<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
Commission file number 0-10619 Commission file number_________
<TABLE>
<S> <C>
HOLLYWOOD PARK, INC. HOLLYWOOD PARK OPERATING COMPANY
(Exact Name of Registrant as Specified in Its Charter) (Exact Name of Registrant as Specified in Its Charter)
Delaware Delaware
(State or Other Jurisdiction of (State or Other Jurisdiction of
Incorporation of Organization) Incorporation of Organization)
95-3667491 95-3667220
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
</TABLE>
1050 South Prairie Avenue Inglewood, California 90301
(Address of Principal Executive Offices) (Zip Code)
(310) 419 - 1500
(Registrant's Telephone Number, 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, and (2) have been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
The number of outstanding shares of the Hollywood Park, Inc.'s common stock, as
of the date of the close of business on November 13, 1997: 26,207,574.
<PAGE>
Hollywood Park, Inc.
Table of Contents
Part I
<TABLE>
<S> <C>
Item 1. Financial Information
Hollywood Park, Inc.
--------------------
Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996.. 1
Consolidated Statements of Operations for the three and nine months ended
September 30, 1997 and 1996................................................ 2
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996................................................ 3
Notes to Consolidated Financial Statements.................................. 4
Crystal Park Hotel and Casino Development Company, LLC
------------------------------------------------------
Balance Sheets as of September 30, 1997 and December 31, 1996............... 9
Statements of Operations for the three and nine months ended
September 30, 1997......................................................... 10
Statements of Cash Flows for the nine months ended September 30,
1997 and inception to December 31, 1996.................................... 11
Notes to Financial Statements............................................... 12
Mississippi - I Gaming, L.P.
----------------------------
Balance Sheets as of September 30, 1997 and 1996............................ 14
Statements of Operations for the three and nine months ended
September 30, 1997 and 1996................................................ 15
Statements of Cash Flows for the nine months ended September 30, 1997
and 1996................................................................... 16
Notes to Financial Statements............................................... 17
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General..................................................................... 19
Results of Operations....................................................... 22
Liquidity and Capital Resources............................................. 24
Part II
Item 5. Other Information................................................................ 28
Item 6.a Exhibits......................................................................... 29
Other Financial Information...................................................... 30
Signatures....................................................................... 32
</TABLE>
<PAGE>
Hollywood Park, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
(unaudited)
ASSETS (in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 22,007 $ 11,922
Restricted cash 1,209 4,486
Short term investments 0 4,766
Other receivables, net of allowance for doubtful accounts
of $1,111,000 in 1997, and $1,089,000 in 1996 10,049 7,110
Prepaid expenses and other assets 20,057 6,215
Deferred tax assets 8,103 6,422
Current portion of notes receivable 41 38
-------- --------
Total current assets 61,466 40,959
Notes receivable 9,450 819
Property, plant and equipment, net 293,737 130,835
Goodwill, net 33,342 20,370
Other assets 15,384 12,903
-------- --------
$413,379 $205,886
======== ========
- ------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 10,625 $ 10,043
Accrued lawsuit settlement 2,750 2,750
Accrued compensation 6,843 4,198
Accrued liabilities 17,174 9,733
Gaming liabilities 3,696 2,499
Racing liabilities 2,610 6,106
Current portion of notes payable 4,005 35
-------- --------
Total current liabilities 47,703 35,364
Notes payable 132,163 282
Deferred tax liabilities 11,005 9,065
-------- --------
Total liabilities 190,871 44,711
Minority interests 3,033 3,015
Stockholders' Equity:
Capital stock --
Preferred - $1.00 par value, authorized 222,500 shares;
none issued and outstanding in 1997, and 27,499 0 28
issued and outstanding in 1996
Common - $.10 par value, authorized 40,000,000 shares;
26,186,724 issued and outstanding in 1997, and 18,332,016
in 1996 2,619 1,833
Capital in excess of par value 222,023 167,074
Accumulated deficit (5,167) (10,775)
-------- --------
Total stockholders' equity 219,475 158,160
-------- --------
$413,379 $205,886
======== ========
</TABLE>
- -------
See accompanying notes to consolidated financial statements.
<PAGE>
Hollywood Park, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
----------------------------------------------
1997 1996 1997 1996
------- ------- -------- --------
(in thousands, except per share data - unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Gaming $57,143 $13,114 $ 83,990 $ 37,917
Racing 12,216 12,544 48,084 50,897
Food and beverage 6,156 2,879 13,016 10,516
Hotel and recreational vehicle park 581 0 581 0
Truck stop and service station 4,897 0 4,897 0
Other income 4,217 1,710 7,781 5,197
------- ------- -------- --------
85,210 30,247 158,349 104,527
------- ------- -------- --------
EXPENSES:
Gaming 29,956 5,027 45,117 19,516
Racing 6,206 5,908 21,615 21,623
Food and beverage 8,101 4,976 16,920 14,058
Hotel and recreational vehicle park 199 0 199 0
Truck stop and service station 4,461 0 4,461 0
Administrative 20,303 9,705 38,622 31,575
Other 1,823 929 3,262 2,028
Depreciation and amortization 6,159 2,498 11,939 7,898
REIT restructuring 397 0 609 0
Write off of investment in Sunflower 0 0 0 11,412
------- ------- -------- --------
77,605 29,043 142,744 108,110
------- ------- -------- --------
Operating income (loss) 7,605 1,204 15,605 (3,583)
Interest expense 3,653 20 3,782 918
------- ------- -------- --------
Income (loss) before minority interests and income taxes 3,952 1,184 11,823 (4,501)
Minority interests 17 0 80 0
Income tax expense 1,524 581 4,624 3,025
------- ------- -------- --------
Net income (loss) $ 2,411 $ 603 $ 7,119 $ (7,526)
======= ======= ======== ========
========================================================================================================
Dividend requirements on convertible preferred stock $ 558 $ 481 $ 1,520 $ 1,443
Net income (loss) attributable to (allocated to)
common shareholders $ 1,853 $ 122 $ 5,599 $ (8,969)
Per common share:
Net income (loss) - primary $ 0.08 $ 0.01 $ 0.27 $ (0.48)
Net income (loss) - fully diluted -- $ 0.01 -- $ (0.48)
Number of shares - primary 24,706 18,535 20,596 18,605
Number of shares - fully diluted -- 20,826 -- 20,896
</TABLE>
- -------------
See accompanying notes to consolidated financial statements.
<PAGE>
Hollywood Park, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1997 1996
--------- --------
(in thousands - unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 7,119 $ (7,526)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 11,939 7,342
Minority interests 17 0
Changes in accounts due to deconsolidation of subsidiary
in bankruptcy:
Property, plant and equipment 0 58,380
Secured notes payable 0 (28,918)
Unsecured notes payable 0 (15,323)
Goodwill and lease with TRAK East 0 6,908
Unrealized gain on short term bond investing 10 11
Gain (loss) on sale or disposal of property, plant and equipment 488 (3)
Changes in assets and liabilities, net of the effects of the
purchase of a business:
Decrease in restricted cash 3,277 2,292
Decrease (increase) in other receivables, net (944) 1,891
Decrease in prepaid expenses and other assets 894 2,897
(Increase) decrease in deferred tax assets (1,681) 10
Decrease in accounts payable (2,151) (3,920)
Decrease in accrued lawsuit settlement 0 (2,482)
Decrease in accrued compensation (1,788) (262)
Decrease in accrued liabilities (10,391) (970)
Increase (decrease) in gaming liabilities 1,197 (1,192)
Decrease in racing liabilities (3,496) (2,313)
Increase (decrease) in deferred tax liabilities 1,569 (5,061)
--------- --------
Net cash provided by operating activities 6,059 11,761
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (23,059) (17,969)
Receipts from sale of property, plant and equipment 114 9
Principal collected on notes receivable 31 25
Purchase of short term investments (1,946) (14,009)
Proceeds from short term investments 6,712 16,958
Long term gaming assets 0 294
Cash acquired in the purchase of a business, net of
transaction and other costs 12,264 0
--------- --------
Net cash used in investing activities (5,884) (14,692)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock options exercised 1,667 0
Proceeds from secured Bank Credit Facility 112,000 0
Payment of secured Bank Credit Facility (112,000) 0
Payment of secured notes payable (4,282) (3,358)
Payment of unsecured notes payable (31) (30)
Proceeds from issuance of 9.5% Notes 125,000 0
Payment of 11.5% Boomtown First Mortgage Notes (110,924) 0
Receipts from minority interest partners 0 3,000
Common stock repurchase and retirement 0 (1,961)
Dividends paid to preferred stockholders (1,520) (1,443)
--------- --------
Net cash provided by (used in) financing activities 9,910 (3,792)
--------- --------
Increase (decrease) in cash and cash equivalents 10,085 (6,723)
Cash and cash equivalents at the beginning of the period 11,922 22,406
--------- --------
Cash and cash equivalents at the end of the period $ 22,007 $ 15,683
========= ========
</TABLE>
- ------
See accompanying notes to consolidated financial statements.
<PAGE>
Hollywood Park, Inc.
Notes to Consolidated Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial information included herein has been prepared in conformity with
generally accepted accounting principles as reflected in the financial
statements included in Hollywood Park, Inc.'s ("Hollywood Park" or the
"Company") consolidated Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1996. This Quarterly Report
on Form 10-Q does not include certain footnotes and financial presentations
normally presented annually and should be read in conjunction with the Company's
1996 Annual Report on Form 10-K.
The information furnished herein is unaudited; however, in the opinion of
management it reflects all normal and recurring adjustments that are necessary
to present a fair statement of the financial results for the interim periods.
It should be understood that accounting measurements at interim dates inherently
involve greater reliance on estimates than at year end. The interim racing
results of operations are not indicative of the results for the full year, due
to the seasonality of the horse racing business.
RESTRICTED CASH Restricted cash as of September 30, 1997, and as of December
31, 1996, was for amounts due to horsemen for purses, stakes and awards.
GAMING REVENUE AND PROMOTIONAL ALLOWANCES Gaming revenues at the Boomtown, Inc.
("Boomtown") properties consisted of the difference between gaming wins and
losses, or net win from gaming activity, and at the Hollywood Park-Casino
consisted of fees collected from patrons on a per seat basis. Revenues in the
accompanying statements of operations exclude the retail value of food and
beverage provided to players on a complimentary basis. The estimated cost of
providing these promotional allowances during the three and nine months ended
September 30, 1997, was $2,745,000, and $3,410,000 respectively. The estimated
cost of providing these promotional allowances during the three and nine months
ended September 30, 1996, was $915,000 and $2,583,000, respectively.
ESTIMATES Financial statements prepared according to generally accepted
accounting principles require the use of management estimates, including
estimates used to evaluate the recoverability of property, plant and equipment,
to determine the fair value of financial instruments, to account for the
valuation allowance for deferred tax assets and to determine litigation related
obligations. Actual results could differ from these estimates.
EARNINGS PER SHARE Primary earnings per share were computed by dividing net
income (loss) available to (allocated to) common shareholders (net income (loss)
less preferred dividend requirements) by the weighted average number of common
shares outstanding during the period. Fully diluted per share amounts were
similarly computed, but include the effect, when dilutive, of the conversion of
the convertible preferred shares and exercise of stock options.
REDEMPTION OF DEPOSITARY SHARES As of August 28, 1997, the Company's 2,749,900
outstanding depositary shares were converted into 2,291,492 shares of the
Company's common stock, thereby, eliminating the annual preferred stock cash
dividend payment of approximately $1,925,000 for future periods.
CASH FLOWS Cash and cash equivalents included certificates of deposit and short
term investments with maturities of 90 days or less.
RECLASSIFICATIONS Certain reclassifications have been made to the 1996 balances
to be consistent with the 1997 financial statement presentation.
4
<PAGE>
NOTE 2 -- ACQUISITION OF BOOMTOWN, INC.
On June 30, 1997, pursuant to the Agreement and Plan of Merger dated as of April
23, 1996, by and among Hollywood Park, HP Acquisition, Inc., a wholly owned
subsidiary of the Company, and Boomtown, HP Acquisition, Inc. was merged with
and into Boomtown (the "Merger"). As a result of the Merger, Boomtown became a
wholly owned subsidiary of the Company and each share of Boomtown common stock
was converted into the right to receive 0.625 of a share of Hollywood Park's
common stock. Approximately 5,362,850 shares of Hollywood Park common stock,
valued at $9.8125 per share (excluding shares repurchased from Edward P. Roski,
Jr. ("Roski") and subsequently retired, as described below) were issued in the
Merger.
The Merger was accounted for under the purchase method of accounting for a
business combination. The purchase price of the Merger was allocated to the
identifiable assets acquired and liabilities assumed based on their estimated
fair values at the date of acquisition. Based on financial analyses prepared by
the Company which considered the impact of general economic, financial and
market conditions on the assets acquired and liabilities assumed, the Company
determined that the estimated fair values approximated their carrying value.
The Merger generated approximately $2,683,000 of excess acquisition cost over
the recorded value of the net assets acquired, all of which was allocated to
goodwill, to be amortized over 40 years. The amortization of the goodwill is
not deductible for income tax purposes. The Company anticipates finalizing any
reallocation of the purchase price within the next nine months.
The Company acquired three of the four Boomtown properties; Boomtown Reno,
Boomtown New Orleans, and Boomtown Biloxi. Boomtown's Las Vegas property was
divested following the Merger on July 1, 1997. Boomtown's Las Vegas property
was divested because it had generated significant operating losses since it
opened, thus reducing the overall profitability of Boomtown. Boomtown and its
subsidiaries exchanged substantially all of their interest in the Las Vegas
property, including substantially all of the operating assets and notes
receivable of approximately $27,300,000 from the landowner/lessor of the Las
Vegas property, IVAC, a California general partnership of which Roski, a former
Boomtown director, is a general partner, for, among other things, two unsecured
notes receivable totaling approximately $8,465,000, cash, assumption of certain
liabilities and release from certain lease obligations. The first note
receivable is for $5,000,000, bearing interest at Bank of America National Trust
and Savings Association's ("Bank of America") reference rate plus 1.5% per year,
with annual principal receipts of $1,000,000 plus accrued interest commencing on
July 1, 1998. The second note is for approximately $3,465,000, bearing interest
at Bank of America's reference rate plus 0.5% per year, with the principal and
accrued interest payable to the Company, in full, on July 1, 2000. In addition,
concurrently with the divestiture of the Las Vegas property, Hollywood Park
purchased and retired 446,491 shares of Hollywood Park common stock received by
Roski in the Merger for a price of approximately $3,465,000, payable in the form
of a Hollywood Park promissory note. The promissory note bears interest at Bank
of America's reference rate plus 1.0%. Interest is payable annually and annual
principal payments in five equal installments of approximately $693,000 are due
commencing July 1, 1998.
PRO FORMA RESULTS OF OPERATIONS The following pro forma results of operations
were prepared under the assumption that the acquisition of Boomtown had occurred
at the beginning of the period presented. The historical results of operations
of Boomtown (excluding the results of operations of Boomtown's Las Vegas
property, which was divested in connection with the Merger) were combined with
Hollywood Park's. Pro forma adjustments were made for the following:
elimination of the amortization of the issuance costs associated with Boomtown's
First Mortgage Notes; amortization of the issuance costs associated with the
$125,000,000 of Hollywood Park and Hollywood Park Operating Company Series A
9.5% Senior Subordinated Notes due 2007 (the "Series A Notes") (see Item 2.
Liquidity and Capital Resources); amortization of the excess purchase price over
net assets acquired in the Merger; elimination of the amortization of the
discount associated with the Boomtown First Mortgage Notes; interest expense
associated with the promissory notes from Hollywood Park to the former lessor of
Boomtown's Las Vegas property; elimination of the interest expense associated
with the Boomtown First Mortgage Notes; amortization of the up-front loan fees
5
<PAGE>
associated with the Company's Bank Credit Facility; interest expense associated
with the Series A Notes at 9.5%; and the estimated 40% tax expense associated
with the pro forma adjustments.
HOLLYWOOD PARK, INC.
Unaudited Pro Forma Combined Consolidated Results of Operations
<TABLE>
<CAPTION>
For the three months ended
September 30,
---------------------------------------
1997 (a) 1996
-------------- --------------
<S> <C> <C>
Revenues:
Gaming $ 57,143,000 $ 55,322,000
Racing 12,216,000 12,544,000
Other 15,851,000 13,862,000
------------ -------------
85,210,000 81,728,000
------------ -------------
Operating income 7,605,000 6,639,000
Net income $ 2,411,000 $ 807,000
============ =============
Dividend requirements on convertible preferred stock $ 558,000 $ 481,000
Net income available to common shareholders $ 1,853,000 $ 326,000
============ =============
Per common share:
Net income - primary $ 0.08 $ 0.01
Net income - fully diluted -- $ 0.01
<CAPTION>
For the nine months ended
September 30,
---------------------------------------
1997 1996
------------- --------------
<S> <C> <C>
Revenues:
Gaming $167,339,000 $ 158,734,000
Racing 48,084,000 50,897,000
Other 43,882,000 43,822,000
------------ -------------
259,305,000 253,453,000
------------ -------------
Operating income (loss) (b) 24,678,000 (22,968,000)
Net income (loss) $ 7,715,000 ($39,867,000)
============ =============
Dividend requirements on convertible preferred stock $ 1,520,000 $ 1,443,000
Net income (loss) available to (allocated to) common
shareholders $ 6,195,000 $ (41,310,000)
============ =============
Per common share:
Net income (loss) - primary $ 0.25 $ (1.72)
Net income (loss) - fully $ 0.25 $ (1.72)
diluted
</TABLE>
_____
(a) The results for the three months ended September 30, 1997, are actual.
(b) The 1996 operating loss included the non-recurring write off of Hollywood
Park's investment in Sunflower of $11,412,000, and the non-recurring loss on
Boomtown's sale of its Las Vegas property of $36,562,000.
NOTE 3 -- SHORT TERM INVESTMENTS
As of September 30, 1997, the Company had liquidated its short term investments
in corporate bonds. For the nine months ended September 30, 1997, gross
realized gains and losses were approximately $9,000 and $88,000, respectively.
6
<PAGE>
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held as of September 30, 1997, and December 31,
1996, consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 (a) 1996
------------- ------------
<S> <C> <C>
Land and land improvements $ 49,830,000 $ 32,215,000
Buildings and building improvements 269,089,000 150,935,000
Equipment 75,234,000 31,531,000
Vessel 18,925,000 0
Construction in progress 16,022,000 128,000
------------ ------------
429,100,000 214,809,000
Less accumulated depreciation 135,363,000 83,974,000
------------ ------------
$293,737,000 $130,835,000
============ ============
</TABLE>
_____
(a) Inclusive of Boomtown assets.
NOTE 5 -- SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of September 30, 1997, and December 31, 1996, consisted of
the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 (a) 1996
-------------- -------------
<S> <C> <C>
Secured notes payable $ 3,845,000 $ 0
Unsecured 9.5% Series A Notes (b) 125,000,000 0
11.5% Boomtown First Mortgage Notes (b) 1,253,000 0
Unsecured notes payable 4,015,000 317,000
Capital lease obligations 2,055,000 0
------------ -----------
136,168,000 317,000
Less current maturities 4,005,000 35,000
------------ -----------
$132,163,000 $282,000
============ ===========
</TABLE>
_____
(a) Includes notes payable related to Boomtown.
(b) See Item 2. Liquidity and Capital Resources.
NOTE 6 -- DEVELOPMENT EXPENSES
Included in Administrative expenses for the three and nine months ended
September 30, 1997, was $166,000 and $280,000 of development expenses,
respectively, which related primarily to the master site plan for the Inglewood
property, and the Hollywood Park - Hilton Indiana riverboat gaming project.
Included in Administrative expenses were development costs of approximately
$446,000 for the nine months ended September 30, 1996, and for the three months
ended September 30, 1996, there was a credit balance of approximately $197,000.
During the three months ended September 30, 1996, the Company was reimbursed for
development expenses of approximately $250,000, from a potential partner related
to an abandoned project. Expenses incurred through the nine months ended
September 30, 1996, primarily related to the Inglewood master site plan and card
clubs in California.
NOTE 7 -- ACCOUNTING FOR STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, ("SFAS 123") Accounting for
Stock-Based Compensation, requires that the Company disclose additional
information about employee stock-based compensation plans. The objective of
SFAS 123 is to estimate the fair value, based on the stock price at the grant
date, of the Company's stock options to which employees become entitled when
they have rendered the requisite service
7
<PAGE>
and satisfied any other conditions necessary to earn the right to benefit from
the stock options. The fair market value of a stock option is to be estimated
using an option-pricing model that takes into account, as of the grant date, the
exercise price and expected life of the option, the current price of the
underlying stock and its expected volatility, expected dividends on the stock
and the risk-free interest rate for the expected term of the options.
In computing the stock-based compensation the following assumptions were made:
<TABLE>
<CAPTION>
Risk-Free Expected Expected
Interest Rate Expected Life Volatility Dividends
------------- ------------- ---------- ---------
<S> <C> <C> <C> <C>
For options granted in the
following periods:
First quarter 1996 5.0% 3 years 36.1% None
Second quarter 1996 5.1% 3 years 46.4% None
</TABLE>
The following table sets forth the pro forma financial results under the
implementation of SFAS 123:
<TABLE>
<CAPTION>
For the nine months ended
September 30,
----------------------------
1997 1996
------------ -----------
<S> <C> <C>
Net income (loss) before stock-based compensation expense $ 7,119,000 $(7,526,000)
Stock-based compensation expense 519,000 61,000
----------- -----------
Pro forma net income (loss) $ 6,600,000 $(7,587,000)
=========== ===========
Dividend requirements on convertible preferred stock $ 1,520,000 $ 1,443,000
Net income (loss) available to (allocated to) common
shareholders $ 5,080,000 $(9,030,000)
=========== ===========
Per common share:
Pro forma net income (loss) - primary $ 0.25 ($0.49)
Pro forma net income (loss) - fully diluted -- ($0.49)
Number of shares - primary 20,596,000 18,605,000
Number of shares - fully diluted -- 20,896,000
</TABLE>
_____
There was no stock-based compensation expense for the three months ended
September 30, 1997 or 1996.
8
<PAGE>
- --------------------------------------------------------------------------------
The following financial statments of Crytal Park Hotel and Casino Development
Company, LLC are included in this Quarterly Report due to the fact that Crystal
Park Hotel and Casino Development Company, LLC is a non-wholly owned subsidiary
guarantor of the Series A 9.5% Senior Subordinated Notes, issued by Hollywood
Park, Inc. and Hollywood Park Operating Company.
- --------------------------------------------------------------------------------
Crystal Park Hotel and Casino Development Company, LLC
Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- -------------
(unaudited)
(in thousands)
<S> <C> <C>
ASSETS
Real estate and leasehold interests held for investment:
Land and land lease $ 2,663 $ 2,663
Buildings 1,404 1,404
Leasehold interests and improvements 19,929 19,457
Less accumulated depreciation and amortization (1,380) (271)
------- -------
22,616 23,253
------- -------
Cash and cash equivalents 1,555 200
Rent and other receivables 361 229
Organization costs, net 384 452
Other assets, net 5,080 5,210
------- -------
$29,996 $29,344
======= =======
- ---------------------------------------------------------------------------------------------
LIABILITIES AND MEMBERS' EQUITY
Accounts payable $ 40 $ 1
Security deposit 200 200
------- -------
Total liabilities 240 201
Members' equity:
HP/Compton, Inc. 26,723 26,128
Redwood Gaming, LLC 2,022 2,010
First Park Investments, LLC 1,011 1,005
------- -------
Total members' equity 29,756 29,143
------- -------
$29,996 $29,344
======= =======
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Crystal Park Hotel and Casino Development Company, LLC
Statements of Operations
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
September 30, September 30,
1997 1997
-------------- --------------
(in thousands - unaudited)
<S> <C> <C>
Lease rental/occupancy revenue $702 $2,202
Expenses:
Administrative 25 66
Amortization of organization costs and other assets 78 214
Depreciation and amortization of real estate and leasehold interests 443 1,109
---- ------
546 1,389
---- ------
Net income $156 $ 813
==== ======
</TABLE>
- --------------------
See accompanying notes to financial statements.
Crystal Park Hotel and Casino opened for business on October 25, 1996. Crystal
Park Hotel and Casino Development Company, LLC was formed July 18, 1996.
10
<PAGE>
Crystal Park Hotel and Casino Development Company, LLC
Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine
months ended Inception to
September 30, December 31,
1997 1996 (a)
------------ ------------
(unaudited)
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 813 $ 125
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,323 319
Increase in rent and other receivables (132) (229)
Increase in organization costs and other assets (16) (216)
Increase in accounts payable 39 1
Increase in security deposit 0 200
------ -------
Net cash provided by operating activities 2,027 200
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES: 0
Additions to leasehold interests and improvements (57) 0
------ -------
Net cash used in investing activities (57) 0
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to majority member (552) 0
Payments to minority members (63) 0
------ --------
Net cash used for financing activities (615) 0
------ -------
Increase in cash and cash equivalents 1,355 200
Cash and cash equivalents at the beginning of the period 200 0
------ -------
Cash and cash equivalents at the end of the period $1,555 $ 200
====== =======
Supplemental disclosure of non-cash transactions:
Contribution of real estate and improvements by majority memb $ 415 $20,776
======= =======
Contribution of other assets by majority member -- $ 5,242
======= =======
Contribution by minority members -- $ 3,000
======= =======
</TABLE>
- ---------
See accompanying notes to financial statements.
(a) Crystal Park Hotel and Casino opened for business on October 25, 1996.
Crystal Park Hotel and Casino Development Company, LLC was formed July 18, 1996.
<PAGE>
Crystal Park Hotel and Casino Development Company, LLC
Notes to Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial information included herein has been prepared in conformity with
generally accepted accounting principles. The information provided in this
Quarterly Report on Form 10-Q is unaudited, and in the opinion of management
reflects all normal and recurring adjustments that are necessary to present a
fair statement of the financial results for the interim period.
GENERAL Crystal Park Hotel and Casino Development Company, LLC ("Crystal Park
LLC") was formed on July 18, 1996, by Hollywood Park, Inc. ("Hollywood Park"),
through its wholly owned subsidiary HP/Compton, Inc. ("HP/Compton"), Redwood
Gaming, LLC ("Redwood") and First Park Investments, LLC ("First Park") for the
purpose of constructing, owning and leasing the Crystal Park Hotel and Casino
(the "Crystal Park Casino"). HP/Compton, Redwood and First Park have an 89.8%,
6.8% and 3.4% membership interest, respectively, in Crystal Park LLC.
Under California law, a publicly traded company, such as Hollywood Park, cannot
operate a card club casino (other than on the same premises as a race track);
therefore, Crystal Park LLC executed a 60 month lease, which was amended twice
(the "Lease"), with Compton Entertainment, Inc. ("CEI") (an unaffiliated third
party operator) for the Crystal Park Casino. (See Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations.)
ESTIMATES Financial statements prepared according to generally accepted
accounting principles require the use of management estimates, including
estimates used to evaluate the recoverability of real estate and leasehold
interests held for investment. These estimates are subject to a variety of
risks and uncertainties that could cause actual results to differ materially
from those anticipated by management.
ORGANIZATION COSTS Organization costs were capitalized and are being amortized
on a straight-line basis over the initial five year term of the Lease.
NOTE 2 -- REAL ESTATE AND LEASEHOLD INTERESTS HELD FOR INVESTMENT
On August 2, 1995, Hollywood Park paid approximately $2,006,000 to the City of
Compton to purchase the convention center and surrounding parking at the Crystal
Park site, and entered into a 50 year lease with the City of Compton for the
hotel, additional parking and expansion parcels at the Crystal Park site. The
cost of the initial improvements to the Crystal Park Casino are credited against
the annual base rent due from Crystal Park LLC to the City of Compton. The
annual lease rent payments start at $600,000 and increase every fifth year until
year 46, when they stabilize at $2,850,000. No cash rent payments are expected
to be made until after the nineteenth year of the lease, or 2014. Crystal Park
LLC has the option to either (i) purchase all of the leasehold parcels at an
amount based on a formula defined in the lease agreement, or (ii) purchase only
the hotel and parking leasehold parcels at a fixed price. Management expects
that in the normal course of business, and after the rent credits are fully
utilized, it is probable that it will exercise the option to purchase the hotel
and parking leasehold parcels only. If the option is exercised after the rent
credits are fully utilized, the future minimum lease payments for the remaining
lease term total approximately $3,350,000. The present value of the future
minimum lease payments, after a reduction of $2,700,000 for imputed interest
based on Crystal Park LLC's incremental borrowing rate, approximates $650,000.
The rent payment credits were considered in determining the future minimum lease
payments.
12
<PAGE>
NOTE 3 -- OTHER ASSETS
Other assets consist of payments made by Hollywood Park (and subsequently
contributed by Hollywood Park to Crystal Park LLC) to CEI as required under the
Amended and Restated Agreement Respecting Pyramid Casino (subsequently changed
to Crystal Park Hotel and Casino). Payments totaling approximately $5,000,000
were made to CEI to acquire its real property rights to the Crystal Park site,
the initial construction plans, and rights to the gaming license that CEI held
with the City of Compton.
These payments made to CEI have been capitalized and are being amortized on a
straight-line basis over their estimated useful lives of 40 years.
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
On August 6, 1997, Hollywood Park and Hollywood Park Operating Company (a wholly
owned subsidiary of Hollywood Park), as co-obligors, issued $125,000,000 of the
Series A Notes. The Series A Notes are fully and unconditionally, jointly and
severally, guaranteed on a senior subordinated basis by all of Hollywood Park's
material subsidiaries, including Crystal Park Hotel and Casino Development
Company, LLC.
13
<PAGE>
- --------------------------------------------------------------------------------
The following financial statements of Mississippi - I Gaming, L.P. are included
in this Quarterly Report due to the fact that Mississippi - I Gaming, L.P. is a
non-wholly owned subsidiary guarantor of the Series A 9.5% Senior Subordinated
Notes, issued by Hollywood Park, Inc. and Hollywood Park Operating Company.
- --------------------------------------------------------------------------------
Mississippi - I Gaming, L.P.
Balance Sheets
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
------------- -------------
(unaudited)
(in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,281 $ 2,907
Other receivables, net 71 148
Prepaid expenses and other assets 2,429 2,947
------- -------
Total current assets 5,781 6,002
Property, plant and equipment, net 44,755 35,671
Other assets 2,067 4,479
------- -------
$52,603 $46,152
======= =======
- --------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' DEFICIT
Current Liabilities:
Accounts payable $ 602 $ 481
Accrued compensation 971 765
Accrued liabilities 3,513 2,918
Accrued interest payable, Boomtown, Inc. 4,188 2,651
Current portion of notes payable, Boomtown, Inc. 44,113 41,432
Current portion of notes payable, other 1,295 1,570
------- -------
Total current liabilities 54,682 49,817
Notes payable, other 2,512 60
Partners' deficit:
General partner 0 0
Limited partner (4,591) (3,725)
------- -------
Total partners' deficit (4,591) (3,725)
------- -------
$52,603 $46,152
======= =======
</TABLE>
- --------
See accompanying notes to financial statements.
14
<PAGE>
Mississippi - I Gaming, L.P.
Statements of Operations
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
----------------------- -----------------------
1997 1996 1997 1996
------- ------- ------- -------
(in thousands - unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Gaming $13,305 $12,512 $39,327 $35,359
Food and beverage 915 862 2,483 2,362
Other 816 860 2,170 2,211
------- ------- ------- -------
15,036 14,234 43,980 39,932
------- ------- ------- -------
EXPENSES:
Gaming 7,193 7,277 21,453 20,798
Food and beverage 1,194 996 3,170 2,974
Administrative 3,857 3,869 11,438 11,310
Other 399 404 1,138 1,052
Depreciation and amortizati 820 492 2,628 1,328
------- ------- ------- -------
13,463 13,038 39,827 37,462
------- ------- ------- -------
Operating income 1,573 1,196 4,153 2,470
Interest expense 1,374 1,286 4,007 3,728
------- ------- ------- -------
Net income (loss) $ 199 $ (90) $ 146 $(1,258)
======= ======= ======= =======
</TABLE>
- -------
See accompanying notes to financial statements.
15
<PAGE>
Mississippi - I Gaming, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine months ended
September 30,
-------------------------
1997 1996
--------- --------
(in thousands - unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 148 $(1,259)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 2,692 1,329
Decrease in other receivables, net 3 34
Increase in prepaid expenses and other assets (577) (647)
Decrease in other assets 2,322 209
(Decrease) increase in accounts payable (9) 48
(Decrease) increase in accrued compensation (64) 13
Decrease in accrued liabilities 453 208
Increase in accrued interest payable, Boomtown, Inc. 1,214 195
------- -------
Net cash provided by operating activities 6,182 130
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (5,634) (3,190)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds note payable, Boomtown, Inc. 2,389 852
Payment notes payable, other (2,993) 0
Proceeds notes payable, other 0 1,094
------- -------
Net cash (used for) provided by financing activities (604) 1,946
------- -------
Decrease in cash and cash equivalents (56) (1,114)
Cash and cash equivalents at the beginning of the period 3,337 3,128
------- -------
Cash and cash equivalents at the end of the period $ 3,281 $ 2,014
======= =======
</TABLE>
- --------
See accompanying notes to financial statements.
<PAGE>
Mississippi - I Gaming, L.P.
Notes to Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial information included herein has been prepared in conformity with
generally accepted accounting principles. The information provided in this
Quarterly Report on Form 10-Q is unaudited, and in the opinion of management
reflects all normal and recurring adjustments that are necessary to present a
fair statement of the financial results for the interim period.
GENERAL Mississippi - I Gaming, L.P. (the "Mississippi Partnership"), is a
Mississippi limited partnership, which is majority owned and controlled by
Hollywood Park, Inc. ("Hollywood Park"), through its wholly owned subsidiaries,
Boomtown, Inc. ("Boomtown") and Bayview Yacht Club, Inc., which own 80% and 5%,
respectively, of the Mississippi Partnership, with the remaining 15% being owned
by Eric Skrmetta ("Skrmetta"). The Mississippi Partnership operates a casino,
known as Boomtown ("Boomtown Biloxi"), on a 40,000-square foot barge, which is
permanently moored to a land-based facility located on the historic Back Bay of
Biloxi, Mississippi.
Historically, the Mississippi Partnership reported financial results with a year
end of September 30. Subsequent to Hollywood Park's June 30, 1997, acquisition
of Boomtown (the "Merger"), the Mississippi Partnership will be reporting
results on a calendar year end of December 31.
ESTIMATES Financial statements prepared according to generally accepted
accounting principles require the use of management estimates, including
estimates used to evaluate the recoverability of real estate and leasehold
interests held for investment. These estimates are subject to a variety of
risks and uncertainties that could cause actual results to differ materially
from those anticipated by management.
RECLASSIFICATIONS Certain reclassifications have been made to the 1996 balances
to be consistent with the 1997 financial statement presentation.
NOTE 2 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held as of September 30, 1997, and September 30,
1996, consisted of the following:
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
------------ -------------
<S> <C> <C>
Land and land improvements $ 226,000 $ 226,000
Buildings and building improvements 41,278,000 32,864,000
Equipment 9,173,000 5,671,000
Construction in progress 292,000 16,000
----------- -----------
50,969,000 38,777,000
Less accumulated depreciation 6,214,000 3,106,000
----------- -----------
$44,755,000 $35,671,000
=========== ===========
</TABLE>
17
<PAGE>
NOTE 3 -- SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of September 30, 1997, and September 30, 1996, consisted of the
following:
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
------------- -------------
<S> <C> <C>
Secured notes payable $3,750,000 $ 320,000
Capital lease obligations 57,000 1,310,000
---------- ----------
3,807,000 1,630,000
Less current maturities 1,295,000 1,570,000
---------- ----------
$2,512,000 $ 60,000
========== ==========
</TABLE>
As of September 30, 1997, and 1996, the Mississippi Partnership also had an
outstanding note payable to Boomtown in the amounts of $44,113,000 and
$41,432,000, respectively. These amounts primarily related to funds invested by
Boomtown for the initial construction of the property, and the net of subsequent
cash transfers to Boomtown from the Mississippi Partnership, and from Boomtown
to the Mississippi Partnership. Interest on the notes payable to Boomtown was
fixed at 11.5%.
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
On August 6, 1997, Hollywood Park and Hollywood Park Operating Company (a wholly
owned subsidiary of Hollywood Park), as co-obligors, issued $125,000,000 of the
Series A Notes. The Series A Notes are fully and unconditionally, jointly and
severally, guaranteed on a senior subordinated basis by all of Hollywood Park's
material subsidiaries, including Mississippi - I Gaming, L.P.
In connection with the Merger, Hollywood Park supplied the funds to Boomtown to
repurchase and retire an aggregate of approximately $102,700,000 in principal
amount of Boomtown's First Mortgage Notes. The remaining balance of $1,253,000
is fully and unconditionally guaranteed by Mississippi - I Gaming, L.P.
The Mississippi Gaming Commission requires, as a condition of licensing or
license renewal, gaming companies to make a one time capital investment in
facilities for general public use, such as restaurants and other non-gaming
facilities, equal to 25% of the initial casino construction and gaming equipment
costs. The Mississippi Partnership believes that it's current land-based
facility satisfies this Mississippi Gaming Commission requirement. The
Mississippi Partnership expects to receive confirmation that it has met the 25%
requirement during the fourth quarter of 1997, but there can be no assurance
that the Mississippi Gaming Commission will not require additional expenditures,
and if required, that the Mississippi Partnership will be able to satisfy or
possibly receive waivers for such requirements.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
- -------------
Except for the historical information contained herein, the matters addressed in
this Quarterly Report on Form 10-Q may constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended. Such
forward-looking statements are subject to a variety of risks and uncertainties
that could cause actual results to differ materially from those anticipated by
the Company's management, including the failure to obtain or retain gaming
licenses or regulatory approvals, failure to utilize Hollywood Park's financial
resources to improve the financial position of its newly acquired subsidiary
Boomtown, failure to complete or successfully operate anticipated expansion
projects, the failure to find a suitable lessee for the Crystal Park Hotel and
Casino, the failure to obtain adequate financing to meet the Company's strategic
goals, difficulties in completing integration of Hollywood Park and Boomtown,
and the failure to implement a REIT/Paired-Share Structure (as described
herein), or to realize the potential benefits to be derived therefrom. The
Private Securities Litigation Reform Act of 1995 (the "Act") provides certain
"safe harbor" provisions for forward-looking statements. All forward-looking
statements made in this Quarterly Report on Form 10-Q are made pursuant to the
Act. For more information on the potential factors which could affect the
Company's financial results, please review the Company's filings with the
Securities and Exchange Commission, including the Company's 1996 Annual Report
on Form 10-K, the Company's other filings including the Joint Proxy/Prospectus
dated September 20, 1996, and the Statement on Form S-4 filed October 30, 1997.
GENERAL Hollywood Park is a gaming, sports and entertainment company engaged in
the ownership and operation of casinos, California card club casinos, pari-
mutuel racing facilities, and the development of other gaming, sports and
entertainment opportunities. As of the June 30, 1997 Merger, the Company owns
and operates a casino and hotel in Verdi, Nevada ("Boomtown Reno"), a riverboat
casino in Harvey, Louisiana ("Boomtown New Orleans") and a dockside casino in
Biloxi, Mississippi ("Boomtown Biloxi"). The Company also owns and operates the
Hollywood Park-Casino, a California card club located in the Los Angeles
metropolitan area, and owns 89.8% of Crystal Park Hotel and Casino Development
Company LLC ("Crystal Park LLC"), which built and presently leases, to an
unaffiliated third party, the Crystal Park Hotel and Casino (the "Crystal Park
Casino"), also located in the Los Angeles metropolitan area. Hollywood Park
owns and operates the Hollywood Park Race Track, located on the same premises as
the Hollywood Park-Casino, which for the past 58 years has been ranked among the
country's most distinguished thoroughbred racing facilities. On November 8,
1997, Hollywood Park Race Track hosted the prestigious Breeders' Cup
championship racing series for a third time. In 1994, the Company acquired Turf
Paradise, Inc. ("Turf Paradise"), a thoroughbred racing facility located in
Phoenix, Arizona, and Sunflower Racing, Inc. ("Sunflower"), a greyhound and
thoroughbred racing facility located in Kansas City, Kansas. On May 17, 1996,
as a result of intense competition from Missouri riverboat gaming, Sunflower
filed for reorganization under Chapter 11 of the Bankruptcy Code. Sunflower is
operating as a debtor in possession during the bankruptcy proceedings (See Item
2. Liquidity and Capital Resources).
Hollywood Park's strategic plan is to grow its gaming, sports and entertainment
businesses by (i) increasing the utilization of its existing properties, (ii)
developing excess real estate at its existing sites, and (iii) making
acquisitions, principally in the gaming industry, to diversify its operations
and to achieve economies of scale.
