<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-9109 Commission file number 0-9110
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
- ------------------------------------- ---------------------------------------
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Delaware Delaware
- ------------------------------------- ---------------------------------------
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
95-3520818 95-3419438
- ------------------------------------- ---------------------------------------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
301 West Huntington Drive, Suite 405 285 West Huntington Drive
Arcadia, California 91007 Arcadia, California 91007
- ------------------------------------- ---------------------------------------
(Address of principal executive (Address of principal executive
offices including zip code offices including zip code
(818) 574-5550 (818) 574-7223
- ------------------------------------- ---------------------------------------
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ----
The number of shares outstanding of each of the issuers' classes of common
stock, as of the close of business on May 3, 1995 were:
Santa Anita Realty Enterprises, Inc. 11,256,353
Santa Anita Operating Company 11,143,853
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION 3
THE SANTA ANITA COMPANIES
Combined Balance Sheets as of March 31,
1995 and December 31, 1994 4
Combined Statements of Operations for the three
months ended March 31, 1995 and 1994 5
Combined Statements of Cash Flows for the three
months ended March 31, 1995 and 1994 6
SANTA ANITA REALTY ENTERPRISES, INC.
Consolidated Balance Sheets as of March 31, 1995
and December 31, 1994 7
Consolidated Statements of Operations for the three
months ended March 31, 1995 and 1994 8
Consolidated Statements of Cash Flows for the three
months ended March 31, 1995 and 1994 9
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets as of March 31, 1995
and December 31, 1994 10
Consolidated Statements of Operations for the three
months ended March 31, 1995 and 1994 11
Consolidated Statements of Cash Flows for the three
months ended March 31, 1995 and 1994 12
NOTES TO FINANCIAL STATEMENTS 13
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 15
PART II. OTHER INFORMATION 18
SIGNATURES 19
</TABLE>
2
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1995
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying balance sheets as of March 31, 1995 and December 31, 1994
of the Santa Anita Companies (the "Companies"), Santa Anita Realty Enterprises,
Inc. ("Realty") and Santa Anita Operating Company and Subsidiaries ("Operating
Company"), the statements of operations for the three months ended March 31,
1995 and 1994, and the related statements of cash flows for the three months
ended March 31, 1995 and 1994, were prepared by management and, except for the
balance sheet as of December 31, 1994, are unaudited. In the opinion of
management, the accompanying financial statements include all adjustments deemed
necessary for a fair presentation.
The following financial statements should be read in conjunction with the
accompanying notes and the Joint Annual Report on Form 10-K of Realty and
Operating Company for the year ended December 31, 1994.
3
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets
Santa Anita Racetrack, less accumulated
depreciation of $19,866,000 and $19,431,000 $ 7,869,000 $ 8,304,000
Commercial properties, less accumulated
depreciation of $33,447,000 and $32,247,000 116,735,000 116,780,000
Investments in unconsolidated joint ventures 5,734,000 6,299,000
Real estate loans and advances receivable 18,040,000 17,990,000
------------ ------------
148,378,000 149,373,000
Cash 9,508,000 12,674,000
Short-term investments, at cost
(approximates market) 24,279,000 5,600,000
Accounts receivable 5,134,000 4,656,000
Prepaid expenses and other assets 8,141,000 6,054,000
Investment in Pacific Gulf Properties Inc. 12,705,000 12,825,000
Property, plant and equipment, less accumulated
depreciation of $25,195,000 and $23,093,000 18,206,000 19,466,000
------------ ------------
$226,351,000 $210,648,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable $102,162,000 $102,472,000
Bank loans payable 13,937,000 9,829,000
Accounts payable 19,470,000 13,179,000
Other liabilities 17,251,000 12,750,000
Dividends payable - 2,251,000
Deferred revenues 1,223,000 2,427,000
Deferred income taxes 3,565,000 3,565,000
------------ ------------
157,608,000 146,473,000
Minority interest in consolidated joint ventures (3,250,000) (3,268,000)
Shareholders' equity
Preferred stock, $.10 par value; authorized
6,000,000 shares; none issued - -
Common stock, $.10 par value; authorized
19,000,000 shares; issued and outstanding
11,143,853 shares 2,227,000 2,227,000
Additional paid-in capital 134,615,000 134,615,000
Retained earnings (deficit) (64,849,000) (69,399,000)
------------ ------------
71,993,000 67,443,000
------------ ------------
$226,351,000 $210,648,000
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Revenues
Horse racing $35,206,000 $34,338,000
Rental property 5,182,000 7,930,000
Interest and other 725,000 459,000
----------- -----------
41,113,000 42,727,000
----------- -----------
Costs and expenses
Horse racing operating costs 22,250,000 22,663,000
Rental property operating expenses 1,646,000 3,118,000
Depreciation and amortization 3,711,000 3,549,000
General and administrative 3,459,000 3,533,000
Interest and other 2,516,000 3,046,000
Losses from unconsolidated joint ventures 730,000 451,000
Minority interest in earnings of consolidated
joint ventures 21,000 260,000
----------- -----------
34,333,000 36,620,000
----------- -----------
$ 6,780,000 $ 6,107,000
Net income =========== ===========
Weighted average number of common shares
outstanding 11,143,853 11,140,953
=========== ===========
Net income per common share $ .61 $ .55
=========== ===========
Dividends declared per common share $ .20 $ .34
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,780,000 $ 6,107,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,711,000 3,549,000
Minority interest in earnings of
consolidated joint ventures 21,000 260,000
Equity in losses of unconsolidated joint
ventures 730,000 451,000
Income from investment in Pacific Gulf
Properties Inc. (186,000) -
Net (increase) decrease in certain other
assets (2,276,000) 3,919,000
Net increase in certain other liabilities 9,599,000 6,286,000
----------- ------------
Net cash provided by operating activities 18,379,000 20,572,000
----------- ------------
Cash flows from investing activities:
Proceeds from disposition of multifamily and
industrial operations - 44,425,000
Payments received on loans and advances
receivable 57,000 64,000
Origination of loans and advances receivable (107,000) (352,000)
Additions and improvements to real estate assets (1,155,000) (6,067,000)
Additions to property, plant and equipment (842,000) (356,000)
Investments in unconsolidated joint ventures (165,000) (165,000)
----------- ------------
Net cash (used in) provided by investing
activities (2,212,000) 37,549,000
----------- ------------
Cash flows from financing activities:
Proceeds from real estate loans payable - 21,077,000
Proceeds from bank loans payable 4,300,000 -
Repayment of real estate loans payable (310,000) -
Repayment of bank loans payable (192,000) (44,600,000)
Net increase (decrease) in certain other
liabilities 8,000 (3,836,000)
Dividends paid (4,458,000) (3,788,000)
Distributions to minority interest in
consolidated joint ventures, net (2,000) (306,000)
Proceeds from stock issued in connection
with exercise of stock options and dividend
reinvestment plan - 61,000
----------- ------------
Net cash used in financing activities (654,000) (31,392,000)
----------- ------------
Net increase in cash and cash equivalents 15,513,000 26,729,000
Cash and cash equivalents at beginning of year 18,274,000 22,021,000
----------- ------------
Cash and cash equivalents at March 31 $33,787,000 $ 48,750,000
=========== ============
</TABLE>
See accompanying notes.
6
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets
Santa Anita Racetrack, less accumulated
depreciation of $19,866,000 and
$19,431,000 $ 7,869,000 $ 8,304,000
Commercial properties, less accumulated
depreciation of $35,085,000 and
$33,842,000 121,565,000 121,653,000
Investments in unconsolidated joint ventures 5,734,000 6,299,000
Real estate loans and advances receivable 18,040,000 17,990,000
------------ ------------
153,208,000 154,246,000
Cash 5,638,000 5,431,000
Accounts receivable 2,509,000 2,274,000
Prepaid expenses and other assets 5,907,000 3,357,000
Investment in Pacific Gulf Properties Inc. 12,705,000 12,825,000
Due from (to) Operating Company 1,198,000 (1,056,000)
------------ ------------
$181,165,000 $177,077,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable $102,162,000 $102,472,000
Bank loans payable 11,600,000 7,300,000
Accounts payable 2,549,000 2,379,000
Other liabilities 1,781,000 2,159,000
Dividends payable - 2,251,000
------------ ------------
118,092,000 116,561,000
Minority interest in consolidated joint
ventures (3,250,000) (3,268,000)
Shareholders' equity
Preferred stock, $.10 par value; authorized
6,000,000 shares; none issued - -
Common stock, $.10 par value; authorized
19,000,000 shares; issued and outstanding
11,256,353 shares 1,125,000 1,125,000
Additional paid-in capital 117,084,000 117,084,000
Retained earnings (deficit) (51,886,000) (54,425,000)
------------ ------------
66,323,000 63,784,000
------------ ------------
$181,165,000 $177,077,000
============ ============
</TABLE>
See accompanying notes.
7
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Revenues
Rent from Racetrack $ 6,478,000 $ 7,791,000
Shopping centers 3,943,000 3,412,000
Office buildings 1,018,000 1,073,000
Apartments and industrial - 3,157,000
Interest and other 585,000 370,000
----------- -----------
12,024,000 15,803,000
----------- -----------
Costs and expenses
Shopping centers 1,295,000 1,110,000
Office buildings 351,000 414,000
Apartments and industrial - 1,594,000
Depreciation and amortization 1,652,000 1,946,000
General and administrative 759,000 1,024,000
Interest and other 2,425,000 2,940,000
Losses from unconsolidated joint ventures 730,000 451,000
Minority interest in earnings of consolidated
joint ventures 21,000 260,000
----------- -----------
7,233,000 9,739,000
----------- -----------
Net income $ 4,791,000 $ 6,064,000
=========== ===========
Weighted average number of common shares
outstanding 11,256,353 11,256,353
=========== ===========
Net income per common share $ .43 $ .54
=========== ===========
Dividends declared per common share $ .20 $ .34
=========== ===========
</TABLE>
See accompanying notes.
8
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,791,000 $ 6,064,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,652,000 1,946,000
Minority interest in earnings of
consolidated joint ventures 21,000 260,000
Equity in losses of unconsolidated
joint ventures 730,000 451,000
Income from investment in Pacific Gulf
Properties Inc. (186,000) -
Net (increase) decrease in certain
other assets (2,496,000) 2,900,000
Net decrease in certain other liabilities (174,000) (587,000)
----------- ------------
Net cash provided by operating activities 4,338,000 11,034,000
----------- ------------
Cash flows from investing activities:
Proceeds from disposition of multifamily and
industrial operations - 44,425,000
Payments received on loans and advances
receivable 57,000 64,000
Origination of loans and advances receivable (107,000) (352,000)
Additions and improvements to real estate
assets (1,155,000) (6,067,000)
Investments in unconsolidated joint ventures (165,000) (165,000)
----------- ------------
Net cash (used in) provided by investing
activities (1,370,000) 37,905,000
----------- ------------
Cash flows from financing activities:
Proceeds from real estate loans payable - 21,077,000
Proceeds from bank loans payable 4,300,000 -
Repayment of real estate loans payable (310,000) -
Repayment of bank loans payable - (44,425,000)
Increase in due from Operating Company (2,254,000) (4,674,000)
Net increase (decrease) in certain other
liabilities 8,000 (3,836,000)
Dividends paid (4,503,000) (3,827,000)
Distributions to minority interest in
consolidated joint ventures, net (2,000) (306,000)
----------- ------------
Net cash used in financing activities (2,761,000) (35,991,000)
----------- ------------
Net increase in cash 207,000 12,948,000
Cash at beginning of year 5,431,000 7,633,000
----------- ------------
Cash at March 31 $ 5,638,000 $ 20,581,000
=========== ============
</TABLE>
See accompanying notes.
9
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash $ 3,870,000 $ 7,243,000
Short-term investments, at cost
(approximates market) 24,279,000 5,600,000
Accounts receivable 2,625,000 2,382,000
Prepaid expenses and other assets 580,000 1,043,000
------------ ------------
Total current assets 31,354,000 16,268,000
Investment in common stock of Realty 2,122,000 2,122,000
Property, plant and equipment, less accumulated
depreciation of $25,195,000 and $23,093,000 18,206,000 19,466,000
------------ ------------
$ 51,682,000 $ 37,856,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 16,921,000 $ 10,800,000
Other liabilities 15,470,000 10,591,000
Bank loans payable 812,000 794,000
Due to (from) Realty 1,198,000 (1,056,000)
------------ ------------
Total current liabilities 34,401,000 21,129,000
Bank loans payable 1,525,000 1,735,000
Deferred revenues 1,223,000 2,427,000
Deferred income taxes 3,565,000 3,565,000
------------ ------------
40,714,000 28,856,000
------------ ------------
Shareholders' equity
Preferred stock, $.10 par value; authorized
6,000,000 shares; none issued - -
Common stock, $.10 par value; authorized
19,000,000 shares; issued and outstanding
11,143,853 shares 1,114,000 1,114,000
Additional paid-in capital 20,596,000 20,596,000
Retained earnings (deficit) (10,742,000) (12,710,000)
------------ ------------
10,968,000 9,000,000
------------ ------------
$ 51,682,000 $ 37,856,000
============ ============
</TABLE>
See accompanying notes.
10
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Revenues
Wagering commissions $25,075,000 $23,757,000
Admission related 10,131,000 10,581,000
Interest and other 162,000 128,000
----------- -----------
35,368,000 34,466,000
----------- -----------
Costs and expenses
Horse racing operating costs 22,250,000 22,663,000
Depreciation and amortization 2,102,000 1,646,000
General and administrative 2,700,000 2,509,000
Interest 91,000 106,000
----------- -----------
27,143,000 26,924,000
----------- -----------
Income before rent expense 8,225,000 7,542,000
Rental expense to Realty 6,257,000 7,503,000
----------- -----------
Net income $ 1,968,000 $ 39,000
=========== ===========
Weighted average number of common shares
outstanding 11,143,853 11,140,953
=========== ===========
Net income per common share $ .18 $ -
=========== ===========
</TABLE>
See accompanying notes.
11
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,968,000 $ 39,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,102,000 1,646,000
Net decrease in certain other assets 220,000 1,019,000
Net increase in certain other liabilities 9,796,000 6,873,000
----------- -----------
Net cash provided by operating activities 14,086,000 9,577,000
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (842,000) (356,000)
Decrease in investment in common stock
of Realty - 57,000
----------- -----------
Net cash used in investing activities (842,000) (299,000)
----------- -----------
Cash flows from financing activities:
Repayment of bank loans payable (192,000) (175,000)
Increase in due to Realty 2,254,000 4,674,000
Proceeds from stock issued in connection
with exercise of stock options - 4,000
----------- -----------
Net cash provided by financing activities 2,062,000 4,503,000
----------- -----------
Net increase in cash and cash equivalents 15,306,000 13,781,000
Cash and cash equivalents at beginning of year 12,843,000 14,388,000
----------- -----------
Cash and cash equivalents at March 31 $28,149,000 $28,169,000
=========== ===========
</TABLE>
See accompanying notes.
12
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - INTERIM PERIOD ACCOUNTING POLICY
Operating Company follows an accounting practice whereby the revenues
associated with thoroughbred horse racing at Santa Anita Racetrack are reported
as they are earned. Costs and expenses associated with thoroughbred horse
racing revenues are charged against income in those interim periods in which the
thoroughbred horse racing revenues are recognized. Other costs and expenses are
recognized as they actually occur throughout the year. Certain prior year
amounts have been reclassified to conform to current year presentation.
NOTE 2 - INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
Realty's investments in unconsolidated joint ventures include investments
in the following commercial real estate ventures at March 31, 1995:
<TABLE>
<CAPTION>
NAME OWNERSHIP PROJECT
------------------- ---------- -------------
<S> <C> <C>
Joppa Associates 33-1/3% Retail
H-T Associates 50% Regional Mall
</TABLE>
Unaudited combined condensed financial statement information for
unconsolidated joint ventures as of March 31, 1995 and December 31, 1994, and
for the three months ended March 31, 1995 and 1994, is as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
Real estate assets $207,316,000 $207,775,000
============ ============
Liabilities
Advances from Realty $ 4,463,000 $ 4,355,000
Secured real estate loans 181,136,000 181,136,000
Other 10,458,000 9,915,000
------------ ------------
$196,057,000 $195,406,000
============ ============
Partners' equity
Realty $ 5,734,000 $ 6,299,000
Others 5,525,000 6,070,000
------------ ------------
$ 11,259,000 $ 12,369,000
============ ============
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1995 1994
-------------- --------------
<S> <C> <C>
Revenues $ 5,365,000 $ 5,245,000
============ ============
Net loss
Realty $ (730,000) $ (451,000)
Others (1,457,000) (395,000)
------------ ------------
$ (2,187,000) $ (846,000)
============ ============
</TABLE>
13
<PAGE>
NOTE 3 - INVESTMENT IN PACIFIC GULF PROPERTIES INC.
In November 1993, Realty entered into a Purchase and Sale Agreement to
sell its multifamily and industrial operations to Pacific Gulf Properties Inc.
("Pacific"), in conjunction with Pacific's public offering of common stock and
debentures.
In February 1994, Realty completed the first part of this transaction
by selling to Pacific ten multifamily properties, containing 2,654 apartment
units, located in Southern California, the Pacific Northwest and Texas and three
industrial properties, containing an aggregate of 185,000 leasable square feet
of industrial space, located in the State of Washington (the "Transferred
Properties"). Realty's corporate headquarters building and related assets were
also acquired by Pacific.
In consideration of the sale of the Transferred Properties, Realty
received $44,425,000 in cash and 150,000 shares of the common stock of Pacific.
In addition, Realty was relieved of $44,290,000 of mortgage debt on the
Transferred Properties.
In October 1994, Realty completed the second part of the transaction,
the sale of its interest in Baldwin Industrial Park to Pacific and Pacific
delivered to Realty an additional 634,419 shares of Pacific common stock as
consideration for the second part of the transaction and the corporate
headquarters and other net assets. As a result of the sale, Baldwin Industrial
Park ceased to be a consolidated joint venture which resulted in a reduction in
mortgage debt of $9,415,000.
The above transactions resulted in a loss of $10,974,000, which was
reflected in the Realty and Combined Realty and Operating Company statements of
operations for the year ended December 31, 1993.
As of March 31, 1995, Realty owned 16.3% of Pacific's common stock and
accounted for its investment by the equity method of accounting. The closing
price of Pacific's common stock, on the American Stock Exchange, on the last
trading day in March 1995 was $15.875 per share.
Financial information relating to Pacific, which is a separate public
company, is available from the Securities and Exchange Commission (Commission
file number 1-12546).
14
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SANTA ANITA REALTY ENTERPRISES, INC.
Realty is principally engaged in investing and holding real property.
The following narrative discusses Realty's results of operations for
the three months ended March 31, 1995 and 1994, together with liquidity and
capital resources as of March 31, 1995.
RESULTS OF OPERATIONS - FIRST QUARTER 1995 COMPARED WITH FIRST
QUARTER 1994
Realty's revenues are derived principally from the rental of real
property. Total revenues for the three months ended March 31, 1995 were
$12,024,000, compared with $15,803,000 for the three months ended March 31,
1994, a decrease of 23.9%. The lower 1995 revenues were due primarily to Realty
selling its multifamily and industrial operations to Pacific Gulf Properties
Inc. ("Pacific"), formerly a wholly-owned subsidiary, in February 1994.
The single most significant source of rental revenue is the lease of
Santa Anita Racetrack. Racetrack rental revenues for 1995 were $6,478,000, a
decrease of 16.9% from revenues of $7,791,000 in 1994. The decrease in rental
revenues resulted primarily from new lease terms with LATC and from fewer racing
days in 1995, partially offset by an increase in average daily wagering. The
lease with LATC for the Santa Anita Racetrack, which expired in December 1994,
was amended and extended for an additional five years. Under the new lease
terms, Realty receives 1.5% of on-track wagering on live races at Santa Anita
Racetrack and 26.5% of wagering commissions from satellite wagering on races
originating at Santa Anita Racetrack and on races originating from certain other
racetracks. Under the old lease, Realty received the same 1.5% of on-track
wagering on live races at Santa Anita Racetrack and 40% of wagering commissions
from satellite wagering on races originating at Santa Anita Racetrack.
Rental revenues from other real estate investments for the 1995 first
quarter were $4,961,000, a decrease of 35.1% from revenues of $7,642,000 in the
1994 first quarter. The decrease in 1995 was due to the February 1994 sale of
Realty's multifamily and industrial operations, partially offset by a 10.6%
increase in rental revenues from other properties.
Costs and expenses for 1995 were $7,233,000, a decrease of 25.7% from
costs and expenses of $9,739,000 in 1994. The decrease resulted primarily from
the sale of Realty's multifamily and industrial operations and was partially
offset by increases in interest expense attributable to continuing operations
and losses from unconsolidated joint ventures. The increase in interest expense
was due to funding the expansion of Fashion Park Mall.
LIQUIDITY AND CAPITAL RESOURCES
Realty has funds available from a combination of short- and long-term
sources. Short-term sources included cash of $5,638,000 at March 31, 1995.
Realty's investment in Pacific common stock was carried at $12,705,000
at March 31, 1995. Pacific currently pays an annual dividend of $1.56 per share
which would result in annual dividend payments to Realty of $1,224,000.
In November 1994, Realty entered into a new $30,000,000 one-year
credit facility with a commercial bank. At March 31, 1995, Realty had borrowed
$11,600,000 under this facility. Borrowings are due one year from the date of
funding but no later than November 30, 1995 and will bear interest, at Realty's
option, at the prime rate, at LIBOR plus 1%, or at the six-month certificate of
deposit rate plus 1%.
15
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
SANTA ANITA REALTY ENTERPRISES, INC. (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
Realty is currently negotiating a long-term credit facility with a
commercial bank to replace the existing revolving credit facility and to finance
the development of a portion of the first phase of the entertainment and retail
complex.
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Operating Company is engaged in thoroughbred horse racing through its
wholly-owned subsidiary, Los Angeles Turf Club, Incorporated ("LATC"), which
leases the Santa Anita Racetrack ("Santa Anita") from Realty.
The following narrative discusses Operating Company's results of
operations for the three months ended March 31, 1995 and 1994 together with
liquidity and capital resources as of March 31, 1995.
RESULTS OF OPERATIONS -- FIRST QUARTER 1995 COMPARED WITH FIRST
QUARTER 1994
For the three months ended March 31, live thoroughbred horse racing at
Santa Anita Racetrack totaled 64 days in 1995 compared with 66 days in 1994.
Total on-track attendance at the live racing events in the first three months of
1995 was down 9.3% from the comparable year ago period while average daily
attendance declined 6.5%. Total wagering during the live racing season
increased 9.1% and average daily wagering increased 12.5% in the first three
months of 1995 compared with the same period last year. On-track wagering
decreased 10.4%, wagering at Southern California satellite locations increased
7.6%, wagering at out-of-state locations increased 9.2% and wagering at Northern
California locations increased 160.6% in the first three months of 1995 compared
with the same period last year.
Horse racing revenues were higher while operating costs were lower in
the first three months of 1995 compared with the same period last year. The
revenue gains from increased wagering were partially offset by revenue declines
from fewer race days and lower on-track attendance. Total horse racing
revenues in the first three months of 1995 were $35,206,000, up 2.5% from
$34,338,000 for the comparable year ago period. Horse racing operating costs in
the first three months of 1995 were $22,250,000, down 1.8% from $22,663,000 for
the comparable year ago period due to fewer race days in 1995.
Depreciation expense in the first three months of 1995 was $2,102,000,
up 27.7% from the $1,646,000 in 1994. The $456,000 increase in depreciation
expense was due primarily to the accelerated depreciation charge on the Santa
Anita Racetrack turf course, which will be replaced in April 1995. General and
administrative expenses were $2,700,000 in the first three months of 1995, up
7.6% from the $2,509,000 from the comparable year ago period. Interest expense
decreased to $91,000 in the first three months of 1995 from $106,000 in 1994.
Rental expense to Realty was $6,257,000 for the first three months of
1995 compared with $7,503,000 reported in 1994. The decrease in rental expense
of 16.6% reflects the new lease terms with Realty. Under the new lease terms,
LATC pays to Realty 1.5% of the on-track wagering on live races at Santa Anita
Racetrack and 26.5% of its wagering commissions from all satellite wagering.
The old lease required LATC to pay Realty the same 1.5% of the on-track wagering
on live races at Santa Anita Racetrack but required 40% of its wagering
commissions from satellite wagering during the live race meets.
16
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES (continued)
RESULTS OF OPERATIONS -- FIRST QUARTER 1995 COMPARED WITH FIRST
QUARTER 1994 (continued)
Due to the revenue and expense items previously discussed, Operating
Company reported net income of $1,968,000 or $.18 per share for the three months
ended March 31, 1995, compared with net income of $39,000 or $.00 per share for
the comparable period in 1994.
SEASONALITY
Operating Company's operations are subject to seasonal fluctuations.
Operating Company recognizes the majority of its revenues in the first quarter
due to live racing activity at Santa Anita. Therefore, the results of
operations for interim periods are not necessarily indicative of the results
that may be expected for the full year.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, Operating Company's sources of liquidity included
cash and short-term investments of $28,149,000 and an unsecured line of credit
with Realty of $10,000,000, of which approximately $2,337,000 was utilized in
connection with a guarantee of a capital lease. Operating Company's ability to
utilize Realty's line of credit is dependent upon Realty's liquidity and capital
resources. (See Item 2. "Managements' Discussion and Analysis of Financial
Condition and Results of Operations-Santa Anita Realty Enterprises, Inc. -
Liquidity and Capital Resources"). For the three months ended March 31, 1995,
short-term investments earned interest income of $162,000.
The cash balances and related interest income from short-term
investments reflect seasonal variations associated with the Santa Anita meet.
During the meet, large cash balances and short-term investments are maintained
by LATC, including amounts to be disbursed for payment of license fees payable
to the state, purses payable to horse owners and un-cashed winning pari-mutuel
tickets payable to the public.
17
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
10.1 Option Agreement dated as of February 8, 1995, among James R.
Knapp, Gregory J. Knapp and Santa Anita Realty Enterprises, Inc.
and Letter Agreement dated February 15, 1995 and effective
February 20, 1995 among James R. Knapp, Gregory J. Knapp and
Santa Anita Realty Enterprises, Inc.
10.2 Form of Indemnity Agreement between Santa Anita Operating Company
and its directors and officers and schedule of omitted documents
relating thereto.
10.3 Form of Indemnity Agreement between Santa Anita Realty
Enterprises, Inc. and its directors and officers and schedule of
omitted documents relating thereto.
10.4 Form of Consulting Agreement between Santa Anita Operating
Company and its directors and schedule of omitted documents
relating thereto.
10.5 Form of Consulting Agreement between Santa Anita Realty
Enterprises, Inc. and its directors and schedule of omitted
documents relating thereto.
10.6 Restricted Stock Agreement dated as of April 1, 1995 between
Santa Anita Operating Company, Stephen F. Keller and the Keller
Family Trust.
10.7 Restricted Stock Agreement dated as of April 1, 1995 between
Santa Anita Operating Company and Clifford C. Goodrich.
10.8 Lease dated as of May 2, 1995 between Santa Anita Realty
Enterprises, Inc. and American Multi-Cinema, Inc.
27(a) Financial Data Schedule for Santa Anita Realty Enterprises, Inc.
27(b) Financial Data Schedule for Santa Anita Operating Company
</TABLE>
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended March 31, 1995.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Realty and Operating Company have duly caused this report
to be signed on their behalf by the undersigned, thereunto duly authorized.
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
By: SHERWOOD C. CHILLINGWORTH By: STEPHEN F. KELLER
--------------------------------- --------------------------------
Sherwood C. Chillingworth Stephen F. Keller
Vice Chairman of the Board and Chairman of the Board, President
Chief Executive Officer and Chief Executive Officer
(Principal Executive Officer) (Principal Executive Officer)
Date: May 5, 1995 Date: May 5, 1995
By: BRIAN L. FLEMING RICHARD D. BRUMBAUGH
-------------------------------- --------------------------------
Brian L. Fleming Richard D. Brumbaugh
Executive Vice President and Vice President-Finance and
Chief Financial Officer Chief Financial Officer
(Principal Financial and (Principal Financial and
Accounting Officer) Accounting Officer)
Date: May 5, 1995 Date: May 5, 1995
19
<PAGE>
EXHIBIT 10.1
OPTION AGREEMENT
This OPTION AGREEMENT (this "Agreement") dated as of February 8, 1995 is
entered into among James R. Knapp, Gregory J. Knapp (the "Partners") and Santa
Anita Realty Enterprises, Inc., a Delaware corporation ("Santa Anita").
RECITALS
WHEREAS, the Partners are the sole limited partners of Bell Jackpot Club,
L.P., a California limited partnership (the "Partnership"), and own at least
85% of the partnership interests in Bell Jackpot Promote, L.P. a California
limited partnership, which is the sole general partner of the Partnership (the
"General Partner");
WHEREAS, the Partnership subleases (the "Sublease") from Bell Facility
Partners, L.P. (the "Sublessor") (i) certain real property located at 4901 South
Eastern Avenue, Bell, California, comprising an approximately 42,000 square foot
building including mezzanine and appurtenances, located on approximately 7.5
acres of land with parking capacity for approximately 700 cars (the "Premises")
and (ii) certain furniture, fixtures and equipment located on the Premises;
WHEREAS, the City of Bell, California ("Bell") has adopted an ordinance to
permit the operation of card clubs within Bell in accordance with the California
Gaming Registration Act (the "Act");
WHEREAS, James R. Knapp, Gregory J. Knapp, Michael A. Meczka and Duane K.
Meek are the only individuals who own partnership interests in the General
Partner (or its constituent entities);
WHEREAS, James R. Knapp, Gregory J. Knapp, Michael A. Meczka and Duane K.
Meek have been granted (i) conditional licenses, pursuant to the California
Gaming Registration Act, from the State of California Department of Justice, and
(ii) have applied for a license from Bell, in each case to own and operate a
card club (the "Casino") on the Premises;
WHEREAS, Santa Anita wishes to obtain an option from the Partners to
acquire a general partnership interest and a limited partnership interest in the
Partnership, which option may be exercised by Santa Anita; and
WHEREAS, the Partners desire to grant such an option to Santa Anita on the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Partners and Santa Anita agree as
follows:
<PAGE>
1. Option
------
The Partners hereby grant to Santa Anita an option (the "Option") to
acquire such interest in the capital and profits of the Partnership as a general
partner and a limited partner as shall be separately agreed by the parties. As
part of the licensing process, such agreement will be made available to the
State of California Department of Justice (or the regulatory agency that then
has jurisdiction under the Act to grant such licenses) (the "DOJ") for its
review and approval. The parties acknowledge that the Partners do not directly
own a general partnership interest in the Partnership, but rather own all of the
capital stock of the corporation that is the sole general partner of the General
Partner; accordingly, it is understood and agreed that the Partners' obligation
hereunder with respect to the general partnership interest is to cause the
General Partner to convey and assign to Santa Anita the general partnership
interest subject to the Option.
Prior to the exercise of the Option, Santa Anita shall have the right
to sell, assign or transfer all of Santa Anita's rights and obligations under
this Agreement to a wholly-owned subsidiary of Santa Anita or of Santa Anita
Operating Company. References in this Agreement to Santa Anita, other than the
representations of Santa Anita contained in paragraph 5, shall be deemed to
refer to any such subsidiary if the Option is so transferred.
2. Consideration
-------------
As consideration for the Option, Santa Anita shall pay the Partners
$2,000,000 (the "Option Price"). The Option Price shall be paid by wire transfer
or check (as determined by the Partners) in immediately available funds on the
date this Agreement is executed by the Partners and Santa Anita. The Partners
agree that any payments made to either Partner pursuant to this Agreement shall
be in full and complete satisfaction of the obligation of Santa Anita to make
such payment, regardless of any agreement between the Partners as to allocation
of such payment between them.
3. Exercise of Option
------------------
(a) Subject to the other provisions of this Agreement, the Option
shall first be exercisable once Santa Anita has received all necessary
licenses or other approvals (the "Licenses") required by law (whether
local, state or federal) to own an interest in and operate the Casino,
including, without limitation (if required at such time), (i) a conditional
license pursuant to the Act (or any successor statute) from the DOJ, and
(ii) a license from Bell.
(b) In order to exercise the Option, Santa Anita shall deliver to the
Partners a notice (a "Notice of Exercise") certifying that Santa Anita has
been granted the Licenses along with evidence that such Licenses are in
full force and effect and no action has been commenced to revoke or suspend
any such Licenses and desires to exercise the Option.
2
<PAGE>
(c) Within 15 days of delivery of the Notice of Exercise, (i) the
Partners shall convey and assign good and marketable title to the limited
partnership interest subject to the Option, and shall (as contemplated in
paragraph 1) cause the General Partner to convey and assign good and
marketable title to the general partnership interest subject to the Option,
to Santa Anita, free and clear of all liens, and (ii) Santa Anita shall pay
to the Partners an exercise fee equal to (A) $3,000,000 less (B) the
-----
aggregate of all Option Extension Payments (as such term is defined in
----
paragraph 4(b)) received by the Partners less (C) any Excess Distribution.
"Excess Distribution" means an amount equal to any cash actually
distributed to the Partners during the period commencing on the date hereof
and ending on the date of payment of such exercise fee less the sum of
-----
taxable net income of the Partnership calculated on an accrual basis for
such period plus amortization and depreciation for such period of up to
$2,000,000 in preopening expenses and other capital expenses.
4. Termination of Option
---------------------
The Option shall terminate and be of no further force and effect on
the earliest to occur of the following:
(a) 60 days after the adoption of (i) legislation in the State of
California permitting publicly held corporations to be licensed under the
California Gaming Registration Act (or any successor statute) without
requiring each of its shareholders to be licensed and (ii) any other
legislation necessary to permit Santa Anita to obtain the Licenses and to
own an interest in and operate the Casino (the legislation referred to in
clauses (i) and (ii) above being the "Required Legislation"), if, prior to
such date, Santa Anita has not provided written notice to the Partners that
it has applied with the DOJ for a conditional license under the Act;
(b) One year after the adoption of the Required Legislation; provided
--------
that Santa Anita may from time to time extend the termination date of the
Option beyond such one year period by paying to the Partners $40,000 for
each month the termination date of the Option is to be extended (such
payments being collectively referred to herein as the "Option Extension
Payments") on or before the day the Option would otherwise terminate
pursuant to this paragraph 4(b); the termination date of the Option
pursuant to this paragraph 4(b) shall be automatically extended upon
receipt of an Option Extension Payment by the Partners by the number of
months equal to the quotient derived by dividing the amount of the Option
Extension Payment by $40,000; the termination date of the Option may be
extended at one time or from time to time prior to its termination,
provided that, notwithstanding the foregoing, the termination date of the
---------
Option pursuant to this paragraph 4(b) may not be extended beyond the
second year after the adoption of the Required Legislation;
(c) Fifteen (15) days after Santa Anita has received the Licenses;
3
<PAGE>
(d) January 31, 2000.
For purposes of paragraphs (a) and (b) above, any period commencing
after the adoption of the Required Legislation shall commence on the
tenth business day after the Partners have delivered a written notice
to Santa Anita that the Required Legislation has been adopted;
provided, however, that if Santa Anita in good faith does not agree
-------- -------
that the Required Legislation has been adopted, the running of any
such period shall be tolled until such time that the Partners deliver
to Santa Anita an opinion of reputable legal counsel stating that the
Required Legislation has been adopted and that Santa Anita is entitled
to apply for the Licenses.
5. Representations and Warranties
------------------------------
(a) Santa Anita hereby represents and warrants to the Partners as
follows:
(i) Santa Anita is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to own and operate
---
its properties, to carry on its business as now conducted and as
proposed to be conducted and to enter into this Agreement;
(ii) The execution, delivery and performance by Santa Anita of
this Agreement (x) have been duly authorized by all necessary
corporate action of Santa Anita, (y) will require no further action by
or in respect of, or filing with, any governmental body, agency or
official (other than those actions required to satisfy the conditions
to the exercise of the Option set forth in paragraph 3 above), and (z)
will not (1) violate any provision of any law or any government rule
or regulation applicable to Santa Anita, the certificate of
incorporation of Santa Anita, or any order, judgment or decree of any
court or other agency of government binding on Santa Anita, (2)
conflict with or constitute a default under any constitutional
obligation of Santa Anita or (3) result in the creation or imposition
of any lien on any of the properties or assets of Santa Anita; and
(iii) This Agreement has been duly executed and delivered by
Santa Anita and is the legally valid and binding obligation of Santa
Anita, enforceable against Santa Anita in accordance with its terms,
except as may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
(b) The Partners hereby represent and warrant to Santa Anita as
follows:
(i) The Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of
California, and has all requisite partnership power and authority to
own and operate its properties
4
<PAGE>
and to carry on its business as now conducted and as proposed to be
conducted; the Partners have all requisite power and authority to
enter into and perform this Agreement and the Partnership's limited
partnership agreement;
(ii) The execution, delivery and performance by the Partners of
this Agreement (x) have been duly authorized by all necessary action
on behalf of the Partners, (y) to the knowledge of the Partners, will
require no action by or in respect of, or filing with, any
governmental body, agency, or official except as specified in Schedule
I hereto, and (z) will not (1), to the knowledge of the Partners,
violate any provision of any law or any government rule or regulation
applicable to the Partnership or the Partners, the General Partner's
partnership agreement, the certificate of limited partnership of the
Partnership, the Partnership's partnership agreement or any order,
judgment, or decree of any court or other agency of government binding
on the Partners or the Partnership, (2) conflict with or constitute a
default under any contractual obligation of the Partners or the
Partnership, or (3) result in the creation or imposition of any lien
on any asset of the properties or assets of the Partners or the
Partnership; provided that the Partners make no representation or
--------
warranty in clause (ii)(z)(1) with respect to the liquor license
required for sale of alcoholic beverages at the Casino (the "Liquor
License") or in clause (ii)(z)(2) with respect to the Sublease;
(iii) This Agreement has been duly executed and delivered by the
Partners and is the legally valid and binding obligation of the
Partners, enforceable against the Partners in accordance with its
terms, except as may be limited by bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability;
(iv) The Partners have heretofore delivered to Santa Anita those
certain financial projections regarding the operation of the
Partnership for fiscal years 1995 through 1999 dated January 3, 1995
(collectively, the "Financial Projections"); the Financial Projections
were prepared in good faith on a basis reflecting the estimates and
judgments of the management of the Partnership that management of the
Partnership believes to be reasonable; the Partnership does not have
any known material contingent obligation, known material contingent
liability or material liability for any tax, long-term lease or
unusual forward or long-term commitment, which is not reflected in the
Financial Projections, the notes thereto or the schedules to this
Agreement;
(v) There is no pending or, to the Partners' knowledge, threatened
action or proceeding affecting the Partnership before any court,
governmental agency or arbitrator, which may materially adversely
affect the consolidated financial condition or operations of the
Partnership;
5
<PAGE>
(vi) To the knowledge of the Partners, the Partnership is in
compliance in all material respects with all applicable laws the
noncompliance with which could reasonably be expected to materially
adversely affect the business, properties, assets, operations,
condition (financial or otherwise) of the Partnership;
(vii) There is no fact known to the Partners (other than matters
of a general economic nature) which the Partners reasonably believe
materially adversely affects the business, operations, property,
assets, condition (financial or otherwise) or business prospects of
the Partnership which has not been disclosed herein or in such other
documents, certificates and statements furnished to Santa Anita for
use in connection with the transactions contemplated hereby;
(viii) There is no strike or work stoppage in existence or
threatened involving the Partnership that may materially adversely
affect the consolidated financial condition or operations of the
Partnership; and
(ix) Each of James R. Knapp, Gregory J. Knapp, Michael A. Meczka
and Duane K. Meek, who constitute all of the individual partners of
the Partnership and the General Partner, has applied for a license to
own and operate the Casino from Bell and has obtained a conditional
license to own and operate the Casino from the DOJ; such licenses are
the only gaming licenses required, to the knowledge of the Partners,
to be obtained by the Partnership, the General Partner and the
Partners to own and operate the Casino in compliance with law; such
licenses from the DOJ are in full force and effect and no action has
been commenced to suspend or revoke any such licenses; and as of the
opening date of the Casino, the requisite licenses from Bell shall
have been issued and be in full force and effect.
6. Covenants. (a) During the term of this Agreement, the Partners
will, unless Santa Anita shall otherwise consent in writing:
(i) Upon adoption of the Required Legislation, furnish all
financial statements prepared for the fiscal years and fiscal quarters ending
prior to such adoption and thereafter furnish to Santa Anita:
(1) as soon as available, but in any event within ninety (90)
days after the end of each fiscal year of the Partnership, a copy of the
balance sheet of the Partnership as at the end of each fiscal year and the
related statements of income and retained earnings (or comparable
statement) and cash flow for such year, setting forth in each case for
fiscal years ending after fiscal year 1995 in comparative form the figures
for the previous year, accompanied by a report and opinion thereon of
independent certified public accountants;
6
<PAGE>
(2) as soon as available, but in any event within forty-five (45)
days after the end of each fiscal quarter of the Partnership, the
Partnership's unaudited balance sheet as at the end of such period and the
related unaudited statements of income and retained earnings (or comparable
statement) and cash flow for such period and year to date, setting forth in
each case for fiscal years ending after fiscal year 1995 in comparative
form the figures as at the end of the previous fiscal year as to the
balance sheet and the figures for the previous corresponding period as to
the other statements, certified by the General Partner as being fairly
stated in all material respects subject to year end adjustments;
the Partners shall use good faith to provide that all such financial
statements referenced in clauses (1) and (2) shall be complete and correct
in all material respects and are prepared in reasonable detail and in
accordance with generally accepted accounting principles applied
consistently throughout the periods reflected therein (except as approved
by the Partnership's independent certified public accountants and disclosed
therein); provided that if any deficiencies omissions are contained in such
---------
financial statements they shall be corrected promptly once they become
known to the Partners;
(3) as soon as practicable and in any event no later than 30 days
prior to the beginning of each fiscal year of the Partnership, a forecasted
statement of income and cash flows of the Partnership for such fiscal year,
together with forecasted statements of income and cash flows of the
Partnership for each month of such fiscal year, together with an
explanation of the assumptions on which such forecasts are based;
(4) as soon as available, but in any event within twenty (20)
days after the end of each month, copies of monthly management financial
reports, including, without limitation, a month-end balance sheet of the
Partnership, a monthly and year to date profit and loss statement and
statement of cash flow of the Partnership, the amount of capital
expenditures made in such month, the amount of disbursements made to the
General Partner and/or any limited partner of the Partnership made in such
month, a detailed report of gross gaming revenues to the extent, and in the
same form, prepared for use by management, a report of casino cage
shortages for such month and a report detailing revenues and profits from
food and beverage operations for such month;
notwithstanding the foregoing, there shall be no breach of the covenants
contained in foregoing paragraph 6(a)(i) if the Partners fail to provide any
item or document referred to in paragraph 6(a)(i) but is proceeding diligently
and in good faith to furnish such item or document as promptly as possible;
(ii) At all times preserve and keep in full force and effect the
partnership existence of the Partnership;
7
<PAGE>
(iii) Cause the Partnership to use good faith efforts to pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its franchises, business, income or
property before any penalty or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
may become a lien upon any of its properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto provided that no such
--------
charge or claim need be paid if being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if such reserve or
other appropriate provision, if any, as shall be required in conformity with
generally accepted accounting principles shall have been made therefor;
(iv) Cause the Partnership to use good faith efforts to maintain (A)
in good repair, working order and condition all material properties used in the
business of the Partnership and from time to time cause to be made all
appropriate repairs, renewals and replacements thereof and (B), with financially
sound and reputable insurers, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar businesses
and similarly situated, of such types (including, without limitation, business
interruption insurance, but excluding earthquake insurance) and in such amounts
as are customarily carried under similar circumstances by such corporations;
(v) Upon adoption of the Required Legislation, in order to allow Santa
Anita to assess the financial and business affairs of the Casino to enable it to
make a prudent decision with respect to the exercise of the Option, upon prior
request to James R. Knapp or Gregory J. Knapp (who shall in good faith respond
promptly to any such request), permit any authorized representatives designated
by Santa Anita to visit and inspect any of the properties of the Partnership,
including its financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its affairs, finances and accounts with
management of the Casino and its independent public accountants, all at such
reasonable times during normal business hours and as often as may be reasonably
requested;
(vi) Cause the Partnership to exercise and cause all reasonable due
diligence in order to comply with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority, including, without
limitation, all environmental laws, rules, regulations and orders and all state
and local card club laws, rules and regulations (including licensing
requirements), noncompliance with which could reasonably be expected to
materially adversely affect the business, properties, assets, operations,
condition (financial or otherwise) or business prospects of the Partnership;
(vii) Not permit the Partnership to acquire, form or own any
subsidiary;
(viii) Not permit the Partnership to engage in any business other than
the ownership and operation of the Casino;
8
<PAGE>
(ix) Not admit any additional partners to the Partnership or transfer
any interest therein in a manner that would result in either James R. Knapp or
Gregory J. Knapp or both of them not having voting control with respect to the
Partnership or having, together with the lineal descendants and spouses of
either, a 51% economic interest in the Partnership; and
(x) Not permit the Partnership to incur any indebtedness not
reasonably required in the ordinary course of the business of the Casino
(including indebtedness incurred for reasonable and prudent capital
expenditures) or that is made pursuant to other than ordinary business terms.
(b) (i) Santa Anita hereby covenants and agrees that it will use all
reasonable efforts to obtain the Licenses as soon as possible following adoption
of the Required Legislation;
(ii) Santa Anita acknowledges that to the extent that capital is
required for the operation of the Casino in excess of $2,000,000, the Partners
intend to provide such capital in the form of loans to the Partnership that will
be made on ordinary business terms, but that no loan will be undertaken by the
Partnership in an amount in excess of what is reasonably required for Casino
operations; and
(iii) During the term of the Option, Santa Anita agrees to take no
action to exercise control over, or seek to exercise control over or influence,
the operations of the Casino.
7. Consent to Amendment of Sublease
--------------------------------
Santa Anita hereby acknowledges that the Sublease does not provide for
the payment of percentage rent by the Partnership with respect to gaming not
currently permitted under California law which may be authorized in the future,
and that the Partnership and the Sublessor have agreed that at such time as
additional classes of gaming are authorized, the Sublease will be amended to
provide for a percentage rent (equating to a 2% percentage rent on poker) based
on the nature of the games authorized. Further, Santa Anita hereby consents to
and agrees to authorize such an amendment in the event it is a partner of the
Partnership at the time.
8. Notices.
--------
Any notice, request, demand, waiver, consent, or other communication
required to permit it hereunder shall be in writing and be deemed properly given
or delivered when delivered by courier or messenger (on the date thereof), by
telecopy (on the date received thereof as confirmed by telecopy) or by
registered airmail, return receipt requested (on the fourth day, excluding
Saturday, Sundays and legal holidays in Los Angeles, after the date mailed);
9
<PAGE>
If to the Partners: James R. Knapp
Gregory J. Knapp
One Brookhollow Drive
Santa Ana, CA 92705
Fax No.: 714-641-3877
Attn: Gregory J. Knapp
with a copy to: Hewitt & McGuire
3501 Jamboree Road, Suite 250
Newport Beach, California 92660
Fax No.: (714) 509-2929
Attn: Paul A. Rowe, Esq.
If to Santa Anita: Santa Anita Realty Enterprises, Inc.
301 West Huntington Drive, Suite 405
Arcadia, California 91006
Fax No.: (818) 574-5997
Attn: Chief Financial Officer
with a copy to: O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071
Fax No.: (213) 669-6407
Attn: Michael Newman, Esq.
or to such other person or address as each party may furnish to the other.
9. Time of the Essence
-------------------
Time is of the essence of each and every provision of this Agreement.
10. Governing Law
-------------
This Agreement shall be construed, and interpreted in accordance with,
it shall be governed and enforced in all respects according to, the laws of the
State of California.
11. Counterparts
------------
This Agreement may be executed in multiple counterparts, which,
together, shall constitute one agreement between the parties hereto.
10
<PAGE>
12. Entire Agreement
----------------
This Agreement and the Schedule attached hereto represent a complete
integration of all the prior and contemporaneous agreements and understandings
of the parties with respect to the subject of this Agreement. Any and all such
prior agreements, understandings, and documents are hereby superseded by this
Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/s/ JAMES R. KNAPP
-----------------------------------
James R. Knapp
/a/ GREGORY J. KNAPP
-----------------------------------
Gregory J. Knapp
SANTA ANITA REALTY ENTERPRISES, INC.
By: /s/ BRIAN L. FLEMING
---------------------------------
Title: Executive Vice President
-----------------------------
12
<PAGE>
SCHEDULE I
1. Filing with and consent of the California Department of Justice.
2. Filing with and consent of the City of Bell, California.
3. Filing with and consent of the California Department of Alcohol and Beverage
Control.
i
<PAGE>
[LETTERHEAD OF SANTA ANITA REALTY ENTERPRISES, INC.]
