensation is payable. Each share of Paired Stock consists
of one share of the Corporation's Common Stock and one share of Hollywood Park
Realty Enterprises, Inc.'s Common Stock.
(c) At the end of each calendar quarter there shall be credited to the
Director's Account the number of full and/or fractional shares of Paired Stock
obtained by dividing the dividends which would have been paid on the shares
credited to the Director's Account as of the dividend record date, if any,
occurring during such calendar quarter if such shares had been shares of issued
and outstanding Paired Stock on such date, by the closing price of the Paired
Stock on the NASDAQ National Market System on the date such dividend(s) is paid.
In the case of stock dividends, there shall be credited to the Director's
Account the number of full and/or fractional shares of Paired Stock which would
have been issued with respect to the shares credited to the Director's Account
as of the dividend record date if such shares of Paired Stock had been shares of
issued and outstanding Paired Stock on such date.
(d) No fractional share interests credited to a Director's Account
shall be distributed pursuant to Section 4 hereof. Instead, any fractional
shares of Paired Stock remaining at the time the final distribution is made
pursuant to paragraph 4 herein shall be converted into a cash credit by
multiplying the number of fractional shares by the average of the closing price
of the Paired Stock on the NASDAQ National Market System on the last ten
business days prior to the date of the final distribution from the Director's
Account.
(e) Cash amounts credited to the Director's Account pursuant to
subparagraph (a) above shall accrue interest commencing from the date the cash
amounts are credited to the Director's Account at a rate per annum to be
determined from time to time by the Board of Directors (the "Board"). Amounts
credited to the Director's Account shall continue to accrue interest until
distributed in accordance with the Plan.
The Director shall not have any interest in the cash or Paired Stock
credited to the Director's Account until distributed in accordance with the
Plan.
-2-
<PAGE>
4. Distribution from Accounts.
--------------------------
(a) Form of Election. At the time a Director makes a participation
----------------
election pursuant to paragraphs 2(a) or 2(c), the Director shall also file with
the Secretary of the Corporation a signed written election with respect to the
distribution of the aggregate amount of cash and shares credited to the
Director's Account pursuant to such participation election. A Director may elect
to receive such amount in one lump-sum payment or in a number of approximately
equal annual installments (provided the payout period does not exceed 15 years).
The lump-sum payment or the first installment shall be paid as of the first
business day of the calendar quarter immediately following the cessation of the
Director's service as a Director of the Company. Subsequent installments shall
be paid as of the first business day of each succeeding installment period until
the entire amount credited to the Director's Account shall have been paid. A
cash payment will be made with the final distribution for any fraction of a
share in accordance with paragraph 3(d) hereof.
(b) Adjustment of Method of Distribution. A Director participating in
------------------------------------
the Plan may, prior to the beginning of any calendar year, file another written
notice with the Secretary of the Corporation electing to change the date and/or
method of distribution of the aggregate amount of cash and shares credited to
the Director's Account for services rendered as a Director commencing with such
calendar year. Amounts credited to the Director's Account prior to the effective
date of such change shall not be affected by such change and shall be
distributed only in accordance with the election in effect at the time such
amounts were credited to the Director's Account.
5. Distribution on Death. If a Director should die before all amounts
---------------------
credited to the Director's Account shall have been paid in accordance with the
election referred to in paragraph 4, the balance in such Account as of the date
of the Director's death shall be paid promptly following the Director's death to
the beneficiary designated in writing by the Director. Such balance shall be
paid to the estate of the Director if (a) no such designation has been made or
(b) the designated beneficiary shall have predeceased the Director and no
further designation has been made.
6. Effective Date. This Plan shall not become effective until approved by
--------------
the affirmative vote of the holders of a majority of the Corporation's Common
Stock present in person or represented by proxy at the Corporation's 1990 Annual
Meeting of Stockholders or such earlier date as is permitted by Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
7. Shares Issuable. The maximum number of shares of Paired Stock which may
---------------
be issued pursuant to this Plan is 100,000.
-3-
<PAGE>
8. Limitation on Distributions. Notwithstanding anything to the contrary
---------------------------
in this Plan, the maximum amount of shares of Paired Stock which can be issued
pursuant to this Plan and the Hollywood Park Realty Enterprises, Inc. Deferred
Compensation Plan in any fiscal year is one percent (1%) of the outstanding
number of shares of Paired Stock at the beginning of such fiscal year, except to
the extent that a greater distribution is authorized by the Board (as defined
below). If distributions would exceed this amount, distributions to each
Director shall be reduced on a pro rata basis. Shares of Paired Stock not
distributed in any fiscal year because of this Section 8 shall be distributed as
soon as possible in the next fiscal year, within the limits of this Section 8.
9. Miscellaneous.
-------------
(a) The right of a Director to receive any amount in the Director's
Account shall not be transferable or assignable by the Director, except by will
or by the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code of 1986, as amended, or
Title I of the Employee Retirement Income Security Act, or the rules thereunder,
and no part of such amount shall be subject to attachment or other legal
process.
(b) The Corporation shall not be required to reserve or otherwise set
aside funds or shares of Paired Stock for the payment of its obligations
hereunder. The Corporation shall make available as and when required a
sufficient number of shares of Paired Stock to meet the needs of the Plan,
either by the issuance of new shares of Paired Stock or the purchase of shares
of Paired Stock on the open market or through private purchases, as the
Corporation may determine.
(c) The establishment and maintenance of, or allocation and credits to
the Director's Account shall not vest in the Director or his beneficiary any
right, title or interest in and to any specific assets of the Corporation. A
Director shall not have any dividend or voting rights or any other rights of a
stockholder (except as expressly set forth in paragraph 3 with respect to
dividends and as provided in subparagraph (g) below) until the shares credited
to a Director's Account are distributed. The rights of a Director to receive
payments under this Plan shall be no greater than the right of an unsecured
general creditor of this Corporation.
(d) The Plan shall be administered by the Board. The Board shall have
the power to interpret provisions of the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan and to make all other determinations
it deems necessary or advisable to administer the Plan with all such
determinations being final and binding; provided, however, that the Board will
not have the power to take any action relating to eligibility for participation
in the Plan or the number of shares of Common Stock to be issued to each
participating Director.
(e) The Board may at any time terminate the Plan or amend the Plan in
any manner it deems advisable and in the best interests of the Corporation;
provided, however, that (i) no amendment or termination shall impair the rights
of a Director with respect to amounts then credited to the Director's Account,
(ii) no amendment shall accelerate any payments or distributions under the Plan
(except with regard to bona fide
---------
-4-
<PAGE>
financial hardships), (iii) no amendment may be made which would cause the Plan
to fail to satisfy the requirements of Rule 16b-3 promulgated under the or any
successor rule or regulation, and (iv) if this Plan is deemed to be a "Grant and
Award Plan" under Rule 16b-3(c) promulgated under the Exchange Act, the
provisions of this Plan shall not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.
(f) Each Director participating in the Plan will receive an annual
statement indicating the amount of cash and number of shares credited to the
Director's Account as of the end of the preceding calendar year.
(g) If adjustments are made to outstanding shares of Paired Stock, or
if outstanding shares of Paired Stock are converted into or exchanged for, other
securities or property, as a result of stock dividends, stock splits, reverse
stock splits, recapitalizations, reclassifications, mergers, consolidations and
the like (including the unpairing of the Paired Stock), an appropriate
adjustment (as determined in good faith by the Board) will also be made in the
number and kind of shares or property credited to the Director's Account so that
when distributions are made pursuant to this Plan, the Director will receive the
number and kind of securities or property to which a holder of Paired Stock
would have been entitled upon such event.
In addition, if outstanding shares of Paired Stock are converted into
or exchanged for another security (the "New Security"), all references to
"Paired Stock" in this Plan shall be deemed to be references to the New
Security.
10. No Accrual Following Proposed Merger. If the merger (the "Merger")
------------------------------------
pursuant to which the Corporation will become a wholly-owned subsidiary of
Hollywood Park Realty Enterprises, Inc. ("Realty") becomes effective (whether
approved by the stockholders at the 1990 Annual Meetings of Stockholders of the
Corporation and Realty, respectively, or by other stockholder action), then no
Director of the Corporation may defer any future compensation pursuant to this
Plan subsequent to the effective date of the Merger. This Plan will remain in
effect, however, with respect to compensation deferred by any Director prior to
the effective date of the Merger.
-5-
<PAGE>
Exhibit 10.2
------------
AIRCRAFT TIME SHARING AGREEMENT
-------------------------------
THIS TIME SHARING AGREEMENT (the "Agreement") is made and entered into as
of the 2nd day of June, 1998, by and between HOLLYWOOD PARK, INC., a Delaware
corporation ("Timesharer") and R.D. HUBBARD ENTERPRISES, INC., a Texas
corporation ("Owner").
SECTION I
TIME SHARING AIRCRAFT
For and in consideration of the expenses to be paid hereunder and the
covenants and agreements herein contained to be kept and performed, Owner does
hereby consent to time share with Timesharer for Timesharer's use the following
described Aircraft with equipment, accessories and flight crew (the "Aircraft"):
Canadair Challenger 601-3A, Year 1987, Serial No. 5014, bearing FAA No.
N888DH and
Two (2) General Electric CF34-3A Engines, Serial Nos. 350273 & 350282
The home airport of the Aircraft shall be Portland International Airport,
Portland, Oregon, or such other airport or airports as the Owner shall determine
from time to time.
SECTION II
TERM
The term of this Agreement shall commence on June 2, 1998 and expire on
December 31, 1999. Thereafter, this Agreement shall automatically renew for
additional terms of one (1) month each unless written notice of termination is
given by one party to the other at least two (2) weeks prior to the commencement
of a renewal term.
SECTION III
EXPENSES
During the term of this Agreement, Timesharer agrees to reimburse Owner for
the following expenses incurred as a result of Timesharer's use of the Aircraft:
a. Fuel, oil, lubricants, and other additives;
b. Travel expenses of the crew, including food, lodging, and ground
transportation;
c. Hangar and tie-down costs away from the Aircraft's base of operations;
d. Insurance obtained for the specific flight;
e. Landing fees, airport taxes, and similar assessments;
f. Customs, foreign permit, and similar fees directly related to the
flight;
g. In-flight food and beverages;
1
<PAGE>
h. Passenger ground transportation;
i. Flight planning and weather contract services; and
j. An additional charge equal to 100% of the expenses listed is
subparagraph a. of this section.
By the thirtieth (30th) day of each month, Owner shall provide
Timesharer with an invoice setting forth the amount owed by Timesharer for
the previous month. Timesharer shall pay such amount within fifteen (15)
days of receipt of such invoice.
Said payments shall be paid at the address of the Owner provided to
Timesharer, or at such other place as Owner may designate. Timesharer
agrees to reimburse Owner for all costs and expenses, including court costs
and reasonable attorney's fees, incurred by Owner in the enforcement of its
rights and remedies under this Agreement.
SECTION IV
TITLE
The registration of, and title to, the Aircraft shall remain in the
name of Owner, and the Aircraft shall at all times during the term of this
Agreement, or any extension hereof, bear United States registration
markings. All responsibility and obligations in regard to maintaining the
Aircraft as above owned, registered, and marked shall be borne by Owner.
This Agreement does not confer on Timesharer any right, title or interest
whatsoever, legal or equitable, in the Aircraft, or to the proceeds of the
sale of the Aircraft.
SECTION V
RESTRICTIONS ON USE
During Timesharer's use of the Aircraft, Timesharer agrees to use the
Aircraft only for the purposes, in the manner and within the geographical
limits set forth in applicable insurance policies, to abide by and conform
to, and cause others to abide by and conform to, all laws, ordinances,
orders, rules and regulations, national, state, municipal or otherwise, now
existing or hereinafter enacted, controlling or in any way affecting the
operation, use or occupancy of the Aircraft or the use of any airport
premises by the Aircraft. Timesharer shall be solely responsible for any
fines, penalties or forfeitures occasioned by Aircraft. If such fines or
penalties are imposed on Owner and paid by Owner, Timesharer shall
reimburse Owner for the amount thereof within 15 days of receipt by
Timesharer of written demand from Lender.
SECTION VI
ASSIGNMENT
Timesharer agrees to keep safe and use carefully the Aircraft, and not
to sell or attempt to sell, assign or dispose of the Aircraft, or any
interest therein, or any part, or necessary equipment or to permit any
charge, lien or encumbrance of any nature upon the Aircraft or any part
thereof, or land or rent the same (other than to or at the direction of
Owner), or change the home airport from that designated therein, or remove
the Aircraft from the Continental United States for a period exceeding
thirty (30) days without the prior written consent of Owner. Timesharer
agrees that Owner reserves the power to assign its rights under this
Agreement.
SECTION VII
MAINTENANCE AND REPAIR
Owner agrees to retain the responsibility for the repair and
maintenance of the Aircraft so as to keep it in good safe operating
condition.
2
<PAGE>
Owner shall perform at its own expense all inspections, repairs,
replacements, modifications, maintenance, and overhaul work as necessary
and in accordance with the standards set by the Federal Aviation
Administration regulations and requirements or those of any other
governmental authority. The Owner's flight crew shall maintain all log
books and records pertaining to Timesharer's personal use and operation of
the Aircraft in accordance with the rules and regulations of the Federal
Aviation Administration. Such records shall be the property of the Owner.
SECTION VIII
ALTERATIONS
Timesharer shall not have the right to alter, modify, or make
additions or improvements to the Aircraft.
SECTION IX
INDEMNIFICATION OF OWNER
Timesharer agrees to be responsible and liable to Owner for, and to
indemnify Owner against, loss of any and all damage during Timesharer's use
of the Aircraft during the term of this Agreement or until redelivery of
the Aircraft to Owner, and to indemnify and save Owner harmless from and
against all claims, costs, expenses, damages and liabilities, including
personal injury, death or property damage claims arising or in any manner
occasioned by Timesharer's custody or operation of the Aircraft for use,
including consequential damages.
Timesharer shall never, at any time during the term of this Agreement,
for any purpose whatsoever, be or become an agent for Owner, and Owner
shall not be responsible for the acts or omissions of Timesharer or its
agents.
SECTION X
RISK OF LOSS
Owner agrees to maintain general insurance covering the Aircraft,
together with all of its equipment and accessories; however, pursuant to
Section III of this Agreement, Timesharer agrees to either (i) reimburse
Owner for any insurance premiums attributable to Timesharer's use and
operation of the Aircraft; or (ii) obtain adequate and necessary insurance
coverage, including but not limited to loss or damage from crash, fire,
windstorm, collision, or other casualty, hull damage and liability for
personal injuries, death or property damages, arising or in any manner
occasioned by the acts or omission of Timesharer while in custody or
operation of the Aircraft for personal use. If Timesharer is required to
obtain such insurance, then losses under the hull damage policies will be
made payable to Owner and Timesharer shall deliver said policies, or
evidence of said insurance, to Owner with premium receipts therefor.
Timesharer shall immediately notify Owner of each accident involving
the Aircraft while it is in timesharer's possession, which notification
shall specify the time, place, and nature of the accident or damage, the
names and addresses of parties involved, persons injured, witnesses, and
owners of properties damaged, and such other information as may be known.
Timesharer shall advise Owner of all correspondence, papers, notices, and
documents whatsoever received by timesharer in connection with any claim or
demand involving or relating to the Aircraft or its operation, and shall
aid in any investigations instituted by Owner and in recovery of damages
from third persons liable for same.
Timesharer hereby appoints Owner as Timesharer's attorney-in-fact to
make proof of loss, and claim for, receive payment of and execute or
endorse all documents, checks for drafts for hull damage or return premium
under said insurance policies.
3
<PAGE>
SECTION XI
INSPECTION BY OWNER
During Timesharer's use, Timesharer agrees to permit Owner to inspect
the Aircraft at any reasonable time, either on the land or aloft, and to
furnish any information in respect to Timesharer's use of the Aircraft that
Owner may reasonably request, and to execute and deliver to Owner any
additional or supplemental instruments or documents as may be required by
Owner in connection with Timesharer's personal use of the Aircraft.
SECTION XII
RETURN TO OWNER
Upon completion of each time shared use of the Aircraft, Timesharer
agrees to return the Aircraft to Owner at such place as may be designated
by Owner, in the same operating order, repair, condition and appearance as
when received, excepting only for (i) reasonable wear and tear; (ii) damage
attributable to acts or omissions of the Timesharer covered by collectible
insurance as provided for in Section X; and (iii) damage attributable to
acts or omissions of Owner.
SECTION XIII
REMEDIES
In the event Timesharer is required to obtain insurance pursuant to
Section X of this Agreement, and Timesharer fails to pay all costs and
expenses to procure and maintain such insurance, Owner may, at its option
and without liability, terminate this Agreement.
Owner's rights and remedies with respect to any of the terms and
conditions of this Agreement shall be cumulative and not exclusive, and
shall be in addition to all other rights and remedies in its favor.
Owner's failure to enforce strictly any provisions of this Agreement shall
not be construed as a waiver thereof or as excusing Timesharer from future
performance.
SECTION XIV
MODIFICATION OF AGREEMENT
This Agreement constitutes the entire agreement between the parties.
Any change or modification to this Agreement must be in writing and signed
by the Owner and Timesharer. The validity of any portion of this Agreement
shall not affect the remaining valid portions. All notices shall be
binding upon the parties if sent to the address provided pursuant to this
Agreement unless a subsequent address shall have been furnished, by
certified mail, by one party to the other.
SECTION XV
GOVERNING LAW
This Agreement shall be interpreted in accordance with, and
performance shall be governed by, the law of the State of Oregon.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
<TABLE>
<S> <C>
OWNER: TIMESHARER:
R.D. HUBBARD ENTERPRISES, INC. HOLLYWOOD PARK, INC.
/s/ Edward A. Burger /s/ G. Michael Finnigan
------------------------------ ------------------------------
By: By:
Title: Vice President of Finance Title: President / Chief Financial Officer
</TABLE>
4
<PAGE>
EXHIBIT 10.11
SECOND ADDENDUM
TO THE LEASE AGREEMENT
DATED DECEMBER 19, 1997
BY AND BETWEEN
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
AND
CALIFORNIA CASINO MANAGEMENT, INC.
Be it known that Crystal Park Hotel and Casino Development Company, LLC
(hereafter referred to as LANDLORD) and California Casino Management, Inc.
(hereafter referred to as TENANT) do hereby agree to amend the above stated
lease (hereafter referred to as ORIGINAL LEASE) as follows:
LANDLORD and TENANT (hereafter jointly referred to as PARTIES) do agree that
commencing on November 1, 1998 and continuing through December 31, 1999 the
monthly lease payments by TENANT to LANDLORD relative to the property addressed
in the ORIGINAL LEASE shall be $100,000 (one-hundred-thousand dollars) per
month.
PARTIES agree that provided TENANT makes the above stated lease payments to
LANDLORD that LANDLORD will deem TENANT to be in full compliance with the lease
between PARTIES and not in default thereof.
All other terms of the original lease shall be deemed to be unmodified and in
full force.
By their signatures below, or those of their authorized agents, PARTIES agree
to be bound by the above.
Signed :
Crystal Park Hotel and Casino California Casino Management, Inc.,
Development Company, LLC TENANT
LANDLORD,
BY: BY:
/s/ G. Michael Finnigan /s/ Leo Chu
- --------------------------- ------------------------
Leo Chu
its: its:
- --------------------------- President/General Manager
Date: 8 Mar 99 Date: 3-5-99
---------------------- ------------------
<PAGE>
Exhibit 10.36
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made on December 23, 1998,
by and between HOLLYWOOD PARK, INC. a Delaware corporation ("Company"), and G.