BOOMTOWN EXPANSION/RENOVATIONS With the June 30, 1997, acquisition of Boomtown,
Hollywood Park has undertaken various renovations, expansion plans and asset
acquisitions for the direct benefit of the Boomtown properties.
Boomtown Reno The $25,000,000 expansion and renovation of Boomtown Reno is
- -------------
underway, and includes a 200 room hotel addition, a complete renovation of the
existing gaming floors, 7,500 square feet of new conference and banquet
facilities, additional new gaming floor space, a new bus tour lobby and
remodeling of the food and beverage facilities.
19
<PAGE>
Boomtown New Orleans As of August 8, 1997, Boomtown New Orleans became wholly
- --------------------
owned by the Company. Previously, Boomtown New Orleans was owned and operated
by a Louisiana limited partnership (the "Louisiana Partnership"), of which 92.5%
was owned by Hollywood Park with the remaining 7.5% owned by Eric Skrmetta
("Skrmetta"). On November 18, 1996, Boomtown entered into an agreement with
Skrmetta under which it would pay approximately $5,670,000 in return for
Skrmetta's interest in the Louisiana Partnership. Under the terms of the
agreement, in 1996 Boomtown made a down payment of $500,000, and the Company
paid the remaining $5,170,000 on August 8, 1997.
On September 25, 1997, Hollywood Park purchased the Crescent City Queen (to be
renamed Boomtown Belle II) riverboat from Casino Magic Corporation for
approximately $11,700,000, which upon approval from the Louisiana Gaming Control
Board will replace the current Boomtown Belle riverboat. Boomtown Belle II is
130 feet longer and 15 feet wider than the current riverboat. The gaming floors
of Boomtown Belle II incorporate a more elegant decor, including escalators to
enhance patron traffic flow and will allow for more spacious gaming floors.
Boomtown Belle II also includes a third deck with 5,000 square feet of banquet
or special use facilities. Hollywood Park will invest approximately $4,700,000
to renovate and equip Boomtown Belle II. Boomtown Belle II is expected to be
placed into service mid-December 1997. In addition to the purchase of Boomtown
Belle II, a $10,000,000 renovation and build-out of the Boomtown New Orleans
land based facility is moving forward and the project is expected to be
completed in July 1998. The renovation will include a second floor banquet
facility, a restaurant and bar with an arcade venue catering to adults. Upon
completion of the renovations, Boomtown New Orleans will be a complete
entertainment complex offering entertainment experiences for a wide range of
customers.
Boomtown Biloxi Boomtown Biloxi is operated by a Mississippi limited
- ---------------
partnership (the "Mississippi Partnership"), of which 85% is owned and
controlled by Hollywood Park, with the remaining 15% owned by Skrmetta. Both
Hollywood Park and Skrmetta have an option, exercisable over a four year period
to exchange Skrmetta's interest in the Mississippi Partnership, at Skrmetta's
option, for either cash and/or shares of Hollywood Park common stock with an
aggregate value equal to the value of Skrmetta's 15% interest in the Mississippi
Partnership, with such value determined by a formula set forth in the relevant
partnership agreements. On August 13, 1997, Hollywood Park exercised this
option and subsequently supplied Skrmetta with the calculation of the value of
his 15% interest in the Mississippi Partnership. Skrmetta did not agree to this
valuation of his 15% interest, and Hollywood Park and Skrmetta are currently
attempting to reach agreement on a value. In the event that Hollywood Park and
Skrmetta are unable to reach an agreement, Hollywood Park plans to initiate
arbitration proceedings.
The Boomtown Biloxi barge and building shell were owned by National Gaming
Mississippi, Inc., a subsidiary of Chartwell Leisure, Inc. ("National Gaming").
Boomtown Biloxi leased these assets from National Gaming under a 25-year lease
with a 25-year renewal option, and also received marketing services from
National Gaming. National Gaming received 16% of the adjusted earnings before
interest, taxes, depreciation and amortization ("Adjusted EBITDA"), as defined
in the relevant contract. On August 4, 1997, Hollywood Park executed an
agreement pursuant to which one of the Hollywood Park entities purchased the
assets for $5,250,000, payable through a down payment of approximately
$1,500,000, with the balance paid in three equal annual installments of
$1,250,000. The Adjusted EBITDA participation and other related agreements were
terminated upon repurchase of the assets.
In October 1997, Boomtown Biloxi exercised its option to purchase for $1,000,000
a half-acre parcel adjacent to the existing property, which is currently used
for valet parking, and may be used for other expansion opportunities in the
future.
YAKAMA EXPANSION Hollywood Park, through its wholly owned subsidiaries HP
Yakama, Inc. ("HP Yakama") and HP Yakama Consulting, Inc. ("HPY Consulting"),
has entered into agreements with the Yakama Tribal Gaming Corporation (the
"Tribal Corporation") and The Confederated Tribes and Bands of the Yakama Indian
Nation (the "Tribes") to fund (through HP Yakama) and consult on (through HPY
Consulting) the construction, development and operation of a casino in Yakima
County, Washington. HP Yakama has committed to fund up to $9,000,000 to
construct and equip the casino, and the Tribal Corporation has signed a
promissory note to repay up to $9,000,000, at a 10% annual interest rate over
seven years from the date of completion. The Development Agreement and the
Consulting Agreement between HPY Consulting and the Tribal Corporation are for
development and gaming operations consulting services, respectively, to the
Tribal Corporation at a cost of $1.00 per year each, plus certain consulting
expenses, not to exceed $2,000 per month under either agreement. The Consulting
Agreement is for a seven year period.
20
<PAGE>
HP Yakama has also entered into a Master Lease to lease the completed casino and
underlying land (the "Facility") from the Tribes, for a seven year term
commencing with the opening of the casino, for $12,000 per year, and then to
Sublease the Facility to the Tribal Corporation, for the same seven year term.
Rent due from the Tribal Corporation Nation to HP Yakama, under the Sublease is
initially set at 28% of Net Revenues (as defined), until such time as the
aggregate accrued Net Revenues equal $26,000,000 and then the rent decreases to
25% of Net Revenues, until such time as the aggregate accrued Net Revenues equal
$41,000,000, and then rent decreases to 22% for the remainder of the Sublease
period. "Net Revenues" is defined as Gross Revenues less normal and necessary
operating expenses as determined under generally accepted accounting principles,
to include interest payments due from the Tribal Corporation to HP Yakama, and
to exclude rent due under the Sublease.
Hollywood Park has entered into a Profit Participation Agreement with North
American Sports Management, Inc. ("NORAM"), which entered into the original
Memorandum of Understanding with the Tribes. NORAM will receive 22% of the
portion of the Net Revenues (as described above) actually received by HP Yakama
under the Sublease.
PROPOSED INDIANA PROJECT The Company, through a joint venture with Hilton
Gaming Corporation, has an application pending for the remaining riverboat
gaming license to be awarded for operations on the Ohio River in Indiana. The
Company filed an updated application (as a result of the Merger) in August 1997.
On October 23, 1997, the Company made a formal presentation to the Indiana
Gaming Commission (the "Indiana Commission"), after which the Indiana Commission
indicated it would hold a meeting between November 15, 1997 and December 15,
1997 to make its determinations. The Indiana Commission could once again defer
any decision regarding granting of the license. There can be no assurance that
Hollywood Park will be granted the gaming license, and if granted the initial
gaming license, will receive all other required approvals and environmental
permits necessary to proceed with this project.
POSSIBLE RESTORATION OF REAL ESTATE INVESTMENT TRUST/PAIRED-SHARE STRUCTURE
From 1982 to 1991, the Company was operated as a Real Estate Investment Trust
("REIT") known as Hollywood Park Realty Enterprises, Inc. ("HP Realty"), and its
stock was paired with, or stapled to, that of Hollywood Park Operating Company
("HP Operating Company"). HP Realty was primarily an owner and lessor of real
property. HP Operating Company was primarily engaged in the active conduct of
racing operations and leased a significant amount of real property from HP
Realty to conduct those racing operations. Generally, a REIT is required to
distribute, as dividends to its stockholders, 95% of its taxable income (other
than net capital gains), and such amounts distributed are not subject to federal
income tax at the corporate level. Effective as of January 1, 1992, as part of
a corporate reorganization, HP Realty and HP Operating Company ceased operating
in a REIT/Paired-Share Structure, and HP Operating Company became a wholly owned
subsidiary of HP Realty and HP Realty was renamed Hollywood Park, Inc.
21
<PAGE>
In May 1997, the Company announced that it was exploring the possibility of
restoring the REIT/Paired-Share Structure. Any decisions to proceed with
restoring the REIT/Paired-Share Structure will depend on a variety of factors,
including tax consequences and receipt of stockholder, regulatory and other
required approvals. The Company submitted a ruling request to the Internal
Revenue Service on certain aspects of the restored REIT/Paired-Share Structure.
There can be no assurance that the Company will elect to proceed with the
restoration of the REIT/Paired-Share Structure, or that the benefits expected
from the restoration will be achieved.
CRYSTAL PARK HOTEL AND CASINO On October 11, 1997, the California Attorney
General revoked CEI's conditional gaming registration, and the City of Compton
revoked CEI's city gaming license. Crystal Park LLC believes that CEI is
attempting to have its California conditional gaming registration and city
gaming license reinstated.
On November 4, 1997, Crystal Park LLC obtained a judgment in an action for
unlawful detainer against CEI, due to CEI's failure to pay a portion of the June
1997 rent and to make required additional rent payments. In addition to the
judgment for possession and for damages of approximately $150,000, Crystal Park
LLC has a claim against CEI for additional damages relating to subsequent unpaid
rent and additional unpaid amounts.
Crystal Park LLC is presently negotiating a new lease for the Crystal Park
Casino with California Casino Management, Inc. ("CCM"), a California
corporation, owned by Mr. Leo Chu, which would take effect in the event that CEI
is unable to continue as operator/lessee of Crystal Park. Mr. Chu presently has
a gaming registration application pending with the California Attorney General
to operate the Crystal Park Casino, and will also require a gaming license from
the City of Compton. Mr. Chu presently holds a California gaming registration
to operate a small card club in Northern California. It is expected that CCM
would assume operations of the Crystal Park Casino no later than January 1,
1998; however, there can be no assurance that CCM will receive the necessary
approvals from the City of Compton and the California Attorney General to
operate the Crystal Park Casino, or that Crystal Park LLC will be able to locate
a replacement operator/lessee who will be granted the required approvals.
In the event that CCM assumes operations of the Crystal Park Casino, HP/Compton,
Inc., a wholly owned subsidiary of the Company, may purchase First Park
Investments, LLC's (owned by Mr. and Mrs. Chu) 3.4% membership in Crystal Park
LLC in order to provide Mr. Chu with additional working capital with which to
operate the Crystal Park Casino. The purchase price is expected to be
$1,000,000 (the amount initially invested by First Park Investments, LLC);
however, there can be no assurance that the parties would be able to agree upon
a price and other terms of such a purchase.
RESULTS OF OPERATIONS
Three months ended September 30, 1997, compared to the three months ended
-------------------------------------------------------------------------
September 30, 1996
------------------
As of June 30, 1997, the results of operations of Boomtown were consolidated
with those of Hollywood Park, and since the Merger was accounted for under the
purchase method of accounting for a business combination there is no
corresponding Boomtown activity in the 1996 results of operations.
Total revenues for the three months ended September 30, 1997, increased by
$54,963,000, as compared to the three months ended September 30, 1996, due
primarily to Boomtown revenues of $55,441,000 recorded during 1997 with no
corresponding revenues recorded in 1996. Gaming revenues increased by
$44,029,000, or 335.7%, due primarily to $43,765,000 of Boomtown gaming revenues
and $702,000 of Crystal Park revenues in 1997, with no corresponding revenues in
1996. The Crystal Park Casino opened on October 25, 1996, under a triple net
lease with CEI. Crystal Park LLC recorded a 100% valuation allowance against
the $350,000 of rent revenue due from CEI for the month of September 30, 1997,
due to the California Attorney General revoking CEI's conditional California
gaming registration on October 11, 1997. The Company is presently in lease
negotiations with CCM to assume the lease of the Crystal Park Casino, if CEI is
unable to regain its conditional California gaming registration, subject to CCM
obtaining all required gaming
22
<PAGE>
registrations and licenses to operate the Crystal Park Casino (as more fully
discussed above). Racing revenues decreased by $328,000, or 2.6%, due primarily
to on-track attendance declines and fewer simulcast events at Hollywood Park
Race Track. Food and beverage revenues increased by $3,277,000, or 113.8%, due
primarily to the inclusion of Boomtown food and beverage revenues in 1997 with
no corresponding revenues recorded in 1996. The hotel and recreational vehicle
park, and truck stop and service station revenues were related to operations at
Boomtown Reno, and there are no corresponding revenues in the 1996 results.
Other revenues increased by $2,507,000, or 146.6%, due primarily to Boomtown
revenues related to the family fun centers, gift shops and other miscellaneous
revenues.
Total operating expenses increased by $48,562,000, due primarily to Boomtown
operating expenses of approximately $44,003,000, during the three months ended
September 30, 1997, with no corresponding Boomtown expenses reflected in the
operating expenses for the three months ended September 30, 1996. Gaming
expenses increased by $24,929,000, or 495.5%, due primarily to $23,356,000 of
Boomtown related expenses and increased tournament marketing costs at the
Hollywood Park-Casino. Racing expenses increased by $298,000, or 5.0% primarily
due to increased marketing spending at the Hollywood Park Race Track. Food and
beverage expenses increased by $3,125,000, or 62.8%, due primarily to the
Boomtown food and beverage expenses of approximately $4,039,000, netted against
cost savings at the Hollywood Park-Casino generated by the implementation of a
food and beverage cost of sales control program in 1997. The hotel and
recreational vehicle park and truck stop and service station expenses related to
operations at Boomtown Reno with no corresponding expenses in the 1996 results.
Administrative expenses increased by $10,598,000, or 109.2%, due primarily to
the inclusion of $10,717,000 of Boomtown expenses netted against cost savings at
the Hollywood Park Race Track and Hollywood Park-Casino, as a result of the
Company's cost savings program. REIT reorganization expense consisted primarily
of legal, and tax expenses incurred by Hollywood Park with respect to the
reinstatement of the Company's REIT, as previously discussed. Other expenses
increased by $894,000, or 96.2%, due primarily to Boomtown expenses of
approximately $1,231,000, netted against cost savings at the Hollywood Park-
Casino gift shop and health club. Depreciation and amortization increased by
$3,661,000, or 146.6%, due primarily to Boomtown and Crystal Park expenses in
1997, for which there are no corresponding expenses in 1996. Interest expense
increased by $3,633,000, due to the interest expense associated with the Series
A Notes and interest expense related to Boomtown. Income taxes increased by
$943,000, or 162.3%, due to increased pre-tax income in 1997 as compared to
1996.
Nine months ended September 30, 1997 compared to the nine months ended
----------------------------------------------------------------------
September 30, 1996
------------------
As of June 30, 1997, the results of operations of Boomtown were consolidated
with those of Hollywood Park, and since the Merger was accounted for under the
purchase method of accounting for a business combination, there is no
corresponding Boomtown activity in the 1996 results of operations. As of April
1, 1996, Sunflower's results of operations were no longer consolidated with
Hollywood Park's results; therefore, the results of operations for the nine
months ended September 30, 1997, are exclusive of Sunflower's results of
operations, but the financial results for the nine months ended September 30,
1996, included Sunflower's results of operations through March 31, 1996. Also
included in the results of operations for the nine months ended September 30,
1996, was the $11,412,000 one time non-cash write off of Hollywood Park's
investment in Sunflower.
Total revenues for the nine months ended September 30, 1997, increased by
$53,822,000, or 51.5%, as compared to the nine months ended September 30, 1996,
due primarily to the inclusion of $55,441,000 of Boomtown revenues in 1997, with
no corresponding revenues recorded during 1996. Gaming revenues increased by
$46,073,000, or 121.5%, due primarily to Boomtown gaming revenues of
$43,765,000, and Crystal Park LLC rent revenues of $2,202,000, in 1997, with no
corresponding Boomtown or Crystal Park LLC revenues in 1996. The Crystal Park
Casino opened on October 25, 1996, under a triple net lease with CEI. Crystal
Park LLC recorded a 100% valuation allowance against the $350,000 of rent
revenue due from CEI for the month of September 1997, due to the California
Attorney General revoking CEI's conditional California gaming registration. The
Company is presently in lease negotiations with CCM to assume the lease of the
23
<PAGE>
Crystal Park Casino, if CEI is unable to regain its conditional California
gaming registration, subject to CCM obtaining all required gaming registrations
and licenses to operate the Crystal Park Casino (as more fully discussed above).
Racing revenues decreased by $2,813,000, or 5.5%, due primarily to one fewer
live race day at Hollywood Park, and the inclusion of $1,317,000 of racing
revenues attributable to Sunflower in 1996, and no corresponding Sunflower
Racing revenues in 1997. Food and beverage revenues increased by $2,500,000, or
23.8%, due primarily to the inclusion of Boomtown food and beverage revenues in
1997, with no corresponding revenues in 1996. Hotel and recreational vehicle
park and truck stop and service station revenues related to Boomtown's Reno
property, and there are no corresponding revenues in 1996. Other income
increased by $2,584,000, or 49.7%, due primarily to the inclusion of Boomtown
revenues in 1997 with no corresponding revenues in 1996.
Total operating expenses (inclusive of approximately $44,003,000 of Boomtown
expenses in 1997) increased by $34,634,000, or 32.0%, during the nine months
ended September 30, 1997, as compared to the nine months ended September 30,
1996. Gaming expenses increased by $25,601,000, or 131.2%, primarily due to the
inclusion of Boomtown gaming expenses of $23,356,000 and increased tournament
costs at the Hollywood Park-Casino. Food and beverage expenses increased by
$2,862,000, or 20.4%, due primarily to Boomtown food and beverage expenses of
$4,039,000, netted against expense reductions, generated by cost saving programs
implemented at the Hollywood Park-Casino. Hotel and recreational vehicle
expenses and truck stop and service station expenses related to Boomtown Reno
and there are no corresponding expenses in 1996. Administrative expenses
increased by $7,047,000, or 22.3%, which included $10,717,000 of Boomtown
expenses, netted against reduced expansion expenses in 1997, and savings
generated by cost saving programs implemented at all Hollywood Park properties.
REIT reorganization expense consisted primarily of legal and tax expenses
incurred by Hollywood Park with respect to the reinstatement of the Company's
REIT as previously discussed. Other expenses increased by $1,234,000, or 60.8%,
due primarily to the inclusion of Boomtown expenses in 1997 with no
corresponding expenses in 1996. Depreciation and amortization increased by
$4,041,000, primarily due to the Boomtown and Crystal Park LLC depreciation
expense in 1997 with no corresponding expenses in 1996. Interest expense
increased by $2,864,000, or 312.0%, due to the interest on the Series A Notes,
short term bank borrowings (all of which have been repaid) and bank commitment
fees (See Item 2. Liquidity and Capital Resources). Income tax expense
increased by $1,599,000, or 52.9%, due to increased income before income taxes
in 1997 as compared to 1996.
LIQUIDITY AND CAPITAL RESOURCES
Hollywood Park's principal source of liquidity as of September 30, 1997, was
cash and cash equivalents of $22,007,000. Cash and cash equivalents increased
by $10,085,000 during the nine months ended September 30, 1997. Net cash
provided by operating activities was $6,059,000. Net cash used by investing
activities was $5,884,000. Cash used for capital assets of $23,059,000 included
amounts spent for the purchase of a new riverboat for Boomtown New Orleans, the
down payment on the purchase of the barge for Boomtown Biloxi, and normal and
necessary capital improvements. Cash provided by investing activities related
to the cash acquired from Boomtown in the Merger (net of Hollywood Park's Merger
costs) and by the liquidation of the Company's short term corporate bond
investments. Net cash provided by financing activities was $9,910,000. Cash of
$125,000,000 was raised with the issuance of the Series A Notes issued on August
6, 1997. Cash of approximately $110,924,000 was used to redeem a majority of
the 11.5% Boomtown First Mortgage Notes. Cash was disbursed for the payment of
the preferred stock dividend through the date of conversion. Cash payments were
also made on a variety of secured notes for gaming and other operating assets
held by the various Boomtown properties, including the approximately $2,107,000
payment of a Boomtown New Orleans note payable on the original riverboat.
Cash and cash equivalents decreased by $6,723,000 during the nine months ended
September 30, 1996. Net cash provided by operating activities was $11,761,000.
Net cash used in investing activities was $14,692,000, which included
disbursements for the construction of the Crystal Park Casino, along with normal
and necessary capital improvements. Net cash used in financing activities was
$3,792,000, which included
24
<PAGE>
the payment of a secured note, the payment of dividends on the preferred stock,
and the repurchase of the Company's common stock, netted against cash received
from the minority members of Crystal Park LLC.
HOLLYWOOD PARK On June 30, 1997, Hollywood Park and a bank syndicate lead by
Bank of America finalized the reducing revolving credit facility (the "Bank
Credit Facility") for up to $225,000,000. On August 7, 1997, the Bank Credit
Facility was reduced by $125,000,000 (representing the funds received in the
issuance of the Series A Notes) to $100,000,000. Of such $100,000,000
approximately $83,586,000 was available at September 30, 1997, as a result of
covenant limitations. The Bank Credit Facility is secured by substantially all
of the assets of Hollywood Park and its significant subsidiaries, and imposes
certain customary affirmative and negative covenants.
The Bank Credit Facility has been amended twice. The first amendment, among
other matters, reduced the availability of the facility until the Bank Credit
Facility was approved by the Louisiana Gaming Control Board. The Company
received this approval on July 10, 1997. The second amendment, among other
matters, allowed the co-issuance of the Notes by HP Operating Company with
Hollywood Park.
Debt service requirements on the Bank Credit Facility consist of current
interest payments on outstanding indebtedness through September 30, 1999. As of
September 30, 1999, and on the last day of each third calendar month thereafter,
through June 30, 2001, the Bank Credit Facility will decrease by 7.5% of the
commitment in effect on September 30, 1999. As of September 30, 2001, and on
the last day of each third calendar month thereafter, the Bank Credit Facility
will decrease by 10% of the commitment in effect on September 30, 1999. Any
principal amounts outstanding in excess of the Bank Credit Facility commitment,
as so reduced, will be payable on such quarterly reduction rates.
The Bank Credit Facility provides for a letter of credit sub-facility of
$10,000,000, of which $2,035,000 is currently outstanding for the benefit of
Hollywood Park's California self insured workers' compensation program. The
facility also provides for a swing line sub-facility of up to $10,000,000.
Borrowings under the Bank Credit Facility bear interest at an annual rate
determined, at the election of the Company, by reference to the "Eurodollar
Rate" (for interest periods of 1, 2, 3 or 6 months) or the "Reference Rate", as
such terms are respectively defined in the Bank Credit Facility, plus margins
which vary depending upon Hollywood Park's ratio of funded debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA"). The margins
start at 1.25% for Eurodollar loans and at 0.25% for Base Rate loans, at funded
debt to EBITDA ratio of less than 1.50%. Thereafter, the margin for each type
of loan increases by 25 basis points for each increase in the ratio of funded
debt to EBITDA of 50 basis points or more, up to 2.625% for Eurodollar loans and
1.625% for Base Rate loans. However, if the ratio of senior funded debt to
EBITDA exceeds 2.50%, the applicable margins will increase to 3.25% for
Eurodollar loans, and 2.25% for Base Rate loans. Thereafter, the margins would
increase by 25 basis points for each increase in the ratio of senior funded debt
to EBITDA of 50 basis points or more, up to a maximum of 4.25% for Eurodollar
loans and 3.25% for Base Rate loans. The applicable margins as of September 30,
1997, were 1.75% with respect to the Eurodollar Rate based interest rate and
0.75% with respect to the Base Rate interest rate.
The Bank Credit Facility allows for interest rate swap agreements, or other
interest rate protection agreements, up to a maximum notional amount of
$125,000,000. Presently, Hollywood Park does not utilize such financial
instruments, though it may in the future.
Hollywood Park pays a quarterly commitment fee for the average daily amount of
unused portions of the Bank Credit Facility. The commitment fee is also
dependent upon the Company's ratio of funded debt to EBITDA. The commitment fee
for the Bank Credit Facility starts at 31.25 basis points when the ratio is less
than 1.00, and increases by 6.25 basis points for each increase in the ratio of
0.50, up to a maximum of 50 basis points. For the quarter beginning October 1,
1997, this fee is 43.75 basis points.
25
<PAGE>
On July 3, 1997, Hollywood Park borrowed $112,000,000 from the Bank Credit
Facility to fund Boomtown's offer to purchase its 11.5% First Mortgage Notes,
and repaid this amount on August 7, 1997, with a portion of the proceeds from
the issuance of $125,000,000 of the Series A Notes. The Series A Notes were co-
issued by Hollywood Park and HP Operating Company (the "Obligors"). The balance
of the proceeds from the issuance of the Notes was primarily used for the
purchase of a new riverboat in Boomtown New Orleans, and other general corporate
needs.
Interest on the Series A Notes is payable semi-annually, on February 1st and
August 1st. The Notes will be redeemable at the option of the Company, in whole
or in part, on or after August 1, 2002, at a premium to face amount, plus
accrued interest, with the premium to the face amount decreasing on each
subsequent anniversary date. The Series A Notes are unsecured obligations of
the Obligors, guaranteed by all other material restricted subsidiaries of either
Hollywood Park or HP Operating Company.
The indenture governing the Series A Notes contains certain covenants that,
among other things, limit the ability of the Obligors and their restricted
subsidiaries to incur additional indebtness and issue preferred stock, pay
dividends or make other distributions, repurchase equity interests or
subordinated indebtness, create certain liens, enter into certain transactions
with affiliates, sell assets, issue or sell equity interests in their respective
subsidiaries or enter into certain mergers and consolidations.
On July 1, 1997, in connection with the divestiture of Boomtown's Las Vegas
property, Hollywood Park issued an unsecured promissory note of approximately
$3,465,000. The promissory note bears interest equal to the Bank of America
reference rate plus 1.0%. Interest is payable annually with five annual
principal payments of approximately $693,000 commencing July 1, 1998.
During the nine months ended September 30, 1997, the Company paid dividends of
$1,520,000 on its convertible preferred stock, representing $70.00 per share, or
$0.70 per depositary share. Effective August 28, 1997 the Company converted the
2,749,900 outstanding depositary shares into 2,291,492 shares of the Company's
common stock, thereby, eliminating the annual preferred cash dividend payment of
approximately $1,925,000 for future periods.
As of September 30, 1997, Hollywood Park liquidated its investments in corporate
bonds. During the nine months ended September 30, 1997, proceeds from the sale
or redemption of the corporate bond investments were approximately $4,766,000,
with gross realized gains and losses of approximately $9,000, and $88,000,
respectively.
BOOMTOWN In November 1993, Boomtown sold $103,500,000 of 11.5% First Mortgage
Notes due November 1, 2003 (the "First Mortgage Notes"). On July 3, 1997,
pursuant to a tender offer, Boomtown repurchased and retired approximately
$102,142,000 in principal amount of the 11.5% First Mortgage Notes, at a
purchase price of $1,085 per $1,000 in principal amount, along with accrued
interest thereon.
As a result of the Merger, Boomtown, as required under the indenture governing
the 11.5% First Mortgage Notes, initiated a change in control purchase offer at
a price of $1,010 for each $1,000 for the remaining approximately $1,358,000
aggregate principal amount of 11.5% First Mortgage Notes outstanding. This
change in control purchase offer was completed on August 12, 1997, with only
$105,000 of the remaining 11.5% First Mortgage Notes tendered.
On August 4, 1997, Hollywood Park executed a promissory note pursuant to which
one of the Hollywood Park entities purchased the barge and the building shell at
Boomtown Biloxi for at total cost of $5,250,000. A payment of $1,500,000 was
made on August 4, 1997, with the balance due of $3,750,000 payable in three
equal annual installments of $1,250,000. Interest on the promissory note is
equal to the prime interest rate in effect on the first day of the quarterly
period. The principal amount of the promissory note, together with accrued
interest, may be repaid, without penalty, in whole or in part, at any time.
26
<PAGE>
On August 7, 1997, Boomtown New Orleans prepaid the 13.0% note payable secured
by the original riverboat, currently in use. The cost of the prepayment
(inclusive of a 1.0% prepayment penalty) was approximately $2,107,000.
As of August 8, 1997, Boomtown New Orleans is wholly owned by the Company.
Previously, Boomtown New Orleans was owned and operated by the Louisiana
Partnership, of which 92.5% was owned by Hollywood Park with the remaining 7.5%
owned by Skrmetta. On November 18, 1996, Boomtown entered into an agreement
with Skrmetta under which it would pay approximately $5,670,000 in return for
Skrmetta's interest in the Louisiana Partnership. Under the terms of the
agreement, Boomtown made a down payment of $500,000, and the Company paid the
remaining $5,170,000 on August 8, 1997.
On September 25, 1997, Hollywood Park acquired the Crescent City Queen (to be
renamed Boomtown Belle II) riverboat from Casino Magic Corporation, at a cost of
approximately $11,700,000. Hollywood Park will invest approximately $4,700,000
to renovate and equip the Boomtown Belle II, which is expected to be placed in
service mid-December 1997.
As of September 30, 1997, Boomtown had two notes payable for gaming and other
operating equipment which total approximately $359,000. Boomtown also has
various capital lease obligations for gaming and other operating equipment,
totaling approximately $2,055,000.
In connection with the sale its Las Vegas property, Boomtown took back two notes
receivable from Roski, the former lessor of the Las Vegas property, totaling
approximately $8,465,000. The first note receivable is for $5,000,000, bearing
interest at Bank of America's reference rate plus 1.5% per year, with annual
principal receipts of $1,000,000 plus accrued interest commencing on July 1,
1998. The second note is for approximately $3,465,000, bearing interest at Bank
of America's reference rate plus 0.5% per year, with the principal and accrued
interest payable, in full, on July 1, 2000.
SUNFLOWER On March 24, 1994, an Amended and Restated Credit and Security
Agreement (the "Sunflower Senior Credit") was executed between Sunflower and
five banks in connection with the Company's acquisition of Sunflower. As of
September 30, 1997, the outstanding balance of the Sunflower Senior Credit was
$28,667,000. The Sunflower Senior Credit is non-recourse to Hollywood Park.
On May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the
Bankruptcy Code. The Cash Collateral Agreement suspended any interest or
principal payments on the Sunflower Senior Credit until August 12, 1997. The
Bankruptcy Court issued an order extending the Cash Collateral Agreement until
the confirmation hearing, which is scheduled for December 18, 1997. The
extension of the Cash Collateral Agreement was subject to Sunflower making
certain cash payments to Wyandotte County, Kansas, the creditor group and TRAK
East (the unaffiliated operator of racing at Sunflower).
On July 15, 1997, Sunflower presented to the Bankruptcy Court a plan of
reorganization (the "Plan") which provides for the sale of Sunflower's property
to the Wyandotte Indians of Oklahoma (the "Wyandotte Indians"). Under the Plan,
the land would be held by the United States Government in trust for the
Wyandotte Indians, and a casino would be built on the property. Upon completion
of the casino, Hollywood Park and a partner (North American Sports Management)
would operate the facility in return for 30% of the profits. The Company would
guarantee certain bank debt of Sunflower of up to $28,667,000 to allow the
property to be released as collateral and then transferred to the Wyandotte
Indians. The Company's guaranty would not go into effect unless and until all
material regulatory approvals have been obtained for operation of the casino and
approval has been obtained under the Bank Credit Facility. The Bankruptcy Court
is expected to rule on the Plan early in 1998.
In 1995, under a promissory note executed in December 1994, between Hollywood
Park and Sunflower, Hollywood Park advanced $2,500,000 to Sunflower to make
certain payments due on the Sunflower Senior Credit. The amounts borrowed under
the promissory note, along with accrued interest, are subordinate to
27
<PAGE>
the Sunflower Senior Credit. Although the Company will continue to pursue
payment of the promissory note, for financial reporting purposes the outstanding
balance of the promissory note was written off as of March 31, 1996.
CAPITAL COMMITMENTS As of September 30, 1997, Hollywood Park has one material
capital commitment of approximately $9,000,000 with respect to construction of
the casino for the Yakama expansion, as previously described.
Expansion Costs In addition to the financing needs discussed above, and the
- ---------------
construction of the casino for the Yakama expansion, Hollywood Park has other
potential capital needs with respect to Boomtown Reno and Boomtown New Orleans.
The Company expects to spend approximately $25,000,000 on the expansion and
renovation of Boomtown Reno, including additional hotel rooms, expanded gaming
space and other amenities, which is expected to be completed by the end of 1998.
The Company also expects to spend approximately $10,000,000 on the expansion and
upgrade of Boomtown New Orleans including the build-out of the second floor of
the land-based facility which expected to be completed by mid-1998. The
Boomtown New Orleans Boomtown Belle II riverboat renovation is expected cost
$4,700,000 and is expected to be completed by mid-December 1997.
GENERAL Hollywood Park is continually evaluating future growth opportunities in
the gaming, sports and entertainment industries. The Company expects that
funding for growth opportunities, payment of interest on the Notes, payments on
notes payable and capital expenditure needs will come from existing cash
balances, cash generated from operating activities and borrowings from the
credit facilities. In the opinion of management, these resources will be
sufficient to meet the Company's anticipated cash requirements for the
foreseeable future and in any event for at least the next twelve months.
PART II
OTHER INFORMATION
ITEM 5. OTHER INFORMATION
- ------- -----------------
As previously discussed in the Company's Annual Report on Form 10-K, under
current California law Hollywood Park can own and operate a card club only on
the same premises as the Hollywood Park Race Track, and unless the California
Legislature enacted a comprehensive scheme for the regulation of gaming under
the jurisdiction of a gaming control commission, prior to January 1, 1999, the
Company would have no longer been allowed to operate the Hollywood Park-Casino,
and would have had to once again lease it for a fixed monthly rent to an
unaffiliated third party operator.
In September 1997, Senate Bill 8 ("SB 8") was enacted into law. SB 8, which
becomes effective January 1, 1998, comprehensively regulates card clubs in
California, and allows the Company to operate the Hollywood Park-Casino
indefinitely beyond January 1, 1999.
28
<PAGE>
ITEM 6.A EXHIBITS
- -----------------
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C>
2.1 Agreement and Plan of Reorganization, by and among Hollywood Park,
Inc. and Pacific Casino Management, Inc., dated November 17, 1995, is
hereby incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K, filed November 30, 1995.
2.2 Agreement and Plan of Merger, by and among Hollywood Park, Inc., HP
Acquisition, Inc. and Boomtown, Inc., dated April 23, 1996, is hereby
incorporated by reference to the Company's Current Report on Form 8-
K, filed May 3, 1996.
3.1 Certificate of Incorporation of Hollywood Park, Inc., is hereby
incorporated by reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-1, dated January 29, 1993.
3.2 Amended By-laws of Hollywood Park, Inc., are hereby incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement on
Form S-1, dated January 29, 1993.
3.3 Certificate of Incorporation of Hollywood Park Operating Company, is
hereby incorporated by reference to Exhibit 3.3 to the Company's
Registration Statement on Form S-4, dated August 27, 1997.
3.4 Amended By-laws of Hollywood Park Operating Company, are hereby
incorporated by reference to Exhibit 3.4 to the Company's
Registration Statement on Form S-4, dated August 27, 1997.
4.5 Convertible Preferred Stock Depositary Stock Agreement, between
Hollywood Park, Inc. and Chase Mellon Shareholder Services, dated
February 9, 1993, is hereby incorporated by reference to Exhibit 4.5
to the Company's Registration Statement on Form S-1, dated January
29, 1993.
4.7 Hollywood Park 1996 Stock Option Plan is hereby incorporated by
reference to Exhibit 10.24 to the Company's Registration Statement on
Form S-4, dated September 18, 1996.
4.8 Hollywood Park 1993 Stock Option Plan is hereby incorporated by
reference to Appendix A to the Notice of Annual Meeting to
Shareholders and Proxy Statement relating to the Annual Meeting of
Stockholders of Hollywood Park, Inc., held on May 17, 1993.
4.9 Indenture, dated August 1, 1997, by and among Hollywood Park, Inc.,
Hollywood Park Operating Company, Hollywood Park Food Services, Inc.,
HP/Compton, Inc., Crystal Park Hotel and Casino Development Company,
LLC, HP Yakama, Inc., Turf Paradise, Inc., Boomtown, Inc., Boomtown
Hotel & Casino, Inc., Louisiana - I Gaming, Louisiana Gaming
Enterprises, Inc., Mississippi - I Gaming, L.P., Bayview Yacht Club,
Inc. and The Bank of New York, as trustee, is hereby incorporated by
reference to Exhibit 10.37 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997.
4.10 Form of Series B 9.5% Senior Subordinated Note due 2007 (included in
Exhibit 4.9), is hereby incorporated by reference to the Company's
Amendment No. 1 to Registration Statement on Form S-4 dated, October
30, 1997.
10.39 Agreement, by and between Crystal Park Hotel and Casino Development
Company, LLC and Compton Entertainment, Inc., dated September 12,
1997.
10.40 Profit Participation Agreement, by and between Hollywood Park, Inc.
and North American Sports Management, Inc., dated July 14, 1997.
10.41 Loan Agreement, by and between Yakama Tribal Gaming Corporation and
HP Yakama, Inc., dated September 11, 1997.
10.42 Security Agreement, by and between Yakama Tribal Gaming Corporation
and HP Yakama, Inc., dated September 11, 1997.
10.43 Master Lease, by and between The Confederated Tribes and Bands of the
Yakama Indian Nation and HP Yakama, Inc., dated September 11, 1997.
10.44 Sublease, by and between HP Yakama, Inc. and Yakama Tribal Gaming
Corporation, dated September 11, 1997.
10.45 Construction and Development Agreement, by and between Yakama Tribal
Gaming Corporation and HP Yakama Consulting, Inc., dated
September 11, 1997.
10.46 Consulting Agreement, by and between Yakama Tribal Gaming Corporation
and HP Yakama Consulting, Inc., dated September 11, 1997.
27.1 Financial Data Schedule
</TABLE>
(b) A Reports on Form 8-K Current Report on Form 8-K was filed July 15,
1997, to report the June 30, 1997, acquisition of Boomtown, Inc. and
the disposition of Boomtown's Las Vegas property, and which included
historical financial statements of Boomtown, Inc. as well as
financial statements for the combined company on a pro forma basis
giving effect to the Merger on January 1, 1996.
A Current Report on Form 8-K was filed August 12, 1997, to report the
redemption of each Depositary Share in exchange for 0.8333 shares of
Common Stock.
29
<PAGE>
Hollywood Park, Inc.