February 15, 1995
Mr. James R. Knapp
Mr. Gregory J. Knapp
One Brookhollow Drive
Santa Ana, CA 92705
Gentlemen:
Please refer to the Option Agreement between the undersigned, Santa Anita
Realty Enterprises, Inc., and you dated as of February 8, 1995. Terms used
herein that are not defined have the meanings set forth herein. In the Option
Agreement, Santa Anita has been granted an Option to acquire such interest in
the capital and profits of the Partnership as a general partner and a limited
partner as shall be separately agreed by us. This letter agreement constitutes
such separate agreement and is binding upon us notwithstanding Section 12 of the
Option Agreement.
Upon exercise of the Option, Santa Anita shall receive such interest in the
capital and profits of the Partnership as a general partner and a limited
partner that will provide it, upon redemption of its interests in the
Partnership in exchange for an interest in all of the assets and liabilities of
the Partnership (such assets and liabilities are herein referred to as the
"Assets") and upon contribution of the Assets as described below to a general
partnership (the "General Partnership") to be formed pursuant to the agreement
attached hereto as Exhibit A (the "General Partnership Agreement") the interest
in capital and profits provided for in the General Partnership Agreement. The
rights of Santa Anita and the rights of the other partners shall, effective upon
the exercise of the Option, redemption of interests, contribution and formation
of the General Partnership, be governed by the General Partnership Agreement.
We acknowledge that you have been issued by the DOJ an Extension
Conditional Registration, dated February 9, 1995, which contains as condition
no. 4, the requirement that, should Santa Anita be able to exercise the Option,
any additional agreements between you and Santa Anita must receive approval from
the DOJ. Each of us agrees that the attached General Partnership Agreement shall
be submitted to the DOJ for its approval, should Santa Anita be able to exercise
the Option, in compliance with this condition no. 4 requirement. The parties
agree that the General Partnership Agreement shall be subject to such conditions
imposed by the DOJ with respect to any license of a party hereto.
<PAGE>
[LOGO OF SANTA ANITA]
Mr. James R. Knapp
Mr. Gregory J. Knapp
February 15, 1995
Page Two
Immediately upon exercise of the Option, (i) the interests of Santa Anita
shall be redeemed in exchange for an interest in the Assets and (ii) the
Partnership and Santa Anita shall contribute 100% of their interests in the
Assets to the General Partnership and shall execute the General Partnership
Agreement; provided, however, that, for administrative convenience, upon
exercise of the Option, the Assets may be transferred directly to the General
Partnership, and the Partnership and Santa Anita shall receive the interests in
the General Partnership as provided in the General Partnership Agreement.
Notwithstanding the foregoing, if Santa Anita and the Partners conclude
that operation of the Casino by a general partnership is impossible, unduly
restrictive or disadvantageous to such business, Santa Anita or the Partners
(whether by reason of gaming licenses, the Sublease or other factors), the
parties agree, upon exercise of the Option, to conduct the business of the
Casino with the same economic relationship in another legal structure mutually
acceptable to each party, in good faith, that will allow such business to be
conducted free of any such impossibility or in a manner less restrictive or
disadvantageous to such business, Santa Anita and the Partners. Each party
agrees to proceed in good faith, upon exercise of the Option, to allow all
parties hereto the benefit of the economic relationship reflected in the General
Partnership Agreement (including, without limitation, the method by which
profits, losses and cash are allocated and distributed) in connection with any
such new legal structure.
Very truly yours,
Santa Anita Realty Enterprises, Inc.
By /s/ BRIAN L. FLEMING
--------------------
Brian L. Fleming
SCC:br
<PAGE>
Mr. James R. Knapp
Mr. Gregory J. Knapp
February 15, 1995
Page Three
Agreed to as of this
20th day of February, 1995
- ----
/s/ JAMES R. KNAPP
- ---------------------------
James R. Knapp
/s/ GREGORY J. KNAPP
- ---------------------------
Gregory J. Knapp
<PAGE>
EXHIBIT A
---------
AGREEMENT OF GENERAL PARTNERSHIP
OF
BELL JACKPOT CLUB
A CALIFORNIA GENERAL PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
RECITALS.................................................... 1
ARTICLE I DEFINITIONS................................................. 1
ARTICLE II FORMATION OF PARTNERSHIP.................................... 7
2.1 Formation of Partnership.................................... 7
2.2 Partnership Name............................................ 7
2.3 Filing for Partnership...................................... 7
2.4 Principal Place of Business................................. 7
2.5 Limited Nature of Business.................................. 7
2.6 Limited Scope of Partners' Authority........................ 7
2.7 Names and Places of Business of the Partners................ 8
2.8 Term........................................................ 8
2.9 Fiduciary Duties............................................ 8
ARTICLE III CAPITAL CONTRIBUTIONS....................................... 8
3.1 Initial Capital Contributions............................... 8
3.2 Capital Account............................................. 9
3.3 Withdrawals................................................. 9
3.4 Contribution Loans.......................................... 9
3.5 Emergency Loans............................................. 10
3.6 Representation and Warranties............................... 13
ARTICLE IV ALLOCATION OF NET PROFITS AND NET LOSSES.................... 13
4.1 Allocation of Net Profits................................... 13
4.2 Allocation of Net Losses.................................... 14
4.3 Code Section 704(c)......................................... 15
4.4 Special Allocation Provisions............................... 15
4.5 Partnership Interest Transfer and Adjustments............... 17
ARTICLE V DISTRIBUTION OF CASH FLOW................................... 17
5.1 Distributions of Distributable Cash......................... 17
5.2 No Distributions In-Kind.................................... 18
5.3 Limits of Distributions..................................... 18
ARTICLE VI MANAGEMENT OF THE PARTNERSHIP BY THE MANAGING
GENERAL PARTNER; MAJOR DECISIONS............................ 19
6.1 Managing General Partner.................................... 19
6.2 Management Agreement........................................ 20
6.3 Restrictions On Managing General Partner.................... 20
6.4 Meetings, Consents, and Approvals........................... 20
6.5 Time Limits for Exercise of Approval Rights................. 20
6.6 Standards of Approval....................................... 21
6.7 Emergency Authority......................................... 21
6.8 Liability of a Partner...................................... 21
6.9 Indemnity of the Partners................................... 21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
6.10 Reimbursement and Fees...................................... 21
6.11 Limits on Authority......................................... 22
6.12 Contracts with Affiliates................................... 22
6.13 Removal of Managing General Partner......................... 22
ARTICLE VII RESTRICTIONS ON TRANSFERS OF PARTNERSHIP INTERESTS.......... 23
7.1 General Restriction......................................... 23
7.2 Permitted Transfers......................................... 23
7.3 Admission of Substituted Partner............................ 24
ARTICLE VIII PROPERTY SALE; ELECTIVE BUY-SELL AGREEMENT.................. 24
8.1 Property Sale or Buy-sell of Partnership Interests.......... 24
8.2 Determination of Purchase Price............................. 25
8.3 Closing of Purchase and Sale................................ 26
8.4 Release and Indemnity....................................... 26
8.5 Marketing Election.......................................... 26
8.6 Lock-in Period.............................................. 28
ARTICLE IX DEFAULT BUY/SELL AGREEMENT.................................. 28
9.1 Buy/Sell Events............................................. 28
9.2 Rights Arising From a Buy/Sell Event........................ 28
9.3 Determination of the Purchase Price......................... 28
9.4 Non-Defaulting Partner's Option............................. 31
9.5 Closing of Purchase and Sale................................ 31
9.6 Payment of Purchase Price................................... 31
9.7 Release and Indemnity....................................... 31
ARTICLE X FAILURE OF A PARTNER TO BE PROPERLY LICENSED................ 32
10.1 Failure to be Properly Licensed............................. 32
ARTICLE XI BOOKS OF ACCOUNT, RECORDS, REPORTS AND TAX MATTERS.......... 32
11.1 Books and Records........................................... 32
11.2 Inspection Rights........................................... 33
11.3 Reports..................................................... 33
11.4 Bank Accounts............................................... 34
11.5 Tax Matters Partner......................................... 34
11.6 Accounting.................................................. 36
ARTICLE XII DISSOLUTION AND TERMINATION OF THE PARTNERSHIP.............. 37
12.1 Retirement, Withdrawal or Bankruptcy of
Partner; Admission of New Partners.......................... 37
12.2 Events Causing Dissolution.................................. 37
12.3 Winding Up and Liquidation.................................. 37
12.4 Time of Liquidation......................................... 39
12.5 Negative Capital Account Restoration; Recourse Liabilities.. 39
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
12.6 No Third-Party Beneficiary.................................. 39
ARTICLE XIII ARBITRATION OF DISPUTES..................................... 39
13.1 In General.................................................. 39
13.2 Procedures and Discovery.................................... 42
13.3 No Timely Decision.......................................... 42
13.4 Extension of Time........................................... 42
ARTICLE XIV EVENTS OF DEFAULT........................................... 42
14.1 Definitions and Cure Periods................................ 42
ARTICLE XV AMENDMENTS.................................................. 44
ARTICLE XVI MISCELLANEOUS............................................... 44
16.1 Notices..................................................... 44
16.2 Construction of Agreement................................... 45
16.3 Successors and Assigns...................................... 45
16.4 Entire Agreement............................................ 46
16.5 Counterparts and Execution.................................. 46
16.6 Attorneys' Fees............................................. 46
16.7 Severability................................................ 46
16.8 Additional Documents........................................ 46
16.9 No Right to Partition....................................... 47
EXHIBIT "A"
DESCRIPTION OF PROPERTY............................................... 48
EXHIBIT "B"
COPY OF EXECUTED MANAGEMENT AGREEMENT, AS AMENDED..................... 49
EXHIBIT "C"
COPY OF EXECUTED SUBLEASE, AS AMENDED................................. 50
EXHIBIT "D"
MAJOR DECISIONS....................................................... 51
EXHIBIT "E"
REPRESENTATIONS AND WARRANTIES OF THE PARTNERS........................ 55
</TABLE>
<PAGE>
AGREEMENT OF GENERAL PARTNERSHIP
OF
BELL JACKPOT CLUB
A CALIFORNIA GENERAL PARTNERSHIP
THIS AGREEMENT OF GENERAL PARTNERSHIP OF BELL JACKPOT CLUB, a
California general partnership (the "Partnership") is entered into as of
________, 19__ between [BELL JACKPOT CLUB,] L.P., a California limited
partnership ("Bell Club") and _________________, a ______________ corporation
("Santa Anita").
RECITALS
--------
A. WHEREAS, prior to the date hereof the ownership, operation and
management of the Property and the Gaming Club thereon has been conducted by
Bell Club;
B. WHEREAS, certain partners of Bell Club previously granted Santa
Anita an option to acquire a general partnership interest and a limited
partnership interest in Bell Club;
C. WHEREAS, Santa Anita has exercised this option and acquired an
interest in Bell Club as a general and limited partner as specified in the
Option Agreement;
D. WHEREAS, Bell Club has redeemed all of Santa Anita's partnership
interest in Bell Club in exchange for an interest in the assets and liabilities
of Bell Club (including Bell Club's interest in the Gaming Club and Property),
with an interest in capital and profits as described herein, subject to the term
and conditions of the Option Agreement (the assets and liabilities of Bell Club
are referred to herein collectively as the "Assets"); and
E. WHEREAS, Bell Club and Santa Anita have assigned all of their
interests in the Assets to the Partnership in exchange for interests in the
Partnership as specified by this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and in consideration of the mutual
agreements set forth in this Agreement, the parties hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
In addition to the terms otherwise defined herein, the following
definitions shall be applicable to the terms set forth below as used in this
Agreement:
1.1 "Accounting Firm" - The nationally recognized certified public
---------------
accounting firm selected by the Partners.
1.2 "Act" - The California Partnership Act, California Corporations
---
Code Sections 15001-15533, or any successor statute thereto.
1.3 "Affiliate" - Any person or entity which, directly or indirectly,
---------
through one (1) or more intermediaries, (i) Controls, is Controlled by, or is
under common Control with another person or entity, (ii) any principal, partner,
officer, or director of such person or entity, and (iii) any spouse, brother or
sister (whether by whole or half-blood), lineal descendant or ancestor of any
person described in (i) or (ii) above.
1.4 "Agreement" - This Agreement of General Partnership, as it may be
---------
amended from time to time.
1.5 "Arbitrator" - A Qualified Person (as defined in Section 13.1(c))
----------
selected as arbitrator pursuant to Section 13.1 of this Agreement.
1.6 "Assets" - The assets and liabilities of Bell Club, an interest
------
in which Santa Anita has acquired for the redemption of its general and limited
partner interest in Bell Club as provided by the Option Agreement, and which
have been contributed to the Partnership by Bell Club and Santa Anita in
accordance with this Agreement.
1.7 "Bell Club" - [Bell Jackpot Club , L.P.,] a California limited
---------
partnership, and any successor-in-interest thereto.
1.8 "Capital Contribution" - The amount of money and the agreed fair
--------------------
market value at the time of contribution of any property (net of any liabilities
secured by such property that the Partnership is considered or assumed to take
subject to under Section 752 of the Code) contributed to the capital of the
Partnership by a Partner.
1.9 "Code" - The Internal Revenue Code of 1986, as amended from time
----
to time.
2
<PAGE>
1.10 "Contribution Loan" - An advance to the Partnership by a
-----------------
Contribution Loan Partner in accordance with the provisions of Section 3.4.
1.11 "Contribution Loan Partner" - A Partner who has made a
-------------------------
Contribution Loan in accordance with Section 3.4.
1.12 "Control" - "Control" shall mean the ability, whether by the
-------
direct or indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation or the managing
general partner of a partnership. The term "Controls" and "Controlled" shall
have correlative meanings.
1.13 "Corporations Code" - The Corporations Code of the State of
-----------------
California, as amended from time to time.
1.14 "Defaulting Partner" - Any defaulting partner as defined in
------------------
Section 14.1 or for purposes of Article X as defined in Section 10.1.
1.15 "Distributable Cash" - All cash funds of the Partnership derived
------------------
from any source, including any liquidation proceeds, less (i) current charges
and expenses; (ii) accrued charges and expenses; (iii) payments on any
indebtedness of the Partnership; and (iv) reserves for working capital,
contingencies, capital improvements and replacements, all as determined in the
reasonable discretion of the General Partners as a Major Decision pursuant to
Section C of Exhibit "D," and as required by commercial lending institutions.
1.16 "Emergency Expenditure" - Has the meaning provided in the
---------------------
Management Agreement.
1.17 "Emergency Loan" - An advance to the Partnership by an Emergency
--------------
Loan Partner in accordance with the provisions of Section 3.5.
1.18 "Emergency Loan Partner" - A Partner who has made an Emergency
----------------------
Partner Loan to the Partnership in accordance with Section 3.5.
1.19 "Event of Default" - Has the meaning provided in Section 14.1 of
----------------
this Agreement.
1.20 "Fiscal Year" - The calendar year, or portion thereof, as the
-----------
context requires.
1.21 "Gaming Club" - A card club and entertainment center and
-----------
associated restaurant, bar and parking facility located on the Property in the
City of Bell, State of California.
3
<PAGE>
1.22 "General Partners" - Bell Club and Santa Anita, the initial
----------------
General Partners hereunder, or any successor or additional General Partner(s) as
of the date that such additional or successor General Partner(s) becomes a
General Partner pursuant to the terms of this Agreement.
1.23 "Initial Capital Contribution" - The Capital Contribution of
----------------------------
each Partner made pursuant to Section 3.1.
1.24 "Knapps" - James R. Knapp and Gregory J. Knapp.
------
1.25 "Licensed" - Shall mean, with respect to a Partner or a
--------
shareholder or partner of a Partner, possession of all Licenses required by the
applicable authorities to own an interest in the Partnership.
1.26 "Licenses" - Shall mean all of the following:
--------
(a) Such person has obtained or, as the case may be, retains a
gaming license from the City of Bell, State of California (a "City Gaming
License");
(b) The registration of such person's ownership in the
Partnership has been approved or re-approved, as the case may be, by the
Attorney General of the State of California (a "State Gaming License"); and
(c) No condition exists with respect to such person that would
cause the Partnership's application for a liquor license to be denied or
which would cause its liquor license to be revoked or suspended.
1.27 "Lock-in Period" - Means a period commencing on the effective
--------------
date of this Partnership and ending five (5) years thereafter.
1.28 "Major Decisions" - Means any decision specified as such in
---------------
Exhibit "D" or elsewhere in this Agreement.
1.29 "Management Agreement" - Means that certain management agreement
--------------------
as amended from time-to-time and attached as Exhibit "B."
1.30 "Net Profits" and "Net Losses" - The net taxable income and
----------------------------
gains, and net taxable losses and deductions, respectively, of the Partnership,
determined in accordance with the Regulations promulgated pursuant to Code
Section 704, excluding any items specially allocated pursuant to Section 4.4.
1.31 "Operator" - Means Bell Jackpot Casino, L.P., a California
--------
limited partnership in its capacity as operator under the Management Agreement
and any successor-in-interest thereto.
4
<PAGE>
1.32 "Option Agreement" - Means that certain option agreement between
----------------
Santa Anita and certain partners of Bell Club pursuant to which Santa Anita
acquired a general and limited partnership interest in Bell Club, and includes
any side or other agreement relating thereto.
1.33 "Partners" - Means the General Partners. Reference to a Partner
--------
shall mean any one of the Partners.
1.34 "Partnership" - The general partnership organized under this
-----------
Agreement, notwithstanding changes in its membership.
1.35 "Partner Loan" - An advance to a Non-Lending Partner (as defined
------------
in Section 3.5) in accordance with the provisions of Section 3.5(a).
1.36 "Percentage Share" - The following percentage as to each
----------------
Partner:
Santa Anita: 50%
Bell Club: 50%
1.37 "Property" - The approximately 7.5-acre parcel of land and a
--------
42,000 square foot building located at 4901 South Eastern Avenue, City of Bell,
California (Parcel 8 of Parcel Map 11282) as further described in Exhibit "A."
1.38 "Qualified Buyer" - A Licensed person or entity or a person or
---------------
entity who or which has submitted all required applications for the Licenses to
the applicable authorities and thereafter obtains the Licenses within a
reasonable period of time.
1.39 "Regulations" - The Income Tax Regulations promulgated pursuant
-----------
to and in accordance with the Code.
1.40 "Santa Anita" - ___________________, a _________ corporation and
-----------
any successor-in-interest thereto.
1.41 "Santa Anita Adjusted First Priority Capital" - The excess
------------------------------------------- ------
(as of any time) of Santa Anita First Priority Capital over any distributions
-- ----
made toSanta Anita of Distributable Cash in prior periods pursuant to Section
5.1(b) of the Agreement.
1.42 "Santa Anita Adjusted Second Priority Capital" - The excess
-------------------------------------------- ------
(as of any time) of Santa Anita Second Priority Capital over any
-- ----
distributions made to Santa Anita of Distributable Cash in prior periods
pursuant to Section 5.1(c) of the Agreement.
1.43 "Santa Anita Cumulative Preferred Return" - Means an amount
---------------------------------------
determined in each Fiscal Year (or portion thereof), which equals the sum of the
Santa Anita Preferred Return
5
<PAGE>
calculated for such Fiscal Year (or portion thereof); provided, that after the
Santa Anita Adjusted First Priority Capital has been reduced to zero, the Santa
Anita Cumulative Preferred Return thereafter shall also be zero.
1.44 "Santa Anita Daily Preferred Return" - Means an amount determined
----------------------------------
for any day, which equals the product of (i) the Santa Anita Daily Rate times
(ii) the sum of Santa Anita Adjusted First Priority Capital, if any, as of that
day plus Santa Anita Adjusted Second Priority Capital, if any, as of that day.
1.45 "Santa Anita Daily Rate" - Means a rate equal to (i) 10%, divided
----------------------
by (ii) 365 days.
1.46 "Santa Anita First Priority Capital" - Equals Three Million
----------------------------------
Dollars ($3,000,000) as of the closing date of the purchase of a portion of the
Assets from Bell Club by Santa Anita pursuant to the exercise of the option
under the Option Agreement.
1.47 "Santa Anita Preferred Return" - Means an amount, determined for
----------------------------
each Fiscal year (or portion thereof), which equals the sum of the Santa Anita
Daily Preferred Return calculated for each day in such Fiscal Year (or portion
thereof), which Santa Anita Preferred Return shall be increased at the end of
each twelve (12) month period for interest on the unpaid portion of such return
at a rate of 10% per annum, compounded annually.
1.48 "Santa Anita Second Priority Capital" - Equals Two Million
-----------------------------------
Dollars ("$2,000,000") as of the receipt of the option premium by Bell Club
under the Option Agreement. It is the intention of the parties that once Santa
Anita becomes a Partner hereunder, it shall be entitled to the Santa Anita Daily
Preferred Return computed retroactively on the Santa Anita Adjusted Second
Priority Capital from the date of payment of such Two Million Dollars as option
premium, compounded annually at a 10% per annum rate.
1.49 "Sublease Agreement" - Means that certain sublease agreement by
------------------
and between the Partnership and Sublessor, as amended from time-to-time and as
attached as Exhibit "C," which agreement grants the Partnership a subleasehold
and other legal and possessory interest in the Property.
1.50 "Sublessor" - Means Bell Facility Partners, L.P., in its capacity
---------
as landlord under the Sublease Agreement, and any successor-in-interest thereto.
6
<PAGE>
ARTICLE II
FORMATION OF PARTNERSHIP
------------------------
2.1 Formation of Partnership. The parties to this Agreement hereby
------------------------
form a general partnership pursuant to the provisions of the Act.
2.2 Partnership Name. The name of the Partnership shall be Bell
----------------
Jackpot Club, a California general partnership.
2.3 Filing for Partnership. The Partnership shall promptly cause
----------------------
such certificates, documents and fictitious business name statement, if any, to
be executed, delivered, published, filed and recorded within the prescribed
period as may be required by the Act, the State of California or any other
relevant jurisdictions in order to create and maintain the legal existence and
status of the Partnership.
2.4 Principal Place of Business. The principal place of business of
---------------------------
the Partnership shall be located at [One Brookhollow Drive, Santa Ana,
California 92705], or at such other place or places in Southern California as
the Managing General Partner may hereafter determine.
2.5 Limited Nature of Business. The express, limited and sole
--------------------------
purpose of the Partnership shall be (i) to acquire and own a subleasehold or
other legal or possessory interest in the Property, (ii) to own, operate,
manage, maintain, market, hold for investment, sell and otherwise realize the
economic benefit from the Property (including any improvements thereon) and the
Gaming Club, and (iii) to engage in any and all activities appropriate in
furtherance thereof, and to do all things incidental to or in furtherance of the
above-enumerated purposes, but in all cases such nature of business and purpose
of the Partnership shall be subject to the terms of this Agreement.
2.6 Limited Scope of Partners' Authority. Except as otherwise
------------------------------------
expressly and specifically provided in this Agreement, no Partner shall have any
authority to act for, bind, or assume any obligations or responsibility on
behalf of, any other Partner or the Partnership. Any Partner who violates the
restrictions contained in this Section 2.6 agrees to indemnify and defend the
Partnership and the other Partner for any losses and damages (including
reasonable attorney fees and court costs) incurred by the Partnership and the
other Partner arising from such violation. This Agreement shall not be deemed
to, and does not, create a Partnership between the Partners with respect to any
activity whatsoever other than the activities within the limited scope and
business purpose of the Partnership.
7
<PAGE>
2.7 Names and Places of Business of the Partners:
--------------------------------------------
(a) Bell Club. The name and place of business of of Bell Club are
---------
as follows:
_______________________
_______________________
_______________________
_______________________
_______________________
(b) Santa Anita. The name and place of business of Santa Anita
are as follows:
_______________________
_______________________
_______________________
_______________________
_______________________
2.8 Term. The term of the Partnership shall commence on the date
----
hereof and, unless extended by agreement of both Partners or terminated earlier
pursuant to this Agreement, shall continue until December 31, 2050.
2.9 Fiduciary Duties. In view of the limited purposes of the
----------------
Partnership as set forth in Section 2.5 hereof, no Partner nor any Affiliate
shall have, by reason of this Agreement, any fiduciary obligations with respect
to the Partnership or to the other Partner insofar as making other investment
opportunities available to the Partnership or the other Partner. Each Partner
and its Affiliates may, notwithstanding this Agreement, engage in whatever
activities such Partner or Affiliate(s) may choose, whether the same are
competitive with the Partnership or otherwise, without having or incurring any
obligation by reason of this Agreement to offer any interest in such activities
to the Partnership or to the other Partner.
ARTICLE III
CAPITAL CONTRIBUTIONS
---------------------
3.1 Initial Capital Contributions. The Partners each shall make an
-----------------------------
Initial Capital Contribution to the Partnership of their interests in the
Assets, which contributions shall be valued and credited to their Capital
Accounts as follows:
Partner Dollar Amount of Initial Contribution
------- -------------------------------------
Santa Anita: $5,000,000
Bell Club: 1,666,666
----------
8
<PAGE>
Total: $6,666,666
==========
Of such $6,666,666 of initial Partnership capital, $3,333,333 shall be
First Priority Capital, and $3,333,333 shall be Second Priority Capital of the
Partners allocated as follows:
<TABLE>
<CAPTION>
Partner First Priority Capital Second Priority Capital
------- ---------------------- -----------------------
<S> <C> <C>
Santa Anita: $3,000,000 $2,000,000
Bell Club: 333,333 1,333,333
---------- ----------
Total: $3,333,333 $3,333,333
========== ==========
</TABLE>
3.2 Capital Account. A capital account shall be maintained for each
---------------
Partner in accordance with the provisions of Section 1.704-1(b) of the
Regulations. Except as otherwise provided in Section 1.704-1(b) of the
Regulations, the balance of each Partner's capital account shall consist of
Capital Contributions made by such Partner, increased by the amount of any Net
Profits and any individual items of income or gain allocated to such Partner,
and decreased by any distributions to such Partner and further decreased by the
amount of any Net Losses and any individual items of deduction or loss allocated
to such Partner.
3.3 Withdrawals. Except as otherwise provided in this Agreement, the
-----------
Capital Contributions of the Partners shall not be subject to withdrawal unless
such withdrawal is approved by all of the Partners.
3.4 Contribution Loans. If (i) the Partners determine and agree as a
------------------
Major Decision pursuant to Section A of Exhibit "D" that the Partnership is in
need of funds to finance its current or projected financial requirements or (ii)
either Partner reasonably determines that an Emergency Expenditure is required
pursuant to the Management Agreement (but only to the extent the principal
amount of all Emergency Loans, in the aggregate, would exceed Three Hundred
Thousand Dollars ($300,000) if such Emergency Expenditure were funded by
Emergency Loans pursuant to Section 3.5), Partnership funds are otherwise
unavailable therefor, and such Partner notifies the other Partner of the nature
and amount thereof, then the Managing General Partner shall give written notice
within five (5) business days of such determination or notice of the amount of
such needed funds, each Partner's share thereof, the Partnership's actual and
projected cash obligations, cash on hand, and projected sources and amounts of
future cashflow and shall specify a contribution loan date ("Contribution Loan
Date") (which shall not be less than 10 business days following the effective
date of such notice) upon which date each Partner shall have the right but not
the obligation to advance to the Partnership such Partner's Percentage Share of
such cash deficit ("Cash Deficit Amount") as
9
<PAGE>
a loan to the Partnership (a "Contribution Loan"). If any Partner fails to make
its Contribution Loan to the Partnership within the ten (10) day period
specified above, one or more of the Partners which have made their Contribution
Loans (each a "Contribution Loan Partner"), shall have the right but not the
obligation to advance such funds to the Partnership by increasing the amount of
their Contribution Loans in proportion to the Percentage Shares of the
Contribution Loan Partners so electing to increase their Contribution Loans.
The making of a Contribution Loan by any Partner will not affect the Percentage
Shares of the Partners. If the total amount of Contribution Loans made to the
Partnership pursuant to the above notice does not equal to the Cash Deficit
Amount, then an amount equal to the proceeds of such Contribution Loans will be
returned to the Partners.
Each Contribution Loan shall bear interest at the Agreed Rate (as
defined in Section 3.5(a)). After all Emergency Loans have been repaid in full,
each Contribution Loan shall be repaid, on a first priority basis, out of any
distributions to which the Partners otherwise would be entitled pursuant to
Article V hereof, which amounts shall be applied first to interest and then to
principal until each Contribution Loan is paid in full. In the event
Contribution Loans are made at different times pursuant to separate notices,
then all interest and principal on the Contribution Loans shall be repaid in
inverse chronological order with all interest and principal on the latest
Contribution Loans being paid in full before any interest or principal on
earlier Contribution Loans is repaid pursuant to this Section 3.4 or Section
12.3(b) hereof.
3.5 Emergency Loans. If either Partner reasonably determines that an
---------------
Emergency Expenditure is required pursuant to the Management Agreement (but only
to the extent the principal amount of all Emergency Loans would not exceed, in
the aggregate, Three Hundred Thousand Dollars ($300,000) if such Emergency
Expenditure were funded by Emergency Loans pursuant to this Section 3.5),
Partnership funds are otherwise unavailable therefor, and such Partner notifies
the other Partner of the nature and amount thereof (which amount, the "Emergency
Cash Deficit," shall not exceed the excess, if any, of Three Hundred Thousand
Dollars ($300,000) over the then outstanding principal amount of any prior
----
Emergency Loans), then the Managing General Partner shall give written notice
within five (5) business days of such notice of the amount of such needed funds,
each Partner's share thereof, the Partnership's actual and projected cash
obligations, cash on hand, and projected sources and amounts of future cashflow
and shall specify an emergency loan contribution date ("Emergency Loan Date")
(which shall not be less than 10 business days following the effective date of
such notice) upon which date each Partner shall have the obligation to advance
to the Partnership such Partner's Percentage Share of such Emergency Cash
Deficit as a loan to the Partnership (an "Emergency Loan").
10
<PAGE>
The making of an Emergency Loan by any Partner will not affect the Percentage
Shares of the Partners.
Each Emergency Loan shall bear interest at the Agreed Rate (as defined
in Section 3.5(a)). Each Emergency Loan shall be repaid, on a first priority
basis, prior to the repayment of any interest on, or principal of, Contribution
Loans, out of any subsequent distributions to which the Partners otherwise would
be entitled in accordance with Article V hereof, which amounts shall be applied
first to interest and then to principal until each Emergency Loan is paid in
full. In the event Emergency Loans are made at different times pursuant to
separate notices, then all interest and principal on the Emergency Loans shall
be repaid in reverse chronological order with all interest and principal on
latest Emergency Loans being paid in full before any interest or principal on
earlier Emergency Loans is repaid pursuant to this Section 3.5 or Section
12.3(b) hereof.
If any Partner (the "Non-Lending Partner") fails to advance all or any
portion of the Emergency Cash Deficit required to be made by such Partner
pursuant to this Section 3.5 ("Delinquent Emergency Loan"), and provided the
other Partner (the "Emergency Loan Partner") has advanced to the Partnership all
of the Emergency Cash Deficit required to be lent by such Emergency Loan Partner
pursuant to Section 3.5, then, in addition to any action at law or equity to sue
the Non-Lending Partner for the amount of the Delinquent Emergency Loan plus
interest from the due date thereof at the Agreed Rate, the Emergency Loan
Partner shall have the right to (i) require the Partnership to return to the
Emergency Loan Partner an amount equal to the proceeds of its Emergency Loan, or
(ii) make a recourse Partner Loan to the Non-Lending Partner under the terms
described below, and if the Emergency Loan Partner makes such Partner Loan, the
Emergency Loan Partner may thereafter also elect to give the Non-Lending Partner
written notice ("Buy/Sell Delinquent Contribution Notice") of its intent to
treat the failure of the Non-Lending Partner to advance the Delinquent Emergency
Loan as a Buy/Sell Event pursuant to Section 9.1. The terms of the Partner Loan
are as follows:
(a) Partner Loan. The Emergency Loan Partner may advance to the
------------
Partnership, in cash within ten (10) business days following the Emergency
Loan Date, an amount equal to the Delinquent Emergency Loan, and such
advance shall be treated as a recourse loan ("Partner Loan") by the
Emergency Loan Partner to the Non-Lending Partner bearing interest at a
rate equal to the lesser of (i) the prevailing B of A commercial prime rate
plus five (5) percentage points, adjusted and compounded annually during
the term of such Partner Loan, or (ii) the maximum, nonusurious rate then
permitted by law for such loans (the "Agreed Rate"). Each Partner Loan
shall be due and payable ninety (90) days from the date such loan was
advanced. As of the effective date
11
<PAGE>
of any such advance of a Partner Loan, the Non-Lending Partner shall be
deemed to have advanced an amount equal to the principal amount of such
Partner Loan to the Partnership as an Emergency Loan pursuant to this
Section 3.5. Notwithstanding the provisions of Section 3.4, Section 3.5,
Article V, or Article XII relating to the repayment of Contribution Loans,
Emergency Loans and/or distributions of Distributable Cash, until any and
all Partner Loans advanced to a Non-Lending Partner are repaid in full,
such Non-Lending Partner shall draw no further distributions from the
Partnership or payments of interest or principal on any Contribution Loans
and/or Emergency Loans made to the Partnership (including the deemed
"Emergency Loan" corresponding to the Partner Loan) by such Non-Lending
Partner and all cash or property otherwise distributable or payable with
respect to such Non-Lending Partner's Partnership interest and any
Contribution Loans and Emergency Loans made to the Partnership by such Non-
Lending Partner shall be distributed or otherwise paid to the Emergency
Loan Partner that has advanced Partner Loan(s) to such Non-Lending Partner,
with such funds being applied first to reduce any and all interest accrued
on such Partner Loan(s) and then to reduce the principal amount thereof.
Any amounts so applied shall be treated, for all purposes under this
Agreement, as having actually been distributed to the Non-Lending Partner
in the case of a distribution, or paid to the Non-Lending Partner in the
case of a payment attributable to any Contribution Loan or Emergency Loan
made by the Non-Lending Partner (which payment shall be treated as if
actually paid to Non-Lending Partner in satisfaction of any interest and
principal otherwise payable on such Contribution Loans and/or Emergency
Loans) and used by such Non-Lending Partner to repay such outstanding
Partner Loan(s). To secure the repayment of any and all Partner Loans made
on behalf of a Non-Lending Partner, such Non-Lending Partner hereby grants
a security interest in favor of the Emergency Loan Partner advancing such
Partner Loan(s) in and to all distributions or payments to which such Non-
Lending Partner may be entitled under this Agreement whether as a Partner
or lender hereunder, and hereby irrevocably appoints such Emergency Loan
Partner, and any of such Emergency Loan Partner's respective agents,
officers, or employees, as such Non-Lending Partner's attorney-in-fact,
with full power to prepare, executed, acknowledge, and deliver, as
applicable, all documents, instruments, and/or agreements memorializing
and/or securing such Partner Loan, including, without limitation, such
Uniform Commercial Code financing and continuation statements, mortgages,
and other security instruments as may be reasonably appropriate to perfect
and continue such security interest in favor of such Emergency Loan
Partner.
12
<PAGE>
If, upon the maturity of a Partner Loan (taking into account any
agreed upon extensions thereof), any principal thereof and/or accrued interest
thereon remains outstanding, the Emergency Loan Partner advancing such Partner
Loan may elect any one (1) of the following options: (i) to demand immediate
repayment of such Partner Loan (or portion thereof) and pursue its rights and
remedies relating thereto; (ii) to renew such Partner Loan (or portion thereof),
plus any unpaid accrued interest thereon, pursuant to the terms and provisions
of this Section 3.5; or (iii) to institute the buy/sell procedure contained in
Section 9.1(b). Any such Emergency Loan Partner may elect any of the options
set forth in the immediately preceding sentence by giving written notice of such
election to such Non-Lending Partner at any time following such maturity date.
Notwithstanding the foregoing, such Non-Lending Partner shall have the right to
repay any Partner Loan (together with any and all accrued, unpaid interest
thereon) within thirty (30) days following the effective date of such Emergency
Loan Partner's written notice setting forth the Emergency Loan Partner's
election to institute the buy/sell election and thereby avoid the buy/sell
procedures of Section 9.1(b).
3.6 Representation and Warranties. The Partners hereby make the
-----------------------------
representations and warranties set forth in Exhibit "E" attached hereto.
ARTICLE IV
ALLOCATION OF NET PROFITS AND NET LOSSES
----------------------------------------
4.1 Allocation of Net Profits. After giving effect to any special
-------------------------
allocations set forth in Section 4.4, Net Profits for any Fiscal Year shall be
allocated in the following order and priority:
(a) First, to the extent of, and in proportion to, the amount by
which the cumulative amount of Net Losses which have been allocated to the
Partners for the current and all prior fiscal years pursuant to Section
4.2(e) exceeds the cumulative amount of Net Profits allocated pursuant to
this paragraph (a);
(b) Second, to the extent of, and in proportion to, the amount by
which the cumulative amount of Net Losses which have been allocated to the
Partners for the current and all prior fiscal years pursuant to Section
4.2(d) exceeds the cumulative amount of Net Profits allocated pursuant to
this paragraph (b);
(c) Third, to the extent of, and in proportion to, the amount by
which the cumulative amount of Net Losses which have been allocated to the
Partners for the current and all
13
<PAGE>
prior fiscal years pursuant to Section 4.2(c) exceeds the cumulative amount
of Net Profits allocated pursuant to this paragraphs (c);
(d) Fourth, to the extent of, and in proportion to, the amount by
which the cumulative amount of Net Losses which have been allocated to the
Partners for the current and all prior fiscal years pursuant to Section
4.2(b) exceeds the cumulative amount of Net Profits allocated pursuant to
this paragraph (d); and
(e) Fifth, any remaining Net Profits shall be allocated among the
Partners in the same proportion that cash has been or would be distributed
to them for such year pursuant to Article V hereof. Any Net Profits
allocated pursuant to this paragraph (d) shall first be allocated 90% to
Santa Anita and 10% to Bell Club until Santa Anita's Adjusted First
Priority Capital has been reduced to zero; next 60% to Santa Anita and 40%
to Bell Club until Santa Anita's Adjusted Second Priority Capital has been
reduced to zero; and thereafter 50% to Santa Anita and 50% to Bell Club;
provided, that, if Santa Anita's Adjusted First Priority Capital and/or
Adjusted Second Priority Capital is reduced to zero for any fiscal year,
then any Net Profits to be allocated among the Partners pursuant to this
paragraph (e) for such year shall be allocated in accordance with the
interim closing of the Partnership's books method in accordance with
Section 4.5 hereof.
4.2 Allocation of Net Losses. After giving effect to the special
------------------------
allocations set forth in Section 4.4, Net Losses for any Fiscal Year shall be
allocated among the Partners as follows:
(a) First, to the extent of, and in proportion to the amount by
which the cumulative Net Profits allocated to the Partners pursuant to
Section 4.1(e) reduced by any cumulative distribution made to the Partners
pursuant to Article V, measured for the current and all prior fiscal years,
exceeds the cumulative Net Losses previously allocated pursuant to this
paragraph (a);
(b) Second, 50% to Santa Anita and 50% to Bell Club until each Partner
has been allocated cumulative Net Losses pursuant to this paragraph (b) for
the current and all prior fiscal years equal to any Capital Contributions
(other than the Initial Capital Contributions) made by such Partner to the
Partnership;
(c) Third, 60% to Santa Anita and 40% to Bell Club until Santa Anita
has been allocated cumulative Net Losses, for the current and all prior
fiscal years pursuant to this paragraph (c) equal to Santa Anita's Adjusted
Second Priority Capital as of the close of the current year;
14
<PAGE>
(d) Fourth, 90% to Santa Anita and 10% to Bell Club until Santa Anita
has been allocated cumulative Net Losses for the current and all prior
fiscal years pursuant to this paragraph (d) equal to Santa Anita's Adjusted
First Priority Capital as of the close of the current year; and
(e) Last, any remaining Net Losses shall be allocated 50% to Santa
Anita and 50% to Bell Club.
4.3 Code Section 704(c). In accordance with Code Section 704(c) and
-------------------
the Regulations thereunder, profits, gains, losses and deductions with respect
to any property contributed to the capital of the Partnership shall be allocated
among the Partners so as to take account of any variation between the adjusted
basis of such property to the Partnership for federal income tax purposes and
its agreed fair market value as of the date of such contribution. Allocations
pursuant to this Section 4.3 are solely for purposes of federal, state and local
taxes and shall not otherwise affect, or in any way be taken into account in
computing, any Partner's capital account or share of profits, gains, losses and
deductions or other items or distributions pursuant to any provisions of this
Agreement.
4.4 Special Allocation Provisions.
-----------------------------
(a) Definitions. The following definitions shall apply to the
-----------
capitalized terms used in this Section 4.5:
(i) "Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(b)(1) and (c) of the Regulations.
(ii) "Nonrecourse Liability" has the meaning set forth in
Section 1.752-1(a)(2) of the Regulations.
(iii) "Partner Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
(iv) "Partner Nonrecourse Deductions" has the meaning set
forth in Section 1.704-2(i)(1) of the Regulations.
(v) "Partnership Minimum Gain" has the meaning set forth in
Regulations Sections 1.704-2(b)(2) and (d)(1).
(b) Minimum Gain Chargeback. Notwithstanding any other provision
-----------------------
of this Article IV, if there is a net decrease in Partnership Minimum Gain
during any fiscal year of the Partnership, each Partner shall be specially
allocated items of income and gain for such year (and, if necessary,
subsequent years) in an amount equal to the
15
<PAGE>
portion of such Partner's share of the net decrease in Partnership Minimum
Gain as determined in accordance with Section 1.704-2(g) of the
Regulations. Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined
in accordance with Section 1.704-2(f)(6). This Paragraph (b) is intended
to comply with the minimum gain chargeback requirement in Section 1.704-
2(f) of the Regulations and shall be interpreted consistently therewith.
(c) Partner Minimum Gain Chargeback. Notwithstanding any other
-------------------------------
provision of this Article IV (except Paragraph (b) above), if there is a
net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse
Debt during any Partnership fiscal year, each Partner who has a share of
the Partner Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704- 2(i)(5), shall be
specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to the portion of
such Partner's share of the net decrease in Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(5). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be
so allocated shall be determined in accordance with Section 1.704-2(i)(4)
of the Regulations. This Paragraph (c) is intended to comply with the
minimum gain chargeback requirement in such Section of the Regulations and
shall be interpreted consistently therewith.
(d) Qualified Income Offset. Except as provided in Section
-----------------------
4.4(b) and (c), if any Partner unexpectedly receives any adjustments,
allocations or distributions described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and gain shall
- - - -
be specially allocated to each such Partner in an amount and manner in
accordance with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d),
-
which are sufficient to eliminate, to the extent required by the
Regulations, the negative capital account balance of such Partner as
quickly as possible; provided, however, that an allocation pursuant to this
Section 4.5(d) shall be made if and only to the extent that such Partner
would have a negative capital account balance in excess of such sum after
all other allocations provided for in this Article IV have been tentatively
made as if Section 4.5(d) were not in this Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
----------------------
fiscal year or other period shall be
16
<PAGE>
specially allocated to the Partners in accordance with their Percentage
Shares.
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse
------------------------------
Deductions for any fiscal year or other period shall be specially allocated
to the Partner who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(2).
(g) Code Section 754 Adjustment. To the extent an adjustment to
---------------------------
the adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2) (iv)(m), to be taken into account in determining the
-
Partners' capital accounts, the amount of such adjustment to the capital
accounts shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases such basis)
and such gain or loss shall be specially allocated to the Partners in a
manner consistent with the manner in which their capital accounts are
required to be adjusted pursuant to such Section of the Regulations.
4.5 Partnership Interest Transfer and Adjustments. In the event of a
---------------------------------------------
transfer of any or all of an interest in the Partnership in accordance with this
Agreement at any time other than at the end of the Partnership's fiscal year or
in the event of any other change in a Partner's interest in the Partnership
within the meaning of Section 706(d) of the Code, then the profits, gains,
losses, deductions and credits of the Partnership for such fiscal year shall be
allocated between or among the respective parties or the Partners, as the case
may be, in accordance with the interim closing of the Partnership's books method
described in Section 1.706-1(c)(2)(ii) of the Regulations or any applicable
successor thereto, and the capital account of the transferor Partner that is
attributed to the transferred interest shall be determined and maintained in
accordance with the provisions of Section 1.704-1(b)(2)(iv)(1) of the
-
Regulations.
ARTICLE V
DISTRIBUTION OF CASH FLOW
-------------------------
5.1 Distributions of Distributable Cash. Within twenty-five (25)
-----------------------------------
days after each month and after any repayment of Emergency Loans pursuant to
Section 3.5 and Contribution Loans pursuant to Section 3.4 (both in the order
therein provided), Distributable Cash, if any, for that month shall be
distributed to the Partners in the following order of priority:
17
<PAGE>
(a) First, 90% to Santa Anita and 10% to Bell Club until Santa
Anita has received cumulative distributions pursuant to this paragraph (a)
for the current and prior periods equal to the Santa Anita Cumulative
Preferred Return;
(b) Second, 90% to Santa Anita and 10% to Bell Club until Santa
Anita has received cumulative distributions pursuant to this paragraph (b)
for the current and prior periods equal to the Santa Anita First Priority
Capital;
(c) Third, 60% to Santa Anita and 40% to Bell Club until Santa
Anita has received cumulative distributions pursuant to this paragraph (c)
for the current and prior periods equal to the Santa Anita Second Priority
Capital; and
(d) Thereafter, to the Partners in proportion to their Percentage
Shares.
5.2 No Distributions In-Kind. No Partnership asset shall be
------------------------
distributed to any Partner in-kind unless both Partners consent in advance to
such distribution and the value thereof, which consent may be granted or
withheld in each Partner's sole discretion.
5.3 Limits of Distributions. Notwithstanding the foregoing,
-----------------------
distributions to the Partners under this Article V shall be subject to the
following special limitations:
(a) No distribution shall be made by the Partnership if the
Partnership's assets shall not exceed its current liabilities after the
distribution;
(b) No distribution shall be made by the Partnership if the
Partnership is in default with respect to any indebtedness or liability of
the Partnership, but in no event will any distribution be made until all
Emergency Loans and Contribution Loans have been repaid in full;
(c) No distribution shall be made if, in the reasonable judgment
of the General Partners as a Major Decision pursuant to Section 6.3 such
distribution will in any way jeopardize or limit the business of the
Partnership; and
(d) No Partner shall have the right to demand or receive property
other than money upon any distribution, and no Partner may be compelled to
accept a distribution of any asset in kind in lieu of a proportionate
distribution of money being made to other Partners.
18
<PAGE>
ARTICLE VI
MANAGEMENT OF THE PARTNERSHIP BY THE
------------------------------------
MANAGING GENERAL PARTNER; MAJOR DECISIONS
-----------------------------------------
6.1 Managing General Partner. The Partners hereby designate Bell
------------------------
Club as the Managing General Partner of the Partnership. Bell Club shall
continue to serve as the Managing General Partner until (i) the Partners
mutually agree that Bell Club shall cease to serve as the Managing General
Partner; (ii) the Partnership is dissolved and wound up in accordance with the
provisions of Article XII hereof; or (iii) Bell Club is removed as Managing
General Partner pursuant to Section 6.13 below. Subject to the approval of the
Partner who is not the Managing General Partner of Major Decisions as required
in Exhibit D and to other limitations (including without limitation, other
requirements for approval of, or decision by, the Partners hereof) set forth in
this Agreement, the day-to-day management of the Partnership shall rest with and
remain the sole obligation and responsibility of the Managing General Partner.
The Managing General Partner shall devote itself to the business and purposes of
the Partnership to the extent necessary for the efficient carrying on thereof,
without compensation. Whenever reasonably requested by the other Partner, the
Managing General Partner shall render a just and faithful accounting of all
dealings and transactions relating to the business of the Partnership. The acts
of the Managing General Partner shall bind the Partners and the Partnership when
such acts are within the scope of the Managing General Partner's authority
hereunder. The Managing General Partner, at the expense and on behalf of the
Partnership, shall implement or cause to be implemented all decisions approved
by the Partners, and shall conduct or cause to be conducted the routine day-to-
day management of the business and the affairs of the Partnership in accordance
with and as limited by this Agreement.
The Managing General Partner shall use such Partner's reasonable
efforts to carry out the business of the Partnership and shall devote such time
to the partnership as is necessary, in the reasonable discretion of the Managing
General Partner, for the efficient operation of the Partnership business.
Without limiting the generality of the following grant of authority, but subject
to the approval of the other Partner in the case of any action constituting a
Major Decision and subject to any other limitation contained in this Agreement,
the Managing General Partner shall have full power and authority to manage all
facets of the business of the Partnership.
The provisions of this Section 6.1 shall not be construed to bar the
Managing General Partner from delegating responsibility for day-to-day
management of the Property and Gaming Club to the Operator pursuant to the
Management Agreement.
19
<PAGE>
6.2 Management Agreement. The Partnership has retained an Affiliate
--------------------
of Bell Club to act as operator ("Operator") of the Gaming Club pursuant to a
Management Agreement, and attached as Exhibit "B" hereof (the "Management
Agreement"). The Managing General Partner has thereby delegated day-to-day
management and operation of the Gaming Club to Operator subject to the terms and
limitations set forth in the Management Agreement. The Partners hereby
expressly authorize and approve such delegation and the Management Agreement
governing the terms of such delegation.
Any decision relating to the Management Agreement and the
Partnership's relationship with Operator shall be a Major Decision pursuant to
Section C of Exhibit "D."