MICHAEL FINNIGAN, an individual ("Executive"), with respect to the following
facts and circumstances:
RECITALS
Executive is currently employed as executive vice president and chief
financial officer of the Company and president of its Sports and Entertainment
Division. Company desires to retain Executive as President and Chief Executive
Officer of Realty Investment Group, Inc., a subsidiary (the "Realty Subsidiary")
of the Company which will conduct all of the real estate business and related
development activities of the Company and its operating subsidiaries.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1
EMPLOYMENT AND TERM
1.1 Employment. Company agrees to engage Executive in the capacity as
President and Chief Executive Officer of the Realty Subsidiary on the Effective
Date (as hereinafter defined) and Executive hereby accepts such engagement by
Company upon the terms and conditions specified below. The Company agrees that
throughout the Term it shall take all such action as may be necessary or
appropriate in order to cause all of the real estate business and related
development activities of the Company and its subsidiaries to be conducted
through or under the control and supervision of the Realty Subsidiary. The
Company will form Realty Subsidiary within thirty days of the date hereof.
1.2 Term. The term of this Agreement (the "Term") shall commence on
January 1, 1999 (or such earlier date on which Executive shall be released from
his current duties (such date being referred to as the "Effective Date") and
shall continue in force until three years from and after the Effective Date,
unless earlier terminated under Article 6 below. Each 12-month period commencing
as of the Effective Date is sometimes called a year of the "Term," and the date
which is 365 days from and after the Effective Date shall be referred to as the
"Anniversary Date"). At least ninety (90) days prior to the expiration of the
Term (as the same may be extended from time to time) , Executive and Company
shall advise each other whether they wish to renew the term of this Agreement
and the proposed basis for such renewal.
<PAGE>
ARTICLE 2
DUTIES OF EXECUTIVE
2.1 Duties. Executive shall perform all the duties and obligations of
President and Chief Executive Officer of the Realty Subsidiary, including
primary responsibility for Company's real estate and related operations subject
to the control and supervision of the Board of Directors of Realty Subsidiary
and such other executive duties consistent with the foregoing as may be assigned
to him from time to time by the Board of Directors of Realty Subsidiary.
Executive shall report to the Chairman of the Board of Realty Subsidiary, who
shall at all times be R. D. Hubbard or another person acceptable to Executive.
Executive shall perform the services contemplated herein faithfully, diligently,
to the best of his ability and in the best interests of Company. Executive
shall devote substantially all his business time and efforts to the rendition of
such services. Executive shall, at all times perform such services in
compliance with, and to the extent of his authority, shall to the best of his
ability cause Realty Subsidiary to be in compliance with, any and all laws,
rules and regulations applicable to Realty Subsidiary of which Executive is
aware. Executive may rely on Company's and Realty Subsidiary's inside counsel
and outside lawyers in connection with such matters. Executive shall, at all
times during the Term, in all material respects adhere to and obey any and all
written internal rules and regulations governing the conduct of Company's
employees, as established or modified from time to time; provided, however, in
the event of any conflict between the provisions of this Agreement and any such
rules or regulations, the provisions of this Agreement shall control.
2.2 Location of Services. Executive's principal place of employment
shall be at Company's headquarters in the greater Los Angeles, California area.
Executive understands he will be required to travel to Company's various
operations as part of his employment.
2.3 Exclusive Service. Except as otherwise expressly provided herein,
Executive shall devote substantially all his business time, attention, energies,
skills, learning and best efforts to the business of Company. Executive may
participate in social, civic, charitable, religious, business, educational or
professional associations, so long as such participation does not materially
interfere with the duties and obligations of Executive hereunder. This Section
2.3, however, shall not be construed to prevent Executive from making passive
outside investments so long as such investments do not require material time of
Executive or otherwise interfere with the performance of Executive's duties and
obligations hereunder. Executive shall not make any investment in an enterprise
that competes with Company without the prior written approval of Company after
full disclosure of the facts and circumstances; provided, however, that so long
as Executive does not utilize material, non-public information this sentence
shall not preclude Executive from owning up to one percent (1%) of the
securities of a publicly traded entity.
2
<PAGE>
ARTICLE 3
COMPENSATION
3.1 Salary. In consideration for Executive's services hereunder,
Company shall pay or cause Realty Subsidiary to pay Executive an annual salary
at the rate of Four Hundred Thousand Dollars ($400,000) per year during each of
the years of the Term; payable in accordance with Company's regular payroll
schedule from time to time (less any deductions required for Social Security,
state, federal and local withholding taxes, and any other authorized or mandated
withholdings).
3.2 Bonus. Executive shall be entitled to earn a bonus with respect
to each year of the Term during which Executive is employed under this Agreement
of up to Two Hundred Thousand Dollars ($200,000) per year. The bonus referable
to the initial year of the Term shall be determined in the discretion of the
Board. For each of the following years in the Term, one-half of the Bonus will
be earned based on whether Realty Subsidiary meets performance targets
established by the Board within three (3) months of the start of each year, and
the second half at the discretion of the Board of Directors.
ARTICLE 4
EXECUTIVE BENEFITS
4.1 Vacation. In accordance with the general policies of Company
applicable generally to other senior executives of Company pursuant to Company's
personnel policies from time to time, Executive shall be entitled to four weeks
vacation each calendar year, without reduction in compensation.
4.2 Company Employee Benefits. Executive shall receive all group
insurance and pension plan benefits and any other benefits on the same basis as
they are available generally to other senior executives of Company under Company
personnel policies in effect from time to time.
4.3 Benefits. Executive shall receive all other such fringe benefits
as Company may offer generally to other senior executives of Company under
Company personnel policies in effect from time to time, such as health and
disability insurance coverage and paid sick leave, but not less than those
currently received.
4.4 Indemnification. Executive shall have the benefit of
indemnification as provided under applicable law and the bylaws of Company,
which indemnification shall continue after the termination of this Agreement for
such period as may be necessary to continue to indemnify Executive for his acts
during the term hereof. Company shall cause Executive to be covered by the
current policies of directors and officers liability insurance covering
directors and officers of Company, copies of which have been provided to
Executive, in accordance with their terms, to the maximum extent of the coverage
available for any director or officer of Company. Company shall use commercially
reasonable efforts to cause the current policies of directors
3
<PAGE>
and officers liability insurance covering directors and officers of Company to
be maintained throughout the term of Executive's employment with Company and for
such period thereafter as may be necessary to continue to cover acts of
Executive during the term of his employment (provided that Company may
substitute therefor, or allow to be substituted therefor, policies of at least
the same coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured in any material respect).
ARTICLE 5
REIMBURSEMENT FOR EXPENSES
Executive shall be reimbursed by Company and Realty Subsidiary for all
ordinary and necessary expenses incurred by Executive in the performance of his
duties or otherwise in furtherance of the business of Company or Realty
Subsidiary in accordance with the policies of Company or Realty Subsidiary in
effect from time to time. Executive shall keep accurate and complete records of
all such expenses, including but not limited to, proof of payment and purpose.
Executive shall account fully for all such expenses to Company or Realty
Subsidiary.
ARTICLE 6
TERMINATION
6.1 Termination for Cause. Without limiting the generality of Section
6.2, Company shall have the right to terminate Executive's employment, without
further obligation or liability to Executive, upon the occurrence of any one or
more of the following events, which events shall be deemed termination for
cause.
6.1.1 Failure to Perform Duties. If Executive neglects to perform the
duties of his employment under this Agreement in a professional and businesslike
manner after having received written notice specifying such failure to perform
and a reasonable opportunity, not to exceed ten days, to perform or if such
performance cannot be completed within such time period, commenced within such
period and diligently pursued to completion as soon as practicable thereafter.
6.1.2 Willful Breach. If Executive willfully commits a material breach
of this Agreement or a material willful breach of his fiduciary duty to Company.
6.1.3 Wrongful Acts. If Executive is convicted of a felony or any other
serious crime, commits a serious wrongful act or engages in other misconduct
involving acts of moral turpitude that would make the continuance of his
employment by Company materially detrimental to Company, which determination
shall be made in the reasonable exercise of Company's judgment.
6.1.4 Disability. If Executive is physically or mentally disabled from
the performance of a major portion of his duties for a continuous period of 120
days or greater, which determination shall be made in the reasonable exercise of
Company's judgment,
4
<PAGE>
provided, however, if Executive's disability is the result of a serious health
condition as defined by the federal Family and Medical Leave Act (or its
California equivalent) ("FMLA"), Executive's employment shall not be terminated
due to such disability at any time during or after any period of FMLA-qualified
leave except as permitted by FMLA. If there should be a dispute between Company
and Executive as to Executive's physical or mental disability for purposes of
this Agreement, the question shall be settled by the opinion of an impartial
reputable physician or psychiatrist agreed upon by the parties or their
representatives, or if the parties cannot agree within ten days after a request
for designation of such party, then a physician or psychiatrist designed by the
Los Angeles County Medical Association. The certification of such physician or
psychiatrist as to the questioned dispute shall be final and binding upon the
parties hereto.
6.2 Termination Without Cause. Notwithstanding anything to the
contrary herein, Company shall have the right to terminate Executive's
employment under this Agreement at any time without cause by giving notice of
such termination to Executive.
6.3 Termination by Executive for Good Reason. Executive may
terminate his employment under this Agreement on thirty (30) days prior notice
to Company for good reason. For purposes of this Agreement, "good reason" shall
mean and be limited to (a) a material breach of this Agreement by Company
(including without limitation any material reduction in the authority or duties
of Executive or any relocation of his or its principal place of business outside
the greater Los Angeles metropolitan area) and the failure of Company to remedy
such breach within thirty (30) days after written notice (or as soon thereafter
as practicable so long as it commences effectuation of such remedy within such
time period and diligently pursues such remedy to completion as soon as
practicable); (b) a "change of control" with respect to the ownership of
Company. For purposes of this Agreement, a change of control shall mean (1) a
sale of substantially all of the property or more than eighty percent (80%) of
the then outstanding stock of Company to another corporation; or (2) the
dissolution of liquidation of Company or the reorganization, merger or
consolidation of Company with one or more corporations as a result of which
Company is not the surviving corporation; or (c) the failure of R. D. Hubbard or
another person acceptable to Executive in his sole discretion to be Chairman of
the Board of Directors of Realty Subsidiary.
6.4 Effectiveness on Notice. Any termination under this Section 6
shall be effective upon receipt of notice by Executive or Company, as the case
may be, of such termination or upon such other later date as may be provided
herein or specified by Company or Executive in the notice (the "Termination
Date").
6.5 Effect of Termination.
6.5.1 Payment of Salary and Expenses Upon Termination. If the Term
of this Agreement is terminated, all benefits provided to Executive by Company
hereunder shall thereupon cease and Company shall pay or cause to be paid to
Executive all accrued but unpaid salary and vacation benefits. In addition,
promptly upon submission by Executive of his unpaid expenses incurred prior to
the Termination Date and owing to Executive pursuant to Article 5, reimbursement
for such expenses shall be made.
5
<PAGE>
6.5.2 Termination for Disability. In the event of a termination under
Section 6.1.4 (for disability), Executive may be eligible for benefits under the
California State Disability Insurance program for his first six months of
disability. In addition Executive shall be eligible for the benefits provided
for under any long term disability insurance policy which Company may have as in
effect from time to time. Eligibility and benefits with regard to either
insurance program shall be governed by the provisions of the insurance program
or policy and shall not be the responsibility of Company.
6.5.3 Termination Without Cause or Termination by Executive for Good
Reason. If Company terminates Executive without cause or Executive terminates
for good reason under clause (a) of Section 6.3 only, the following shall apply:
(a) Executive shall be entitled to receive an amount equal to
his annual compensation for one year (equal to his salary at
the time of Termination and bonus (determined based on his
bonus for the last completed year) as of the date of
termination), plus any amounts payable under Section 6.5.1
above, plus continuation of health and disability insurance
coverage for a period of six (6) months after Termination at
Company's expense; and
(b) In addition to those already vested, all unvested stock
options that would have vested on future Anniversary Dates
of the Agreement shall be deemed immediately and fully
vested and exercisable by Executive; and
6.6 Suspension. In lieu of terminating Executive's employment
hereunder for cause under Section 6.1, Company shall have the right, at its sole
election, to suspend the operation of this Agreement during the continuance of
events or circumstances under Section 6.1 for an aggregate of not more than 30
days during the Term (the "Default Period") by giving Executive written notice
of Company's election to do so at any time during the Default Period. Company
shall have the right to extend the Term beyond its normal expiration date by the
period(s) of any suspension(s). Company's exercise of its right to suspend the
operation of this Agreement shall not preclude Company from subsequently
terminating Executive's employment hereunder. Executive shall not render
services to any other person, firm or corporation in the casino business during
any period of suspension. Executive shall be entitled to continued compensation
pursuant to the provisions hereof during the Default Period.
6.7 DEFRA Limitation. The payments that Executive shall be entitled to
receive hereunder and upon the exercise of his stock options shall in all events
be limited by the provisions of Section 280G of the Internal Revenue Code
("Code") and the regulations thereunder (or their then equivalents) and no
payment shall be made that would have the result of limiting the deductibility
of such payments by Company or that would result in the imposition of an excise
tax under Section 4999 of the Code.
6
<PAGE>
6.8 Exercisability of Options. As provided in the Option Agreement,
all options terminate no later than ninety (90) days after the termination,
regardless of the cause of such termination.
ARTICLE 7
CONFIDENTIALITY
7.1 Nondisclosure of Confidential Material. In the performance of his
duties, Executive may have access to confidential records, including, but not
limited to, development, marketing, organizational, financial, managerial,
administrative and sales information, data, specifications and processes
presently owned or at any time hereafter developed or used by Company or its
agents or consultants that is not otherwise part of the public domain
(collectively, the "Confidential Material"). All such Confidential Material is
considered secret and is disclosed to Executive in confidence. Executive
acknowledges that the Confidential Material constitutes proprietary information
of Company which draws independent economic value, actual or potential, from not
being generally known to the public or to other persons who could obtain
economic value from its disclosure or use, and that Company has taken efforts
reasonable under the circumstances, of which this Section 7.1 is an example, to
maintain its secrecy. Except in the performance of his duties to Company or as
required by a court order, Executive shall not, directly or indirectly for any
reason whatsoever, disclose, divulge, communicate, use or otherwise disclose any
such Confidential Material, unless such Confidential Material ceases to be
confidential because it has become part of the public domain (not due to a
breach by Executive of his obligations hereunder). Executive shall also take
all reasonable actions appropriate to maintain the secrecy of all Confidential
Information. All records, lists, memoranda, correspondence, reports, manuals,
files, drawings, documents, equipment, and other tangible items (including
computer software), wherever located, incorporating the Confidential Material,
which Executive shall prepare, use or encounter, shall be and remain Company's
sole and exclusive property and shall be included in the Confidential Material.
Upon termination of this Agreement, or whenever requested by Company, Executive
shall promptly deliver to Company any and all of the Confidential Material, not
previously delivered to Company, that is in the possession or under the control
of Executive.
7.2 Assignment of Intellectual Property Rights. Any ideas, processes,
know-how, copyrightable works, maskworks, trade or service marks, trade secrets,
inventions, developments, discoveries, improvements and other matters that may
be protected by intellectual property rights, that relate to Company's business
and are the results of Executive's efforts during the Term (collectively, the
"Executive Work Product"), whether conceived or developed alone or with others,
and whether or not conceived during the regular working hours of Company, shall
be deemed works made for hire and are the property of Company. In the event that
for whatever reason such Executive Work Product shall not be deemed a work made
for hire, Executive agrees that such Executive Work Product shall become the
sole and exclusive property of Company, and Executive hereby assigns to Company
his entire right, title and interest in and to each and every patent, copyright,
trade or service mark (including any attendant goodwill), trade secret or other
7
<PAGE>
intellectual property right embodied in Executive Work Product. Company shall
also have the right, in its sole discretion to keep any and all of Executive
Work Product as Company's Confidential Material. The foregoing work made for
hire and assignment provisions are and shall be in consideration of this
agreement of employment by Company, and no further consideration is or shall be
provided to Executive by Company with respect to these provisions. Executive
agrees to execute any assignment documents Company may require confirming
Company's ownership of any of Executive Work Product. Executive also waives any
and all moral rights with respect to any such works, including without
limitation any and all rights of identification of authorship and/or rights of
approval, restriction or limitation on use or subsequent modifications.
Executive promptly will disclose to Company any Executive Work Product.
7.3 No Unfair Competition After Termination of Agreement. Executive
hereby acknowledges that the sale or unauthorized use or disclosure of any of
Company's Confidential Material obtained by Executive by any means whatsoever,
at any time before, during or after the Term shall constitute unfair
competition. Executive shall not engage in any unfair competition with Company
either during the Term or at any time thereafter.
7.4 Irreparable Injury. The promised service of Executive under this
Agreement and the other promises of this Article 7 are of special, unique,
unusual, extraordinary, or intellectual character, which gives them peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in an action at law.
7.5 Remedies for Breach. Executive agrees that money damages will
not be a sufficient remedy for any breach of the obligations under this Article
7 and Article 2 hereof and that Company shall be entitled to injunctive relief
(which shall include, but not be limited to, restraining Executive from directly
or indirectly using or disclosing the Confidential Material) and to specific
performance as remedies for any such breach. Executive agrees that Company shall
be entitled to such relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, without the necessity of proving actual
damages and without the necessity of posting a bond or making any undertaking in
connection therewith. Any such requirement of a bond or undertaking is hereby
waived by Executive and Executive acknowledges that in the absence of such a
waiver, a bond or undertaking might otherwise be required by the court. Such
remedies shall not be deemed to be the exclusive remedies for any breach of the
obligations in this Article 7, but shall be in addition to all other remedies
available at law or in equity.
ARTICLE 8
ARBITRATION
In the event there is any dispute between Executive and Company which the
parties are unable to resolve themselves, including any dispute with regard to
the application, interpretation or validity of this Agreement or any dispute
with regard to any aspect of Executive's employment or the termination of
Executive's employment, both Executive and Company agree by entering into this
Agreement that the exclusive remedy for determining any such dispute, regardless
of its nature, will be by arbitration in accordance with the then
8
<PAGE>
applicable rules of the American Arbitration Association; provided, however, the
breach of the obligation to provide services under this Agreement or of the
obligations of Article 7 may be enforced by an action for injunctive relief and
damages in a court of competent jurisdiction. In the event of any conflict
between this Agreement and the rules of the American Arbitration Association,
the provisions of this Agreement shall be determinative. In the event the
parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list designated by the Los Angeles Office of the
American Arbitration Association of seven arbitrators all of whom shall be
retired judges of the Superior of appellate courts resident in Los Angeles who
are members of the "Independent List" of retired judges. If the parties are
unable to select an arbitrator from the list provided by the American
Arbitration Association, then the parties shall each strike names alternatively
from the list, with the first to strike being determined by lot. After each
party has used three strikes, the remaining name on the list shall be the
arbitrator. This agreement to resolve any disputes by binding arbitration shall
extend to claims against any shareholder or partner of Company, any brother-
sister company, parent, subsidiary or affiliate of Company, any officer,
director, employee, or agent of Company, or of any of the above, and shall apply
as well to claims arising out of state and federal statutes and local ordinances
as well as to claims arising under the common law. Unless mutually agreed by the
parties otherwise, any arbitration shall take place in Los Angeles County,
California. In the event the parties are unable to agree upon a location for the
arbitration, the location within Los Angeles County shall be determined by the
arbitrator. The prevailing party in such arbitration proceeding, as determined
by the arbitrator, and in any enforcement or other court proceedings, shall be
entitled to the extent permitted by law, to reimbursement from the other party
for all of the prevailing party's costs (including but not limited to the
arbitrator's compensation), expenses and attorneys' fees.
ARTICLE 9
MISCELLANEOUS
9.1 Amendments. The provisions of this Agreement may not be waived,
altered, amended or repealed in whole or in part except by the signed written
consent of the parties sought to be bound by such waiver, alteration, amendment
or repeal.
9.2 Entire Agreement. This Agreement and the nonqualified Option
Amendment of even date herewith constitutes the total and complete agreement of
the parties and supersedes all prior and contemporaneous understandings and
agreements heretofore made, and there are no other representations,
understandings or agreements.
9.3 Counterparts. This Agreement may be executed in one of more
counterparts, each of which shall be deemed and original, but all of which shall
together constitute one and the same instrument.