Calculation of Earnings Per Share
<TABLE>
<CAPTION>
For the three months ended September 30,
-----------------------------------------------------
Primary Assuming full dilution (a)
-------------------- --------------------------
1997 1996 1997 1996
------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Average number of common shares outstanding 24,706 18,535 24,706 18,535
Average common shares due to assumed conversion
of convertible preferred shares 0 0 -- 2,291
------- ------- ------- -------
Total shares 24,706 18,535 24,706 20,826
======= ======= ======= =======
Net income $ 2,411 $ 603 $ 2,411 $ 603
Less dividend requirements on convertible preferred shares 558 481 0 0
------- ------- ------- -------
Net income available to common shareholders $ 1,853 $ 122 $ 2,411 $ 603
======= ======= ======= =======
Net income per share $ 0.08 $ 0.01 $ 0.10 $ 0.03
======= ======= ======= =======
For the nine months ended September 30,
-----------------------------------------------------
Primary Assuming full dilution (a)
-------------------- --------------------------
1997 1996 1997 1996
------- ------- ------- -------
(in thousands, except per share data)
Average number of common shares outstanding 20,596 18,605 20,596 18,605
Average common shares due to assumed conversion
of convertible preferred shares 0 0 -- 2,291
------- ------- ------- -------
Total shares 20,596 18,605 20,596 20,896
======= ======= ======= =======
Net income (loss) $ 7,119 $(7,526) $ 7,119 $(7,526)
Less dividend requirements on convertible preferred shares 1,520 1,443 0 0
------- ------- ------- -------
Net income (loss) attributable to (allocated to) common shareholders $ 5,599 $(8,969) $ 7,119 $(7,526)
======= ======= ======= =======
Net income (loss) per share $ 0.27 $ (0.48) $ 0.35 $ (0.36)
======= ======= ======= =======
</TABLE>
- -------
Note: As of August 28, 1997, the Company's 2,749,900 outstanding depositary
shares were converted into 2,291,492 shares of the Company's common
stock.
(a) The computed values assuming full dilution are anti-dilutive; therefore,
the primary share values are presented on the face of the consolidated
statements of operations.
<PAGE>
Hollywood Park, Inc.
Selected Financial Data by Operational Location
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
--------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
(in thousands, except per share data - unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Hollywood Park, Inc. - Casino Division $14,759 $15,205 $ 44,076 $ 44,151
HP/Compton, Inc. - Crystal Park Hotel and Casino 702 0 2,202 0
Boomtown Reno 20,978 0 20,978 0
Boomtown New Orleans 19,380 0 19,380 0
Boomtown Biloxi 15,028 0 15,028 0
Hollywood Park Race Track 12,334 12,978 44,527 45,970
Turf Paradise, Inc. 1,647 1,546 11,352 11,362
Sunflower Racing, Inc. 0 0 0 1,782
Hollywood Park, Inc. - Corporate 327 518 751 1,262
Boomtown, Inc. - Corporate 55 0 55 0
----------- ----------- ----------- -----------
85,210 30,247 158,349 104,527
----------- ----------- ----------- -----------
EXPENSES:
Hollywood Park, Inc. - Casino Division 12,071 12,676 37,577 37,549
HP/Compton, Inc. - Crystal Park Hotel and Casino 25 0 66 0
Boomtown Reno 16,665 0 16,665 0
Boomtown New Orleans 13,860 0 13,860 0
Boomtown Biloxi 12,642 0 12,642 0
Hollywood Park Race Track 11,183 10,792 35,201 36,016
Turf Paradise, Inc. 2,023 2,013 8,923 8,835
Sunflower Racing, Inc. 0 0 0 1,703
Hollywood Park, Inc. - Corporate 1,744 1,064 4,426 4,697
Boomtown, Inc. - Corporate 836 0 836 0
----------- ----------- ----------- -----------
71,049 26,545 130,196 88,800
----------- ----------- ----------- -----------
NON-RECURRING EXPENSES:
REIT restructuring 397 0 609 0
Write off of investment in Sunflower Racing, Inc. 0 0 0 11,412
----------- ----------- ----------- -----------
397 0 609 11,412
----------- ----------- ----------- -----------
DEPRECIATION AND AMORTIZATION:
Hollywood Park, Inc. - Casino Division 685 740 2,215 2,151
HP/Compton, Inc. - Crystal Park Hotel and Casino 521 0 1,323 0
Boomtown Reno 1,353 0 1,353 0
Boomtown New Orleans 1,031 0 1,031 0
Boomtown Biloxi 820 0 820 0
Hollywood Park Race Track 1,013 964 3,004 2,924
Turf Paradise, Inc. 288 301 880 911
Sunflower Racing, Inc. 0 0 0 536
Hollywood Park, Inc. - Corporate 431 493 1,296 1,376
Boomtown, Inc. - Corporate 17 0 17 0
----------- ----------- ----------- -----------
6,159 2,498 11,939 7,898
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS):
Hollywood Park, Inc. - Casino Division 2,003 1,789 4,284 4,451
HP/Compton, Inc. - Crystal Park Hotel and Casino 156 0 813 0
Boomtown Reno 2,960 0 2,960 0
Boomtown New Orleans 4,489 0 4,489 0
Boomtown Biloxi 1,566 0 1,566 0
Hollywood Park Race Track 138 1,222 6,322 7,030
Turf Paradise, Inc. (664) (768) 1,549 1,616
Sunflower Racing, Inc. 0 0 0 (457)
Hollywood Park, Inc. - Corporate (1,848) (1,039) (4,971) (4,811)
Boomtown, Inc. - Corporate (798) 0 (798) 0
REIT restructuring (397) 0 (609) 0
Write off of investment in Sunflower Racing, Inc. 0 0 0 (11,412)
----------- ----------- ----------- -----------
7,605 1,204 15,605 (3,583)
----------- ----------- ----------- -----------
Interest expense 3,653 20 3,782 918
MINORITY INTERESTS:
HP/Compton, Inc. - Crystal Park Hotel and Casino 17 0 80 0
----------- ----------- ----------- -----------
Income (loss) before income tax expense 3,935 1,184 11,743 (4,501)
Income tax expense 1,524 581 4,624 3,025
----------- ----------- ----------- -----------
Net income (loss) $ 2,411 $ 603 $ 7,119 $ (7,526)
=========== =========== =========== ===========
Dividend requirements on convertible preferred stock $ 558 $ 481 $ 1,520 $ 1,443
----------- ----------- ----------- -----------
Net income (loss) available to (allocated to) common shareholders $ 1,853 $ 122 $ 5,599 $ (8,969)
=========== =========== =========== ===========
Per common share:
Net income (loss) - primary $ 0.08 $ 0.01 $ 0.27 $ (0.48)
Net income (loss) - fully diluted -- $ 0.01 -- $ (0.48)
Number of shares - primary 24,706 18,535 20,596 18,605
Number of shares - fully diluted -- 20,826 -- 20,896
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
HOLLYWOOD PARK, INC.
(Registrant)
By: /s/ R.D. Hubbard Dated: November 13, 1997
---------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ G. Michael Finnigan Dated: November 13, 1997
---------------------------------
G. Michael Finnigan
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
HOLLYWOOD PARK OPERATING COMPANY
(Registrant)
By: /s/ R.D. Hubbard Dated: November 13, 1997
---------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ G. Michael Finnigan Dated: November 13, 1997
---------------------------------
G. Michael Finnigan
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
32
<PAGE>
Hollywood Park, Inc.
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
10.39 Agreement, by and between Crystal Park Hotel and Casino
Development Company, LLC and Compton Entertainment, Inc.,
dated September 12, 1997. 1
10.40 Profit Participation Agreement, by and between Hollywood
Park, Inc. and North American Sports Management, Inc.,
dated July 14, 1997. 5
10.41 Loan Agreement, by and between Yakama Tribal Gaming
Corporation and HP Yakama, Inc., dated September 11, 1997. 12
10.42 Security Agreement, by and between Yakama Tribal Gaming
Corporation and HP Yakama, Inc., dated September 11, 1997. 45
10.43 Master Lease, by and between The Confederated Tribes and
Bands of the Yakama Indian Nation and HP Yakama, Inc.,
dated September 11, 1997. 53
10.44 Sublease by and between HP Yakama, Inc. and Yakama Tribal
Gaming Corporation, dated September 11, 1997. 71
10.45 Construction and Development Agreement, by and between
Yakama Tribal Gaming Corporation and HP Yakama Consulting,
Inc., dated September 11, 1997. 83
10.46 Consulting Agreement, by and between Yakama Tribal Gaming
Corporation and HP Yakama Consulting, Inc., dated
September 11, 1997. 100
27.1 Financial Data Schedule
</TABLE>
<PAGE>
Hollywood Park, Inc.
Exhibit 10.39
AGREEMENT
---------
This agreement ("Agreement") is hereby entered into by and between Crystal
Park Hotel & Casino Development Company LLC, a California limited liability
company ("Crystal Park") and Compton Entertainment, Inc., a California
corporation ("CEI") as of September 12, 1997 with reference to the following
facts:
A. On or about August 3, 1995, CEI and Crystal Park's predecessor,
HP/Compton, Inc., entered into a written lease agreement (the "Original Lease")
for the premises commonly known as 111 N. Artesia Boulevard, Crystal City,
California 90220 (the "Premises"). On or about March 12, 1996, CEI and
HP/Compton, Inc. entered into the First Amendment to Lease. On or about July
30, 1996, Crystal Park succeeded to the rights of HP/Compton, Inc. with respect
to the Lease and the amendment thereto. On or about September 13, 1996, Crystal
Park and CEI entered into the Second Amendment to Lease. The Original Lease and
amendments thereto shall be collectively referred to herein as the "Lease."
B. CEI failed to make timely payment for rent under the Lease for the
month of June, 1997 and failed to make timely payment of property taxes due
Crystal Park under the Lease.
C. On July 21, 1997, Crystal Park filed an action for unlawful detainer
against CEI in Los Angeles Superior Court, case number BC 174953 (the "Action").
CEI answered the complaint on July 30, 1997. The trial of the Action is
currently scheduled to begin on September 8, 1997.
D. CEI has requested that Crystal Park continue the trial date in the
Action until October 9, 1997, or as soon thereafter as the Court's schedule will
allow.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Crystal Park and CEI hereby agree as follows:
1. Continuance of Trial Date. Crystal Park shall request that the Court
-------------------------
continue the trial of the Action from September 8, 1997 until the week of
October 13, 1997, or as soon thereafter as the Court's schedule will allow.
2. Payment Schedule. CEI shall make the following payments on the dates
----------------
listed below:
2.1 CEI and Crystal Park acknowledge that on or about September 4,
1997, CEI delivered to Crystal Park's offices a check in the
amount of $200,000, and that on or about September 12, 1997 CEI
delivered to Crystal Park's offices a check in the amount of
$150,000. CEI and Crystal Park hereby agree that Crystal Park
has accepted these checks as payment for CEI's occupancy of the
Premises for the month of August, 1997 in accordance with and
subject to all of the provisions of this Agreement, including but
not limited to the provisions of paragraphs 3 and 4 hereof.
Without limiting the generality of the foregoing, CEI and Crystal
Park hereby agree that Crystal Park's acceptance of these
payments (1) does not constitute a waiver of Crystal Park's
declaration of forfeiture of the Lease, or of Crystal Park's
rights to prosecute the
<PAGE>
Action and recover possession of the Premises; and (2) does not
constitute, and shall not be used as evidence of, any lease
agreement between CEI and Crystal Park.
2.2 On or before September 19, 1997, CEI shall pay Crystal Park the
amount of $50,000 as a partial payment for CEI's occupancy of the
Premises for the month of September, 1997.
2.3 On or before October 8, 1997, CEI shall pay Crystal Park the
amount of $350,000. The first $300,000 of this amount shall
complete payment for CEI's occupancy of the Premises for the
month of September, 1997. The last $50,000 of this amount shall
constitute a partial payment for CEI's occupancy of the Premises
for the month of July, 1997.
3. Crystal Park's Contentions. Crystal Park contends that it declared
--------------------------
the Lease terminated prior to commencing the Action and that the Lease is
terminated and of no further force and effect. Crystal Park contends that CEI
is currently occupying the Premises as a holdover tenant only with no rights
under the Lease or any other lease agreement and the payments referred to in
paragraph 2 represent occupancy charges as a holdover tenant. CEI denies these
contentions.
4. No Waiver. CEI and Crystal Park hereby acknowledge and agree that the
---------
purpose of this Agreement is to continue the trial of the Action and allow CEI
to make, and Crystal Park to accept, the payments specified in paragraph 2
above, without causing any change or prejudice whatsoever to the parties'
respective contentions and positions in the Action, or to Crystal Park's ability
to pursue any and all rights and remedies it currently has or may have in the
future. Without limiting the generality of the preceding sentence, CEI and
Crystal Park hereby further agree as follows:
4.1 Nothing in this Agreement, including but not limited to the
characterization of payments hereunder as "rent," nor any action taken by either
party pursuant to this Agreement, including but not limited to Crystal Park's
acceptance of payment hereunder, shall constitute a waiver of Crystal Park's
contentions described in paragraph 3 above. Neither this Agreement nor any
action taken by CEI or Crystal Park pursuant to this Agreement, including but
not limited to Crystal Park's acceptance of payment by CEI, shall constitute or
be used as evidence of any lease, or the reinstatement of the Lease, between the
parties.
4.2 Nothing in this Agreement, nor any action taken by either party
pursuant to this Agreement, including but not limited to Crystal Park's
acceptance of payment hereunder, shall constitute a waiver of any of Crystal
Park's rights, including but not limited to Crystal Park's rights to (1) enforce
the payment of rent previously due under the Lease; (2) pursue remedies for
previous defaults by CEI under the Lease; (3) pursue the Action and seek
possession of the Premises and a judicial declaration of termination of the
Lease; or (4) characterize CEI's present occupancy as a holdover tenancy.
Nothing in this paragraph 4.2 shall be interpreted as an admission by CEI that
Crystal Park has any of the rights described in this paragraph 4.2.
4.3 Neither this Agreement, nor any action by either party hereunder,
including but not limited to Crystal Park's acceptance of payment hereunder,
shall constitute a waiver of any notice previously served on CEI by Crystal
Park, including but not limited to the notices served on CEI on July 14, 1997
and August 20, 1997, any
<PAGE>
declaration of forfeiture of the Lease contained in such notices, or of Crystal
Park's right to pursue an action for unlawful detainer based on any such
notices. Neither this agreement nor any action taken by either party hereunder
shall constitute a waiver of any of the defenses raised by CEI in the Action
including but not limited to CEI's contention (which Crystal Park disputes) that
Crystal Park's acceptance of rent payments made prior to the payments identified
in paragraph 2 constituted a waiver of Crystal Park's claims for unlawful
detainer.
5. CEI and Crystal Park agree that, provided that CEI is in full and
strict compliance with the terms of this Agreement, CEI and Crystal Park will
meet within thirty days after September 19, 1997 to discuss the possibility of
an agreement to allow CEI to continue in possession of the Premises at an agreed
upon monthly rent. Notwithstanding the foregoing, CEI and Crystal Park
acknowledge and agree that (1) Crystal Park is under no obligation, either
express or implied, to enter into any such agreement; and (2) Crystal Park has
made no promises or representations, either express or implied, that it will
enter any such agreement; (3) this paragraph 5 does not constitute, and shall
not be used as evidence of, any leasehold interest in the Premises by CEI; and
(4) nothing in this paragraph 5 shall constitute a waiver of, or otherwise
limit, Crystal Park's right to characterize CEI's current occupation of the
Premises as a holdover tenancy.
6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which, when executed, shall be deemed to be an original
hereof, and all of which together shall be deemed to be one and the same
instrument.
7. Entire Agreement. This Agreement constitutes a single, integrated
----------------
written contract expressing the entire agreement between the Parties and
supersedes any and all prior written, oral or implied discussions, negotiations
or understandings between them. No person has authority to make any
representations or promises on behalf of the parties hereto which is not
specifically set forth in this Agreement. This Agreement may be amended,
modified, or supplemented only by a writing executed on behalf of both of the
parties hereto.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
CRYSTAL PARK HOTEL & CASINO
DEVELOPMENT COMPANY, LLC
a California limited liability company
By: HP/Compton, Inc.
a California Corporation, Manager
By: /s/ G. Michael Finnigan
---------------------------------
G. Michael Finnigan
Its: Vice President
COMPTON ENTERTAINMENT, INC.
a California Corporation
By: /s/ Rouben Kandilian
-------------------------------------
Rouben Kandilian
<PAGE>
Hollywood Park, Inc.
Exhibit 10.40
PROFIT PARTICIPATION AGREEMENT
THIS PROFIT PARTICIPATION AGREEMENT (the "AGREEMENT") dated as of July 14,
1997, is made and entered into by and between Hollywood Park, Inc., a Delaware
corporation ("HP"), and North American Sports Management, Inc., a Florida
corporation ("NORAM"), with reference to the following facts:
A. NORAM and the Confederated Tribes and Bands of the Yakama Indian
Nation (the "NATION") have entered into that certain Memorandum of Understanding
dated August 16, 1996, as extended by the parties (the "MOU"), pursuant to which
NORAM agreed to provide (i) financial, development, construction and consulting
services to the Nation in connection with the construction of a bingo hall and
casino (the "FACILITY"), together with all related infrastructure, parking,
landscaping, interior design, engineering, architectural and other services, on
the Nation's lands in Toppenish, Washington, and (ii) consulting services in
connection with the Nation's operation, management and maintenance of the gaming
operations and ancillary business activities conducted at the Facility
(collectively, the "CONSULTING SERVICES"). Capitalized terms used but not
defined herein shall have the same meanings given to them in the MOU.
B. Subject to the terms and conditions described herein, NORAM and HP
have determined that in order to most efficiently finance and obtain the
necessary licensing to finance the Facility, and provide the Consulting
Services, (i) HP will fully finance the Facility, (ii) NORAM will relinquish all
its rights to pursue the construction of the Facility and render Consulting
Services, whether under the MOU or otherwise, except for those items identified
herein as NORAM Services, (iii) HP will obtain all of NORAM's rights under the
MOU, including, without limitation, the right to 100% of the profit
participation interest granted in the MOU, and HP will be responsible for
obtaining the financier's license, and (iv) HP and NORAM shall provide the
Consulting Services in the manner described herein; all as contemplated by the
MOU as the same may be subsequently modified by HP and the Nation.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereby agree as follows:
1. Relinquishment of Rights. In consideration of the agreements made by HP
------------------------
herein, NORAM and all of its affiliates hereby relinquish any and all rights and
interest with respect to the provision of Consulting Services to, and the
establishment of a Facility for, the Nation, including, without limitation, any
and all rights and interests pursuant to the MOU. Concurrently with the
execution of this Agreement, NORAM shall provide HP with copies of all
documentation and information relating to the Facility and NORAM's actual and
contemplated relationship with the Nation.
<PAGE>
NORAM acknowledges that HP intends to enter into an agreement with the Nation to
provide Consulting Services to the Nation with respect to the development,
construction and operation of the Facility, and HP intends to fund or cause to
be funded a loan to the Nation to fund the construction and development of the
Facility (the "LOAN") and otherwise succeed to the rights and responsibilities
of NORAM under the MOU. NORAM further acknowledges and agrees that HP or its
affiliates shall be entitled to receive 100% of the Consulting Fee or profit
participation interest, however structured, other than principal or interest
payments on loans to the Nation (the "PROFIT PARTICIPATION INTEREST") and any
other remuneration payable by the Nation in respect of the development,
construction or operation of the Facility; and except as provided by Sections 3
and 4 herein, neither NORAM nor any of its affiliates shall be entitled to
receive any portion of the Profit Participation Interest or such other
remuneration nor to receive any payments of any kind whatsoever with respect to
the Facility or the Consulting Services, whether from HP, the Nation or
otherwise. If HP or its affiliates determine not to provide the Consulting
Services to the Nation as contemplated by the MOU, NORAM may, upon prior notice
to HP, seek to negotiate and enter into an arrangement with the Nation regarding
the development, construction and operation of the Facility.
2. Activities of HP Yakama, Inc. HP and NORAM acknowledge that HP Yakama,
-----------------------------
Inc., a wholly-owned subsidiary of HP (the "SUBSIDIARY"), will enter into such
agreements and contracts as the parties may deem necessary to establish the
relationship with the Nation and consummate the transactions contemplated by the
MOU. HP shall be primarily responsible for, and NORAM shall participate in, the
drafting and negotiation of such agreements and contracts. In addition, NORAM
shall provide Consulting Services with respect to the construction of the
Facility and regulatory issues ("NORAM SERVICES"). NORAM hereby covenants that
the construction costs of the Facility, which costs shall include those items
listed on the budget dated July 8, 1997 and approved by HP and NORAM prior to
the execution of this Agreement, shall not exceed $9 million. (A copy of such
budget dated July 8, 1997 is attached hereto as Exhibit A.) Notwithstanding the
foregoing covenant, NORAM shall not be responsible for any cost increases due to
changes in the plans or specifications for construction made by the Nation, HP,
HP's affiliates or the Subsidiary without the approval of NORAM, which approval
shall not be a prerequisite to making any such changes. HP shall be wholly
responsible for financing the Facility and for providing all Consulting Services
(other than NORAM Services) and any other services to be provided pursuant to
the MOU. Subject to its obligations pursuant to Sections 3 and 4 hereof, HP
shall receive from the Nation all payments required by the MOU, including,
without limitation, payments of principal and interest related to the Loan and
payment of the Profit Participation Interest.
-2-
<PAGE>
3. Repayment of Expenses. The parties acknowledge that prior to entering into
---------------------
this Agreement, NORAM advanced eight hundred and ninety two thousand, eight
hundred eighty-five dollars and eight cents ($892,885.08) to the Nation in
connection with the development and construction of the Facility (the "Pre-
Development Amount"). In addition, prior to the execution of this Agreement,
NORAM has provided HP with appropriate documentation to establish the Pre-
Development Amount and the amount of actual, out-of-pocket expenses (excluding
any overhead costs or charges) in excess of the Pre-Development Amount that
NORAM has incurred as of the date of this Agreement with respect to negotiating
its business relationship with the Nation and advancing funds for the benefit of
the Nation (such excess amount, "NORAM'S VERIFIABLE EXPENSES"). Prior to or at
the execution of this Agreement, HP shall have the right to request additional
information and/or documentation as is reasonably necessary to verify the Pre-
Development Amount and NORAM's Verifiable Expenses. Within three (3) days of
the receipt and verification of such additional information and/or
documentation, or within five (5) days of the execution of this Agreement if no
such request is made, HP shall pay, or cause NORAM to be paid, NORAM's
Verifiable Expenses. Promptly following the initial advance of funds made to
the Nation under the Loan, HP shall pay, or cause NORAM to be paid, fifty
percent (50%) of the Pre-Development Amount. Promptly following the date on
which the Facility is first open to the general public, HP shall pay, or cause
NORAM to be paid, the remaining fifty percent (50%) of the Pre-Development
Amount, provided that the aggregate amount paid by HP pursuant to this Section
--------
shall not exceed $1,000,000, and provided, further, that (i) if the construction
-------- -------
costs of the Facility exceed $9 million and NORAM is responsible for such excess
costs in accordance with Section 2 hereof, the payment to be made by HP pursuant
to this sentence shall be reduced by the amount of such excess costs, and (ii)
the payment to be made by HP pursuant to this sentence shall be reduced by the
Forgiven Amount (as defined herein).
For purposes of the foregoing paragraph, NORAM hereby acknowledges that a
portion of the principal amount of the Loan shall be forgiven under the
following circumstances: thirty thousand dollars ($30,000) of the principal
amount of the Loan shall be forgiven on the eighth day of each month, commencing
on September 8, 1997, if the Facility has not opened to the public for business,
until a maximum amount of one hundred fifty thousand dollars ($150,000) is
forgiven. The aggregate amount of the Loan that is actually forgiven is
referred to above as the "FORGIVEN AMOUNT."
4. Profit Participation. During the term of any agreement between the
--------------------
Subsidiary and the Nation which gives rise to any portion of the Profit
Participation Interest, NORAM shall be entitled to receive from the Subsidiary
twenty-two percent (22%) of the Profit Participation Interest actually received
by HP or its affiliates (the "NORAM PROFIT PARTICIPATION")
-3-
<PAGE>
pursuant to the terms of such agreements. Such amounts shall be paid by HP to
NORAM within fifteen (15) days of the Subsidiary's receipt of such payments.
5. Modifications to Agreements. NORAM acknowledges and agrees that HP or its
---------------------------
affiliates in their sole discretion, without any notice to or approval from
NORAM, may (i) amend or modify the Consulting Agreement or any other agreement
HP or the Subsidiary enters into with the Nation, including, without limitation,
any amendment or modification to the amount or timing of payments to be received
thereunder, or (ii) settle, compromise or otherwise resolve any disputes with
the Nation relating to the Facility; provided, however, that HP or its
-------- -------
affiliates shall provide NORAM with notice of any such amendment, modification,
settlement, compromise or resolution and, if such amendment, modification,
settlement, compromise or resolution materially increases NORAM's
responsibilities hereunder, NORAM must approve such action, which approval shall
not be unreasonably withheld. Notwithstanding the foregoing, if HP or
Subsidiary sells or transfers to a third party, or otherwise liquidates, its
interest in the relationship with the Nation, NORAM shall be entitled to receive
twenty-two percent (22%) of the consideration received by HP or Subsidiary for
such disposition.
6. Additional Projects. Should the Nation determine to establish any
-------------------
additional gaming facilities, including, without limitation, a facility in the
State of Oregon, and desire to enter into a relationship with any of HP, NORAM,
the Subsidiary, or any affiliate thereof, HP and NORAM agree that they shall
establish a new entity to jointly develop and operate such facilities, with both
HP and NORAM each owning fifty percent (50%) of such entity and both HP and
NORAM receiving fifty percent (50%) of any profit participation of such
facilities, provided that both HP and NORAM make financial contributions to such
--------
entity in an amount equal to fifty percent (50%) of the total development and
construction costs of such additional facilities.
7. Licensing Requirements. It is the intent of the parties that this
----------------------
Agreement be structured such that NORAM is not required to be licensed by the
Nation or the State of Washington with respect to the Facility. However, to the
extent that NORAM or any of its affiliates is required to comply with or be
licensed under applicable gaming laws in order to receive the NORAM Profit
Participation or reimbursement of the Pre-Development Amount or NORAM's
Verifiable Expenses, NORAM hereby acknowledges and agrees that its rights
hereunder are expressly subject to compliance with such laws on or before the
date on which the Facility is first open to the general public. As soon as
practicable, NORAM shall apply, at its sole expense, to obtain licensing and all
necessary approvals required with respect to the NORAM Profit Participation or
reimbursement of the Pre-Development Amount or NORAM's Verifiable Expenses, and
NORAM hereby agrees to use its best efforts to obtain (and to cause each of its
-4-
<PAGE>
directors, officers, equity owners and other affiliates, as applicable, to
obtain) all required licenses and approvals as promptly as possible. If NORAM
or any of its directors, officers, equity owners or other affiliates is unable,
at any time, to obtain or maintain such licensing or otherwise comply with
applicable law (such person or entity, a "NONCOMPLYING PERSON"), NORAM shall
take such action, including without limitation, a corporate restructuring, the
severing of its relationship with the Noncomplying Person or the assignment of
the NORAM Profit Participation in accordance with paragraph 0 hereof, in order
to comply with applicable law within thirty (30) days of the date on which the
Noncomplying Person was unable or ceased to comply with such law. If NORAM is
unable or unwilling to comply with the requirements of the preceding sentence,
the parties will use their best efforts to restructure the NORAM Profit
Participation so that the payment thereof will not violate any licensing
requirements, provided, however that if such a restructuring cannot be
accomplished, to HP's reasonable satisfaction, within a reasonable time, HP may
terminate the NORAM Profit Participation in order to avoid any adverse effect on
the Consulting Agreement, any other agreement between HP and the Nation or the
regulatory status of HP or any of its affiliates.
8. Assignment. NORAM may not assign any of its rights hereunder without the
----------
prior written consent of HP in its sole discretion. NORAM acknowledges that HP
may refuse to grant its consent to an assignment if, in HP or its counsel's
judgment, the assignee or its affiliates (i) would be a Noncomplying Person,
(ii) would otherwise be unsuitable for licensing in the State of Nevada or any
other jurisdiction which would require such entity to be licensed for purposes
of this Agreement, (iii) would otherwise adversely affect the license or
regulatory status of HP or any of its subsidiaries, or (iv) would not fulfill
all of NORAM'S obligations hereunder.
9. Further Assurances. Each party hereto agrees to execute any and all
------------------
further documents and writings and to perform such other actions which may be or
become necessary or expedient to effectuate and carry out this Agreement.
Without limiting the generality of the foregoing, each party agrees to execute,
deliver and if necessary record any and all additional instruments,
certifications, amendments, modifications and other documents as may be required
by the Secretary of the Interior, the Bureau of Indian Affairs, the National
Indian Gaming Commission, the State of Washington, the State of Nevada or any
applicable statute, rule or regulation in order to effectuate, complete,
perfect, continue or preserve the respective rights, obligations, liens and
interests of the parties hereto to the fullest extent permitted by law;
provided, that any such additional instrument, certification, amendment,
- --------
modification or other document shall not materially change the respective
rights, remedies or obligations of the parties under this Agreement or any other
agreement or document related hereto.
-5-
<PAGE>
10. Governing Law; Jurisdiction. All questions with respect to this Agreement
---------------------------
and the rights and liabilities of the parties will be governed by the laws of
the State of Washington, regardless of the choice of law provisions of
Washington or any other jurisdiction. Except for any actions seeking injunctive
relief, all disputes relating to this Agreement shall be settled by arbitration
conducted in Seattle, Washington pursuant to the rules of the American
Arbitration Association. Any and all disputes between the parties which may
arise pursuant to this Agreement not covered by arbitration will be heard and
determined before an appropriate federal or state court located in Seattle,
Washington. The parties hereto acknowledge that such court has the jurisdiction
to interpret and enforce the provisions of this Agreement and the parties waive
any and all objections that they may have as to personal jurisdiction or venue
in any of the above courts.
11. Miscellaneous. The validity, legality or enforceability of the remainder
-------------
of this Agreement will not be affected even if one or more of the provisions of
this Agreement will be held to be invalid, illegal or unenforceable in any
respect. All amendments to this Agreement shall be in writing signed by all of
the parties hereto. None of the provisions of this Agreement shall be for the
benefit of, or enforceable by, any third party. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, this Agreement is executed as of the day and year set
forth above.
Hollywood Park, Inc.
By: /s/ Bruce Rimbo
----------------------
Bruce Rimbo
Its: Executive Vice President/Race Track
Development
North American Sports
Management, Inc.
By: /s/ Alan Ginsburg
----------------------
Alan Ginsburg
Its: President
-6-
<PAGE>
EXHIBIT A
BUDGET DATED JULY 8, 1997
-7-
<PAGE>
Hollywood Park, Inc.
Exhibit 10.41
LOAN AGREEMENT
By and Between
YAKAMA TRIBAL GAMING CORPORATION
and
HP YAKAMA, INC.
Dated: September 11, 1997
<PAGE>
LOAN AGREEMENT
This LOAN AGREEMENT (this "Agreement") is entered into this 11th day of
September, 1997 by and between YAKAMA TRIBAL GAMING CORPORATION, ("Borrower"), a
tribal corporation established under the laws of The Confederated Tribes and
Bands of the Yakama Indian Nation (the "Nation"), having a mailing address of
P.O. Box 151, Toppenish, Washington 98948, and HP YAKAMA, INC. ("Lender"), a
Delaware corporation, having a place of business at c/o Hollywood Park, Inc.,
1050 South Prairie Avenue, Inglewood, California 90301, with reference to the
following facts and circumstances:
A. Nation is a federally recognized Indian tribe eligible for the special
programs and services which the United States provides to Indians because of
their status as Indians, and possessing sovereign powers of self-government.
B. Nation is the beneficial owner of certain real property (the
"Property") within its reservation in the State of Washington which is held in
trust by the United States for the benefit of the Nation and over which it
exercises governmental jurisdiction. The Property is more particularly described
in Exhibit A attached hereto.
---------
C. Nation has established Borrower as a special purpose tribal entity to
establish and operate the Enterprise (as defined in the Master Definition List
attached hereto as Exhibit B; all capitalized terms used herein without
---------
definition shall have the respective meanings described thereto in the Master
Definition List) at the Facility for the purpose of engaging in Gaming.
D. Nation has determined that the construction of the Facility and the
development and operation of the Enterprise is an important tribal governmental
project which is intended to improve the economic condition of the Nation and
its members, increase tribal revenues, enhance the Nation's economic self-
sufficiency, and enable the Nation's government to better serve the social,
economic, educational and health needs of the Nation's members.
E. Nation and Borrower are in need of the financial means to permit them
to construct, develop, operate and maintain the Facility and Gaming Enterprise.
F. Nation and Borrower have requested that Lender make a loan of up to
Nine Million and 00/100 Dollars ($9,000,000.00) (the "Loan"), and in connection
therewith, will execute and deliver to the Lender's benefit, among other things,
the Note and the Security Agreement (as such capitalized terms are defined
hereinafter). These documents, together with all other documents evidencing or
securing the Loan, are referred to jointly and severally herein as the "Loan
Documents."
G. This Agreement sets forth the terms and conditions of the obligations
undertaken by Borrower to induce Lender to make the Loan.
H. This Agreement is intended to be for the financing of the Facility and
the Enterprise only. Nothing herein is intended to be and shall not be
construed as constituting a contract for management services as contemplated by
IGRA, 25 U.S.C. sec. 2711 (or any successor or related statute or regulation).
The parties acknowledge that Lender is to have no management responsibilities
with respect to the Enterprise or Gaming activities whatsoever.
-1-
<PAGE>
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged by the parties, the parties
hereby agree, as of the date first stated above, as follows:
1. Defined Terms. In addition to the words and terms elsewhere defined
-------------
in this Agreement or in the Master Definition List, the words and terms set
forth in this Article I shall have the meanings herein set forth. All
references in this Agreement to any agreement or instrument shall include such
agreement or instrument as the same may be amended, restated, modified,
supplemented, replaced or substituted from time to time. Such definitions shall
be equally applicable to both singular and plural forms of any of the words and
terms therein defined. As used herein:
Council: The Tribal Council of the Nation.
-------
Financing Statements: The UCC-1 Financing Statements executed and
--------------------
delivered by Borrower to Lender naming Borrower as debtor and Lender as secured
party in order to perfect the security interests granted to the Lender in the
Security Agreement.
Indebtedness: (i) all indebtedness, whether or not represented by bonds,
------------
debentures, notes or other securities, for the repayment of money borrowed, (ii)
all deferred indebtedness for the payment of the purchase price of property or
assets purchased, (iii) all guaranties, endorsements, assumptions and other
contingent obligations in respect of, or to purchase or otherwise to acquire,
indebtedness of others, (iv) all indebtedness secured by any mortgage, pledge or
lien existing on property owned, subject to such mortgage, pledge or lien,
whether or not the indebtedness secured thereby shall have been assumed, and (v)
installment purchase contracts, loans secured by purchase money security,
interests, and lease-purchase agreements or capital leases.
Organizational Documents: Collectively, the following documents, each of
------------------------
which shall be in form and substance acceptable to the Lender:
(a) a copy of the Bylaws of the Borrower;
(b) a copy of the ordinances and/or resolutions of the Nation and the
Borrower authorizing the execution, delivery and performance of the
Loan Documents and the Transaction Documents and providing a limited
waiver of its sovereign immunity to the extent required hereby hereof,
and providing that all notice and other procedures in connection with
the adoption of such ordinances were complied with;
(c) certificates of the Nation and the Borrower as to organizational
matters in form and substance acceptable to Lender;
(d) financial statements of the Borrower and the Enterprise as may be
required to be delivered under the Transaction Documents.
2. The Loan.
--------
2.1 Funding Commitment. Lender hereby represents that upon the
------------------
Execution Date of this Agreement it shall have on hand or available to it for
funding hereunder, and shall loan to Borrower, and Borrower hereby agrees to
borrow and repay
-2-
<PAGE>
to Lender upon and after receipt of such amount (the "Loan"), the maximum sum of
Nine Million Dollars ($9,000,000)("Maximum Loan Amount"). The Loan shall be
evidenced by the Note.
2.2 Repayment. The full terms and conditions regarding repayment,
---------
interest, prepayment and other matters related to repayment of the Loan are as
set forth in the Promissory Note.
2.3 Purpose; Disbursement Conditions. The proceeds of the Loan shall
--------------------------------
be used solely in accordance with the Cost Breakdown to fund the construction,
development, equipping, furnishing, decorating, staffing (including training),
startup operating capital and related start-up needs of the Facility and the
Enterprise. Subject to the terms and conditions of this section, the Loan shall
be funded in such a manner so as to assure Borrower that at least sufficient
funds will be on hand to cover the next sixty (60) days of expenses, based upon
cash flow needs to be developed and approved by the Borrower and Lender.
Borrower shall not incur any construction or development obligations without its
reasonable satisfaction that adequate cash is available.
2.3.1 Cost Breakdown
--------------
(a) Lender will make disbursements of the Loan based on a
detailed breakdown (a "Cost Breakdown" and projected disbursement release
schedule) of construction, financing and other development costs, as more fully
described in the attached Exhibit C, which shall be submitted to, and approved
---------
prior to the initial disbursement of the Loan.
(b) The Cost Breakdown restricts disbursements to line items
in cost categories. Lender acknowledges that the Cost Breakdown includes funds
and disbursements which cover a mutually agreed upon amount of Nation's and
Borrower's reasonable legal fees in connection with the negotiation and
preparation of this Agreement, the other Loan Documents and the Transactional
Documents, and projected costs of efforts to obtain BIA and Commission approval
thereof. Borrower agrees to use disbursements solely in conformity with the Cost
Breakdown. If the Facility cannot be completed in strict conformity with the
most recently approved Cost Breakdown, Borrower must submit immediately to
Lender for its approval a revised Cost Breakdown. In the revised Cost Breakdown,
Borrower must identify requested changes in any line items and provide a written
statement of reasons for the changes. If further changes are required, Borrower
must seek Lender's approval. Lender need make no further disbursements unless
and until it approves the revised Cost Breakdown as provided, which approval (or
the denial thereof) shall be in Lender's reasonable discretion; provided,
however that, Lender shall approve all revised Cost Breakdowns necessitated as a
consequence of Consultant's default or breach of its obligations under Section
3(ii) of the Construction and Development Agreement so long as the aggregate
costs specified in such revised Cost Breakdown do not exceed $9,000,000. The
most recently approved Cost Breakdown supersedes all previously approved Cost
Breakdowns.
2.3.2 Loan in Balance; Borrower's Funds Account
-----------------------------------------
(a) The Loan is "in balance" whenever the amount of the
undistributed Loan funds, plus any sums provided or to be provided by Borrower
as shown in the Cost Breakdown most recently approved by Lender, are sufficient
in Lender's reasonable judgment to pay, through completion of the Facility and
maturity of the Loan, all costs of construction of the Facility and commencement
of initial operation
-3-
<PAGE>
of the Enterprise. The Loan is "out of balance" if and when Lender in its
reasonable judgment determines that the funds are insufficient to pay for all
such costs and sums payable under the Loan Documents.
(b) Borrower acknowledges the Loan may become "out of balance"
in numerous ways, not all of which may now be foreseen. Borrower further
acknowledges that the Loan may become "out of balance" from a shortage of funds
in any single line item or category of the Cost Breakdown, even if there are
undisbursed Loan funds in other line items or categories. Undisbursed Loan funds
in one category or line item (e.g., insurance costs) may not be applied to
another category or line item (e.g., HVAC) unless either the Cost Breakdown
allows such use (and only to the extent specifically allowed) or Lender consents
in writing to such use in each instance, which consent shall not be unreasonably
withheld.
2.3.3 Disbursement Conditions, Amounts and Procedures.
------------------------------------------------
The Disbursement Procedures attached as Exhibit D, set forth disbursement
---------
conditions, amounts and procedures applicable to the Loan. Lender will disburse
the Loan as described in Exhibit D and elsewhere in this Agreement.
---------
2.3.4 Repayment of Initial HP Loan and Pre-Development
------------------------------------------------
Amount. Borrower hereby agrees that: (i) the Initial HP Loan and fifty percent
- -------
(50%) of the Pre-Development Amount shall be repaid from the first advance of
funds to Borrower that occurs after Lender has received a license from the
Washington State Gambling Commission ("WSGC") as required by Applicable Law; and
(ii) at such time as advances under the Loan equal fifty percent (50%) of the
amounts required to fund construction of the Facility (as determined in
accordance with the Cost Breakdown), the remaining fifty percent (50%) of the
Pre-Development Amount shall be repaid as an advance under the Loan.