6.3 Restrictions On Managing General Partner. All "Major Decisions"
----------------------------------------
as defined in Exhibit "D" or elsewhere in this Agreement with respect to the
Partnership's business and operations shall require the approval of the other
Partner. Accordingly, the Managing General Partner shall not have the right or
power to make any commitment or engage in any undertaking on behalf of the
Partnership with respect to a Major Decision unless and until such commitment or
undertaking has been approved by the other Partner in accordance with the
provisions of Exhibit "D" except as expressly provided in this Agreement.
Although the Managing General Partner generally shall be the initiating Partner
for purposes of setting forth proposals and actions to be taken by the
Partnership, the Managing General Partner agrees to provide the other Partner
any reasonably available information with respect to Major Decisions.
6.4 Meetings, Consents, and Approvals. Meetings of the Partners may
---------------------------------
be called (on at least five (5) business days' prior written notice) by any
Partner for the purpose of discussing and/or voting upon the matters described
in this Agreement. Any Partner may either seek the written vote of the other
Partner on any proposed matter by written consent without a meeting or may call
a meeting of the Partners to vote thereon.
6.5 Time Limits for Exercise of Approval Rights. Whenever in this
-------------------------------------------
Agreement the consent or approval of a Partner is required and unless a
different time limit is provided in this Agreement, such consent or approval
shall be promptly considered and acted upon, but in any event within no more
than ten (10) business days (except for thirty (30) days for any action required
to be taken by Santa Anita's Board of Directors) in each case following receipt
or deemed receipt of written notice of the item to be approved or disapproved
and any reasonable supporting material in the possession of the Partner or its
Affiliate requesting such approval. The failure of the Partner expressly to
disapprove of any item within such 10 business day (or 30-day) period shall
conclusively be deemed to be an approval of the item specified in the notice.
20
<PAGE>
6.6 Standards of Approval. Except as otherwise expressly provided
---------------------
elsewhere in this Agreement, any consent or approval under this Agreement
including, but not limited to, this Article VI, shall not be unreasonably
withheld or delayed and any refusal to consent or to approve shall be in writing
and shall specify with particularity the reason therefor. However, whenever in
this Agreement any Partner is given the right to consent or refuse to consent or
to approve or disapprove in its sole discretion, said Partner may disapprove
arbitrarily and without reason or refuse to consent arbitrarily and without any
reason and need not specify in writing any reason therefor.
6.7 Emergency Authority. Notwithstanding any other provision of this
-------------------
Agreement, either Partner shall have the right to take such action as either
Partner, in either Partner's reasonable judgment, deems necessary for the
protection of life or health or the preservation of Partnership assets if, under
the circumstances in the good faith judgment of either Partner, there exists an
emergency or other situation requiring an immediate decision which should not
reasonably be delayed until the approval of the other Partner is obtained. The
Partner shall notify the other Partner of such action contemporaneously
therewith or as soon as reasonably practicable thereafter.
6.8 Liability of a Partner. The Partners shall not be liable or
----------------------
accountable in damages or otherwise to the Partnership or to the other Partner
for any error of judgment or mistake of fact or law or for anything that the
Partners may do or refrain from doing hereafter except in the case of willful
misconduct or gross negligence or a breach of this Agreement by such Partner.
6.9 Indemnity of the Partners. The Partnership does hereby indemnify
-------------------------
and agree to hold the Partners wholly harmless from and against any loss,
expense or damage suffered by the Partner by reason of anything which a Partner
may do or refrain from doing hereafter for and on behalf of the Partnership and
in furtherance of its interest; provided, however, that the Partnership shall
not be required to indemnify a partner from any loss, expense or damage which
the Partner may suffer as a result of the Partner's willful misconduct or gross
negligence or a breach of this Agreement by such Partner.
6.10 Reimbursement and Fees. Except as otherwise provided in this
----------------------
Agreement, none of the Partners nor any Affiliates thereof shall be paid any
compensation for rendering services to the Partnership or be reimbursed for
general and administrative expenses and/or overhead. Each Partner shall be
reimbursed, without reduction to such Partner's Capital Account by the
Partnership for reasonable out-of-pocket expenses incurred by such Partner on
behalf of the Partnership in connection with the business and affairs of the
Partnership for items that directly relate to the purpose of the Partnership as
provided by Section 2.5.
21
<PAGE>
6.11 Limits on Authority. The Managing General Partner shall have
-------------------
the sole and exclusive right, obligation and authority to manage the day-to-day
management of the Partnership. Except as otherwise expressly provided in this
Agreement, the other Partner, acting alone, shall not have any authority to act
for, undertake or assume any obligations or responsibility on behalf of the
Managing General Partner or Partnership. Notwithstanding the foregoing, and
without limiting the Managing General Partner's liability to the other Partner
for acting without authority under this Agreement if such action constitutes a
Major Decision or otherwise expressly requires the other Partner's approval
pursuant to this Agreement, no person dealing with the Partnership shall be
required to inquire into or verify the power and authority of the Managing
General Partner to act on behalf of the Partnership, and such person shall be
entitled to rely upon any act or agreement of the Managing General Partner.
6.12 Contracts with Affiliates. With the exception of the Management
-------------------------
Agreement and the Sublease Agreement, the Partnership shall not enter into any
other contract, agreement or other arrangement with a Partner or an Affiliate of
the Partner or the Knapps without the prior written consent of the other Partner
which cannot be unreasonably withheld.
6.13 Removal of Managing General Partner. The other Partner shall
-----------------------------------
have the right, to be exercised by written notice to the Managing General
Partner, to remove the Managing General Partner and to take over the duties of
the Managing General Partner of the Partnership at such time as:
(a) The Managing General Partner becomes a Defaulting Partner by
reason of its failure to make required Emergency Loans to the Partnership
under Section 3.5, if such failure is not cured within ten (10) calendar
days after written notice thereof is given to the Managing General Partner
by the other Partner; or
(b) The Managing General Partner commits any act or omission
constituting an Event of Default hereunder.
Notwithstanding anything to the contrary herein, in the event that the
Managing General Partner subsequently cures any and all Events of Default
hereunder and provides the other Partner with written notice and evidence of
such cure, then the former Managing General Partner shall thereafter have all of
the rights of the Managing General Partner under this Agreement from and after
the date the other Partner receives such notice and evidence of cure from the
former Managing General Partner, and the Managing General Partner shall be re-
instated as such.
22
<PAGE>
ARTICLE VII
RESTRICTIONS ON TRANSFERS
-------------------------
OF PARTNERSHIP INTERESTS
------------------------
7.1 General Restriction. Except as expressly provided in this
-------------------
Article VII or Section 3.5 (relating to Partner Loans), no Partner may sell,
exchange, assign, transfer, pledge, mortgage, encumber, grant a security
interest in, or otherwise dispose of or hypothecate directly or indirectly
(collectively, a "Transfer") all or a portion of its interest in the
Partnership. If at any time a Partner is a corporation or partnership, then an
indirect transfer of an interest in such Partner (including the admission of any
additional equity members of such Partner) or in any other entity owning,
directly or indirectly through one or more other entities, an equity interest in
such Partner, shall be treated as a Transfer for this purpose. Any purported
Transfer in violation of this Article VII shall be void, of no force or effect
whatever, and shall constitute an Event of Default.
7.2 Permitted Transfers. Subject to Section 7.3, and provided such
-------------------
Transfer does not adversely effect the status of the Licenses, each Partner may
Transfer all, but not less than all, of its interest in the Partnership to an
Affiliate without the consent of the other Partner; provided, however, that no
Transfer to an Affiliate shall relieve the transferring Partner of its
obligations under this Agreement; provided further that in the case of Santa
Anita, either Realty or Operating Company (as defined below) or, in the case of
Bell Club, the Knapps and Knapp Family Members (as defined below) own, directly
or indirectly, at least a 51% interest in the capital and profits of such
Affiliate. In the case of an indirect Transfer, a shareholder or partner of a
Partner may Transfer, directly or indirectly, all or any portion of its interest
in such Partner or in any entity owning, directly or indirectly through one or
more entities, an equity interest in such Partner, provided that (i) in the case
of Santa Anita, Santa Anita Operating Company, a Delaware corporation
("Operating") or Santa Anita Realty Enterprises, Inc., a Delaware corporation
("Realty") is in Control of the entity to which the indirect Transfer has
occurred and Realty and Operating own, directly or indirectly, in the aggregate
at least a 51% interest in the profits and capital of such entity; or (ii) in
the case of Bell Club, one or both of the Knapps is in Control of the entity to
which the indirect Transfer has occurred and the Knapps and Knapp Family Members
own, directly or indirectly, in the aggregate at least a 51% interest in the
profits and capital of such entity. In all other cases, any Transfer shall
require the prior written consent of the other Partner, which consent may be
granted or withheld in such Partner's sole discretion. It is the intention of
this Section 7.2 that, without the consent of the other Partner which can be
unreasonably withheld, neither Partner may, directly or indirectly, cause by way
of transfer, admission of equity participants, or otherwise, in the case of
23
<PAGE>
Santa Anita, both Realty and Operating to lose Control of Santa Anita or fall
below, in the aggregate, a 51% economic interest in Santa Anita; or, in the case
of Bell Club, both of the Knapps to lose Control of Bell Club or fall below, in
the aggregate (including Knapp Family Members for this purpose only), a 51%
economic interest in Bell Club. Knapp Family Members include the Knapps, a
spouse, and any lineal descendants thereof.
Any permitted transferee shall receive and hold such Partnership
interest, ownership interest, or portion thereof subject to the terms of this
Agreement and to the obligations hereunder of the transferor Partner (or
constituent owner as the case may be) and there shall be no further transfer of
such Partnership interest, ownership interest, or portion thereof except to a
person or entity to whom such permitted transferee could have transferred such
interest or portion thereof in accordance with this Section 7.2 had such
transferee originally been named as a Partner hereunder.
7.3 Admission of Substituted Partner. No assignee of all or any
--------------------------------
portion of a Partner's interest in the Partnership shall have the right to
become a partner in substitution of the assigning Partner unless the other
Partner consents to such substitution which consent may be granted or withheld
in the other Partner's absolute discretion. Any assignee who does not become a
substituted Partner shall have no right to acquire any Partnership information,
to inspect the Partnership's books, or to vote or have approval rights on any
matter relating to the Partnership or its business. Such assignee shall only be
entitled to receive the share of Net Profits or Net Loss and cash distribution
to which the assignor Partner would otherwise be entitled.
ARTICLE VIII
PROPERTY SALE; ELECTIVE BUY-SELL AGREEMENT
------------------------------------------
8.1 Property Sale or Buy-sell of Partnership Interests. From and
--------------------------------------------------
after the expiration of the Lock-in Period, either Partner may require the
Partnership to sell all, but not less than all, of the Partnership's interest in
the Property, the Gaming Club and any other assets and liabilities of the
Partnership (other than the Emergency Loans and Contribution Loans) to a person
or entity which is not a Partner or Affiliate of a Partner or the Knapps by
providing written notice (the "Offering Notice") to the other Partner (the
"Offeree Partner") that it has elected to exercise its rights to require a sale
of the Partnership's assets under this Section 8.1 and setting forth its good
faith estimate of the gross value (determined without regard to Partnership
debt, if any) of the assets of the Partnership ("Stated Value") and the proposed
terms and conditions of sale.
24
<PAGE>
The Offeree Partner shall have a period of thirty (30) days after
receipt of such notice to take either one of two actions: (1) to agree as a
Major Decision to market actively the assets (subject to liabilities other than
Emergency Loans and Contribution Loans) of the Partnership, to cooperate with
the other Partner (the "Offeror Partner") in all marketing and sales efforts, to
provide market exposure of the assets and business, to allow access to
prospective purchasers and to otherwise comply with the procedures and
provisions of Section 8.5 below, or (2) to cause the buy/sell procedures of this
Article VIII to be implemented. Failure of the Offeree Partner to give written
notice of its election to Offeror Partner within this thirty (30) day period
shall constitute an election to implement the buy-sell procedures of this
Article VIII. If the Offeree Partner elects to implement the buy/sell
procedures hereunder, then the Offeree Partner shall have a period of sixty (60)
days after the effective date of the Price Determination Notice (as defined in
Section 8.2 below) either (a) to sell such Offeree Partner's entire Partnership
interest to the Offeror Partner upon the terms and conditions set forth in the
Offering Notice and for the Purchase Price determined pursuant to Section 8.2 or
(b) to purchase the Partnership interest of the Offeror Partner upon the terms
and conditions set forth in the Offering Notice and for the Purchase Price
determined pursuant to Section 8.2. Failure of the Offeree Partner to give
written notice of its election within sixty (60) days after the effective date
of the Price Determination Notice shall constitute an election by the Offeree
Partner to sell such Offeree Partner's entire Partnership interest for the
Purchase Price determined pursuant to Section 8.2.
8.2 Determination of Purchase Price. Concurrently with the delivery
-------------------------------
of the Offering Notice to the Offeree Partner pursuant to Section 8.1, the
Offeror Partner shall deliver a copy of the Offering Notice to the Accounting
Firm. Within fifteen (15) days after the effective date of the Offering Notice,
the Accounting Firm shall determine the amount of cash which would be
distributed or paid to each Partner pursuant to Section 12.3 hereof if (i) the
assets of the Partnership were sold for the Stated Value thereof as of the date
of the Offering Notice, (ii) the liabilities of the Partnership were paid
pursuant to Section 12.3(b)(i), (iii) reserves were established pursuant to
Section 12.3(b)(ii) in an amount equal to the reserves that would be
established, and (iv) the Partnership made the Partnership's required
distributions or payments (on account of any Emergency Loans and/or Contribution
Loans) to the Partners pursuant to Sections 12.3(b)(iii)-(v). Upon such
determination, the Accounting Firm shall give the Offeror Partner and the
Offeree Partner written notice ("Price Determination Notice") thereof. The
determination by the Accounting Firm of such amounts, including all components
thereof, shall be deemed conclusive. One hundred percent (100%) of the cash
amount which would be distributed or paid to a Partner pursuant to Sections
25
<PAGE>
12.3(b)(iii)-(v) (without regard to any Partner Loan) shall be deemed the
purchase price ("Purchase Price") for such Partner's Partnership Interest;
provided that such Purchase Price shall be increased by the unpaid amount of any
principal and accrued interest on any Partner Loans owed to a Partner and
decreased by the unpaid amount of any principal and accrued interest on any
Partner Loans owed by the Partner, which unpaid amounts shall be determined on
the closing of the purchase and sale. Any such Partner Loans shall be deemed
repaid as of such closing date. If any such decrease results in a negative
Purchase Price for a Partner, then, on such closing date, such Partner shall pay
in cash the negative balance to the other Partner.
8.3 Closing of Purchase and Sale. The closing of a purchase and sale
----------------------------
transaction pursuant to this Article VIII shall be held at the principal
executive office of the Partnership on the ninetieth (90th) day after the
effective date of the Price Determination Notice (the "Closing Date"). The
selling Partner shall transfer to the buying Partner or their nominee(s) the
entire Partnership interest(s) of the selling Partner free and clear of all
liens, security interests and competing claims, and shall deliver to the buying
Partner or their nominee(s) such instruments of transfer, such evidence of due
authorization, execution, and deliver, and such evidence of the absence of any
liens, security interests, or competing claims as the buying Partner or its
nominee(s) shall reasonably request. The buying Partner or its nominee(s) shall
pay the Purchase Price for the Partnership interest(s) of the selling Partner in
cash at the closing of such purchase.
8.4 Release and Indemnity. On or before the Closing Date, the buying
---------------------
Partner shall use such Partner's efforts to obtain written releases of the
selling Partner from all liabilities of the Partnership and from all guarantees
of such liabilities of the Partnership previously executed by the selling
Partner. To the extent such releases cannot be obtained by such buying Partner,
such Partner shall indemnify, defend and hold the selling Partner free and
harmless from and against any and all claims, liabilities, causes of action,
liens, charges, and all other matters arising from such liabilities or
guarantees, whether arising prior to or subject to the effective date of such
closing, except for unknown liabilities arising prior to the effective date of
such closing and not taken into account in calculating the selling Partner's
Purchase Price.
8.5 Marketing Election. If the Offeree Partner elects to market the
------------------
assets of the Partnership pursuant to Section 8.1(i) hereof, then for a period
of eighteen (18) months following such election (the "Marketing Period") each
Partner shall use its best efforts to market the property for a purchase price
at least equal to the Stated Value less any liabilities (other than Emergency
Loans and Contribution Loans) as of the date of the Offering Notice, (the
"Minimum Sales Price.") In the
26
<PAGE>
event either Partner receives during the Marketing Period from any person or
entity who is a Qualified Buyer (which in no event shall be a Partner or an
Affiliate of a Partner or the Knapps) a written offer (the "Minimum Price
Offer") acceptable to it for the purchase of the assets and liabilities of the
Partnership upon the terms and conditions specified in the Offering Notice set
forth in Section 8.1 and for a price at least equal to the Minimum Sales Price,
then such Partner shall notify and consult with the other Partner of the Minimum
Price Offer prior to entering into any agreement to sell such assets and
liabilities. After due consultation and notice, each Partner is obligated to
cause the Partnership to complete the sale of the assets and liabilities at a
price and upon terms and conditions no less favorable to the Partnership than
those set forth in the Minimum Price Offer and to execute and deliver any
documentation necessary or appropriate to effectuate and consummate the sale.
In the event either Partner receives during the Marketing Period from
a Qualified Buyer (which in no event shall be a Partner or an Affiliate of a
Partner or the Knapps) a written offer (a "Nonconforming Offer") acceptable to
it for the purchase of the assets and liabilities (other than Emergency Loans
and Contribution Loans) of the Partnership upon either terms and conditions less
favorable to the Partnership than that specified in the Offering Notice set
forth in Section 8.1 or for a price less than the Minimum Sales Price, then such
Partner ("Offeror Partner") shall, prior to entering into any agreement to sell
such assets and liabilities (other than the Emergency Loans and Contribution
Loans) subject to the Nonconforming Offer, deliver to the other Partner
("Offeree Partner") a true and complete copy of the Nonconforming Offer. The
Offeree Partner shall, upon receipt of the Offer, have twenty (20) days
thereafter (the "Offer Period") to (1) agree to the sale, or (2) agree to
purchase the entire Partnership interest of the Offeror Partner upon the terms
and conditions and for a Purchase Price equal to that which the Offeror Partner
would have received under Sections 12.3(b)(iii)-(v) (taking into account any
Emergency Loans and Contribution Loans) and 3.5(a) (taking into account any
Partner Loans) had the property been sold pursuant to the Nonconforming Offer
and the Partnership immediately liquidated by giving written notice of its
decision to make such purchase within the Offer Period (an "Acceptance Notice").
If the Offeree Partner gives an Acceptance Notice to the Offeror Partner within
the Offer Period, then Offeree Partner shall purchase the Offeror Partner's
Partnership interest on a closing date specified in the Acceptance Notice, which
closing date shall not be more than ninety (90) days after expiration of the
Offer Period. If Offeree Partner has not given an Acceptance Notice or notifies
the Offer Partner of its election to agree to the sale, then the Offeror Partner
shall cause the Partnership to complete the sale of the assets and liabilities
of the Partnership at a price and upon terms and conditions no less favorable to
the Partnership than those set forth in the Nonconforming Offer within one
27
<PAGE>
hundred eighty (180) days following the expiration of the Offer Period, and the
Offeree Partner agrees to execute and deliver any documentation necessary or
appropriate to effectuate and consummate such sale. If the proposed sale is not
completed within said one hundred eighty (180) day period, then the rights of
the Offeree Partner shall be fully restored as if such Nonconforming Offer had
never been made.
8.6 Lock-in Period. Subject to Article X hereof, no Partner shall
--------------
have the right to require the marketing of the Partnership's assets pursuant to
Sections 8.1 and 8.5 or to initiate the buy/sell procedures of this Article VIII
prior to the expiration of the Lock-in Period.
ARTICLE IX
DEFAULT BUY/SELL AGREEMENT
--------------------------
9.1 Buy/Sell Events. For purposes of this Article IX, the following
---------------
shall be "Buy/Sell Events":
(a) Event of Default. An "Event of Default," as such term is
----------------
defined in Section 14.1 (other than paragraphs (a) and (c) thereof) occurs;
or
(b) Failure to Make Emergency Loan or Repay Partner Loan. A Non-
----------------------------------------------------
Lending Partner fails to advance as an Emergency Loan all or any portion of
its Delinquent Emergency Loan within thirty (30) days of the date of the
Buy/Sell Delinquent Contribution Notice (as defined in Section 3.5), or
fails to repay a Partner Loan within thirty (30) days of the maturity date
thereof pursuant to Section 3.5.
For purposes of implementing the provisions contained in this Article
IX, the "Defaulting Partner" shall be: (a) in the case of the occurrence of the
event referenced in Section 9.1(a) the party defined as the Defaulting Partner
in Article XIV; and (b) in the occurrence of the event referenced in Section
9.1(b), the Non-Lending Partner. The "Non-Defaulting Partner" shall be the
Partner who is not the Defaulting Partner.
9.2 Rights Arising From a Buy/Sell Event. In the event of the
------------------------------------
occurrence of a Buy/Sell Event, the Non-Defaulting Partner shall have the right,
but not the obligation, to implement the buy/sell procedures set forth in this
Article IX by giving written notice ("Election Notice") thereof to the
Defaulting Partner.
9.3 Determination of the Purchase Price. Within fifteen (15) days
-----------------------------------
after the determination of the Appraised Value of the assets of the Partnership,
the Accounting Firm shall
28
<PAGE>
determine the amount of cash which would be distributed or paid to each Partner
pursuant to Section 12.3 hereof if (i) the assets of the Partnership were sold
for the Appraised Value thereof as of the effective date of the Election Notice;
(ii) the liabilities of the Partnership were paid pursuant to Section
12.3(b)(i); (iii) a reserve for contingent or unforeseen liabilities were
reasonably established by the Non-Defaulting Partner; and (iv) the Partnership
made the Partnership's required distributions or payments (on account of any
Emergency Loans and/or Contribution Loans) to the Partners pursuant to Sections
12.3(b)(iii)-(v). Upon such determination, the Accounting Firm shall give each
Partner written notice ("Accountant's Notice") thereof. The determination by
the Accounting Firm of such amounts, including all components thereof shall be
deemed conclusive. The Purchase Price for such Defaulting Partner's Partnership
interest shall be deemed conclusive. The Purchase Price for such Defaulting
Partner's Partnership interest shall be one hundred percent (100%) of the
amount, which would be distributed or paid to the Defaulting Partner pursuant to
Sections 12.3(b)(iii)-(v) determined without regard to Partner Loans
("Defaulting Partner's Purchase Price," as applicable) in the event the same is
purchased and sold pursuant to this Article IX; provided that such Defaulting
Partner's Purchase Price shall be increased by the unpaid amount of any
principal and accrued interest on any Partner Loans owed to the Defaulting
Partner and decreased by the unpaid amount of any principal and accrued interest
on any Partner Loans owed by the Defaulting Partner, which unpaid amounts shall
be determined on the closing of the purchase and sale. Any such Partner Loans
shall be deemed repaid as of such closing date. If any such decrease results in
a negative Defaulting Partner's Purchase Price for a Defaulting Partner, then,
on such closing date, such Defaulting Partner shall pay in cash the negative
balance to the Non-Defaulting Partner.
(a) Determination of Appraised Value. For purposes of this
--------------------------------
Article IX, the appraised value ("Appraised Value") of the assets of the
Partnership shall be determined as follows: The Appraised Value shall be
determined by independent qualified appraisers each of whom shall be a
Member of the Appraiser Institute or similar professional body of
appraisers. The Non-Defaulting Partner giving the Election Notice shall
select one such appraiser and shall include such selection in the Election
Notice. Within ten (10) days after the expiration of the ten (10) day
period referenced in the immediately preceding sentence, the Defaulting
Partner shall either agree to the appraiser selected by the Non-Defaulting
Partner or select a second (2nd) such appraiser and give written notice to
the Non-Defaulting Partner of the person so selected. In the event of the
failure of either the Non-Defaulting Partner or the Defaulting Partner to
appoint such an appraiser within the time period specified and after the
expiration of ten (10)
29
<PAGE>
business days following the effective date of written demand that an
appraiser be appointed, then the appraiser duly appointed by the Partner
making such demand to appoint such appraiser shall proceed to make the
appraisal as herein set forth, and the determination thereof shall be
conclusive on all the Partners. If two (2) appraisers are selected, then
such selected appraisers shall thereafter appoint a third (3rd) appraiser.
If the two (2) selected appraisers fail to appoint a third (3rd) appraiser
within ten (10) days following the effective date of written notice from
the Defaulting Partner notifying the Non-Defaulting Partner of the
selection of the second appraiser, any Partner may petition a court of
competent jurisdiction in Los Angeles, California to appoint a third (3rd)
appraiser.
The appraiser or three (3) appraisers, as the case may be, shall
promptly fix a time for a completion of the appraisal, which shall not be later
than thirty (30) days from the effective date of appointment of the last
appraiser.
The appraiser(s) shall determine the Appraised Value by determining
the fair market value of the assets of the Partnership, such fair market value
being the fairest price estimated in the terms of money which the Partnership
could obtain if such assets were sold in the open market allowing a reasonable
time to find a purchaser who purchases with knowledge of the uses which such
assets in their then condition are adapted and for which such assets are capable
of being used as a Qualified Buyer at the time of the occurrence of the Buy/Sell
Event.
Upon submission of the appraisals setting forth the opinions as to the
Appraised Value of the assets of the Partnership, the two (2) such appraisals
which are nearest in amount shall be retained, and the third (3rd) appraisal
shall be discarded. The average of the two (2) retained appraisals shall
constitute the Appraised Value of the assets of the Partnership for purposes of
this Article, unless one appraisal is the mean of the other two (2) appraisals,
in which case such appraisal shall constitute the Appraised Value of the assets
of the Partnership for purposes of this Article.
(b) Payment of Costs. The Non-Defaulting Partner shall pay for
----------------
the services of the appraiser appointed by such Partner and the Defaulting
Partner shall pay for the services of the appraiser appointed by such
Partner. The cost of the services of the third appraiser, if any, shall be
paid one-half (1/2) by the Non-Defaulting Partner, and one-half (1/2) by
the Defaulting Partner. The costs of the services of the Accounting Firm
shall be paid one-half (1/2) by the Non-Defaulting Partner and one-half
(1/2) by the Defaulting Partner.
30
<PAGE>
9.4 Non-Defaulting Partner's Option. For a period of sixty (60) days
-------------------------------
after the effective date of the Accountant's Notice, the Non-Defaulting Partner
shall have the right, but not the obligation, to purchase the entire Partnership
interest of the Defaulting Partner for the Defaulting Partner's Purchase Price,
and on the terms and conditions set forth in this Article IX by giving written
notice thereof to the Defaulting Partner within such sixty (60) day period.
Failure by the Non-Defaulting Partner to timely give written notice exercising
such Partner's right to purchase set forth in this Section shall be deemed an
election by such Partner to waive such right to purchase.
9.5 Closing of Purchase and Sale. The closing of a purchase pursuant
----------------------------
to this Article shall be held at the principal executive office of the
Partnership on the ninetieth (90th) day after the expiration of the sixty (60)
day period set forth in Section 9.4. The Defaulting Partner shall transfer to
the Non-Defaulting Partner (or such Partner's nominee) the entire Partnership
interest of the Defaulting Partner free and clear of all liens, security
interests, and competing claims and shall deliver to the Non-Defaulting Partner
(or such Partner's nominee) such instruments of transfer and such evidence of
due authorization, execution, and delivery, and of the absence of any such
liens, security interests, or competing claims as such Non-Defaulting Partner
(or such Partner's nominee) shall reasonably request.
9.6 Payment of Purchase Price. The Non-Defaulting Partner electing
-------------------------
to purchase the Partnership Interest of the Defaulting Partner pursuant to
Section 9.4 shall pay the Defaulting Partner's Purchase Price, by delivery at
the closing cash in an amount equal to the Defaulting Partner's Purchase Price.
9.7 Release and Indemnity. On or before the closing of a purchase
---------------------
held pursuant to this Article IX, the purchasing Non-Defaulting Partner shall
use such Partner's respective reasonable efforts to obtain written releases of
the Defaulting Partner from all liabilities of the Partnership and from all
guarantees of such liabilities of the Partnership previously executed by the
Defaulting Partner. To the extent such releases cannot be obtained by such
purchasing Non-Defaulting Partner, such Partner shall indemnify and hold the
Defaulting Partner free and harmless from and against any and all claims,
liabilities, causes of action, liens, charges, and all other matters arising
from such liabilities or guarantees, whether arising prior to or subsequent to
the effective date of such closing, except for unknown liabilities arising prior
to the effective date of such closing and not taken into account in calculating
the Defaulting Partner's Purchase Price.
31
<PAGE>
ARTICLE X
FAILURE OF A PARTNER TO BE
--------------------------
PROPERLY LICENSED
-----------------
10.1 Failure to be Properly Licensed. Upon the failure of any
-------------------------------
Partner or any of its partners (or any of their indirect owners) to be properly
Licensed as required by the applicable authorities (which Licenses shall be
obtained and retained at each such person's or entity's sole expense) and
provided such failure is not cured to the satisfaction of such authorities
within thirty (30) days of the date that management of the Partner learns or
should have learned of such event in respect of the Partner (or any of its
direct or indirect equity owners), then the Partner which fails to be so
properly Licensed may elect to submit an Offering Notice to the other Partner
pursuant to Section 8.1, provided such failure occurs after the expiration of
the Lock-in Period. If such failure occurs prior to the expiration of the Lock-
in Period, then the Partner which fails to be so properly Licensed shall be a
defaulting partner ("Defaulting Partner") for purposes of Article IX only. The
other Partner ("Non-Defaulting Partner") shall have the right, but not the
obligation, to implement as the Non-Defaulting Partner the buy/sell procedures
set forth in Article IX by written notice to the Defaulting Partner within ten
(10) business days after the date that the Defaulting Partner learns or should
have learned of its failure to be properly Licensed. If such notice is not
provided by the Non-Defaulting Partner to the Defaulting Partner within such ten
(10) business day period, then the Defaulting Partner may elect to submit an
Offering Notice to the Non-Defaulting Partner pursuant to the terms and
provisions of Section 8.1 and Article VIII (including the marketing procedures
of Section 8.5 if the Non-Defaulting so elects), but without regard to the Lock-
in Period or Section 8.6. If the Non-Defaulting Partner timely elects the
buy/sell procedures of Article IX and elects not to purchase the Defaulting
Partner's interest within the sixty (60) day period pursuant to Section 9.4,
then either Partner may thereafter elect to market the assets and liabilities of
the Partnership pursuant to Sections 8.1 and 8.5 hereof without regard to the
Lock-in Period or Section 8.6 and treating the Appraised Value of the assets of
the Partnership less any liabilities (other than any Emergency Loans and
Contribution Loans) as of the date of the Non-Defaulting Partner's written
notice to elect the buy/sell procedures of Article IX as the Minimum Sales
Price.
ARTICLE XI
BOOKS OF ACCOUNT, RECORDS, REPORTS AND TAX MATTERS
--------------------------------------------------
11.1 Books and Records. Proper and complete records and books of
-----------------
account shall be kept by the Managing General Partner in which shall be entered
fully and accurately all transactions and other matters relative to the
Partnership's business as are usually entered into records and books of account
32
<PAGE>
maintained by partnerships engaged in businesses of like character. The
Partnership books and records shall be maintained on the accrual basis in
accordance with generally accepted accounting principles, consistently applied.
The Managing General Partner shall keep at the principal office of the
Partnership all of the following:
(a) A current list of the full name and last known business or
residence address of each Partner, together with the Capital Contributions,
Partner Loans and the Percentage Share of each Partner;
(b) Copies of all of the Partnership's federal, state and local
income tax or information returns and reports, if any, for the six most
recent taxable years;
(c) Copies of this Agreement and all amendments thereto;
(d) Financial statements of the Partnership for the six most
recent Fiscal Years; and
(e) The Partnership's books and records for at least the current
and past six Fiscal Years.
11.2 Inspection Rights. Each Partner and its authorized
-----------------
representatives shall have the right following notice to the Managing General
Partner to have access to, inspect, audit and copy the Partnership's original
books, records, files, securities, vouchers, cancelled checks, bank statements,
bank deposit slips, bank reconciliation, cash receipts and disbursement records,
as applicable, and other documents owned or maintained by or for the
Partnership. Each Partner shall be entitled to any additional information
reasonably requested and to question any persons with control or otherwise
responsible for such books and records.
11.3 Reports. Managing General Partner shall prepare or cause to be
-------
prepared and send to the other Partner an unaudited operating statement of the
Partnership and its operations within ten (10) days after the end of each month.
Each such operating statement shall set forth income, a balance sheet, and such
other information as the other Partner shall reasonably require and shall also
include management narratives, analysis of trends and analysis of payable and
receivables. Additionally, Managing General Partner shall prepare or cause to
be prepared and send to the other Partner unaudited quarterly financial reports
within twenty (20) days after the end of each quarter and audited annual
financial statements within forty-five (45) days after the end of each Fiscal
Year. All financial statements or reports shall be prepared in accordance with
generally accepted accounting principles, consistently applied. All audited
financial statements or reports shall be done by the
33
<PAGE>
Accounting Firm selected by the Partners pursuant to Section C of Exhibit "D."
11.4 Bank Accounts. All funds of the Partnership shall be deposited
-------------
in its name in an account or accounts maintained with such banking
institution(s) as may be approved by the Partners. Funds of the Partnership
shall not be commingled with funds of any other person or entity except as
otherwise provided in the Management Agreement. All withdrawals from any such
bank accounts shall be made only for the purpose of the Partnership and shall be
signed by the Managing General Partner or its duly authorized representatives.
11.5 Tax Matters Partner. Managing General Partner shall act as the
-------------------
tax matters partner (as defined in Section 6231 of the Code) for the Partnership
and, subject to the provisions of this Section 11.5, is authorized and required
to file or cause the Partnership to file any tax returns (at the Partnership's
expense) and to represent the Partnership (at the Partnership's expense) in
connection with all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
reasonably expend Partnership funds for professional services and costs
associated therewith.
(a) Filing of Tax Returns. Managing General Partner as tax
---------------------
matters partner shall file, or cause to be filed, on a timely basis all
federal, state and local income tax returns and income tax reports which
are required to be filed by the Partnership and to provide the other
Partner with information relating to the Partnership which will allow such
Partner to file on a timely basis its federal, state and local income tax
returns and reports. Any such returns shall be prepared in accordance with
Article IV hereof. Within sixty (60) days after the close of the
Partnership's taxable year and in no event later than thirty (30) days
prior to the filing due date, including extensions, of the Partnership's
federal, state and local income tax returns and reports, Managing General
Partner shall deliver to the other Partner for its approval (by overnight
delivery) draft copies of such returns and reports. On or before the
fifteenth (15th) day after such delivery, the other Partner shall either
approve the draft tax returns and reports or state in writing any
objections in respect of any items. Any unagreed items shall then be
resolved in good faith by the mutual agreement of the Partners; provided
that if such disagreed items cannot so be resolved within a reasonable time
by the Partners, then the Partners shall jointly select a third party
arbitrator, which shall be a nationally recognized accounting firm (other
than the Accounting Firm), to resolve the impasse and such arbitrator's
decision shall be final and binding on the Partners. Thereafter, the
returns and reports shall be filed consistent with such resolution.
34
<PAGE>
No Partner shall treat in its individual federal, state or local
income tax return or report, an item of income, gain, loss or deduction in
a manner inconsistent with the Partnership's treatment of such item on its
approved return or report, without the prior written consent of the other
Partner.
(b) Examination and Audits. In addition to any other rights
----------------------
conferred on a Partner (other than the Managing General Partner in its
capacity as tax matters partner) by the Code or the Regulations thereunder:
(1) Managing General Partner as tax matters partner shall
furnish promptly to the Internal Revenue Service a written statement, in
accordance with Regulations Section 301.6223(b)-1T (or any successor
thereto), which causes the Internal Revenue Service to mail to the other
Partner all notices described in Section 6223(a) of the Code (or any
successor thereto) (and comparable provisions of state and local income tax
laws);
(2) Managing General Partner as tax matters partner shall
deliver to the other Partner a copy of any notice, letter, request for
information, request for inspection of documents, subpoena and any other
item of correspondence or other communication or document, including notice
of any matter described in Sections 6223(a) or 6223(g) of the Code or the
Treasury Regulations promulgated thereunder (or any successor thereto) (and
comparable provisions of state and local income tax laws), received by the
Managing General Partner (in its capacity as tax matters partner) from the
Internal Revenue Service or any state or local taxing authority which is
directly related to an administrative proceeding (as defined in Section
6223(a) of the Code (or any successor thereto) (and comparable provisions
of state and local income tax laws)) (an "Administrative Proceeding") with
respect to the Partnership;
(3) Managing General Partner as tax matters partner shall
inform promptly the other Partner of any oral request for information
received by Managing General Partner (in its capacity as tax matters
partner) from, or conference with, the Internal Revenue Service or any
state or local taxing authority which is directly related to an
Administrative Proceeding with respect to the Partnership;
(4) Managing General Partner as tax matters partner shall
confer with the other Partner and its counsel before responding to any
notice, letter, request for information, request for inspection of
documents, subpoena or other correspondence or item of communication or
document received by Managing General Partner (in its capacity as tax
35
<PAGE>
matters partner) from or oral request made by the Internal Revenue Service
or any state or local taxing authority which is directly related to an
Administrative Proceeding with respect to the Partnership; and
(5) The Partners shall jointly make all decisions for the
Partnership and the Partnership shall take such actions as the Partners
mutually deem appropriate with respect to (i) any federal, state or local
contest of any partnership item (as defined in Section 6231(a)(3) of the
Code (or any successor thereto) (and comparable provisions of state and
local income tax laws)) of the Partnership (a "Partnership Level Income Tax
Matter"); (ii) any audit of any federal, state or local income tax return
or income tax report filed by or on behalf of the Partnership; (iii) any
conference concerning any 30-day letter or similar document issued to the
Partnership by the Internal Revenue Service or any state or local taxing
authority; (iv) the decision whether or not to (A) pursue litigation, and
the selection of the litigation forum, if any, of any final partnership
administrative adjustment, or (B) any request for an administrative
adjustment of partnership items; (v) the negotiation of a settlement of any
protest filed in the United States Tax Court; (vi) the negotiation of a
settlement of any refund suit in any United States District Court or the
United States Claims Court; (vii) the decision whether or not to pursue an
appeal of a decision of the United States Tax Court, a United States
District Court or the United States Claims Court and the negotiation of a
settlement of such appeal; and (viii) the negotiation of a settlement of
any litigation concerning a state or local income tax matter of the
Partnership.
(c) Income Tax. For purposes of this Section 11.5, the term
----------
"income tax" shall include, without limitation, (i) state franchise taxes
which are based upon or measured by net income, and (ii) interest and
penalties associated with such franchise or income taxes.
11.6 Accounting.
----------
(a) Joint Approval. Any elections of the Partnership with
--------------
respect to federal or state income taxes or financial accounting shall be
made by the joint agreement of the Partners as a Major Decision pursuant to
Section C of Exhibit "D."
(b) Fiscal Year. The fiscal year ("Fiscal Year") and the taxable
-----------
year of the Partnership shall be the calendar year.
36
<PAGE>
ARTICLE XII
DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
----------------------------------------------
12.1 Retirement, Withdrawal or Bankruptcy of Partner; Admission of
-------------------------------------------------------------
New Partners. The retirement, withdrawal, bankruptcy or other cessation to
- ------------
serve as a partner of the Partnership by either Partner shall not dissolve the
Partnership, but the business of the Partnership shall be continued by a
successor general partner ("Successor Partner") to be selected by the remaining
Partner within ninety (90) days of such retirement, withdrawal, bankruptcy, or
other cessation to serve by such Partner. The admission of new partners into
the Partnership in accordance with the terms of this Agreement shall not
dissolve the Partnership.
12.2 Events Causing Dissolution. The Partnership shall be dissolved
--------------------------
upon the first to occur of any of the following events:
(a) The expiration of the term of the Partnership as provided in
Section 2.8, unless all Partners agree to extend the term of the
Partnership past the date set forth in Section 2.8;
(b) The sale or other disposition by the Partnership of all or
substantially all of its assets; or
(c) The written consent of both Partners; or
(d) The retirement, withdrawal, bankruptcy or other cessation to
serve by either Partner followed by the failure of the remaining Partner to
select a successor Partner within ninety (90) days thereafter in accordance
with Section 12.1.
12.3 Winding Up and Liquidation.
--------------------------
(a) Upon the dissolution of the Partnership, caused by other than
the termination of the Partnership under Section 708(b)(1)(B) of the Code
(in which latter case the Partnership shall remain in existence in
accordance with such Section), the General Partners shall proceed to the
winding up and liquidation of the affairs of the Partnership. For the
purposes of this Agreement, a liquidation shall be considered to occur upon
the earlier upon which the Partnership is terminated under Section
708(b)(1) of the Code, or the date upon which the Partnership ceases to be
a going concern (even though it may continue in existence for the purpose
of winding up its affairs, paying its debts and distributing any remaining
balance to its Partners), and with respect to a Partner wherein the
Partnership is not in liquidation, the
37
<PAGE>
liquidation of a Partner's Partnership interest under Section 1.761-1(d) of
the Regulations. The holders of interests in the Partnership shall
continue to share distributions, profits, losses and allocations during the
period of liquidation in accordance with Articles IV and V. Unless all
Partners agree otherwise, the person(s) winding up the Partnership's
affairs shall not be entitled to any special compensation for such
activities.
(b) The Partnership's assets (other than cash) shall be sold
pursuant to the agreement of the Partners as a Major Decision pursuant to
Section C of Exhibit "D," as is promptly consistent with obtaining a fair
value therefor, its liabilities and obligations to creditors and all
expenses incurred in its liquidation shall be paid, and all resulting items
of Partnership income, gain, loss or deduction shall be credited or charged
to the Capital Accounts of the Partners in accordance with Article IV of
this Agreement. The proceeds from such sales shall be distributed in the
following order of priority:
(i) First, to the payment and discharge of all of the
Partnership's debts and liabilities, including liabilities to Partners to
the extent permitted by law (other than Emergency Loans pursuant to Section
3.5, Contribution Loans pursuant to Section 3.4 and Partner Loans and
liabilities for distributions pursuant to Sections 3.5 and Article V,
respectively), except the claims of secured creditors whose obligations
will be assumed or otherwise transferred upon liquidation of the
Partnership's assets;
(ii) Second, to establish any reserves which the General
Partners may deem necessary appropriate or desirable for any future,
contingent or unforeseen liabilities, obligations, or debts of the
Partnership or of the General Partners (other than any Emergency Loans,
Contribution Loans and Partner Loans) arising out of or in connection with
the Partnership which are not yet payable or have not yet been paid as
determined as a Major Decision pursuant to Section C of Exhibit "D." Such
reserves may, but are not obligated to, be paid over by the General
Partners to an independent escrow holder, designated by the General
Partners, to be held by it for the purpose of disbursing such reserves in
payment of any of such liabilities, obligations and debts and, at the
expiration of such period as the General Partners shall deem necessary,
advisable or desirable, to distribute the balance thereafter remaining in
the manner provided below;
(iii) Third, to the Emergency Loan Partners to repay their
Emergency Loans in the order specified in Section 3.5, subject to the
Partner Loan provisions of such section;
38
<PAGE>
(iv) Fourth, to the Contribution Loan Partners to repay their
Contribution Loans in the order specified in Section 3.4; and
(v) Fifth, notwithstanding the Partners' Capital Account
balances, to the Partners in accordance with Article V hereof.
12.4 Time of Liquidation. A reasonable time shall be allowed for the
-------------------
orderly liquidation of the properties and other assets of the Partnership and
the discharge of liabilities to creditors so as to enable the General Partners
to minimize, to the extent it deems practicable, advisable or desirable, the
normal losses attendant upon a liquidation.
12.5 Negative Capital Account Restoration; Recourse Liabilities. No
----------------------------------------------------------
Partner shall have any liability to restore any closing deficit balance in the
Partner's Capital Account. Notwithstanding anything in this Section 12.5 or
Article III to the contrary, the Partners are liable for any recourse
liabilities or other recourse indebtedness of the Partnership in accordance with
their Percentage Shares if cash or other property of the Partnership is
unavailable for such purpose, and each Partner agrees to indemnify the other
Partner to the extent the other Partner satisfies more than its Percentage Share
of all or any portion of such liability that has been satisfied by it and the
other Partner.
12.6 No Third-Party Beneficiary. Any agreement to pay any amount and
--------------------------
any assumption of liability herein contained, express or implied, shall be only
for the benefit of the Partners and their respective heirs, successors and
assigns, and such agreements and assumptions shall not inure to the benefit of
the obligees of any indebtedness or any other party, whomsoever, deemed to be a
third-party beneficiary of this Agreement. In this regard, it is hereby
expressly agreed and understood that any right of the Partnership or the
Partners to require any loans or other contributions under the terms of this
Agreement shall not be construed as conferring any rights or benefits to or upon
any party not a party to this Agreement.
ARTICLE XIII
ARBITRATION OF DISPUTES
-----------------------
13.1 In General. Any controversy or claim arising which in this
----------
Agreement is expressly provided herein to be resolved by arbitration, shall be
resolved by binding arbitration in accordance with the Rules of the American
Arbitration Association Governing Commercial Arbitration ("Rules"), subject to
the following additional provisions:
39
<PAGE>
(a) The Partner seeking arbitration ("Demanding Partner") shall
deliver a written notice of demand to resolve the dispute (the "Demand") to
the other Partner ("Non-Demanding Partner"). The Demand shall include a
brief statement of the Demanding Partner's claim or controversy, the amount
thereof, and the name of the proposed Qualified Person to decide the
dispute ("Arbitrator"). Within ten (10) days after receipt of the Demand,
the Non-Demanding Partner against whom a Demand is made shall deliver a
written response to the Demanding Partner. Such response shall include a
short and plain statement of the Non-Demanding Partner's defenses to the
claim and shall also state whether such Partner agrees to the Arbitrator
chosen by the Demanding Partner. If the Non-Demanding Partner fails to
agree to the Arbitrator chosen by the Demanding Partner, then such Non-
Demanding Partner shall state in its response the name of the proposed
Qualified Person chosen by such Non-Demanding Partner as the proposed
Arbitrator. If the Non-Demanding Partner fails to deliver its written
response to the Demanding Partner within ten (10) days after receipt of the
Demand, or if the Non-Demanding Partner fails to select in its written
response a proposed Arbitrator, then the Arbitrator selected by the
Demanding Partner shall serve as the Arbitrator.
(b) The locale of the arbitration shall be in Los Angeles,
California.
(c) If the Non-Demanding Partner selects a proposed Arbitrator
different than the Arbitrator selected by the Demanding Partner, and such
selection is indicated by the Non-Demanding Partner in its written response
to the Demanding Partner made within ten (10) days after receipt of the
demand, then the parties shall, for ten (10) days after the Demanding
Partner's receipt of the Non-Demanding Partner's written response to the
Demand, attempt to agree upon an Arbitrator. If the parties cannot agree
upon an Arbitrator within said ten (10) day period, then a single neutral
Arbitrator shall be appointed pursuant to the Rules; provided, however,
that in all events the neutral Arbitrator must be a Qualified Person.
A Qualified Person for purposes of this Article XIII is, in the
case of any matter involving a legal question arising under the Agreement,
a retired judge from the County of Los Angeles or Orange. In the case of
any matter involving a business question arising under the Agreement, then
a Qualified Person is an independent accountant, other than from the
Accounting Firm, with at least five (5) years experience with respect to
gaming club operation(s) and with reasonable expertise to decide the
questions at issue. If the matter in controversy involves a mixed question
of both law and business, then a Qualified
40
<PAGE>
Person may be either such a retired judge or independent accountant. The
Arbitrator shall have the right to retain and consult experienced and
competent authorities skilled in the matters under arbitration.
(d) The Arbitrator's powers shall be limited as follows: The
Arbitrator shall follow the substantive laws of the State of California
("California Law"), and the rules of evidence of California, and his/her
decision shall be subject to review thereon as would the decision of the
superior court of the State of California sitting without a jury. In
rendering any decision or award, the Arbitrator shall not add to, subtract
from, or otherwise modify the provisions of this Agreement. The Arbitrator
shall follow the terms of this Agreement. Judgment may be entered on the
determination and award made by the Arbitrator or any court of competent
jurisdiction and may be enforced in accordance with the Laws of the State
of California.
(e) The costs of the resolution (including all reporter costs)
shall be split equally between the Partners, provided, however, that such
costs, along with all other costs and expenses, including attorneys' fees,
shall be subject to award, in full or in part, by the Arbitrator, in
his/her discretion, to the prevailing party. Unless the Arbitrator so
awards attorneys' fees, each Partner shall be responsible for its own
attorneys' fees.
(f) To the extent possible, the arbitration hearings shall be
conducted on consecutive days, excluding Saturdays, Sundays and holidays,
until the completion of the hearings.
(g) In connection with any arbitration proceedings commenced
hereunder, either Partner shall have the right to join any third parties in
such proceedings in order to resolve any other disputes, the facts of which
are related to the matters submitted for arbitration hereunder.
(h) The Arbitrator shall render his/her decision(s) concerning
the substantive issue(s) in dispute in writing. The written decision shall
be sent to the parties no later than fifteen (15) days following the last
hearing date.