9.4 Severability. Each term, covenant, condition or provision of this
Agreement shall be viewed as separate and distinct, and in the event that any
such term, covenant, condition or provision shall be deemed by an arbitrator or
a court of competent jurisdiction to be invalid or unenforceable, the court or
arbitrator finding such invalidity or
9
<PAGE>
unenforceability shall modify or reform this Agreement to give as much effect as
possible to the terms and provisions of this Agreement. Any term or provision
which cannot be so modified or reformed shall be deleted and the remaining terms
and provisions shall continue in full force and effect.
9.5 Waiver or Delay. The failure or delay on the part of Company, or
Executive to exercise any right or remedy, power or privilege hereunder shall
not operate as a waiver thereof. A waiver, to be effective, must be in writing
and signed by the party making the waiver. A written waiver of default shall
not operate as a waiver of any other default or of the same type of default on a
future occasion.
9.6 Successors and Assigns. This Agreement shall be binding on and
shall inure to the benefit of the parties to it and their respective heirs,
legal representatives, successors and assigns, except as otherwise provided
herein.
9.7 No Assignment or Transfer by Executive. Neither this Agreement
nor any of the rights, benefits, obligations or duties hereunder may be assigned
or transferred by Executive. Any purported assignment or transfer by Executive
shall be void.
9.8 Necessary Acts. Each party to this Agreement shall perform any
further acts and execute and deliver any additional agreements, assignments or
documents that may be reasonably necessary to carry out the provisions or to
effectuate the purpose of this Agreement.
9.9 Governing Law. This Agreement and all subsequent agreements
between the parties shall be governed by and interpreted, construed and enforced
in accordance with the laws of the State of California.
9.10 Notices. All notices, requests, demands and other communications
to be given under this Agreement shall be in writing and shall be deemed to have
been duly given on the date of service, if personally served on the party to
whom notice is to be given, or 48 hours after mailing, if mailed to the party to
whom notice is to be given by certified or registered mail, return receipt
requested, postage prepaid, and properly addressed to the party at his address
set forth as follows or any other address that any party may designate by
written notice to the other parties:
To Executive: G. Michael Finnigan
26804 Rolling Hills Road
Rolling Hills Estates, California 90274
To Company: Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Attn: R. D. Hubbard
10
<PAGE>
9.11 Headings and Captions. The headings and captions used herein are
solely for the purpose of reference only and are not to be considered as
construing or interpreting the provisions of this Agreement.
9.12 Construction. All terms and definitions contained herein shall be
construed in such a manner that shall give effect to the fullest extent possible
to the express or implied intent of the parties hereby.
9.13 Counsel. Executive has been advised by Company that he should
consider seeking the advice of counsel in connection with the execution of this
Agreement and Executive has had an opportunity to do so. Executive has read and
understands this Agreement, and has sought the advice of counsel to the extent
he has determined appropriate.
9.14 Withholding of Compensation. Executive hereby agrees that
Company may deduct and withhold from the compensation or other amounts payable
to Executive hereunder or otherwise in connection with Executive's employment
any amounts required to be deducted and withheld by Company under the provisions
of any applicable Federal, state and local statute, law, regulation, ordinance
or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
EXECUTIVE COMPANY
/s/ G. Michael Finnigan Hollywood Park, Inc., a Delaware corporation
- -------------------------------
G. Michael Finnigan
Social Security No:____________ By: /s/ R. D. Hubbard
---------------------------------------
Its: Chief Executive Officer
---------------------------------------
11
<PAGE>
Exhibit 10.37
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made on September 10, 1998,
by and between HOLLYWOOD PARK, INC. a Delaware corporation ("Company"), and PAUL
ALANIS, an individual ("Executive"), with respect to the following facts and
circumstances:
RECITALS
Executive is currently employed as president and chief operating officer of
Horseshoe Gaming, LLC ("Horseshoe"). Company desires to retain Executive as
President and Chief Operating Officer of Company after Executive completes his
obligations under his existing employment agreement and after such agreement has
terminated. Executive desires to be retained by Company in that capacity, on
the terms and conditions and for the consideration set forth below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1
EMPLOYMENT AND TERM
1.1 Employment. Company agrees to engage Executive in the capacity as
President and Chief Operating Officer of Company on the Effective Date (as
hereinafter defined) and Executive hereby accepts such engagement by Company
upon the terms and conditions specified below. It is understood and agreed,
however, that it is the intent of the parties in entering into this Agreement
that Executive is to be promoted to the position of Chief Executive Officer of
Company and a member of the Board of Directors by at some point in time during
1999.
1.2 Term. The term of this Agreement (the "Term") shall commence on January
1, 1999 (or such earlier date on which Executive shall be released from his
commitments to his current employer (such date being referred to as the
"Effective Date") and shall continue in force until three years from and after
the Effective Date, unless earlier terminated under Article 6 below. Each 12-
month period commencing as of the Effective Date is sometimes called a year of
the "Term," and the date which is 365 days from and after the Effective Date
shall be referred to as the "Anniversary Date"). At least ninety (90) days prior
to the expiration of the Term (as the same may be extended from time to time) ,
Executive and Company shall advise each other whether they wish to renew the
term of this Agreement and the proposed basis for such renewal.
<PAGE>
ARTICLE 2
DUTIES OF EXECUTIVE
2.1 Duties. Executive shall perform all the duties and obligations of
President and Chief Operating Officer, including primary responsibility for
Company's day-to-day operations subject to the control and supervision of the
Chief Executive Officer of Company and such other executive duties consistent
with the foregoing as may be assigned to him from time to time by the Chief
Executive Officer of Company. Executive shall report to the Chief Executive
Officer of Company. Upon promotion to Chief Executive Officer, Executive shall
perform the duties generally associated with such position as presently held by
Mr. R.D. Hubbard, subject to the control and supervision of the Board of
Directors, and such other executive duties consistent with the foregoing as may
be assigned to him from time to time by the Board of Directors of Company.
Executive shall report to the Chairman of the Board of Directors. Executive
shall perform the services contemplated herein faithfully, diligently, to the
best of his ability and in the best interests of Company. Executive shall
devote all his business time and efforts to the rendition of such services.
Executive shall, at all times perform such services in compliance with, and to
the extent of his authority, shall to the best of his ability cause Company to
be in compliance with, any and all laws, rules and regulations applicable to
Company of which Executive is aware. Executive may rely on Company's inside
counsel and outside lawyers in connection with such matters. Executive shall,
at all times during the Term, in all material respects adhere to and obey any
and all written internal rules and regulations governing the conduct of
Company's employees, as established or modified from time to time; provided,
however, in the event of any conflict between the provisions of this Agreement
and any such rules or regulations, the provisions of this Agreement shall
control.
2.2 Location of Services. Executive's principal place of employment shall
be at Company's headquarters in the greater Los Angeles, California area.
Executive understands he will be required to travel to Company's various
operations as part of his employment.
2.3 Exclusive Service. Except as otherwise expressly provided herein,
Executive shall devote his business time, attention, energies, skills, learning
and best efforts to the business of Company. Executive may participate in
social, civic, charitable, religious, business, educational or professional
associations, so long as such participation does not materially interfere with
the duties and obligations of Executive hereunder. This Section 2.3, however,
shall not be construed to prevent Executive from making passive outside
investments so long as such investments do not require material time of
Executive or otherwise interfere with the performance of Executive's duties and
obligations hereunder. Executive shall not make any investment in an enterprise
that competes with Company without the prior written approval of Company after
full disclosure of the facts and circumstances; provided, however, that so long
as Executive does not utilize material, non-public information this sentence
shall not preclude Executive from owning up to one percent (1%) of the
securities of a publicly traded entity. Company acknowledges that Executive
presently owns an approximately 3% interest in Horseshoe Gaming, LLC, which
Executive, at the termination of his employment with Horseshoe Gaming, LLC.,
will sell back to such
-2-
<PAGE>
company pursuant to the terms of his existing employment agreement. During the
Term, Executive shall not directly or indirectly work for or provide services to
or own an equity interest in any person, firm or entity engaged in the casino
gaming, card club or horse racing business. In this regard, Executive
acknowledges that the gaming industry is national in scope and that accordingly
this covenant shall apply throughout the United States.
ARTICLE 3
COMPENSATION
3.1 Salary. In consideration for Executive's services hereunder, Company
shall pay Executive an annual salary at the rate of $600,000 per year during
each of the years of the Term; payable in accordance with Company's regular
payroll schedule from time to time (less any deductions required for Social
Security, state, federal and local withholding taxes, and any other authorized
or mandated withholdings).
3.2 Bonus. Executive shall be entitled to earn a bonus with respect to each
year of the Term during which Executive is employed under this Agreement of not
less than $100,000 and up to $600,000 based upon the following criteria: a) the
first $100,000 shall be paid so long as Executive remains employed by Company
for the year in question; b) the next $200,000 shall be paid if Company meets
its EBITDA budget (as established by the Board in consultation with Executive)
for the year in question and does not exceed its capital budget for such year;
and c) the remaining $300,000 at the discretion of the Board of Directors. For
the purposes of determining whether Company has met its EBITDA budget, income
and expenses relating to acquisitions and new projects made during the year
shall be disregarded unless such acquisitions or projects were included in the
budget for the year and the budget shall be equitably adjusted for divestitures
made during the year not contemplated by the budget. No bonus under clause b)
will be earned or payable if Company's results are less than those established
as target results under its budget. Any such bonus earned by Executive shall be
paid annually within ninety (90) days after the conclusion of Company's fiscal
year. The amount of and criteria for earning bonuses may be adjusted by mutual
agreement of Executive and Company.
3.3 Stock Options. As an additional element of compensation to Executive,
in consideration of the services to be rendered hereunder, Company shall grant
to Executive options to purchase 400,000 shares of Company's common stock,
300,000 of which shall have an exercise price equal to the fair market value of
such stock on the date hereof and the remaining 100,000 options shall have an
exercise price of $18.00 (eighteen dollars). The terms and conditions of such
options shall be governed by a Stock Option Agreement between Company and
Executive, in the form attached hereto as Exhibit A. Three Hundred Thousand
(300,000) of such options (including 100,000 exercisable at $18) have been
granted subject to approval by Company's stockholders at its next annual meeting
of stockholders. Company covenants and agrees to recommend such approval.
-3-
<PAGE>
ARTICLE 4
EXECUTIVE BENEFITS
4.1 Vacation. In accordance with the general policies of Company applicable
generally to other senior executives of Company pursuant to Company's personnel
policies from time to time, Executive shall be entitled to four weeks vacation
each calendar year, without reduction in compensation.
4.2 Company Employee Benefits. Executive shall receive all group insurance
and pension plan benefits and any other benefits on the same basis as they are
available generally to other senior executives of Company under Company
personnel policies in effect from time to time.
4.3 Benefits. Executive shall receive all other such fringe benefits as
Company may offer generally to other senior executives of Company under Company
personnel policies in effect from time to time, such as health and disability
insurance coverage and paid sick leave.
4.4 Indemnification. Executive shall have the benefit of indemnification as
provided under applicable law and the bylaws of Company, which indemnification
shall continue after the termination of this Agreement for such period as may be
necessary to continue to indemnify Executive for his acts during the term
hereof. Company shall cause Executive to be covered by the current policies of
directors and officers liability insurance covering directors and officers of
Company, copies of which have been provided to Executive, in accordance with
their terms, to the maximum extent of the coverage available for any director or
officer of Company. Company shall use commercially reasonable efforts to cause
the current policies of directors and officers liability insurance covering
directors and officers of Company to be maintained throughout the term of
Executive's employment with Company and for such period thereafter as may be
necessary to continue to cover acts of Executive during the term of his
employment (provided that Company may substitute therefor, or allow to be
substituted therefor, policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured in any material respect).
ARTICLE 5
REIMBURSEMENT FOR EXPENSES
Executive shall be reimbursed by Company for all ordinary and necessary
expenses incurred by Executive in the performance of his duties or otherwise in
furtherance of the business of Company in accordance with the policies of
Company in effect from time to time. Executive shall keep accurate and complete
records of all such expenses, including but not limited to, proof of payment and
purpose. Executive shall account fully for all such expenses to Company.
-4-
<PAGE>
ARTICLE 6
TERMINATION
6.1 Termination for Cause. Without limiting the generality of Section 6.2,
Company shall have the right to terminate Executive's employment, without
further obligation or liability to Executive, upon the occurrence of any one or
more of the following events, which events shall be deemed termination for
cause.
6.1.1 Failure to Perform Duties. If Executive neglects to perform the
duties of his employment under this Agreement in a professional and businesslike
manner after having received written notice specifying such failure to perform
and a reasonable opportunity, not to exceed ten days, to perform or if such
performance cannot be completed within such time period, commenced within such
period and diligently pursued to completion as soon as practicable thereafter.
6.1.2 Willful Breach. If Executive willfully commits a material breach of
this Agreement or a material willful breach of his fiduciary duty to Company.
6.1.3 Wrongful Acts. If Executive is convicted of a felony or any other
serious crime, commits a serious wrongful act or engages in other misconduct
involving acts of moral turpitude that would make the continuance of his
employment by Company materially detrimental to Company, which determination
shall be made in the reasonable exercise of Company's judgment.
6.1.4 Disability. If Executive is physically or mentally disabled from the
performance of a major portion of his duties for a continuous period of 120 days
or greater, which determination shall be made in the reasonable exercise of
Company's judgment, provided, however, if Executive's disability is the result
of a serious health condition as defined by the federal Family and Medical Leave
Act (or its California equivalent) ("FMLA"), Executive's employment shall not be
terminated due to such disability at any time during or after any period of
FMLA-qualified leave except as permitted by FMLA. If there should be a dispute
between Company and Executive as to Executive's physical or mental disability
for purposes of this Agreement, the question shall be settled by the opinion of
an impartial reputable physician or psychiatrist agreed upon by the parties or
their representatives, or if the parties cannot agree within ten days after a
request for designation of such party, then a physician or psychiatrist designed
by the Los Angeles County Medical Association. The certification of such
physician or psychiatrist as to the questioned dispute shall be final and
binding upon the parties hereto.
6.2 Termination Without Cause. Notwithstanding anything to the contrary
herein, Company shall have the right to terminate Executive's employment under
this Agreement at any time without cause by giving notice of such termination to
Executive.
6.3 Termination by Executive for Good Reason. Executive may terminate his
employment under this Agreement on thirty (30) days prior notice to Company for
good reason. For purposes of this Agreement, "good reason" shall mean and be
limited to (a) a
-5-
<PAGE>
material breach of this Agreement by Company (including without limitation any
material reduction in the authority or duties of Executive or any relocation of
his or its principal place of business outside the greater Los Angeles
metropolitan area) and the failure of Company to remedy such breach within
thirty (30) days after written notice (or as soon thereafter as practicable so
long as it commences effectuation of such remedy within such time period and
diligently pursues such remedy to completion as soon as practicable); or (b) a
"change of control" with respect to the ownership of Company. For purposes of
this Agreement, a change of control shall mean (a) a sale of substantially all
of the property or more than eighty percent (80%) of the then outstanding stock
of Company to another corporation; or (b) the dissolution of liquidation of
Company or the reorganization, merger or consolidation of Company with one or
more corporations as a result of which Company is not the surviving corporation.
6.4 Termination by Executive Upon Failure to be Promoted. Executive may
terminate his employment under this Agreement on thirty (30) days prior notice
to Company upon failure of Company to designate Executive as Chief Executive
Officer or elect Executive as a member of its Board of Directors on or before
December 31, 1999; provided however, if Company offers to so designate and
elect, and Executive declines, Executive shall not have the right to elect to
terminate pursuant to this Section. Executive must elect to exercise such
termination right on or before March 31, 2000, at which time such right to
terminate shall be deemed waived if not previously exercised.
6.5 Effectiveness on Notice. Any termination under this Section 6 shall be
effective upon receipt of notice by Executive or Company, as the case may be, of
such termination or upon such other later date as may be provided herein or
specified by Company or Executive in the notice (the "Termination Date").
6.6 Effect of Termination.
6.6.1 Payment of Salary and Expenses Upon Termination. If the Term of this
Agreement is terminated, all benefits provided to Executive by Company hereunder
shall thereupon cease and Company shall pay or cause to be paid to Executive all
accrued but unpaid salary and vacation benefits. In addition, promptly upon
submission by Executive of his unpaid expenses incurred prior to the Termination
Date and owing to Executive pursuant to Article 5, reimbursement for such
expenses shall be made.
6.6.2 Termination for Disability. In the event of a termination under
Section 6.1.4 (for disability), Executive may be eligible for benefits under the
California State Disability Insurance program for his first six months of
disability. In addition Executive shall be eligible for the benefits provided
for under any long term disability insurance policy which Company may have as in
effect from time to time. Eligibility and benefits with regard to either
insurance program shall be governed by the provisions of the insurance program
or policy and shall not be the responsibility of Company.
6.6.3 Termination Without Cause or Termination by Executive for Good
Reason. If Company terminates Executive without cause or Executive terminates
for good reason under clause (a) of Section 6.3 only, the following shall apply:
-6-
<PAGE>
(a) So long as Executive does not compete with Company or its subsidiaries
in the gaming business prior to the end of the Term, Executive shall
be entitled to receive an amount equal to $700,000 per year through
the end of the Term, payable in accordance with Company's regular
salary payment schedule from time to time, plus any amounts payable
under Section 6.6.1 above, plus a continuation of health and
disability insurance coverage for a period of six (6) months after
termination, at Company's expense. Should Executive compete with
Company or its subsidiaries prior to the end of the Term, Executive
shall not be entitled to receive any additional payments from Company
with respect to periods after the commencement of any such competitive
activity under this Section 6.6.3 and all such obligations shall be
extinguished;
(b) In addition to those already vested, all unvested stock options that
would have vested on future Anniversary Dates of the Agreement shall
be deemed immediately and fully vested and exercisable by Executive;
and
(c) The "Covenant Not to Compete" set forth in Sections 7.4 below shall
not apply in any respect to Executive (except as the same may affect
his entitlement to payments under Section 6.6.3(a) hereof) and the
term of the "No Hire Away Policy" in Section 7.6 shall be limited to
six months from the date of termination.
In the event of a termination by Executive by reason of Section
6.3(b), the provisions of clauses (b) and (c) above shall apply but Executive
shall not be entitled to any severance payment.
6.6.4 Termination by Executive Upon Failure to be Promoted. If Executive
terminates this Agreement as a result of his failure to be promoted, then the
following shall apply:
(a) Employee shall be entitled to receive a severance payment equal to
$700,000, payable in one lump sum within ninety (90) days after
termination, plus any amounts payable in Section 6.6.1 above, plus a
continuation of health and disability insurance coverage for a period
of (six) months after termination, at Company's expense;.
(b) In addition to those already vested, that portion of the stock options
that would have vested on the next Anniversary Date of the Agreement
shall be deemed immediately vested and
-7-
<PAGE>
exercisable by Executive (i.e., bringing the total amount of options
which are vested to 75% of the total); and
(c) The "Covenant Not to Compete" and "No Hire Away Policy" set forth in
Sections 7.4 and 7.5 below shall not apply in any respect to
Executive.
6.7 Suspension. In lieu of terminating Executive's employment hereunder
for cause under Section 6.1, Company shall have the right, at its sole election,
to suspend the operation of this Agreement during the continuance of events or
circumstances under Section 6.1 for an aggregate of not more than 30 days during
the Term (the "Default Period") by giving Executive written notice of Company's
election to do so at any time during the Default Period. Company shall have the
right to extend the Term beyond its normal expiration date by the period(s) of
any suspension(s). Company's exercise of its right to suspend the operation of
this Agreement shall not preclude Company from subsequently terminating
Executive's employment hereunder. Executive shall not render services to any
other person, firm or corporation in the casino business during any period of
suspension. Executive shall be entitled to continued compensation pursuant to
the provisions hereof during the Default Period.
6.8 DEFRA Limitation. The payments that Executive shall be entitled to
receive hereunder and upon the exercise of his stock options shall in all events
be limited by the provisions of Section 280G of the Internal Revenue Code
("Code") and the regulations thereunder (or their then equivalents) and no
payment shall be made that would have the result of limiting the deductibility
of such payments by Company or that would result in the imposition of an excise
tax under Section 4999 of the Code.