2.4 Conditions to Funding Obligation. The obligation of Lender to
--------------------------------
make or cause to be made the Loan pursuant to Article 2 hereof shall be subject
to, among other things, the following conditions precedent, unless Lender shall
have, in each instance, waived such requirement in writing:
2.4.1 Lender and any Affiliates, officers, shareholders,
directors, employees or others connected therewith, as may be required by
Applicable Law, shall have applied for and been granted a license or other
permission as may be required from the Tribal Gaming Commission, the WSGC, and
any other Governmental agency required by Applicable Law, approving said funding
by Lender; provided, however, that if Lender has received Interim Funding
Approval (as defined herein), the granting of a license from the WSGC shall not
be a condition to any funding up to the dollar amount authorized by such Interim
Funding Approval; and provided, further, that any funding made pursuant to an
Interim Funding Approval shall not be used to repay the Initial HP Loan or the
Predevelopment Amount. For purposes hereof, the term "Interim Funding Approval"
shall mean written authorization from the WSGC, in form and substance reasonably
satisfactory to Lender, approving the funding by Lender of a specified dollar
amount prior to the receipt of a license from the WSGC. Lender agrees to
promptly apply for such licenses and permissions as soon as practicable
following the date of this Agreement, shall cooperate fully with and
expeditiously to all requests of any such agency to provide any information
required to approve such licensing or other approval, and shall use commercially
reasonable efforts, to receive such approval within ninety (90) days of such
application. Lender shall bear all of its own costs and attorneys fees
associated with obtaining such licenses and permissions. Lender warrants and
represents that it knows of
-4-
<PAGE>
no information that would reasonably be expected to prevent it from obtaining
such licenses or approvals. The failure to obtain such licenses or approvals in
the time specified shall be cause, at Lender's or Borrower's discretion, to
terminate the Loan Documents and the Transaction Documents to which Lender is a
party, but shall not operate to forgive Borrower of its obligation to repay
monies previously advanced to it in accordance with the terms hereof or Nation
of its obligation to repay the Initial HP Loan pursuant to the terms of that
certain Promissory Note in the maximum principal amount of $800,000 dated August
4, 1997 by the Nation in favor of Lender.
2.4.2 All of the Loan Documents and the Transaction Documents,
including the Exhibits to be attached thereto, shall have been fully completed
and executed and delivered by both parties.
2.4.3 Lender shall have received verification in form and
substance satisfactory to it that the NIGC does not consider the Loan Documents
or Transaction Documents, or any of them taken individually, to constitute a
management contract as defined under IGRA, 25 U.S.C. (S) 2711, provided that
Nation shall seek such approval from the NIGC immediately after the Execution
Date, and if such verification is not approved within ninety (90) days after
such approval is sought, this Agreement and the other Loan Documents and
Transaction Documents shall terminate and be of no force and effect.
2.4.4 Lender shall have received approval of the Loan Documents
and the Transaction Documents, to the extent required by Applicable Law, from
the BIA. Nation shall seek such approval from the Secretary of the Interior
immediately after the Execution Date, and if such verification is not approved
within sixty (60) days after such approval is sought, this Agreement and the
other Transaction Documents shall terminate and be of no force and effect.
2.4.5 Lender shall have approved UCC, state and federal tax
lien, bankruptcy and judgment searches with respect to Nation, Borrower, the
Property, the Facility and the Collateral duly certified to a current date by
the appropriate filing officer, from the Secretary of State of Washington, the
BIA, and each and every other jurisdiction in which the Borrower or the Nation
owns assets (other than vehicles covered by a certificate of title), which
searches, if not disapproved within ten (10) days after execution of this
Agreement, shall be deemed approved.
2.4.6 Lender shall have received:
(a) an opinion of the Nation's and Borrower's Counsel,
in a form and substance acceptable to Lender, addressing such matters as Lender
may require;
(b) a copy of the Compact;
(c) the Organizational Documents;
(d) Borrower shall have directed Lender to pay all
disbursements to be made on the occasion of the initial advance;
(e) A certificate of an officer of the Nation and the
Borrower confirming the representations and warranties set forth herein;
-5-
<PAGE>
(f) All certificates of insurance and insurance
endorsements required herein; and
(g) All collateral schedules, security interest
subordination agreements, searches, releases and termination statements which
Lender may request to assure and confirm the creation, perfection and first
priority of the security interests created by the Security Agreement.
3. Warranties and Representations. The Nation and Borrower hereby
------------------------------
warrant, represent and certify to and for the benefit of Lender as follows,
which warranties, representations, certifications and agreements shall be
conditions to the disbursement of the Loan, shall survive the funding of the
Loan and shall remain continuing during all times when any portion of the Loan
remains outstanding:
3.1 Nation and Borrower each have the full power, authority and
authorization to execute, enter into, and deliver the Loan Documents and the
Transaction Documents to which each is a party and to perform the obligations
Nation and Borrower have assumed hereunder and thereunder, and to own and
operate the Facility and to conduct the Enterprise.
3.2 Borrower is authorized to conduct Gaming on the Property in the
manner and in the places anticipated in this Agreement, and to perform the
obligations it has assumed under this Agreement.
3.3 The execution, delivery and performance of the Loan Documents and
the Transaction Documents by the Nation and Borrower will not violate any law of
the Nation or any law, rule, regulation or court order applicable to the Nation
or Borrower, or result in the breach of or constitute a default under the
Compact, any indenture or loan, credit or other agreement or instrument to which
the Nation is a party or by which they or their assets may be bound or affected
or result in the creation or imposition of any lien, charge or encumbrance of
any nature upon any of its properties or assets contrary to the terms of any
such instrument or agreement;
3.4 The Loan Documents and the Transaction Documents (including,
without limitation, the waivers of sovereign immunity contained therein) have
been duly authorized, executed and delivered by the Nation and Borrower, and
constitute legal, valid and binding obligations of the Nation and Borrower,
enforceable in accordance with the terms thereof except as may be limited by
bankruptcy or other laws.
3.5 Any resolution of the Nation and Borrower approving and
authorizing the execution of the Loan Documents and the Transaction Documents
was duly adopted at a meeting of the authorizing body at a duly called and
convened meeting at which a quorum was present, and has not been repealed,
modified or amended since its adoption. All necessary resolutions or other
Tribal actions have been taken, and such actions are not subject to any reverse
referendum or similar requirement or provision.
3.6 There are no judgments filed or suits, actions or proceedings
pending, or to the knowledge of the Nation or Borrower, threatened against or
affecting the Nation or Borrower, or the Property or by any Court, arbitrator,
administrative agency or other governmental authority which, if adversely
determined, would materially and adversely affect the construction, development
or operation of the Enterprise contemplated in the Loan Documents and the
Transaction Documents.
-6-
<PAGE>
3.7 Borrower possesses adequate licenses, certificates, permits,
franchises, patents, copyrights, trademarks and trade names, or the rights
thereto, to conduct the Enterprise.
3.8 The Property, the Facility and the Enterprise and the intended
use thereof for the purpose and in the manner contemplated by this Agreement or
any other document related hereto are permitted by and will comply in all
material respects with all presently applicable Governmental use requirements.
3.9 The most recent financial statements furnished to Lender by
Borrower fairly present the financial condition of the Borrower at and as of the
date thereof, and, as of said date, there were no material liabilities of the
Borrower, direct or indirect, fixed or contingent, which were not reflected in
such financial statements or the notes thereto.
3.10 To the best of its knowledge, Borrower and the Nation have filed
all federal and state tax returns and reports required to be filed, which
returns properly reflect the taxes owed for the period covered thereby, and
except for taxes being contested in good faith by appropriate proceedings
Borrower and the Nation have paid or made appropriate provisions for the payment
of all taxes which may become due pursuant to said returns and for the payment
of all present installments of any assessments, fees and other Governmental
charges upon Borrower or upon any of its property.
3.11 No consent, approval or authorization of or permit or license
from or registration with or notice to any federal or state regulatory
authority, the BIA or any third party is required in connection with the making
or performance of the Loan Documents, the Transaction Documents or any document
or instrument related hereto or thereto, or, if so required, such consent,
approval, authorization, permit or license has been requested and/or obtained or
will be requested within five (5) business days of the Execution Date or such
registration has been made or notice has been given or such other appropriate
action has been taken on or prior to the date of such making or performance.
3.12 Neither the Nation nor Borrower is in default of a material
provision under any material agreement, instrument, decree or order to which it
is a party or to which it, the Property, the Facility or the Enterprise are
bound or affected.
3.13 The conduct and operation of the Enterprise by the Borrower is
not subject to registration with, notification to, or regulation, licensing,
franchising, consent or approval by any state or federal Governmental authority
or administrative agency, except (i) general laws and regulations which are not
related or applicable particularly or uniquely to the type of business conducted
by the Nation, which do not materially restrict or limit the business of the
Nation, and with which the Nation is in substantial compliance and (ii) laws and
regulations promulgated by or associated with the BIA, the NIGC or any State law
or agency with jurisdiction over gaming activities under the Compact, including
the Washington State Gaming Commission and the laws of the United States and the
State of Washington, all of which have been obtained or will be applied for in
accordance with the terms hereof.
3.14 No tax claims or governmental proceedings are pending or are
threatened against Borrower.
3.15 The Property and the Facility are in compliance with applicable
provisions of any specific or general plan and all zoning, subdivision,
environmental and
-7-
<PAGE>
health and safety rules, regulations, ordinances, directives and statutes
applicable to the Property and the Facility, its occupancy or use; all
restrictive covenants, zoning and subdivision ordinances and building laws and
other applicable governmental laws, ordinances and lawful requirements
applicable to the Property and the Facility have been complied with in all
material respects; and no order, notice, complaint, report, or warning from any
Governmental agency has been or will be received by or communicated to Nation
and/or Borrower, their respective agents, assigns, tenants, subcontractors, or
any other Person acting for Nation and/or Borrower, regarding the Property and
the Facility, its occupancy or use that has not been or will not be promptly
communicated and delivered to Lender.
3.16 As used herein, "Regulated Substance" means any substance,
material, or matter (including, without limitation, medical waste, asbestos,
oil, petroleum or chemical liquids or solids, liquids or gaseous products) that
may give rise to liability under any Environmental Laws (as defined herein). As
used herein, "Environmental Laws" means (i) any local, state or federal laws,
rules, ordinances or regulations either in existence as of the date hereof, or
enacted or promulgated after the date of this Agreement, that concern the
existence, management, control, discharge, treatment, containment, and/or
removal of substances or materials that are or may become a threat to public
health or the environment; or (ii) any common law theory based on nuisance,
trespass, negligence, strict liability, aiding and abetting, or other tortious
conduct.
3.16.1 To Borrower's and Nation's knowledge without investigation
or inquiry, there has been no deposit, storage, seepage or filtration of any
Regulated Substances at, upon, under or within the Property or any contiguous
real estate. To Borrower's and Nation's knowledge without investigation or
inquiry, neither the Nation nor the Borrower has caused or permitted to occur,
and shall not permit to exist, any condition that may cause a discharge of any
Regulated Substances at, upon, under or within the Property or on any contiguous
real estate.
3.16.2 Nation and Borrower shall comply strictly and in all
respects with the requirements of the Environmental Laws applicable to the
Property and related regulations and with all similar laws and regulations and
shall notify Lender immediately in the event of any discharge or discovery of
any Regulated Substance at, upon, under or within the Property and the Facility
of which Lender has notice. Nation and Borrower shall promptly forward to
Lender copies of all orders, notices, permits, applications or other
communications and reports of which Lender has notice in connection with any
discharge or the presence of any Regulated Substance or any other matters
relating to the Environmental Laws or any similar laws or regulations, as they
may affect the Property and the Facility.
4. Representations and Warranties of Lender. Lender, as an inducement to
----------------------------------------
the Nation to enter into this Agreement hereby represents, warrants and
covenants that:
4.1 Lender is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and is (or prior to the
providing of funds herein shall be) licensed, to conduct business in the State
of Washington as contemplated herein, and has applied for, and, except as
otherwise provided herein, shall obtain prior to providing such funds, such
licenses and background investigation approvals as may be required by Applicable
Law.
4.2 The execution, delivery and performance of the Loan Documents
have been duly authorized by Lender and such documents are valid and binding
-8-
<PAGE>
obligations of Lender in accordance with their terms thereof, except as such
enforcement may be limited by bankruptcy, insolvency or similar laws affecting
creditor's rights.
4.3 To the extent relevant under Applicable Law with respect to
Lender's obtaining Governmental approval of the Loan, and to the best of
Lender's knowledge, neither Lender nor any current Affiliate, shareholder,
officer, director or key employee thereof has ever had an application for a
gaming license rejected, or because of its or their own background caused the
application for a gaming license for another to be rejected, nor has any gaming-
related license which has been issued to any of such entities or persons ever
been suspended or revoked, and neither Lender nor any of its current Affiliates,
officers, directors or key employees has ever been convicted of a felony or a
gaming-related misdemeanor.
5. Affirmative Covenants. In addition to the covenants and agreements of
---------------------
the Nation set forth and contained in the other Loan Documents and the
Transaction Documents, the Nation and Borrower hereby covenant and agree to and
with Lender that, so long as the Note remains due and unpaid, or any other
obligation of Nation to Lender pursuant to the Loan Documents or the Transaction
Documents remains due under the terms hereof, Borrower will:
5.1 Use the proceeds of the Loan solely for the purposes of and in
accordance with the terms hereof;
5.2 Pay all taxes (including payroll and withholding taxes)
assessments and governmental charges prior to the time when any penalties or
interest accrue, unless contested in good faith by appropriate proceedings in
accordance with Section 10;
5.3 Continue the operation of the Enterprise; maintain all rights,
licenses, and franchises necessary for the operation of the Enterprise; and
comply with all Applicable Laws pertaining to the Enterprise, including but not
limited to IGRA;
5.4 Maintain property, liability, business interruption, worker's
compensation and other forms of insurance in commercially reasonable amounts
naming Lender as an additional insured and a loss payee, with thirty (30) day
cancellation notices to go to Lender.
5.5 Furnish to Lender as soon as possible and in any event within
five (5) business days after the Nation has obtained actual knowledge of the
occurrence of Event of Default or any event which with the passage of time or
the giving of notice or both would constitute an Event of Default, a statement
signed by Borrower setting forth details of such event and the action which
Borrower has taken, is taking, or proposes to take to correct the same;
5.6 Promptly give notice in writing to Lender of any and all
litigation involving Borrower, the Nation, the Enterprise or the Facility where
the amount in dispute exceeds $50,000 or is not covered by insurance, and of any
and all proceedings commenced against the Nation or Borrower by or before any
court or governmental or regulatory agency, which may have an adverse material
impact on the Enterprise or Borrower's ability to pay amounts due under the
Note;
5.7 Comply with the requirements of all Applicable Laws, rules,
regulations and orders of any Governmental Authority a breach of which would
materially and adversely affect the Enterprise, except where diligently
contested in good faith and by
-9-
<PAGE>
proper proceedings;
5.8 Obtain all necessary and appropriate state, federal, local,
tribal, and private clearances, authorizations, permits and licenses with
respect to the Enterprise;
5.9 Preserve all of the rights, privileges and franchises necessary
or desirable in the normal conduct of the Enterprise; conduct the Enterprise in
an orderly, efficient and regular manner; and not liquidate, merge, dissolve,
suspend business operations or assign, encumber, lease, transfer, encumber or
sell the Facility, the Enterprise, the Collateral or any portion thereof or all
or substantially all of its assets and the Nation shall not transfer any of its
ownership interest in Borrower without the prior written consent of Lender,
which consent (or the denial thereof) shall be in Lender's sole and absolute
discretion;
5.10 Keep all of the assets and properties necessary to its business,
including without limitation the Facility, in good working order and condition,
ordinary wear and tear excepted;
5.11 At all times keep proper books of record and accounts for the
Enterprise in accordance with GAAP, and, upon one (1) days notice of Lender,
provide any duly authorized representative of Lender access during normal
business hours to, and permit such representative to reasonably examine, copy or
make extracts from, any and all books, records and documents in the Nation's
possession or control relating to the Facility, the Property or the Enterprise;
5.12 Authorize and cause the Enterprise, on behalf of the Nation, to
make monthly principal payments under the Note to the extent it is required to
do so, under the Note, which authorization shall not be revoked, canceled, or
terminated;
5.13 Employ as Enterprise management and key operating personnel
persons with requisite and appropriate experience for the position for which
they are employed, taking into account Nation's Indian preference policy and its
goal of placing and advancing as many of Nation's qualified tribal members as
possible into Gaming Enterprise managerial, key and other employee positions;
and
5.14 Employ in positions other than as management and key operating
personnel a reasonable and appropriate number of persons with requisite and
appropriate experience for the position for which they are employed, at rates of
pay appropriate to the position; and establish, maintain and enforce operating
policies and procedures which reflect sound and reasonable business judgment and
which are appropriate for the Enterprise.
6. Financial Statements and Audits.
-------------------------------
6.1 Borrower shall deliver to the Lender as soon as practicable and
in any event within twenty (20) days after the end of each month, a statement of
Gross Revenue, Net Receipts, Net Revenue and Available Distributable Cash for
the preceding month, all in reasonable detail and certified by the chief
executive or financial officer of Borrower to have been prepared in accordance
with GAAP and this Agreement.
6.2 Borrower shall deliver to the Lender an accounts receivable
report and an accounts payable aging report of the Enterprise at such times as
the Lender may from time to time request.
-10-
<PAGE>
6.3 Borrower shall deliver to the Lender, all reports required by law
and applicable regulations submitted to or received from any federal, state or
Tribal gaming authorities within thirty (30) days of receipt thereof.
6.4 Borrower shall deliver to the Lender as soon as is practicable
and in any event within ninety (90) days after the close of each fiscal year,
(i) an audited balance sheet of the Enterprise and Borrower, (ii) an audited
statement of income of the Enterprise and Borrower, and (iii) an audited
statement of cash flows, in each case, of the Enterprise and Borrower, as at the
end of and for the fiscal year just closed, setting forth in comparative form
the corresponding figures for the preceding Fiscal Year all in reasonable detail
and certified (without any qualification or exception) by independent,
nationally recognized public accountants; and concurrently with such financial
statements, a written statement signed by such independent accountants (x) to
the effect that, in making the examination necessary for their certification of
such financial statements, they have not obtained any knowledge of the existence
of any Event of Default or potential Event of Default, or, if such independent
accountants shall have obtained from such examination any such knowledge, they
shall disclose in such written statement the Event of Default or potential Event
of Default and the nature thereof, it being understood that such independent
accountants shall be under no liability, directly, or indirectly, to anyone for
failure to obtain knowledge of any such Event of Default or potential Event of
Default, and (y) setting forth calculations of such auditors as to the
compliance by Borrower with all the covenants contained herein (including,
without limitation, calculations of Gross Gaming Revenues, Net Receipts, Net
Revenues and Available Distributable Cash).
6.5 Audits. Borrower shall cause to be performed on a timely basis,
------
and delivered to Lender within thirty (30) days of completion and receipt by
Borrower thereof, all audits of the Enterprise which must be performed in
accordance with Applicable Law. Such reports shall include at a minimum an
annual audit performed by a nationally recognized independent public accounting
firm in accordance with generally accepted auditing standards as applied to
casinos and sufficient to meet NIGC auditing requirements.
6.6 Government Reports. The Nation shall deliver to Lender all
------------------
reports to or from any Governmental agency within five (5) days of submission to
or receipt from such agency.
7. Negative Covenants. Nation and Borrower covenant and agree that
------------------
Borrower will not, except with the prior written consent of Lender (which
consent, or the denial thereof, shall be in Lender's sole and absolute
discretion):
7.1 Indebtedness. Incur any Indebtedness during the term of the Loan
------------
other than (i) the Loan, (ii) trade payables of the Enterprise incurred in the
ordinary course of business, and (iii) purchase money financing not in excess of
$100,000 at any one time outstanding;
7.2 Sale or Disposition of Property. Sell, dispose of, lease,
-------------------------------
assign, sublet, transfer, mortgage or encumber (whether voluntarily or by
operation of law) all or any part of its right, title or interest in or to the
Property, the Facility, the Collateral, the Enterprise or, in the case of
Nation, Borrower except (i) encumbrances to secure purchase money financing
permitted under Section 7.1 which attach solely to the asset being financed
thereby; and (ii) dispositions of equipment in connection with replacements with
equipment of equal or greater value;
-11-
<PAGE>
7.3 Alteration of Enterprise. Materially alter the nature of the
------------------------
Enterprise;
7.4 Excessive Compensation. Pay excessive or unreasonable salaries,
----------------------
bonuses, commissions, consultant fees, or other commissions to employees,
agents, contractors, vendors or the Tribal Gaming Commission;
7.5 Material Breach. Cause or permit any breach, default or event of
---------------
default to occur under any of the Transaction Documents which is not cured
within the applicable cure provisions thereof;
7.6 Consolidations; Mergers. Consolidate or merge with any
-----------------------
corporation; acquire any business, or acquire stock of any corporation; enter
into any partnership or joint venture; or form any subsidiary.
7.7 Distributions. Make any distribution of funds to the Nation or
-------------
any dependent or independent entity or Affiliate of the Nation or Borrower not
expressly permitted in the Loan Documents or the Transaction Documents; or
7.8 Investments. Lend or advance money or credit to any person
-----------
(other than customers of the Enterprise in the ordinary course of business,
consistent with industry standards and on commercially reasonable terms), or
invest in (by capital contribution, creation of subsidiaries or otherwise), or
purchase or repurchase the stock or Indebtedness, or all or a substantial part
of the assets or properties, of any person, or enter into any exchange of
securities with any person, or guarantee, assume, endorse or otherwise become
responsible for (directly or indirectly or by any instrument having the effect
of assuring any person's payment or performance or capability) the Indebtedness,
performance, obligations, stock or dividends of any person, or agree to do any
of the foregoing.
8. Events of Default. Each of the following occurrences shall constitute
-----------------
an Event of Default under this Agreement and under the other Loan Documents (any
such event, an "Event of Default"):
8.1 Failure of Borrower to pay any or all of the Indebtedness arising
out of this Agreement or the other Loan Documents or any amounts owing pursuant
to the Transaction Documents or provide any financial statements or audits
required pursuant to Section 6 hereof within five (5) days of when due;
8.2 Failure of Borrower to observe or perform any of its respective
covenants, conditions or agreements to be observed or performed by it under the
Loan Documents so as to render it in default thereof, including the failure to
cure as provided in such document, for a period of fifteen (15) days after
written notice specifying such default and requesting that it be remedied,
unless Lender has agreed in writing to an extension of such time prior to its
expiration, or for such longer period as may be reasonably necessary to remedy
such default (other than defaults which can be cured through payment of money),
provided that such breaching party is proceeding with reasonable diligence to
remedy the same;
8.3 Nation or Borrower shall file a petition in bankruptcy or for
reorganization or for an arrangement pursuant to any present or future state or
federal bankruptcy act or under any similar federal or state law, or shall be
adjudicated a bankrupt
-12-
<PAGE>
or insolvent, or shall make a general assignment for the benefit of its
creditors, or shall be unable to pay its debts generally as they become due
(other than as permitted in the Note and the Sublease); or if a petition or
answer proposing the adjudication of Nation or Borrower by Nation, Borrower or
any Affiliate of Nation or Borrower as a bankrupt or its reorganization under
any present or future state or federal bankruptcy act or any similar federal or
state law shall be filed in any court and such petition or answer shall not be
discharged or denied within thirty (30) days after the filing thereof, or if a
receiver, trustee or liquidator of Nation or Borrower of all or substantially
all of the assets of Nation or Borrower or of the Property, the Facility, the
Enterprise, or the Collateral shall be appointed in any proceeding and shall not
be discharged within thirty (30) days of such appointment; or if such party
shall consent to or acquiesce in such appointment; or if the property and estate
and interest of the Nation or Borrower in the Property, the Facility, the
Enterprise, or the Collateral or any part thereof shall be levied upon or
attached in any proceeding, and such levy or attachment shall remain
undischarged for a period of thirty (30) days during which execution has not
been effectively stayed; or
8.4 The Property, the Facility or the Enterprise is condemned,
destroyed or damaged to any material extent, and is not substantially restored
within one (1) year after the date thereof.
8.5 Any representation or warranty made by the Nation or Borrower in
any of the Loan Documents or the Transaction Documents shall prove to be untrue
or misleading in any material respect, or any financial information, or any
statement, certificate or report furnished hereunder or under any of the Loan
Documents or the Transaction Documents by or on behalf of the Nation or Borrower
shall prove to be untrue or misleading in any material respect on the date when
the facts set forth and recited therein are stated or certified.
8.6 The occurrence of an event of default of Borrower with respect to
any Indebtedness other than the Loan.
8.7 Any breach or default under any Transaction Document (taking into
account applicable cure periods set forth therein).
9. Rights and Remedies. Upon the occurrence of an Event of Default and
-------------------
at any time thereafter until such Event of Default is cured to the written
satisfaction of Lender, may, without notice or demand, exercise one or more of
the following rights and remedies:
9.1 So long as Lender has given the notice required pursuant to
Section 11.6.3.4 and the thirty (30) day period specified therein has expired
without cure, declare all unmatured obligations to be immediately due and
payable, and the same shall thereupon be immediately due and payable;
9.2 Offset any indebtedness Lender or any of its Affiliates then owes
to the Nation, whether or not then due, against any obligation then owed to the
Lender or any of its Affiliates, whether or not then due;
9.3 Exercise and enforce any and all rights and remedies available
upon default otherwise available under Applicable Law or any other Loan Document
or Transactional Document, including but not limited to the Security Agreement.
10. Permitted Contests. Neither the Nation nor the Borrower shall be
------------------
required
-13-
<PAGE>
to pay any tax, charge, assessment or imposition on Gross Revenues or Net
Revenues, or imposed on the Nation or Borrower with respect to the Facility or
the Enterprise, or on the Facility or Gaming Enterprise themselves, so long as
the Nation or Borrower shall contest, in good faith and at its own cost and
expense, the amount or validity thereof, in an appropriate manner or by
appropriate proceedings which shall operate during the pendency thereof to
prevent the collection of or other realization upon the tax, assessment, levy,
fee, rent, charge, lien or encumbrance so contested and to further prevent the
sale, forfeiture or loss of the Enterprise or Facility or any part thereof, to
satisfy the same. Each such contest shall be promptly prosecuted to final
conclusion (subject to the right of the Nation or Borrower to settle any such
contest), and in any event the Nation and Borrower will save Lender harmless
against all losses, judgments, decrees and costs (including attorneys fees and
expenses in connection therewith) and will, promptly after the final
determination of such contest or settlement thereof, pay and discharge the
amounts which shall be levied, assessed or imposed or determined to be payable
therein, together with all penalties, fines, interest, costs and expenses
thereon or in connection therewith. Nation or Borrower shall give Lender prompt
written notice of any such contest.
11. Miscellaneous.
-------------
11.1 Notices. Any notice required to be given pursuant to this
-------
Agreement shall be delivered by overnight courier or U.S. Express Mail with
notice deemed effective on the later of the first business day after deposit or
the day on which the courier confirms delivery, addressed as follows:
(a) If to the Borrower:
Yakama Tribal Gaming Corporation
c/o The Confederated Tribes and
Bands of the Yakama Indian Nation
P.O. Box 151
Toppenish, Washington 98948
With a copy to:
The Confederated Tribes and
Bands of the Yakama Indian Nation
P.O. Box 151
Toppenish, Washington 98948
Attn: Chairperson, Tribal Council
and:
Levine & Associates
2049 Century Park East, Suite 710
Los Angeles, CA 90017
Attn: Jerome Levine, Esq.
-14-
<PAGE>
(b) If to Lender:
HP Yakama, Inc.
c/o Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, CA 90301
Attn: Chief Financial Officer
With simultaneous copies to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attn: Alvin Segel, Esq.
or to such other address(es) as the parties provide to each other in writing.
11.2 Amendments, Etc. This Agreement and the Transaction Documents
---------------
may not be amended or modified, nor may any of their terms (including, without
limitation, terms affecting the maturity of or rate of interest on the Note) be
modified or waived, except by written instruments signed by Lender and Borrower.
11.3 Time of Essence. Time is of the essence in the performance of
---------------
this Agreement.
11.4 Binding Effect and Assignment. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of the Nation and Lender and their respective
successors and permitted assigns, except that neither party may transfer or
assign its rights hereunder without the prior written consent of the other.
11.5 Waivers. No waiver by a party of any right, remedy or Event of
-------
Default hereunder shall operate as a waiver of any other right, remedy, or Event
of Default or of the same right, remedy or Event of Default on a future
occasion. No delay on the part of a party in exercising any right or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right or remedy preclude other or future exercise thereof or the
exercise of any other right or remedy.
11.6 Limited Waiver of Sovereign Immunity.
------------------------------------
11.6.1 Retention of Sovereign Immunity. By this Agreement, the
-------------------------------
Nation and Borrower do not waive, limit or modify their respective sovereign
immunity from unconsented suit or proceedings in arbitration, except as provided
in this Section.
11.6.2 Scope of Waiver. Subject to the provisions of this
---------------
Section, the Nation and Borrower hereby expressly grant to Lender and other
Persons within the scope of Section 11.6.5, a limited waiver of their respective
sovereign immunity from unconsented suit and proceedings in arbitration, their
respective right to require exhaustion of Tribal remedies, its right to seek
Tribal remedies and their respective right to be sued in the Courts of the
Nation, as such Courts are or may be established, and consents to suit in
accordance with this Section.
-15-
<PAGE>
11.6.3 Procedural Requirements. The Nation and Borrower grant a
-----------------------
limited waiver of their respective sovereign immunity as to suit involving a
claim if, and only if, each and every one of the following conditions is met:
11.6.3.1 The claim is made by a party designated under
Section 11.6.5, and not by any other Person;
11.6.3.2 The claim alleges a breach by the Nation or
Borrower of one or more of the specific obligations or duties expressly assumed
by the Nation or Borrower under the terms of this Agreement or the other Loan
Documents (including, without limitation, all indemnification obligations
hereunder);
11.6.3.3 The claim seeks:
(a) some specific action, or discontinuance of
some action, by the Nation, Borrower or the Enterprise to bring the Nation or
Borrower into full compliance with the duties and obligations expressly assumed
by the Nation or Borrower under this Agreement or the other Loan Documents; or
(b) money damages for noncompliance with the
terms and provisions of this Agreement or the other Loan Documents (including,
without limitation, all indemnification obligations hereunder).
11.6.3.4 The claim is made in a detailed written statement to the
Nation or Borrower, as applicable, stating the specific action or discontinuance
of action by the Nation, Borrower, or the Enterprise which would cure the
alleged breach or non-performance, or the sum of money claimed to be due and
owing from the Nation or Borrower, as applicable, to Lender by reason of such
specific breach or non-performance, and, except where Lender is seeking
injunctive relief, the Nation or Borrower shall have thirty (30) calendar days
to cure such breach or non-performance or to make such payment before
arbitration or judicial proceedings may be instituted.
11.6.4 Time Period. With respect to any claim authorized in this
-----------
Section, initial judicial proceedings, as authorized herein, shall be commenced
within the later of two (2) years after the claim accrues or one year after the
claim is discovered, or such claim shall be forever barred. The waiver granted
herein shall commence on the Execution Date and shall continue for two years
following the expiration, termination, or cancellation of this Agreement or the
other Loan Documents (whichever is later), except that the waiver shall remain
effective for any proceedings then pending, and all appeals therefrom.
11.6.5 Recipient of Waiver. The recipients of the benefit of
-------------------
this waiver of sovereign immunity are limited to Lender, its successors and
assigns, and any and all Persons covered by the indemnification provisions
hereof.
11.6.6 Federal Question. The parties agree that any dispute
----------------
raised under the provisions of this Section 11.6 shall be resolved first
pursuant to applicable federal law, and if no federal law applies, pursuant to
the applicable laws of the State.
11.6.7 Service of Process. In any proceeding brought pursuant to
------------------
this Section 11.6, the Nation and Borrower consent to service made in accordance
with the notice provisions of this Agreement.
-16-
<PAGE>
11.6.8 Enforcement. The Nation and Borrower waive their
-----------
respective sovereign immunity from a judgment or order consistent with the terms
and provisions of this Section 11.6, which is final because either the time for
appeal thereof has expired or the judgment or order is issued by a court having
final appellate jurisdiction over the matter. The Nation and Borrower consent to
the jurisdiction of the United States District Court for the Eastern District of
Washington and any court having appellate jurisdiction thereover, consistent
with the terms and conditions of this Section 11.6. None of the parties shall
object to the jurisdiction or venue of said federal court. Without in any way
limiting the generality of the foregoing, the Nation and Borrower expressly
authorize any Governmental authorities who have the right and duty under
Applicable Law to take any action authorized by any court, to take such action
to give effect to any judgment entered against the Nation or Borrower,
including, without limitation, entering on to the Property, or any other lands
within the Nation's jurisdiction, and the Facility to seize possession of any
Collateral for the purpose of giving effect to any judgment entered against the
Nation or Borrower pursuant to this Section 11.6.
11.6.9 Assets Pledged to Satisfy Enforcement Proceedings. The
-------------------------------------------------
foregoing limited waiver of sovereign immunity is expressly conditioned on the
parties' agreement, set forth herein, that the only assets, including property
and funds, which shall be available, and which are thus specifically pledged and
assigned hereby, to satisfy any enforcement proceedings or judgment in
connection with this Agreement, or any other Loan Document, shall be limited to
(i) the Collateral, and (ii) possession of the Leased Premises as provided in
the Master Lease.
11.6.10 Limitation Upon Enforcement. Except with respect to
---------------------------
damages arising under the indemnification provisions of this Agreement awarded
against the Borrower and/or the Enterprise, damages awarded against the Nation,
Borrower, or the Enterprise shall be satisfied solely from assets specified in
Section 11.6.9, and shall not constitute a lien upon or be collectible from any
other income or assets of the Nation or Borrower, except with the written
consent of the Nation or Borrower.
11.6.11 Expenses of Judicial Enforcement. Except as ordered by a
--------------------------------
court of competent jurisdiction and as set forth in the indemnification
provisions hereof, all parties shall bear their own costs, including attorneys'
fees, in connection with any judicial proceedings authorized under this
Agreement. The parties expressly agree that this provision shall survive the
termination, for any reason, or expiration of this Agreement.
11.6.12 Guaranty. The Nation and Borrower agree not to revoke or
--------
limit, in whole or in part, the limited waiver of sovereign immunity of the
Nation and Borrower contained in this Section 11.6 or in any way attempt to
revoke or limit, in whole or in part, such limited waiver of sovereign immunity.
In the event of any such revocation or attempted revocation, the parties
expressly recognize and agree that there remains no adequate remedy at law
available to Lender or the Persons covered by the indemnification provisions
hereof, and the Nation and Borrower hereby consent to the entry of appropriate
injunctive relief consistent with the terms and conditions of this Agreement, as
may be granted by any court of competent jurisdiction.
11.7 Remedies Cumulative. The rights and remedies herein specified of
-------------------
the parties hereto are cumulative and not exclusive of any rights or remedies
which the parties hereto would otherwise have at law or in equity or by statute.
11.8 Governing Law and Entire Agreement. This Agreement shall be
----------------------------------
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<PAGE>
governed by federal law, if applicable, then by the laws of the State of
Washington. The Loan Documents and the Transaction Documents contain the entire
agreement of the parties on the matters covered herein.
11.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be an original,
but such counterparts shall together constitute one and the same instrument.
11.10 Not Joint Venturers. Lender is not, and shall not by reason of
-------------------
any provision of any of the Transaction Documents be deemed to be, a joint
venturer with or partner or agent of the Nation and/or Borrower.
12. Indemnification.
---------------
12.1 Indemnification by Nation and Borrower. The Nation and Borrower
--------------------------------------
agree to indemnify and hold harmless Lender, its directors, officers, agents and
employees, against any and all claims of or losses, damages or liability to
third parties to which Lender, its directors, officers, agents and employees,
may become subject under any law in connection with the carrying out of the
transactions contemplated by this Agreement or the other Loan Documents, or the
conduct of any activity on the Property (other than as a result of gross
negligence or willful misconduct of any such party) and to reimburse Lender, its
directors, officers, agents and employees, for any out-of-pocket legal and other
expenses (including reasonable attorneys' fees) incurred by Lender, its
directors, officers, agents and employees, in connection with investigating any
such losses, claims, damages or liabilities or in connection with defending any
actions relating thereto. Lender agrees, at the request and reasonable expense
of the Nation and Borrower, to cooperate in the making of any investigation in
defense of any such claim and promptly to assert any or all of the rights and
privileges and defenses which may be available to Lender. The Nation and
Borrower further release and agree to hold harmless Lender, its directors,
officers, agents and employees, from any claims of or losses, damages or
liability to third parties arising out of any covenant, representation or
undertaking of the Nation or Borrower contained in this Agreement, or the other
Loan Documents. The provisions of this Section shall survive the termination of
this Agreement and the other Loan Documents.
12.1.1 Indemnification by Lender. Lender agrees to indemnify and
-------------------------
hold harmless the Nation and Borrower and their respective directors, officers,
agents and employees, against any and all claims of or losses, damages or
liability to third parties to which the Nation and Borrower and their respective
directors, officers, agents and employees, may become subject under any law as a
result of the gross negligence or willful misconduct of the directors, officers,
agents or employees of the Lender, and to reimburse the Nation and Borrower and
their respective directors, officers, agents and employees, for any out-of-
pocket legal and other expenses (including reasonable attorneys' fees) incurred
by the Nation or Borrower or their respective directors, officers, agents and
employees, in connection with investigating any such losses, claims, damages or
liabilities or in connection with defending any actions relating thereto. The
Nation and Borrower agree, at the request and reasonable expense of the Lender,
to cooperate in the making of any investigation in defense of any such claim and
promptly to assert any or all of the rights and privileges and defenses which
may be available to the Nation and Borrower. Lender further releases and agrees
to hold harmless the Nation and Borrower and their respective directors,
officers, agents and employees, from any claims of or losses, damages or
liability to third parties arising out of any covenant, representation or
warranty of the Lender contained in this Agreement or the other Loan Documents.
The provisions
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<PAGE>
of this Section shall survive the termination of this Agreement and the other
Loan Documents.
12.1.2 Rights of Persons Covered. The Persons covered by the
-------------------------
indemnification provisions hereof shall be third party beneficiaries of this
Agreement and shall have the right, subject to the provisions of this Agreement,
to enforce such indemnification provisions.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives and delivered as of the day
and year first above written.
"Borrower"
YAKAMA TRIBAL GAMING CORPORATION,
a tribal corporation formed under the laws of
the Confederated Nations and Bands of the
Yakama Indian Nation
By: /s/ Ross S. Sockzehigh
---------------------------------
Name: Ross S. Sockzehigh
-------------------------------
Title: Chairman of the Board
------------------------------
"Lender"
HP YAKAMA, INC.,
a Delaware corporation
By:/s/ Bruce Rimbo
---------------------------------
Name: Bruce Rimbo
-------------------------------
Title: Vice President and Secretary
------------------------------
As to Sections 3, 5, 6, 7, 10, 11.4, 11.6, 11.8 and 12 only
"Nation"
CONFEDERATED NATIONS AND BANDS OF THE
YAKAMA INDIAN NATION,
a federally recognized Indian Nation
By:/s/ Ross K. Sockzehigh
---------------------------------
Name: Ross K. Sockzehigh
-------------------------------
Title: Chairman
------------------------------
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<PAGE>
Exhibit A
---------
[description of property]
-1-
<PAGE>
Exhibit B
---------
Master Definitions List
-1-
<PAGE>
Exhibit C
---------
COST BREAKDOWNS
The Cost Breakdown shall be an analysis, prepared by Borrower and approved
by Lender, of the total amount needed by Borrower to construct, develop and
initiate operations of the Facility and the Enterprise and to perform Borrower's
other obligations under the Loan Documents and the Transaction Documents.
The Cost Breakdown shall set forth the maximum amount of Loan funds
allocated to each line item. Lender will disburse the Loan according to those
allocations, all on the terms and subject to the conditions of this Agreement.