(i) All hearings shall be concluded within four (4) months from
the day the Arbitrator is selected or appointed.
(j) If any of the provisions relating to arbitration are not
adhered to or complied with either party may petition any court of
competent jurisdiction for appropriate relief.
41
<PAGE>
13.2 Procedures and Discovery. The parties hereby agree that in any
------------------------
such arbitration each party shall be entitled to discovery of the other party as
provided by California Law; provided, however, any such discovery shall be
completed within three (3) months from the date the Arbitrator is appointed,
unless such period is extended by agreement of the parties and any disputes
concerning discovery shall be determined by the Arbitrator with any such
determination being binding on the parties. The Arbitrator shall have the power
to grant all legal and equitable remedies and award compensatory damages
provided by California Law to the extent not inconsistent with this Agreement.
The Arbitrator shall prepare in writing and provide to the parties an award
including factual findings and the reasons on which the decision is based. The
Arbitrator shall not have the power to commit errors of law or legal reasoning
and award may be vacated on any grounds specified in 9 United States Code
Sections 10 or 11 or if such award (i) contains material errors of applicable
law; (ii) is in manifest disregard of applicable law; or (iii) is arbitrary or
capricious. The parties further agree that arbitration proceedings must be
instituted within one (1) years after the claimed breach occurred, and that the
failure to institute arbitration proceedings within such period shall constitute
an absolute bar to the institution of any proceedings and a waiver of claims.
13.3 No Timely Decision. If for any reason whatsoever the written
------------------
decision and award of the Arbitrator shall not be rendered within the time
limits set forth in this Article XIII, either party may apply to a court located
in Los Angeles County, California, venue being stipulated conclusively to be in
Los Angeles County, California and governing law to be California substantive
law 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.
13.4 Extension of Time. Any time periods for performance of a matter
-----------------
submitted to arbitration hereunder shall be extended by the amount of time taken
by the arbitration.
ARTICLE XIV
EVENTS OF DEFAULT
-----------------
14.1 Definitions and Cure Periods. The occurrence of any of the
----------------------------
following events shall constitute a default ("Event of Default") hereunder on
the part of the Partner with respect to whom such event occurs ("Defaulting
Partner") if within thirty (30) calendar days following notice of any non-
monetary default or if within ten (10) calendar days following notice of the
nonpayment of monies, the Defaulting Partner fails to pay such monies, or in the
case of non-monetary defaults fails to commence substantial efforts to cure such
default or, having commenced to
42
<PAGE>
cure, thereafter fails within a reasonable time to prosecute to completion with
diligence and continuity the curing of such default; provided, however, that the
occurrence of any of the events described in paragraphs (d) through (j) shall
constitute an Event of Default immediately upon such occurrence without any
requirement of notice or passage of time except as specifically set forth in any
such paragraph:
(a) the failure by a Partner to make any Emergency Loan to the
Partnership as required pursuant to the provision of Section 3.5;
(b) the violation by a Partner of any of the restrictions set
forth in Article VII of this Agreement upon the right of a Partner to
Transfer, directly or indirectly, its Partnership interest or any portion
thereof;
(c) a Non-Lending Partner fails to repay a Partner Loan at the
maturity date thereof pursuant to Section 3.5;
(d) institution by a Partner of proceedings of any nature under
any law, whether now existing or subsequently enacted or amended, for the
relief of debtors wherein such Partner is seeking relief as a debtor;
(e) a general assignment by a Partner for the benefit of
creditors;
(f) the institution by a Partner of a case or other proceeding
under any section or chapter of the Federal Bankruptcy Code as now existing
or hereafter amended or effective;
(g) the institution against a Partner of a case or other
proceeding under any section or chapter of the Federal Bankruptcy Code as
now existing or hereafter amended or becoming effective, which proceeding
is not dismissed, stayed or discharged within a period of sixty (60)
calendar days after the filing thereof or if stayed, which stay is
thereafter lifted without a contemporaneous discharge or dismissal of such
proceeding;
(h) a proposed plan or arrangement is adopted or other action by
a Partner's creditors is taken as a result of a general meeting of the
creditors of such Partner;
(i) the appointment of a receiver, custodian, trustee or like
officer, to take possession of assets having a value in excess of One
Hundred Thousand Dollars ($100,000) of a Partner if the pendency of said
receivership would reasonably tend to have a materially adverse effect upon
the performance by said Partner of its obligations under this
43
<PAGE>
Agreement, which receivership remains undischarged for a period of thirty
(30) calendar days from the date of its imposition;
(j) attachment, execution or other judicial seizure of all or any
substantial part of a Partner's assets or of a Partner's Partnership
interest, or any part thereof, such attachment, execution or seizure being
with respect to an amount not less than One Hundred Thousand Dollars
($100,000) and remaining undismissed or undischarged for a period of thirty
(30) calendar days after the levy thereof, if the occurrence of such
attachment, execution or other judicial seizure would reasonably tend to
have a materially adverse effect upon the performance by said Partner of
its obligations under this Agreement; provided, however, that said
attachment, execution or seizure shall not constitute an Event of Default
hereunder if said Partner posts a bond sufficient in amount to fully
satisfy the amount of such claim of judgment within thirty (30) calendar
days after the levy thereof and the Partner's assets are thereby released
from the lien of such attachment;
(k) a material default in the performance of or failure to comply
with any other material agreements, material obligations or material
undertakings of a Partner herein contained; and
(l) fraud, misrepresentation or breach of fiduciary duty by a
Partner.
ARTICLE XV
AMENDMENTS
----------
This Agreement may not be amended in whole or in part without the
prior written consent of both Partners.
ARTICLE XVI
MISCELLANEOUS
-------------
16.1 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be delivered or sent, as the
case may be, by any of the following methods: (i) personal delivery; (ii)
overnight commercial carrier or delivery service; (iii) registered or certified
mail (with postage prepaid and return receipt requested); or (iv) telegraph,
telex, telecopy, or cable. Any such notice or other communication shall be
deemed received and effective upon the earlier of (i) if personally delivered,
the date of delivery to the address of the party to receive such notice; (ii) if
delivered by overnight commercial carrier or delivery service,
44
<PAGE>
one (1) day following the receipt of such communication by such carrier or
service, as the case may be; (iii) if mailed, forty-eight (48) hours after the
date of posting as shown on the sender's registry or certification receipt; (iv)
if given by telegraph or cable, when delivered to the telegraph company with
charges prepaid; or (v) if given by telex or telecopy, when sent. Any notice or
other communication sent by cable, telex, or telecopy must be confirmed within
forty-eight (48) hours by letter mailed or delivered in accordance with the
foregoing. Any reference herein to the date of receipt, delivery, or giving, as
the case may be, of any notice or other communication shall refer to the date
such communication becomes effective under the terms of this Section 16.1. The
address for purposes of the giving of notices hereunder (i) to the Partnership
is the address set forth in Section 2.4 and (ii) to a Partner is the address set
forth for such Partner in Section 2.7. Notice of change of address shall be
given by written notice in the manner detailed in this Section 16.1. Rejection
or other refusal to accept, or the inability to deliver, because of a changed
address of which no notice was given shall be deemed to constitute receipt of
the notice or other communication.
16.2 Construction of Agreement. The Article and Section headings used
-------------------------
in this Agreement are for reference purposes only, and are not intended to be
used in construing this Agreement. Each of the Exhibits attached hereto is
incorporated herein by reference and expressly made a part of this Agreement for
all purposes. References to any Exhibit in this agreement shall be deemed to
include this reference and incorporation. As used in this Agreement, the
masculine gender shall include the feminine and neuter, and singular number
shall include the plural, and vice versa. Time is of the essence of this
Agreement. The provisions of this Agreement shall be construed and enforced in
accordance with the laws of the State of California. Except to the extent that
applicable California law is inconsistent with the provisions of this Agreement
(in which case this Agreement shall apply to the extent legally permissible),
the provision of applicable California law shall apply to the Partnership. Each
party hereto acknowledges, represents, and warrants that (i) each party hereto
is of equal bargaining strength; (ii) each such party has actively participated
in the drafting, preparation, and negotiation of this Agreement; (iii) each such
party hereto and such party's independent counsel have reviewed this Agreement;
and (iv) any rule of construction to the effect that ambiguities are to be
resolved against the drafting party shall not apply in the interpretation of
this Agreement, any portion hereof, any amendments hereto, or any Exhibits
attached hereto.
16.3 Successors and Assigns. Subject to the restrictions against
----------------------
transfers set forth in Article VI this Agreement shall inure to the benefit of
and shall bind the parties hereto and their respective heirs, executors,
45
<PAGE>
administrators, personal representatives, successors, and assigns.
16.4 Entire Agreement. This Agreement and the Exhibits contain the
----------------
entire understanding among the parties hereto and superseded any prior or
contemporaneous understanding, correspondence, negotiations, or agreements
between them respecting the within subject matter. No alteration, modification,
or interpretation hereof shall be binding unless in writing and signed by all
the Partners.
16.5 Counterparts and Execution. This Agreement may be executed in
--------------------------
multiple counterparts, each of which shall be deemed an original Agreement, but
all of which shall constitute one (1) Agreement, binding on the parties hereto.
The signature of any party hereto to any counterpart hereof shall be deemed a
signature to, and may be appended to, any other counterpart.
16.6 Attorneys' Fees. Certain specified disputes pursuant to this
---------------
Agreement shall be resolved by binding arbitration pursuant to Article XIII.
Any other disputes pursuant to this Agreement may be resolved by litigation.
With respect to disputes resolved by litigation, the party prevailing in such
arbitration, whether by out-of-court settlement or final judgment, shall be
entitled, in addition to such other relief as may be granted, to a reasonable
sum as and for attorneys' fees reasonably incurred in such litigation. Any
judgment or order entered in any final judgment shall contain a specific
provision providing for the recovery of all costs and expenses of suit,
including, without limitation, actual attorneys' fees, costs and expenses
incurred in connection with (i) enforcing, perfecting and executing such
judgment, (ii) post-judgment motions, (iii) contempt proceedings; (iv)
garnishment, levee, and debt or and third-party examinations; (v) discovery; and
(vi) bankruptcy litigation.
16.7 Severability. If any provision of this Agreement, or the
------------
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
16.8 Additional Documents. Each party hereto agrees to execute,
--------------------
with acknowledgment or affidavit, if required, any and all documents and
writings which may be necessary or expedient in connection with the creation of
the Partnership and the achievement of its purposes, specifically including (i)
all amendments to this Agreement and such certificates and other documents as
the Managing General Partner deems necessary or appropriate to form, qualify or
continue the Partnership as a general partnership in all other jurisdictions in
which the Partnership conducts or plans to conduct business and (ii) all
46
<PAGE>
such agreements, certificates, tax statements, tax returns and other documents
as may be required of the Partnership or its Partners by the laws of the United
States of America, the State of California, or any other state in which the
Partnership conducts or plans to conduct business, or any political subdivision
or agency thereof.
16.9 No Right to Partition. No Partner shall have the right to bring
---------------------
an action for partition against the Partnership. Each of the Partners hereto
waives any and all right which it may have to maintain an action to partition
Partnership property.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the dates.
"MANAGING GENERAL PARTNER"
BELL JACKPOT CLUB, L.P., a
California limited partnership
By: Bell Jackpot Promote, L.P.,
its general partner
By: Bell Jackpot, Inc., its
general partner
Dated: _____________ By: _________________________
Title: _______________________
Dated: _____________ _______________________________
By: __________________________
Title: ________________________
"GENERAL PARTNER"
SANTA ANITA _________
Dated: _____________ By: ___________________________
Title: _________________________
47
<PAGE>
EXHIBIT 10.2
SANTA ANITA OPERATING COMPANY
INDEMNITY AGREEMENT
This Indemnity Agreement (the "Agreement") is made as of ___________________,
19___ by and between SANTA ANITA OPERATING COMPANY, a Delaware corporation
(the "Company"), and ____________________________ (the "Indemnitee"), a
director of the Company.
RECITALS
A. The Indemnitee is currently serving as a director of the Company and in
such capacity has rendered and will render valuable services to the Company.
B. The Company has investigated the availability and sufficiency of liability
insurance and Delaware statutory indemnification provisions to provide its
directors and officers with adequate protection against various legal risks and
potential liabilities to which such individuals are subject due to their
positions with the Company and has concluded that such insurance and statutory
provisions may provide inadequate and unacceptable protection to certain
individuals requested to serve as its directors and officers.
C. In order to induce and encourage highly experienced and capable persons
such as the Indemnitee to continue to serve as a director of the Company, the
Board of Directors has determined, after due consideration and investigation of
the terms and provisions of this Agreement and the various other options
available to the Company and the Indemnitee in lieu hereof, that this Agreement
is not only reasonable and prudent but necessary to promote and ensure the best
interests of the Company and its stockholders.
AGREEMENT
NOW, THEREFORE, in consideration of the continued services of the Indemnitee
and in order to induce the Indemnitee to continue to serve as a director, the
Company and the Indemnitee do hereby agree as follows:
1. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought in the name of the
Company or otherwise and whether of a civil, criminal or administrative or
investigative nature, by reason of the fact that the Indemnitee is or was a
director of the Company, or is or was serving at the request of the Company as
a director, officer, employee or agent of another enterprise, whether or not
he is serving in such capacity at the time any liability or expense is
incurred for which indemnification or reimbursement is to be provided under
this Agreement.
(b) The term "Expenses" includes, without limitation, attorneys' fees,
disbursements, retainers, accounting and witness fees, travel and deposition
costs, expenses of investigations, judicial or administrative proceedings and
appeals, amounts paid in settlement by or on behalf of Indemnitee, and any
expenses of establishing a right to indemnification, pursuant to this
Agreement or otherwise, including reasonable compensation for time spent by
the Indemnitee in connection with the investigation, defense or appeal of a
Proceeding or action for indemnification for which he is not otherwise
compensated by the Company or any third party. The term "Expenses" does not
include the amount of judgments, fines, penalties or ERISA excise taxes
actually levied against the Indemnitee.
<PAGE>
2. Agreement to Serve. The Indemnitee agrees to continue to serve as a
director of the Company at the will of the Company for so long as he is duly
elected or appointed or until such time as he tenders his resignation in
writing.
3. Indemnification in Third Party Actions. The Company shall indemnify the
Indemnitee in accordance with the provisions of this section if the Indemnitee
is a party to or threatened to be made a party to or is otherwise involved in
any Proceeding (other than a Proceeding by or in the name of the Company to
procure a judgment in its favor), by reason of the fact that the Indemnitee is
or was a director of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another enterprise, against
all Expenses, judgments, fines, penalties and ERISA excise taxes actually and
reasonably incurred by the Indemnitee in connection with the defense or
settlement of such a Proceeding, to the fullest extent permitted by Delaware
law; provided that any settlement of a Proceeding be approved in writing by the
Company.
4. Indemnification in Proceedings By or In the Name of the Company. The
Company shall indemnify the Indemnitee in accordance with the provisions of this
section if the Indemnitee is a party to or threatened to be made a party to or
is otherwise involved in any Proceeding by or in the name of the Company to
procure a judgment in its favor by reason of the fact that Indemnitee was or is
a director of the Company, or is or was serving at the request of the Company as
a director, officer, employee or agent of another enterprise, against all
Expenses actually and reasonably incurred by the Indemnitee in connection with
the defense or settlement of such a Proceeding, to the fullest extent permitted
by Delaware law.
5. Conclusive Presumption Regarding Standards of Conduct. The Indemnitee
shall be conclusively presumed to have met the relevant standards of conduct, as
defined by Delaware law, for indemnification pursuant to this Agreement, unless
a determination is made that the Indemnitee has not met such standards (i) by
the Board of Directors by a majority vote of a quorum thereof consisting of
directors who were not parties to the Proceeding due to which a claim is made
under this Agreement, (ii) by the stockholders of the Company by majority vote,
or (iii) in a written opinion by independent legal counsel, selection of whom
has been approved by the Indemnitee in writing.
6. Indemnification of Expenses of Successful Party. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee has been
successful in defense of any Proceeding or in defense of any claim, issue or
matter therein, on the merits or otherwise, including the dismissal of a
Proceeding without prejudice, the Indemnitee shall be indemnified against all
Expenses incurred in connection therewith to the fullest extent permitted by
Delaware law.
7. Advances of Expenses. The Expenses incurred by the Indemnitee in any
Proceeding shall be paid promptly by the Company in advance of the final
disposition of the Proceeding at the written request of the Indemnitee to the
fullest extent permitted by Delaware law; provided that as long as Delaware law
requires such an undertaking, the Indemnitee shall undertake in writing to repay
any advances to the extent that it is ultimately determined that the Indemnitee
is not entitled to indemnification.
8. Partial Indemnification. If the Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for a portion of the
Expenses, judgments, fines, penalties or ERISA excise taxes actually and
reasonably incurred by him in the investigation, defense, appeal or settlement
of any Proceeding but not, however, for the total amount of his Expenses, the
Company shall nevertheless indemnify the Indemnitee for the portion of Expenses,
judgments, fines, penalties or ERISA excise taxes to which the Indemnitee is
entitled.
<PAGE>
9. Indemnification Procedure; Determination of Right to Indemnification.
(a) Promptly after receipt by the Indemnitee of notice of the commencement of
any Proceeding, the Indemnitee shall, if a claim in respect thereof is to be
made against the Company under this Agreement, notify the Company of the
commencement thereof in writing. The omission to so notify the Company will not
relieve it from any liability which it may have to the Indemnitee otherwise than
under this Agreement.
(b) If a claim for indemnification or advances under this Agreement is not
paid by the Company within 30 days of receipt of written notice, the rights
provided by this Agreement shall be enforceable by the Indemnitee in any court
of competent jurisdiction. The burden of proving by clear and convincing
evidence that indemnification or advances are not appropriate shall be on the
Company. Neither the failure of the directors or stockholders of the Company or
its independent legal counsel to have made a determination prior to the
commencement of such action that indemnification or advances are proper in the
circumstances because the Indemnitee has met the applicable standard of conduct,
nor an actual determination by the directors or stockholders of the Company or
independent legal counsel that the Indemnitee has not met the applicable
standard of conduct, shall be a defense to the action or create a presumption
that the Indemnitee has not met the applicable standard of conduct.
(c) The Indemnitee's Expenses incurred in connection with any proceeding
concerning his right to indemnification or advances in whole or in part pursuant
to this Agreement shall also be indemnified by the Company regardless of the
outcome of such a proceeding, unless a court of competent jurisdiction
determines that each of the material assertions made by the Indemnitee in the
proceeding was not made in good faith or was frivolous.
(d) With respect to any Proceeding for which indemnification is requested, the
Company will be entitled to participate therein at its own expense and, except
as otherwise provided below, to the extent that it may wish, the Company may
assume the defense thereof, with counsel satisfactory to the Indemnitee. After
notice from the Company to the Indemnitee of its election to assume the defense
of a Proceeding, the Company will not be liable to the Indemnitee under this
Agreement for any Expenses subsequently incurred by the Indemnitee in connection
with the defense thereof, other than as provided below. The Company shall not
settle any Proceeding in any manner which would impose any penalty or limitation
on the Indemnitee without the Indemnitee's written consent. The Indemnitee shall
have the right to employ his counsel in any Proceeding but the fees and expenses
of such counsel incurred after notice from the Company of its assumption of the
defense of the Proceeding shall be at the expense of the Indemnitee, unless (i)
the employment of counsel by the Indemnitee has been authorized by the Company,
(ii) the Indemnitee shall have reasonably concluded that there may be a conflict
of interest between the Company and the Indemnitee in the conduct of the defense
of a Proceeding, or (iii) the Company shall not in fact have employed counsel to
assume the defense of a Proceeding, in each of which cases the fees and expenses
of the Indemnitee's counsel shall be advanced by the Company. The Company shall
not be entitled to assume the defense of any Proceeding brought by or on behalf
of the Company or as to which the Indemnitee has made the conclusion that there
may be a conflict of interest between the Company and the Indemnitee.
10. Limitations on Indemnification. No payments pursuant to this Agreement
shall be made by the Company:
(a) To indemnify or advance funds to the Indemnitee for expenses with
respect to proceedings initiated or brought voluntarily by the Indemnitee and
not by way of defense, except with respect to proceedings brought to establish
or enforce a right to indemnification under this Agreement or any other
<PAGE>
statute or law or otherwise as required under Delaware law, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors finds it to be appropriate;
(b) To indemnify the Indemnitee for any Expenses, judgments, fines,
penalties or ERISA excise taxes sustained in any Proceeding for which payment
is actually made to the Indemnitee under a valid and collectible insurance
policy, except in respect of any excess beyond the amount of payment under
such insurance;
(c) To indemnify the Indemnitee for any Expenses, judgments, fines or
penalties sustained in any Proceeding for an accounting of profits made from
the purchase or sale by the Indemnitee of securities of the Company pursuant
to the provisions of Section 16(b) of the Securities Exchange Act of 1934, the
rules and regulations promulgated thereunder and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) To indemnify the Indemnitee for any Expenses, judgments, fines,
penalties or ERISA excise taxes resulting from the Indemnitee's conduct which
is finally adjudged to have been willful misconduct, knowing fraud or
deliberate dishonesty; or
(e) If a court of competent jurisdiction finally determines that any
indemnification hereunder is unlawful.
11. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, as long as the Indemnitee
continues to serve as a director of the Company and thereafter as long as the
Indemnitee may be subject to any possible Proceeding, the Company, subject to
subsection (c), shall promptly obtain and maintain in full force and effect
directors' and officers' liability insurance ("D&O Insurance") in reasonable
amounts from established and reputable insurers.
(b) In all D&O Insurance policies, the Indemnitee shall be named as an insured
in such a manner as to provide the Indemnitee the same rights and benefits as
are accorded to the most favorably insured of the Company's directors.
(c) Notwithstanding the foregoing, the Company shall have no obligation to
obtain or maintain D&O Insurance if the Company determines in good faith that
such insurance is not reasonably available, the premium costs for such insurance
are disproportionate to the amount of coverage provided, the coverage provided
by such insurance is so limited by exclusions that it provides an insufficient
benefit, or the Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company.
12. Indemnification Hereunder Not Exclusive. The indemnification provided by
this Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may be entitled under the Certificate of Incorporation, Bylaws, any
agreement, vote of stockholders or disinterested directors, provision of
Delaware law, or otherwise, both as to action in his official capacity and as to
action in another capacity on behalf of the Company while holding such office.
13. Successors and Assigns. This Agreement shall be binding upon, and shall
enure to the benefit of the Indemnitee and his heirs, personal representatives
and assigns, and the Company and its successors and assigns.
<PAGE>
14. Separability. Each provision of this Agreement is a separate and distinct
agreement and independent of the others, so that if any provision hereof shall
be held to be invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. To the extent required, any provision of this Agreement may
be modified by a court of competent jurisdiction to preserve its validity and to
provide the Indemnitee with the broadest possible indemnification permitted
under Delaware law.
15. Savings Clause. If this Agreement or any provision hereof is invalidated
on any ground by any court of competent jurisdiction, the Company shall
nevertheless indemnify the Indemnitee as to any Expenses, judgments, fines,
penalties or ERISA exercise taxes incurred with respect to any Proceeding to the
full extent permitted by any applicable provision of this Agreement that has not
been invalidated or by any other applicable provision of Delaware law.
16. Interpretation, Governing Law. This Agreement shall be construed as a
whole and in accordance with its fair meaning. Headings are for convenience only
and shall not be used in construing meaning. This Agreement shall be governed
and interpreted in accordance with the laws of the State of Delaware.
17. Amendments. No amendment, waiver, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
the party against whom enforcement is sought. The indemnification rights
afforded to the Indemnitee hereby are contract rights and may not be diminished,
eliminated or otherwise affected by amendments to the Certificate of
Incorporation, Bylaws or by other agreements, including D&O Insurance policies.
18. Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other.
19. Notices. Any notice required to be given under this Agreement shall be
directed to Santa Anita Operating Company at 285 West Huntington Drive, Arcadia,
California 91006, Attention: Secretary and to Indemnitee at
or to such other address as either shall designate in writing.
IN WITNESS WHEREOF, the parties have executed this Indemnity Agreement as of
the date first written above.
___________________________________
"Indemnitee"
SANTA ANITA OPERATING COMPANY
By ________________________________
Its _______________________________
<PAGE>
Schedule of Omitted Documents
and Material Details Regarding
Indemnity Agreements of Certain Directors and Officers
of Santa Anita Operating Company
The persons listed below have entered into substantially identical forms of
Indemnity Agreements, effective as of the dates listed opposite their names.
William C. Baker June 13, 1991
Thomas J. Barrack, Jr. March 17, 1995
Richard S. Cohen May 19, 1987
Arthur L. Crowe May 19, 1987
Clifford C. Goodrich September 29, 1989
Stephen F. Keller June 13, 1991
J. Terrence Lanni March 1, 1995
Thomas P. Mullaney September 29, 1989
William D. Schulte September 15, 1994
<PAGE>
EXHIBIT 10.3
SANTA ANITA REALTY ENTERPRISES, INC.
INDEMNITY AGREEMENT
This Indemnity Agreement (the "Agreement") is made as of ___________________,
19___ by and between SANTA ANITA REALTY ENTERPRISES, INC., a Delaware
corporation (the "Company"), and __________________________ (the "Indemnitee"),
a director of the Company.
RECITALS
A. The Indemnitee is currently serving as a director of the Company and in
such capacity has rendered and will render valuable services to the Company.
B. The Company has investigated the availability and sufficiency of liability
insurance and Delaware statutory indemnification provisions to provide its
directors and officers with adequate protection against various legal risks and
potential liabilities to which such individuals are subject due to their
positions with the Company and has concluded that such insurance and statutory
provisions may provide inadequate and unacceptable protection to certain
individuals requested to serve as its directors and officers.
C. In order to induce and encourage highly experienced and capable persons
such as the Indemnitee to continue to serve as a director of the Company, the
Board of Directors has determined, after due consideration and investigation of
the terms and provisions of this Agreement and the various other options
available to the Company and the Indemnitee in lieu hereof, that this Agreement
is not only reasonable and prudent but necessary to promote and ensure the best
interests of the Company and its stockholders.
AGREEMENT
NOW, THEREFORE. in consideration of the continued services of the Indemnitee
and in order to induce the Indemnitee to continue to serve as a director, the
Company and the Indemnitee do hereby agree as follows:
1. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought in the name of the
Company or otherwise and whether of a civil, criminal or administrative or
investigative nature, by reason of the fact that the Indemnitee is or was a
director of the Company, or is or was serving at the request of the Company
as a director, officer, employee or agent of another enterprise, whether or
not he is serving in such capacity at the time any liability or expense is
incurred for which indemnification or reimbursement is to be provided under
this Agreement.
(b) The term "Expenses" includes, without limitation, attorneys' fees,
disbursements, retainers, accounting and witness fees, travel and deposition
costs, expenses of investigations, judicial or administrative proceedings and
appeals, amounts paid in settlement by or on behalf of Indemnitee, and any
expenses of establishing a right to indemnification, pursuant to this
Agreement or otherwise, including reasonable compensation for time spent by
the Indemnitee in connection with the investigation, defense or appeal of a
Proceeding or action for indemnification for which he is not otherwise
compensated by the Company or any third party. The term "Expenses" does not
include the amount of judgments, fines, penalties or ERISA excise taxes
actually levied against the Indemnitee.
<PAGE>
2. Agreement to Serve. The Indemnitee agrees to continue to serve as a
director of the Company at the will of the Company for so long as he is duly
elected or appointed or until such time as he tenders his resignation in
writing.
3. Indemnification in Third Party Actions. The Company shall indemnify the
Indemnitee in accordance with the provisions of this section if the Indemnitee
is a party to or threatened to be made a party to or is otherwise involved in
any Proceeding (other than a Proceeding by or in the name of the Company to
procure a judgment in its favor), by reason of the fact that the Indemnitee is
or was a director of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another enterprise, against
all Expenses, judgments, fines, penalties and ERISA excise taxes actually and
reasonably incurred by the Indemnitee in connection with the defense or
settlement of such a Proceeding, to the fullest extent permitted by Delaware
law; provided that any settlement of a Proceeding be approved in writing by the
Company.
4. Indemnification in Proceedings By or In the Name of the Company. The
Company shall indemnify the Indemnitee in accordance with the provisions of this
section if the Indemnitee is a party to or threatened to be made a party to or
is otherwise involved in any Proceeding by or in the name of the Company to
procure a judgment in its favor by reason of the fact that Indemnitee was or is
a director of the Company, or is or was serving at the request of the Company as
a director, officer, employee or agent of another enterprise, against all
Expenses actually and reasonably incurred by the Indemnitee in connection with
the defense or settlement of such a Proceeding, to the fullest extent permitted
by Delaware law.
5. Conclusive Presumption Regarding Standards of Conduct. The Indemnitee shall
be conclusively presumed to have met the relevant standards of conduct, as
defined by Delaware law, for indemnification pursuant to this Agreement, unless
a determination is made that the Indemnitee has not met such standards (i) by
the Board of Directors by a majority vote of a quorum thereof consisting of
directors who were not parties to the Proceeding due to which a claim is made
under this Agreement, (ii) by the stockholders of the Company by majority vote,
or (iii) in a written opinion by independent legal counsel, selection of whom
has been approved by the Indemnitee in writing.
6. Indemnification of Expenses of Successful Party. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee has been
successful in defense of any Proceeding or in defense of any claim, issue or
matter therein, on the merits or otherwise, including the dismissal of a
Proceeding without prejudice, the Indemnitee shall be indemnified against all
Expenses incurred in connection therewith to the fullest extent permitted by
Delaware law.
7. Advances of Expenses. The Expenses incurred by the Indemnitee in any
Proceeding shall be paid promptly by the Company in advance of the final
disposition of the Proceeding at the written request of the Indemnitee to the
fullest extent permitted by Delaware law; provided that as long as Delaware law
requires such an undertaking, the Indemnitee shall undertake in writing to repay
any advances to the extent that it is ultimately determined that the Indemnitee
is not entitled to indemnification.
8. Partial Indemnification. If the Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for a portion of the
Expenses, judgments, fines, penalties or ERISA excise taxes actually and
reasonably incurred by him in the investigation, defense, appeal or settlement
of any Proceeding but not, however, for the total amount of his Expenses, the
Company shall nevertheless indemnify the Indemnitee for the portion of Expenses,
judgments, fines, penalties or ERISA excise taxes to which the Indemnitee is
entitled.
<PAGE>
9. Indemnification Procedure; Determination of Right to Indemnification
(a) Promptly after receipt by the Indemnitee of notice of the commencement of
any Proceeding, the Indemnitee shall, if a claim in respect thereof is to be
made against the Company under this Agreement, notify the Company of the
commencement thereof in writing. The omission to so notify the Company will not
relieve it from any liability which it may have to the Indemnitee otherwise than
under this Agreement.
(b) If a claim for indemnification or advances under this Agreement is not
paid by the Company within 30 days of receipt of written notice, the rights
provided by this Agreement shall be enforceable by the Indemnitee in any court
of competent jurisdiction. The burden of proving by clear and convincing
evidence that indemnification or advances are not appropriate shall be on the
Company. Neither the failure of the directors or stockholders of the Company or
its independent legal counsel to have made a determination prior to the
commencement of such action that indemnification or advances are proper in the
circumstances because the Indemnitee has met the applicable standard of conduct,
nor an actual determination by the directors or stockholders of the Company or
independent legal counsel that the Indemnitee has not met the applicable
standard of conduct, shall be a defense to the action or create a presumption
that the Indemnitee has not met the applicable standard of conduct.
(c) The Indemnitee's Expenses incurred in connection with any proceeding
concerning his right to indemnification or advances in whole or in part pursuant
to this Agreement shall also be indemnified by the Company regardless of the
outcome of such a proceeding, unless a court of competent jurisdiction
determines that each of the material assertions made by the Indemnitee in the
proceeding was not made in good faith or was frivolous.
(d) With respect to any Proceeding for which indemnification is requested,
the Company will be entitled to participate therein at its own expense and,
except as otherwise provided below, to the extent that it may wish, the Company
may assume the defense thereof, with counsel satisfactory to the Indemnitee.
After notice from the Company to the Indemnitee of its election to assume the
defense of a Proceeding, the Company will not be liable to the Indemnitee under
this Agreement for any Expenses subsequently incurred by the Indemnitee in
connection with the defense thereof, other than as provided below. The Company
shall not settle any Proceeding in any manner which would impose any penalty or
limitation on the Indemnitee without the Indemnitee's written consent. The
Indemnitee shall have the right to employ his counsel in any Proceeding but the
fees and expenses of such counsel incurred after notice from the Company of its
assumption of the defense of the Proceeding shall be at the expense of the
Indemnitee, unless (1) the employment of counsel by the Indemnitee has been
authorized by the Company, (ii) the Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and the Indemnitee
in the conduct of the defense of a Proceeding, or (iii) the Company shall not in
fact have employed counsel to assume the defense of a Proceeding, in each of
which cases the fees and expenses of the Indemnitee's counsel shall be advanced
by the Company. The Company shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of the Company or as to which the Indemnitee
has made the conclusion that there may be a conflict of interest between the
Company and the Indemnitee.
10. Limitations on Indemnification. No payments pursuant to this Agreement
shall be made by the Company:
(a) To indemnify or advance funds to the Indemnitee for expenses with
respect to proceedings initiated or brought voluntarily by the Indemnitee and
not by way of defense, except with respect to proceedings brought to establish
or enforce a right to indemnification under this Agreement or any other
<PAGE>
statute or law or otherwise as required under Delaware law, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors finds it to be appropriate;
(b) To indemnify the Indemnitee for any Expenses, judgments, fines,
penalties or ERISA excise taxes sustained in any Proceeding for which payment
is actually made to the Indemnitee under a valid and collectible insurance
policy, except in respect of any excess beyond the amount of payment under
such insurance;
(c) To indemnify the Indemnitee for any Expenses, judgments, fines or
penalties sustained in any Proceeding for an accounting of profits made from
the purchase or sale by the Indemnitee of securities of the Company pursuant
to the provisions of Section 16(b) of the Securities Exchange Act of 1934, the
rules and regulations promulgated thereunder and amendments thereto or similar
provisions of any federal, state or local statutory law;
(d) To indemnify the Indemnitee for any Expenses, judgments, fines,
penalties or ERISA excise taxes resulting from the Indemnitee's conduct which
is finally adjudged to have been willful misconduct, knowing fraud or
deliberate dishonesty; or
(e) If a court of competent jurisdiction finally determines that any
indemnification hereunder is unlawful.
11. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, as long as the Indemnitee
continues to serve as a director of the Company and thereafter as long as the
Indemnitee may be subject to any possible Proceeding, the Company, subject to
subsection (c), shall promptly obtain and maintain in full force and effect
directors' and officers' liability insurance ("D&O Insurance") in reasonable
amounts from established and reputable insurers.
(b) In all D&O Insurance policies, the Indemnitee shall be named as an insured
in such a manner as to provide the Indemnitee the same rights and benefits as
are accorded to the most favorably insured of the Company's directors.
(c) Notwithstanding the foregoing, the Company shall have no obligation to
obtain or maintain D&O Insurance if the Company determines in good faith that
such insurance is not reasonably available, the premium costs for such insurance
are disproportionate to the amount of coverage provided, the coverage provided
by such insurance is so limited by exclusions that it provides an insufficient
benefit, or the Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company.
12. Indemnification Hereunder Not Exclusive. The indemnification provided by
this Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may be entitled under the Certificate of Incorporation, Bylaws, any
agreement, vote of stockholders or disinterested directors, provision of
Delaware law, or otherwise, both as to action in his official capacity and as to
action in another capacity on behalf of the Company while holding such office.
13. Successors and Assigns. This Agreement shall be binding upon, and shall
enure to the benefit of the Indemnitee and his heirs, personal representatives
and assigns, and the Company and its successors and assigns.
<PAGE>
14. Separability. Each provision of this Agreement is a separate and distinct
agreement and independent of the others, so that if any provision hereof shall
be held to be invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. To the extent required, any provision of this Agreement may
be modified by a court of competent jurisdiction to preserve its validity and to
provide the Indemnitee with the broadest possible indemnification permitted
under Delaware law.
15. Savings Clause. If this Agreement or any provision hereof is invalidated
on any ground by any court of competent jurisdiction, the Company shall
nevertheless indemnify the Indemnitee as to any Expenses, judgments, fines,
penalties or ERISA excise taxes incurred with respect to any Proceeding to the
full extent permitted by any applicable provision of this Agreement that has not
been invalidated or by any other applicable provision of Delaware law.
16. Interpretation. Governing Law. This Agreement shall be construed as a
whole and in accordance with its fair meaning. Headings are for convenience only
and shall not be used in construing meaning. This Agreement shall be governed
and interpreted in accordance with the laws of the State of Delaware.
17. Amendments. No amendment, waiver, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
the party against whom enforcement is sought. The indemnification rights
afforded to the Indemnitee hereby are contract rights and may not be diminished,
eliminated or otherwise affected by amendments to the Certificate of
Incorporation, Bylaws or by other agreements, including D&O Insurance policies.
18. Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other.
19. Notices. Any notice required to be given under this Agreement shall be
directed to Santa Anita Realty Enterprises, Inc. 301 W. Huntington Dr., Arcadia
CA 91006-3439 Attention: Secretary and to Indemnitee at ______________________
or to such other address as either shall designate in writing.
IN WITNESS WHEREOF, the parties have executed this Indemnity Agreement as of
the date first written above.
_________________________________________
("Indemnitee")
SANTA ANITA REALTY ENTERPRISES, INC.
By ______________________________________
Its _____________________________________
<PAGE>
Schedule of Omitted Documents
and Material Details Regarding
Indemnity Agreements of Certain Directors and Officers
of Santa Anita Realty Enterprises, Inc.
The persons listed below have entered into substantially identical forms of
Indemnity Agreements, effective as of the dates listed opposite their names.
William C. Baker June 13, 1991
Thomas J. Barrack, Jr. March 17, 1995
Sherwood C. Chillingworth June 16, 1994
Richard S. Cohen May 19, 1987
Arthur L. Crowe May 19, 1987
Clifford C. Goodrich September 29, 1989
Taylor B. Grant June 30, 1989
Stephen F. Keller June 13, 1991
J. Terrence Lanni March 1, 1995
Thomas P. Mullaney September 29, 1989
William D. Schulte September 15, 1994
<PAGE>
EXHIBIT 10.4
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into as of this ____ day of _____________,
19___ by and between Santa Anita Operating Company, a Delaware corporation (the
"Company") and ________________________________ ("Director").
WITNESSETH:
WHEREAS, Director has provided and is now providing valuable services
to Company resulting from Director's long familiarity with Company's affairs and
Director's financial expertise acquired through years of experience with Company
and other companies;
WHEREAS, Company desires to assure itself of the continued
availability of Director's consultative and advisory services subsequent to
Director's Termination from the Board and so long as Director remains able to
render such services;
WHEREAS, Director is willing to remain available to render such
services so long as Director is able to do so, on the terms and conditions
herein set forth; and
WHEREAS, the Board has determined that Director is an Eligible
Director.
NOW, THEREFORE, in consideration of the premises and the covenants
herein contained and the rendition by Director of the services specified herein,
Company and Director have agreed and contracted as follows:
1. Definitions.
------------
(a) "Beneficiary" shall mean Director's beneficiary, designated in
writing on such form as the Committee may require, if any, or otherwise
Director's estate.
(b) "Board" shall mean any of the boards of directors of Santa Anita
Realty Enterprises, Inc., (including Santa Anita Consolidated, Inc. and, through
1966, Los Angeles Turf Club,) and/or Santa Anita Operating Company.
(c) "Committee" shall mean the Compensation Committee of the Board.
(d) "Corporation" shall mean Santa Anita Realty Enterprises, Inc.
(including Santa Anita Consolidated, Inc.), Santa Anita Operating Company or any
other company while such company is or was a subsidiary of Santa Anita Realty
Enterprises, Inc. (or Santa Anita Consolidated Inc.) or Santa Anita Operating
Company.
<PAGE>
(e) "Eligible Director" shall mean a current or prior member of the
Board who has a total of at least 120 full months of Service.
(f) "Service" shall commence on the first day the Director is a member
of the Board and is not an officer or employee of any Corporation. Service shall
thereafter be earned, on an elapsed time basis, until the individual ceases to
be a member of the Board or becomes an officer or employee of any Corporation.
Simultaneous Service as a member of more than one Board shall not receive double
credit. A new period of Service shall commence if an individual again becomes a
member of the Board who is not an officer or employee of the Corporations. In
the case of an individual with two or more periods of Service, such Service
shall be aggregated and 30 days of Service shall constitute a full month of
Service in the case the aggregation of partial months. Notwithstanding the
above, no Service shall be earned for any period before January 1, 1960.
(g) "Termination from the Board" shall mean the date Director (i)
resigns or retires from the Board, (ii) dies while serving as a Board member on
or after January 1, 1980, or (iii) fails to be reelected to the Board.
2. Services.
---------
(a) If Director is currently a member of the Board, Director agrees
(i) to continue performing services in that capacity for such compensation as
may be established from time to time by the Board and (ii) upon Director's
Termination from the Board, to remain available for such advisory and
consultative services as may reasonably be assigned to Director by or under the
authority of the Board until Director's demise (see 3(c)).
(b) If Director is a prior member of the Board, Director agrees as of
the date of execution of this Agreement to remain available for such advisory
and consultative services as may reasonably be assigned to Director by or under
the authority of the Board until Director's demise (see 3(c)).
(c) It is understood that the services to be rendered by Director
subsequent to Director's Termination from the Board are not to be full time and
that they will not be required to be performed outside the geographic area of
Director's residence without reimbursement for out-of-pocket expenses.
3. Payments.
---------
(a) In consideration of Director's agreement to remain available for
services as specified above, Company agrees to pay Director an annual amount for
five years following Director's Termination from the Board. The annual amount
shall
2
<PAGE>
equal $480 times the number of years of Service. The number of years of Service
shall be the number of full months of Service, divided by twelve, and rounded
upward to the next highest whole number if the quotient is not already a whole
number. For this purpose only, if the Director has one partial month of Service
(after aggregating any separate periods of Service), such partial month shall be
treated as one full month of Service.
(b) The annual amount described in subsection (a) above shall be
payable for five years to Director in quarterly installments. The first
installment shall be paid to Director on the first day of the calendar quarter
immediately following the date of Director's Termination from the Board or, if
later, the date of execution of this Agreement. Subsequent installments shall be
paid to Director on the first day of each succeeding calendar quarter.
(c) In the event of the death of Director prior to the expiration of
the five years, all remaining installments shall be paid to Director's
Beneficiary.
(d) Any payment under this Agreement shall, to the extent thereof, be
in full satisfaction of all claims against the Committee and Company, and the
Committee may require Director or Director's Beneficiary as a condition
precedent to such payment, to execute a receipt and release to such effect.
(e) In the event any amount becomes payable under this Agreement to
Director or Director's Beneficiary, who in the sole judgment of the Committee,
is considered by reason of physical or mental condition to be unable to give a
valid receipt therefor, the Committee may direct that such payment be made to
any person found by the Committee, in its sole judgment, to have responsibility
for the care of Director or Director's Beneficiary. Any payment made pursuant to
such determination shall constitute a full release and discharge of the
Committee and Company.
4. Additional Rights.
------------------
Director shall, in addition to receiving the payments described in 3.
above, be designated as a Director Emeritus with the right to receive notices of
Board meetings, to attend such meetings, and to use the Directors Room,
including having the credentials to enjoy use of the Directors Room in the
Private Turf Club. Director shall not however, be entitled to receipt of any
retainer or fees for attending Board meetings; and such rights and privileges
shall be personal to Director and shall expire on Director's demise.
5. Assignability.
--------------
This Agreement shall inure to the benefit of, and be binding upon, the
parties hereto. Neither Director nor
3
<PAGE>
Director's Beneficiary shall have any right to assign, transfer, encumber or
dispose of any rights hereunder, all of such rights being expressly declared to
be nonassignable.
6. Interpretation.
---------------
(a) The Committee is authorized to construe and interpret all of the
terms of this Agreement and its interpretation shall be binding on both of the
parties.
(b) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California. If any provision shall be held by a
court to be invalid and unenforceable, the remaining provisions of the Agreement
shall continue to be fully effective.
7. Source of Payments.
-------------------
The payments to be made by Company hereunder shall be made from
Company's general assets and shall not be funded in any way. Director's rights
shall be those of an unsecured general creditor without priority or preference.
8. Notice.
-------
Any notice required or permitted to be given under this Agreement by
one party hereto to the other shall be sufficient if given or confirmed in
writing to the following address:
To Company:
Corporate Secretary
Santa Anita Operating Company
P.O. Box 60014
Arcadia, CA 91006-6014
To Director: _________________________________
_________________________________
_________________________________
4
<PAGE>
IN WITNESS WHEREOF, Company has caused this Agreement to be executed
by its duly authorized officers and its corporate seal to be hereunto affixed,
and Director has hereunto set his hand on the day and year first above written.
SANTA ANITA OPERATING COMPANY "Director"
By: _______________________________ By: ______________________________
5
<PAGE>
Schedule of Omitted Documents
and Material Details Regarding
Consulting Agreements of Certain Directors
of Santa Anita Operating Company
The persons listed below have entered into substantially identical forms of
Consulting Agreements, effective as of the dates listed opposite their names.
William C. Baker September 1, 1994
Thomas J. Barrack, Jr. March 17, 1995
Richard S. Cohen October 5, 1990
Arthur L. Crowe October 8, 1990
J. Terrence Lanni March 1, 1995
Thomas P. Mullaney October 7, 1990
William D. Schulte September 15, 1994
<PAGE>
EXHIBIT 10.5
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into as of this ___ day of ______________,
19___ by and between Santa Anita Realty Enterprises, Inc., a Delaware
corporation (the "Company") and _____________________________ ("Director").
WITNESSETH:
WHEREAS, Director has provided and is now providing valuable services
to Company resulting from Director's long familiarity with Company's affairs and
Director's financial expertise acquired through years of experience with Company
and other companies;
WHEREAS, Company desires to assure itself of the continued
availability of Director's consultative and advisory services subsequent to
Director's Termination from the Board and so long as Director remains able to
render such services;
WHEREAS, Director is willing to remain available to render such
services so long as Director is able to do so, on the terms and conditions
herein set forth; and
WHEREAS, the Board has determined that Director is an Eligible
Director.
NOW, THEREFORE, in consideration of the premises and the covenants
herein contained and the rendition by Director of the services specified herein,
Company and Director have agreed and contracted as follows:
1. Definitions.
------------
(a) "Beneficiary" shall mean Director's beneficiary, designated in
writing on such form as the Committee may require, if any, or otherwise
Director's estate.
(b) "Board" shall mean any of the boards of directors of Santa Anita
Realty Enterprises, Inc., (including Santa Anita Consolidated, Inc. and, through
1966, Los Angeles Turf Club), and/or Santa Anita Operating Company.
(c) "Committee" shall mean the Compensation Committee of the Board.
(d) "Corporation" shall mean Santa Anita Realty Enterprises, Inc.
(including Santa Anita Consolidated, Inc.), Santa Anita Operating Company or any
other company while such company is or was a subsidiary of Santa Anita Realty
Enterprises, Inc. (or Santa Anita Consolidated Inc.) or Santa Anita Operating
Company.
<PAGE>
(e) "Eligible Director" shall mean a current or prior member of the
Board who has a total of at least 120 full months of Service.
(f) "Service" shall commence on the first day the Director is a member
of the Board and is not an officer or employee of any Corporation. Service shall
thereafter be earned, on an elapsed time basis, until the individual ceases to
be a member of the Board or becomes an officer or employee of any Corporation.
Simultaneous Service as a member of more than one Board shall not receive double
credit. A new period of Service shall commence if an individual again becomes a
member of the Board who is not an officer or employee of the Corporations. In
the case of an individual with two or more periods of Service, such Service
shall be aggregated and 30 days of Service shall constitute a full month of
Service in the case the aggregation of partial months. Notwithstanding the
above, no Service shall be earned for any period before January 1, 1960.
(g) "Termination from the Board" shall mean the date Director (i)
resigns or retires from the Board, (ii) dies while serving as a Board member on
or after January 1, 1980, or (iii) fails to be reelected to the Board.
2. Services.
--------
(a) If Director is currently a member of the Board, Director agrees
(i) to continue performing services in that capacity for such compensation as
may be established from time to time by the Board and (ii) upon Director's
Termination from the Board, to remain available for such advisory and
consultative services as may reasonably be assigned to Director by or under the
authority of the Board until Director's demise (see 3(c)).
(b) If Director is a prior member of the Board, Director agrees as of
the date of execution of this Agreement to remain available for such advisory
and consultative services as may reasonably be assigned to Director by or under
the authority of the Board until Director's demise (see 3(c)).
(c) It is understood that the services to be rendered by Director
subsequent to Director's Termination from the Board are not to be full time and
that they will not be required to be performed outside the geographic area of
Director's residence without reimbursement for out-of-pocket expenses.
3. Payments.
---------
(a) In consideration of Director's agreement to remain available for
services as specified above, Company agrees to pay Director an annual amount for
five years following Director's Termination from the Board. The annual amount
shall
2
<PAGE>
equal $480 times the number of years of Service. The number of years of Service
shall be the number of full months of Service, divided by twelve, and rounded
upward to the next highest whole number if the quotient is not already a whole
number. For this purpose only, if the Director has one partial month of Service
(after aggregating any separate periods of Service), such partial month shall be
treated as one full month of Service.