6.9 Exercisability of Options. As provided in the Option Agreement, all
options terminate no later than ninety (90) days after the termination,
regardless of the cause of such termination.
ARTICLE 7
CONFIDENTIALITY
7.1 Nondisclosure of Confidential Material. In the performance of his
duties, Executive may have access to confidential records, including, but not
limited to, development, marketing, organizational, financial, managerial,
administrative and sales information, data, specifications and processes
presently owned or at any time hereafter developed or used by Company or its
agents or consultants that is not otherwise part of the public domain
(collectively, the "Confidential Material"). All such Confidential Material is
considered secret and is disclosed to Executive in confidence. Executive
acknowledges that the Confidential Material constitutes proprietary information
of Company which draws independent economic value, actual or potential, from not
being generally known to the public or to other persons who could obtain
economic value from its disclosure or use, and that Company has taken efforts
reasonable under the circumstances, of which this Section 7.1 is an example, to
maintain its secrecy. Except in the performance of his duties to
-8-
<PAGE>
Company or as required by a court order, Executive shall not, directly or
indirectly for any reason whatsoever, disclose, divulge, communicate, use or
otherwise disclose any such Confidential Material, unless such Confidential
Material ceases to be confidential because it has become part of the public
domain (not due to a breach by Executive of his obligations hereunder).
Executive shall also take all reasonable actions appropriate to maintain the
secrecy of all Confidential Information. All records, lists, memoranda,
correspondence, reports, manuals, files, drawings, documents, equipment, and
other tangible items (including computer software), wherever located,
incorporating the Confidential Material, which Executive shall prepare, use or
encounter, shall be and remain Company's sole and exclusive property and shall
be included in the Confidential Material. Upon termination of this Agreement, or
whenever requested by Company, Executive shall promptly deliver to Company any
and all of the Confidential Material, not previously delivered to Company, that
is in the possession or under the control of Executive.
7.2 Assignment of Intellectual Property Rights. Any ideas, processes, know-
how, copyrightable works, maskworks, trade or service marks, trade secrets,
inventions, developments, discoveries, improvements and other matters that may
be protected by intellectual property rights, that relate to Company's business
and are the results of Executive's efforts during the Term (collectively, the
"Executive Work Product"), whether conceived or developed alone or with others,
and whether or not conceived during the regular working hours of Company, shall
be deemed works made for hire and are the property of Company. In the event that
for whatever reason such Executive Work Product shall not be deemed a work made
for hire, Executive agrees that such Executive Work Product shall become the
sole and exclusive property of Company, and Executive hereby assigns to Company
his entire right, title and interest in and to each and every patent, copyright,
trade or service mark (including any attendant goodwill), trade secret or other
intellectual property right embodied in Executive Work Product. Company shall
also have the right, in its sole discretion to keep any and all of Executive
Work Product as Company's Confidential Material. The foregoing work made for
hire and assignment provisions are and shall be in consideration of this
agreement of employment by Company, and no further consideration is or shall be
provided to Executive by Company with respect to these provisions. Executive
agrees to execute any assignment documents Company may require confirming
Company's ownership of any of Executive Work Product. Executive also waives any
and all moral rights with respect to any such works, including without
limitation any and all rights of identification of authorship and/or rights of
approval, restriction or limitation on use or subsequent modifications.
Executive promptly will disclose to Company any Executive Work Product.
7.3 No Unfair Competition After Termination of Agreement. Executive hereby
acknowledges that the sale or unauthorized use or disclosure of any of Company's
Confidential Material obtained by Executive by any means whatsoever, at any time
before, during or after the Term shall constitute unfair competition. Executive
shall not engage in any unfair competition with Company either during the Term
or at any time thereafter.
7.4 Covenant Not to Compete. In the event this Agreement is terminated by
Company for cause under Section 6.1 above, or by Executive, for a reason other
than one
-9-
<PAGE>
specified in either Section 6.3 or 6.4 above, then for a period of one year
after the effective date of such termination, Executive shall not, directly or
indirectly, work for or provide services to or own an equity interest in any
person, firm or entity engaged in the casino gaming, card club or horseracing
business which competes against Company in any "market" in which Company owns or
operates a casino, card club or horseracing facility. For purposes of this
Agreement, "market" shall be defined as the area within a 100 mile radius of any
casino, card club or horseracing facility owned or operated by Company.
7.5 No Hire Away Policy. In the event this Agreement is terminated prior
to the normal expiration of the Term, either by Company for cause under 6.1
above, or by Executive, for a reason other than one specified in either Section
6.3 or 6.4 above, then for a period of one year after the effective date of such
termination, Executive shall not, directly or indirectly, hire any person known
to Executive to be an employee of Company or any of its subsidiaries (or any
person known to Executive to have been such an employee within six months prior
to such occurrence). In the case of a termination under Sections 6.2 and 6.3,
the period of the No Hire Away Policy shall be six months from the date of such
termination.
7.6 No Solicitation. During the Term and for a period of one year
thereafter, or for a period of one year after earlier termination of this
Agreement prior to expiration of the Term, and regardless of the reason for such
termination (whether by Company or Executive), Executive shall not directly or
indirectly solicit any employee of Company or any of its subsidiaries (or any
person who was such an employee within six months prior to such occurrence) or
encourage any such employee to leave the employment of Company or any of its
subsidiaries.
7.7 Non-Solicitation of Customers. During the Term and for a period of two
years thereafter, or for a period of two years after the earlier termination of
this Agreement prior to the expiration of the Term, and regardless of the reason
for such termination (whether by Company or Executive), Executive shall not
directly or indirectly use customer lists or confidential information to solicit
any customers of Company or its subsidiaries or any of their respective casinos
or card clubs, or knowingly encourage any such customers to leave Company's
casinos or card clubs or knowingly encourage any such customers to use the
facilities or services of any competitor of Company or its subsidiaries.
7.8 Irreparable Injury. The promised service of Executive under this
Agreement and the other promises of this Article 7 are of special, unique,
unusual, extraordinary, or intellectual character, which gives them peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in an action at law.
7.9 Remedies for Breach. Executive agrees that money damages will not be a
sufficient remedy for any breach of the obligations under this Article 7 and
Article 2 hereof and that Company shall be entitled to injunctive relief (which
shall include, but not be limited to, restraining Executive from directly or
indirectly working for or having an ownership interest in any person engaged in
the casino, gaming or horseracing businesses in any market in which Company or
its affiliates owns or operates any such business, using or disclosing the
Confidential Material) and to specific performance as remedies for any such
-10-
<PAGE>
breach. Executive agrees that Company shall be entitled to such relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions, without the necessity of proving actual damages and without the
necessity of posting a bond or making any undertaking in connection therewith.
Any such requirement of a bond or undertaking is hereby waived by Executive and
Executive acknowledges that in the absence of such a waiver, a bond or
undertaking might otherwise be required by the court. Such remedies shall not be
deemed to be the exclusive remedies for any breach of the obligations in this
Article 7, but shall be in addition to all other remedies available at law or in
equity.
ARTICLE 8
ARBITRATION
In the event there is any dispute between Executive and Company which the
parties are unable to resolve themselves, including any dispute with regard to
the application, interpretation or validity of this Agreement or any dispute
with regard to any aspect of Executive's employment or the termination of
Executive's employment, both Executive and Company agree by entering into this
Agreement that the exclusive remedy for determining any such dispute, regardless
of its nature, will be by arbitration in accordance with the then applicable
rules of the American Arbitration Association; provided, however, the breach of
the obligation to provide services under this Agreement or of the obligations of
Article 7 may be enforced by an action for injunctive relief and damages in a
court of competent jurisdiction. In the event of any conflict between this
Agreement and the rules of the American Arbitration Association, the provisions
of this Agreement shall be determinative. In the event the parties are unable
to agree upon an arbitrator, the parties shall select a single arbitrator from a
list designated by the Los Angeles Office of the American Arbitration
Association of seven arbitrators all of whom shall be retired judges of the
Superior of appellate courts resident in Los Angeles who are members of the
"Independent List" of retired judges. If the parties are unable to select an
arbitrator from the list provided by the American Arbitration Association, then
the parties shall each strike names alternatively from the list, with the first
to strike being determined by lot. After each party has used three strikes, the
remaining name on the list shall be the arbitrator. This agreement to resolve
any disputes by binding arbitration shall extend to claims against any
shareholder or partner of Company, any brother-sister company, parent,
subsidiary or affiliate of Company, any officer, director, employee, or agent of
Company, or of any of the above, and shall apply as well to claims arising out
of state and federal statutes and local ordinances as well as to claims arising
under the common law. Unless mutually agreed by the parties otherwise, any
arbitration shall take place in Los Angeles County, California. In the event
the parties are unable to agree upon a location for the arbitration, the
location within Los Angeles County shall be determined by the arbitrator. The
prevailing party in such arbitration proceeding, as determined by the
arbitrator, and in any enforcement or other court proceedings, shall be entitled
to the extent permitted by law, to reimbursement from the other party for all of
the prevailing party's costs (including but not limited to the arbitrator's
compensation), expenses and attorneys' fees.
-11-
<PAGE>
ARTICLE 9
MISCELLANEOUS
9.1 Amendments. The provisions of this Agreement may not be waived,
altered, amended or repealed in whole or in part except by the signed written
consent of the parties sought to be bound by such waiver, alteration, amendment
or repeal.
9.2 Entire Agreement. This Agreement and the nonqualified Option Amendment
of even date herewith constitutes the total and complete agreement of the
parties and supersedes all prior and contemporaneous understandings and
agreements heretofore made, and there are no other representations,
understandings or agreements.
9.3 Counterparts. This Agreement may be executed in one of more
counterparts, each of which shall be deemed and original, but all of which shall
together constitute one and the same instrument.
9.4 Severability. Each term, covenant, condition or provision of this
Agreement shall be viewed as separate and distinct, and in the event that any
such term, covenant, condition or provision shall be deemed by an arbitrator or
a court of competent jurisdiction to be invalid or unenforceable, the court or
arbitrator finding such invalidity or unenforceability shall modify or reform
this Agreement to give as much effect as possible to the terms and provisions of
this Agreement. Any term or provision which cannot be so modified or reformed
shall be deleted and the remaining terms and provisions shall continue in full
force and effect.
9.5 Waiver or Delay. The failure or delay on the part of Company, or
Executive to exercise any right or remedy, power or privilege hereunder shall
not operate as a waiver thereof. A waiver, to be effective, must be in writing
and signed by the party making the waiver. A written waiver of default shall
not operate as a waiver of any other default or of the same type of default on a
future occasion.
9.6 Successors and Assigns. This Agreement shall be binding on and shall
inure to the benefit of the parties to it and their respective heirs, legal
representatives, successors and assigns, except as otherwise provided herein.
9.7 No Assignment or Transfer by Executive. Neither this Agreement nor any
of the rights, benefits, obligations or duties hereunder may be assigned or
transferred by Executive. Any purported assignment or transfer by Executive
shall be void.
9.8 Necessary Acts. Each party to this Agreement shall perform any further
acts and execute and deliver any additional agreements, assignments or documents
that may be reasonably necessary to carry out the provisions or to effectuate
the purpose of this Agreement.
-12-
<PAGE>
9.9 Governing Law. This Agreement and all subsequent agreements between
the parties shall be governed by and interpreted, construed and enforced in
accordance with the laws of the State of California.
9.10 Notices. All notices, requests, demands and other communications to be
given under this Agreement shall be in writing and shall be deemed to have been
duly given on the date of service, if personally served on the party to whom
notice is to be given, or 48 hours after mailing, if mailed to the party to whom
notice is to be given by certified or registered mail, return receipt requested,
postage prepaid, and properly addressed to the party at his address set forth as
follows or any other address that any party may designate by written notice to
the other parties:
To Executive: Paul Alanis
675 Burleigh Dr.
Pasadena, California 91105
with copy to: Cox, Castle & Nicholsen
2049 Century Park East, 28th Floor
Los Angeles, CA 90067-3284
Attn: Matt Wyman
To Company: Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Attn: G. Michael Finnigan
with copy to: Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4276
Attn: Alvin G. Segel
9.11 Headings and Captions. The headings and captions used herein are
solely for the purpose of reference only and are not to be considered as
construing or interpreting the provisions of this Agreement.
9.12 Construction. All terms and definitions contained herein shall be
construed in such a manner that shall give effect to the fullest extent possible
to the express or implied intent of the parties hereby.
9.13 Counsel. Executive has been advised by Company that he should
consider seeking the advice of counsel in connection with the execution of this
Agreement and Executive has had an opportunity to do so. Executive has read and
understands this Agreement, and has sought the advice of counsel to the extent
he has determined appropriate.
9.14 Withholding of Compensation. Executive hereby agrees that Company may
deduct and withhold from the compensation or other amounts payable to Executive
-13-
<PAGE>
hereunder or otherwise in connection with Executive's employment any amounts
required to be deducted and withheld by Company under the provisions of any
applicable Federal, state and local statute, law, regulation, ordinance or
order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
EXECUTIVE COMPANY
/s/ Paul Alanis Hollywood Park, Inc., a Delaware corporation
- --------------------------------
Paul Alanis
Social Security No: By: /s/ R.D. Hubbard
-------------- -------------------------------------
Its: Chairman and CEO
-------------------------------------
-14-
<PAGE>
Exhibit 10.38
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made on September 10, 1998,
by and between HOLLYWOOD PARK, INC. a Delaware corporation ("Company"), and MIKE
ALLEN, an individual ("Executive"), with respect to the following facts and
circumstances:
RECITALS
Executive is currently employed by Horseshoe Gaming, LLC ("Horseshoe").
Company desires to retain Executive as Senior Vice President and Chief Operating
Officer of the Gaming Division of Company after Executive completes his
obligations under his existing employment agreement and after such agreement has
terminated. Executive desires to be retained by Company in that capacity, on
the terms and conditions and for the consideration set forth below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1.
EMPLOYMENT AND TERM
1.1. Employment. Company agrees to engage Executive in the capacity
as Senior Vice President and Chief Operating Officer of the Gaming Division of
Company on the Effective Date (as hereinafter defined) and Executive hereby
accepts such engagement by Company upon the terms and conditions specified
below.
1.2. Term. The term of this Agreement (the "Term") shall commence on
June 1, 1999 (or such earlier date on which Executive shall be released from his
commitments to his current employer (such date being referred to as the
"Effective Date") and shall continue in force until three years after the
Effective Date, unless earlier terminated under Article 6 below. Each 12-month
period commencing as of the Effective Date is sometimes called a year of the
"Term," and the date which is 365 days from and after the Effective Date shall
be referred to as the "Anniversary Date"). At least ninety (90) days prior to
the expiration of the Term (as the same may be extended from time to time),
Executive and Company shall advise each other whether they wish to renew the
term of this Agreement and the proposed basis for such renewal. If Paul Alanis
("Alanis") is not offered promotion to Chief Executive Officer of Company by
December 31, 1999 and as a result terminates his employment with Company by
March 31, 2000, then Executive may
<PAGE>
terminate his employment with Company at any time within ninety (90) days
following Alanis' termination.
ARTICLE 2.
DUTIES OF EXECUTIVE
2.1. Duties. Executive shall perform all the duties and obligations
of Senior Vice President and Chief Operating Officer of the Gaming Division
subject to the control and supervision of the Chief Executive and Chief
Operating Officers of Company and such other executive duties consistent with
the foregoing as may be assigned to him from time to time by the Chief Executive
or Chief Operating Officer of Company. Executive shall report to the Chief
Operating Officer or the Chief Executive Officer of Company. In his capacity as
Chief Operating Officer of the Gaming Division, Executive shall have the
Marketing, Human Resources and MIS Department heads of such Division, as well as
other similar operating departments that may be created in the future, and all
Property General Managers reporting directly to Executive (it being understood
that they may have dotted line reporting obligations to the other corporate
officers as well). Executive shall perform the services contemplated herein
faithfully, diligently, to the best of his ability and in the best interests of
Company. Executive shall devote all his business time and efforts to the
rendition of such services. Executive shall, at all times perform such services
in compliance with, and to the extent of his authority, shall to the best of his
ability cause Company to be in compliance with, any and all laws, rules and
regulations applicable to Company of which Executive is aware. Executive may
rely on Company's inside counsel and outside lawyers in connection with such
matters. Executive shall, at all times during the Term, in all material respects
adhere to and obey any and all written internal rules and regulations governing
the conduct of Company's employees, as established or modified from time to
time; provided, however, in the event of any conflict between the provisions of
this Agreement and any such rules or regulations, the provisions of this
Agreement shall control.
2.2. Location of Services. Executive's principal place of employment
shall be at Company's headquarters in the greater Los Angeles, California area.
Executive understands he will be required to travel to Company's various
operations as part of his employment and that he will spend up to six months on
site in connection with new gaming facilities opened or acquired by Company
during the Term. While living on site at new development projects, Executive
shall be provided with appropriate housing and a Company vehicle, at the
Company's expense.
2.3. Exclusive Service. Except as otherwise expressly provided herein,
Executive shall devote his business time, attention, energies, skills, learning
and best efforts to the business of Company. Executive may participate in
social, civic, charitable, religious, business, educational or professional
associations, so long as such participation does not materially interfere with
the duties and obligations of Executive hereunder. This Section 2.3, however,
shall not be construed to prevent Executive from making passive
2
<PAGE>
outside investments so long as such investments do not require material time of
Executive or otherwise interfere with the performance of Executive's duties and
obligations hereunder. Executive shall not make any investment in an enterprise
that competes with Company without the prior written approval of Company after
full disclosure of the facts and circumstances; provided, however, that so long
as Executive does not utilize material, non-public information this sentence
shall not preclude Executive from owning up to one percent (1%) of the
securities of a publicly traded entity. Company acknowledges that Executive
presently owns an interest in Horseshoe Gaming, LLC, which Executive, at the
termination of his employment with Horseshoe Gaming, LLC., will sell back to
such company pursuant to the terms of his existing employment agreement. During
the Term, Executive shall not directly or indirectly work for or provide
services to or own an equity interest in any person, firm or entity engaged in
the casino gaming, card club or horse racing business. In this regard, Executive
acknowledges that the gaming industry is national in scope and that accordingly
this covenant shall apply throughout the United States.
ARTICLE 3.
COMPENSATION
3.1. Salary. In consideration for Executive's services hereunder,
Company shall pay Executive an annual salary at the rate of $400,000 per year
during each of the years of the Term; payable in accordance with Company's
regular payroll schedule from time to time (less any deductions required for
Social Security, state, federal and local withholding taxes, and any other
authorized or mandated withholdings).
3.2. Bonus. Executive shall be entitled to earn a bonus with respect
to each year of the Term during which Executive is employed under this Agreement
of up to $200,000, $100,000 of which shall be based upon Company meeting its
EBITDA budget (as established by the Board) for the year in question and not
exceeding its capital budget for such year and the balance at the discretion of
the Board of Directors. For the purposes of determining whether Company has met
its EBITDA budget, income and expenses relating to acquisitions and new projects
made during the year shall be disregarded unless such acquisitions or projects
were included in the budget for the year and the budget shall be equitably
adjusted for divestitures made during the year not contemplated by the budget.
No bonus based on meeting its EBITDA budget will be earned or payable if
Company's results are less than those established as target results under its
budget. Any such bonus earned by Executive shall be paid annually within ninety
(90) days after the conclusion of Company's fiscal year. The amount of and
criteria for earning bonuses may be adjusted by mutual agreement of Executive
and Company.
3.3. Stock Options. As an additional element of compensation to
Executive, in consideration of the services to be rendered hereunder, Company
shall grant to Executive options to purchase 200,000 shares of Company's common
stock, 150,000 of which shall
3
<PAGE>
have an exercise price equal to the fair market value of such stock on the date
hereof and the remaining 50,000 options shall have an exercise price of $18.00
(eighteen dollars). The terms and conditions of such options shall be governed
by a Stock Option Agreement between Company and Executive, in the form attached
hereto as Exhibit A. The grant of 150,000 of such options (including the 50,000
exercisable at $18) have been granted subject to approval by Company's
stockholders at its next annual meeting of stockholders. Company covenants and
agrees to recommend such approval.