Whenever a revised Cost Breakdown is required, Borrower must prepare and
submit it for Lender's approval all in accordance with this Agreement. Any
revised Cost Breakdown approved by Lender will be a more recent version of the
analysis provided in the initial cost breakdown, and must include revised
versions of any detailed breakdowns included in the initial cost breakdown.
The signature of Borrower or any of its authorized agents or
representatives on the initial Cost Breakdown or any revised Cost Breakdown
constitutes representations and warranties made by Borrower to Lender under this
Agreement.
-1-
<PAGE>
Exhibit D
---------
DISBURSEMENT PROCEDURES
I. Conditions to Disbursement
--------------------------
Before Lender becomes obligated to make any disbursement under this
Agreement, all conditions to the disbursement must have been satisfied at
Borrower's sole cost and expense in a manner reasonably acceptable to Lender.
No waiver of any condition to disbursement is effective unless expressly
made by Lender in writing. If Lender makes a disbursement before fulfillment of
one or more required conditions, that disbursement alone will not be a waiver of
such conditions, and Lender reserves the right to require their fulfillment
before making any subsequent disbursements. If all conditions are not
satisfied, Lender, acting in its reasonable judgment, may disburse as to certain
items or categories of costs and not others.
I.1 Loan Closing and First Disbursement
-----------------------------------
Lender is not required to make the first disbursement until all
conditions to close the Loan are satisfied. In addition to the conditions set
forth in the body of this Agreement, these conditions include the following:
(a) Lender must receive a Draw Request, as defined and described
hereinafter.
(b) The plans and specifications for the Facility must be
approved by Lender.
(c) The account(s) to be established for funding of the Loan
must be opened.
(d) Lender must receive such financial statements, tax returns
and other financial information as it may reasonably require regarding the
financial condition of Borrower or any of its other parties or the Property.
(e) Lender shall have received and approved the first Cost
Breakdown.
I.2 Subsequent Disbursements
------------------------
After the first disbursement, Lender shall not be required to make any
further disbursements if:
(a) Lender does not receive a Draw Request; or
(b) Lender has not received copies of all building permits (or
their equivalent) for the Facility or evidence satisfactory to Lender from the
appropriate Governmental authorities that, except for the payment of permit
issuance fees, all conditions to the issuance of permits (or their equivalent)
have been satisfied and the Governmental authorities are in a position to
deliver such permits (or their equivalent) to Borrower; or
(c) The Facility (or any portion thereof) is materially damaged
and not
-2-
<PAGE>
repaired, unless Lender receives funds from Borrower or insurance proceeds
sufficient to pay for all repairs in a timely manner; or
(d) The Property or any interest in it is affected by eminent
domain or condemnation proceedings; or
(e) Lender receives a bonded stop notice or notice of a
mechanics lien or notice of a claim from a contractor for unpaid and delinquent
amounts owing, unless Borrower files a bond satisfactory to Lender; or
(f) The Loan is "out of balance" according to this Agreement; or
(g) Lender determines that there has been or will be a material
failure to meet the projections of the Cost Breakdown, and Borrower fails to
comply with any demand by Lender to submit a revised Cost Breakdown or Lender
does not approve any revised Cost Breakdown proposed by Borrower; or
(h) Lender has notified Borrower that a reasonable basis to
believe that a breach, default or failure of condition of or under any of the
Transaction Documents exists.
(i) An Event of Default has occurred and is continuing, or an
event has occurred that with notice or the passage of time could become such an
Event of Default.
II. Disbursement Amounts
--------------------
Set forth in column (_) of the cost breakdown is a "Loan Disbursement
Budget" broken down by line items. From each line item, Lender will disburse
Loan funds in a total amount not to exceed the Loan Disbursement Budget for that
line item, taking into account all prior disbursements, any applicable retention
requirements and any reallocation of funds to which Lender has consented in
writing.
III. Disbursement Procedures
-----------------------
III.1 Draw Requests
-------------
(a) For each disbursement, Borrower must submit to Lender a
written request signed by Borrower or its agent designated below and its
contractor, together with such documentation and information as Lender requires
(collectively, a "Draw Request"). Each Draw Request must be acceptable in form
and substance to Lender in the exercise of its reasonable judgment and include
such items of information and documentation, including invoices, canceled
checks, lien waivers and other evidence as Lender requires, to show that
Borrower is in compliance with the Loan Documents. If Lender so requires, any
given Draw Request also must include written certification by the Facility
architect and the contractor that the Facility as constructed to date conform to
the plans and specifications previously approved by Lender.
(b) In each Draw Request, Borrower must request disbursement
for one or more specified line items of the cost breakdown. Borrower may submit
a Draw Request to Lender on or about the 1st day of each month, unless Lender
agrees to make disbursements more frequently than once a month. Borrower must
use all Loan funds strictly for the purposes for which they are disbursed.
-3-
<PAGE>
(c) Unless Borrower has notified Lender in writing to the
contrary, each Draw Request constitutes Borrower's representation and warranty
to Lender that (i) the Loan is "in balance," (ii) all prior disbursements, as
well as that currently being requested, were and will be used in strict
compliance with the cost breakdown and (iii) no Event of Default has occurred,
and no event has occurred that, with notice or the passage of time, could become
an Event of Default.
III.2 Account
-------
Unless Lender and Borrower have agreed otherwise in writing, Lender
shall make disbursements into a single account established for the funding of
the Loan.
III.3 Disbursements to Other Parties
------------------------------
Notwithstanding the foregoing, Lender if it so chooses may make
disbursements directly to Borrower's contractor, subcontractors, laborers or
material suppliers designated by Borrower.
III.4 Interest on Disbursements
-------------------------
Interest on each disbursement, whether initiated by Borrower or
Lender, is payable from the time Lender debits the Loan funds in the amount of
the disbursement.
-4-
<PAGE>
III.5 Authorized Signatories
----------------------
Borrower authorizes either Richard Steve Isaac or Mitzie Smart Lowit
to sign all Draw Requests and other documents in connection with the
administration of the Loan. Borrower represents and warrants to Lender that the
following signatures are specimen signatures of the persons named in the
preceding sentence:
_____________________________
_____________________________
-5-
<PAGE>
SECURED PROMISSORY NOTE
$9,000,000 Toppenish, Washington
September 11, 1997
FOR VALUE RECEIVED, the YAKAMA TRIBAL GAMING CORPORATION, a tribal
corporation established under the laws of Confederated Bands and Tribes of the
Yakama Indian Nation ("Maker"), agrees and promises to pay to the order of HP
YAKAMA, INC., a Delaware corporation, its endorsees, successors and assigns
("Holder"), at c/o Hollywood Park, Inc., 1050 South Prairie Avenue, Inglewood,
California 90301, or such other place as Holder may from time to time at its
sole discretion designate, the principal sum of Nine Million Dollars
($9,000,000), or so much thereof as may be advanced together with interest on
the unpaid principal balance at an annual rate of interest of ten percent
(10%)(the "Stated Rate").
1. Loan Agreement. All capitalized terms used herein and not defined
--------------
herein shall have the respective meanings ascribed thereto in the Loan Agreement
by and between Maker and Holder of even date herewith (the "Loan Agreement").
This Secured Promissory Note is issued pursuant to the Loan Agreement, and is
entitled to the benefits thereof, including, without limitation, all collateral
provided for therein or in connection therewith. Reference is made to the Loan
Agreement for certain rights of Holder as to the acceleration of the unpaid
principal balance hereof before its stated maturity upon the happening of
certain events and/or the giving of notice and/or the passage of time.
2. Repayment. Principal and interest at the Stated Rate shall be paid in
---------
eighty-four (84) equal consecutive monthly installments on the first day of each
month beginning on the twentieth (20) day of the first complete month following
the Commencement Date. Interest shall be payable monthly from and after such
date from Net Receipts irrespective of the amount of Available Distributable
Cash and shall be paid prior to setasides for reserves or payment of the Tribal
Preference or Tribal Rent. Principal shall only be payable from and to the
extent of Available Distributable Cash remaining and shall be paid prior to
Sublease Rent or Tribal Rent. Principal or interest amounts unable to be repaid
in any month due to insufficiency of Available Distributable Cash shall be added
to the next month's payment. The remaining principal balance hereof together
with all accrued interest thereon shall be due and payable on the seventh (7th)
anniversary of the Commencement Date.
3. Limitations on Repayment: The parties acknowledge that the Borrower's
------------------------
obligations to repay the Loan are subject to the following limitations:
(a) On September 8, 1997, $30,000 of the principal amount of the Loan
shall be forgiven if the Commencement Date has not yet occurred, and an
additional like amount of the principal of the Loan shall be forgiven in each
month thereafter, on the eighth day thereof, if the Commencement Date has not
yet occurred, provided, that the maximum amount forgiven pursuant to this
--------
Section shall not exceed $150,000.
(b) All Loan amounts accrued but remaining unpaid more than 31 days
(extended by the number of days of any periods during which the term of the
Consulting Agreement has been extended pursuant to Section 3.5 of the Consulting
Agreement) after the earlier of (i) the date upon which the Consulting Agreement
is terminated by the Nation as a consequence of a default thereunder by HP
Yakama Consulting, and (ii) the last day of the eighty-fourth month following
the Commencement Date as a consequence of insufficient Net Receipts (as to
interest payable hereunder or Available Distributable
<PAGE>
Cash (as to principal payable hereunder) (unless accelerated prior thereto in
accordance with the Loan Agreement) shall no longer by payable.
4. Application of Payments; Calculations. All payments made hereunder
-------------------------------------
shall be made in lawful money of the United States applied first to interest and
then to principal. Interest shall be calculated on the basis of a 360 day year
consisting of twelve (12) thirty (30) day months.
5. Prepayments. This Secured Promissory Note may be prepaid by Maker (a)
-----------
in whole or (b) in part in amounts not less than Fifty Thousand Dollars
($50,000), at anytime, upon 15 days advance written notice to Holder, without
any prepayment premium or penalty. Upon such prepayment, the remaining
principal balance shall not be reamortized, and monthly installments shall
neither be readjusted nor avoided; rather, prepayments shall be applied to the
final remaining principal payments owing pursuant to the amortization schedule
in inverse order. Prepayment of this Note does not, and shall not be deemed to,
relieve Maker from any other obligations to the Holder or to any other party
under the Transaction Documents, or any one of them (including, without
limitation, the obligation to make monthly rental payments under the Sublease
(including, without limitation, the obligation to pay Sublease Rent as provided
therein)).
6. Mandatory Prepayments. Maker shall pay and there shall become due and
---------------------
payable, concurrently with the receipt by Maker of the proceeds of (i) any sale,
lease, conveyance, transfer, financing or disposition of any asset of Maker from
or relating to the Facility, the Property or the Enterprise (including, without
limitation, insurance proceeds) in excess of $100,000 in any calendar year, or
(ii) cash receipts of Maker from or relating to the Facility, the Property or
the Enterprise not in the ordinary course of business, a prepayment in respect
of the indebtedness evidenced hereby equal to 100% of such proceeds, such
prepayment to be applied to the final remaining principal payments owing
pursuant to the amortization schedule in inverse order in accord with the
preceding paragraph).
7. Grid. Each portion of the amount of each disbursement of the Loan
----
which Holder has made to Maker and the amount of each payment or prepayment made
on account of principal thereof shall be recorded by Holder and endorsed on the
grid schedule attached hereto, which is made a part of this Secured Promissory
Note (or so noted in its records); provided, however, that the failure of Holder
-------- -------
to make any such endorsement or recordation shall not in any manner affect the
obligation of Maker to repay the Loan in accordance with the terms hereof. Any
such endorsement or recordation shall represent prima facie evidence of the date
and amount of the date and amount of disbursements of the Loan or any payment or
prepayment of principal thereon, absent manifest error.
8. Late Charge. In the event that any payment required hereunder is not
-----------
paid on its due date, for any reason other than a good faith accounting dispute
as to the amount of such payment which is payable in accordance herewith Maker
shall pay a late charge equal to 2% of the late payment to defray the costs of
Holder incident to collecting and accounting for such payment. This late charge
shall not be deemed to excuse a late payment or be deemed a waiver of any other
rights Holder may have (including, without limitation, the right to declare the
entire unpaid principal and interest immediately due and payable upon the
occurrence of certain events).
9. Waiver of Sovereign Immunity. Maker hereby waives its sovereign
----------------------------
immunity from suit and consents to jurisdiction and arbitration as provided in
the Loan
2
<PAGE>
Agreement.
10. Notices. All notices to be given by any party to the other hereunder
-------
shall be in writing and deemed to have been given when delivered in accordance
with the Loan Agreement.
11. Governing Law. Subject to the waiver of sovereign immunity set forth
-------------
in the Loan Agreement, this Secured Promissory Note shall be governed by federal
law, if applicable, then by the laws of the State of Washington.
12. Time of Essence; Waiver. Time is of the essence. No delay or
-----------------------
omission on the part of Holder in exercising any right hereunder shall operate
as a waiver of such right or of any other remedy under this Secured Promissory
Note. A waiver on any one occasion shall not be construed as a bar to or waiver
of any such right or remedy on a future occasion.
13. Waivers; Consent. Presentment for payment, protest and notice of non-
----------------
payment are waived; provided, however, that the foregoing waiver shall not be
deemed to be applicable to the notice requirements set forth in the waiver of
sovereign immunity set forth in the Loan Agreement. Consent is given to any
extension or alteration of the time or terms of payment hereof, any renewal, and
any release or resort to any party liable for payment hereof.
14. Binding Effect. This Secured Promissory Note shall be binding upon
--------------
and inure to the benefit of Maker and Holder and their respective successors and
assigns.
3
<PAGE>
IN WITNESS WHEREOF, Maker has duly executed this Secured Promissory Note as
of the date first above written.
YAKAMA TRIBAL GAMING CORPORATION, a tribal
corporation established under the laws of
Confederated Bands and Tribes of the Yakama
Indian Nation
By:/s/ Ross K. Sockzehigh
----------------------
Name: Ross K. Sockzehigh
------------------
Title: Chairman of the Board
---------------------
4
<PAGE>
GRID SCHEDULE
-------------
<TABLE>
<CAPTION>
Unpaid
Amount of Amount of Principal Name of Person
Date Disbursement Principal Paid Balance Making Notion
- ---- ------------ -------------- --------- --------------
<S> <C> <C> <C> <C>
</TABLE>
5
<PAGE>
Hollywood Park, Inc.
Exhibit 10.42
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Security Agreement") made and delivered as
of this 11th day of September, 1997, by and between (i) YAKAMA TRIBAL GAMING
CORPORATION, a tribal corporation established under the laws of the Confederated
Tribes and Bands of the Yakama Indian Nation ("Debtor") (references herein to
and Debtor referring to Debtor only and not referring to Nation), THE
CONFEDERATED TRIBES AND BANDS OF THE YAKAMA INDIAN NATION ("Nation") and (ii) HP
YAKAMA, INC., a Delaware corporation ("Secured Party"), with reference to the
following facts and circumstances:
A. The Secured Party and the Debtor have entered into a Loan Agreement
dated as of the date first set forth above (as the same may be amended,
modified, restated or supplemented from time to time (the "Loan Agreement," all
capitalized terms used herein without definition shall have the respective
meanings ascribed thereto in the Loan Agreement) pertaining to the Loan.
B. The Secured Party and the Debtor have entered into the Sublease
pursuant to which the Debtor is leasing the Leased Premises (as defined in the
Sublease) from the Secured Party.
C. The Loan and the Debtor's obligations under the Sublease are to be
secured by, among other things, this Security Agreement, creating a first
priority security interest in the Collateral (as defined hereinafter) in favor
of Secured Party.
D. As used herein the term "Indebtedness Secured Hereby" shall mean (i)
payment of the indebtedness evidenced by performance of the terms and conditions
of, and payment of all other sums with interest thereon becoming due and payable
to the Secured Party and contained in the Note and the Loan Agreement; (ii)
payment of the rent owing under, performance of the terms and conditions of, and
payment of all other sums with interest thereon becoming due and payable to the
Secured Party and contained in the Sublease; and (iii) performance and discharge
of each and every obligation, covenant and agreement, whether involving the
payment of money or not, contained in any of the other Loan Documents or the
other Transaction Documents.
NOW THEREFORE, in consideration of the Loan and the Sublease and in order
to induce the Secured Party to make the Loan and enter into the Sublease, the
parties agree as follows:
1. For valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Debtor and Nation hereby convey, assign, transfer and
grant to the Secured Party a first priority security interest in all of their
present right and hereafter acquired right, title and interest in and to the
following (collectively, the "Collateral"):
a. all present and hereafter acquired equipment owned by the Debtor in
all of its forms and wherever located
b. any and all machinery, equipment, controls, attachments, parts, tools,
furniture and furnishings used in the conduct of the Enterprise, and
all attachments, accessories, accessions, replacements, substitutions,
additions and improvements to any of the foregoing (the property in a.
and b. being referred to collectively herein as the "Equipment");
c. all insurance proceeds (including but not limited to proceeds of
insurance and refunds of unearned premiums) due or to become due to
Debtor or
<PAGE>
Nation under, and all other rights of Debtor or Nation under or with
respect to, any and all policies of insurance covering all or any
portion of the Property, the Facility, the Leased Premises, and/or the
Equipment;
d. all Available Distributable Cash; and
e. all proceeds and products of the foregoing, including but not limited
to accounts, general intangibles, equipment, inventory, money, deposit
accounts, goods, chattel paper, documents, instruments and insurance
proceeds, all refunds, equities, benefits, book equities, returns,
credits, revolving fund withholdings, return of capital and
certificates evidencing any right to receive payment in any form from
any marketer of goods or inventory and any other tangible or
intangible property received upon the sale, lease, transfer or other
disposition of any of the foregoing.
2. The Debtor warrants and represents to Secured Party that:
a. Debtor and Nation are the true and lawful owners of the Collateral and
have good and valid title to the Collateral free and clear from any
and all liens, security interests, encumbrances or other rights, title
or interest of any other person, firm or corporation, excepting the
rights and interest of the Secured Party hereunder. The Equipment has
been delivered to and accepted and installed by the Debtor, and is in
good working order. The Equipment is all of the equipment used in the
conduct of the Enterprise.
b. The Collateral is not subject to any other lien or security interests
(including, without limitation, "blanket" security interests).
c. The Debtor shall defend the Secured Party's interest in the Collateral
against all claims and demands of all or any other persons at any time
claiming the same or any interest therein adverse to the Secured
Party.
d. There are no actions at law, suits in equity, or proceedings before
any governmental agency, commission, bureau or tribunal or any
arbitration proceedings that if adversely determined would adversely
affect the present condition, financial or otherwise, of the
Collateral or would adversely affect the right of the Debtor to pledge
and assign all or any part of the Collateral or rights and security
afforded Secured Party hereunder.
e. The Equipment is and will be used for the business purpose of
equipping the Enterprise located within the Facility. The Collateral
will at all times be located at the Property.
f. The Debtor will keep the Collateral insured at all times against loss
by fire and/or other hazards concerning which, in the judgment of the
Secured Party, insurance protection is reasonably necessary, in a
company or companies reasonably satisfactory to the Secured Party and
in amounts sufficient to protect Secured Party against loss or damage
to said Collateral and will pay the premiums therefore; such policy or
policies of insurance will be delivered to and held by the Secured
Party, together with loss payable clauses in favor of the Secured
Party as its interest may appear, in form satisfactory to the Secured
Party; and Secured Party may act as attorney for Debtor in obtaining,
adjusting, settling and canceling such
-2-
<PAGE>
insurance and endorsing any drafts.
g. The Debtor will keep the Equipment in good condition and repair,
reasonable wear and tear excepted. The Debtor will permit Secured
Party to enter upon any lands owned, leased or otherwise controlled by
or on behalf of the Debtor at reasonable times for the purpose of
examining the Collateral, subject to the security requirements of the
Enterprise.
h. The Debtor will pay as part of the Indebtedness Secured Hereby all
amounts, including reasonable attorneys' fees and legal expenses, with
interest thereon, paid by Secured Party (a) for taxes, levies,
insurance, repairs to, or maintenance of the Collateral, and (b) in
taking possession of, disposing of or preserving the Collateral after
any default hereinafter described.
i. Debtor will not without the prior written consent of Secured Party (a)
permit any liens or security interests (other than the security
interest granted hereby) to attach to any of the Collateral; (b)
permit any of the Collateral to be levied upon or attached by legal
process; (c) except as permitted by the Loan Agreement, sell or offer
to sell or otherwise transfer the Collateral; (d) do or permit
anything to be done that may impair the value of the Collateral; or
(e) except as permitted by the Loan Agreement, remove or permit the
Collateral to be removed from the Property.
j. If any of the Collateral is or is to become a fixture, the Debtor
agrees to furnish Secured Party, at its request, with a statement or
statements signed by all persons who have or claim an interest in the
real estate concerned, which statements shall provide that the signer
consents to the security interest created hereby and disclaims any
interest in the Collateral as fixtures.
k. Debtor acknowledges that the Equipment is of the design, capacity and
manufacture specified for and by the Debtor and that Debtor is
satisfied that the same is suitable for its intended purposes. Debtor
further acknowledges and agrees that Secured Party is not a
manufacturer or vendor of the Equipment and that Secured Party has not
made, and does not make, any representation, warranty or covenant with
respect to merchantability, fitness for any purpose, condition,
quality, delivery, installation, durability, patent, copyright or
trademark infringement, suitability or capability of any item of
Equipment in any respect or in connection with any other purpose or
use of Debtor, or any other representation, warranty or covenant of
any kind or character expressed or implied with respect thereto.
Debtor accordingly agrees not to assert any claim whatsoever against
Secured Party based thereon. Secured Party shall have no obligation
to install, erect, test, adjust or service the Equipment. Debtor
shall look to the manufacturer or vendor for any claims related to the
Equipment.
l. Debtor shall provide Secured Party with sixty (60) days' prior written
notice of any change in its name or the location of its principal
offices.
m. The Debtor will derive economic benefit from the Loan and the
Sublease, and the Debtor acknowledges that Secured Party is relying
upon the security interests granted herein and in the remaining
Collateral Agreements
-3-
<PAGE>
in making the Loan.
3. This Agreement constitutes a Security Agreement under the Uniform
Commercial Code (the "UCC") as in effect in the State of Washington.
4. a. Debtor shall give prompt written notice to Secured Party of any
damage or injury to the Property, the Facility, the Leased Premises
and/or the Equipment or of any loss or diminution in value thereof,
and Debtor shall give whatever notice to insurers of any such damage,
injury, loss or diminution of value as may be required. All insurance
proceeds of the Property, the Facility, the Leased Premises and/or the
Equipment and all causes of action, claims, compensation, awards and
recoveries for any damage or injury to the Property, the Facility, the
Leased Premises and/or the Equipment or for any loss or diminution in
value of the Property, the Facility, the Leased Premises and/or the
Equipment are hereby assigned to and shall be paid to Secured Party,
and Debtor agrees to execute such further evidence of such assignment
of such insurance proceeds, causes of action, claims, compensation,
awards and recoveries as Secured Party may require. Secured Party may
(but shall not be obligated to) participate in any suits or
proceedings relating to any such proceeds, causes of action, claims,
compensation, awards or recoveries and may join with Debtor in
adjusting any loss covered by insurance. Debtor hereby directs the
issuer of any such policy to pay any such money directly to Secured
Party. Both before and after the occurrence of an Event of Default
(defined below), Secured Party may (but need not) in Secured Party's
own name or in Debtor's name, execute and deliver proofs of claim,
receive all such money, endorse checks and other instruments
representing payment of such money and adjust, litigate, compromise or
release any claim against the issuer of any such policy.
b. In the event of loss, Secured Party is hereby authorized either (a) to
settle, adjust or compromise any claim under the above insurance
policies without consent of Debtor, which consent is hereby expressly
waived; or (b) to allow Debtor to agree with the insurance company or
companies on the amount to be paid upon the loss. In either case,
Secured Party is authorized to collect and receive any such insurance
money. Notwithstanding anything to the contrary contained herein,
Debtor may, without the consent of Secured Party, so long as Debtor is
not in default hereunder, settle, adjust or compromise any claim in an
original amount less than Fifty Thousand Dollars ($50,000).
c. Notwithstanding anything to the contrary herein contained, if (i) the
insurers do not deny liability as to the original amount of the claim;
(ii) no Event of Default exists and no event exists that, with the
passage of time or the giving of notice or both, would constitute such
an Event of Default; (iii) Secured Party has received evidence,
reasonably satisfactory to Secured Party in its sole discretion, that
there are sufficient funds available and/or committed, including such
insurance proceeds, to effectuate a restoration and to cover the
expenses of operating and maintaining the Property, the Facility, the
Leased Premises and/or the Equipment, (iv) Secured Party has
reasonably approved the plans and specifications to be used in
connection with such restoration; and (v) the restoration will be
completed within one (1) year (and in any event prior to the last day
of the seventy-eighth (78th)
-4-
<PAGE>
month following the Commencement Date) and will return the Property,
the Facility, the Leased Premises and/or the Equipment to
substantially the same condition, character and utility and to at
least the value that existed immediately prior to such casualty; then
such insurance proceeds shall be used to pay Debtor for the cost of
rebuilding, replacing, restoring or repairing the Property, the
Facility, the Leased Premises and/or the Equipment so insured in
accordance with the disbursement procedures herein contained. The 31
day time period set forth in Section 3(b) of the Note shall be
extended by the number of days in which the Enterprise is not
operational as a consequence of such restoration. In all other cases,
such insurance proceeds may at Secured Party's discretion, either be
applied in payment or reduction of the Indebtedness Secured Hereby
(whether then due or not) or be held by Secured Party and used to
reimburse Debtor or any other party for the cost of the rebuilding,
replacing, restoring or repairing the Property, the Facility, the
Leased Premises and/or the Equipment so insured.
d. In the event Debtor is entitled (whether pursuant to the terms hereof
or pursuant to Secured Party's election or otherwise) to payment out
of insurance proceeds for any repair, rebuilding, restoration or
replacement, such proceeds shall be made available, from time to time,
upon Secured Party being furnished with satisfactory evidence of
progress in such repair, rebuilding, restoration or replacement,
together with satisfactory evidence of the estimated cost of
completion thereof and together with any such architect's
certificates, waivers of lien, contractors' sworn statements and other
evidence of cost and payments as Secured Party may require and
approve. If the estimated cost of the work exceeds ten percent (10%)
of the original principal amount of the indebtedness secured hereby,
Secured Party shall also be furnished with all plans and
specifications for such rebuilding, replacement, restoration or repair
as Secured Party may require and reasonably approve. At all times the
undisbursed balance of said proceeds remaining in the hands of Secured
Party shall be at least sufficient to pay for the cost of completion
of the work free and clear of liens. Any surplus that may remain out
of said insurance proceeds after payment of such cost of repair,
rebuilding, restoration or replacement shall, at the option of Secured
Party, be applied on account of the Indebtedness Secured Hereby
(whether then due or not).
5. Upon the occurrence of an Event of Default and or any event that, with
the passage of time or the giving of notice or both, would constitute such an
Event of Default, Secured Party may require Debtor to establish a cash
management and depositary arrangement acceptable to Secured Party in its sole
and absolute discretion pursuant to which, among other things, (i) the
depositary bank shall enter into an agreement in form and substance acceptable
to Secured Party in its sole and absolute discretion acknowledging Secured
Party's first priority security interest in the Available Distributable Cash and
waiving all set off, banker's lien and similar rights, (ii) Debtor shall cause
all revenues of the Enterprise to be transferred to such depositary bank
pursuant thereto, and (iii) the parties shall agree as to use of revenues from
the Enterprise for the Debtor's continued operation of the Enterprise
(including, without limitation, the continued payment of normal and necessary
operating expenses thereof).
6. Upon one (1) day's written notice, Debtor shall make available for
inspection and copying by Secured Party all present and future books, records,
accounting
-5-
<PAGE>
logs and stored data pertaining to the Collateral or to the Enterprise,
including, without limitation, computer programs, software and the equipment
containing said books, records, accounting logs and stored data.
7. (a) Upon the occurrence and during the continuance of an Event of
Default, the Secured Party or its designee may without demand, advertisement or
notice of any kind (except such notice as may be required under the UCC) all of
which are, to the extent permitted by law, hereby expressly waived:
(i) Exercise any of the remedies available to a secured party under the
UCC or other applicable law;
(ii) Proceed immediately to exercise each and all of the powers, rights,
and privileges reserved or granted to Secured Party hereunder and
under the Note and the Sublease and the other Loan Documents and the
Transaction Documents;
(iii) Proceed to protect and enforce this Security Agreement by suits or
proceedings or otherwise, and for the enforcement of any other legal
or equity available to Secured Party; and/or
(iv) Realize upon the Collateral and hold, own or dispose of the same as
its own property to the extent permitted pursuant to Applicable Law.
(b) Upon the occurrence of an Event of Default the Debtor shall make
the Collateral available to Secured Party or its designee at a place to be
designated by Secured Party or its designee which is reasonably convenient, and
authorizes Secured Party or its designee to enter the Property and/or the
Facility to assemble, possess, store and sell the Collateral. Debtor further
agrees to pay all costs and expenses of Secured Party or its designee, including
reasonable attorneys' fees, in the enforcement of any of Secured Party's rights
hereunder. If any notice of sale, disposition or other intended action by
Secured Party or its designee is required by law to be given to Debtor, such
notice shall be deemed reasonably and properly given if mailed to Debtor at the
notice address specified in accordance with the Loan Agreement at least ten (10)
days before such sale, disposition or other intended action. Waiver of any
default hereunder by Secured Party shall not be waiver of any other default or
of a same default on any other occasion. No delay or failure by Secured Party
to exercise any right or remedy shall be a waiver of such right or remedy and no
single or partial exercise by Secured Party of any right or remedy shall
preclude other or further exercise thereof or the exercise of any other right or
remedy at any other time.
8. Debtor agrees to execute such financing statements or other
instruments as may be required under the UCC or similar state, federal or tribal
laws to perfect the security interest hereunder and shall from time to time at
Debtor's expense execute and deliver such assignments and endorsements and file
such additional financing statements or other instruments as may be required to
create and continue to perfect the security interest intended to be created
herein. Debtor hereby authorizes Secured Party at Debtor's expense, to do all
reasonable acts and things which Secured Party may deem necessary to perfect and
continue perfected the security interest created by this Security Agreement and
to protect the Collateral.
9. This Security Agreement shall be governed by federal law, if
applicable, then by the laws of the State of Washington.
-6-
<PAGE>
10. Without in any way limiting the waiver of sovereign immunity contained
herein, the Nation and the Debtor expressly authorize any governmental or other
agency authorities who have the right and duty under Applicable Law to take any
and all action authorized or ordered by any court, including without limitation,
entering Indian land within the Nation's jurisdiction for the purpose of
repossessing the Collateral or otherwise giving effect to any judgment entered.
It is the intent of the parties that the Secured Party or its designee will be
able to obtain possession of the Collateral in accordance with the rights
afforded it under applicable laws and/or any court order.
11. This Security Agreement and each and every covenant and agreement and
other provisions hereunder shall be binding upon the Debtor and its successors
and assigns and shall inure to the benefit of Secured Party and its successors
and assigns.
12. Any unenforceability or invalidity of any provision hereof shall not
render any other provision or provisions herein contained unenforceable or
invalid.
13. Debtor hereby waives its sovereign immunity from suit and consents to
jurisdiction to the extent provided and as limited in the Loan Agreement.
14. Any notice any party may hereto desire may be required to give to any
other party shall be sent in accordance with the Loan Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Security Agreement to
be duly executed as of the date first above written.
HP YAKAMA, INC.,
a Delaware corporation
By: /s/ Bruce Rimbo
--------------------------------
Name: Bruce Rimbo
----------------------------
Title: Vice President and Secretary
----------------------------
YAKAMA TRIBAL GAMING CORPORATION,
a tribal corporation established
under the laws of the Confederated
Tribes and Bands of the Yakama Indian Nation
By: /s/ Ross K. Sockzehigh
--------------------------------
Name: Ross K. Sockzehigh
----------------------------
Title: Chairman of the Board
----------------------------
THE CONFEDERATED TRIBES
AND BANDS OF THE YAKAMA INDIAN NATION
By: /s/ Ross K. Sockzehigh
--------------------------------
-7-
<PAGE>
Name: Ross K. Sockzehigh
--------------------------
Title: Chairman
--------------------------
-8-
<PAGE>
Hollywood Park, Inc.
Exhibit 10.43
MASTER LEASE
by and between
THE CONFEDERATED TRIBES AND BANDS
OF THE YAKAMA INDIAN NATION
and
HP YAKAMA, INC.
September 11, 1997
<PAGE>
U.S. Department of the Interior
Bureau of Indian Affairs
Lessee: HP Yakama, Inc. Lease No. ____________
Lessor: The Confederated Tribes and Bands
of the Yakama Indian Nation
-i-
<PAGE>
Administrative
Fee: $ ___
UNITED STATES
DEPARTMENT OF THE INTERIOR
Bureau of Indian Affairs
Yakama Agency
Yakama Reservation
Toppenish, Washington
Lease No._________
Approved:_________
Land:____________
_________________
MASTER LEASE
This LEASE, handsigned and notarized in quadruplicate, is made and entered
into this 11th day of September, 1997 by and between the parties duly identified
below as "Lessor" and "Lessee":
Lessor: The Confederated Tribes and Bands
of the Yakama Indian Nation
P.O. Box 151
Toppenish, Washington 98948-0151
Lessee: HP Yakama, Inc.
c/o Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
under the provisions of the Act of August 9, 1955 (69 Stat. 539; 25 U.S.C. (S)
415), as amended, and as supplemented by Part 162 - Leasing and Permitting, of
the Code of Federal Regulations, Title 25, INDIANS, and any amendments thereto
relative to Business Leases on restricted Indian lands, all of which by
reference are made a part hereof.
<PAGE>
ARTICLE 1
---------
Unless otherwise defined herein, the capitalized words and terms used in
this Lease shall have the meanings set forth in Exhibit A hereto, "Master
Definitions List."
ARTICLE 2
---------
LAND DESCRIPTION
----------------
For and in consideration of the rents and agreements hereinafter set out,
the Lessor hereby leases to the Lessee the lands described, and identified in
Exhibit B, together with all buildings and structures thereon and improvements
thereto (the "Leased Premises"). Said lands are a part of the lands held in
trust by the United States for the benefit of Lessor situated in Yakima County,
Washington, and subject to any prior, valid existing rights of way.
ARTICLE 3
---------
TERM
----
The initial term of this Lease shall begin on the Effective Date and shall
continue thereafter until the seventh (7th) anniversary of the Commencement
Date; provided, however, that (i) the term of this Lease shall be extended by
-------- -------
the number of days of any periods during which the term of the Consulting
Agreement has been extended pursuant to Section 3.5 of the Consulting Agreement,
and no rent shall be payable hereunder during such suspension period and (ii)
this Lease shall terminate and be of no force and effect if the Effective Date
has not occurred on or before August 1, 1998.
ARTICLE 4
---------
PURPOSE OF THIS LEASE
---------------------
For and on behalf of the Lessor Lessee shall use the Leased Premises for
the specific purposes of developing the Facility to be operated in accordance
with Applicable Law or other lawful uses not inconsistent with the customs and
practices of the Nation. If the Lessee uses the Leased Premises for any purpose
not set forth herein without the consent and written approval of the Lessor and
the Secretary, such use shall constitute grounds for cancellation of this Lease.
ARTICLE 5
---------
RENTALS
-------
The Lessee, in consideration of the foregoing, agrees to pay directly to
the Lessor at the address set forth herein in lawful money of the United States
of America, rent of One Thousand Dollars ($1,000) per month. The parties hereto
agree and acknowledge that such rent is based on the appraised fair annual
rental as determined by the Bureau of Indian Affairs, after taking into account
the additional consideration from Lessee in the
-2-
<PAGE>
making of this Lease, including Lessee's financing of the development of the
Leased Premises and Lessee's concurrence with the terms and conditions of the
Loan Documents and the other Transaction Documents. It is expressly agreed that
the parties waive periodic review of Lease consideration pursuant to 25 C.F.R.
(S) 162.8.
ARTICLE 6
---------
PAYMENT OF RENTS
----------------
Rental payments due hereunder shall be paid in arrears with the first
monthly payment due on the first day of the first complete month following the
month in which the Commencement Date occurs. Rental payments shall be paid
directly to the Lessor at the address specified herein unless and until Lessee
is notified in writing by the Secretary to remit such payments elsewhere.
There is no additional consideration for this Lease based upon income
produced on the Leased Premises.
Upon receiving written notice from the Secretary, Lessee shall make rent
payments accordingly, commencing with the next rental due date and, if requested
------------
by the Secretary, will furnish surety bond as provided in Article 13 (Rental
Bond).
All rents shall be paid without prior notice or demand.
ARTICLE 7
---------
NONRESPONSIBILITY NOTICES
-------------------------
Prior to the commencement of the development of the Facility or
commencement or construction of each other improvement on the Property, or any
repair or alteration thereto, the Lessee shall give the Secretary ten (10) days
advance notice in writing of intention to begin said activity, in order that
nonresponsibility notices may be posted and recorded as provided by State and
local laws. Lessor hereby authorizes the Secretary to post said notices on
Lessor's behalf. Nothing contained herein shall be construed as a waiver of
immunity of trust property from mechanics' nonresponsibility notices while the
Leased Premises are in a trust status.
ARTICLE 8
---------
PUBLIC LIABILITY INSURANCE
--------------------------
At all times during the terms of this Lease, Lessee shall carry a public
liability insurance policy in commercially reasonable amounts. Said policy is
to be written jointly to protect Lessee and Lessor. Evidence, acceptable to the
Secretary, of such coverage or a change in coverage shall be furnished to Yakama
Agency Superintendent, as an authorized representative of the Secretary. Should
Lessee sublease the Leased Premises, the sublease therefor may contain a
provision shifting responsibility for carrying the insurance provided for in
this article to Lessee's lessee thereunder, provided that Lessee and Lessor
herein are named covered parties to such insurance.
-3-
<PAGE>
ARTICLE 9
---------
FIRE AND DAMAGE INSURANCE
-------------------------
Lessee shall, from the date of approval of this Lease, carry fire insurance
with extended coverage endorsements, to include, without limitation, vandalism,
jointly in the names of Lessee and Lessor, covering the full value of all
improvements and buildings on the Leased Premises. Evidence, acceptable to the
Secretary, of such coverage or a change in coverage shall be furnished to an
authorized representative of the Secretary. Should Lessee sublease the Leased
Premises, the sublease therefor may contain a provision shifting responsibility
for carrying the insurance provided for in this Article to Lessee's lessee
thereunder, provided that Lessee and Lessor herein are named covered parties to
such insurance.
Premiums will be paid as an operating expense of the Enterprise. Lessee
shall deposit with the Secretary evidence, acceptable to the Secretary, that
said premiums or other charges have been paid.
Lessee hereby agrees that damage to or destruction of the Leased Premises
(or any portion thereof) where the proceeds received from insurance are being
applied towards reconstruction in accordance with the Security Agreement shall
not cause termination of this Lease or authorize the Lessee or those claiming
by, through, or under it to quit or surrender possession of said lands or any
part thereof, and shall not release the Lessee in any way from its liability to
pay Lessor the considerations hereinabove provided for or from any other
agreements, covenants, or conditions of this Lease.
If damage to or destruction of the Leased Premises (or any portion thereof)
occurs and there are no insurance proceeds or the insurance proceeds are not
being applied towards reconstruction in accordance with the Security Agreement,
Lessee may elect to either terminate this Lease as of the date the damage
occurred, or repair the damage, in which case this Lease shall remain in full
force and effect.
The Term shall be extended to account for the time required to reconstruct
the portion of the Facility damaged and being reconstructed in accordance
herewith.