(b) The annual amount described in subsection (a) above shall be
payable for five years to Director in quarterly installments. The first
installment shall be paid to Director on the first day of the calendar quarter
immediately following the date of Director's Termination from the Board or, if
later, the date of execution of this Agreement. Subsequent installments shall be
paid to Director on the first day of each succeeding calendar quarter.
(c) In the event of the death of Director prior to the expiration of
the five years, all remaining installments shall be paid to Director's
Beneficiary.
(d) Any payment under this Agreement shall, to the extent thereof, be
in full satisfaction of all claims against the Committee and Company, and the
Committee may require Director or Director's Beneficiary as a condition
precedent to such payment, to execute a receipt and release to such effect.
(e) In the event any amount becomes payable under this Agreement to
Director or Director's Beneficiary, who in the sole judgment of the Committee,
is considered by reason of physical or mental condition to be unable to give a
valid receipt therefor, the Committee may direct that such payment be made to
any person found by the Committee, in its sole judgment, to have responsibility
for the care of Director or Director's Beneficiary. Any payment made pursuant to
such determination shall constitute a full release and discharge of the
Committee and Company.
4. Additional Rights.
------------------
Director shall, in addition to receiving the payments described in 3.
above, be designated as a Director Emeritus with the right to receive notices of
Board meetings, to attend such meetings, and to use the Directors Room,
including having the credentials to enjoy use of the Directors Room in the
Private Turf Club. Director shall not however, be entitled to receipt of any
retainer or fees for attending Board meetings; and such rights and privileges
shall be personal to Director and shall expire on Director's demise.
5. Assignability.
--------------
This Agreement shall inure to the benefit of, and be binding upon, the
parties hereto. Neither Director nor
3
<PAGE>
Director's Beneficiary shall have any right to assign, transfer, encumber or
dispose of any rights hereunder, all of such rights being expressly declared to
be nonassignable.
6. Interpretation.
---------------
(a) The Committee is authorized to construe and interpret all of the
terms of this Agreement and its interpretation shall be binding on both of the
parties.
(b) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California. If any provision shall be held by a
court to be invalid and unenforceable, the remaining provisions of the Agreement
shall continue to be fully effective.
7. Source of Payments.
-------------------
The payments to be made by Company hereunder shall be made from
Company's general assets and shall not be funded in any way. Director's rights
shall be those of an unsecured general creditor without priority or preference.
8. Notice.
-------
Any notice required or permitted to be given under this Agreement by
one party hereto to the other shall be sufficient if given or confirmed in
writing to the following address:
To Company:
Corporate Secretary
Santa Anita Operating Company
P.O. Box 60025
Arcadia, CA 91006-6025
To Director:
____________________________________
____________________________________
____________________________________
4
<PAGE>
IN WITNESS WHEREOF, Company has caused this Agreement to be executed
by its duly authorized officers and its corporate seal to be hereunto affixed,
and Director has hereunto set his hand on the day and year first above written.
SANTA ANITA REALTY "Director"
ENTERPRISES, INC.
By: _________________________________ By: ________________________________
<PAGE>
Schedule of Omitted Documents
and Material Details Regarding
Consulting Agreements of Certain Directors
of Santa Anita Realty Enterprises, Inc.
The persons listed below have entered into substantially identical forms of
Consulting Agreements, effective as of the dates listed opposite their names.
William C. Baker September 1, 1994
Thomas J. Barrack, Jr. March 17, 1995
Richard S. Cohen October 5, 1990
Arthur L. Crowe October 8, 1990
Taylor B. Grant October 4, 1990
J. Terrence Lanni March 1, 1995
Thomas P. Mullaney October 7, 1990
William D. Schulte September 15, 1994
<PAGE>
EXHIBIT 10.6
SANTA ANITA OPERATING COMPANY
RESTRICTED STOCK AGREEMENT
--------------------------
THIS AGREEMENT dated as of the 1st day of April, 1995, is between Santa
Anita Operating Company, a Delaware corporation (the "Corporation"), Stephen F.
Keller (the "Employee") and the Keller Family Trust (the "Trust" and
collectively with Employee, the "Recipient").
W I T N E S S E T H
-------------------
WHEREAS, pursuant to the Santa Anita Operating Company 1995 Share Award
Plan, as amended (the "Plan"), which Plan remains subject to shareholder
approval, the Corporation has granted to the Recipient effective as of the 15th
day of December, 1994 (the "Award Date") a restricted stock award of 86,322
paired shares of Common Stock, $.10 par value, and Realty Stock, $.10 par value
(a "Paired Share") upon the terms and conditions set forth herein and in the
Plan.
NOW, THEREFORE, in consideration of the mutual promises and covenants made
herein and the mutual benefits to be derived herefrom, the parties agree as
follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
-------------
herein shall have the meaning assigned to such terms in the Plan.
2. Grant of Award. The Corporation hereby grants to the Trust the right
--------------
to purchase, and Trust hereby agrees to purchase, on the date the shareholders
of this Corporation approve the Plan (the "Approval Date") and pursuant to the
terms and conditions set forth herein and in the Plan, an aggregate of 86,322
Paired Shares, in consideration of services heretofore rendered, receipt of
which is hereby acknowledged.
3. Restrictions on Transfer.
------------------------
(a) The Paired Shares so purchased and any additional shares
attributable thereto received by Recipient as a result of any stock
dividend, recapitalization, merger, reorganization or similar event
(collectively the "Restricted Stock") shall be subject to the restrictions
set forth herein. During the Restricted Period as hereinafter described,
except as permitted by this Agreement or the Plan, the Restricted Stock and
the rights and privileges
1
<PAGE>
conferred hereby are not transferable or assignable and may not be offered,
sold, pledged, hypothecated or otherwise disposed of in any way (whether by
operation of law or otherwise) and shall not be subject to execution,
attachment, garnishment, levy or similar process. Notwithstanding the
preceding, Trust may transfer the Restricted Stock to Employee.
(b) Except as earlier permitted by or pursuant to the Plan or by
resolution of the Committee adopted after the date hereof, the Restricted
-----
Period shall commence as of the Award Date and shall terminate as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PAIRED
SHARES FREE FROM
DATE RESTRICTIONS
--------------- ---------------------
<S> <C>
July 1, 1996 50%
July 1, 1997 60%
July 1, 1998 70%
July 1, 1999 80%
July 1, 2000 90%
July 1, 2001 100%
</TABLE>
(c) Notwithstanding subsection (b),
(1) if, prior to July 1, 1996, the Corporation terminates the
Employee's employment for other than cause, or the Employee voluntarily
terminates his employment with the Corporation for good reason, then
50% of the Paired Shares shall be free from the restrictions set forth
above. For this purpose, "cause" and "good reason" shall be defined in
accordance with Employee's employment agreement with the Corporation
entered into as of the first day of January, 1994; and
(2) if Employee terminates his employment with the Corporation
because of death or Total Disability, all of the Restricted Stock held
by Recipient under this Agreement be free from the restrictions set
forth above upon the date of termination of Employee's employment with
the Corporation, and the Restricted Period shall end on that date.
4. Corporation Right of Reacquisition.
----------------------------------
(a) Recipient hereby agrees that the Corporation shall have the right
and option to reacquire shares of
2
<PAGE>
Restricted Stock as hereinafter provided as long as such shares are subject
to the restrictions in Section 3. If Employee's employment with the
Corporation is terminated for any reason, other than death or Total
Disability, then the Corporation may exercise its right and option to
reacquire all or any portion of the shares of Restricted Stock that are not
free from restrictions in accordance with Section 3. Such reacquisition
shall be made in consideration of such termination of employment prior to
the expiration of the Restricted Period; no additional consideration shall
be payable by the Corporation in connection with such reacquisition. Such
right and option shall be exercised by giving written notice of exercise to
Recipient within 90 days of the date of termination of employment.
(b) If the Corporation exercises its right and option to reacquire
shares of Restricted Stock, stock certificates representing such shares
shall be promptly surrendered to the Corporation.
(c) References to the Corporation in this Section include the
Corporation's Subsidiaries. A transfer of Employee's employment between
Subsidiaries of the Corporation, or between any Subsidiary and the
Corporation shall not be considered a termination of employment for
purposes of this Agreement. If Employee is employed by an entity which
ceases to be a Subsidiary, such event shall be deemed for purposes of this
Section 4 to be a termination of employment described in subsection (a) in
respect of Employee. Absence from work caused by military service or
authorized sick leave shall not be considered as a termination of
employment for purposes of this Section.
5. Stock Certificates.
------------------
(a) Upon the purchase of the Restricted Stock by Trust, stock
certificates issued in respect of such shares of Restricted Stock shall be
registered in the name of Trust (on the books of the Corporation and
Realty, as applicable) and shall be deposited by Trust with the
Corporation, together with a stock power endorsed in blank in the form
attached as Attachment 1.
(b) All stock certificates for shares of Restricted Stock during the
Restricted Period shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained in
an Agreement entered into between the registered owner and Santa Anita
Operating Company. A copy of such
3
<PAGE>
Agreement is on file in the office of the Secretary of Santa Anita
Operating Company, 285 West Huntington Drive, Arcadia, California
91006."
(c) With regard to any shares of Restricted Stock which cease to be
subject to restrictions pursuant to Section 3, the Corporation shall,
within sixty (60) days of the date such shares cease to be subject to
restrictions, deliver a stock certificate for the Paired Shares, free of
all restrictions set forth in Section 3 of this Agreement, to the Trust.
Such shares shall be paired and stapled.
6. Shareholder's Rights. Subject to the terms of this Agreement,
--------------------
during the Restricted Period, Trust shall have, with respect to the Restricted
Stock, all rights of a shareholder of the Corporation and of Realty, including
the right to vote such shares and the right to receive all dividends paid with
respect to the shares of Restricted Stock while subject to the restrictions of
Section 3. Notwithstanding the preceding sentence, prior to the Approval Date,
Recipient shall not have any rights of a shareholder of this Corporation or
Realty with respect to the Restricted Stock.
7. Regulatory Compliance. The issue and sale of shares of Restricted Stock
---------------------
shall be subject to full compliance with all then applicable requirements of law
and the requirements of any stock exchange upon which the Paired Shares may be
listed.
8. Withholding Tax. Recipient agrees that, in the event the purchase of
---------------
the Restricted Stock or the expiration of restrictions thereon results in
Recipient's realization of income which for Federal, State or local income tax
purposes is subject to withholding of tax at source by Employee's employer,
Recipient will pay to such Employee's employer an amount in cash or previously
owned Paired Shares (valued at their Fair Market Value at the time of payment)
equal to such withholding tax (or such employer on behalf of the Corporation may
withhold such amount from Employee's salary). In addition, notwithstanding any
other provision of this Agreement, if permitted by applicable law, to the extent
that withholding is required at the time of the expiration of restrictions set
forth in Section 3 hereof, withholding may at the election of Employee be
satisfied by the reduction of the number of Paired Shares to be delivered to
Trust at the time such restrictions lapse.
9. Investment Representation. Recipient represents and agrees that if
-------------------------
Recipient purchases the Restricted Stock at a time when there is not in effect
under the Securities Act of 1933 a registration statement relating to the shares
and there is not available for delivery a prospectus meeting the requirements of
Section 10(a)(3) of
4
<PAGE>
said Act, (i) Recipient will acquire the shares upon such purchase for the
purpose of investment and not with a view to their resale or distribution, (ii)
that upon such purchase, Recipient will furnish to the Corporation an investment
letter in form and substance satisfactory to the Corporation, (iii) if and when
the Recipient proposes to publicly offer or sell shares of Restricted Stock, the
Recipient shall notify the Corporation prior to any such offering or sale and
shall abide by the opinion of counsel to the Corporation as to whether and under
what conditions and circumstances, if any, Recipient may offer and sell such
shares of Restricted Stock; and (iv) the certificate or certificates
representing the Restricted Stock may bear a legend referring to the foregoing
matters and any limitations under the Act and state securities laws with respect
to the transfer of such Restricted Stock, and the Corporation may impose stop
transfer instructions to implement such limitations, if applicable.
Notwithstanding the foregoing or Section 5(c), stock certificates
evidencing shares of Restricted Stock, both during the Restricted Period and
thereafter, shall bear such legends that may be required to evidence the paired
status of the Common Stock and Realty Stock and Recipient's status as an
affiliate of the Corporation.
10. Federal Income Tax Election. Recipient hereby acknowledges receipt of
---------------------------
advice that pursuant to current Federal income tax laws, (i) Recipient has 30
days in which to elect to be taxed in the current taxable year on the Fair
Market Value of the Restricted Stock in accordance with the provisions of
Internal Revenue Code (S)83(b) and, (ii) if no such election is made, the
taxable event will occur when the shares of Restricted Stock cease to be subject
to the Corporation's right of repurchase, and the tax will be measured by the
Fair Market Value of the Restricted Stock on the date of the taxable event.
11. Acceleration of Restricted Stock Awards.
---------------------------------------
(a) If there is a Change in Control Event (as defined in the Plan) and
a Qualifying Termination occurs on or prior to the third anniversary of the
date the Change in Control Event occurred, the Restricted Period for
Restricted Stock shall immediately expire. Acceleration of awards shall
comply with applicable regulatory requirements, including, without
limitation, Rule 16b-3 promulgated by the Securities and Exchange
Commission. For purposes of this Section 11 only, Committee shall mean the
Committee of the Corporation as constituted immediately prior to the Change
in Control Event.
(b) (1) Notwithstanding subsection (a), the Restricted Period
hereunder shall not expire to
5
<PAGE>
the extent that the Committee determines that such expiration would
cause the deduction limitations of Section 280G of the Code to come
into effect. In the event that the Restricted Period does not expire
for any of the Restricted Stock, the Employee may request independent
verification of the Committee's calculations with respect to the
application of Section 280G. In such case, the Committee will provide
to the Employee within 15 business days after such a request an opinion
from a nationally recognized accounting firm selected by Employee (the
"Accounting Firm"). The opinion shall state the Accounting Firm's
opinion that the limitation on the expiration of the Restricted Period
hereunder is necessary to avoid the limits of Section 280G and contain
supporting calculations. The cost of such opinion shall be paid for by
the Corporation.
(2) The Corporation and the Employee have also entered into a
Severance Agreement which provide certain payments in the event of a
Qualified Termination after a Change in Control Event. Section 8 of
such Severance Agreement provides limitations on the amount of such
severance payments if such severance payments, together with all other
"parachute payments" (as defined in the Severance Agreement), would
cause the deduction limitations of Section 280G of the Code to come
into effect. Notwithstanding Section 8(d) of the Severance Agreement,
if the Employee so elects, Employee may elect that the Restricted
Period not expire with respect to all or part of a Restricted Stock
prior to any reductions of payments under the Severance Agreement.
(c) If, subsequent to a Change in Control Event and during the period
described in Section 11(a), Employee's employment terminates, such
termination shall be considered a Qualifying Termination if either of the
-----
following events occurs:
(1) Employee voluntarily terminates employment for Good Reason.
For purposes of this Section, "Good Reason" shall mean the occurrence
of one of the following events without Employee's consent:
(i) The assignment to Employee of any duties inconsistent in
any material respect with the Employee's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as they existed in their most
significant form during the 90 days
6
<PAGE>
preceding the Change in Control Event or any other action by the
Corporation which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Corporation promptly after
receipt of notice thereof given by the Employee;
(ii) Any reduction in Employee's total compensation not
agreed to by Employee, which reduction shall be deemed to occur
if there is a reduction in (I) Employee's base salary or annual
bonus (which shall be deemed to be reduced if the annual bonus is
less than the average annual bonus for the three fiscal years
preceding the Change in Control Event) or (II) Employee's ability
to participate in employee benefit plans, receive expense
reimbursements, receive other fringe benefits, receive office and
support staff, or receive paid vacation, on the same terms as
such benefits were applicable during the 90 days preceding the
Change in Control Event, provided that, (I) an isolated,
insubstantial, and inadvertent failure not occurring in bad faith
and which is promptly remedied after notice by the Employee shall
not be deemed a violation of this paragraph and (II) a reduction
in one element of Employee's total compensation shall not be
deemed a violation of this paragraph if a counterbalancing
increase in another element of Employee's total compensation
occurs (the determination of whether the increase is
counterbalancing shall be determined by Employee in good faith);
and
(iii) The transfer of Employee's job location to a site
which is more than 30 miles away from his or her place of
employment prior to the Change in Control Event of the
Corporation, unless the transfer is to the headquarters of Santa
Anita Realty Enterprises, Inc. or Santa Anita Operating Company.
(2) Employee is involuntarily terminated without "Cause." For
purposes of this Section, "Cause" shall mean (i) an act or acts of
dishonesty (including but not limited to conviction of a felony) taken
by Employee which materially injures or damages the Corporation or (ii)
Employee's willful failure to substantially
7
<PAGE>
perform Employee's duties where such willful failure results in
demonstrable material injury and damage to the Corporation.
(d) In the event a Change in Control Event occurs before Employee's
termination from the Corporation, the following rules shall apply:
(1) Because it is agreed that time will be of the essence in
determining the extent to which the Restricted Stock is vested in
Recipient (or the beneficiary) under this Agreement, Recipient (or the
beneficiary) may, if he or she desires, submit any claim for payment
under this Agreement or dispute regarding the interpretation of this
Agreement to arbitration. This right to select arbitration shall be
solely that of Recipient (or the beneficiary) and Recipient (or the
beneficiary) may decide whether or not to arbitrate in his or her
discretion. The "right to select arbitration" is not mandatory on
Recipient (or the beneficiary) and Recipient (or the beneficiary) may
choose in lieu thereof to bring an action in an appropriate civil
court. Once an arbitration is commenced, however, it may not be
discontinued without the mutual consent of both parties to the
arbitration. During the lifetime of the Employee only Recipient can use
the arbitration procedure set forth in this section.
(2) Any claim for arbitration may be submitted as follows: if
Recipient (or the beneficiary) disagrees with the Corporation regarding
the interpretation of this Agreement and the claim is finally denied by
the Corporation in whole or in part, such claim may be filed in writing
with an arbitrator of Recipient's or beneficiary's choice who is
selected by the method described in the next four sentences. The first
step of the selection shall consist of Recipient or beneficiary
submitting a list of five potential arbitrators to the Corporation.
Each of the five arbitrators must be either (i) a member of the
National Academy of Arbitrators located in the State of California or
(ii) a retired California Superior Court or Appellate Court judge.
Within one week after receipt of the list, the Corporation shall select
one of the five arbitrators as the arbitrator for the dispute in
question. If the Corporation fails to select an arbitrator in a timely
manner, Recipient (or beneficiary) shall then designate one of the five
arbitrators as the arbitrator for the dispute in question.
8
<PAGE>
(3) The arbitration hearing shall be held within seven days (or as
soon thereafter as possible) after the picking of the arbitrator. No
continuance of said hearing shall be allowed without the mutual consent
of Recipient (or beneficiary) and the Corporation. Absence from or
nonparticipation at the hearing by either party shall not prevent the
issuance of an award. Hearing procedures which will expedite the
hearing may be ordered at the arbitrator's discretion, and the
arbitrator may close the hearing in his or her sole discretion when he
or she decides he or she has heard sufficient evidence to satisfy
issuance of an award.
(4) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than one week after the close of the
hearing. In the event the arbitrator finds that the Corporation has
breached this Agreement, he or she shall order the Corporation to
immediately take the necessary steps to remedy the breach. The award of
the arbitrator shall be final and binding upon the parties. The award
may be enforced in any appropriate court as soon as possible after its
rendition. If an action is brought to confirm the award, both the
Corporation and Recipient agree that no appeal shall be taken by either
party from any decision rendered in such action.
(5) Solely for purposes of determining the allocation of the costs
described in this subsection, the Corporation will be considered the
prevailing party in a dispute if the arbitrator determines (i) that the
Corporation has not breached this Agreement and (ii) the claim by
Recipient (or beneficiary) was frivolous. Otherwise, Recipient (or
beneficiary) will be considered the prevailing party. In the event that
the Corporation is the prevailing party, the fee of the arbitrator and
all necessary expenses of the hearing (excluding any attorneys' fees
incurred by the Corporation) including stenographic reporter, if
employed, shall be paid by the other party. In the event that Recipient
(or beneficiary) is the prevailing party, the fee of the arbitrator and
all necessary expenses of the hearing (including all attorneys' fees
---------
incurred by Recipient (or beneficiary) in pursuing his or her claim),
including the fees of a stenographic reporter if employed, shall be
paid by the Corporation.
(6) If the arbitrator determines that (i) the Corporation has
breached this Agreement and
9
<PAGE>
(ii) the Corporation was unjustified in failing to make the payments
required under this Agreement to Recipient, Corporation shall pay to
Recipient, as liquidated damages and not as a penalty, an additional
amount equal to 10% of the amount involved in the arbitration with
respect to this Agreement.
(e) This Section 11 shall be effective through September 30, 1997 and
may not be amended or terminated during such period except pursuant to an
instrument in writing executed by all of the parties hereto.
Notwithstanding the preceding sentence, the board of directors of the
Corporation may, in its sole discretion and for any reason, provide written
notice of termination or amendment (effective as of the then applicable
expiration date, but not with respect to a Change in Control Event
occurring on or before such expiration date) to Employee no later than six
months before the expiration date of this Section 11. If written notice is
not so provided, this Section 11 shall be automatically extended for an
additional period of 60 months past the expiration date. This Section 11
shall continue to be automatically extended for an additional 60 months at
the end of such 60-month period and each succeeding 60-month period unless
notice is given in the manner described in this Section 11.
12. Continuance of Employment. Nothing contained herein or in the Plan
-------------------------
shall confer upon the Employee any right with respect to the continuation of
employment by the Corporation or any subsidiary or interfere in any way with the
right of the Corporation or of any subsidiary at any time to terminate such
employment or to increase or decrease the compensation of the Employee from the
rate in existence at any time.
13. Notices. Any notice to be given under the terms of this Agreement shall
-------
be in writing and addressed to the Corporation at its principal office to the
attention of the Corporate Secretary and to the Recipient at the address given
beneath the Employee's signature hereto, or at such other address as either
party may hereafter designate in writing to the other. Any notice to or from
Employee shall be deemed a notice to or from the Trust.
14. Plan. This award and all rights of Recipient thereunder are subject to,
----
and the Recipient agrees to be bound by, all of the terms and conditions of the
provisions of the Plan, incorporated herein by this reference, to the extent
such provisions are applicable to restricted stock awards granted to Eligible
Employees. The Recipient acknowledges receipt of a copy of the Plan, which is
made a part hereof by this reference, and agrees to be bound by the terms
thereof. Unless otherwise expressly provided in other
10
<PAGE>
Sections of this Agreement, provisions of the Plan that confer discretionary
authority on the Committee do not (and shall not be deemed to) create any rights
in the Recipient unless such rights are expressly set forth herein or are
otherwise in the sole discretion of the Committee so conferred by appropriate
action of the Committee under the Plan after the date hereof.
15. Notwithstanding any provision of this Agreement to the contrary,
this Agreement and the award set forth herein shall be null and void if (i) the
Plan is not approved by the shareholders of the Corporation at its May, 1995
meeting or (ii) prior to the date of such shareholder approval, a "triggering
--
event" (as defined in accordance with the Exchange Agreement, dated as of the
Award Date, between the Corporation and the Recipient) occurs.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Recipient has
hereunto set his or her hand.
SANTA ANITA OPERATING COMPANY
(a Delaware corporation)
By /s/ KATHRYN J. McMAHON
----------------------------------------
Title Secretary and General Counsel
----------------------------------
EMPLOYEE
/s/ STEPHEN F. KELLER
------------------------------------------
(Signature)
Stephen F. Keller
------------------------------------------
(Address)
------------------------------------------
(City, State, Zip Code)
TRUST
/s/ STEPHEN F. KELLER
------------------------------------------
Stephen F. Keller, Trustee
/s/ SARAH M. KELLER
------------------------------------------
Sarah Mage Keller, Trustee
11
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Restricted Stock
Agreement by Santa Anita Operating Company, I, Sarah M. Keller, the spouse of
---------------
the Employee herein named, do hereby join with my spouse in executing the
foregoing Restricted Stock Agreement and do hereby agree to be bound by all of
the terms and provisions thereof and of the Plan.
DATED: April 1, 1995. /s/ SARAH M. KELLER
-----------------------------------
Signature of Spouse
12
<PAGE>
EXHIBIT 10.7
SANTA ANITA OPERATING COMPANY
RESTRICTED STOCK AGREEMENT
--------------------------
THIS AGREEMENT dated as of the 1st day of April, 1995, is between Santa
Anita Operating Company, a Delaware corporation (the "Corporation") and Clifford
C. Goodrich (the "Employee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, pursuant to the Santa Anita Operating Company 1995 Share Award
Plan, as amended (the "Plan"), which Plan remains subject to shareholder
approval, the Corporation has granted to the Employee effective as of the 15th
day of December, 1994 (the "Award Date") a restricted stock award of 40,325
paired shares of Common Stock, $.10 par value, and Realty Stock, $.10 par value
(a "Paired Share") upon the terms and conditions set forth herein and in the
Plan.
NOW, THEREFORE, in consideration of the mutual promises and covenants made
herein and the mutual benefits to be derived herefrom, the parties agree as
follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
-------------
herein shall have the meaning assigned to such terms in the Plan.
2. Grant of Award. The Corporation hereby grants to the Employee the
--------------
right to purchase, and Employee hereby agrees to purchase, on the date the
shareholders of this Corporation approve the Plan (the "Approval Date") and
pursuant to the terms and conditions set forth herein and in the Plan, an
aggregate of 40,325 Paired Shares, in consideration of services heretofore
rendered, receipt of which is hereby acknowledged.
3. Restrictions on Transfer.
------------------------
(a) The Paired Shares so purchased and any additional shares
attributable thereto received by Employee as a result of any stock
dividend, recapitalization, merger, reorganization or similar event
(collectively the "Restricted Stock") shall be subject to the restrictions
set forth herein. During the Restricted Period as hereinafter described,
except as permitted by this Agreement or the Plan, the Restricted Stock and
the rights and privileges conferred hereby are not transferable or
assignable and
1
<PAGE>
may not be offered, sold, pledged, hypothecated or otherwise disposed of
in any way (whether by operation of law or otherwise) and shall not be
subject to execution, attachment, garnishment, levy or similar process.
(b) Except as earlier permitted by or pursuant to the Plan or by
resolution of the Committee adopted after the date hereof, the Restricted
-----
Period shall commence as of the Award Date and shall terminate as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PAIRED
SHARES FREE FROM
DATE RESTRICTIONS
---------------- ---------------------
<S> <C>
Approval Date 20%
July 1, 1996 60%
July 1, 1997 70%
July 1, 1998 80%
July 1, 1999 90%
July 1, 2000 100%
</TABLE>
(c) Notwithstanding subsection (b), if the Employee's employment
terminates and such termination is a Qualifying Termination (as defined
below) or is due to Employee's death or Total Disability, all of the
Restricted Stock held by Employee under this Agreement be free from the
restrictions set forth above upon the date of termination of Employee's
employment with the Corporation, and the Restricted Period shall end on
that date. A Qualifying Termination shall occur if either of the following
events occurs:
(1) Employee voluntarily terminates employment for Good Reason.
For purposes of this Section, "Good Reason" shall mean the occurrence
of one of the following events without Employee's consent:
(i) The assignment to Employee of any duties inconsistent in
any material respect with the Employee's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as they existed on the date hereof or
any other action by the Corporation which results in a diminution
in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insub-
2
<PAGE>
stantial and inadvertent action not taken in bad faith and which
is remedied by the Corporation promptly after receipt of notice
thereof given by the Employee;
(ii) Any reduction in Employee's total compensation not
agreed to by Employee, which reduction shall be deemed to occur
if there is a reduction in (I) Employee's base salary or (II)
Employee's ability to participate in employee benefit plans,
receive expense reimbursements, receive other fringe benefits,
receive office and support staff, or receive paid vacation, on
the same terms as such benefits were applicable on the date
hereof, provided that, (I) an isolated, insubstantial, and
inadvertent failure not occurring in bad faith and which is
promptly remedied after notice by the Employee shall not be
deemed a violation of this paragraph, (II) a reduction in
Employee's annual bonus shall not be deemed a violation of this
paragraph and (III) a reduction in one element of Employee's
total compensation shall not be deemed a violation of this
paragraph if a counterbalancing increase in another element of
Employee's total compensation occurs (the determination of
whether the increase is counterbalancing shall be determined by
Employee in good faith); and
(iii) The transfer of Employee's job location to a site
which is more than 30 miles away from his or her place of
employment on the date hereof, unless the transfer is to the
headquarters of Santa Anita Realty Enterprises, Inc. or Santa
Anita Operating Company.
(2) Employee is involuntarily terminated without "Cause." For
purposes of this Section, "Cause" shall mean (i) an act or acts of
dishonesty (including but not limited to conviction of a felony) taken
by Employee which materially injures or damages the Corporation or
(ii) Employee's willful failure to substantially perform Employee's
duties where such willful failure results in demonstrable material
injury and damage to the Corporation.
4. Corporation Right of Reacquisition.
----------------------------------
(a) Employee hereby agrees that the Corporation shall have the right
and option to reacquire shares of
3
<PAGE>
Restricted Stock as hereinafter provided as long as such shares are subject
to the restrictions in Section 3. If Employee's employment with the
Corporation is terminated for any reason, other than death, Total
Disability or Qualifying Termination, then the Corporation may exercise its
right and option to reacquire all or any portion of the shares of
Restricted Stock that are not free from restrictions in accordance with
Section 3. Such reacquisition shall be made in consideration of such
termination of employment prior to the expiration of the Restricted Period;
no additional consideration shall be payable by the Corporation in
connection with such reacquisition. Such right and option shall be
exercised by giving written notice of exercise to Employee within 90 days
of the date of termination of employment.
(b) If the Corporation exercises its right and option to reacquire
shares of Restricted Stock, stock certificates representing such shares
shall be promptly surrendered to the Corporation.
(c) References to the Corporation in this Section include the
Corporation's Subsidiaries. A transfer of Employee's employment between
Subsidiaries of the Corporation, or between any Subsidiary and the
Corporation shall not be considered a termination of employment for
purposes of this Agreement. If Employee is employed by an entity which
ceases to be a Subsidiary, such event shall be deemed for purposes of this
Section 4 to be a termination of employment described in subsection (a) in
respect of Employee. Absence from work caused by military service or
authorized sick leave shall not be considered as a termination of
employment for purposes of this Section.
5. Stock Certificates.
------------------
(a) Upon the purchase of the Restricted Stock by Employee, stock
certificates issued in respect of such shares of Restricted Stock shall be
registered in the name of Employee (on the books of the Corporation and
Realty, as applicable) and shall be deposited by Employee with the
Corporation, together with a stock power endorsed in blank in the form
attached as Attachment 1.
(b) All stock certificates for shares of Restricted Stock during the
Restricted Period shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained
in an Agreement
4
<PAGE>
entered into between the registered owner and Santa Anita Operating
Company. A copy of such Agreement is on file in the office of the
Secretary of Santa Anita Operating Company, 285 West Huntington Drive,
Arcadia, California 91006."
(c) With regard to any shares of Restricted Stock which cease to be
subject to restrictions pursuant to Section 3, the Corporation shall,
within sixty (60) days of the date such shares cease to be subject to
restrictions, deliver a stock certificate for the Paired Shares, free of
all restrictions set forth in Section 3 of this Agreement, to Employee or,
in the event of such Employee's death, to Employee's legal representative,
heir or legatee. Such shares shall be paired and stapled.
6. Shareholder's Rights. Subject to the terms of this Agreement,
--------------------
during the Restricted Period, Employee shall have, with respect to the
Restricted Stock, all rights of a shareholder of the Corporation and of Realty,
including the right to vote such shares and the right to receive all dividends
paid with respect to the shares of Restricted Stock while subject to the
restrictions of Section 3. Notwithstanding the preceding sentence, prior to the
Approval Date, Employee shall not have any rights of a shareholder of this
Corporation or Realty with respect to the Restricted Stock.
7. Regulatory Compliance. The issue and sale of shares of
---------------------
Restricted Stock shall be subject to full compliance with all then applicable
requirements of law and the requirements of any stock exchange upon which the
Paired Shares may be listed.
8. Withholding Tax. Employee agrees that, in the event the purchase
---------------
of the Restricted Stock or the expiration of restrictions thereon results in
Employee's realization of income which for Federal, State or local income tax
purposes is subject to withholding of tax at source by Employee's employer,
Employee will pay to such Employee's employer an amount in cash or previously
owned Paired Shares (valued at their Fair Market Value at the time of payment)
equal to such withholding tax (or such employer on behalf of the Corporation may
withhold such amount from Employee's salary). In addition, notwithstanding any
other provision of this Agreement, if permitted by applicable law, to the extent
that withholding is required at the time of the expiration of restrictions set
forth in Section 3 hereof, withholding may at the election of Employee be
satisfied by the reduction of the number of Paired Shares to be delivered to
Employee at the time such restrictions lapse.
5
<PAGE>
9. Investment Representation. Employee represents and agrees that if
-------------------------
Employee purchases the Restricted Stock at a time when there is not in effect
under the Securities Act of 1933 a registration statement relating to the shares
and there is not available for delivery a prospectus meeting the requirements of
Section 10(a)(3) of said Act, (i) Employee will acquire the shares upon such
purchase for the purpose of investment and not with a view to their resale or
distribution, (ii) that upon such purchase, Employee will furnish to the
Corporation an investment letter in form and substance satisfactory to the
Corporation, (iii) if and when the Employee proposes to publicly offer or sell
shares of Restricted Stock, the Employee shall notify the Corporation prior to
any such offering or sale and shall abide by the opinion of counsel to the
Corporation as to whether and under what conditions and circumstances, if any,
he or she may offer and sell such shares of Restricted Stock; and (iv) the
certificate or certificates representing the Restricted Stock may bear a legend
referring to the foregoing matters and any limitations under the Act and state
securities laws with respect to the transfer of such Restricted Stock, and the
Corporation may impose stop transfer instructions to implement such limitations,
if applicable.
Notwithstanding the foregoing or Section 5(c), stock certificates
evidencing shares of Restricted Stock, both during the Restricted Period and
thereafter, shall bear such legends that may be required to evidence the paired
status of the Common Stock and Realty Stock and Employee's status as an
affiliate of the Corporation.
10. Federal Income Tax Election. Employee hereby acknowledges
---------------------------
receipt of advice that pursuant to current Federal income tax laws, (i) Employee
has 30 days in which to elect to be taxed in the current taxable year on the
Fair Market Value of the Restricted Stock in accordance with the provisions of
Internal Revenue Code (S)83(b) and, (ii) if no such election is made, the
taxable event will occur when the shares of Restricted Stock cease to be subject
to the Corporation's right of repurchase, and the tax will be measured by the
Fair Market Value of the Restricted Stock on the date of the taxable event.
11. Continuance of Employment. Nothing contained herein or in the
-------------------------
Plan shall confer upon the Employee any right with respect to the continuation
of employment by the Corporation or any subsidiary or interfere in any way with
the right of the Corporation or of any subsidiary at any time to terminate such
employment or to increase or decrease the compensation of the Employee from the
rate in existence at any time.
6
<PAGE>
12. Notices. Any notice to be given under the terms of this
-------
Agreement shall be in writing and addressed to the Corporation at its principal
office to the attention of the Corporate Secretary and to the Employee at the
address given beneath the Employee's signature hereto, or at such other address
as either party may hereafter designate in writing to the other.
13. Plan. This award and all rights of Employee thereunder are
----
subject to, and the Employee agrees to be bound by, all of the terms and
conditions of the provisions of the Plan, incorporated herein by this reference,
to the extent such provisions are applicable to restricted stock awards granted
to Eligible Employees. The Employee acknowledges receipt of a copy of the Plan,
which is made a part hereof by this reference, and agrees to be bound by the
terms thereof. Unless otherwise expressly provided in other Sections of this
Agreement, provisions of the Plan that confer discretionary authority on the
Committee do not (and shall not be deemed to) create any rights in the Employee
unless such rights are expressly set forth herein or are otherwise in the sole
discretion of the Committee so conferred by appropriate action of the Committee
under the Plan after the date hereof.
14. Notwithstanding any provision of this Agreement to the contrary,
this Agreement and the award set forth herein shall be null and void if (i) the
Plan is not approved by the shareholders of the Corporation at its May, 1995
meeting or (ii) prior to the date of such shareholder approval, a "triggering
--
event" (as defined in accordance with the Exchange Agreement, dated as of the
Award Date, between the Corporation and the Employee) occurs.
7
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Employee has
hereunto set his or her hand.
SANTA ANITA OPERATING COMPANY
(a Delaware corporation)
By /s/ KATHRYN J. McMAHON
-----------------------------------
Title Secretary and General Counsel
-----------------------------
EMPLOYEE
/s/ CLIFFORD C. GOODRICH
-------------------------------------
(Signature)
Clifford C. Goodrich
-------------------------------------
(Address)
-------------------------------------
(City, State, Zip Code)
8
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Restricted Stock
Agreement by Santa Anita Operating Company, I, Karen R. Goodrich, the
-----------------
spouse of the Employee herein named, do hereby join with my spouse in executing
the foregoing Restricted Stock Agreement and do hereby agree to be bound by all
of the terms and provisions thereof and of the Plan.
DATED: April 1, 1995. /s/ KAREN R. GOODRICH
---------------------- --------------------------------
Signature of Spouse
9
<PAGE>
EXHIBIT 10.8
LEASE BETWEEN SANTA ANITA REALTY ENTERPRISES, INC., AS LANDLORD,
AND AMERICAN MULTI-CINEMA, INC., AS TENANT,
COVERING PREMISES IN
ARCADIA, CALIFORNIA
<PAGE>
TABLE OF CONTENTS
-----------------
LEASE BETWEEN SANTA ANITA REALTY ENTERPRISES, INC., AS LANDLORD,
AND AMERICAN MULTI-CINEMA, INC., AS TENANT
COVERING PREMISES IN
ARCADIA, CALIFORNIA
ARTICLE PAGE
- ------- ----
1. Attachments to Lease; Rent and Expense
Rider and Exhibits ............................... 1
2. Definitions and Rules of Construction ............ 3
3. Premises ......................................... 16
4. Term ............................................. 16
5. Delivery of Tenant's Building and
Completion of Improvements ....................... 17
6. Rent ............................................. 19
7. Covenant of Title; Authority and
Quiet Possession; Transfer of Title .............. 19
8. Use of Premises .................................. 23
9. Subletting and Assigning ......................... 27
10. Continued Possession of Tenant ................... 33
11. Fixtures ......................................... 34
12. Utilities ........................................ 35
13. Governmental Compliance .......................... 36
14. Repairs .......................................... 41
15. Damage Clause .................................... 43
16. Insurance, Indemnity, Waiver of
Subrogation and Fire Protection .................. 51
17. Landlord to Pay Taxes ............................ 57
18. Tenant's Real Estate Taxes ....................... 57
19. Alterations and Tenant's Liens ................... 57
20. Tenant's Signs ................................... 60
21. Condemnation ..................................... 63
<PAGE>
22. Other Tenancies .................................. 66
23. Project Entity ................................... 68
24. Common Facilities ................................ 72
25. Construction of Tenant's Building ................ 78
26. Opening of Tenant's Building ..................... 78
27. Options to Extend ................................ 79
28. Common Area Charge ............................... 81
29. Other Theatres and Restrictions .................. 82
30. Merchants Association ............................ 84
31. Landlord's Operating Covenants ................... 85
32. Tenant's Covenant to Operate ..................... 86
33. Estoppel Certificate; Attornment
and Priority of Lease; Subordination ............. 89
34. Default Clause and Self-Help ..................... 91
35. Access to Premises ............................... 96
36. Force Majeure .................................... 97
37. Remedies Cumulative; Legal Expenses;
Time of the Essence .............................. 98
38. Lease Not to be Recorded ......................... 98
39. Notices .......................................... 98
40. Waiver of Performance and Disputes ............... 99
41. Modification of Lease ............................ 103
42. Captions and Lease Preparation ................... 104
43. Lease Binding on Heirs, Etc. ..................... 104
44. Brokers .......................................... 104
45. Tenant's Financial Information ................... 105
46. WAIVER OF TRIAL BY JURY .......................... 105
47. Mortgagee Protection Clause ...................... 106
<PAGE>
48. Limitation on Tenant's Recourse .................. 107
49. Real Estate Investment Trust ..................... 107
50. No Partnership ................................... 108
51. No Option ........................................ 108
52. Legal Expenses ................................... 108
53. Nondisclosure of Lease Terms ..................... 109
54. Nondiscrimination ................................ 110
55. Sale of Leased Premises .......................... 111
56. Choice of Law .................................... 111
57. Severability ..................................... 111
58. Conditions Precedent ............................. 113
59. Guaranty ......................................... 113
60. Tenant's Expansion Right ......................... 113
ATTACHMENTS
- -------------------------------------------------------------
RENT AND EXPENSE RIDER
EXHIBIT A - Legal Description of Entertainment Center
Land
EXHIBIT A-1 - Legal Description of Tenant's Building Pad
EXHIBIT B - Site Plans (Exhibits B-1 through B-5)
EXHIBIT C - Description of Tenant's Building and
Construction Provisions
EXHIBIT D - Permitted Exceptions
EXHIBIT E - Guidelines for Structured Parking
EXHIBIT F - Form of Lease Guaranty
EXHIBIT G - Location of Tenant's Building and Tenant's
Expansion Area
<PAGE>
L E A S E
---------
THIS LEASE, dated as of May 2, 1995, is made by and between SANTA
ANITA REALTY ENTERPRISES, INC., a Delaware corporation, with an office at 301
West Huntington Drive, Suite 405, Arcadia, California 91007 ("LANDLORD"), and
--------
AMERICAN MULTI-CINEMA,INC., a Missouri corporation, with an office at 106 West
14th Street, Suite 1700, Kansas City, Missouri 64105 ("TENANT").
1. ATTACHMENTS TO LEASE; RENT AND EXPENSE RIDER AND EXHIBITS.
- -------------------------------------------------------------
Attached to this Lease and hereby made a part hereof are the
following:
RENT AND EXPENSE RIDER - a statement of the Annual Fixed Rent,
----------------------
Percentage Rent and common area and real estate tax charges, if any, which are
to be paid by Tenant hereunder, together with provisions pertaining to the
payment thereof.
EXHIBIT A - A legal description of the tract of land constituting the
---------
land portion of the Entertainment Center. The parties acknowledge that Exhibit
-------
A references land additional to the land which is contemplated to comprise the
- -
Entertainment Center (the Entertainment Center land being outlined in black on
Exhibits B-1, B-2 and B-3 hereto) and that Landlord intends to subdivide the
- ------------ --- ---
land described on Exhibit A into smaller parcels one or more of which will
---------
correspond to the Entertainment Center (outlined in black on Exhibits B-1, B-2,
------------ ---
and B-3) as the same may be configured during the processing of governmental
---
entitlements and approvals
-1-
<PAGE>
for the Entertainment Center ("APPROVALS"). The parties agree to substitute a
---------
new legal description as Exhibit A to this Lease corresponding to the
---------
Entertainment Center when the subdivision of the land has been effected and
filed of record. Exhibit A shall then set forth only those parcels of land
---------
which comprise the Entertainment Center as it may be configured upon receipt of
all Approvals. Notwithstanding the foregoing, in all events the parcels of land
so constituting the Entertainment Center shall be substantially as outlined in
black on Exhibits B-1, B-2, and B-3 to this Lease, subject to the addition of
------------ --- ---
any of the three "Annexation Areas" shown on Exhibits B-1, B-2 and B-3 as
------------ --- ---
provided in this Lease.
EXHIBIT A-1 - A legal description of the parcel of land upon which
-----------
Tenant's Building is to be constructed and which is shown as Tenant's Building
Pad on Exhibit B-4. Exhibit A-1, containing a metes and bounds legal
----------- -----------
description prepared by Landlord and approved by Tenant, will be attached to
this Lease within 30 days after the date hereof.
EXHIBIT B - Site plans of the Entertainment Center (the "SITE PLANS")
--------- ----------
consisting of Exhibits B-1 through B-5 showing, among other things, (i) the land
------------ ---
initially constituting the entire Entertainment Center outlined in black on
Exhibits B-1, B-2 and B-3, (ii) the location of the Entertainment Center Pylons,
- ------------ --- ---
the Permitted Building Areas and other Common Facilities, capable of being shown
thereon, for each phase of the Entertainment Center as presently contemplated
(designated as Phases I, II and III) on Exhibits B-1
------------
-2-
<PAGE>
through B-3, (iii) the location of Tenant's Building, Tenant's Building Pad,
---
Tenant's Box Office, and the other buildings and improvements within which the
Minimum Floor Area Exclusive of Tenant's Building will be constructed within the
Phase I Development on Exhibit B-4, and (iv) the location of the Critical
-----------
Facilities Area described in Articles 15 and 21 and shown on Exhibit B-5.
-----------
EXHIBIT C - A description of Tenant's Building and the improvements to
---------
be constructed therein, together with provisions pertaining thereto.
EXHIBIT D - A list of the Permitted Exceptions.
---------
EXHIBIT E - Guidelines for Structured Parking.
---------
EXHIBIT F - Form of Lease Guaranty.
---------
EXHIBIT G - A drawing showing the area in which Tenant's Building,
---------
including Tenant's Expansion Area, will be located.
2. DEFINITIONS AND RULES OF CONSTRUCTION.
- -----------------------------------------
(A) The following terms for purposes of this Lease shall have the
meanings hereinafter specified:
"ACTUAL APPROVAL DATE" means the date Landlord has secured from the
--------------------
appropriate Governmental Authorities the approvals, consents and entitlements
necessary to construct the Phase I Development ("APPROVALS").
---------
"ANNEXATION AREA" shall mean each of the three areas designated
---------------
"Annexation Area" on Exhibits B-1, B-2 and B-3, one of which is designated
------------ --- ---
"ANNEXATION AREA A."
- ------------------
-3-
<PAGE>
"ANNUAL FIXED RENT" shall mean the annual fixed rent payable
-----------------
hereunder, which shall be the following, subject to the provisions of paragraph
(D)(4) of Section 3 of Exhibit C:
---------
(i) From the Commencement Date through and including the 3rd Lease
Year, an amount, per annum, equal to the product obtained by multiplying
$19.00 by the number of square feet of Floor Area in Tenant's Building
("TENANT'S FLOOR AREA"). At Tenant's election, the Floor Area of Tenant's
---------------------
Box Office shall be included as part of "Tenant's Floor Area", both for
purposes of determining Landlord's Construction Allowance as provided in
Exhibit C, and for purposes of computing Annual Fixed Rent as herein
---------
defined. If Tenant does not so elect to have the Floor Area of Tenant's
Box Office included as part of "Tenant's Floor Area" then Tenant shall pay
no Annual Fixed Rent or other rent or charges with respect thereto and
shall not receive any Landlord's Construction Allowance with respect
thereto.
(ii) During the 4th through and including the 5th Lease Year, an
amount, per annum, equal to the product obtained by multiplying $20.00 by
Tenant's Floor Area.
(iii) During the 6th through and including the 10th Lease Year, an
amount, per annum, equal to the product obtained by multiplying $21.50 by
Tenant's Floor Area.
(iv) During the 11th through and including the 15th Lease Year, an
amount, per annum, equal to the product obtained by multiplying $23.50 by
Tenant's Floor Area.
-4-
<PAGE>
(v) During the 16th through and including the 20th Lease Year, an
amount, per annum, equal to the product obtained by multiplying $25.50 by
Tenant's Floor Area.
(vi) During the first Option Period, if exercised, an amount per
annum equal to the greater of (i) the product obtained by multiplying
$27.50 by Tenant's Floor Area, or (ii) the Average Rent.
(vii) During the second Option Period, if exercised, an amount per
annum equal to the greater of (i) the Annual Fixed Rent, per annum, payable
by Tenant during the first Option Period plus an amount equal to $2.00
multiplied by Tenant's Floor Area, or (ii) the Average Rent.
"ANNUAL PERCENTAGE RENT" is defined in the Rent and Expense Rider.
----------------------
"AVERAGE RENT" shall mean the quotient obtained by dividing (i) the
------------
sum of the Annual Fixed Rent plus Annual Percentage Rent payable by Tenant for
the three Lease Years immediately preceding such Option Period, by (ii) 3.
"CAR PARKING RATIO" shall mean (i) 1 parking space for each 3 theatre
-----------------
seats within Tenant's Building, plus (ii) 5 parking spaces for each 1,000 square
feet of Floor Area in the Entertainment Center (exclusive of the Floor Area in
Tenant's Building). The Car Parking Ratio shall be calculated without taking
into account any parking located outside the Entertainment Center (but the Car
Parking Ratio shall include parking spaces within any Annexation Area if and to
the extent the Annexation Area
-5-
<PAGE>
is annexed into the Entertainment Center as herein provided), but for the
purpose of calculating the minimum ratio of 5:1000 set forth in clause (ii)
above, there shall be taken into account night-day shared parking and any rapid
transit credits available to the Entertainment Center under applicable Laws.
"COMMENCEMENT DATE" is defined in Article 4 captioned "Term."