ARTICLE 4.
EXECUTIVE BENEFITS
4.1. Vacation. In accordance with the general policies of Company
applicable generally to other senior executives of Company pursuant to Company's
personnel policies from time to time, Executive shall be entitled to four weeks
vacation each calendar year, without reduction in compensation.
4.2. Company Employee Benefits. Executive shall receive all group
insurance and pension plan benefits and any other benefits on the same basis as
they are available generally to other senior executives of Company under Company
personnel policies in effect from time to time.
4.3. Benefits. Executive shall receive all other such fringe benefits
as Company may offer generally to other senior executives of Company under
Company personnel policies in effect from time to time, such as health and
disability insurance coverage and paid sick leave.
4.4. Indemnification. Executive shall have the benefit of
indemnification as provided under applicable law and the bylaws of Company,
which indemnification shall continue after the termination of this Agreement for
such period as may be necessary to continue to indemnify Executive for his acts
during the term hereof. Company shall cause Executive to be covered by the
current policies of directors and officers liability insurance covering
directors and officers of Company, copies of which have been provided to
Executive, in accordance with their terms, to the maximum extent of the coverage
available for any director or officer of Company. Company shall use commercially
reasonable efforts to cause the current policies of directors and officers
liability insurance covering directors and officers of Company to be maintained
throughout the term of Executive's employment with Company and for such period
thereafter as may be necessary to continue to cover acts of Executive during the
term of his employment (provided that Company may substitute therefor, or allow
to be substituted therefor, policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured in any material respect).
4
<PAGE>
ARTICLE 5.
REIMBURSEMENT FOR EXPENSES
Executive shall be reimbursed by Company for all ordinary and necessary
expenses incurred by Executive in the performance of his duties or otherwise in
furtherance of the business of Company in accordance with the policies of
Company in effect from time to time. Executive shall keep accurate and complete
records of all such expenses, including but not limited to, proof of payment and
purpose. Executive shall account fully for all such expenses to Company.
ARTICLE 6.
TERMINATION
6.1. Termination for Cause. Without limiting the generality of
Section 6.2, Company shall have the right to terminate Executive's employment,
without further obligation or liability to Executive, upon the occurrence of any
one or more of the following events, which events shall be deemed termination
for cause.
6.1.1. Failure to Perform Duties. If Executive neglects to perform the
duties of his employment under this Agreement in a professional and businesslike
manner after having received written notice specifying such failure to perform
and a reasonable opportunity, not to exceed ten days, to perform or if such
performance cannot be completed within such time period, commenced within such
period and diligently pursued to completion as soon as practicable thereafter.
6.1.2. Willful Breach. If Executive willfully commits a material breach
of this Agreement or a material willful breach of his fiduciary duty to Company.
6.1.3. Wrongful Acts. If Executive is convicted of a felony or any other
serious crime, commits a serious wrongful act or engages in other misconduct
involving acts of moral turpitude that would make the continuance of his
employment by Company materially detrimental to Company, which determination
shall be made in the reasonable exercise of Company's judgment.
6.1.4. Disability. If Executive is physically or mentally disabled from
the performance of a major portion of his duties for a continuous period of 120
days or greater, which determination shall be made in the reasonable exercise of
Company's judgment, provided, however, if Executive's disability is the result
of a serious health condition as defined by the federal Family and Medical Leave
Act (or its California equivalent) ("FMLA"), Executive's employment shall not be
terminated due to such disability at any time during or after any period of
FMLA-qualified leave except as permitted by FMLA. If there should be a dispute
between Company and Executive as to Executive's physical or mental disability
for purposes of this Agreement, the question shall be settled by the opinion of
an impartial reputable physician or psychiatrist agreed
5
<PAGE>
upon by the parties or their representatives, or if the parties cannot agree
within ten days after a request for designation of such party, then a physician
or psychiatrist designed by the Los Angeles County Medical Association. The
certification of such physician or psychiatrist as to the questioned dispute
shall be final and binding upon the parties hereto.
6.2. Termination Without Cause. Notwithstanding anything to the
contrary herein, Company shall have the right to terminate Executive's
employment under this Agreement at any time without cause by giving notice of
such termination to Executive.
6.3. Termination by Executive for Good Reason. Executive may
terminate his employment under this Agreement on thirty (30) days prior notice
to Company for good reason. For purposes of this Agreement, "good reason" shall
mean and be limited to a material breach of this Agreement by Company (including
without limitation any material reduction in the authority or duties of
Executive or any relocation of his or its principal place of business outside
the greater Los Angeles metropolitan area) and the failure of Company to remedy
such breach within thirty (30) days after written notice (or as soon thereafter
as practicable so long as it commences effectuation of such remedy within such
time period and diligently pursues such remedy to completion as soon as
practicable).
6.4. Termination by Executive Upon Failure of Paul Alanis to be
Promoted. Executive may terminate his employment under this Agreement on thirty
(30) days prior notice to Company upon failure of Company to offer to designate
Paul Alanis as Chief Executive Officer on or before December 31, 1999, resulting
in his termination of employment with Company. Executive must elect to exercise
such termination right within ninety (90) days after Alanis terminates his
employment due to his failure to be offered promotion, at which time such right
to terminate shall be deemed waived if not previously exercised.
6.5. Effectiveness on Notice. Any termination under this Section 6
shall be effective upon receipt of notice by Executive or Company, as the case
may be, of such termination or upon such other later date as may be provided
herein or specified by Company or Executive in the notice (the "Termination
Date").
6.6. Effect of Termination.
6.6.1. Payment of Salary and Expenses Upon Termination. If the
Term of this Agreement is terminated, all benefits provided to Executive by
Company hereunder shall thereupon cease and Company shall pay or cause to be
paid to Executive all accrued but unpaid salary and vacation benefits. In
addition, promptly upon submission by Executive of his unpaid expenses incurred
prior to the Termination Date and owing to Executive pursuant to Article 5,
reimbursement for such expenses shall be made.
6.6.2. Termination for Disability. In the event of a
termination under Section 6.1.4 (for disability), Executive may be eligible for
benefits under the California State Disability Insurance program for his first
six months of disability. In addition,
6
<PAGE>
Executive shall be eligible for the benefits provided for under any long term
disability insurance policy which Company may have as in effect from time to
time. Eligibility and benefits with regard to either insurance program shall be
governed by the provisions of the insurance program or policy and shall not be
the responsibility of Company.
6.6.3. Termination Without Cause or Termination by Executive for Good
Reason. If Company terminates Executive without cause or Executive terminates
for good reason under Section 6.3 only, the following shall apply:
(a) So long as Executive does not compete with Company or its
subsidiaries in the gaming business prior to the end of the
Term, Executive shall be entitled to receive an amount equal
to $400,000 per year through the end of the Term, payable in
accordance with Company's regular salary payment schedule
from time to time, plus any amounts payable under Section
6.6.1 above, plus a continuation of health and disability
insurance coverage for a period of six (6) months after
termination, at Company's expense. Should Executive compete
with Company or its subsidiaries prior to the end of the
Term, Executive shall not be entitled to receive any
additional payments from Company with respect to periods
after commencement of such competitive activity under this
Section 6.6.3 and all such obligations shall be extinguished;
(b) In addition to those already vested, all unvested stock
options that would have vested on future Anniversary Dates of
the Agreement shall be deemed immediately and fully vested
and exercisable by Executive; and
(c) The "Covenant Not to Compete" set forth in Sections 7.4 below
shall not apply in any respect to Executive (except as the
same may affect his entitlement to payments under Section
6.6.3(a) hereof) and the term of the "No Hire Away Policy" in
Section 7.6 shall be limited to six months from the date of
termination.
6.6.4. Termination by Executive Upon Failure of Alanis to be Promoted. If
Executive terminates this Agreement as a result of Alanis' failure to be
promoted, then Executive shall be entitled to receive the payments under Section
6.6.1 hereof.
6.7. Suspension. In lieu of terminating Executive's employment
hereunder for cause under Section 6.1, Company shall have the right, at its sole
election, to suspend the operation of this Agreement during the continuance of
events or circumstances under Section 6.1 for an aggregate of not more than 30
days during the Term (the "Default Period") by giving Executive written notice
of Company's election to do so at any time
7
<PAGE>
during the Default Period. Company shall have the right to extend the Term
beyond its normal expiration date by the period(s) of any suspension(s).
Company's exercise of its right to suspend the operation of this Agreement shall
not preclude Company from subsequently terminating Executive's employment
hereunder. Executive shall not render services to any other person, firm or
corporation in the casino business during any period of suspension. Executive
shall be entitled to continued compensation pursuant to the provisions hereof
during the Default Period.
6.8. DEFRA Limitation. The payments that Executive shall be entitled to
receive hereunder and upon the exercise of his stock options shall in all events
be limited by the provisions of Section 280G of the Internal Revenue Code
("Code") and the regulations thereunder (or their then equivalents) and no
payment shall be made that would have the result of limiting the deductibility
of such payments by Company or that would result in the imposition of an excise
tax under Section 4999 of the Code.
6.9. Exercisability of Options. As provided in the Option Agreement,
all options terminate no later than ninety (90) days after the termination,
regardless of the cause of such termination.
ARTICLE 7.
CONFIDENTIALITY
7.1. Nondisclosure of Confidential Material. In the performance of
his duties, Executive may have access to confidential records, including, but
not limited to, development, marketing, organizational, financial, managerial,
administrative and sales information, data, specifications and processes
presently owned or at any time hereafter developed or used by Company or its
agents or consultants that is not otherwise part of the public domain
(collectively, the "Confidential Material"). All such Confidential Material is
considered secret and is disclosed to Executive in confidence. Executive
acknowledges that the Confidential Material constitutes proprietary information
of Company which draws independent economic value, actual or potential, from not
being generally known to the public or to other persons who could obtain
economic value from its disclosure or use, and that Company has taken efforts
reasonable under the circumstances, of which this Section 7.1 is an example, to
maintain its secrecy. Except in the performance of his duties to Company or as
required by a court order, Executive shall not, directly or indirectly for any
reason whatsoever, disclose, divulge, communicate, use or otherwise disclose any
such Confidential Material, unless such Confidential Material ceases to be
confidential because it has become part of the public domain (not due to a
breach by Executive of his obligations hereunder). Executive shall also take all
reasonable actions appropriate to maintain the secrecy of all Confidential
Information. All records, lists, memoranda, correspondence, reports, manuals,
files, drawings, documents, equipment, and other tangible items (including
computer software), wherever located, incorporating the Confidential Material,
which Executive shall prepare, use or encounter, shall be and remain Company's
sole and exclusive property and shall be included in the
8
<PAGE>
Confidential Material. Upon termination of this Agreement, or whenever requested
by Company, Executive shall promptly deliver to Company any and all of the
Confidential Material, not previously delivered to Company, that is in the
possession or under the control of Executive.
7.2. Assignment of Intellectual Property Rights. Any ideas, processes,
know-how, copyrightable works, maskworks, trade or service marks, trade secrets,
inventions, developments, discoveries, improvements and other matters that may
be protected by intellectual property rights, that relate to Company's business
and are the results of Executive's efforts during the Term (collectively, the
"Executive Work Product"), whether conceived or developed alone or with others,
and whether or not conceived during the regular working hours of Company, shall
be deemed works made for hire and are the property of Company. In the event that
for whatever reason such Executive Work Product shall not be deemed a work made
for hire, Executive agrees that such Executive Work Product shall become the
sole and exclusive property of Company, and Executive hereby assigns to Company
his entire right, title and interest in and to each and every patent, copyright,
trade or service mark (including any attendant goodwill), trade secret or other
intellectual property right embodied in the Executive Work Product. Company
shall also have the right, in its sole discretion to keep any and all of the
Executive Work Product as Company's Confidential Material. The foregoing work
made for hire and assignment provisions are and shall be in consideration of
this agreement of employment by Company, and no further consideration is or
shall be provided to Executive by Company with respect to these provisions.
Executive agrees to execute any assignment documents Company may require
confirming Company's ownership of any of the Executive Work Product. Executive
also waives any and all moral rights with respect to any such works, including
without limitation any and all rights of identification of authorship and/or
rights of approval, restriction or limitation on use or subsequent
modifications. Executive promptly will disclose to Company any Executive Work
Product.
7.3. No Unfair Competition After Termination of Agreement. Executive
hereby acknowledges that the sale or unauthorized use or disclosure of any of
Company's Confidential Material obtained by Executive by any means whatsoever,
at any time before, during or after the Term shall constitute unfair
competition. Executive shall not engage in any unfair competition with Company
either during the Term or at any time thereafter.
7.4. Covenant Not to Compete. In the event this Agreement is
terminated by Company for cause under Section 6.1 above, or by Executive, for a
reason other than one specified in either Section 6.3 or 6.4 above, then for a
period of one year after the effective date of such termination, Executive shall
not, directly or indirectly, work for or provide services to or own an equity
interest in any person, firm or entity engaged in the casino gaming, card club
or horseracing business which competes against Company in any "market" in which
Company owns or operates a casino, card club or horseracing facility.
9
<PAGE>
For purposes of this Agreement, "market" shall be defined as the area within a
100 mile radius of any casino, card club or horseracing facility owned or
operated by Company.
7.5. No Hire Away Policy. In the event this Agreement is terminated
prior to the normal expiration of the Term, either by Company for cause under
6.1 above, or by Executive, for a reason other than one specified in either
Section 6.3 or 6.4 above, then for a period of one year after the effective date
of such termination, Executive shall not, directly or indirectly, hire any
person known to Executive to be an employee of Company or any of its
subsidiaries (or any person known to Executive to have been such an employee
within six months prior to such occurrence). In the case of a termination under
Sections 6.2 and 6.3, the period of the No Hire Away Policy shall be six months
from the date of such termination.
7.6. No Solicitation. During the Term and for a period of one year
thereafter, or for a period of one year after earlier termination of this
Agreement prior to expiration of the Term, and regardless of the reason for such
termination (whether by Company or Executive), Executive shall not directly or
indirectly solicit any employee of Company or any of its subsidiaries (or any
person who was such an employee within six months prior to such occurrence) or
encourage any such employee to leave the employment of Company or any of its
subsidiaries.
7.7. Non-Solicitation of Customers. During the Term and for a period
of two years thereafter, or for a period of two years after the earlier
termination of this Agreement prior to the expiration of the Term, and
regardless of the reason for such termination (whether by Company or Executive),
Executive shall not directly or indirectly use customer lists or confidential
information to solicit any customers of Company or its subsidiaries or any of
their respective casinos or card clubs, or knowingly encourage any such
customers to leave Company's casinos or card clubs or knowingly encourage any
such customers to use the facilities or services of any competitor of Company or
its subsidiaries.
7.8. Irreparable Injury. The promised service of Executive under this
Agreement and the other promises of this Article 7 are of special, unique,
unusual, extraordinary, or intellectual character, which gives them peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in an action at law.
7.9. Remedies for Breach. Executive agrees that money damages will
not be a sufficient remedy for any breach of the obligations under this Article
7 and Article 2 hereof and that Company shall be entitled to injunctive relief
(which shall include, but not be limited to, restraining Executive from directly
or indirectly working for or having an ownership interest in any person engaged
in the casino, gaming or horseracing businesses in any market in which Company
or its affiliates owns or operates any such business, using or disclosing the
Confidential Material) and to specific performance as remedies for any such
breach. Executive agrees that Company shall be entitled to such relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions, without the necessity of proving actual damages and without the
necessity of posting a bond or
10
<PAGE>
making any undertaking in connection therewith. Any such requirement of a bond
or undertaking is hereby waived by Executive and Executive acknowledges that in
the absence of such a waiver, a bond or undertaking might otherwise be required
by the court. Such remedies shall not be deemed to be the exclusive remedies for
any breach of the obligations in this Article 7, but shall be in addition to all
other remedies available at law or in equity.
ARTICLE 8.
ARBITRATION
In the event there is any dispute between Executive and Company which the
parties are unable to resolve themselves, including any dispute with regard to
the application, interpretation or validity of this Agreement or any dispute
with regard to any aspect of Executive's employment or the termination of
Executive's employment, both Executive and Company agree by entering into this
Agreement that the exclusive remedy for determining any such dispute, regardless
of its nature, will be by arbitration in accordance with the then applicable
rules of the American Arbitration Association; provided, however, the breach of
the obligation to provide services under this Agreement or of the obligations of
Article 7 may be enforced by an action for injunctive relief and damages in a
court of competent jurisdiction. In the event of any conflict between this
Agreement and the rules of the American Arbitration Association, the provisions
of this Agreement shall be determinative. In the event the parties are unable
to agree upon an arbitrator, the parties shall select a single arbitrator from a
list designated by the Los Angeles Office of the American Arbitration
Association of seven arbitrators all of whom shall be retired judges of the
Superior of appellate courts resident in Los Angeles who are members of the
"Independent List" of retired judges. If the parties are unable to select an
arbitrator from the list provided by the American Arbitration Association, then
the parties shall each strike names alternatively from the list, with the first
to strike being determined by lot. After each party has used three strikes, the
remaining name on the list shall be the arbitrator. This agreement to resolve
any disputes by binding arbitration shall extend to claims against any
shareholder or partner of Company, any brother-sister company, parent,
subsidiary or affiliate of Company, any officer, director, employee, or agent of
Company, or of any of the above, and shall apply as well to claims arising out
of state and federal statutes and local ordinances as well as to claims arising
under the common law. Unless mutually agreed by the parties otherwise, any
arbitration shall take place in Los Angeles County, California. In the event
the parties are unable to agree upon a location for the arbitration, the
location within Los Angeles County shall be determined by the arbitrator. The
prevailing party in such arbitration proceeding, as determined by the
arbitrator, and in any enforcement or other court proceedings, shall be entitled
to the extent permitted by law, to reimbursement from the other party for all of
the prevailing party's costs (including but not limited to the arbitrator's
compensation), expenses and attorneys' fees.
11
<PAGE>
ARTICLE 9.
MISCELLANEOUS
9.1. Amendments. The provisions of this Agreement may not be waived,
altered, amended or repealed in whole or in part except by the signed written
consent of the parties sought to be bound by such waiver, alteration, amendment
or repeal.
9.2. Entire Agreement. This Agreement and the nonqualified stock
option agreement of even date herewith constitutes the total and complete
agreement of the parties and supersedes all prior and contemporaneous
understandings and agreements heretofore made, and there are no other
representations, understandings or agreements.
9.3. Counterparts. This Agreement may be executed in one of more
counterparts, each of which shall be deemed and original, but all of which shall
together constitute one and the same instrument.
9.4. Severability. Each term, covenant, condition or provision of
this Agreement shall be viewed as separate and distinct, and in the event that
any such term, covenant, condition or provision shall be deemed by an arbitrator
or a court of competent jurisdiction to be invalid or unenforceable, the court
or arbitrator finding such invalidity or unenforceability shall modify or reform
this Agreement to give as much effect as possible to the terms and provisions of
this Agreement. Any term or provision which cannot be so modified or reformed
shall be deleted and the remaining terms and provisions shall continue in full
force and effect.
9.5. Waiver or Delay. The failure or delay on the part of Company, or
Executive to exercise any right or remedy, power or privilege hereunder shall
not operate as a waiver thereof. A waiver, to be effective, must be in writing
and signed by the party making the waiver. A written waiver of default shall not
operate as a waiver of any other default or of the same type of default on a
future occasion.
9.6. Successors and Assigns. This Agreement shall be binding on and
shall inure to the benefit of the parties to it and their respective heirs,
legal representatives, successors and assigns, except as otherwise provided
herein.
9.7. No Assignment or Transfer by Executive. Neither this Agreement
nor any of the rights, benefits, obligations or duties hereunder may be assigned
or transferred by Executive. Any purported assignment or transfer by Executive
shall be void.
9.8. Necessary Acts. Each party to this Agreement shall perform any
further acts and execute and deliver any additional agreements, assignments or
documents that may be reasonably necessary to carry out the provisions or to
effectuate the purpose of this Agreement.