ARTICLE 10
----------
REMOVAL OF IMPROVEMENTS
-----------------------
All buildings and improvements, excluding removable personal property and
trade fixtures of Lessee and any sublessee (including, without limitation, any
Collateral in which Lessee continues to hold an interest pursuant to the
Security Agreement), on the Leased Premises shall remain on the Leased Premises
after termination of this Lease and shall thereupon become the property of the
Lessor. The term "removable personal property and trade fixtures" as used in
this Article shall not include property, other than the Collateral, which
normally would be attached or affixed to the buildings, improvements, or land in
such a way that it would become a part of the realty, regardless of whether such
property is in fact so placed in, or on, or affixed to the buildings,
improvements, or land in such a way as to legally retain the characteristics of
personal property. Personal property and trade fixtures of Lessee and any
sublessee (including, without limitation the Collateral) may be removed by
Lessee and/or any sublessee at any
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<PAGE>
time during the term of this Lease or within ninety (90) days after termination
of this Lease or within such other reasonable time after the termination of this
Lease as may be agreed upon between Lessor and Lessee and/or any sublessee. If
Lessee and/or any sublessee fails to remove the same within ninety (90) days
after termination of this Lease, or such other reasonable time as agreed upon,
said fixtures and property shall be deemed abandoned and shall become the
property of Lessor.
ARTICLE 11
----------
CONSTRUCTION, MAINTENANCE, REPAIR, ALTERATION
---------------------------------------------
Subject to Article 7 (Nonresponsibility Notices) of this Lease and approval
of the Lessor, the Lessee shall have the right at any time during the term of
this Lease to make alterations, additions, or repairs to any improvement or
building on the Leased Premises with a cost not in excess of $100,000 in any
year or otherwise with the consent of Lessor. Except in connection with
alterations, additions or repairs pursuant to the preceding sentence the
development of the Facility in accordance with the plans and specifications
therefor, removal or demolition of any improvement or building on the Leased
Premises shall not be made without the prior approval of the Lessor. The Lessee
shall at all times during the term of this Lease maintain the Leased Premises in
good order and repair and in a neat, sanitary and attractive condition and in
compliance with Applicable Laws.
ARTICLE 12
----------
RENTAL BOND
-----------
Upon the occurrence of an Event of Default under this Lease or if Lessee is
consistently delinquent in making its rental payments hereunder, the Secretary
may require the Lessee to post a bond satisfactory to the Secretary in a sum of
not less than the succeeding 3 months' rent, which bond shall be deposited with
the Secretary. Any other type of security which may be offered by Lessee to
satisfy the requirement of this Article will be given reasonable consideration
by the Secretary, but it is agreed that acceptance of other security shall be at
the sole discretion of the Lessor and the Secretary. It is agreed that bond
required by this provision will guarantee payment of rent only.
ARTICLE 13
----------
COMPANIES BONDING AND INSURING
------------------------------
All corporate surety bonds provided by Lessee in compliance with this Lease
shall be furnished by companies holding certificates of authority from the
Secretary of the Treasury as acceptable sureties of Federal bonds. Insurance
policies shall be furnished and maintained by such responsible companies as are
rate A plus--Class XI or better in the current edition of Best's Insurance
Guide.
-5-
<PAGE>
ARTICLE 14
----------
SUBLEASE, ASSIGNMENT, TRANSFER
------------------------------
The Lessee shall not, unless otherwise expressly authorized herein,
sublease, assign or transfer any right to or interest in this Lease to any
Person other than an Affiliate without the written consent of the Lessor and
approval of the Secretary and sureties. No such sublease, assignment or
transfer shall be valid or binding without said consent and approval and then
only upon the condition that sublessee has agreed in writing that in the event
of conflict between the provisions of this Lease and of said sublease, the
provisions of this Lease shall prevail. The term of any sublease shall not
exceed the term of this Lease. No sublease shall release the Lessee from any
obligation under this Lease or substitute the sublessee for the Lessee
hereunder. Any sublease made, except as aforesaid shall be deemed a breach of
this Lease.
Lessor and the Secretary, in approving this Lease, acknowledge and consent
in advance to Lessee's sublease of the Leased Premises to the Tribal Corporation
pursuant to the Sublease. The parties acknowledge and agree that the Tribal
Corporation will assume Lessee's obligations under this Lease pursuant to the
Sublease submitted herewith to the Secretary for approval.
If a proposal to assign this Lease to a qualified assignee or other
successor in interest is submitted while a default in this Lease exists, neither
the Secretary nor the Lessor will be obligated to consider said proposal until
the Lease is restored to good standing.
ARTICLE 15
----------
STATUS OF SUBLEASES
-------------------
Termination of this Lease, by cancellation or otherwise, shall not serve to
cancel approved sublease and/or subtenancies (including, without limitation, the
Sublease), but shall operate as an assignment to Lessor of any and all such
subleases and/or subtenancies.
ARTICLE 16
----------
AGREEMENTS FOR UTILITY FACILITIES
---------------------------------
Upon entering into any agreements with public utility companies and the
State or any of its political subdivisions to provide utility services to the
Leased Premises, the Lessee shall furnish the Lessor and the Secretary with
executed copies thereof together with a plat or diagram showing the true
location of the utility lines to be constructed.
ARTICLE 17
----------
RIGHTS OF WAY FOR STREETS AND UTILITY EASEMENTS
-----------------------------------------------
Any rights of way for streets and utility facilities for the enjoyment and
development of the Lease Premises shall be granted by the Secretary in
accordance with the approved general development plan and pursuant to the Act of
February 5, 1948 (62
-6-
<PAGE>
Stat. 17), and any amendment thereto, and as implemented by regulations
appearing in Title 25, INDIANS, Code of Federal Regulations, at Part 169.
ARTICLE 18
----------
ENCUMBRANCE
-----------
This Lease, or any right to or interest in this Lease, or any of the Leased
Premises, may not be encumbered by the Lessee without the written approval of
the Secretary and the Lessor.
ARTICLE 19
----------
IMPOSITIONS
-----------
Lessee shall pay all taxes, license and permit fees, charges for public
utilities of any kind including, both utilities supplied by Governmental
authorities and utilities supplied by private companies, and obligations for any
and all other Governmental charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind and nature
whatsoever, including, but not limited to, assessments for sidewalks, streets,
sewers, water, or any public improvements, and any other improvements or
benefits which shall, prior to the Effective Date, be made, assessed, levied, or
imposed upon, or become due and payable in connection with or a lien upon, the
Leased Premises, or any part thereof, (all of such items being herein referred
to as "Impositions") prior to any fine, penalty, interest or other charge which
may be added thereto for the nonpayment thereof being assessed. Impositions
shall be deemed to be operating expenses of the Enterprise and shall be paid and
accounted for as such.
Any Imposition, or part thereof properly allocable to periods before or
after the Term, shall be equitably apportioned between Lessor and Lessee. The
parties agree to send promptly to the other party copies of any notices in
respect of any Imposition, and to furnish to the other party, upon specific
request in each instance, official receipts of the proper taxing or other
Governmental authorities or other satisfactory proof, evidencing the full
payment of that party's share any and all such Impositions.
ARTICLE 20
----------
DEFAULT
-------
In the event of default by Lessee in any of the terms and provisions of
this Lease, Lessee shall be given notice citing the defaults in the Lease and
allowing Lessee, thirty (30) days from receipt of said notice to cure such
default or show cause (including, without limitation, pursuant to Article 34
(Sublessee Responsibility) hereof why this Lease should not be cancelled.
Lessor and the Secretary may grant a reasonable extension of time is Lessee so
requests.
If Lessee fails to cure such default or show cause why this Lease should
not be cancelled, the Secretary may terminate the Lease and the Lessee shall
quit and surrender the Leased Premises to Lessor. The Secretary may proceed by
suit or otherwise to enforce collection or rents or compliance with other
obligations or provisions of the Lease.
-7-
<PAGE>
Any action taken or suffered by Lessee as a debtor under any insolvency or
bankruptcy act shall constitute a breach of this Lease, and in such event,
subject to the provisions of the Bankruptcy Act of the United States, the Lessor
or the Secretary may enter the premises and remove all persons and property
therefrom, excluding the persons and property belonging to authorized sublessees
and may relet the premises without terminating this Lease.
ARTICLE 21
----------
LESSEE'S OBLIGATIONS
--------------------
Because the Leased Premises are held in trust by the United States, all of
the Lessee's obligations under this Lease and the obligations of Lessee's
sureties, are to the United States as well as to the Lessor.
Lessee shall furnish the Secretary and Lessor documentary evidence of any
change in name or structure of its organization within thirty (30) days of such
change. Lessee shall also keep the Lessor and the Secretary informed of any
change of person and/or persons authorized to represent Lessee and execute
documents on behalf of Lessee and shall furnish the Secretary documentary
evidence of such change in authority within ten (10) days of any such change.
ARTICLE 22
----------
NOTICES
-------
Any notice required to be given pursuant to this Lease shall be delivered
by overnight courier or U.S. Express Mail with notice deemed effective on the
later of the first business day after deposit or the day on which the courier
confirms delivery, addressed as follows:
(a) If to Lessor:
The Confederated Tribes and
Bands of the Yakama Indian Nation
P.O. Box 151
Toppenish, Washington 98948
With a copy to:
Levine & Associates
2049 Century Park East, Suite 710
Los Angeles, CA 90017
Attn: Jerome Levine, Esq.
-8-
<PAGE>
(b) If to Lessee:
c/o Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, CA 90301
Attn: Chief Financial Officer
With simultaneous copies to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attn: Alvin Segel, Esq.
or to such other address(es) as the parties provide to each other in writing.
ARTICLE 23
----------
INSPECTION
----------
The Secretary and the Lessor or their authorized representative shall have
the right, at any reasonable times upon one (1) day's advance written notice
during the term of this Lease to enter upon the Leased Premises to inspect the
same.
ARTICLE 24
----------
DELIVERY OF PREMISES
--------------------
At the termination or expiration of this Lease, Lessee will peaceably and
without legal process deliver up the possession of the Leased Premises in good
condition. Holding over by Lessor after the termination or expiration of this
Lease shall not constitute a renewal or extension thereof.
ARTICLE 25
----------
LEASE BINDING AND PRIORITY OF LEASE
-----------------------------------
This Lease and the covenants, conditions and restrictions hereof shall
extend to, be binding upon and inure to the benefit of the successors, heirs,
assigns, executors and administrators of the parties hereto, and the provisions
of such agreement(s) conflict with this Lease, the terms of this Lease shall
prevail.
ARTICLE 26
----------
INTEREST OF MEMBER OF CONGRESS
------------------------------
No member of, or delegate to, Congress, shall be admitted to any share or
part of this Lease or to any benefit that may arise herefrom, but his provision
shall not be construed to extend to this contract if made with a corporation or
company for its general
-9-
<PAGE>
benefit.
ARTICLE 27
----------
VALIDITY
--------
This Lease, and any modification or amendment to this Lease, shall not be
valid or binding upon either party hereto until approved by the Secretary.
Additionally, approval of any proposed modification or amendment to this Lease
may not be considered by the Lessor or the Secretary unless the Lease is in good
standing.
ARTICLE 28
----------
APPROVAL BY LESSOR AND/OR SECRETARY
-----------------------------------
Whenever under the terms of this Lease the acceptance, consent or approval
of the Lessor and/or the Secretary is required, said acceptance, consent or
approval shall not be unreasonably withheld.
ARTICLE 29
----------
FORCE MAJEURE
-------------
Whenever under this instrument a time is stated within which or by which
original construction, repairs or reconstruction of said improvements shall be
completed, and if during such period a general or sympathetic strike or lockout,
war or rebellion or some other event occurs that is beyond Lessee's power to
control, the period of delay so caused shall be added to the period allowed
herein for the completion of such work. This provision is in no way intended to
extend the term of this Lease.
ARTICLE 30
----------
ENVIRONMENTAL PROTECTION REQUIREMENTS
-------------------------------------
It is agreed that it shall be the responsibility of the Lessee to satisfy
all applicable environmental protection requirements as set forth in the
National Environmental Policy Act of 1969 and its implementing regulations. It
is further agreed that Lessee will furnish the Secretary, at Lessee's sole cost
and expense, a copy of all environmental assessments and/or environmental impact
statements received by Lessee with respect to the Property.
ARTICLE 31
----------
ARCHAEOLOGICAL, CULTURAL AND HISTORIC RESOURCES PROTECTION
----------------------------------------------------------
Lessee agrees that whenever in the course of construction on the Leased
Premises involving ground disturbing activities, a qualified archaeologist
(specified at 43 C.F.R. 7.8) will monitor to insure that if archaeological or
historical resources are uncovered, the construction activity shall immediately
be halted and the involved area evaluated regarding
-10-
<PAGE>
the significance of the discovered resource. Within 12 hours of the discovery,
the Superintendent of the Yakama Agency shall immediately be notified by the
Lessee's archaeologist. Upon notification of the discovery, the Superintendent,
or his designee, will initiate a preliminary resource assessment. At the
completion of the assessment, the Bureau of Indian Affairs will initiate
consultation with the State Historic Preservation Officer and the Advisory
Council on Historic Preservation pursuant to the required procedures at 36
C.F.R. 800 (Protection of Historic Properties) and specifically at 36 C.F.R.
800.11 (Properties discovered during implementation of an undertaking) to
determine the disposition of the resource. The Lessee will comply with any
mitigation measures determined appropriate as a result of the consultation
completed pursuant to 36 C.F.R. 800.11. The cost of any required archaeological
evaluation, mitigation, analysis, and curation shall be borne by the Lessee. To
the extent that performance of the obligations contained in this Article results
in any suspension of development of the Facility or the Enterprise, the Term
shall be extended by a like amount.
ARTICLE 32
----------
TERMINATION OF FEDERAL TRUST
----------------------------
Nothing contained in this Lease shall operate to delay or prevent a
termination of Federal trust responsibilities with respect to the land by the
issuance of a fee patent or otherwise during the term of the Lease; however,
such termination shall not serve to abrogate the Lease. The owners of the land
and the Lessee and his surety or sureties shall be notified of any such change
in the status of the land.
ARTICLE 33
----------
UNLAWFUL USE
------------
The Lessee agrees not to use or cause to be used any part of the Leased
Premises for any unlawful conduct or purpose.
ARTICLE 34
----------
SUBLESSEE RESPONSIBILITY
------------------------
Should Lessee sublease the Leased Premises (including, without limitation,
pursuant to the Sublease), the sublease therefor may contain a provision
shifting all of the responsibilities of Lessee hereunder to Lessee's lessee
thereunder. To the extent that any failure to comply with this Lease arises as
a consequence of Sublessee's failure to perform such shifted responsibilities,
such failure shall not constitute an Event of Default hereunder.
ARTICLE 35
----------
TERMINATION BY LESSEE
---------------------
Upon the occurrence of an Event of Default by Lessor and/or Sublessee under
any of the Loan Documents and/or the Transaction Documents, Lessee, in addition
to and
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<PAGE>
without limitation of any rights it may have pursuant hereto, thereto or
Applicable Laws shall be entitled to terminate and cancel this Lease and from
and after such termination shall have no further liability hereunder.
ARTICLE 36
----------
LIMITED WAIVER OF SOVEREIGN IMMUNITY
------------------------------------
1. Retention of Sovereign Immunity. By this Agreement, Lessor does
-------------------------------
not waive, limit or modify its sovereign immunity from unconsented suit or
proceedings in arbitration, except as provided in this Article.
2. Scope of Waiver. Subject to the provisions of this Article,
---------------
Lessor hereby expressly grants to Lessee and the other Persons within the scope
of Article 36, Section 5, a limited waiver of its sovereign immunity from
unconsented suit and proceedings in arbitration, its right to require exhaustion
of Tribal remedies, its right to seek Tribal remedies and its right to be sued
in the Courts of the Nation, as such Courts are or may be established, and
consents to suit in accordance with this Article.
3. Procedural Requirements. Lessor grants a limited waiver of its
-----------------------
sovereign immunity as to suit involving a claim if, and only if, each and every
one of the following conditions is met:
a. The claim is made by a party designated under Article
36, Section 5, and not by any other Person;
b. The claim alleges a breach by Lessor of one or more of
the specific obligations or duties expressly assumed by Lessor under the terms
of this Agreement or the other Transaction Documents;
c. The claim seeks:
(i) some specific action, or discontinuance of some
action, by Lessor or the Enterprise to bring Lessor into full compliance with
the duties and obligations expressly assumed by Lessor under this Agreement or
the other Transaction Documents; or
(ii) money damages for noncompliance with the terms
and provisions of this Agreement or the other Transaction Documents.
d. The claim is made in a detailed written statement to
Lessor stating the specific action or discontinuance of action by Lessor or the
Enterprise which would cure the alleged breach or non-performance, or the sum of
money claimed to be due and owing from Lessor to Lessee by reason of such
specific breach or non-performance, and, except where Lessee is seeking
injunctive relief, Lessor shall have thirty (30) calendar days to cure such
breach or non-performance or to make such payment before arbitration or judicial
proceedings may be instituted.
4. Time Period. With respect to any claim authorized in this
-----------
Article, initial judicial proceedings, as authorized herein, shall be commenced
within the later of two (2) years after the claim accrues or one year after the
claim is discovered, or such claim shall be forever barred. The waiver granted
herein shall commence on the Execution Date and shall continue for two years
following the expiration, termination, or
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<PAGE>
cancellation of this Agreement or the other Transaction Documents (whichever is
later), except that the waiver shall remain effective for any proceedings then
pending, and all appeals therefrom.
5. Recipient of Waiver. The recipients of the benefit of this waiver
-------------------
of sovereign immunity are limited to Lessee, its successors and assigns.
6. Federal Question. The parties agree that any dispute raised under
----------------
the provisions of this Article shall be resolved first pursuant to applicable
federal law, and if no federal law applies, pursuant to the applicable laws of
the State.
7. Service of Process. In any proceeding brought pursuant to this
------------------
Article, Lessor consents to service made in accordance with the notice
provisions of this Agreement.
8. Enforcement. Lessor waives its sovereign immunity from a judgment
-----------
or order consistent with the terms and provisions of this Article, which is
final because either the time for appeal thereof has expired or the judgment or
order is issued by a court having final appellate jurisdiction over the matter.
Lessor consents to the jurisdiction of the United States District Court for the
Eastern District of Washington and any court having appellate jurisdiction
thereover, consistent with the terms and conditions of this Article. None of
the parties shall object to the jurisdiction or venue of said federal court.
Without in any way limiting the generality of the foregoing, Lessor expressly
authorizes any Governmental authorities who have the right and duty under
Applicable Law to take any action authorized by any court, to take such action
to give effect to any judgment entered against Lessor, including, without
limitation, entering on to the Property, or any other lands within Lessor's
jurisdiction, and the Facility to seize possession of any Collateral for the
purpose of giving effect to any judgment entered against Lessor pursuant to this
Article.
9. Assets Pledged to Satisfy Enforcement Proceedings. The foregoing
-------------------------------------------------
limited waiver of sovereign immunity is expressly conditioned on the parties'
agreement, set forth herein, that the only assets, including property and funds,
which shall be available, and which are thus specifically pledged and assigned
hereby, to satisfy any enforcement proceedings or judgment in connection with
this Agreement, or any other Transaction Document, shall be limited to (i) the
Collateral, and (ii) possession of the Leased Premises as provided herein.
10. Limitation Upon Enforcement. Damages awarded against Lessor or
---------------------------
the Enterprise shall be satisfied solely from assets specified in Article 36,
Section 9, and shall not constitute a lien upon or be collectible from any other
income or assets of Lessor, except with the written consent of Lessor.
11. Expenses of Judicial Enforcement. Except as ordered by a court
--------------------------------
of competent jurisdiction, all parties shall bear their own costs, including
attorneys' fees, in connection with any judicial proceedings authorized under
this Agreement. The parties expressly agree that this provision shall survive
the termination, for any reason, or expiration of this Agreement.
12. Guaranty. Lessor agrees not to revoke or limit, in whole or in
--------
part, the limited waiver of sovereign immunity of Lessor contained in this
Article or in any way attempt to revoke or limit, in whole or in part, such
limited waiver of sovereign immunity. In the event of any such revocation or
attempted revocation, the parties
-13-
<PAGE>
expressly recognize and agree that there remains no adequate remedy at law
available to Lessee, and Lessor hereby consents to the entry of appropriate
injunctive relief consistent with the terms and conditions of this Agreement, as
may be granted by any court of competent jurisdiction.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto sign and execute this document, as
of the date first noted above, as authorized representative of their respective
parties:
THE CONFEDERATED TRIBES AND BANDS
OF THE YAKAMA INDIAN NATION,
a federally-recognized Indian Tribe
By: /s/ Ross Sockzehigh
-------------------------------------
Name: Ross Sockzehigh
------------------------------------
Title: Chairman
----------------------------------
SECRETARY OF INTERIOR
By: ____________________________________
Name:__________________________________
Title: __________________________________
HP YAKAMA, INC.,
a Delaware corporation
By: /s/ Bruce Rimbo
---------------------------------------
Name: Bruce Rimbo
-------------------------------------
Title: Vice President and Secretary
------------------------------------
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<PAGE>
ACKNOWLEDGMENTS TO LEASE
------------------------
State of Washington :
: SS
County of Yakima :
On this ____ day of _______________, 1997, before me, the undersigned
Notary Public, appeared The Confederated Tribes and Bands of the Yakama Indian
Nation, by and through _______________, its _______________, personally known to
be, or proved to me on the basis of satisfactory evidence to be, the person who
executed the attached document as the authorized representative of The
Confederated Tribes and Bands of the Yakama Indian Nation, who swore that the
same was an act of his own free will and of the free will of The Confederated
Tribes and Bands of the Yakama Indian Nation.
____________________________
Notary Public
State of __________ :
: SS
County of _________ :
On this ____ day of _______________, 1997, before me, the undersigned
Notary Public, appeared HP Yakama, Inc., a _______ corporation, by and through
_______________, its ______________________, personally known to be, or proved
to me on the basis of satisfactory evidence to be, the person who executed the
attached document as the authorized representative of HP Yakama, Inc., who swore
that the same was an act of his own free will and of the free will of HP Yakama,
Inc.
____________________________
Notary Public
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<PAGE>
Hollywood Park, Inc.
Exhibit 10.44
SUBLEASE
By and Between
HP YAKAMA, INC.
and
YAKAMA TRIBAL GAMING CORPORATION
September 11, 1997
<PAGE>
SUBLEASE
This SUBLEASE (this "Sublease") is made this 11th day of September, 1997,
by and between HP YAKAMA, INC., a Delaware corporation ("Sublessor"), and Yakama
Tribal Gaming Corporation (the "Tribal Corporation"), a tribal corporation
established under the laws of THE CONFEDERATED TRIBES AND BANDS OF THE YAKAMA
INDIAN NATION (the "Nation"), a federally recognized Indian tribe located in the
State of Washington, with reference to the following facts and circumstances:
A. Sublessor is leasing the Leased Premises (as defined in the Master
Lease (as defined hereinafter)) from the Tribal Corporation pursuant to that
certain Master Lease dated as of the date first set forth above by and between
the Nation and the Sublessor (the "Master Lease") (all capitalized terms used
herein without definition shall have the respective meanings ascribed thereto in
the Master Lease).
B. Sublessor is subleasing the Leased Premises to the Tribal Corporation
upon the terms and conditions set forth herein, including, without limitation,
the Nation's assumption of all of Sublessor's obligations under the Master
Lease.
NOW, THEREFORE, Sublessor, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, for the execution and
performance of the Loan Documents and the other Transaction Documents and the
covenants, agreements and conditions contained in this Sublease to be performed
and kept by the Tribal Corporation, does hereby let and rent to the Tribal
Corporation, and the Tribal Corporation does hereby take and hire as tenant of
Sublessor, the Leased Premises, upon the terms and conditions set forth in this
Sublease.
ARTICLE I
PRELIMINARY PROVISIONS
I.1 The Tribal Corporation. The Tribal Corporation represents and warrants
----------------------
that it has full right, power and authority to enter into this Sublease.
I.2 Notices. Any notice required to be given pursuant to this Sublease shall
-------
be delivered by overnight courier or U.S. Express Mail with notice deemed
effective on the later of the first business day after deposit or the day on
which the courier confirms delivery, addressed as follows:
(a) If to the Tribal Corporation:
YAKAMA TRIBAL GAMING CORPORATION
c/o The Confederated Tribes and
Bands of the Yakama Indian Nation
P.O. Box 151
Toppenish, Washington 98948
With a copy to:
The Confederated Tribes and
Bands of the Yakama Indian Nation
P.O. Box 151
Toppenish, Washington 98948
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<PAGE>
Attention: Chairperson, Tribal Council
and:
Levine & Associates
2049 Century Park East, Suite 710
Los Angeles, CA 90017
Attn: Jerome Levine, Esq.
(b) If to Sublessor:
c/o Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, CA 90301
Attn: Chief Financial Officer
With simultaneous copies to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attn: Alvin Segel, Esq.
or to such other address(es) as the parties provide to each other in writing.
I.3 Assumption of Master Lease Obligations. The Tribal Corporation hereby
--------------------------------------
assumes each and every obligation of Sublessor, as lessee, under the Master
Lease. Without limitation of the foregoing, the Tribal Corporation hereby
acknowledges and agrees that all responsibilities under the Master Lease have
shifted to the Tribal Corporation and the Tribal Corporation has full
responsibility with respect thereto (including, without limitation, all
obligations with respect to payment of rents, completion of development of the
Facility, insurance, indemnification, accounting and audits, bonding,
maintenance, environmental conditions and reports and encumbrances).
ARTICLE II
TERM
II.1 Term. The term of this Sublease (the "Term") shall commence on the
----
Effective Date and shall continue thereafter, unless sooner terminated in
accordance with the provisions hereof, through and including the seventh (7th)
anniversary of the Commencement Date (the "Lease Termination Date"); provided,
--------
however, that the Term (i) shall be extended to the same extent that the term of
- -------
the Master Lease is extended pursuant to Article 9 thereof, (ii) shall, at
Sublessor's option, be extended by the number of days of any period during which
the term of the Consulting Agreement has been extended pursuant to Section 3.5
of the Consulting Agreement and rent shall continue to be payable hereunder
during such suspension period, and (iii) this Sublease shall terminate and be of
no force and effect if the Effective Date has not occurred on or before August
1, 1998.
II.2 Surrender of the Leased Premises. On the Lease Termination Date, or upon
--------------------------------
the sooner termination of this Sublease pursuant to the provisions hereof, the
Tribal Corporation shall peaceably and quietly leave, surrender and yield up to
Sublessor the
-2-
<PAGE>
Leased Premises, broom clean and in good order and condition, reasonable wear
and tear excepted; provided, however, that the Tribal Corporation shall have the
-------- -------
right to remove personal property to the extent such property is not required to
remain on the Leased Premises pursuant to the Master Lease.
ARTICLE III
RENTALS
III.1 Rent.
----
(a) During the Term, the Tribal Corporation shall pay to Sublessor, at the
address set forth herein and in lawful money of the United States, monthly
payments ("Sublease Rent") in an amount equal to the applicable percentage of
Net Revenues for the preceding month set forth below:
(i) Twenty-eight percent (28%), until such time as the aggregate
Net Revenues which have accrued since the Commencement Date
equal $26,000,000;
(ii) Twenty-five percent (25%), until such time as the aggregate Net
Revenues which have accrued since the Commencement Date equal
$41,000,000; and
(iii) Twenty-two percent (22%) after such time as the aggregate Net
Revenues exceed $41,000,000;
provided, however, that in the event that the Tribal Corporation fully repays
- -------- -------
the Loan before the maturity thereof, the applicable percentage of Net Revenues
payable as Sublease Rent shall be reduced from the date of such repayment by
three percent (3%); provided, further, that no such reduction shall be made in
-------- -------
the applicable percentage of Net Revenues payable as Sublease Rent prior to the
fifth anniversary of the Commencement Date.
(b) Rental payments due hereunder shall be payable, in arrears, with the
first monthly rental payment due on the twentieth (20th) day of the first
complete month following the month in which the Commencement Date occurs, and
continuing on the twentieth (20th) day of each month thereafter. Sublease Rent
shall be payable solely out of and to the extent of Available Distributable
Cash. Sublease Rent which is earned but not paid shall be accrued without
interest. Payments of Sublease Rent shall be based on the following priority of
payments: (i) principal amounts on the Loan that were previously accrued but
unpaid; (ii) principal amounts on the Loan that are currently due and payable;
(iii) Sublease Rent that was previously accrued but unpaid; and (iv) Sublease
Rent that is currently due and payable.
(c) All Sublease Rent accrued but unpaid because of insufficient Available
Distributable Cash and still unpaid more than thirty-one (31) days after the
seventh anniversary of the Commencement Date or the termination of the
Consulting Agreement by reason of a default thereunder by the Consultant shall
no longer be payable.
ARTICLE IV
USE and OCCUPANCY
IV.1 Use of the Facility. The Tribal Corporation shall use the Leased Premises
-------------------
solely
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<PAGE>
for the establishment and operation of the Enterprise in accordance with the
provisions of Applicable Laws and the Master Lease.
IV.2 Maintenance and Repairs. The Tribal Corporation shall make or cause to be
-----------------------
made all necessary repairs, alterations and/or replacements thereto, interior,
exterior, structural and nonstructural, reasonable wear and tear excepted. All
such repairs, alterations and replacements shall be equal in quality to the
original work. Further, the Tribal Corporation shall keep the sidewalks, curbs,
entrances, passageways and areas adjoining or appurtenant to the Facility in a
clean and orderly condition, free of snow, ice, rubbish and obstruction. Any
and all expenses incurred in connection with the performance of the obligations
imposed under this Section shall be deemed an operating expense of the
Enterprise.
IV.3 Right to Enter. Sublessor shall have access to the Facility in company
--------------
with an agent of the Tribal Corporation at any and all reasonable times for the
purpose of inspecting the Facility, or for the purpose of carrying out
Sublessor's rights described in this Sublease, subject to the security
requirements of the Enterprise.
ARTICLE V
IMPROVEMENTS
V.1 Quality. Any construction, maintenance and repair work, alterations, or
-------
replacements to the Facility shall be of first class quality in accordance with
the Master Lease.
V.2 Liens. The Tribal Corporation shall have no authority, express or implied
-----
to create or place any lien or encumbrance, of any kind or nature whatsoever,
upon, or in any manner to bind the interest of Sublessor in the Leased Premises.
Sublessor will pay promptly all sums legally due and payable by Sublessor on
account of any labor performed, or on account of any material supplied, to the
Leased Premises as to which any lien is or legally can be asserted against the
Leased Premises.
ARTICLE VI
INSURANCE
The parties agree that at all times during the Term, the Tribal Corporation
shall obtain and maintain such insurance coverage for the Facility as is
required pursuant to the Consulting Agreement, the Loan Agreement and the Master
Lease.
ARTICLE VII
ENCUMBRANCES
The Tribal Corporation shall have no right or privilege to mortgage or
otherwise encumber its interest, in whole or in part in the Leased Premises
without the express, written consent of Sublessor, which consent, or the denial
thereof, shall be in Sublessor's sole and absolute discretion.
-4-
<PAGE>
ARTICLE VIII
ASSIGNMENT AND SUBLETTING.
The Tribal Corporation shall not, unless otherwise expressly authorized
herein, sublease, assign or transfer any right to or interest in this Sublease
to any Person other than an Affiliate without the written consent of the Lessor
and approval of the Secretary and sureties. No such sublease, assignment or
transfer shall be valid or binding without said consent and approval and then
only upon the condition that sublessee has agreed in writing that in the event
of conflict between the provisions of this Sublease and of said sublease, the
provisions of this Sublease shall prevail. The term of any sublease shall not
exceed the term of this Sublease. No sublease shall release the Tribal
Corporation from any obligation under this Sublease or substitute the sublessee
for the Tribal Corporation hereunder. Any sublease made, except as aforesaid
shall be deemed a breach of this Sublease.
ARTICLE IX
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
IX.1 Event of Default. Any one or more of the following events shall constitute
----------------
an Event of Default hereunder:
(a) Failure to pay any amount or any part thereof payable by the Tribal
Corporation under this Sublease or the Master Lease (including, without
limitation, rental payments hereunder, payments of Impositions and payment of
rent owing under the Master Lease) within five (5) days of when due and payable.
(b) Any set of facts which would cause the Secretary to cancel this Sublease,
pursuant to any Applicable Law (including, without limitation, 25 U.S.C. (S)415
and regulations promulgated thereunder).
(c) Any other act or omission in breach of the terms hereof which act or
omission shall continue for a period of fifteen (15) days after written notice
specifying such omission or breach and requesting that it be remedied, unless
Sublessor has agreed in writing to an extension of such time prior to its
expiration, or for such longer period as may be reasonably necessary to remedy
such act or omission, provided that the Tribal Corporation is proceeding with
reasonable diligence to remedy the same.
(d) An Event of Default under any of the Loan Documents or the other
Transaction Documents.
IX.2 Notice of Termination. In the event that an Event of Default occurs and is
---------------------
not cured, then the Term shall expire and terminate with the same force and
effect as though the date so specified were the Lease Termination Date, and
Sublessor shall have the remedies with respect to the Leased Premises set forth
below.
IX.3 The Tribal Corporation's Obligations upon Termination. Upon the expiration
-----------------------------------------------------
or termination of this Sublease, without limitation of any and all rights and
remedies available to Sublessor pursuant to Applicable Laws (including, without
limitation, the right to evict Tribal Corporation from the Leased Premises)
which rights are expressly reserved by and made available to Sublessor hereby,
the Tribal Corporation shall quit and
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<PAGE>
peaceably surrender the Leased Premises, without any payment by Sublessor,
without further notice, any and all notice to quit, notice of intention to re-
enter or any other notices and any institution of legal proceedings being hereby
waived.
ARTICLE X
LIMITED WAIVER OF SOVEREIGN IMMUNITY
X.1 Limited Waiver of Sovereign Immunity.
------------------------------------
X.1.1 Retention of Sovereign Immunity. By this Agreement, the Tribal
-------------------------------
Corporation does not waive, limit or modify its sovereign immunity from
unconsented suit or proceedings in arbitration, except as provided in this
Article.
X.1.2 Scope of Waiver. Subject to the provisions of this Article,
---------------
the Tribal Corporation hereby expressly grants to Sublessor and the other
Persons within the scope of Article X, Section 10.1.5, a limited waiver of its
sovereign immunity from unconsented suit and proceedings in arbitration, its
right to require exhaustion of Tribal remedies, its right to seek Tribal
remedies and its right to be sued in the Courts of the Nation, as such Courts
are or may be established, and consents to suit in accordance with this Article.
X.1.3 Procedural Requirements. the Tribal Corporation grants a
-----------------------
limited waiver of its sovereign immunity as to suit involving a claim if, and
only if, each and every one of the following conditions is met:
(a) The claim is made by a party designated under Article X,
Section 10.1.5, and not by any other Person;
(b) The claim alleges a breach by the Tribal Corporation of one
or more of the specific obligations or duties expressly assumed by the Tribal
Corporation under the terms of this Agreement or the other Transaction Documents
(including, without limitation, all indemnification obligations hereunder);
(c) The claim seeks:
(i) some specific action, or discontinuance of some
action, by the Tribal Corporation or the Enterprise to bring the Tribal
Corporation into full compliance with the duties and obligations expressly
assumed by the Tribal Corporation under this Agreement or the other Transaction
Documents; or
(ii) money damages for noncompliance with the terms and
provisions of this Agreement or the other Transaction Documents (including,
without limitation, all indemnification obligations hereunder).
(d) The claim is made in a detailed written statement to the
Tribal Corporation stating the specific action or discontinuance of action by
the Tribal Corporation or the Enterprise which would cure the alleged breach or
non-performance, or the sum of money claimed to be due and owing from the Tribal
Corporation to Sublessor by reason of such specific breach or non-performance,
and, except where Sublessor is seeking injunctive relief, the Tribal Corporation
shall have thirty (30) calendar days to cure such breach or non-performance or
to make such payment before arbitration or judicial proceedings may be
instituted.
-6-
<PAGE>
X.1.4 Time Period. With respect to any claim authorized in this
-----------
Article, initial judicial proceedings, as authorized herein, shall be commenced
within the later of two (2) years after the claim accrues or one year after the
claim is discovered, or such claim shall be forever barred. The waiver granted
herein shall commence on the Execution Date and shall continue for two years
following the expiration, termination, or cancellation of this Agreement or the
other Transaction Documents (whichever is later), except that the waiver shall
remain effective for any proceedings then pending, and all appeals therefrom.
X.1.5 Recipient of Waiver. The recipients of the benefit of this
-------------------
waiver of sovereign immunity are limited to Sublessor, its successors and
assigns and any and all Persons covered by the indemnification provisions
hereof.
X.1.6 Federal Question. The parties agree that any dispute raised
----------------
under the provisions of this Article shall be resolved first pursuant to
applicable federal law, and if no federal law applies, pursuant to the
applicable laws of the State.
X.1.7 Service of Process. In any proceeding brought pursuant to this
------------------
Article, the Tribal Corporation consents to service made in accordance with the
notice provisions of this Agreement.
X.1.8 Enforcement. the Tribal Corporation waives its sovereign
-----------
immunity from a judgment or order consistent with the terms and provisions of
this Article, which is final because either the time for appeal thereof has
expired or the judgment or order is issued by a court having final appellate
jurisdiction over the matter. the Tribal Corporation consents to the
jurisdiction of the United States District Court for the Eastern District of
Washington and any court having appellate jurisdiction thereover, consistent
with the terms and conditions of this Article. None of the parties shall object
to the jurisdiction or venue of said federal court. Without in any way limiting
the generality of the foregoing, the Tribal Corporation expressly authorizes any
Governmental authorities who have the right and duty under Applicable Law to
take any action authorized by any court, to take such action to give effect to
any judgment entered against the Tribal Corporation, including, without
limitation, entering on to the Property, or any other lands within the Tribal
Corporation's or the Nation's jurisdiction, and the Facility to seize possession
of any Collateral for the purpose of giving effect to any judgment entered
against the Tribal Corporation pursuant to this Article.
X.1.9 Assets Pledged to Satisfy Enforcement Proceedings. The
-------------------------------------------------
foregoing limited waiver of sovereign immunity is expressly conditioned on the
parties' agreement, set forth herein, that the only assets, including property
and funds, which shall be available, and which are thus specifically pledged and
assigned hereby, to satisfy any enforcement proceedings or judgment in
connection with this Agreement, or any other Transaction Document, shall be
limited to (i) the Collateral, and (ii) possession of the Leased Premises as
provided in the Master Lease.
X.1.10 Limitation Upon Enforcement. Damages awarded against the
---------------------------
Tribal Corporation or the Enterprise shall be satisfied solely from assets
specified in Article X, Section 10.1.9, and shall not constitute a lien upon or
be collectible from any other income or assets of the Tribal Corporation, except
with the written consent of the Tribal Corporation.
-7-
<PAGE>
X.1.11 Expenses of Judicial Enforcement. Except as ordered by a
--------------------------------
court of competent jurisdiction, all parties shall bear their own costs,
including attorneys' fees, in connection with any judicial proceedings
authorized under this Agreement. The parties expressly agree that this
provision shall survive the termination, for any reason, or expiration of this
Agreement.
X.1.12 Guaranty. the Tribal Corporation agrees not to revoke or
--------
limit, in whole or in part, the limited waiver of sovereign immunity of the
Tribal Corporation contained in this Article or in any way attempt to revoke or
limit, in whole or in part, such limited waiver of sovereign immunity. In the
event of any such revocation or attempted revocation, the parties expressly
recognize and agree that there remains no adequate remedy at law available to
Sublessor, and the Tribal Corporation hereby consents to the entry of
appropriate injunctive relief consistent with the terms and conditions of this
Agreement, as may be granted by any court of competent jurisdiction.
ARTICLE XI
NO MERGER
It is the intention of the parties hereto that the leasehold interest
created by this Sublease shall not merge into fee title to the Leased Premises
by reason of such interests coming into common or related ownership.
ARTICLE XII
MISCELLANEOUS
XII.1 Indemnification by the Tribal Corporation.