-----------------
"COMMON FACILITIES" shall include all parking areas, streets,
-----------------
driveways, curb cuts, access facilities, drive aisles, sidewalks, malls,
landscaped areas, sanitary and storm sewer lines (including off-site sewer lines
which Landlord is required to maintain), water, gas, electric, telephone and
other utility lines, systems, conduits and facilities located outside building
structures and other common and service areas within the Entertainment Center
located outside building structures, whether or not shown on the Site Plan.
"COMPLETION DATE" shall mean the later to occur of: (i) 15 days prior
---------------
to the date Tenant shall be prepared to open Tenant's Building for business with
the public; PROVIDED, HOWEVER, Tenant shall have provided Landlord with at least
60 days prior written notice as to the date Tenant intends to open Tenant's
Building for business with the public, or (ii) twelve (12) months from the date
Tenant commences construction of Tenant's Building.
"CONSTRUCTION ALLOWANCE" shall mean an amount equal to the lesser of
----------------------
(i) the Actual Cost of Tenant's Building, or (ii) the Maximum Construction
Allowance.
-6-
<PAGE>
"CPI" shall mean the United States Department of Labor, Bureau of
---
Labor Statistics, Consumer Price Index for all Urban Consumers (U.S. City
Average; Base 1982-84 = 100), published by the Bureau of Labor Statistics of the
United States Department of Labor; PROVIDED, HOWEVER, solely for the purpose of
applying the provisions of Section 3 of the Rent and Expense Rider, the CPI
shall be the Los Angeles-Anaheim-Riverside Index. If at any time during the
term of this Lease, the "CPI" shall be discontinued or published less
frequently, Landlord and Tenant shall mutually and reasonably agree to
substitute an existing official index published by the aforesaid Bureau of Labor
Statistics or a successor other, similar governmental agency, which index is
most nearly equivalent to the "CPI" or to a substitute procedure which
reasonably reflects and monitors consumer prices.
"CRITICAL FACILITIES AREA" shall mean the portion of the Entertainment
------------------------
Center shown cross-hatched on Exhibit B-5.
-----------
"DEFAULT RATE" shall mean the lesser of (i) the Prime Rate plus 4% or
------------
(ii) the highest rate of interest that may lawfully be charged to the party then
required to pay interest under this Lease at the Default Rate.
"ENTERTAINMENT CENTER" shall mean the tract of land outlined in black
--------------------
on the Site Plans attached hereto as Exhibits B-1, B-2 and B-3, together with
------------ --- ---
the buildings, Common Facilities and other improvements thereon, as the
Entertainment Center is constituted from time to time. The legal description of
the land constituting the Entertainment Center shall be set forth
-7-
<PAGE>
on Exhibit-A as hereinabove contemplated. Tenant acknowledges that Landlord may
---------
in the future incorporate into the Entertainment Center any or all of the
Annexation Areas, in which event Landlord shall give Tenant written notice of
such incorporation and upon such notice, such additional lands shall be deemed
included within the meaning of the term "Entertainment Center" and shall be
subject to the provisions of this Lease which govern the Entertainment Center.
"ENTERTAINMENT CENTER PYLONS" is defined in Article 20 captioned
---------------------------
"Tenant's Signs."
"FINAL PLANS" is defined in Exhibit C.
----------- ---------
"FLOOR AREA" shall mean, with respect to each building or structure in
----------
the Entertainment Center, including Tenant's Building and Tenant's Box Office
(if Tenant elects to include Tenant's Box Office within the Floor Area of
Tenant's Building), the number of square feet of floor area at each level or
story lying within the exterior faces of exterior walls thereof (except party
walls as to which the center line, not the exterior faces, shall be used),
whether or not leased or occupied; PROVIDED, HOWEVER, none of the following
shall be included in the computation of any Floor Area ("EXCLUDED FLOOR AREA"):
-------------------
(i) any canopies (or the area under such canopies) extending from the walls of
building structures in the Entertainment Center, (ii) any sidewalks, ramps,
stairways or other walkways located outside the exterior walls of building
structures in the Entertainment Center regardless of whether any are contiguous
or adjacent to building structures, (iii) any mezzanines
-8-
<PAGE>
in Tenant's Building used primarily for projection and office purposes, (iv) any
area in or attached to Tenant's Building that is designed as a weather barrier,
and (v) any corridors located outside the exterior walls of building structures,
whether or not enclosed; PROVIDED, HOWEVER, nothing herein shall obligate
Landlord to exclude the Excluded Floor Area from the definition of "Floor Area"
in any other tenant's lease.
"FORCE MAJEURE" is defined in Article 36 captioned "Force Majeure."
-------------
"GOVERNMENTAL AUTHORITIES" shall mean all federal, state, county,
------------------------
municipal and local departments, commissions, boards, bureaus, agencies and
offices thereof, having or claiming jurisdiction over all or any part of the
Entertainment Center or the use thereof.
"GROSS RECEIPTS" is defined in the Rent and Expense Rider.
--------------
"HAZARDOUS SUBSTANCES" is defined in Article 13 captioned
--------------------
"Governmental Compliance."
"LANDLORD'S INITIAL CONSTRUCTION OBLIGATIONS" is defined in Article
-------------------------------------------
23.
"LANDLORD'S INITIAL OBLIGATIONS" is defined in Article 7.
------------------------------
"LANDLORD'S OPERATING COVENANT" is defined in Article 31 captioned
-----------------------------
"Landlord's Operating Covenants."
"LANDLORD'S WORK" is defined in Exhibit C.
--------------- ---------
-9-
<PAGE>
"LAWS" shall mean all present and future requirements, administrative
----
and judicial orders, laws, statutes, ordinances, rules and regulations of any
Governmental Authority.
"LEASE YEAR" is defined in the Rent and Expense Rider.
----------
"LEASED PREMISES" shall mean Tenant's Building and Tenant's Box Office
---------------
and all improvements, appurtenances, rights, easements and privileges thereunto
belonging or in any way appertaining to Tenant's Building and Tenant's Box
Office, and all other rights, easements and privileges granted to Tenant in this
Lease.
"MAIN ACCESS WAYS" shall mean, collectively, the Main Pedestrian
----------------
Access Ways and the Main Vehicular Access Ways.
"MAIN PEDESTRIAN ACCESS WAYS" shall mean the sidewalks and walkways
---------------------------
providing pedestrian access between the Critical Parking Zone and Tenant's
Building, shown and designated as "Main Pedestrian Access" on Exhibits B-1, B-2
------------ ---
and B-3.
---
"MAIN VEHICULAR ACCESS WAYS" shall mean the three main vehicular
--------------------------
access roads providing vehicular access to and from the Critical Parking Zone,
shown and designated as "Main Vehicular Access" on Exhibits B-1, B-2 and B-3,
------------ --- ---
one providing access to and from North Baldwin Avenue on the west of the
Entertainment Center, one providing access to and from West Huntington Drive on
the south of the Entertainment Center, and one providing access to and from West
Huntington Drive on the east of the Entertainment Center, all of which Main
Vehicular Access Ways shall be at least 20 feet wide and shall provide for two-
way vehicular traffic.
-10-
<PAGE>
"METROPOLITAN AREA" shall mean the Los Angeles, California
-----------------
metropolitan area.
"MAXIMUM CONSTRUCTION ALLOWANCE" shall mean an amount equal to $115.00
------------------------------
multiplied by the Tenant's Floor Area.
"MINIMUM FLOOR AREA EXCLUSIVE OF TENANT'S BUILDING" shall mean 50,000
-------------------------------------------------
square feet of Floor Area.
"MINIMUM NUMBER OF PARKING SPACES" shall mean 1 parking space for
--------------------------------
passenger automobiles for each 3 theatre seats in Tenant's Building, the size of
which spaces shall conform to the applicable code of the City of Arcadia.
"MORTGAGE" shall mean any mortgage or deed of trust or other
--------
instrument in the nature thereof evidencing a security interest in the
Entertainment Center or any part thereof.
"NUMBER OF PLAN DAYS" shall mean 120 days.
-------------------
"NUMBER OF TENANT WORKING DAYS" shall mean 365 days.
-----------------------------
"NUMBER OF TERM YEARS" shall mean 20 years.
--------------------
"OPTION PERIODS" shall mean two successive separate periods of 10
--------------
years each.
"OUTSIDE APPROVAL DATE" shall mean the date which is eighteen (18)
---------------------
months following the date of this Lease; PROVIDED, HOWEVER, if Landlord notifies
Tenant at least 20 days prior to the Outside Approval Date that Landlord has
obtained all such Approvals but they are being appealed by one or more third
parties, Tenant agrees that the Outside Approval Date shall be extended for up
to an additional six (6) months to allow Landlord to continue to pursue the
unconditional obtaining of the Approvals; PROVIDED,
-11-
<PAGE>
FURTHER, if following the expiration of such 6-month extension, the Approvals
are still subject to appeal, Tenant shall have the unilateral right to extend
the Outside Approval Date for an additional six (6) months and if Tenant does
so, Landlord shall with due diligence take all necessary action to attempt to
prevail in such appeal.
"OUTSIDE FINISH DATE" shall mean six (6) months after the Completion
-------------------
Date, subject to extension only for Tenant Delays.
"OUTSIDE TURNOVER DATE" shall mean 60 days after the Turnover Date,
---------------------
subject to extension only for Tenant Delays.
"PARENT CORPORATION" is defined in Article 9 captioned "Subletting and
------------------
Assigning."
"PERCENTAGE RATE" shall mean 8%.
---------------
"PERMITTED BUILDING AREAS" shall mean (i) those portions of the
------------------------
Entertainment Center on which buildings and other structures may be constructed,
the permitted locations of which are as shown on Exhibits B-1, B-2 and B-3, and
------------ --- ---
(ii) the Annexation Areas if and to the extent Landlord elects to incorporate
the same into the Entertainment Center as herein provided.
"PHASE I DEVELOPMENT" shall mean that portion of the Entertainment
-------------------
Center shown on Exhibit B-4 outlined by a heavy broken line, and the buildings,
-----------
Common Facilities and other improvements thereon.
"PRIME RATE" shall mean the per annum interest rate from time to time
----------
publicly announced by Citibank, N.A., New York, New York as its base rate. If
Citibank, N.A. should cease to publicly
-12-
<PAGE>
announce its base rate, the Prime Rate hereunder shall be the prime, base or
reference rate of the largest bank (based on assets) in the United States which
announces such rate.
"PROJECT" shall mean the retail/entertainment center operated at the
-------
Entertainment Center, which is called the Santa Anita Entertainment Center or
such other name as Landlord may from time to time establish for the Project
which is bounded by Huntington Drive on the east and south and Baldwin Avenue on
the west in Arcadia, California.
"RETAIL USES" is defined in Article 31.
-----------
"TAXES" is defined in the Rent and Expense Rider.
-----
"TENANT DELAYS" shall mean, for the purpose of this Lease, any delay
-------------
in the completion of Landlord's Work resulting solely from any of the following:
(a) Tenant's failure to timely perform any of its obligations pursuant to this
Lease (including Tenant's failure in preparing, submitting, revising or
approving plans within the time periods set forth in Exhibit C); or (b) Tenant's
---------
changes to the Final Plans, or (c) change orders to Landlord's Work requested by
Tenant, or (d) Tenant's sequencing or performance of Tenant's Work as described
in Exhibit C. Notwithstanding the foregoing, a Tenant Delay shall not be deemed
---------
to have occurred unless Landlord shall notify Tenant of the Tenant Delay
(specifying the cause and number of days involved) within 20 days after the
occurrence thereof.
-13-
<PAGE>
"TENANT'S BOX OFFICE" shall mean the box office utilized by Tenant for
-------------------
the sale of admission tickets to Tenant's Building, which box office shall be
located as shown on Exhibit B-4.
-----------
"TENANT'S BUILDING" shall mean the premises to be erected for Tenant
-----------------
pursuant to the provisions of Exhibit C and which shall initially contain
---------
approximately 100,000 square feet of Floor Area, 25 auditoriums and 6,000 seats.
Attached hereto as Exhibit G is a drawing showing the area in which Tenant's
---------
Building and Tenant's Expansion Area will be located.
"TENANT'S CAM CAP" is defined in the Rent and Expense Rider.
----------------
"TENANT'S ESTIMATED COMMON FACILITIES CONTRIBUTION FOR THE FIRST LEASE
---------------------------------------------------------------------
YEAR" shall mean an amount computed by multiplying $1.50 by Tenant's Floor Area.
- ----
"TENANT'S EXCLUSIVE PARKING AREA" shall mean a parking area which
-------------------------------
Landlord may designate at its election, by notice to Tenant, and which shall be
located either (i) within the "Critical Parking Zone" shown on Exhibits B-1, B-2
------------ ---
and B-3 or (ii) within "Annexation Area A" shown on Exhibits B-1, B-2 and B-3,
--- ------------ --- ---
and shall contain not less than the Minimum Number of Parking Spaces, all of
which shall be available for the exclusive use of Tenant's customers, employees
and invitees and the customers, invitees and employees of any subtenant,
concessionaire or licensee of Tenant. If Landlord elects to create Tenant's
Exclusive Parking Area, Tenant's parking spaces shall be located in either the
northernmost portion of such Critical Parking Zone or the southeasternmost
-14-
<PAGE>
portion of Annexation Area A and, if located within structured parking, shall be
ratably allocated throughout all floors of the parking garage. Tenant
acknowledges that some space on the ground level and/or the second level of any
such parking garage may be devoted to retail use.
"TENANT'S FLOOR AREA" is defined in the definition of "Annual Fixed
-------------------
Rent" above.
"TENANT'S OPERATING COVENANT" is defined in Article 32 captioned
---------------------------
"Tenant's Covenant to Operate."
"TENANT'S OPERATING PERIOD" shall mean the period beginning on the
-------------------------
date Tenant opens Tenant's Building for business with the public and ending on
the 15th anniversary of such date.
"TENANT'S PROPERTY" is defined in Article 11 captioned "Fixtures."
-----------------
"TENANT'S SIGNS" is defined in Article 20 captioned "Tenant's Signs."
--------------
"TENANT'S WORK" is defined in Exhibit C.
------------- ---------
"TERM OF THIS LEASE" or "TERM HEREOF" shall mean the initial term as
------------------ -----------
provided in the Article captioned "Term" and any renewal or extension thereof
exercised by Tenant.
"TURNOVER DATE" shall mean 180 days after the Actual Approval Date.
-------------
"UPSET AMOUNT" shall mean an amount equal to the product obtained by
------------
multiplying $125.00 by Tenant's Floor Area.
-15-
<PAGE>
(B) The following rules of construction shall be applicable for all
purposes of this Lease, unless the context otherwise requires:
(1) The terms "hereby," "hereof," "hereto," "herein," "hereunder"
and any similar terms shall refer to this Lease, and the term "hereafter"
shall mean after, and the term "heretofore" shall mean before, the date of
this Lease.
(2) Words of the masculine, feminine or neuter gender shall mean
and include the correlative words of the other genders and words importing
the singular number shall mean and include the plural number and vice
versa.
(3) The terms "include," "including" and similar terms shall be
construed as if followed by the phrase "without being limited to."
3. PREMISES.
- ------------
Landlord hereby demises and leases unto Tenant, and Tenant hereby
leases from Landlord, for the consideration and upon the terms and conditions
herein set forth, the Leased Premises.
4. TERM.
- --------
The initial term of this Lease shall commence as of the date (the
"COMMENCEMENT DATE") on which Tenant opens or is required to open Tenant's
- ------------------
Building to the public for business as provided in Article 26 captioned "Opening
of Tenant's Building," whichever is earlier, and shall expire as of midnight on
the last day of the
-16-
<PAGE>
last year of the Number of Term Years from the first day of the first month
immediately following the Commencement Date. When the Commencement Date has
been determined, Landlord and Tenant shall enter into an agreement in recordable
form setting forth such date and the expiration date of the initial term of this
Lease and such other matters as Landlord or Tenant may reasonably request
concerning the commencement of this Lease, Tenant's acceptance of the Leased
Premises, and Tenant's Work. Neither Landlord nor Tenant shall record any such
agreement without the other party's prior written consent.
5. DELIVERY OF TENANT'S BUILDING AND COMPLETION OF IMPROVEMENTS.
- ----------------------------------------------------------------
Subject to "Force Majeure" and "Tenant Delays," Landlord shall: (i)
by the Turnover Date complete construction of Landlord's Work as set forth in
Exhibit C and deliver to Tenant physical possession of the Leased Premises, free
- ---------
and clear of all tenancies and occupancies, and (ii) by the Completion Date,
"substantially complete" construction of the Minimum Floor Area Exclusive of
Tenant's Building of buildings and other improvements within the Phase I
Development (including the Common Facilities thereon), and sufficient parking
facilities elsewhere in the Entertainment Center to meet the Car Parking Ratio,
in accordance with the requirements specified in this Lease; PROVIDED, HOWEVER,
Landlord shall use diligent efforts to complete the portion of Landlord's Work
described in Section II A(1) of Exhibit C and such other portions of Landlord's
---------
Work as will enable Tenant to commence
-17-
<PAGE>
Tenant's Work without subsequent interruption, as soon as possible following the
Actual Approval Date. The term "substantially complete" shall mean full
completion of the particular improvements except for minor items not affecting
the use of such improvements, which minor items Landlord shall complete within
not more than 30 days after the date of substantial completion without
interfering with the progress of Tenant's Work or with the operation of Tenant's
business at the Leased Premises. Subject to Force Majeure and Tenant Delays, if
Landlord fails by the Completion Date to perform its obligations as set forth in
clause (ii) above, then and in such event, beginning on the Commencement Date,
the Annual Fixed Rent and other charges payable by Tenant under the Lease shall
be abated in full for a period equivalent to the number of days between the
Completion Date and the date Landlord shall actually complete its obligations as
set forth in clauses (i) and (ii). Notwithstanding the foregoing, if Landlord
fails by the Outside Turnover Date or Outside Finish Date to perform its
obligations as set forth in clause (i) or (ii) for any reason, and irrespective
of delays caused by Force Majeure, then and in either such event, Tenant may, in
addition to its other rights and remedies, terminate this Lease by notice to
Landlord given at any time within 60 days after the Outside Turnover Date or
Outside Finish Date, as the case may be, and prior to Landlord's completion of
its obligations under clauses (i) and (ii) above.
-18-
<PAGE>
6. RENT.
- --------
Tenant shall pay Landlord the Annual Fixed Rent, Annual Percentage
Rent and all other sums due hereunder in the manner set forth in the Rent and
Expense Rider commencing on the Commencement Date, subject to the provisions of
paragraph (B) below and paragraph (B) of the Article captioned "Opening of
Tenant's Building."
7. COVENANT OF TITLE; AUTHORITY AND QUIET POSSESSION; TRANSFER
- ---------------------------------------------------------------
OF TITLE.
--------
(A) Landlord represents and warrants to Tenant that: (i) Landlord has
full right and lawful authority to enter into and perform Landlord's obligations
under this Lease for the term hereof, and Landlord has good and marketable title
to the Entertainment Center in fee simple, free and clear of all contracts,
leases, tenancies, agreements, restrictions, violations, encumbrances or defects
in title which would prevent or materially restrict the use or enjoyment by
Tenant of the Leased Premises subject only to those matters which are set forth
in Exhibit D hereto (the "PERMITTED EXCEPTIONS"); (ii) this Lease shall not be
--------- --------------------
subject or subordinate to any Mortgage except for such subordination as may be
accomplished in accordance with the provisions of Article 33 captioned "Estoppel
Certificate, Attornment," etc.; (iii) if Tenant shall discharge the obligations
herein set forth to be performed by Tenant, Tenant shall have and enjoy, during
the term hereof, the quiet and undisturbed possession
-19-
<PAGE>
of the Leased Premises together with the right to use the Common Facilities as
contemplated in this Lease; (iv) the erection of Tenant's Building and the
balance of the Entertainment Center, as contemplated in this Lease, will not
violate any Law which would or does have any adverse impact on the Leased
Premises or the ability of Tenant to operate its business at the Leased Premises
and to use the Common Facilities; (v) all curb cuts shown on the Site Plan as
providing ingress and egress between the Entertainment Center and public
streets, as the locations of such curb cuts may be modified with the prior
written approval of Tenant in the process of obtaining governmental Approvals
for the Entertainment Center, are, or will be prior to the Commencement Date, in
existence, open and validly authorized by Governmental Authority; and (vi) the
Leased Premises are and at the time Tenant opens Tenant's Building for business
will be zoned and regulated under all Laws so as to permit the operation therein
of a motion picture theatre and the other uses authorized to be conducted
therein by Tenant as in this Lease provided, 7 days a week without restriction
as to hours of operation (except between 3:00 a.m. and 10:00 a.m. on any given
day). Notwithstanding the foregoing, Landlord shall not be deemed to have made
the representations and warranties in clauses (iv), (v) or (vi) until the Actual
Approval Date.
(B) Within 30 days after the later of (i) the date on which a
memorandum of this Lease shall have been recorded or (ii) the Actual Approval
Date, upon request by Tenant, Landlord shall
-20-
<PAGE>
furnish Tenant, without expense to Tenant, a leasehold owner's title insurance
policy on the ALTA standard form B-1970 (amended 10/17/70) policy form in the
amount of $200,000.00, written by a title company specified by Landlord and
reasonably acceptable to Tenant, insuring as of the date of such policy that the
then existing condition and state of the title to the leasehold estate created
hereunder and the Entertainment Center is in accordance with clauses (i), (ii),
and (v) of paragraph (A) of this Article, provided Landlord shall not be
obligated to incur any additional expense for any special endorsements requested
by Tenant. If such title policy is not furnished to Tenant within said 30-day
period following Tenant's written request therefor or is not in accordance with
such clauses in paragraph (A) of this Article in any way which would materially
adversely affect the Leased Premises or this Lease, as reasonably determined by
Tenant, then and in either such event, Tenant may, in addition to its other
rights and remedies, terminate this Lease by notice to Landlord given at any
time within thirty (30) days thereafter, but such termination shall not be
deemed to discharge Landlord from liability because of such default; PROVIDED,
HOWEVER, Landlord shall not be deemed in default of this provision if the title
policy is not issued or is not satisfactory because as of the Actual Approval
Date Landlord is unable to make the representations and warranties contained in
clauses (iv), (v) or (vi) of paragraph (A) of this Article, but this proviso
shall not be deemed or construed as a waiver of any breach or default on the
part of Landlord under any other provision
-21-
<PAGE>
of this Lease or a waiver of any rights or remedies of Tenant hereunder. The
acceptance of such title policy shall in no way be construed as a waiver of, or
in any way be deemed to impair, Landlord's representations and warranties set
forth in paragraph (A) of this Article except that if and to the extent Tenant
obtains recovery for any damages suffered by reason of any alleged breach of
such representations and warranties from the title insurance company which
issues Tenant's title policy (which Tenant may but shall not be obligated to
do), Tenant shall not be entitled to any duplicative recovery from Landlord.
(C) Landlord shall promptly notify Tenant in writing of any change in
the ownership of the Leased Premises, giving the name and address of the new
owner and instructions regarding the payment of rent. In the event of any
change in or transfer of title of Landlord in and to the Leased Premises or any
part thereof, whether voluntary or involuntary, or by act of Landlord or by
operation of law, Tenant shall be under no obligation to pay Annual Fixed Rent
or other charges to the new owner accruing until (i) Tenant shall have been
notified of such change in title and given satisfactory proof thereof, and (ii)
such new owner shall execute and deliver an agreement, in recordable form,
whereby such new owner assumes and agrees with Tenant to discharge all
obligations of Landlord under this Lease, and the payment of Annual Minimum Rent
and other charges in the meantime to the prior owner shall not be deemed a
default upon the part of Tenant and shall not give rise to any claim against
Tenant by the new owner (the new owner having a right
-22-
<PAGE>
to claim solely against the prior owner, but not Tenant). If Landlord shall
have fully performed all of its obligations under Exhibit C, the first sentence
---------
of Article 5, paragraph (A) of Article 22 and paragraph (A) of Article 23
(collectively, "LANDLORD'S INITIAL OBLIGATIONS"), then upon Tenant's receipt of
------------------------------
such assumption agreement, Landlord shall be released from all liability and
obligations under this Lease arising from and after the date of such assumption.
8. USE OF PREMISES.
- -------------------
(A) During the period commencing with the date Tenant opens Tenant's
Building for business and ending on expiration or earlier termination of
Tenant's Operating Covenant, Tenant shall not use Tenant's Building except (i)
primarily as a theatre and auditorium for presentation of motion pictures,
telecasts and other audio-visual presentations, and for meetings and other
public presentations and entertainment; (ii) for the incidental operation
therein of games and other amusement devices (electronic or otherwise), provided
such games and amusement devices are (a) intended only to be used by Tenant's
ticket-purchasing customers, (b) no greater in number than twelve (12) and
occupy no greater than 500 feet of Floor Area in the aggregate and (c) not
visible from the exterior of the Leased Premises and are not accessible by means
of a separate customer entrance into Tenant's Building (as opposed to the main
customer entrance thereto); (iii) for the incidental retail sale therein of
food, beverages and refreshments;
-23-
<PAGE>
(iv) for the incidental sale or rental (or both) of video cassettes and discs
related to the movie industry in an area not to exceed 500 square feet of Floor
Area; (v) for the incidental sale of records, compact discs, books, magazines,
toys and novelties sold in connection with a particular presentation in an area
not to exceed 500 square feet of Floor Area; and (vi) for the incidental sale of
other goods, wares, merchandise and services related to the movie industry in an
area not to exceed 500 square feet of Floor Area.
(B) From and after the expiration or earlier termination of Tenant's
Operating Covenant, Tenant may use Tenant's Building, if used at all, for (i)
any lawful retail, service or entertainment purpose(s) consistent with the then
character and quality of the Entertainment Center so long as Landlord shall not
be in default in discharging Landlord's Operating Covenant, or (ii) any lawful
purpose(s) after Landlord shall default in discharging Landlord's Operating
Covenant; PROVIDED, HOWEVER, if Tenant proposes to change the use from that
permitted in paragraph (A) above, Tenant shall not violate exclusive use
provisions then in full force and effect granted by Landlord to other tenants of
the Entertainment Center then occupying either (i) (with respect to uses other
than those described in clause (ii) below) at least 10,000 square feet of Floor
Area in the Entertainment Center, or (ii) at least 5,000 square feet therein for
the operation of a theme restaurant (e.g., a music theme like "Hard Rock Cafe")
or restaurant specializing in a particular type of food (e.g., a steakhouse or
fish house),
-24-
<PAGE>
provided in all instances any such exclusive use provision shall be narrowly
drawn to prevent competition with the primary use being conducted by such other
tenant within its premises in the Entertainment Center. From time to time upon
Tenant's request, Landlord shall furnish Tenant with copies of such exclusive
use provisions and shall certify to Tenant that such exclusive use provisions
are the only exclusive use provisions in effect pertaining to the Leased
Premises, and Tenant shall be entitled to rely thereon without any
investigation, obligation or liability. Additionally, Tenant shall not use
Tenant's Building for any of the following uses: a so-called "IMAX" theatre or
similar operation where the screen size exceeds 50 feet in height, or off track
betting, gambling, games of chance or skill, redemption games, card games,
bingo, casinos or other betting or gaming uses except as set forth in clause
(ii) of Paragraph (A) in this Article.
(C) Landlord agrees to execute, without cost to Landlord, such
applications, consents and other instruments as shall be required by
Governmental Authorities to permit the operation of Tenant's Building as
permitted by this Lease. The provisions of this paragraph shall not be
construed as limiting the representations and warranties of Landlord set forth
in paragraph (A) of the Article captioned "Covenant of Title," etc.
(D) Notwithstanding the provisions of paragraph (B) of this Article
and subject to Paragraph (F) of Article 9, if Tenant shall propose to use all or
substantially all of Tenant's Building for a use ("PROPOSED USE") other than
------------
those described in paragraph
-25-
<PAGE>
(A) of this Article and Landlord shall not be in default in discharging
Landlord's Operating Covenant, then prior to effecting such Proposed Use, Tenant
shall give notice to Landlord setting forth such Proposed Use. Within 45 days
after receipt of Tenant's notice, Landlord shall have the right to terminate
this Lease by giving notice thereof to Tenant, and if such notice is so given
this Lease shall terminate (and Landlord and Tenant shall be released from all
further liability under this Lease) on the earlier of 120 days from the date of
Landlord's notice or the date Tenant shall vacate the Leased Premises. If
Landlord fails to give such notice during said 45-day period, Landlord shall
conclusively be deemed to have elected to permanently waive its right of
termination under this paragraph, and the provisions of this paragraph shall no
longer apply. Tenant shall be entitled at any time thereafter to effectuate
such Proposed Use and subsequently any other use permitted by this Lease without
being obligated to give Landlord the notice described above in this paragraph
(D).
(E) The obligations of Tenant under this Article are subject to the
provisions of paragraph (C) of the Article captioned "Tenant's Covenant to
Operate."
(F) Tenant shall be responsible for providing within Tenant's Building
such security as Tenant deems necessary for its operations therein, and Landlord
shall have no obligation to provide any security within Tenant's Building.
(G) Tenant shall not commit or suffer to be committed any waste upon
the Leased Premises or any nuisance or other act or
-26-
<PAGE>
thing which may disturb the quiet enjoyment of any other tenants or their
customers in the Entertainment Center. Without limiting the foregoing, Tenant
will not use or permit the Leased Premises to be used in any manner that would
result in any noise or vibration interfering with the operations of any
businesses adjacent to the Leased Premises or which would result in any
offensive odors penetrating other premises; PROVIDED, HOWEVER, the customary use
of Tenant's Building as a motion picture theatre and popcorn odors shall not be
violations of the foregoing.
(H) No use shall be made or permitted to be made of the Leased
Premises, nor acts done, which will cause a cancellation of any insurance policy
covering the Leased Premises or any part thereof. Tenant shall not sell or
permit to be kept, used, stored or sold in or about Leased Premises any article
which may be prohibited by standard form fire insurance policies.
(I) No auction, "fire," sidewalk, close-out or bankruptcy sales may be
conducted in or upon the Leased Premises without Landlord's prior written
consent.
9. SUBLETTING AND ASSIGNING.
- ----------------------------
(A) Intentionally Deleted.
(B) If Tenant assigns this Lease or sublets all or any part of the
Leased Premises, Tenant shall, subject to the provisions of paragraph (C) of
this Article, remain liable and responsible under this Lease; PROVIDED, HOWEVER,
in the case of an
-27-
<PAGE>
assignment, if this Lease shall continue in effect after the last day of the
initial term hereof and if the assignee shall have assumed in writing the
performance of the covenants and obligations of Tenant hereunder, Tenant shall
not be liable or responsible to Landlord for any default or nonperformance by
such assignee as tenant hereunder arising or occurring after the last day of the
initial term hereof.
(C) Anything in this Lease to the contrary notwithstanding, it is
agreed that at any time during the term of this Lease, Tenant shall have the
right, without Landlord's consent, once or more often, to:
(1) Subject to Paragraph (F) of this Article, sublease or
license the operations referred to in clauses (ii), (iii), (iv), (v) and
(vi) of paragraph (A) of the Article captioned "Use of Premises," or grant
concessions giving other parties the right to conduct such operations or
any of them.
(2) Sublet the Leased Premises or assign this Lease (a) to any
corporation (which term for the purposes of this paragraph shall include
any form of business entity) to which ten or more theatres of Tenant
(containing an aggregate of at least 50 screens) are transferred (by sale
or otherwise) in a single transaction, or (b) to any corporation which may,
as the result of a reorganization, merger, consolidation, or sale of
assets, succeed to all or substantially all of the business now carried on
by Tenant in the Metropolitan Area, or (c) to
-28-
<PAGE>
any subsidiary or affiliate corporation of Tenant or of Tenant's parent
corporation ("PARENT CORPORATION") which remains as such, or (d) to
------------------
Tenant's Parent Corporation, or (e) to any corporation which acquires 50%
or more of the issued and outstanding voting stock (or such lesser
percentage as shall be sufficient to acquire voting control) of Tenant or
of Tenant's Parent Corporation, or (f) to any corporation which operates at
least 20 motion picture theatres (containing at least 100 screens, in the
aggregate) and has a book net worth of at least the "Transferee Amount" (as
defined below) as of the end of the last complete calendar month
immediately preceding any such assignment or subletting and to any
subsidiary or affiliate of such corporation, provided that such corporation
duly and validly then guarantees the performance of the obligations of such
subsidiary or affiliate under this Lease, or (g) to any corporation which
shall acquire the Leased Premises in a transaction whereby Tenant shall
continue to have the right to operate the Leased Premises pursuant to a
sublease, management contract, operating agreement or otherwise. The
"TRANSFEREE AMOUNT" shall mean $10,000,000.00, except that as of the 5th
------------------
anniversary of the Commencement Date, and every 5 years thereafter, the
Transferee Amount shall be adjusted, and shall be equal to the product
obtained by multiplying $10,000,000.00 by a fraction, the numerator of
which is the CPI for the January immediately preceding each
-29-
<PAGE>
such adjustment, and the denominator of which is the CPI for the
Commencement Date.
(3) Tenant shall be released and relieved from further liability
under this Lease if (i) an assignment is made pursuant to clause (a), (b),
(d), (e) or (f) of subparagraph (2) of this paragraph, and (ii) the
assignee, by written instrument duly executed, acknowledged and delivered
to Landlord, assumes and covenants and agrees with Landlord to perform all
the terms, covenants and conditions of this Lease which by the terms hereof
are binding on Tenant from and after such transfer, and (iii) such assignee
(or the guarantor of such assignee's obligations under this Lease) has a
book net worth of at least the "Release Amount" as of the end of the last
complete calendar month immediately preceding any such assignment. The
"RELEASE AMOUNT" shall mean $50,000,000.00; however, as of the 5th
---------------
anniversary of the Commencement Date, and every 5 years thereafter, the
Release Amount shall be adjusted and shall be equal to the product obtained
by multiplying $50,000,000.00 by a fraction, the numerator of which is the
CPI in effect for January preceding each such adjustment, and the
denominator of which is the CPI for the month in which the Commencement
Date occurs.
(4) Subject to the terms of clause (7) of paragraph (B) of
Section 1 of the Rent and Expense Rider, Tenant shall be entitled to enter
into so-called "four-wall" deals whereby Tenant's Building or any part
thereof is permitted to be used
-30-
<PAGE>
by others on a limited engagement basis for any use permitted to be made
thereof by Tenant.
(D) Except as otherwise provided in this Article and in paragraph (C)
of the Article captioned "Tenant's Covenant to Operate," Tenant shall not assign
this Lease or sublet the Leased Premises without the consent of Landlord, which
consent Landlord agrees not to unreasonably withhold or delay.
(E) If Tenant assigns this Lease and remains liable hereunder, then
Landlord, when giving notice to said assignee or any future assignee in respect
of any default, shall also serve a copy of such notice upon the original tenant
named in this Lease, American Multi-Cinema, Inc. (the "ORIGINAL TENANT"), and no
---------------
notice of default shall be effective until a copy thereof is received by the
Original Tenant. The Original Tenant, at its sole option, shall have the same
period after receipt of such notice to cure such default as is given to Tenant
under this Lease. If because of a default of an assignee after an assignment of
this Lease (i) this Lease shall terminate, or (ii) this Lease and the term
hereof ceases and expires, or (iii) an assignee's possession of the Leased
Premises shall be terminated without termination of this Lease (Landlord hereby
agreeing to terminate this Lease upon Original Tenant and Landlord executing a
new lease if Original Tenant exercises its option to become the tenant
thereunder), then in any of such events Landlord shall promptly give the
Original Tenant notice thereof, and the Original Tenant shall have the option,
to be exercised by notice to Landlord given within 30 days after
-31-
<PAGE>
receipt by the Original Tenant of Landlord's notice, to cure any default and
become Tenant under a new lease for the remainder of the term of this Lease
(including any renewal periods) upon all of the same terms and conditions as
then remain under this Lease as it may have been amended by agreement between
Landlord and Original Tenant. If any default of an assignee is incapable of
being cured by the Original Tenant, then notwithstanding the failure to cure
same, the Original Tenant shall have the foregoing option to enter into a new
lease. Such new lease shall commence on the date of termination of this Lease.
Notwithstanding the foregoing, if Landlord delivers to the Original Tenant,
together with Landlord's notice, a release as to all liability under this Lease
as theretofore amended, the Original Tenant shall not have any option to enter
into a new lease with Landlord.
(F) If Tenant intends to sublease 5,000 square feet of Floor Area or
more in Tenant's Building and such subleased space is to have its own exterior
entrance directly into such subleased space, separate and apart from the main
customer entrance into Tenant's Building ("DIRECT ENTRANCE SUBLEASE SPACE"),
------------------------------
Tenant shall give Landlord prior notice thereof and Landlord shall have 30 days
after the receipt of such notice to terminate this Lease with respect to the
Direct Entrance Sublease Space only and if Landlord so elects Landlord shall pay
all costs of separating the Direct Entrance Sublease Space from the remainder of
Tenant's Building (including the construction of demising partitions [adequately
insulated so as to accommodate Tenant's acoustical requirements]
-32-
<PAGE>
separating such space from the remainder of Tenant's Building and the separation
of all utility systems [including HVAC] so that the remainder of Tenant's
Building shall be separately metered and served by the applicable utility
companies and its own HVAC system), all pursuant to plans and specifications
approved by Tenant. If Landlord makes such election, then as of the date which
is 75 days after Tenant's notice, Tenant shall surrender the Direct Entrance
Sublease Space "as is-where is-with all faults" and the Annual Fixed Rent and
other charges payable under this Lease shall be reduced in the same percentage
as the number of square feet of Floor Area in the Direct Entrance Sublease Space
bears to the original number of square feet in Tenant's Building. Neither
Landlord nor the tenant or occupant of such space shall interfere with Tenant's
business in the construction or operation of the Direct Entrance Sublease Space.
The use of the Direct Entrance Sublease Space shall be restricted as provided in
Paragraph (C) of Article 29 and in Article 31.
10. CONTINUED POSSESSION OF TENANT.
- -----------------------------------
Any holding over after the last day of any extension of the term
hereof, or after the last day of the initial term hereof if this Lease is not
extended, shall be construed to be a monthly tenancy, on all of the terms set
forth in this Lease, terminable by either party on not less than one month's
notice; PROVIDED, HOWEVER, if such hold over is without Landlord's consent, the
-33-
<PAGE>
monthly Annual Fixed Rent during such hold over period shall be equal to 150% of
the monthly Annual Fixed Rent for the last Lease Year of the term of this Lease.
Nothing contained in this Paragraph or this Lease shall be construed to give
Tenant the right to holdover beyond the term of this Lease without the express
written consent of Landlord.
11. FIXTURES.
- -------------
(A) Any and all trade fixtures and equipment, signs, appliances,
furniture and other personal property of any nature installed in Tenant's
Building at any time by Tenant or Landlord, at Tenant's expense, including non-
recessed lighting fixtures, concession stands and related equipment, acoustical
wall panels, projection and sound equipment, seats and satellite dish, if
installed (all of the foregoing being collectively referred to in this Lease as
"TENANT'S PROPERTY"), shall not become a part of the realty and may be removed
-----------------
from Tenant's Building by Tenant at any time during the term hereof or within 30
days after the termination of the term hereof; PROVIDED, HOWEVER, subject to the
rights of any lender or lessor having an interest in Tenant's Property, prior to
the expiration or earlier termination of Tenant's Operating Covenant, Tenant
shall replace Tenant's Property so removed to the extent necessary to perform
Tenant's Operating Covenant. Landlord hereby waives any and all liens, claims,
demands or rights, including rights of levy, execution, sale and distraint for
unpaid
-34-
<PAGE>
rent, or any other right, interest or lien which Landlord has or may hereafter
acquire in any of Tenant's Property.
(B) Tenant shall have the right to finance the acquisition and
installation of Tenant's Property (by granting a security interest therein or
entering into an equipment lease therefor), and in connection therewith,
Landlord agrees to execute and to cause the holder of any Mortgage to execute
and deliver a Landlord's and mortgagee's waiver (the form of which shall be
subject to Landlord's reasonable approval) and all other documents reasonably
required by such lessor of or holder of a security interest in Tenant's
Property.
12. UTILITIES.
- --------------
(A) Tenant shall pay all charges for gas, electricity, water, sewer
service and other utilities used in Tenant's Building and Tenant's Box Office
during the term hereof, all such utilities to be separately metered and to be
obtained by Tenant from the applicable utility company; PROVIDED, HOWEVER,
Landlord and Tenant shall each be responsible for the payment of those
respective fees, deposits, costs and charges specified in paragraph (J) of
Section I in Exhibit C hereto. Tenant shall contract for and pay separately for
---------
trash removal services and shall keep Tenant's trash enclosure area neat and
clean. Unless caused by Landlord's negligent or willful act or omission or that
of its agents, employees or contractors, no interruption in utility services to
the Leased Premises shall create any liability for Landlord, or
-35-
<PAGE>
constitute an actual or constructive eviction, or entitle Tenant to any
abatement of rent, or otherwise relieve Tenant of its obligations under this
Lease.
(B) Landlord shall, at Landlord's expense, furnish, install and
maintain in good condition and repair, (i) to points of connection as provided
in paragraph (A)(2) of Section II in Exhibit C hereto, all storm and sanitary
---------
sewers, and all gas, water, telephone, electrical facilities and other utilities
of such size and type as may be required to provide adequate service for
Tenant's Building, which shall be determined and confirmed by Tenant through the
plan review process described in Exhibit C, and (ii) to the Entertainment Center
---------
Pylons, electrical facilities of such size and type as may be required to
adequately service the Entertainment Center Pylons, which shall be determined
and confirmed by Tenant through the plan review process described in Exhibit C.
---------
(C) Notwithstanding the foregoing provisions of this Article, if
Tenant shall deposit foreign substances in the sewerage lines serving Tenant's
Building which block the same, Tenant shall be responsible for the elimination
of such blockage.
13. GOVERNMENTAL COMPLIANCE.
- ----------------------------
(A) Except as provided in Paragraph (B) of this Article, Landlord shall, at
Landlord's expense, comply with all Laws affecting the portions of the
Entertainment Center which are owned and/or to be maintained by Landlord as
provided in this Lease,
-36-
<PAGE>
irrespective of the nature of the work, if any, required for such compliance, to
the end that the portions of the Entertainment Center owned and/or to be
maintained by Landlord shall at all times be lawfully used and occupied as
contemplated in this Lease.
(B) Except as provided in paragraphs (C) and (D) of this Article,
Tenant shall, at Tenant's expense, comply with all Laws which pertain to
Tenant's Building and the use and occupancy thereof.
(C) Landlord warrants and represents to Tenant that to Landlord's
actual knowledge, (i) no release, leak, discharge, spill, storage, disposal or
emission of "Hazardous Substances" (hereinafter defined) has occurred in, on or
under the Entertainment Center, including the Leased Premises, and that the
Entertainment Center, including the Leased Premises, are free of Hazardous
Substances as of the date hereof (other than de minimis amounts which are not in
-- -------
violation of any Law and that pose no threat to persons or property), (ii) there
are no underground storage tanks under or adjacent to the Leased Premises, (iii)
there has not been any notice of intent to sue, notice of violation, citation,
warning or similar notification under any federal, state or local environmental
law or regulation regarding the Entertainment Center or arising out of
operations on the Entertainment Center, and (iv) Landlord is not aware of any
investigation or inquiry by any Governmental Authority concerning the
Entertainment Center or the operations thereon. Tenant acknowledges that
Landlord is to provide Tenant a "Phase I Assessment" as provided in
-37-
<PAGE>
paragraph (E) of Section I in Exhibit C, and agrees that the foregoing
---------
representations and warranties of Landlord shall be modified to include the
information set forth in said Phase I Assessment as the same may be approved by
Tenant.
(D) Landlord shall not cause or permit any Hazardous Substances to be
used, stored, generated or disposed of (collectively "USED") on, in or under the
----
Entertainment Center, and shall not cause any Hazardous Substances to be Used
within Tenant's Building, except for those Hazardous Substances which may
lawfully be Used in the ordinary course of business in the operation of the
Entertainment Center or which may be reasonably required in performing the
obligations of Landlord under this Lease, and then only to the extent no Laws
are violated in so doing; PROVIDED, HOWEVER, if without fault or knowledge of
Landlord or any of its affiliates, Hazardous Substances (i.e., contaminated
ground water) shall migrate onto the Entertainment Center, Landlord shall not be
deemed to have permitted the introduction of such Hazardous Substance on the
Entertainment Center.
(E) Tenant shall not cause or permit any Hazardous Substances to be
Used on, in or under Tenant's Building by Tenant, Tenant's agents, employees or
contractors, except in the ordinary course of business in the operation of any
business not prohibited under this Lease, or as reasonably required in
performing the obligations of Tenant under this Lease, and then only to the
extent no Laws in effect at such time are violated by Tenant.
-38-
<PAGE>
(F) Each party ("INDEMNIFYING PARTY") shall indemnify and save the
------------------
other party ("INDEMNIFIED PARTY") harmless from any and all claims of third
-----------------
parties, and damages, costs and losses owing to third parties or suffered by
Indemnified Party, including court costs, reasonable attorneys' fees and
consultants' fees, arising during or after the term and reasonably incurred or
suffered by the Indemnified Party as a result of any default or breach of any
representation, warranty or covenant made by Indemnifying Party under paragraphs
(A) through (E) of this Article (but for this purpose Landlord shall be deemed
to have made the representations and warranties in paragraph (C) of this Article
absolutely and without the limitation "to the best of Landlord's knowledge").
It is a condition of this indemnification and save harmless that the
Indemnifying Party shall receive notice of any such claim against the
Indemnified Party promptly after Indemnified Party first has knowledge thereof.
This indemnification and save harmless includes any and all costs reasonably
incurred by the Indemnified Party after notice to Indemnifying Party for any
cleanup, removal or restoration mandated by any public official acting lawfully
under Law if Indemnifying Party shall not timely perform such work.
Notwithstanding the foregoing, the provisions of this Paragraph (F) shall
exclude any and all consequential damages suffered by the Indemnified Party.
(G) As used herein, "HAZARDOUS SUBSTANCE" means any substance that is
-------------------
toxic, radioactive, ignitable, flammable, explosive, reactive or corrosive and
that is, in the form,
-39-
<PAGE>
quantity, condition and location then found upon or under the Leased Premises
and/or the remainder of the Entertainment Center, as the case may be, regulated
by any Governmental Authority. "Hazardous Substance" includes any and all
materials and substances that are defined as "hazardous waste," "hazardous
chemical," "pollutant," "contaminant" or "hazardous substance," in the form,
quantity, condition and location then found upon the Leased Premises and/or the
remainder of the Entertainment Center, as the case may be, pursuant to Law.
"Hazardous Substance" includes asbestos, polychlorinated biphenyls and
petroleum.
(H) If Tenant's operations in the Leased Premises are interrupted in
whole or in part such that Tenant is prevented (in the exercise of Tenant's
reasonable business judgment) from operating, in whole or in part, without
additional cost or risk of injury to persons or damage to property or potential
violation of any Law as a result of any breach by Landlord of its
representations or obligations under paragraph (A), (C) or (D) of this Article
(but for this purpose Landlord shall be deemed to have made the representations
and warranties in paragraph (C) of this Article absolutely and without the
limitation "to Landlord's actual knowledge"), then during the period of such
interruption the Annual Fixed Rent and other charges hereunder, or a just and
fair proportion thereof according to the nature and extent of the interruption,
shall be abated.
(I) Notwithstanding anything to the contrary contained in paragraph
(H) of this Article, if Tenant's operations in the
-40-
<PAGE>
Leased Premises are interrupted in whole or in part such that Tenant is
prevented (in the exercise of Tenant's reasonable business judgment) from
operating, in whole or in part, without additional cost or risk of injury to
persons or damage to property or potential violation of any Law for more than 12
months as a result of any breach by Landlord of its representations or
obligations under paragraph (A), (C) or (D) of this Article (but for this
purpose Landlord shall be deemed to have made the representations and warranties
in paragraph (C) of this Article absolutely and without the limitation "to
Landlord's actual knowledge"), then in addition to the indemnification contained
in paragraph (F) of this Article, Tenant may terminate this Lease by giving
notice to Landlord of its election to do so, but such termination shall not
affect Landlord's indemnity under paragraph (F) of this Article, which shall
survive such termination.
(J) The provisions of this Article shall survive the expiration or
sooner termination of this Lease.
14. REPAIRS.
- ------------
(A) Landlord covenants and agrees after notice from Tenant of the need
therefor, to make all repairs to and remedy all damage to Tenant's Building,
both exterior and interior, structural or otherwise caused by Landlord's failure
to (a) provide adequate drainage of surface and sub-surface waters or (b)
properly perform Landlord's Work.
-41-
<PAGE>
(B) Subject to Landlord's obligations under paragraph (A) of this
Article and to reasonable wear and tear, Tenant covenants and agrees to keep and
maintain in good repair Tenant's Building including , the roof, exterior walls,
foundations, doors, windows, all electrical, plumbing, heating and air
conditioning equipment and facilities contained within Tenant's Building (it
being acknowledged by the parties that Tenant's Building will not contain any
common wiring, pipes, conduits, water, sewer or other utility lines serving
other portions of the Entertainment Center), the exterior awnings, display cases
and window boxes on Tenant's Building, if any, and all signs of Tenant, wherever
located, and Tenant's Box Office. Landlord shall have no obligation with
respect to any janitorial service furnished to Tenant's Building.