12
<PAGE>
9.9. Governing Law. This Agreement and all subsequent agreements
between the parties shall be governed by and interpreted, construed and enforced
in accordance with the laws of the State of California.
9.10. Notices. All notices, requests, demands and other communications
to be given under this Agreement shall be in writing and shall be deemed to have
been duly given on the date of service, if personally served on the party to
whom notice is to be given, or 48 hours after mailing, if mailed to the party to
whom notice is to be given by certified or registered mail, return receipt
requested, postage prepaid, and properly addressed to the party at his address
set forth as follows or any other address that any party may designate by
written notice to the other parties:
To Executive: Mike Allen
8408 Turtle Creek Circle
Las Vegas, NV 89113
with copy to Cox, Castle & Nicholson
2049 Century Park East, 28th Floor
Los Angeles, CA 90067-3284
Attn: Matt Wyman
To Company: Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, CA 90301
Attn: G. Michael Finnigan
with copy to: Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Al Segel
9.11. Headings and Captions. The headings and captions used herein are
solely for the purpose of reference only and are not to be considered as
construing or interpreting the provisions of this Agreement.
9.12. Construction. All terms and definitions contained herein shall
be construed in such a manner that shall give effect to the fullest extent
possible to the express or implied intent of the parties hereby.
9.13. Counsel. Executive has been advised by Company that he should
consider seeking the advice of counsel in connection with the execution of this
Agreement and Executive has had an opportunity to do so. Executive has read and
understands this Agreement, and has sought the advice of counsel to the extent
he has determined appropriate.
13
<PAGE>
9.14. Withholding of Compensation. Executive hereby agrees that
Company may deduct and withhold from the compensation or other amounts payable
to Executive hereunder or otherwise in connection with Executive's employment
any amounts required to be deducted and withheld by Company under the provisions
of any applicable Federal, state and local statute, law, regulation, ordinance
or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
EXECUTIVE COMPANY
HOLLYWOOD PARK, INC.,
/s/ Mike Allen a Delaware Corporation
- ---------------------------------
Mike Allen
By: /s/ R.D. Hubbard
-----------------------------
Its: Chairman and CEO
- --------------------------------- -----------------------------
Social Security Number
14
<PAGE>
EXHIBIT 10.39
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of January 1, 1999,
by and between HOLLYWOOD PARK OPERATING COMPANY, a Delaware corporation
("Company"), and DONALD M. ROBBINS, an individual ("Executive"), with respect to
the following facts and circumstances:
RECITALS
The Company wishes to employ Executive as president of its Horse Racing
Division and Executive wishes to be so employed.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1
EMPLOYMENT AND TERM
1.1 Employment. Company agrees to engage Executive in the capacity as
President of the Horse Racing Division of the Company on the Effective Date (as
hereinafter defined) and Executive hereby accepts such engagement by Company
upon the terms and conditions specified below.
1.2 Term. The term of this Agreement (the "Term") shall commence on
January 1, 1999 (such date being referred to as the "Effective Date") and shall
continue in force until three years from and after the Effective Date, unless
earlier terminated under Article 6 below. Each 12-month period commencing as of
the Effective Date is sometimes called a year of the "Term," and the date which
is 365 days from and after the Effective Date shall be referred to as the
"Anniversary Date".
ARTICLE 2
DUTIES OF EXECUTIVE
2.1 Duties. Executive shall perform all the duties and obligations of
President of the Horse Racing Division of the Company, including primary
responsibility for Company's horse racing and related operations subject to the
control and supervision of the Board of Directors of the Company (the "Board")
and such other executive duties consistent with the foregoing as may be assigned
to him from time to time by the Board of Directors. Executive shall report to
the Chief Executive Officer ("CEO") of the Company, or, if specified by the CEO,
to the Chief Operating Officer. Executive shall perform the services
contemplated
<PAGE>
herein faithfully, diligently, to the best of his ability and in the best
interests of Company. Executive shall devote substantially all his business
time and efforts to the rendition of such services. Executive shall at all
times perform such services in compliance with, and to the extent of his
authority, shall to the best of his ability cause the Company to be in
compliance with, any and all laws, rules and regulations applicable to it of
which Executive is aware. Executive may rely on the Company's inside counsel
and outside lawyers in connection with such matters. Executive shall, at all
times during the Term, in all material respects adhere to and obey any and all
written internal rules and regulations governing the conduct of Company's
employees, as established or modified from time to time; provided, however, in
the event of any conflict between the provisions of this Agreement and any such
rules or regulations, the provisions of this Agreement shall control.
2.2 Location of Services. Executive's principal place of employment shall
be at Company's headquarters in the greater Los Angeles, California area.
2.3 Exclusive Service. Except as otherwise expressly provided herein,
Executive shall devote substantially all his business time, attention, energies,
skills, learning and best efforts to the business of Company. Executive may
participate in social, civic, charitable, religious, business, educational or
professional associations, so long as such participation does not materially
interfere with the duties and obligations of Executive hereunder. This Section
2.3, however, shall not be construed to prevent Executive from making passive
outside investments so long as such investments do not require material time of
Executive or otherwise interfere with the performance of Executive's duties and
obligations hereunder. Executive shall not make any investment in an enterprise
that competes with Company without the prior written approval of Company after
full disclosure of the facts and circumstances; provided, however, that so long
as Executive does not utilize material, non-public information this sentence
shall not preclude Executive from owning up to one percent (1%) of the
securities of a publicly traded entity.
ARTICLE 3
COMPENSATION
3.1 Salary. In consideration for Executive's services hereunder, Company
shall pay to Executive an annual salary at the rate of Two Hundred Ninety-Five
Thousand Dollars ($295,000) per year during each of the years of the Term;
payable in accordance with Company's regular payroll schedule from time to time
(less any deductions required for Social Security, state, federal and local
withholding taxes, and any other authorized or mandated withholdings).
3.2 Bonus. Executive shall be eligible to be considered for a bonus with
respect to each year of the Term during which Executive is employed under this
Agreement. The amount, if any, of each such bonus shall be determined in the
discretion of the Board or a committee thereof.
-2-
<PAGE>
ARTICLE 4
EXECUTIVE BENEFITS
4.1 Vacation. In accordance with the general policies of Company
applicable generally to other senior executives of Company pursuant to Company's
personnel policies from time to time, Executive shall be entitled to four weeks
vacation each calendar year, without reduction in compensation.
4.2 Company Employee Benefits. Executive shall receive all group
insurance and pension plan benefits and any other benefits on the same basis as
they are available generally to other senior executives of Company under Company
personnel policies in effect from time to time.
4.3 Benefits. Executive shall receive all other such fringe benefits as
Company may offer generally to other senior executives of Company under Company
personnel policies in effect from time to time, such as health and disability
insurance coverage and paid sick leave, but not less than those currently
received. In addition, the Company will continue to pay the premiums on
Executive's term life insurance policy and his club dues and expenses,
consistent with past practice.
4.4 Indemnification. Executive shall have the benefit of indemnification
as provided under applicable law and the bylaws of Company, which
indemnification shall continue after the termination of this Agreement for such
period as may be necessary to continue to indemnify Executive for his acts
during the term hereof. Company shall cause Executive to be covered by the
current policies of directors and officers liability insurance covering
directors and officers of Company, copies of which have been provided to
Executive, in accordance with their terms, to the maximum extent of the coverage
available for any director or officer of Company. Company shall use
commercially reasonable efforts to cause the current policies of directors and
officers liability insurance covering directors and officers of Company to be
maintained throughout the term of Executive's employment with Company and for
such period thereafter as may be necessary to continue to cover acts of
Executive during the term of his employment (provided that Company may
substitute therefor, or allow to be substituted therefor, policies of at least
the same coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured in any material respect).
ARTICLE 5
REIMBURSEMENT FOR EXPENSES
Executive shall be reimbursed by Company for all ordinary and necessary
expenses incurred by Executive in the performance of his duties or otherwise in
furtherance of the business of Company in accordance with the policies of
Company in effect from time to time. Executive shall keep accurate and complete
records of all such expenses, including but not limited to, proof of payment and
purpose. Executive shall account fully for all such expenses to Company.
-3-
<PAGE>
ARTICLE 6
TERMINATION
6.1 Termination for Cause. Without limiting the generality of Section
6.2, Company shall have the right to terminate Executive's employment, without
further obligation or liability to Executive, upon the occurrence of any one or
more of the following events, which events shall be deemed termination for
cause.
6.1.1 Failure to Perform Duties. If Executive neglects to perform
the duties of his employment under this Agreement in a professional and
businesslike manner after having received written notice specifying such failure
to perform and a reasonable opportunity, not to exceed ten days, to perform or
if such performance cannot be completed within such time period, commenced
within such period and diligently pursued to completion as soon as practicable
thereafter.
6.1.2 Willful Breach. If Executive willfully commits a material
breach of this Agreement or a material willful breach of his fiduciary duty to
Company.
6.1.3 Wrongful Acts. If Executive is convicted of a felony or any
other serious crime, commits a serious wrongful act or engages in other
misconduct involving acts of moral turpitude that would make the continuance of
his employment by Company materially detrimental to Company, which determination
shall be made in the reasonable exercise of Company's judgment.
6.1.4 Disability. If Executive is physically or mentally disabled
from the performance of a major portion of his duties for a continuous period of
120 days or greater, which determination shall be made in the reasonable
exercise of Company's judgment, provided, however, if Executive's disability is
the result of a serious health condition as defined by the federal Family and
Medical Leave Act (or its California equivalent) ("FMLA"), Executive's
employment shall not be terminated due to such disability at any time during or
after any period of FMLA-qualified leave except as permitted by FMLA. If there
should be a dispute between Company and Executive as to Executive's physical or
mental disability for purposes of this Agreement, the question shall be settled
by the opinion of an impartial reputable physician or psychiatrist agreed upon
by the parties or their representatives, or if the parties cannot agree within
ten days after a request for designation of such party, then a physician or
psychiatrist designed by the Los Angeles County Medical Association. The
certification of such physician or psychiatrist as to the questioned dispute
shall be final and binding upon the parties hereto.
6.2 Termination Without Cause. Notwithstanding anything to the contrary
herein, Company shall have the right to terminate Executive's employment under
this Agreement at any time without cause by giving notice of such termination to
Executive.
6.3 Effectiveness on Notice. Any termination under this Section 6 shall
be effective upon receipt of notice by Executive or Company, as the case may be,
of such
-4-
<PAGE>
termination or upon such other later date as may be provided herein or specified
by Company or Executive in the notice (the "Termination Date").
6.4 Effect of Termination.
6.4.1 Payment of Salary and Expenses Upon Termination. If this
Agreement is terminated, all benefits provided to Executive by Company hereunder
shall thereupon cease and Company shall pay or cause to be paid to Executive all
accrued but unpaid salary and vacation benefits. In addition, promptly upon
submission by Executive of his unpaid expenses incurred prior to the Termination
Date and owing to Executive pursuant to Article 5, reimbursement for such
expenses shall be made.
6.4.2 Termination for Disability. In the event of a termination
under Section 6.1.4 (for disability), Executive may be eligible for benefits
under the California State Disability Insurance program for his first six months
of disability. In addition Executive shall be eligible for the benefits
provided for under any long term disability insurance policy which Company may
have as in effect from time to time. Eligibility and benefits with regard to
either insurance program shall be governed by the provisions of the insurance
program or policy and shall not be the responsibility of Company.
6.4.3 Termination Without Cause. If Company terminates Executive
without cause, the following shall apply:
(a)(i) If such termination occurs prior to January 1, 2000,
Executive shall be entitled to receive in a lump sum an
amount equal to two times his annual compensation
(equal to his salary at the time of Termination and
bonus (determined based on his bonus, if any, for the
last completed year)) payable on the date of
termination, plus any amounts payable under Section
6.4.1 above,
(ii) If such Termination occurs after January 1, 2000,
Executive shall be entitled to receive in a lump sum an
amount equal to his annual compensation for the balance
of the Term (equal to his salary at the time of
Termination and bonus (determined based on his bonus,
if any, for the last completed year and prorated for
partial year's severance)) payable on the date of
Termination, but in no event less than one year's
compensation (salary and bonus), plus any amounts
payable under Section 6.4.1 above.
(b) continuation of health and disability insurance and the
other benefits provided in Section 4.3 hereof for a
period of six (6) months after Termination at Company's
expense; and
-5-
<PAGE>
(c) In addition to those already vested, all unvested stock
options that would have vested on future Anniversary
Dates of the Agreement shall be deemed immediately and
fully vested and exercisable by Executive.
6.5 Termination after Term. If Executive's employment with the Company is
terminated without cause at any time after the end of the Term, whether or not
this contract is extended or otherwise terminates in accordance with its terms,
Executive shall be entitled to receive in a lump sum an amount equal to one
year's compensation (salary and bonus) plus the amounts contemplated by clauses
(b) and (c) of Section 6.4.
6.6 Suspension. In lieu of terminating Executive's employment hereunder
for cause under Section 6.1, Company shall have the right, at its sole election,
to suspend the operation of this Agreement during the continuance of events or
circumstances under Section 6.1 for an aggregate of not more than 30 days during
the Term (the "Default Period") by giving Executive written notice of Company's
election to do so at any time during the Default Period. Company shall have the
right to extend the Term beyond its normal expiration date by the period(s) of
any suspension(s). Company's exercise of its right to suspend the operation of
this Agreement shall not preclude Company from subsequently terminating
Executive's employment hereunder. Executive shall not render services to any
other person, firm or corporation in the casino business during any period of
suspension. Executive shall be entitled to continued compensation pursuant to
the provisions hereof during the Default Period.
6.7 Exercisability of Options. As provided in the Option Agreement, all
options terminate no later than ninety (90) days after the termination,
regardless of the cause of such termination.
ARTICLE 7
CONFIDENTIALITY
7.1 Nondisclosure of Confidential Material. In the performance of his
duties, Executive may have access to confidential records, including, but not
limited to, development, marketing, organizational, financial, managerial,
administrative and sales information, data, specifications and processes
presently owned or at any time hereafter developed or used by Company or its
agents or consultants that is not otherwise part of the public domain
(collectively, the "Confidential Material"). All such Confidential Material is
considered secret and is disclosed to Executive in confidence. Executive
acknowledges that the Confidential Material constitutes proprietary information
of Company which draws independent economic value, actual or potential, from not
being generally known to the public or to other persons who could obtain
economic value from its disclosure or use, and that Company has taken efforts
reasonable under the circumstances, of which this Section 7.1 is an example, to
maintain its secrecy. Except in the performance of his duties to Company or as
required by a court order, Executive shall not, directly or indirectly for any
-6-
<PAGE>
reason whatsoever, disclose, divulge, communicate, use or otherwise disclose any
such Confidential Material, unless such Confidential Material ceases to be
confidential because it has become part of the public domain (not due to a
breach by Executive of his obligations hereunder). Executive shall also take
all reasonable actions appropriate to maintain the secrecy of all Confidential
Information. All records, lists, memoranda, correspondence, reports, manuals,
files, drawings, documents, equipment, and other tangible items (including
computer software), wherever located, incorporating the Confidential Material,
which Executive shall prepare, use or encounter, shall be and remain Company's
sole and exclusive property and shall be included in the Confidential Material.
Upon termination of this Agreement, or whenever requested by Company, Executive
shall promptly deliver to Company any and all of the Confidential Material, not
previously delivered to Company, that is in the possession or under the control
of Executive.
7.2 Assignment of Intellectual Property Rights. Any ideas, processes,
know-how, copyrightable works, maskworks, trade or service marks, trade secrets,
inventions, developments, discoveries, improvements and other matters that may
be protected by intellectual property rights, that relate to Company's business
and are the results of Executive's efforts during the Term (collectively, the
"Executive Work Product"), whether conceived or developed alone or with others,
and whether or not conceived during the regular working hours of Company, shall
be deemed works made for hire and are the property of Company. In the event that
for whatever reason such Executive Work Product shall not be deemed a work made
for hire, Executive agrees that such Executive Work Product shall become the
sole and exclusive property of Company, and Executive hereby assigns to Company
his entire right, title and interest in and to each and every patent, copyright,
trade or service mark (including any attendant goodwill), trade secret or other
intellectual property right embodied in Executive Work Product. Company shall
also have the right, in its sole discretion to keep any and all of Executive
Work Product as Company's Confidential Material. The foregoing work made for
hire and assignment provisions are and shall be in consideration of this
agreement of employment by Company, and no further consideration is or shall be
provided to Executive by Company with respect to these provisions. Executive
agrees to execute any assignment documents Company may require confirming
Company's ownership of any of Executive Work Product. Executive also waives any
and all moral rights with respect to any such works, including without
limitation any and all rights of identification of authorship and/or rights of
approval, restriction or limitation on use or subsequent modifications.
Executive promptly will disclose to Company any Executive Work Product.
7.3 No Unfair Competition After Termination of Agreement. Executive
hereby acknowledges that the sale or unauthorized use or disclosure of any of
Company's Confidential Material obtained by Executive by any means whatsoever,
at any time before, during or after the Term shall constitute unfair
competition. Executive shall not engage in any unfair competition with Company
either during the Term or at any time thereafter.
7.4 Irreparable Injury. The promised service of Executive under this
Agreement and the other promises of this Article 7 are of special, unique,
unusual,
-7-
<PAGE>
extraordinary, or intellectual character, which gives them peculiar value, the
loss of which cannot be reasonably or adequately compensated in damages in an
action at law.
7.5 Remedies for Breach. Executive agrees that money damages will not be
a sufficient remedy for any breach of the obligations under this Article 7 and
Article 2 hereof and that Company shall be entitled to injunctive relief (which
shall include, but not be limited to, restraining Executive from directly or
indirectly using or disclosing the Confidential Material) and to specific
performance as remedies for any such breach. Executive agrees that Company
shall be entitled to such relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, without the necessity of
proving actual damages and without the necessity of posting a bond or making any
undertaking in connection therewith. Any such requirement of a bond or
undertaking is hereby waived by Executive and Executive acknowledges that in the
absence of such a waiver, a bond or undertaking might otherwise be required by
the court. Such remedies shall not be deemed to be the exclusive remedies for
any breach of the obligations in this Article 7, but shall be in addition to all
other remedies available at law or in equity.
ARTICLE 8
ARBITRATION
In the event there is any dispute between Executive and Company which the
parties are unable to resolve themselves, including any dispute with regard to
the application, interpretation or validity of this Agreement or any dispute
with regard to any aspect of Executive's employment or the termination of
Executive's employment, both Executive and Company agree by entering into this
Agreement that the exclusive remedy for determining any such dispute, regardless
of its nature, will be by arbitration in accordance with the then applicable
rules of the American Arbitration Association; provided, however, the breach of
the obligation to provide services under this Agreement or of the obligations of
Article 7 may be enforced by an action for injunctive relief and damages in a
court of competent jurisdiction. In the event of any conflict between this
Agreement and the rules of the American Arbitration Association, the provisions
of this Agreement shall be determinative. In the event the parties are unable
to agree upon an arbitrator, the parties shall select a single arbitrator from a
list designated by the Los Angeles Office of the American Arbitration
Association of seven arbitrators all of whom shall be retired judges of the
Superior of appellate courts resident in Los Angeles who are members of the
"Independent List" of retired judges. If the parties are unable to select an
arbitrator from the list provided by the American Arbitration Association, then
the parties shall each strike names alternatively from the list, with the first
to strike being determined by lot. After each party has used three strikes, the
remaining name on the list shall be the arbitrator. This agreement to resolve
any disputes by binding arbitration shall extend to claims against any
shareholder or partner of Company, any brother-sister company, parent,
subsidiary or affiliate of Company, any officer, director, employee, or agent of
Company, or of any of the above, and shall apply as well to claims arising out
of state and federal statutes and local ordinances as well as to claims arising
under the common law. Unless mutually agreed by the parties otherwise, any
arbitration shall take place in Los Angeles County, California. In the event
the parties are
-8-
<PAGE>
unable to agree upon a location for the arbitration, the location within Los
Angeles County shall be determined by the arbitrator. The prevailing party in
such arbitration proceeding, as determined by the arbitrator, and in any
enforcement or other court proceedings, shall be entitled to the extent
permitted by law, to reimbursement from the other party for all of the
prevailing party's costs (including but not limited to the arbitrator's
compensation), expenses and attorneys' fees.