-----------------------------------------
XII.1.1 Indemnification by The Tribal Corporation. The Tribal
-----------------------------------------
Corporation agrees to indemnify and hold harmless Sublessor, its directors,
officers, agents and employees, against any and all claims of or losses, damages
or liability to third parties to which Sublessor, its directors, officers,
agents and employees, may become subject under any law in connection with the
carrying out of the transactions contemplated by this Agreement or the other
Transaction Documents, or the conduct of any activity on the Property (other
than as a result of gross negligence or willful misconduct of any such party)
and to reimburse Sublessor, its directors, officers, agents and employees, for
any out-of-pocket legal and other expenses (including reasonable attorneys'
fees) incurred by Sublessor, its directors, officers, agents and employees, in
connection with investigating any such losses, claims, damages or liabilities or
in connection with defending any actions relating thereto. Sublessor agrees, at
the request and reasonable expense of the Tribal Corporation, to cooperate in
the making of any investigation in defense of any such claim and promptly to
assert any or all of the rights and privileges and defenses which may be
available to Sublessor. The Tribal Corporation further releases and agrees to
hold harmless Sublessor, its directors, officers, agents and employees, from any
claims of or losses, damages or liability to third parties arising out of any
covenant, representation or undertaking of the Tribal Corporation contained in
this Agreement, or the other Transaction Documents. The provisions of this
Section shall survive the termination of this Agreement and the other
Transaction Documents.
XII.1.2 Indemnification by Sublessor. Sublessor agrees to indemnify
----------------------------
and hold harmless the Tribal Corporation and its directors, officers, agents and
employees, against any and all claims of or losses, damages or liability to
third parties to which the Tribal Corporation and its directors, officers,
agents and employees, may
-8-
<PAGE>
become subject under any law as a result of the gross negligence or willful
misconduct of the directors, officers, agents or employees of the Sublessor, and
to reimburse the Tribal Corporation and its directors, officers, agents and
employees, for any out-of-pocket legal and other expenses (including reasonable
attorneys' fees) incurred by the Tribal Corporation and its directors, officers,
agents and employees, in connection with investigating any such losses, claims,
damages or liabilities or in connection with defending any actions relating
thereto. The Tribal Corporation agrees, at the request and reasonable expense of
the Sublessor, to cooperate in the making of any investigation in defense of any
such claim and promptly to assert any or all of the rights and privileges and
defenses which may be available to the Tribal Corporation. Sublessor further
releases and agrees to hold harmless the Tribal Corporation and its directors,
officers, agents and employees, from any claims of or losses, damages or
liability to third parties arising out of any covenant, representation or
warranty of the Sublessor contained in this Agreement or the other Transaction
Documents. The provisions of this Section shall survive the termination of this
Agreement and the other Transaction Documents.
XII.1.3 Rights of Persons Covered. The Persons covered by the
-------------------------
indemnification provisions hereof shall be third party beneficiaries of this
Agreement and shall have the right, subject to the provisions of this Agreement,
to enforce such indemnification provisions.
XII.2 Recording. This Sublease shall be filed and recorded in the appropriate
---------
branch of the Land Titles and Records Office of the Department of the Interior.
Sublessor agrees that if so requested by the Tribal Corporation, Sublessor will
execute in recordable form for purposes of recordation at the Tribal
Corporation's expense a short form of Sublease containing the names of the
parties, the description of the Leased Premises and the Facility, the Term of
the Sublease, a statement regarding the use of the Facility, and such other
provisions as either party may require.
XII.3 Right to Perform. If the Tribal Corporation defaults in the making of
----------------
any payment required to be made by the Tribal Corporation and which is capable
of being made or done by Sublessor, then Sublessor may, but shall not be
required to, make such payment, and the amount of such payment, if made by
Sublessor, with interest thereon at the rate of ten percent (10%) per annum,
shall be paid by the Tribal Corporation to Sublessor. The making of such
payment by Sublessor shall not operate to cure such default or to estop
Sublessor from the pursuit of any remedy to which Sublessor may be entitled
because of any breach on the part of the Tribal Corporation of any covenant or
condition herein, nor the acceptance of rent herein by Sublessor either from the
Tribal Corporation or any tenant, whether or not such delay or acceptance be
with knowledge on the part of Sublessor of such breach, shall prejudice
Sublessor's privilege to invoke such remedy, which privilege shall continue
until such breach is cured.
XII.4 No Partnership. The Tribal Corporation shall not be construed or held to
--------------
be a partner or associate of Sublessor in the conduct of Sublessor's business,
it being expressly understood and agreed that the relationship between the
parties hereto is and shall at all times remaining during the Term, that of
lessor and lessee.
XII.5 No Waiver. No failure by the Tribal Corporation to insist upon the
---------
performance of any covenant, agreement, provision or condition of this Sublease
or to exercise any right or remedy consequent upon a default hereunder, and no
acceptance of full or partial rent during the continuance of any such default
shall constitute a waiver of any such default or of such covenant, agreement,
provision or condition.
XII.6 Execution in Counterparts, in Quadruplicate. This Sublease is being
-------------------------------------------
executed in counterparts in four (4) originals, one to be retained by each party
and one each for the Secretary and the Chairman.
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<PAGE>
XII.7 Covenants to Run with the Land. During the Term, the covenants contained
------------------------------
herein shall run with the land and be binding on and inure to the benefit of the
parties, their heirs, successors and assigns.
XII.8 Entire Agreement. This Sublease cannot be changed or terminated orally.
----------------
This Sublease, along with the Loan Documents and the other Transaction
Documents, contain the entire agreement between the parties; any prior agreement
(including, without limitation, the MOU) is hereby superceded and any agreement
hereafter made shall be ineffective to change, modify or discharge this Sublease
in whole or in part, unless such subsequent agreement is in writing and signed
by the party against whom enforcement of the change, modification or discharge
is sought.
XII.9 No Third Party Beneficiary Rights. Except as provided in Section 12.1.3,
---------------------------------
nothing contained in this Sublease is intended nor shall be construed as
creating any third party beneficiary rights.
IN WITNESS WHEREOF, on the day and year first above written, the Tribal
Corporation and Sublessor have duly executed this Sublease as their free act and
deed, by and through their authorized representatives.
YAKAMA TRIBAL GAMING CORPORATION,
a tribal corporation established under the laws
of THE CONFEDERATED TRIBES AND BANDS OF THE
YAKAMA NATION
By: /s/Ross K. Sockzehigh
--------------------------------
Name: Ross K. Sockzehigh
-----------------------------
Title: Chairman of the Board
-----------------------------
HP YAKAMA, INC.,
a Delaware corporation
By: /s/Bruce Rimbo
-------------------------------
Name: Bruce Rimbo
-----------------------------
Title: Vice President and Secretary
-----------------------------
-10-
<PAGE>
ACKNOWLEDGMENTS TO SUBLEASE
---------------------------
State of Washington :
: SS
County of __________ :
On this ____ day of ________, 1997, before me, the undersigned Notary
Public, appeared Yakama Tribal Gaming Corporation, by and through
_______________________, its __________, personally known to be, or proved to me
on the basis of satisfactory evidence to be, the person who executed the
attached document as the authorized representative of the Yakama Tribal Gaming
Corporation, who swore that the same was an act of his own free will and of the
free will of the Yakama Tribal Gaming Corporation.
----------------------------------
Notary Public
State of __________ :
: SS
County of _________ :
On this ____ day of _______________, 1997, before me, the undersigned
Notary Public, appeared HP YAKAMA, INC., a _______________ , by and through
__________________, its ___________________ personally known to be, or proved to
me on the basis of satisfactory evidence to be, the person who executed the
attached document as the authorized representative of HP YAKAMA, Inc., who swore
that the same was an act of his own free will and of the free will of HP YAKAMA,
INC.
----------------------------------
Notary Public
-11-
<PAGE>
Hollywood Park, Inc.
Exhibit 10.45
CONSTRUCTION AND DEVELOPMENT AGREEMENT
By and Between
YAKAMA TRIBAL GAMING CORPORATION
and
HP YAKAMA CONSULTING, INC.
Dated: September 11, 1997
<PAGE>
CONSTRUCTION AND DEVELOPMENT AGREEMENT
THIS CONSTRUCTION AND DEVELOPMENT AGREEMENT ("Agreement") is entered into
this 11th day of September 1997 by and between YAKAMA TRIBAL GAMING CORPORATION
(the "Tribal Corporation"), a tribal corporation established under the laws of
The Confederated Tribes And Bands Of The Yakama Indian Nation (the "Nation"), a
federally recognized Indian tribe located in the State of Washington and having
a mailing address of P.O. Box 151, Toppenish, Washington 98948, and HP
CONSULTING, INC. ("Consultant"), a Delaware corporation, having a mailing
address of c/o Hollywood Park, Inc., 1050 South Prairie Avenue, Inglewood, CA
90301.
RECITALS
--------
A. The Tribal Corporation wishes to engage Consultant and Consultant is
willing to provide certain services in connection with the construction and
development of the Enterprise as contemplated herein and in the Transaction
Documents executed concurrently herewith. Simultaneously with the execution of
this Agreement, the Tribal Corporation has borrowed certain monies from
Consultant's Affiliate, HP Yakama, Inc., to finance the construction and
development of the Enterprise, and has entered into a Consulting Agreement with
Consultant (the "Consulting Agreement") pursuant to which Consultant shall
provide certain consulting services in connection with the operation of the
Enterprise. All of such agreements are more particularly set forth in the
Transaction Documents and the Loan Documents, all of which have been executed
concurrently with one another. The parties expressly acknowledge and agree that
each of the Transaction Documents shall serve as essential and mutually
interdependent consideration for each of the other agreements.
B. Nation has determined that the construction of the Facility and the
development and operation of the Enterprise is an important tribal governmental
project which is intended to improve the economic condition of the Nation and
its members, increase tribal revenues, enhance the Nation's economic self-
sufficiency, and enable the Nation's government to better serve the social,
economic, educational and health needs of the Nation's members.
C. This Agreement is intended only to be for pre-Commencement Date
construction and development services with respect to the Facility and
Enterprise. Nothing in this Agreement is intended or shall be construed as
authorizing Consultant to engage in gaming on Nation's reservation or in
connection with the Enterprise, either directly or indirectly, as a manager or
otherwise. This Agreement is not intended to be and shall not be construed as
constituting a contract for management services as contemplated by IGRA.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged by the parties, the parties
hereby agree, as of the date first stated above, as follows:
1. Defined Terms. Unless otherwise defined herein, the capitalized words
-------------
and terms used in this Agreement shall have the meanings set forth in Exhibit A
hereto, "Master Definitions List."
<PAGE>
1.1 Appointment of the Consultant as Development Manager.
----------------------------------------------------
1.2 Consultant Retained. The Tribal Corporation hereby retains and
-------------------
appoints the Consultant as development manager to perform, during the term and
in accordance with all of the provisions of this Agreement, the design,
development, construction, and other functions described in this Agreement, and
the Consultant hereby accepts such appointment. It shall be the Consultant's
duty to cause, as owner's agent, the construction of the Facility subject to
Tribal Corporation's approval rights hereunder. Said development and
construction shall be on the terms set forth herein, and the Consultant shall
use commercially reasonable efforts to ensure that the Commencement Date occurs
no later than six (6) months after the Effective Date.
1.3 No Gaming Management Functions. Nothing herein is intended to
------------------------------
confer on the Consultant and this Agreement shall not be construed as conferring
on the Consultant, any rights, duties or obligations as a manager of any Gaming
activity.
2. Term of Agreement. This Agreement shall become effective on the
-----------------
Effective Date and shall remain in effect until the earlier of (i) one (1) month
after the Commencement Date or (ii) the date on which this Agreement is
terminated. If the Effective Date has not occurred on or before August 1, 1998,
this Agreement shall terminate and be of no further force and effect.
Regardless of the cause of termination, the warranties included or incorporated
herein shall survive termination of this Agreement.
3. Construction Management. Following the Effective Date and prior to
-----------------------
the Commencement Date, the Consultant shall serve as the Tribal Corporation's
construction manager, and shall be responsible for supervision of the
development and construction of the Facility on a day-to-day basis. In
discharging its duties, the Consultant shall use commercially reasonable efforts
to ensure that (i) the Facility shall have no less than 45,000 sq. ft. in floor
space and shall be finished generally in a quality equal to that of the
Muckleshoot Indian Casino in Auburn, Washington; (ii) the Facility shall be
constructed on time and within the Development Budget (as hereinafter defined),
in accordance with all approved plans and specifications as contemplated in the
Transaction Documents and under Applicable Law; (iii) all contractors shall
carry out in all material respects the duties and responsibilities prescribed
under their respective contracts, and will follow the Nation's Indian preference
and subcontractor bidding guidelines, and (iv) such development and construction
complies in all material respects with applicable codes and building standards.
4. Consultation. The parties hereby agree to designate one or more
------------
individuals who shall serve as their representatives (the "Representatives") and
who shall meet as often as necessary (but no less frequently than once per week
unless the parties otherwise agree) to provide ongoing supervision, information
and consultation with respect to the construction and development of the
Enterprise and Facility. All decisions shall be reached by consensus whenever
possible, and disagreements shall be resolved if necessary through arbitration
(or such other means to expedite the process as the parties shall agree) as set
forth in the Consulting Agreement.
-2-
<PAGE>
5. Construction Management Responsibilities. The Consultant shall have
----------------------------------------
responsibility for the following:
5.1 Selection of Architect and Engineer. It is acknowledged that a
-----------------------------------
project architect has already been selected. Such architect, and any
replacement or substitute architect hired in accordance with this Agreement, is
referred to herein as the "Architect." Consultant shall provide advice and
assistance to the Tribal Corporation in determining the terms of and causing to
be prepared an owner/architect agreement with an Architect (such agreement and
any substitute agreement therefor shall be referred to as the "Owner/Architect
Agreement"). The Owner/Architect Agreement shall provide that the Architect
shall provide the following services (the "Architect Services"):
(1) design the Facility;
(2) prepare plans and specifications for the construction of the
Facility;
(3) inspect the Facility and review the appropriateness of
requests for payments submitted by the Contractor (as
hereinafter defined) during the construction of the
Facility; and
(4) notify the Tribal Corporation of the substantial completion
of the Facility and determine the timing of the final
payment to the Contractor.
In the event it should become necessary to replace said architect or engage
an additional architect, the following shall apply:
5.1.1 Recommendation and Scope. Consultant shall recommend to
------------------------
the Tribal Corporation an architect and, if deemed appropriate by the
Consultant, a civil engineer to provide the Architect Services (to the extent
such services have not previously been provided).
5.1.2 Acceptance of Recommendation. Upon receipt of Consultant's
----------------------------
recommendation, the Tribal Corporation's Representative shall review the
recommendation and if acceptable forward it to the Tribal Corporation for formal
acceptance. Unless there is no reasonable basis for Tribal Corporation to reject
Consultant's recommendation, Tribal Corporation shall designate the recommended
architect as the "Architect" under this Agreement, and designate the recommended
engineer, if any, as the "Engineer" under this Agreement, and enter into such
agreements as may be necessary to acquire their services.
5.1.3 Rejection of Recommendation. If there is a reasonable
---------------------------
basis for Tribal Corporation to reject a recommendation by Consultant, and the
Tribal Corporation rejects such recommendation, the Tribal Corporation shall
notify Consultant of such rejection and provide a written description of the
basis for such rejection. Consultant shall then submit additional
recommendations to the Tribal Corporation's Representative until the Tribal
Corporation accepts a recommendation and designates the Architect under this
Agreement and the Engineer under this Agreement.
-3-
<PAGE>
5.1.4 Preparation of New Owner/Architect Agreement. Upon the
--------------------------------------------
Tribal Corporation's acceptance of an Architect, the Tribal Corporation shall
cause to be prepared a new Owner/Architect Agreement between the Tribal
Corporation and the Architect to be signed by the Tribal Corporation and the
Architect. The new Owner/Architect Agreement shall be consistent with this
Agreement and approved by the Tribal Corporation's legal counsel. Consultant and
its counsel shall have a reasonable opportunity to review, and give comments on,
the new Owner/Architect Agreement prior to its execution.
5.1.5 Preparation of Engineer's Agreement. Upon the Tribal
-----------------------------------
Corporation's acceptance of an Engineer, the Tribal Corporation shall cause to
be prepared an owner/engineer agreement (the "Owner/Engineer Agreement") between
the Tribal Corporation and the Engineer to be signed by the Tribal Corporation
and the Engineer. The Owner/Engineer Agreement shall be consistent with this
Agreement and approved by the Tribal Corporation's legal counsel. Consultant
shall have a reasonable opportunity to review, and give comments on, the
Owner/Architect Agreement prior to its execution.
5.2 Designation of Consultant Reports. The Tribal Corporation hereby
---------------------------------
designates and appoints Consultant as the owner's representative for the purpose
of the administration and implementation of the Owner/Architect Agreement and
Owner/Engineer Agreement (the "Architect and Engineering Agreements").
Consultant shall have the authority as the owner's representative, to exercise
all of the powers of the owner in its reasonable business judgment under the
Architect and Engineering Agreements, including, without limitation, supervising
the completion of all construction, renovation, development and related
activities undertaken on the Facility pursuant to the terms and conditions of
such agreements; provided, however, that Consultant shall not amend or terminate
-------- -------
either such agreement without the prior approval of the Tribal Corporation,
which shall not be unreasonably withheld. Consultant shall provide the Tribal
Corporation with written progress reports on the implementation of such
agreements on a weekly basis, and shall confer and consult with the Tribal
Corporation over any material disputes or developments with respect to the
administration of such agreements provided such consultation will not
unreasonably delay progress on the construction. Consultant shall be
responsible for completing all construction and project preparation development
as set forth herein.
5.3 Amendments. The Tribal Corporation shall not amend the Architect
----------
and Engineering Agreements without first obtaining Consultant's written approval
of the amendment.
5.4 Design Standards. Neither the State of Washington nor any of the
----------------
state's political subdivisions has the power to enforce any building, fire,
energy or life/safety code or requirements which would apply if such state or
political subdivision had jurisdiction over the Property. The Tribal
Corporation, however, hereby finds and determines that the application of the
standards and methods included in such codes and requirements will be in the
best interest of the Tribal Corporation. Accordingly, Consultant and Tribal
Corporation shall cause the Architect and Engineering Agreements to require the
Architect and any Engineer to design the Facility to comply in all material
respects with state and local standards and methods that would otherwise be
applicable, provided that if for any reason an applicable standard cannot be
determined as provided, then the parties shall apply standards and methods set
forth in the applicable and current
-4-
<PAGE>
Uniform Building Code. Using qualified inspectors, Consultant shall conduct such
inspections as are necessary to ensure compliance in all material respects with
these standards. Nothing in this Section shall be deemed to grant the State of
Washington or any of such state's political subdivisions any jurisdiction over
any property owned by or held for the benefit of the Tribal Corporation, or the
right to apply or enforce any such building, fire, energy or life/safety code or
requirements with respect to such property.
5.5 Approval of Plans and Specifications. Upon receipt from the
------------------------------------
Architect and any Engineer of plans and specifications for the Facility (which
plans and specifications may be submitted in stages, rather than all at one
time), Consultant shall promptly submit such plans and specifications to the
Representatives for discussion and approval. Upon the approval of such plans
and specifications by the Tribal Corporation, Consultant shall, as the owner's
representative, notify the Architect and any Engineer that such plans and
specifications have been approved. No construction shall begin until all plans
and specifications for such construction shall have been approved under this
Section.
6. Selection of Contractor. It is acknowledged that a project contractor
-----------------------
has already been selected. Such contractor, and any replacement or substitute
therefor hired in accordance with this Agreement, is referred to herein as the
"Contractor." Consultant shall provide advice and assistance to the Tribal
Corporation in determining the terms of and causing to be prepared an
owner/contractor agreement consistent with the Loan Documents and the
Transaction Documents and the budgets thereunder (such agreement and any
substitute therefor shall be referred to as the "Owner/Contractor Agreement").
6.1 Replacement of Contractor. In the event it should become
-------------------------
necessary to replace said Contractor or engage an additional contractor, the
following shall apply:
6.1.1 Recommendation. Consultant shall recommend to the Tribal
--------------
Corporation's Representative one or more contractors to construct the Facility
in accordance with the plans and specifications approved or to be, approved
pursuant to Section 5.5 above.
6.1.2 Acceptance of Recommendation. Upon receipt of
----------------------------
Consultant's recommendation, the Tribal Corporation's Representative shall
review the recommendation and if acceptable forward it to the Tribal Corporation
for formal acceptance. Unless there is a reasonable basis for the Tribal
Corporation to reject Consultant's recommendation, the Tribal Corporation shall
designate the recommended general contractor as the Contractor under this
Agreement, and enter into an agreement to acquire the Contractor's services.
6.1.3 Rejection of Recommendation. If there is a reasonable
---------------------------
basis for the Tribal Corporation to reject Consultant's recommendation, and the
Tribal Corporation rejects such recommendation, the Tribal Corporation shall
notify Consultant of such rejection and provide a written description of the
basis for such rejection. Consultant shall then submit additional
recommendations until the Tribal Corporation accepts a recommendation and
designates the Contractor under this Agreement.
6.1.4 Contract with Contractor. Upon the Tribal Corporation's
------------------------
designation of a Contractor, the Tribal Corporation shall cause to be prepared a
new Owner/Contractor Agreement between the Tribal Corporation and the Contractor
to be signed by the Tribal Corporation and the Contractor. The Owner/Contractor
Agreement,
-5-
<PAGE>
including any general and special conditions, shall be consistent
with this Agreement and approved by the Tribal Corporation's legal counsel.
6.2 The Owner/Contractor Agreement shall provide for commencement and
completion of construction as soon as practicable after said agreement is
executed, but no later than six (6) months after the Effective Date. The Tribal
Corporation shall cause the Owner/Contractor Agreement to provide that the
Contractor warrants that the work performed under the Owner/Contractor Agreement
will be completed in a workmanlike manner and be free of defects for a period
ending thirty-six (36) months after the Architect provides a certificate of
substantial completion.
6.3 The Tribal Corporation hereby designates and appoints Consultant
as the owner's representative for the purpose of the administration and
implementation of the Owner/Contractor Agreement and agrees that, with the
Tribal Corporation's approval, which shall not be unreasonably withheld,
Consultant may enter into the Owner/Contractor Agreement (or any agreement to be
entered into in connection therewith) directly as "Owner" thereunder, provided
that the representations, warranties and indemnities contained therein also run
in favor of the Tribal Corporation and the Nation. Consultant shall have the
authority as the owner's representative to exercise all of the powers of the
owner under the Owner/Contractor Agreement, including, without limitation,
supervising the completion of all construction, renovation, development and
related activities undertaken on the Facility pursuant to the terms and
conditions of such agreements; provided, however, that Consultant shall not
-------- -------
exceed the construction budget and items therein approved by Tribal Corporation,
without Tribal Corporation's prior written consent, which shall not be
unreasonably withheld, or amend or terminate such agreement without the prior
written approval of the Tribal Corporation, which approval shall not be
unreasonably withheld. Consultant shall provide the Tribal Corporation's
Representative with written progress reports on the implementation of such
agreement on a weekly basis.
6.4 Amendments. The Tribal Corporation shall not amend the
----------
Owner/Contractor Agreement without first obtaining Consultant's written approval
of the Amendment.
6.5 Payment and Performance Bonds. Unless the parties determine
-----------------------------
otherwise, the Owner/Contractor Agreement shall require the Contractor to
provide to the Tribal Corporation a payment bond and a performance bond (the
"Contractor's Bonds") in the full amount of the costs of construction of the
work and performance of the work under the Owner/Contractor Agreement and issued
by a surety reasonably acceptable to the Tribal Corporation. The form of the
Contractor's Bond shall be approved by the Tribal Corporation's legal counsel
and by Consultant's legal counsel.
6.6 Contract Terms. The parties have estimated that the total cost
--------------
of developing and constructing the Facility and commencing operation of the
Enterprise will not exceed Nine Million Dollars ($9,000,000). To enable
Consultant to maintain total costs within said amount, Consultant shall have the
right to require that any Architect and Engineering Agreements and any
Owner/Contractor Agreement provide for either a fixed fee or a guaranteed
maximum fee in an amount reasonably established by the parties.
-6-
<PAGE>
6.7 Development Budget. Prior to the commencement of construction,
------------------
and in conjunction with the Loan Agreement, Consultant shall submit to the
Tribal Corporation's Representative, and the Tribal Corporation shall approve, a
proposed construction budget for the construction of the Facility ("Development
Budget"). Consultant shall supervise the progress of construction and take such
action as may be necessary to maintain construction costs within said budget.
In doing so, Consultant shall have the following powers and duties:
6.7.1 Consultant shall, as the owner's representative, receive
and review requests for payments from the Architect, any Engineer and each
Contractor under the Architect and Engineering Agreements and the
Owner/Contractor Agreement, respectively, and if in conformity with the
applicable agreement, shall promptly authorize payment of same. Expenditures
made under contracts previously approved and within the Development Budget shall
not require further approval. In reviewing such requests, Consultant shall be
entitled to reasonably rely on any certification by the Architect, Engineer or
Contractor regarding such request, including any certification regarding the
extent of work completed. Consultant shall maintain accurate records regarding
each authorization for such payment, and shall provide the Tribal Corporation
with a written monthly report of all such payments.
6.8 Compensation of the Consultant. In consideration of its services
------------------------------
hereunder, the Consultant shall be entitled to receive annual compensation equal
to One Dollar ($1.00).
6.9 Reimbursement of Expenses to Consultant. The Consultant shall be
---------------------------------------
reimbursed, if approved by the Tribal Corporation, for all actual, reasonable
and necessary out-of-pocket expenses, incurred in connection with the discharge
of its duties hereunder as Consultant, and previously approved as estimated
costs by the Tribal Corporation, provided, however, that any such out-of-pocket
-------- -------
expense shall not exceed two thousand dollars ($2,000) per month unless the
Tribal Corporation has approved the same prior to the occurrence thereof. Such
reimbursement shall be made on a regular basis within thirty (30) days after
submission of a reimbursement request by the Consultant and consistent with the
formal procedural requirements of the Tribal Corporation for reimbursement of
expenses.
7. Revisions to Plans; Change Orders; Additional Work or Time Claims.
-----------------------------------------------------------------
7.1 Consultant shall, as the owner's representative, submit to the
Tribal Corporation for approval or disapproval:
(1) material revisions to the plans and specifications approved
pursuant to Section 5.5 above and Section 7.2 below,
(2) material change orders under the Owner/Contractor Agreement; and
(3) any material claim by the Contractor for payment for additional
work or for additional time to complete the work described in the
Owner/Contractor Agreement.
7.2 Consultant shall submit to the Tribal Corporation with each
request for approval of such revision, change order or claim, a written
statement of the amount, if
-7-
<PAGE>
any, by which the cost of the development and construction of the Facility
will increase or decrease if such revision, change order or claim is approved,
which approval shall not be unreasonably withheld.
7.3 Notwithstanding Section 7.2 hereof, the Tribal Corporation shall
approve any reasonable revision, change order or claim which is attributable to
any delay or failure of the Tribal Corporation, the Nation, Tribal Council or
the Representative to make in a timely manner any decision or selection required
under this Agreement or required to administer the Architect and Engineering
Agreements or the Owner/Contractor Agreement and the work contemplated therein.
8. Multiple Shifts. The budgets for the Facility assume that the
---------------
Contractor may use multiple shifts to complete the Facility and the Tribal
Corporation may approve the use of multiple shifts to expedite the construction
process.
9. Selection, Delivery and Installation of Equipment and Furnishings.
-----------------------------------------------------------------
Consultant shall select furniture, fixtures, furnishings, machinery and
equipment, including gaming equipment, to be installed in the Facility (the
"FF&E"). Consultant shall arrange for and coordinate the delivery to the
Facility and installation in the Facility of such FF&E, ensuring that delivery
thereof is in conformity with the specifications and orders for such FF&E and is
in time for the Commencement Date and any training that must precede such date.
Subject to approval by the Tribal Corporation, FF&E may be leased, but the
capital cost thereof shall be included in any Maximum Loan Amount and shall
appear on the Cost Breakdown (as defined in the Loan Agreement).
10. Disclosure of Proposed Transactions with Related Companies. Any
----------------------------------------------------------
transaction between Consultant and any vendor or lessor to acquire FF&E shall be
a commercially reasonable, arms-length transaction. Any existing or prior
relationship or direct or indirect financial transaction between Consultant or
its Affiliates and the vendor or lessor, or to the extent known by Consultant,
any of the principal shareholders, directors or executive officers of such
vendor or lessor, shall be disclosed in writing to the Tribal Corporation prior
to the time the proposed transaction is presented to the Tribal Corporation for
approval.
11. Indian Preference. To maximize the benefits of the Enterprise to the
-----------------
Nation, all contracts and subcontracts relating to this Agreement shall give
preference to qualified Nation members and other Native Americans in accordance
with the Nation's standard tribal employment policies.
12. Compliance. Consultant shall, in performing its obligations under
----------
this Agreement, comply in all material respects with Applicable Laws, ordinances
and regulations adopted by the Tribal Corporation.
-8-
<PAGE>
13. Non-interference in Nation Affairs. In performing its duties
----------------------------------
hereunder, Consultant shall not intentionally interfere with the internal
affairs of the Nation or its government, or any subdivision, department or
agency of the Nation (including, without limitation, the Tribal Corporation).
For the purposes of this Section, "interfere" shall mean any attempt by
Consultant to influence a decision of the Tribal Council or any officer or
employee of the Nation or the Tribal Corporation, or to influence any Tribal
election, by doing any of the following in connection with such decision or
election:
(1) offering any incentive; or
(2) making any written or oral threat against any person or thing;
provided, however, that neither Consultant's assertion of its rights under this
- -------- -------
Agreement nor any recommendation, suggestion or assertion of opinion made by
Consultant regarding the Enterprise or any action of Consultant at a meeting of
any committee, officers, agency or council of the Nation or the Tribal
Corporation or to any employee of the Nation in the ordinary course of such
employee's duties, shall be deemed to be "interference" for the purpose of this
Section.
13.1 Remedies. If the Nation believes that Consultant has violated
--------
the provisions of this Section by engaging in prohibited interference, the
Nation shall give Consultant written notice describing the incident which the
Nation claims constitutes prohibited interference and identifying the person or
persons claimed to have acted on Consultant's behalf in engaging in such
interference. Consultant shall have ten (10) business days from the date of
receipt of such notice to respond to such notice.
14. Insurance. Consultant shall, during the term of this Agreement,
---------
recommend to and assist the Tribal Corporation in obtaining on a timely basis on
behalf of the Tribal Corporation and Consultant the following insurance
coverages:
14.1 Builder's Risk. During the construction of the Facility,
--------------
builder's risk insurance with such limits as the parties from time-to-time agree
upon;
14.2 Casualty. After the substantial completion of the Facility as
--------
determined by Consultant in its reasonable discretion, casualty insurance for
the Facility and all FF&E, providing coverage against fire, wind, theft,
vandalism, malicious mischief, sprinkler leakage and such other casualties, for
their full replacement cost, without depreciation;
14.3 Liability. During the term of the Transaction Documents,
---------
commercial liability insurance against claims for injury, death and property
damage occurring on, in or about the Property, the Facility, or in connection
with the Enterprise or any operation thereof, with such limits in excess of an
annual aggregate limit as the parties from time-to-time may agree upon;
14.4 Worker's Compensation. During the term of this Agreement,
---------------------
worker's compensation insurance to the extent (i) deemed appropriate by the
parties or (ii) required by Applicable Law.
14.5 Other. During the term of this Agreement, such other insurance
-----
coverages as the parties from time-to-time may agree upon.
-9-
<PAGE>
14.6 Nature of Coverages. The parties shall from time-to-time
-------------------
determine the appropriate limits, deductibles and endorsements for the coverages
to be obtained pursuant to this section.
14.7 No Jurisdiction. Except as specifically provided herein,
---------------
nothing in this Agreement or the other Transaction Documents shall be deemed or
construed to subject the Tribal Corporation or its officers, agents, employees
or representatives (including Tribal Corporation employees assigned to the
Enterprise) to the jurisdiction of the State of Washington or any political
subdivision thereof.
14.8 Policy Requirements. Each policy of insurance obtained by
-------------------
Consultant pursuant to this Section shall be issued by an entity reasonably
acceptable to the Tribal Corporation. The Tribal Corporation shall be named as
insured and Consultant and any parent of Consultant shall be named as additional
insureds in all such policies.
14.9 Enterprise Expenses. The premiums and other charges required to
-------------------
obtain and maintain insurance coverage pursuant to this Agreement shall be paid
in advance for the first year from Loan proceeds, and thereafter as operating
expenses of the Enterprise.
15. Condition Precedent to the Consultant's Duties. It shall be a
----------------------------------------------
condition precedent to Consultant's duties hereunder that the Effective Date
shall have occurred. Within five (5) business days following the Execution
Date, the Tribal Corporation shall seek the approval of the NIGC that the Loan
Documents and the Transaction Documents, or any of them taken individually, do
not constitute a management contract as defined under IGRA, 25 U.S.C. (S) 2711,
and if such verification is not obtained within ninety (90) days after such
approval is sought, this Agreement and the other Transaction Documents shall
terminate and be of no further force and effect; provided further that the
parties shall negotiate in good faith regarding any modifications to the
Transaction Documents or the Loan Documents which may be required or suggested
by the NIGC or BIA in order to receive the approvals referred to herein.
In addition, within five (5) business days following the Execution Date,
the Tribal Corporation shall seek the approval of the Loan Documents and the
Transaction Documents, to the extent required by Applicable Law, from the Bureau
of Indian Affairs, and if such approval is not obtained within sixty (60) days
after such approval is sought, this Agreement and the other Transaction
Documents shall terminate and be of no further force and effect, subject to the
good faith negotiation requirements set forth above.
-10-
<PAGE>
Each of the parties hereto agrees to execute, deliver and, if necessary,
record any and all additional instruments, certifications, amendments,
modifications and other documents as may be required by the Secretary, the BIA,
the NIGC, or any applicable statute, rule or regulation in order to effectuate,
complete, perfect, continue or preserve the respective rights, obligations,
liens and interests of the parties thereto to the fullest extent permitted by
law; provided, however, that any such additional instrument, certification,
amendment, modification or other document shall not materially change the
respective rights, remedies or obligations of the Tribal Corporation or
Consultant under this instrument or any other agreement or document related
hereto.
16. Termination and Suspension.
--------------------------
16.1 By Mutual Agreement. This Agreement may be terminated at any
-------------------
time by written agreement executed on behalf of both parties.
16.2 Consultant Default. If the Consultant defaults in any material
------------------
way in the performance of its obligation under this Agreement or breaches in any
material way any representation or warranty made by it herein, and such default
or breach is not cured within 10 days after the Tribal Corporation gives the
Consultant written notice of such default or breach, then the Tribal Corporation
shall have the right to terminate this Agreement by giving the Consultant
written notice of termination (except that the Tribal Corporation may not
exercise such right if such default or breach cannot be cured within such 10-day
period and the Consultant commences a cure within such 10-day period and
diligently pursues such cure to completion).
16.3 Default of Nation or Tribal Corporation. If the Nation and/or
---------------------------------------
the Tribal Corporation default in any material way in the performance of any
obligation under this Agreement, and such default is not cured within 10 days
after the Consultant gives the defaulting party written notice describing such
default, then Consultant shall have the right to seek specific enforcement of
the provisions of this Agreement or terminate this Agreement by giving the
Tribal Corporation written notice of termination (except that the Consultant may
not exercise such right if such default cannot be cured within such 10-day
period and the defaulting party commences a cure within such 10-day period and
diligently pursues such cure).
16.4 Termination by Consultant. Consultant may terminate this
-------------------------
Agreement in the event that the Nation and/or the Tribal Corporation breach or
are in default under any of the Loan Documents or the Transaction Documents and
such default is not cured within the applicable cure period.
16.5 Suspension by Consultant. Consultant may suspend the performance
------------------------
of its services hereunder pursuant to the terms and subject to the limitations
of Section 3.5 of the Consulting Agreement.
17. Incorporation by Reference. The parties hereby incorporate into this
--------------------------
Agreement by this reference Sections 3.5, 5, 6, 9, and 12 of the Consulting
Agreement, which provisions shall apply as if set forth in full herein.
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<PAGE>
18. Notices. Any notice required to be given pursuant to this Agreement
-------
shall be delivered by overnight courier or U.S. Express Mail with notice deemed
effective on the later of the first business day after deposit or the day on
which the courier confirms delivery, addressed as follows:
(a) If to the Tribal Corporation:
YAKAMA TRIBAL GAMING CORPORATION
c/o The Confederated Tribes and
Bands of the Yakama Indian Nation
P.O. Box 151
Toppenish, Washington 98948
with a copy to:
The Confederated Tribes and
Bands of the Yakama Indian Nation
P.O. Box 151
Toppenish, Washington 98948
Attention: Chairperson, Tribal Council
and:
Levine & Associates
2049 Century Park East, Suite 710
Los Angeles, CA 90067
Attn: Jerome Levine, Esq.
(b) If to Consultant:
HP YAKAMA CONSULTING, INC.
c/o Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, CA 90301
Attn: Chief Financial Officer
with a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attn: Alvin Segel, Esq.
19. Miscellaneous Provisions.
------------------------
19.1 Captions. The captions in this Agreement are inserted for
--------
convenience of reference only; they are not part of this Agreement and shall not
affect its interpretation.
19.2 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective permitted
successors and
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<PAGE>
permitted assigns, provided neither party hereto shall assign or encumber its
interest in this Agreement without the prior written consent of the other party,
which consent may be withheld in the sole discretion of that party.
19.3 Entire Agreement; Modifications. This Agreement and the
-------------------------------
Transaction Documents contain the entire understanding of the parties regarding
their subject matter, and supersede all prior negotiations, understandings and
agreements of the parties with respect thereto (including, without limitation,
the MOU). The express terms of this Agreement shall control and supersede any
course of performance and/or customary practice inconsistent with such terms.
Any subsequent agreement between the parties hereto shall not change or modify
this Agreement unless in writing and signed by the party against whom
enforcement of such change or modification is sought.
19.4 No Waiver. No failure or delay by either party to this
---------
Agreement to exercise any right, remedy, power or privilege under this Agreement
shall be a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power or privilege with respect to any
occurrence. No waiver shall be effective unless it is in writing and signed by
the party asserted to have granted such waiver.
19.5 No Joint Venture. Consultant shall be an independent contractor
----------------
engaged by the Tribal Corporation to perform the duties and obligations
described in this Agreement. Accordingly, nothing in this Agreement shall be
deemed or construed to create a joint venture or other partnership relationship
between the Tribal Corporation and the Consultant.
19.6 No Conveyance. Nothing in this Agreement shall be deemed or
-------------
construed to transfer or convey to the Consultant any lien on or interest in the
Property or Facility, or to transfer or convey to the Consultant any proprietary
interest in the Enterprise.
19.7 Time of Essence. Time is of the essence in the performance by
---------------
the parties hereto of their respective obligations under this Agreement.
19.8 Execution. Four original copies of this Agreement are being
---------
executed on behalf of each of the parties hereto. Each such party is retaining
two original copies of this Agreement. Each of the four original copies of this
Agreement shall be equally valid.
19.9 Tribal Corporation's Obligations Limited. Nothing in this
----------------------------------------
Agreement shall obligate the Tribal Corporation to encumber or make any payment
from assets of the Tribal Corporation other than (i) revenues and receipts and
personal property of the Enterprise; and (ii) the revenues and receipts of any
other Gaming operation conducted by the Tribal Corporation, during the term of
this Agreement.
19.10 Severability. If any part, term or provision of this Agreement
------------
is invalid, unenforceable, illegal, or in conflict with any federal, state or
local laws, such part, term or provision shall be considered severable from the
rest of this Agreement and the remaining portions of this Agreement shall not be
thereby affected or impaired and this Agreement shall be construed and enforced
as if this Agreement did not contain such part, term or provision, provided that
the removal of such part, term or provision does not
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<PAGE>
materially and adversely alter the ability of the parties to achieve the
intended of the transactions contemplated by this Agreement.
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<PAGE>
19.11 Choice of Law. This Agreement shall be governed first by
-------------
federal law, if applicable, then by the laws of the State of Washington.
19.12 Binding Effect. This Agreement shall be binding upon, and
--------------
inure to the benefit of and be enforceable by the parties and by their
successors and assigns as permitted herein.
19.13 Further Assurances. Each party hereto shall from time-to-time,
------------------
at the reasonable request of the other party (i) execute and deliver or cause to
be executed and delivered such additional documents and papers, and (ii) take or
cause to be taken such additional actions as may be reasonably required to
effectively evidence and implement the transactions described in and
contemplated by this Agreement.