(C) Notwithstanding the foregoing provisions of this Article but
subject to paragraph (D) of Article 16 and paragraph (D) of this Article, each
party shall be responsible for repairing any damage to Tenant's Building or
Tenant's Box Office resulting from its negligent or willful act.
(D) Notwithstanding anything set forth in paragraphs (A), (B) and (C)
of this Article to the contrary, the respective obligations of Landlord and
Tenant set forth therein shall be subject to the provisions set forth in the
Articles captioned "Damage Clause" and "Condemnation."
(E) Any repairs to the roof of Tenant's Building for which Tenant
shall be responsible under paragraph (B) hereof shall
-42-
<PAGE>
be performed by a roofing contractor reasonably acceptable to Landlord.
(F) Tenant shall periodically have Tenant's Building inspected by a
reputable pest exterminator for pests and rodents and shall perform (or cause to
be performed) the work reasonably recommended by such inspector.
15. DAMAGE CLAUSE.
- ------------------
(A) Subject to Paragraph (C) of this Article, if Tenant's Building
shall be damaged or destroyed by fire or other casualty, either in whole or in
part, Tenant shall with due diligence remove any resulting debris and repair
and/or rebuild the same, in accordance with the Final Plans (to the extent then
permitted by law), subject to such changes therein as Tenant may propose and
which are approved by the applicable Governmental Authorities and Landlord,
Landlord hereby agreeing not to unreasonably withhold or delay such approval
provided such changes are consistent in character and quality to the previous
improvements and the balance of the Entertainment Center. Tenant agrees that
Tenant's obligations to pay rent shall not abate as a result of any such damage
or destruction or during the period of any restoration or repair by Tenant, it
being acknowledged that Tenant is obligated under Article 16 to maintain
business interruption insurance to cover, among other things, its rental
obligations under this Lease in the event of any such damage or destruction;
PROVIDED, HOWEVER, that if Tenant's Building shall be
-43-
<PAGE>
damaged or destroyed by a casualty not insurable ("UNINSURABLE CASUALTY") under
--------------------
the insurance required to be maintained by Tenant under paragraph (A) of Article
16 ("REQUIRED INSURANCE"), then until the earlier of (i) the date which is 90
------------------
days after the date Tenant's Building is repaired, rebuilt and put in good and
tenantable order (including the installation of Tenant's Property therein), or
(ii) the date Tenant reopens the portion(s) of Tenant's Building so damaged or
destroyed, or (iii) the date which is 6 months after the occurrence of the
Uninsurable Casualty, the Annual Fixed Rent and other charges hereby reserved,
or a fair and just proportion thereof according to the degree to which Tenant's
use of Tenant's Building is impaired, shall be abated.
(B) Anything in this Article to the contrary notwithstanding, it is
agreed that if (i) Tenant's Building is damaged or destroyed by fire or other
cause to such an extent that the cost of restoration would exceed 25% of the
amount it would have cost to replace Tenant's Building in its entirety at the
time such damage or destruction occurred, and (ii) such damage or destruction
occurs during the last 3 years of the initial term hereof or during the last 3
years of any Option Period, then either Landlord or Tenant shall have the right
and option to terminate this Lease by giving the other party notice of such
election within 30 days after the date on which such damage or destruction
occurred, and if such notice is given this Lease shall terminate as of the date
Tenant vacates Tenant's Building, which date shall be no later than 45 days
after the giving of such notice, and the Annual Fixed Rent and
-44-
<PAGE>
other charges hereby reserved shall be adjusted as of the effective date of
termination; PROVIDED, HOWEVER, that Tenant shall have the right to nullify any
such notice of termination given by Landlord if at the time such notice is given
an option herein granted Tenant to extend the term of this Lease for an
additional period of 5 years or more remains unexercised and Tenant shall
exercise such option within 30 days after the receipt of such notice of
termination from Landlord, in which event Landlord's notice of such termination
shall be of no force or effect and Tenant shall perform the restoration and
other work required of Tenant under the terms of paragraph (A).
(C) If Tenant's Building shall be damaged or destroyed by an
Uninsurable Casualty to such an extent that the cost of restoration would exceed
an amount ("THRESHOLD AMOUNT") equal to 15% of the amount it would have cost to
----------------
replace Tenant's Building in its entirety at the time such damage or destruction
occurred, then Tenant shall have the right to either (i) repair and restore
Tenant's Building at its sole cost and expense, or (ii) terminate this Lease.
Said election shall be made by Tenant within 60 days of the occurrence of such
casualty by notice to Tenant given within such period. If Tenant elects to
rebuild and repair Tenant's Building, then Tenant shall be required to do so
with due diligence. Until the earlier to occur of (i) the date Tenant's
Building is repaired, rebuilt and put in good and tenantable order (including
the installation of Tenant's Property), or (ii) the date Tenant reopens the
portion of Tenant's Building so damaged or
-45-
<PAGE>
destroyed, or (iii) the date which is 6 months after the occurrence of the
Uninsurable Casualty, the Annual Fixed Rent and other charges hereunder, or a
just and fair proportion thereof according to the degree to which Tenant's use
of Tenant's building is impaired, shall be abated.
(D) If Tenant elects to terminate this Lease as set forth in paragraph
(C) of this Article and such notice of termination is not negated by Landlord as
provided in this paragraph, then this Lease shall terminate as of the date of
such damage or destruction and the Annual Fixed Rent and other charges hereunder
shall be adjusted as of the date of termination. If Tenant so elects to
terminate this Lease as provided in paragraph (C) of this Article, Landlord
shall nevertheless have the option of negating such notice of termination by
giving notice to Landlord of such negation, which notice, if given at all, shall
be given within 30 days of Tenant's receipt of Landlord's notice of termination.
If Landlord elects to negate Tenant's notice of termination, then (i) this Lease
shall not terminate, and (ii) Landlord shall contribute to Tenant the uninsured
cost of restoration in excess of the Threshold Amount. Tenant agrees that
except in the event this Lease is terminated pursuant to this paragraph (D) as a
result of such damage or destruction, Tenant's obligations to pay rent shall not
abate as a result of any such damage or destruction or during the period of any
restoration or repair by Tenant, it being acknowledged that Tenant is obligated
under Article 16 to maintain business interruption insurance to cover, among
other things, its
-46-
<PAGE>
rental obligations under this Lease in the event of any such damage or
destruction; PROVIDED, HOWEVER, that if such damage or destruction was caused by
an Uninsurable Casualty, then the Annual Fixed Rent and other charges payable
hereunder shall abate until the earlier to occur of (i) the date on which Tenant
opens Tenant's Building for business with the public following such repair and
restoration, or (ii) 90 days after Tenant's Building is repaired, rebuilt and
put in good and tenantable order and condition, or (iii) the date which is 6
months after the occurrence of the Uninsurable Casualty.
(E) If before the Commencement Date or during the term hereof, any of
the "Required Facilities" (hereinafter defined) shall be damaged or destroyed by
fire, casualty or any cause whatsoever, either in whole or in part, Landlord
shall with due diligence remove any resulting debris and repair and/or rebuild
such Required Facilities in accordance with the plans and specifications
pursuant to which they were originally constructed (to the extent then permitted
by Law). Landlord shall obtain Tenant's consent (which shall not be
unreasonably withheld) to any material deviation from such plans and
specifications required by Governmental Authorities. It is hereby expressly
provided that if Landlord, for any reason whatsoever, fails to commence such
repair and rebuilding within 4 months from the date when such damage or
destruction occurred (subject to the "120 Day Limited Conditional Extension" [as
defined in paragraph (F) of this Article]), then Tenant may, at Tenant's sole
option, in addition to its other
-47-
<PAGE>
rights and remedies, either (a) terminate this Lease, or (b) repair and restore
such Required Facilities (or such portion thereof as Tenant shall elect) and
offset the reasonable, actually incurred and documented cost thereof against the
installments of Annual Fixed Rent and other charges payable hereunder until
Tenant has recouped such costs, together with interest thereon at the Default
Rate. Until (y) Landlord shall substantially complete the repair and/or
rebuilding of the Required Facilities, or (z) Tenant shall substantially
complete the repair and/or rebuilding of the Required Facilities, as the case
may be, the Annual Fixed Rent and other charges payable hereunder (but not the
Annual Percentage Rent), or a fair and just proportion thereof according to the
nature and extent of the interference with, and damage to, Tenant's business,
shall be abated. If Tenant elects to terminate this Lease as provided in this
paragraph, then upon the giving of such notice this Lease shall automatically
terminate and the Annual Fixed Rental and other charges hereunder shall be
adjusted as of the date of such notice. "REQUIRED FACILITIES" shall mean (i)
-------------------
the Minimum Number of Parking Spaces within the Critical Parking Zone (or within
Tenant's Exclusive Parking Area in Annexation Area A if Landlord has designated
the same as provided in paragraph (A) of Article 23), (ii) the Main Access Ways,
and (iii) such additional number of parking spaces elsewhere in the
Entertainment Center as shall be necessary to meet the Car Parking Ratio.
(F) If during the term hereof any of the buildings located within the
Phase I Development (exclusive of Tenant's
-48-
<PAGE>
Building) shall be damaged or destroyed by fire or other casualty or any cause
whatsoever, either in whole or in part, Landlord shall promptly repair and/or
rebuild at least 50,000 square feet of the Floor Area therein devoted to Retail
Uses. Until such other buildings are repaired, rebuilt and put in good and
tenantable condition, the Annual Fixed Rent and other charges payable hereunder
(but not the Annual Percentage Rent) shall be equitably abated according to the
nature and extent of interference with, and damage to, Tenant's business, except
to the extent of insurance proceeds (if any) Tenant is entitled to under its
business interruption insurance policy it is required to maintain under Article
16. If Landlord fails to commence such repair and rebuilding within 4 months
(subject to extension, not to exceed an additional 120 days, for delays
encountered by Landlord in securing the approvals of Governmental Authorities
for such repairs and reconstruction provided Landlord acts with due diligence to
obtain such approvals ["120 DAY LIMITED CONDITIONAL EXTENSION"]) after the date
-------------------------------------
when such damage or destruction occurred or fails thereafter to proceed
diligently to complete such repair and rebuilding, then Tenant, in addition to
such other rights and remedies as may be accorded Tenant by law, shall have the
right and option to terminate this Lease by giving Landlord written notice of
Tenant's election to do so at any time prior to completion of such repair and
rebuilding provided Landlord shall not then be actively undertaking such work,
and upon the giving of such notice this Lease shall automatically terminate and
the Annual Fixed Rent and
-49-
<PAGE>
other charges hereunder shall be adjusted as of the date of such notice.
(G) If any of the buildings within the Entertainment Center located
within the Phase I Development which Landlord is not required to restore
pursuant to Paragraph (F) of this Article, or any building located outside the
Phase I Development shall, before the Commencement Date or during the term
hereof, be damaged or destroyed by fire, casualty or any cause whatsoever,
either in whole or in part, Landlord shall either (i) repair and restore with
due diligence such buildings so that they are harmonious with the remainder of
the Entertainment Center, or (ii) remove any resulting debris, demolish such
buildings and leave the affected areas in a neat, clean and level condition with
surface paving, improvements and/or landscaping compatible with the surrounding
Common Facilities of the Entertainment Center.
(H) In addition to the rights of termination accorded Tenant under
paragraphs (A) and (B) of this Article, it is agreed that if (i) Tenant's
Property is damaged or destroyed by fire or other casualty to the extent of 25%
or more of the amount it would have cost to replace the same in its entirety at
the time such damage or destruction occurred, and (ii) such damage or
destruction occurs during the last 3 years of the initial term hereof or during
the last 5 years of any Option Period, then Tenant shall have the right to
terminate this Lease by notice to Landlord given within 60 days after the date
on which such damage or destruction occurred, and upon the giving of such
notice, this Lease shall automatically
-50-
<PAGE>
terminate and the Annual Fixed Rent and other charges hereunder shall be
adjusted as of the effective date of termination.
(I) Except as expressly provided in this Article 15, Tenant hereby
waives any statutory rights which it may have to terminate the Lease in the
event of the partial or total destruction of the Leased Premises, the Building
or any portion of the Entertainment Center, including, without limitation, the
provisions of Sections 1932(s) and 1933(4) of the California Civil Code, it
being agreed that the provisions of Article 15 shall control in the event of any
such damage or destruction. In no event shall Landlord have any obligations
whatsoever to repair, reconstruct or restore any of Tenant's Property.
16. INSURANCE, INDEMNITY, WAIVER OF SUBROGATION AND FIRE
- ---------------------------------------------------------
PROTECTION.
----------
(A) Tenant shall, at its sole expense, (i) during the course of
construction of Tenant's Building, carry a policy of builder's risk insurance in
an amount equal to 100% of the cost of construction thereof, and (ii) upon and
after completion of Tenant's Building, keep Tenant's Building (including all
improvements, alterations, additions and changes made thereto by Landlord or
Tenant) insured under (y) a commercial property insurance policy ("ALL-RISK
--------
POLICY") with a special broad causes of loss form (formerly known as "all-risk"
- ------
insurance) with an agreed amount endorsement, in an amount not less than 100% of
the full replacement cost of Tenant's Building (exclusive of foundations,
footings
-51-
<PAGE>
and other underground improvements), and (z) a so-called difference in
conditions policy with such endorsements as shall be necessary to insure against
the perils of earth movement and flood but the coverage for earth movement and
flood shall not be required to exceed $20,000,000 in the aggregate for all of
Tenant's Facilities, including Tenant's Building ("DIC POLICY"). Tenant shall
----------
be responsible for determining the amounts of the All-Risk Policy and the DIC
Policy. Tenant shall also maintain business interruption insurance which shall
cover, among other things, Tenant's rental obligations under this Lease in the
event of any interruption to Tenant's business operations arising from the
occurrence of any insured peril(s). Tenant shall provide Landlord with
certificates of insurance from Landlord's insurer evidencing that the insurance
so required to be maintained by Landlord is in full force and effect at all
times. Tenant shall have the right to maintain its insurance pursuant to a
blanket policy or policies covering the Tenant's Building together with other
property owned by Tenant provided the coverage afforded thereby to Tenant's
Building shall not be less than otherwise required by this Lease.
(B) Tenant will, subject to the provisions of paragraph (D) of this
Article, and subject to the provisions of paragraph (F) of Article 13 captioned
"Governmental Compliance," indemnify, protect and save harmless Landlord, its
officers, agents and servants, from and against any and all claims, actions,
suits, judgments, decrees, orders, liability and expense in connection with loss
of life, bodily injury and/or damage to property
-52-
<PAGE>
(collectively, "CLAIMS") (i) arising from or out of any occurrence in, upon or
------
at Tenant's Building, or the occupancy or use by Tenant of Tenant's Building or
any part thereof, unless the same is caused by the willful or negligent act or
omission of Landlord; PROVIDED, HOWEVER, Tenant's obligation to indemnify
Landlord from Claims arising from the acts of third parties (i.e., parties other
than Tenant, its agents, employees or servants) shall be limited to the extent
of Tenant's commercial general liability insurance required to be maintained
under this Lease, and/or (ii) occasioned wholly or in part by any negligent act
or omission of Tenant, its agents, employees, servants, subtenants, lessees or
concessionaires. If any action or proceeding is brought against Landlord, its
officers, agents or servants by reason of any of the aforementioned causes,
Tenant, upon receiving notice thereof from Landlord, agrees to defend such
action or proceeding by adequate counsel reasonably acceptable to Landlord at
its own expense. Tenant agrees to insure the foregoing obligation by
contractual endorsement under a commercial general liability policy (which may
be a blanket policy) to be maintained by Tenant with single limits of not less
than $10,000,000; PROVIDED, HOWEVER, in lieu of all or part of such insurance,
Tenant may self-insure up to $100,000 single limits per occurrence for each
$10,000,000 of Tenant's net worth as reflected on Tenant's most recent audited
balance sheet, but such self-insurance shall not impair Tenant's indemnity under
this paragraph (B). Tenant shall furnish Landlord certificates of
-53-
<PAGE>
insurance from Tenant's insurer evidencing that such insurance is in full force
and effect at all times.
(C) Landlord will, subject to the provisions of paragraph (D) of this
Article, and subject to the provisions of paragraph (F) of the Article captioned
"Governmental Compliance," indemnify, protect and save harmless Tenant, its
officers, agents and servants, from and against any and all Claims (i) arising
from or out of any occurrence in or upon any of the Common Facilities or any
part thereof, unless the same is caused by the willful or negligent act or
omission of Tenant; PROVIDED, HOWEVER, Landlord's obligation to indemnify Tenant
from Claims arising from the acts of third parties other than Landlord, its
agents, employees or servants shall be limited to the extent of Landlord's
commercial general liability insurance required to be maintained under this
Lease, and/or (ii) occasioned wholly or in part by any negligent act or omission
of Landlord, its agents, employees or servants. If any action or proceeding is
brought against Tenant, its agents or servants by reason of any of the
aforementioned causes, Landlord, upon receiving notice thereof from Tenant,
agrees to defend such action or proceeding by adequate counsel reasonably
acceptable to Tenant at its own expense. Landlord agrees to insure the
foregoing obligation by contractual endorsement under a commercial general
liability policy (which may be a blanket policy) to be maintained by Landlord
with single limits of not less than $25,000,000.00; PROVIDED, HOWEVER, in lieu
of all or part of such insurance, Landlord may self-insure up to $100,000 for
each $10,000,000 of its
-54-
<PAGE>
net worth as reflected on Landlord's most recent audited balance sheet, but such
self-insurance shall not impair Landlord's indemnity under this paragraph (C).
Landlord shall provide Tenant certificates of insurance from Landlord's insurer
evidencing that the insurance so required to be maintained by Landlord is in
full force and effect at all times.
(D) Anything in this Lease to the contrary notwithstanding, it is
agreed that each party (the "RELEASING PARTY") hereby releases the other (the
---------------
"RELEASED PARTY") from any liability which the Released Party would, but for
- ---------------
this paragraph, have had to the Releasing Party during the term of this Lease
resulting from any accident or occurrence or casualty (i) which is or would be
covered by an All-Risk Policy or a DIC Policy irrespective of whether such
coverage is being carried by the Releasing Party, and (ii) which is covered by
any other casualty or property damage insurance being carried by the Releasing
Party at the time of such occurrence, which casualty may have resulted in whole
or in part from any act or neglect of the Released Party, its officers, agents
or employees; PROVIDED, HOWEVER, the release hereinabove set forth shall become
inoperative and null and void if the Releasing Party wishes to place such
insurance with an insurance company which (y) takes the position that the
existence of such release vitiates or would substantially adversely affect any
policy so insuring the Releasing Party and notice thereof is given to the
Released Party, or (z) requires the payment of a higher premium by reason of the
existence of such release, unless in the latter case the Released Party
-55-
<PAGE>
within 20 days after notice thereof from the Releasing Party pays such increase
in premium.
(E) During the continuance of Tenant's Operating Covenant, Tenant
shall insure Tenant's Property under a commercial property coverage policy
consistent with that maintained by Tenant for its fixtures and equipment at its
similar theatre locations. All proceeds payable in connection with such policy
shall be the sole property of Tenant, and Landlord shall have no claim or
interest therein.
(F) Landlord shall construct and shall maintain in good condition and
repair, without cost to Tenant, in all premises immediately adjacent to Tenant's
Building, if any, automatic wet sprinkler systems, smoke vents, smoke detecting
devices, fire walls and such other fire warning, prevention and containment
devices as are sufficient to qualify Tenant's Building for a superior risk
rating from Tenant's property damage insurer provided Tenant's Building would
otherwise qualify therefor. If the manner of construction of immediately
adjacent buildings is not sufficient to qualify Tenant's Building for a superior
risk rating and Tenant's Building would otherwise qualify therefor based on the
method of construction of Tenant's Building and, if Tenant's property insurance
premiums are greater as a result, Landlord shall either pay for necessary
upgrades to the adjacent building(s) to qualify Tenant's Building for a superior
risk rating or pay for the increased costs of Tenant's property insurance.
-56-
<PAGE>
17. LANDLORD TO PAY TAXES.
- --------------------------
Subject to Tenant's obligation to reimburse Landlord for certain Taxes
as provided in the Rent and Expense Rider, Landlord shall pay all Taxes assessed
or charged against the Entertainment Center or any part thereof.
18. TENANT'S REAL ESTATE TAXES.
- -------------------------------
(A) Tenant shall reimburse Landlord for certain Taxes as provided in
the Rent and Expense Rider.
(B) Tenant shall pay to the appropriate Governmental Authorities all
personal property taxes separately assessed against Tenant's Property.
19. ALTERATIONS AND TENANT'S LIENS.
- -----------------------------------
(A) Tenant shall have the right and privilege at all times during the
term hereof, at its own expense, in accordance with applicable Laws to make such
alterations, changes, improvements and additions to Tenant's Building as Tenant
may desire (including, without limitation, the installation of a satellite dish
on the roof of Tenant's Building, subject to the limitations set forth below)
provided such work, when completed, will not impair the structural integrity or
soundness thereof and provided further that if any of Tenant's proposed work
will materially affect the exterior appearance of Tenant's Building or affect
the roof of Tenant's Building or the HVAC or other mechanical systems in or
serving Tenant's Building, Tenant shall, before undertaking
-57-
<PAGE>
such work, obtain Landlord's consent to the performance thereof, Landlord hereby
agreeing not to unreasonably withhold or delay such consent. To the extent any
of the foregoing is not subject to Landlord's consent and the cost thereof
exceeds $100,000.00, then for informational purposes only, Tenant shall notify
Landlord before undertaking such work and furnish Landlord with a copy of the
plans, if any, for such work. In any event, upon completion of any alterations,
changes, improvements and additions to Tenant's Building (as opposed to Tenant's
Property), Tenant shall provide Landlord with a written description of same and
a copy of the plans, if any, for such work so that Landlord can properly advise
its property insurance carrier. Subject to the provisions of Article 11
captioned "Fixtures," any alterations, changes, improvements and additions made
by Tenant shall immediately become the property of Landlord and shall be
considered a part of Tenant's Building. The installation of any satellite dish
or any other rooftop installation shall be subject to (1) the prior written
consent of Landlord, which shall not be unreasonably withheld and (2) the
approval of all Governmental Authorities. Without limiting the foregoing,
Landlord shall have the right to reasonably approve the size, location,
screening and method of installation of any such rooftop installation(s).
Landlord may require that Tenant consult with Landlord's roof contractor
concerning the location and method of installation of any such rooftop
installation(s). All changes to the Tenant's Building and the performance
thereof shall at all times comply with (i) all applicable Laws, and (ii) all
-58-
<PAGE>
reasonable rules, orders, directions, regulations and requirements of the
Pacific Fire Rating Bureau (or of any similar insurance body or bodies having
jurisdiction over the Leased Premises) of which Landlord has given prior notice
to Tenant, and shall be performed in a good and workmanlike manner. During the
course of any work effected by Tenant under this paragraph, Tenant, at its
expense, shall carry, or cause to be carried, workmen's compensation insurance
in statutory limits, and general liability insurance for any occurrence in or
about the Leased Premises arising from such work, of which Landlord (and its
managing agent if Landlord shall have notified Tenant of the name thereof) shall
be named as additional insureds (as their interests may appear), in the amount
of $1,000,000.00 single limits.
(B) Tenant shall not permit any mechanic's or materialman's lien to be
foreclosed against Tenant's Building or the Entertainment Center by reason of
work, labor, services or materials performed by or furnished to Tenant or anyone
holding any part of the Leased Premises under Tenant. If any such lien shall at
any time be filed, Tenant may contest the same in good faith but Tenant shall,
within 30 days after the filing thereof, cause such lien to be released of
record by payment, bond, order of a court of competent jurisdiction or
otherwise. Landlord shall have a right to post, in a location reasonably
acceptable to Tenant, a notice of non-responsibility on Tenant's Building in
accordance with applicable Laws with respect to any work performed in Tenant's
Building by Tenant. Nothing contained in this Lease shall be
-59-
<PAGE>
construed as a consent on the part of Landlord to subject Landlord's estate in
the Leased Premises to any lien or liability under the lien laws of the state in
which the Leased Premises are located. If within thirty (30) days after filing,
Tenant fails to remove any lien filed against the Leased Premises or the
Entertainment Center which Tenant is obligated to remove pursuant to this
Article 19, Landlord may take such action as Landlord deems necessary to remove
such lien(s) and Tenant shall indemnify and reimburse Landlord from any and all
costs reasonably incurred by Landlord in so removing such lien(s) including,
without limitation, payment of the amount of the lien, together with interest on
all amounts so expended by Landlord at the Default Rate until paid by Tenant.
20. TENANT'S SIGNS.
- -------------------
(A) Tenant shall have the right to maintain the following signs in
accordance with and subject to any applicable provisions of the Site Plans and
Laws and approval by the City of Arcadia:
(1) Illuminated signs on the exterior walls of Tenant's Building
and on the theatre canopy or marquee including attraction board.
(2) Signs on the interior or exterior of any windows of Tenant's
Building.
(3) Easel or placard signs within the lobby entrance or on
sidewalks immediately in front of Tenant's Building, provided the same do
not unreasonably interfere with
-60-
<PAGE>
pedestrian traffic and provided further Landlord shall have the right to
reasonably restrict the location, number and size of any exterior easel or
placard signs.
(4) Poster cases within the lobby of Tenant's Building and on the
exterior walls of Tenant's Building in locations approved as part of the
approval of Tenant's plans for Tenant's Building.
(5) Illuminated roadside identification sign panel on two pylon
signs to be installed by Landlord (individually, "ENTERTAINMENT CENTER
--------------------
PYLON" and collectively, "ENTERTAINMENT CENTER PYLONS") located as shown on
----- ---------------------------
Exhibit B-1, B-2 and B-3.
----------- --- ---
(B) The design, size, location, materials and method of illumination
of all signs which Tenant elects to construct (or any future alterations
thereto) pursuant to clauses (1) and (5) of paragraph (A) of this Article
("TENANT'S SIGNS") shall be subject to Landlord's approval, which Landlord
- ----------------
agrees not to unreasonably withhold or delay, and to the approval of all
applicable Governmental Authorities, shall advertise Tenant's business in
Tenant's Building and shall be constructed and maintained in good repair at
Tenant's expense (it being agreed that Tenant shall pay a pro-rata share of the
reasonable cost of constructing, maintaining and repairing the Entertainment
Center Pylon(s) [exclusive of any signs thereon] on which Tenant shall have a
sign, based on the square footage of Tenant's sign thereon relative to the
square footage of all signs which can be placed thereon). Tenant shall pay a
prorata share of the cost of electricity
-61-
<PAGE>
consumed in illuminating the Entertainment Center Pylon(s) on the same square
footage basis set forth in the preceding sentence.
(C) Landlord hereby grants to Tenant non-exclusive easements,
appurtenant to the Leased Premises, over portions of the Entertainment Center,
for the purpose of enabling Tenant to have access to the Entertainment Center
Pylons and Tenant's sign panels thereon, to maintain and service same and to
insure the continued availability of power thereto in the event Landlord fails
to do so.
(D) If Tenant shall be deprived of its sign panels on any
Entertainment Center Pylon as the result of a condemnation, Landlord shall (a)
make available a site (and power thereto) for a substitute pylon within the
Entertainment Center strategically located so as to be as visible to the same
automobile traffic on highways adjoining the Entertainment Center as to which
the previous Pylon Sign was visible, and (b) grant to Tenant easements similar
to those granted in paragraph (C) of this Article with respect to the new site.
(E) Landlord shall not erect or permit to be erected any sign or
advertising device on the roof or exterior walls of Tenant's Building, nor any
landscaping, signs or other obstructions which would block the view of any
Entertainment Center Pylon from adjoining streets to which such Entertainment
Center Pylon was visible when initially constructed.
(F) Nothing in this Lease shall restrict Tenant's unlimited right to
maintain signs on the interior of Tenant's Building.
-62-
<PAGE>
21. CONDEMNATION.
- -----------------
(A) If any material part of Tenant's Building shall be taken in any
proceeding by any Governmental Authority by condemnation or otherwise, or be
acquired for public or quasi-public purposes, or be conveyed under threat of
such taking or acquiring (which Landlord shall not do without Tenant's prior
consent), Tenant shall have the option of terminating this Lease by notice to
Landlord of its election to do so given on or before the date which is 6 months
after Tenant shall have been deprived of possession of the condemned property,
and upon the giving of such notice, this Lease shall automatically terminate and
the Annual Fixed Rent and other charges hereunder shall be adjusted as of the
date of such notice. In the event a material part of Tenant's Building is so
taken and Tenant elects not to terminate this Lease, then Landlord shall, at
Landlord's expense, restore Tenant's Building (exclusive of Tenant's Property)
to a complete unit as similar as reasonably possible in design, character and
quality to the building which existed before such taking. In the event Tenant's
Building is partially taken and this Lease is not terminated, the Annual Fixed
Rent and other charges thereafter payable hereunder shall be equitably reduced.
If Landlord shall be obligated to perform restoration work under this paragraph,
so much of the Annual Fixed Rent and other charges payable by Tenant as is
fairly allocable to the space which is to be restored shall abate until such
restoration work shall have been completed. Any restoration work to be
performed by Landlord pursuant to this paragraph shall be completed
-63-
<PAGE>
in accordance with plans and specifications which shall have been approved by
Tenant, such approval not to be unreasonably withheld. In any such proceeding
whereby all or part of the Leased Premises is taken, whether or not Tenant
elects to terminate this Lease, each party shall be free to make claim against
the condemning authority for the amount of the actual provable damage done to
each of them by such proceeding. If the condemning authority shall refuse to
permit separate claims to be made, then Landlord shall prosecute with counsel
reasonably satisfactory to Tenant the claims of both Landlord and Tenant, and
the proceeds of the award shall be divided between Landlord and Tenant in a fair
and equitable manner.
(B) If (i) 20% or more of the parking spaces within the Critical
Parking Zone (or, if Landlord has designated "Tenant's Exclusive Parking Area"
as permitted in subparagraph (ii) of paragraph (A) of Article 23, 10% or more of
the parking spaces within Tenant's Exclusive Parking Area), or (ii) 20% or more
of the parking spaces needed to comply with the Car Parking Ratio, or (iii) any
of the Main Vehicular Access Ways, shall be taken in any proceeding by any
Governmental Authority, by condemnation or otherwise, or be acquired for public
or quasi-public purposes, or be conveyed under threat of such taking or
acquiring (which Landlord shall not do without Tenant's prior consent), or the
use of any of the foregoing shall be lost, terminated or materially adversely
altered by reason of any such taking, acquisition or conveyance or other
governmental action (any of the foregoing events being herein called a
"TAKING"), then in any of such events
------
-64-
<PAGE>
Tenant shall have the option of terminating this Lease by notice to Landlord of
its election to do so given on or before the date which is 6 months after the
Taking, and this Lease shall automatically terminate 30 days after the giving of
such notice and the Annual Fixed Rent and other charges hereunder shall be
adjusted as of that date; PROVIDED, HOWEVER, that Tenant's right to terminate
this Lease pursuant to clause (i) or clause (ii) shall be nullified if:
(I) in the case of clause (i), the Taking was of not more than
20% of the parking spaces within the Critical Parking Zone and Landlord
elects to provide a substitute parking area in Annexation Area A; or in the
case of clause (ii), the taking was of not more than 25% of the parking
spaces required to meet the Car Parking Ratio and Landlord elects to
provide a substitute parking area or areas within or contiguous to the
Critical Facilities Area of the Entertainment Center such that with the
substitute parking area(s) the number of parking spaces within the
Entertainment Center shall be sufficient to meet the Car Parking Ratio; and
(II) on or before the 30th day after the giving of Tenant's
notice of termination, Landlord shall give Tenant notice of Landlord's
intention to forthwith provide a substitute parking area or areas as set
forth in subparagraph (I) above; and
(III) such substitute parking area(s) shall be reasonably
acceptable to Tenant and shall be of comparable quality and equal in size
to the area(s) taken; and
-65-
<PAGE>
(IV) any such substitute parking area(s) located with an
Annexation Area shall be incorporated into the Entertainment Center as
herein provided; and
(V) within 6 months after so notifying Tenant, Landlord shall
actually provide such substitute parking area(s) and enter into a written
agreement amending this Lease to include said substitute parking area(s) as
part of the parking area with respect to which Tenant is granted the
parking rights provided for in Article 24 captioned "Common Facilities."
(C) [Intentionally Deleted.]
(D) If by reason of a Taking Tenant shall be temporarily deprived in
whole or in part of the use of Tenant's Building or any part thereof, this Lease
shall remain in full force and effect, the entire award made as compensation
therefor shall belong to Tenant, and there shall be no abatement of the Annual
Fixed Rent payable hereunder.
(E) Landlord shall not initiate or take any action seeking a public or
private taking of Tenant's Building or of any other part of the Entertainment
Center once developed.
22. OTHER TENANCIES.
- --------------------
(A) As provided in Article 5, Landlord covenants that, in addition to
the improvements which are to be constructed by Landlord as provided in Exhibit
-------
C, Landlord will erect or cause to be erected by the Completion Date, subject to
- -
delays due to Force
-66-
<PAGE>
Majeure and Tenant Delays, within the Phase I Development in the Permitted
Building Areas shown therefor on Exhibit B-4 , buildings suitable for occupancy
-----------
by entertainment, food and beverage and/or retail shops containing at least the
Minimum Floor Area Exclusive of Tenant's Building.
(B) Tenant shall be under no duty or obligation to open Tenant's
Building for business unless and until (i) Landlord shall have completed
construction of the buildings which Landlord is obligated to erect or cause to
be erected within the Phase I Development as provided in paragraph (A) of this
Article, and (ii) tenants occupying at least 50% of the Minimum Floor Area
Exclusive of Tenant's Building have opened or are about to open their stores
(within not more than 90 days after the opening of Tenant's Building) for
business with the public for Retail Uses.
(C) Landlord shall not make the Entertainment Center subject to any
reciprocal easement agreement, operating agreement or similar agreement ("REA")
---
unless and until Landlord has first submitted the REA to Tenant and Tenant has
approved the same (which approval shall not be unreasonably withheld by Tenant).
Upon approval of the REA by Tenant:
(1) Landlord shall furnish to Tenant true, complete and exact
copies of all documents comprising the REA as executed and recorded.
(2) The REA shall not be amended to materially derogate the
rights granted to Landlord thereunder without
-67-
<PAGE>
Tenant's prior consent, which shall not be unreasonably withheld.
(3) Landlord hereby agrees to enforce the cross-easement rights,
operating covenants and other rights contained in the REA on Tenant's
behalf, and if Landlord fails to enforce said rights on Tenant's behalf
within 30 days after notice thereof from Tenant, Landlord agrees that
Tenant shall have the right to enforce said rights under the REA directly
and in the name of and on behalf of Landlord if required (all at Landlord's
expense), Landlord hereby conferring such enforcement rights unto Tenant.
(6) Upon at least 30 days' prior written notice from Tenant,
Landlord shall secure an agreement from the other party or parties to the
REA pursuant to which such other parties confirm for the benefit of Tenant
that the REA is in full force and effect without default thereunder.
Tenant agrees to comply with the terms and conditions of the REA if
and to the extent Tenant shall approve the REA in writing.
23. PROJECT ENTITY.
- -------------------
(A) Landlord covenants and represents as follows:
(i) All buildings in the Entertainment Center shall, to the
extent constructed, be constructed substantially within the Permitted
Building Areas.
-68-
<PAGE>
(ii) Landlord shall construct and maintain parking spaces in the
Entertainment Center in accordance with the requirements of the Car Parking
Ratio, PROVIDED, HOWEVER, that at least the Minimum Number of Parking
Spaces shall be located either within the Critical Parking Zone or within
Annexation Area A (if Landlord has designated a portion of Annexation Area
A as Tenant's Exclusive Parking Area as hereinafter provided and has
incorporated the same into the Entertainment Center). Landlord may, at its
election, designate at least the Minimum Number of Parking Spaces as
"TENANT'S EXCLUSIVE PARKING AREA," which number of parking spaces so
--------------------------------
designated shall be located either within the Critical Parking Zone or
within Annexation Area A as aforesaid; and in the event Landlord makes such
election, Tenant's Exclusive Parking Area shall be reserved for the
exclusive use of Tenant, its customers, employees and invitees and the
customers, employees and invitees of any concessionaire, licensee or
subtenant of Tenant.
(iii) Landlord shall construct and maintain the Main Access Ways
in substantially the locations therefor shown on Exhibits B-1, B-2 and B-3.
------------ --- ---
(iv) The two southernmost buildings in the Phase I Development,
adjacent to the Critical Parking Zone, as shown on Exhibit B-4, shall not
-----------
exceed 50 feet in height.
-69-
<PAGE>
(v) Each of the two buildings immediately adjacent to and in
front of Tenant's Building, as shown on Exhibit B-4, shall be structurally
-----------
independent.
(B) Subject to the foregoing provisions of paragraph (A) of this
Article and to all other provisions of this Lease, Landlord shall retain sole
and exclusive control of the Entertainment Center and the Common Facilities
(reasonably exercised consistent with good shopping center practice) and shall
have the right to construct such buildings and improvements within the
Entertainment Center as are permitted under applicable Laws and pursuant to
governmental approvals. Subject to the foregoing limitations, Landlord's
control of the Entertainment Center and the Common Facilities shall include,
without limitation, the right to:
(i) restrain the use of the Common Facilities by unauthorized
persons;
(ii) utilize from time to time any portion of the Common
Facilities for promotional, entertainment and related matters, provided
that no promotional, entertainment or other activity or event shall be
conducted in the Common Facilities within fifty (50) feet of the entrance
of Tenant's Building;
(iii) place permanent or temporary kiosks, displays, carts and
stands and outdoor seating and entertainment areas in the Common
Facilities, but not within fifty (50) feet of the entrance to Tenant's
Building other than outdoor seating for any restaurant located in either
building contiguous to the Premises (any such outdoor seating
-70-
<PAGE>
to be located substantially within the areas designated therefor on Exhibit
-------
B-4), and to lease same to tenants;
---
(iv) temporarily close any portion of the Common Facilities (but
not all of the Common Facilities at any one time) to the minimum extent and
for the minimum time reasonably necessary for repairs, improvements or
alterations, to discourage non-customer use, to prevent dedication or an
easement by prescription;
(v) subdivide all or portions of the Entertainment Center
(including the Common Facilities other than the portions of the Common
Facilities which Landlord is required to maintain as such as expressly
provided in this Lease), sell or lease the lots or parcels so created and,
subject to the limitations contained in paragraph (C) of Article 22,
encumber the Entertainment Center with reciprocal easements and operating
agreements with such landlords or tenants; PROVIDED, HOWEVER, that prior to
selling all or any part of the Entertainment Center, Landlord shall subject
the Entertainment Center to a recorded REA which sets forth such rights of
Tenant under this Lease and such provisions relating to the Common
Facilities contained in this Lease as shall be reasonably designated by
Tenant and which is otherwise in form and substance reasonably acceptable
to Tenant;
(vi) determine the nature, size and extent of the Common
Facilities and whether portions of the same shall be surface, underground
or multiple-deck (subject to the
-71-
<PAGE>
restrictions on structured parking contained in Exhibit E to this Lease);
---------
and
(vii) reasonably change the shape and size of the Common
Facilities and other portions of the Entertainment Center, and add,
eliminate or change the location of buildings and improvements within the
Entertainment Center, including, without limitation, buildings, lighting,
parking areas, structured parking, roadways and curb cuts, sidewalks and
landscaped areas.
(C) Except as provided in paragraph (A) of Article 22 and in Article 5
and in Exhibit C, and as otherwise expressly provided in this Lease
---------
(collectively, "LANDLORD'S INITIAL CONSTRUCTION OBLIGATIONS"), Landlord makes no
-------------------------------------------
representations or warranties that Landlord will ever construct any buildings,
improvements or Common Facilities within the Entertainment Center which are not
part of Landlord's Initial Construction Obligations.
24. COMMON FACILITIES.
- ----------------------
(A) Landlord agrees, at Landlord's sole cost and expense, upon construction
of each Phase of the Entertainment Center as shown on the Site Plans, to
provide, grade and surface the areas designated within such Phase on the
applicable Site Plan as parking areas, curb cuts, sidewalks, access facilities,
aisles, malls, streets and driveways, and also to provide adequate water
drainage and lighting systems therefor. Said parking areas shall be striped and
adequate directional markers shall be furnished. All parking
-72-
<PAGE>
areas shall be at ground level and no elevated parking structures shall be
permitted within the Entertainment Center; PROVIDED, HOWEVER, Landlord may
construct elevated parking structure(s) provided such structured parking
conforms to the guidelines set forth on Exhibit E hereto.
---------
(B) Landlord agrees that Tenant, its customers, employees and
invitees, and the customers, employees and invitees of any subtenant,
concessionaire or licensee of Tenant, shall have throughout the term hereof, in
common with Landlord and other tenants and occupants of space situated within
the Entertainment Center and their customers, employees and invitees, the use of
the areas reserved for parking as designated on the Site Plans (or any
enlargement of said parking areas) and the use of the sidewalks, aisles, malls,
streets, driveways and other Common Facilities located within the Entertainment
Center, which are from time to time constructed, without being required to pay
any charge or fee whatsoever for such use except as set forth in the Article
captioned "Common Area Charge." Notwithstanding the preceding sentence, if
Landlord shall designate Tenant's Exclusive Parking Area as provided in
paragraph (A) of Article 23, the use of the same shall be exclusive as provided
in said paragraph (A). If Landlord (or a parking operator employed by Landlord)
shall institute parking charges for the use of the parking facilities within the
Entertainment Center, (i) Landlord shall employ a validation system (reasonably
satisfactory to Tenant) whereby Tenant's customers shall be entitled to at least
4 hours of free
-73-
<PAGE>
parking (parking charges, if any, beyond such number of hours to be at the
lowest visitor parking charge to the public, if any, for parking in the
Entertainment Center), and (ii) Tenant shall employ a system reasonably designed
to limit the availability of such parking validation to its customers purchasing
theatre tickets; PROVIDED, HOWEVER, beginning with the 4th Lease Year, Landlord
(or a parking operator employed by Landlord) may charge $1.00 (One Dollar) per
car for each such 4 hours of parking after 6:00 p.m. on weekdays, at all times
on weekends and holidays and on December 26 and December 31 and the foregoing
$1.00 charge may be increased by 25c every five (5) Lease Years beginning with
the 9th Lease Year ("AFTER-HOURS PARKING CHARGE"), but if Landlord does so then
--------------------------
at Tenant's election Landlord shall employ a validation system such that parking
shall remain free to Tenant's customers, and Tenant shall reimburse Landlord
monthly, in arrears, for the After-Hours Parking Charge validations for Tenant's
customers. In such event, Landlord agrees that it shall at all times employ a
reasonably sufficient number of parking lot personnel to avoid any undue delay
in entering or exiting the parking facilities. Notwithstanding any parking
charges otherwise permitted hereunder, Landlord agrees that employees of Tenant
shall be entitled to park free of charge in accordance with a reasonable, non-
discriminatory plan for employee parking to be adopted by Landlord. Tenant
agrees that Landlord (or a parking operator employed by Landlord) may implement
optional valet parking for the customers of the Entertainment Center, for which
Landlord may impose a reasonable charge, PROVIDED, HOWEVER, all cars for which
valet parking is utilized shall be parked outside of the Critical Parking Zone
(or outside of Tenant's
-74-
<PAGE>
Exclusive Parking Area if Landlord has designated the same as herein provided).
(C) Landlord shall provide an area of adequate size within 100 feet
of the rear wall of Tenant's Building as reasonably approved by Tenant for the
installation of Tenant's trash compactor (which area shall be finished by
Landlord with appropriate electrical service, a faucet and floor drain), and
Tenant shall cause its trash to be removed therefrom periodically so as not to
cause an unreasonable accumulation of its trash.
(D) Landlord agrees, at its expense except as set forth in Article 28
captioned "Common Area Charge," (i) to provide and maintain, throughout the term
of this Lease, reasonably adequate lighting and security for the areas reserved
for parking and for the other Common Facilities, all such lighting to be kept on
from dusk until at least one half hour after the end of the last scheduled
evening performance in Tenant's Building; (ii) to keep said parking areas and
the drainage and lighting systems therefor and said sidewalks, aisles, curb
cuts, malls, streets, driveways and other Common Facilities in good order and
repair and in a clean and sanitary condition; (iii) to keep said parking areas,
sidewalks, aisles, malls, streets and driveways properly drained and reasonably
free from snow, ice and debris and to keep the parking area properly striped;
and (iv) to provide such additional security as Tenant shall reasonably request
within the parking areas and other Common Facilities within 300 feet from the
main entrance to the Leased Premises. To the extent that Tenant requires any
such additional security described in clause (iv) of the preceding sentence, or
requires that the Common Facilities remain illuminated
-75-
<PAGE>
later than 1:00 a.m., Tenant shall reimburse Landlord (directly, and not as part
of Common Facilities Expense) for the actual and reasonable cost incurred by
Landlord for such additional security plus any such late hour illumination,
together with the actual and reasonable cost of any security Landlord or Tenant
deems reasonably necessary past 1:00 a.m. by reason of Tenant's Building being
open past 1:00 a.m. and which Landlord does not or would not otherwise provide
if Tenant were not open past 1:00 a.m.; PROVIDED, HOWEVER, if any other tenants
within the Project also require such late hour illumination and/or additional
security, then Tenant and such other tenants shall share the cost of such late
hour illumination and/or additional security in proportion to their respective
late hour usage of the Common Facilities or usage of such additional security,
as reasonably determined by Landlord. If with respect to a specific film,
Landlord shall give notice to Tenant that Landlord reasonably believes Tenant
needs to provide security in addition to the foregoing security required to be
furnished by Landlord, Tenant shall comply with Landlord's reasonable requests
for such additional security, at Tenant's expense.
(E) Parking areas, sidewalks, aisles, curb cuts, malls, streets,
driveways and other Common Facilities within the Critical Facilities Area, to
the extent constructed, shall be maintained as such during the term of this
Lease and shall not be fenced or otherwise obstructed (except to the limited
extent necessary to make repairs thereto) and shall be kept open at all times
for the unimpeded use thereof as intended herein. Landlord agrees to use
-76-
<PAGE>
its best efforts not to permit the Common Facilities to be used for parking or
any other purpose by any occupant, visitor or invitee of any property contiguous
or adjacent to the Entertainment Center and, upon request by Tenant, Landlord
shall take such reasonable steps as are necessary to prevent such use of the
Common Facilities; PROVIDED, HOWEVER, the parking areas on the Critical
Facilities Area may be used by patrons of the Santa Anita Race Track in
accordance with a program adopted and implemented by Landlord to control patrons
from parking in areas on the Entertainment Center which are likely to be used by
customers of Tenant's Building to the end that at all times Tenant is afforded
the parking to be provided to Tenant for its customers as provided in this Lease
without their being denied the use of any material amount of parking by the
patrons of the Race Track. Landlord agrees to provide Tenant advance notice of
Landlord's proposed program with respect to parking by Race Track patrons, and
to confer with Tenant concerning the measures to be taken. Notwithstanding the
foregoing, Tenant acknowledges that on certain designated major horse racing
event days (which Landlord agrees shall each be one-day events, and which shall
not exceed 20 days per calendar year in the aggregate), it may be difficult or
impossible for Landlord to prevent the use of Entertainment Center parking areas
by Racetrack visitors and that Landlord shall have no liability therefor and
Tenant shall not be entitled to any rent abatement or other remedies based upon
such use. Such major racing events may include: Opening day for the racetrack
(presently
-77-
<PAGE>
December 26th of each year), the Strubb Stakes (typically in February), the
Santa Anita Handicap (typically in March), the Santa Anita Derby (typically in
April) and the San Juan Capistrano Derby (typically within the last thirty (30)
days prior to closing of the racetrack) and The Breeders Cup race which may
occur every four (4) years or so (typically in October).
25. CONSTRUCTION OF TENANT'S BUILDING.
- --------------------------------------
Landlord and Tenant agree to erect, make and complete Tenant's
Building and the other improvements leased to Tenant hereunder in accordance
with the provisions set forth in Exhibit C.
---------
26. OPENING OF TENANT'S BUILDING.
- ---------------------------------
(A) Tenant agrees that it will, subject to delays resulting from Force
Majeure and subject to the provisions of paragraph (B) of Article 22 captioned
"Other Tenancies", proceed to open Tenant's Building to the public for business
within the Number of Tenant Working Days after the date Tenant shall be required
to commence Tenant's Work as provided in Exhibit C; PROVIDED, HOWEVER, that
---------
Tenant shall not be required to open Tenant's Building for business with the
public until (i) the Common Facilities within the Phase I Development have been
substantially completed (as defined in Article 5) within the areas shown on
Exhibit B-4 and the same are ready for use by the public; (ii) Landlord shall
- -----------
have "substantially completed" the construction work required of Landlord under
the provisions of paragraph (A) of Article 22 captioned
-78-
<PAGE>
"Other Tenancies"; (iii) there shall be full compliance with the covenants and
agreements set forth in Article 31 captioned "Landlord's Operating Covenants";
and (iv) Landlord has complied with the provisions of Exhibit C.