ARTICLE 9
MISCELLANEOUS
9.1 Amendments. The provisions of this Agreement may not be waived,
altered, amended or repealed in whole or in part except by the signed written
consent of the parties sought to be bound by such waiver, alteration, amendment
or repeal.
9.2 Entire Agreement. This Agreement constitutes the total and complete
agreement of the parties and supersedes all prior and contemporaneous
understandings and agreements heretofore made, and there are no other
representations, understandings or agreements.
9.3 Counterparts. This Agreement may be executed in one of more
counterparts, each of which shall be deemed and original, but all of which shall
together constitute one and the same instrument.
9.4 Severability. Each term, covenant, condition or provision of this
Agreement shall be viewed as separate and distinct, and in the event that any
such term, covenant, condition or provision shall be deemed by an arbitrator or
a court of competent jurisdiction to be invalid or unenforceable, the court or
arbitrator finding such invalidity or unenforceability shall modify or reform
this Agreement to give as much effect as possible to the terms and provisions of
this Agreement. Any term or provision which cannot be so modified or reformed
shall be deleted and the remaining terms and provisions shall continue in full
force and effect.
9.5 Waiver or Delay. The failure or delay on the part of Company, or
Executive to exercise any right or remedy, power or privilege hereunder shall
not operate as a waiver thereof. A waiver, to be effective, must be in writing
and signed by the party making the waiver. A written waiver of default shall
not operate as a waiver of any other default or of the same type of default on a
future occasion.
9.6 Successors and Assigns. This Agreement shall be binding on and shall
inure to the benefit of the parties to it and their respective heirs, legal
representatives, successors and assigns, except as otherwise provided herein.
9.7 No Assignment or Transfer by Executive. Neither this Agreement nor
any of the rights, benefits, obligations or duties hereunder may be assigned or
transferred by Executive. Any purported assignment or transfer by Executive
shall be void. The Company
-9-
<PAGE>
may assign this Agreement to any entity which, at the time of such assignment,
is an affiliate of the Company.
9.8 Necessary Acts. Each party to this Agreement shall perform any
further acts and execute and deliver any additional agreements, assignments or
documents that may be reasonably necessary to carry out the provisions or to
effectuate the purpose of this Agreement.
9.9 Governing Law. This Agreement and all subsequent agreements between
the parties shall be governed by and interpreted, construed and enforced in
accordance with the laws of the State of California.
9.10 Notices. All notices, requests, demands and other communications to
be given under this Agreement shall be in writing and shall be deemed to have
been duly given on the date of service, if personally served on the party to
whom notice is to be given, or 48 hours after mailing, if mailed to the party to
whom notice is to be given by certified or registered mail, return receipt
requested, postage prepaid, and properly addressed to the party at his address
set forth as follows or any other address that any party may designate by
written notice to the other parties:
To Executive: Donald M. Robbins
828 Via Lido Sound
Newport Beach, California 92663
To Company: Hollywood Park Operating Company
1050 South Prairie Avenue
Inglewood, California 90301
Attn: R. D. Hubbard
9.11 Headings and Captions. The headings and captions used herein are
solely for the purpose of reference only and are not to be considered as
construing or interpreting the provisions of this Agreement.
9.12 Construction. All terms and definitions contained herein shall be
construed in such a manner that shall give effect to the fullest extent possible
to the express or implied intent of the parties hereby.
9.13 Counsel. Executive has been advised by Company that he should
consider seeking the advice of counsel in connection with the execution of this
Agreement and Executive has had an opportunity to do so. Executive has read and
understands this Agreement, and has sought the advice of counsel to the extent
he has determined appropriate.
9.14 Withholding of Compensation. Executive hereby agrees that Company
may deduct and withhold from the compensation or other amounts payable to
Executive hereunder or otherwise in connection with Executive's employment any
amounts required to
-10-
<PAGE>
be deducted and withheld by Company under the provisions of any applicable
Federal, state and local statute, law, regulation, ordinance or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
EXECUTIVE COMPANY
/s/ Donald M. Robbins Hollywood Park Operating Company, a
- ---------------------------------- Delaware Corporation
Donald M. Robbins
Social Security No:_______________ By: /s/ R.D. Hubbard
---------------------------------
Its: Chairman and CEO
-------------------------------
-11-
<PAGE>
EXHIBIT 10.40
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of February 25, 1998 among
---------
Hilton Gaming (Switzerland County) Corporation, a Nevada corporation ("Seller"),
------
Boomtown Hoosier, Inc., a Nevada corporation ("Purchaser") and Hollywood Park,
---------
Inc., a Delaware corporation ("Hollywood Park").
--------------
R E C I T A L S
A. Indiana Ventures, LLC is a limited liability company organized under
the laws of the State of Nevada (the "Company"), with the authority to issue
-------
1000 Units consisting of 970 Voting Units and 30 Non-Voting Units (as Units,
Voting Units and Non-Voting Units are defined in the Operating Agreement, as
amended, of the Company.) Capitalized terms used herein and not otherwise
defined shall have the meaning set forth in the Operating Agreement.
B. Seller and Purchaser each own 485 Voting Units in the Company.
C. Seller and Purchaser have reached an agreement for the sale by Seller
and the purchase by Purchaser of Seller's Voting Units in the Company.
D. Hollywood Park is the ultimate parent entity of Purchaser and in
consideration of the agreements of Seller set forth herein has agreed to join in
certain of the provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
representations hereinafter contained, and subject to the conditions hereinafter
set forth, it is agreed as follows:
1. Sale. Upon the terms and conditions set forth herein, Seller shall
----
sell to Purchaser, and Purchaser shall purchase from Seller, 485 Voting Units
(the "Sold Units") in the Company, constituting all of Seller's Voting Units in
the Company.
2. Purchase Price. The sales price of the Sold Units (the "Purchase
-------------- --------
Price") will be $750,000.00. The Purchase Price shall be evidenced by a
- ------
promissory note in the form of Exhibit A attached hereto and incorporated herein
by reference (the "Promissory Note").
---------------
3. Representations.
---------------
(a) Seller's Representations. Seller represents and warrants to Purchaser
------------------------
that:
(i) Seller is the owner of all of the Sold Units, free and clear of
all liens and encumbrances.
(ii) Seller has full power to transfer the Sold Units to Purchaser
without obtaining the consent or approval of any person or governmental
authority.
(iii) This Agreement is the valid and binding obligation of Seller
enforceable against Seller in accordance with its terms.
<PAGE>
(b) Purchaser's Representations. Purchaser and Hollywood Park represent
---------------------------
and warrant to Seller that:
(i) Purchaser has full power to purchase the Sold Units from Seller
without obtaining the consent or approval of any person or governmental
authority.
(ii) This Agreement is the valid and binding obligation of Seller and
Hollywood Park, enforceable against Purchaser and Hollywood Park in accordance
with its terms.
4. As-Is Sale. The parties acknowledge that Purchaser and Seller have
----------
been jointly responsible for management and operation of the Company and its
business and as such Purchaser is fully informed as to the assets, rights,
obligations and liabilities of the Company. Purchaser represents and warrants to
Seller that Purchaser has independent knowledge regarding the Company and the
Sold Units and Purchaser has entered into this Agreement based upon such
personal knowledge, and not based upon any representation or warranty of Seller,
except as specifically set forth in Section 3 above. Purchaser agrees that the
Sold Units shall be transferred to Purchaser AS-IS and WITH ALL FAULTS, without
warranty, express, implied or statutory, including any warranty of
merchantability or fitness for a particular purpose excepting only those
warranties specifically set forth in Section 3 above.
5. Costs: Indemnification.
------ ---------------
(a) Costs. Pursuant to the terms of the Operating Agreement, the Members
-----
agreed to make Initial Capital Contributions and, under certain circumstances,
additional Capital Contributions, from time to time. Pursuant to the terms of a
letter agreement (the "Letter Agreement") dated May 16, 1996 among Purchaser,
----------------
Seller and Full House L.L.C. ("Full House"), Purchase and Seller agreed to fund
----------
the Initial Capital Contributions and certain Additional Capital Contributions
of Full House. Purchaser acknowledges that Seller has fully paid all of its
Initial Capital Contributions and any additional Capital Contributions, together
with its share of any Capital Contributions on behalf of Full House under the
Letter Agreement, through February 25, 1998. Seller hereby assigns to Purchaser
all of Seller's obligations under the Letter Agreement and Purchaser hereby
assumes all of Seller's obligations and agrees that Purchaser shall be fully
liable for funding any Capital Contributions thereunder. From and after the
date hereof, Seller shall have no further obligation for any Capital
Contributions pursuant to the Operating Agreement, the Letter Agreement or
otherwise and Purchaser hereby assumes all liability with respect thereto.
(b) Indemnity. Purchaser and Hollywood Park agree to indemnify Seller,
---------
Seller's affiliates, its and their officers, directors, agents, employees,
shareholders, and each of their successors and assigns (collectively, the
"Indemnified Persons"), and to save and hold the Indemnified Persons harmless
- --------------------
from and against any liability, obligation, loss, damage, penalty, cost and
expense, suit, claim, action or demand, asserted against, or incurred by, the
Indemnified Persons (including, without limitation, reasonable attorneys' fees
and expenses) as a result of, under, arising from, or in connection with (a) a
breach of this Agreement by Purchaser or Hollywood Park or (b) the Project, the
Company, the Sold Units, the Letter Agreement or otherwise from and after the
date of this Agreement.
-2-
<PAGE>
6. Closing. The closing of the purchase and sale of the Sold Units (the
-------
"Closing") shall occur concurrently with, and be effective as of the date of,
-------
this Agreement. Concurrently with the execution of this Agreement, Seller shall
execute and deliver to Purchaser an assignment transferring the Sold Units to
Purchaser and Purchaser shall execute and deliver to Seller the Promissory Note.
Promptly after the Closing Seller shall deliver to Purchaser all books, records,
agreements, drawings, plans, aerial photographs and other documents and papers
relating to the Project and belonging to the Company.
7. Miscellaneous.
-------------
(a) Notices. Any and all notices and demands by any party hereto to any
-------
other party required or desired to be given hereunder shall be in writing and
shall be validly given or made only if deposited in the United States mail,
certified or registered, postage prepaid, return receipt requested or if made by
Federal Express or other similar delivery service keeping records of deliveries
and attempted deliveries or if sent by telecopy. Service by United States Mail
or by Federal Express or other similar delivery service shall be conclusively
deemed made on the first business day delivery is attempted or upon receipt,
whichever is sooner. Service by telecopy shall be deemed made upon confirmed
transmission. Any notice or demand to Seller shall be addressed c/o Bally's
Park Place, Park Place and The Boardwalk, Atlantic City, New Jersey, Attention:
Wallace R. Barr. Any notice or demand to Purchaser shall be addressed c/o
Boomtown, Inc., P.O. Box 399, Verdi, Nevada, 89839, Attention: Robert List. Any
notice or demand to Hollywood Park shall be addressed c/o Boomtown, Inc., P.O.
Box 399, Verdi, Nevada 89839, Attention: Robert List. The parties may change
their address for the purpose of receiving notices or demands as herein provided
by a written notice given in the manner aforesaid to the others, which notice of
change of address shall not become effective, however, until the actual receipt
thereof by the others.
(b) Binding Effect. This Agreement shall inure to the benefit of and be
--------------
binding upon the parties hereto and their respective successors and assigns.
(c) Partial Invalidity. If any term, provision, covenant or condition of
------------------
this Agreement, or any application thereof, should be held by a court of
competent jurisdiction to be invalid, void or unenforceable by the laws
applicable thereto, all provisions, covenants, and conditions of this Agreement,
and all applications thereof, not held invalid, void or unenforceable, shall
continue in full force and effect and shall in no way be affected, impaired or
invalidated thereby.
(d) Entire Agreement. This Agreement contains the entire agreement between
----------------
the parties and cannot be changed or terminated orally.
(e) Attorneys' Fees. In the event any action or proceeding is commenced by
---------------
any party against any other in connection herewith, including but not limited to
any proceeding in bankruptcy, the prevailing party shall be entitled to recover
from the other party all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in such action or proceeding,
including, but not limited to any proceeding in bankruptcy, in addition to any
other relief awarded by the court.
-3-
<PAGE>
(f) Time of Essence. Time is of the essence of this Agreement and all of
---------------
the terms, provisions, covenants and conditions hereof.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute one and the same Agreement. The
parties agree and intend that executed copies of this Agreement, transmitted
from the parties to each other by facsimile machine, shall constitute original
executed counterparts of this Agreement and such facsimile signatures shall have
the same effect as original signatures.
(h) Severability. If any of the provisions of this Agreement shall be held
------------
by any court of competent jurisdiction to be unlawful, void or unenforceable for
any reason as to any person or circumstances, such provision or provisions shall
be deemed severable from and shall in no way affect the enforceability and
validity of the remaining provisions of this Agreement.
(i) Further Assurances. In addition to the acts and deeds recited herein
------------------
and contemplated to be performed, executed and/or delivered by either Seller or
Purchaser, Seller and Purchaser shall perform, execute and/or deliver or cause
to be performed, executed and/or delivered at or prior to the Closing, or if
necessary, after the Closing, any and all further acts, deeds and assurances as
may, from time to time, be reasonably required to satisfy the conditions of this
Agreement or to consummate the transactions contemplated in this Agreement and
to confirm the transfer of the Shares from Seller to Purchaser. These
obligations shall survive the Closing.
(j) Governing Law. Nevada law shall govern the validity, construction,
-------------
performance and effect of this Agreement.
(k) Interpretation. This Agreement is an agreement between financially
--------------
sophisticated and knowledgeable parties and is entered into by the parties in
reliance upon the economic and legal bargains contained herein and shall be
interpreted and construed in a fair and impartial manner without regard to such
factors as the party who prepared (or caused the preparation of) this instrument
or the relative bargaining power of the parties.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement effective
the day and year above written.
"SELLER" "PURCHASER"
Hilton Gaming (Switzerland Boomtown Hoosier, Inc.
County) Corporation
By: /s/ Wallace R. Barr By: /s/ Robert F. List
-------------------------------- --------------------------------
Name: Wallace R. Barr Name: Robert F. List
------------------------------ ------------------------------
Title: Executive Vice President Title: Secretary
----------------------------- ----------------------------
"HOLLYWOOD PARK"
Hollywood Park, Inc.
By: /s/ G. Michael Finnigan
--------------------------------
Name: G. Michael Finnigan
------------------------------
Title: CFO
-----------------------------
The undersigned hereby consents to the transfer of the Sold Units to
Purchaser and the assignment by Seller to Purchaser of all of Seller's
obligations under the Letter Agreement, as defined above, and hereby releases
Seller from any liability under the Letter Agreement.
FULL HOUSE L.L.C.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-5-
<PAGE>
Exhibit A
---------
PROMISSORY NOTE
$750,000 Las Vegas, Nevada July 14, 1998
For valuable consideration, Boomtown Hoosier, Inc., a Nevada corporation
("Promisor"), does hereby promise to pay to the order of Hilton Gaming
(Switzerland County) Corporation, a Nevada corporation ("Promisee"), the
principal sum of Seven Hundred Fifty Thousand Dollars ($750,000.00), together
with interest thereon, from date, at the rate of 8.5% per annum. The entire
outstanding principal balance of this Note, together with accrued interest
thereon, shall become due five (5) business days after the date on which
Pinnacle Gaming Development Corporation, Hollywood Park, Inc., Boomtown, Inc.,
Promisor, or any affiliate of any of them, is awarded a Certificate of
Suitability for riverboat gaming operations on the Ohio River for either of
Switzerland County or Crawford County, Indiana.
Both principal and interest are payable at the office of Promisee, in Las
Vegas, Nevada, or at such place as the holder hereof may from time to time
designate in writing. Promisor may prepay this Note in full or in part, at any
time.
Promisor and all others who may become liable for the payment of all or any
part of this obligation do hereby severally waive presentment for payment,
protest and demand, notice of protest, demand and dishonor, and nonpayment of
this Note and expressly agree that the maturity of this Note or any payment
hereunder may be extended from time to time, at the option of the holder hereof,
without in any way affecting the liability of each.
Promisor promises to pay all costs incurred in collection and/or
enforcement of this Note or any part thereof or otherwise in connection
herewith, including, but not limited to, reasonable attorneys' fees, and, in the
event of court action, all costs and such additional sums and attorneys' fees as
the court may adjudge reasonable.
If any term, provision, covenant or condition of this Note, or any
application thereof, should be held by a court of competent jurisdiction to be
invalid, void, or unenforceable, all provisions, covenants and conditions of
this Note and all applications thereof not held invalid, void or unenforceable,
shall continue in full force and effect and shall in no way be affected,
impaired or invalidated thereby.
The laws of the State of Nevada shall govern the validity, construction,
performance and effect of this Note. Any action to enforce Promisor's
obligations hereunder may be brought in any court of competent jurisdiction in
the State of Nevada, and Promisor hereby consents to the jurisdiction of Nevada
courts over it.
Boomtown Hoosier, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in
Hollywood Park, Inc.'s Amendment Number One to its Registration Statement on
Form S-4 dated March 1999, of our reports dated February 27, 1998 on the
financial statements of Hollywood Park, Inc. and Casino Magic Corp. We also
consent to the incorporation by reference in Hollywood Park, Inc.'s Amendment
Number One to its Registration Statement on Form S-4 dated March 1999, of our
report dated February 27, 1998 included in Hollywood Park, Inc.'s form 10-K for
the year ended December 31, 1997, and to all references to our Firm included in
or made a part of the Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
March 23, 1999
<PAGE>
EXHIBIT 23.3
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 333-73235) and related Prospectus of
Hollywood Park, Inc. for the registration of $350,000,000 Series B 9 1/4%
Senior Subordinated Notes due 2007 and to the incorporation by reference
therein of our report dated November 15, 1996 (except for the first paragraph
of Note 13 and the first two paragraphs of Note 12 as to which the dates are
November 18, 1996 and January 5, 1998, respectively), with respect to the
consolidated financial statements of Boomtown, Inc. included in Amendment No.
4 to the Registration Statement (Form S-4 No. 333-34471) of Hollywood Park,
Inc. filed with the Securities and Exchange Commission.
We also consent to the incorporation by reference into this Registration
Statement (Form S-4 No. 333-73235) and related Prospectus of Hollywood Park,
Inc. for the registration of $350,000,000 Series B 9 1/4% Senior Subordinated
Notes due 2007, of our report dated November 15, 1996 (except for the first
paragraph of Note 13 and the first two paragraphs of Note 12 as to which the
dates are November 18, 1996 and January 5, 1998, respectively), with respect
to the financial statement schedule of Boomtown, Inc. for the years ended
September 30, 1994, 1995 and 1996 included in Amendment No. 4 to the
Registration Statement (Form S-4 No. 333-34471) of Hollywood Park, Inc. filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Reno, Nevada
March 24, 1999
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
HOLLYWOOD PARK, INC.
Offer to Exchange 9 1/4% Series B Senior Subordinated Notes Due 2007
for Any and All Outstanding 9 1/4% Senior Subordinated Notes Due 2007
Pursuant to the Prospectus dated March 29, 1999
- ------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON MAY 3, 1999, UNLESS THE OFFER IS EXTENDED BY THE COMPANY IN ITS
SOLE DISCRETION.
- ------------------------------------------------------------------------------
----------------
The Exchange Agent for the Exchange Offer is:
The Bank of New York
<TABLE>
<S> <C>
By Mail: By Overnight Delivery or Hand:
The Bank of New York The Bank of New York
101 Barclay Street, Floor 7E 101 Barclay Street
New York, New York 10286 Corporate Trust Services Window
Attn: Martha James Ground Level
Reorganization Section New York, New York 10286
Attn: Martha James
Reorganization Section
</TABLE>
To Confirm by Telephone or for Information:
(212) 815-6335
Facsimile Transmissions:
(212) 815-6339
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN AND THE PROSPECTUS (AS DEFINED BELOW)
SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus.