19.14 Interpretation. No provision of this Agreement shall be
--------------
interpreted for or against either party because that party or that party's legal
representative or counsel drafted such provision.
19.15 Attorneys' Fees. The prevailing party in any arbitration
---------------
proceeding relating to this Agreement shall recover from the other party
reasonable attorneys' fees and all costs and expenses incurred by the prevailing
party in such proceeding or action.
IN WITNESS WHEREOF, the parties hereto have executed this Construction and
Development Agreement as of the date stated in the introduction hereof.
YAKAMA TRIBAL GAMING CORPORATION,
a tribal corporation established under the laws of
The Confederated Tribes And Bands Of
The Yakama Nation
By: /s/ Ross K. Sockzehigh
-----------------------
Name: Ross K. Sockzehigh
--------------------------
Title: Chairman of the Board
----------------------------
HP YAKAMA CONSULTING, INC.,
a Delaware corporation
By: /s/ Bruce Rimbo
Name: Bruce Rimbo
-------------------------
Title: Vice President and Secretary
------------------------------------
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<PAGE>
The undersigned hereby agrees to be
bound by the terms and provisions of
Section 17 hereof.
CONFEDERATED TRIBES AND BANDS OF
THE YAKAMA INDIANS, a federally
recognized Indian Tribe
By: Ross K. Sockzehigh
------------------------------
Name: Ross K. Sockzehigh
-----------------------------
Title: Chairman
-----------------------------
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<PAGE>
Hollywood Park, Inc.
Exhibit 10.46
CONSULTING AGREEMENT
By and Between
YAKAMA TRIBAL GAMING CORPORATION
and
HP YAKAMA CONSULTING, INC.
Dated: September 11, 1997
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into this 11th day of
September 1997 by and between Yakama Tribal Gaming Corporation (the "Tribal
Corporation"), a tribal corporation established under the laws of The
Confederated Tribes and Band of the Yakama Indian Nation (the "Nation"), a
federally recognized Indian tribe located in the State of Washington and having
a mailing address of P.O. Box 151, Toppenish, Washington 98948, and HP Yakama
Consulting, a Delaware corporation, having a mailing address of c/o Hollywood
Park, Inc. 1050 South Prairie Avenue, Inglewood, CA 90301 ("Consultant").
RECITALS
A. The Tribal Corporation desires to engage Consultant to provide the
Consulting Services (as herein defined), and Consultant agrees to such
engagement, all upon the terms and conditions herein contained.
B. Simultaneously with the execution of this Agreement, the Tribal
Corporation and Consultant have entered into that certain Construction and
Development Agreement of even date herewith (the "Construction and Development
Agreement").
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged by the parties, the parties
hereby agree, as of the date first stated above, as follows:
1. Use of Defined Terms. Unless otherwise defined herein, the
--------------------
capitalized words and terms used in this Agreement shall have the same meanings
set forth in Exhibit A hereto, "Master Definitions List."
---------
2. Retention of Consultant. Subject to the terms and conditions herein
-----------------------
contained, the Tribal Corporation hereby retains and appoints Consultant as an
independent contractor, to perform the consulting services described herein
during the Term (as defined below) of this Agreement and Consultant hereby
accepts such appointment. Consultant shall consult with the Tribal Corporation
as reasonably necessary to assist the Tribal Corporation to operate the Facility
and the Enterprise including identifying potential management and other key
employees; training personnel; preparing accounting, internal control, security,
surveillance, personnel and other written operating policies and procedures;
recommending the kinds of games to be played and rules in connection therewith
to the extent not established in the Gaming Control Ordinance; and providing
such other consulting advice as reasonably requested by Tribal Corporation
during the Term hereof to assist it in operating the Enterprise in accordance
with industry standards for similar operations (collectively the "Consulting
Services"). Without limiting the generality of the foregoing, the Consulting
Services shall include but not be limited to those specific services and
deliverables, on the schedules indicated, set forth on Exhibit B hereto. In
---------
rendering its services hereunder, Consultant shall make regular reports on a
monthly basis to and take direction from the person or persons designated by the
Tribal Corporation, which shall be the Tribal Gaming Commission or such
person(s) as it shall designate, until further notice.
<PAGE>
3. Consulting Services.
-------------------
3.1 Time for Rendering Consulting Services. Consultant agrees to
--------------------------------------
provide the Consulting Services under this Agreement on an ongoing basis
commencing upon the Effective Date and continuing throughout the Term (as
hereinafter defined) of this Agreement.
3.2 Limit of Consultant's Authority. This Agreement does not, and is
-------------------------------
not intended to, provide for the management or control of any part of the
Enterprise, and shall not be so construed. Consultant shall have no authority
to interfere with the operations, or duties of any employee, of the Tribal
Corporation or of the Enterprise.
3.3 Consulting Personnel. Consultant agrees to assign such personnel
--------------------
to perform the Consulting Services and other obligations Consultant has assumed
hereunder as Consultant deems reasonably necessary to assist Tribal Corporation
in the orderly and efficient operation of the Enterprise and to fulfill
Consultant's obligations hereunder. Consultant shall be solely responsible for
all salaries, wages, taxes, withholding, fringe benefits, and liabilities in
connection with such personnel and agrees to hold Tribal Corporation harmless,
indemnify and defend it from any and all claims, damages or expenses in any way
arising out of the payment or nonpayment to such personnel or any of them.
3.4 Additional Consultants.
----------------------
3.4.1 Tribal Corporation's Consultants. During the Term (as herein
--------------------------------
defined) of this Agreement, neither the Tribal Corporation or the Enterprise
shall engage any additional consultants or independent contractors to provide
services to the Enterprise similar in nature to the Consulting Services.
Subject to the foregoing, the Tribal Corporation or the Enterprise may engage
any additional consultants or independent contractors as they deem necessary and
appropriate, provided, however, that such additional consultants or contractors
-------- -------
shall not be deemed employees of or consultants to Consultant and, without the
prior written consent of Consultant, Consultant shall have no obligation to
supervise or review the work product of such additional consultants or
contractors. Consultant shall have no responsibility or liability to the Tribal
Corporation or the Enterprise arising out of, resulting from, or in any way
connected with services or work product provided by such contractors or
consultants and the Tribal Corporation expressly warrants and represents that it
shall make reasonable efforts to ensure that such Consultants do not interfere
with Consultant's performance hereunder. The Tribal Corporation agrees to hold
Consultant harmless, indemnify and defend it from any and all claims, damages or
expenses in any way arising out of any act or omission of, or in any way
connected to the presence of, rendition of services by, or payment to, such
additional consultants or contractors.
3.4.2 Additional Consultants hired by Consultant. Notwithstanding
------------------------------------------
any term or provision of this Agreement, Consultant retains the right to hire
such additional consultants as Consultant, in its sole discretion, believes are
necessary to or desirable for the performance of the Consultant Services. Any
additional consultants engaged or retained by Consultant shall be the sole
responsibility of Consultant, shall be supervised exclusively by Consultant and
shall be paid by Consultant; provided, however, that if the Tribal Corporation
-------- -------
provides its prior written approval of Consultant's engagement of such
additional consultants and the terms thereof, and the Tribal
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<PAGE>
Corporation agrees to be responsible therefor, then the Tribal Corporation shall
reimburse Consultant on a monthly basis for the fees and expenses, as approved
by the Tribal Corporation, which Consultant pays such additional consultants.
The generality of the foregoing notwithstanding, nothing contained in this
Agreement or the Construction and Development Agreement is intended or shall be
construed as creating any direct relationship between the Tribal Corporation or
the Enterprise and any additional consultants which Consultant engages.
Employees and additional consultants hired by Consultant shall be required to
submit to the background investigation and licensing requirements as required
under Applicable Law. The Tribal Corporation shall have the right to restrict
the access of any individual serving as Consultant's employees, agents,
representatives or consultants to the Enterprise until such person has been
granted the licenses or approvals required under any Applicable law.
3.5 Suspension of Consulting Services. It is expressly understood
---------------------------------
and agreed that in the event that Consultant shall declare the Tribal
Corporation to be in material breach of this Agreement or the other Transaction
Documents or Loan Documents, Consultant may, upon written notice to the Tribal
Corporation, suspend its performance of any or all Consulting Services until
such material breach has been cured or forgiven by Consultant, provided,
--------
however, that nothing contained herein or in the Loan Documents and other
- -------
Transaction Documents shall obligate Consultant to forgive a material breach of
this Agreement. In no event shall such suspension of Consulting Services if
determined to be justified in accordance with the dispute resolution provisions
of Section 9, be considered or constitute a breach of this Agreement or in any
way excuse the Tribal Corporation from the performance of its obligations under
this Agreement or the Construction and Development Agreement, and Consultant
shall not be liable to the Tribal Corporation, the Tribal Gaming Commission or
the Enterprise for any damages which may be incurred or alleged as a result of
such suspension in Consulting Services. The period during which Consultant has
suspended the performance of its Consulting Services shall not be deemed to have
been part of the term of this Agreement and the date of expiration of the term
of this Agreement shall be extended by the number of days of such suspension
period; provided, however that any such extension shall not exceed the length of
time in which the Tribal Corporation may cure the breach upon which such
suspension is based.
4. Compensation.
------------
4.1 Annual Consulting Fee. In consideration of Consultant's
---------------------
performance of the Consulting Services, the Tribal Corporation shall pay
Consultant an annual fee of One Dollar ($1.00), plus reasonable expenses in
accordance with section 4.2 below ("Consulting Fees").
4.2 Reimbursement of Expenses. The Tribal Corporation shall
-------------------------
reimburse Consultant for all reasonable expenses which Consultant incurs in
connection with the performance of its obligations hereunder, provided that such
expenses have been approved in writing in advance by the Tribal Corporation and
do not exceed $2,000 per month. For purposes of this Agreement, "reasonable
expenses" shall include all expenses regarded under GAAP as being necessary to
the development or operation of the Enterprise, but shall not include clerical
expenses, rent or other overhead expenses of Consultant. Consultant agrees to
provide to the Tribal Corporation such documentation as may be required in
accordance with Tribal Corporation's standard governmental policies on expense
reimbursements to support any such request. Reimbursements shall be paid in
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<PAGE>
the ordinary course within thirty (30) days after submission of required
documentation, provided that expenses incurred prior to the Commencement Date
shall be paid only as part of the Loan disbursements and only to the extent
approved by the Representatives and included in the Development Budget.
5. Limited Waiver of Sovereign Immunity.
------------------------------------
5.1 Retention of Sovereign Immunity. By this Agreement, the Nation
-------------------------------
and the Tribal Corporation do not waive, limit or modify their respective
sovereign immunity from unconsented suit or proceedings in arbitration, except
as provided in this Section.
5.2 Scope of Waiver. Subject to the provisions of this Section 5,
---------------
the Nation and the Tribal Corporation hereby expressly grant to the Consultant
and the other Persons within the scope of Section 5.5, a limited waiver of their
respective sovereign immunity from unconsented suit and proceedings in
arbitration, their respective right to require exhaustion of Tribal remedies,
its right to seek Tribal remedies and their respective right to be sued in the
Courts of the Nation, as such Courts are or may be established, and consents to
suit in accordance with this Section.
5.3 Procedural Requirements. The Nation and the Tribal Corporation
-----------------------
grant a limited waiver of their respective sovereign immunity as to suit
involving a claim if, and only if, each and every one of the following
conditions is met:
5.3.1 The claim is made by a party designated under Section 5.5,
and not by any other Person;
5.3.2 The claim alleges a breach by the Nation or the Tribal
Corporation of one or more of the specific obligations or duties expressly
assumed by the Nation or the Tribal Corporation under the terms of this
Agreement or the Construction and Development Agreement (including, without
limitation, all indemnification obligations hereunder);
5.3.3 The claim seeks:
(a) some specific action, or discontinuance of some
action, by the Nation, the Tribal Corporation or the Enterprise to bring the
Nation or the Tribal Corporation into full compliance with the duties and
obligations expressly assumed by the Nation or the Tribal Corporation under this
Agreement or the Construction and Development Agreement; or
(b) money damages for noncompliance with the terms and
provisions of this Agreement or the Construction and Development Agreement
(including, without limitation, all indemnification obligations hereunder).
5.3.4 The claim is made in a detailed written statement to the
Nation or the Tribal Corporation, as applicable, stating the specific action or
discontinuance of action by the Nation, the Tribal Corporation, or the
Enterprise which would cure the alleged breach or non-performance, or the sum of
money claimed to be due and owing from the Nation or the Tribal Corporation, as
applicable, to the Consultant by reason of such specific breach or non-
performance, and, except where the Consultant is
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<PAGE>
seeking injunctive relief, the Nation or the Tribal Corporation shall have
thirty (30) calendar days to cure such breach or non-performance or to make such
payment before arbitration or judicial proceedings may be instituted.
5.4 Time Period. With respect to any claim authorized in this
-----------
Section, initial judicial proceedings, as authorized herein, shall be commenced
within the later of two (2) years after the claim accrues or one year after the
claim is discovered, or such claim shall be forever barred. The waiver granted
herein shall commence on the Execution Date and shall continue for two years
following the expiration, termination, or cancellation of this Agreement or the
Construction and Development Agreement (whichever is later), except that the
waiver shall remain effective for any proceedings then pending, and all appeals
therefrom.
5.5 Recipient of Waiver. The recipients of the benefit of this
-------------------
waiver of sovereign immunity are limited to the Consultant, its successors and
assigns, and any and all Persons covered by the indemnification provisions
hereof.
5.6 Federal Question. The parties agree that any dispute raised
----------------
under the provisions of this Section 5 shall be resolved first pursuant to
applicable federal law, and if no federal law applies, pursuant to the
applicable laws of the State.
5.7 Service of Process. In any proceeding brought pursuant to this
------------------
Section 5, the Nation and the Tribal Corporation consent to service made in
accordance with the notice provisions of Section 12.5 of this Agreement.
5.8 Enforcement. The Nation and the Tribal Corporation waive their
-----------
respective sovereign immunity from a judgment or order consistent with the terms
and provisions of this Section 5, which is final because either the time for
appeal thereof has expired or the judgment or order is issued by a court having
final appellate jurisdiction over the matter. The Nation and the Tribal
Corporation consent to the jurisdiction of the United States District Court for
the Eastern District of Washington and any court having appellate jurisdiction
thereover, consistent with the terms and conditions of this Section 5. None of
the parties shall object to the jurisdiction or venue of said federal court.
Without in any way limiting the generality of the foregoing, the Nation and the
Tribal Corporation expressly authorize any Governmental authorities who have the
right and duty under Applicable Law to take any action authorized by any court,
to take such action to give effect to any judgment entered against the Nation or
the Tribal Corporation, including, without limitation, entering on to the
Property, or any other lands within the Nation's jurisdiction, and the Facility
to seize possession of any Collateral for the purpose of giving effect to any
judgment entered against the Nation or the Tribal Corporation pursuant to this
Section 5.
5.9 Assets Pledged to Satisfy Enforcement Proceedings. The foregoing
------------------------------------- -----------
limited waiver of sovereign immunity is expressly conditioned on the parties'
agreement, set forth herein, that the only assets, including property and funds,
which shall be available, and which are thus specifically pledged and assigned
hereby, to satisfy any enforcement proceedings or judgment in connection with
this Agreement or the Construction and Development Agreement, shall be limited
to the Collateral; provided, however, that any rights or interest which the
Consultant may claim or acquire in and to such assets shall be subordinate to
the security interests which the Nation or the Tribal Corporation grants under
the Loan Documents.
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<PAGE>
5.10 Limitation Upon Enforcement. Except with respect to damages
---------------------------
arising under Section 12.1 of this Agreement awarded against the Tribal
Corporation and/or the Enterprise, damages awarded against the Nation, the
Tribal Corporation, or the Enterprise shall be satisfied solely from assets
specified in Section 5.9, and shall not constitute a lien upon or be collectible
from any other income or assets of the Nation or the Tribal Corporation, except
with the written consent of the Nation or the Tribal Corporation.
5.11 Expenses of Judicial Enforcement. Except as ordered by a court
--------------------------------
of competent jurisdiction and as set forth in Section 12.1 hereof, all parties
shall bear their own costs, including attorneys' fees, in connection with any
judicial proceedings authorized under this Agreement. The parties expressly
agree that this provision shall survive the termination, for any reason, or
expiration of this Agreement.
5.12 Guaranty. The Nation and the Tribal Corporation agree not to
--------
revoke or limit, in whole or in part, the limited waiver of sovereign immunity
of the Nation and the Tribal Corporation contained in this Section 5 or in any
way attempt to revoke or limit, in whole or in part, such limited waiver of
sovereign immunity. In the event of any such revocation or attempted
revocation, the parties expressly recognize and agree that there remains no
adequate remedy at law available to the Consultant or the Persons covered by the
indemnification provisions hereof, and the Nation and the Tribal Corporation
hereby consent to the entry of appropriate injunctive relief consistent with the
terms and conditions of this Agreement, as may be granted by any court of
competent jurisdiction.
6. Representations and Warranties of the Nation and the Tribal
-----------------------------------------------------------
Corporation. The Nation and the Tribal Corporation, as an inducement to
- -----------
Consultant to enter into this Agreement, hereby represent, warrant and covenant
that:
6.1 The Nation is a federally recognized Indian tribe eligible for
the special programs and services which the United States provides to Indians
because of their status as Indians, and possessing sovereign powers of self-
government.
6.2 The Nation is the beneficial owner of the Property within its
reservation in the State of Washington which is held in trust by the United
States for the benefit of the Nation and over which it exercises governmental
jurisdiction.
6.3 Each of the Nation and the Tribal Corporation has the right,
authority and power to establish the Enterprise in the Facility which shall be
constructed on the Property for the purpose of engaging in Gaming.
6.4 Each of the Nation and the Tribal Corporation has the full power,
authority and authorization to execute, enter into, and perform this Agreement
and the Construction and Development Agreement.
6.5 Within five (5) business days following the Execution Date, the
Nation and the Tribal Corporation shall submit the Transaction Documents,
together with such other documents or instruments as may be required by law, to
the BIA and the NIGC and shall use their respective best efforts to obtain
written approval from such agencies, to the satisfaction of Consultant that (a)
the Transactions Documents, either individually or
-6-
<PAGE>
taken together, do not constitute a "Management Contract," as such term is used
in 25 U.S.C. (S) 2711, and (b) the Transaction Documents, either individually or
collectively have been approved by the Secretary or do not require such
approval.
6.6 Provided any approvals required herein or under Applicable Law
have been obtained, the Transaction Documents have been duly authorized,
executed and delivered by the Nation and the Tribal Corporation and constitute
legal, valid and binding obligations of the Nation and the Tribal Corporation,
enforceable in accordance with the terms thereof, except as such enforcement may
be limited by bankruptcy, insolvency or similar laws.
6.7 Any resolution of the Tribal Corporation (on behalf of the Nation
and the Tribal Corporation) approving and authorizing the execution of this
Agreement and the Construction and Development Agreement was duly adopted at a
meeting of the authorizing body at a duly called and convened meeting at which a
quorum was present, and has not been repealed, modified or amended since its
adoption. All necessary resolutions or other Tribal actions have been taken and
are not subject to any reverse referendum or similar requirement or provision.
6.8 The execution, delivery and performance of this Agreement and the
Construction and Development Agreement will not (i) violate any law, rule,
regulation or court order applicable to the Nation, the Tribal Corporation or
the Property, (ii) result in the breach of or constitute a default under the
Compact, any indenture or loan, credit or other agreement or instrument to which
the Nation and/or the Tribal Corporation is a party or by which the Nation, the
Tribal Corporation or the Property may be bound or affected, (iii) result in the
creation or imposition of any lien, charge or encumbrance of any nature upon any
properties or assets of the Nation and/or the Tribal Corporation, (iv) result in
the acceleration of any obligation under the terms of such instrument or
agreement to which the Nation and/or the Tribal Corporation is a party or to
which the Property is subject, or (v) violate the IGRA or any other Applicable
Law as to the Nation or the Tribal Corporation.
6.9 There are no judgments filed or suits, actions or proceedings
pending, or to the knowledge of the Nation or the Tribal Corporation, threatened
against or affecting the Nation, the Tribal Corporation, or the Property by any
Court, arbitrator, administrative agency or other governmental authority which,
if adversely determined, would materially and adversely affect the construction,
development or operation of the Enterprise contemplated in the Transaction
Documents.
6.10 No consent, approval or authorization of or permit or license
from or registration with or notice to any federal or state regulatory
authority, the BIA or any third party is required in connection with the making
or performance of this Agreement or the Construction and Development Agreement
or any document or instrument related hereto or thereto, or, if so required,
such consent, approval, authorization, permit or license has been requested
and/or obtained or will be requested within five (5) business days of the
Execution Date or such registration has been made or notice has been given or
such other appropriate action has been taken on or prior to the date of such
making or performance.
6.11 Neither the Nation nor the Tribal Corporation is in default of a
material provision under any material agreement, instrument, decree or order to
which it
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<PAGE>
is a party or to which it, the Property, the Facility or the Enterprise are
bound or affected.
6.12 The conduct and operation of the Enterprise by the Tribal
Corporation is not subject to registration with, notification to, or regulation,
licensing, franchising, consent or approval by any state or federal Governmental
authority or administrative agency, except (i) general laws and regulations
which are not related or applicable particularly or uniquely to the type of
business conducted by the Nation, which do not materially restrict or limit the
business of the Nation, and with which the Nation is in substantial compliance
and (ii) laws and regulations promulgated by or associated with the BIA, the
NIGC or any State law or agency with jurisdiction over gaming activities under
the Compact, including the Washington State Gaming Commission and the laws of
the United States and the State of Washington, all of which have been obtained
or will be applied for in accordance with the terms hereof.
6.13 The Property and the Facility are in compliance with applicable
provisions of any specific or general plan and all zoning, subdivision,
environmental and health and safety rules, regulations, ordinances, directives
and statutes applicable to the Property and the Facility, its occupancy or use;
all restrictive covenants, zoning and subdivision ordinances and building laws
and other applicable governmental laws, ordinances and lawful requirements
applicable to the Property and the Facility have been complied with in all
material respects; and no order, notice, complaint, report, or warning from any
Governmental agency has been or will be received by or communicated to Nation,
its agents, assigns, tenants, subcontractors, or any other person acting for
Nation, regarding the Property and the Facility, its occupancy or use that has
not been or will not be promptly communicated and delivered to Consultant.
7. Representations and Warranties of Consultant. Consultant, as an
--------------------------------------------
inducement to the Nation and the Tribal Corporation to enter into this
Agreement, hereby represents, warrants and covenants that:
7.1 Consultant is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and is licensed, or
prior to the Commencement Date, shall be licensed, to conduct business in the
State of Washington, as contemplated herein.
7.2 Prior to rendering any services hereunder Consultant and any
current Affiliate, officer, director, employee or others connected therewith, as
may be required by Applicable Law, shall have applied for and been granted a
license or other permission as may be required from the Tribal Gaming
Commission, the Washington State Gambling Commission, and any other governmental
agency required by Applicable Law, in order to provide the services contemplated
herein or in any other Transaction Document. Consultant agrees to promptly
apply for such licenses and permissions as soon as possible following the
Execution Date of this Agreement, shall cooperate fully with and expeditiously
to all requests of any such agency to provide any information required to
approve such licensing or other approval. All fees connected with such
licensing and approval under this or any other Transactional Document shall be
the sole responsibility of Consultant and shall not be subject to repayment or
reimbursement. Consultant warrants and represents that it knows of no
information that would reasonably be expected to prevent it from obtaining such
licenses or approvals. The failure to obtain such licenses or approvals within
a reasonable period of time shall be cause, at Consultant's or Tribal
-8-
<PAGE>
Corporation's discretion, to terminate the Transaction Documents, including but
not limited to this Consulting Agreement, and shall relieve Tribal Corporation
of any obligations, if any, to Consultant under such documents, except as
otherwise provided therein.
7.3 The execution, delivery and performance of the Transaction
Documents have been duly authorized by Consultant and such documents are valid
and binding obligations of Consultant in accordance with the terms thereof,
except as such enforcement may be limited by bankruptcy, insolvency or similar
laws.
7.4 To the extent relevant under Applicable Law, and to the best of
Consultant's knowledge, neither Consultant nor any current Affiliate, officer,
director or present key employee thereof has ever had an application for a
gaming license rejected, or because of its or their own background caused the
application for a gaming license for another to be rejected, nor has any gaming-
related license which has been issued to any of such entities or persons ever
been suspended or revoked.
7.5 To the extent relevant under Applicable Law, and to the best of
Consultant's knowledge, neither Consultant nor any current Affiliate, officer,
director, agent, representative or present key employee thereof has ever been
convicted of a felony or a gaming-related misdemeanor.
7.6 Any information Consultant receives, whether directly or through
an agent, employee, or representative, or through any consultant or other
contractor it may retain which concerns the financial, marketing or other
affairs of the Nation, the Tribal Corporation or the Enterprise which are not
available to the general public, shall be treated as the Nation's and/or the
Tribal Corporation's trade secrets, and shall be kept by Consultant in full
confidence and not disclosed to any other person, firm or organization without
the Nation's or the Tribal Corporation's written consent.
8. Term of Agreement. The rights and obligations of the parties
-----------------
hereunder shall commence as of the Execution Date and shall continue for a
period of seven (7) years from the Effective Date, unless (i) earlier terminated
in accordance with the terms of this Agreement or (ii) extended by the mutual
consent of the parties or in accordance with the terms of this Agreement (the
"Term"). If the Effective Date has not occurred on or before August 1, 1998,
this Agreement shall terminate and be of no further force and effect.
9. Dispute Resolution. Whenever during the term of this Agreement or the
------------------
Construction and Development Agreement, any disagreement or dispute arises
between the parties as to the interpretation of this Agreement, or the
Construction and Development Agreement, or any rights or obligations arising
thereunder, including the inability of the Representatives to reach a decision
required under this Agreement, such matters shall be resolved whenever possible
by meeting and conferring of the parties. Either party may request such a
meeting by giving notice to the other, in which case such other party shall make
itself available within seven (7) days thereafter.
9.1 Arbitration Required. With the exception of (i) disputes
--------------------
involving the Nation's or the Tribal Corporation's attempt to rescind or in any
way restrict the limited waiver of sovereign immunity contained in Section 5 of
this Agreement, (ii) claims for injunctive relief, and (iii) disputes arising
under the Ground Lease, the Sublease and/or the
-9-
<PAGE>
Loan Documents (or the provisions of this Agreement or the Construction and
Development Agreement which cross-default this Agreement and the Construction
and Development Agreement therewith), any claim, controversy or dispute arising
out of or relating to this Agreement or the Construction and Development
Agreement, or any alleged breach of any provisions hereunder and thereunder that
cannot be resolved under the provisions of the preceding section shall be
submitted to binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in effect at the time of
submission subject to the provisions of this Section.
9.2 Place of Arbitration. Unless the parties hereto otherwise agree
--------------------
in writing prior to the submission of such claim, controversy or dispute to
arbitration, arbitration proceedings under this section shall be held on the
Yakama Reservation, or at such other location as the parties may agree.
9.3 Selection of Arbitrators. Either party may, at any time prior to
------------------------
the selection of an arbitrator or arbitrators, require that the arbitrator or
arbitrators selected be an attorney or attorneys licensed to practice law in the
State of Washington or in the United States District Court for the Eastern
District of Washington.
9.4 Unless the parties hereto otherwise agree in writing, any matter
to be arbitrated shall be submitted to a panel of three arbitrators. If such a
panel is to be selected, within ten (10) days after commencement of the
proceedings, one arbitrator shall be designated by the Tribal Corporation, one
arbitrator shall be designated by the Consultant, and within ten (10) days
thereafter, the third arbitrator shall be designated by the two arbitrators
designated by the parties hereto. If either party fails or refuses to appoint
an arbitrator, the arbitrator appointed by the other party shall designate the
other two (2) arbitrators.
9.5 Award and Orders. The arbitration award shall be in writing
----------------
signed by each of the arbitrators, and shall state the basis for the award. In
rendering its award, the arbitration panel shall not alter or otherwise modify
the provisions of this Agreement. Awards shall only be satisfied in accordance
with, and subject to the limitations under, Section 5.
10. Termination and Suspension. This Agreement shall be terminated or
--------------------------
suspended, as applicable, as follows:
10.1 Mutual Consent. This Agreement may be terminated at any time
--------------
upon the mutual written consent of the parties.
10.2 Material Breach. Either party may terminate this Agreement if
---------------
the other commits or allows to be committed any uncured material breach of this
Agreement. A material breach of the Agreement shall include, but not be limited
to (i) failure by the other party to perform any duty or obligation hereunder
for any twenty (20) consecutive days, or any twenty (20) days out of thirty (30)
consecutive days, (ii) failure by the Tribal Corporation to make payments of any
money due under this Agreement, (iii) any representation, warranty or statement
made herein which proves to have been knowingly false or knowingly erroneous or
misleading in any material respect when made, (iv) any representation, warranty
or statement ceases to be true and correct, (v) any other grounds identified in
this Agreement as cause for termination, and (vi) any other breach which is
finally adjudicated to be a material breach of this Agreement. Notwithstanding
any other
-10-
<PAGE>
term or provision of this Agreement, neither party may terminate the
Agreement under this provision unless such party has provided written notice to
the other party of its intention to terminate the Agreement and the defaulting
party thereafter fails to cure the claimed material breach within thirty (30)
days of receipt of such notice, except in the case of a failure to make payment
of any money due under this Agreement, in which case the time to cure shall be
seven (7) calendar days. The discontinuance or cure of the claimed material
breach shall constitute a cure thereof. Any and all disagreements or disputes
concerning either party's right to terminate this Agreement pursuant to this
Section shall be resolved pursuant to the dispute resolution mechanisms
contained in the Construction and Development Agreement.
10.3 Termination by Tribal Corporation for Cause. Notwithstanding
-------------------------------------------
anything herein to the contrary, the Tribal Corporation may terminate this
Agreement immediately in the event that Consultant (i) is convicted of a felony
under the laws of the United States or any State therein or of any offense
relating to organized crime, (ii) is prohibited, by the State or any other
regulatory body having jurisdiction over Gaming in the State, from participation
in Gaming, or (iii) has any gaming license, right to participate in gaming, or
registration, from any Federal, State or Tribal gaming regulatory agency
revoked.
10.4 Termination by Consultant. Consultant may terminate this
-------------------------
Agreement in the event that the Nation and/or the Tribal Corporation breach or
are in default under any of the Loan Documents or the Transaction Documents and
such default is not cured within the applicable cure period.
10.5 Suspension by Tribal Corporation. In the event any gaming
--------------------------------
license of Consultant is suspended by any Federal, State or Tribal gaming
regulatory agency, Consultant's rights and obligations may, at Tribal
Corporation's option, be suspended for a like period. Such suspension period
shall not extend the term of this Agreement.
10.6 Suspension by Consultant. Consultant may suspend the performance
------------------------
of its duties hereunder in accordance with Section 0 hereof.
10.7 Force Majeure. It is the present understanding and intention of
-------------
the parties that Consultant's performance of the obligations it has agreed to
assume hereunder shall comply with Applicable Laws. If, during the term of this
Agreement, the Enterprise, any material aspect of Gaming, or any material aspect
of the Compact, is determined by the Congress of the United States, a final
order of any agency of the United States, or a court of competent jurisdiction,
to be unlawful under any Applicable Law as a matter of general law and not due
to any act or omission of any party, the obligations of the parties hereto shall
cease and this Agreement shall be of no further force and effect, provided that
Consultant shall retain all monies previously paid to it pursuant to this
Agreement to the extent permitted by Applicable Law.
11. Assignment. Consultant acknowledges that the services to be provided
----------
hereunder are unique to Consultant, based on Consultant's expertise, and depend
on a personal working relationship between the Tribal Corporation and
Consultant. Consultant therefore may not assign or transfer its rights or
obligations under this Agreement without the prior written consent of the Tribal
Corporation.
-11-
<PAGE>
12. General Provisions.
------------------
12.1 Indemnification.
---------------
12.1.1 Indemnification by Nation and Tribal Corporation. The Nation
------------------------------------------------
and the Tribal Corporation agree to indemnify and hold harmless the Consultant,
its directors, officers, agents and employees, against any and all claims of or
losses, damages or liability to third parties to which the Consultant, its
directors, officers, agents and employees, may become subject under any law in
connection with the carrying out of the transactions contemplated by this
Agreement or the Construction and Development Agreement, or the conduct of any
activity on the Property (other than as a result of gross negligence or willful
misconduct of any such party), and to reimburse the Consultant, its directors,
officers, agents and employees, for any out-of-pocket legal and other expenses
(including reasonable attorneys' fees) incurred by the Consultant, its
directors, officers, agents and employees, in connection with investigating any
such losses, claims, damages or liabilities or in connection with defending any
actions relating thereto. The Consultant agrees, at the request and reasonable
expense of the Nation and the Tribal Corporation, to cooperate in the making of
any investigation in defense of any such claim and promptly to assert any or all
of the rights and privileges and defenses which may be available to the
Consultant. The Nation and the Tribal Corporation further release and agree to
hold harmless the Consultant, its directors, officers, agents and employees,
from any claims of or losses, damages or liability to third parties arising out
of any covenant, representation or warranty of the Nation or the Tribal
Corporation contained in this Agreement, the documents related hereto or the
Construction and Development Agreement. The provisions of this Section shall
survive the termination of this Agreement or the Construction and Development
Agreement.
12.1.2 Indemnification by Consultant. Consultant agrees to indemnify
-----------------------------
and hold harmless the Nation and the Tribal Corporation, and each of their
respective directors, officers, agents and employees, against any and all claims
of or losses, damages or liability to third parties to which the Nation and the
Tribal Corporation, and each of their respective directors, officers, agents and
employees, may become subject under any law as a result of the gross negligence
or willful misconduct of the directors, officers, agents or employees of the
Consultant, and to reimburse the Nation and the Tribal Corporation, and each of
their respective directors, officers, agents and employees, for any out-of-
pocket legal and other expenses (including reasonable attorneys' fees) incurred
by the Nation and the Tribal Corporation, and each of their respective
directors, officers, agents and employees, in connection with investigating any
such losses, claims, damages or liabilities or in connection with defending any
actions relating thereto. The Nation and the Tribal Corporation each agree, at
the request and reasonable expense of the Consultant, to cooperate in the making
of any investigation in defense of any such claim and promptly to assert any or
all of the rights and privileges and defenses which may be available to the
Nation and the Tribal Corporation. Consultant further releases and agrees to
hold harmless the Nation and the Tribal Corporation, and each of their
respective directors, officers, agents and employees, from any claims of or
losses, damages or liability to third parties arising out of any covenant,
representation or warranty of the Consultant contained in this Agreement, the
documents related hereto or the Construction and Development Agreement. The
provisions of this Section shall survive the termination of this Agreement or
the Construction and Development Agreement.
12.1.3 Rights of Persons Covered. The Persons covered by the
-------------------------
-12-
<PAGE>
indemnification provisions hereof shall be third party beneficiaries of this
Agreement and shall have the right, subject to the provisions of this Agreement,
to enforce such indemnification provisions.
12.2 Survival of Representations. All representations and warranties
---------------------------
made herein shall survive the execution of this Agreement.
12.3 Captions. The captions in this Agreement are inserted for
--------
convenience of reference only; they are not part of this Agreement and shall not
affect its interpretation.
12.4 Approvals. When approval by any party is required hereunder,
---------
such approval will not be unreasonably withheld or delayed.
12.5 Notices. Any notice required to be given pursuant to this
-------
Agreement shall be delivered by overnight courier or U.S. Express Mail with
notice deemed effective on the later of the first business day after deposit or
the day on which the courier confirms delivery, addressed as follows:
(a) If to the Tribal Corporation:
YAKAMA TRIBAL GAMING CORPORATION
c/o The Confederated Tribes and
Bands of the Yakama Indian Nation
P.O. Box 151
Toppenish, Washington 98948
With simultaneous copies to:
The Confederated Tribes and
Bands of the Yakama Indian Nation
P.O. Box 151
Toppenish, Washington 98948
Attn: Chairperson, Tribal Council
and:
Levine & Associates
2049 Century Park East, Suite 710
Los Angeles, CA 90017
Attn: Jerome Levine, Esq.
(b) If to Consultant:
c/o Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, CA 90301
Attn: Chief Financial Officer
-13-
<PAGE>
With simultaneous copies to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attn: Alvin Segel, Esq.
or to such other address(es) as the parties provide to each other in writing.
12.6 Construction. This Agreement shall be governed first by federal
------------
law, if applicable, then by the laws of the State of Washington. Nothing in
this Agreement will be construed to constitute Consultant as a joint venturer
with the Tribal Corporation or to constitute a partnership between Consultant
and Tribal Corporation. The descriptive headings of the Sections of this
Agreement are for convenience only and are not to be used in the construction of
the substance of this Agreement. The Parties hereto have been represented by
counsel in the negotiation of the terms hereof and no provision should be
construed against any party as the drafter thereof. This Agreement may be
executed in multiple counterparts, each of which will be an original instrument,
but all of which will constitute one agreement.
12.7 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of and be enforceable by the successors and assigns as permitted
herein.
12.8 Entire Agreement. This Agreement and the Construction and
----------------
Development Agreement constitute the entire agreement between the Tribal
Corporation and Consultant concerning the subject matter hereof and supercede
any and all prior agreements, whether written or oral (including, without
limitation the MOU). This Agreement may not be modified except as provided
herein, and no amendments hereto shall be valid unless in writing and executed
by the parties hereto.
12.9 Severability. If any part, term or provision of this Agreement
------------
is invalid, unenforceable, illegal, or in conflict with any federal, state or
local laws, such part, term or provision shall be considered severable from the
rest of this Agreement and the remaining portions of this Agreement shall not be
thereby affected or impaired and this Agreement shall be construed and enforced
as if this Agreement did not contain such part, term or provision.
12.10 Incorporation By Reference. The parties hereby incorporate
--------------------------
into this Agreement by this reference Section 15 of the Construction and
Development Agreement as if set forth in full herein.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have, by their duly authorized
officers and agents caused this Agreement to be executed on the day and year
first written above.
YAKAMA TRIBAL GAMING CORPORATION,
a tribal corporation established under the laws of THE
CONFEDERATED TRIBES AND BANDS OF THE YAKAMA NATION
By: /s/ Ross K. Sockzehigh
------------------------------
Name: Ross K. Sockzehigh
Title: Chairman of the Board
HP YAKAMA CONSULTING, INC.,
a Delaware corporation
By: /s/ Bruce Rimbo
-------------------------------
Name: Bruce Rimbo
Title: Vice President and Secretary
The undersigned hereby agrees to be
bound by the terms and provisions of
Sections 5, 6, 9 and 12 hereof.
CONFEDERATED TRIBES AND BANDS OF
THE YAKAMA INDIANS,
a federally-recognized Indian Tribe
By: /s/ Ross K. Sockzehigh
----------------------
Name: Ross K. Sockzehigh
Title: Chairman
-15-
<PAGE>
EXHIBIT A
MASTER DEFINITION LIST
-16-
<PAGE>
EXHIBIT B
SCHEDULE OF DELIVERABLES
-17-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000356213
<NAME> HOLLYWOOD PARK, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 22,007,000
<SECURITIES> 0
<RECEIVABLES> 19,540,000
<ALLOWANCES> 1,111,000
<INVENTORY> 0
<CURRENT-ASSETS> 61,466,000
<PP&E> 429,100,000
<DEPRECIATION> (135,363,000)
<TOTAL-ASSETS> 413,379,000
<CURRENT-LIABILITIES> 47,703,000
<BONDS> 136,168,000
0
0
<COMMON> 2,619,000
<OTHER-SE> 216,856,000
<TOTAL-LIABILITY-AND-EQUITY> 413,379,000
<SALES> 17,913,000
<TOTAL-REVENUES> 158,349,000
<CGS> 21,381,000
<TOTAL-COSTS> 142,744,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 51,000
<INTEREST-EXPENSE> 3,782,000
<INCOME-PRETAX> 11,743,000
<INCOME-TAX> 4,624,000
<INCOME-CONTINUING> 7,119,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,119,000
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.00
</TABLE>