---------
(B) If the buildings and improvements to be constructed by Landlord
hereunder are not fully completed when Tenant opens Tenant's Building for
business, Landlord covenants and agrees to complete the same as soon thereafter
as reasonably possible.
27. OPTIONS TO EXTEND.
- ----------------------
(A) Provided Tenant is not in default under this Lease beyond the
expiration of the applicable grace period provided for the curing of such
default, Tenant shall have the right to extend the term of this Lease for the
Option Periods from the date upon which the term would otherwise expire upon the
same terms and conditions as those herein specified with Annual Fixed Rent to be
adjusted as provided in the Rent and Expense Rider. If Tenant elects to
exercise its option for any Option Period, it shall, subject to the provisions
of paragraph (B) of this Article, do so by giving Landlord notice of such
election at least 12 months before the beginning of the Option Period for which
the term hereof is to be extended by the exercise of such option. If Tenant
gives such notice, the term of this Lease shall be automatically extended for
the Option Period covered by the option so exercised without execution of an
extension or renewal lease.
-79-
<PAGE>
(B) It is the intention of Landlord and Tenant to avoid forfeiture of
Tenant's right to extend the term of this Lease under any of the extension
options set forth in paragraph (A) of this Article through failure to give
notice of exercise thereof within the time prescribed. Accordingly, if Tenant
shall fail to give notice of exercise of any such option within the time
prescribed in paragraph (A) of this Article, then the time to give such notice
shall be deemed extended for an additional period commencing on the last day on
which such notice by Tenant may be timely given pursuant to paragraph (A) above
and ending upon the earlier of (i) 30 days after the date Landlord gives Tenant
notice of Tenant's failure to exercise such option within the time prescribed or
(ii) the expiration of the then current term of this Lease. If Tenant exercises
any such option after the date prescribed in paragraph (A) above, but within the
extended time permitted above, the extended term to which such option relates
shall commence, or shall be deemed to have commenced, at the time it would have
commenced if such notice had been given within the time prescribed in paragraph
(A) above; otherwise, any period during which Tenant remains in possession after
the expiration of the term hereby created, or as extended by the exercise of a
previous option or options, shall be subject to the provisions of the Article
captioned "Continued Possession of Tenant."
-80-
<PAGE>
28. COMMON AREA CHARGE.
- -----------------------
(A) Effective as of the Commencement Date, for the purpose of
reimbursing Landlord for part of the cost incurred by Landlord in operating and
maintaining the Common Facilities, Tenant shall pay Landlord the common area
charge, if any, computed as set forth in the Rent and Expense Rider.
(B) Notwithstanding anything to the contrary contained in this Lease,
if Tenant's business in Tenant's Building is materially interfered with on
account of any changes, alterations, removal or additions in or to the Common
Facilities, Tenant's Building (other than those made by Tenant), or any other
building or improvements in the Entertainment Center, including the construction
of additional buildings or expansion of existing buildings, then the Annual
Fixed Rent and other charges payable hereunder shall be equitably reduced during
the period thereof to the extent of the damage sustained to Tenant's business,
unless Tenant shall be unable to operate its business, in which event the Annual
Fixed Rent and Annual Percentage Rent and other charges hereunder shall fully
abate; PROVIDED, HOWEVER, if the parties cannot agree within 30 days after any
such interference on the amount that Annual Fixed Rent and other charges are to
be reduced, then either party may within 20 days thereafter submit the matter to
arbitration in accordance with Paragraph (C) of Article 40.
-81-
<PAGE>
29. OTHER THEATRES AND RESTRICTIONS.
- ------------------------------------
(A) If at any time during the term hereof a movie theatre, other than
the one operated in Tenant's Building, is open for business within the
Entertainment Center or on premises which are (i) owned or controlled (directly
or indirectly) by Landlord or any affiliate thereof, and (ii) located within 500
feet from any boundary line of the Entertainment Center, then the Annual Fixed
Rent hereunder shall be abated during the continuance of the operation of such
movie theatre by an amount equal to the product obtained by multiplying the
number of seats in such other theatre by the quotient obtained by dividing the
amount of the Annual Fixed Rent then payable under this Lease by the number of
seats then in Tenant's Building; PROVIDED, HOWEVER, the provisions of this
paragraph (A) shall not apply to (i) any theatre(s) on the Entertainment Center
in which all screens therein are at least 50 feet in height (e.g., an "IMAX"
type theatre), or (ii) any so-called "simulator theatres" in which the film
presentation is 31 minutes or less and in which no auditorium therein exceeds
100 seats, or (iii) any film presentations within the Entertainment Center of
educational, historical or informational films not currently in broad-based
distribution in the United States, in conjunction with museum or archival
activities, including art galleries, or (iv) the Santa Anita Fashion Park Mall
("MALL") so long as Landlord is unable to effectively prevent a movie theatre
----
from being operated thereon, or (v) the existing theatre at the Mall (but any
expansion thereof shall be subject to the foregoing
-82-
<PAGE>
provisions of this paragraph (A) [subject to clause (iv) hereof]); PROVIDED,
HOWEVER, notwithstanding the foregoing provisions of clause (iv) or any other
provision of this paragraph (A) to the contrary, in the event that Landlord
shall hereafter grant to any other tenant of the Entertainment Center the
benefit of any provisions of the type generally known as "exclusive use" or
"restrictive use" provisions which are more favorable in coverage and/or scope
concerning the Mall than the foregoing provisions of this paragraph (A), then
the provisions of this paragraph (A) shall be deemed amended so as to provide
Tenant the same more favorable coverage and/or scope concerning the Mall.
(B) Landlord will take all reasonable actions designed to prohibit the
use of any other premises or equipment controlled by Landlord and located within
the Entertainment Center in any manner that would result in any noise or
vibration interfering with the acoustics required by Tenant in its use of
Tenant's Building or would result in any offensive odors penetrating Tenant's
Building; PROVIDED, HOWEVER, Tenant acknowledges the periodic existence of odors
from stables and agrees Landlord shall have no liability therefor. Tenant will
not use, and will take all reasonable actions designed to prohibit or prevent
the use of, any equipment owned or controlled by Tenant and located within
Tenant's Building that would result in any noise or vibration interfering with
the operation of any business in buildings adjacent to Tenant's Building or
would result in any offensive odors penetrating any buildings adjacent to
Tenant's Building; PROVIDED, HOWEVER,
-83-
<PAGE>
Landlord acknowledges the existence of normal popcorn odors from Tenant's
Building and agrees Tenant shall have no liability therefor.
(C) Landlord will not sell or permit to be sold for off-premises
consumption candy and/or fresh cooked popcorn in or from any premises located
within 150 feet of the main customer entrance of Tenant's Building; PROVIDED,
HOWEVER, the foregoing shall not apply to (i) gum and mints sold in restaurants,
(ii) packaged candy sold in a video store, or (iii) fresh cooked popcorn and
candy sold within the lobby of any theatre adjacent to Tenant's Building in
which all screens therein are at least 50 feet in height (e.g., an "IMAX" type
theatre), for consumption solely by customers of such operator(s).
(D) Without limiting the foregoing, in no event shall Landlord lease
or permit the occupancy of any premises located in the Entertainment Center for
any of the following uses: (i) funeral home; (ii) bookstore or other
establishment engaged primarily in the business of selling, exhibiting or
delivering pornographic or obscene materials; or (iii) so-called "head shop."
30. MERCHANTS ASSOCIATION.
- --------------------------
During each Lease Year, Tenant shall contribute to the Merchant's
Association an amount per annum equal to the lesser of (i) the product obtained
by multiplying .15c by Tenant's Floor Area, or (ii) the least amount per square
foot paid by any other tenant of the Project.
-84-
<PAGE>
31. LANDLORD'S OPERATING COVENANTS.
-----------------------------------
Landlord covenants and agrees that (i) it will during the term of this
Lease, except when prevented from doing so by Force Majeure, continuously
operate the Entertainment Center primarily as a first class mixed use
retail/entertainment facility, and (ii) except with Tenant's prior consent,
which consent Tenant shall not unreasonably withhold or delay, no portion of the
Entertainment Center within the Critical Facilities Area of the Entertainment
Center shall be used for any purpose other than for the operation of
restaurants, bars and other entertainment, gaming or sports-oriented facilities,
and for establishments selling goods, wares, merchandise, food, beverages and
services to the public at retail and for such incidental office and storage
areas as may reasonably be needed in connection with the foregoing
(collectively, "RETAIL USES"); PROVIDED, HOWEVER, the Phase I Development may
-----------
contain up to 25,000 square feet of office space, but this shall not be counted
in computing the 50,000 square feet of Minimum Floor Area Exclusive of Tenant's
Building which Landlord is required to construct in Phase I (all such Floor Area
to be devoted to Retail Uses). Tenant acknowledges that outside of the Critical
Facilities Area of the Entertainment Center, hotels, offices and other uses as
may be permitted by the City of Arcadia may be constructed and operated in the
Entertainment Center, PROVIDED Landlord complies with the provisions of Article
23 of this Lease. The covenants and agreements of Landlord set forth in this
Article are sometimes collectively herein referred to as "LANDLORD'S OPERATING
--------------------
COVENANT".
- --------
-85-
<PAGE>
32. TENANT'S COVENANT TO OPERATE.
- ---------------------------------
(A) So long as (i) Landlord shall not be in default in discharging
Landlord's Operating Covenant, and (ii) tenants or operators of premises within
the Phase I Development occupying at least 60% of the Minimum Floor Area
Exclusive of Tenant's Building shall be conducting business with the public,
Tenant will, except when prevented from so doing by Force Majeure or by other
causes beyond its reasonable control (including the unavailability of film) and
subject to the provisions of Article 9 captioned "Subletting and Assigning,"
during Tenant's Operating Period, operate or cause to be operated a first-class
movie theatre in Tenant's Building, in at least a majority of the screens
therein (such covenant being herein called "TENANT'S OPERATING COVENANT").
---------------------------
During the first 5 years of Tenant's Operating Period when Tenant's Operating
Covenant shall be in effect, Tenant shall, if economically practical, use
reasonable efforts to show primarily first-run films and re-releases of films in
general re-release.
(B) Except as specifically provided in Paragraph (A) of this Article,
nothing contained in this Lease or in rules or regulations (if any) promulgated
by Landlord shall be deemed in any way to (i) regulate the manner of operation
by Tenant of its business in Tenant's Building and/or the hours and/or days of
such operation, or (ii) require Tenant to operate all its theatre auditoriums,
or (iii) give Landlord any right, express or implied, of censorship over any
attractions exhibited in Tenant's Building or over the content of Tenant's
advertising; PROVIDED, HOWEVER,
-86-
<PAGE>
notwithstanding the foregoing, in no event shall Tenant utilize Tenant's
Building for the operation of a so-called "adult" movie theater, which shall
mean a theatre primarily showing films of a pornographic nature. Subject to
Force Majeure, and to the provisions of Articles 15 and 21 entitled "Damage
Clause" and "Condemnation", respectively, if Tenant shall discontinue operations
in Tenant's Building for longer than 6 months (exclusive of any period during
which Tenant's Building is being repaired or restored following casualty damage
thereto or condemnation of a portion thereof), Landlord shall have the right to
terminate this Lease by notifying Tenant of such election at any time prior to
the resumption of operations in Tenant's Building, and if Landlord so elects to
terminate this Lease, this Lease shall terminate, and the rent and other charges
shall be adjusted, as of the date which is earlier of (i) the date 60 days after
the Landlord's notice of termination, or (ii) the date Tenant surrenders
exclusive possession of Tenant's Building to Landlord.
(C) Notwithstanding anything to the contrary contained in this Lease,
if at any time during the term hereof 50% or more of the Minimum Floor Area
Exclusive of Tenant's Building is not being operated for business with the
public for a period of at least 6 months (exclusive of any such Floor Area which
is being restored with due diligence following casualty damage thereto):
(1) The Annual Fixed Rent, Annual Percentage Rent and all other
rent and charges payable by Tenant under this Lease shall abate so long as
such condition shall continue;
-87-
<PAGE>
PROVIDED, HOWEVER, if Tenant is then obligated to operate Tenant's Building
pursuant to paragraph (A) of this Article or Tenant otherwise elects to
operate Tenant's Building, then for each calendar month or fraction thereof
during the period of such abatement and operation Tenant shall pay
Landlord, in lieu of any and all other rent and charges, a sum determined
by multiplying Tenant's Gross Receipts during such period by the Percentage
Rate, and provided, further, in no event shall the Gross Receipts during
such period be included in Gross Receipts for the purpose of computing
Annual Percentage Rent pursuant to the Rent and Expense Rider; and
(2) Tenant may elect, without the consent of Landlord, to (a)
sublet the Leased Premises (or portions thereof) or assign this Lease to
any party or parties of Tenant's choice, and/or (b) use Tenant's Building
for any lawful purpose and remodel Tenant's Building, interior and/or
exterior (structural or otherwise).
(D) Notwithstanding anything to the contrary contained in this Lease,
if at any time during the term hereof 50% or more of the Minimum Floor Area
Exclusive of Tenant's Building is not being operated for business with the
public for a period of at least 12 months (exclusive of any such Floor Area
which is being restored with due diligence following casualty damage thereto),
then Tenant may terminate this Lease at any time while such condition exists by
giving notice thereof to Landlord, whereupon this Lease shall
-88-
<PAGE>
terminate and Tenant shall be relieved and released from all liability
hereunder.
(E) Except as specifically provided in paragraph (A) of this Article,
Tenant shall have no obligation whatsoever, either express or implied, to at any
time operate or otherwise use Tenant's Building.
33. ESTOPPEL CERTIFICATE; ATTORNMENT AND PRIORITY OF LEASE;
- ------------------------------------------------------------
SUBORDINATION.
-------------
(A) Each party agrees, within 20 days after request by the other
party, to execute, acknowledge and deliver to and in favor of the proposed
holder of any Mortgage or purchaser or ground lessor of all or any portion of
the Entertainment Center which includes the Leased Premises, any encumbrance
holder of Tenant or any proposed sublessee of Tenant or assignee of Tenant's
interest in this Lease, an estoppel certificate stating: (i) whether this Lease
is in full force and effect; (ii) whether this Lease has been modified or
amended and, if so, identifying and describing any such modification or
amendment; (iii) the date to which rent and any other charges have been paid;
and (iv) whether such party knows of any default on the part of the other party
or has any claim against the other party and, if so, specifying the nature of
such default or claim. If a party fails to give the estoppel certificate
requested of it within such 20-day period, such party shall pay to the other
party the sum of $100 for each day after the expiration of such 20-day period it
shall fail to deliver such certificate.
-89-
<PAGE>
(B) Tenant shall, in the event any proceedings are brought for the
foreclosure of, or in the event of the exercise of the power of sale under, or
conveyance by deed in lieu of foreclosure, any Mortgage prior in lien to this
Lease made by Landlord, attorn to the purchaser/successor to Landlord upon any
such foreclosure, sale or conveyance and recognize such purchaser as Landlord
under this Lease, provided such purchaser assumes in writing Landlord's
obligations under this Lease.
(C) Upon request of the holder of any Mortgage, Tenant will
subordinate its rights under this Lease to the lien thereof and to all advances
made or hereafter to be made upon the security thereof, and Tenant shall
execute, acknowledge and deliver an instrument effecting such subordination;
PROVIDED, HOWEVER, Landlord shall obtain and deliver to Tenant within 30 days
after demand by Tenant an agreement, in recordable form, from the holder of any
Mortgage to which this Lease is subordinate containing a covenant binding upon
the holder thereof to the effect that as long as Tenant shall not be in default
under this Lease, or, if Tenant is in default hereunder, as long as Tenant's
time to cure such default has not expired, this Lease shall not be terminated or
modified in any respect whatsoever, nor shall the rights of Tenant hereunder or
its occupancy of the Leased Premises be affected in any way by reason of such
Mortgage or any foreclosure action or other proceeding that may be instituted in
connection therewith, and that Tenant shall not be named as a defendant in any
such foreclosure action or other proceeding.
-90-
<PAGE>
(D) Without limiting the foregoing provisions of this Article, all
documents requested by either party in order to effectuate the provisions of
this Article shall be in form and substance reasonably satisfactory to the other
party to the extent not inconsistent with such provisions.
34. DEFAULT CLAUSE AND SELF-HELP.
- ---------------------------------
(A) If Tenant neglects or fails to (i) pay any Annual Fixed Rent,
Annual Percentage Rent or other charge hereunder within 10 days after notice of
such failure, or (ii) perform or observe any of the other covenants, terms,
provisions or conditions on its part to be performed or observed under this
Lease within 30 days after notice of such failure (or if more than 30 days shall
be reasonably required because of the nature of the default, if Tenant shall
fail to proceed diligently to cure such failure after such notice) (the events
described in clauses (i) and (ii) being called an "EVENT OF DEFAULT"), then
----------------
Landlord may either:
(1) Terminate Tenant's right to possession of the Premises
because of such breach, and upon termination, recover from Tenant as
damages (i) the worth at the time of award of any unpaid rent which had
been earned at the time of termination, plus (ii) the worth at the time of
award of the amount by which the unpaid rent which would have been due and
payable after termination until the time of award exceeds the amount of
such rent loss that Tenant proves could have been reasonably avoided, plus
(iii) the worth at the time of award
-91-
<PAGE>
of the amount by which the unpaid rent for the balance of the Term after
the time of award exceeds the amount of such rent loss that Tenant proves
could be reasonably avoided, plus (iv) any other amounts necessary to
compensate Landlord for all of the detriment proximately caused by Tenant's
failure to perform Tenant's obligations under this Lease, or which in the
ordinary course of things would be likely to result therefrom, including,
without limitation, any costs or expenses incurred by Landlord (A) in
retaking possession of the Leased Premises, (B) in maintaining, repairing,
preserving, restoring, replacing, cleaning, altering or rehabilitating the
Leased Premises or any portion thereof, including such acts for reletting
to a new tenant or tenants, (C) for leasing commissions, or (D) for any
other costs necessary or appropriate to relet the Leased Premises, plus (v)
at Landlord's election, such other amounts and remedies in addition to or
in lieu of the foregoing as may be permitted from time to time by the laws
of the State of California including, without limitation, the remedies
provided by California Civil Code Section 1951.2, as amended or as
superseded by any successor statute.
The "worth at the time of award" of the amounts referred to in
subsections 34(A)(1)(i) and (ii) above shall be computed by allowing
interest at the maximum rate permitted by law. The "worth at the time of
award" of the amount referred to in subsection 34(A)(1)(iii) shall be
computed by
-92-
<PAGE>
discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus 1%. No act by Landlord other than
giving written notice thereof to Tenant shall terminate this Lease. Any
act of maintenance or efforts to relet the Leased Premises or the
appointment of a receiver on Landlord's initiative to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's
right to possession; or
(2) Not terminate Tenant's right to possession because of such
breach, but continue this Lease in full force and effect; and in that event
(1) Landlord may enforce all rights and remedies under this Lease and under
the provisions of Section 1951.4 of the California Civil Code, as amended
or as superseded by any successor statute, including the right to recover
the rent and all other charges due hereunder as such rent and other charges
become due hereunder, and (2) Tenant may assign its interest in this Lease
with Landlord's prior written consent, which shall not be unreasonably
withheld, subject to the terms of Article 9 hereof; or
(3) With or without terminating this Lease, re-enter the Leased
Premises and remove all persons and property from the Leased Premises.
Such property may be removed and stored in a public warehouse or elsewhere
at the cost of and for the account of Tenant. No re-entry or taking
possession of the Leased Premises by Landlord pursuant to this paragraph
-93-
<PAGE>
shall be construed as an election to terminate this Lease unless a written
notice of such intention is given to Tenant.
Tenant agrees that any notice served in accordance with the provisions
of this paragraph 34(A) shall be in addition to, and not in lieu of, any notice
required under applicable law including, without limitation, the provisions of
California Code of Civil Procedure Section 1161 or any successor statute.
(B) Notwithstanding anything to the contrary contained in paragraph
(A) of this Article, with respect to any alleged default other than a default in
the payment of Annual Fixed Rent, if within 45 days after Landlord's notice of
such alleged default, Tenant (i) notifies Landlord that Tenant disputes such
alleged default, and (ii) submits the dispute to arbitration pursuant to
Paragraph (C) of Article 40 hereof, then Tenant shall not be deemed to be in
default under this Lease with respect to such alleged default, provided that if
the final award or decision in such arbitration is adverse to Tenant, in whole
or in part, then Tenant shall forthwith commence to correct the matters
complained of by Landlord, or that portion thereof as to which such award or
decision is adverse to Tenant, and complete the same within 30 days after the
rendering of such award or decision, or if more than 30 days are required to
complete such corrections with reasonable diligence, commence to correct the
same within such 30 days and prosecute the same to completion with reasonable
diligence. Nothing in this Paragraph (B) shall be construed as excusing Tenant
-94-
<PAGE>
from the performance of any of its obligations under this Lease which are not in
dispute.
(C) If either party (the "DEFAULTING PARTY") fails to perform any
----------------
agreement or obligation on its part to be performed under this Lease, the other
party (the "CURING PARTY") shall have the right (i) if no emergency exists, to
------------
perform the same after first giving 20 days' notice to the Defaulting Party
followed by a second 10 days' notice to the Defaulting Party, and (ii) in any
emergency situation to perform the same immediately without notice or delay.
For the purpose of rectifying a default of the Defaulting Party as aforesaid,
the Curing Party shall have the right to enter the premises of the Defaulting
Party. The Defaulting Party shall on demand reimburse the Curing Party for the
costs and expenses reasonably incurred by the Curing Party in rectifying
defaults as aforesaid, including reasonable attorneys' fees, together with
interest thereon at the Default Rate from the date of expenditure by the Curing
Party, which demand shall be accompanied by an invoice setting forth a
reasonably particularized breakdown of the Curing Party's costs and expenses;
PROVIDED, HOWEVER, if the Defaulting Party within 10 days after the date of such
demand shall notify the Curing Party that it in good faith disputes that it was
in default, the dispute shall be promptly submitted to arbitration pursuant to
Paragraph (C) of Article 40, in which case the Defaulting Party shall not be
required to reimburse the Curing Party until and unless the arbitration shall
determine that it was in default. Any act or thing done by the Curing Party
pursuant to
-95-
<PAGE>
this paragraph shall not constitute a waiver of any such default by the Curing
Party or a waiver of any covenant, term or condition herein contained or the
performance thereof. If Landlord fails to so reimburse Tenant within 30 days
after Tenant's demand, Tenant shall be entitled to an immediate credit against
the Annual Fixed Rent and other charges payable hereunder in an amount equal to
the costs and expenses incurred by Tenant in rectifying Landlord's defaults as
aforesaid, together with interest thereon at the Default Rate as aforesaid. In
addition, Tenant shall be entitled to an immediate credit against the Annual
Fixed Rent and other charges payable hereunder in an amount equal to any sums
owing by Landlord to Tenant under this Lease which shall not be paid when due,
together with interest thereon at the Default Rate.
35. ACCESS TO PREMISES.
- -----------------------
Tenant shall permit Landlord and its authorized representatives to
enter Tenant's Building at all reasonable times (and in the event of an
emergency, at the time of the emergency) for the purposes of (i) serving or
posting or keeping posted thereon notices required by Law or notices of non-
responsibility, (ii) conducting periodic inspections, and (iii) performing any
work thereon required to be performed by Landlord pursuant to this Lease;
PROVIDED, HOWEVER, nothing set forth in this Lease shall be construed as
authorizing Landlord to enter the projection booths in Tenant's Building without
the consent of Tenant, except in the case of an emergency.
-96-
<PAGE>
36. FORCE MAJEURE.
------------------
Subject to any express limitations contained in this Lease on delays
due to "Force Majeure" (as defined hereinbelow), if either party shall be
delayed or hindered in or prevented from the performance of any act required
under this Lease by reason of strikes, lockouts, labor troubles, inability to
procure materials, failure of power, restrictive Laws (except as otherwise
specifically provided herein), riots, insurrection, war or other reason not the
fault of the party delayed in performing the work or doing the acts required
under the terms of this Lease (collectively, "FORCE MAJEURE"), then performance
-------------
of such act shall be excused for the period of the delay, and the period for the
performance of any such act shall be extended for a period equivalent to the
period of such delay. The provisions of this Article shall not (i) operate to
excuse Tenant from prompt payment of Annual Fixed Rent or any other payment
required by Tenant under the terms of this Lease, except as may be otherwise
specifically provided herein to the contrary and except to the extent that such
delays affect the Commencement Date, or (ii) be applicable to delays resulting
from the inability of a party to obtain financing or to proceed with its
obligations under this Lease because of a lack of funds.
-97-
<PAGE>
37. REMEDIES CUMULATIVE; LEGAL EXPENSES; TIME OF THE ESSENCE.
- -------------------------------------------------------------
(A) The various rights and remedies given to or reserved to Landlord
and Tenant by this Lease or allowed by law shall be cumulative, irrespective of
whether so expressly stated.
(B) Time is of the essence of this Lease.
38. LEASE NOT TO BE RECORDED.
- -----------------------------
Upon request of Landlord or Tenant, the parties hereto shall promptly
execute and deliver a memorandum of this Lease for recording purposes in
recordable form. If Tenant elects to record such memorandum, Landlord shall
promptly cause the same to be recorded, at Landlord's expense. Neither party
shall record this Lease without the consent of the other party.
39. NOTICES.
- ------------
All notices, consents, requests, approvals and authorizations
(collectively, "NOTICES") required or permitted hereunder shall only be
-------
effective if in writing. All Notices by Landlord to Tenant shall be sent to
Tenant by registered or certified mail (return receipt requested), postage
prepaid, or by Federal Express, U.S. Post Office Express Mail, Airborne or
similar overnight courier which delivers only upon signed receipt of the
addressee, to 106 West 14th Street, Suite 1700, Kansas City, Missouri 64105,
marked for the attention of Lease Administrator, and/or to such other addresses
as Tenant may later designate by Notice to Landlord. All Notices by Tenant to
Landlord shall be deemed to
-98-
<PAGE>
have been duly given if sent by registered or certified mail (return receipt
requested), postage prepaid, or by Federal Express, U.S. Post Office Express
Mail, Airborne or similar overnight courier which delivers only upon signed
receipt of the addressee, to any one of the parties named herein as Landlord at
such party's address first above written, or to such other address as Landlord
may later designate by Notice to Tenant. All Notices shall be effective upon
being deposited in the United States mail or delivered to the overnight courier
in the manner prescribed above. However, the time period in which a response to
any such Notice must be given shall commence to run from the date of receipt by
the addressee thereof as shown on the return or courier receipt of the Notice.
Rejection or other refusal to accept or the inability to deliver because of
changed address of which no Notice was given shall be deemed to be receipt of
the Notice as of the date of such rejection, refusal or inability to deliver.
40. WAIVER OF PERFORMANCE AND DISPUTES.
- ---------------------------------------
(A) One or more waivers of any covenant, term or condition of this
Lease by either party shall not be construed as a waiver of a subsequent breach
of the same or any other covenant, term or condition, nor shall any delay or
omission by either party to seek a remedy for any breach of this Lease or to
exercise a right accruing to such party by reason of such breach be deemed a
waiver by such party of its remedies or rights with respect to such breach. The
consent or approval by either party to or of any act
-99-
<PAGE>
by the other party requiring such consent or approval shall not be deemed to
waive or render unnecessary consent to or approval of any similar act.
(B) If at any time a dispute shall arise as to any amount or sum of
money to be paid by one party to the other party under the provisions hereof,
the party against whom the obligation to pay the money is asserted shall have
the right to make payment "under protest" and such payment shall not be regarded
as a voluntary payment and there shall survive the right on the part of said
party to institute suit for the recovery of such sum, and if it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease, together with interest thereon at the Default Rate. If at any time
a dispute shall arise between the parties hereto as to any work to be performed
by either of them under the provisions hereof, the party against whom the
obligation to perform the work is asserted may perform such work and pay the
cost thereof "under protest" and the performance of such work shall in no event
be regarded as a voluntary performance and there shall survive the right on the
part of said party to institute suit for the recovery of the cost of such work,
and if it shall be adjudged that there was no legal obligation on the part of
said party to perform the same or any part thereof, said party shall be entitled
to recover the cost of such work or the cost of so much thereof as said party
was not
-100-
<PAGE>
legally required to perform under the provisions of this Lease, together with
interest thereon at the Default Rate.
(C) In the event of any dispute between Landlord and Tenant is to be
submitted to arbitration pursuant to Article 28(B), 34(B) and 34(C) of this
Lease (collectively, "ARBITRATION PROVISIONS"), then such dispute shall be
----------------------
resolved through binding arbitration pursuant to this Paragraph (C). If demand
for arbitration is timely made as provided in subparagraph (a) below, such
arbitration shall be conducted in accordance with the provisions of the
Commercial Arbitration Rules of the American Arbitration Association as are then
in effect, except as provided below. Any such arbitration shall be held and
conducted, within thirty (30) days after the selection of an arbitrator, in Los
Angeles County, California before one arbitrator who shall be selected by mutual
agreement of the parties; if agreement is not reached on the selection of an
arbitrator within ten (10) days after the demand for arbitration is made, then
such arbitrator shall be appointed by the presiding judge of the Superior Court
of Los Angeles County, and the parties hereto shall not contest the jurisdiction
or authority of such presiding judge to select such arbitrator. The provisions
of the Commercial Arbitration Rules of the American Arbitration Association
shall apply and govern such arbitration, subject, however, to the following:
(i) Any demand for arbitration shall be in writing and must be
made and served on the other party within a time set forth in the
Arbitration Provisions.
-101-
<PAGE>
(ii) The arbitrator selected or appointed must be an attorney or
a former or retired judge with at least ten (10) years experience in
commercial real property matters, or a nonattorney with like experience in
the subject matter of dispute.
(iii) All proceedings involving the parties shall be reported by
a certified shorthand court reporter and written transcripts of the
proceedings shall be prepared and made available to the parties.
(iv) The arbitrator shall prepare and deliver to the parties
factual findings in writing which shall include the reasons on which the
decision of the arbitrator is based. The arbitrator shall be bound by the
provisions of this Lease, and shall not add to, subtract from or otherwise
modify such provisions.
(v) Final decision by the arbitrator must be provided to the
parties within thirty (30) days from the date on which the matter is
submitted to the arbitrator.
(vi) The prevailing party (as defined below) shall be awarded
reasonable attorneys' fees, expert and nonexpert witness costs and expenses
(including without limitation the fees and costs of the court reporter
described in clause (iii) above), and other costs and expenses incurred in
connection with the arbitration, unless the arbitrator for good cause
determines otherwise.
-102-
<PAGE>
(vii) As used herein, the term "prevailing party" shall mean the
party, if any, that the arbitrator determines is "clearly the prevailing
party."
(viii) Costs and fees of the arbitrator shall be borne by the
nonprevailing party, unless the arbitrator for good cause determines
otherwise. If there is no prevailing party, the parties shall bear their
own fees and costs and split the fees and costs of the arbitrator and court
reporter.
(ix) The award or decision of the arbitrator, which may include
equitable relief, shall be final and judgment may be entered on it in
accordance with applicable law in any court having jurisdiction over the
matter. The provisions of this Article 40, Paragraph (C) are not intended
to alter the applicable provisions of law which provide the grounds on
which a court may vacate an arbitration award.
41. MODIFICATION OF LEASE.
- --------------------------
The terms, covenants and conditions hereof may not be changed orally,
but only by an instrument in writing signed by the party against whom
enforcement of the change, modification or discharge is sought, or by such
party's agent. The failure of either party hereto to insist in any one or more
cases upon the strict performance of any term, covenant or condition of this
Lease to be performed or observed by the other party hereto shall not constitute
a waiver or relinquishment for the future of any such term, covenant or
condition.
-103-
<PAGE>
42. CAPTIONS AND LEASE PREPARATION.
-----------------------------------
Captions throughout this instrument are for convenience and reference
only and the words contained therein shall in no way be deemed to explain,
modify, amplify or aid in the interpretation or construction of the provisions
of this Lease. In any interpretation, construction or determination of the
meaning of any provision of this Lease, no presumption whatsoever shall arise
from the fact that the Lease was prepared by or on behalf of any party hereto.
43. LEASE BINDING ON HEIRS, ETC.
- --------------------------------
Except as herein otherwise expressly provided, all covenants,
agreements, provisions and conditions of this Lease shall be binding upon and
inure to the benefit of the parties hereto and their heirs, devisees, executors,
administrators, successors in interest and assigns as well as grantees of
Landlord, and shall be deemed to run with the land. Without limiting the
generality of the foregoing, all rights of Tenant under this Lease may be
granted by Tenant to any sublessee of Tenant.
44. BROKERS.
- ------------
Landlord represents and warrants to Tenant that (i) it has not
incurred or caused to be incurred any liability for real estate brokerage
commissions or finder's fees in connection with the execution or consummation of
this Lease except to IJM Realty, Inc. ("BROKER") and (ii) Landlord shall pay all
------
commissions and
-104-
<PAGE>
fees of Broker. Tenant represents and warrants to Landlord that it has not
incurred or caused to be incurred any liability for real estate brokerage
commissions or finder's fees in connection with the execution or consummation of
this Lease for which Landlord may be liable. Each of the parties agrees to
indemnify and hold the other harmless from and against any and all claims,
liabilities or expense (including reasonable attorneys' fees) in connection with
any breach of the foregoing representations and warranties.
45. TENANT'S FINANCIAL INFORMATION.
- -----------------------------------
Upon request, Tenant shall furnish to Landlord and the holder of the
first Mortgage on the Entertainment Center, a copy of Tenant's balance sheet for
Tenant's most recently expired fiscal year for which a balance sheet has been
prepared provided such holder and Landlord agree to hold the same as
confidential to the extent the statement is not otherwise publicly filed with
the Securities and Exchange Commission.
46. WAIVER OF TRIAL BY JURY.
- ----------------------------
TENANT AND LANDLORD HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER IN ANY MATTERS ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE AND OCCUPANCY OF TENANT'S
BUILDING OR THE ENTERTAINMENT CENTER, AND ANY CLAIM OF INJURY OR DAMAGE.
-105-
<PAGE>
47. MORTGAGEE PROTECTION CLAUSE.
--------------------------------
Tenant agrees to give the holder of any Mortgage on the Leased
Premises (in the manner Notices are to be sent as set forth in Article 39), a
copy of any notice of default served by Tenant upon Landlord, provided that
prior to such notice Tenant has been expressly notified in writing (in the
manner Notices are required to be given under this Lease) of the address of such
holder. Tenant further agrees that if Landlord shall have failed to cure such
default within thirty (30) days, then if such holder is an "Institutional
Lender" and shall first agree with Tenant in writing to cure such default such
holder shall have an additional thirty (30) days within which to cure such
default, or if such default cannot be cured within that time, then such
additional time as may be necessary, provided such holder commences such cure
within said thirty (30) days and diligently proceeds to complete the cure of
such default, in which event this Lease shall not be terminated while such
holder is so diligently curing such default; PROVIDED, HOWEVER, the foregoing
shall not impair, limit or postpone the exercise of Tenant's rights under
Paragraph (C) of Article 34. The term "Institutional Lender" shall mean a bank,
savings institution, insurance company, REIT, pension trust or other
institutional lender that regularly engages in making loans on commercial real
estate.
-106-
<PAGE>
48. LIMITATION ON TENANT'S RECOURSE.
- ------------------------------------
From and after the full performance by Landlord of Landlord's Initial
Obligations, Tenant's sole recourse under this Lease for monetary damages
against Landlord is against the interest of Landlord in and to the Leased
Premises and the interest of Landlord in the remainder of the Entertainment
Center and the rents therefrom and all proceeds from the sale thereof. Tenant
shall have no right to satisfy any judgment which it may have against Landlord
from any other assets of Landlord or from any other assets of any partner,
venturer or shareholder of Landlord. The provisions of this Article are not
intended to limit the Tenant's right to seek injunctive relief or specific
performance, or Tenant's right to claim the proceeds of insurance (if any)
specifically maintained by Landlord for Tenant's benefit. The foregoing
limitations shall also apply to any successor to Landlord's interest in the
Leased Premises.
49. REAL ESTATE INVESTMENT TRUST.
- ---------------------------------
Tenant is advised that Landlord named herein is a real estate
investment trust. If Landlord in good faith determines that its status as a
real estate investment trust under the provisions of the Internal Revenue Code
of 1986, as heretofore or hereafter amended, will be jeopardized because of any
provision of this Lease, Landlord may request reasonable amendments to this
Lease and Tenant will not unreasonably withhold, delay or defer its consent
thereto, provided that such modifications do not (i) increase the
-107-
<PAGE>
obligations of Tenant or decrease Tenant's rights pursuant to this Lease, or
(ii) diminish Landlord's obligations under this Lease, or (iii) in any other
manner materially adversely affect Tenant or its interest in the Leased
Premises.
50. NO PARTNERSHIP.
- -------------------
Landlord does not in any way or for any purpose become a partner of
Tenant in the conduct of its business, or otherwise, or joint venturer or a
member of a joint enterprise with Tenant by reason of this Lease. The
provisions of this Lease relating to the Annual Percentage Rent payable
hereunder are included solely for the purpose of providing a method whereby rent
is to be measured and ascertained.
51. NO OPTION.
- --------------
The submission of this Lease for examination does not constitute a
reservation of or option for the Leased Premises and this Lease becomes
effective as a Lease only upon execution and delivery thereof by Landlord to
Tenant.
52. LEGAL EXPENSES.
- -------------------
If either Landlord or Tenant should bring suit against the other with
respect to this Lease, then all costs and expenses, including without
limitation, actual professional fees and costs such as appraisers', accountants'
and attorneys' fees and costs, incurred by the party which prevails in such
action, whether by
-108-
<PAGE>
final judgment or out of court settlement, shall be paid by the other party,
which obligation on the part of the other party shall be deemed to have accrued
on the date of the commencement of such action and shall be enforceable whether
or not the action is prosecuted to judgment. As used herein, attorneys' fees
and costs shall include, without limitation, attorneys' fees, costs and expenses
incurred in connection with any (i) postjudgment motions; (ii) contempt
proceedings; (iii) garnishment, levy, and debtor and third party examination;
(iv) discovery; and (v) bankruptcy litigation.
53. NONDISCLOSURE OF LEASE TERMS.
- ---------------------------------
Landlord and Tenant each acknowledge and agree that the terms of this
Lease are confidential and constitute proprietary information of Landlord and
Tenant. Disclosure of the terms could adversely affect the ability of Landlord
and Tenant to negotiate other leases and impair Landlord's relationship with
other tenants and Tenant's relationship with other landlords. Accordingly,
Tenant and Landlord each agree that it, and its partners, officers, directors,
employees, agents and attorneys, shall not intentionally and voluntarily
disclose the terms and conditions of this Lease to any newspaper or other
publication or any other landlord or prospective landlord of Tenant, any other
tenant or apparent prospective tenant of the Leased Premises or other portion of
the Entertainment Center, or real estate agent (except Broker), either directly
or indirectly, without the prior written consent of the
-109-
<PAGE>
other party; PROVIDED, HOWEVER, that Tenant may disclose the terms to
prospective subtenants or assignees under, or of, this Lease and Landlord may do
so to prospective purchasers of the Entertainment Center or to any Institutional
Lender holding a first Mortgage thereon and either party may disclose the same
as necessary in connection with any litigation involving the parties or as
otherwise required by Law.
54. NONDISCRIMINATION.
- ----------------------
Tenant acknowledges and agrees that there shall be no discrimination
against, or segregation of, any person, group of persons, or entity on the basis
of race, color, creed, religion, age, sex, marital status, national origin, or
ancestry in the leasing, subleasing, transferring, assignment, occupancy,
tenure, use, or enjoyment of the Leased Premises, or any portion thereof. The
failure of Tenant to comply with this Article shall not be deemed a default
under this Lease.
55. SALE OF LEASED PREMISES.
- ----------------------------
In the event Landlord shall sell, convey, transfer or exchange the
Leased Premises, the Entertainment Center or the Building, Tenant agrees to
recognize and attorn to the purchaser, or transferee, as the Landlord hereunder
provided the successor landlord assumes all of Landlord's obligations under this
Lease accruing from and after such transfer.
-110-
<PAGE>
56. CHOICE OF LAW.
- ------------------
This Lease shall be governed by and construed pursuant to the laws of
the State of California.
57. SEVERABILITY.
- -----------------
Any provision of this Lease which shall prove to be invalid, void or
illegal shall in no way affect, impair or invalidate any other provision hereof,
and such other provisions shall remain in full force and effect.
58. CONDITIONS PRECEDENT.
- -------------------------
The obligations of Landlord and Tenant hereunder are subject to the
full satisfaction of the following conditions precedent for the benefit of
Landlord and/or Tenant as the case may be. In the event that any of the
conditions set forth below have not been fully satisfied (or waived by the
benefited party in writing) within the times, if any, prescribed below but in no
event later than the Outside Approval Date, then either party may, at their
option, terminate the Lease by delivering written notice of such termination to
the other party in which event all rights and obligations of both Landlord and
Tenant under this Lease shall be null and void and of no further force and
effect.
(A) Application Approval. On or before the Outside Approval Date,
--------------------
Landlord shall have obtained approval by the City of Arcadia of Landlord's
application for Approvals for the Entertain-
-111-
<PAGE>
ment Center based on Landlord's conceptual plans and elevations and other
application materials.
(B) Receipt of Approvals. On or before the Outside Approval Date,
--------------------
Landlord shall have obtained all necessary governmental approvals, permits,
entitlements and other authorizations for the planning, development and
construction of the Entertainment Center as a retail/entertainment development
as contemplated by Landlord and this Lease containing no less than 800,000
rentable square feet of leasable space plus all required parking and landscaping
areas including, without limitation, final certification of an environmental
impact report, zoning change and the issuance of all development, demolition,
building, construction, use and/or parking permits and all other permits,
approvals and entitlements that may be required in connection therewith.
Landlord shall use all reasonable efforts to obtain all approvals, permits, etc.
contemplated by Paragraphs (A) and (B) by the earliest practical date.
(C) Approval of Phase I Environmental Report. Within 45 days after
----------------------------------------
receipt of the Report by Tenant, Tenant shall have approved the Phase I
Environmental Report for the Entertainment Center ("REPORT") which is to be
------
prepared at Landlord's sole cost by an environmental consultant selected by
Landlord (and reasonably acceptable to Tenant). Landlord shall provide Tenant
written notice, separate from the transmittal of the Report to Tenant, that the
Report is being sent to Tenant.
-112-
<PAGE>
(D) Approval of Title. Within 45 days after submission to Tenant of
-----------------
the commitment for the title insurance policy contemplated by Paragraph (A) of
Article 7, legible copies of all exception instruments identified therein and a
current ALTA Survey of the Entertainment Center showing the location of all such
exceptions capable of being shown thereon and identifying the same by their
recording information, Tenant shall have approved the condition of title to the
Entertainment Center and the portion of the land which comprises the Leased
Premises as described in Article 7 of this Lease. Landlord shall provide Tenant
written notice, separate from the transmittal of the title insurance commitment
and exception instruments, that the same are being sent to Tenant.
59. GUARANTY.
- -------------
As a condition to Landlord's obligations under this Lease, Tenant's
obligations under this Lease shall be guaranteed by AMC Entertainment, Inc., a
Delaware corporation ("AMCE"), in accordance with the terms of that certain
Guaranty of Lease in the form of Exhibit F attached hereto, which shall be
---------
executed by AMCE and delivered to Landlord on or prior to the date Landlord is
to execute this Lease.
60. TENANT'S EXPANSION RIGHT.
- -----------------------------
(A) Subject to the terms of this Article 60, Landlord hereby grants to
Tenant the option ("Expansion Option"),
----------------
-113-
<PAGE>
exercisable at any time within the first ten (10) years of the Lease Term, to
amend this Lease to expand the Leased Premises to include approximately 12,000
to 15,000 additional feet of Floor Area, contiguous to Tenant's Building as
initially constructed (the "Expansion Space"), which Expansion Space shall be
---------------
within the building area depicted on Exhibit G attached hereto as "CINEMAS WITH
---------
EXPANSION". If Tenant desires to exercise Tenant's Expansion Option, Tenant
shall provide Landlord with written notice ("Expansion Notice") of Tenant's
----------------
election to exercise its Expansion Option. If Tenant exercises its Expansion
Option, the Expansion Space when constructed as provided herein will be added to
the Leased Premises then leased by Tenant under this Lease effective as of the
date the Expansion Space is completed. Tenant's Notice will specify the
approximate number of additional square feet of Floor Area Tenant desires for
the Expansion Space.
(B) Tenant's lease of the Expansion Space will be on the same terms
and conditions set forth in this Lease as affect the original Leased Premises;
provided, however: (i) all figures in this Lease affected by the addition of
the additional Floor Area of the Expansion Space to the Leased Premises will be
adjusted accordingly (but the Percentage Rate for determining Annual Percentage
Rent with respect to the Expansion Space shall be the Percentage Rate specified
in paragraph (A) of Article 2); (ii) except as provided in paragraph (C) below,
the Annual Fixed Rent attributable to the Expansion Space will be equal to the
Annual Fixed Rent payable for the balance of the Leased Premises on
-114-
<PAGE>
a per square foot of Floor Area basis, as of the "Commencement Date" with
respect to the Expansion Space, as adjusted thereafter from time to time in
accordance with the schedule of Annual Fixed Rent set forth in this Lease; and
(iii) the improvement of the Expansion Space will be subject to the provisions
of paragraph (C) below.
(C) The improvement of the Expansion Space shall be completed
substantially in accordance with the terms of Exhibit C attached hereto as
---------
applied to the Expansion Space except as provided herein to the contrary. The
"Commencement Date" with respect to the Expansion Space will be the date which
is the earlier of (i) 365 days after the date Tenant shall have obtained all
building permits and other approvals from Governmental Authorities required for
the construction of the Expansion Space (which Tenant shall apply for promptly
upon the giving of Tenant's Expansion Notice and shall thereafter pursue with
reasonable diligence), or (ii) the date Tenant opens the Expansion Space to the
public for business. Landlord shall pay Tenant the Construction Allowance with
respect to the Expansion Space as provided in paragraph (D) of Section III of
Exhibit C; PROVIDED, HOWEVER, that Landlord may elect not to do so by written
- ---------
notice to Tenant given within 15 days after the giving of Tenant's Expansion
Notice, in which event the Annual Fixed Rent for the Expansion Space shall be
equal to the scheduled Annual Fixed Rent in the Lease (as described in paragraph
(B) above), less an amount, per
----
-115-
<PAGE>
annum, equal to 12% of the product obtained by multiplying $105.00 by the number
of square feet of Floor Area in the Expansion Space.
(D) The term of Tenant's lease of the Expansion Space will expire co-
terminously with the Term of Tenant's lease of the original Leased Premises,
subject to extension of the Lease Term as may elsewhere be provided in this
Lease. Following the commencement of the term of Tenant's lease of the
Expansion Space, the parties will execute an amendment to this Lease in order to
include the Expansion Space as part of the Leased Premises and to document the
terms of Tenant's lease thereof.
-116-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
duly executed as of the day and year first above written.
"LANDLORD"
SANTA ANITA REALTY ENTERPRISES,
INC., a Delaware corporation
By: /s/ CHRISTOPHER T. STIRLING
-------------------------------
Title: President
---------------------------
ATTEST:
/s/ BRIAN L. FLEMING
- ------------------------------
Brian L. Fleming, Secretary
"TENANT"
AMERICAN MULTI-CINEMA, INC., a
Missouri corporation
By: /s/ ED DURWOOD
--------------------------------
Edward D. Durwood, President
ATTEST:
/s/ DIANE M. SCHULTE
- -------------------------------------
Diane M. Schulte, Asst. Secretary
-117-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SANTA ANITA
REALTY ENTERPRISES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000313749
<NAME> SANTA ANITA OPERATING COMPANY
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 5,638,000
<SECURITIES> 0
<RECEIVABLES> 2,203,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 184,266,000
<DEPRECIATION> (54,832,000)
<TOTAL-ASSETS> 181,165,000
<CURRENT-LIABILITIES> 0
<BONDS> 102,162,000
<COMMON> 1,125,000
0
0
<OTHER-SE> 65,198,000
<TOTAL-LIABILITY-AND-EQUITY> 181,165,000
<SALES> 0
<TOTAL-REVENUES> 12,024,000
<CGS> 0
<TOTAL-COSTS> 1,646,000
<OTHER-EXPENSES> 3,162,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,425,000
<INCOME-PRETAX> 4,791,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,791,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,791,000
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SANTA ANITA
OPERATING COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000314661
<NAME> SANTA ANITA REALTY ENTERPRISES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,870,000
<SECURITIES> 24,279,000
<RECEIVABLES> 2,625,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,354,000
<PP&E> 43,401,000
<DEPRECIATION> (25,195,000)
<TOTAL-ASSETS> 51,682,000
<CURRENT-LIABILITIES> 34,401,000
<BONDS> 2,337,000
<COMMON> 1,114,000
0
0
<OTHER-SE> 9,854,000
<TOTAL-LIABILITY-AND-EQUITY> 51,682,000
<SALES> 0
<TOTAL-REVENUES> 35,368,000
<CGS> 0
<TOTAL-COSTS> 28,507,000
<OTHER-EXPENSES> 4,802,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91,000
<INCOME-PRETAX> 1,968,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,968,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,968,000
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0
</TABLE>