This Letter of Transmittal is to be completed by holders of Old Notes (as
defined below) either if Old Notes are to be forwarded herewith or if tenders
of Old Notes are to be made by book-entry transfer to an account maintained by
The Bank of New York (the "Exchange Agent") at The Depository Trust Company
("DTC") pursuant to the procedures set forth in "The Exchange Offer--
Procedures for Tendering Old Notes" in the Prospectus.
Holders of Old Notes whose certificates (the "Certificates") for such Old
Notes are not immediately available or who cannot deliver their Certificates
and all other required documents to the Exchange Agent on or prior to the
Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The
Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus. See
Instruction 1. Delivery of documents to DTC does not constitute delivery to
the Exchange Agent.
1
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
DESCRIPTION OF OLD NOTES TENDERED
- -------------------------------------------------------------------------------
If blank, please
print name and
address Old Notes Tendered
of registered holder. (Attach additional list if necessary)
- --------------------------------------------------------------------------------
Principal Amount
of Old Notes
Certificate Principal Amount Tendered (if less
Number(s)* of Old Notes than all)**
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
TOTAL AMOUNT
TENDERED:
- --------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Old Notes may be tendered in whole or in part in denominations of
$1,000 and integral multiples thereof. All Old Notes held shall be
deemed tendered unless a lesser number is specified in this column.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution ______________________________________________
DTC Account Number _________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holders(s) ______________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution __________________________________________
DTC Account Number _____________________________________________________
Transaction Code Number ________________________________________________
[_]CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[_]CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
___________________________________________________________________
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Hollywood Park, Inc., a Delaware
corporation (the "Company"), the above described aggregate principal amount of
9 1/4% Series A Senior Subordinated Notes due 2007 (including the guarantees
thereof, the "Old Notes") in exchange for a like aggregate principal amount of
9 1/4% Series B Senior Subordinated Notes due 2007 (including the Guarantees,
the "Exchange Notes") which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), upon the terms and subject to the
conditions set forth in the Prospectus dated March 29, 1999 (as the same may
be amended or supplemented from time to time, the "Prospectus"), receipt of
which is acknowledged, and in this Letter of Transmittal (which, together with
the Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with
the Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described
in the Prospectus, to (i) deliver Certificates for Old Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the Exchange Notes to be issued in exchange for such
Old Notes, (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of the Company, and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, sell, assign and transfer the Old
Notes tendered hereby and to acquire Exchange Notes issuable upon the exchange
of such tendered Old Notes, and that, when the same are accepted for exchange,
the Company will acquire good and unencumbered title to the tendered Old
Notes, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned also warrants that it will,
upon request, execute and deliver any additional documents deemed by the
Company or the Exchange Agent to be necessary or desirable to complete the
exchange, assignment and transfer of the Old Notes tendered hereby or transfer
ownership of the Old Notes on the account books maintained by the book-entry
transfer facility, and the undersigned will comply with its obligations under
the Registration Rights Agreement. The undersigned has read and agrees to all
of the terms of the Exchange Offer.
The undersigned further agrees that acceptance of any and all validly
tendered Old Notes by the Company and the issuance of the Exchange Notes in
exchange therefor shall constitute performance in full by the Company of its
obligations under the Registration Rights Agreement and that the Company shall
have no further obligations or liabilities thereunder except as provided in
the last paragraph of Section 3 of the Registration Rights Agreement.
The name(s) and address(es) of the registered Holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer
for any reason, or if Certificates are submitted for more Old Notes than are
tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered
by book-entry
3
<PAGE>
transfer, such Old Notes will be credited to an account maintained at DTC),
without expense to the tendering Holder, promptly following the expiration or
termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one of
the procedures described in "The Exchange Offer--Procedures for Tendering Old
Notes" in the Prospectus and in the instructions hereto will, upon the
Company's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Old Notes tendered hereby.
Unless otherwise instructed by the undersigned, the undersigned hereby
directs that the Exchange Notes be issued in the name(s) of the undersigned
or, in the case of a book-entry transfer of Old Notes, that such Exchange
Notes be credited to the account indicated above maintained at DTC, if
applicable, and substitute Certificates representing Old Notes not exchanged
or not accepted for exchange will be issued to the undersigned or, in the case
of a book-entry transfer of Old Notes, will be credited to the account
indicated above maintained at DTC. Similarly, unless otherwise instructed by
the undersigned, please deliver Exchange Notes to the undersigned at the
address shown below the undersigned's signature.
By tendering Old Notes and executing this Letter of Transmittal, the
undersigned hereby represents and agrees that (i) the undersigned is not an
"affiliate" of the Company or the Guarantors, (ii) any Exchange Notes to be
received by the undersigned are being acquired in the ordinary course of its
business, and (iii) the undersigned is not engaged in, does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution (within the meaning of the Securities Act) of
Exchange Notes to be received in the Exchange Offer. Any holder of Old Notes
who is a broker-dealer who acquired the Old Notes directly from the Company or
who is an affiliate of the Company or the Guarantors or who intends to use the
Exchange Offer to participate in a distribution of the Exchange Notes
acknowledges and agrees that (i) it cannot rely on the position of the staff
of the Securities and Exchange Commission enunciated in its interpretive
letter with respect to Exxon Capital Holdings Corporation (available April 13,
1989) or similar letters and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
By tendering Old Notes pursuant to the Exchange Offer and executing this
Letter of Transmittal, a holder of Old Notes which is a broker-dealer
represents and agrees, consistent with certain interpretive letters issued by
the staff of the Division of Corporation Finance of the Securities and
Exchange Commission to third parties, that (a) such Old Notes held by the
broker-dealer are held only as a nominee, or (b) such Old Notes were acquired
by such broker-dealer for its own account as a result of market-making
activities or other trading activities (a "Participating Broker Dealer") and
it will deliver the Prospectus (as amended or supplemented from time to time)
meeting the requirements of the Securities Act in connection with any resale
of such Exchange Notes (provided that, by so acknowledging and by delivering a
Prospectus, such broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act).
A Participating Broker-Dealer who intends to use the Prospectus in
connection with the resale of the Exchange Notes received in exchange for Old
Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided
for that purpose on page 2 of this Letter of Transmittal or may be delivered
to the Exchange Agent at the address set forth on page 1 of this Letter of
Transmittal. Any such Participating Broker-Dealer, by tendering Old Notes and
executing this Letter of Transmittal agrees (i) to notify the Company prior to
using the Prospectus in connection with the sale or transfer of Exchange
Notes, and acknowledges and agrees that, upon receipt of notice from the
Company of the happening of any event which makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not
misleading or which may impose upon the Company disclosure obligations that
the
4
<PAGE>
Company determines in good faith may not be in the best interests of the
Company (which notice the Company agrees to deliver promptly to such
Participating Broker-Dealer), such Participating Broker-Dealer will suspend
use of the Prospectus until the Company has notified such Participating
Broker-Dealer that delivery of the Prospectus may resume and has furnished
copies of any amendment or supplement to the Prospectus to such Participating
Broker-Dealer, and (ii) to observe all other obligations imposed on it under
the Registration Rights Agreement.
Each Exchange Note will bear interest from its issuance date. Interest will
accrue on the Old Notes that are tendered in exchange for the Exchange Notes
through the issue date of the Exchange Notes. Holders of the 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 Exchange Notes, on the first Interest Payment
Date after the Expiration Date. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and every
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of
the undersigned. Except as stated in the Prospectus, this tender is
irrevocable.
5
<PAGE>
HOLDER(S) SIGN HERE
(See Instructions 1 and 3)
(Please Complete Substitute Form W-9 Below)
(Note: Signature(s) must be guaranteed if required by Instruction 3)
Must be signed by registered Holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Old Notes hereby tendered or on a security position
listing, or by any person(s) authorized to become the registered Holder(s)
by endorsements and documents transmitted herewith (including such opinions
of counsel, certifications and other information as may be required by the
Company or the Trustee for the Old Notes to comply with the restrictions on
transfer applicable to the Old Notes). If signature is by an attorney-in-
fact, executor, administrator, trustee, guardian, officer of a corporation
or another acting in a fiduciary capacity or representative capacity,
please set forth the signer's full title. See Instruction 3.
______________________________________________________________________________
______________________________________________________________________________
(Signature(s) of Holder(s))
Date _____________, 1999
Name(s) ____________________________________________________________________
(Please Print)
Capacity or Title __________________________________________________________
Address ____________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _____________________________________________
_____________________________________________________________________________
(Tax Identification or Social Security Number(s))
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 3)
Authorized Signature _______________________________________________________
Name _______________________________________________________________________
(Please Print)
Date ____________, 1999
Capacity or Title __________________________________________________________
Name of Firm _______________________________________________________________
Address ____________________________________________________________________
(Include Zip Code)
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates.
A holder of Old Notes may tender the same by (i) properly completing and
signing this Letter of Transmittal or a facsimile hereof (all references in
the Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Old Notes being tendered and any required
signature guarantees and any other document required by this Letter of
Transmittal, to the Exchange Agent at its address set forth above on or prior
to the Expiration Date (or complying with the procedure for book-entry
transfer described below) or (ii) complying with the guaranteed delivery
procedures described below.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY
MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERTY INSURED, BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO
PERMIT TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT
TO THE COMPANY.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall
include any participant in DTC (also referred to as a "book-entry transfer
facility") whose name appears on a security listing as the owner of Old
Notes), the signature of such signer need not be guaranteed. In any other
case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed
by the registered holder, and the signature on the endorsement or instrument
of transfer must be guaranteed by a bank, broker, dealer, credit union,
savings association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act
of 1934, as amended. If the Exchange Notes and/or Old Notes not exchanged are
to be delivered to an address other than that of the registered holder
appearing on the note register for the Old Notes, the signature on the Letter
of Transmittal must be guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of the Prospectus to establish accounts with respect to the
Old Notes at the book-entry transfer facility for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-
entry transfer facility, a Letter of Transmittal with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected if the Exchange Agent has received
on or prior to the Expiration Date, a letter, telegram or facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) from an Eligible Institution setting forth the
name and address of the
7
<PAGE>
tendering holder, the names in which the Old Notes are registered and, if
possible, the certificate numbers of the Old Notes to be tendered, and stating
that the tender is being made thereby and guaranteeing that within three
business days after the Expiration Date, the 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 the book-entry transfer facility), will be
delivered by such Eligible Institution together with a properly completed and
duly executed Letter of Transmittal (and any other required documents). Unless
Old Notes being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required
documents), the Company may, at its option, reject the tender. Copies of the
notice of guaranteed delivery ("Notice of Guaranteed Delivery") which may be
used by Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer
facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or Letter, telegram or facsimile transmission to similar effect (as
provided above) from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant
to a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) by an Eligible Institution
will be made only against deposit of the Letter of Transmittal (and any other
required documents) and the tendered Old Notes.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders appear on the Old
Notes.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the Old Notes for exchange.
2. Partial Tenders; Withdrawals.
If less than the entire principal amount of Old Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount of Old Notes
Tendered." A newly issued certificate for the principal amount of Old Notes
submitted but not tendered will be sent to such holder as soon as practicable
after the Expiration Date. All Old Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise clearly indicated.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter
must be received by the Exchange Agent at the address set forth herein prior
to the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having tendered the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii)
specify the principal amount of Old Notes to be withdrawn, (iv) include a
statement that such holder is withdrawing his election to have such Old Notes
exchanged, (v) 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
or as otherwise described above (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee
under the Indenture register the transfer of such Old Notes into the name of
the person withdrawing the tender and (vi) specify the name in which any such
Old Notes are to be registered, if different from that of the Depositor. The
Exchange Agent will return the properly withdrawn Old Notes promptly following
receipt of notice of withdrawal. If Old Notes have been tendered pursuant to
the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Old Notes or otherwise comply with the book-entry
transfer facility procedure. All questions as to the validity of notices of
withdrawals, including, time of receipt, will be determined by the Company and
such determination will be final and binding on all parties.
8
<PAGE>
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account with
such book-entry transfer facility specified by the 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 under the caption "Procedures for Tendering
Old Notes" in the Prospectus at any time on or prior to the Expiration Date.
3. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby, the signature must correspond with the name(s)
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it will
be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Old Notes) of Old Notes listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the Old Notes.
If this Letter of Transmittal or any Old Notes or powers of attorney 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 Company, proper evidence satisfactory to the Company of their authority so
to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by
an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
holder of such Old Notes, for the holder of such Old Notes; or (ii) for the
account of an Eligible Institution.
4. Transfer Taxes.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Old Notes pursuant to the Exchange Offer. If, however,
certificates representing Exchange Notes or 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 Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering
9
<PAGE>
holder. If satisfactory evidence of payment of such taxes or exception
therefrom is not submitted herewith the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. Waiver of Conditions.
The Company reserves the right to waive in its reasonable judgment, in whole
or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed,
should contact the Exchange Agent at the address indicated above for further
instructions.
7. Substitute Form W-9.
Each holder of Old Notes whose Old Notes are accepted for exchange (or other
payee) is required to provide a correct taxpayer identification number
("TIN"), generally the holder's Social Security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided under "Important Tax Information" below, and to certify
that the holder (or other payee) is not subject to backup withholding. Failure
to provide the information on the Substitute Form W-9 may subject the holder
(or other payee) to a $50 penalty imposed by the Internal Revenue Service and
31% federal income tax backup withholding on payments made in connection with
the Exchange Notes. The box in Part 3 of the Substitute Form W-9 may be
checked if the holder (or other payee) has not been issued a TIN and has
applied for a TIN or intends to apply for a TIN in the near future. If the box
in Part 3 is checked and a TIN is not provided by the time any payment is made
in connection with the Exchange Notes, 31% of all such payments will be
withheld until a TIN is provided.
8. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Hollywood Park, Inc., 1050 South Prairie
Avenue, Inglewood, California 90031, attention: Assistant Treasurer
(telephone: (310) 419-1609).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH
CERTIFICATES FOR OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED
BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
10
<PAGE>
IMPORTANT TAX INFORMATION
Under U.S. federal income tax law, a holder of Old Notes whose Old Notes are
accepted for exchange may be subject to backup withholding unless the holder
provides The Bank of New York (as payor) (the "Paying Agent"), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Old Notes
is awaiting a TIN) and that (A) the holder of Old Notes has not been notified
by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or
(B) the Internal Revenue Service has notified the holder of Old Notes that he
or she is no longer subject to backup withholding; or (ii) an adequate basis
for exemption from backup withholding. If such holder of Old Notes is an
individual, the TIN is such holder's social security number. If the Paying
Agent is not provided with the correct taxpayer identification number, the
holder of Old Notes may be subject to certain penalties imposed by the
Internal Revenue Service.
Certain holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Exempt holders of Old Notes should indicate their
exempt status on Substitute Form W-9. In order for a foreign individual to
qualify as an exempt recipient, the holder must submit a Form W-8, signed
under penalties of perjury, attesting to that individual's exempt status. A
Form W-8 can be obtained from the Paying Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for more instructions.
If backup withholding applies, the Paying Agent is required to withhold 31%
of any such payments made to the holder of Old Notes or other payee. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained
from the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of Old Notes has not been issued a TIN and has applied for
a TIN or intends to apply for a TIN in the near future. If the box in Part 3
is checked, the holder of Old Notes or other payee must also complete the
Certificate of Awaiting Taxpayer Identification Number below in order to avoid
backup withholding. Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Paying Agent will withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Paying Agent.
The holder of Old Notes is required to give the Paying Agent the TIN (e.g.,
social security number or employer identification number) of the record owner
of the Old Notes. If the Old Notes are in more than one name or are not in the
name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
11
<PAGE>
TO BE COMPLETED BY ALL
TENDERING SECURITYHOLDERS
(See Instructions)
PAYER'S NAME: The Bank of New York
- --------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND ----------------------
CERTIFY BY SIGNING AND Social Security Number
SUBSTITUTE DATING BELOW. OR
Form W-9
Department of ----------------------
the Treasury Employer Identification
Internal Number TIN
Revenue --------------------------------------------------------
Service
Name (Please Print) ___________________ Part 2--
Awaiting
Address _______________________________ TIN [_]
City ___________ State _______ Zip Code _______
Payer's Request --------------------------------------------------------
for Taxpayer Part 3--Certification--UNDER THE PENALTIES OF
Identification PERJURY, I CERTIFY THAT:
Number (TIN)
and Certification (1) the number shown on this form is my correct
taxpayer identification number (or I am waiting
for a number to be issued to me),
(2) I am not subject to backup withholding either
because (i) I am exempt from backup withholding,
(ii) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (iii) the
IRS has notified me that I am no longer subject
to backup withholding, and
(3) any other information provided on this form is
true, correct.
SIGNATURE _______________________ DATE _________
You must cross out item (2) above of this Part 3 if
you have been notified by the IRS that you are
subject to backup withholding because of
underreporting interest or dividends on your tax
return and you have not been notified by the IRS that
you are no longer subject to backup withholding.
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT
TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 2 OF THE SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and that either (1) I have mailed or
delivered an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all payments made to
me on account of the Exchange Notes shall be retained until I provide a
taxpayer identification number to the Exchange Agent and that, if I do not
provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup
withholding and 31% of all reportable payments made to me thereafter will
be withheld and remitted to the Internal Revenue Service until I provide a
taxpayer identification number.
SIGNATURE _______________________ DATE: ________________________
- --------------------------------------------------------------------------------
12
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
9 1/4% Series A Senior Subordinated Notes due 2007
of
Hollywood Park, Inc.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's (as defined below) 9 1/4% Series A Senior
Subordinated Notes due 2007 (the "Old Notes") are not immediately available,
(ii) Old Notes, the Letter of Transmittal and all other required documents
cannot be delivered to The Bank of New York (the "Exchange Agent"), on or
prior to the Expiration Date (as defined in the Prospectus referred to below)
or (iii) the procedures for delivery by book-entry transfer cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand, overnight courier or mail, or transmitted by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier), to the Exchange Agent. See "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
The Bank of New York
By Mail: By Overnight Delivery or Hand:
The Bank of New York The Bank of New York
101 Barclay Street, Floor 7E 101 Barclay Street
New York, New York 10286 Corporate Trust Services Window
Attention: Martha James Ground Level
Reorganization Section New York, New York 10286
Attention: Martha James
Reorganization Section
To Confirm by Telephone or for Information:
(212) 815-6335
Facsimile Transmissions
(212) 815-6339
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number other than as set forth above will not constitute a
valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Hollywood Park, Inc., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions
set forth in the Prospectus dated March 29, 1999 (as the same may be
amended or supplemented from time to time, the "Prospectus"), and the
related Letter of Transmittal (which together constitute the "Exchange
Offer"), receipt of which is hereby acknowledged, the aggregate principal
amount of Old Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange
Offer--Procedures for Tendering Old Notes."
Aggregate Principal Name(s) of Registered Holder(s): ____
Amount Tendered: __________________
-------------------------------------
Certificate No(s).
(if available): ___________________ Address(es): ________________________
----------------------------------- -------------------------------------
----------------------------------- -------------------------------------
If Old Notes will be tendered by Area Code and Telephone Number(s): __
book-entry
transfer, provide the following Signature(s): _______________________
information:
-------------------------------------
DTC Account Number: _______________
-------------------------------------
Date: _____________________________
THE FOLLOWING GUARANTEE MUST BE COMPLETED
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Old
Notes tendered hereby in proper form for transfer, or confirmation of the
book-entry transfer of such Old Notes to the Exchange Agent's account at
the book-entry transfer facility, pursuant to the procedures for book-
entry transfer set forth in the Prospectus, in either case together with
one or more properly completed and duly executed Letter(s) of Transmittal
(or facsimile thereof), and any other required documents within three
business days after the Expiration Date.
Name of Firm: _____________________________________________________________
___________________________________________________________________________
(Authorized Signature)
Address: __________________________________________________________________
(Zip Code)
Area Code and Telephone Number: ___________________________________________
Title: ____________________________________________________________________
Name: _____________________________________________________________________
(Please Type or Print)
Date: ___________________
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
ACTUAL SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
